Why J&K Bank Share Price is Rising

Nifty Bank continued to fall for the sixth session on Thursday, marking its lengthiest losing streak since 29 September 2022.

The decline comes in response to specific structural challenges within the banking sector, which were highlighted by Fitch, the credit rating agency.

These challenges encompass prolonged legal processes, contributing to a negative sentiment that has placed downward pressure on stock performance. This comes amid an improved operational environment due to the easing of covid-related risks.

In this prevailing weakness across the banking sector, one stock has been defying the trend by surging 20% in just five days. This impressive performer is none other than J&K Bank.

Here's why the shares of the bank have been on a roll.

#1 Ex-dividend jump

The recent surge in the stock can be attributed to the stock turning ex-dividend.

The company's board announced a final dividend of Rs 0.5 per share last month. The record date for the dividend payment was set as 18 August 2023.

The ex-dividend date is the day on which shares of the company begin trading without the right to receive the upcoming dividend payment.

The stock's rise, as it approaches its ex-dividend date, is due to the dividend capture strategy. This strategy involves buying shares just before the ex-dividend date to receive the dividend. As more investors pursue this approach, demand for the stock increases, driving its price higher.

However, the stock price might decline after the ex-dividend date as some investors sell their shares after capturing the dividend.

#2 Strong Q1 result

For the June 2023 quarter, the bank reported a 25% YoY jump in income to Rs 28.9 bn. The bank reported revenue of Rs 23.1 bn a year back.

The net profit for the quarter rose by 96% year-on-year (YoY) to Rs 3.3 billion (bn), aided by a decline in bad loans. The Srinagar-based lender had posted a net profit of Rs 1.7 bn in the year-ago period.

Additionally, the net interest income (NII) increased by 24% YoY to Rs 12.8 bn, while the Net Interest Margin (NIM) improved to 3.98% compared to 3.46% registered in Q1.

The bank's asset quality, too, improved in the quarter, with gross non-performing assets (GNPA) declining to 5.8% from 9.1% last year. Net non-performing assets (NNPA) dropped to 1.4% from 3%.

Over the past six quarters, the bank has fortified and stabilised crucial operational metrics. The objective was to reinforce these core elements, paving the way for uninterrupted and sustainable growth.

This endeavour has propelled the stock to a remarkable 184% increase over the past year.

What next?

Going forward, the bank aims to achieve a business of Rs 4 trillion (tn) in the next five years with an annual profit of Rs 40 bn. To achieve this, the bank plans to expand its presence in the country and increase its share of the retail banking market.

The bank also wants to lower its gross non-performing assets (NPAs) to below 4% and its net NPAs to 1%. The bank has been working on improving its asset quality and has made some progress in recent years.

Bolstering this outlook is the anticipation of robust economic growth in India in the years ahead, amplifying the need for loans and credit.

The ongoing digital transformation within the banking sector stands as a pivotal driver. This will enhance operational efficiency and curtail expenses fostering increased profitability for banks.

The regulatory reforms meticulously instituted by the Reserve Bank of India will fortify the overall health of the banking sector, making the banks more appealing to prospective investors.

How J&K Bank shares have performed recently

The share price of J&K Bank have surged over 21% in the past week. While over the month they are trading higher by 34%.

In 2023 so far, J&K Bank share price is up over 51%. Over the past year the shares of the bank have delivered a multibagger return of 184%.

J&K Bank has a 52-week high quote of Rs 88 touched on 8 August 2023 while the stock touched its 52-week low of Rs 26.7 on 29 September 2022.

The stock is currently trading at a PE (price to earning) ratio of 6.5x.

About J&K Bank

Jammu and Kashmir Bank (J&K Bank) is a Scheduled Commercial Bank and one of the oldest private sector Bank in India.

Jammu And Kashmir Bank Limited (J&K) a state owned bank was incorporated in 1938.

It offers banking services under the three major divisions as Support services Depository services and third party services. The bank operates mainly in four segments - treasury, corporate banking, retail banking, and other banking operations.

According to the extended central laws of the state, Jammu & Kashmir Bank was defined as government of India company as per the provision of Indian companies act 1956.

To know more about the company, you can check out J&K Bank company fact sheet and quarterly results.

For a sector overview, read our banking sector report.

You can also compare J&K Bank with its peers.

J&K Bank vs IDFC First Bank

J&K Bank vs SBI

To know more about the sector, you can have a look at the banking sector report on our website.

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