15/10/2016 Jammu & Kashmir Bank: Continued clean-up to hurt profitability Detailed Report

13 October 2016
Update | Sector: Fi na nci a l s

Jammu & Kashmir Bank

BSE SENSEX S&P CNX
27,643 8,573 CMP: INR75 TP: INR68 (-9%) Neutral
Con nued clean-up to hurt protability
Takeaways from new CEOs rst investor conference call

Jammu & Kashmir Bank (JKBK) hosted an investor conference call to spell out its strategy
Stock Info (already communicated through a press release) a er Mr. Parvez Ahmad (execu ve
Bloomberg JKBK IN president previously) was elevated as the banks chairman and CEO for three years. While
Equity Shares (m) 484.9 we like the new CEOs strategy of acknowledging and recognizing pain upfront, the
52-Week Range (INR) 93/56
process is likely to have a signicant impact on earnings. Also, the situa on in the
1, 6, 12 Rel. Per (%) 3/19/-20
Kashmir Valley remains tense, which could weigh on near-term stock performance. We
M.Cap. (INR b)/ (USD b) 36.4/0.5
cut earnings es mates post management guidance of clean-up in ensuing quarters.
Avg Val. (INR m) 82
Maintain Neutral.
Free oat (%) 46.8

Financials Snapshot (INR b)

Asset quality challenging in ensuing quarters
Y/E March 2017E 2018E 2019E
NII 25.7 28.5 32.3 JKBK has recognized 14% of loans as GNPA and 6% as restructured loans for its
OP 13.9 15.2 17.5 outside J&K loan book (50% of loans). Outside J&K, the bank largely operates under
NP -0.9 2.7 5.4 consor um/mul ple banking arrangements. Considering asset recogni on of peer
NIM (%) 3.4 3.3 3.3 banks, management is expec ng more clean-up in the ensuing quarter (clearer
EPS (INR) -1.8 5.6 11.2
picture likely to emerge by end-3Q). Even assuming 5% addi onal stress from this
EPS Gr. (%) -120.8 -412.8 101.0
BV/Sh. (INR) 130.1 135.7 144.3 book, addi on to stress loans is likely to be INR13b (2-3% of overall loans)
ABV/Sh. (INR) 93.7 103.1 119.6
RoE (%) -1.4 4.2 8.0 Normaliza on of situa on in Kashmir Valley key to protability
RoA (%) -0.1 0.3 0.5 J&K business makes ~6% margins, and the book has held up well so far (GNPA of
Div. Payout (%) 0.0 0.0 23.4 ~3.8% v/s overall of 9.3%). J&K ood loans have been rescheduled (~INR5b).
Valua ons
Recent unrest in the Kashmir Valley has been worrisome, impac ng cash ows for
P/E(X) -42.1 13.5 6.7
P/BV (X) 0.58 0.55 0.52
the trades, SME and corporate segments. Two-thirds of J&K book belongs to the
Div. Yield (%) 0.0 0.0 3.0 Kashmir Valley. As of now (although early days), management is seeing some delay
Shareholding pa ern (%)
in payments for loans worth INR100b. Trade, SME and large corporate book
As On Jun-16 Mar-16 Jun-15 together account for INR114b (22% of overall loans). During such excep onal
Promoter 53.2 53.2 53.2 situa on, rescheduling of loans and regulatory excep on are possible.
DII 10.3 9.3 8.4
FII 15.2 19.6 24.3 Consolida on to con nue; protability under pressure
Others 21.3 17.9 14.1 Signicant stress addi on is likely to exert pressure on earnings due to higher
FII Includes depository receipts credit cost and interest reversals. Management is targe ng to reach 90% PCR
Stock Performance (1-year) (including technical write-o), but this will be based on protability. Considering
J & K Bank the focus on asset quality and the situa on in J&K, we expect loan growth to
Sensex - Rebased
110 remain largely in line with industry. Current er I ra o of 10.5% is sucient to
95 absorb expected asset quality stress. From capitaliza on perspec ve, mone za on
80 of stake in MetLife (INR3.5b+) and revalua on of assets will provide relief.
65
However, higher-than-expected asset quality stress remains a risk. We have cut our
earnings es mates for FY17, and now expect loss of INR0.9b v/s PAT of INR3.4b
50
earlier. Earnings can exhibit signicant vola lity, considering the challenging mes
for the bank. Maintain Neutral.

