UPDATE 1-Banco do Brasil sees sustainable low loan rates

* CEO says low loan rates sustainable on risk controls

* Aggressive rates are part of Banco do Brasil's role (Recasts, adds CEO comments)

SAO PAULO Aug 13 (Reuters) - Banco do Brasil, Latin America's largest bank by assets, sees sustainable low interest rates for its loans due to strict risk controls on its credit portfolio, Chief Executive Aldemir Bendine said on Thursday.

President Luiz Inacio Lula da Silva has urged federally controlled Banco do Brasil and public banks such as Caixa Economica Federal and state development bank BNDES to charge lower lending rates to increase competition with private sector firms.

Banco do Brasil and Caixa Economica have expanded their loan books faster than rivals Itau Unibanco (ITUB4.SA)(ITUB.N), Bradesco (BBDC4.SA)(BBD.N) and other private banks, helping lift Brazil's economy out of recession.

"Our interest rate guidelines are perfectly sustainable," Bendine said at a news conference to discuss the bank's quarterly results. "The rates are much more aggressive and that's the role of Banco do Brasil."

Roberto Setubal, chief executive of Brazil's largest private sector bank Itau Unibanco, said on Tuesday that rates charged by public banks had been falling faster than at private firms, but were not sustainable.

The bank is unconcerned about an increase in default rates in the second-quarter, Bendine said. The bank kept its forecast for lending growth at 13 to 17 percent for 2009. (Reporting by Aluisio Alves; writing by Elzio Barreto; editing by Andre Grenon)