Thu Jan 31, 2013 5:21am EST
* Recurring profit at 1.598 bln reais beats poll estimates
* Provisions slump 15.2 pct even after defaults increased
By Guillermo Parra-Bernal
SAO PAULO, Jan 31 (Reuters) - Banco Santander Brasil SA posted on Thursday fourth-quarter profit that beat analysts' expectations as Brazil's largest foreign lender aggressively cut bad-loan provisions to offset sliding revenue and a spike in delinquencies.
The São Paulo-based bank, also the local subsidiary of Spain's Banco Santander SA, reported recurring profit, or net income excluding one-time items, of 1.598 billion reais ($803 million), up 6.5 percent from the prior three months, according to a statement. A Thomson Reuters poll of six analysts predicted recurring profit of 1.29 billion reais.
Compared with the same period of 2011, recurring profit dropped 2.7 percent from 1.643 billion reais. Investors in Brazil follow quarter-on-quarter results more closely than annual comparisons.
The results confirmed the impact that record-low interest rates are having on Brazilian banks' revenue stream and the still-fragile situation of delinquencies as the economy enters a third year of sub-par economic expansion.
On Monday, Banco Bradesco SA said that a small decline in provisions, stubborn loan delinquencies and a continuing squeeze on margins led Brazil's No. 2 private sector bank to miss fourth-quarter profit estimates.
Management at Santander Brasil led by Chief Executive Marcial Portela Álvarez slashed provisions on bad loans by 4.1 percent to 3.096 billion reais from the third quarter even as delinquencies spiked. The bank has cut provisions, or the amount of earnings set aside to cover for credit-related losses, by more than 700 million reais in the past two quarters.
Loans in arrears for 90 days or more, the benchmark for delinquencies, rose to the equivalent of 5.5 percent of its loan book, compared with 5.1 percent in the prior three months. Analysts in the poll expected the so-called default ratio at 5.2 percent.
Net interest income, or proceeds from lending transactions excluding funding costs, fell to 4.717 billion reais from 4.883 billion reais in the third quarter. Fee income, or revenue stemming from financial services such as investment-banking, rose 3 percent on a sequential basis, well below expectations in the poll.
Annualized return on average equity at Santander Brasil rose to 12.2 percent from 11.7 percent in the third quarter. ROE, as the widely used indicator for profitability in the banking industry is known, was 13.5 percent a year earlier.
Analysts in the poll expected ROE at 9.9 percent.
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