Global Markets
Home›Global Markets›India›HDFC Bank CEO exits, spotlight turns to slow post-merg…
HDFC Bank CEO exits, spotlight turns to slow post-merger economics
HDFC Bank shares swung, rising nearly 2% intraday before closing 1.5% lower after the CEO said he will not extend his term beyond Oct. 26.
LiveMint Markets reports that HDFC Bank CEO Sashidhar Jagdishan will not seek an extension beyond his term ending Oct. 26, prompting a leadership reset that initially drew investor optimism. The stock rose nearly 2% intraday on Monday, the first trading day after the announcement, but reversed course to close 1.5% lower.
The bigger test for Jagdishan’s successor will be delivering on the promised benefits of HDFC Bank’s merger with HDFC Ltd, three years after the mortgage company was folded into the bank. LiveMint Markets says margins and returns are still under pressure, with the bank’s shares down more than 28% this year as investors wait for stronger profitability and returns.
LiveMint Markets also ties the transition to recent turbulence for the lender, including the exits of former chairman Atanu Chakraborty and Sampath Kumar, group head of branch banking, plus controversies involving Credit Suisse AT-1 bonds, deposits at Maharashtra State Road Development Corporation, and alleged mis-selling of Carlisle’s Luxembourg Life Fund via the bank’s Dubai operations in 2019. The outlet adds that regulatory lapses and governance concerns have weighed on investor confidence.
According to LiveMint Markets, SBI Securities’ Sunny Agrawal said the CEO uncertainty is overshadowing a more fundamental issue, that the post-merger economics have not played out as expected. The outlet also cites a Aug. 31 report by PL Capital, saying the transition has impacted financials but core earnings quality is stabilizing, while unresolved issues remain including the balance sheet construct around the loan-to-deposit ratio and a lower net interest margin driven by an unfavorable incremental loan mix.