July 23, 2014 / 6:02 PM / 3 years ago

UPDATE 1-Portugal's Banco BPI falls to first-half loss after debt sale

* H1 net loss 106.6 mln euros vs profit of 59 mln

* CEO says bank’s capital position “very strong”

* Net interest income steady at 236.5 mln euros (Adds CEO on Espirito Santo exposure, details)

LISBON, July 23 (Reuters) - BPI, Portugal’s third-largest listed bank, fell to a first-half net loss due to forced sovereign debt sales designed to comply with new European rules.

Chief Executive Fernando Ulrich told reporters the bank’s capital position was “very strong” after repayments of state loans and the debt sales.

Ulrich also said the bank had no direct exposure to troubled holding companies of the Espirito Santo banking family, which have requested creditor protection.

He said BPI had “small credit exposure” to healthcare companies and the hotel business of the Espirito Santo Group, but said they caused no concerns and expected no losses there.

Troubles at the Espirito Santo holding companies which own stakes in the country’s largest listed bank BES have hit banking and other assets in Portugal, and even caused a brief sell-off in global assets earlier this month.

The government has said the country’s financial system is safe and expected little impact on the economy as it recovers from a three-year slump.

BPI said it lost a net 106.6 million euros ($143.5 million) in January-June 2014, compared with a year-ago profit of 59 million.

BPI in the first quarter 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 102 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 - was steady at 236.5 million euros in the period.

Overdue loans rose by 2.8 percent to 971 million euros, but new provisions for bad loans and impairments fell to 100 million euros from 150 million a year earlier.

While the bank’s domestic unit posted a loss of 156 million euros, its international operations, mainly in Angola, had a 29 percent increase in profit to 49.5 million euros.

In June, BPI repaid the remaining 420 million euros of 1.5 billion in state loans taken at the height of the debt crisis in 2012, becoming the first Portuguese bank to have reimbursed the state in full.

$1 = 0.7428 Euros Reporting by Sergio Goncalves and Andrei Khalip; Editing by David Holmes

Our Standards:The Thomson Reuters Trust Principles.
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