* Net profit 39.9 bln rupees vs 39.56 bln rupees estimate
* Bad loan ratio sequentially stable at 1.05 pct, provisions rise
* Shares rise more than 1.5 pct after results (Adds details of results, share price)
MUMBAI, April 21 (Reuters) - HDFC Bank HDBK.NS , India's second-biggest lender by assets, reported a slightly better-than-expected 18.3 percent rise in fourth-quarter net profit on higher interest and fee income, while keeping its bad-loan ratio stable quarter-on-quarter.
Net profit was 39.9 billion rupees ($617.60 million) for the three months to March 31, compared with 33.74 billion rupees reported a year ago, HDFC Bank, the nation's most valuable lender, said on Friday.
Analysts, on average, had expected a net profit of 39.56 billion rupees, according to data compiled by Thomson Reuters.
Gross bad loans as a percentage of total loans, at 1.05 percent, were little changed from end-December, although higher than 0.94 percent a year earlier.
Provisions, including for loan losses, jumped, however.
Loan-loss provisions were 9.78 billion rupees in the March quarter, nearly doubling from 4.9 billion rupees a year earlier, as the bank accounted for loan defaults that were not recognised as such in the December quarter after the central bank temporarily relaxed rules to help businesses weather a shock banknote ban. are also recovering from the government ban of high-value banknotes in November that hit their usual business as they scrambled to exchange older notes, and also weakened credit demand.
The government and the sector regulator are also tightening rules around recognition and resolution of bad loans, with total stressed loans in the sector hitting almost $150 billion as of December.
HDFC Bank, with its stronger retail business and relatively smaller exposure to project finance, has far lower bad loans than its bigger rivals and has been an investor favourite.
Its advances grew 19.4 percent in the year to end-March, the lender said, helping a 21.5 percent rise in fourth-quarter net interest income from a year ago. Net interest margin for the quarter was 4.3 percent.
Non-interest income including fees and commissions grew 20.3 percent in the March quarter, the Mumbai-headquartered lender said.
Shares in HDFC Bank, which has a market capitalisation of about $58 billion, were trading 1.6 percent higher by 0815 GMT in a Mumbai market .NSEI that was down 0.2 percent. ($1 = 64.6050 Indian rupees)
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