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
15 Anand Dama, Ashwini Agarwal, Darshil, Harshil Katari, Kunal Shah, Pankaj Kishani, Parth, Ruthie, Saket, Uma, Vineet Sharma, Vijaya, Yash, Yogesh, Yuvraj Chaudhary
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | YoY +16.75%; QoQ +4%+ (absolute value not disclosed) | First Q1 sequential deposit growth in six years; term deposits +25.24% YoY outpaced CASA +7.5% YoY amid industry-wide shift to term deposits (58%→61% of SCB deposits, FY19→FY26) |
| CASA Ratio | 42.06% | Down QoQ on one-off/seasonal flows - Q4 FY26 state government terminal benefits parked in savings accounts converted to term deposits (Triple-A day scheme) in Q1; FY27 guidance 45% |
| Term Deposits / Bulk Deposits | +25.24% YoY | Net bulk deposit increase of ₹6,700 crores in Q1; being shed over 1-2 months from July |
| Total Advances | YoY +25.44%; QoQ +4%+ | Outpaced system growth; corporate-led in Q1 (tactical, well-rated borrowers); RAM ~2/3 of book; FY27 actual expected 18-20% |
| RAM (Retail/Agri/MSME) | ~66% of loan book | Retail double-digit YoY; agri +18% YoY; car loans +20%+ YoY at bank level and +30%+ in ROI; personal loans +12%+ YoY in ROI |
| Gross NPA | 2.37% | Improved; gross slippages <0.5% in Q1; SMA numbers continuing to moderate |
| Net NPA | 0.60% | Sustained improvement reflecting disciplined underwriting |
| Provision Coverage Ratio | >90.5% | Healthy coverage maintained |
| Credit Cost | 0.1% | Very low; higher standard asset provisions reflect advances growth vs ~3% degrowth base, not credit deterioration |
| Operating Profit | ₹703 crores | +5% YoY |
| Net Profit | ₹424 crores | Below prior year on lower technical write-off (TWO) recoveries, higher standard asset provisions and NIM compression |
| ROA | ~0.90% (Q1) | FY27 guidance: maintain FY26 levels (~1.25%); management expects normalization from Q2 |
| Net Interest Margin | 3.28% | Compressed YoY on yield pressure + sticky deposit costs; management labels Q1 an aberration; ~3.5% targeted by end-Q3 |
| Yield on Advances | 8.56% | -79 bps YoY (9.35%); +5 bps QoQ (8.51%); ~2/3 of system credit now sub-9% per RBI data |
| Cost of Deposits | 4.74% | -9 bps YoY (4.83%); QoQ optically higher - Q4 FY26 included ₹105 crores one-time interest expense (government scheme) |
| CRAR / CET1 | 16.67% / 13.91% | Strong capital buffers; ₹1,250 crores capital raise approved (quantum under upward revision) |
Geographic & Segment Commentary
J&K & Ladakh (Home Market): Maintains commanding position with 61.13% share of banking business (March 2026); deposit market share improved in 19 of 22 districts during FY26. Q1 FY27 retail/agri growth doubled YoY pace after last year's subdued credit uptake, aided by tourism normalization. Core source of low-cost CASA, including government salary and terminal benefit flows.
Rest of India (ROI): Business share rose to ~26% (June 2026) from <20% a year ago via calibrated expansion across 22 states. Q1 corporate growth was ROI-led and opportunistic; retail momentum building - car loans +30%+ YoY, housing/education double-digit. ~100 staff posted, ~300 being recruited; 50-70 branches planned over next two years; liability/CASA franchise being built.
Retail, Agriculture & MSME (RAM): ~Two-thirds of the loan book; strategic retail focus unchanged. Agriculture +18% YoY, car loans +20%+ YoY (30%+ ROI), personal loans +12%+ YoY (ROI). Retail yields ~200 bps above corporate; 55-60% of FY27 advance growth targeted from retail - the core NIM recovery lever.
Corporate (ROI-led): Q1 growth outpaced retail - higher bond yields pushed companies back to the banking system; bank lent selectively to well-rated corporates at competitive rates (repo-linked, not MCLR, for financial market exposures). Low-yield advances maturing in Q2 will be shed; corporate proportion to be rebalanced toward retail.
Company-Specific & Strategic Commentary
Business & Market Milestones: Crossed ₹3 lakh crores business in Q1 (₹2→3 lakh crores in ~3 years vs a decade for ₹1→2 lakh crores); market cap crossed ₹20,000 crores; share price hit all-time high ₹202.75 (BSE) / ₹201.75 (NSE) on July 10, 2026; FII + domestic MF holding rose to 15.74% from 11.5% a year ago.
Diversification: ROI share ~26% vs <20% a year ago; targeted balance over next 2-3 years, achieved without losing home-market leadership; deposit/advance geographic skew (deposits ~83% J&K vs advances ~62% J&K) to be balanced over time.
CASA & Deposit Franchise: New GM-headed vertical exclusively for CASA improvement; J&K Police salary account MoU signed; 5-year government MoU renewal in process; three corporate salary MoUs in July (500-1,500 employees each); salary MoUs with Bangalore schools; Triple-A day deposit rate raised 5 bps.
