Portugal’s banking system closed 2018 with earning totalling €1.3 billion, against losses of € 228 million in the year before, according to the European Banking Federation (EBF).

According to the data released by EFB, these results are «largely explained by the substantial reduction in impairments».

Last year there was also a significant decrease in the non-performing loans (NPL) ratio, with total NPLs to fell by €24.6 billion since the peak in June 2016. «Ambitious strategies have been implemented to reduce NPLs and remarkable progress has been achieved: the NPL ratio has decreased significantly after reaching its peak level in June 2016 (from 17.9% to 9.4%), while the NPL coverage ratio increased from 43.2% to 51.9%», says EFB.

Total outstanding loans decreased 0.6% year-on-year, which may be an indication that deleveraging is nearing its end. Considering the domestic activity, loans to non-financial corporations (NFCs) fell 4.8% to €69.6 billion. In 2018, loans to SMEs, which correspond to 80.2% of total corporate loans, decreased 5.6% year-on-year to €55.4 billion. Furthermore, SMEs’ overdue credit dropped significantly (down 35.7% year-on-year or €3.2 billion), with the corresponding ratio standing at 10.4% (versus 15.2% in 2017), mostly fuelled by the performance of micro companies. Loans to households rose by 0.5%, with loans for consumption increasing by 10.5% and loans for house purchase decreasing by 0.2%.

At the end of 2018, the Portuguese banking system comprised 150 institutions, 60 of which were banks (including 30 branches of foreign banks), 86 mutual agricultural credit banks and four savings banks. The number of bank employees stood at around 1% of the total active workforce, while the five largest banks accounted for 78% of total assets.

Original Story: EXPRESSO | Lusa
Photo: Svilen Milev from Free Images
Edition and Translation: Prime Yield

After a long-running investigation, Portugal’s competition authority AdC announced it fined 14 banks a total of € 225 million for concerted practices of exchanging sensitive commercial information on credit products.

The fines were imposed on Portugal’s biggest bank, CGD, as well as Millennium BCP, BBVA, BIC, BPI, BES, BANIF, Barclays, Caixa de Credito Agricola, Montepio, Santander, Deutsche Bank and UCI.

«AdC is not aware of similar convictions in other member states of the European Union and (it) is therefore an unprecedented condemnation,» it said.

In a statement, AdC said that for more than a decade, between 2002 and 2013, the banks exchanged sensitive information on the supply of retail banking credit products, including mortgages, consumer and corporate loans.

According to AdC, each bank knew in detail «the characteristics of the offer of other banks, which discouraged the target banks from offering better conditions to customers by eliminating competitive pressure».

AdC said the scheme had a significant impact on customers.

«By distorting the rules of competition through unlawful coordination that allowed them (banks) to reduce the risk and uncertainty about the performance of their direct competitors, the behaviour of the banks harmed competition, directly affecting consumers,» AdC said.

The fine imposed was based on the «severity and duration of the participation in the infringement by each bank», AdC added.

Original Story: Reuters | Author: Catarina Demony and Sérgio Gonçalves
Photo: Photo by Armindo Caetano from Free Images
Edition: Prime Yield

Portugal’s Novo Banco confirmed the sale of a non-performing loans (NPL) portfolio originally valued in €2,732 million to an international fund for €193 million. This operation represents a € 106 million loss-making in 2019 results but will have a positive impact in the bank’s capital, with its NPL ration shrinking from 20.7% to 15%.

In cause, a portfolio of NPL and related assets, including securities – real estate or shares -, among others, that were previously arranged in the so-called Nata II Project. The buyer is a society owned by the US asset management group David Kempner European Partners.

However, the dimension of the now sold portfolio ended to be smaller than the € 3 billion initially estimated, since there were excluded ten cases with a combined original value of € 309 million, for which the bank believes it can receive individual biddings with a more attractive value. The information was released by the bank in a note, where it explains that this is still the largest transaction of its kind to be completed in Portugal.

The loans now sold correspond to assets identified as high-risk and which losses could unleash further capital injections from the State. Among these assets, inherited from the extinct BES, there were credits borrowed by companies as the Ongoing or the construction group Moniz da Maia.

In a note, Novo Banco states that with such deal «another relevant step in the process of non-performing assets disposal was given, allowing the bank to accelerate its reduction».

The credits and assets sold had a nominal value of € 2,732 million and a gross book value of € 1,713 million. The difference among these figures is explained by the fact that the original values include liabilities, guarantees and writte-offs. The sale was closed by only €191 million, representing a discount of 89% from the assets’ book value, but of only 35% from the net value, meaning that the bank had already recognized significant impairment losses in these.

Original Story: Observador |  Author: Ana Suspiro 
Photo: Novo Banco site
Translation and Edition: Prime Yield

Portugal’s banks have around €4 billion in bad loans for sale, 75% of which from the extinct BES. In the country there are almost one hundred credit recovery companies, but only about a fifth is registered.

«To buy [non-performing credit] from CGD [Caixa Geral de Depósitos] is one thing, buying from Santander is other completely different», said to Renascença the executive director from APERC, the association that represents more than 90% of the recovered credit in the country.

The reason, he explains, «has to do with the credit’s risk analysis and its acceptance prospects». According to António Gaspar, «the acceptance of the credit risk analysis, for instance, is very much stricter in Santander than in CGD or of what it was in BES, now Novo Banco».

In practical terms, this means that, with a stricter risk analysis the probability of default is much smaller and the «existing defaults will be easily recovered than those having a larger net, on which everything fits in».

Original Story: Renascença | Author: Sandra Afonso 
Photo: Caixa Geral de Depósitos
Translation and Edition: Prime Yield

In Portugal, more than half of the firms do not have any bank relationship, reveals the country’s Central Bank (BdP).

According to an analysis taken by BdP’s team, when firms borrow from banks, they hold two bank relationships on average. The smaller firms rely on less banks than the larger ones. Large firms have on average six different bank relationships, while micro firms, that employ less than 10 employees, usually have only one bank relationship.

There is also evidence that when firms gain access to bank loans for the first time, they usually establish a single bank relationship. As time goes by and the firm expands its activity, the likelihood of establishing relationships with other banks increases.

Original Story: BdP | Author: Diana Bonfim and Sujiao Zhao 
Photo: FreeImages.com/ Matthew Bowden
Edition: Prime Yield