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.

Jammu & Kashmir Bank has reported its highest-ever first-quarter net profit of Rs 485.00 crore, marking a 16.7% year-on-year (YoY) growth. This impressive performance comes despite a one-time impairment provision that impacted the bank's profitability.

Key Highlights

• Net profit grew 16.7% YoY to Rs 485.00 crore
• One-time impairment provision of Rs 87.00 crore related to J&K Grameen Bank investment
• Deposit growth of 12.1% YoY, outpacing industry average of 10.1%
• Loan growth muted at 6.1% YoY with a 2.7% decline in Q1
• Operating income increased by 9.7% YoY

Profitability and One-Time Provision

The bank's profitability was impacted by a one-time impairment provision of Rs 87.00 crore related to its investment in J&K Grameen Bank. This provision was necessitated due to the amalgamation requirements under the 'One State One RRB' concept. Notably, excluding this provision, the bank's net profit growth would have exceeded 30% YoY.

Deposit and Loan Performance

Jammu & Kashmir Bank achieved an above-average deposit growth of 12.1% compared to the industry average of 10.1%. However, the CASA (Current Account Savings Account) ratio declined from 47.01% to 45.71% as customers migrated to term deposits for higher yields.

Loan growth remained muted at 6.1% YoY, with a 2.7% decline in the quarter. This was attributed to flat corporate lending and scheduled repayments. Personal Finance and Agriculture sectors, contributing around 50% of the loan book, grew by 7.4% and 19.9% YoY, respectively.

Financial Metrics

Outlook and Guidance

Despite the challenges, Jammu & Kashmir Bank maintains its FY26 guidance, except for a downward NIM revision to 3.65-3.70% following the Reserve Bank of India's 50 basis point rate cut. The bank remains confident in its strong fundamentals and strategic priorities.

Management Commentary

Baldev Prakash, MD & CEO of Jammu & Kashmir Bank, stated, "We've begun the new financial year on a strong note, delivering another consistent performance. This reflects the strength and resilience of our Institution, the unwavering commitment of our teams, and the continued trust and support of our stakeholders."

The bank's performance demonstrates its ability to navigate challenging circumstances while maintaining growth and profitability. As Jammu & Kashmir Bank continues to evolve, it remains well-positioned to deliver consistent performances and create long-term value for its shareholders.