J&K Bank Limited

4Q11 Results: Estimates (), TP (), Rating () Regular Coverage Robust credit growth continues; Need to watch out for NIMs
2011 Equirus All rights reserved Rating Information Price (`) Target Price (`) Target Date Target Set On Implied yrs of growth (DCF) Fair Value (ERoE) Fair Value (DDM) Ind Benchmark Model Portfolio Position Stock Information Market Cap (` Bn) Free Float (%) 52 Wk H/L (`) Avg Daily Volume Avg Daily Value (` Mn) Equity Cap (` Mn) Face Value (`) Bloomberg Code Ownership Promoters DII FII Public Price % Absolute Vs Industry Andhra Bank Dena Bank Recent 53.2 4.5 23.0 19.4 1M% -4.2 4.1 -5.2 -15.3 38.7 47% 938/580 88,008 70.3 485 10 J&KBK IN 3M % 0.0 -0.3 0.3 0.0 3M% 5.6 8.4 -7.5 -5.6 12M % 0.0 1.5 -6.4 4.9 12M% 1.0 -11.2 4.4 -2.1 798 977 31st Mar12 18th May11 10 977 383 BSE Bankex NA

Absolute : LONG Relative : Overweight 22% upside in 10 months Financials

Consolidated Financials ` Mn YE Mar Net Int Income Non Int Income Operating Costs Provisioning Costs Net Profit Total Equity Deposits Borrowings Loans & Advances Investments Cash ` Per Share Earnings (FD) Book Value Dividends P/E (x) P/B (x) NIM (%) Operating Costs (%) Provisions (%) ROA (%) Leverage (x) ROE (%) Change in Estimates Revised Estimates FY12E NII PPI PAT Advances EPS 15,691 8,025 7,177 308,719 148.0 FY13E 18,243 9,490 8,321 361,865 171.6 % Change over Old Est. FY12 4% 4% 10% 3% 10% FY13 5% 5% 9% 3% 9% FY11E 15,437 3,648 7,590 2,151 6,151 34,787 446,759 11,047 261,936 196,958 35,488 FY11E 127 717 27 6.3 1.1 3.7% 1.8% 0.5% 1.3% 13.2 19% FY12E 15,691 3,816 7,666 1,129 7,177 39,951 512,643 12,047 308,719 217,404 39,219 FY12E 148 824 32 5.4 1.0 3.2% 1.6% 0.2% 1.3% 13.1 19% FY13E 18,243 4,262 8,753 1,332 8,321 46,192 588,242 13,047 361,865 239,974 45,215 FY13E 172 952 37 4.6 0.8 3.2% 1.6% 0.2% 1.3% 13.0 19% FY14E 19,816 4,718 9,409 1,500 9,129 53,028 674,990 14,047 388,325 264,886 87,268 FY14E 188 1,093 40 4.2 0.7 3.2% 1.5% 0.2% 1.3% 13.0 18%