Alpesh Mehta (Al pes h.Mehta @Mo l a l Os wa l .com); +91 22 6129 1526
Sunesh Khanna (Sunes h.Kha nna @Mo l a l Os wa l .com); +91 22 6129 1540
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Mo lal Oswal research is available on www.mo laloswal.com/Ins tu onal-Equi es, Bloomberg, Thomson Reuters, Factset and S&P Capital.

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Exhibit 1: Be er NIM performance driving earnings upgrade

INR b Old Es mates Revised Es mates Change (%)
FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19
Net Interest Income 27.0 30.5 34.7 25.7 28.5 32.3 -4.9 -6.8 -6.9
Other Income 5.0 5.8 6.6 5.0 5.8 6.6 0.0 0.0 0.0
Total Income 32.0 36.3 41.3 30.7 34.2 38.9 -4.2 -5.8 -5.8
Opera ng Expenses 16.8 19.0 21.5 16.8 19.0 21.5 0.0 0.0 0.0
Opera ng Prots 15.2 17.3 19.8 13.9 15.2 17.5 -8.8 -12.1 -12.0
Provisions 10.1 6.6 6.8 15.2 11.1 9.2 50.0 68.0 35.1
PBT 5.1 10.7 13.0 -1.3 4.1 8.2 -125.8 -61.7 -36.8
Tax 1.7 3.6 4.4 -0.4 1.4 2.8 -125.8 -61.7 -36.8
PAT 3.4 7.1 8.6 -0.9 2.7 5.4 -125.8 -61.7 -36.8
Loans 562 641 731 562 641 731 0.0 0.0 0.0
Deposits 798 910 1,037 798 910 1,037 0.0 0.0 0.0
Margins (%) 3.57 3.55 3.56 3.39 3.31 3.31
Credit Cost (%) 1.80 1.00 0.90 2.75 1.75 1.25
RoA (%) 0.39 0.73 0.78 -0.10 0.28 0.50
RoE (%) 5.12 10.19 11.42 -1.36 4.19 8.00
BV 137 148 162 130 136 144 -5 -9 -11
ABV 106 120 138 94 103 120 -11 -14 -13
EPS 7 15 18 -2 6 11 -126 -62 -37

Exhibit 2: Higher incremental slippages expected in FY17-18

INR m Old Es mates Revised Es mates Varia on in es mates
FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
Movement of Gross NPAs
Opening Balance 43,789 52,674 54,693 43,789 61,458 67,604 0.0 16.7 23.6
Addi ons during the year 21,332 14,054 14,099 30,116 16,865 12,817 41.2 20.0 -9.1
Reduc ons during the year 12,447 12,035 12,439 12,447 10,719 11,641 0.0 -10.9 -6.4
Closing Balance 52,674 54,693 56,354 61,458 67,604 68,781 16.7 23.6 22.1
Less: Other Credits 1,032 1,032 1,032 1,032 1,032 1,032 0.0 0.0 0.0
Closing Balance (Adjusted) 51,642 53,662 55,322 60,426 66,572 67,749 17.0 24.1 22.5

Exhibit 3: Change in NIM es mates (bps) Exhibit 4: Change in credit cost es mates (bps)

