CGD to repurchase debt

Portugal’s state-owned bank Caixa Geral de Depósitos has been given the green light to repurchase debts that have already cost €270 million in interest.

The bank run by Paulo Macedo has permission to amortise perpetual debt securities issued in the recapitalisation programme of 2017, and for which it paid around 10%, and has already cost the bank €270 million in interest in just five years.
According to a note sent to the CMVM (Portuguese stock market and securities commission), the European Central Bank gave CGD permission to acquire additional AT1 own fund security issues in an operation that should enable annual savings on interest.
The green light for the early repayment of these debt securities on 30 March is a result of the positive assessment by the ECB into CGD’s financial solidity after successfully completing its restructuring plan.
An interest rate of 10.75% associated with these debt securities corresponds to an annual cost of €53.75 million for CGD which over five years represented a total of €268.75, according to the bank.
With the amortisation of this issue, which was a pre-condition set out in the agreement between Portugal and the European Commission to recapitalisation of Caixa by €4.9Bn, the bank’s capital ratios will remain at 18.2% (CET1) and 20.82% (total capital), well above ECB requirements of 13.5%
The repurchase of AT1 debt is one of the objectives that CEO Paulo Macedo has for this year and next. In a statement he said that the ECB authorisation was a sign of the “success achieved by the institution “in implementing a stringent restructuring plan which was only possible because of the bank’s capacity to generate organic capital and its profitability”.
After dividends of €200 million in 2019, and €383.6 million paid to the State last year, CGD states that with this repurchase of AT1 debt, it has already paid back over €1Bn of the recapitalisation sum of nearly €5Bn given in 2017.
Paulo Macedo aims to pay back up to €2Bn by 2023 and distribute more dividends to the public shareholder and purchase another AT2 debt worth €300 million, also undertaken in the same process.
This represents the first main act for Paulo Macedo’s new mandate which had just begun. CGD is preparing to present its results for 2021. To September, profits rose 9% to €429 million.