SAO PAULO Banco Bradesco's (BBDC4.SA) third-quarter profit beat estimates after Brazil's second-largest private sector lender cut back bad loan provisions, and defaults fell for the first time in six quarters.
Earnings rose from the previous quarter, despite a decline in net interest income and insurance premiums after borrowing costs in Latin America's largest economy fell to a record low.
Recurring net income, a gauge of profit that excludes one-off items, rose 0.9 percent to 2.89 billion reais ($1.43 billion) from the second quarter, compared with a forecast for 2.88 billion in a Reuters poll.
Bradesco's loan book rose 1.8 percent, missing estimates in the poll, as the lender took a more prudent approach on credit.
Loans in arrears for more than 90 days - the industry's most-widely watched gauge for credit delinquencies - fell in line with expectations in the poll. The so-called default ratio slipped to 4.1 percent of Bradesco's total loans at the end of September from 4.2 percent in the second quarter.
The decline in the indicator followed a tumble in delinquencies at the largest corporate borrowers, Bradesco said. The 90-day non-performing loan ratio for large companies more than halved to 0.4 percent, while that for consumer loans remained at 6.2 percent for the third straight quarter.
That allowed the Osasco, Brazil-based lender to cut net provisions for bad loans by 3.1 percent to 3.303 billion reais from the second quarter. The lower provisions helped prop up return on equity (ROE), despite sliding interest-, trading- and insurance-related revenues.
The profitability measure fell to 19.9 percent, the lowest since early 2009, from 20.6 percent in the prior quarter and 22.4 percent a year earlier.
The Reuters poll had predicted ROE, a benchmark gauge for profitability at banks, at 18.1 percent.
The bank's loan book was 371.674 billion reais at the end of September, about 12 percent up on the third quarter of 2011.
Third-quarter net income, which came in at 2.862 billion reais at the end of September, missed estimates in the poll.
($1 = 2.03 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Editing by Helen Massy-Beresford)