J & K Bank — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

J & K Bank delivered a strong Q3 FY26, marked by robust advances growth of 17.3% YoY and a significant 18.7% QoQ increase in net profit to INR587 crores. Asset quality continued to improve with GNPA at 3% and NNPA at 0.68%, supported by a PCR above 90%. While NIMs showed a 6 bps QoQ improvement to 3.62%, deposit growth lagged, leading to a decline in CASA ratio and prompting a revised credit growth guidance of 12-15%. The bank has approved raising INR750 crores in equity and INR500 crores in Tier 2 capital to support future growth, despite analyst concerns about valuation.

Highlights

  • Advances recorded 17.3% Y-o-Y growth and 7.7% Q-o-Q growth, significantly higher than the estimated system credit growth of 11.7% to 12%.

  • Net profit increased by 18.7% Q-on-Q to INR587 crores for Q3 FY26, contributing to a 4.5% Y-o-Y growth in net profit for the 9 months ended December 31, 2025, reaching INR1,566 crores.

  • Asset quality showed continued improvement with Gross NPA at 3% and Net NPA at 0.68% as of December 31, 2025, coupled with a Provision Coverage Ratio above 90%.

  • Net Interest Margin (NIM) for Q3 stood at 3.62%, with a 6 basis points improvement from the previous quarter, despite RBI's 125 bps rate cuts.

  • Cost-to-Income Ratio remained disciplined, recorded below 56% for the current quarter, with operating costs showing a marginal 2.8% Y-o-Y growth for the 9-month period.

Concerns

  • Deposit growth of 10.6% Y-o-Y and 2.5% sequentially lagged advances growth, leading to stress on deposit generation and a revised credit growth guidance of 12-15% (down from a potential 20%).

  • CASA ratio declined to 44.10% as of December 31, 2025, below the 48.51% observed in the J&K and Ladakh region, driven by a shift towards higher-yielding term deposits.

  • Analyst concerns were raised regarding the timing and valuation of the proposed capital raise, suggesting it might be dilutive at current low valuations.

Key financials

5 periods

Headline

  • Deposits Growth
    10.6%
    QoQ +2.5%
  • Advances Growth
    17.3%
    QoQ +7.7%
  • Gross NPA
    3%
  • Net NPA
    0.68%
  • CASA Ratio
    44.1%
  • Cost of Deposits
    4.7%
  • Cost-to-Income Ratio
    56%
  • CRAR
    15%
  • CET1
    11.8%

Q3 FY26

  • Net Profit
    ₹587 Cr
    QoQ +18.7%
  • NIM
    3.6%

Q3 FY26 Annualized

  • RoA
    1.4%

9M FY26

  • Net Profit
    ₹1,566 Cr
    YoY +4.5%
  • NIM
    3.6%

9M FY26 Annualized

  • RoA
    1.2%
  • RoE
    15.2%

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
  • Liquidity Liquidity disclosed CRAR recorded at 15% with CET1 at 11.84%. The bank has received board approval for raising equity capital up to INR750 crores and Tier 2 capital up to INR500 crores.
    CRAR has been recorded at 15% with CET1 at 11.84%. This is without reckoning the net profits for the 9-month period, which would have incremental impact of around 145 bps. While the bank, at present, is comfortably placed in terms of capital adequacy, the Board of the bank during this quarter has accorded their approval for raising equity capital up to INR750 crores and Tier 2 capital up to INR500 crores.

Guidance & targets

Credit Growth

  • Credit Growth Credit Growth · FY26 · High confidence 12%
    comfortably poised to achieve the guidance of 12% credit growth for the fiscal.

    — Amitava Chatterjee

  • Credit Growth Credit Growth · FY26 · Medium confidence 12% to 15%

    Previously 12% → 12% to 15%

    I would still maintain the guidance of 12% to 15%, especially owing to the fact that there is a stress on the deposit growth.

    — Amitava Chatterjee

Deposit Growth

  • Deposit Growth Deposit Growth · FY26 · High confidence 10%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

CASA Ratio

  • CASA Ratio CASA Ratio · FY26 · High confidence 45%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

NIM

  • NIM NIM · FY26 · High confidence 3.65% to 3.7%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

  • NIM NIM · FY26 year-ending · Medium confidence around 3.70%
    somewhere around 3.70% for the last year-ending. This is what I presume will happen, maybe slightly better if there is no further rate cuts. But if there are no rate cuts, I believe we'll be close to these numbers in future.

    — Amitava Chatterjee

RoA

  • Return on Assets RoA · FY26 · High confidence 1.2% to 1.25%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

RoE

  • Return on Equity RoE · FY26 · High confidence 15% to 16%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

Gross NPA

  • Gross NPA Gross NPA · FY26 · High confidence below 3%
    Market guidance for financial year '25, '26 credit growth 12%, deposit growth 10%, CASA 45%, NIM 3.65% to 3.7%, Return on Assets 1.2% to 1.25%, Return on Equity 15% to 16%, Gross NPA below 3%.

