Bandhan Bank Drops 9% after CEO Decides to step down

Tanushree Jaiswal Tanushree Jaiswal 8th April 2024 - 05:56 pm
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One of the top private sector banks in India, Bandhan Bank, witnessed a 9% decline in share price following the announcement by CEO Chandra Shekhar Ghosh that he would be retiring in July. Ghosh has overseen the bank's operations for almost nine years and became the leader of the company on July 10, 2015.

The announcement of Ghosh's departure has raised doubts among investors, which has led the price of the bank's shares to drop dramatically. Bandhan Bank shares were down from their previous closing of Rs 202.50 to Rs 183.95 on the NSE at 9:36 a.m.

Ghosh stated in a special interview that the bank had already started looking for a new CEO and that his decision to stand down was voluntary. Ghosh has expressed interest in taking on a more expansive position at the group level, and the bank has formed an internal search committee to choose a new chief.

The brokerage Jefferies has expressed dissatisfaction with the CEO's choice to step down and has issued a warning over the lack of clarity surrounding the selection of his replacement. According to the brokerage, the uncertainty may lead to weaker growth and increased loan costs. Jefferies has reduced its target price for the stock by more than 41%, to Rs 170, citing the resignation as an unanticipated development.

Ghosh, who has over thirty years of experience in development and microfinance, will resign on July 9th, even though the board approved his reappointment in November for a further three years as MD and CEO. Ghosh stated that he will seek a more expansive strategic role inside the organization in his letter of resignation.

About 40% of Bandhan Bank is owned by the bank. Apart from the bank, Bandhan Financial Holdings Ltd. is also involved in the mutual fund industry and in Bandhan Financial Services Ltd. Ghosh stated that he will have a "strategic role" at the group holding company level after leaving his position as CEO, where he would advise the firm's business verticals.

The bank operates 6,250 locations nationwide, including branches, ATMs, and other touch points. As of March 31, 2024, the bank employed over 75,000 people and had a total of 3 crore debtors and depositors.

The bank has demonstrated remarkable financial performance; for the October–December quarter, the bank reported a net profit gain of over two times the amount, to Rs 733 crore, mostly due to an improvement in core revenue. From Rs 4,840.94 crore in the previous year to Rs 5,210 crore in the December quarter of this fiscal year, the bank's overall income grew.

In Q3 of FY24, the bank's net interest income increased to Rs 2,525 crore from Rs 2,081 crore the previous year. While net non-performing assets (NPA) grew to 2.2 percent from 1.9 percent, gross non-performing assets (NPA) decreased to 7 percent from 7.2 percent a year ago, indicating an improvement in the bank's asset quality. Compared to Rs 1,541 crore in FY23, provision and contingencies were almost reduced to Rs 684 crore. At the end of the third quarter, the bank's collection efficiency ratio was 98%, while its capital adequacy ratio was 19.8%.

Following CEO Ghosh's retirement announcement, shares of Bandhan Bank have dropped by 9%. In addition to Ghosh assuming a more strategic role inside the organisation, the bank has already started the process of searching for a new CEO. The bank has demonstrated remarkable financial performance, as seen by the more than two-fold increase in net profit it reported for the October–December quarter. Nonetheless, investors' unease regarding the selection of Ghosh's replacement has resulted in a precipitous drop in the bank's share price.

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