Abhinav

International Monthly Refereed Journal of Research In Management & Technology

ISSN – 2320-0073 Volume II, June’13

FINANCIAL ANALYSIS: A STUDY OF J & K BANK

LIMITED
Aijaz Ahmad Baba

Lecturer Commerce, Govt. Hr. Sec. School, Unisoo, Kupwara, India

Email: dam.aijaz@gmail.com

ABSTRACT
Financial statement information is used by both external and internal users, including
investors, creditors, managers, and executives. Financial analysis refers to an assessment of
the financial position and profitability of a business. This paper attempts to document the
general understanding of Financial analysis in the banking organization and to give a brief
overview of Jammu and Kashmir Bank Ltd.
Keywords: Reserves, Earnings per Share, Deposits

INTRODUCTION
Financial analysis (also referred to as financial statement analysis or accounting analysis)
refers to an assessment of the viability, stability and profitability of a business. It is
performed by professionals who prepare reports using ratios and other analysis devices that
make use of information taken from financial statements. These users must analyze the
information in order to make business decisions, so understanding financial statements is of
great importance. There are two important financial statements which investors analyze.
They are the balance sheet and income statement; some analysts rely also on cash flow
statement. The balance sheet is a snapshot in time. It shows all the assets owned and
liabilities owed for a company. It also shows the amount of equity or ownership that is paid
for by investors. The income statement looks at the entire year. It starts with revenues and
then deducts expenses for net income. The cash flow statement shows where the cash is
really coming by breaking down cash flow into cash from operations, investing and
financing.
Profile of The Bank
The Jammu And Kashmir Bank Ltd:
The Jammu and Kashmir Bank was formally incorporated on 1st October 1938 and
commenced business from 4th July 1939 at registered office at Residency Road, Srinagar,
Kashmir. The Jammu & Kashmir Bank Limited has been the first of its nature and
composition as a state owned bank in the country. The state government besides contributing
half of the issued capital also appointed it as its bankers for general banking and treasury
business. In its formative years, the bank had to encounter several serious problems,
particularly around the time of independence, when out of its total of ten branches two
branches of Muzaffarabad and Mirpur fell to the other side of the line of control (now Pak
Administered Kashmir) along with cash and other assets, in 1947. However the state
government came to its rescue with the assistance of Rs.6.00 lacs to meet the claims, this
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Abhinav
International Monthly Refereed Journal of Research In Management & Technology
ISSN – 2320-0073 Volume II, June’13

enabled the bank to overcome its difficulties and keep growing. Following the extension of
central laws to the state of Jammu & Kashmir, the bank was defined as a government
company as per the provisions of Indian Companies Act 1956. The bank has its first full time
chairman in 1971, following social central measures in banks. The year 1971 was a turning
point for the bank on conferment of scheduled bank status and witnessed remarkable
progress in all the vital fields of operations. The Reserve Bank of India declared the bank as
“A” Class Bank in 1976. In recognition of dominant role and exalted performance, RBI
appointed the bank as its agent for performing the general banking business of the central
government especially in maintaining currency chests and collection of taxes.
The customer faith in the bank can be judged by millions of customers doing their banking
operations through this bank having a large network of branches spread all over the country.
A significant contributing factor for this fact is the growing trust of people towards the bank
and the bank‟s reciprocation to serve them better and coming to their expectations in every
activity.
RESEARCH OBJECTIVES
The study will be undertaken to focus on the following objectives:
1. To develop an understanding of financial analysis in the banking organization.
2. To give a brief overview of Jammu and Kashmir Bank Ltd.
3. To analyze financial performance of Jammu and Kashmir Bank.
4. To offer suggestions for further improvement.
METHODOLOGY
The study will be carried out with the help of secondary data published by the bank from
time to time. Appropriate ways will be used to analyze and interpret such data for the
purpose of the study.
DATA INTERPRETATION AND ANALYSIS
Table 1. Statement of Financial Position
CAPITAL AND As at 31.03.2012 As at 31.03.2011
Schedule
LIABILITIES (Rs „000‟ Omitted) (Rs„000‟ Omitted)
Capital 1 484,922 484,922
Reserves and Surplus 2 40,446869 34301946
Deposits 3 533,469016 446,759350
Borrowings 4 12,409,572 11,046,502
Other Liabilities and
5 15,881824 12488814
Provisions
Total 602,692203 505,081534
ASSETS
Cash and Balance with
6 27,836,539 29,749,638
Reserve Bank of India
Balance with Banks &
7 16,702,140 5,738,477
Money at Call & Short notice

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Abhinav
International Monthly Refereed Journal of Research In Management & Technology
ISSN – 2320-0073 Volume II, June’13

Table 1. Statement of Financial Position (Contd….)

