IndusInd Bank hits fresh 3-year low after clarification on new CEO

Shares of IndusInd Bank have slipped 3 per cent to Rs 1,102 on the BSE on Thursday after the private sector said that the speculation around the name of Rajiv Sabharwal of Tata Capital as a contender for the bank’s top position is completely untrue.

IndusInd Bank was trading at its lowest level since January 4, 2017. The stock has fallen below its previous low of Rs 1,109 touched on Tuesday, February 18, 2020.

A Business Standard today reported that IndusInd Bank is considering Rajiv Sabharwal of Tata Capital as a probable candidate for the post of managing director (MD) and chief executive officer (CEO) of the bank. CLICK HERE TO READ FULL REPORT

The bank, however, has issued a clarification against this report and has denied any such plans.

“We wish to state that the speculation around this name as a contender for the position mentioned is completely untrue,” IndusInd Bank said on clarification of the news report. “As previously advised to the exchanges, the Bank's Nomination and Remuneration Committee and Board had considered and finalised a potential candidate for the post of MD and CEO, and forwarded an application to the RBI seeking approval for the appointment. That position remains unchanged,” it added. READ THE CLARIFICATION HERE

Ramesh Sobti’s term as MD and CEO of IndusInd Bank will end on March 23.

Sharp decline

In the past two months, IndusInd Bank has plunged 28 per cent at the bouses on account of the risk of further asset quality deterioration. In comparison, the S&P BSE Sensex has gained 5 per cent during the same period.

“Over the last few quarters, the bank has seen deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs),” Moody's Investors Service said on February 11. The rating agency downgraded the private lender’s outlook to negative from stable.

Analysts at JP Morgan have ‘neutral’ rating on IndusInd Bank as the brokerage firm believe higher interest rates will exert some pressure on IIB’s relatively nascent deposit franchise and loan growth in the commercial vehicle book. Investors will also need to take a view on the strategy outlook beyond FY21 after Mr. Sobti’s retirement. Further, we think IndusInd Bank’s relative P/BV differential versus HDFC Bank should moderate as markets start giving a higher valuation to stable deposit franchises, analysts at JP Morgan added.

At 02:13 pm; IndusInd Bank was trading 2 per cent lower at Rs 1,112 on the BSE, against 0.71 per cent decline in the S&P BSE Sensex. A combined 5.2 million shares changed hands on the counter on the BSE and NSE so far.