Jammu & Kashmir Bank - Result Update - Kotak

Q4FY12 Results: Strong Quarter

- NII came at Rs.5.16 bn (24.1% YoY), ahead of our expectations, on back of strong loan growth (26.3% YoY) and improvement in NIM (14bps YoY). Net income growth was even stronger (50.2% YoY) due to decline in opex (7.6% YoY) along with only moderate rise in provisions & contingencies.

- Muted non-interest income (2.7% YoY) at Rs.1.22 bn during Q4FY12 came on the back of lower trading profit (decline of 55.2%) which fell from Rs.227 mn during Q4FY11 to Rs.102 mn during Q4FY12.

- Balance sheet grew at healthy pace - loan book and deposits grew at 26.3% and 19.4%, respectively during Q4FY12. Its liability franchise improved marginally both YoY as well as QoQ, unlike the industry trends (CASA mix improved by 50 bps QoQ/20 bps YoY to 40.7% at the end of Q4FY12), positive in our view.

- Its asset quality continues to remain amongst the best in class - gross NPA and net NPA improved QoQ to 1.54% and 0.15%, respectively (Q4FY12). Its coverage ratio is also one of the best and now stands at 90.5% (93.8% including technical W/O) providing cushion to its future earnings during rainy days (future deterioration in asset quality).

- At the current market price of Rs.861, stock is trading at 4.6x its FY13E earnings and 0.9x its FY13E ABV. We retain BUY rating on the stock with unchanged TP of Rs.1060 based on 1.1x its FY13E ABV.

Source : Equity Bulls

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