Federal Bank Shares Decline Over 6% Amid Leadership Speculations

20 Feb 2024 , 11:14 AM

Federal Bank shares witnessed a sharp decline of over 6% to touch an intraday low of ₹149.15 on the NSE during early trading on February 20. The slump in trade comes amidst reports of leadership reshuffling and speculation surrounding the appointment of the bank’s next managing director and chief executive officer.

The dip in share prices follows the recent re-designation of KVS Manian as the joint managing director of Kotak Mahindra Bank, a move that reportedly derailed Federal Bank’s consideration of Manian as a potential successor to Shyam Srinivasan.

Earlier reports had suggested that Federal Bank was exploring internal candidates along with KVS Manian from Kotak Mahindra Bank for the top leadership role. However, with the Reserve Bank of India (RBI) rejecting Federal Bank’s plea to extend Srinivasan’s tenure by one year, the bank found itself in a challenging position.

Srinivasan, who has been at the helm of the Aluva-based private sector lender since 2010, was eligible for an additional year according to RBI guidelines. However, with his current term set to end on September 22, 2024, the bank was compelled to seek alternatives.

In its latest regulatory filing, Federal Bank disclosed the allotment of equity shares under the Employee Stock Option Scheme (ESOS) 2017 Scheme, indicating ongoing internal organizational processes.

Despite the leadership uncertainties, Federal Bank reported a notable 25.24% year-on-year increase in net profit at ₹1,007 crore for the quarter ended December 2023, bolstered by a significant 61% surge in other income. Additionally, the bank’s net interest income (NII) for the quarter rose to ₹2,123 crore, marking an 8.48% increase compared to the same period last year.

On the stock market front, Federal Bank shares have witnessed a 21% rise over the past year. However, the recent speculation surrounding leadership transitions has triggered short-term volatility, contributing to the decline witnessed in early trading on February 20.