AMSTERDAM, Feb 2 (Reuters) - ING Groep NV, the Netherlands' largest bank, on Thursday reported a better-than-expected fourth quarter net profit of 1.09 billion euros ($1.20 billion) on stable margins as it controlled costs and loan loss provisions fell.

CEO Steven van Rijswijk said the bank's margins should profit from rising interest rates in 2023, though customers' appetite to borrow and the bank's appetite to lend are not strong given inflation and economic uncertainty.

"With the current circumstances we want to focus on existing clients, so don't take on too much risk," he said. "Once the economic cycle improves again, we expect a bit of flatlining in terms of GDP growth in the eurozone for the next 12 months -- they will continue to expand."

Core lending growth was a modest 3.1 billion euros, down from 13.4 billion euros in the fourth quarter of 2021. ING estimates housing prices will fall by 10% from the 2022 peak and demand for mortgages, which make up the lion's share of ING's loanbook, is falling.

Interest margins were 1.36% versus 1.37% a year ago, but Van Rijswijk said they should improve in 2023. "That's what we anticipate now," he said.

Analysts had forecast net profit at 1.03 billion euros according to data from Refinitiv, up from 945 million euros in the fourth quarter of 2021.

Loan loss provisions of 269 million were down 22% from 346 million euros a year ago.

The results are "ahead of expectations," Jefferies analysts said in a note, thanks to fewer bad loans, but the earnings are not likely to be seen as a "significant catalyst".

Shares closed at 13.39 euros on Wednesday, up 17.6% in the year to date.

Total income rose 5% to 4.87 billion euros thanks to higher rates, offset by lower fees and commissions. ($1 = 0.9076 euros) (Reporting by Toby Sterling; Editing by Jacqueline Wong, Jamie Freed and Raissa Kasolowsky)