HDFC Bank net profit misses estimates on higher provisions

MUMBAI (Reuters) - HDFC Bank Ltd posted a 18.2 percent rise in first-quarter net profit but missed analysts' estimates as the lender chose to include all mark-to-market losses in the first quarter, leading to higher provisions.

Net profit rose to 46.01 billion rupees ($669.43 million) for the quarter ended June 30, from 38.94 billion rupees a year ago, India's second-biggest lender by assets said in a statement.

Analysts had on average expected a net profit of 47.66 billion rupees for the bank that has the highest market capitalisation in the sector at nearly $85 billion, according to Thomson Reuters data.

Gross bad loans as a percentage of total loans stood at 1.33 percent at end-June, versus 1.3 percent at end-March.

With its strong retail presence and relatively smaller exposure to sectors such as infrastructure that have led to record levels of bad loans in India's banking sector, HDFC Bank is a favourite among investors.

Its loans at end-June grew 22 percent from a year earlier.

Private sector banks have expanded loans at a faster pace and have snatched market share from dominant state-backed lenders that account for the bulk of bad loans in India.

Provisions, or the amount set aside by the bank to cover a future liability, for the quarter rose to 16.29 billion rupees from 15.59 billion rupees, last year, with the lender not opting for a central bank dispensation of spreading bond losses over four quarters.

This led to a mark-to-market loss of 3.91 billion rupees in the quarter, the bank said in a statement.

Net interest income rose 15.4 percent from a year earlier, while net interest margin came in at 4.2 percent.

HDFC Bank's smaller rival Kotak Mahindra Bank Ltd missed profit estimates earlier this week as provisions surged.

($1 = 68.7300 Indian rupees)

(Reporting by Promit Mukherjee in Mumbai and Chris Thomas in Bengaluru; Editing by Himani Sarkar and Ros Russell)