“Recovery and Retail business will remain our thrust area”

Srinagar, July 3:(KNS) J&K Bank’s one-year performance (FY2019-20) declared on June 29, 2020, registering a whopping net loss of over Rs.1139 crore has exposed decaying key financial ratios of the bank. The stakeholders of the bank constituting customers, employees and the shareholders call the bank as a "sinking ship" because of the cracked fundamentals.
Many reputed customers of the bank while commenting on the falling financials of the bank said, “Dismal financial performance declared by the J&K Bank for the financial year ended March 31, 2020 (FY2019-20) reflects that the bank is in shambles and losing foothold as the premier financial institution of J&K.”
The bank reported a net loss of Rs 1139.41 crore for the financial year ended March, 2020 as compared to net profit of Rs 464.88 crore during the financial year ended March, 2019. For the fourth quarter (Q4) March the bank reported a net loss of Rs 294.10 crore compared with net profit of Rs 214.80 crore in Q4 March 2019.
The total income in the fourth quarter fell 7.9% to Rs 2277 crore from Rs 2473.47 crore in the same period last year.
According to the information on the bank’s website, the audited earnings update presents a shabby outlook of the bank. Almost all the key financial ratios/indicators have gone in negative territory.
Earning per share (EPS) for the financial year ended Mar, 2020 has dropped to Rs -15.97 from Rs 8.35 of the previous financial year. the book value of shares of the bank has fallen from Rs.108 of 2018-19 to Rs.75 at the end of March 2020.
Net profit per branch too has fallen into negative territory where it has fallen from Rs 0.49 Crore to Rs -1.19 Crore. Net profit per employee in FY 2019-20 is down to Rs -9.03 lacs from Rs 3.69 lac of 2018-19.
Though the present management had announced to cut down expenditure, the figure in this aspect speaks a different story. Cost to Income Ratio stood at 65.52% for the quarter ended March, 2020 as compared to 55.01 % for the quarter ended Mar, 2019. There is more than 10 % increase in expenditure. On year to year basis, cost to income ratio has gone up from 59% of the FY 2018-19 to 64% in the FY 2019-20.
Analysts question the nature of expenditure which has increased substantially that too when income of the bank has gone down.
It is to be stated here that cost-to-income ratio is a key financial measure, particularly important in valuing banks. ... To get the ratio, divide the operating costs (administrative and fixed costs, such as salaries and property expenses, but not bad debts that have been written off) by operating income.
Return on assets is reported to have gone down in negative territory from 8% of 2018-19 to -20% in the FY 2019-20.
Return on assets is a profitability ratio that provides how much profit a company is able to generate from its assets. In other words, return on assets (ROA) measures how efficient a company's management is in generating earnings from its economic resources or assets on their balance sheet.
The earnings update states downfall in credit-deposit (CD) ratio though the bank has been beating the drum of extending credit to different economic sectors. During the FY 2019-20, the CD ratio of the bank has gone down from 74% to 65%.
The gross NPA of the bank is up to 11% from 9% of FY 2018-19.
There has been a meagre increase in deposits of the bank which mostly constitute government deposits. While as there has been a decrease of 3% in loans and advances which shows the lackadaisical approach of the top management of the bank.
An increase of 10% has been recorded in the interest earned during the financial year 2019-20 and same 10 per cent increase in the interest paid head, thus raising the question as how cost to income has increased.
Other income of the bank has decreased from Rs.813 crore in 2108-19 to Rs.546 crore on 2109-20 representing nose dive decrease of 33%.
Operating expenses have increased by 10% from 2479 crore in 2018-19 to 2727 crore of 2019-20 when only 21 staff members have been added from 2018-19 and there is no developmental work going on.
These figures have been disappointing for the public and raise serious questions on the management of the bank.
“There is lack of vibrant management in the bank and it is visible that the bank continues to suffer from mis-governance, lack of control over operational level resulting in indiscipline and loss of clientele, nepotism and favoritism,” said traders’ representatives.
Speaking exclusively to KNS, CMD J&K Bank R K Chibber said that he has set out to clean things up and is hopeful of a turnaround in fortunes.
“We have Rs 1525 crore operating profit. It is true the provisions of bad and doubtful debts have gone up. There is Rs 600 crore of provisions of bad and doubtful debts whom in common parlance is called NPAs. In one of those NPAs, ILF account was Rs 1000 crore account. It was already declared NPA. Bank had done only 15 % provision in that account. Recently when RBI declared it unsecured account and directed for securing it 100 %; Rs 800 crore is that account. The reason is some big provisions has happened in past.”
“Now we are working in it, presently we have almost 80% provision coverage ratio. There is not much-unprovsioned ratio left in JK bank balance sheet i.e Rs 2000 crore. This year we have at maximum do Rs 1000 crore provision. Our thrust is on recoveries and NPA which is at present Rs 7600 crore. We have to improve recoveries. NPA is the biggest issue. Our focus is on retail business and recoveries,” he added.
Regarding what action has been taken against those officials who have given loan irresponsibly without proper documents, CMD said, “We ensure staff accountability whenever there are NPA. First of all, we look into it through staff angle accountability and ensure there is no fraud angle. We try to ascertain whether it is wrongdoing internally or externally. If staff is involved, we fix responsibility. At present we have a robust mechanism in place to ensure no past misdeeds are repeated in the bank.”
He reiterated that goal of J&K bank under his chairmanship is not only to survive but thrive even in present circumstances.
"JK bank has the main role in up-upliftment of J&K economy. It is the top lenders of the state, other banks do not match it anywhere. Their focus in on increasing deposits not lending in J&K."(KNS)