RBL Bank tumbles 18% on heavy volumes; stock hits record low

The Reserve Bank of India has approved R Subramaniakumar's appointment as the managing director & chief executive officer of the private sector lender.

The stock price of RBL Bank hit a record low of Rs 92.75 as it tumbled 18 per cent on the BSE in Monday’s intra-day trade after the Reserve Bank of India (RBI) approved R Subramaniakumar's appointment as the managing director & chief executive officer (MD & CEO) of the private sector lender.

 "The RBI has approved the appointment of Mr. R Subramaniakumar as Managing Director & CEO of the Bank for a period of three years with effect from date of his taking charge," RBL Bank said in a exchange filing on Saturday, June 11, 2022.

Previously, Subramaniakumar was the former managing director and chief executive director of state-run Indian Overseas Bank. He was also appointed as the administrator of Dewan Housing Finance Co Ltd after the mortgage financier’s board was superseded.

According to analysts at Kotak Institutional Equities, RBL Bank has addressed one concern, however, issues on strategy of the bank given its reliance on high yielding product segments, employee retention, and recovery in return ratios and growth remain unclear.

"We need to have clarity (1) Construct of the loan mix. The bank’s key profit pool comes from the credit card and MFI business. Any changes to this model would hurt the near term prospects on growth and profitability. (2) Employee retention/hiring strategy. ESOPs usually tend to play a critical role in retaining talent and RBL Bank price performance since listing has not been impressive. (3) Normalization of the RoE journey could be longer. The path to RoE needs more clarity and there could be a lot of changes that could happen in the next few years and the bank may need more time to get to a higher RoE from current levels," they said in a report dated June 13. 

Last year in December, RBL's then MD & CEO Vishwavir Ahuja went on an indefinite leave. Executive director Rajeev Ahuja was appointed as the interim Managing Director & Chief Executive Officer. Ahuja's departure had come after the RBI appointed one of RBL’s chief general managers, Yogesh Dayal, on the lender’s board as additional director.

The stock of RBL Bank has fallen below its previous low of Rs 100.80 touched on May 12, 2022. The trading volumes on the counter jumped over four-fold with a combined 60.25 million equity shares having changed hands on the NSE and BSE.

In the past six months, the market price of the bank has more-than-halved (down 52 per cent) as against a 9 per cent decline in the S&P BSE Sensex. RBL Bank has faced multiple issues in the last couple of years on the growth front starting from the corporate book blow up till the recent Covid impact on its micro finance institutions (MFI) and cards business.

Tech view

Outlook: Bearish
Target: Rs 91

Resistance: Rs 119

Shares of RBL Bank have broken below their immediate support level of Rs 102 as they hit a record low of Rs 93 per share. Going forward, the stock will face near-term hurdle at Rs 102, followed by Rs 119 (its 50-day moving average), and Rs 129 (100-DMA), as per the daily chart. 

A sustained trade below today's low may push the stock towards Rs 90.89 level, as per monthly charts.

The price-to-moving average action, as well as movement om momentum oscillators such as Relative Strength Index (RSI), Directional Index (DI), MACD, and Slow Stochastic all suggest bearish trend in the stock.

(With inputs from Nikita Vashisht)