FY2017E FY2018E FY2019E 95

75

35

-18

-24 -25 FY2017E FY2018E FY2019E

Source: MOSL, Company Source: MOSL, Company

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Ba nk i n cons ol i da on
pha s e; to s et the sta ge
for s usta i na bl e growth
from FY19.
Al i gni ng i nterna l ca pa bi l i es
a nd technol ogy wi th
opera ona l proces s es .
Muted prota bi l i ty a
func on of constra i ned
growth, hi gher i ncrementa l
s l i ppa ges a nd i ncrea s ed
provi s i oni ng.
J&K state bus i nes s l oa n
por ol i o to undergo
s i gni ca nt restructuri ng i n
next few qua rters .
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Concall Highlights
Balance sheet quality takes precedence over growth: Management reiterated
its view to consolidate, clean-up and strengthen the balance sheet over FY17-18.
The bank aims to increase transparency through appropriate disclosures and higher
provisioning with a view to gain investor condence. Balance sheet quality will take
precedence over growth and, coupled with high PCRs, will lead to a subdued bo om
line over next 46 quarters.
Building internal capabili es: The bank has hired/hiring external management
consultants to revamp HR prac ces and build internal capabili es to support its
strategic business plan. JKBK is making signicant investments to leverage on
technology infrastructure and realign IT processes with the banks opera ons.
Management expects these eorts to bear fruits in the form of a leaner and
sustainable organiza onal structure over coming few years.
Muted opera ng performance expecta ons
Elevated credit costs: JKBK is targe ng 90% PCR (including technical write-os)
by FY18, although shoring up of PCR will depend upon protability. The picture
will be clearer once the clean-up exercise is in ow (expect more clarity by 2Q
results) and there is more visibility on prots.
Incremental slippages and further restructuring, in combina on with higher
provisioning, will impact the sequen al bo om line over next six quarters (may
even result in losses for FY17).
Deposit growth will con nue to be strong; slowdown in advances growth may
lead to modera on in margins. However, management is condent of
maintaining NIMs at ~3.5%. We believe that these margins will be dicult to
achieve, considering the expected stress addi on.
Asset quality headwinds to sustain
Rest of India stress levels NPA 10%, Restructured book 6%. Further clean-up
possible, considering stress seen in other banks.
Poli cal unrest has resulted in drying up of cash ows for businesses and thus
contributed to most of the stress in this por olio. Out of the INR250b exposure
in J&K, INR100b is under stress (primarily business banking loans).
The bank will u lize sale to ARC, SARFAESI and one- me se lement tools to
clean up the balance sheet with a strong focus on recoveries. Regulatory
comfort with regards to resolu on of stressed assets will allow for signicant
restructuring in the J&K state business loans por olio.
Balance sheet-related commentary
Loan mix: 50:50 between J&K state and Rest of India (ROI). Within J&K
state, Jammu and Ladakh 35%, Kashmir 65%.
Advances growth: Jammu and Ladakh 20%, ROI 10-15% without any
compromise on quality; advances growth in Kashmir will be muted in
comparison.
Demand for educa on, housing and consump on loans strong in J&K state.
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The ba nk ha s bui l t
compe ve a dva nta ge i n
the state, des pi te uncerta i n
pol i ca l envi ronment.
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Capital adequacy
Looking to raise INR10b in er 2 capital in FY17.
Will evaluate whether to raise er 1 capital (the government has expressed its
support on this) or sell stake in MetLife in FY18 (this is not a meaningful
number).
Other highlights
Comfortable taking exposure to consor um lending, considering that adequate
quality checks are done by the lead bankers; trying to build internal capabili es
to strengthen direct lending exposures.
The bank has gained valuable experience and built strong capabili es amid an
unsuitable poli cal environment. While this has created numerous short-term
headwinds, management believes it has built a sustainable long-term
compe ve moat with regards to opera ons in this state.
Branches and ATMs func oning properly in Kashmir Valley, although the unrest
has contributed to periodic disrup ons in business ac vi es.
In view of muted bo om-line expecta ons, management has decided against
any dividend payments in FY17-18.
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Exhibit 5: One year forward P/BV Exhibit 6: One Year forward P/E
PB (x) Peak(x) Avg(x) PE (x) Peak(x) Avg(x)
2.0 Median(x) Min(x) 20 Median(x) Min(x)
1.6 15.3
15
1.4
0.9 10
6.3
0.8 0.9
5 3.9
0.5
5.5
0.4 2.3
0.2 0

