Axis Bank rallied over 5 per cent on Tuesday after the private sector lender on Monday announced that its CEO Shikha Sharma will step down at December end. The announcement came days after the RBI was reported to have expressed concerns about the lender giving her a three-year extension.
The scrip closed at Rs 5.43 per cent up at Rs 546 against the previous close of Rs 517.90.
Promoters of Axis Bank decreased their holdings to 27.60 per cent as of March 31, 2018 against 28.04 at December 31 end, according to the latest shareholding data filed by the lender to stock exchanges on Tuesday.
On the other hand, public holdings increased to 74.40 per cent from 71.96 per cent during the same period.
Heres how brokerages reacted to the issue:
Management transition needs to now be managed well, failing which there could be near-term challenges to operations and growth. More importantly, Macquarie believes the appointment of a credible successor will be critical for the banks performance ahead. The global financial services firm maintained Outpeform on Axis Bank with a target price of Rs 651.
The brokerage house believes that change in top management is positive in the long run, as the new CEO would join at a time when most of the cleanup is done and can focus on reviving earnings growth. But it would lead to short term pressure on asset quality and growth.
There is also a possibility of the stress loan pool rising over the reported levels. Also it will be important to know the profile of the new CEO who will join after Sharmas term ends.
IDFC Securities maintained Neutral view on Axis Bank and it does not see any positive earnings triggers in the short term. The CEO change after six months will add to uncertainty, it added in a report.
While the board has not identified a successor just yet, Kotak expects the bank to continue its journey towards de-risking the business by strengthening the liability franchise and increasing the share of retail and better-rated corporates.
“We find upside in the stock at current valuations, post recent underperformance, leading to an upgrade to ADD with unchanged target price of Rs 600,” the brokerage house said in a report.
The global financial services firm said Axis Bank shares could remain volatile till CEO succession will be completed. Asset quality concerns could be an overhand for the lender and upside in shares is capped till there is a visibility on the new CEO.
Nilanjan Karfa of Jefferies
“We hope the new person is an outsider, allowing fresh thoughts and strategy and to reestablish old links and rebuild credibility with investors," PTI said quoting the analyst.