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UPDATE 2-Santander Brasil posts weaker Q1 net interest income, shares fall

(Updates with share reaction, analyst comment)

SAO PAULO, April 26 (Reuters) - Banco Santander Brasil SA said on Tuesday that its quarterly loan loss provisions had risen by 24.9% on a sequential basis, while net interest income fell, sending its shares lower even as its earnings matched expectations.

Analysts mentioned the weaker net interest income and poorer asset quality among the reasons for the negative market reaction, with Santander’s units down 4.8% at 32.02 reais in early morning trading.

The Brazilian unit of Spain’s Banco Santander SA was the top loser on Brazil’s Bovespa stock index, which fell 1.25%.

The lender reported that net income rose 1.3% from a year earlier to 4.005 billion reais ($821.17 million), versus a consensus of 4.026 billion from analysts polled by Refinitiv.

Its loan loss provisions hit 4.612 billion reais in the quarter, for growth of 45.9% year on year.

The company’s loan book rose by 7.2% on the year to 455.16 billion reais, outpacing a 3.8% net interest income growth amid higher interest rates in Brazil. Both indicators, however, fell about 1.5% from the previous quarter.

“Our loan portfolio quality remains under control, showing the already anticipated deterioration in non-performing loans, given the macroeconomic landscape and in line with our origination volume and mix,” Chief Financial Officer Angel Santodomingo said.

But analysts at Credit Suisse said that Santander’s asset quality performance was worse than anticipated, with results reinforcing their view of sequentially weaker net interest income (NII).

Goldman Sachs noted that NII missed their estimates by 4% mainly due to trading results, which offset a decent client NII.

“We also noticed a slowdown in credit origination, as volumes expanded just 6% year on year,” it said.

Santander’s return on average equity (ROAE), a gauge of profitability, came in at 20.7%, a rise of 0.6 percentage point from the previous three months.

$1=4.8772 reais Reporting by Gabriel Araujo; Editing by Louise Heavens, Will Dunham and Clarence Fernandez

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