<div>HDFC Bank, India's second-biggest private sector lender by assets, reported quarterly net profit grew by a fifth and asset quality was stable as loans grew faster than expected.</div><div> </div><div>Indian banks are battling slower credit growth and a surge in bad loans as companies and consumers have been squeezed by an economic downturn. While corporate loans have yet to revive, lending to individuals is growing at a faster pace.</div><div> </div><div>HDFC Bank, with its stronger retail business and relatively smaller exposure to project finance has far lower bad loans than its bigger rivals and is seen as a better bet for investors.</div><div> </div><div>The Mumbai-based lender said net profit rose to Rs 2,869 crore ($440 million) for its fiscal second quarter to September 30, from Rs 2,381 crore a year earlier. Analysts on average had expected a net profit of Rs 2,881 crore, according to data compiled by Thomson Reuters.</div><div> </div><div>Gross non-performing loans as a percentage of total loans fell to 0.91 per cent from 0.95 per cent in the June quarter.</div><div> </div><div>Cuts in minimum lending rates to pass on policy rate reductions by the central bank weighed on net interest margin that fell to 4.2 per cent in the September quarter from 4.3 per cent in the previous three months.</div><div> </div><div>HDFC Bank will likely recoup some of the lost margins in the coming quarters, said Vaibhav Agrawal, a sector analyst at Mumbai's Angel Broking. Agrawal, who considers the lender among his preferred stock picks, described its asset quality as "rock solid".</div><div> </div><div>Net interest income for the quarter grew 21.2 per cent to Rs 6,681 crore as loans grew about 28 per cent - much faster than the industry. Non-interest revenue including fees and commissions grew a faster 24.7 per cent.</div><div> </div><div>Shares in HDFC Bank, India's most-valuable lender with a market capitalisation of more than $42 billion, were down 0.2 per cent by 0743 GMT. </div><div> </div><div>The stock has gained more than 6 per cent since the start of September and is up nearly 15 per cent this year during which it has outperformed the NSE bank index and the broader Nifty.<br><br>(Reuters)</div>
