HDFC Bank sees strong loan growth after profit rises

HDFC Bank Ltd, India's second-biggest private sector lender by assets, said on Thursday it was optimistic of growing loans on the back of faster economic expansion after reporting net profit grew more than a fifth in the March quarter.

The lender said net profit rose to 28.07 billion rupees ($444 million) in its fiscal fourth quarter from Rs 2,327 crore or Rs 23.27 billion a year ago.

Analysts on average had expected a profit of Rs 2780 crore or Rs 27.8 billion,  according to data compiled by Thomson Reuters.

HDFC Bank expects to grow loans faster than the banking sector during the financial year to March 2016, Paresh Sukthankar, deputy managing director at the lender, told reporters.

He expected the banking system loan growth this fiscal year to be between 13 and 14 per cent if the economy grows one percentage point faster. Bank loans grew about 12 percent last fiscal year.

Indian lenders have been hurt by two straight years of slower economic expansion that led to projects being stalled and corporate balance sheets getting stretched.

Demand for loans from companies has yet to pick up, although consumer loans are growing fast.

"Have we seen a huge pick up on the capex side?

The answer is 'no'," Sukthankar said, but added that was not a surprise since loan demand revival typically comes with a lag to economic recovery.

HDFC Bank's net interest income grew 21.4 per cent in the March quarter as advances rose 20.6 per cent. Net interest margin was stable at 4.4 per cent.

Bad loans as a percentage of total loans was at 0.9 percent compared with 1 percent in the third quarter.

Shares in HDFC Bank, which is India's most-valuable lender with more than $40 billion in market capitalisation, have outperformed bigger rivals such as State Bank of India and ICICI Bank so far this year.

HDFC Bank stock has gained 6.5 percent in 2015, while the bank sector index is down 2.6 per cent.