May 25, 2018 / 10:53 AM / 2 years ago

UPDATE 2-India's Bank of Baroda, IDBI post big Q4 losses as bad loans surge

* Bank of Baroda posts 31.02 bln rupee loss, IDBI’s loss 56.63 bln

* IDBI’s non-performing loan ratio 28 pct, Baroda’s 12.26 pct

* IDBI to shrink corporate lending; sell bad loans, assets

* Fifteen state-run lenders’ combined Q4 loss $7.9 bln

(Recasts with Bank of Baroda results)

By Devidutta Tripathy and Subrat Patnaik

MUMBAI, May 25 (Reuters) - India’s Bank of Baroda and IDBI Bank reported big fourth-quarter losses on Friday, continuing the losing streak of state-run lenders which have been hit by tighter central bank rules on bad loans.

India’s banks, burdened by 9.5 trillion rupees ($140 billion) of bad loans at the end of 2017, have seen a further surge in bad loans in the March quarter after the central bank withdrew half a dozen restructuring schemes and tightened other rules.

Bank of Baroda, the third-biggest among state-run lenders by assets, swung to a net loss of 31.02 billion rupees ($457.6 million) for the three months to March 31, compared with a net profit of 1.55 billion rupees a year ago. Its gross bad loans as a percentage of total loans rose to 12.26 percent at end-March, from 11.31 percent three months earlier.

IDBI Bank, which has the worst bad-loan ratio among all Indian lenders, said its ratio neared 28 percent at the end of March, leading to a net loss of 56.63 billion rupees ($834.8 million) - its sixth straight quarter of losses.

Including Bank of Baroda and IDBI, 15 state banks have so far reported combined losses of 533.5 billion rupees ($7.9 billion) in the March quarter. Two have reported modest profits and four have yet to report results.

Twenty one banks majority owned by the Indian government, which account for two-thirds of banking assets in the country, also hold close to 90 percent of soured loans.

IDBI Bank will reduce its lending to corporate borrowers, which account for the bulk of its bad loans, and will instead focus on growing its retail loans, although that would mean the overall loan book could shrink, said Chief Executive M.K. Jain.

“Most of the stress has already been recognised,” he told a news conference, outlining plans to sell about 214 billion rupees of bad loans to distressed asset buyers and raise as much as 40 billion rupees by selling non-core assets.

The bank will also shut unprofitable branches and curb its international presence among other measures to help it turn around its fortunes.

Bank Baroda Chief Executive P.S. Jayakumar said he expected the current financial year to be a “turning point” with expected recoveries from defaulters via the nascent bankruptcy court process.

IDBI shares closed 3.1 percent lower after the results. Bank of Baroda shares ended 1.8 percent higher ahead of the results in a Mumbai market that closed 0.9 percent higher. ($1 = 67.7800 Indian rupees)

Reporting by Devidutta Tripathy, Subrat Patnaik and Vishal Sridhar; Editing by Elaine Hardcastle

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