UPDATE 1-Banco do Brasil to boost lending; profit matches estimate
SAO PAULO, Aug 13 (Reuters) - State-controlled Banco do Brasil SA said on Tuesday it will boost lending at a faster pace than rivals this year, betting that a mending economy and fewer defaults will stoke demand for credit.
The decision by Banco do Brasil, the country's largest bank, to revise its forecast higher came as private-sector peers trimmed their own outlooks due to slow demand for credit and flagging activity.
Disbursements may rise between 17 percent and 21 percent this year, the bank said, up from 16 percent to 20 percent previously, and much higher than the central bank's 15 percent forecast for the banking system as a whole.
Rapid credit expansion, however, is failing to translate into higher interest income as reduced borrowing costs are outpacing disbursements.
The Brasilia-based lender posted second-quarter earnings in line with estimates, with strong fee income and trading-related revenue offsetting the impact of higher operating expenses and a jump in bad loan provisions.
Recurring profit, a measure that excludes one-time items, totaled 2.634 billion reais ($1.15 billion) in the quarter, according to a securities filing. A Thomson Reuters poll of seven analysts predicted recurring profit of 2.630 billion reais for the period.
Compared with the first quarter, recurring profit slipped 1.9 percent and fell a further 11.8 percent from a year earlier.
Banco do Brasil and its biggest shareholder, the federal government, are betting on a recovery across the board in an economy that is underperforming for a third year. President Dilma Rousseff has used the bank as a tool to kick-start the economy in a strategy that has been questioned as too risky by financial industry analysts.
The bank's loan book, the largest in Brazil's financial system, totaled 575.51 billion reais at the end of June, an increase of 25.2 percent from the prior 12 months. On a quarterly basis, lending growth at Banco do Brasil outpaced that of rivals with an expansion of 7.2 percent.