(Rewrites throughout with CEO comments, share performance)
By Guillermo Parra-Bernal
SAO PAULO, Feb 3 (Reuters) - Itaú Unibanco Holding SA , Brazil's largest bank by market value, plans to increase interest income at a faster pace than rivals and keep loan-loss provisions stable this year, evidence Itaú could boost profit even if the economy contracts.
Interest income may rise between 10 percent and 14 percent this year, faster than projected loan book growth, Itaú executives said on Tuesday - faster than rival Banco Bradesco SA's 6 percent-to-10 percent forecast for the indicator.
Guidance for provisions was left unchanged at between 13 billion reais and 15 billion reais ($4.78 billion and $5.5 billion) from last year. Taking into account the top of that range, provision growth would more than offset loan book growth expectations, a sign of prudence as activity falters, executives said.
The goal for provisions is realistic, even if activity slumped further and the impact of a corruption probe into state-controlled oil producer Petrobras and some contractors fanned defaults, Itaú Chief Executive Officer Roberto Setubal said at an event to discuss fourth-quarter earnings.
Itaú has no plans to book one-time provisions, as it did in the fourth quarter, Setubal said.
"We are prepared for a very challenging scenario," Setubal said.
Rising interest income and lower provisions helped Itaú post record profit in the fourth quarter. Recurring net income, or profit before one-time items, totaled 5.660 billion reais ($2.1 billion), ahead of the 5.367 billion reais forecast in a Reuters poll.
Setubal promised to continue his strategy to grow in low-risk credit segments and implement stricter risk assessment standards to protect profit. His tack has helped Itaú's results top market estimates in seven of the past eight quarters.
Itaú shares jumped as much as 3.5 percent to 34.22 reais.
Worries about the exposure of Itaú and other large lenders to Petrobras and a dozen contractors in the oil equipment and construction sectors are hampering confidence in the sector. Petrobras is Brazil's biggest corporate borrower and relies on all major lenders to obtain funding.
"Petrobras is a good credit," Setubal said, adding that "so far, there's not a sign that this crisis could grow uncontrollably bad."
Itaú cut provisions to 4.614 billion reais after the 90-day default ratio slipped to an all-time low of 3.1 percent of outstanding loans in the fourth quarter. The bank did not report rising delinquencies among large borrowers.
$1 = 2.727 Brazilian reais Editing by Chizu Nomiyama and Grant McCool