The Reserve Bank of India approved the reappointment of Shyam Srinivasan as the Managing Director and Chief Executive Officer of Federal Bank for a period of three years with effect from September 23, 2021.
Federal Bank
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Federal Bank share price jumped over 5 percent intraday on July 12 a few days after the Reserve Bank of India (RBI) cleared Shyam Srinivasan’s reappointment as the managing director and chief executive officer.
The reappointment, approved on July 9, will be effective from September 23, 2021 to September 22, 2024, the bank said in a press release to exchanges.
Over the last decade that Srinivasan has been at the helm, the bank has transformed into a mid-sized private bank with a strong focus on retail business, including gold loans and funding small and medium entrepreneurs.
Srinivasan also brought in changes on the expansion strategy by focusing on digital channels instead of physical expansion.
“When I joined the bank, I added 600 branches in five years. In the last five and half years, I have added only 20 branches. In 2015, we stopped adding and our mantra became—branch light and distribution heavy. I believe branches should become more productive,” Srinivasan said in a recent interview to Moneycontrol.
The stock was trading at Rs 90.40, up Rs 4.75, or 5.55 percent at 12:38 hours. It has touched an intraday high of Rs 90.90 and an intraday low of Rs 87.35.
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Research and broking firm Motial Oswal has reiterated its “buy” rating on the stock with the target of Rs 110 per share.
“We see the RBI’s approval for re-appointmenting Shyam Srinivasan as MD and CEO for a period of three years as a positive development as it addresses a key overhang on the management continuity. Moreover, the approval for three years has come at a time when the street was expecting RBI to grant only a one-year extension,” the brokerage firm said.
Motilal Oswal expects a drop in collection efficiency in April-May 2021 to be similar to other banks and it remains a key monitorable in the near term. The average RoE for the bank has been around9 percent over the past six years. With earnings now gaining traction, the brokerage estimates RoE to improve to 14 percent by FY23E.
“We reiterate our buy rating with a target of Rs 110 per share (1.2x FY23E ABV+ Rs 9 per share from subs/JV). Federal Bank remains our top pick in the midcap banking space,” it said.
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