India’s No. 2 Lender Jumps Most in Decade as Bad Loans Surprise

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Bank of Baroda, India’s second-largest lender by assets, paced gains in banks after reporting a narrowing bad-loan ratio.

Shares of the bank rose 17 percent to 169.70 rupees in Mumbai, the biggest increase since May 2004, while State Bank of India, the nation’s largest lender gained 5.4 percent. Bank of Baroda was the best performer on the 12-stock S&P BSE Bankex Index which climbed 2.4 percent.

Chief Executive Officer Ranjan Dhawan’s focus on recovering soured debt helped Bank of Baroda narrow its gross bad debt ratio as a part of the total to 3.72 percent in the quarter ended March 31 from 3.85 percent in the December quarter, exchange filing showed.

“Investors who were expecting the March quarter to be a washout for the state-run banks were surprised with Bank of Baroda results,” Nitin Kumar, a Mumbai-based banking analyst at Prabhudas Lilladher Ltd., said by phone. “Everybody is suddenly sitting up and closely watching for further cues.”

Net income in the three months to March 31 fell 48 percent to 5.98 billion rupees ($94 million) from a year earlier, the bank said in a filing on Monday. Total loans at the lender grew by 7.8 percent to 4.3 trillion rupees. State Bank will report its March quarter earnings on May 22, exchange filing shows.

“I personally did not, and my colleagues in the bank did not expect that we would in this quarter have so little” bad loans, Dhawan said. “We have worked hard toward recovering bad loans and improving the quality of our books.”

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