J&KBANK — earnings call

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Prepared remarks

Moderator · Conference Operator

MR. RENISH BHUVA – ICICI SECURITIES LIMITED.

J&K Bank May 12, 2022

Ladies and gentlemen, good day, and welcome to J&K Bank Q4 FY22 Earnings Conference Call hosted by ICICI Securities.

As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing “*”and then “0” on your touchtone telephone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Renish Bhuva from ICICI Securities.

Thank you, and over to you, sir.

Renish Bhuva

Hi.

Thanks, Inba.

Hello, and good evening to everyone.

Welcome to the J&K Bank Q4 FY22

Moderator · Conference Operator

Thank you.

I would now like to hand the conference back to the management of J&K Bank for closing comments.

Over to you, sir.

Baldev Prakash

Thank you, ma'am.

And as I have stated already in my opening remarks, the Bank is on the growth trajectory now.

And whatever the stress was there in the loan book has already been booked and we are well capitalized also as compared to the last year.

Of course, that effort will continue.

And the provision coverage ratio is quite healthy.

And so that Bank is bound to achieve new heights during this year.

So, I request all support from all our stakeholders.

Thank you very much.

Moderator · Conference Operator

Thank you.

On behalf of ICICI Securities that concludes this conference.

Thank you for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you very much, sir.

Ladies and gentlemen, we will now begin the question-and-answer session.

We'll take the first question from the line of Renish Bhuva from ICICI Securities.

Please go ahead.

Renish Bhuva

So, there's just a couple of things, okay.

So, one is that we all are aware about our full liability franchise in J&K.

But when it comes to the asset side, we have our own learning curve on the asset side.

So, briefly, if you can throw some light, let's say, on the asset side which product will be your focus product going ahead and which geographies you will target to grow that product, sir?

Baldev Prakash

Good question.

Renish, actually, all the segments like agriculture, retail as well as MSME will be on our focus and the stages we have decided that already we have with Phone Pe Loan which is a digital loan for the employees of department only of J&K government.

So, now, the Phone Pe Loan facility that a digital loan has been rolled out to all the government departments and going forward in a month or so, we will be rolling out to all corporates of the J&K government.

So, that is one and then going forward, we will be approaching the Ladakh UT also so that the employees of that UT also are covered under this scheme.

And the effort is that all the retail loans are done through digital mode only.

And we are going forward, we are now very aggressively working for the AMTs, advances monitoring team because as of now, as you know, that the assets in the MSMEs are basically spread out and the credit risk is spread out across geographies.

So, from 1st of June, all the teams will be specialized teams will be headed by the relationship manager and the team will be owning a number of accounts of 30 to 35, and it will be supported by the Credit Support Officer.

So, these teams will be exclusively responsible for maintenance, growth, and audit related issues of the MSME, which will give us definitely edge and it will further improve the quality of our portfolio.

Renish Bhuva

And sir, any growth numbers would you like to guide for.

J&K Bank May 12, 2022

Baldev Prakash

As I've already told, we are looking for around 12% to 15% growth as far as the deposits is concerned, and we are looking for around 15% of growth in advances during the current year and in the J&K UT, we are expecting a growth of 20% in advances.

Renish Bhuva

And just the last question from my side on the margin.

So, we already entered the rising interest cycle.

So, looking at your asset mix and your deposit profile, how should the margin trajectory going ahead, I mean do you foresee a margin expansion or, let's say, margin will remain static at around current level, sir.

Baldev Prakash

So, Renish, what we are thinking is that our NIM should be in this range only because our CASA portfolio is quite strong and we are confident that this will be maintained at around 56%, 57% level, and the credit growth which is expected mainly in the retail segment and agriculture segment.

So, we are confident that it will be maintained in the similar range.

Renish Bhuva

So, our SA rate is linked to the benchmark rate or how is it sir?

Baldev Prakash

It is both, it’s external also as well as MCLR also.

I think around 40% is external and 60% is MCLR.

Renish Bhuva

So, I’m saying SA rate, not the asset book.

Baldev Prakash

Pardon.

Renish, you have to repeat.

Renish Bhuva

So, this saving rates are linked to the repo rate or it is the fixed rate pool.

Baldev Prakash

The saving rate as of now is fixed, and then with respect to RLR, that’s linked to the repo rate, repo linked lending rate, that’s the external benchmark rate.

Our Risk Head is responding to this question, Renish.

Altaf Kira

So, if we look at it with respect to the margins, I think the margins are settling as sir rightly said, because due to the hardening of the interest rates there, because of our rate sensitive assets are at higher end.

So, it will give some benefit of that and going forward, the margins will be higher than this.

Moderator · Conference Operator

We'll take our next question from the line of Gaurav from Bowhead India.

Please go ahead.

Gaurav

I think it's a long time that we have had a stable CEO at the helm.

So, I’m sure that with your presence we achieve the numbers which we had all been waiting for the last 5, 6 years.

Sir, with that, what about your capital raising plan, if you can highlight, so since we are already low on the CET1, what are our plans on the equity?

Baldev Prakash

As I have covered in my opening remarks, so last year it is around Rs.

1,100 crore, Rs.

1,103 crore of the capital, and the same effort will continue this year also.

Government of J&K is J&K Bank May 12, 2022 expected to provide around Rs.

200 crore which they have already budgeted and once after a quarter or so, we are confident that our rating will be improving with the growth in the profitability as well as in the business.

So, we will be again reaching and going to the market for raising capital in Tier 1 as well as in Tier 2.

Gaurav

Sir, in terms of your operating profit, do you have any targets for FY23?

Like for FY22, you generated Rs.

1,369 crore of operating profit.

Do you have any target for FY23?

Baldev Prakash

So, this year actually Gaurav, our operating profit has been impacted because of this provision which was amortize for 5 years, but we have covered it in this year itself.

So, that is amount of around Rs.

270 crore.

Gaurav

Sir, that is anyways part of the exceptional items, right?

It is not the operating profit.

The operating profit which I am referring to Rs.

1,370 crore odd, that is excluding the exceptional item of Rs.

270 crore.

Baldev Prakash

That has affected this quarter’s operating profit.

So, going forward, we are confident of achieving appropriate profit of – so we are expecting Gaurav a 25% growth excluding this one-time item from this year.

Gaurav

And sir, you mentioned 1% for FY23. Sir, can you hint at the absolute number since there is some confusion, some Banks leave it on assets, some Banks leave it on advances.

What does, sir 1% translate to in terms of absolute number?

Baldev Prakash

I'm sorry, Gaurav, please.

Can you repeat?

I’m not able to hear correctly.

Gaurav

Sir, in your credit cost, you gave a guidance that for 1% credit cost for FY23. I wanted to check the absolute number here, that 1% translates to what kind of absolute number for credit cost with the provision line item in your P&L.