J&K Bank Limited (J&K Bank) posted a healthy 15.4% YoY and -17% QoQ growth in its Q4FY11 EPS on the back of a 13.6% YoY growth in Loans & Advances and has underperformed our EPS estimates by 12%. The major reason for the underperformance was higher provisioning of Rs 756 Mn (against our estimate of Rs 257 Mn). Also as RBI replaced J&K Bank as the state banker it got a repayment of Rs 23 Bn of overdraft facilities. This has hurt overall credit growth for the bank (Excluding this repayment the bank had a credit growth of 25%). The management asserted that the combination of the structural advantages of low cost of funds and the monopoly status in Jammu & Kashmir and the high asset quality in terms of one of the lowest Net NPA and highest NPA coverage in the industry places it in a strong position to grow its Loans & Advances over the coming quarters. We have considered a contraction of ~53 bps in the NIMs in FY12 looking at the current interest rate scenario leading to a lower NII growth of 2%. We would consider an upward revision of the current estimates after it is able to sustain the present growth in the coming quarters. We maintain our earlier Target Price (TP) of ` 977/share for Mar 2012 and continue with an Absolute LONG rating along with a Relative Overweight Rating. Aggressive Growth in Loans & Advances driven by high lending outside J&K State: J&K Bank grew its Loans and Advances at 13.6% in-line with our estimates inspite of the overdraft facilities withdrawn by the state. This incremental growth was dominated by corporate lending outside J&K State (~70%). This supports our thesis regarding the ability of J&K Bank to grow its Loans & Advances at the cost of a minor drop in yields by focusing on asset growth outside J&K State and grow the assets at ~18% CAGR over FY11-13E. We have taken a conservative stance against the management guidance of 25% credit growth due to strong headwinds faced by the entire banking industry. We expect this growth sustenance to be one of the main challenges before J&K Bank especially in a tightening rate environment. Highest provisioning (for NPAs as well as gratuity & pension) amongst the PSB to help maintain EPS growth over FY 11-13E: J&K Bank continues to provide high coverage ratio of 93% (Highest amongst the Indian banks). Along with this J&K Bank has also provided complete charge of the pensions & gratuity to the P&L and expect no further damage in the coming quarters from the same. This should substantially boost the EPS growth over next 2 years for the bank. Ambitious Vision of Rs. 10 bn profit by FY13: J&K Bank targets to achieve ` 10 bn profit and ` 1000 bn by 2013 implying a 25% CAGR of Advances and 20% CAGR of Deposits with NIMs of 3.7-4.0%, RoA of 1.3-1.5% and RoE of 19-23% at a Cost/Income Ratio of 35-40%, Loan/Deposit Ratio of >65% and Provision Coverage Ratio of >90%. We believe that it will be able to maintain the profitability margins and the key challenge will be the high CAGRs of Loans & Advances and Deposits. Compelling Valuations among peers: J&K Bank continues to trade at extremely compelling valuations of P/BV of 1, dividend yield of 4% and Return on Equity of 1819% on FY 12E valuations.
Analyst: Devam Modi devam@equirus.com (+91-9099987467)

Standalone/Consolidated Quarterly EPS forecast `/Share 1Q 2Q 3Q 4Q EPS (11A) EPS (12E) May 19, 2011 30.0 35.2 33.7 36.2 34.6 37.3 28.6 39.4

Before reading this report, you must refer to the disclaimer on the last page

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J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Key Highlights of the Con-Call/Analyst Meet: Advances amount grew from Rs 23 Bn to 26 Bn (~14% growth YOY) including the repayment from the government for Rs 23 Bn. Expect advance growth of 25% & deposit growth of 20% in FY12E. Deposits increased up to Rs 445 Bn & CASA moved up to Rs 180 Bn improving the CASA ratio to 40.5% from 39.5% (YOY) The bank has provided for 100% of the pension liability & doesnt expect any hit in the coming quarters from the same. NIMs were maintained at 3.7% inspite of the repayment of the OD facilities by the State Government. Expect to achieve 4% NIMs for FY12E. Gross NPAs down to 1.95% from 1.97%; NPA Coverage Ratio increased to 93% (highest among the Indian Banks) C/D Growth ratio: Bank targets to be 85000 crore (53000 crore of deposits) in FY12E. Will increase the branches from 548 to over 600. Comfortable on CAR level with Basel 1 CAR of 13.2% and Basel 2 level of 13.30%. Major growth was outside J&K state with 70% of the incremental disbursements of Rs 60 Bn. Duration of 3.5 years on the overall portfolio and 1.5 years on AFS portfolio which help maintain the NIMs in an increasing interest rate environment.

