Jammu and Kashmir Bank (JKBK) posted PAT growth of 36% YoY (7% QoQ) in
3QFY13 to INR2.9b. Core operating parameters were healthy, with NIM at 4.1%
(up 44bp YoY and 13bp QoQ), loan growth of 20% YoY (4% QoQ) and PCR of ~94%.
While slippages were contained at INR1.1b (annualized slippage ratio of 1.5%),
negative surprise came from higher restructuring of INR7.3b (2% of overall
loans). The management mentioned that the restructuring was largely on
account of four large corporate accounts worth INR4.7b.
While yield on loans declined 11bp QoQ to 12.6%, the decline in cost of funds
was sharper (down 26bp QoQ), and led to margin expansion (13bp QoQ) to
4.1%. Margins were 6% in the home state and 2.5% in states other than J&K.
Loans grew 6% QoQ within J&K and 4.5% QoQ in other states. Overall loans
grew 20% YoY.
CASA growth was strong at 7% QoQ and 15% YoY, led by 7% QoQ (17% YoY)
increase in SA deposits. CA deposits grew 10% QoQ (9% YoY). CASA ratio
improved to 39.4% v/s 38.2% in 2QFY13.
Valuation and view: JKBK continues to deliver healthy performance on business
growth and NIM. Some of the core operating parameters like CASA ratio of ~40%,
NIM of 4% with the lowest CD ratio of 62%, PCR of 94%+ and RoA/RoE of 1.5%+/
21%+ remain the best in the industry. While the sharp increase in restructured
loans came as a negative surprise, the management stated that these were
technical and no NPV hit was taken. Further, it does not expect significant
restructuring going forward, which provides some comfort. Maintain Buy.
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