On Monday, global rating agency Fitch expressed doubts about the corporate governance standards at ICICI Bank, amid allegations of impropriety against Chanda Kochhar
Fund managers at domestic mutual funds are closely watching the developments at ICICI Bank and Axis Bank, as the two major private sector lenders grapple with leadership issues.
As on December 31, 2017, domestic mutual funds owned 22.62 percent in ICICI Bank and 9.5 percent in Axis Bank.
Fund managers who spoke to Moneycontrol on conditions of anonymity said there was no cause for panic at the moment. They, however, would wait for clarity before investing further in both stocks.
ICICI Bank shares have fallen around 7 percent over the last month, compared to a 2 percent rise in the Bank Nifty. Axis Bank shares have risen too over the last month.
"We are little skeptical on the way things are turning out in these banks,” said the chief executive officer of a fund house.
The CEO said the ICICI Bank board’s initial decision to give a clean chit to Chanda Kochhar in the controversy surrounding the loan to the Videocon group, may have been a bit hasty. Media reports over the last couple of days suggest the board is divided in its support for Kochhar.
On Monday, global ratings agency Fitch expressed doubts about the corporate governance standards at ICICI Bank, amid allegations of impropriety against Chanda Kochhar.
Over the past two weeks, top ICICI Bank board members have responded to queries and held conference calls with several investors, assuring them that the bank adheres to corporate governance standards and that internal investigations are being carried out.
Some management officials have reportedly been participating in the reassuring investors - excluding CEO Chanda Kochhar, who has chosen to maintain complete silence on the matter.
In the case of Axis Bank, MD & CEO Shikha Sharma stepped down after the RBI questioned the bank’s board decision to extend her term by another three years starting June this year. Sharma will be staying in her role till December to ensure an orderly transition. So far, it is not clear who will be replacing Sharma.
Over the last many months, there had been persistent speculation about Sharma quitting Axis Bank. So much that Axis Bank had to issue a statement denying the rumours.
Last month, there were reports in a section of the media that Deputy Managing Director V Srinivasan had resigned from his position some weeks back. Axis Bank has termed the reports ‘speculative’.
The next trigger for both banks from a stock market perspective, will be the fourth quarter earnings. Market expectations from both banks are muted, given the bad loan problem in the sector appears to be far from over.