FINANCIALS: The Interest Income of J&K Bank has posted CAGR growth of more than 14% during FY05-FY10, Net Interest Income (NII) and Net Profit of the company has also grown by 13% and 35% respectively in the same period. In FY10 the Interest Earned Income of Bank rose by 2.3% to Rs 3056.88 crore over FY09, NII also surged by 11.9% to Rs 1119.34 crore, J&K Bank has also reported more than 25% jump in Profit after Tax to Rs 512.38 crore over FY09. In Q2FY11 the Interest Earned Income of the bank surged by 22%, NII and PAT also grew by 53% & 21.60% respectively. The NIM & PATM of J&K Bank for the same period were 3.66% & 18.16% respectively.
INVESTMENT GROUNDS
Industry Outlook
Banking Sector is always being playing the key role in the growth of the Indian economy and an ample liquidity in the banking system is always being the exigent task for the RBI. RBI has taken steps many times to squeeze the unusual liquidity condition in the Indian financial system since November. In its latest mid term monetary policy review RBI has left the repo and reverse repo rates unchanged to 6.25% and 5.25% respectively, CRR also retained at 6%. The policy review was lined with the expectations but in forthcoming meetings RBI is planning to raise the rates and may be around 25-50bps in upcoming quarters. RBI has maintained key policy rates unchanged but to encourage banks to increase their lending it cut SLR by 1% to 24%. Reducing SLR is more of a comfort given to banks when loan demand is rising, it is a signal to banks to lend more instead of holding huge SLR. Tight liquidity and slowing deposit growth may have deterred banks from the aggressive lending needed to boost economic growth.
Advantage of Regional Spread
J&K Bank is enjoying the advantage of regional spread across the state of Jammu & Kashmir provenance. Currently it is dominating the region with the total number of 380 branches & 220 ATMs. Bank has largest number of account holders and branches spread almost in every block of Jammu & Kashmir region. It caters around 3.7 million customers through it branches and having a kind of Monopolises Business in the region. It holds market share of 87% in total advances and 70% in the total deposits held by the all banks in this region.
Balanced Loan Distribution to minimize the evasion risk
J&K Bank has maintained a balanced distribution of advances to different section of the society. In Jammu & Kashmir area it has lend 25% of its total loan to Government and 22% to corporate sector, and remaining 53% is almost equally distributed in Agriculture, Personal, Trade and to Small Medium Enterprises. On the national level J&K Bank has distributed major portion of its advances to corporate sector which accounts 60% of the total advances. This well balanced loan distribution loom is also maintaining a good quality of source income.
Healthy Business Growth
J&K Bank has managed to record a healthy growth in all its business mix. The bank has achieved the CASA ratio of more than 41% in Q2FY11 from 37.84% in Q1FY11. Bank has also maintained its most sensitive margin (NIIM) above 3% since last three years to 3.66% in Q2FY11. The bad assets (NPA) of the J&K Bank are at encouraging level of 0.13% in Q2FY11 from 1.38% in Q2FY10. J&K Bank has also given impressive rate of return on Equity and Assets It has given return on equity of more than 18% in last two years and more than 16.5% in previous two years The Return of Assets also consistently grown to 1.34% in Q1FY11 which was always being above 1% in last four years.
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