SAO PAULO, May 8 (Reuters) -

Brazilian lender Itau Unibanco ( ITUB ) posted on Thursday

a 13.9% increase in its first-quarter net recurring profit

compared with a year earlier, marginally beating analysts'

forecast amid a rise in profitability and a lower default ratio.

Latin America's largest private bank by total assets,

Itau posted an 11.13 billion reais ($1.97 billion) net recurring

profit in the quarter ended in March, while analysts polled by

LSEG had expected 11 billion reais.

The Brazilian lender, which kept its annual projections

unchanged, posted a 22.5% return on equity (ROE), a gauge of

profitability, rising from 21.9% a year earlier.

Citi analysts in a note to clients called the results a

"decent quarter," and said Itau showed "skill in its reading of

the credit cycle, managing to deliver one of the best ROE levels

among our Latin American coverage."

Shares of peer Bradesco, which has been working to recover

profitability following difficult recent years, closed up near

16% after reporting results late on Wednesday.

Brazilian rivals Banco do Brasil and Nubank

are set to publish quarterly results next week. Santander

Brasil already released its first-quarter results.

Itau's total credit portfolio stood at 1.38 trillion

reais, rising 13.2% year-on-year, but declining 1.7% compared

with the previous quarter. Itau said it would be stable compared

with the prior quarter without currency effects.

Itau's 90-day default ratio improved 0.4 percentage

points from a year earlier and 0.1 point from the last quarter

of 2024, reaching 2.3%. Including securities, the ratio hit the

lowest level since 2021, at 1.9%.

Itau's main source of revenue, net interest income, rose

almost 13% year-on-year to 30.3 billion reais. Cost of credit

also increased, by 2.1% to near 9 billion reais.

($1 = 5.6620 reais)