Jammu & Kashmir Bank Ltd. share price target

A regional play

Credit growth remained muted with advances at | 65170 crore, down 4% YoY, corporate book de-grew ~18% YoY to | 23461 crore. J&K; book grew 10.3% YoY to | 44277 crore while ROI book was down 14.1% YoY to | 26615 crore. Deposit traction remained healthy at 12.1% YoY to | 99691 crore, mainly driven by growth of 22.1% in savings deposit partially offset by decelerated in term deposits at 4.1%. CASA continued to remain strong with ~357 bps YoY improvement in CASA ratio at 53.57%. Amid uncertainty, credit cost continued to remain higher at | 266 crore, of...

Instability in J&K; impacted business activities thereby keeping credit offtake muted and operational performance subdued. Operating profit was at | 336 crore, down 21% YoY largely due to flattish NII and lower other income. NII came in at | 875 crore, flat YoY, due to muted credit growth & decline in margins. Reorganisation in state related slippages and thereby higher provision led to loss of | 917 crore in Q2FY20 and de-growth of 52% YoY to ~| 49.6 crore in Q3FY20. Impact on business activities and repayment ability of borrowers led to asset quality deterioration on exposure in Jammu &...

Led by moderation in slippages at | 559 crore & improving recovery of | 749 crore, absolute GNPA stood at | 6031 crore, down 3% QoQ. Accordingly, GNPA ratio improved 49 bps QoQ to 8.48%. NNPA declined 53 bps QoQ to 4.36%, on the back of higher provision during the quarter. As anticipated, provision trajectory continued to remain higher at | 293 crore, which resultant in ~231 bps improvement in PCR to 66.6%. However, higher tax outgo at | 96 crore impacted earnings trajectory which came at | 22 crore. Advances growth remain steady at 13.5% YoY at | 67950 crore with faster...

Jammu and Kashmir Bank, in a filing to exchanges, has informed the bank's board of directors, pursuant to government order, has appointed RK Chhibber as interim Chairman and Managing Director (CMD) of the bank with effect from June 8, 2019 for a tenure of three months. Consequent to the above, Parvez Ahmed, current CMD, whose tenure was to end in October 2019, has been asked to vacate the office. This move has been undertaken citing concerns regarding governance and functioning of the...

Trimming corporate book; low exposure to recently downgraded groups; RBI cited divergence-in-provisions made JKBK's earnings of Rs2.1bn (PLe:Rs1.5bn) were better than expectations as bank recorded higher Other Income pertaining to stake sale in PNB MetLife. Adjusting for stake sale, PPoP grew 56% despite spike in employee cost coming from wage provisions. Loan growth was driven by retail segment (34%YoY) and J&K; State. Bank reported NIM of 4.05% (+14bps/+86bps...

Moderate slippages at | 914 crore coupled with higher recoveries of | 1552 crore, led to a reduction in absolute GNPA by ~9% QoQ to | 6221 crore (GNPA ratio declined ~97 bps QoQ to 8.97%). However, PCR declined to ~64.3% vs. 65.8% in Q3FY19. Provision came in at | 378 crore vs. | 252 crore in Q3FY19. Divergence in provision was at | 105 crore for FY18....

Advances growth came in lower QoQ at 12.3% YoY at ~| 65027 crore, primarily led by moderation in disbursement outside J&K; state. Advances growth in J&K; continued to remain healthy at ~22% YoY Margins increased to 3.91% vs. 3.69% in Q2FY19 with strong NII growth of 13% YoY ahead of our estimates. Growth in other income came in healthy at 52% YoY to ~| 164 crore on the back of trading income, which supported topline. Therefore, PPP came in at | 425 crore, up 11% YoY and above our estimate of | 354 crore...

Strong margin improvement on back of higher yields partly due to booking of interest income from impaired assets JKBK's earnings of Rs1.03bn (PLe:1.07bn) were in-line with expectations as provisions were flattish as envisaged on back of provisions on IL&FS; exposure. Core opearting performance was encouraging with beat from NII which grew by 13% as bank booked some interest back on impaired assets helping NIMs improvement. Bank's J&K; state restructured which has been...

ICICI Securities Ltd | Retail Equity Research Absolute GNPA declined 2.8% QoQ at | 6068 crore. GNPA ratio declined ~83 bps QoQ to 9%, led by growth in advances. Slippages came at | 250 crore; lowest in last several quarters. NNPA declined 10.5% QoQ at | 2489 crore, with decline of ~74 bps QoQ to 3.91%. Standard restructured asset remained steady QoQ at | 3948 crore, with | 3847 crore related to J&K; state. Rehabilitated account (~| 4300 crore) remained stable with ~0.8% slippages in 9 months...

ICICI Securities Ltd | Retail Equity Research Absolute GNPA increased 3.9% QoQ to | 6242 crore. GNPA ratio declined ~13 bps QoQ to 9.83%, led by increase in advances. Absolute NNPA remained broadly stable at | 2782 crore, with decline of ~25 bps QoQ to 4.65%. Slippages were at | 770 crore (| 17476 crore in Q4FY18), led by a fall of three restructured accounts to NPA Standard restructured asset remained steady QoQ at | 4129 crore, with | 4019 crore related to J&K; state. NCLT exposure at | 2600 crore...

