UPDATE 2-PrivateBancorp posts surprise Q2 profit, stock jumps

* Q2 profit $0.06/shr vs loss of $0.49/shr last yr

* Q2 net interest income up 74 pct at $74.1 mln

* Q2 provision for bad loans down 7 pct at $21.5 mln

* Stock rises as much as 18 pct

By Anurag Kotoky

BANGALORE, July 27 (Reuters) - PrivateBancorp Inc (PVTB.O), posted a surprise second-quarter profit, helped by a jump in net interest income, signalling that the lender's loss-making streak could finally be over.

Shares of the company, which turned profitable in its fiscal first quarter after posting losses for five straight quarters, rose as much as 18 percent Monday on Nasdaq.

William Blair & Co analyst David Long said he expects PrivateBancorp to grow earnings per share by at least 20 percent per year over the next five years, exceeding the growth prospects of its closest peers.

Robust earnings growth over the next few years is likely to produce attractive relative stock-price performance for the company's stock, Long said. He maintained his "outperform" rating on the company.

Sandler O'Neill analyst Daniel Arnold attributed the company's earnings outperformance to its growth in net interest margin, with core deposit growth outpacing core loan growth.

For the second quarter, net interest margin improved 31 basis points to 2.99 percent, PrivateBancorp said. Net interest margin is the difference between what the bank earns on loans and pays on deposits, and is a measure of profitability.

"Additionally, while credit deteriorated modestly, it appeared to hold up fairly well, although it is unclear how much credit costs are still benefiting from the extremely high costs taken in the kitchen sink fourth quarter," Arnold said.

"We would continue to be sellers of PrivateBancorp on any strength resulting from the headline earnings beat, given the core loss and our continuing concerns regarding credit at the company," he added.

The analyst estimated that the company's core loss for the second quarter was 4 cents a share, excluding special items.

Q2 SURPRISES ON HIGHER NET INTEREST INCOME

For the second quarter, the company earned $2.5 million, or 6 cents a share, compared with a loss of $13.7 million, or 49 cents a share, a year earlier.

Analysts, on average, were looking for a loss of 4 cents a share, excluding items, according to Reuters Estimates.

Provision for loan losses fell 7 percent to $21.5 million, while net interest income rose about 74 percent to $74.1 million.

The company also posted a tangible common equity ratio of 6.81 percent for the period. Tangible common equity, a measure of capital strength closely watched by investors these days, indicates how much ownership equity owners of common stock would get in the event of a company's liquidation.

The company provides personalized financial services primarily to entrepreneurial and middle-market companies, affluent individuals, wealthy families, professionals, entrepreneurs and real estate investors.

Shares of the Chicago, Illinois-based company were up $3.46 at $24.02 Monday on Nasdaq. The shares, which earlier touched a high of $24.25, have more than doubled in value since hitting a 52-week low of $9.08 in March. (Editing by Aradhana Aravindan)