Srinagar:
J&K Bank recently reported a record-breaking profit of Rs. 1,767.27 crore for FY 2024. However, a closer look at the bank’s financials reveals some underlying issues.
Headline growth masks cost pressures: While J&K Bank achieved double-digit growth in both loans and deposits, a significant rise in interest expenses (30% YoY) outpaced the growth in interest income (20% YoY), resulting in a muted increase in net interest income (10% YoY). This squeeze on margins raises concerns about the bank’s profitability in the future, especially in a rising interest rate environment.
Asset quality a mixed bag: The bank boasts improved Gross NPA (Non-performing Assets) and Net NPA ratios, but a large technical write-off of Rs. 506 crore paints a less rosy picture. Additionally, delays in recoveries are impacting the bank’s ability to generate income from previously written-off loans.
Reliance on government support: Despite a strong capital adequacy ratio, the announcement of a government infusion of Rs. 500 crore for J&K Bank raises questions about the bank’s ability to generate sufficient capital internally. This could be a sign of underlying weaknesses in the bank’s financial health.