Why Shares of Bandhan Bank Are Trending Higher: Key Things to Know

Introduction: A Surge Amidst Market Volatility

On Friday, shares of Bandhan Bank surged over 9%, despite the high volatility in the broader markets. The stock opened with a gap-up and quickly reclaimed its 20-day moving average (DMA), registering a significant trading volume of 4.87 crore shares on the NSE during the initial trading hour. This sharp upward movement has raised questions about the reasons behind the surge.

Let’s dive into the key factors driving this positive momentum for Bandhan Bank.

New Leadership Brings Renewed Optimism

The primary catalyst for the stock’s rise is the appointment of Partha Pratim Sengupta as the new Managing Director and CEO of Bandhan Bank. A veteran banker with extensive experience at State Bank of India (SBI) and Indian Overseas Bank (IOB), Sengupta’s appointment has been well-received by investors. The market views this leadership change as a critical step in providing stability and strategic direction for the bank.

The Reserve Bank of India’s (RBI) approval of his appointment further solidified investor confidence. With a seasoned leader now at the helm, concerns about leadership uncertainty have been alleviated, sparking positive sentiment in the stock.

Finalization of Credit Guarantee Claims: A Positive Development

In addition to the leadership change, Bandhan Bank has provided an update on its claims under two key schemes managed by the National Credit Guarantee Trustee Company (NCGTC) – the Credit Guarantee Fund for Micro Units (CGFMU) and the Emergency Credit Line Guarantee Scheme (ECLGS).

The bank insured a loan portfolio of approximately Rs 20,807 crore under CGFMU for FY21, with 85% of these loans already repaid. A settled claim for Rs 916.61 crore in 2022 and an additional claim of Rs 1,296.32 crore for FY24 has led to the payout being finalized at Rs 1,231.29 crore. This settlement, with a further Rs 314.68 crore still pending, removes another overhang on Bandhan Bank’s financial performance.

These recoveries will be reflected in the bank’s upcoming financials, further bolstering its balance sheet. The completion of the forensic audit and the release of funds have been viewed as a significant positive by market participants, who had been concerned about the potential impact of delayed recoveries.

Positive Stock Performance of Bandhan Bank

Despite the broader market’s volatility and Bandhan Bank’s year-to-date (YTD) decline of 15%, the stock has managed to recover slightly in October, showing an upward movement of over 2%. This latest rally can be attributed to the resolution of key uncertainties, both in leadership and in CGFMU recoveries.

The market’s positive response to these developments reflects investor confidence in the bank’s ability to overcome challenges and pave the way for a more stable future.

Conclusion: Bandhan Bank on the Path to Recovery

The recent surge in Bandhan Bank’s share price is primarily driven by the strategic appointment of a new MD and CEO and the settlement of significant credit guarantee claims. These developments have addressed some of the key concerns investors had about the bank’s future performance.

While the stock has faced challenges in 2024, these latest moves offer a glimmer of hope for recovery and growth in the near future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.