A day after RBL Bank appointed R Subramaniakumar as its chief government, analysts watching the sector expressed disappointment on the alternative. The choice of a former public sector financial institution (PSB) government, additionally recognized for steering the decision of a bankrupt housing finance firm, despatched alarm bells ringing in regards to the state of RBL Bank’s financials. RBL Bank’s share worth hit a lifetime low of Rs 86.25 on Monday amid a heavy selloff in Indian equities.
Analysts at CLSA stated in a report that the brand new CEO appointment raises a number of questions which may come to weigh on the inventory’s efficiency. “Mr. Subramaniakumar is an ex-PSU banker, and historically such appointments at financial institutions have been associated with weak asset quality and/or governance structures. Hence, the CEO appointment raises more questions including the continuity of the existing top leadership at the bank,” the broking agency stated.
Although CLSA believes asset high quality is not going to be an issue for RBL Bank, the scenario may have a possible weakening affect on liabilities and therefore have an effect on the financial institution’s efficiency and progress trajectory adversely. Therefore, the broking agency has downgraded its suggestion on the financial institution to ‘outperform’ from ‘buy’ on an unchanged worth goal of Rs 130.
Other sector watchers echoed CLSA’s confidence in RBL Bank’s asset high quality, however made a case for larger readability on another features. Kotak Institutional Equities (KIE) stated that it might be careful for the lender’s technique, given its reliance on high-yielding product segments like bank cards and microfinance, in addition to its skill to retain workers.
“We also need to understand the medium-term relationship of Bajaj Finance, given that they would need a strong partner to achieve their growth objectives as well,” KIE stated. RBL Bank has a co-branded bank card partnership with Bajaj Finance for a five-year interval as much as December 2026.
Questions additionally prevailed in regards to the possible cultural issues that might crop up with a PSU banker taking cost at a personal financial institution. Analysts at Emkay Global Financial Services stated, “We believe that his selection by RBL and relatively swift approval by the RBI indicate possible RBI blessing throughout the process to bring stability and credibility to the bank.”
While the brand new CEO’s precedence would possible be to enhance portfolio high quality, strengthen compliance and threat administration structure and stabilise the financial institution, there may very well be a possible threat of some asset-quality clean-up and mid-level administration attrition, Emkay stated.
Source: www.financialexpress.com”