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

Ladies and gentlemen, good day, and welcome to Jammu and Kashmir Bank's Q4 and FY '26 Conference Call hosted by Emkay Global Financial Services Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinion and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Dama from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Yes. Thank you, operator. Good evening, ladies and gentlemen. I welcome you all to Jammu and Kashmir Bank's Post Results Conference Call for Fourth Quarter of Financial Year 2026, hosted by Emkay Global. From the top management, we have with us Shri. Amitava Chatterjee, MD and CEO; and other top management. First, I would request the MD, sir, to briefly summarize the key highlights from Q4 FY '26 results and also provide some strategic direction on growth, margins and asset quality, post which we will have the Q&A session. Over to you, MD, sir.

Thank you, Anand ji. I'm audible, I suppose.

Yes, sir. You're audible.

A very good evening, and a warm welcome to all the investors, analysts and other stakeholders joining us today for the Jammu and Kashmir Bank March 2026 Earnings Call. And as mentioned, I would definitely be brief. Before starting with the numbers, let me introduce my fellow colleagues from the bank's senior management who are accompanying me on this call: Executive Director, Mr. Sudhir Gupta; Chief General Managers, Mr. Sunit Kumar; Mr. Imtiyaz Ahmad Bhat; and Mr. Ashutosh Sareen; Retail Banking Head, Mr. Rakesh Magotra; Corporate Banking Head, Mr. Suresh Kumar Chowdhary; Impaired Assets Portfolio Management Head, Mr. Irfan Anjum; Chief Financial Officer, Mr. Ketan Kumar Joshi; Chief Risk Officer, Mr. Altaf Hussain Kira; and our Treasury Head, Mr. Ajay Kohli. Financial year 2026 marks yet another milestone year for the bank's -- for the Bank, as we have fulfilled our promise and delivered a fourth consecutive year of record annual profitability, posting a net profit of INR 2,363 crores for the financial year. What sets this achievement apart and makes it more special is the backdrop in which it has been achieved as FY '25-'26 was laced with frequent challenges, especially in our core geography of Jammu and Kashmir besides global uncertainties. The ability to sustain the trajectory in this challenging environment is a reflection of a structurally stronger and a resilient franchise that has been built over a period of time, along with the adaptability of our business model. Besides ending the year with the highest ever annual net profit, we have also ended the financial year with a record quarterly performance, posting a net profit of almost INR 800 crores, recording a 36% Q-on-Q growth. We are also pleased to have been able to broadly deliver on our market guidance, surpassing the same comfortably on most parameters despite all the challenges faced. The only exception has been a marginal shortfall in the NIM, where we have fallen short of our guidance. This is largely on account of the cumulative rate cuts of 125 bps by RBI in 2025, which has impacted yield on advances, coupled with intense competition from deposits, resulting in lower transmission of the reduced rates on the liability side. The bank has registered a business growth of 13.6% during financial year '25-'26, with deposits and gross advances growing at 11.3% and 16.8%, respectively, both comfortably exceeding our guidance for the financial year. In accordance with our recalibrated strategy for the fiscal, the loan growth in ROI was much higher at 28.8% vis-a-vis 9.5% of Jammu Kashmir and Ladakh. This has led to a marginal shift in the regional composition of the loan book with Jammu, Kashmir, Ladakh contributing 63% and rest of India contributing 37% as on 31st of March 2026. In alignment with the bank's medium- to long-term vision of geographical diversification with a 50-50 business split between Jammu, Kashmir, Ladakh and Rest of India. Retail agriculture and MSME loans, that is RAM continue to constitute a dominant segment of our loan book with more than 2/3 share. During FY '25-'26, corporate and agriculture segments have recorded a robust growth of 38.5% and 27.6%, respectively. Our Personal Loan segment in Rest of India has also gained traction with a growth of around 13% recorded for the year. Amongst personal loans, car loans has been the best performing segment across all divisions with a growth of 17.5%. In the Rest of India division, housing and education loans have also recorded a double-digit growth. In deposits, both Jammu, Kashmir and Ladakh and Rest of India have recorded double-digit growth. The growth in term deposits is 14.2%, has been higher than the growth in CASA deposits at 8.1%, in line with the broad industry trend. However, on a sequential basis, growth in CASA deposits has substantially outpaced the growth in term deposits, resulting in a bank being able to improve its CASA ratio from 44.10% as on 31st December '25 to 45.65% as on 31st March 2026, thereby surpassing our guidance of 45%. While we have witnessed some moderation in NIM during the year, as mentioned at the start of this call, with NIM of FY '25-'26 being recorded at 3.60%, the decline has been relatively contained, especially when seen against the backdrop of cumulative rate cut of 125 bps by RBI in the calendar year 2025. Despite pressure on net interest income owing to the contractions in NIMs as well as a hit on our other income on account of impairment provision of INR 180 crores along with a sequential moderation in our trading income triggered by an uptick in bond yields owing to the geopolitical developments, we have still been able to record a 13.5% growth in our annual profit. A key driver in this improved profitability has been operating leverage with operating expenditure reducing by around 4%. As has been indicated previously also by the bank, the cost of reduction has been brought about by a moderation in our employee costs with tapering of pension-related obligations and shift of our workforce composition towards NPS. This reduction of costs has also been complemented by enhanced operating efficiency as evidenced by steady improvement in key productivity metrics, with business per employee improving from INR 20.18 crores as on 31st March '25 to INR 23.64 crores as on 31st March '26 and net profit per employee improving from INR 16.65 lakhs to INR 19.47 lakhs during the same period. Cost-to-income ratio also continues to moderate for the fourth year running being recorded at 56.18% for the financial year. With this record profitability performance, we have also surpassed the guided ROA and ROE levels with ROA and ROE of 1.37% and 16.85%, respectively, for the financial year. The consistent improvement in asset quality alongside a healthy business growth now extending to 6 consecutive years continues to remain a hallmark of our performance and reflects our commitment to responsible growth. GNPA and NNPA as on 31st March 2026 stand at 2.50% and 0.64%, respectively. This demonstrates a structural strengthening of our underwriting discipline alongside a tight control over slippages with gross slippage ratio of just around 0.82% for the year. Improved recovery mechanisms have also played a crucial role with another year of negligible credit costs despite a relatively challenging economic environment. Our provision coverage ratio also continues to stay above 90%, reflecting adequate buffers. With another year of record internal accruals, we have achieved highest ever capital adequacy of 16.55% with CET1 at 13.54%. However, considering that RBI has notified ECL implementation with effect from 1st April 2027, the bank will consider raising of capital to the tune of INR 1,250 crores in the current year at an opportune time for which the bank has already obtained both Board as well as shareholders' approval. Despite a broad-based exodus of FIIs from Indian markets during 2025 with outflows of around INR 2.4 lakh crore, our bank has witnessed an increase in FII shareholding to 8.34% as on 31st March '26 from 7.64% a year ago. This is a recognition of our transformation journey and consistently improving performance. The ongoing geopolitical tensions in West Asia, which has led to the World Bank slashing India's growth forecast for '26, '27 from 7.2% to 6.6% call for a degree of caution in our immediate future outlook. In light of this evolving external environment, we have taken a conservative stance in our market guidance for '26-'27, which is a credit growth of 12%, deposit growth of 10%, CASA at 45%, NIM around 3.5%, ROA maintained around the current levels, ROE around 16% and gross NPA below 2.25%. While it may seem like we are under promising, rest assured that we will strive to overdeliver like we did this year. Thank you for your time today and for giving me a patient hearing. We can start the question and answers now.

