Event Participants
Executives
13 Ajay Kohli, Altaf Hussain Khera, Amitabh Chatterjee, Ashutosh Sarin, Imtiaz Ahmed Bhat, Irfan Anjum, Ketan Kumar Joshi, Masood Ahmed, Rajesh Tiku, Sanjay Gupta, Sudhir Gupta, Sunil Kumar, Suresh Kumar Chaudhuri
Analysts
14 Anand Dama (Varma), Ashwini Agarwal (Edelweiss Mutual Fund), Darshil (Crown Capital), Harshil Katari (Individual Investor), Kunal Shah (Citigroup), Pankaj Kishani (Individual Investor), Parth (360 One Capital), Ruthie (Financial Services Limited), Uma (Kotak Mutual Fund), Vijaya (Individual Investor), Vineet Sharma (Capital), Yash (Integrity Ventures), Yogesh (Sequent Investment), Yuvraj Chaudhary (Anand Rathi Financial Services)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total deposits growth | +16.75% YoY | >4% QoQ; first Q1 sequential deposit growth in six years; term deposits (~+25% YoY) outpaced CASA (+7.5% YoY) |
| CASA ratio | 42.06% | Declined sequentially; J&K government retirement terminal benefits parked in savings in Q4 converted to term deposits in Q1 |
| Total advances growth | +25.44% YoY | >4% QoQ; corporate-led in Q1 at competitive rates; RAM remains ~two-thirds of loan book |
| Business volume | ₹3 lakh crores+ | Crossed ₹3 trillion milestone; 2→3 trillion achieved in ~3 years vs a decade for 1→2 |
| GNPA | 2.37% | Gross slippages below 0.5%; SMA moderating |
| NNPA | 0.60% | Continued improvement |
| PCR | >90.5% | Healthy coverage maintained |
| Credit cost | ~0.1% | Very low; standard asset provisions rose on strong advances growth vs ~3% degrowth in Q1 FY26 |
| Operating profit | ₹703 crores | +5% YoY; other income subdued on timing of technical write-off recoveries |
| Net profit | ₹424 crores | Below YoY; impacted by lumpy recoveries and higher standard asset provisions |
| NIM | 3.28% | Compressed YoY; yield on advances 8.56% (-79 bps YoY), cost of deposits 4.74% (-9 bps YoY) |
| Yield on advances | 8.56% | vs 9.35% YoY on aggressive rate transmission; marginal QoQ improvement from 8.51% |
| Cost of deposits | 4.74% | vs 4.83% YoY; Q4 FY26 included ₹105 crores one-time government scheme expense, so QoQ trend is improving |
| CAR | 16.67% | CET1 at 13.91% |
| Market cap / share price | >₹20,000 crores / ₹202.75 (BSE) | All-time high on 10 July 2026; FII + domestic MF holding at 15.74% vs 11.5% a year ago |
Geographic & Segment Commentary
J&K & Ladakh (Home Territory): Retains dominant position with 61.13% share of banking business (as on 31 March 2026); deposit market share improved in 19 of 22 districts in FY26. Retail credit demand rebounded sharply in Q1 FY27 - J&K retail volumes grew at double the rate of Q1 FY26 as tourism normalised. An analyst noted J&K contributes ~83% of deposits vs ~62% of advances; management expects this skew to balance over 2-3 years.
Rest of India (ROI): Business share rose to ~26% from <20% a year ago, driven by corporate credit (industry trend of higher bond yields pushing companies back to banks) and building retail momentum: car loans +30% YoY in ROI, housing and education loans double-digit, personal loans +12% YoY. 100+ staff deployed and ~300 being recruited; 50-70 new branches planned over the next two years.
Retail, Agriculture & MSME (RAM): ~Two-thirds of the loan book; strategic retail-focused positioning unchanged. Agri advances +18% YoY; car loans +20% YoY at bank level; personal loans +12% YoY. RAM expected to drive 55-60% of FY27 advances growth as the corporate share reduces.
Company-Specific & Strategic Commentary
- Diversification: ROI division now ~26% of business vs <20% a year ago, achieved without ceding home-market leadership (61.13% share in J&K/Ladakh); supports positioning as a national bank across 22 states.
- CASA & Liability Franchise: Dedicated GM-headed vertical for CASA improvement; J&K Police salary-account MoU signed; 5-year MoU with J&K government under renewal; three salary MoUs (500-1,500 employees each) signed in July; exploring corporate salary accounts at Bangalore schools; hiked term deposit rates by 5 bps on Triple A day deposit scheme.
