Buy Jammu & Kashmir Bank; target of Rs 95: ICICI Direct

ICICI Direct's research report on Jammu & Kashmir Bank

Large corporates (mostly AAA) comprise 82% of the credit portfolio outside J&K and 51% of total credit of J&K Bank. Within J&K, 35% is personal loans wherein majority are salaried account with relatively low risk. In FY17, a slowdown in J&K and corporate slippage have led to a surge in stressed asset accretion at 25.9%.

Outlook

Return ratios (RoE) are seen to inch up in double digit at 10.6% in FY19E. The management’s focus on recovery offers potential for upward re-rating of multiple. Therefore, we maintain our target price at Rs 95(1.3x FY19E P/ABV) and BUY recommendation on the stock.