Street has high hopes from HDFC Bank's new MD-CEO Sashidhar Jagdishan

Smooth transition, past experience are positives, say experts

The Reserve Bank of India’s approval to the appointment of Sashidhar Jagdishan as Managing Director and Chief Executive Officer of HDFC Bank sent the stock four per cent higher on Tuesday. The lack of clarity on a successor to the bank’s existing MD & CEO, Aditya Puri, who is retiring in October this year, was a key reason for the correction in the stock in recent times.

Says Gaurav Dua, head of Capital Market Strategy and Investments at Sharekhan: “Besides the end of the leadership overhang, the positive from this development is the smooth transition given Jagdishan’s long association with the bank.” 

Though Puri, who took the bank to new highs, will be leaving at a time when the entire banking industry is witnessing asset quality pressure due to Covid-19-led economic disruptions, experts do not view this as a major concern.

Says Sanjiv Bhasin, director at IIFL: “Now that the new leadership is confirmed and Jagdishan is a credible banker, we believe the bank’s performance going ahead would remain strong. This is a good entry point for investors.” What offers comfort is the fact that Jagdishan has been a part of HDFC Bank’s success under Puri, say analysts.

On the asset quality front, HDFC Bank’s moratorium proportion is relatively lower (nine per cent of loan book) and overall provision coverage ratio of 149 per cent is healthy too. Also, some segments such as micro, medium and small enterprises (MSME), which are severely impacted by the pandemic could get good support if RBI announces one-time restructuring. In fact, it would be a good move for the entire banking industry. Overall, the Street has high hopes from the new boss of HDFC Bank.