* Sees 1 pct-5 pct loan book growth, similar to 2016
* Nudges down LLP range to 21 bln reais-24 bln reais
* Recurring profit of 4.4 bln reais misses estimates (Adds comments, updates share performance)
By Guillermo Parra-Bernal
SAO PAULO, Feb 2 (Reuters) - Banco Bradesco SA expects slow lending growth and high loan-loss provisions this year, as Brazil's No. 3 bank remains cautious over the pace of economic recovery and the ability of households and companies to take on new borrowing.
On Thursday, Bradesco unveiled forecasts for loan book growth between 1 percent and 5 percent this year, similar to last year's goal. It also nudged down a range for projected provisions from last year, when it hiked them by 43 percent as defaults soared.
Banks in Brazil are struggling with the country's harshest recession since 1901 and fallout from a sweeping corruption probe into state firms and large corporate borrowers. Both have contributed to a three-fold jump in Brazilian bankruptcy filings over the past couple of years.
By setting conservative goals for operational performance this year, Chief Executive Officer Luiz Carlos Trabuco may be pointing to some of the challenges facing Bradesco; more companies refinancing looming obligations, and unemployment preventing households from remaining current on their debt.
"There are still lingering risks that could surface any time," Carlos Firetti, Bradesco's head of investor relations, said at a conference call to discuss fourth-quarter results. "Our guidance reflects that."
Shares slumped, reflecting concern that Bradesco's cautious forecast could foretell weak annual earnings. Based on the new numbers, net income at Bradesco could reach 19.1 billion reais, below current consensus estimates of 19.33 billion reais.
"With new guidance suggesting provisions will remain elevated this year, we expect a negative market reaction" to the numbers, said Philip Finch, a strategist and senior banking analyst with UBS Securities in London.
Preferred shares posted their biggest intraday slump in two months, shedding as much as 4.6 percent to 30.93 reais on Thursday. The shares of rivals also tumbled, suggesting prices may be expensive relative to their outlook.
While Brazil's economy is showing recovery signs, a revival of credit among individuals and companies remains slow, Trabuco said during the call. Confidence and activity indicators have recently shown improved readings, but data suggests credit markets face more headwinds.
Hedge fund managers such as Adam Capital's Márcio Appel said this week at a Credit Suisse Group AG summit that credit aversion would delay Brazil's emergence from recession, forcing the central bank to keep cutting interest rates for longer than expected.
"A weak economy means lower rates for longer," said Appel, who oversees about 9 billion reais in assets for Rio de Janeiro-based Adam.
Still-high defaults, an unexpected impairment in the value of financial securities and costs linked to the integration of a business bought from HSBC Holdings Plc in 2015 led to profit that missed estimates.
Net income excluding one-off items reached 4.385 billion reais ($1.4 billion) last quarter, down 1.7 percent from the prior three months. Recurring profit was below a consensus forecast of 4.578 billion reais compiled by Thomson Reuters.
Loans in arrears for 90 days or more, a benchmark for defaults, unexpectedly rose to 5.5 percent of outstanding credit last quarter. Consensus estimates put the so-called default ratio at 5.1 percent.
Despite that, provisions fell 4 percent to 5.525 billion reais, beating the consensus estimate of 5.732 billion reais.
Defaults will probably start falling consistently from July, which should lead to a significant reduction in provisions next year, Firetti said.
He said stricter credit risk assessment could keep provisions in check and stem the impact of rising corporate defaults.
Interest income fell more than expected in the wake of a 1.2 billion-real reduction in the value of financial securities Bradesco holds. Interest income dropped 7 percent last quarter, while administrative and general expenses climbed 2 percent, also missing consensus estimates.
Lower rates usually hamper banks' ability to reprice loans. Last quarter, net interest margin - or the average rate Bradesco charges on borrowers - fell slightly to 7.5 percent.
$1 = 3.1285 reais Editing by Mark Potter and Bernadette Baum