HDFC Bank eyes pickup in corporate credit

By Sumeet Chatterjee

MUMBAI (Reuters) - HDFC Bank sees borrowings by corporates for expansion purposes picking up from second quarter of next year, a senior executive said, a move that will boost the outlook for banks hit by tepid loan demand in Asia's third-largest economy.

HDFC Bank, India's second-biggest private sector lender by assets, on Tuesday posted a 20 percent rise in quarterly net profit, missing street estimates, due to higher tax expenses and provisioning for loan losses.

Loan growth at Indian banks slowed to 9.7 percent last month compared to about 17 percent in the same period last year, as companies put off big investments in an economy growing at its slowest rate since the 1980s.

"To be fair greenfield capex (capital expenditure) decisions take anywhere between I would say 18 to 24 months," HDFC Bank's Deputy Managing Director Paresh Sukthankar told reporters, after the banks posted a 20 percent rise in the July-Sept profit.

"So, even if some of these projects has been brought back on drawing boards in the last couple of months I think it would be realistic to expect capex related loan demand not earlier than first or second quarter of the next financial year."

Nomura said this month a stable policy environment and the new government's focus on resolving policy bottlenecks was likely to result in a gradual pickup in investments, seen as a key trigger for reviving economic growth.

HDFC Bank's net profit rose to 23.81 billion rupees ($388.51 million) in its fiscal second quarter to Sept. 30, from 19.82 billion rupees a year earlier, the Mumbai-headquartered bank said in a statement.

Analysts had on average had expected a net profit of 24.25 billion rupees, according to data compiled by Thomson Reuters.

For HDFC Bank, net non-performing assets as a percentage of net advances were 0.28 percent as on end-September, unchanged from a year ago period.

General and loan loss provisions in the September quarter increased to 4.6 billion rupees from 3.9 billion rupees a year ago. Tax expense rose to 12.23 billion rupees from 11.28 billion rupees in the same period last year.

HDFC Bank's credit book posted a rise of 21.8 percent to 3.3 trillion rupees at the end of September. The bank said the loan growth was helped by working capital requirements of companies and a surge in mortgage and car loans.

HDFC Bank has seen profit growth slowing in recent quarters in part due to the domestic economic slowdown, after reporting a consistent 30 percent profit growth for a decade, better than its rivals State Bank of India and ICICI Bank.

Shares in HDFC Bank, India's most-valuable lender, are up 35 percent this year, outperforming the main market index, but underperforming the bank sector index that has risen 44 percent.

The HDFC Bank stock ended up 0.2 percent on Tuesday.

($1 = 61.2850 rupee)

(Reporting by Sumeet Chatterjee, editing by Louise Heavens)