Bandhan Bank shares plunge 9% as CEO set to step down; Jefferies cuts target

"After leading the Bank for almost a decade including three consecutive tenure as MD & CEO, I feel that the time has now come for me to assume a larger strategic role at Bandhan group level. Hence, I have decided to retire from the services of Bandhan Bank at the end of my current tenure as MD & CEO, i.e. on July 09, 2024. I sincerely request the Board to accept my decision. I am grateful to the Board for continued support and advice over the years which has been a great source of strength," said Ghosh in his letter.

Following the development, US brokerage firm Jefferies downgraded the stock to 'Underperform' from an earlier 'Buy' even as it cut the target price to Rs 170 from Rs 290. It sees founder-CEO Ghosh's resignation as a negative surprise while noting that a smooth succession will remain a key as most of the senior management is new at the bank. It said that uncertainty could lead to slower growth and higher credit costs.

The stock has been a laggard and lost nearly 10% in share price over a 1-year period. In the year, so far, its decline has been more pronounced at 23%. In contrast, Nifty has delivered nearly 19% over 12 months while this year's gains stand at 0.67%.

Meanwhile, Kotak Institutional Equities remains positive on the counter though it said that the current development is most likely to de-rate the bank from its current levels. "Investors are now most likely to wait for more than a few quarters to assess the situation, review the new appointment and the subsequent changes that are likely to happen. We have a BUY rating on the stock at this point," Kotak said. The target is kept at Rs 270.

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