RPT-UPDATE 2-India's State Bank Q1 beats f'cast, ICICI drops

(Repeats story from Saturday) (Adds analysts' comments, ICICI comments, details, byline)

By Narayanan Somasundaram

MUMBAI, July 26 (Reuters) - State Bank of India (SBI.BO: Quote, Profile, Research) beat forecasts with a 15 percent rise in quarterly profit as other income more than doubled, but its private sector rival ICICI Bank (ICBK.BO: Quote, Profile, Research) posted an unexpected fall in profits after its bond and equity portfolios lost value.

Both banks saw a rise in bad debts as higher interest rates hurt retail loans such as personal loans, credit card dues and automobile loans.

India's central bank hiked interest rates to a six-year high of 8.5 last month in an effort to control inflation, which is holding just below 12 percent, and many expect it to tighten policy again at a review on Tuesday. See [ID:nBOM260256].

ICICI Bank, India's no.2 lender, posted a 6 percent drop in net profit to 7.28 billion rupees ($172 million) in the June quarter as the value of bonds and shares it holds fell by 5.94 billion rupees.

Analysts had expected a rise in net profit of 8.1 percent to 8.38 billion rupees.

"The road ahead is clearly bumpy for ICICI. The numbers show the bank may be heading for a sustained slowdown," an analyst with a local brokerage said. He did not want to be named as he is not authorised to speak to the media.

Ten-year bond yields IN082418G=CC rose by 75 basis points in the quarter, due to higher rates, eroding the value of banks' bonds, and the benchmark share index .BSESN slid 14 percent.