RBL BANK - HIGH FEAR FACTOR

about 30 days ago
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Management changes, that too in a Bank, given the previous background of various other banks, always spooks the market. That explains why RBL Bank is today stuck with a “Fevicol ka jod” to the top loser slot since the opening bell.

The stock hit a new 52-week low today at Rs.132.35 with four times more sellers than buyers on the counter currently.

Over the weekend, first, the MD and CEO of the Bank, Vishawvir Ahuja stepped down with immediate effect and in his place, an interim MD & CEO, Rajeev Ahuja was appointed.

The development comes after the Board accepted Vishwavir Ahuja’s request to proceed on medical leave. Though the Bank bent over backwards to allay fears, saying that the changes had nothing to do with asset quality or any adverse developments in the Bank, bitten too many times, customers as well as shareholders just want to get out. The fear of the unknown in a Bank has been at high levels for a long time.

The RBI also appointed its Chief General Manager Yogesh K Dayal as an additional director on the board of RBL Bank.

The leaving of Ahuja, six months ahead of schedule and RBI intervening brings back bad memories of Ujjivan, PSB, Yes Bank, LVB, J&K. The management needs to give more clarity into the reality, give numbers to assuage fears; merely saying that all is well and there was nothing to worry, brings more worry.

The Bank was slowly getting onto the recovery path though asset quality remained worrisome. Yet, this sudden change in management will derail the recovery process. Even if the Management gives more details and manages to allay fears, in the immediate short term, the impact on deposits and stock price will remain. Sentiments are rattled and no number of assurances, as this point of time, will help.

We have seen in the past that whenever RBI has stepped in and appointed its nominee on the Board, it was when banks had major asset quality issues and other management issues. This move to appoint Dayal might be a pre-emptive move but after so many bank failures and losses, this spooks the market.

For now, for all those scavengers, hoping to make a quick buck on RBL currently, its best to avoid buying into the stock; the short and medium term looks smoggy.

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