BENGALURU, April 16 (Reuters) - HDB Financial Services rallied as much as 11% on Thursday after the Indian non-bank lender reported a sharp 41.4% increase in quarterly profit on margin expansion and healthier asset quality.
The stock touched its highest level in nearly two months, and was last up 9% at 702.25 rupees, putting it on track for its best session on record.
HDB Financial, a unit of HDFC Bank, saw its net profit rise to 7.51 billion rupees ($80.40 million) for the quarter ended March 31, from 5.31 billion rupees a year earlier.
With pressure on asset quality beginning to ease, analysts at ICICI Securities said the lender's credit growth could pick up in the coming quarters as stress in unsecured loans starts to recede.
"Subsiding segmental stress triggered a sharp recovery," the analysts at ICICI Securities said.
HDB Financial Services said its assets under management rose 10.7% year-on-year to 1.19 trillion rupees, while net interest income - the difference between interest earned and paid - increased 21.6% to 23.99 billion rupees.
Jefferies analysts noted that growth in assets under management was likely to stabilize and regain momentum, while a healthy recovery in earnings and returns over the next two years should support valuation multiples.
HDB Financial's consumer finance book grew about 16%, outpacing enterprise lending, which rose nearly 8%, and asset finance, which increased close to 11% over the same period, according to a Reuters calculation.
Asian Markets Securities said the lender's used commercial vehicle portfolio was expected to grow faster, aided by a lower base.
The results mark a shift in momentum for HDB Financial, which has lagged peers ever since its July listing, after grappling with elevated bad loans in the first half of the fiscal year. The stock is down about 10% year-to-date.
(Reporting by Pranav Kashyap in Bengaluru)
By Pranav Kashyap
