RBL stock tanks over 22% as Street weighs new CEO’s ‘compatibility’

R Subramaniakumar, a career banker with public sector credentials, was named the new MD & CEO of the bank.

Analysts raised concerns over the possible compatibility issue of a public sector banker taking over a new-age private sector bank. While some suspended their coverage of RBL Bank, a few downgraded the stock ratings.

Agencies

“Although has addressed the investors’ concern over asset quality trend and stability of liability franchise to a great extent over the last two quarters, the appointment of a PSU career banker as MD & CEO looks disappointing prima facie,” said Asutosh Mishra, head of research, Ashika Institutional Equity, while suspending coverage on the bank until further clarity.

“While his personal reputation and track record look good, the key concern is the possible 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 key concerns of the analysts were how the new MD & CEO would tackle HR issues. Analysts said they would closely watch the attrition in the top-to-mid segment in the coming quarters apart from key financial numbers. Any adverse trend in attrition will impact the bank, said analysts.

“Given Subramaniakumar’s profile, he comes across as a troubleshooter with decent success at and DHFL. However, his selection as MD & CEO of a private bank, despite the interim management’s assurance on asset quality and plans to reorient the bank on the path of growth, is a little surprising,” said Anand Dama, analyst .

“We believe the new MD’s priority would be to improve portfolio quality, strengthen compliance/risk management architecture and stabilize the bank, but there could be a potential risk of some asset quality clean-up and mid-level management attrition as well,” Dama said.

According to MB Mahesh of Kotak Securities, the stock is inexpensive but lacks the re-rating trigger, which could take it higher from current levels.

“Issues on the strategy of the bank given its

on high yielding product segments, employee retention and recovery in return ratios and growth remain unclear,” he said.

Kotak Securities also suspended the ratings of the stock.

The RBL Bank had come under RBI scrutiny in December 2021, after which the regulator appointed Yogesh Dayal, chief general manager of RBI, as an additional director on the bank’s board for a term of two years. Later the bank’s MD and CEO Vishwavir Ahuja went on leave ahead of his tenure. RBL shares have declined 87% from the all-time high of 716.55 on May 28, 2019.