Exhibit 1: Break-up of Provisions

Provisions and Contingencies Provision for tax Provision for bad and doubtful assets Provision for Depreciation on Investments Provision for Funded Interest on Term Loan Provision for Frauds / Embezzlements Contingencies Provision for diminution in fair value of Restructured / Rescheduled advances Provision for Contingent Liabilities Total Source: Company, Equirus Securities Dec-09 739 200 6 2 2 24 56 18.50 1,046 Mar-10 757 403 -394 63 -4 225 112 -14.30 1,147 Jun-10 729 440 259 2 1,429 Sep-10 823 390 -48 25 21 1,212 Dec-10 823 150 2 85 6 64 1,130 Mar-11 818 320 198 -61 12 210 76 1,574

Exhibit 2: Trend of Yields on Advances, Cost of Deposits, NIMs

14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jun09 Sep09 Dec09 Mar10 Jun10 Sep10 Dec10 Mar11 NIM(%) CostofDeposits

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Yieldonadvances

Source: Company, Equirus Securities

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

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J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Company Snapshot
How we differ from Consensus
Equirus EPS Sales PAT FY12E FY13E FY12E FY13E FY12E FY13E 148.0 171.6 19,507 22,506 7,177 8,321 Consensus 145.5 176.2 19,000 21,760 7,060 8,541 % Diff 2% -3% 3% 3% 2% -3% Comment Sales includes Net Interest Income and Other Income

Key Triggers Higher than expected growth of Loans and Advances, Increase in Allocation of Government Spending to J&K State and Higher Dividend Payout Ratios
Sensitivity to Key Variables Growth of Loans and Advances NIM Yield on Investments % Change -5% -5% -5% % Impact on FY12 EPS -0.2 -4.5 -1.7 %Impact on FY13 EPS -0.8 -5.7 -3.6

DCF Valuations & Assumptions

Rf 8% Ke 14.6% WACC 6.1% FY12E NII Growth NIM (%) Dividend Payout RoE Years of strong growth Valuation as on date (`) Valuation as of 31st Mar12 2% 3.2% 25.0% 19.2% 1 1,090 1,018 Term. Growth 3.0% FY13E 16% 3.2% 25.0% 19.3% 2 1,258 1,175 FY14-16E 8.6% 3.0% 25.0% 17.6% 5 1,188 1,110 RoE in Terminal Yr 15.0% FY17-21E 8% 2.7% 25.0% 16.0% 10 1,046 977

Our Key Investment arguments:

Structural Advantages of Cost of Funds and Monopoly Status in J&K driven by Reserve Bank Status of J&K Bank: J&K Bank enjoys the lowest cost of deposits of ~5-5.5% among its peers due to its functional equivalence of being the Reserve Bank of J&K. This has also led to monopoly status within J&K in the form of 87% share of advances and 70% share of total deposits in J&K. Successful Business Consolidation post the FY05 MTM losses resulting in ~100% NPA Coverage: J&K Bank has successfully consolidated its business post FY05 by a combination of increased lending within J&K, focus on retail deposits and higher working capital to term loans. This has led to higher provisioning coverage and an improvement in the Net Non Performing Assets (NNPAs) from 1.0% in 2004 to 0.2% in FY11. Lending inside J&K State + High Growth Potential outside J&K State = Stable ~14% EPS CAGR from 2010 to 2013: J&K Bank has achieved impressive NIMs of ~3-3.5% alongwith a 30% EPS CAGR from 2006 to 2010 by following a two pronged strategy of lending inside J&K State (a high yield, low volume business) focused on retail and SME segments involved in agriculture and handicrafts, and lending outside J&K State (a low yield, high volume business) focused on Large Corporate Groups like Tata, Birla and Reliance. We expect that the diversified business mix and several capex focused Government Schemes will lead to 3 year CAGRs of ~13% and ~15% in Loans & Advances and EPS respectively.

