Bank of Baroda posts Q3 loss as bad loans surge

MUMBAI (Reuters) - Bank of Baroda swung to a quarterly loss and joined its state-run peers in posting sharply higher bad loan provisions, as part of a central bank drive to clean up sour debts in the banking industry.

The country's No. 2 lender by assets said on Saturday its provisions, including for loan losses, jumped more than five times from the year-ago period to 61.65 billion rupees ($905 million) in the October-December quarter.

Bank of Baroda's earnings came a day after State Bank of India, the nation's top lender by assets, reported its biggest fall in quarterly profit in nearly five years due to a jump in bad loan provisions.

More than two dozen lenders majority owned by the government dominate India's banking sector with two thirds of the assets. These lenders together also account for about 85 percent of the sector's troubled assets.

Sector regulator, Reserve Bank of India (RBI), has asked all lenders to treat some troubled accounts as non-performing even if an actual default has yet to happen and make adequate provisions.

The RBI's directions followed Governor Raghuram Rajan's call for a clean-up of bank balance sheets by March 2017.

Bank of Baroda reported a net loss of 33.42 billion rupees ($491 million) in the fiscal third quarter ending December 31, down from a profit of 3.3 billion rupees a year earlier, the Mumbai-based lender said in a regulatory filing.

Analysts on average had expected a net profit of 4.93 billion rupees for the bank, which late last year took on a chief executive from the private sector as part of a government bid to reform state banks.

Bank of Baroda Chief Executive P. S. Jayakumar, the former head of an Indian real estate firm, said the bank expected a "fair bit of stability" in its asset quality in the quarters ahead.

The bank's gross bad loans as a percentage of total advances nearly doubled to 9.68 percent in the December quarter from 5.56 percent in the previous three months.

($1 = 68.1082 Indian rupees)

(Reporting by Sumeet Chatterjee and Himank Sharma; Editing by Richard Pullin)