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J&K Bank’s long term issuer rating reaffirmed at ‘AA’

J&K Bank’s long term issuer rating reaffirmed at ‘AA’
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Srinagar: India Ratings has reaffirmed J&K Bank’s Long term issuer rating at ‘IND AA’. Instruments with AA rating are considered to have a high degree of safety regarding timely servicing of financial obligations and carry very-low credit risk.

Notably, the agency has re-affirmed the rating in view of the Bank’s turnaround in terms of growth, profit, improvement in asset quality, capital infusion and comfortable liquidity position.

Meanwhile, the Bank’s liquidity coverage ratio was 368.69 % at H1 of FY2019, which is over four times the regulatory requirement of 90%.

Furthermore, J&K Bank’s Common Equity Tier 1 (CET 1) is at 8.66% for H1 of the FY 2019 and 9.24% for FY 2018 against regulatory requirement of 7.375% under Basel III, which is relatively better than that of its peer banks. J&K Bank’s asset-liability tenure is also well supported by a high CASA ratio of 49.3%.

Having a high systemic importance, J&K Bank is a dominant player in the strategically important state of Jammu and Kashmir, where it plays a major role in the economy besides acting as the agent of RBI.

The Bank plans to increase its business by about 20% annually over the next two years, which will be led by the growth within the state.

Though the outlook has been revised to negative, the revision has been done as the rating agency perceives capitalization pressure in view of the bank’s high growth aspirations. The bank, however, is confident of maintaining capital over and above the regulatory requirement along with a comfortable cushion.

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