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Rbl Bank shares collapse 20% as concerns rise over financial health of lender

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Rbl Bank shares collapse 20% as concerns rise over financial health of lender

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RBL Bank shares fell 20% to hit the lower circuit on Monday as negative developments over the weekend and lackluster brokerage comments weighed on investor sentiment.

The stock hit its 52 week low at Rs 138 today. It’s been down for the past two sessions and is down over 22% over the period.

RBL Bank’s Vishawvir Ahuja stepped down as managing director and CEO of the bank, and the lender appointed Rajeev Ahuja as interim managing director and CEO with immediate effect.
The Reserve Bank of India has also appointed its Managing Director Yogesh K Dayal as an additional director on the board of directors of RBL Bank.

CLSA said that the central bank’s appointment of an additional director to RBL Bank’s board is a surprising move, and that in the past this RBI action has usually taken place when banks were in trouble. This decision will lead to short-term uncertainty, CLSA said.

CLSA reduced its target price on the share to Rs 200 from Rs 230.

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Meanwhile, ICICI Securities downgraded its rating on the bank stock to “sell”, given the looming uncertainty.

This intermediate unfavorable development may cause the bank’s valuation to be as low as 0.55 times the FY23 book, the brokerage said, reducing its target price by around 28% to Rs130.

Investec has placed its recommendation for RBL Bank “under review” from “purchase” and will update third quarter results. The recent development is clearly a negative result from an investor confidence standpoint, the brokerage said.

The umbrella body of bank employee unions, AIBEA, wrote a letter to Minister of Finance Nirmala Sitharaman, expressing concern that all was not well at RBL Bank and that it was moving in the direction of Yes Bank and Lakshmi Vilas Bank.

“We are worried and concerned about the developments taking place in the affairs of RBL Bank Ltd, the Kolhapur-based private bank. The sequence of events leading to the sudden exit of Vishwavir Ahuja as well as the enthronement of Dayal from RBI on the board as an additional member indicates that all is not well with the bank, ”AIBEA said in its letter to the Minister of Finance.

However, Rajeev Ahuja said that “recent developments are not due to our financial performance. The bank has the backing of the RBI”.

Rumors about the bank’s financial health circulated after Vishwawir Ahuja’s sudden exit.

Rajeev Ahuja declined to speculate on the reason for the departure of former managing director and CEO Vishwawir Ahuja and said the RBI was comfortable with the bank’s performance. He said he saw no problem for the bank’s stakeholders, “now or later.”

First publication: STI

Rbl Bank shares collapse 20% as concerns rise over financial health of lender

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