(Adds CEO, retail exec comments, shares, PIX available)
By Carolina Mandl
SAO PAULO, Aug 8 (Reuters) - Banco do Brasil SA is not considering selling its stake in Cielo SA, the state-controlled lender's chief executive of said on Thursday, sending shares of the card processor down more than 2%.
Cielo's shares rose more than 15% last Thursday after newspaper O Estado de S. Paulo reported Banco do Brasil was looking into selling its 29% stake in the company.
But CEO Rubem Novaes said during a news conference that the bank "was not considering either delisting or selling our stake".
Chief Retail Officer Marcelo Labuto called the card processor part of the bank's "core."
Controlled by Banco do Brasil and Banco Bradesco SA , Cielo's margins have come under heavy pressure since newcomers PagSeguro Digital Ltd and StoneCo Ltd entered the market.
Even so, Banco do Brasil reported its second-quarter recurring net income surged 36.8% from a year earlier to a higher-than-expected 4.432 billion reais ($1.12 billion), helped by lower operating expenses and taxes and higher fee income.
The bank did caution that its loan book may shrink up to 2% this year, or grow by 1% at most, as its corporate loan book continues to decline. In the first six months, its loan book grew 1.1%, short of its earlier forecast of 3% to 6% growth.
Novaes blamed the revised target on sluggish economic growth, which he said is reducing companies' appetite for loans.
Still, the bank maintained its forecast for full-year net income to rise 17.5%.
He said Banco do Brasil, which last month launched a voluntary severance program, was likely to further slash costs to meet its profit estimates. The bank plans to turn 333 of its bank branches into simpler physical locations, which usually have lower costs.
Novaes said the cost cutting program, to cost 300 million reais this year, will save it 500 million reais annually starting in 2020.
The bank's return on equity, a gauge of profitability, was at 17.6%, up 0.8 percentage point from the previous quarter. Its second-quarter operating expenses declined 1.1% from a year earlier.
$1 = 3.97 reais Reporting by Carolina Mandl; Editing by Angus MacSwan, Bernadette Baum and Bill Bekrot