<div>Bank of Baroda Ltd, India's second-biggest state-run lender by assets, posted on Friday an unexpectedly sharp 89 percent tumble in its quarterly net profit, hit by a spike in bad loans and higher provisions for impaired assets.</div><div> </div><div>The numbers cast a shadow over hopes of an improvement in the asset quality of India's banks, helped by a pickup in Asia's third-largest economy. State Bank of India, the country's top lender will report earnings later on Friday.</div><div> </div><div>Slower credit growth and a surge in bad loans in the past three years has hobbled the country's lenders. Despite some signs of a pick up in the economy, bank loan growth in the three months to September was less than 10 percent.</div><div> </div><div>Lenders including State Bank of India, the country's largest, however, have been able to rein in the pace of rise in bad loans in the last few quarters, by tightening scrutiny and increasing recovery efforts.</div><div> </div><div>Net profit at Bank of Baroda, which in August became one of the first state-owned lenders to appoint a boss from the private sector, fell to 1.24 billion rupees ($18.9 million) in the quarter ended September 30, from 11.04 billion reported a year earlier, the Mumbai-based lender said in a statement.</div><div> </div><div>The bank's gross bad loan ratio for the quarter rose to 5.56 percent, a jump from 4.13 percent in the previous three months and 3.32 percent in the same quarter a year earlier.</div><div> </div><div>Bank of Baroda's provisions for problem loans in the July-September quarter more than doubled to 18.9 billion rupees, which included 25 percent of a credit account worth 3.74 billion rupees that was declared as fraud by the bank, it said.</div><div> </div><div>That number, seen by analysts as a partial "clean up" effort by the bank's new boss, includes a provision to cover a probe into suspected money laundering of about 60 billion rupees through one of its branches.</div><div> </div><div>Shares in the Mumbai-based bank tumbled almost 10 percent at the market open, but by 0530 GMT had erased most of the losses to be down just 0.6 percent.</div><div> </div><div>(Reuters)</div>
