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Floods hit J&K Bank hard; bank's assets under stress 10/24/2014 11:25:29 PM Early Times Report Jammu, Oct 24: Rating agency CRISIL has downgraded rating for Jammu & Kashmir Bank's fixed deposits from "AA+/stable" to "AA/negative". Rating action reflects ongoing stress in bank's asset quality and the expected impact on its profitability, CRISIL said in a statement. The stress is on account of two factors. One, weakness in some large corporate accounts following the economic downturn, which has resulted in sizeable slippages during the quarter ended June 30, 2014. Second, ratings are also result of the potential impact of devastating floods that hit Jammu & Kashmir (J&K) in September 2014. Both developments are likely to result in J&K Bank's financial performance being below-par for the previous rating level. The rating on the bank's short-term debt instruments has been reaffirmed at "A1+'. The rating continues to reflect J&K Bank's healthy resource profile, and the systemic support it is expected to receive in the event of distress, given its dominant banking role in J&K and its unique status as banker to the J&K government. Its resource profile is marked by a stable retail deposit base. The share of low-cost current and savings account (CASA) deposits in the bank's total deposits was 41% as on June 30, 2014' significantly higher than the industry average of 32%. Rating strengths are partially offset by the bank's average asset quality, and small scale of, and high geographical concentration in, its operations. There have been material slippages in J&K Bank's large corporate book in recent months. The weak asset quality in the corporate advances segment is due to exposure to high-risk sectors and borrowers, CRISIL said. The bank's overall gross non-performing assets (NPAs) increased to 4.2% as on June 30, 2014, from 1.7% as on March 31, 2014, due to slippages in two large corporate accounts. At the end of March 2014, bank's total assets were Rs 78,620 crore, up from Rs. 71,740 crore as on March 31, 2013. Chunkiness in the corporate advances vis-a-vis the bank's net worth increases the vulnerability. The weakness in J&K Bank's corporate loan book will be compounded by the impact of the recent floods in the state. The significant losses in commercial property and business assets for the small and medium enterprises (SME) and trader borrowers will affect the bank's asset quality. Around 45% of the bank's advances are to J&K.   Share This News with Your Friends on Social Network     Comment on this Story

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