Money & Banking

In his new role as CEO, Sumant Kathpalia to face several challenges at IndusInd Bank

Surabhi Mumbai | Updated on February 29, 2020

The appointment of Sumant Kathpalia as the Managing Director and CEO of IndusInd Bank comes at an interesting time.

The current incumbent, Romesh Sobti, has been the bank’s CEO since 2007-08, and analysts say there have been a lot of concerns in the recent past about the lender’s asset quality, CEO succession, and adverse macro developments (Supreme Court ruling on telecom AGR).

“The Reserve Bank of India’s approval addresses one of the major overhangs on the stock performance, prompting us to assess the investment case as IndusInd Bank navigates through residual asset quality challenges,” said Motilal Oswal in a research note on Friday.

The private sector lender had, on Thursday, announced that the RBI has approved Kathpalia’s appointment as the MD and CEO for a three-year period from March 24.

His appointment was in line with the expectation that the bank would recommend an internal candidate to the RBI as Sobti’s successor.

Kathpalia, who works out of the bank’s New Delhi office, has been associated with the lender since 2008. He heads the consumer banking division, which forms 54 per cent of the bank’s total loan portfolio. He is seen as being responsible for building the bank’s retail franchise.

A Chartered Accountant, Kathpalia has more than 20 years of experience in banking, and has worked with foreign banks such as Citibank and Bank of America. Prior to joining IndusInd Bank, he was the Head, Consumer Banking, ABN AMRO Bank.

IndusInd Bank had reported a 32 per cent increase in net profit at ₹1,300.20 crore in the third quarter of the fiscal, but its provisions surged and asset quality was a concern. Its gross non-performing assets (NPAs) rose to 2.18 per cent of the gross advances at the end of December quarter of the current fiscal against 1.13 per cent at the end of the same period a year ago.

Moody’s rating

Earlier this month, rating agency Moody’s had affirmed the lender’s ratings, but changed its outlook to negative over the risk of further asset quality deterioration.

On concerns over its exposure to Vodafone, the bank had, on February 17, clarified this in an exchange filing without naming the telecom company.

“The bank has a loan exposure of ₹995 crore, which is standard. The bank also has a non-fund exposure in the nature of bank guarantees of ₹2,409 crore. The entire exposure is secured,” it had said.

On Friday, IndusInd Bank scrip closed 1.04 per cent lower at ₹1,104 apiece on the BSE.

Published on February 29, 2020

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