Novo Banco posts €137 million profit

Novo Banco, the bank led by António Ramalho, has obtained a profit of €137.7 million for the first half of 2021. It had already achieved its first quarterly profit since it was created in 2014 this year with €70.7 million in Q1.

The amount compares with the bank’s €555.3 million losses registered in the first half of 2020.
“Novo Banco for the 2nd consecutive quarter presented a positive net result”, states a communiqué sent to the stock market commission, CMVM on 2 August.
Novo Banco announced a second consecutive profitable quarter with a net profit of €137.7 million in the 1H 2021 (vs -€555.3 million in 1H2020).
In 1Q 2021 it made profits of €70.7 million and in 2Q 2021 €67.0 million.
“This significant turn-around in profitability demonstrates the capacity of the business to consequently generate capital” states the bank.
Net interest income increased 13.1% YoY, contributing to an improvement in commercial banking income, +9.7% YoY (1Q 2021: €208.5 million; 2Q 2021: €216.3 million), as a result of the measures to reduce average deposit rates, lower cost of long-term financing and maintaining pricing discipline.
The bank’s core operating income (commercial banking income — operating costs) increased to €220.7 million (+27.5%; +€47.6 million YoY), driven by improved commercial banking income and lower operating costs (-4.7%; -€10.0 million YoY).
Further improvement of Cost to Income, excluding markets and other operating results, reached 48.1% in the period (FY20: 52.2%; 1H 2020: 55.3%).
Impairments for credit totalled €84.7million, including €35.2 million impairments for Covid-19 related risks, a YoY reduction of -69.9% or -€196.4 million.
The cost of risk reached 68bps, or 40 bps if excluding the impairments related to Covid-19.

SOLID BUSINESS MODEL WITH RESILIENT LENDING AND DEPOSITS GROWTH

Net customer loans stood at €23.5Bn, broadly stable across corporate (adjusted for NPL disposal), mortgage and consumer books.
Total customer funds increased by +3.7% YTD, with customer deposits increasing by 3.0% (+€782 million), reflecting the continued confidence of clients in Novo Banco.
Continuous investment in the business, to provide a unique integrated customer experience, with the implementation of a new distribution model and the execution of digital transformation initiatives.
There was growth in the digital segment with 52% of active digital customers (+5.5% YoY) with 32% share of digital sales.
The results also showed a continued reduction of non-performing loans (NPL) ratio to 7.3% (Dec/2020: 8.9%; Mar/21: 8.0%), while increasing the coverage ratio to 78.4% (Dec/2020: 74.1%), demonstrating the continued de-risking of the balance sheet and efforts to match the European average ratio in the medium-term.

STABLE CAPITAL RATIOS AND LIQUIDITY RATIO

The bank states it is well positioned to support retail and corporate customers, with CET 1 ratio at 10.9% (total solvency ratio at 12.8%), liquidity ratio (LCR) of 150% and NSFR of 112%.