Analysing Financial Productivity of J&K Bank

J&K Bank Ltd, incorporated on 1^st October 1938, convened its 87^th Annual General Meeting (AGM) on Tuesday, 26^th August 2025 at 11:00 AM at SKICC, Srinagar. The Annual Report 2024–25, themed “Committed to: Driving Growth & Delivering Excellence”, showcased another year of strong performance, marked by record profits, double-digit business growth, continuing improvement in asset quality, capital adequacy ratio and cost-to-income ratio- a reflection of its strong fundamentals and enhanced operational efficiency.

During FY 2024–25, the Bank achieved an Aggregate Business crossing Rs 2.5 lakh Crore, with Deposits of Rs 1.49 lakh Crore and Gross Advances of Rs 1.07 lakh Crore-registering a YoY growth of 10.60 per cent. Deposits grew by 10.20 per cent and Net Advances by 11.10 per cent. Of the total deposits, Current and Savings Account (CASA) deposits accounted for 47.01 per cent, reflecting stability in low-cost funds. The Bank posted its highest-ever Net Profit of Rs 2,082.46 Crore, up 18 per cent from Rs 1,767.27 Crore in FY 2023–24 and significantly higher than Rs 1,197.38 Crore in FY 2022–23. With its long-term vision, the Bank aims to cross Rs 5 lakh Crore in business and achieve Rs 5,000 Crore annual net profit by FY 2030.

To realize this ambition, Bank will reportedly focus on quality-driven business growth, digital excellence, promoting financial inclusion, developing future-ready human capital and enhanced customer service. During FY 2024-25, the Net NPA stood at 0.79 per cent, unchanged from FY 2023-24, when it had declined sharply from 1.62 per cent in FY 2022-23. The CRAR (Capital to Risk-Weighted Assets Ratio) also called CAR (Capital Adequacy Ratio) stood at 16.29 per cent as on 31^st March 2025 while as Net Worth of the Bank stood at Rs 13013.26 Crore indicating Bank’s financial strength.

The Return on Assets (ROA), a key measure of Bank’s profitability from lending operations, increased from 0.42 per cent in FY 2021-22 to 0.89 per cent in FY 2022-23, rose further to 1.22 per cent in FY 2023-24, and reached 1.32 per cent in FY 2024-25. Earnings per Share (EPS) stood at Rs. 18.91 for the year ended 31^st March 2025 as compared to Rs. 16.80 and Rs. 12.43 for the years ended 31^st March 2024 and 2023 respectively. This exceptional performance has been made possible through active government support, unwavering commitment of Bank’s workforce, trust and goodwill of people, strong investor relations and enduring loyalty of customers-factors that have enabled the Bank to withstand challenges over the years and emerge stronger and more successful.

Following remarkable results and record-breaking performance in FY 2024-25, Bank’s Board of Directors declared a dividend of Rs 2.15 per equity share of Re one for the said period. The Bank has reiterated its role as a development partner in UTs of Jammu and Kashmir and Ladakh by extending credit, facilitating government transactions and supporting entrepreneurs, farmers and communities. Building on trust of its shareholders and customers-its core strength-the Bank reportedly aspires to strengthen this confidence further by playing a leading role in enhancing per capita income in the UTs through expanded operations and a diversified business base in near future. It may be indicated here that the performance during FY 2024-25 underlines Bank’s enhanced productivity and stakeholder value creation, driven by digital initiatives, effective risk management and robust growth across both retail and corporate segments.

Now coming to main topic, in present business environment assessing the financial productivity of a banking institution goes beyond measuring profitability alone. The technique of Value Added Accounting (VAA) is now considered an important measure to judge operational efficiency and productivity from the perspective of all stakeholders-employees, shareholders, government, customers, business enterprise itself and society at large. Unlike traditional measures that primarily focus on profitability, VAA emphasizes the wealth generated and its distribution among stakeholders, making it highly relevant for banks such as J&K Bank.

While profitability highlights financial health, assessing a bank’s productivity and stakeholder contribution requires a broader lens. VAA provides this view by analyzing how much wealth is created and how it is shared among stakeholders. For long-term success, the path to value creation is paved with small but consistent steps, making wise decisions and delighting customers rather than simply satisfying them with the products and services. In this context, following analysis examines the financial productivity trajectory of JK Bank over the past three financial years, that is, 2022-23, 2023-24, and 2024-25, based on Bank’s Annual Reports available on its website.

In this backdrop, the present analysis reveals that Gross Value Added (GVA) registered a strong growth of 16.03 per cent, while Net Value Added (NVA) accelerated by 17.77 per cent. This growth was primarily driven by a 13.58 per cent YoY increase in total earnings from diverse sources. In contrast, interest costs rose by a comparatively lower 12.21 per cent, while net operating costs increased by 9.29 per cent.

