UPDATE 2-Santander Brasil sees early recovery signs as defaults ease

miércoles 27 de julio de 2016 11:30 GYT

(Recasts to add potential Citigroup bid, details, comments throughout)

By Guillermo Parra-Bernal and Aluísio Alves

SAO PAULO, July 27 (Reuters) - Banco Santander Brasil SA could gradually disburse more loans and possibly seek an acquisition, executives said on Wednesday, as early signs of a turnaround in Latin America's largest economy translated into stronger-than-expected second-quarter profit.

The outlook for credit demand in the second half of the year looks better as economic and political turmoil eases, Chief Executive Officer Sérgio Rial said at an event to discuss results. Santander Brasil will probably bid for Citigroup Inc's local unit, although at a reasonable price, Rial said.

Rial pointed to better retail data and signs of a revival in stock offerings to reflect the recovery in Brazil, which is struggling with the harshest recession in eight decades and fallout from President Dilma Rousseff's ongoing impeachment proceedings.

"We foresee a more positive scenario" for the rest of the year, Rial said. On Wednesday, the central bank said loans in arrears in Brazil fell for the first time in a year in June.

Rial's strategy of charging more for loans and financial services helped Santander Brasil offset weak disbursements and post the biggest quarterly profit in five years.

Net income, excluding one-time items, totaled 1.806 billion reais ($551 million), beating the consensus estimate of 1.397 billion reais, as compiled by Thomson Reuters.

Santander Brasil's beat buoyed results at parent Banco Santander SA of Spain, which posted profit slightly above expectations. Executives at the Madrid-based bank expect Brazilian loan defaults to peak by the end of this year.   Continuación...