By Guillermo Parra-Bernal
SAO PAULO (Reuters) - Banco Santander Brasil SA (SA:SANB11) posted record first-quarter profit that beat analysts' estimates, reflecting a jump in interest income and the biggest drop in loan-loss provisions in almost five years.
In a Wednesday presentation, Santander Brasil said recurring net income, or profit excluding one-time items, totalled 2.28 billion reais (565.76 million pounds) last quarter, up 15 percent from the prior three months. The number beat a consensus estimate of 1.63 billion reais compiled by Thomson Reuters.
Interest income surged 13 percent from the prior quarter as disbursements rose 8 percent and loan repricing continued. Provisions dipped 16 percent as delinquencies fell below 3 percent of Santander Brasil's outstanding loan book for the first time in at least seven years.
The results show how Chief Executive Officer Sérgio Rial's strategy of cutting fundraising costs and improving customer experience have bore fruit. Since taking the helm of Brazil's No. 4 listed bank in September 2015, Rial set as a top priority cutting Santander Brasil's profitability gap with rivals Itaú Unibanco Holding SA (SA:ITUB4) and Banco Bradesco SA (SA:BBDC4).
Recurring return on equity, a widely followed gauge of bank profitability, hit a six-year high of 15.9 percent last quarter. The number beat a consensus estimate of 12.5 percent and topped a 2018 year-end target of 15.6 percent for the first time.
Management at the São Paulo-based lender plans to discuss Santander Brasil's results later in the day.
Rial and his team kept other targets unchanged, including a December 2018 goal of bringing default ratios in line with those of peers and increasing the base of longstanding clients to 4.6 million customers.
The latest improvement in the performance of Santander Brasil, for years a laggard among Brazil's largest banks, also propelled the results of parent Banco Santander SA (MC:SAN).
Earlier in the day, the Spanish banking behemoth reported a 14 percent jump in first-quarter profit. Results at Santander Brasil represented 26 percent of Santander's profit last quarter, sharply up from 21 percent in the quarter before.