(Updates with details, context)
SAO PAULO, Oct 30 (Reuters) - Brazil's largest bank, Itau Unibanco Holding SA, posted a 6.25 billion reais ($1.9 billion) profit on the third quarter as it managed to improve loan book quality, offsetting the reduction of net interest income.
Net profit rose 1.4 percent from the prior three months when adjusted for one-off items, and was slightly above a consensus estimate of 6.23 billion reais compiled by Thomson Reuters.
Itaú reduced its loan book by 2.4 percent from three months earlier, to 539 billion reais. Net interest income fell 2.2 percent, reflecting lower interest rates and new restrictive regulations on credit card lending.
Even so, Itaú posted a higher profit with a 4 percent growth in fee income, mainly due to rising volumes managed by the asset management division and credit card fees.
Provisions for loan losses fell 13 percent to 4.28 billion reais, well below a consensus estimate of 4.83 billion reais.
Recurring return on equity (ROE), a gauge of profitability, totaled 21.6 percent for the quarter, above a consensus estimate of 20.86 percent. ($1 = 3.2888 reais) (Reporting by Tatiana Bautzer and Aluisio Alves; Additional reporting by Bruno Federowski; Editing by Sandra Maler)