Montepio Wants to Take Part in Portuguese Bank Deals

Caixa Economica Montepio Geral SA, a Portuguese savings bank that has booked losses for two consecutive years, plans to take part in an expected consolidation of the industry.

Chief Executive Officer Antonio Tomas Correia says he’s convinced Portugal’s banking industry will look very different in a few years. Speaking at a news conference in Lisbon, he said the bank wants to be part of any mergers or acquisitions.

“I don’t know how we will, but we will,” he said Tuesday as the bank announced earnings. The CEO declined to provide more details about what shape that participation might take.

Firms from Spain to China are looking at Novo Banco SA, the entity that emerged from the wreckage of Banco Espirito Santo SA, while Banco BPI SA has drawn a takeover offer from Spain’s CaixaBank SA, its largest shareholder. Banco Comercial Portugues SA and BPI have also been cited as possible partners.

Caixa Economica Montepio Geral, a savings bank focused on consumer lending, said first-quarter profit fell more than 70 percent to 9.76 million euros ($11 million) as net interest income declined and year-earlier gains from the sale of Portuguese sovereign debt weren’t repeated. The bank reported a net loss of 187 million euros in 2014 after provisioning for losses from the collapse of the Espirito Santo family empire.

Montepio is one of the country’s smaller banks. Its 22.5 billion euros in assets at the end of 2014 ranked it behind Banco Santander Totta SA, the country’s fifth-biggest commercial bank with 41.5 billion euros in assets.

Audit Results

In October 2013, the Bank of Portugal requested an independent audit on the bank’s credit risk practices from 2009 through 2012. The audit began in July 2014.

Tomas Correia said Tuesday that the audit didn’t find any irregularities or a need to increase capital. Only procedural errors were identified, most of which have been addressed, he said.

The lender is controlled by Montepio Geral-Associacao Mutualista, a mutual association with more than 630,000 members and 4.7 billion euros in assets at the end of 2014.

Caixa Economica Montepio Geral had an 8.57 percent common equity Tier 1 phased-in ratio, a measure of financial strength, at the end of March. The bank is planning a capital increase of 200 million euros through the Montepio Geral holding, which then plans to look for investors.

Tomas Correia said some investors may have stepped back as doubts on the outcome of the central bank’s audit caused them to “pause.”

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