HDFC Bank says "comfortable" with higher bad loans in Q1

By Devidutta Tripathy

MUMBAI (Reuters) - HDFC Bank Ltd said it was "comfortable" with the rise in bad loans in its fiscal first quarter as the nation's second-biggest private sector lender by assets reported net profit rose by a fifth in line with analysts' estimates.

Net profit was 32.39 billion rupees ($482 million) for the three months to June 30, the Mumbai-based bank said in a statement on Thursday. Analysts on average had expected a net profit of 32.52 billion rupees, according to data compiled by Thomson Reuters.

Gross bad loans as a percentage of total loans rose to 1.04 percent as of June 30 from 0.94 percent as of end-March, which the bank's deputy managing director Paresh Sukthankar said was driven by small-and-medium corporate borrowers and individuals.

"We are still very comfortable," Sukthankar told a news conference, adding "no serious large chunky" corporate account had contributed to the rise in the bad loans.

HDFC Bank - India's most valuable bank with a market capitalisation of about $46 billion - is an investor favourite with its relatively low exposure to long-term infrastructure financing and the lowest bad-loan ratio among top lenders.

Its focus on lending to individuals has helped it outpace the broader market where stretched corporate balance sheets and stalled projects mean there has been little demand for new loans.

As of end-June, the bank's loans grew 23.2 percent from a year earlier, more than double the pace of industry's credit growth. Net interest margin for the quarter stood at 4.4 percent, and Sukthankar guided for the margins to remain in the 4.0-4.4 percent range.

Kotak Mahindra Bank , India's fourth-biggest private sector lender by assets which also reported on Thursday, said first-quarter net profit jumped to 7.42 billion rupees, meeting estimates.

The bank, which bought smaller rival ING Vysya last year in India's biggest ever bank acquisition, saw its gross bad loan ratio widening to 2.5 percent in June from 2.36 percent in March.

Shares in HDFC Bank were trading 0.3 percent down at 0759 GMT in a Mumbai market <.NSEI> that was 0.4 percent lower. Kotak Mahindra fell 1.6 percent.

($1 = 67.2100 Indian rupees)

(Reporting by Devidutta Tripathy; Editing by Muralikumar Anantharaman)