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MUMBAI (Reuters) - Shares in HDFC Bank (HDBK.NS), India's second-biggest lender by assets, hit a record high on Friday thanks to higher than expected quarterly profit and a stable bad loans portfolio.
Net profit rose 18.3 percent from a year earlier to 39.9 billion rupees ($617.60 million) for its fiscal fourth-quarter to March 31, HDFC Bank said, slightly ahead of analysts' estimate of 39.56 billion rupees.
The Mumbai-based lender stands out in a sector that has been marked by a surge in soured assets and slower loan growth. A shock government ban on high-value banknotes in November also hit their usual business as they scrambled to exchange scrapped notes, and further weakened credit demand.
The sector also faces higher regulatory scrutiny with total stressed loans in the sector hitting almost $150 billion.
HDFC Bank, with its stronger retail business and relatively smaller exposure to project finance, has far lower bad loans among India's leading banks, and has been an investor favourite.
"Our focus will remain on growing both our wholesale and retail businesses, and that's something we remain committed to," Deputy Managing Director Paresh Sukthankar told a news conference after the results.
Shares in HDFC Bank, which is the most valuable in the sector and overall has India's third-highest market capitalisation of about $58 billion, closed 2.4 percent higher at 1496.60 rupees, having hit a lifetime high of 1499 rupees earlier in the session.
The bank's gross bad loans as a percentage of total loans, at 1.05 percent, were little changed from end-December, although higher than 0.94 percent a year earlier.
Provisions, including for loan losses, jumped, however.
While faster loan growth led to an increase in standard asset provisioning, loan-loss provisions also nearly doubled from a year earlier to 9.78 billion rupees in the March quarter.
The bank said it accounted for loan defaults that were not recognised as such in the December quarter after the central bank temporarily relaxed rules to help businesses weather the shock banknote ban.
HDFC Bank's "asset quality remains one of the best in the system", said Alpesh Mehta, a sector analyst at Mumbai brokerage Motilal Oswal Securities, adding the results "positively surprised".
HDFC Bank's loans grew 19.4 percent in the year to end-March, far outpacing the sector's loan growth of about 5 percent.
That helped a 21.5 percent rise in fourth-quarter net interest income from a year ago, while net interest margin for the quarter was 4.3 percent. Non-interest income including fees and commissions grew 20.3 percent in the March quarter.
($1 = 64.6050 Indian rupees)
Reporting by Devidutta Tripathy; Editing by Muralikumar Anantharaman/Keith Weir