Jammu and Kashmir Bank Limited (JKBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Q2 FY 2026 Conference Call of Jammu and Kashmir Bank Limited. [Operator Instructions] Please note that this conference is being recorded. We have with us from the bank, Mr. Amitava Chatterjee, Managing Director and Chief Executive Officer, along with his management team. I now hand the conference over to Mr. Chatterjee. Thank you, and over to you, sir.

Thank you very much, Steve. A very good evening, and a warm welcome to all the investors, analysts and other stakeholders joining us today for the J&K Bank September 2025 Earnings Call. First of all, let me introduce my fellow colleagues from the bank's senior management who are accompanying me on this call. Executive Director, Shri Sudhir Gupta; our new Chief General Managers Mr. Sunit Kumar and Mr. Imtiyaz Ahmad Bhat; Retail Banking Head, Mr. Rakesh Magotra; Corporate Banking Head, Mr. Nishi Kant Sharma; Impaired Assets Portfolio Management Head, Mr. Rajesh Malla Tikoo; Chief Financial Officer, Mr. Ketan Kumar Joshi; Chief Risk Officer, Mr. Altaf Hussain Kira; and our Treasury Head, Mr. Ajay Kohli. Indian economy has exhibited marked resilience in quarter 1 of FY '25-'26 with a better-than-expected real GDP growth of 7.8%, reaching a 5-quarter high with the dual engines of growth, consumption and investment remaining strong, even though global uncertainty remains elevated in the wake of geopolitical tensions and renewed tariff-related frictions among major trading blocks. Acknowledging India's consistent outperformance amidst this challenging global environment, IMF has increased India's growth projections by 20 bps to 6.6% for 2025, while also revising the global growth forecast upwards to 3.2% for FY '25. With the domestic economy picking up momentum, the bank has also recorded a substantial improvement in its business numbers, with deposits growing by 2.4% sequentially and advances recording a 3.9% sequential growth. On a Y-o-Y basis, the bank has recorded a deposit growth of 10.2% and advances growth of 9.4%, which is broadly in alignment with our overall Y-o-Y deposit growth of 9.5% and advances growth of 10.3% recorded by all scheduled banks as on 19th September 2025 as per the latest data published by RBI. One of the highlights of this quarter has been the growth in CASA deposits at 2.8%, outpacing the growth in term deposits at 2%, resulting in an improvement in the bank's CASA ratio from 45.71% recorded on 30th of June '25 to 45.89% as on 30th September 2025. Even though the improvement may seem marginal, however, it is remarkable considering that it is after a period of 9 consecutive quarters that the bank has witnessed an improvement in its CASA ratio on a sequential basis, and it comes at a time when the industry CASA ratio has fallen from a 25-year high of over 42% in March '22 to around 36% in June 2025 as per CRISIL report. On the advances side, Rest of India book has recorded a Y-o-Y growth of 16.1% against a growth of 5.9% in Jammu and Kashmir and Ladakh, which is in alignment with the bank's vision of achieving a 50-50 split of the loan book between JKL and ROI over the medium to long term. Quarterly numbers also present a similar trend with Jammu Kashmir Ladakh recording a loan growth of 2.8%, whereas Rest of India, which at present contributes to around 30% of the total loan book of the bank, has recorded a growth of 6% for the same period. Sector-wise, Corporate and Agriculture, which together constitute around 40% of the bank's loan portfolio, have been the best performers, both on a Y-o-Y and a sequential basis, witnessing a growth of 11.7% and 27.4% Y-o-Y, respectively. In Personal Finance, which alone constitutes around 38% of the loan book, Y-o-Y growth is 6.9%. Within Personal Finance also, the Rest of India growth at 12.9% Y-o-Y is more than double that of Jammu Kashmir Ladakh that is 6.2%, again, in line with our plans of expanding our retail footprints across the rest of the country. Major growth contributors in the personal loans category are housing and car loans, constituting roughly half of the personal loan portfolio, with both recording a double-digit Y-o-Y growth in Rest of India geographical division. Profitability for the quarter has moderated on Y-o-Y basis, in line with broader industry trends, though sequential performance has still marginally improved with net profit for this quarter being recorded at INR 494 crores with a 1.9% Q-on-Q growth despite a substantially lower TWO recovery in this quarter. Moderation in profitability across the industry has been brought about by the pressure on margins as expected. After RBI's cumulative rate cuts of 100 bps, with our NIM also contracting to 3.56% for this quarter against 3.90% for the same period in the previous year. The contraction in NIM has been brought about by faster transmission of rate cuts on the lending side compared to the transmission on liability side as well as due to migration of CASA balances to term deposits. As per the RBI bulletin of September 2025, whereas the weighted average lending rate on outstanding rupee loans of scheduled commercial banks for the period February to August 2025 declined by 49 bps. Weighted average domestic term deposit rate on outstanding term deposits had declined by 17 basis points only. The impact is evident in our case also with our yield on advances declining to 9.20% for this quarter against 9.57% Y-o-Y, and cost of deposits being recorded at 4.86% for this quarter. However, we believe that the cost of deposits has now peaked and NIM has bottomed out, unless there is a further repo rate cut. Besides the aforesaid factors, which have had an industry-wide impact, our profitability in this quarter has been impacted due to reduction of other income on account of impairment provision of INR 92 crores on our investment in Jammu and Kashmir Grameen Bank, in addition to the provision of INR 87 crores made in the previous quarter. Despite taking this one-off hit of INR 180 crores during this half year, we have still posted a Y-o-Y growth of 1.3% in our half yearly net profit. If we exclude the impact of INR 180 crores, our net profit growth for the first half year would have been around 20% Y-o-Y without considering tax impact. On the cost side, our operating costs for the quarter continued to be well under control with just a marginal 2.2% Y-o-Y growth. GNPA has not only been contained but reduced to 3.32%, with GNPA on absolute terms also reducing sequentially and gross slippage ratio for the quarter on an annualized basis being below 0.90%, which is pleasing and should allay concerns around asset quality, especially in light of the disturbances affecting our core geography in the first quarter, followed by natural calamities, floods and landslides in the second quarter. Consequentially, NNPA has also been reduced to 0.76%, while PCR continues to be healthy above 90%. It is pertinent to mention here that post declaration of the unfortunate Pahalgam incident and subsequent conflict as disturbances across the UT of J&K by the government of J&K on recommendations of the Jammu and Kashmir Union Territory Level Bankers Committee, bank has formulated a special rehabilitation package for the affected borrowers, wherein the borrowers can avail relief by way of extension of repayment period, interest funding, moratorium and additional working capital. CRAR has been recorded at 15.27% with CET1 at 12.11%. This is without reckoning the net profits of half year, which has an incremental impact of more than 90 basis points. Due to the hit of INR 180 crores on account of impairment provision, the annualized return on assets and return on equity for the half year have been recorded below our guided range at 1.17% and 14.52%, respectively. Consequently, we are revising our guidance for ROA and ROE for the current financial year to reflect this exceptional and unforeseen substantial impairment provision. However, excluding this one-off item, our underlying operation -- operating performance and upward core profitability trajectory remains intact. So the market guidance for FY '25-'26: credit growth, 12%; deposit growth, 10%; CASA, 48%; NIM, 3.65% to 3.70%; ROA, 1.20% to 1.25%; ROE, 15% to 16%; GNPA, below 3%. Thank you for your time today on a Saturday evening. We appreciate your continued interest and support. We can start the questions now.