CAPITAL AND As at 31.03.2012 As at 31.03.2011
Schedule
LIABILITIES (Rs „000‟ Omitted) (Rs„000‟ Omitted)
Investments 8 216,243,188 196957679
Advances 9 330,774,215 261,936,350
Fixed Assets 10 4,202,704 3,937,702
Other Assets 11 6933417 6761688
Total 602,692,203 505,081,534
Contingent Liabilities 12 150,660,768 255,176,641
Bills for Collection 9,203,354 14,616,755
Source: Corporate annual reports of the bank for the years 2011-12
Table 2. Statement of income
Year ended Year ended
Schedule 31-03-2012 31-03-2011
(Rs.‟000‟omitted) (Rs.‟000‟omitted)
I. INCOME
Interest Earned 13 48,355,773 37,131,322
Other Income 14 3341232 3,647,562
Total 51,697,005 40,778,884
II. EXPENDIURE
Interest Expended 15 21,694685
29972224
Operating Expenses 16 8021519 7,589318
Provisions and
5,670,757 5,342862
contingencies
Total 43664500 34,626865
III. NET PROFIT FOR
8032505 6152019
THE YEAR
Total 51697005 40,778,884
Earnings per Share
18 165.66 126.93
(Basic/Diluted)
Source: Corporate annual reports of the bank for the years 20011-12.

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Abhinav
International Monthly Refereed Journal of Research In Management & Technology
ISSN – 2320-0073 Volume II, June’13

Table 3. Key Financial Indicators

S. No. Particulars March 2012 March 2011 Rs. In crores
Rs. In crores
1. Reserves 4044.68 3430.19
2. Profit 803.250 615.20
3. Income 51,69.70 40,77.88
4. Net Interest Income 1838.35 1543.66
5. Deposits 53346.90 44675.93
6. Advances 33077.42 26193.63
7. Investments 21624.31 19695.76
8 Borrowings 1240.95 1104.65
9 Earnings Per Share 165.69 („000) 126.90 („000)
Source: Corporate Annual Report of the Bank for the year 2011-12.
The above indicators are interpreted as below:
Reserves: The reserves of the bank increased to Rs. 4044.68 crore as on 31 st March 2012
from Rs. 3430.19 crore of the previous year.
Profit: The bank posted a net profit of Rs.803.25 crore for the financial year ending March
2012 against a figure of Rs.615.20 crore as on March 2011 registering robust increase of
30.56%.
Income: The bank continued to register an impressive year-on-year improvement in
earnings. The total income rose to Rs 51,69.70 crore from Rs. 40,77.88 crore in 2011-12.
During the year the income has grown by 26.77 percentage points.
Net Interest Income: The net interest income of the bank continued to record a consistent
growth year-on-year. It rose to Rs. 1838.35 crore from Rs. 1543.66 crore in 2011-12 and
recorded a growth of 19.09%.
Deposits: The aggregate deposits of the bank increased to an amount of Rs. 53346.90 crore
as on March 2012 from Rs. 44675.93 crore existing at the end of financial year 2011, thus
recorded an absolute growth by RS. 8670.97 crore, this can be also put in the percentage
points which is approximately 19.40.
Advances: The focus on credit growth helped the bank to record an impressive growth of
26.28% from the year ending March 2011 to the year ending March 2012.
Investments: The total investments of the bank stood at Rs. 21624.31 crore as on 31st March
2012 against Rs. 19695.76 crore of the previous year The increase in portfolio has been
made by Rs 1928.55 crore, which is almost 9.79 percents.
Earnings Per Share: The bank under study is currently earning Rs 165.69 („000) per share
at an average, a year before i.e., as on March 2011 it was Rs. 126.90 („000) . It has been
increased by 30.56 percents. This uptrend clearly signifies healthy financial performance and
best profitability of the bank.

