Indian private sector banks reap Q2 profit boost; bad loans ease

MUMBAI (Reuters) - Indian private sector lenders HDFC Bank Ltd and Kotak Mahindra Bank Ltd reported second-quarter net profit rose on higher interest and fee income, while their bad-loan ratios were lower than the previous quarter.

HDFC Bank, the nation's second-biggest private sector lender, said on Tuesday net profit for July-September climbed 20 percent from a year ago to 34.55 billion rupees ($517 million), just beating analysts' estimate of 34.15 billion rupees.

India's banking sector has been burdened with about $138 billion of stressed loans, but the bulk of the bad assets are with nearly two dozen state-run banks.

HDFC's gross bad loans were 1.02 percent of total loans outstanding as of Sept. 30, down from 1.04 percent at the end of June. The bank, an investor favourite due to its strong retail banking business and relatively small exposure to project finance, has the lowest bad-loan ratio among the bigger lenders.

Kotak Mahindra, the fourth-biggest private sector lender by assets, said second-quarter net profit rose 43 percent from a year ago to 8.13 billion rupees. Its gross bad-loan ratio narrowed to 2.49 percent at end-September, from 2.5 percent at end-June.

Federal Bank, a smaller private sector lender, reported a better-than-expected 25 percent rise in second-quarter net profit to 2.01 billion rupees, sending its shares more than 4 percent higher. Its gross bad-loan ratio was 2.78 percent at end-September, lower than 2.92 percent at end-June.

Shares in HDFC Bank were trading 0.6 percent down after the results, while Kotak Mahindra was up 0.1 percent. The main Mumbai market index was down 0.26 percent as of 0801 GMT.

Third-biggest private sector lender Axis Bank reports second-quarter results later in the day.

($1 = 66.8800 rupees)

(Reporting by Devidutta Tripathy; Editing by Kenneth Maxwell)