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UPDATE 1-Santander Brasil profit tops view; loan picture better

Thursday, 24 Oct 2013 | 7:06 AM ET

SAO PAULO, Oct 24 (Reuters) - Banco Santander Brasil SA , the largest foreign lender in Brazil, beat third-quarter profit expectations following a steeper-than-expected decline in bad loan provisions, it said on Thursday.

The lender earned 1.407 billion reais ($642 million) in recurring profit, excluding one-time items, according to a securities filing. Analysts in a Thomson Reuters poll had expected 1.338 billion reais.

Recurring profit was down 0.2 percent from the prior quarter because of sliding fee income and a rise in expenses that outpaced interest income. Compared with the same quarter a year earlier, recurring profit fell 6.8 percent on steep margin erosion and declining interest income.

Bad loan provisions fell 16 percent to 2.698 billion reais in the quarter, the lowest in seven quarters and below analysts' estimates of 3.231 billion reais, after loan delinquencies fell.

Loans in arrears for 90 days or more, a benchmark indicator for defaults, fell to the equivalent of 4.5 percent of total outstanding loans in the third quarter from 5.2 percent in the prior three months.

Loan growth accelerated on a quarterly and annual basis. Compared with the second quarter, growth in Santander's loan book accelerated by 1.8 percent to 222.071 billion reais.

Analysts in the poll expected Santander Brasil's loan book to be about 223 billion reais. Management was due to discuss results at a presentation later Thursday.

Return on equity fell for a third consecutive quarter, reaching 10.6 percent in the July-to-September quarter. The number came in above the poll's 9.9 percent.

The São Paulo-based bank is a subsidiary of Spain's Banco Santander SA and is Brazil's largest foreign lender.