JAMMUANDKASHMIRBANK Q1 FY27 earnings call.
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Jammu and Kashmir Bank delivered strong business momentum in Q1 FY27 with deposits up 16.75% YoY and advances up 25.44% YoY, crossing the Rs 3 trillion business milestone for the first time. However, profitability metrics disappointed with NIM compressed to 3.28% (vs 3.5% guidance) and PAT below year-ago levels. The margin weakness stems from management's strategic decision to pursue competitive corporate lending in Rest of India when J&K credit uptake was subdued last year, combined with elevated deposit costs from bulk term deposits. Management characterized Q1 as a one-quarter aberration and expects sequential normalization from Q2, with NIM recovery toward 3.5% driven by retail growth picking up in J&K and high-cost bulk deposits rolling off. ROA guidance of ~1.25% (matching FY26 levels) and credit growth of 18-20% (vs 12% formal guidance) indicate confidence in recovery. Key risks include persistent deposit competition, ECL model transition impact on provisions, and geopolitical sensitivity of the home state. Rest of India contribution rising to 26% shows successful diversification without compromising 61.13% market share in J&K/Ladakh.
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Guidance to track
- Management expects actual credit growth to be 18-20% despite formal guidance of 12%, with J&K growing 12-13% and Rest of India growing ~25%. Growth in J&K retail has doubled compared to last year's Q1.
- Current quarter's 3.28% NIM is a one-quarter aberration. Sequential improvement expected as low-yielding financial market loans mature and high-cost bulk deposits run off, with retail growth (yielding ~200bps higher than corporate) providing support.
- New vertical headed by a GM created exclusively for CASA improvement; MoU with J&K police for salary accounts secured; three fresh salary package MoUs signed in July with corporates of 500-1500 employees.
- Maintaining FY27 targets: 12% credit growth, 10% deposit growth, CASA 45%, NIM ~3.5%, ROA ~2026 levels, ROE ~16%, GNPA below 2.25%. Formal guidance revision only after Q2 results.
Risks flagged
- Cost of deposits only moderated 9bps YoY to 4.74% despite industry rate cuts, while yield on advances compressed 79bps to 8.56%. Intense deposit competition limiting NIM recovery potential.
- One analyst explicitly questioned whether 18-20% credit growth is advisable given sharp ROA contraction to ~90bps in Q1, suggesting growth is coming at cost of balance sheet stretching.
- Retail banking profit dropped sharply from Rs 472 crore (Q4 FY26) to Rs 196 crore (Q1 FY27). Management attributed this to timing of technical written-off account recoveries but did not provide forward-looking recovery timeline or specific pipeline details.
- Management acknowledged ECL impact may be slightly lower than earlier estimated Rs 600-700 crore but could not quantify precisely. Rs 1,250 crore capital raise approved but quantum revision pending. Government participation in capital raise also uncertain.
Key quotes
- This quarterly performance should be viewed in entirety as another important milestone in our continuing growth journey rather than just through the prism of a short-term profitability. The choices and decisions that we have made during this quarter have been conscious, strategic and forward-looking.
- We expect the recovery from technically written-off accounts to be around Rs 250 crores. Last year also it was Rs 250 crores around. It will be upward than Rs 250 crores but at times you are not very sure with the timing whether it comes within that quarter or not.
- I expect almost 55 to 60% growth of advances coming this year from retail itself. Once we are able to improve upon the retail loan book growth in rest of India we are definitely in line to improve the margins. I'm absolutely certain about that.
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