Based on ERoE, considering 10 years of 13% CAGR growth in Loans and Advances and 10% CAGR growth in EPS along with average ROE of ~17%, we derive current fair value of ` 1046 and 31st Mar 2012 fair value of ` 977. Company Description: J&K Bank, incorporated in 1938 is designated as RBIs agent for banking business. It has enjoyed four decades of uninterrupted profitability and dividends and is rated P1+ by S&P. It is present throughout J&K state with 426 branches out of a total of 536 branches within J&K and 254 ATMs within J&K. It has a virtual monopoly in the form of 87% share of advances and 70% share of deposits. The bank offers stock broking services through J&K Financial Services and has an insurance joint venture with Metlife International apart from being a stakeholder in J&K Grameen Bank.
P/E BPS FY13E 4.6 4.8 4.2 FY11 717 116 98 P/B FY12E 1.0 1.0 0.8 FY11 19.0% 23.2% 21.0% RoE FY12E 19.2% 19.8% 19.0% FY13E 13.1% 19.3% 19.2% Div Yield FY11 3.0% 4.0% 2.4% FY12E 3.8% 4.4% 2.6% FY11 6.3 6.3 4.9 FY12E 5.4 5.2 4.5

Risk to Our View Future Growth in Loans and Advances, Credit Crisis in J&K which could impact the near term liquidity of the bank
Comparable Valuation Company J&K Bank Andhra Bank Dena Bank Reco. Long Long NR CMP 798 137 90 Mkt Cap (` Bn) 38.7 66.5 30.0 Price Target 977 211 N.R Target Date Mar 2012 Mar 2012 N.R EPS FY11 126.8 26.0 19.2 FY12E 148.0 28.7 22.3 FY13E 171.6 32.4 26.2

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

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J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Quarterly Results Table (Consolidated)

Rs Mn Interest Income Interest Expended Net Interest Income Operating Income Operating Expenses Operating Profit Provision and Write Off Other Non Operating Income Profit Before Taxes Income Tax Expense (Gain) Net Profit EPS (Rs.) Net Int. Margin Key Drivers Advances Growth (YoY) Deposit Growth Net NPA (%) RoA CAR (Basel-II) 13.6% 20.0% 0.20% 1.19% 14.13% 1.39% 14.11% 13.3% 14.2% 22.0% 21.4% 0.04% 1.57% 15.11% 10.2% 12.8% 0.28% 1.20% 14.99% 30 bps 581 bps 20 bps -20 bps 1 bps -843 bps -145 bps 16 bps -38 bps -99 bps 344 bps 715 bps -8 bps -1 bps -86 bps Q4FY11 10,139 5,981 4,157 4,157 2,388 1,769 756 1,190 2,203 818 1,386 28.57 3.76% Q4FY11E 10,049 6,397 3,653 3,653 1,644 2,009 257 749 2,347 775 1,573 32.42 3.39% Q3FY11 9,347 5,451 3,895 3,895 1,863 2,033 306 776 2,502 823 1,679 34.61 3.76% Q4FY10 7,735 4,648 3,087 3,087 1,664 1,423 390 1,017 1,957 757 1,200 24.76 3.39% % Change Q4FY11E 1% -6% 14% 14% 45% -12% 194% 59% -6% 6% -12% -12% 11% Q3FY11 8% 10% 7% 7% 28% -13% 147% 53% -12% -1% -17% -17% 0% Q4FY10 31% 29% 35% 35% 43% 24% 94% 17% 13% 8% 15% 15% 11% Comments

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

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J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Quarterly Consolidated Earnings Forecast & Key Drivers

