Brokerages See Sandeep Bakhshi As De Facto CEO Of ICICI Bank

Most brokerages are seeing Sandeep Bakhshi as the de facto interim chief executive officer of ICICI Bank in the absence of current CEO Chanda Kochhar.

The Mumbai-based bank’s board accepted Kochhar’s request for leave while a panel continues to examine an anonymous complaint which alleged that she failed to comply with ICICI’s code of conduct in dealing with certain borrowers. The board named Bakhshi--who was serving as the MD and CEO of ICICI Prudential Life Insurance Company--as its COO for five years.

Kochhar, who the bank had earlier said was on a planned annual leave, will continue in her role as managing director and chief executive officer. While Bakhshi will report to Kochhar, during her leave Bakhshi will report to the board, the bank said.

Brokerages expect the management bandwidth to shift to business operations and earnings turnaround. “For now, perhaps the board has found a safe middle ground,” Jefferies analysts wrote in a note.

Here’s what brokerages are saying:

IDFC

• Win-win for both ICICI Bank and ICICI Prudential.
• See Bakhshi as the de-facto interim CEO.
• Believe Bakhshi will continue with the existing policies of the bank.
• ICICI’s board has ensured smooth business continuity and addressessed concerns on succession planning.
• See today’s announcement as positive as focus to move back on the earnings turnaround at the bank.
• Maintain ‘Outperform’, with target price at Rs 370.

Jefferies

• Bakhshi’s 32 years of work at bank under different verticals should aid smooth transition.
• Wonder under what circumstances three-tier structure at bank might end, as COO role seems unnecessary in the long-term.
• Likes bank on gradual improvement in operating environment, decline in fresh bad loans and cheap valuation.
• Maintain ‘Buy’, with target price at Rs 380.
• Also retain ‘Buy’ on ICICI Prudential, with target price of Rs 520.

Citi

• Appointment makes Sandeep Bakhshi the de facto CEO.
• Should significantly reduce uncertainty regarding management continuity.
• Core banking business trading at 0.9 times FY20 book value estimate.
• Maintain ‘Buy’, with a target price of Rs 390.

Fitch

Saswata Guha of Fitch Ratings, however, told BloombergQuint in an interview that while the new appointment is a positive move, he would wait for outcome of investigations against Kochhar.

Chanda Kochhar’s Term At ICICI Bank

Chanda Kochhar took over as the CEO of ICICI Bank from KV Kamath in May 2009, having already spent 25 years at the bank. Her tenure began at a time when the bank was battling an increase in bad loans in the aftermath of the global financial crisis.

After spending her early time as chief of the bank cleaning up the retail loan book, Chanda Kochhar shifted focus to the corporate loan book to try and take advantage of a surge in infrastructure investments in the country. This led to rapid growth in the bank’s loan book but has, since then, led to a surge in bad loans too.

Since March 2009, the bank’s loan book has more than doubled from Rs 2.2 lakh crore to Rs 5.12 lakh crore at the end of 2017-18. Its gross non-performing assets have risen from 4.32 percent in March 2009 to 9.90 percent as of March 2018. The bank, like other lenders, has seen bad loans surge following the RBI’s asset quality review initiated in 2015 to help snuff out under-reported stressed assets.

While announcing the bank’s January-March quarter results, Kochhar had said that the bank was going to base its future growth strategy on increasing the share of retail loans on its loan book, while continuing to reduce the share of foreign loans to less than 10 percent by March 2020. The bank also aims at reducing its NPA ratio to below 1.5 percent within the next two years.

In the process of cleaning up its books, the bank has lost its tag of being the largest private sector lender to HDFC Bank, which now has a larger domestic loan book.

ICICI Bank has also given lower returns to shareholders compared to HDFC Bank. ICICI’s standalone price-to-book ratio has remained below other private sector peers like HDFC Bank and Kotak Mahindra Bank.

Shares of ICICI Bank fell 0.4 percent to Rs 291 apiece on the NSE as of 10:30am. The stock has fallen 6.7 percent year-to-date compared with a 3.4 percent gain in the NSE Nifty Bank Index and 2.6 percent advance in the benchmark Nifty 50 Index over the same period.