(J&KBANK) Q2 FY27 J&K Bank Profit Soars 29% QoQ as Asset Quality Hits Decade Best

For J&K Bank, the September quarter was a story of two engines. One, a powerful surge in other income and pristine asset quality, drove profit sharply higher. The other, a persistent squeeze on lending margins, kept a lid on the core earnings power.

The numbers show the split. Profit jumped 28.7% from the previous quarter to ₹547.3 crore, while revenue grew 5.1% sequentially to ₹3,728.78 crore. Compared to last year, profit is up 10.6% on a 13.2% rise in revenue.

The sequential profit rebound was fueled by a more than doubling of other income, which surged 105% year-on-year to ₹315 crore, as reported by Investing.com. This included treasury gains of ₹92 crore. Meanwhile, operating profit grew a robust 26.7% as the bank controlled costs better.

Why the core engine is still sputtering

Despite the headline growth, the bank's net profit margin contracted by 30 basis points from a year ago. The reason is pressure on the core lending business. Net interest income grew just 4.8% year-on-year, far slower than the 24.8% growth in its loan book.

According to the bank's investor slides, the net interest margin (NIM) compressed to 3.17% from 3.56% a year earlier. The cost of funds inched up while yields on advances fell, a classic margin squeeze. This dynamic, where loan growth outpaces cheaper deposit growth, was a key risk flagged last quarter.

A balance sheet transformed

Offsetting the margin pain is a remarkably cleaner balance sheet. Asset quality hit what management called decadal-best levels. Gross NPAs improved to 2.23% from 2.37% last quarter and 3.32% a year ago. Net NPAs fell to 0.51%.

CNBC-TV18 reported the provision coverage ratio also reached a decade high of 91.76%. This strength allowed the bank to absorb a six-fold year-on-year jump in provisions—a deliberate build-up of coverage, not a sign of fresh stress—while still posting strong profit growth.

The guidance that banks on a recovery

Management expects the margin pressure to ease. On the earnings call, they guided for a "substantial improvement" in NIM over the next two quarters as deposit costs stabilise and loans reprice. Their full-year outlook, noted by Investing.com, includes credit growth of 14-18%, gross NPA below 2%, and no incremental credit cost for the rest of the year.

The bank also plans to raise ₹1,000 crore through equity and ₹500 crore via debt to fund growth and prepare for upcoming regulatory changes, while maintaining a strong capital adequacy ratio of 16.57%.