Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jammu & Kashmir Bank Ltd (BOM:532209, Financial) reported a strong quarterly operating profit exceeding INR750 crores and a net profit of INR551 crores, marking a 44.6% YoY growth.
- The bank's CASA ratio remains robust at 48.60%, with a particularly strong performance in its home territories of Jammu & Kashmir and Ladakh.
- Advances have grown by 9.5% YoY, with notable growth in personal finance, especially housing loans, which increased by 15.6% YoY.
- The bank's cost-to-income ratio has improved, recorded at 54.56% for the quarter, indicating better operational efficiency.
- Asset quality remains strong with a gross slippage ratio below 1% and a healthy provision coverage ratio above 90%.
Negative Points
- There was a marginal increase in gross NPA and net NPA on a quarter-on-quarter basis, recorded at 3.95% and 0.85%, respectively.
- The bank experienced a decline in deposits in the previous quarter, although there was a recovery with a 4% QoQ growth in the current quarter.
- The cost of deposits increased to 4.8% due to higher accruals to term deposits, putting pressure on margins.
- The bank's advances to NBFCs have been restricted due to caution from the Reserve Bank of India, impacting growth.
- There is a potential risk of policy changes impacting growth due to the recent regime change in Jammu & Kashmir.
Q & A Highlights
Q: We have seen strong other income growth. What is contributing to that?
A: Three factors contribute to this growth: healthy technical write-off recovery of over INR90 crores, reduced staff costs due to purchasing annuities without the return on capital clause, and efficient deployment of reimbursed government pensions into investments and credit, boosting income. - Baldev Prakash, CEO
Q: What is your loan growth guidance, and which sectors will contribute to it?
A: Our loan growth guidance remains at 15%, with the loan book consisting of 70% retail and 30% corporate. Retail will dominate long-term growth. - Baldev Prakash, CEO
Q: Can you explain the ROC clause and its impact on FY25?
A: We previously purchased staff annuities with a return on capital clause, incurring a 20-25% extra premium. We've now aligned with industry practices by purchasing without this clause, reducing premiums by INR120-125 crores for FY25. - Baldev Prakash, CEO
Q: What is the status of the succession planning for the MD position?
A: My tenure ends in December, and the succession process has started. The J&K government, as the majority shareholder, selects candidates, and the Reserve Bank of India finalizes the appointment. The process is in an advanced stage. - Baldev Prakash, CEO
Q: Are there any areas of higher stress in your portfolio, and what are the SMA numbers?
A: As of September 30, SMA-0 is INR13,300 crores, SMA-1 is INR4,086 crores, and SMA-2 is INR3,000 crores. These numbers have decreased recently, and we see no significant stress, especially in larger accounts. - Baldev Prakash, CEO
Q: What is your NPA recovery and technical write-off recovery pipeline?
A: We aim for an NPA recovery of INR700-800 crores and a technical write-off recovery of over INR300 crores, with INR125 crores already recovered. - Baldev Prakash, CEO
Q: What is your cost-to-income guidance?
A: Our cost-to-income ratio is expected to be better than the 57-58% range. - Baldev Prakash, CEO
Q: How do you plan to bring down GNPA, and what is your approach to write-offs?
A: We have a calibrated approach to reducing GNPA and net NPA, focusing on disciplined recovery actions and OTSs for small loans. Our guidance is to reduce GNPA to 3.5%, and we may exceed this target. - Baldev Prakash, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
