UPDATE 2-Doral Financial posts lower Q1 loss

(Adds details, background, analyst comments) By Supantha Mukherjee

BANGALORE, May 13 (Reuters) - Doral Financial Corp (DRL.N: Quote, Profile, Research, Stock Buzz) reported narrower-than-expected loss for the first quarter, helped by lower non-interest expense, higher non-interest income and better net interest income.

"We are attracting thousands of new customers, cross-selling to our existing customer base, increasing our core deposits and mortgage production, all while decreasing costs," Chief Executive Glen Wakeman said in a statement.

"From those metrics they are doing well but I would like to see more details about asset quality," Joseph Gladue, analyst at B Riley and Co, said from Pennsylvania.

He said the two things which were primarily responsible for the improved results were much lower loan loss provision and trading gains.

The company said non-interest income rose 50 percent to $17.4 million, mainly driven by higher trading gains.

The provision for loan and lease losses was $4.8 million, 20 percent lower than year-ago quarter. The company said its fundamentals improved significantly in the first quarter.

Doral was Puerto Rico's largest mortgage lender before accounting problems forced it to restate 2000 to 2004 results. The SEC fined Doral $25 million for overstating pretax earnings by $921 million for that period.

Puerto Rico has been in recession for more than 2 years with high gas prices and U.S. slowdown hurting the island, and it is a difficult environment to turn a bank around, analyst Gladue said.