Strong loan book powers Banco do Brasil to quarterly profit surge

The Banco do Brasil logo is seen outside a bank office in Sao Paulo

By Peter Frontini

SAO PAULO (Reuters) -Brazilian state-controlled lender Banco do Brasil SA on Monday reported a 29% leap in first-quarter net profit compared with a year ago, boosted by double-digit growth in the value of its loan book.

Banco do Brasil's adjusted net income reached 8.55 billion reais ($1.71 billion) during the first three months of this year, while analysts polled by Refinitiv expected 8.69 billion reais.

The lender said the results were helped by the performance of its credit portfolio, "which reflects an adequate mix of risk against return."

Its loan book reached 1.03 trillion reais, growing 16.8% year-on-year and 2.7% from the previous quarter, boosted by an expansion in agribusiness-related lending.

"This performance is reinforced by growth in service revenues, while administrative expenses remained under control," the bank added in a statement.

Analysts at Citi welcomed the results, describing the lender's performance during the January-to-March period as having "started the year with a solid pace." The analysts pointed to improving margins with controlled asset quality.

During the quarter, Banco do Brasil reported 5.85 billion reais set aside for bad loans, more than doubling the figure reported a year ago, but down 10.4% from the previous three months.

The bank again managed to keep delinquency under control during the first three months of the year, with its 90-day loan default ratio at 2.62%, slightly up from the 2.51% reported the previous quarter.

"Asset quality trends remain resilient, with non-performing loans formation under control and below peers," Citi analysts wrote.

Fee income grew 8.1% to 8.13 billion reais, while its return on equity, which measures profitability, landed at about 21%, or nearly 3 percentage points above the previous year.

The company's interest income, a measure of earnings on loans minus deposit cost, rose 38% from a year earlier, to 21.16 billion reais.

($1 = 5.0033 reais)

(Reporting by Peter Frontini in Sao Paulo; Editing by Anthony Esposito and Matthew Lewis)