Novobanco posts record results for 2022
Novobanco managed to triple its positive results in 2022 with profits of €560.8 million. Its profits were €184.5 million in 2021.
In a communiqué to the market, the bank which has received around €8Bn from the Resolution Fund and taxpayers since it was set up in 2014 did not mention that it would be receiving fresh injections of capital from the Resolution Fund on the back of the Contingent Capitalisation Agreement.
In an interview with Negócios, he said despite there still being €500 million in the CCA (Contingent Capital Agreement), and that closing it – which would require a decision on both sides – would be very positive for the bank because it would mean that its restructuring had been a success for all involved and fo those who designed it. It would also “stop all the noise” around the bank.
Yet despite making better profits, as did all the banks in Portugal, its commissions have risen, while the amounts savers get barely reaches 1% (or 2%) by the second year at a time when ECB interest rates are 3.25%. In other words, interest is passed on to mortgage holders and borrowers, but not to savers by the same amount.
The CEO, Mark Bourke, who took over from António Ramalho in August last year, foresees even more improvement in results in 2023.
The bank has successfully managed to increase its margins (+60% in Q4 and +9% annual) that it gets from interest charged on loans against the money it pays out in interest on savings deposits.
The bank also reports that the percentage ratio of NPLs was 4.3% (the goal had been 5%), but could be greater this year than in 2022. The goal for the next tree years is to get NLPs down to a ratio of 3%.
The financial margin rate obtained by the bank owned by US equity manager Lone Star was 2% in the fourth quarter, while the average overall for all four quarters was 1.5%. Novobanco expanded its credit portfolio by 3.8%.
On bank charges, Bourke said these comprised bank insurance and asset management, (stable) loans and guarantees (stable, with €85 million in 2022 and €86 million for this year), while payment fees (recovered from €114 million to €127 million), largely down to a recovery in the number of transactions people are making. “We will make some headway, but I don’t think we’ll be seeing a change in the structure of bank charges and I expect that we’ll see some increase next year in each of these categories.”
The target now defined by Mark Bourke and CFO Benjamin Dickgiesser who are still awaiting the green light from the ECB to officially begin their job functions, is 2.2%
“The new interest rates environment will support an even greater financial margin” according to the communiqué handed out to investors, and this will have an impact on the results, taking into account that that the balance of the bank owned by Lone Star is “highly sensitive to interest rates”, states the CFO.
Mark Bourke said on the possibility of the bank being merged with or sold to another bank, a PAO was possible, but the choice was not theirs (the bank is owned by Lone Star). “We are a bank that is capable of competing and being in the market on its own merits, but we are not at the stage of an IPO, but rather at an initial phase.”
However, the CEO did say that the bank was easier to sell now. “We’ve restructured the bank and have now had eight quarters of profits. Our capitalisation is within requirements, and our performance and strategy makes us a strong business”.