Banco do Brasil Q3 profit falls less than forecast

* Recurring profit falls less than expected in 3rd-qtr

* Credit portfolio surges 41.1 pct, led by consumer, autos

* Assets rise 50 pct to 685.68 bln reais with Votorantim

SAO PAULO, Nov 12 (Reuters) - Banco do Brasil, Latin America's largest bank by assets, posted a smaller-than-expected decline in third-quarter profit as its credit portfolio surged.

Net income fell to 1.98 billion reais ($1.15 billion) from 1.87 billion reais a year earlier, the bank said in a securities filing.

Recurring profit, which excluded one-off items such as the sale of a stake in credit card operator VisaNet VNET3.SA, dropped to 1.76 billion reais from 2.04 billion reais in the third-quarter of 2008.

State-controlled Banco do Brasil (BBAS3.SA) was expected to report a third-quarter recurring profit of 1.68 billion reais, according to the average estimate of 10 analysts in a Reuters survey.

Like other public banks Caixa Economica Federal and state development bank BNDES, Banco do Brasil has expanded its loan book faster than private-sector banks as the government sought to speed up lending to lift Brazil's economy out of recession.

Its loan portfolio surged 41.1 percent year-on-year in the third quarter to 301.4 billion reais as consumer credit nearly doubled and automobile loans more than tripled. Corporate loans grew 37.1 percent.

By comparison, Brazil's two largest private sector banks, Itau Unibanco (ITUB4.SA) (ITUB.N) and Bradesco (BBDC4.SA) (BBD.N), saw 5.5 percent and 10.2 percent year-on-year growth in their loan books, respectively.

Return on equity, a key gauge of profitability, averaged 26.2 percent in the third quarter, down from 33.2 percent in the previous quarter and 30.5 percent a year earlier.

Assets jumped 49.6 percent to 685.7 billion reais as Banco do Brasil consolidated a 50 percent stake in Brazilian group Banco Votorantim. The purchase of the Votorantim stake was announced last year and finalised in September 2009.

Banco do Brasil shares dipped 0.38 percent to close at 31.12 reais on Wednesday, compared with a 0.19 percent rise in the benchmark Bovespa .BVSP index. The stock has more than doubled in price so far in 2009, while the Bovespa gained 73 percent over the same period. ($1=1.722 reais) (Reporting by Elzio Barreto, editing by Will Waterman)