July 27, 2018 / 5:03 PM / 10 months ago

Portugal CGD swings to H1 profit, recapitalisation complete

LISBON, July 27 (Reuters) - Portugal’s largest bank, state-owned Caixa Geral de Depositos, swung to a first-half net profit of 194 million euros after a year-ago loss following a massive recapitalisation which the bank said puts it on course to better solvency and returns.

The unlisted lender said on Friday its overall net interest income slipped 2 percent from a year earlier due to a foreign exchange impact from some of its overseas businesses, but in its core domestic operations net interest income rose 6 percent.

The end of the first half also marked the completion of the bank’s near 5 billion euro recapitalisation plan, which also envisaged a major clean-up of its accounts laden with non-performing loans and assets, and across the board cost cuts.

CGD said its key CET1 solvency ratio reached 14 percent at the end of June, exceeding the full-year target of 12 percent and putting it on course to meet easily its 2020 target of a solvency ratio above 14 percent.

Costs, including personnel, administrative and depreciation and amortization, fell over 14 percent as CGD slashed the number of employees by 10 percent from a year earlier to around 7,900 people and the number of branches by nearly 12 percent to 522 as of the end of June.

The recapitalisation of CGD by the state last year inflated the budget deficit, which hit the EU threshold for excessive deficits of 3 percent of GDP, although the one-off impact has been generally disregarded by the European Commission, which lauded Portugal for an otherwise exemplary deficit reduction.

Without CGD, the budget gap halved to just over 1 percent of GDP in 2017, the lowest mark in over four decades of Portugal’s democratic history, and this year the government expects to post a deficit of 0.7 percent due to continuing economic growth. (Reporting By Andrei Khalip; editing by David Evans)

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