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SAO PAULO, May 14 (Reuters) - State-controlled Banco do Brasil SA slightly missed first-quarter profit estimates on Thursday as loan-loss provisions soared amid an economic downturn and as an unexpected fall in fee income offset a decline in expenses.
The Brasilia-based lender set aside a record 5.99 billion reais to cover consumer and, especially, corporate loans gone sour during the quarter. Defaults rose slightly in the quarter as management stepped up efforts to recover bad credit and reclassify riskier loans.
Recurring net income, a measure of profit before one-time items, totaled 3.025 billion reais ($995 million) in the first three months of the year, compared with an average estimate of 3.033 billion reais in a Reuters poll.
Executives plan to discuss earnings at a news conference later in the day.
Loan disbursements increased at the slowest pace in a year, rising 0.8 percent from the fourth quarter to 704.4 billion reais. Interest income rose 3.7 percent, less than forecasts in the poll, signaling growth came from sustained increases in borrowing costs and the price of insurance policies and more trading of financial securities.
Fee income, or revenue from the sale of financial services, surprisingly fell 7.2 percent, while provisions jumped over 15 percent from the prior three months. General and administrative expenses shrank 5.4 percent in the quarter, helping keep annual growth below inflation.
The bank targets expenses to rise between 5 percent and 8 percent this year.
Recurring return on equity, a widely followed gauge of profitability for banks, came in at 14.5 percent in the first quarter, below the poll's estimate of 15.7 percent. Guidance for the indicator, known as ROE, ranges between 14 percent and 17 percent for the year.
$1 = 3.0412 Brazilian reais Reporting by Guillermo Parra-Bernal and Aluísio Alves Editing by W Simon