Mumbai: India’s second largest private sector bank HDFC Bank Ltd announced a 30.2% rise in net profit to Rs687.50 crore on Wednesday for the quarter ended 30 September, riding on higher fee income as well as interest income on an expanded loan book.

Net profit exceeded expectations, with 10 analysts polled by Reuters having estimated it at Rs660 crore. Axis Bank Ltd, another Indian private bank that competes with HDFC Bank, had on Monday announced a 31.95% jump in net profit.

Asset growth: An HDFC Bank branch.?The bank’s bad loans have fallen. Hemant Mishra / Mint

The bank’s net interest income grew 4.82% to Rs1,956 crore.

“In the past two quarters, the bank has seen profits being driven by the rise in bonds and fee income," said Paresh Sukthankar, executive director at HDFC Bank. “Asset growth was muted in the December quarter. However, we are seeing loan growth picking up in second quarter.’’

“The banking system as a whole should grow at the 17-18% level. We normally target to grow at a slightly faster rate in the system," Sukthankar told reporters in a conference call.

In the first half of the fiscal year, the bank’s advances have grown 14.8% from an average of more than 30% over the past four years as firms shelved expansion plans. This is, however, much higher than the 3.5% growth that the Indian banking industry has posted in the first half.

The bank’s net interest margin, or the difference between the cost of funds and earnings on deployment of funds, has marginally risen to 4.2% in the September quarter, from 4.1% in the June quarter.

Similarly, there is an improvement in the quality of assets, with net non-performing assets (NPAs) as a percentage of loan book down to 0.5% in September, from 0.6% in June.

HDFC Bank’s total restructured assets, including applications received for loan restructuring but not approved as yet, stood at 0.56% of advances.

“Some corporate accounts that have been restructured could slip into NPAs, but this is not a major threat to the bank as the quantum of loans restructured are lesser as compared to some of its peers,’’ said a banking analyst from a Mumbai-based brokerage house, who does not want to be quoted as he is not allowed to speak to the media.

“We expect credit growth to pick up in the coming quarters and the stock’s higher valuations must be seen in the context of HDFC Bank’s performance across most key parameters, which is better in comparison to that of its peers," said First Global Securities Ltd, in its research report released on Wednesday after the bank announced its earnings.

“We expect HDFC Bank, Axis Bank, Yes Bank Ltd and IndusInd Bank Ltd to be the leaders among private sector banks, with Punjab National Bank, Bank of Baroda, Union Bank of India and IDBI Bank Ltd among public sector banks. ICICI Bank Ltd, State Bank of India and Canara Bank could turn out laggards,’’ said a recent research report of Anand Rathi Financial Services Ltd, a Mumbai-based brokerage.

On the Bombay Stock Exchange, HDFC Bank’s shares rose marginally by 0.13% to close at Rs1,702.55 apiece on Wednesday even as the exchange’s bellwether index, the Sensex, rose 1.2%. The shares have risen 70.7% so far this year, lagging a 78.6% rise in the Sensex and an 86.9% rise in the sectoral index.

Narayanan Somasundaram of Reuters contributed to this story.