J & K Bank — Q2 FY26 earnings call

Call held 18 Oct 2025

Management summary

J & K Bank reported a resilient Q2 FY26 with robust sequential and YoY growth in both deposits and advances, and an improved CASA ratio. Asset quality showed significant improvement with reduced GNPA and NNPA. However, profitability was impacted by NIM compression due to RBI rate cuts and a one-off impairment provision of INR 92 crores related to a Grameen Bank amalgamation, leading to a revision in RoA/RoE guidance for the year.

Highlights

  • Deposits grew 2.4% sequentially and 10.2% YoY, while advances increased 3.9% sequentially and 9.4% YoY.

  • CASA ratio improved sequentially to 45.89% from 45.71%, outpacing industry trends.

  • Asset quality improved significantly with GNPA reduced to 3.32% and NNPA to 0.76%, and gross slippage ratio below 0.90% annualized.

  • Operating costs remained well-controlled with a marginal 2.2% YoY growth.

  • Provision Coverage Ratio (PCR) maintained healthy above 90%.

Concerns

  • Profitability moderated YoY, with NIM contracting to 3.56% from 3.90% in the previous year due to RBI rate cuts.

  • A one-off impairment provision of INR 92 crores this quarter (total INR 180 crores for half-year) impacted other income and reported RoA/RoE.

  • Cost-to-income ratio increased to approximately 60% from 54% due to the one-off impairment provision.

Key financials

  1. Deposits Growth 10.2% +10.2%YoY
  2. Advances Growth 9.4% +9.4%YoY
  3. CASA Ratio 45.9%
  4. Net Profit ₹494 Cr +1.9%QoQ
  5. NIM 3.6%
  6. GNPA 3.3%
  7. NNPA 0.76%
  8. CRAR 15.3%
  9. CET1 12.1%
  10. Operating Costs Growth 2.2% +2.2%YoY

What they filed

Q1 FY27: revenue up 8.5%, net profit down 11.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,124 3,210 3,213 3,269 3,293 +5%3,315 +3%3,273 +2%3,547 +9%
Net profit553 529 582 485 495 −10%581 +10%799 +37%429 −12%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • M&A Ellaquai Dehati Bank Merger · Integrated

    Amalgamation with J&K Grameen Bank as a government policy decision, where Ellaquai Dehati Bank was not performing well and had losses.

    Resulted in an additional impairment provision of INR 92 crores this quarter and INR 87 crores last quarter, totaling INR 180 crores for the half-year.

    So the impairment has resulted us an additional provision of INR92 crores this quarter and INR87 crores last quarter. So we have had to provide for INR180 crores. This is a onetime event, and this was something which I mean, if you want to know, we are the only private sector bank in the country, which has a Grameen Bank. And no other private sector bank has Grameen Bank. And that too, we had a bank -- another regional rural bank being amalgamated with our Grameen Bank, whereas our Grameen Bank was doing very well before that. So this is something which I mean, it was a policy decision by the government, and we have accepted it.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · FY25-26 · High confidence 12%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

Deposit Growth

  • Overall Deposit Growth Deposit Growth · FY25-26 · High confidence 10%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

CASA

  • CASA Ratio CASA · FY25-26 · High confidence 48%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

Margin

  • NIM Margin · FY25-26 · High confidence 3.65% to 3.70%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

Profitability

  • RoA Profitability · FY25-26 · High confidence 1.20% to 1.25%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

  • RoE Profitability · FY25-26 · High confidence 15% to 16%

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

Asset Quality

  • GNPA Asset Quality · FY25-26 · High confidence below 3%
    So the market guidance for FY '25-'26, credit growth 12%, deposit growth 10% CASA 48%, NIM 3.65% to 3.70%, RoA 1.20% to 1.25%, RoE 15% to 16%, GNPA below 3%.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

Branch Expansion

  • Number of new branches Branch Expansion · this financial year · High confidence close to 14
    We have a plan to open 11 branches this year. And three branches which were not opened last year also, we are going to add, so close to 14 branches.

