J&K Bank Q2 net profit rises 12%

Better margin, higher interest income drive earnings growth

Jammu & Kashmir (J&K) Bank today said its net profit for the quarter ended September 30, 2013 increased by 12.3 per cent from a year earlier to Rs 302.7 crore as it earned more interest income, improved its margin and kept asset quality stable.

Net interest income, or the difference between interest income and interest expense, grew by 23.4 per cent from a year ago to Rs 681.8 crore during the three-month period. Net interest margin improved 39 basis points year-on-year to 4.33 per cent at the end of the second quarter on account of better liability management.

"Despite stressed economy, we feel confident by our results. Going by the current industry scenario, we have performed really well. Our focus for the last two quarters has primarily been driven by twin objectives of sustaining growth and maintaining a quality asset book. So far, we have pulled it through," Mushtaq Ahmad, chairman and chief executive officer of J&K Bank, said in his post-earnings comments.

The gross non-performing asset ratio was 1.69 per cent, while the net bad loan ratio was 0.19 per cent for July-September period. The non-performing asset coverage ratio was 92.06 per cent at the end of the quarter.

Advances increased by almost 20 per cent year-on-year to Rs 41,120.8 crore. Deposits were up 11.4 per cent from a year earlier at Rs 61,171.2 crore.

"This year, we have already opened five business units in Bangalore, Delhi and Hyderabad. We are prospectively looking at opening 15 more such units this fiscal in Maharashtra, Kerala, Karnataka and Delhi. Our corporate loan book outside the state shall grow, though on a very selective basis," Ahmad said.

Friday, J&K Bank shares ended at Rs 1,293 on the National Stock Exchange (NSE), up 1.2 per cent from previous close. "At the current market price, the stock is trading at a higher end compared to peers, which factors in its better asset quality performance vis-a-vis peers even in a challenging macro environment. Hence, we maintain our neutral recommendation on the stock," Vaibhav Agrawal, vice-president for research - banking at Angel Broking, said in a note to clients.