BES posts 86% fall in first-half net profit

BANCO ESPIRITO Santo, Portugal’s second-largest listed bank by assets, posted a steep 86 per cent fall in first-half net profit after taking a hit from a jump in bad loan provisions, a symptom of the country’s recession and debt crisis.

BES said in a statement yesterday that net profit fell to €25.5 million ($31.5 million), even though net interest income rose 12 per cent from a year earlier to nearly 608 million euros.

Debt-laden Portugal, which has taken a €78 billion European Union/IMF bailout, is struggling through its worst recession since the 70s. Analysts surveyed by Reuters had predicted a net profit of €28 million and net interest income – the difference between interest charged on loans and interest paid on deposits – of €599 million. The bank’s provisions for bad loans jumped 15 per cent from a year earlier to €352 million.

BES said it took a €54 million one-off loss from the consolidation of life insurance unit BES Vida on to its balance sheet. In the same period last year, the bank had pocketed a one-off gain of €179 million from selling a position in Brazil’s Bradesco bank.

BES is the only major Portuguese bank which did not tap a €12 billion bank recapitalisation line included in Portugals bailout. It has said it does not intend to draw on the bailout funds after having raised €1 billion from shareholders in May.

The bank’s Core Tier 1 capital ratio reached 9.9 per cent at the end of June under the European Banking Authority’s criteria, above the EBA’s 9 per cent minimum requirement.

Under the Bank of Portugal’s criteria, BES Core Tier 1 ratio rose to 10.5 per cent in June from 8.2 per cent a year ago, exceeding the domestic financial authoritys target of 10 per cent by end-2012.

The bank’s shares had closed 4.2 per cent higher yesterday before the results were announced, outperforming the broader market in Lisbon, up 1.6 per cent. Still, its shares have shed almost 40 per cent of their value so far this year.

BES had a loss of €109 million in 2011 due to provisions and the transfer of bank’s pension assets to the state, which used the money to cover a budget shortfall, but it fared better than its Portuguese peers as it had almost no exposure to Greek debt. – (Reuters)