    — Amitava Chatterjee, Managing Director and Chief Executive Officer

What to watch in Q3 FY26

CASA Ratio Improvement

Next quarter
Current 45.89% as of Sep 30, 2025
Target Progress towards 48%

Why it matters

Indicates strength of deposit franchise and lower cost of funds, crucial for NIM sustainability.

One of the highlights of this quarter has been the growth in CASA deposits at 2.8%, outpacing the growth in term deposits at 2%, resulting in an improvement in the bank's CASA ratio from 45.71% recorded on 30th June '25 to 45.89% as on 30th September 2025.

Risks & concerns

  • Global Economic Uncertainty

    medium

    Global uncertainty remains elevated due to geopolitical tensions and renewed tariff-related frictions among major trading blocs.

    Management acknowledged

  • Regional Disturbances and Natural Calamities

    medium

    Disturbances affecting the core geography (Pahalgam incident, conflict) and natural calamities (floods, landslides) could impact asset quality, though mitigated by a rehabilitation package.

    Management acknowledged

  • NIM Compression from RBI Rate Cuts

    medium

    RBI's cumulative 100 bps rate cuts have led to NIM contraction due to faster transmission on lending rates and migration of CASA to term deposits.

    Management acknowledged

  • One-off Impairment Provision

    low

    A total of INR 180 crores in impairment provisions for the half-year related to the amalgamation of a loss-making Grameen Bank impacted reported profitability.

    Management acknowledged

Q&A highlights

6 direct
Prudential provisions and their nature Direct
So the impairment has resulted us an additional provision of INR92 crores this quarter and INR87 crores last quarter. So we have had to provide for INR180 crores. This is a onetime event, and this was something which I mean, if you want to know, we are the only private sector bank in the country, which has a Grameen Bank.

Clarified the significant one-off impairment provision of INR 180 crores was due to the amalgamation of a loss-making Grameen Bank, explaining its impact on profitability.

Asked by Ronak Daga, Kotak AMC

GST notice status of INR 16,000 crores Direct
That GST notice has not been pursued by the GST Council. We had already obtained a stay on the notice from the court and the court had given a time line to the GST Council to come and present their case, and they have not done it. So we are waiting for the court's judgment. In all probability as they have not contested the stay, so it is definitely going to be in our favor.

Provided an update on a large potential liability, indicating a likely favorable outcome for the bank due to the GST Council's inaction.

Asked by Sahil Mahajan, Individual Investor

Normalized credit cost and CASA ratio targets Direct
The credit cost, I have always said it will be below 1%. So we do not foresee even after -- I mean, I just want to explain that to you. Even after what has happened through in this geography for the last 6 months, we have managed to reduce our NPAs, not only in percentage terms, but also in absolute terms. So the credit cost, as I've always maintained will be fairly low... We have a very strong focus on CASA growth, and we believe that we'll be able to reach the guidance number of 48%.

Reiterated key targets for credit cost and CASA ratio, providing confidence in asset quality management and funding strategy despite recent challenges.

Asked by Ronak Daga, Kotak AMC

Outlook on NIM compression Direct
As I mentioned, see, the two components of margin, let's take deposits, I said that the deposit rates have now peaked. So I do not see any further increase in the deposit rates. Going forward, we'll have a better cost of deposit situation. And as far as advances are concerned, we are very actively looking at our retail credit growth.

Explained the reasons for NIM compression and provided an optimistic outlook, suggesting NIM has bottomed out and future deposit costs will be favorable.

Asked by Ronak Daga, Kotak AMC

Asset quality trajectory in H2 Direct
See, I will stick to the guidance of NPA level less than 3%. I have a very strong pipeline of assets which are under resolution. So -and also that the slippages have been under control largely. And in this geography whatever has happened, we still have the benefit of the rehabilitation package to be implemented. So I'm very sure see, even in this quarter, when all things looked very bleak, very gloomy, we have reduced our NPA, not only in percentage terms, but also in absolute terms. So going forward, we'll further reduce it and we intend to bring it below 3% by the end of this year.

Reaffirmed commitment to achieving GNPA below 3% by year-end, citing strong resolution pipeline and controlled slippages, which is crucial for investor confidence in asset quality.

