Shares of Bandhan Bank Ltd soared by over 9% during Friday’s trading session, following the RBI approval of Partha Pratim Sengupta as the new Managing Director and Chief Executive Officer of the private lender. The news was disclosed in an exchange filing after market hours on Thursday, igniting investor optimism and pushing the stock to new heights.
The RBI’s approval has given Sengupta a three-year tenure, which will begin once he officially takes charge, a date no later than November 10, 2024. Investors were quick to respond positively to the announcement, with Bandhan Bank’s stock climbing by 9.15% to close at ₹204.90, up from its previous close of ₹187.75.
This sharp rise brought the bank’s total market capitalization above ₹33,000 crore, reflecting a renewed sense of confidence in the bank’s future under new leadership.
The Man at the Helm: Partha Pratim Sengupta
Partha Pratim Sengupta is no stranger to the banking sector, having accumulated nearly four decades of experience across various segments of the industry. With a diverse career spanning retail and corporate banking, he has held pivotal roles at the State Bank of India (SBI), including Deputy Managing Director and Chief Credit Officer.
His leadership capabilities were further solidified during his stint as the MD and CEO of Indian Overseas Bank (IOB), where he navigated the bank through challenging times.
Sengupta’s deep understanding of credit risk and operational strategies makes him an ideal candidate to steer Bandhan Bank, a bank heavily involved in microfinance and small-scale lending, through the evolving financial landscape. His appointment is expected to bring stability and strategic direction to the bank, which has seen varied performance metrics in recent years.
Stock Performance and Market Sentiment
Bandhan Bank’s stock has been somewhat volatile in 2024. Despite Friday’s surge, the bank’s shares have gained only about 10% over the last six months and are still down 18% year-to-date. The sharp rise in share price on Friday, however, indicates renewed investor enthusiasm, potentially signaling the start of a rebound. The approval of Sengupta as MD and CEO appears to have erased some of the uncertainties that have loomed over the bank, allowing investors to refocus on its core fundamentals.
Several brokerages have weighed in on the stock in light of the leadership change. Kotak Institutional Equities has maintained a ‘buy’ rating with a target price of ₹250, reflecting optimism about the bank’s future under Sengupta’s leadership.
Similarly, Nirmal Bang and Nuvama Institutional Equities have issued ‘hold’ ratings, with target prices of ₹200 and ₹242, respectively, suggesting a more cautious outlook. On the other hand, Emkay Global Financial Services has a ‘reduce’ rating with a target price of ₹175, highlighting concerns over asset quality and slower growth relative to peers.
Analyst Take: Clarity on Fundamentals
The leadership change at Bandhan Bank has been met with generally positive responses from market experts. Global brokerage firm CLSA noted that with the leadership uncertainty resolved, focus can now return to the bank’s core business fundamentals.
CLSA, which has an ‘outperform’ rating on the stock with a target price of ₹200, pointed out that while the microfinance industry continues to face challenges related to asset quality, the worst might already be factored into market estimates. The brokerage expects a potential re-rating of the stock, contingent on the new management’s performance.
Adding to the favorable sentiment is the resolution of claims under the Credit Guarantee Fund for Micro Units (CGFMU) scheme. Bandhan Bank announced in another filing that the National Credit Guarantee Trustee Company (NCGTC) has completed a forensic audit of the bank’s claims under the scheme, assessing the total claim payout at ₹1,231.29 crore as of March 31, 2024.
The bank had already received ₹916.61 crore of that amount in December 2022, and the final claim payout now stands at ₹314.68 crore. This financial boost is expected to further stabilize the bank’s balance sheet, reducing some of the pressure on its microfinance portfolio.
Broader Market Impact and Analyst Ratings
International brokerage firms have also chimed in on the leadership change at Bandhan Bank. Jefferies has issued a ‘buy’ rating with a target price of ₹240, praising Sengupta’s extensive background and highlighting expectations for asset quality improvements. Jefferies noted that while risks remain for FY25, especially in the microfinance sector, the CGFMU recovery boosts the bank’s credibility and offers reassurance to investors.
Meanwhile, JM Financial Services maintains a ‘buy’ rating with a higher target price of ₹260, citing Bandhan Bank’s attractive valuations at just 1.0 times its estimated price-to-book value for FY26. JM Financial also emphasized that the bank’s slower growth relative to the industry during the current cycle could actually help mitigate incremental stress on asset quality, providing a more conservative, risk-managed approach.
Goldman Sachs, however, took a more measured stance, issuing a ‘neutral’ rating with a target price of ₹222. The firm acknowledged that the appointment of Sengupta, along with the CGFMU claim resolution, removes near-term concerns and restores some confidence in the continuity of the bank’s business operations. However, it noted that challenges in the microfinance sector could still weigh on the stock’s performance going forward.
Looking Ahead
As Partha Pratim Sengupta prepares to take charge, Bandhan Bank’s stock performance will remain closely watched. The market appears optimistic that his leadership will provide the bank with the strategic vision and operational discipline needed to navigate the challenges of the microfinance sector.
With the RBI’s approval in place and the CGFMU claim settlement adding financial strength, the bank is well-positioned to regain investor confidence and possibly achieve a sustained recovery in the months ahead.
