Jammu & Kashmir Bank Ltd. · NSE:J&KBANK
Jammu & Kashmir Bank — CLSA India Forum 2008
29 slides from Jammu & Kashmir Bank's conference presentation, Nov 3, 2008
Slide 1: CLSA India Forum: J&K Bank: Anticipating and Adapting
CLSA India Forum J&K Bank: Anticipating and Adapting November 3rd, 2008 New Delhi
Slide 2: Basic facts
Basic facts ¾ Incorporated in 1938 as a limited liability company ¾ Listed on National stock exchange (NSE) and Bombay stock exchange (BSE) ¾ 53 per cent owned by J&K Government ¾ Rated “P1 +” by Standard and Poor-CRISIL: highest degree of safety ¾ Four decades of uninterrupted profitability and div
Slide 3: Subsidiaries and Investments
Subsidiaries and Investments • J&K Bank Financial Services Ltd • Providing Depository Services • Offering Stock Broking Services • Insurance JV with MetLife International • Distributor of •Life Insurance products (MetLife) • General Insurance (Bajaj Allianz) •Two Regional Rural Banks 3
Slide 4: Shareholding Pattern
Shareholding Pattern 9.34% 2.75% 2.35% 0.37% 53.17% 32.02% J&K Govt FIIs Non-Resident Indians Indian Mutual Funds Resident Individuals Bodies Corporate/ Banks/ Instt./other As on October 24, 2008 4
Slide 5: Best of both worlds
Best of both worlds • Private Bank despite government’s majority holding • Public ownership: – Stability – Safety • Private functioning: – Efficiency – Growth
Slide 6: Anticipating Issues
Anticipating Issues “The real issue is not growth but managing growth. Two aspects stand out – liability management and asset quality”. “This stems from the belief that in short to medium run, banking is more about liability management rather than asset planning.” (Annual Report 2005-2006)
Slide 7: Anticipating Developments
Anticipating Developments “At present the biggest structural problem in the banking sector is a high degree of mismatch between the need for and availability of credit. The obverse holds true for the liabilities side”. “Banks with regional dominance are best equipped to address this crisis. Domain k
Slide 8: Evolving Strategies
Evolving Strategies: • To do all this in a meaningful manner for a structurally and geographically diverse conomy like India, two things are required: – region-specific credit policies that suit the sub- national growth impulses and context, and – productization of finance to suit local enterprises.
Slide 9: Strategic Inference
Strategic Inference • Smaller banks — focused and niche players — with regional dominance to outperform. – Banking verticals with defined slivers of business – Focus on SMEs and the informal segment • Bi polar structure to emerge • Muddled middle of the Indian banking sector to get squeezed.
Slide 10: Advocating conservatism
Advocating conservatism “The dangers of managing a business (or for that matter, an economy) in uncertain environs lie in under estimating the extent and intensity of the downside” (Annual Report 2007-2008)
Slide 11: Adapting to Change
Adapting to Change • Business model: – Flexible – Adaptable • Making liabilities the driver • Insulate earnings from environment – Linking asset to local needs – Linking liabilities to local sources
Slide 12: Results
Results • Conservatism and consolidation of the last three years has paid off • The critical choice was not to sacrifice medium to long-term growth to meet a short-term goal, be it business, incomes or profi ts. • Our priority is to ensure sustained long-term profitability.
Slide 13: Results
Results • Despite adverse environment: – Earnings were robust, – Net interest margins increasing – Impairment was reduced – Cost to income reduced – Return on Equity rising – Return on Assets up and above peer group levels.
Slide 14: Better liability structure: CASA
Better liability structure : CASA 45 40 35 30 25 20 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 14
Slide 15: Cost of Deposits: Declining
Cost of Deposits : Declining 7 6 5 4 3 2 1 0 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 15
Slide 16: Cost to income ratio: Sharp drop
Cost to income ratio : Sharp drop 46 44 42 40 38 36 34 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 16
Slide 17: Advances Yield: Increasing
Advances Yield : Increasing 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 17
Slide 18: NIMs: Rising
NIIMs : Rising 3.4 3.2 3 2.8 2.6 2.4 2.2 2 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 18
Slide 19: Return on assets: Constant rise
Return on assets : Constant rise 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 19
Slide 20: Return on equity
Return on equity 20 18 16 14 12 10 8 6 4 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 20
Slide 21: Earning per share
Earning per share 105 85 65 45 25 5 2005-2006 2006-2007 2007-2008 Half Year Sep, 2008 21
Slide 22: NPA coverage
NPA coverage 80 70 60 50 40 30 20 10 0 Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- 0405 0506 0506 0506 0506 0607 0607 0607 0607 0708 0708 0708 0708 0809 0809 22
Slide 23: Financial: Valuations ratios
Financial : Valuations ratios 2005-2006 2006-2007 2007 -2008 Earning per Share (annualized) 36.48 56.62 74.26 Net Asset Value 371.2 414.36 476.28 Adjusted Book Value 343.43 374.43 434.3 Price to book value ratio 1.23 1.73 1.35 Price to adjusted book value ratio 1.33 1.91 1.48 Price Earning Ratio (On
Slide 24: Profitability Ratios
Profitability Ratios 2005-2006 2006-2007 2007-2008 Net Interest Margins (%) 2.68% 2.97% 2.95% Interest Spreads (%) 2.61% 2.79% 2.64% Yield on Advances (Av) (%)(annualized) 8.48% 8.58% 10.44% Yield on Investments (Av) (%)(Annualized) 6.22% 6.20% 6.70% Cost of Deposits (Av) (%) (annualized) 4.55% 4.50
Slide 25: Asset Quality
Asset Quality: 2005-2006 2006-2007 2007 -2008 Gross NPAs ( Rs. in Mns) 3702 5018 4852 Net NPAs ( Rs. in Mns) 1339 1936 2036 Gross NPA Ratio ( %) 2.52% 2.89% 2.53% Net NPA Ratio (%) 0.92% 1.13% 1.08% NPA Coverage Ratio (%) 63.64% 61.43% 58.05% Gross NPA to Net Worth Ratio (%) 20.57% 24.98% 21.02% 25
Slide 26: Operating ratios
Operating ratios: 2005-2006 2006-2007 2007-2008 Operating Expenses to AWF (%) 1.36% 1.35% 1.31% (annualized) Operating Expenses to Total Income (%) 19.00% 18.08% 15.06% Operating expenses to other income (%) 311% 232.48% 164.73% Staff Cost to Total Income (%) 10.59% 10.69% 8.43% Interest Earned to A
Slide 27: Efficiency Ratios
Efficiency Ratios: 2005 -2006 2006 -2007 2007-2008 Cost to Income Ratio (%) 44.57% 40.13% 38.24% CD Ratio (%) 61.67% 67.79% 66.04% CASA Ratio (%) 34.17% 37.02% 39.16% Business per Employee (Rs. In Mns) 55.57 61.74 62.82 Net Profit per Employee (Rs. In Mns) 0.26 0.4 0.48 Business Per Branch (Rs. In M
Slide 28: Recap
Recap • J&K Bank will outperform the sector • With rising margins and lower costs, even as • Economic growth in India declines and • Banking sector slows down in uncertain environment and wavering policy prescriptions 28
Slide 29: Thank you!
Thank you! SK Bank