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LISBON, Jan 4 (Reuters) - Portugal started a planned recapitalisation of state-owned lender CGD on Wednesday by converting 945 million euros of contingent convertible bonds (CoCo) into equity and transferring 500 euros of shares to the bank, the finance ministry said.
The recapitalisation, which will include a direct capital injection by the state of up to 2.7 billion euros in the second phase, was agreed with the European Commission in August.
The ministry said in a statement the convertible bonds were transferred to CGD on Wednesday as was the 500 million euros of CGD shares held by state holding company ParCaixa.
Portuguese banks are still reeling from two bank rescues in 2014 and 2015 that undermined investor confidence. CGD, Portugal's largest bank by assets, needs to bolster its capital because of massive bad loans on its books.
CGD posted a net loss of 189 million euros in the first nine months of last year.
Reporting By Axel Bugge; Editing by Angus MacSwan