Prabhudas Lilladher

J&K Bank (Accumulate)

CMP: ₹139.40

Target: ₹185

The recent floods in the valley have not only affected daily life in J&K State, but also the banking business. We through this report, try to assess the situation to bank credit in the State, with specific attention to J&K bank which has 60 per cent share in the overall business and is likely to be the worst affected. Although it is early to assess the quantifiable impact of the floods, we believe that there could possibly be near-term headwinds to asset quality. J&K Bank’s balance sheet remains highly concentrated in J&K with about 69 per cent deposits and about 45 per cent loans. Immediate impact on asset quality could be limited as only around 35 per cent of J&K Bank’s advances and deposits remain below tenure of 12 months and could be possibly recognised upfront which mostly are in agri, trade and personal segments (largely unsecured). J&K Bank’s management believes flooding in the State is a national disaster and would be provided regulatory relief on loans mostly by dispensation in non-performing assets recognition and restructuring of loans on easier terms.

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