Capital & ECL Readiness: CRAR 16.67% / CET1 13.91%; ₹1,250 crores capital raise approved with quantum under upward revision (government may dilute); ECL impact estimated at ~₹1,600-1,700 crores, likely slightly lower; MetLife stake sale in process - proceeds use (incl. potential ECL buffer) undecided.
Operational Efficiency: OpEx at worst flat; Q1 employee cost (~₹650 crores incl. ~₹150 crores gratuity/pension/leave provisioning) flagged as base; cost-to-income improving for six-seven quarters.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit Growth | FY27 guidance: 12%; management expects 18-20% actual | J&K ~12-13%, ROI ~25%; 55-60% of growth from retail; corporate proportion to be reduced |
| Deposit Growth | FY27 guidance: ~10% | Q1 already +16.75% YoY; home-market franchise resilient; bulk deposits (₹6,700 crores) being shed |
| CASA Ratio | FY27 guidance: 45% | 42.06% in Q1; substantial improvement expected by end of Q3 via salary MoUs and dedicated CASA vertical |
| NIM | FY27 guidance: ~3.5% | 3.28% in Q1 (aberration); drivers: retail mix (~200 bps higher yield), shedding bulk/high-cost deposits and low-yield corporate book; ~3.5% by end-Q3 |
| ROA | Maintain FY26 levels (~1.25%) | Q1 ~0.90%; normalization expected from Q2 |
| ROE | ~16% | Unchanged |
| GNPA | <2.25% (FY27) | 2.37% at Q1; slippages <0.5%, SMA improving |
| Technical Write-off (TWO) Recoveries | ~₹250 crores FY27 (up to ~₹300 crores) | Timing-dependent; Q1 pipeline slipped to Q2; expected to continue through FY28 |
| OpEx / Employee Cost | At worst flat | Q1 employee cost (~₹650 crores) is base; recruitment of ~300 in ROI may keep it flat but not increase |
| Capital Raise | ₹1,250 crores approved; quantum under upward revision | For ECL readiness; government may dilute |
| Branch Expansion | 50-70 branches in ROI over 2 years; 15-20/year in J&K | 100 staff already posted to ROI |
Risks & Constraints
| Risk | Context |
|---|---|
| NIM Compression / Funding Costs | Yield on advances down 79 bps YoY (8.56%) with cost of deposits sticky at 4.74%; ~2/3 of system credit sub-9%. Management views Q1 as an aberration; recovery depends on retail mix shift, shedding bulk deposits and maturing low-yield corporate loans. |
| CASA Erosion & Deposit Competition | CASA at 42.06% (savings ~33%); industry-wide shift to term deposits and financialisation of savings. Mitigation: home-market dominance, salary MoUs, dedicated CASA vertical. |
| Macro / Geopolitical Uncertainty | IMF cut India FY26 GDP forecast by 10 bps to 6.4% on Middle East tensions; fragile global backdrop could dampen growth, credit demand and collections. |
| ECL Implementation | Estimated ₹1,600-1,700 crores impact on net worth (possibly slightly lower); ₹1,250 crores capital raise approved with quantum under upward revision; final ECL model still pending, timing uncertain. |
| Recovery Timing / Other Income Volatility | TWO recoveries are lumpy and timing-dependent; Q1 subdued vs ₹70-80 crores base; ~₹250 crores FY27 guidance depends on pipeline materializing (largely shifted to Q2). |
| Geographic Concentration & Execution Risk | ~83% of deposits from J&K vs ~62% of advances; ROI expansion (50-70 branches, ~300 hires) carries underwriting/execution risk; government may dilute in capital raise. |
| IT-Sector-Linked Retail Stress | Industry concern over housing/unsecured stress from IT layoffs; bank's IT exposure is low, housing book diversified, no visible stress with SMA improving. |
Q&A Highlights
Q1 Margin Drop, Rationale and Recovery to 3.5% NIM
- Question: Why did margins drop sharply on both yield and cost sides, and what drives NIM from 3.28% to the 3.5% guidance? (Ashwini Agarwal - Edelweiss MF; Uma - Kotak MF)
- Answer: Q1 was a conscious, one-off strategic choice - last year's J&K environment suppressed local credit uptake, so the bank sustained momentum via well-rated ROI corporates at competitive rates, funded by higher-cost deposits. The correction is underway: J&K retail/agri growth doubled YoY; ROI retail is running ~30% higher with potential to reach ~100% (low base); ~100 staff posted and ~300 being recruited in ROI. Retail yields are ~200 bps above corporate; NIM ~3.5% by end of Q3, normalization from Q2. (Amitabh Chatterjee)
Growth vs Profitability Trade-off and Guidance Credibility
- Question: Is 18-20% growth advisable when it costs ~20 bps of NIM? Guidance of 12% vs 25% actual delivery has diverged significantly. (Uma - Kotak MF)
- Answer: Opportunistic corporate lending was limited to last year and Q1 only; it will not continue. 55-60% of FY27 advance growth will come from retail; ROA will be ~1.25%+ with a better Q2. Management acknowledged the divergence and committed to guiding closer to delivery. (Amitabh Chatterjee)