[Operator Instructions] We have our first question. It's from the line of [ Sahil Mahajan ], an individual investor.

I want to know about the current status of the GST notice of INR 16,000 crores.

Okay, Sahil. Thanks, Sahil, for this question. That GST notice has not been pursued by the GST Council. We had already obtained a stay on the notice from the court, and the court had given a time line to the GST Council to come and present their case, and they have not done it. So we are waiting for the court's judgment in all probability since they have not contested the stay. So it is definitely going to be in our favor.

Okay. And what is the number of branches going to open in this financial year? Any idea?

We have approximately -- just a second. We have a plan to open 11 branches this year. And 3 branches, which were not opened last year also, we are going to add. So close to 14 branches.

[Operator Instructions] The next question comes from the line of [ Ronak Daga ] with Kotak AMC.

So sir, I can see that you have made a provision for standard assets for negative INR 13 crores. So can you tell me the nature of the same?

Okay. That is a release of provision for nonfund exposures of NPA borrowers.

And sir, you mentioned something of the prudential provisions, I guess, in the opening remarks. Actually I missed the same. So can you just repeat on the same?

Okay. Okay. So that is something which we could not avoid. If you are aware that Ellaquai Dehati Bank, a Grameen Bank sponsored by State Bank of India, has got merged with J&K Grameen Bank, and the combined entity now is called Jammu and Kashmir Grameen Bank. So on account of the impairment of assets related to this merger, the Ellaquai Dehati Bank obviously was not doing well and it had losses. So the impairment has resulted us an additional provision of INR 92 crores this quarter and INR 87 crores last quarter. So we have been -- we have had to provide for INR 180 crores. This is a onetime event, and this was something which -- I mean, if you want to know, we are the only private sector bank in the country which has a Grameen Bank. And no other private sector bank has a Grameen Bank. And that too, we had a bank -- another rural -- regional rural bank being merged with our Grameen Bank, whereas our Grameen Bank was doing very well before that. So this is something which -- I mean, it was a policy decision by the government, and we have accepted it. And going forward, we would want to ensure that the combined entity does well in future.

So sir, this INR 180 crores you have provided in this quarter only?

No, INR 92 crores this quarter and INR 87 crores last quarter.

Okay. And just last one data keeping question. What is the normalized credit cost and CASA ratio that you are looking for in the near term?

The credit cost, I have always said it will be below 1%. So we do not foresee even after -- I mean, I just want to explain that to you. Even after what has happened through in this geography for the last 6 months, we have managed to reduce our NPAs, not only in percentage terms, but also in absolute terms. So the credit cost, as I've always maintained, will be fairly low, although there is some stress because of the natural calamities, which, again, we have the opportunity through the rehab program to ensure that they do not turn into NPAs. So the credit cost will remain low. And the second, CASA -- see, CASA, we have improved slightly. And this has happened after a lot many 8 quarters, 9 quarters. So we are into a very strong campaign for CASA growth, which has resulted this and which is in future also is going to -- we have a very strong focus in CASA growth, and we believe that we'll be able to reach the guidance number of 48%.

[Operator Instructions] We have a follow-up question. It's from the line of [ Sahil Mahajan ], an individual investor.

I want to know if there is any guidance on the total profit in this financial year.