CGD backtracks on sale of Brazilian arm
The CEO of State-owned bank Caixa Geral de Depósitos, Paulo Macedo says he does not want to sell the bank’s interests in Brazil, Banco Caixa Geral, under “bad conditions”.
The brakes have also been put on the sell off of its interest in Cape Verde, the bank Interatlântico after interests had been shown to buy.
Asked about the sales of Banco Caixa Geral – Brazil, Paulo Macedo, CEO of CGD said that the bank had received proposals but chose to reject them because he did not want to sell the Brazilian operation under bad conditions.
“We continue to make efforts, but the main conclusion we have drawn is that Caixa could have been sold under unfavourable terms and so chose not to sell.”
Caixa advised the Portuguese Government not to sell (on these terms) but is looking for interested parties, which in the current economic situation in Brazil isn’t easy,” said Paulo Macedo to the business title Jornal Económico.
Regarding the operation in Cape Verde, the CEO said that the bank had “received offers” and were in discussions with both the Cape Verde and Portuguese governments.
CGD’s CEO said he was not very optimistic about a quick sale of the Interatlântico. “This process will still take time and we think it will not be resolved this year,” said Paulo Macedo.
Paulo Macedo was speaking during the presentation of the quarterly results. In the accumulated results for the year to September, CGD saw a 39% year-on-year drop in consolidated net income, which reached €392 million.
Within the current context of globalisation, Caixa Geral de Depósitos (CGD) expanded its overseas direct operations in Africa where there is a favourable climate for foreign direct investment.
As part of this drive, CGD opened a branch in Cape Verde in 1998 in a bid to harness the potential of a developing economy and help boost the local financial system, complementing the traditional form of the Group’s presence in Cape Verde via the representative office of Banco Nacional Ultramarino.
In July 1999, CGD turned the entity into Banco Interatlântico by integrating assets and liabilities.
CGD now holds 70% of the bank’s capital, with the remainder divided between a number of local businessmen and companies. Banco Interatlântico has branches in Santiago, São Vicente, Sal and Boa Vista.
CGD consolidated results
As for the Caixa Geral de Depósitos Consolidated net income for first nine months of 2020, this was down 39% over the same period 2019 to €392 million, equivalent to a ROE of 6.6% (down by a year-on-year 4.2 p.p.)
This amount includes an extraordinary gain of €51 million (after tax) arising from actuarial gains in liabilities with post-employment benefits (pension fund and medical plan). Current net income of €342 million was therefore down 29% over the current income in first nine months of 2019. ROE stood at 5.8%.
The cost of credit risk totalled 0.29% owing to a €220 million increase of impairment and provisions in anticipation of the effects of the Covid-19 pandemic; Recurring operating costs, down 6% over September 2019, reflected improved efficiency levels as shown by the recurring cost-to-income ratio of 49%1 in terms of domestic activity.
Customer deposits were up €5.3 billion in the first nine months of 2020. This was essentially on account of the resources taken by CGD Portugal, fuelled by higher levels of household savings in Caixa.
The corporate credit stock in Portugal (excluding the construction and real estate sectors) grew 9.8% across the first nine months of 2020, strengthening the support for corporates.
CGD maintained the trend of increasing its mortgage loans production share, which reached 21% between January to August (24% considering only the month of August). The annual output growth reached 4% over the same period of 2019.
Improvement of asset quality, with the non-performing loans (NPL) ratio decreasing to 4.2% which, together with impairment increases resulted in an NPL ratio net of impairment of 0.5% (considering all credit impairments).
Capital ratios reached 17.2% in core capital (CET1) and 19.8% in total capital, both above the average for eurozone banks.
Reporting for Caixa Geral de Depósitos, the bank’s consolidated net income for first half 2020 was down 41% over the same period in 2019 to €249 million, equivalent to a ROE of 6.2% (down by a year-on-year 4.5 pp).