Bandhan Bank stock hits 4-year low; Ghosh's retirement plan weighs

In past two weeks, the share price of Bandhan Bank has declined 14 per cent after Chandra Shekhar Ghosh, MD and CEO of he bank, on April 5 said would retire after the completion of his current tenure

Shares of Bandhan Bank hit a fresh four-year low at Rs 170.35, down nearly 2 per cent on the BSE in Friday's intra-day trade. The stock is trading at its lowest level since April 2020. It had hit a record low of Rs 152.20 on March 25, 2020. The stock had touched an all-time high of Rs 741.80 on August 9, 2018.

In the past two weeks, the stock of private sector lender slipped 14 per cent after Chandra Shekhar Ghosh, Managing Director and Chief Executive Officer (MD and CEO) of the bank on April 5 said would retire after the completion of his current tenure on July 9. Ghosh has led the bank since July 10, 2015.

The resignation of Ghosh from the MD & CEO) position of Bandhan Bank is considered a negative surprise for the lender, which was looking at a sustainable recovery in the financial year 2025, according to analysts.

According to analysts at ICICI Securities, Ghosh, who has been the founder and instrumental in the overall functioning of the lender, and therefore, his resignation could significantly alter the business growth and profitability of the bank.

Thus far in the calendar year 2024, Bandhan Bank has underperformed the market by falling 29 per cent, as compared to 0.07 per cent decline in the S&P BSE Sensex.

Meanwhile, institutional investors have reduced their stake in Bandhan Bank by nearly 6 percentage points to 43.57 per cent in the March quarter. They held 49.44 per cent holding in the bank at the end of December quarter. Foreign investors reduced their holding to 31.19 per cent (34.74 per cent), mutual funds to 8.06 per cent (9.63 per cent) and insurance companies to 4.32 per cent (5.07 per cent).

However, individual shareholding in Bandhan Bank increased by 5.76 percentage points to 13.88 per cent from 8.12 per cent, the shareholding pattern data shows.

Notably, Ghosh's current term was due to end on July 9, 2024 and the Reserve Bank India (RBI) decision was awaited on his term extension. However, prolonged asset-quality issues (including the recent CGFMU audit) leading to sharp deterioration in RoA and management attrition had already raised the prospects of a shorter term extension by the RBI, analysts at Emkay Global Financial Services had said in a report dated April 8.

Bandhan Bank has recently hired business heads/ED/CFO from marquee banks (incl. HDFC Bank, Citi Bank) to refill vacant positions. Ghosh’s sudden resignation (like Equitas Founder cum MD’s in CY22) at this crucial juncture could usher in business/management uncertainty and potentially delay, if not derail, the bank’s recovery story, unless he is replaced by a credible candidate.

Given the incumbent ED being relatively inexperienced, the brokerage firm believes Bank may look for an external candidate to fill in its permanent MD & CEO position; this though could be a long drawn-out process. Post the near term correction, the brokerage firm believes the stock would enter a consolidation phase and any re-rating would be conditioned to smoother/more credible management transition and sustained asset quality recovery, which will not be easy.