J&K Bank to benefit in the long run, likely to see shareholding rejig

Kolkata: Jammu & Kashmir Bank, the most prominent institution in the state, may see changes in shareholding following the withdrawal of statehood for Jammu & Kashmir, but analysts do not expect any fundamental change for the bank which is struggling with asset quality issues.
The bank is 59.23% owned by the state government. Now, as Jammu & Kashmir becomes a union territory, there could be some long-drawn process for a change in the shareholding. As of today, chief secretary of the J&K government holds 55.89% in the bank with the secretary, finance department of the government, holding 3.34%.

Analysts and stakeholders expect changes in shareholding in the bank while it may take a few weeks for a clearer picture to emerge.

“It’s too early to talk about changes in the shareholding pattern. A lot will depend on how the central government handles the entire issue,” said Sanjeev Jain, vice president for equity research at Sunness Capital India.

“Fundamentally, there will be no change for the bank as the lender is facing asset quality concerns. However, today's development should benefit the bank in the long run with better business prospects,” Jain said.

The bank has largely thrived on government businesses. The question which keeps everybody guessing after Monday’s development is whether the central government will infuse equity into the bank following the change in shareholding. Till date, the bank was treated as a private sector entity.

A senior executive at Reserve Bank of India said the central bank was taking a wait and watch policy while it did not make any official comment on the shareholding issue.

The shares of the bank fell 3.13% Monday to ₹34.10 on BSE. The lender reported a 58% dip in net profit at ₹22 crore in the June quarter on account of rise in provisions for bad loans.