Question 37

Over the last five years, Bank of Bharat has seen the number of its retail customer accounts drop by over 40 percent. Over the same period, the share price of Bank of Bharat has increased by more than 80 percent. This amazed a few investors, who believe that a bank's share price should drop if its number of customers drops. Which of the following, if true over the last five years, best accounts for the observed movement in the price of Bank of Bharat's equity shares?

Solution

Loss of retail customers does not necessarily mean loss of revenue. It is important to understand that this reduction in retail customers may be by design and an organizational objective. The organization may have been trying to shift its customer base from retail to commercial and their success in doing so can account for the increase in revenue. Hence answer choice C is correct.

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