ICICI Securities Ltd | Retail Equity Research Absolute GNPA declined to | 6007 crore vs. | 6232 crore in Q3FY18. This decline along with credit growth at 14.2% YoY led to 12 bps QoQ increase in GNPA ratio at 9.96%. Slippages at | 1747 crore were highest due to four large corporates, RBI divergence of | 570 crore. Net NPA ratio increased 61 bps QoQ to 4.9% (| 2791 crore). Though PCR declined QoQ, it still continued to remain healthy at 65.83% Exposure to rehabilitated account at | 4117 crore (flat QoQ) saw |...

ICICI Securities Ltd | Retail Equity Research Slippages moderated to | 371 crore vs. | 480 crore in Q2FY18. Higher credit growth and moderation in slippages led to 79 bps QoQ decline in GNPA ratio at 10.08% (GNPA - | 6232 crore). NNPA ratio also declined 47 bps QoQ at 4.29% with steady PCR at ~69.5% Exposure to rehabilitated account was at | 4117 crore (| 4070 crore in Q2FY18) wherein the performance has remained steady PPP was better than estimate at | 382.7 crore. NII growth resumed in...

JKBK reported PAT of INR725m in 3QFY18 (+1.1% QoQ), exceeding our estimate by 3%, aided by 33.8% growth in NII. PPoP was up 30.6% YoY (4%beat), despite high opex (23.1% YoY), raising the CI ratio to 57%. Provisions of INR2.5b were 5% below our estimate. Tax rate for 3QFY18 was 45.4% (v/s40.9% in 2QFY18). NII grew ~34% YoY (+8% QoQ), led by an improvement in margins to 4%(+24bp QoQ, +103bp YoY) and a pick-up in loan growth (INR579b,+12.8%/+28.5% QoQ/YoY). NIM improved despite 27bp/55bp QoQ/YoY decline in yield on advances, as the bank shifted its treasury portfolio for growing loans.

ICICI Securities Ltd | Retail Equity Research Slippages moderated to | 480 crore in Q2FY18 vs. | 505 crore in Q1FY18, led by one large corporate exposure of ~| 300 crore. Lower recoveries led GNPA ratio to inch up QoQ 8 bps to 10.87%. IBC related exposure was at | 3524.8 crore (17 accounts). Restructured accounts were at | 6613 crore (12.9% of total advances) Rehabilitated exposure within J&K; state at ~| 4070 crore is under watch as dispensation by RBI is to end in December 2017...

(+8bp QoQ, +41bp YoY) and a pick-up in loan growth (INR513b, +5%/+8% QoQ/YoY). NIM improved on the back of a 9bp/44bp QoQ/YoY increase in spreads, as the bank's cost of funds declined 6bp/71bp QoQ/YoY. Both slippages (INR4.8b; INR5.1b in 1Q) and recoveries & upgrades (INR1.37b; INR1.9b in 1Q) moderated sequentially, leading to a 6% sequential rise in GNPA (INR59.8b, 10.87% of advances). However, PCR stood strong at 69.2% (marginal down from 70.3% in 1Q). NNPA stood at INR24.4b (4.76% v/s 4.65% of advances in 1Q). Std. restructured loans stood...

Bottomline came in at | 30 crore compared to our estimate of loss, primarily led by lower-than-expected provision at | 278.7 crore Asset quality improved sequentially with ~41 bps QoQ decline in GNPA ratio at 10.79%. The bank reported a one-time gain of | 238 crore owing to DTA, which was utilised to shore up provision coverage ratio (PCR). Therefore, PCR has improved ~3% QoQ at 70.26% including floating provision of | 349 crore. Restructured assets were at | 6415 crore vs. | 6382 crore in Q4FY17...

ICICI Securities Ltd | Retail Equity Research The management's focus on strengthening the balance sheet led to an improvement in asset quality with 64 bps QoQ decline in GNPA ratio at 11.2%. Slippages remained higher at | 648 crore but were abated by higher recoveries/upgrades at | 362 crore. PCR improved ~5% QoQ at 66.88%, including floating provision of | 349 crore The bottomline in Q4FY17 continued to remain in the red with a loss at | 554 crore, led by higher provision. Provision came in at | 768...

ICICI Securities Ltd | Retail Equity Research Jammu & Kashmir (J&K;) Bank has a dominant position in J&K; with ~65% of market share in terms of advances and deposits. For the bank, ~51% of advances and 80% of deposits are being sourced from the state. Within J&K;, the bank has been able to garner higher NIM of 6% and above, which aided overall performance. In the recent past, a slowdown in J&K; state and corporate slippage led to a moderation in credit growth as well as increased stressed asset accretion impacting profitability. However,...

ICICI Securities Ltd | Retail Equity Research The bank reported loss at | 498 crore in Q3FY17 vs. our estimate of | 162 crore loss, primarily led by higher provision during the quarter Led by unrest in J&K; and resultant impact on borrower's ability to repay, asset quality stress witnessed a surge in Q3FY17. However, slippages declined sequentially at | 191 crore in Q3FY17 compared to | 871 crore in Q2FY17. Absolute GNPA increased marginally at | 5683 crore (GNPA: 11.84% vs. 11.33% in Q2FY17). Provision...