Yes, operator, please open up the floor. Yes.

[Operator Instructions] Our first question comes from the line of Yogesh Bhatia from Sequent Investment.

Congratulations, sir, on a good set of numbers in challenging times. My question is regarding the employee cost, which you mentioned in your opening commentary that we have tried to maintain it. So this quarter, the employee cost has come to INR 509 crores versus last year same quarter, it was INR 734 crores. Similarly, on a full year basis also, we've seen a reduction of 11%. So I wanted to know going forward for the next year, what trend are we looking at in the employee cost?

Thank you very much for the comments. Definitely, see, there are 2 basic reasons for the reduction in employee cost. One, as I mentioned, that our pension obligations are being now shifted to NPS. So that is coming down gradually. And second is, of course, over the last couple of years, we have had retirements. So the number of employees have also gone down. So the employee cost has come down. And the shortfall in the employees have been largely compensated by the use of technology that we have been able to leverage on. But that doesn't mean that we will not be recruiting people. As and when required, we will definitely be recruiting people. But going forward, I believe that staff costs will further come down even in the next quarter and the quarters after that.

Okay. So overall as a percentage, what it used to be in the past of the earnings, it will remain -- it will trend to be lower?

Yes. It has been lower for the last, I think, a couple of years.

Our next question comes from the line of Gaurav Agrawal from Nine One Capital.

Congratulations on wonderful set of numbers and giving out your comments with such clarity. Sir, as the previous participant asked about the employee cost. Sir, is it fair to assume that the quarterly run rate for employee cost starting from Q1 onwards, it is going to be INR 500 crores or lower. Is that a fair understanding to take?

