UPDATE 2-Santander Brasil sees financial margins under pressure in the coming quarters - CFO

(Adds CFO comments)

By Carolina Mandl

SAO PAULO, Oct 30 (Reuters) - Chief Financial Officer of Banco Santander Brasil SA said on Wednesday that the bank's net interest income is likely to be under pressure in the coming quarters, as Brazil's interest rates hit all-time low levels and competition increases.

CFO Angel Santodomingo told analysts in a conference call that Santander Brasil seeks to offset a potential pressure in margins with higher fee income and lower operating expenses.

"The bank has to analyse its costs in an industrial way," he said, adding he still sees room for improvements in Santander Brasil's efficiency.

The most profitable unit of Spain's Santander Brasil SA reported third-quarter results that beat analysts' estimates, mainly driven by the retail segment.

Recurring net income, which excludes one-off items, came in at 3.705 billion reais ($926.60 million), up 19.2% from a year earlier and beating the 3.48 billion reais that analysts were expecting, according to Refinitiv data.

Still, units in Santander Brasil were down 2.8% in the morning trading.

RETAIL GROWTH

As in recent quarters, consumer lending boosted the bank's net income. Its loan book reached 408.7 billion reais, up 3.7% from the previous quarter, as the bank sped up its pace of auto, payroll and credit card lending.

In corporate loans, international trade lines also grew in the quarter.

Still, Santander kept a lid on loans in arrears for over 90 days. Its delinquency ratio came in stable at 3%.

Its net interest income grew by 3.9% from a year earlier, to 8.9 billion reais.

The bank posted a third-quarter return on equity of 21.1%, down 0.2% from the previous quarter.

Chief Executive Sergio Rial in October disclosed for the first time operating targets for the bank, which is the Brazilian unit of Spain's Banco Santander SA. Its loan book is expected to grow by more than 10% per year through 2022 and the bank aims to maintain its relatively high return on equity of 21%.

Santander Brasil also aims to keep growing its customer base by at least 7% per year through 2022.

Fee income also bolstered Santander Brasil's profit, as the bank has added new clients.

To outpace its competitors, Santander has opened small new branches dedicated to agribusiness and micro personal loans outside big cities. It added 15 branches in the third quarter, totaling 2.317 branches.

In spite of Brazil's strong results, Banco Santander SA posted a 75% decline in third-quarter profit.

($1 = 3.9985 reais) (Reporting by Carolina Mandl, editing by Louise Heavens and Chizu Nomiyama)