UPDATE 1-India's ICICI Bank Q2 profit halves, but asset quality improves

(Adds bad loan additions, background on CEO)

Oct 26 (Reuters) - India’s ICICI Bank reported on Friday a bigger than expected 56 percent decline in second-quarter net profit, as expenses increased, but the lender’s bad loan ratio improved.

India’s third-largest bank by assets said net profit came in at 9.09 billion rupees ($124 million) for the three months ended Sept. 30, compared with 20.58 billion rupees a year earlier.

Analysts had forecast a second-quarter profit of 9.98 billion rupees, according to Refinitiv data.

Still, the bank’s performance was better than the first quarter when it made a quarterly loss for the first time in at least 16 years due to higher provisions.

ICICI said second-quarter profit was partly hit by a 10.6 percent rise in operating expenses to 43.24 billion rupees.

The bank is facing a change of its top management after Chief Executive Officer Chanda Kochhar resigned this month after being mired in allegations of nepotism. Kochhar will be replaced by Sandeep Bakhshi, the former head of ICICI’s life insurance arm.

Gross bad loans as a percentage of total loans fell to 8.54 percent by the end of September 2018, from 8.81 percent in the previous quarter, but that was still higher than 7.87 percent in the same period a year ago.

Bad loan additions of 31.17 billion rupees in the second quarter, were down from 40.36 billion in the June quarter.

Provisions fell 10.5 percent to 39.94 billion rupees.

$1 = 73.4025 Indian rupees Reporting by Chris Thomas in Bengaluru; Editing by Amrutha Gayathri and Susan Fenton