Thank you, Gaurav ji, and it's a very fair estimate that you made. At least for the next 2 quarters, I'm certain that it will be around that.

And sir, for full year, can it be maintained below INR 2,500 crores?

Why I am saying that first 2 quarters is, I do have some intention of getting some employees into the bank, especially the specialized people to take care of various specialized positions in the bank. So -- but then that will not add to the cost because the lowering of the cost in the last, say, 6 to 7 quarters has been substantial and that will continue. So it will not add to the cost. But yes, INR 2,500 crores, if you are considering, it is a fair estimate.

Great, sir. And sir, other operating cost this time, it has gone up around 13%, 14%. Similar kind of growth we can see for next year?

We will try to contain the operating costs definitely, but I think it will definitely average out.

Got it. And sir, lastly, on the provisions, if you can help us, what should we expect on the provisioning as a whole without taxes?

We have -- I don't know how many quarters we have delivered a zero-credit cost situation. So...

Yes, for us, the more the merrier.

So I believe we still have some amount of NPAs in pipeline, which will be recovered in the coming quarters. So I believe that provisioning will not be something which will be alarming. I cannot predict at the moment. Even I had said last year that I cannot predict, but we maintained a zero-credit cost situation.

Great, sir. And I understand that you have given a conservative growth guidance and hopefully...

So that is essentially because of the situation that is going around. But then I gave the same similar kind of guidance last year, and I think we overachieved by several basis points.

Correct, sir, correct. Hopefully, this time also, we do the same. And congrats and all the best for the next year.

[Operator Instructions] Our next question comes from the line of Sonaal from Bowhead.

Congratulations on good set of numbers. So sir, I had a couple of questions, if you allow me. Can I ask 3?

Yes, please.

So sir, firstly, your miscellaneous income has fallen substantially Y-on-Y. Was there any one-off last year in Q4? Or is there any one-off this year in Q4 because of which it has fallen? That's my first question.

So I answer this question first?

Yes.

Other income has fallen because of the onetime provision of INR 180 crores for Grameen Bank, that EDB amalgamation with our Grameen Bank, that was taken in the other income head. So that is the reason. Otherwise, we are almost at par with last year.

So you're saying that your other income -- I could not actually fully understand. Your other income has fallen. What is to do with Grameen Bank, I could not follow?

See, the impairment of the investment in Grameen Bank because of the amalgamation of EDB as per the instructions and the guidance of NABARD, we had to make an impairment of INR 180 crores on account of this amalgamation. And you know Grameen Bank is a sponsor -- we are the sponsors of J&K Grameen Bank. and Ellaquai Dehati Bank, EDB, which was sponsored by SBI was amalgamated with us. So that bank was in a very bad state. It was in a very bad state. In fact, it had eroded entire net worth. While we should have not been required, we had represented with the -- all the authorities, including finance ministry. But then it was a policy decision that was taken for all the banks, all the regional rural banks that were amalgamated. So on account of that, we had to take an impairment, and that was classified in the other income head. So that is the reason it went down.

And sir, when you talk -- second question, when you talked about the increase in employee cost, what is the increase in employee cost? Because initially, you said it will fall, then you said you will hire. So if you could just give some idea, is it going to increase in absolute terms compared to FY '25-'26? Is it going to be lower, and if increase, what is it like what kind of percentage rough?

It will not increase. When I say that I will hire, the additional -- see, it's a very simple arithmetic when you hire in a bank, you lose people on account of retirement who are high paid individuals. And we -- when you hire, they come at a lower cost. So obviously, the cost will not go up. Cost is definitely going to go down. We still have a substantial number of people retiring this year. And also the -- as I mentioned, the cost of the pension liabilities that we have, that has been shifted to NPS. So that is the reason why I said that employee cost will not go up. Employee cost will steadily come down. The rate of reduction might be slightly reduced if we hire people. And that also is not going to happen for the first 2 quarters of next year. If we are able to hire, it will be -- the impact will come only in the third and the fourth quarter.

So sir, just to put things in context, you had almost a INR 2,500 crores employee cost this year, INR 2,480 crores. And this quarter it is INR 509 crores. There was no one-off in this INR 509 crores, right?

No, no. No one-off. Sorry, there was a reversal of...

INR 153 crores in Q4.

That was on account of?

Discount rate change in retirement.

The discount rate change in retirement benefits, because of that, we had a one-off reduction of INR 153 crores in this quarter, right.

