The growth at J&K Bank remains to be uninterrupted. Even though Kashmir is passing through a crisis since June, the bank registered a net profit of Rs 163.27 crore for the quarter ended September 2010, which is up by 22% from Rs 134.27 crore earned during the corresponding quarter of previous financial year.

This has pushed the half-yearly profit up to Rs 252 crores from Rs 309 crores in September 2009 – an appreciation by 22%. This was the first result for the new chairman and chief executive Mushtaq Ahmad who took over after over a month of Dr Haseeb A Drabu.

Against 17% increase in bank’s turnover from Rs 53671 crores to Rs 62871 crores, the advances surged by 10% from Rs 21108 crores to Rs 23183 crores. Bank’s 51% loan book is about the home turf. Bank has adopted the strategy of changing its lending book composition – in terms of geography from ‘Rest of India’ to ‘J&K state’ and in terms of asset type from ‘low margin’ to ‘high margin’.

Bank has been focusing on the effective balance sheet management which is now paying dividend. Deposits increased by 22% from Rs 32563 crore to Rs 39688 crore in the half year. These included low cost demand and savings deposits that had a massive 36 % increase from Rs 12041 crores to Rs 16329 on YoY basis improving the CASA ratio further to 41% from 37%.

Net NPAs have gone down from 0.55% to 0.13% as the NPA Coverage Ratio (including technical write-off) now stands at 95% up from 82% a year ago and well above the RBI stipulated norm of 70%. The annualized Net Interest Margins improved to 3.69 % from 2.96 % for the corresponding half year as cost of deposits declined further by 73 basis points from 5.83 % to 5.10 %. Cost to income ratio dipped from 37.32% to 36.38%.

Bank’s asset quality is termed to be one of the best in the industry. Its NPA ratio and its provision coverage ratio (PCR) are only matched by a few in the sector across India. The higher PCR is like icing on the cake as it provides cushion to its future earnings due to any unforeseen deterioration in its asset quality. Its impressive CASA mix is indicator of its strong liability franchise. The bank re-priced its deposits along with improvement in CASA mix that helped it improve its net interest margins (NIM).

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