    — Amitava Chatterjee

CD Ratio

  • Credit-to-Deposit Ratio CD Ratio · Medium term · Medium confidence 76%, 77%

    From 72% today

    No, no. I'm not going to stabilize at 72%. We will definitely -- provided we are adequately capitalized as we are planning to be, I can expect the CD ratio to go up to 76%, 77%.

    — Amitava Chatterjee

Employee Expenses

  • Employee Expenses Employee Expenses · For some time · Medium confidence go down further
    It will not be flat. It will still go down, but we have plans to recruit people, but then if you consider the outgoing employees are high-cost employees and the people we recruit will be at a lower cost. So overall, the employee cost will remain low. In fact, it is likely to go down further for some time.

    — Amitava Chatterjee

Provisions

  • Credit Cost / Provision Number Provisions · FY27 · Medium confidence near zero
    I believe so. We still have quite a bit of pipeline. I do not think that the credit cost will be anything positive by the end of this year.

    — Amitava Chatterjee

What to watch in Q4 FY26

Deposit Growth Trajectory

Next quarter
Current 10.6% YoY, 2.5% QoQ
Target Improvement to support credit growth guidance of 12-15%

Why it matters

Deposit growth is crucial for funding advances and maintaining a healthy Credit-to-Deposit ratio.

Had the deposit growth been similar to advances growth, I would have said we would be growing at 20%, but we have to maintain the balance.

Risks & concerns

  • Deposit Growth Stress

    medium

    Deposit growth lagged advances growth, leading to a revised credit growth guidance and focus on deposit generation.

    Management acknowledged

  • System Liquidity & Customer Preferences

    medium

    System liquidity constraints and evolving customer preferences for higher-yielding investment avenues impact CASA accretion.

    Management acknowledged

  • Capital Raising Valuation

    medium

    Analyst expressed concern about diluting equity at current low valuations, potentially impacting book value and shareholders.

    Analyst acknowledged but justified need for capital

  • Impact of Disturbances and Natural Calamities

    low

    Periods of disturbances and natural calamities in J&K impacted operations, but the bank remained focused and disciplined.

    Management acknowledged but managed

Q&A highlights

7 direct
Credit discipline, expanding lending, and deepening presence outside J&K Direct
The focus on NPA recovery has been very, very constant for the last 9 quarters and more. We have not only reduced the gross NPA in percentage terms, but also in absolute terms. So this is the gross NPA that I'm talking about... the idea of high potential areas has already started chipping in. So this has been the strategy of the bank for the last 1 year, and I believe we will continue to do that.

Addresses how the bank plans to sustain asset quality improvement while pursuing growth, especially in MSME and Retail, and outside J&K.

Asked by Sucrit D. Patil

Capital raising plans and optimization of cost of funds Direct
To supplement that credit growth, we expect that we will have at least INR1,500 crores of additional capital, which will take care of that business growth. And that's where we are planning to raise INR500 crores Tier 2 bonds and then subsequently QIP. We are also targeting QIP to be completed by 31st March... our focus is on the retail CASA, as mentioned by MD sir. So our focus will remain on retail CASA and that too from the Rest of India. And that will definitely offset whatever cost we are adding towards the Tier 2 bond.

Details the bank's strategy for funding future growth and managing capital adequacy and cost of funds.

Asked by Sucrit D. Patil

Deposit re-pricing and NIM outlook Direct
So what I meant was the repo cut directly impacts the lending rates, while the deposit rates are contracted for a period. So the shift of -- the moderation of deposits takes some time, one to two quarters, before it takes a hit... So now you see there has been a 6 basis points improvement from last quarter in the NIMs. So this is how it works in the industry.

Explains the dynamics of NIMs in a changing interest rate environment and the expectation for further improvement as deposit re-pricing catches up.

Asked by Deepak Poddar

Deposit generation strategy Direct
We are working on this home territory of all the deposits that we may have lost in the last few quarters to get them back and also generate more deposits through IT initiatives... Through CASA, I want to improve the deposits, which will help in both the ways.

Addresses the challenge of lagging deposit growth and the bank's plan to strengthen its deposit franchise, particularly CASA, through focused efforts and IT initiatives.

Asked by Deepak Poddar

Negative provisions and Grameen Bank performance Direct
Negative provisioning is on account of big ticket size recovery that has happened in one of the accounts where we have recovered almost more than INR100 crores, which was fully provided for. So that provisioning has got reversed... We have a strong possibility of reversal provided that the Grameen Bank starts performing well... from next quarter onwards, we expect the bank to do well.

Clarifies the reason for negative provisions due to a large recovery and hints at potential future reversals from Grameen Bank, which could positively impact profitability.

Asked by Mona Khetan

Capital raising at low valuation Partial
Sir, that's my humble submission. Please do consider postponing it a bit. We are raising capital when all the PSU banks are trading at such low valuations, probably when things are better, whenever we get closer to book value or higher than what we are, we should at least contemplate raising them because it unnecessarily impacts our book value and is negative for everyone as a shareholder... I do not intend to go to the market unless I am absolutely ready for it. So please don't be worried about that. It's just that we have got an approval and the approval stands for 12 months.

