Jammu & Kashmir Bank crashes 9% on poor outlook, brokerages' target cuts

NEW DELHI: Shares of Jammu & Kashmir Bank plunged over 9 per cent in Friday’s trade after a number of brokerages cut their ratings on the stock on weak outlook.

The stock tumbled 9.49 per cent to hit a low of Rs 67.70 on BSE.

Brokerage Credit Suisse has downgraded the stock to neutral from outperform, while slashing the target price for the scrip to Rs 68 from Rs 77 earlier.

The brokerage believes that that the lender is in a phase of 'consolidation' given problems in Jammu & Kashmir, is adding to the corporate stress.

Political unrest led to significant disruption to commercial activities, it noted adding that the development may result in rising impairments.
“Almost all of commercial loan portfolio in J&K (20 per cent of loan book) is also facing stress. We cut EPS estimates by 37-49 per cent; stock at 0.9 times FY18E adjusted BV no longer looks inexpensive,” said the brokerage.

“I am pessimistic on the J&K Bank stock as its asset quality has deteriorated in the last few quarters.Investors should sell this stock on every rise and buy quality banks, "Sanjiv Basin, executive VPMarkets at IIFL told the ET.

“Margins have been declining impacted by interest reversals, moderation in CASA mix and lower yield lending,“ he said.

The J&K Bank management said in a conference call to analysts on Thursday that it is looking to clean up outside J&K book worth Rs 25,000 crore and within J&K stress is likely to be felt for business loans worth Rs 10,000 crore.