Notably, the Bank’s Net Value Added (NVA) over the past three years stood at 41.76 per cent in FY 2024-25, 40.28 per cent in FY 2023-24 and 45.12 per cent in FY 2022-23. The NVA is derived from Total Earnings after deducting Interest Cost, Net Operating Cost and Depreciation on Physical Assets. Total Earnings have exhibited a consistent upward trend, both in absolute terms and on a YoY basis, over the past three years. On the other hand, though Interest Cost also reflects acceleration at a faster rate but the NVA increased during current fiscal compared to previous fiscal by 1.48 per cent. The Net Value Added Cake of 41.76 per cent (FY 2024-25), 40.28 per cent (FY 2023-24) and 45.12 per cent (FY 2022-23) is distributed among different players who are engaged in its generation.

As far as the sharing of NVA Cake is concerned, the employees claimed 48.69 per cent (FY 2024-25), 53.04 per cent (FY 2023-24) and 59.26 per cent (FY 2022-23). This declining trend in the employees’ share out of NVA could partly be attributed to application of digitalization/digital transformation of banking services.

The State Exchequer by way of taxation claimed a share of 14.91 per cent (FY 2024-25), 12.73 per cent (FY 2023-24) and 12.87 per cent (FY 2022-23). This shows the financial commitment of the Bank towards the State by way of corporate and personal taxation which in turn supports the state towards achieving its economic objectives and social infrastructure.

The shareholders were deprived of dividend during FY 2021-22. However, for the last three years, they have been entitled to a share from NVA Kitty at the rate of 1.13 per cent (FY 2022-23), 4.88 per cent (FY 2023-24) and 4.15 per cent (FY 2024-25). The Bank put a cap on cash outflow in terms of dividend payment in FY 2021-22 strengthening its liquidity position to maintain a proper Asset-Liability Management. The liquidity position comparatively being robust during the past three years, the Bank paid dividend to its shareholders.

The Bank retained an impressive share of 32.32 per cent during the fiscal 2024-25 and 31.57 per cent during the fiscal 2023-24 as against 25.12 per cent and 13.43 per cent during early two years. Because of exemplary NVA performance, it seems probable that the Bank strengthens its financial position by ploughing back from the NVA Basket.

Interestingly, the Bank reversed risk provisions of 0.07 per cent in FY 2024-25 and 2.22 per cent in FY 2023-24. In contrast, the Bank had created risk provisions of 1.62 per cent in FY 2022-23 and 8.56 per cent in FY 2021-22. Adequate risk provisioning plays a critical role in ensuring financial prudence and mitigating the challenges of market volatility, uncertainty, complexity, and ambiguity (VUCA). Accordingly, the FY 2024-25 Net Profit reflects core operations and a 0.7 per cent reversal of risk provisions.

Simply put, shareholders remain satisfied as consistent growth in EPS and dividends has given them a significant share of Bank’s value creation. Likewise, employees are content; having secured a strong portion of the value generated and remain fully committed to contributing towards the organization’s growth. Government/State Exchequer, through taxation, continues to receive a steady fiscal contribution in line with rising profits, while the Bank’s retained earnings further strengthen its capital base.

Interestingly, the Bank’s reversal of risk provisions (0.07 per cent in FY 2024–25) after significant provisioning in earlier years, demonstrates prudent risk management in a VUCA (Volatility–Uncertainty–Complexity–Ambiguity) environment. Society has also benefitted, with Rs 31.70 Crore allocated under Bank’s Corporate Social Responsibility (CSR) policy, as mandated by Section 135(1) of the Companies Act, 2013. This amount has been invested across diverse sectors such as healthcare, education, livelihood, skill development, community welfare, environment and ecology and disaster relief. These initiatives have not only addressed pressing community challenges but also enhanced Bank’s emotional equity, brand affinity and public goodwill.

While consolidating its financial position through profitability and value addition, J&K Bank must continue strengthening its Customer Relationship Management (CRM) practices-treating its clientele with respect and care. This holds particular importance in Jammu & Kashmir and Ladakh, where people share a deep emotional connection with this institution. The goodwill and trust the Bank has nurtured over the years stand as its greatest strength.

To conclude, J&K Bank’s exceptional performance highlights its financial strength, digital initiatives, stakeholder value creation, community and societal engagement. While looking ahead, with sustained profitability, strong financial base and customer trust deeply rooted in emotional equity, the Bank is well-positioned to expand its footprint, leverage future opportunities and sustain its competitive edge in the evolving banking landscape.

The writers are Life Members of Indian Accounting Association (IAA) and Commerce Teachers.