Bandhan Bank, a prominent player in the Indian banking sector, recently faced a setback as Jefferies downgraded its rating on the bank from BUY to Underperform. The target price was also slashed from Rs290 to Rs170, reflecting concerns about the bank’s future performance.
The downgrade came in the wake of the unexpected resignation of Bandhan Bank’s founder-CEO, which took effect on July 9th. This move came as a surprise, especially since the board had approved a 3-year reappointment for the CEO, and the application was awaiting RBI approval. The lack of clarity from the regulator on this matter has added to the uncertainty surrounding the bank’s leadership.
Jefferies highlighted the importance of a smooth succession plan, especially since most senior management members at the bank are relatively new. The uncertainty surrounding the CEO’s resignation is expected to impact the bank’s growth trajectory and could lead to higher credit costs in the near term.
The downgrade by Jefferies is in line with the cautious approach taken by other analysts. ICICI Securities has put Bandhan Bank’s rating and target price under review, while Goldman Sachs has raised concerns about the lack of apparent management succession. The timing of the CEO’s resignation has raised questions about the bank’s future direction, especially given the ongoing asset quality stress and recent senior-level exits.
On the other hand, Goldman Sachs and JPMorgan have maintained a positive outlook on Bandhan Bank, emphasizing the need for a smooth transition and the potential impact on loan growth and profitability. However, the overall sentiment remains cautious until more clarity emerges on the bank’s leadership succession.
The unexpected events at Bandhan Bank serve as a reminder of the challenges faced by the banking sector in India. With leadership transitions and regulatory uncertainties looming, investors are advised to tread carefully and monitor the situation closely for any further developments.
