Jammu and Kashmir Bank - 3QFY13 Results Update - Motilal Oswal

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.

Source : Equity Bulls

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