Scripscan:Jammu & Kashmir Bank
Expected return for 5 years:22-25% CAGR
Story:J&K Bank functions as a universal bank in Jammu & Kashmir and as a specialised bank in the rest of the country. It is also the only private sector bank designated as RBI’s agent for banking business, and carries out the banking business of the Central Government, besides collecting central taxes for CBDT.J&K Bank follows a two-legged business model whereby it seeks to increase lending in its home state which results in higher margins despite modest volumes, and at the same time, seeks to capture niche lending opportunities on a pan-India basis to build volumes and improve margins.J&K Bank operates on the principle of 'socially empowering banking' and seeks to deliver innovative financial solutions for household, small and medium enterprises.I have also picked this one as its pretty insulated from the present uncertain environment and has robust financial condition.Five points to vindicate my stand:-
1)The condition of Jammu & Kashmir by all means is getting better than before.The slow but steady signs of the growth in the economy of the state is one of the reasons which helped me to pick the counter.With 60% market share in advances and deposits,the bank is best positioned to benefit from the J&K story.The more prosperity and growth in the state,the better the performance of the bank.
2)How about a mix of high dividend yield with high CAGR capital appreciation?.J&K bank is one such counter where not only you would be provided safe and secure returns but the comfort gets compounded when you find it recently paid 50 bucks dividend per share.It pays over 20% of the earnings as dividends.So as the earning grows 25% per year,the dividend per share would grow proportionately too.It has a track record of uninterrupted profits and dividends for four decades.
3)Consistent performer:In stock markets people crave for consistent performers.Something which has been consistent for years.Jammu bank has grown over 24% for the last six years as far the profits are concerned.Net Interest Income too has seen a robust jump of around 20% in the same period.The bank should grow its profits by a CAGR of 22-25% for the coming five years.
4)The Bank''s strategy of consolidation,re-engineering, re-pricing and re-organisation has resulted in productive and efficient growth,robust balance sheet, reality asset book and substantial provisions.The J&K Bank is rated P1+, indicating the highest degree of safety by Standard &Poor and CRISIL. Ratios like ROAs of around 1.5% and ROE of 20% proves the quality of the bank.In the coming quarters too the bank should be able to maintain its NIM at healthy levels.At price to book value of around 1.1,its probably the cheapest bet in the entire banking sector,leaving tremendous scope for future capital appreciation.
5)The bank has more than sufficient funds for its future expansion(for next 3-4 years).No equity dilution and thus no destruction of shareholders wealth.Bank’s net profit for the quarter ended March 31, 2013 has increased by 20.16% at Rs 250.08 crore for the quarter as compared to Rs 208.12 crore for the quarter ended March 31, 2012. Bank’s total income has increased by 24.05% to Rs 1835.71 crore for the quarter under review, as compared to Rs 1479.81 crore for the corresponding quarter of the previous fiscal.The bank’s net profit for the year ended March 31, 2013 has increased by 31.35% at Rs 1055.10 crore as compared to Rs 803.25 crore in previous year ended March 31, 2012. Its total income surged by 28.06% to Rs 6620.53 crore for the year from Rs 5169.70 crore of the previous year.
2012-13 Performance at a Glance:-
1)The aggregate business of the Bank crossed yet another milestone mark and stood at Rs. 1,03,421.03 Crores at the end of FY 2012-13. The total business of the Bank increased by Rs. 16,996.71 Crores from the previous year''s figure of Rs. 86,424.32 Crores, registering a growth of 19.67%.
2)The total deposits of the Bank have grown by Rs. 10,873.72 Crores from Rs. 53,346.90 Crores, as on 31st March, 2012, to Rs. 46,220.62 Crores, as on 31st March, 2013, registering a growth of 20.38%.CASA deposits of the Bank at Rs. 25,191 Crores constituted 39.23% of total deposits of the Bank.
3) Cost of deposits for current FY stood at 6.87%.
4) The Bank continued its prudent approach in expanding quality credit assets in line with its policy on Credit Risk Management.
5)The net advances of the Bank increased by Rs. 6,122.99 Crores from Rs. 33,077.42 Crores, as on 31st March, 2012, to Rs. 39,200.41 Crores, as on 31st March, 2013, a growth of 18.51%.
6)Yield on advances for the current FY improved to 12.59%, compared to 12.12% for FY 2011-12.
7)Priority sector advances (Gross) stood at Rs. 11,591.58 Crores, as on 31st March, 2013.
8)The Bank''s performance in the recovery of NPAs during the year continued to be good. The Bank effected cumulative cash recovery;upgradation of NPAs and technical write-off of Rs. 327.83 Crores,compared to Rs. 316.91 Crores in the previous year.
9)Investment portfolio of the bank increased by Rs. 4,116.74 Crores from Rs. 21,624.32 Crores, as on 31st March, 2012, to Rs. 25,741.06 Crores, as on 31st March, 2013.
Conclusion:Very unlike of myself as I seldom look at known blue chip bets.But balancing growth counters with safe heavens like J&K Bank is an ideal proposition to win big in stock markets.Even the expected 22-25% capital appreciation comes much superior to bank FD returns or any other quality asset returns.Its one heck of a great buy folks.
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