Hold Jammu and Kashmir Bank; target of Rs 18: ICICI Direct

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ICICI Direct's research report on Jammu and Kashmir Bank

J&K Bank reported weak set of numbers wherein muted topline coupled with higher provision and tax dented earnings. On the back of muted advances and margins, NII growth was flattish at Rs 904 crore vs Rs 902 crore in Q1FY20. NIMs were down ~34 bps YoY to 3.56% on account of lower yields. Other income was down 35% YoY to Rs 120 crore, due to sluggish fee income growth. Decline in other income was partially offset by stable opex, thus leading to 20% YoY decline in operating profit to Rs 331 crore. Higher provision and tax outgo marred PAT at Rs 6.5 crore, down 70% YoY.

Outlook

Further, raising via fresh issuance will shore up capital adequacy but at the current price will lead to substantial dilution for existing shareholders. We value the bank at ~0.25x FY22E ABV and arrive at a target price of Rs 18/share. We upgrade the stock to HOLD recommendation.

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