As CEO Ghosh Set to Resign, Jefferies Downgrades Bandhan Bank’s Rating to Underperform

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Jefferies suggests that the uncertainty surrounding the selection of a new CEO could lead to slower growth and increased credit costs. Following Bandhan Bank Ltd’s announcement on April 5 that Managing Director & CEO Chandra Shekhar Ghosh would step down upon the completion of his term in early July, Jefferies downgraded the bank’s rating from “buy” to “underperform”. Consequently, they revised the stock’s target price downwards from Rs 290 to Rs 170, attributing this adjustment to the unexpected departure of the founder-CEO. The new target price implies a 14 percent decrease from the bank’s April 5 closing price of Rs 197.40. Bandhan Bank’s shares have seen a decline of nearly 20 percent over the past six months.

During an interview, Ghosh stated that his decision to resign was voluntary, and the bank has initiated the process of searching for a new CEO. “Let me make it clear that this is a voluntary decision. I have been thinking of retirement for nearly a year and has a taken a call now,” Ghosh mentioned.

Jefferies voiced concerns regarding the uncertainty surrounding the appointment of a new CEO, highlighting the potential for slower growth and increased credit costs. The brokerage stressed the significance of a seamless succession process, particularly given that most senior management members are relatively new to the bank.

Ghosh, who is set to retire on July 9, boasts over 30 years of experience in the microfinance and development sector. On November 24, the board approved Ghosh’s reappointment as the MD & CEO of the bank for a three-year term. In his resignation letter submitted with the regulatory filing, Ghosh expressed his intention to step down from Bandhan Bank to assume a broader strategic role within the group.

“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,” Ghosh said in his resignation letter attached in the regulatory filing.

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