J&K Bank net up 29% at Rs 62.4 cr

The Jammu and Kashmir Bank today reported a 29 per cent jump in net profit in the quarter ended June 30, 2006, as it managed to reduce cost of deposits and increase net interest margin (NIM).

The bank, majority owned by the Jammu and Kashmir government, said its net profit in the first quarter of 2006-07 was Rs 62.38 crore against Rs 48.44 crore a year earlier.

Chairman Haseeb Drabu said, "Better liability management is key to the good result. Cost of deposits has come down to 4.8 per cent from 5.3 per cent and the net interest margin has increased to 2.96 per cent from 2.6 per cent. we have achieved 29 per cent growth in net profit even after heavy provisioning. Our NPA coverage ratio is up to 72 per cent from 48 per cent."

The bank's net interest income for the quarter ended June 30, 2006 increased by 19 per cent to Rs 178.61 crore compared with Rs 150.50 crore a year earlier, driven by increase in advances and reduction in cost of deposits.

Non-interest income for the quarter ended June 30, 2006, was Rs 27.20 crore, consisting principally of fee and commission of Rs 15.19 crore, insurance commission, miscellaneous income and profit/loss on sale of investments). Non-interest income a year earlier was Rs 22.46 crore.

J&K Bank said provisioning levels in the first quarter of 2006-07 were increased to Rs 60.55 crore, up 27 from a year earlier. For bad and doubtful debts, provision has been increased by 200 per cent from Rs 5 crore to Rs 15 crore.

The increased provisioning levels increased the NPA coverage ratio to 72 per cent compared with 53 per cent a year earlier and 64 per cent as on March 31, 2006.

The bank aims to increase the NPA coverage ratio to the international standard of 80 per cent by the end of 2006-07. The NPA levels stood at 0.72 per cent - one of the lowest in the industry.