MUMBAI (Reuters) - Bank of Baroda, India's second-biggest state-run lender by assets, reported a 60 percent fall in first-quarter net profit and a rise in bad loans, and said a recovery was still two quarters away.
The lender expects its bad loans to rise to between 450 billion rupees($6.7 billion) and 500 billion rupees by the end of the fiscal year to March, with a bias towards the lower end of the range, Chief Executive P.S. Jayakumar told a news conference on Thursday.
Its gross bad loans increased to about 430 billion rupees, or 11.15 percent of total loans, as of end-June, from 9.99 percent three months earlier.
Indian banks have seen a surge in their bad loans this year after an asset quality review ordered by the regulator Reserve Bank of India as part of a broader clean-up exercise. The regulator wants them to fully provide for all problem loans by March 2017.
Jayakumar defended the lender's strategy and efforts to keep bad loans in check, and said he saw an improvement in the fourth quarter to March.
Most Indian companies follow an April to March fiscal year.
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"Maybe the first, second and third will be slightly lower, and fourth will start the recovery process," said Jayakumar, one of two former private sector executives last year named to head state lenders as part of the government's banking reform agenda.
The bank's net profit fell to 4.24 billion rupees ($63.4 million) for the three months to June 30, from 10.52 billion rupees a year earlier, missing analysts' estimate of 4.92 billion rupees.
The profit comes after two straight quarters of losses.
Shares in Bank of Baroda closed 9 percent lower in a Mumbai market that edged up 0.2 percent.
Top lender State Bank of India reports first quarter results on Friday.
($1 = 66.7810 Indian rupees)
(Reporting by Devidutta Tripathy; Editing by Sunil Nair and Alexandra Hudson)