(Adds more analysts and CEO comments)
By Carolina Mandl
SAO PAULO, Oct 31 (Reuters) - Shares of Banco Santander Brasil SA were down 6 percent in Wednesday afternoon trading after analysts said the bank's quarterly results showed some signs of weakness in the third-quarter in spite of a higher-than-expected profit.
Fee income and net interest margin - the difference between what a bank pays to borrow money and what it charges customers for loans - dropped in the quarter, raising questions if this performance would be a trend for the coming quarters.
The company, however, reported recurring net income of 3.1 billion reais ($841 million) for the quarter, nearly 3 percent above the Refinitiv average estimate from analysts and 20 percent above the same period a year earlier.
BTG Pactual's analysts said in a note to clients that Santander Brasil is "losing some stamina after 19 quarters of sequential earnings per share growth."
Chief Financial Officer Angel Santodomingo added fuel to the fire, saying on Wednesday that competition would pressure the bank's net income margin over coming quarters.
In the third quarter, the CFO said the biggest cause of the drop was a one-time regulatory change in credit card rules that capped the use of revolving lines at a maximum of 30 days.
Net interest margin fell 0.5 percentage points in the third quarter, to 9.7 percent.
Fee income also fell, but Santodomingo repeated it was related to another one-off regulatory change.
Still, Chief Executive Sergio Rial said in a conference with journalists that Santander Brasil is seeking a higher return on equity and growth without relying on acquisitions.
Rial said the bank will open up to 300 new branches in the next two years, especially outside Brazil's largest cities.
The bank's loan book reached 381 billion reais, up 3.4 percent in the quarter from the preceding quarter, and 13.1 percent in 12 months, driven by individuals and small companies.
Santander Brasil has been outpacing its main competitors in Brazil in loan book growth in spite of cuts to the country's growth outlook.
The 90-day delinquency rate was 2.9 percent in the third quarter, slightly up from the previous three months.
Rial told journalists he does not expect a big change in the Brazilian unit after the new CEO at parent company Banco Santander, Andrea Orcel, takes the helm in January.
Since Orcel, a former head of UBS Group's investment banking unit, was appointed CEO, analysts have been speculating if Santander would change its strategy worldwide by seeking acquisitions or getting bigger in investment banking.
"In Brazil, Santander is a retail bank," said Rial. "But there is room for improvement in the investment banking unit." ($1 = 3.6962 reais) (Reporting by Carolina Mandl; Additional reporting by Paula Laier; Editing by Bernadette Baum and Steve Orlofsky)