Cheaper Loans, New Fees: What Novo Banco’s €610M Profit Means for Portugal

Portugal’s fourth-largest lender has quietly slipped another solid profit under its belt. The figure – €610.5 million after tax for the first nine months of 2025 – is almost identical to last year, yet the composition of those earnings is changing in ways that matter for anyone with a mortgage, a savings account or a stake in the country’s public finances.

Why the result is more than just a round number

At first glance, a virtually flat profit may look like a non-event, but it signals three developments with direct impact on local wallets. First, interest margins are cooling as Euribor retreats from post-pandemic highs, translating into lighter loan instalments but also lower deposit remuneration. Second, fee income is accelerating, shifting costs toward transactional services. Third, the bank’s ability to earn during a transition period reinforces Portugal’s case for attracting long-term foreign capital as it prepares to pass majority control to France’s Groupe BPCE.

Dissecting the headline: where the money came from

Between January and September, Novo Banco generated €1.167 billion in total banking product, a modest uptick of 1%, even as the commercial slice slipped 2.8% to €1.095 billion. The crucial line – net interest income – shrank 6.5% to €829 million, confirming that the era of windfall gains from rising rates has peaked. Counter-balancing that slide, commission revenue jumped 10.7% to €266.1 million, helped by a growing retail customer base and a push into digital wealth products. Operating costs, meanwhile, advanced 5% to €384.2 million, a reminder that wage inflation and tech investment continue to bite, even after several rounds of restructuring.

Interest margin slows, fees take the wheel

For households, the cooling of the margin between lending and deposit rates – traditionally banks’ main driver of profitability – has a double edge. Monthly mortgage bills linked to 12-month Euribor have already fallen roughly €50 to €60 since spring, offering respite after two painful years of increases. Yet savers who rushed into term deposits at 3%-plus rates are now finding renewal offers closer to 2%. To compensate, the bank is monetising everyday services: card interchange, asset management, insurance brokerage and even the controversial maintenance fee on basic accounts. Those streams are less sensitive to ECB policy and, in aggregate, now cover close to one-third of the group’s cost base.

Capital strength and asset quality underpin the story

Behind the profit line sits a balance-sheet that regulators say is more resilient than at any point since the 2014 resolution of the old Banco Espírito Santo. The fully-loaded CET1 ratio remains above 16%, comfortably above the medium-term target of 13-13.5%. The stock of non-performing loans has fallen to roughly 3.3% of total credit, well below the European average, thanks to brisk portfolio sales and lower default formation. Crucially, the bank actually reversed €0.7 million in loan provisions, a dramatic swing from the €68.7 million charge booked a year earlier, indicating fewer surprises in the corporate book. Liquidity ratios – with an LCR near 160% – leave ample room for continued credit expansion, evidenced by a 6.3% rise in gross lending to €30.56 billion, led by housing and consumer segments.

Laying the tracks for a French handover – and maybe an IPO after all

Chief executive Mark Bourke used the earnings release to reassure investors that the planned sale to BPCE is "progressing through normal regulatory channels" and is expected to close in the first half of 2026. Lisbon has already pencilled in roughly €1.7 billion of proceeds in next year’s budget, money earmarked for debt reduction. Analysts, for their part, still flirt with the idea of a dual track: outright sale versus a partial Euronext Lisbon flotation that could value the bank north of €7 billion. Either scenario would mark the definitive end of the costly public backstop that saw the Resolution Fund inject €3.4 billion between 2018 and 2021. With the controversial Contingent Capital Agreement now terminated, no further taxpayer cheques are expected, a point the Finance Ministry is keen to underscore ahead of an election year.

What it means for borrowers, savers and the public purse

The next few quarters will test whether fee growth can fully replace the tailwind of high interest rates. For mortgage holders, the message is cautiously optimistic: instalments should keep edging lower unless global energy shocks revive inflation. Savers may need to shop around as banks adjust deposit rates to thinner spreads. And for the state, the combination of robust earnings and a forthcoming sale promises to remove a lingering post-crisis headache while delivering a one-off fiscal boost. In short, Novo Banco’s €610 million profit is less about record-breaking numbers and more about proof of maturity: a once-troubled institution now stable enough to change hands without fresh calls on the taxpayer.