SAO PAULO, May 5 (Reuters) - Banco Bradesco's loan defaults are under control despite the Brazilian lender's decision to set aside an extra 1 billion reais ($185.31 million) in the first quarter to blunt the impact of the coronavirus pandemic, Chief Executive Octavio de Lazari said on Wednesday.

The CEO told analysts the bank is likely to end 2021 with between 15-16 billion reais in loan-loss provisions, roughly the mid-point of the annual outlook it unveiled in February.

"I am very positive about Brazil's economic recovery in the coming months," he said after repeatedly being questioned about the quality of the bank's assets amid a brutal second wave of the pandemic in Latin America's largest economy.

Bradesco, the country's second-biggest private lender, reported a 73.6% rise in first-quarter profit on Tuesday, beating estimates, as its loan-loss provisions fell 41.8% from a year earlier. With many lenders failing to pay down debts in forbearance, the bank decided to increase its cushion for bad loans by 1 billion reais.

Shares of Bradesco opened on Wednesday down more than 2% but were roughly flat in mid-morning trading, underperforming the Bovespa stock index and the company's private-sector peers.

Bradesco's 90-day default ratio rose 0.3 percentage point to 2.5% in the first quarter from the previous three months, mainly driven by small companies and individuals.

The indicator is likely to rise by the end of 2021 but to pre-pandemic levels, Lazari added, as forbearances are keeping delinquencies at abnormally low levels. He said the provisions set aside last year should be enough to cover for the expected increase.

In a note to clients, analysts at XP Inc said the performance of bad loans at Bradesco still needs clarification.

With lower traffic to its branches due to the pandemic and competition with financial startups weighing on Bradesco's fee income, Lazari said the bank will work to reduce operating costs by at least 5%.

The closure or resizing of between 300 to 400 branches this year are among the measures to be taken to reach this goal, Lazari said. Bradesco ended March with 3,312 branches, more than 1,000 units less than a year ago.

($1 = 5.3964 reais) (Reporting by Carolina Mandl Editing by Paul Simao)