Portugal Banco BPI swings to loss, to repay state loans

LISBON, April 23 Wed Apr 23, 2014 3:40pm EDT

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LISBON, April 23 (Reuters) - Portugal's third-largest listed bank BPI posted on Wednesday a first-quarter net loss after a year-ago profit, mostly due to sovereign debt sales meant to comply with new European rules, while its net interest income edged lower.

The bank also said it requested permission to repay to the state the remaining 420 million euros in loans held in so-called contingent convertible bonds (CoCos) that have weighed on the bank's bottom line due to high interest charged.

Portugal's banks took the loans during the country's debt crisis and the financing was provided by the government as one part of Lisbon's 78-billion-euro bailout by the European Union and International Monetary Fund that ends next month. BPI originally received 1.5 billion euros in financing in June 2012.

As the economy started to recover last year, the banks began repaying the emergency loans to the state.

The bank said it lost a net 104.8 million euros ($144.9 million) in the first three months of the year, while a year ago it had a profit of 40.5 million euros.

Last quarter, BPI sold 1.3 billion euros worth of its holdings of Portuguese and Italian government bonds, to reduce the future volatility of capital ratios. The sale resulted in a loss of just over 100 million euros due to the closure of hedging contracts.

BPI's net interest income - the difference between interest charged on loans and interest paid on clients' deposits - dipped almost 4 percent to 112 million euros in the quarter. While deposits rose 2.4 percent, loans fell by over 5 percent. Overdue loans rose by 3.7 percent.

On a positive note, provisions for bad loans and impairments fell 35 percent to 45 million euros and operating costs dipped 1.4 percent to 157 million euros.

The bank's international activity, primarily in Angola, had a positive contribution to the results of over 24 million euros, which is 26 percent higher than a year earlier. ($1 = 0.7231 euros) (Reporting By Andrei Khalip; Editing by Angus MacSwan)

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