` in Million Net Interest Income Operating and Other Expenses Pre-Provision Income Provision & Write Off Other Income Profit Before Taxes Tax Reported PAT EPS (Rs) Key Drivers Yield on Productive Assets Cost of Funds NIM Growth in Loans and Advances Other income/NII Sequential Growth (%) Net Interest Income Operating Expenses Other Income Provisions and Contingencies EPS Yearly Growth (%) Net Interest Income Operating Expenses Other Income Provisions and Contingencies EPS Margin (%) NIM Pre-Provision Income Margin Provision and Write Off % PAT 1Q11 3,658 1,712 1,946 701 937 2,182 729 1,454 30.0 9.5% 5.6% 3.8% -0.1% 25.6% 18.5% -2.6% -7.9% 79.6% 21.1% 2Q11 3,726 1,627 2,100 388 745 2,456 823 1,633 33.7 9.7% 5.7% 3.7% 0.6% 20.0% 1.9% -5.0% -20.5% -44.6% 12.3% 3Q11 3,895 1,863 2,033 306 776 2,502 823 1,679 34.6 9.5% 5.7% 3.8% 9.4% 19.9% 4.5% 14.5% 4.1% -21.1% 2.8% 4Q11 4,157 2,388 1,769 756 1,190 2,203 818 1,386 28.6 9.8% 5.7% 3.8% 3.3% 28.6% 6.7% 28.2% 53.5% 146.8% -17.5% 1Q12 3,744 1,842 2,059 267 910 2,544 840 1,705 35.2 10.1% 6.7% 3.2% 3.5% 24.3% -10.0% -22.9% -23.6% -64.7% 23.0% 2% 8% -3% -62% 17% 3.8% 53% 19% 40% 3.7% 56% 10% 44% 3.8% 52% 8% 43% 3.8% 43% 18% 33% 3.2% 55% 7% 46% 2Q12 3,842 1,882 2,113 275 934 2,619 864 1,755 36.2 10.2% 6.7% 3.2% 3.1% 24.3% 2.6% 2.2% 2.7% 3.3% 2.9% 3% 16% 25% -29% 7% 3.2% 55% 7% 46% 3Q12 3,936 1,920 2,165 286 968 2,698 890 1,807 37.3 10.2% 6.9% 3.2% 4.6% 24.6% 2.4% 2.0% 3.6% 3.9% 3.0% 1% 3% 25% -7% 8% 3.2% 55% 7% 46% 4Q12 4,170 2,021 2,293 301 1,004 2,852 941 1,911 39.4 10.1% 6.8% 3.2% 5.5% 24.1% 5.9% 5.3% 3.7% 5.1% 5.7% 0% -15% -16% -60% 38% 3.2% 55% 7% 46% 1Q13 4,202 2,032 2,311 314 1,027 2,883 951 1,931 39.8 9.8% 6.6% 3.1% 3.5% 24.4% 0.8% 0.5% 2.3% 4.5% 1.1% 12% 10% 13% 18% 13% 3.1% 55% 7% 46% 2Q13 4,325 2,084 2,379 325 1,048 2,964 978 1,986 40.9 9.6% 6.3% 3.1% 3.6% 24.2% 2.9% 2.5% 2.1% 3.5% 2.8% 13% 11% 12% 18% 13% 3.1% 55% 8% 46% 3Q13 4,703 2,250 2,587 339 1,077 3,191 1,053 2,138 44.1 9.4% 6.0% 3.3% 4.6% 22.9% 8.7% 8.0% 2.8% 4.1% 7.7% 19% 17% 11% 18% 18% 3.3% 55% 7% 45% 4Q13 5,014 2,387 2,758 354 1,110 3,382 1,116 2,266 46.7 9.3% 5.7% 3.4% 4.6% 22.1% 6.6% 6.1% 3.0% 4.6% 6.0% 20% 18% 11% 18% 19% 3.4% 55% 7% 45% 38% 40% -12% 29% 20% 3.7% 51% 14% 40% 2% 1% 5% -48% 17% 3.2% 51% 7% 46% 16% 14% 12% 18% 16% 3.2% 52% 7% 46% 9% 7% 11% 13% 10% 3.2% 53% 8% 46% FY11E 15,437 7,590 7,847 2,151 3,648 9,343 3,193 6,151 126.8 9.0% 5.2% 3.7% 13.6% 23.6% FY12E 15,691 7,666 8,025 1,129 3,816 10,712 3,535 7,177 148.0 9.5% 6.3% 3.2% 17.9% 24.3% FY13E 18,243 8,753 9,490 1,332 4,262 12,420 4,099 8,321 171.6 9.0% 5.8% 3.2% 17.2% 23.4% FY14E 19,816 9,409 10,407 1,500 4,718 13,625 4,496 9,129 188.2 8.8% 5.4% 3.2% 7.3% 23.8%

