Jammu & Kashmir Bank conducted a concall on 22 January 2024 to discuss the financial results for the quarter ended December 2023 and prospects of the bank. Baldev Prakash, MD&CEO of the bank addressed the call:

Highlights:

The business performance of the bank is inline with the industry with healthy growth in the advances. The advances growth was robust at 15.6% end December 2023. The deposit growth was lagging at 9%, but the bank still has headroom for rapid growth with low credit deposit ratio.

The CASA deposit ratio of the bank is holding above 50% mark.

The loan growth is broad based both on the geographical count as well as sectoral count.

J&K loan book has increased by 12%, while rest of India book has grown at 19%.

The fresh slippage ratio has been low at 1.29% for 9MFY2024, helping to reduce gross NPA ratio to 4.84%. The net NPA ratio is below the year end target at 0.83%.

The bank has witnessed upgrades of Rs 100 crore in the restructured loan book in Q3FY2024.

The bank has created additional provisions of Rs 118 crore in Q3 over and above regulatory requirements. Provision coverage ratio has increased to 91.6%, while reducing the net NPAs to Rs 741 crore end December 2023

The bank is holding extra provisions of Rs 113 crore on standard advances and another Rs 124 crore of floating provisions.

The credit cost was negligible in Q3 and is expected to be remain near zero in Q4FY2024 and FY2025.

The bank has raised equity capital of Rs 750 crore in Q3FY2024.

The profits for 9MFY2024 add 138 bps to capital adequacy ratio.

The cost of deposit is expected to remain stable at 4.75% to 4.85% in Q4FY2024 and 4.6% for FY2024.

The bank has made recoveries in written off accounts of Rs 130 crore in 9MFY2024, while it is targeting another Rs 150 crore of recoveries in Q4FY2024 taking overall recoveries to more than Rs 250 crore in FY2024 as compared to Rs 230 crore in FY2023.

The overall noninterest income of the bank is expected to be about Rs 950 crore against Rs 750 crore in FY2023.

The bank had appointed consultant to review its employee provisioning which are in line with the IBA provisioning. It was observed that bank is holding excess gratuity provisions. The bank has not reversed any provisions held till March 2023. However, the bank has reversed provisions of Rs 67 crore created in Q1 and Q2, while it has not created any additional provisions in Q3 and no further provisions are required for Q4FY2024.

The bank expects its overall employee cost to be lower in FY2025 than in FY2024.

About 5000 employees are under the pension benefit scheme and 7000 employees are under NPS scheme. As per the bank, about 6000 retired employees are drawing pension.

The bank takes annuity with retirement corpus loss option which is high cost and it is no longer required from next year onward substantially reducing the cost.

The retirement of high cost employees in next 2 to 3 years would further support cost to income ratio. About 1500 high cost employees are expected to retire in next 2-3 years.

The bank has maintained the guidance of net interest margin of 3.75%to 3.9% for Q4FY2024.

The credit growth is expected to be at 15-17% for FY2025. The bank aims to raise the credit-deposit ratio to 72% by March 2024 and 75% by March 2025.

The high costs of deposits of Rs 10000 crore are maturing soon helping to keep cost of deposit in check.

The bank is focusing on digitalization and more staff would be diverted to marketing and sourcing.

The tax rate is expected to be at 26% for FY2024.

Cost to income ratio would be below 50% by FY2028.

The bank aims to raise RoA to 1.3 to 1.4% by FY2028.