Bank of Baroda Q3 net down 69 per cent on higher provisions

Bank of Baroda, India's second-biggest lender by assets, has reported a 69 per cent fall in quarterly profit due to higher provisions for bad loans and a surge in tax expenses.

The bank, majority-owned by the government, on Friday said net profit reached Rs 3.3 billion ($53.45 million) in the third quarter ended December 31, from Rs 10.5 billion 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.

"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 said.

Provisions in the quarter rose 66 per cent from a year earlier to Rs 12.6 billion, while tax expenses doubled. Bank of Baroda said tax costs were higher because of pending taxes levied by the authorities in Dubai.

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.

Latest Reserve Bank of India data showed 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.

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.

Shares in Bank of Baroda were down 11.3 per cent on BSE in afternoon trade while the main Mumbai market index was trading down 1.2 per cent.

The public sector bank index was down 4.9 per cent.

(Reuters)