LISBON (Reuters) – Portugal’s fourth-largest bank, Novo Banco, said on Thursday that profit had tripled in 2022, boosted by higher interest rates and fewer distressed assets, and said the strong results paved the way for a Event could pave IPO.
The bank’s consolidated net profit increased to 561 million euros ($592 million) last year from 184.5 million euros in 2021, it said in a statement.
Novo Banco, which is 75% owned by US private equity fund Lone Star, will report a pre-tax profit again this year, Chief Executive Mark Bourke told Reuters in a phone interview.
Recurring “profit before tax” is expected to rise to over 600 million euros this year, up from 407 million euros last year, he said.
The bank’s solid performance in 2022 as it “posted eight consecutive quarterly profits” bodes well for its plan to eventually list its shares on the stock exchange.
“The only thing we can aspire to is an IPO,” Bourke said. A listing is critical to building the equity story and keeping the independent bank’s business healthy, he added.
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Timing of the IPO would depend on market conditions, and the bank “is not yet at the stage” to choose an exchange to list its shares, appoint advisors or conduct roadshows.
Since Lone Star bought its stake in 2017, Novo Banco has focused on de-risking and closing subsidiaries abroad and divesting bad loans and properties under tough restructuring commitments Portugal agreed with the EU. The Portuguese Resolution Fund owns the remaining 25% of the shares.
The bank said its net interest income (NII), which is income from loans minus deposit costs, rose 9.1% to 625.5 million euros in 2022 thanks to rising interest rates after hikes by the European Central Bank. The average NII rate improved to 1.47%, compared to 1.42% in 2021.
Non-performing loans fell to 4.3% of total loans in December, down from 5.7% a year earlier and from 28% in 2017.
The bank sees its NII rate above 2.2% in 2023, a cost-to-income ratio of 40%, and an NPL ratio of less than 4.5%.
Impairments and provisions fell 69% year-on-year to €111.2 million in 2022, while the cost of risk – which measures the cost of dealing with potential losses – fell to 45 basis points from 70 basis points in 2021.
Novo Banco’s Common Equity Tier 1 solvency ratio improved by 300 basis points (bp) to 13.1% in December, “meets all medium-term targets and positions the bank for its next phase of development,” it said.
($1 = 0.9476 euros)
Reporting by Sergio Goncalves Editing by Inti Landauro, Mark Potter and Susan Fenton
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