* Credit growth to exceed sector's 20 pct rate in FY 2011
* Net profit 8.12 billion rupees vs 8.15 bln market
* Gross advances rise by 40 pct
* Sharp rise in interest rates could derail loan demand
* Shares up 21 percent ytd vs 14 pct rise in sector index
(Adds management and analyst comments)
By Sumeet Chatterjee
MUMBAI, July 19 HDFC Bank (HDBK.BO), India's
No. 2 private sector lender, reported its strongest profit
growth in more than a year, and highlighted more gains for the
booming industry on robust loan demand.
HDFC Bank and its bigger rivals State Bank of India
(SBI.BO) and ICICI Bank (ICBK.BO) are benefiting from improving
business and consumer confidence in an economy set to grow
about 8.5 percent in the year that began in April.
"The signs of core loan growth are clearly visible in the
strong earnings of the top banks and we see this picking up in
the coming quarters," said K.K. Mital, head of portfolio
management services at Globe Capital.
HDFC Bank matched analysts estimates with a 34 percent rise
in April-June net profit as companies and consumers take
advantage of a fast-growing economy.
The bank expects strong demand from mortgage borrowers and
improving asset quality to help it exceed the sector's 20
percent credit growth estimated in the year ending March 2011.
"There has been a steady increase in the asset quality as a
result of which the provisions and contingencies are lower,"
said HDFC Bank's Executive Director Paresh Sukthankar. "We do
see corporate loan growth remaining strong.
ICICI Bank, India's second-largest lender, expects its
loans to expand by a fifth in the fiscal year ending March, its
chief executive said on Monday. [ID:nSGE66I09H]
Bank credit in India grew an annual 21.70 percent in early
July, according to the central bank's data, in line with a rise
in business and consumer confidence, from a low of 9.7 percent
in October and compared with 16.7 percent at end-March.
Analysts said a sharp rise in interest rates could derail
demand for loans, especially from mortgage borrowers.
But this month's rate increase by the central bank to
counter double-digit inflation and a further hike in rates
likely at its scheduled policy meeting on July 27 is unlikely
to impact loan demand due to ample liquidity in the banking
The central bank sees non-food credit growth of banks at 20
percent in 2010/11, still a far cry from growth rates of above
30 percent in the pre-crisis period. [ID:nSGE66B0BN]
New York-listed HDFC Bank (HDB.N) said its gross advances
grew 40 percent in April-June to 1.5 trillion rupees ($31
The loan growth was helped by mobile carriers' scramble to
secure funds to pay for 3G spectrum after winning an auction
for high-speed radiowaves, Sukthankar said.
The government raised $14.3 billion from the auction,
nearly double the target. [ID:nSGE64P0I0]
HDFC Bank's April-June net profit rose to 8.12 billion
rupees from 6.06 billion rupees and versus 8.15 billion rupees
forecast by a Reuters poll of brokerages.
The bank's net interest margin, a key gauge for
profitability, edged up to 4.3 percent from 4.2 percent, and
Sukthankar said margins would remain in a 4-4.3 percent range
in the near-term.
On Monday, HDFC Bank shares ended up 0.6 percent a Mumbai
market .BSESN down 0.2 percent. The shares have jumped about
21 percent so far this year versus a 14 percent rise in the
bank index .BSEBANK and a 3 percent rise in the main index.
(Editing by Surojit Gupta and Anshuman Daga)