Bank of Baroda Falls Most in Three Months After Bad Loans Surge

  • Provisions for soured credit more than triple in June quarter
  • First-quarter profit slumps 60 percent, lender reports

Bank of Baroda, India’s second largest state-run lender by assets, fell the most in almost three months after surging bad-loan provisions dragged first-quarter profit lower.

Shares of Baroda fell 8.3 percent, the biggest intraday drop since May 16, to 147.15 rupees as of 12:20 p.m. local time. The stock has lost 6 percent this year, compared with the S&P BSE India Bankex Index’s 11 percent climb.

Net income at the Mumbai-based bank fell 60 percent to 4.23 billion rupees ($63 million) in the three months ended June 30 from a year earlier, it said in an exchange filing. Provisions for soured credit at the lender more than tripled to 19.8 billion rupees, as its bad-loan ratio climbed to 11.2 percent from 10 percent as of March, the filing showed.

“Stress on Bank of Baroda’s book will continue for at least another two quarters,” Siddharth Purohit, a Mumbai-based analyst at Angel Broking Ltd., said by phone. “In spite of the management’s focus on recovery, only so much can be done until economic recovery gathers pace.”

The proportion of Indian banks’ stressed assets to total advances surged to a 16-year high of 11.5 percent as of March 31, Reserve Bank of India data show. In December, RBI Governor Raghuram Rajan set lenders a March 2017 deadline to rid their balance sheets of bad debt, which have curbed their ability to extend loans.

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