July 21, 2014 / 6:52 AM / 3 years ago

UPDATE 1-India's HDFC Bank Q1 net up 21 pct, lags estimates

* Net profit 22.33 bln rupees vs 23.21 bln rupees estimate

* Higher provisions weigh on net profit

* Indian banks betting on economy recovery to boost credit (Adds details on financials)

MUMBAI, July 21 (Reuters) - HDFC Bank Ltd, India’s second-biggest private sector lender by assets, reported its slowest quarterly earnings growth in more than a decade on higher-than-expected provisions.

The Mumbai-based bank said net profit rose 21 percent to 22.33 billion rupees ($371 million) for its fiscal first quarter to end-June from 18.44 billion rupees a year earlier.

Analysts had on average forecast a net profit of 23.21 billion rupees, according to Thomson Reuters data.

Weaker economic expansion has squeezed credit growth for Indian lenders, slowing their earnings growth in recent quarters. The sector is betting on a revival in economic activity after a new government led by Prime Minister Narendra Modi took power in May.

The central bank’s recent move to allow long-term bonds raised by banks for infrastructure lending to be exempt from mandatory reserve requirements, in line with government policy, is also seen as a positive for the sector.

Indian banks are expected to report a net income growth of about 22.2 percent in the next 12 months, according to Thomson Reuters StarMine SmartEstimates, which would be the second-fastest earnings growth in the sector in Asia Pacific after South Korea.

HDFC Bank, which had outperformed rivals with consistently high profit growth of about 30 percent and stable asset quality, has seen profit growth weaken in the past quarters.

Provisions for the June quarter increased to 4.83 billion rupees from 2.86 billion rupees in the previous quarter.

Net non-performing loans as a percentage of net advances remained stable at 0.3 percent.

Net interest margin fell to 4.4 percent from 4.6 percent a year earlier.

Shares of HDFC Bank, valued at more than $33 billion, were up 0.7 percent by 0552 GMT. The stock is up almost 27 percent so far this year. The Indian banking sector index has gained more than 36 percent, the highest in Asia Pacific. ($1 = 60.1850 Indian Rupees) (Reporting by Devidutta Tripathy; Additional reporting by Shilpa Murthy in Bangalore; Editing by Prateek Chatterjee)

Our Standards:The Thomson Reuters Trust Principles.
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