Millennium BCP, Portugal's largest listed bank, reports a third quarter net profit of €142.1 million ($182.5 million), down 65 per cent, mainly because of a loss on its stake in domestic rival Banco BPI.

The drop was larger than expected by analysts polled by Reuters, who predicted, on average, net profit of €152 million and net interest income of €1.296 billion for the first nine months of 2008.

Excluding the provision for the depreciation of BCP's 10 per cent stake in BPI and other specific items, net earnings totalled €345 million, according to a report that the bank entitled “A year that will never recur”. Net interest income was 11 per cent higher at €1,277 billion.

In a statement last week, the bank said it plans to issue debt for which the bank may request state guarantees in support. It did not detail the amount it was planning to raise. It said it would "consider requesting the state guarantee" to back the debt.

Portugal's government recently announced a credit guarantee of €20 billion for its banks, which they could draw on when under pressure from the ongoing crisis.

Portuguese banks are generally thought to have done well despite the turmoil, comparably, due to conservative lending practices and the lack of a property boom in recent years, but recently their shares have plunged.

Earlier this month, leaders of the country’s three largest banks BCP, BPI and Banco Espirito Santo said the banks were strong enough to weather market conditions and would not merge in the face of financial turbulence. Prior to that, BPI and BCP had made two failed attempts to merge in the last twelve months; the latter is now rumoured to be considering new merger deals, according to Reuters.

BCP declined to comment when contacted by WealthBriefing.

Last week, BPI reported a third quarter net profit drop of 6 per cent, which the bank put down to losses on its holding of stock in BCP.