Srinagar: Despite the J&K Bank stocks recording an upward swing at Rs. 1394, the state’s premier financial institution has recorded 58 percent drop in net profit in the first of quarter of this fiscal, ending in June. The bank had posted a profit of Rs. 308 Cr in the corresponding quarter last fiscal but this year has been able to show a dismal Rs. 130 Cr earnings. Chief reason for this drop is said to be the bank’s swelling Non-Performing Assets -NPA.
The asset quality of the bank has deteriorated in the first quarter with gross non-performing assets (NPA) rising to 4.16% from 1.67%, while net NPA jumped to 2.18% from 0.14%.
Reports said that Jammu and Kashmir Bank’s net profit slipped 57.8 percent to Rs 130 Crore in June quarter on huge provisions and lower net interest income but aided by other income.
Net interest income, the difference between interest earned and interest expended, declined 2.6 percent to Rs 637.7 Crore in the quarter ended June 2014 from Rs 655 Crore in corresponding quarter of last fiscal while other income shot up 42 percent year-on-year to Rs 130.99 Crore during the quarter.
Provisions quadrupled sequentially and nearly seven times on yearly basis to Rs 246.8 Crore in the quarter gone by with provision coverage ratio at 55.08 percent as on June 2014 (declined from 90 percent in Q4FY14).
While explaining the reason for weak results, the Jammu and Kashmir Bank authorities said that Rs 700 Crore of NPA addition was due to REI Agro that is currently under corporate debt restructuring. Many accounts like REI Agro are under stress, an official of J&K Bank says. According to the Bank, the asset quality will improve only when REI Agro restructuring is done. Net interest margin has come down to 3.63 percent from 4.20 percent year-on-year. The Jammu and Kashmir Bank authorities believe that worst seems to be over for the bank.
In absolute terms, gross NPA increased by 141 percent quarter-on-quarter (up 184 percent year-on-year) to Rs 1,888 Crore and net NPA rose by 9.5 times sequentially (up 17 times on yearly basis) to Rs 968.5 Crore in the quarter gone by. At 15:05 hours IST, the stock was quoting at Rs 1,442, down Rs 136.20, or 8.63 percent amid high volumes on the BSE.
Pertinently, Jammu and Kashmir Bank stock in May this year also had suffered major losses on Indian bourses on NPA concern.
The loans granted by the Bank to outside companies based in Kolkatta, Mumbai and Hyderabad have fallen into the category of unsecured loans. J&K Bank continues to show these unsecured loans as a standard loan while the fact is that a particular bank outside J&K is looking forward to file a wind-up petition against a company for non-payments of Rs 224 Crore outstanding unlike Jammu and Kashmir Bank.
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