(Adds CFO comments)
By Aluisio Alves
SAO PAULO, Aug 20 (Reuters) - Brazilian state bank Caixa Economica Federal will resume loan book growth in 2019 after its Tier 1 capital ratio reaches a satisfactory level, Chief Financial Officer Arno Meyer told journalists on Monday.
Caixa said in a statement that the bank focused efforts on raising its Tier 1 capital ratio to the detriment of loan book growth in the first half of 2018. The ratio, a key measure of financial strength, reached 12.49 percent, up 0.53 percentage point in the quarter.
The bank, which focuses mainly on providing mortgages for poorer Brazilians, has reined in growth after asset quality deteriorated as it lent aggressively to individuals and businesses under the country's former Worker's Party government.
The bank is discussing a possible government capital injection of 872 million reais ($222.89 million) in the coming quarters which would be repaid out of funds the government previously collected from Caixa in the form of dividends, said Meyer.
Caixa's CFO also did not rule out issuing a bond between now and December to further strengthen the bank's Tier 1 capital ratio.
The bank reported its second-quarter net income rose 34 percent year-on-year to 3.464 billion reais ($885.44 million) as a drop in loan-loss provisions offset a contraction in loans.
Caixa said its total loan book shrank 0.7 percent in the quarter to 695.3 billion reais due to a contraction in both corporate and individual credits. Its mortgage book, however, increased by 0.8 percent in the quarter.
The bank's 90-day default ratio was at 2.5 percent in June, down 0.4 percentage point from March. Loan-loss provisions also decreased by 34.2 percent year-on-year to 3.340 billion reais.
Caixa's strategy of concentrating on more profitable loans also helped the bank boost its return on equity - a gauge of profitability - by 0.6 percentage point in the quarter to 15.36 percent. ($1 = 3.9122 reais) (Writing by Carolina Mandl; Editing by Christian Plumb and Jonathan Oatis)