Bank of Baroda Q3 Net Down 69%; Shares Sink

Mumbai: Bank of Baroda Ltd, India's second-biggest lender by assets, booked a 69 per cent fall in quarterly profit due to higher provisions for bad loans and a surge in tax expenses, sending its shares down more than 10 per cent.

The lender, majority-owned by the government, also said bad loans were difficult to contain and that growth in bad loans was unlikely to slow significantly in the next two quarters, Executive Director Ranjan Dhawan told a news conference.

India's more than two dozen state-run banks have long been constrained by a pile of bad loans, mainly due to a slowdown in economic growth in the past two fiscal years, pulling profitability well below their private-sector rivals.

State lenders recorded their highest-ever level of stressed loans in September at 12.9 per cent of total advances, while the same ratio in the private sector was just 4.4 per cent, latest central bank data showed. Stressed loans comprise bad loans and restructured loans.

Bank of Baroda and other government-owned lenders such as State Bank of India and Punjab National Bank account for more than 70 per cent of loans, so a surge in their bad loans is a worry for the government and the regulator.

On Friday, Bank of Baroda said net profit reached Rs 334 crore in the fiscal third quarter ended December 31, from Rs 1,048 crore a year earlier.

Net bad loans as a percentage of net advances was 2.21 per cent, from 1.74 per cent in the second quarter.

Provisions for bad loans rose 66 per cent from a year earlier to Rs 1,260 crore, while tax expenses doubled. The bank said tax costs were higher because of pending taxes levied by the authorities in Dubai.

Shares in Bank of Baroda were down 11 per cent at 12:42 p.m., while the BSE Sensex was trading down 1.2 per cent. The public sector bank index was down 4.9 per cent.

Copyright: Thomson Reuters 2015