UPDATE 1-Chile's Santander bank profit rises in September

* Santander's net profit rises 4.1 percent from August

* Santander's shares up 2 percent

* Chile's banking sector net profit rose about 7 pct

SANTIAGO, Oct 29 (Reuters) - Banco Santander Chile SAN.SN, the nation's largest private sector bank, posted net profit of 38.12 billion pesos ($70 million) in September, a 4.1 percent nominal increase from August, according to data released by the banking regulator on Thursday.

The bank's January-September profit totaled 293.95 billion pesos, the regulator said.

Santander's shares were nearly 2 percent higher in afternoon trading.

Chile's banking sector net profit grew nearly 7 percent in September from August to $202 million, lifted by a growing loan portfolio and a decrease in loan loss provisions. Net profit for the nine-month period ending in September was $1.55 billion, the regulator said.

The regulator is reporting bank earnings using new international accounting rules, which means the figures are not fully comparable on a year-on-year basis.

Analysts said banks' revenues were squeezed on financial transactions indexed to inflation, such as mortgages, because the consumer price index fell in the month.

Amid the global economic crisis, the Chile's central bank slashed its benchmark lending rate to a historic low of 0.5 percent to kick-start the economy.

Loan portfolios grew 1.1 percent in September from August across the sector. Mortgage loans rose 1.1 percent, business loans grew 0.3 percent and consumer loans climbed 0.8 percent.

Banco de Chile CHI.SN, the country's second biggest bank, had a net profit of 191.226 million pesos ($350 million) during the January-September period, including a 40 percent increase in September over August.

Banco BCI BCI.SN, Chile's third bank, reported net profit for September of 109.218 million pesos ($200 million).

($1 = 546.07 pesos at end September) (Reporting by Antonio de la Jara; writing by Louise Egan and Aaron Nelsen; Editing Bernard Orr)