Jammu & Kashmir Bank has reported a robust 16.7% year-on-year increase in net profit for the first quarter, driven by strong growth in net interest income and improved asset quality.

Financial Performance

The bank's net profit rose to ₹484.84 crore in Q1, compared to ₹415.49 crore in the same quarter last year. This significant growth in profitability was supported by a 7% increase in Net Interest Income, which reached ₹1,465.43 crore.

J&K Bank's Operating Income also saw a healthy rise of 9.7%, totaling ₹1,715.73 crore for the quarter. The bank's profitability ratios showed improvement, with Return on Assets (RoA) increasing to 1.17% from 1.08% in the previous year.

Asset Quality Improvement

The bank reported a notable improvement in asset quality. Gross Non-Performing Assets (GNPA) ratio decreased to 3.50% from 3.91% year-on-year, reflecting the bank's efforts in managing its loan portfolio effectively. However, the Net NPA ratio saw a slight increase to 0.82% from 0.76%.

Business Growth

J&K Bank's total business volume expanded, with deposits reaching ₹1,48,542 crore, marking a 12.1% year-on-year growth. Net advances stood at ₹1,01,230 crore, showing a 6.1% increase compared to the same period last year.

Capital Adequacy and Efficiency

The bank maintained a strong capital position with a Capital Adequacy Ratio (CRAR) of 15.98%. The Cost to Income Ratio improved to 60.78% from 61.96% in the previous year, indicating enhanced operational efficiency.

Digital Banking Push

J&K Bank continued its focus on digital transformation, achieving over 94% digital transactions. This aligns with the industry trend towards increased digitalization and improved customer convenience.

Branch Network

The bank operates a network of 1,019 branches, with 841 branches in Jammu and Kashmir, 37 in Ladakh, and 141 branches spread across 20 other states and Union Territories.

J&K Bank's Q1 results demonstrate its resilience and growth in key financial metrics. The bank's focus on asset quality improvement and digital banking initiatives are likely to be key drivers for its future performance.

Jammu & Kashmir Bank (J&K Bank) has delivered its highest-ever first quarter net profit of ₹485.00 crores, marking a 16.7% year-on-year growth despite challenging circumstances in its core territories. The bank's performance comes in the wake of regional tensions and the unfortunate Pahalgam terror incident.

Strong Profitability Despite One-Time Provision

The bank's profitability was impacted by a one-time impairment provision of ₹87.00 crores related to its investment in J&K Grameen Bank. This provision was necessitated due to the amalgamation of J&K Grameen Bank and Ellaquai Dehati Bank into a single Regional Rural Bank (RRB) under J&K Bank's sponsorship, in line with the government's "One State, One RRB" concept.

Notably, excluding this one-time provision, the bank's net profit growth would have exceeded 30% year-on-year, demonstrating the underlying strength of its core operations.

Deposit Growth and CASA Ratio

J&K Bank registered an above-average year-on-year growth of 12.1% in deposits, outperforming the industry average of 10.1%. However, the Current Account Savings Account (CASA) ratio declined from 47.01% to 45.71% as customers migrated to term deposits to lock in higher yields prior to deposit interest rate cuts.

Credit Growth and Sectoral Performance

Credit growth remained relatively muted at 6.1% year-on-year, with a 2.7% quarterly decline. The bank witnessed similar loan growth in both Jammu & Kashmir, Ladakh (JKL) and Rest of India (ROI) at 5.3% and 6.0% year-on-year, respectively. Personal finance and agriculture, which contribute around 50% of the loan book, grew at 7.4% and 19.9% year-on-year, respectively.

Net Interest Margin and Asset Quality

The bank's Net Interest Margin (NIM) contracted to 3.72% due to faster transmission of rate cuts on the lending side and lagging relief on deposit costs. Gross Non-Performing Assets (GNPA) slightly increased to 3.5%, while Net NPA rose to 0.82%. The bank maintained a healthy Provision Coverage Ratio (PCR) above 90%.

Future Outlook and Guidance

Despite compression in NIMs and measured growth, J&K Bank remains confident in its strong fundamentals and strategic priorities. The bank maintains its guidance for FY 2025-26, with slight adjustments:

J&K Bank's performance in Q1 demonstrates its resilience and ability to navigate challenging circumstances while maintaining profitability and growth. The bank's focus on digital initiatives, strategic realignment of repayment dates, and targeted growth in both its core and expansion markets positions it well for consistent performance in the coming quarters.