(Adds CFO remarks)
BRASILIA, Nov 14 (Reuters) - Caixa Econômica Federal SA, Brazil's largest mortgage lender, has reached an agreement to pay only 25 percent of its 2016 and 2017 profits in dividends to Brazil's federal government, Chief Financial Officer Osvaldo Brasil told Reuters on Monday.
The state-owned bank reported on Monday a 67 percent drop in third-quarter net profit from a year earlier, to 998 million reais ($294.3 million). The CFO said in a telephone interview that reducing dividends will help the bank strengthen capital levels.
Caixa cut back provisions for credit losses by 16 percent to 5.1 billion reais. The delinquency rate was 3.5 percent in the third quarter, and Brasil said it may rise slightly in the coming quarters.
The state bank's return on equity (ROE), a gauge of profitability, has fallen to 6.5 percent, less than half that of Brazilian private peers. Brasil said the bank aims to deliver ROE equivalent to at least the benchmark Selic rate, currently at 14 percent, by 2018.
Brasil said he expects Caixa's loan book to grow 4 to 5 percent this year, down from the previous guidance of 7 to 10 percent growth.
$1= 3.3912 reais Reporting by Aluisio Alves and; Alonso Soto; Editing by Jason Neely and Will Dunham