RBL Bank’s stock price fell over 23% on the BSE in intra-day trade on Monday after the Reserve Bank of India (RBI) accepted R Subramaniakumar’s nomination as managing director and chief executive officer (MD & CEO) of the private sector lender. “…a meeting of the Board of Directors will be summoned to approve the appointment of Mr. R Subramaniakumar as an Additional Director and as the Managing Director and CEO of the Bank,” the Bank stated in a stock exchange statement on Saturday.
Subramaniakumar previously served as the managing director and chief executive officer of the state-owned Indian Overseas Bank. After the mortgage financier’s board was replaced, he was appointed as the administrator of Dewan Housing Finance Co Ltd. “Given his background, he appears to be a troubleshooter with a track record of success at IOB/DHFL.” However, notwithstanding interim management’s assurances on asset quality and plans to refocus the bank on a development path, his appointment as MD & CEO of a private bank is a little surprise,” analysts at brokerage Emkay wrote in a report.
In December of last year, RBL’s then-MD and CEO, Vishwavir Ahuja, took an indefinite leave of absence. Rajeev Ahuja, an executive director, has been named temporary Managing Director and Chief Executive Officer.
After the RBI named one of RBL’s chief general managers, Yogesh Dayal, as an additional director to the lender’s board, Ahuja resigned.
RBL Bank has addressed one problem, according to analysts at Kotak Institutional Equities, but questions about the bank’s strategy, given its reliance on high-yielding product divisions, employee retention, and recovery in return ratios and growth remain unanswered. “We require clarity.” (1) The loan mix is constructed. The credit card and MFI businesses are the bank’s main profit generators. Any alterations to this approach would jeopardize the company’s near-term growth and profitability prospects. (2) Retention/hiring strategy for employees. ESOPs are known to play a key role in retaining talent, and RBL Bank’s pricing performance since its initial public offering has not been impressive. (3) The RoE trip may take longer to normalise. In a June 13 report, they noted, “The route to RoE needs more clarity, and there could be a lot of changes in the coming few years, and the bank may need more time to get to a higher RoE from current levels.”
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