HDFC Bank posts record quarterly profit; bad loans largely stable

(Reuters) - HDFC Bank Ltd, India's second-biggest lender by assets, on Tuesday reported a record quarterly profit, buoyed by an increase in interest and fee incomes.

The Mumbai-based bank, which was recently added to the central bank's list of lenders it considers "too big to fail", raked in a net profit of 41.51 billion rupees ($634 million) in the three months to Sept. 30, up 20 percent from a year ago.

That was mostly in line with an average estimate of 41.61 billion rupees from 24 analysts, Thomson Reuters data shows.

Gross bad loans as a percentage of total loans stood at 1.26 percent at end-September, versus 1.24 percent in the previous quarter and 1.02 percent a year ago. (http://bit.ly/2gzG5qk)

With its focus on retail clients and relatively smaller exposure to segments such as infrastructure financing, HDFC Bank has the lowest bad-loan ratio among top Indian lenders. That has made it an investor favourite in a sector that has been marred by a record $146 billion of soured loans.

HDFC Bank's net interest income rose 22 percent in the quarter on a 22.3 percent rise in loans.

Non-interest revenue rose 24.3 percent, while core net interest margin steadied at 4.3 percent.

The bank has a market capitalisation of more than $87 billion, making it the most valuable in the sector and second among all Indian companies.

Shares of the bank were little changed after the results in a Mumbai market that was up 0.3 percent.

It has rallied about 55 percent this year, outperforming the sector index that has risen 33 percent and the main market index that has added 24 percent.

($1 = 64.9625 Indian rupees)

(Reporting by Samantha Kareen Nair in Bengaluru and Devidutta Tripathy in Mumbai; Editing by Himani Sarkar)