After shares of RBL Bank plunged over 22 per cent in the previous trading session, the bank has issued a clarification on appointing a bad loan expert as the CEO & MD. It said “There has been considerable speculation and rumours linking the appointment of the new MD & CEO of the Bank, Mr. R S Kumar, with asset quality challenges for the Bank in the near future. We wish to reiterate that such speculation is baseless and unfounded and purely speculative in nature.”
In the previous session, the stock was under pressure as on being nudged by Reserve Bank of India (RBI), the bank appointed a new CEO, who the central bank had earlier brought in to clean up the bad loan mess at troubled housing finance company DHFL.
The bank further pointed out in its note that “For the year ended March 31, 2022, the Bank’s gross and net NPA were 4.4 per cent and 1.3 per cent, with a provision coverage ratio of 70.4 per cent, with no reportable divergence. As the Bank has been highlighting in its past commentaries, the Bank is well provided and does not foresee any asset quality challenges. Also as stated earlier, given the strong provision coverage, lower delinquency trends, and strong recovery visibility from the GNPA book, credit costs for FY 23 are expected to be materially lower than FY 22. The Bank also remains well capitalised and post its recent Tier 2 capital raise on May 13, 2022, from the United States International Development Finance Corporation, America’s development finance institution, the capital adequacy ratio of the Bank has increased to approx 17.8 per cent.”
RBL Bank had said on Saturday that the RBI had approved the appointment of R Subramaniakumar as MD & CEO of the bank. According to reports, the RBI had chosen from a list of names suggested by the private bank, which included a few private bankers. Subramaniakumar, a public sector banker for four decades, was appointed by RBI as the administrator of DHFL in 2019. He had successfully resolved the case, including the sale of assets to Piramal. “Given his profile, he comes across as a troubleshooter with decent success at IOB/DHFL. However, his selection as MD & CEO of a private bank, despite interim management’s assurance on asset quality and plans to reorient the bank on the path of growth, is a little surprising,” said brokerage Emkay in a note.
Last year in December, RBL’s then MD & CEO Vishwavir Ahuja went on indefinite leave. Executive director Rajeev Ahuja was appointed as the interim Managing Director & Chief Executive Officer. Ahuja’s departure had come after the RBI appointed one of RBL’s chief general managers, Yogesh Dayal, on the lender’s board as an additional director.
According to analysts at Kotak Institutional Equities, RBL Bank has addressed one concern, however, issues on the strategy of the bank given its reliance on high-yielding product segments, employee retention, and recovery in return ratios and growth remain unclear. “We need to have clarity (1) Construct of the loan mix. The bank’s key profit pool comes from the credit card and MFI business. Any changes to this model would hurt the near-term prospects on growth and profitability. (2) Employee retention/hiring strategy. ESOPs usually tend to play a critical role in retaining talent and RBL Bank’s price performance since listing has not been impressive. (3) Normalization of the RoE journey could be longer. The path to RoE needs more clarity and there could be a lot of changes that could happen in the next few years and the bank may need more time to get to a higher RoE from current levels,” they said in a report dated June 13.
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