MUMBAI (Reuters) - Bank of Baroda Ltd, India's second-biggest lender by assets, booked a 69 percent fall in quarterly profit due to higher provisions for bad loans and a surge in tax expenses, sending its shares down more than 10 percent.
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 percent of total advances, while the same ratio in the private sector was just 4.4 percent, 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 percent 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 3.3 billion rupees ($53.45 million) in the fiscal third quarter ended Dec. 31, from 10.5 billion rupees a year earlier.
Net bad loans as a percentage of net advances was 2.21 percent, from 1.74 percent in the second quarter.
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Provisions for bad loans rose 66 percent from a year earlier to 12.6 billion rupees, 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 percent at 12:42 p.m., while the main Mumbai market index was trading down 1.2 percent. The public sector bank index was down 4.9 percent.
($1 = 61.7451 rupees)
(Reporting by Devidutta Tripathy; Writing by Sumeet Chatterjee; Editing by Christopher Cushing)