* Chairman admits decline in profit
Neeraj Rohmetra
JAMMU, Aug 13: In a major setback, the Jammu and Kashmir Bank, the premier financial institution of Jammu and Kashmir, has suffered a whopping decline of 58 per cent in its net profit for the quarter ending June this year.
Jammu and Kashmir Bank chairman Mushtaq Ahmad has himself admitted dip in the bank’s profit.
Official sources told the Excelsior that the Jammu and Kashmir Bank’s net profit for the quarter ending June this year fell 57.8 per cent to Rs 130 crores from Rs 307.9 crores in the corresponding period last year. The massive decline in profits was attributed to huge provisions and lower net interest income.
“Net interest income, the difference between interest earned and interest expended, decline 2.6 per cent to Rs 637.7 crore in the quarter ended June 2014 from Rs 655 crore in corresponding quarter of last fiscal,” they said.
The drop was primarily due to higher provisioning, which rose about seven-fold to Rs 246.7 crore from Rs 36.2 crore in the year-ago period. In the March quarter, provisioning stood at Rs 60.6 crore, they added.
“Maintaining a strong and clean balance sheet necessitated higher provisioning during the first quarter…This led to a sharp dip in the Bank profits,” sources said.
They added that during the June quarter, gross Non-Performing Assets (NPAs) increased to 4.2 per cent from 1.7 per cent a year earlier. Net NPAs stood at 2.2 per cent, a year-on-year rise of 204 basis points.
“Asset quality pressures on bank didn’t abate during the first quarter of this financial year. As such, banks had to go for higher provisioning on account of fresh slippages to the NPA category and addition to restructured assets,” sources said.
While deposits increased 8.6 per cent year-on-year to Rs 63,651.9 crore, advances rose 13.1 per cent to Rs 44,430.7 crore.
On Wednesday, the J&K Bank stock closed at Rs 1,498.4 on Bombay Stock Exchange (BSE), down five per cent.
The decline in the profits of Jammu and Kashmir Bank was also due to seven-fold increase in provisions triggered by a sharp rise in bad loans. The profit was lower than the Rs.292 crore estimated by a poll of eight analysts and resulted in a sharp drop in the bank’s share price.
J&K Bank fell sharply on the BSE, losing 8.82% at 2.36 pm. At 3.30 pm, it had recovered some of the losses, and was trading at Rs 1,541.00 on the BSE, down 2.36%, while India’s benchmark Sensex index was up 0.15% at 25,918.95 points.
“Non-Performing Assets (NPAs) increased both on a net and gross basis. Gross NPAs increased to 4.16% of the bank’s loan book, up from 1.67% in 2013, while net NPAs increased to 2.18% of net advances up from 0.14% in 2013. As a result, the bank had to set aside Rs 247 crore as provision for bad loans, up seven times from just Rs 36 crore provided in 2013.
“The bank earned Rs 1,280 crore as interest on advances, up 8% from Rs.1,184 crore earned in April-June 2013. Other income increased 42% to Rs.131 crore from Rs.92 crore earned in 2013. However, the sharp rise in provisions pulled the bank’s profit down,” sources said.
J&K Bank, which is controlled by the State Government, with a 53.17% stake, had always been boasting of profits in its self issued statements over the years. However, sources said, the claims of the Bank have now been exposed with Bank Chairman Mushtaq Ahmad himself admitting that the bank’s profits have dipped sharply as higher provisioning during first quarter had put pressure on the profits.
However, he claimed that the bank would continue with growth momentum in the coming quarters and maintain profitability along with net interest margin during the current fiscal.
Follow our WhatsApp channel