RBL Bank Slumps To Record Low After New CEO Is Named
The appointment of R Subramaniakumar as RBL Bank CEO, raises more questions than answers, analysts say.
Shares of RBL Bank Ltd. fell over 22% to a record low after the central bank approved the appointment of R Subramaniakumar as its managing director and chief executive officer.
The appointment comes after former MD and CEO Vishwavir Ahuja unexpectedly stepped down, after which the Reserve Bank of India appointed a nominee director on the board of the private lender.
Most analysts downgraded the stock noting that the appointment raises more questions than answers as Subramaniakumar, a veteran banker, was previously involved in the resolution process or turning around lenders with weak asset quality—Dewan Housing Finance Corp. Ltd. and Indian Overseas Bank.
Of the 22 analysts tracking the company, 13 maintain 'buy', three suggest 'hold' and six recommend 'sell'. The return potential of the stock is 59.5%. Trading volume was more than 10-times the 30-day average when markets closed on Monday.
Emkay Global
Downgrades RBL Bank to 'hold' from 'buy' with the target price reduced to Rs 110 from Rs 140, an implied downside of 3.51%.
RBI did not give any reason for the appointment of Yogesh Dayal as the additional director on the bank's board for two years after RBL Bank came under central bank's scrutiny in December 2021.
The regulator's discomfort could have been due to unsecured heavy asset-side creating asset-quality risks seen during Covid, poor compliance with RBI's directives on risk management, governance, succession.
While RBL Bank management emphasised that change in top management/board is not due to asset-quality issues/divergence, former MD & CEO Vishwavir Ahuja went on medical leave and did not return after the central bank's intervention.
Despite new MD & CEO R Subramaniakumar's profile, a troubleshooter with decent success in turning around Indian Overseas Bank and DHFL, his selection is little surprising.
MD's priority would be to improve portfolio quality, strengthen compliance/risk management architecture and stability.
There could be a potential risk of some asset quality clean-up and mid-level management attrition.
Expect stock to remain under pressure in the near term as investors await new management's business strategy, including near-term growth/asset-quality movement.
CLSA
Downgrades stock from 'buy' to 'outperform' and keep target unchanged at Rs 130 apiece.
Subramaniakumar's appointment raises more questions than answers as the veteran banker has been associated with turning around weak asset quality/governance structures in the past.
The leadership change could have potential weakening impact on liabilities and adversely affect growth.
RBL Bank's asset quality situation and outlook remain manageable compared to situations at Yes Bank and Lakshmi Vilas Bank.
Questions about management are likely to weight on the stock performance.
Kotak Securities
Maintains 'rating suspended' till better clarity on near-term strategy emerges.
Concerns on growth strategy of the bank, employee retention and recovery in return ratios persist.
Do not believe that there are any fresh asset quality concerns in the bank.
Need to have more clarity on construction of loan mix, hiring plans and normalisation of RoE, before arriving at an investment thesis on the stock.
The stock is inexpensive but also lacks rerating trigger.