Source: MOSL, Company Source: MOSL, Company

Exhibit 7: Du Pont Analysis

Y/E MARCH FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Net Interest Income 3.32 3.51 3.57 3.43 3.47 3.00 2.94 2.95
Fee income 0.54 0.51 0.44 0.62 0.46 0.44 0.45 0.45
Fee to core Income 14.0 12.6 11.0 15.4 11.6 12.8 13.2 13.4
Core Income 3.86 4.02 4.01 4.05 3.93 3.44 3.38 3.40
Opera ng Expenses 1.45 1.50 1.56 1.82 1.98 1.96 1.96 1.96
Cost to Core Income 37.5 37.3 38.9 45.0 50.4 57.1 58.0 57.6
Employee cost 0.94 0.99 0.99 1.16 1.31 1.27 1.26 1.25
Employee to total exp 65.0 66.0 63.3 63.4 65.9 64.9 64.3 63.7
Others 0.51 0.51 0.57 0.67 0.67 0.69 0.70 0.71
Core Opera ng Prot 2.41 2.52 2.45 2.23 1.95 1.47 1.42 1.44
Trading and others 0.06 0.23 0.08 0.15 0.19 0.15 0.15 0.15
Opera ng Prot 2.47 2.74 2.53 2.38 2.14 1.62 1.57 1.59
Provisions 0.31 0.43 0.20 1.31 1.25 1.77 1.15 0.84
NPA 0.16 0.29 0.11 1.08 1.15 1.71 1.09 0.78
Others 0.14 0.14 0.08 0.23 0.10 0.06 0.06 0.06
PBT 2.17 2.31 2.33 1.06 0.89 -0.15 0.42 0.75
Tax 0.72 0.71 0.76 0.40 0.35 -0.05 0.14 0.26
Tax Rate 33.1 30.9 32.5 38.0 39.9 34.0 34.0 34.0
ROA (%) 1.45 1.60 1.57 0.66 0.53 -0.10 0.28 0.50
Leverage (x) 14.6 14.7 14.2 13.1 12.5 13.4 15.0 16.1
ROE (%) 21.2 23.6 22.3 8.6 6.6 -1.4 4.2 8.0

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Exhibit 8: Financials: Valua on metrics