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

Page 5 of 9

J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Consolidated Financials
P&L

FY11E 15,437 7,590 7,847 2,151 3,648 9,343 3,193 6,151 126.8 27.1 126.8 -219.7 717 38% 20% 20% 15.55% 23% 34%

FY12E 15,691 7,666 8,025 1,129 3,816 10,712 3,535 7,177 148.0 31.6 160.5 76.9 824 2% 17% 17% 14.85% 17% 33%

FY13E 18,243 8,753 9,490 1,332 4,262 12,420 4,099 8,321 171.6 36.7 182.8 123.6 952 16% 16% 16% 15.62% 16% 33%

FY13E 19,816 9,409 10,407 1,500 4,718 13,625 4,496 9,129 188.2 40.2 198.4 867.1 1093 9% 10% 10% 14.80% 10% 33%

Balance Sheet

FY11E 485 34,083 34,568 446,759 11,047 12,489 504,863 3,938 261,936 196,958

FY12E 485 39,466 39,951 512,643 12,047 12,996 577,636 3,533 308,719 217,404 526,123 5,523 39,219 577,636 60% 14.46 2.0% 0.2% 100%

FY13E 485 45,707 46,192 588,242 13,047 13,524 661,004 3,189 361,865 239,974 601,839 7,150 45,215 661,004 62% 14.31 2.0% 0.2% 100%

FY14E 485 52,543 53,028 674,990 14,047 14,073 756,137 2,897 388,325 264,886 653,211 6,762 87,268 756,137 58% 14.26 2.0% 0.2% 100%

Cash Flow

FY11E 6,151 0 74,388 44 57,395 31,364 111 169,454 -1,896 -1,468 166,089 35,488 19% 1.3% 13% 25% 6.29 1.11 3.4%

FY12E 7,177 605 65,883 1,000 20,447 46,782 2,507 144,402 -200 -2,013 142,189 39,219 19% 1.3% 13% 25% 5.39 0.97 4.0%

FY13E 8,321 544 75,599 1,000 22,569 53,146 2,528 163,708 -200 -2,080 161,427 45,215 19% 1.3% 13% 25% 4.65 0.84 4.6%

FY14E 9,129 492 86,748 1,000 24,912 26,460 2,549 151,290 -200 -2,293 148,797 87,268 18% 1.3% 14% 25% 4.24 0.73 5.0%

NII Opex PPI Provision Other Income PBT Tax PAT EPS (Rs) DPS (Rs) CEPS (Rs) FCFEPS (Rs) BVPS (`) NII Gr. (%) PAT Gr. (%) EPS Gr. (%) BVPS Gr. (%) Dividend Gr. (%) Tax Rate (%)

Equity Capital Reserve Networth Deposits Borrowing Other Liab & Prov Total Liabilities Net Fixed Assets Loans and Advances Investments Productive Assets Other Assets Cash Total Assets Advance/Deposit Asset/Equity GNPA NNPA NPA Coverage

Net Profit Depreciation Changes in Deposits Changes in Borrowings Changes in Investments Changes in Loans & Adv Changes in Others Net Cash from Ops Net Cash from Investing Net Cash from Financing Cash Generation Ending Cash Balance RoE (%) RoA(%) CAR(%) Div Payout (%) P/E P/BV Div Yield(%)

458,894 4,865 35,488 505,082 59% 14.61 2.0% 0.2% 94%

TTM P/E to 2 year forward EPS Growth

TTM P/B to 2 year forward RoE

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

Page 6 of 9

J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Historical Consolidated Financials

