Numbers well above expectations
J&K Bank numbers are well above our expectations. Despite system based
recognition of NPA of balance loans, slippages were contained at 1.1%
during the quarter. GNPA are flat sequentially at 1.6%. NII grew by 27%
driven by credit growth of 21% and sequential NIMs expansion of 10bps to
3.9%. PAT grew by 35% to Rs2.7bn. It made treasury gains of Rs261mn
during the quarter, even after excluding treasury gains impact bottom‐line
grew by 27%.
Asset Quality un‐impacted by system based recognition: In line with
management guidance, asset quality remained healthy even after
completion of sytem based recognition of loans with ticket size < Rs1 mn.
Slippages were contained at 1.1% and GNPA were flat sequentially at
1.6%. Provision coverage continues to remain healthy at 93.3%.
Restructuring increased by 50bps sequentially to 4.6% of loan book.
Healthy Balance Sheet Growth along with NIMs expansion: Advances
as well as deposits have grown at a decent pace of 21% and 16%
respectively. CD ratio improved by 290bps YoY to 62.4%. NIMs have
improved by 10bps sequentially to 3.9%. Further improvement in CD
ratio would help in providing support to NIMs. CASA has dipped
slightly by 50bps sequentially to 38.2%.
Excellent operational and return ratio’s: Operational matrix for the bank
is best in class. Cost‐to‐income ratio has improved by 380bps YoY to
34.3%. Return ratio’s are best among PSU peers with ROA of 1.7% and
ROE of 24.1% for the quarter.
Outlook & Valuation
At the CMP the stock is trading at 6.1x and 5.7x FY13E and FY14E earnings,
and at 1.3x and 1.1x P/ABV FY13E and FY14E respectively, which we feel to
be attractive considering the potential business growth, regional dominance,
superior quality of assets and sustainable ROE of +20%. We continue to
maintain our BUY rating on the stock revising our target price upwards from
Rs1370 to Rs1500 valuing the stock at 1.3x P/ABV FY14E and Rs. 28 for its
stake in MetLife (based on recent deal).
No comments:
Post a Comment