SAO PAULO (Reuters) – Banco Santander Brasil SA’s second-quarter net profit beat market expectations, but loan loss provisions rose sharply amid a tough macroeconomic backdrop, data showed on Thursday.

Net profit rose 2% from the previous quarter to 4.08 billion reais ($778.08 million), better than expected, as analysts polled by Refinitiv had forecast Banco’s Brazilian unit Santander SA in Spain would post a net profit of 3.88 billion.

However, Santander Brasil said in a securities filing that provisions for loan losses reached 5.75 billion reais, up 59.7% from a year earlier, with general expenses up by 8.4% in the same comparison.

Such indicators have been in the spotlight for market participants, with Itau BBA analysts saying in a client note that Santander Brasil was their “first name to avoid among banks” on lower coverage and higher provisions. already expected.

Investors polled by Bank of America ahead of the earnings season said the company was likely to deliver the weakest quarterly numbers among large-cap banks in Brazil, with provision charges among their top concerns.

The South American country’s third-largest private bank, Banco Santander Brasil competes with players such as Itau Unibanco, Bradesco and the state-run Banco do Brasil.

In a statement on Thursday, the company’s chief financial officer, Angel Santodomingo, said: “Despite a still challenging macroeconomic environment, loan portfolio quality indicators remained stable over the period.”

The lender’s loan portfolio increased by 2.9% in the quarter to reach 468.54 billion reais.

Brazil is the Spanish lender’s largest customer base and accounts for almost a third of the group’s underlying profit.

(Reporting by Gabriel Araujo; Editing by David Goodman and Clarence Fernandez)

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