CGD profits increase 45% to €282.5M in first half
Portugal’s state bank Caixa Geral de Depósitos (CGD) enjoyed profits of €282 million for the first half of 2019 – an increase of 45.6% on the same period last year.
In the first half of 2018, the public bank has registered a net profit of €194 million euros.
“An increase in the bank’s complementary margin (net income from bank charges, profits from financial operations and other net gains) by around €34 million contributed towards these profits and compensated from a fall of €15 million on the financial margin (Net interest margin (MIM) — the interest income generated by the bank and the amount of interest paid out to its lenders (i.e. deposits), relative to the amount of interest earning assets).
In presenting the bank’s results, CEO Paulo Macedo stressed that the bank is now operating within a more difficult market context as well as under European Central Bank policies which have had a constraining effect on banking sector business.
The fall in interest rates (and of the index and loan contract spreads) have proved an immediate “drag” on profit margins and the business”, said the CGD CEO. “The banks have stopped being attractive for investors because of low returns”, he added.
Macedo said that CGD was now in a second phase of “recovery”: the first had to do with improving the balance by offloading default loans — the ratio of NPLs fell to 7.3% with a capital increase of 64.3% by the end of June.
“Now we have to fix the results account”, he said CGD says that its financial profit margin was impacted negatively by low interest rates: the margin fell 3.2% to €281 million in consolidated terms.
Bank charges increased 1% to €243 million (more than a million euros compared to the first half of last year), and were offset somewhat by a fall of financial margin. All told, profits from bank products added €19.1 million to €908 million in the first six months of the year.
José Brito, CGD Administrator said that the reduction in structure costs (-5.9%) to €477 million) compensated further towards the fall in the financial margin. The bank says that staff costs were €35.5 million from the implementation of early retirement/amicable severance packages, “with a zero impact on the net result for the first half.”
There are now 400 fewer staff working at CGD compared to June, 2018 while two bank branches were closed.