SAO PAULO, Nov 12 (Reuters) - Brazilian state-run lender

Banco do Brasil on Wednesday lowered its outlook for

adjusted net income this year, citing higher funding expenses

and rising defaults among local farmers.

The bank now expects annual net income of

18 billion t

o

21 billion reais ($3.33 billion-$3.89 billion), down from a

previous forecast of 21-25 billion reais.

Banco do Brasil, long seen as a pillar of farm credit in the

country, has been grappling with

record default levels

in its agribusiness portfolio, which hit results and raised

investor concern over

its exposure

to the sector.

In the third quarter, the bank's agribusiness default ratio

hit 5.34%, up from 3.49% in the prior three-month period and

above its overall 90-day default ratio of 4.93%, which rose 72

basis points sequentially.

"Given this scenario, we have acted with transparency and

implemented effective measures to address the situation,

responding quickly and decisively," the bank said in its

earnings report.

Banco do Brasil posted an adjusted net profit of 3.79

billion reais ($701.35 million) for the third quarter, down

60.2% from a year earlier but slightly above the 3.71 billion

reais expected by analysts polled by LSEG.

The lender's return on equity, a gauge of profitability,

was down 1,276 basis points year-on-year to 8.4%, but unchanged

quarter-over-quarter.

In another revision, Banco do Brasil also raised its

estimate for cost of credit in 2025 to a range between 59

billion and 62 billion reais, from the 53 billion to 56 billion

reais forecast before.

($1 = 5.4039 reais)