Portugal's Millennium bcp profit grows despite ECB rates pressure

LONDON: Net profit of Portugal's largest listed bank, Millennium bcp, grew 12.7% to 169.8 million euros in the first half of 2019, boosted by stronger core income and lower impairment and provision charges, the company said on Monday.

Activity in Portugal contributed nearly 72.7 million euros to the half-year profit, growing 23.2% compared to a year ago, while the net profit of international businesses, which includes the core operations in Poland, Angola and Mozambique, slightly fell to 83.7 from 89.9 million euros.

Despite pressure from record low European Central Bank's (ECB) rates, Millennium bcp's net interest income, a measure of earnings on loans minus deposit costs, rose 7.6% to 740.1 million euros between January and June 2019.

Miguel Maya, chief executive officer, said the increase in net interest income was "fundamentally based on a reduction in the cost of funding, namely a decrease in the cost of debt issued, together with a decrease in the cost of time deposits".

"It was a challenging semester due to the evolution of the ECB's monetary policy," he added. "But we had an improvement in the group, with a core income expansion and impairment reduction."

In a subtle shift in monetary policy guidance, the ECB said last week that it sees key rates at current or lower levels until mid-2020, when previously expected to remain unchanged until next June.

Maya said the bank was not expecting the new ECB guidance but will know how to "win in this context", offsetting the adverse effect with "more business intensity, efficiency and credit quality".

Continuing the clearing of its balance sheet, the bank reduced its non-performing exposures (NPE) by 1.7 billion euros to 5 billion euros in June 2019.

In the period, impairments decreased 13.1% to 243.1 million euros, with loan impairments falling 9.2% to 200 million euros.

Operating costs increased 6.7% to 526 million euros in the six months of 2019. The core equity Tier 1 ratio stood at 12% in June 2019, improving 52 bps from June 2018.