Bandhan Bank, a prominent player in the Indian banking sector, has recently faced a major setback with the resignation of its founder-CEO. The unexpected move has led to a downgrade in the bank’s rating by Jefferies, from BUY to Underperform, with the target price being slashed to Rs170 from Rs290.
The resignation of the founder-CEO, Mr. Ghosh, came as a surprise as the board had approved his reappointment for three years, and the application was awaiting RBI’s approval. The timing of the resignation has raised concerns about the smooth succession at the bank, especially since most senior management members are relatively new.
The uncertainty surrounding the leadership transition may impact the bank’s growth and profitability, leading to slower growth and higher credit costs. Jefferies has lowered its growth outlook and credit cost estimates for FY25-26, resulting in a decrease in EPS by about 10-14%. The valuations of the bank are expected to remain under pressure due to the ongoing uncertainty.
On the other hand, ICICI Securities has put Bandhan Bank’s rating and target price under review until further clarity is obtained. The absence of apparent management succession and the sudden resignation of Mr. Ghosh have raised concerns about the bank’s future performance.
Meanwhile, Goldman Sachs maintains a positive outlook on Bandhan Bank, with a Buy rating and a target price of Rs 267. The bank’s CEO’s retirement has put the focus on growth and balance sheet management during the transition period. The debate among investors around succession planning and the impact of leadership transition on loan growth and profitability is expected to continue until a new CEO is appointed.
In conclusion, the unexpected resignation of Bandhan Bank’s founder-CEO has created uncertainty in the market, with different analysts offering varying perspectives on the bank’s future prospects. The key now lies in the smooth transition to a new CEO and the ability of the bank to navigate through this challenging period. Investors will be closely monitoring the developments at Bandhan Bank as they await more clarity on the leadership succession.
