Mumbai: ICICI Bank reported a better-than-expected 30 per cent rise in quarterly profit Friday on strong interest income and demand for retail loans, as India’s largest private lender managed to improve loan quality despite rising corporate defaults.

ICICI said Friday that net profit for the July to September quarter was Rs19.6 billion (Dh1.3 billion).

Analysts polled by FactSet forecast quarterly profit to jump 25 per cent from a year earlier to Rs18.7 billion.

The ratio of net non-performing assets to the total loan book was 0.66 per cent on September 30, down from 0.8 per cent the year before. Loans rose 18 per cent to Rs2.8 trillion.

ICICI chief executive Chanda Kochhar said those numbers reflected the bank’s classification of a Rs5 billion loan to an Indian media company as non-performing during the quarter.

She declined to name the company. Kochhar said an additional Rs5 billion of loans are in corporate debt restructuring and could turn bad.

India’s banks have been struggling with rising bad debt as companies face slowing economic growth, but private sector banks have fared far better than state-owned banks, which dominate the sector.

“In general private sector banks have a larger proportion of retail assets. Retail assets have been pretty stable, the performance has been good,” Kochhar said. She said that for corporate loans, not all companies and projects in a given sector face the same fate. “A lot depends on which are the projects various banks have financed,” she said.

ICICI Bank’s loan book is 33 per cent retail, 25 per cent international and 28 per cent corporate, she said.

Kochhar said she still expects ICICI’s loan book to grow by 20 per cent in the fiscal year ending March, as strong consumption takes the sting out of an investment slowdown that has helped drag India’s economic growth to its lowest levels since the Great Recession.

“Today even if there is a little slowdown on investment activity, consumption continues to grow, therefore people’s jobs are intact and people’s salaries continue to increase,” she said. “People are still buying homes. People are still buying cars. People are still buying two-wheelers. That continues to provide a source of growth for retail credit.”

Angel Broking analyst Vaibhav Agrawal said private sector banks have made more prudent lending decisions than their public sector peers, but even they are not immune from deteriorating credit quality going forward.

“Private sector banks went quite cautious after the Lehman crisis. They really clamped down on credit growth and went for only quality assets,” he said. “During this period public sector banks continued to lend aggressively, including in infrastructure. In the economic environment deteriorating, a lot of those loans are turning bad.”

But he said things won’t stay sunny for private lenders like ICICI. He forecasts earnings growth to slow to 15 to 18 per cent for India’s private banks and said private banks will likely have to set aside 25 per cent more money to cover bad loans for the year ending March than they did last fiscal year.

“We can’t expect these numbers to sustain forever,” he said.