Santander Brasil shares up as Q4 net profit beats forecasts

SAO PAULO (Reuters) -Santander Brasil on Wednesday reported a 75% jump in fourth-quarter net profit, sending its shares higher as it surpassed market expectations on the back of stronger margins and increased fees.

The lender, a unit of Spain's Banco Santander, said net profit totaled 3.85 billion reais ($668.62 million) in the October-December quarter, above the 3.72 billion forecast by analysts polled by LSEG.

Sao Paulo-traded shares of Santander Brasil rose more than 4.5% after the earnings beat, and were among the top gainers on local benchmark stock index Bovespa, which was down 0.3%.

Santander, usually the first major private bank in Brazil to publish quarterly results, sets the stage for its peers, including Itau Unibanco and Bradesco, which report shortly.

"The Q4 earnings reflect the delivery of our strategy, showing positive revenue performance and consistent growth in client net interest income (NII)," Chief Executive Mario Leao said, highlighting the bank's portfolio diversification.

Analysts at XP Investimentos said the results were solid, adding that Santander was well positioned to face ongoing macro challenges in Brazil.

"Despite the deterioration of the macroeconomic scenario and elevated interest rates, the bank maintained consistent results with good asset quality," they said in a note to clients.

Latin America's largest country is a key market for the bank's Spanish parent, which earlier on Wednesday announced 10 billion euros ($10.42 billion) in share buybacks after notching record profits helped by its retail business in Brazil.

Santander Brasil's NII - earnings on loans minus deposit costs - rose 16% in the fourth quarter to 15.98 billion reais, while its return on average equity (ROAE), a gauge of profitability, was up 5.3 percentage points to 17.6%.

"We are ready to move forward with our ROAE evolution with a disciplined approach to capital allocation," Leao said.

The bank's allowance for loan losses dropped 13.2% on a yearly basis to 5.93 billion reais, which Leao said was "within expected levels," while its expanded loan portfolio rose 6.2% to 682.7 billion reais.

($1 = 5.7581 reais)

($1 = 0.9600 euros)

(Reporting by Gabriel Araujo, Editing by Louise Heavens and Jane Merriman)