SAO PAULO, April 30 (Reuters) - Lender Santander Brasil

on Wednesday reported a 27.8% year-on-year rise in

its first-quarter net profit, landing slightly ahead of market

expectations despite what it called a more challenging global

macroeconomic scenario.

Santander Brasil's bottom line for the period came in at

3.86 billion reais ($686.83 million), it said in a securities

filing, while analysts polled by LSEG expected net income of

3.77 billion reais.

The result was roughly stable on a sequential basis, the

company added.

The lender, a unit of Spain's Banco Santander, is

usually the first major private bank in Brazil to publish

quarterly results, setting the stage for peers such as Itau

Unibanco ( ITUB ) and Bradesco.

The firm said the latest earnings reflect a strategy it

has built over the past few years, being more selective in

lending as credit conditions deteriorated.

"In credit, we are still focused on strategic

businesses, keeping our strict discipline in capital allocation,

while concentrating on higher profitability lines and good asset

quality," Chief Executive Mario Leao said in a statement.

"In funding, we continue to make progress in our funding

mix with a greater share of individual clients," he added.

Santander Brasil's net interest income - earnings on

loans minus deposit costs - rose 7.7% in the first quarter to

15.92 billion reais, while its return on average equity (ROAE),

a gauge of profitability, was up 3.3 percentage points to 17.4%.

Both, however, slowed slightly from the previous

three-month period.

Allowance for loan losses rose 5.7% on a yearly basis to

6.39 billion reais, while the expanded loan portfolio was up

4.3% to 682.3 billion reais.

Leao said that 90-day non-performing loans remain under

control and in line with the bank's target portfolio and the

macroeconomic environment, adding that the lender continues "on

the path of sustainable ROAE evolution".

Latin America's largest economy is a key market for

Santander Brasil's Spanish parent, which reported its

own results

earlier in the day.

($1 = 5.6200 reais)