Ra ng CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%)
66
(INR) (USD b) FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18
ICICIBC* Buy 241 21.3 17.3 20.0 10.5 8.2 145 160 1.20 1.02 1.13 1.18 10.5 11.2
HDFCB Buy 1,264 48.4 58.4 70.2 21.6 18.0 332 386 3.80 3.27 1.90 1.89 18.9 19.6
AXSB Buy 519 18.7 31.8 37.4 16.3 13.9 243 274 2.13 1.89 1.32 1.31 13.8 14.4
KMB* Buy 771 21.4 26.8 34.0 28.8 22.7 208 240 3.71 3.21 1.61 1.82 14.2 15.4
YES Buy 1,255 8.0 79.0 101.2 15.9 12.4 390 471 3.22 2.67 1.80 1.86 22.0 23.5
IIB Buy 1,219 11.0 48.3 61.1 25.2 19.9 333 385 3.66 3.16 1.83 1.87 15.5 17.0
IDFC Bk UR 74 3.8 3.4 4.2 21.8 17.7 43 46 1.73 1.61 1.24 1.13 8.2 9.4
FB Buy 71 1.8 4.3 5.2 16.3 13.6 50 54 1.40 1.30 0.75 0.75 8.9 9.9
DCBB UR 123 0.5 7.7 8.7 16.1 14.1 69 78 1.78 1.58 1.02 0.95 11.7 11.9
JKBK Neutral 75 0.5 17.7 21.4 4.2 3.5 146 162 0.51 0.46 1.00 1.06 12.8 13.9
SIB Buy 23 0.5 3.0 3.6 7.8 6.3 30 33 0.77 0.71 0.59 0.62 10.3 11.7
Private Aggregate 136.0 19.9 16.6 2.65 2.35
SBIN (cons)* Buy 250 29.4 14.7 24.3 16.9 10.3 234 253 1.20 1.10 0.47 0.54 7.9 9.5
PNB Neutral 138 4.1 10.8 12.8 12.8 10.7 189 200 0.73 0.69 0.31 0.34 5.8 6.6
BOI Neutral 111 1.6 -10.8 21.6 -10.3 5.1 239 255 0.47 0.44 -0.16 0.29 -4.6 8.7
BOB Buy 154 5.4 14.1 20.0 10.9 7.7 157 173 0.98 0.89 0.47 0.60 9.3 12.1
CBK Neutral 310 2.6 26.8 36.8 11.6 8.4 498 527 0.62 0.59 0.25 0.31 5.5 7.2
UNBK Buy 142 1.5 22.4 39.1 6.4 3.6 314 348 0.45 0.41 0.37 0.58 7.4 11.8
OBC Neutral 123 0.6 16.7 24.2 7.4 5.1 410 428 0.30 0.29 0.23 0.30 4.2 5.8
INBK Buy 209 1.5 25.3 31.4 8.3 6.7 300 324 0.70 0.65 0.57 0.64 8.7 10.0
ANDB Buy 56 1.7 1.5 6.4 36.4 8.6 109 114 0.51 0.49 0.08 0.31 1.4 5.8
Public Aggregate 48.4 15.4 10.0 0.77 0.73
Banks Aggregate 184.4 18.5 14.1 1.62 1.48
HDFC* Buy 1,338 32.0 34.5 37.8 26.6 21.0 194 217 4.10 3.21 1.84 1.82 19.4 19.0
LICHF Buy 583 4.5 39.5 49.6 14.8 11.8 213 253 2.74 2.31 1.49 1.55 20.1 21.3
IHFL Buy 825 5.3 67.6 84.0 12.2 9.8 280 315 2.95 2.62 3.68 3.78 25.3 28.3
GRHF Buy 357 2.0 8.2 10.3 43.6 34.5 28 35 12.62 10.20 2.31 2.31 32.0 32.7
REPCO Buy 753 0.7 30.4 39.7 24.8 19.0 180 215 4.19 3.51 2.15 2.20 18.3 20.1
DEWH Buy 285 1.3 30.2 38.4 9.4 7.4 201 230 1.41 1.24 1.27 1.39 16.4 17.8
Housing Finance 45.7 21.8 18.2 4.34 3.83
RECL Neutral 130 3.9 29.4 33.4 4.4 3.9 168 194 0.77 0.67 2.63 2.54 18.8 18.5
POWF Neutral 123 4.9 24.0 25.5 5.1 4.8 149 167 0.83 0.74 2.37 2.12 16.8 16.2
Infra Finance 8.8 4.8 4.4 0.81 0.71
SHTF Buy 1,152 4.0 70.5 93.8 16.3 12.3 505 579 2.28 1.99 2.43 2.75 14.8 17.2
MMFS Buy 370 3.2 14.6 18.1 25.4 20.5 118 131 3.13 2.82 2.02 2.19 12.9 14.5
BAF Buy 1,055 1.7 34.6 44.2 30.5 23.9 166 204 6.34 5.17 3.48 3.38 22.8 23.9
MUTH Buy 344 2.1 28.0 33.6 12.3 10.2 159 180 2.17 1.91 3.66 3.57 18.7 19.9
SKSM Buy 882 1.8 50.4 48.8 17.5 18.1 206 255 4.28 3.46 6.73 4.25 32.9 21.2
Asset Finance 12.7 13.8 11.2 2.29 2.03
NBFC Aggregate 67.3 13.8 11.9 2.49 2.20
Financials 251.7 17.0 13.5 1.78 1.62

UR=Under Review*Mul ples adj. for value of key ventures/Investments; For ICICI Bank & HDFC Ltd BV is adj.for investments in subsidiaries

