CGD’s profit increased by 45% to 282.5M€

Caixa Geral de Depósitos (CGD), the Portuguese State’s bank, registered profits of 282.5M€ in the first semester of 2019, which represents an increase of 45.6% relative to the same period of last year. In the first semester of 2018, the state-owned bank registered a profit of 194M€.

“Contributing to this favourable evolution was the increase of non-interest income, of around €34 million, which more than compensated the €15 million drop in net interest income including income from equity instruments”, the bank explained.

In the press conference on the consolidated results for the first half of 2019, Paulo Macedo stressed the bank is now operating in a “harder” market context as a result of the ECB’s monetary policy which has harmed the banking business. The interest rates and spreads decrease are “backwinds”, the CGD’s CEO declared.

“Banks are now less attractive to investors due to its low profitability”, he mentioned during the press conference.

Macedo also told the journalists that the bank is going now through a recovery second phase: the first had to do with the balance sheet by reducing the non-performing loans – NPL ratio dropped to 7.3% with a coverage reinforcement to 64.3% at the end of June. “We must now fix the results’ accounting”, the CEO said.

Cost reductions compensate margin break

CGD says its net interest margin suffered the impacts of “interest rates conjuncture” as it has dropped by 3.2% to 281M€ in consolidated terms. The banking commissions increased by 1% to 243M€, compensating the net interest margin break. All summed up, the banking activity tallied 19.1M€ to 908M€ in the first six months of the year.

José Brito, CGD’s administrator, said the structural cost reduction (-5.9% to 477M€) compensated, even more, the net interest margin break. The bank registered staff costs of 35.5M€ as a result of a 2017 provision to implement a lay-off plan. The bank has less 400 employees and two branches than last year.

Regarding the balance sheet, client credit is falling to less than 50Bn€ in the first half of 2019, less 3.7Bn€ than in the same period of 2018. “It reflects the reduction of non-performing loans and reimbursements to public entities”, the bank explained. Deposits increased to 73.1Bn€.