(Adds planned exchange offer)
LISBON Jan 30 Portugal's third-largest listed bank BPI posted a steeper-than-expected 73 percent fall in 2013 net profit on Thursday, pressured by the high cost of state loans that the bank hopes to repay soon.
BPI holds 920 million euros in state loans in the form of contingent convertible bonds carrying high interest payments and in October the bank requested authorisation to repay 588 million euros of that sum early.
The bank expects to repay 500 million euros in the first quarter, it said.
It also plans to hold a voluntary public exchange offer to swap debt notes convertible into shares held by various private investors for new shares, which would reinforce its core Tier 1 capital ratio allowing to make the CoCo repayments without weakening its core capital.
"Assuming an acceptance rate of 100 percent, the bank estimates a positive impact on shareholders' equity in the amount of 123 million euros," BPI said.
The state made an injection of funds via CoCos in 2012 for various Portuguese banks to meet strict solvency criteria under the country's bailout. BPI has already repurchased 380 million euros in CoCos.
Net profit fell to 66.8 million euros ($90.6 million), while analysts surveyed by Reuters had expected, on average, a net profit of 79 million euros. Aside from CoCos, it was affected by sales of government bonds that had brought in strong interest payments in 2012 and a drop in net interest income.
BPI's domestic operations had an overall loss of 28 million euros, while its international division led by Angola contributed with some 95 million euros in profits, which was 10 percent higher than a year ago.
BPI's total net interest income -- the difference between interest charged on loans and interest paid on clients' deposits -- fell 18 percent to 475 million euros.
BPI shares had closed flat at 1.54 euros before the results were announced. ($1 = 0.7373 euros) (Reporting By Daniel Alvarenga and Andrei Khalip; Editing by Elaine Hardcastle)