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Financials and Valua ons

Income Statement (INR Million)
Y/E March 2012 2013 2014 2015 2016 2017E 2018E 2019E
Interest Income 48,356 61,368 67,670 70,611 68,436 67,606 75,570 85,672
Interest Expense 29,972 38,208 40,825 44,102 41,335 41,955 47,119 53,362
Net Interest Income 18,384 23,160 26,845 26,509 27,101 25,651 28,451 32,309
Change (%) 19.1 26.0 15.9 -1.3 2.2 -5.4 10.9 13.6
Non Interest Income 3,341 4,837 3,903 5,940 5,040 5,020 5,786 6,636
Net Income 21,725 27,998 30,747 32,449 32,141 30,671 34,237 38,946
Change (%) 13.8 28.9 9.8 5.5 -0.9 -4.6 11.6 13.8
Opera ng Expenses 8,022 9,890 11,750 14,090 15,462 16,808 19,002 21,485
Pre Provision Prots 13,703 18,108 18,998 18,358 16,679 13,864 15,235 17,461
Change (%) 19.2 32.1 4.9 -3.4 -9.1 -16.9 9.9 14.6
Provisions (excl tax) 1,692 2,842 1,479 10,155 9,762 15,172 11,141 9,230
PBT 12,011 15,266 17,519 8,203 6,917 -1,309 4,094 8,230
Tax 3,979 4,715 5,694 3,117 2,757 -445 1,392 2,798
Tax Rate (%) 33.1 30.9 32.5 38.0 39.9 34.0 34.0 34.0
PAT 8,032 10,551 11,825 5,086 4,160 -864 2,702 5,432
Change (%) 30.6 31.4 12.1 -57.0 -18.2 -120.8 -412.8 101.0
Equity Dividend (Incl tax) 1,888 2,836 2,836 1,222 1,021 0 0 1,271
Core PPP* 13,345 16,614 18,429 17,235 15,208 12,614 13,785 15,811
Change (%) 26.2 24.5 10.9 -6.5 -11.8 -17.1 9.3 14.7
*Core PPP is (NII+Fee income-Opex)

Balance Sheet (INR Million)

Y/E March 2012 2013 2014 2015 2016 2017E 2018E 2019E
Share Capital 485 485 485 485 485 485 485 485
Equity Share Capital 485 485 485 485 485 485 485 485
Preference Share Capital 0 0 0 0 0 0 0 0
Reserves & Surplus 40,447 48,162 56,751 60,616 63,755 62,623 65,325 69,486
Net Worth 40,932 48,647 57,236 61,101 64,240 63,108 65,810 69,971
Deposits 533,469 642,206 693,359 657,562 693,903 797,988 909,706 1,037,065
Change (%) 19.4 20.4 8.0 -5.2 5.5 15.0 14.0 14.0
of which CASA Dep 217,152 251,910 270,833 274,764 306,204 352,134 404,954 465,698
Change (%) 20.1 16.0 7.5 1.5 11.4 15.0 15.0 15.0
Borrowings 12,410 10,750 17,650 23,397 22,400 24,040 25,844 27,828
Other Liabili es & Prov. 15,882 15,830 17,953 17,248 22,138 24,241 26,603 29,214
Total Liabili es 602,692 717,433 786,197 759,307 802,681 909,377 1,027,963 1,164,078
Current Assets 44,539 54,043 42,139 37,338 32,030 44,590 46,244 49,536
Investments 216,243 257,411 262,158 227,596 203,536 227,961 255,316 285,954
Change (%) 9.8 19.0 1.8 -13.2 -10.6 12.0 12.0 12.0
Loans 330,774 392,004 463,846 445,858 501,933 562,165 640,868 730,589
Change (%) 26.3 18.5 18.3 -3.9 12.6 12.0 14.0 14.0
Fixed Assets 4,203 4,562 5,338 6,889 7,637 8,485 9,433 10,482
Other Assets 6,934 9,413 12,924 41,627 57,544 66,176 76,102 87,518
Total Assets 602,692 717,433 786,405 759,307 802,681 909,377 1,027,963 1,164,078

Asset Quality (%)

GNPA (INR m) 5,166 6,438 7,834 27,641 43,789 61,458 67,604 68,781
NNPA (INR m) 493 553 1,020 12,363 21,640 27,209 24,328 18,434
GNPA Ra o 1.54 1.62 1.67 6.00 8.37 10.30 9.88 8.81
NNPA Ra o 0.15 0.14 0.22 2.77 4.31 4.84 3.80 2.52
PCR (Excl Tech. write o) 87.1 87.4 83.4 53.1 48.2 55.7 64.0 73.2
PCR (Incl Tech. Write o) 93.8 94.0 90.3 59.0 56.2 59.9 67.5 76.1
E: MOSL Es mates

