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RBL Bank Shares Decline 23% Today: What Caused the Drop and What Will Happen Next? Find Out More.



After the Reserve Bank of India (RBI) confirmed R Subramaniakumar's nomination as the managing director and chief executive officer (MD & CEO) of the private sector lender, the stock price of RBL Bank fell to a record low of Rs 87.60 and about 23% on the BSE on Monday. The Bank stated in its stock exchange filing on Saturday that "...a meeting of the Board of Directors will be convened to approve the appointment of Mr. R Subramaniakumar as an Additional Director and as the Managing Director & CEO of the Bank and the approval of the shareholders shall be obtained thereafter."

Subramaniakumar's previous positions were managing director and chief executive officer of the government-run Indian Overseas Bank. Additionally, he was chosen to serve as Dewan Housing Finance Co Ltd.'s administrator after the board of the mortgage financier was replaced. "Based on his resume, he appears to be a problem solver with some success at IOB/DHFL. Despite interim management's assurances on asset quality and plans to realign the bank toward growth, his appointment as MD & CEO of a private bank is a little surprise, according to analysts at brokerage Emkay.

In December of last year, Vishwavir Ahuja, the MD, and CEO of RBL took an indefinite leave of absence. Rajeev Ahuja, an executive director, was chosen to serve as acting managing director and chief executive officer. After Yogesh Dayal, one of RBL's principal general managers was added as a director to the lender's board by the RBI, Ahuja left.

What Investors Should Know?

Kotak Institutional Equities analysts claim that RBL Bank has addressed one issue, 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. "We require clarity." (1) Loan mix construction. The credit card and MFI businesses are where the bank makes the majority of its profits. The chances for development and profitability in the short term would suffer from any alterations to this paradigm. (2) A plan for hiring and keeping employees. Since RBL Bank's listing, its stock price hasn't performed particularly well, and ESOPs frequently play a crucial role in keeping talent, according to research. (3) The RoE trip could take longer to normalize. In a report dated June 13, they stated: "The route to RoE needs more clarity, there could be many changes in the next several years, and the bank may need more time to get to a higher RoE from current levels."

RBL Bank: Stock Price History


The bank's market price has decreased by more than 50% (down 52%) over the past six months, while the S&P BSE Sensex has dropped by 9%. Starting with the corporate book blow-up and continuing with the current impact of Covid on its microfinance institutions (MFI) and cards business, RBL Bank has had several problems in the previous couple of years about growth.

What Should Investors Do Now?


With a lowered target price of Rs 110, we downgrade the stock from Buy to Hold amid the uncertainty ( Rs 140 earlier). As investors wait for the new management's business strategy, which includes short-term growth and asset quality movement, we anticipate the stock to be under pressure shortly "said the note.


With a target price of Rs 130 and a downgrade to outperform from buy, CLSA, another top brokerage, anticipates a 15% increase from RBL Bank's previous finish of Rs 114.45. "Leadership flux and liability are the main challenges, although the lender's asset quality is controllable." Despite several concerns, the RBI has cleared R Subramaniakumar to be the new MD and CEO of the lender "It read.

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