SAO PAULO, Nov 11 (Reuters) - Net income at Brazil's state development bank BNDES jumped 51 percent in the first nine months of 2014, the strongest profit reading in three years, as income from financial investments more than doubled from a year ago.
Net income totaled 7.399 billion reais ($2.9 billion) in the January-through-September period, compared with 4.886 billion reais a year earlier, according to a statement on Tuesday. BNDES' loan book rose 14.2 percent to 618.1 billion reais in the same period.
The healthy expansion of BNDES' loan book, Brazil's second largest, comes as state-controlled and private-sector banks alike slow the pace of disbursements to stave off the impact of an economic downturn. BNDES lent over 180 billion reais in the past 12 months, although the pace of loan approval and commitments is decreasing rapidly as demand wanes.
BNDES is Brazil's major source for long-term corporate credit and has been actively used by President Dilma Rousseff to jumpstart economic growth since 2011. However, Rousseff's financial support of BNDES has strained public finances, and critics are urging her to downsize the lender's role during her second term, which begins in January.
Interest income rose 26.6 percent to 9.303 billion reais in the first nine months, partly helped by healthy loan book growth and gains from trading-related activities, the statement said. Investment income, which rose 130 percent in the same period, was bolstered by growing profits at BNDESPar, BNDES's investment holding unit.
The bank saw that line generating income of 4.264 billion reais, after proceeds from dividends and interest on equity rose by 23.6 percent and income from equity derivatives produced gains of 869 million reais, wiping out losses in the year-earlier period. The bank also scaled down provisions related to investment writedowns by 652 million reais, bolstering overall profit.
Return on equity, a gauge of profitability in the financial industry, rose to 11.82 percent in September from 10.15 percent a year earlier. Defaults were 0.07 percent of outstanding loans, well below the average of Brazil's banking system. BNDES has 99.8 percent of outstanding loans earmarked for the nation's most creditworthy corporate borrowers, the statement said.
$1 = 2.5634 Brazilian reais Reporting by Guillermo Parra-Bernal and Aluísio Alves; Editing by James Dalgleish