* Net profit down 6.7%, misses forecasts

* Company cites mark-to-market losses

* Says expects to recoup those losses this year

MUMBAI, Aug 6 (Reuters) - State Bank of India on Saturday missed estimates with a 6.7% fall in first-quarter net profit hit by investment losses which India's largest lender said it expected to recoup over the course of the year.

In the quarter to June 30, the bank recorded mark-to-market (MTM) losses of 65.49 billion rupees.

That slashed SBI's other income to 23.12 billion rupees from 118.02 billion a year earlier.

"We will recover most of the mark-to-market losses during this year," SBI Chairman Dinesh Khara told an earnings news conference.

"If we go by the government securities yield of 7.30%, which was yesterday’s closing, we can write back 19 billion rupees of MTM provision."

Net profit fell to 60.68 billion rupees, well below the 78.19 billion expected by analysts, Refinitiv Eikon data showed.

Gross bad loans as a percentage of total assets improved, falling to 3.91% from 3.97% in the previous quarter.

The bank doesn't foresee any challenges on asset quality going ahead, Khara said.

SBI expanded its domestic loans by 14.93% year on year, led by strong growth in retail loans and it expects advances to grow at a similar pace during through the year.

Most Indian banks have seen a healthy rise in advances as economic activity rebounds after widespread COVID-19 restrictions.

Deposits grew 8.73%, registering a marginal decline from the March quarter.

($1 = 79.3600 Indian rupees) (Reporting by Nupur Anand; Editing by Kim Coghill)