Motilal Oswal is bullish on Jammu and Kashmir Bank and has recommended buy rating on the stock with a target of Rs 1145 in its August 9, 2012 research report.
â??J&K Bank's 1QFY13 PAT grew 35% YoY to ~INR2.5b. Healthy NII growth of ~23% YoY coupled with containment of opex (up 14% YoY) and lower provisions (INR504m v/s INR843m in 4QFY12 and INR445m in 1QFY12) boosted bottom-line."
"Reported margins declined 6bp QoQ to 3.8%. While cost of deposits increased 52bp QoQ to 6.9%, higher yield on loans (+22bp QoQ) and investments (+27bp QoQ) helped bank to contain margin fall. In 1QFY13, bank shifted its loan portfolio between INR1m and INR5m to system based NPA recognition. However despite that slippages were contained to INR857m (annualized slippage ratio of 1.3% as compared to 1.2% in FY12)."
â??In 1QFY13, the bank restructured loans of INR400m, taking the outstanding restructured loan portfolio to INR13.7b, 4.1% of overall loans. During the quarter bank made provision for contingencies of INR239m taking the cumulative number to INR800m, which the bank intends to utilize in case asset quality comes under pressure. Loans and deposits grew 26% and 23% YoY respectively and remained flat QoQ. CD ratio improved marginally by 60bp QoQ to 62.6%. CASA ratio declined 200bp QoQ to 38.7%.â??
â??JKBK continues to deliver healthy performance on business growth, margins and asset quality. While shifting to system based recognition of NPA and strong growth in corporate segment outside J&K remains a risk to asset quality, strong margins of 3.7-3.8% and PCR of 94% would provide cushion. Maintain Buy,â?? says Motilal Oswal research report.
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