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Financials and Valua ons

Ra os
Y/E March 2012 2013 2014 2015 2016 2017E 2018E 2019E
Spreads Analysis (%)
Avg. Yield-Earning Assets 9.4 9.9 9.6 9.9 9.8 8.9 8.8 8.8
Avg. Yield on loans 11.5 11.9 11.7 11.3 10.6 9.3 9.3 9.3
Avg. Yield on Investments 6.8 7.3 6.5 7.1 7.6 7.6 7.3 7.3
Avg. Cost-Int. Bear. Liab. 6.0 6.4 6.0 6.3 5.9 5.5 5.4 5.3
Avg. Cost of Deposits 5.9 6.4 6.0 6.2 5.9 5.4 5.3 5.3
Interest Spread 3.4 3.5 3.6 3.6 3.9 3.5 3.4 3.4
Net Interest Margin 3.6 3.7 3.8 3.7 3.9 3.4 3.3 3.3

Protability Ra os (%)
RoE 21.2 23.6 22.3 8.6 6.6 -1.4 4.2 8.0
RoA 1.5 1.6 1.6 0.7 0.5 -0.1 0.3 0.5
Int. Expense/Int.Income 62.0 62.3 60.3 62.5 60.4 62.1 62.4 62.3
Fee Income/Net Income 6.2 5.4 4.9 6.8 5.2 5.6 5.7 5.8
Non Int. Inc./Net Income 15.4 17.3 12.7 18.3 15.7 16.4 16.9 17.0

Eciency Ra os (%)
Cost/Income* 38.6 35.8 40.2 44.2 49.8 57.6 57.6 57.3
Empl. Cost/Op. Exps. 65.0 66.0 63.3 63.4 65.9 64.9 64.3 63.7
Busi. per Empl. (INR m) 85.0 101.0 116.9 120.5 113.4 123.6 138.1 154.5
NP per Empl. (INR lac) 8.7 11.2 12.6 5.4 4.1 -0.8 2.6 5.1
* ex treasury
Asset-Liability Prole (%)
Loans/Deposit Ra o 62.0 61.0 66.9 67.8 72.3 70.4 70.4 70.4
CASA Ra o 40.7 39.2 39.1 41.8 44.1 44.1 44.5 44.9
Investment/Deposit Ra o 40.5 40.1 37.8 34.6 29.3 28.6 28.1 27.6
G-Sec/Investment Ra o 53.4 54.6 57.0 59.1 68.5 77.0 78.4 79.8

Valua on
Book Value (INR) 84 100 118 126 132 130 136 144
Change (%) 17.6 18.8 17.7 6.8 5.1 -1.8 4.3 6.3
Price-BV (x) 0.9 0.7 0.6 0.6 0.6 0.6 0.6 0.5
Adjusted BV (INR) 84 100 117 109 103 94 103 120
Price-ABV (x) 0.9 0.8 0.6 0.7 0.7 0.8 0.7 0.6
EPS (INR) 16.6 21.8 24.4 10.5 8.6 -1.8 5.6 11.2
Change (%) 30.6 31.4 12.1 -57.0 -18.2 -120.8 -412.8 101.0
Price-Earnings (x) 4.5 3.4 3.1 7.2 8.7 -42.1 13.5 6.7
Dividend Per Share (INR) 3.3 5.0 5.0 2.1 1.8 0.0 0.0 2.2
Dividend Yield (%) 4.5 6.7 6.7 2.8 2.3 0.0 0.0 3.0
E: MOSL Es mates

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15/10/2016 Jammu & Kashmir Bank: Continued clean-up to hurt profitability Detailed Report

Ja mmu & Ka s hmi r Ba nk

NOTES

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15/10/2016 Jammu & Kashmir Bank: Continued clean-up to hurt profitability Detailed Report
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