- Capital & ECL Preparedness: ₹1,250 crores capital raise approved and forthcoming; quantum under upward revision awaiting approvals; ECL impact expected slightly below earlier ₹1,600-1,700 crores estimate; government may dilute its stake.
- MetLife Stake Sale: Transaction entered; one-off gain pending regulatory clearances; deployment of proceeds (e.g., ECL buffer) not yet decided.
- Written-off Recoveries: ~₹250-300 crores expected in FY27, with continuity into FY28; Q1 shortfall is timing-related and transitory per management.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit growth | 12% formal guidance; actual expectation 18-20% | J&K ~12-13%, ROI ~25%; 55-60% from retail; guidance reassessed only after Q2 results |
| Deposit growth | 10% guidance | Q1 delivered +16.75% YoY; CASA rebuild via salary MoUs and dedicated vertical |
| CASA ratio | 45% | Substantial improvement targeted by end of Q3 FY27 |
| NIM | ~3.5% | Expected by end of Q3 FY27; drivers: retail mix (yields ~200 bps above corporate), bulk-deposit run-off, shedding low-yield repo-linked advances |
| ROA | ~1.25%+ (maintain FY26 levels) | Q1 at ~90 bps is an aberration; normalisation expected from Q2 |
| ROE | ~16% | Maintained |
| GNPA | <2.25% | Slippages <0.5%; SMA moderating |
Risks & Constraints
| Risk | Context |
|---|---|
| NIM compression | Yield on advances fell 79 bps YoY (8.56%) on rapid rate transmission while deposit costs remain sticky (4.74%, -9 bps YoY); Q1 NIM at 3.28% vs 3.5% guidance. Mitigation: retail mix shift, ₹6,700 crores bulk-deposit unwind, maturing low-yield corporate advances. |
| Deposit franchise pressure | Industry-wide deposit competition and CASA decline to 42.06%; savings balances converted to term deposits post government retirement payouts. Mitigation: salary MoUs, dedicated CASA vertical, district-level share gains (19/22 districts). |
| ECL implementation | Earlier estimated at ₹1,600-1,700 crores impact on net worth, now seen slightly lower; ₹1,250 crores capital raise approved with quantum under upward revision; government may dilute. |
| Geopolitical / macro uncertainty | Middle East tensions and supply chain pressures; IMF trimmed India FY26 GDP forecast by 10 bps to 6.4%; could temper credit demand and sentiment. |
| Lumpy other income | Technical write-off recoveries are timing-dependent (~₹250-300 crores expected FY27); Q1 shortfall demonstrates quarterly unpredictability; management expects continuity into FY28. |
| J&K regional events | Flash floods in pockets; no visible impact on collections or SMA so far; tourism normalisation is supporting recovery. |
Q&A Highlights
Segment Profit Decline & Recoveries
- Question: Why did retail segment profit fall from ₹472 crores in Q4 FY26 to ₹196 crores in Q1 FY27 despite strong retail growth? (Harshil Katari)
- Answer: Q4 profits included technical write-off recoveries classified under the retail segment; recoveries are timing-dependent and good pipeline recoveries did not materialise in Q1 but are expected in the coming quarter. (Management)
Credit Growth & Cost of Deposits
- Question: What is the medium-term credit growth expectation, and why did cost of funds rise sharply QoQ from 4.47% to 4.74%? (Yuvraj Chaudhary)
- Answer: FY27 credit growth will be 18-20% versus the 12% formal guidance - J&K ~12-13% and ROI ~25%. The QoQ cost increase is an artefact: Q4 FY26 included ₹105 crores one-time government scheme expense; excluding that, cost of deposits actually improved sequentially. (Amitabh Chatterjee)
Margin Compression Drivers & Outlook
- Question: What caused the sharp margin drop on both yield and cost sides, and how do margins recover? (Ashwini Agarwal)
- Answer: A conscious strategic choice - with J&K retail demand subdued last year, growth came from well-rated corporates at competitive rates, funded by higher-cost deposits in a tight liability market. Correction is underway: J&K retail volumes doubled YoY, ~300 staff being recruited in ROI. Q1 is an aberration; guidance will be reassessed only after Q2. (Amitabh Chatterjee)
Path to 3.5% NIM
