Jammu & Kashmir Bank - 1QFY2013 Result Update - Motilal Oswal

J&K Bank's 1QFY13 PAT grew 35% YoY to ~INR2.5b. Healthy NII growth of ~23% YoY coupled with containment of opex (up 14% YoY) and lower provisions (INR504m v/s INR843m in 4QFY12 and INR445m in 1QFY12) boosted bottom-line.

Key Highlights:

- Reported margins declined 6bp QoQ to 3.8%. While cost of deposits increased 52bp QoQ to 6.9%, higher yield on loans (+22bp QoQ) and investments (+27bp QoQ) helped bank to contain margin fall.

- In 1QFY13, bank shifted its loan portfolio between INR1m and INR5m to system based NPA recognition. However despite that slippages were contained to INR857m (annualized slippage ratio of 1.3% as compared to 1.2% in FY12).

- In 1QFY13, the bank restructured loans of INR400m, taking the outstanding restructured loan portfolio to INR13.7b, 4.1% of overall loans.

- During the quarter bank made provision for contingencies of INR239m taking the cumulative number to INR800m, which the bank intends to utilize in case asset quality comes under pressure.

- Loans and deposits grew 26% and 23% YpY respectively and remained flat QoQ. CD ratio improved marginally by 60bp QoQ to 62.6%. CASA ratio declined 200bp QoQ to 38.7%.

Valuation and view: JKBK continues to deliver healthy performance on business growth, margins and asset quality. While shifting to system based recognition of NPA and strong growth in corporate segment outside J&K remains a risk to asset quality, strong margins of 3.7-3.8% and PCR of 94% would provide cushion. Maintain Buy.

Source : Equity Bulls

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