What’s happening with this bank?

Bandhan Bank shares surged over 12% in today's session following the Reserve Bank of India's (RBI) approval of Partha Pratim Sengupta as the new Managing Director (MD) and CEO. Sengupta accepted the role on October 9, 2024, and confirmed on October 10 that he will resign from his other positions to comply with the RBI's conditions. His three-year term is expected to begin by November 10, 2024, pending final approval from the bank’s Nomination and Remuneration Committee.

Partha Pratim Sengupta has nearly 40 years of banking experience, with leadership roles at State Bank of India (SBI), and Indian Overseas Bank. He has worked in areas focusing on retail, corporate banking, and technology driven growth. Appointment of his leadership puts an end to the ambiguity, thereby expected to aid valuation.

In April this year, Bandhan Bank founder Chandra Shekhar Ghosh, who was the MD & CEO, decided to hang up his boots by announcing a surprise retirement. Ratan Kumar Kesh, one of the executive directors, was appointed the interim CEO. Clarity on leadership should get the focus back on the bank's fundamentals and strategic direction to be undertaken going ahead. 

Additionally, Bandhan Bank reported that the National Credit Guarantee Trustee Company (NCGTC) completed a forensic audit of claims under the Credit Guarantee Fund for Micro Units (CGFMU) scheme. As of March 31, 2024, the total payout assessed was Rs 1,231.29 crore, with Rs 916.61 crore already received in December 2022. The final payout of Rs 314.68 crore was reported as settled by March 2024.

International brokerages have responded positively to these developments. Jefferies reaffirmed its "buy" recommendation for Bandhan Bank, with a target price of Rs 240 per share. The brokerage cited Sengupta's appointment and his experience in West Bengal, a critical market for the bank, as factors that could bolster its performance. Jefferies also pointed out that the resolution of the CGFMU claim, with an additional Rs 230 crore in recoveries, will enhance the bank's profitability.

Similarly, Goldman Sachs noted that the appointment of the new MD and CEO, alongside the resolution of the CGFMU claim, resolves near-term uncertainties. The bank's focus now shifts to its fundamentals, as concerns over business continuity are alleviated.

In the stock market, Bandhan Bank's shares have risen 8.1% over the past five trading sessions, delivering a return of 5.42% in the past month and 13% over the last six months. However, the stock has declined by 17% over the past year. By contrast, the Nifty 50 index has risen 0.14% in the last month and 11% in the past six months, offering a 26% return over the past year despite a 0.5% drop in the past five sessions.