P&L Net Interest Income Operating Exp Pre-Provision Income Provision & Write Off Other Income Profit Before Taxes Tax Reported PAT EPS (`) DPS (`) CEPS (`) FCFEPS (`) BVPS (`) NII Growth PAT Growth (%) EPS Growth (%) BVPS Growth Dividend Gr. (%) Tax Rate (%) FY07 7,679 3,724 4,285 23% 1,602 4,152 1,407 2,745 56.6 11.5 290.0 273.5 414 16% 55% 55% 12% 44% 34% FY08 8,104 4,036 4,068 17% 2,450 5,760 2,160 3,600 74.2 15.5 409.1 169.8 476 6% 31% 31% 15% 35% 37% FY09 10,003 4,709 5,294 18% 2,614 6,321 2,223 4,098 84.5 16.9 494.5 172.7 541 21% 14% 14% 14% 9% 35% FY10 11,193 5,774 5,420 18% 4,162 7,916 2,792 5,124 105.7 22.0 113.3 -136.2 621 14% 25% 25% 15% 30% 35% Balance Sheet Equity Capital Reserve Networth Deposits Borrowing Other Liab & Prov Total Liabilities Net Fixed Assets Loans and Advances Investments Cash and Cash Equivalents Total Assets Cash Total Assets Advances/Deposits Asset/Equity GNPA NNPA NPA Coverage Tier I Capital* Tier II Capital* *Basel I Figures FY07 485 19,602 20,087 2,51,943 6,202 8,233 2,86,466 1,835 1,70,799 73,922 36,138 2,86,466 36,138 2,86,466 68% 14.26 2.89% 1.13% 61.43% 12.6% 0.6% FY08 485 22,323 22,808 2,85,933 7,518 11,020 3,27,560 1,920 1,88,826 87,577 44,372 3,27,560 44,372 3,27,560 66% 14.19 2.53% 1.08% 58.05% 12.1% 0.7% FY09 485 25,744 26,229 3,30,041 9,966 10,697 3,76,933 1,994 2,09,304 1,07,363 52,748 3,76,932 52,748 3,76,932 63% 14.37 2.64% 1.37% 48.59% 12.8% 0.7% FY10 485 29,620 30,105 3,72,372 11,002 11,990 4,25,468 2,041 2,30,572 1,39,563 46,142 4,25,468 46,142 4,25,468 62% 14.13 1.97% 0.28% 90.13% 11.9% 2..9% Cash Flow Net Profit Depreciation Changes in Deposits Changes in Borrowings Changes in Investments Changes in Loans & Adv Changes in Others Net Cash from Ops Net Cash from Investing Net Cash from Financing Cash Generation Ending Cash Balance RoE (%) RoA(%) CAR(%) Div Payout (%) P/E P/BV Div Yield(%) FY07 2,745 0 17,097 3,563 -16,017 25,968 -1,904 31,453 113 -652 30,913 36,138 14% 1.1% 12% 24% 13.0 1.8 1.6% FY08 3,600 322 33,990 1,316 13,655 18,027 3,880 56,895 -408 -598 55,889 44,372 17% 1.4% 12% 24% 9.9 1.6 2.1% FY09 4,098 325 44,108 2,448 19,787 20,478 335 71,250 -399 -959 69,892 52,748 17% 1.4% 13% 23% 8.7 1.4 2.3% FY10 5,124 369 42,331 1,036 32,199 21,268 2,919 84,147 -416 -1,248 82,484 46,142 18% 1.5% 13% 24% 7.0 1.2 3.0%

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

Page 7 of 9

J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

Equirus Securities
Bhavin Shah Research Analysts Abhijith Vara Ankur Goyal Ashutosh Tiwari Devam Modi Jaykumar Doshi Manoj Behera Maulik Patel Nikhil Upadhyay Sourav Agarwal Viraj Mehta Sector/Industry Shipping, Logistics, Industrials Pharma Metals & Mining Power & Infrastructure IT Services Media & Telecom Oil and Gas Consumer Durables Auto & Auto Ancillaries Chemicals, Cement, Mid Caps CEO Email
abhijith@equirus.com ankur@equirus.com ashutosh@equirus.com devam@equirus.com jaykumar@equirus.com manojbehera@equirus.com maulik@equirus.com nikhil@equirus.com souravagarwal@equirus.com viraj@equirus.com

