RBL Bank: RBL stock over 22% as Street weighs in on new CEO’s ‘compatibility’

Mumbai: shares of RBL Bank fell more than 22% on Monday, its worst single-day crash since its listing in August 2016, as the Street appeared to be disappointed with the new CEO appointment.

Public sector credit career banker R Subramaniakumar has been named the new MD and CEO of the bank.

Analysts raised concerns over the potential compatibility of a public sector banker to handle a new age private sector bank. Some suspended their coverage of RBL Bank, some downgraded the stock rating.

Ashutosh Mishra, Head of the Company, said, “While the asset quality trend over the past two quarters and the sustainability of liability franchisees has largely addressed investor concerns, the appointment of a PSU career banker as MD & CEO was disappointing. Is.” While suspending coverage on research, Ashika Institutional Equity, Bank Until further clarity.

“While his personal reputation and track record looks good, the major concern is the potential compatibility issue of a PSU banker with a new age private sector bank,” he added.

The stock, which opened at 102.05, fell to an all-time low of 86.25 before closing at 87.90. The major concern of analysts was how the new MD and CEO would deal with HR issues. Analysts said they would be closely watching the top to mid-segment layoffs in the coming quarters apart from key financial figures. Analysts say any unfavorable trend of leaving the job will affect the bank.

“Looking at Subramaniakumar’s profile, he comes across as a troubleshooter with good success in DHFL and DHFL. However, his selection as MD and CEO of a private bank, interim management’s assurance on asset quality Despite this and the plan to redirect the bank on the growth trajectory, is a bit surprising,” said Anand Dama, analyst.

“We believe that the priority of the new MD will be to improve portfolio quality, strengthen compliance/risk management architecture and stabilize the bank, but there may be some asset quality cleanup and mid-level management as well as potential risk Maybe,” said Dama.

According to MB Mahesh of Kotak Securities, the stock is cheap but lacks a re-rating trigger, which could propel it above the current levels.

“Given the issues on the bank’s strategy”

On high-yield product segments, recovery and growth in employee retention and return ratio is not clear,” he said.

Kotak Securities also suspended the rating of the stock.

RBL Bank came under RBI’s scrutiny in December 2021, following which the regulator appointed RBI Chief General Manager Yogesh Dayal as an additional director on the bank’s board for a period of two years. Later the bank’s MD and CEO Vishwavir Ahuja went on leave before his tenure. The shares of RBL have declined 87% from an all-time high of 716.55 on May 28, 2019.