RBL Bank shares plunged as much as 23%, hitting the daily low of ??133 each on BSE in Monday’s first trades after a series of worrying developments over the weekend. RBL Bank’s Vishawvir Ahuja stepped down as Managing Director and CEO, and the bank appointed Rajeev Ahuja as Managing Director and Interim CEO.
In a surprising turn of events, the Reserve Bank of India (RBI) also appointed its chief managing director Yogesh K Dayal as an additional director on the board of directors of RBL Bank.
Brokerage firm Emkay believes that in order to comfort investors, management will need more explanation to justify the sudden departure of Vishwavir Ahuja almost six months before the end of his tenure and the intervention of the RBI (usually observed in weak banks like Ujjivan, Dhanlaxmi, LVB, Bank J&K).
“That said, we take some comfort from the appointment of Rajeev Ahuja as interim CEO and CEO, sound liquidity cushions / capital ratios and management’s strategic intention to change the composition of the portfolio. towards guaranteed assets. However, the quality of the activities / assets in the short / medium term the dislocation is inevitable, “added the brokerage. He kept the Hold rating with a price target. ??165.
Rajeev Ahuja, the new managing director and CEO of the bank, told reporters that the bank does not anticipate major short-term capital needs, thwarting fears of management problems. He added that the December quarter is expected to be even better and that in the March quarter the bank will hopefully return to its pre-pandemic performance.
Following the resignation of its senior manager, RBL bank clarified that these changes are in no way a reflection on the fundamentals of the Bank. He further added that these developments are not due to any concerns regarding the advances, asset quality and level of deposits of the Bank and that it has the full support of the RBI.
In recent months, reports have suggested that some employees of the RBL bank have sought the support of the Ministry of Finance to oversee operations, as they believe the regulatory frameworks are being ignored by the bank’s senior management.
Another brokerage, ICICI Securities, said that “the impact of this decision on various stakeholders (including depositors, employees, etc.) With high anticipated stress and moderate growth, we believed that ‘A modest RoA / RoE profile would cap valuations. “
The brokerage lowered the stock to sell with a revised target price of ??130 (formerly: Rs181) as he believes this incremental unfavorable development will put more pressure on the interim pressure and may result in valuations.
The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.
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