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* Recurring profit at 1.598 bln reais beats poll estimates
* Provisions slump 15.2 pct even after defaults increased
By Guillermo Parra-Bernal
SAO PAULO, Jan 31 (Reuters) - Banco Santander Brasil SA said on Thursday that fourth-quarter profit beat analysts' expectations because of an aggressive cut in bad-loan provisions despite sagging revenue and a spike in delinquencies, according to a securities filing on Thursday.
The São Paulo-based bank, also the local subsidiary of Spain's Banco Santander SA, reported recurring profit, or net income excluding one-time items, of 1.598 billion reais ($803 million), compared with 1.501 billion reais in the prior quarter.
Brazil's largest foreign lender was expected to post recurring profit of 1.29 billion reais in a Thomson Reuters poll of six analysts.
Compared with the same period of 2011, recurring profit dropped 8.5 percent from 1.643 billion reais. Investors in Brazil follow quarter-on-quarter results more closely than annual comparisons.
Management slashed provisions on bad loans by 15.2 percent from the third quarter to 3.096 billion reais even as delinquencies spiked. Santander has cut provisions, or the amount of earnings set aside to cover for credit-related losses, by more than 700 million reais in the past two quarters.
Annualized return on average equity at Santander Brasil rose to 12.2 percent from 11.7 percent in the third quarter. ROE, as the widely used indicator for profitability in the banking industry is known, was 13.5 percent a year earlier.
Loans in arrears for 90 days or more, the benchmark for delinquencies, rose to the equivalent of 5.5 percent of its loan book, compared with 5.1 percent in the prior three months.