Novo Banco profit jumps 22%, boosted by interest income and fees

Portugal's Novo Banco reported a 21.8% increase in first-quarter net profit on Thursday thanks to higher interest income and a robust increase in fees while strongly reinforcing its capital.

The country's fourth-largest bank, which is considering an initial public offering (IPO), said consolidated net profit rose to 180.7 million euros, up from 148.4 million euros a year earlier.

The bank, 75% owned by U.S. private equity firm Lone Star, said its fully loaded Common Equity Tier 1 solvency ratio stood at 19% in March, up 87 basis points from a year earlier.

CEO Mark Bourke said the bank met all its expectations and continues to deliver on its strategy, with sustained growth in activity and results.

Net interest income (NII), a measure of earnings on loans minus deposit costs, rose 21.4% year on year to 299 million euros, the bank said.

Net customer loans fell 6.6% to 24.3 billion euros at the end of March while its commercial cost-to-income ratio decreased to 31.8% from 35.5% despite staff costs increasing 8.6%.

It said fees and commissions increased by 8.8% to 75 million euros compared with a year earlier while net impairments and provisions, at 27.9 million euros, were in line with the same period last year.

Since Lone Star bought its stake in 2017, Novo Banco has reduced risk, closed subsidiaries abroad and offloaded bad loans and real estate under tough restructuring commitments agreed by Portugal with the EU.

Non-performing loans stood at 1.09 billion euros, or 4.3% of total loans, down from 5% a year earlier.