Banco Santander Brasil SA posted first-quarter net profit of 2.14 billion reais ($425.09 million) on Tuesday, down 46.6% from a year earlier, but still above the 1.83 billion reais forecast by analysts in a Refinitiv poll.

The Brazilian unit of Spain's Banco Santander SA has been trying for more than a year to be more selective in lending as credit conditions deteriorate, but in the meantime has reported weak quarterly results.

The lender's chief executive, Mario Leao, said in a statement that Santander started 2023 with a focus on strengthening its balance sheet, but still managed to grow its portfolio in some strategic businesses such as auto, payroll and real estate lending.

Santander Brazil's loan portfolio totaled 500.3 billion reais in the quarter, up about 10% from a year earlier, while loan-loss provisions rose 46.7% to 6.76 billion reais, although they slowed 8% sequentially.

"Loan loss provisions and credit cost increases are appropriate for the current circumstances, as they continue to be influenced by previous vintages," Leao said, while highlighting a one-time event that generated income from the reversal of tax provisions in the quarter.

Quarterly return on average equity (ROAE), a proxy for profitability, rebounded to 10.6% after plummeting to single-digit levels at the end of 2022, but remained well below the 20.7% recorded a year ago, Santander Brazil said.

Its Spanish parent, which has Brazil as its main market, reported its results earlier in the day, beating forecasts with a 1% rise in net profit, but noting that weak operations in Latin America's largest economy offset a strong performance in Europe.

(1 dollar = 5.0342 reais)

(Report by Gabriel Araujo; Edited in Spanish by Ricardo Figueroa)