Jan. 20, Mumbai (Reuters) - Strong loan growth helped India's ICICI Bank (ICBK.NS), opens new tab, post a better-than-expected third-quarter profit on Saturday, even though its net interest margin (NIM) declined for the fourth consecutive quarter.

Based on LSEG data, the second-biggest private bank in the country recorded a record high standalone net profit for the quarter ended December 31, of 102.72 billion rupees ($1.24 billion), against analysts' projections of 100.25 billion rupees.

ICICI's net interest margin (NIM), which is the percentage difference between interest paid on deposits and interest earned on loans, decreased to 4.43% from 4.65% the previous year. In the latter quarter, it was at 4.53%.

Due to increased demand, Indian lenders have been reporting double-digit loan growth over the past few months; but, as deposit costs have increased, their profits have been squeezed.

The largest private lender in India, HDFC Bank, revealed low margins for the second straight quarter earlier this week.

Deposits increased by 18.7% at ICICI Bank, while total loans increased by 18.8% year over year, mostly driven by retail loans.

The difference between interest paid and earned, or net interest income, increased by 13.4% to 186.78 billion rupees.

The gross non-performing assets ratio decreased from 2.48% at the end of September to 2.30% at the end of December, indicating an improvement in asset quality.

The bank has contributed 6.27 billion rupees to its exposure to alternative investment funds (AIFs), adhering to the central bank's stricter guidelines for such exposures.

According to executive director Sandeep Batra, on a media conference call, the exposure should provide returns for the bank over time, and the lender has no immediate plans to wind it down.

Separately, the Reserve Bank of India's higher risk weights on unsecured loans have cost the bank about 70 basis points on its capital ratio, Batra continued.

Ahead of the news, ICICI Bank's shares finished 1% higher.