UPDATE 3-Brazil's Bradesco profit unexpectedly rises

* Net profit unexpectedly rises to 2.297 bln reais

* Loan portfolio up 18.1 pct from Q2 2008, drops from Q1

* Total assets rise 19.7 pct to 482.5 bln reais

* Bradesco cuts 2009 loan growth view on high defaults (Adds Bradesco comments, share performance)

By Elzio Barreto

SAO PAULO, Aug 3 (Reuters) - Banco Bradesco (BBDC4.SA)(BBD.N), Brazil's second-largest private-sector bank, posted a surprise increase in second-quarter profit even as it curbed lending to cope with a surge in loan delinquencies.

Bradesco booked 2 billion reais in pretax profits from the record initial public offering of credit card processing company VisaNet VNET3.SA in June, which helped offset losses from rising defaults.

Net income rose to 2.297 billion reais ($1.23 billion) from 2.002 billion reais a year earlier, Bradesco said in a statement on Monday.

Bradesco was expected to post profit of 1.72 billion reais, according to the average estimate of six analysts in a Reuters survey. The forecasts ranged from 1.57 billion reais to 1.82 billion reais.

Bradesco shares rose 2 percent in mid-afternoon trade on Monday, compared with a 2.3 percent gain in the benchmark Bovespa index .BVSP.

Like most banks in Brazil, Bradesco has increased bad debt provisions because of rising default rates on personal loans and other types of credit. The bank set aside 1.3 billion reais for bad debt in the second quarter.

"The worst might be over in terms of defaults," Chief Executive Luiz Carlos Trabuco Cappi said in a conference call with journalists. "With the formal economy and wages growing, the trend for default rates after reaching the peak is to edge lower."

Default rates on Bradesco's total loan portfolio rose to 4.6 percent from 3.4 percent a year earlier. Defaults should rise to about 4.9 percent in the third quarter before dropping to an expected 4.7 percent at the end of the year as an expansion in Brazil's economy and increase in jobs helps workers pay down their debt.

Bad debt provisions surged 60 percent from a year earlier to 13.87 billion reais.

"In the second quarter of 2009, the economic crisis that started in the fourth quarter of 2008 still affected financial activity, as reflected in the small increase in the credit portfolio and with the continuation of a high level of defaults," the bank said in the statement.

Total credit portfolio rose 18.1 percent from a year earlier to 212.8 billion reais at the end of June, but fell 0.7 percent from the 214.29 billion reais in the first quarter.

Consumer loans rose 13.2 percent from the second quarter of 2008 to 74.3 billion reais, while loans to companies jumped 20.9 percent year-on-year to 138.5 billion reais.

The bank cut its estimates for credit growth in 2009 to between 8 percent and 12 percent from a previous forecast of 13 percent to 17 percent.

Return on equity, a key gauge of profitability, averaged 23.7 percent in the second quarter, up from 21 percent in the previous quarter but down from 27.2 percent a year earlier.

The bank finished the second quarter with 482.5 billion reais in total assets, 19.7 percent more than a year earlier and little changed from 482.14 billion reais at the end of March. ($1=1.866 reais) (Reporting by Elzio Barreto; Editing by Phil Berlowitz)