Under new boss Ana Botin, the Spanish bank is trying to boost income by expanding credit and winning over clients, shifting away from a reliance on acquisitions. Net lending across the group rose 8 percent, though it was still slightly down in its home market, the bank said on Tuesday.

Domestic peers have also been struggling to ramp up their stock of credit despite an accelerating recovery, as subdued demand for loans and low interest rates weigh on their recovery from the financial crisis.

Santander weathered a real estate crash and recession at home with earnings overseas, however, and these are still propelling profits. Net income grew in nine of its 10 core countries in the quarter from a year ago, with the exception of Chile.

Lower charges against soured debts helped profits jump about 41 percent in Brazil, a key unit facing potential headwinds from slowing economic growth. In the UK, which also makes up about a fifth of group profit, net income in sterling rose 14 percent.

Santander as a whole posted net profit of 1.72 billion euros (1 billion pounds), in line with expectations. It said a weaker euro against the dollar and the pound had boosted earnings when converted into the euro zone currency.

Its shares rose 0.6 percent just after the market opened.

Ana Botin, who took over as chairwoman from her late father Emilio last September, boosted capital levels with a 7.5 billion euro share sale in January to back its lending push.

Some analysts said the bank's results were encouraging, especially as income from fees and loans grew, though stressed that the credit drive would keep eating up capital.

Core Tier 1 capital ratios, under stricter "fully-loaded" criteria which takes into account rules that must be met by 2019, stood at 9.7 percent at the end of March.

"They're still a little way away from the 10 percent of some big banks in Europe and they will have to keep strengthening capital levels," said analyst Nagore Diez at brokerage Norbolsa.

Santander said it was on track to meet targets for 2017. It aims for a return on tangible equity (ROTE), a measure of profitability, of 12 to 14 percent, and said ROTE stood at 11.5 percent at end-March.

(Editing by Kenneth Maxwell and David Holmes)

By Sarah White and Jesús Aguado