Bank of India Q1 net plunges 84 percent as bad loans surge

By Devidutta Tripathy

MUMBAI (Reuters) - Bank of India Ltd posted a bigger-than-expected 84 percent fall in quarterly net profit as bad loans surged, sending shares of the nation's third-biggest state-run lender by assets down to their lowest level in nearly two years.

Punjab National Bank and Union Bank of India , two other government-run lenders, also reported falls in their first-quarter profits on Tuesday but their shares rose as the market had expected their bad-loan ratios to be higher than the disclosed levels.

India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic expansion hurt companies' abilities to service debt.

While the pace of additions to bad loans has started slowing for most banks, higher provisioning is hurting their profits. State-run lenders also account for a majority of the sector's bad loans.

Bank of India's net profit fell to 1.3 billion rupees ($20.3 million) for its fiscal first quarter to June 30, from 8.06 billion rupees reported a year earlier, the bank said in a statement to the stock exchanges.

Analysts on average had expected a net profit of 3.31 billion rupees, according to Thomson Reuters data.

Bank of India's gross bad loans as a percentage of total loans rose to 6.8 percent in the June quarter from 5.39 percent in the previous three months and 3.28 percent a year earlier, the statement said.

Shares in Bank of India dropped as much as 5 percent after the earnings to 155.55 rupees, the lowest level since Sept. 11, 2013.

Punjab National Bank, the fourth-biggest state-run lender by assets, said its fiscal first quarter net profit nearly halved to 7.21 billion rupees, but its bad-loan ratio fell marginally from the previous three months.

The stock jumped as much as 6.7 percent.

Union Bank of India, the sixth-biggest state-run lender by assets, reported a 22 percent fall in first quarter profit of 5.19 billion rupees that was higher than analysts' estimate of 4.99 billion rupees.

Its gross bad-loan ratio increased to 5.53 percent in June quarter.

($1 = 64.0200 rupees)

(Additional reporting by Karen Rebelo in MUMBAI; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)