With a near monopoly status in its home turf, J&K Bank has been able to post better numbers than even the best private sector banks
Mention Jammu and Kashmir and the first thought that comes to mind is the violence and tension racking the region. It's difficult to imagine any business staying alive, leave aside thrive, in such turbulence.
Yet Jammu and Kashmir Bank (JK Bank), a bank headquartered in the restive state, has managed to navigate the turmoil rather well: profits have run over 50 per cent in the past five years; in the same period, deposits have grown over 30 per cent; and advances have swelled over 28 per cent. In fiscal 2002 too, profits soared 55 per cent to touch Rs 259 crore, while total income rose 39 per cent to Rs 1,611 crore.
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If all goes according to plan, bank officials believe that they will be able to live up to promises of getting better every year. "We foresee an average growth of over 20 per cent in our business turnover in financial 2002-03 and in net profit, we envisage a sustained growth of 40 per cent," says M Y Khan, chairman and managing director, JK Bank.
One key driver will be the business of retail banking. "The bank has been concentrating on retail banking and the focus is on quality of assets, preventing slippage and containing NPA level below one per cent," says Khan. The proportion of retail banking credit to total advances is around 30 per cent, with housing finance contributing the most.
Another vital ingredient in its success is the fact that it is the designated banker of the government of Jammu and Kashmir. Being the government's banker has its advantages: there is immediate access to a huge pool of government funds, allowing a "free float", and can aid in lowering a bank's cost of funds substantially.
While it's a leader in its home turf claiming around 70 per cent of the business in J&K, it is now concentrating on snapping up business outside the state borders. Already a little less than a quarter of its 441 branches are located in states other than J&K; and more than half of its advances are to borrowers outside that state.
It's also eyeing generating more income from fee-based operations -- a survival strategy being adopted by many banks to offset sliding credit offtake. "Fee-based income constitutes 10 per cent of the total income and it will be our endeavour to increase its proportion to 15 per cent by March 2003," says Khan. Steps taken in that direction include forays into depository services, credit and debit cards. The insurance business also promises rich rewards: one analyst estimates suggest it may bring in over Rs 50 crore in revenues by 2005.
Then again, its non-performing assets at just 1.88 per cent of total advances, is one of the lowest in the banking industry and compares well with even the NPA figures of new-generation banks such as HDFC Bank and ICICI Bank. Also, JK Bank's cost of funds stands at just a little over seven per cent -- one of the lowest figures in the industry. Khan says he would like to pull it below seven this year.
Recently, the air has been thick with rumours of various banks attempting to gobble each other up. Khan says he sees no merit in adding JK Bank to that growing list of banks appearing as open targets for an acquisition.
Instead, he says, "