UPDATE 1-PORTUGAL'S NOVO BANCO AIMS FOR 2018 PROFIT AS RISKY LOANS WEIGH
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LISBON, Feb 24 (Reuters) - Portugal's Novo Banco said onWednesday it does not expect a turnaround until 2018, after newprovisions for risky assets at the state-rescued lender turned a2015 positive operating result into a 2015 net loss of 981million euros ($1 billion).
The results are a setback for Lisbon, which is desperatelytrying to sell the 'good bank' successor to Banco EspiritoSanto, which crumbled in 2014 under its founding family's debtsand required a 4.9 billion-euro rescue of mainly public funds.
Novo Banco CEO Eduardo Stock da Cunha told reportersoperating income should double this year to exceed 230 millioneuros, but that would still not be enough to post a net profit.
'We expect profit at the bank overall in 2018, with profitfrom the core banking activity already in 2017,' he said.
Novo Banco said it had to reinforce provisions by 1.06billion euros last year, 'influenced by losses related to assetstransferred from BES', in addition to coverage for bad loans asoverdue loans surged by about 50 percent.
But it said that an operating profit of 125 million euros'demonstrates the capacity to generate positive results beforeimpairments and provisions'. It also cut operating costs bynearly 13 percent to 755 million euros.
The bank, which had assets worth 57.5 billion euros, saidits customer deposits, which had slumped before and shortlyafter the resolution, rose by 2.8 percent to 27.4 billion euros,while net loans fell by nearly 10 percent to 31.6 billion.
Stock da Cunha said he was targeting a 6 percent increase indeposits this year.
Novo Banco ended the year with common equity Tier 1 solvencyratio of 13.6 percent under phased-in criteria, and 11.5 percentfully-implemented, 'one of the highest values in the Portuguesefinancial system', Novo Banco said.
The solvency boost came after the central bank in lateDecember took a controversial decision to transfer nearly 2billion euros in bonds from Novo Banco back to 'bad bank' BancoEspirito Santo, intended to plug a 1.4 billion euro capitalshortfall identified by an ECB stress test on Novo Banco.
The Bank of Portugal is leading the state's efforts to sellNovo Banco to recover the rescue funds. The first attempt failedlast year as bids came in too low, but the sale was relaunchedlast month.
