Jammu and Kashmir Bank Ltd. shares fell nearly 8% on Friday, despite the lender reporting a 10.6% year-on-year rise in September-quarter net profit, as questions over future provisioning requirements and the pace of core income growth remain in focus.
The stock fell to Rs 124.48, down 7.8% from its previous close of Rs 135.08, and traded near its intraday low. The decline came a day after the bank reported its quarterly results and held an earnings conference call on Oct. 22.
The bank's standalone net profit rose to Rs 546.36 crore from Rs 494.11 crore a year earlier. Net interest income (NII), the difference between interest earned and interest paid, increased 5% to Rs 1,502 crore. Other income more than doubled to Rs 314.90 crore from Rs 153.76 crore.
ECL Concerns
The potential impact of the expected credit loss (ECL) provisioning framework emerged as a key issue during the conference call.
An analyst questioned the bank's preparedness, citing the level of special mention accounts and its relatively low credit costs. The analyst also sought clarity on the potential one-time impact of the transition.
Management said the ECL model was almost ready and would be placed before the board in December. It expects the impact to be below the industry average and said the bank has a buffer of around Rs 300 crore.
However, management did not quantify the one-time impact, saying it would provide a range in December.
NII Growth
NII growth remained modest compared with the 23.7% year-on-year increase in gross advances to Rs 1.34 lakh crore. Total deposits rose 16.3% to Rs 1.77 lakh crore.
Management attributed earlier pressure on net interest margins (NIM) to high-cost deposits and competitive lending rates. It said the bank had shed most of those deposits and expected NIM to improve substantially over the next two quarters, but declined to provide a numerical forecast.
READ | J&K Bank Q2 Results: Net Profit Rises 11% To Rs 546 Crore, Asset Quality Improves
Capital Raise
The bank plans to raise Rs 1,000 crore through equity and Rs 500 crore through debt, management said during the call. The debt issue is expected in the current quarter, while the timing of the equity raise will depend on market conditions.
Asset quality improved sequentially. Gross non-performing assets fell to 2.23% from 2.37% in June, while net non-performing assets declined to 0.51% from 0.60%.
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