No Bottomline Growth, Dividends For 18 Months: J&K Bank

Srinagar: Current unrest in the Valley has further complicated the financial situation, J&K Bank chairman Parvez Ahmad said on Monday and warned that there would not be any bottomline growth in the next 18 months, resulting in "no dividend, no tax provisions and no contribution to the CSR". 

The banking industry is passing through very tough times due to the economic slowdown as well as the prevailing political environment and the bank expects "slippages" in the coming months, he said.

"Our September numbers shall be unveiled in a couple of weeks and we expect further slippages in our portfolio because some of our assets, which have been restructured and under the stress, are not turning around... These slippages will continue further in the coming quarters also," Mr Ahmad told reporters at his first interaction with the media after assuming the charge of the chairman of J&K Bank.

Banking industry in India is crippled with huge stress and many have an alarming level of non-performing assets (NPAs) of close to 20 per cent, he said, adding, "Ours is also in the range of 9.3 per cent on the basis of numbers as on June 30, 2016."

Mr Ahmad said the situation has become further complicated on account of the unrest in Jammu and Kashmir.

"So, in the given circumstances, we feel that against a profit of Rs 460 crores, which we have registered during the previous financial year, there will be no bottom-line growth during the current fiscal and also this may continue in the second half of next financial year."

"There will be no dividend, no tax provisions (and) no contribution to the CSR for the next at least one-and-a-half year," he added.

He said, however, that the bank will focus on recovering bad loans and minimising losses in the next 18 months. 

J&K Bank's non-performing asset (NPA) coverage ratio, which was considered one of the best in the industry, has diluted considerably during the last two-and-a-half years, he said.

From 94 per cent, it has come down to 50 per cent and with further losses, there are chances, he said, adding, "If we will not provide sufficiently and effectively in the balance sheet, the coverage ratio will come down."

Mr Ahmad said the losses would have an impact on the network, which would also require the Bank to augment its capital base. 

"So, our focus will remain now on consolidation and cleaning of the balance sheet for the next 4-6 quarters with a moderate growth, without compromising on the quality, in the range on 10-15 per cent," he added. 

"Once we are sure that we are done with the cleaning of the balance sheet, we will again revive the growth trajectory and also ensure that we return to the good old numbers." 

He said the bank has designed a strategy for NPA recovery. 

"The NPAs are in the range of around 10 per cent coupled with the stressed assets portfolio which is around 10 per cent more, that takes it to 20 per cent of our portfolio."

Elaborating the strategy, Mr Ahmad said: "We will be reducing our impaired exposure in the stressed asset portfolio through legal recourse, one-time settlements and through the asset reconstruction company."

The NPAs of J&K Bank, its chairman said, are mostly from outside the state.

"NPAs are mostly, almost 80 per cent, from the rest of India. We are not pin-pointing at a particular person only because the decisions have been taken at various levels at the board level, at the managerial level," Mr Ahmad said.
He said it was essential for the JK Bank to take forward the agenda of economic empowerment of the state and hence the state would not be a part of the process of consolidation and cleaning of the balance sheet.

"When I said that we will be focusing both on consolidation and cleaning of the balance sheet and growth, I was referring to, since 80 per cent of our NPAs are coming from rest of India, so the consolidation and the cleanup will take place in respect of the rest of India," he clarified.

The NPAs are also on account of the global environment, there is now a slowdown, Ahmad said, refusing to make public such account holders.

He assured however that stakeholders' investments are safe.

"I am sure that with these measures and with the moderate growth of 10-15 per cent in the next four to six quarters, we will be reviving the growth path and assure our stakeholders that their investment is safe with the JK Bank and we are sure that they will be also registering a decent return on their investment," Mr Ahmad said.

"With the strengthening of the balance sheet, we will be also focusing on the upgradation of our services, continuous updation of the product offering and creating an environment- driven product offering in line with the national and international standards," he added.

Mr Ahmad said the bank would not stop its growth but instead of registering a growth of 25 to 30 per cent, which is not happening at present, he would like to moderate it. 

"I would like to moderate those targets in the range of say 10-15 per cent. But at the same time, once I built a strong platform for the growth, I will like to grow more aggressively both in JK and the rest of India," he said.

He said that as the new chairman of the bank, he has taken over both its assets and its liabilities.

"It is my primary responsibility to manage the safety and security of the funds invested in JK bank. The expectations are very high in the sense that if the NPA levels are not manageable, it becomes very difficult for us to focus on the stability as well as the growth," he said.

"I need the stability of the institution in the first instant and once I build a platform for the safety and stability of my institution, then it will be very easy for me to look for a growth trajectory which will take care of the losses which we suffer in the first one-and-a-half year,"  he said.

Mr Ahmad said the bank is passing through a very tough situation and there were difficult challenges in the state but it can manage through the situation.

"Please understand that the whole team has been managing growth in this fragile environment for the last two decades. So, we are highly trained to manage these kind of situations," he said.

"NPA part will be taken care of but not the growth part," he added.