Asia-focused bank Standard Chartered reported a record-beating 17 percent rise in first-half profits on Wednesday as a booming Hong Kong market and increased restraint on costs outweighed a slump in India.

The London-headquartered bank, which makes over 80 percent of its profits in Asia and other emerging markets, said it expects costs to rise in line with income this year, removing an imbalance that had weighed on the lender over the past few years of rapid growth.

Costs are coming down, which is always encouraging, said John Wadle, a Hong Kong-based analyst with Mirae Asset Management. On balance, it was a set of encouraging results and I expect second half revenue to continue growing strongly.

Profits in India fell 39 percent from a year ago and the outlook looks tough due to interest rate rises, inflation and rising competition, the bank said. India had overtaken Hong Kong as the bank's most profitable country last year, but a slowdown had been faster and deeper than the bank expected.

But most other markets grew and Standard Chartered reported a pretax profit of $3.64 billion, up from $3.12 billion a year earlier and beating analysts' expectations for $3.47 billion.

Its London-listed shares were up 1.5 percent at 15.73 pounds by 0720 GMT, outperforming a 1.3 percent fall by the European bank index.

We've got a different story to other banks. We're growing, we're hiring and we're delivering profit growth, Peter Sands, chief executive, told reporters on a conference call.

Sands said the bank would add about 1,000 jobs this year as it picks up the pace of hiring in the coming months after cutting 1,170 jobs in the first six months of the year as it attempted to keep costs under control. That was about 1 percent of its 84,000 staff.

The bank limited cost growth to 8 percent in the first half, below income growth of 11 percent, and said it expects cost and income growth to be flat for the full year.

Banks in Asia are facing stiff wage price inflation -- Standard Chartered said its staff costs rose 15 percent on the year and rival HSBC on Tuesday called the environment a war for talent.

Cost growth rising faster than income growth, known as negative jaws, has dogged Standard Chartered in the past year as it battles local and international rivals to keep and retain staff in fast-growing Asian markets.

Lenders have cut jobs to restrain costs and HSBC this week said it will axe 30,000 jobs by 2013 and Credit Suisse cutting 2,000 jobs.

Problems in western economies such as the euro zone debt crisis and U.S. debt ceiling were having a profound effect across the global economy, Sands said, warning it could add to asset inflation in Asia and create economic bumps.

Our markets are in much better shape than Europe and the U.S., but they're not immune to the ripple effects of some of the problems in the west. Growth in our markets is not going to be even or smooth or linear, and India is a good example, he said.

He declined to predict how long the slowdown in India would last, but said the country remained a key engine of future income and earnings growth.

Costs were too high in South Korea and its balance sheet there inefficient, the bank said.

Sands said he was hopeful a dispute with staff in Korea will soon be resolved, as a strike continues over proposed changes to the pay structure.

The bank's profits in Hong Kong jumped 55 percent to $790 million as income rose 29 percent, while earnings in China jumped 76 percent to $137 million and revenues from Indonesia rose by a fifth.

Return on equity (RoE), a key measure of profitability, was 13 percent in the first half, down from 14.7 percent a year ago as the cost of holding more capital hurt. The bank's core Tier 1 equity rose to 11.9 percent from 9 percent.

Sands said the bank is aiming for an RoE of near 15 percent, but said it is hard to be definitive on returns when so much is in flux around capital and liquidity regulation.

Its London-listed shares are down about 11 percent so far this year, valuing the bank at about $60 billion. It is trading at about 11 times earnings, roughly in line with crosstown rival HSBC.

(Editing by Greg Mahlich)

(Editing by Muralikumar Anantharaman)