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Abhinav
International Monthly Refereed Journal of Research In Management & Technology
ISSN – 2320-0073 Volume II, June’13

CONCLUSIONS
1. The Jammu & Kashmir Bank is a growing and profit-making Bank in India. The
profits of the Bank have tremendously increased during the period under study and
are likely to grow further as the trend is soaring upward.
2. The financial position of the bank is not enough sound, from the stand point of data
relating to the financial year 2011-12, the total advances are less than the deposits, If
the position will remain same in future years the health of the organization is likely
to get adversely effected. Despite above the total amount of investment during the
period under study exceeds borrowings, thus signaling the efforts of better financial
management.
3. The Jammu & Kashmir Bank is working towards building trust with customers,
shareholders, employees and other diverse stakeholders. Because of increase in
deposits year after year, it indicates that the account holders have trust on the
organization; shareholders also get satisfied by the increased amount of Earnings Per
Share year after year.
4. Lack of incentives to customers has also resulted into customers‟ dissatisfaction.
Many of its customer base have shifted their loyalty and have started purchase of the
products offered by other banking organization, it is obvious from the fact that
almost all other banks have stretched and expanded in J and K state and are, in other
words, occupying the market of J and K bank.
SUGGESTIONS
1. The bank under study should go for sales promotion activities in order to create
awareness among the people about its product and services. The most people are not
aware about the products, services and other facilities being provided by the bank.
This would definitely strengthenise the profitability of the bank. Because the rival
banks from outside, functioning in India especially in the state of Jammu &
Kashmir, have strengthened their roots by adopting modern approaches of publicity /
advertising of their products and services.
2. The bank must change its strategy in the field of sales. It should shift its attitude
from sales oriented job to relationship oriented job, which means that at present
moment of time the operations of the bank are confined only to the four walls of
their premises. They do not go outside their premises in order to sell their products
and services. If it will not resort to relationship oriented operations, it is likely to
face the problem of poor functioning in future. This is evident from the meager
increase in profits during the year 2011-12, which is around 30%. This percentage is
considered as meager because the company has kept large amount of assets at its
disposal and has been, to some extent, exercising monopoly in the state from
decades together. By the time its monopoly, which is a property of a bank, has
eroded to a considerable extent.
3. The bank should provide various attractions by adopting motivation-oriented
activities to retain the existing customers and attract new customers. This would
definitely have an affirmative impact on the financial position and profitability side
of the bank.

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Abhinav
International Monthly Refereed Journal of Research In Management & Technology
ISSN – 2320-0073 Volume II, June’13

4. There is large scope for the bank to grow further and boost its operating and
financial position positively. As there are many areas in the country in general and in
J and K state in particular, which are un-banked. So in order to grab this opportunity
the bank must open its branches in those areas where banking facilities are not
available. If it will not take into account such kinds of opportunities, the rival banks
can take the position to get availed of these benefits and will become a type of threat
to it for increasing its market share. These are the golden moments for Jammu &
Kashmir Bank to reach at the remote areas. because; foreign aswell as domestic
banks are expanding their area of operation in India and are thirsty of unoccupied
market.
5. The bank should participate in exhibitions wherever possible. The exhibitions will
help it to exhibit its products and services. While carrying out the exhibitions a care
should be taken to reduce the intangibility of products and services so that the
customers can understand them, their use and importance easily. It is, in-fact, the
need of the hour to grow further and maintain pace with the other banks in the
industry.
REFERENCES
1. R.K Sharma and Shashi K Gupta, (1996), Management Accounting , principles and
practice, 7th revised edition, New Delhi, Kalyani Publishers.
2. S.P. Jain and K.L. Narang , (1979), Advanced Accountancy, 7th revised edition, New
Delhi, Kalyani Publishers.
3. Jha S. M. (2006), Service Marketing, Himalaya Publishing House.
4. Annual Report of the J & K Bank Ltd. (2011 – ‟12).
5. Discussion with banking officials.
6. www.jkbank.net

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