Because Q4 is typically a peak employee cost?

Correct, correct.

Okay. So -- but you're saying overall on a yearly basis, this INR 2,500 crore number is unlikely to grow up even as the loans grow by 12% or whatever number you've forecasted?

Yes, yes. It's not going to grow, right.

And sir, you had talked about 2 more. You had talked about being large number of changes in the bank some time back. Have they progressed well? And because of changes, you are actually expecting to accelerate your growth at some point of time. So where are we in the cycle? Are we in the late stages of those changes? Are you still in the early stages of those changes? And I missed your ROA guidance, if you could just repeat that for us.

ROA, we are going to remain where we are, 1.37%. We wish to maintain it at that. You talked about the initiatives taken. I guess, I have lost count on the number of initiatives that we have taken this financial year. I'm very happy to share that all the initiatives are now in place and functioning. I mean they are not at any stage. They have started functioning. For example, we have the clusters, the change in the reporting structure of cluster heads. We have the CPCs in place. We have all those control mechanisms that we needed to apply in the bank. So a host of all those initiatives were taken early and also the initiatives related to technology also, getting many additional softwares, which will help us in generating more business. So most of them have been already put in place. For example, we have end-to-end digitized loan journeys now for all loans, not only retail loans, all loans. So these are certain initiatives which have already been completed, and they have started showing results. The TAT in case of our corporate, mid-corporate and SME loans have come down substantially in the last quarter. So now this year, we intend to consolidate. Instead of initiating more such initiatives, new initiatives, we intend to consolidate on the initiatives already taken, ensure that they are functioning at its best and efficient best and get the maximum amount of them. The HR initiatives, for example, I just -- I forgot to mention. For the first time in the bank, we have completed the entire set of promotion exercise for the bank within March. So everybody has been placed in their new positions, start doing business from the very first month itself. And it has shown results. The first month figures that I have with me end of April, they are far better than any April of previous years. So if you ask me if they are showing results, they are definitely showing results.

And therefore, sir, you should grow much faster than the system-wide loan growth. So let's say, the India entire country's loan growth grows at 12%, 13%, 14%; do you expect to grow much faster than the system loan growth? Or do you expect to match it or grow lower than that?

See, I gave these conservative figures only because of the environment around. But if the system grows at 16%, I would definitely want to grow more than 16%. And that is given. You can take it from me.

[Operator Instructions] Our next question comes from the line of Darshil Jhaveri from Crown Capital.

A lot of my questions have already been answered. So just like -- sorry to harp on our guidance. The ROA in Q4 also, I think we were able to do around 1.7%, 1.8%. So I understand you want to be conservative, but just for us, we can at least expect our Q4 to be maintained, right, in terms of ROA, sir?

Quarter-on-quarter, you mention -- you are saying?

Yes, the just -- we will not have a decline, right?

What I gave the guidance is not for the quarter, for the year ahead. But definitely, we would like to -- see, not every quarter, we will have a profit improvement of 33%, right? So we need to keep that in mind. But yes, our endeavor will always be -- I told you in the beginning only, whatever guidance we have given, they are the base guidances that we are trying to give. The ultimate numbers would be much better that I can assure.

Our next question comes from the line of Mona Khetan from Club Millionaire PMS.

Congrats on the quarter. Firstly, I think it was a great move to not to pay out dividend in order to conserve capital. So I have 2 questions in particular. Firstly, when I look at your segmental growth, the financial market book has grown very fast in the last 1 year, almost doubled -- the mix has almost doubled. So what is driving this growth? What constitutes -- what are the constituents in this book that is driving the growth?

See, if you look at the entire industry, this financial year has been excellent for the NBFCs. The NBFCs have grown and NBFCs grow when they get a lot of banking support. So we have -- if you compare it with the previous years, we have actually been able to have some good NBFCs onboarded with good returns from them. So this year, we have had some very good NBFCs, all highly rated NBFCs. And that is the reason why this segment is showing -- I mean, higher growth.

Does this also include the co-lending book that you do? And what could be the size, if at all this year versus last year of the co-lending book within this?

See, last year, we started co-lending very late. Last year, the book has -- I mean, it is still yet to give any substantial numbers. But this year, we have a target of, say, around INR 1,000 crores to start with, and we have a Board approval of going up to INR 5,000 crores. But then we will wait and watch how it actually pans out because the co-lending activity has just started late in the fourth quarter.

Okay. So you're saying that the financial market book doesn't include -- I mean, of the INR 20,000 crores of financial market book, co-lending is not a very material part?

No, no, not yet, not yet. Not yet.