Jammu & Kashmir Bank (JKB) reported stellar performance for the fourth quarter backed by over 10 fold rise in its fee based income. The bank's operating margins however, declined sharply, resulting in drop in operating profits.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
During the fourth quarter, more than proportionate rise in the bank's interest cost negated the effect of decline in cost to income ratio to 42% (from 47% in 4QFY01). Consequently, operating profits declined by 51%.
Other income accounted for over 24% of total income of the bank in the fourth quarter (for the full year the contribution was 16%). Almost all the banks recorded strong treasury gains in FY02 due to sharp decline in interest rates. However, the bank could have to make higher provision for diminution in investment value if it is holding long maturity bond portfolio. Already in the fourth quarter, the bank provided Rs 57 m for depreciation in the value of investments. Treasury gains are unlikely to grow at an exponential rate in the coming year, as interest rates are not expected to come down significantly. This could slowdown JKB's growth pace.
The bank's effective tax rate at 31% declined marginally as it took credit for deferred tax assets amounting to Rs 19 m according to the accounting standard AS 22. Its non-performing assets provisions were also up marginally. The bank's net NPAs to advances ratio stood at 2.5% as on March 2001.
At the current market price of Rs 92, JKB is trading at a P/E of 1.7x FY02 earnings and price to book value ratio of 0.5x. Over the last four months the bank's stock price has doubled. Its public sector status (53% stake held by the government of J&K), regional nature and risk of concentration of business in one region (most part of its deposits are from J&K but lending is spread across India) is however, keeping further appreciation in JKB's stock price restricted.
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