JK Bank reports ‘colossal’ net loss of ₹1139 Cr, CSR, other initiatives likely to be hit

Malik Sameed

Srinagar 03 July (KNB): Jammu and Kashmir Bank has reported net loss of ₹1139.41 Crore for the year ended March 2020 as compared to net profit of ₹464.88 Crore during the previous financial year.

The Bank announced its annual results for the financial year ended March 31, 2020 after the Board of Directors adopted the audited numbers of the bank in their meeting held on June 29, 2020.

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According to insiders the huge loss reported has eroded the net worth of the bank from ₹6626 Crore as on March 31, 2019 to ₹6393 Crore as on March 31, 2020 and wiped out the capital of ₹500 Crore recently infused by the government of UT in the bank besides adversely impacting the following key ratios.

In the end year march 2019, the return on assets was 0.49 percent while in march 2020 the percentage dropped to -1.10. Same as return on Average Net Worth in 2019 was 8.04 and in 2020 it dropped to -19.96.

Net profit per employee(in Rs Lakh) was 3.69 in year 2019 and has dropped to -9.03 in 2020 financial year. Net Profit per Branch (in Rs. Crore) was 0.49 and which is now -1.19, similarly Capital Adequacy Ratio(%) was 12.46 and now 11.40.

Earnings per share(in Rupees) dropped from 8.35 to -15.97 and net Asset Value (in Rupees) also dropped from 108.11 to 76.65.

With such a huge loss CSR activities of the bank which has a co-relationship with the Net profit is likely to have a spending freeze for CSR Programmes revolving around health, education, ecology and community welfare at large in the UT’s of J&K and Ladakh.

Operating profit of the bank before provisions and contingencies was down by 10 percent at ₹1525 Crore as compared to ₹1717 Crore for the full year and down by 36 percent at ₹382 Crore (₹601 Crore) on QoQ basis. Other income of the bank was sharply down 70 percent in Q4 at ₹121 Crore (₹404 Crore) and down by 33 percent at ₹546 Crore against ₹812 Crore on YoY basis. Gross non-performing assets (GNPA’s) ratio increased sharply from 8.97 percent to 10.97 percent (₹6211 Crore vs ₹7671 Crore) on YoY basis on account of fresh slippages to the tune of around ₹1100 Crore. Credit Cost has gone up at 3.81 percent vis a vis 1.53 percent a year ago.

Despite the guidance given by the management to the market that the emphasis during the year will be on rationalisation of costs/expenditure yet the operating expenses have gone up by 10 percent on YoY basis and cost income ratio has risen sharply at 64.14 percent for the financial year ended March 2020 as compared to 59.06 percent for the financial year ended March 2019.As on March-2020 advances declined 3 percent YoY to ₹64399 Crore but surprisingly income on loans and advances has shown a 11 percent increase on YoY.

On the positive note the deposits have shown a growth of 9 percent YoY at ₹9778 Crore compared to ₹89638 Crore. CASA ratio stood at 53.6 percent vis a vis 50.70 percent a year ago, however term deposits have shown a marginal increase of only 3 percent on YoY basis. NIM’s for the financial year ended March 2020 up at 3.92 percent vis a vis 3.84 percent for the financial year. Also net interest income has increased 10 percent on YoY. Further net NPA Ratio has come down from 4.89 percent to 3.48 percent on YoY basis and NPA Coverage Ratio has increased to 78.59 percent vis a vis 64.30 percent a year ago on account of the provisioning prescribed by the Regulator.

Share price of the bank has shown constant decline during the past one year and has fallen from 52 weeks high of ₹63 to 52 weeks low of ₹11. Management of the bank needs serious introspection to see that despite the bank having a Net Asset Value of ₹75 per share why the share is grossly undervalued and trading at a huge discount vis a vis its peers. Despite the media reports that investors show renewed interest in J&K bank stock on the back of new Management structure the share price of the bank post declaration of annual results slumps to 17.25 INR.

Due to the inadequate capital for Regulatory compliance/maintaining growth momentum, the bank will have serious challenges on capital front for the current fiscal as raising the capital from the market on the basis of the current performance will be difficult and only recourse left for the bank is to approach to the Government of UT for infusion of further capital. Also with the erosion in the Net worth the capacity to lend has decreased as per the prudential norms of RBI. Going forward it will be interesting to watch the performance of the bank amidst the tough times and how effectively the present management of the bank will leverage the support being extended both by the Government of UT of J&K and Central Government to their advantage.(KNB)

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