Bulk Deposits, Cost of Deposits and CASA Decline
- Question: How much of term deposit growth is bulk, and is the savings decline seasonal? Why did cost of deposits rise QoQ to 4.74%? (Kunal Shah - Citi; Yuvraj Chaudhary - Anand Rathi)
- Answer: Net bulk deposits rose ₹6,700 crores in Q1 and will be shed within one to two months. Savings decline reflects Q4 FY26 state government terminal benefits flowing into savings accounts, then converting to term deposits (Triple-A day scheme) in Q1. Cost of deposits optically higher QoQ because Q4 FY26 included ₹105 crores one-time interest expense (government scheme); ex that, cost improved sequentially. (Amitabh Chatterjee)
Retail Segment Profit Decline and TWO Recoveries
- Question: Why did retail segment profit fall from ₹472 crores (Q4 FY26) to ₹196 crores (Q1 FY27)? (Harshil Katari - Individual Investor)
- Answer: Technical write-off recoveries in Q4 FY26 were classified under the retail segment, inflating that quarter; recoveries are timing-dependent - good recoveries in pipeline slipped to Q2. (Amitabh Chatterjee)
Other Income and Recovery Outlook
- Question: Why was other income down, and what are recovery expectations? (Ashwini Agarwal - Edelweiss MF)
- Answer: Q1 FY26 had ₹70-80 crores of TWO recoveries absent this year, plus subdued treasury income. FY27 expectation is ~₹250 crores (up to ~₹300 crores); recoveries should continue through FY28. (Amitabh Chatterjee)
ECL Impact and Capital Raise
- Question: Any revision to the ₹1,600-1,700 crores ECL impact and ₹1,250 crores fund raise? (Uma - Kotak MF)
- Answer: ECL impact likely slightly lower than earlier estimate; ₹1,250 crores approval is in place and on track, but quantum is being revised upward pending approvals; government may dilute its stake. (Amitabh Chatterjee)
CASA Restoration Strategy
- Question: How will the CASA ratio be restored to the 45% guidance? (Parth - 360 One Capital)
- Answer: A GM-headed vertical now focuses exclusively on CASA; J&K Police salary accounts MoU signed; 5-year government MoU renewal underway; three corporate salary MoUs in July (500-1,500 employees each); Bangalore school salary MoUs; substantial CASA improvement expected by end of Q3. (Amitabh Chatterjee)
Employee Cost and OpEx Run Rate
- Question: Employee cost rose to ~₹650 crores vs ₹509 crores base; is this the run rate? (Yogesh - Sequent Investment; Darshil - Crown Capital)
- Answer: Q4 FY26 had a reversal of excess employee-benefit provisioning; Q1 includes ~₹150 crores of gratuity/pension/leave provisioning for pre-NPS employees. Q1 employee cost is the base and should decline slightly until next recruitment; overall OpEx at worst flat. (Amitabh Chatterjee)
Low-Yield Book Run-off and MetLife Proceeds
- Question: Will short-term financial-market credit roll off? Will MetLife gains build an ECL buffer? (Anand Dama - Varma)
- Answer: No new short-term lending recently; low-yield advances (repo-linked, not MCLR) mature this month/next and will be shed, aiding margins. MetLife sale awaits clearances; use of one-off proceeds undecided - ECL buffer idea under consideration. (Amitabh Chatterjee)
Asset Quality: Floods and IT-Sector Stress
- Question: Any collection/asset-quality impact from flash floods, or stress in housing/unsecured from IT-sector job losses? (Ruthie; Anand Dama)
- Answer: Flood impact minimal - collections normal and SMA down QoQ; housing book diversified between J&K and ROI; IT-sector exposure low; no visible stress. (Amitabh Chatterjee)
Key Takeaway
Jammu and Kashmir Bank delivered strong growth with compressed margins in Q1 FY27: deposits rose 16.75% YoY - the first Q1 sequential deposit growth in six years - and advances grew 25.44% YoY, crossing ₹3 lakh crores of business and ₹20,000 crores of market capitalization. Net profit fell to ₹424 crores as NIM compressed to 3.28% (yield on advances down 79 bps YoY to 8.56%), technical write-off recoveries lagged and standard asset provisions rose; asset quality improved, with GNPA at 2.37%, NNPA at 0.60% and PCR above 90.5%. Management termed the quarter a deliberate, one-off aberration from well-rated corporate lending in Rest of India (now 26% of business) funded by high-cost bulk deposits; the correction is underway - J&K retail growth doubled YoY, ~300 recruits are being added in ROI and ₹6,700 crores of bulk deposits are being shed. FY27 guidance stays at NIM ~3.5%, CASA 45%, ROA ~1.25%, ROE ~16% and GNPA below 2.25%, with normalization expected from Q2 and full margin recovery by Q3; ECL implementation, lumpy recovery timing and deposit competition remain key watchpoints.