March 6, 2017 / 6:18 PM / 6 months ago

UPDATE 1-Portugal's BCP posts smaller 2016 profit despite bad loan provisions

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LISBON, March 6 (Reuters) - Portugal's second-largest bank Millennium bcp posted a sharply lower 2016 net profit on Monday, but remained in the black for the second year running despite hefty losses last year due to massive provisions for bad loans.

It also said the pace of new bad loan entries fell significantly last year, while the coverage strengthened, and the share of non-performing loans and risky loans fell after it took loan impairment charges of over 1.1 billion euros ($1.16 billion), 37 percent higher than in 2015.

"There was a very positive and consistent evolution of the consolidated operating result before provisions," Chief Executive Nuno Amado told a news conference, citing an operating income of over 1 billion euros and adding that there was "a clear reduction in non-performing exposures".

For 2016, it reported a net profit of 23.9 million euros after a profit of 235 million euros in 2015, with net interest income - the difference between interest charged on loans and interest paid on deposits - rising 3.3 percent to 1.23 billion euros.

It did not announce its fourth-quarter result, but it had previously reported a nine-month net loss of 251 million euros.

The bank said its core net income rose 8 percent last year reflecting the higher net interest income and a 5 percent fall in operating costs after cutting staff and branches.

Its key solvency ratios strengthened in the last quarter of 2016, before an early February capital increase, which helped it repay expensive state loans and achieve a fully-loaded core Tier 1 ratio of over 11 percent, up from 10.2 percent at the end of 2015.

The capital increase that gave a bigger stake to BCP's key shareholder, China's Fosun, has helped ease some investor worries about Portugal's fragile banking sector, which is still reeling after two bank rescues by the state in 2014 and 2015. ($1 = 0.9451 euros) (Reporting By Sergio Goncalves and Andrei Khalip; editing by Susan Thomas)

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