RBL Bank has been grappling with a surge in soured loans to consumers during the coronavirus pandemic, prompting the lender to boost provisions that led to a first-quarter loss.
RBL Bank Ltd shares dropped by a record on Monday after the Reserve Bank of India (RBI) named an additional director to the lender’s board over the weekend and its chief executive went on medical leave over the weekend. The stock tumbled as much as 25 per cent, the biggest decline since listing in 2016.
Yogesh Dayal was appointed to RBL’s board by the RBI for two years from December 24 and Rajeev Ahuja was elevated as the interim managing director and chief executive officer of the bank after Vishwavir Ahuja went on medical leave.
The RBI’s action comes as RBL grapples with a surge in soured loans to consumers during the pandemic, prompting the lender to boost provisions that led to a first-quarter loss.
Rajeev Ahuja said on the weekend the RBI’s move wasn’t motivated by worries over asset quality and deposit levels.
Analysts at ICICI Securities said given the circumstances under which RBI initiated such an action in the past, there will be clarity required not only on management succession, but fundamental performance and strategy of the bank.
It also downgraded RBL’s stock to “sell” and cut its price target to ₹130 from ₹181.
Morgan Stanley analysts, including Sumeet Kariwala, wrote in a note the changes at RBL “may have reflected some delay in implementation of certain RBI guidelines, as well as increased risk on the balance sheet in recent years — including a sharp increase in unsecured loans”.
RBL’s shares are now down about 40% this year, trimming the lender’s market value to $1.1 billion.
RBL, founded in the 1940s, has witnessed a steady deterioration in its asset quality in the past two to three years.
(With agency inputs)
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