bhavin@equirus.com 91-79-40504050 91-79-40504018 91-79-40504023 91-79-40504017 91-79-40504016 91-79-40504013 91-79-40504020 91-79-40504019 91-79-40504022 91-79-40504015 91-79-40504014 Equity Sales Anil Chaurasia Himani Shah Sanghavi Darshit Shah Dealing Room Ashish Shah Sandip Amrutiya Research Associates Manav Choksi Anoli Shah Ankit Mittal Compliance Officer Rahul Joshi E-mail

91-79-40504040 91-22-26530600 91-22-26530615 91-22-26530632 91-79-40504005 91-79-40504003 91-79-40504004 91-79-40504003 91-79-40504050 91-79-40504026 91-79-40504027 91-79-40504028 91-22-26530600 91-22-26530600

anil@equirus.com himani@equirus.com darshitshah@equirus.com

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manav@equirus.com anoli@equirus.com ankit@equirus.com

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Rating & Coverage Definitions: Absolute Rating LONG : >= 15% upside over investment horizon for companies with market cap > Rs 10 billion and >= 20% for rest of the companies SHORT: >=5% downside over investment horizon NEUTRAL: Trading range of -4% to +14% Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon NEUTRAL: likely to perform in line with the benchmark UNDERWEIGHT: likely to underperform the benchmark by at least 5% over investment horizon Target Period Target Period of minimum 3 months to maximum 12 months with target date either on last day of nearest September or March month falling within the Target Period.

Registered Office: Equirus Securities Private Limited 4th Floor, A Wing, Fortune 2000, Bandra (East) Mumbai-400051. Tel. No: +91 (0)22 2653 0600 Fax No: +91- (0)22 2653 0601

Corporate Office: Equirus Securities Private Limited 304, The Grand Mall, Lite vs. Regular Coverage vs. Spot Coverage Our research opinions are based on set of several assumptions. The distinction between Lite and Regular coverage Opp. SBI Zonal Office, Ambawadi, is provided to indicate the depth of analysis and due diligence performed to derive such assumptions. However Ahmedabad 380015.
such distinction should not be interpreted as an indication of confidence level or accuracy of forecast and recommendation. Spot coverage implies one-off coverage of a specific company. May include very crude earnings Tel. No: +91 (0)79 - 4050 4050 forecasts and target price. Spot coverage is meant to stimulate discussion rather than provide a research opinion Fax No: +91 (0)79 4050 4060

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

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J&K Bank Limited

Absolute LONG

Relative Overweight

22% upside in 10 months

2011 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited
Disclaimers:
Equirus Securities Private Limited (ESPL) is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No. INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No. INB011301737) of Bombay Stock Exchange Limited (BSE). This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this document may come are required to inform themselves of, and to observe, such applicable restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this document. This document has been prepared by ESPL. ESPL and its group companies are a full-service investment banking firm involved in financial services including but not limited to merchant banking, alternate investment advisory and securities brokerage. This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe a security. The information contained herein is from publicly available data or other sources believed to be reliable but ESPL provides no guarantee as to its accuracy or completeness. The information contained herein stand on date, which are subject to change or modification. Any such changes could impact our interpretation of relevant information contained herein. While we would endeavor to update the information herein on reasonable basis, ESPL, its group companies, their directors and employees are under no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL and group companies do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest that could affect the objectivity of this document.

Disclosures:
ESPL and its affiliates may have received compensation from the company covered herein in the past twelve months for issue management, capital structure, M&A, buyback of shares and other corporate advisory services. ESPL & its affiliates may have received a mandate from the subject company. ESPL & its affiliates may hold paid up capital of the subject company. ESPL & its affiliates, their directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein.

May 19, 2011

Analyst: Devam Modi devam@equirus.com (+91-9099987467)

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