* Profit beats estimates on surprising tax credit
* Loan-loss provisions up 13 pct, above estimates
* Brazil woes hurt net income at parent Santander (Adds comments from executives, details throughout)
SAO PAULO, Jan 27 (Reuters) - Banco Santander Brasil SA will work to boost profit amid the toughest outlook for the nation’s banks in decades by repricing loans accordingly with higher borrowing costs and tightening credit disbursements, Chief Executive Officer Sérgio Rial said on Wednesday.
Management is committed to tapping business opportunities on the liabilities side of Santander Brasil’s balance sheet, Rial said on a conference call to discuss quarterly results. Close attention is being paid to corporate loan defaults, which spiked in the quarter, he said.
Santander Brasil was the first of Brazil’s largest listed private-sector banks to release fourth-quarter results. Profit at the nation’s largest foreign lender beat estimates after an unexpected tax credit offset soaring loan-loss provisions and a drop in loan-related income.
Rial, who took over as CEO this year, wants to stem falling interest income and rising cost of risk, trends investors say will escalate this year. Banks in the country could further slow loan disbursements this year as Brazil’s worst recession in a century weighs down the quality of their loan books and hampers profitability.
“Rial has the right mindset to recover the ground that Santander Brasil lost to peers” in recent years, said Eduardo Rosman, analyst with Banco BTG Pactual. “However, a weaker quarter and the fact that we see Santander as one of the most exposed banks to the credit cycle leave results at greater risk.”
Shares seesawed as Santander Brasil downgraded some corporate borrowers into higher-risk categories, a sign of the challenges facing the lender this year.
Recurring net income, or profit excluding one-time items, totaled 1.607 billion reais ($395 million) last quarter, benefiting from a tax credit of 55 million reais. The number compares with an estimate of 1.560 billion reais in a Reuters poll.
Loan-loss provisions, or the money that Santander Brasil set aside to cover loan-related losses, had the sharpest quarterly increase in 3-1/2 years. Rial ruled out further increases in generic loan-loss reserves this year.
Santander Brasil was unable to take advantage of the highest borrowing costs in a decade to charge more for new loans. The coverage ratio, a gauge of reserves for bad loans, soared alongside early corporate defaults, indicating that delinquencies are on the rise.
Profit at parent company, Spain’s Banco Santander SA , slumped 98 percent in the quarter, hit by one-off charges in the U.K. and slowing income in Brazil.
$1 = 4.0654 Brazilian reais Additional reporting by Aluísio Alves in São Paulo; Editing by Chizu Nomiyama and Meredith Mazzilli