UPDATE 1-Banco do Brasil's profit jumps and sets higher target

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SAO PAULO, Nov 7 (Reuters) - Banco do Brasil SA on Thursday posted a 33.5% rise in third-quarter profit helped by higher consumer lending and fee income.

Recurring net income, which excludes one-time items, rose to 4.543 billion reais ($1.11 billion) from 3.402 billion reais and topped the 4.356 billion expected by analysts, Refinitiv estimates showed.

As its profit gained momentum, the bank decided to set a new higher target for 2019 recurring net income. Banco do Brasil estimates it will grow between 16.5% and 18.5% this year, above a previous 14.5%-17.5% target range.

Amid absent loan book growth, Banco do Brasil’s management decided to tighten its belt to improve efficiency and maintain profitability. The bank has also moved towards higher-margin credit lines, such as consumer loans.

So far, the bank seems to be on the right track. Its return on equity reached 18%, up 0.4 percentage points from the previous quarter.

The bank’s loan book remained stable in the quarter, despite growth in consumer lending, as corporate loans declined for an fourth straight quarter, reflecting the effort to shift resources to higher-margin consumer lending.

This strategy led its third-quarter net interest income to rise 4.9% from a year earlier.

Loans in arrears for over 90 days stood at 3.47%, slightly up from the previous quarter.

Profit was also helped by fee income, which went up 8.7% from a year earlier. It was boosted mainly by asset management, retirement plans, insurance and investment banking.

Under the helm of Chief Executive Rubem Novaes, the bank has sold some non-core assets, such as stakes in power company Neoenergia and reinsurer IRB Brasil Resseguros SA , and is seeking partners to boost some units.

In the most recent move, Banco do Brasil and Switzerland’s UBS Group AG reached an agreement on Wednesday to form an investment banking joint venture in South America, both banks said. UBS will hold a 50.01% stake in the new investment bank, and Banco do Brasil will own 49.99%. ($1 = 4.0834 reais) (Reporting by Carolina Mandl; editing by Jason Neely and David Evans)