PNB profit slides as bad loans rise; shares fall

NEW DELHI (Reuters) - India's third-biggest state lender by assets, Punjab National Bank (PNB) , posted lower-than-expected second-quarter earnings as slower loan growth and worsening asset quality weighed on profits, sending its shares down over 4 percent.

For the quarter quarter-ended September, PNB's net profit slumped 52.6 percent to 5.05 billion rupees from 10.66 billion rupees a year earlier. Net interest income, the difference of interest earned and paid out, rose 10 percent.

Analysts, on average, had estimated net profit of 9.53 billion rupees, according to Thomson Reuters I/B/E/S.

Earlier, UCO Bank posted a four-fold jump in net profit for July-Sept even as bad loans continued to rise.

Bank of Baroda also surprised the street with better-than-expected quarterly earnings last week, stoking speculation that the bad loans weighing on big government banks may be easing, although mid-sized lenders such as Union Bank of India did not fare well.

Over $20 billion of bad loans were weighing on the country's top 10 state banks as of March 31, according to Reuters calculations based on data from individual banks.

At PNB, non-performing loans for the quarter rose to 3.07 percent from 2.69 percent from the same period last year. Net interest margins, a key indicator of profitability, fell to 3.47 percent from 3.52 percent in the June quarter.

Provisions set aside for bad loans and loan contingencies rose to 18.99 billion rupees from 10.7 billion rupees in the same period a year earlier.

The largest state lender, State Bank of India (SBI), which accounts for about a quarter of all loans and deposits, will report earnings on November 13.

Shares of Punjab National Bank fell 4.7 percent to 520.1 rupees.

(Reporting by Devidutta Tripathy; Editing by Anand Basu)