Novo Banco had a loss of 555,3 million euros in the first half of 2020, the financial institution led by António Ramalho announced this Friday. Compared to the first half of 2019, losses increased by around 39%.
The legacy bank, which is the bad bank, had losses of 493,7 million euros and, in view of these, Novo Banco estimates to request, until June, a capital injection of 176 million euros under the capital mechanism contingent (CCA), to the Resolution Fund.
“Novo Banco continues to comply with its strategic plan, objectives and commitments assumed by the Portuguese Government with DGComp. During this period, the Bank continued to show progress in its strategic priorities, with positive results in the recurring commercial banking product, despite the already visible effects of the pandemic COVID-19. In the legacy activity, the strategy of reducing non-productive assets was continued ”, says the financial institution.
Novo Banco recorded additional impairments in view of the risks inherent to the Covid-19 pandemic of 138,3 million.
In addition to the impairments, the semester result is also justified by the losses of 260,6 million euros from the revaluation of restructuring funds, of 78,7 million relating to the coverage of interest rate risk on Portuguese public debt securities and also due to the provision of 26,9 million for the bank's restructuring.
Jornal Económico knows that Novo Banco intends to classify restructuring funds and sell these assets on the market, which are 80% covered by the contingent capital mechanism.
The assessment fair value of the restructuring funds comes after notification from the European Central Bank, in 2018, for Novo Banco to carry out this independent assessment, which was the responsibility of Alvarez & Marschal, which designed the bank's NPL reduction plan in 2016.
It was Alvarez & Marschal's report that prompted Novo Banco to provisionally register 260 million euros.
At Novo Banco 'recurrent', which is a good bank, net income for the semester amounted to 34 million euros, which translates into a year-on-year drop of 70%. This result is due to the contraction of the operating result, which contracted 45,6% in year-on-year terms to 132,4 million euros.
Commercial banking product, that is, revenue from net interest income and commissions, stabilized at 387,8 million euros. But the banking product, that is, including the results of financial operations and other operating results, fell 55,9%, to 358 million euros.
The loan portfolio reached 24.380 million euros, that is, an increase of 2,7% compared to June 2019, driven by the 5,8% growth in loans to companies.
Bad loans fell 2,6% in twelve months to 921 million euros. Novo Banco recognized impairments of 674 million euros, that is, an increase of 4,6% compared to June 2019.
The NPL ratio improved from 5,6% in June 2019 to 3,3% in June 2020. The NPL coverage ratio was fixed at 73,3%.
In the consolidated, it reinforced provisions in the amount of 351,3 million euros, of which 289,5 million were for credit. In addition, Novo Banco said that “the economic slowdown resulting from the evolution of the economic crisis, inevitably led to an increase in the cost of risk, with impairments for credit risks being reinforced by 138,3 million (…) anticipating losses specifically related to the Covid-19 pandemic ”. The bank also warns that "the level of provisioning is expected to remain high in the coming quarters".
Also in the consolidated, the reduction in overdue loans for more than 90 days and non-performing loans (including cash and deposits with credit institutions) led to an improvement in the claims ratios, which stood at 3,7% and 10,2, respectively, 30% on June 2020, 4,0 (11,8% and 31% on December 2019, XNUMX).
Non-performing credit impairment coverage (including cash and deposits with credit institutions) stood at 62,8% (6,6 pp more than in December 2019). Loan impairment totaled 1,9 billion euros, representing 6,9% of the total loan portfolio.
(updated with more information)