Asked by Keshav Karwa, White Pine Investment Management

Increase in cost-to-income ratio Direct
See, I mentioned the cost-to-income ratio has gone up on account of the provision that we had to make for the merger of EDB Bank with our Grameen Bank. If we remove it, it comes down substantially. And also, the staff cost if you have a sense of the staff cost, it has gone down over a period of time. So eventually our aim is to bring down this cost-to-income ratio.

Attributed the rise in cost-to-income ratio to the one-off impairment provision, suggesting it's not a structural issue and the ratio would normalize without it.

Asked by Naveen Chopra, Individual Investor

Guidance on total profit for the financial year Partial
Normally, there is no guidance on profit. But I would say that as an investor, you won't be disappointed. And it will definitely be better than what we have recorded last year. We have been recording record profits every year. So we intend to continue with that.

While not providing a specific number, management gave a strong qualitative indication of improved profitability for the full year, reassuring investors.

Asked by Sahil Mahajan, Individual Investor

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Detailed narrative

Robust Business Growth and CASA Strength

Jammu & Kashmir Bank demonstrated strong business momentum in Q2 FY26, with deposits growing 2.4% sequentially and 10.2% YoY, while advances increased 3.9% sequentially and 9.4% YoY. A key highlight was the sequential improvement in the CASA ratio to 45.89% from 45.71%, outperforming the industry trend where the overall CASA ratio has declined from 42% to 36%. This indicates a strengthening deposit franchise and a stable, low-cost funding base, with management targeting a 48% CASA ratio for FY26.

Moderated Profitability and NIM Contraction

Profitability for the quarter moderated YoY, with net profit growing 1.9% QoQ to INR 494 crores. The Net Interest Margin (NIM) contracted to 3.56% for Q2 FY26, down from 3.90% in the previous year, primarily due to faster transmission of RBI's cumulative 100 bps rate cuts on the lending side compared to liabilities, and migration of CASA balances to Term Deposits. Management believes the cost of deposits has now peaked at 4.86% and NIM has bottomed out, barring further repo rate cuts, and expects to meet the annual guidance of 3.65%-3.70%.

Significant Asset Quality Improvement

The bank achieved substantial improvement in asset quality, with Gross Non-Performing Assets (GNPA) reducing to 3.32% and Net Non-Performing Assets (NNPA) to 0.76%. The annualized gross slippage ratio remained below 0.90%, and the Provision Coverage Ratio (PCR) stayed healthy above 90%. This improvement occurred despite regional disturbances and natural calamities, supported by a special rehabilitation package for affected borrowers, and management aims to bring GNPA below 3% by year-end.

Impact of One-off Impairment Provision

The bank's profitability was notably impacted by a one-off impairment provision totaling INR 180 crores for the half-year (INR 92 crores this quarter and INR 87 crores last quarter). This provision was made on investments in Jammu and Kashmir Grameen Bank due to its amalgamation with the loss-making Ellaquai Dehati Bank, a government policy decision. Excluding this one-off hit, the half-yearly net profit growth would have been approximately 20% YoY, leading to a revision in RoA guidance to 1.20%-1.25% and RoE to 15%-16% for FY26.

Strategic Focus on Retail and Rest of India Growth

The bank is strategically focusing on expanding its retail footprint, particularly in the Rest of India (ROI), which saw a 16.1% YoY growth in its loan book compared to 5.9% in J&K and Ladakh. The goal is to achieve a 50-50 split of the loan book between J&K/Ladakh and ROI in the medium to long term. Corporate and Agriculture segments also performed strongly, growing 11.7% and 27.4% YoY respectively, contributing significantly to the overall advances growth.

Controlled Operating Costs and Capital Adequacy

Operating costs remained well under control, showing only a marginal 2.2% YoY growth. The Capital to Risk-weighted Assets Ratio (CRAR) stood at 15.27%, with Common Equity Tier 1 (CET1) at 12.11%, indicating strong capital adequacy to support future growth. The increase in cost-to-income ratio to approximately 60% was attributed to the one-off impairment provision, which management expects to normalize, and noted that staff costs have decreased over time.

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