In early trading on Monday, the share price of Bandhan Bank fell by 9% following the resignation of its MD and CEO, Chandra Shekhar Ghosh. On the BSE, shares of Bandhan Bank dropped as much as 9.04% to ₹179.55 a share.
Bandhan Bank: The CEO Retires
The board of directors of Bandhan Bank on April 05 took on record the letter sent by its Managing Director & Chief Executive Officer Chandra Shekhar Ghosh indicating that he would retire from the services of the Bank as the MD & CEO upon completion of his current tenure on July 09, 2024. Since July 10, 2015, Ghosh has held the positions of MD and CEO of Bandhan Bank.
Following the resignation of its founder and CEO, Ghosh, on July 9 of this year, international brokerage Jefferies reduced its rating from “Buy” to “Underperform.”
Target Price Cut
Additionally, Jefferies cut its target price on Bandhan Bank shares from ₹290 to ₹170, suggesting a potential 14% drop from Friday’s closing price. The brokerage views the founder-CEO’s resignation as an unfavorable surprise, noting that since the majority of Bandhan Bank’s senior staff is new, a seamless transfer and succession plan are essential.
Even a three-year reappointment had been authorized by the Bandhan Bank board, and the RBI was still reviewing the proposal.
According to Jefferies, any potential ambiguity might cause the private lender’s development to stall and its lending costs to rise. We are reducing our growth expectation and credit cost estimates for FY25–26 due to the uncertainties, which would result in a roughly 10–14% drop in EPS. Additionally, valuations continue to be overshadowed by this uncertainty, according to Jefferies.
Bandhan Bank Gets Prohibited From Trading
In the meanwhile, during Monday’s trading session, shares of Bandhan Bank are prohibited from trading. This indicates that no new holdings in any F&O contracts stock are permitted.
Nomura says that one of the most important things to watch will be how the CEO’s abrupt departure affects the bank’s operations, particularly in terms of liabilities, asset quality, and growth.
We reduce our rating because we see additional uncertainty for the franchise moving forward with the current leadership in flux. Nomura values the bank at 1x FY26F BVPS (formerly 1.5x), with the lower target multiple accounting for a higher cost of equity.
Additionally, it remains to be seen if the RBI names a person to the board of Bandhan Bank, as was the case in a recent instance of a similar circumstance involving RBL Bank in December 2021.
As of now in 2024, Bandhan Bank shares have dropped more than 18%, underperforming both the benchmark Nifty 50 and the Bank Nifty index.
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