SAO PAULO (Reuters) - Santander Brasil a subsidiary of Spain's Banco Santander, reported on Wednesday a 75% jump in its fourth-quarter net profit, surpassing market expectations on the back of better spreads and increased fees.

The lender said in a securities filing that net profit totaled 3.85 billion reais ($668.62 million) in the October-December quarter, above the 3.72 billion forecast by analysts polled by LSEG.

"The Q4 earnings reflect the delivery of our strategy, showing positive revenue performance and consistent growth in client net interest income (NII)," Chief Executive Mario Leao said, highlighting the "diversification of our portfolio."

Santander, typically the first major private lender in Brazil to publish quarterly results, sets the stage for its peers, including Itau Unibanco ( ITUB ) and Bradesco.

Latin America's largest country is a key market for the lender's Spanish parent, which earlier on Wednesday announced 10 billion euros ($10.42 billion) in share buybacks after notching record profits helped by its retail business in Brazil.

Santander Brasil's NII - earnings on loans minus deposit costs - rose 16% in the fourth quarter to 15.98 billion reais, while its return on average equity (ROAE), a gauge of profitability, was up 5.3 percentage points to 17.6%.

"We are ready to move forward with our ROAE evolution with a disciplined approach to capital allocation," Leao said.

The bank's allowance for loan losses dropped 13.2% on a yearly basis to 5.93 billion reais, which Leao said was "within expected levels," while its expanded loan portfolio rose 6.2% to 682.7 billion reais.

($1 = 5.7581 reais)

($1 = 0.9600 euros)