LISBON, April 18 (Reuters) - Portugal’s largest listed bank, Millennium bcp, plans to exchange junior debt for new shares worth up to 428 million euros ($462 million) to increase its solvency ratio by 70 basis points, helping to put it in line with European benchmarks.
It said in a statement late on Friday that shareholders would vote on the measure on May 11.
Including other previously-announced steps and an expected increase in profitability, the bank’s common equity Tier (CET) 1 fully-implemented ratio should exceed 10 percent, up from 8.9 percent at the end of 2014, it said.
The projected figure is “in line with European benchmarks, even before further capital accretion up to the end of 2017,” it said, adding it expected to generate a significant amount of capital during the 2015-2017 period stemming from a return to consolidated profits after a long period of losses.
It said its profitability had improved significantly over the last quarters with more gains expected in the first quarter.
Last month’s sale of a 15.41 percent stake in BCP’s Polish subsidiary Bank Millennium had boosted the CET 1 ratio by 46 basis points after a fall in its solvency ratio in late 2014 that unsettled the market.
The public exchange offer would increase the bank’s share capital by 428 million euros to over 4.13 billion euros, though if the subscription was incomplete, the share capital increase would be limited to the subscriptions received.
That operation will reduce interest costs, improving BCP’s financial margin as well as its profit-and-loss account.
Holders of subordinated debt instruments, hybrid instruments issued by the BCP and preference shares issued by its subsidiary BCP Finance Company can exchange their holdings for new shares.
The total nominal value of these securities not held by the bank and related entities is over 630 million euros.
The issue price of the new shares will have a 7 percent discount to the average market price of BCP shares in the five trading days before the offer’s launch, and will not exceed 0.08 euros a share. BCP shares last closed at 0.808 euros on Friday.
$1 = 0.9255 euros Reporting by Andrei Khalip; Editing by Mark Potter