Highlights a key investor concern regarding the timing and valuation of the proposed capital raise, with the analyst suggesting postponement, and management acknowledging the concern while reiterating the need for capital and the 12-month approval window.

Asked by Gaurav Agrawal / Sonaal Kohli

Restructuring package and future NPA outlook Direct
The last date for restructuring was 31st of December, 2025. So there are no further accounts for restructuring. We have done almost 10,600 accounts to the tune of INR1,400 crores and we have provided for 5% of the assets that is around INR68 crores we have provided for... I do not believe that these accounts are going to turn NPA in any time in future.

Provides clarity on the completion and impact of the special rehabilitation package, reassuring about future asset quality from these accounts.

Asked by Sonaal Kohli

Yield on advances and competitive pressure Direct
The yield on advances, if you look at quarter 3 '24-25, to quarter 3 '25-26 it is less than 100 bps, while the repo cut has been 125 bps... almost 70% of the loan book... in Jammu & Kashmir and Ladakh... competitive rates that you are talking about, it constitutes only 30%, 31%, which is in the rest of the country... we are focusing a lot on retail advances in Rest of India.

Explains the bank's strategy to manage yield compression by focusing on its home territory and retail advances, and lending to AAA-rated corporates with low capital charge.

Asked by Parth Gutka

3 min read 8 chapters

Detailed narrative

Q3 FY26 Performance Overview

J & K Bank reported a strong Q3 FY26, with net profit increasing by 18.7% Q-on-Q to INR587 crores. For the nine months ended December 31, 2025, net profit grew 4.5% Y-o-Y to INR1,566 crores. The bank's annualized Return on Assets (RoA) for the quarter improved to 1.35% from 1.16% in Q2, while the annualized RoE for the nine-month period stood at 15.16%.

Deposit and Advance Growth Dynamics

Deposits grew by 2.5% sequentially and 10.6% Y-o-Y. Advances recorded robust growth of 7.7% Q-o-Q and 17.3% Y-o-Y, significantly outpacing the estimated system credit growth of 11.7% to 12%. However, the CASA ratio declined to 44.10% as of December 31, 2025, reflecting a broader industry trend of shifts towards higher-yielding term deposits. The bank aims to increase its Credit-to-Deposit (CD) ratio from the current 72% to 76-77%.

Profitability and Margin Management

The Net Interest Margin (NIM) for Q3 FY26 was 3.62%, with the nine-month NIM at 3.64%. Despite RBI's cumulative rate cuts of 125 bps in calendar year 2025, the bank's NIMs were affected by only 40-42 bps, demonstrating resilience. The cost of deposits for the quarter was 4.69%. Management expects NIMs to reach around 3.70% by the year-ending, assuming no further rate cuts.

Asset Quality and Provisioning

Asset quality continued its strong improvement, with Gross NPA at 3% and Net NPA at 0.68% as of December 31, 2025, compared to 0.94% a year ago. The Provision Coverage Ratio (PCR) remained robust at above 90%. The bank incurred INR180 crores in impairment provisions due to RRBs amalgamation and INR68 crores for the Special Rehabilitation Package 2025. A negative provision of INR70 crores was recorded due to a recovery of a big-ticket NPA account that was fully provided for.

Capital Adequacy and Future Funding

The Capital to Risk-weighted Assets Ratio (CRAR) stood at 15%, with CET1 at 11.84%. The Board has approved raising equity capital up to INR750 crores and Tier 2 capital up to INR500 crores to support future business growth. The bank is targeting to complete a Qualified Institutional Placement (QIP) by March 31st, 2026, to secure the additional capital of INR1,500 crores.

Strategic Focus Areas

The bank is focusing on generating deposits, particularly retail CASA from its home territory (J&K and Ladakh, which accounts for 86.3% of total deposits) and through IT initiatives like QR codes and POS machines. Credit growth is balanced across geographies (56.7% from J&K/Ladakh, 43.3% from Rest of India) and segments (53.4% retail, 46.6% corporate). Retail advances, constituting 65% of the portfolio, grew 9.4% Y-o-Y, with car loans up 15.3% and housing loans up 8.9%.

Employee Cost Efficiency

Employee expenses showed a Y-o-Y decline on a nine-month basis. Management indicated that employee costs are expected to go down further due to the retirement of high-cost employees and the recruitment of new staff at lower costs. This strategy contributes to maintaining the Cost-to-Income Ratio below 56% for the quarter, despite business growth and inflationary pressures.

Outlook and Guidance

For FY26, the bank maintains its guidance for credit growth at 12-15%, deposit growth at 10%, and CASA ratio at 45%. NIM is projected to be between 3.65% and 3.7%, with RoA between 1.2% and 1.25%, and RoE between 15% and 16%. Gross NPA is targeted to remain below 3%. The bank expects its CD ratio to increase to 76-77% in the medium term.

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