- Question: What will drive margin expansion from 3.28% to the 3.5% guidance in the remaining three quarters? (Uma, Kotak Mutual Fund)
- Answer: Retail + agri growth is running 20-30% higher YoY; ROI retail improvement (~30% now) can reach ~100% on a low base; retail growth will exceed corporate growth by year-end; retail yields are ~200 bps above corporate. Expect ~3.5% NIM by end of Q3 FY27, if not sooner. (Amitabh Chatterjee)
Growth vs. Profitability Trade-off
- Question: Is 25% credit growth worth ~20 bps of margin sacrifice given the stretch on liabilities and sharp ROA contraction? (Uma, Kotak Mutual Fund)
- Answer: The opportunistic corporate lending was confined to last year and Q1 to take share in good-quality advances; the focus is now fully on retail, which will deliver 55-60% of FY27 growth. FY27 ROA will be ~1.25%+ and Q1's ~90 bps is not indicative of the year. (Amitabh Chatterjee)
ECL Impact & Capital Raise
- Question: Any update on the ECL impact (~₹1,600-1,700 crores) and the ₹1,250 crores capital raise? Will the government participate? (Uma, Kotak Mutual Fund)
- Answer: ECL impact is likely slightly lower than the earlier estimate. The ₹1,250 crores raise is approved and will come; the quantum is being revised upward, pending fresh approvals. Government may dilute. (Amitabh Chatterjee)
Short-Term Credit Run-off & MetLife Stake Sale
- Question: Will the sharp growth in the financial markets segment run off, and will MetLife stake-sale gains be used to build an ECL buffer? (Anand Dama, Varma)
- Answer: Recent financial-market lending is mostly repo-linked (not MCLR), and some low-yield advances mature this month and next, aiding yield recovery. MetLife proceeds are pending clearances; usage (including an ECL buffer) is undecided. Flash floods in J&K have not impacted collections or SMA. (Amitabh Chatterjee)
Bulk Deposits & CASA Decline
- Question: What is the bulk-deposit proportion of term deposits, and why did savings deposits fall QoQ? (Kunal Shah, Citigroup)
- Answer: Net bulk-deposit increase in Q1 was ~₹6,700 crores, expected to unwind within a month or two. The savings decline reflects J&K government terminal benefits (retired employees) parked in savings in Q4 and converted to term deposits in Q1. (Amitabh Chatterjee)
CASA Recovery Strategy
- Question: How will the bank rebuild CASA toward the 45% guidance? (Parth, 360 One Capital)
- Answer: A GM-led vertical now exclusively focuses on CASA; J&K Police salary-account MoU signed; 5-year government MoU renewal underway; three salary MoUs (500-1,500 employees each) in July; exploring Bangalore school salary accounts. Term deposit rates were hiked 5 bps on the Triple A day deposit scheme. (Amitabh Chatterjee)
Employee Cost Base
- Question: Why did employee cost rise to ~₹650 crores versus the ~₹509 crores base discussed earlier? (Yogesh, Sequent Investment)
- Answer: Q4 FY26 had a reversal of excess provisioning; the current quarter includes ~₹150 crores of annual provisions for gratuity, pension and leave for pre-2009 (pre-NPS) staff. Q1 is a fair base and employee cost is likely to decline slightly until the next recruitment round. (Amitabh Chatterjee)
Key Takeaway
Jammu and Kashmir Bank opened FY27 with strong business momentum - deposits +16.75% YoY and advances +25.44% YoY, crossing the ₹3 lakh crore milestone - but profitability lagged on conscious choices: corporate-led growth at competitive rates and high-cost bulk deposits (net +₹6,700 crores) compressed NIM to 3.28%, while lumpy technical write-off recoveries and higher standard asset provisions pulled net profit to ₹424 crores. Asset quality stayed resilient (GNPA 2.37%, NNPA 0.60%, PCR >90.5%, credit cost ~0.1%) and capital remained strong (CAR 16.67%, CET1 13.91%). Management reaffirmed FY27 guidance (NIM ~3.5%, ROA ~1.25%, ROE ~16%, GNPA <2.25%), expecting normalisation from Q2 as J&K retail volumes (doubled YoY), Rest of India expansion (now 26% of business) and CASA initiatives rebalance the mix. Watch points: ECL provisioning impact, upward revision of the ₹1,250 crores capital raise, and NIM recovery pace.