Company Update - Jammu & Kashmir Bank - ICICI Securities

J&K Bank reported weak set of numbers wherein muted topline coupled with higher provision and tax dented earnings. On the back of muted advances and margins, NII growth was flattish at Rs. 904 crore vs Rs. 902 crore in Q1FY20. NIMs were down ~34 bps YoY to 3.56% on account of lower yields. Other income was down 35% YoY to Rs. 120 crore, due to sluggish fee income growth. Decline in other income was partially offset by stable opex, thus leading to 20% YoY decline in operating profit to Rs. 331 crore. Higher provision and tax outgo marred PAT at Rs. 6.5 crore, down 70% YoY.

Valuation & Outlook

General slowdown and cautious approach would keep business growth moderate in the near term. Moderate growth in advances coupled with pressure on yields is expected to lead to a weak operational performance. Higher PCR at ~80% provides comfort but credit cost is expected to remain elevated keeping return ratios subdued. Divestment of non-core assets, including stake in PNB MetLife (expected to fetch ~Rs. 360 crore) is under way to shore up capital. Further, raising via fresh issuance will shore up capital adequacy but at the current price will lead to substantial dilution for existing shareholders. We value the bank at ~0.25x FY22E ABV and arrive at a target price of Rs. 18/share. We upgrade the stock to HOLD recommendation.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_JKBank_CoUpdate_Sep20.pdf

Shares of JAMMU & KASHMIR BANK LTD. was last trading in BSE at Rs.17.3 as compared to the previous close of Rs. 17.75. The total number of shares traded during the day was 93410 in over 204 trades.

The stock hit an intraday high of Rs. 18 and intraday low of 17.25. The net turnover during the day was Rs. 1632276.

Source : Equity Bulls

Keywords