July 25, 2018 / 11:36 AM / 23 days ago

UPDATE 2- Santander Brasil CEO says the bank will keep up growth pace

(Adds CEO, CFO comments)

SAO PAULO, July 25 (Reuters) - Shares in Banco Santander Brasil SA surged nearly 6 percent in afternoon trading on Wednesday, as the bank beat second-quarter profit estimates, and Chief Executive Officer Sergio Rial it would continue to gain market share.

At a news briefing after the results were released, Rial said the bank was not planning to slow down in terms of loan growth expansion, even as many of its peer have adopted more conservative strategies.

Santander Brasil beat the mean estimate of analysts polled by Reuters, as the bank's loan book expanded for another quarter and fee revenue increased. Recurring net income came in at 3.025 billion reais ($807 million), 14 percent above the analyst estimate of 2.652 billion reais and 30 percent higher than a year earlier.

Santander Brasil's return on equity, a gauge of banks' profitability, reached 19.5 percent, the highest since its initial public offering in 2009.

"Overall, results were strong pretty much everywhere you look. The bank continues to gain market share," Eduardo Rosman, an analyst at BTG Pactual, wrote in a note to clients.

Driven by disbursements to individuals, the bank's loan book grew 4 percent in the quarter, reaching 368.2 billion reais. Rial said the bank will keep its current pace of credit growth in the second half of this year in spite of cuts to Brazil's growth outlook.

Earlier, in a conference call, Chief Financial Officer Angel Santodomingo told analysts that market share gains will not come at the expense of Santander Brasil's profitability, which should continue to increase.

Despite the growth in loans, asset quality improved marginally, as the 90-day default ratio fell 0.1 percentage point in the quarter, to 2.8 percent.

In a securities filing, the bank said it gained two million clients in one year, reaching 22.7 million clients through June. A larger client base helped boost fee revenue, which rose by 12.7 percent in yearly terms, to 4.275 billion reais.

The bank led consumer complaints ranking compiled by Brazil's central bank in the second quarter. Those problems, according to Rial, were being addressed.

To support clients, Rial said the bank would open 50 new branches by the end of the year, in a move contrary to those of its main competitors.

In spite of the robust performance of its Brazilian unit, Banco Santander reported on Wednesday a 3 percent decrease in net income, as the bank was hit by one-off restructuring costs from Banco Popular. Santander derives more than a quarter of its profit from Brazil.

($1 = 3.7474 reais)

Reporting by Carolina Mandl; Editing by Bernadette Baum

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