Government negotiates loan for a further injection into Novo Banco

The Portuguese government is trying to arrange finance so that the Resolution Fund can channel another tranche of money into Novo Banco.

The bank that emerged from the BES debacle has asked for €600 million this year (when the State Budget only allowed for €475 million). 

The government apparently seems prepared to spend €400 million, but first it has to raise it. Bloco de Esquerda has said Novo Banco should get another cent.

Original Story: Portugal Resident| Natasha Donn
Photo: Novo Banco website
Edition: Prime Yield

Brazil’s Caixa may raise up to $1.15 bln in insurance holding Caixa Seguridade IPO

Brazilian state-controlled lender Caixa Economica Federal may raise up to 6.5 billion reais ($1.15 billion) by selling part of its stake in insurance holding Caixa Seguridade Participacoes according to documents filed with CVM.

The calculation considers the maximum size of the offering and the top of the price range for the shares, which was set between 9.33 reais and 12.67 reais per share.

The offering size will initially be 450 million shares in the insurance holding owned by parent Caixa Federal, but, depending on demand, the number of shares may rise to 517.5 million.

The IPO will be priced on April 27, according to the documents, and Caixa Seguridade will be listed under the ticker symbol CXSE. The offering will be managed by investment banking units of Morgan Stanley, Caixa Economica Federal, Bank of America, Credit Suisse AG, Itau Unibanco Holding and UBS BB.

Original Story: Nasdaq |  Tatiana Bautzer
Photo: Rodrigo de Oliveira
Edition: Prime Yield

Abanca acquires the Novo Banco’s retail network in Spain

Abanca, the heir group of the old Galician savings banks, has closed the purchase of the retail network from Portugal’s Novo Banco in Spain. After the operation, Abanca, will tottal 71,338 million euros in assets owned and 42,368 million of loans to customers under management, 46,037 million in deposits and 11,789 million in off-balance-sheet liabilities. It will have 6,312 employees and 745 offices.

With this, the Galician entity reports that it reaches 100,000 million in business volume and will increase its presence both in retail banking and in the business of companies. The group assures that “the purchase presents a low execution risk and minimal capital consumption.” The agreement contributes 4,287 million of business volume and 10 branches, in addition to 172 employees and 102 financial agents. The closing of the operation is awaiting the authorizations of the competent authorities.

The bank defends that the operation “strengthens” its presence in Spain, especially in Madrid and in “strategic” businesses for the entity. The first is the Personal and Private banking business that has already grown in recent years with the development foreseen in its Strategic Plan and with the purchases of the Deutsche Bank PCB network in Portugal, that of Banco Caixa Geral in Spain and, more recently with the acquisition of Bankoa. The second of the axes that will be reinforced with the purchase of Novo Banco’s Spanish network is the business of companies, especially in off-balance-sheet operations and foreign activity.

In addition, Novo Banco will provide growth potential in lines such as insurance activity. The insurance business is in full growth in Abanca’s strategy after the relaunch of the life insurance company and the creation of Abanca Seguros Generales together with Crédit Agricole Assurances, which already has permission to operate and which will launch its first products own in the next few weeks.

Abanca adds with this operation a new milestone in the construction based on mergers of the banking group that emerged from the old savings banks and is its sixth operation in seven years. The first was in 2014, with the integration of Banco Etcheverría. After that, in 2017, came the purchase of Popular Financial Services and a year later, that of Deutsche Bank PCB. That same year, Abanca added the business of another Portuguese bank in Spain, Caixa Geral. Last year it incorporated Bankoa, whose integration will take place throughout this year.

Original Story: Spain News | News
Photo: Abanca website
Edition: Prime Yield

Impact from the pandemic on Greek banks to intensify in 2021

The impact of the pandemic on the banking sector is expected to intensify in 2021, mainly in the form of a new wave of NPLs, as well as an anticipated worsening of the Deferred Tax Credits (DTCs) as a share of total prudential own funds, according to the Bank of Greece, the country’s central bank. 

In the governor’s annual report, the central bank said that it has estimated that new NPLs in 2021 will amount to 8-10 billion euros.

In addition to the twin problem of NPLsand DTCs, Greek banks face a number of serious challenges, common to most euro area banks, such as low core profitability, increased competition from non-banks, challenges stemming from the incomplete banking union, and others associated with the impact of climate change and cyberattacks,” the bank said. 

“Non-performing loans (NPLs) stood at 47.4 billion euros at end-December 2020, down by about 21 billion euros from a year earlier. The NPL ratio to total loans remains high, at 30.2% compared with an EU average of just 2.6%. However, compared with its March 2016 peak, the stock of NPLs has declined by roughly 60 billion euros, mainly through loan sales and write-offs, and much less through recoveries from active NPL management. 

By the time the Hercules plan is completed in the course of 2021, theNPL ratio will likely have fallen to about 25%and the average capital adequacy ratio to below its current levels, with a simultaneous increase in the share of DTCs. These estimates do not take into account the new NPLs that are expected to be added to the current stock as a result of the pandemic shock,” the report added.

Against this background, additional measures need to be taken to facilitate the frontloaded recognition of credit losses on account of the pandemic, as well as the fast repair of bank balance sheets together with addressing the DTC problem. To this end, the Bank of Greece called on the government, as a complement to the Hercules plan currently underway, to establish an Asset Management Company (AMC). 

The Bank of Greece proposal simultaneously addresses the problem of DTCs. The government is examining the advisability of establishing an AMC, as proposed by the Bank of Greece, and has applied to the European Commission’s DG Competition for an extension of the Hercules plan. Should the proposal of the Bank of Greece not be selected by the authorities, an alternative way of addressing the problem of DTCs will need to be found that is compatible with the applicable capital requirement legislation,” stressed the bank. 

The commitment of sizeable public funds in the form of state guarantees, to support NPL securitisation through the Hercules plan, which was a decision in the right direction, should ensure a definitive and comprehensive solution to the twin problem of NPLs and the high share of DTCs in banks’ regulatory own funds, it said. 

Original Story: Ekathimerini | Newsroom
Photo: Bank of Greece Website
Edition: Prime Yield

Almost a third of Portuguese companies in state of “significant debt”

Roughly 30% of Portuguese companies suffered “significant defaults” in 2020 despite the various State led injections of liquidity and fiscal stimuli designed to “atentuate the economic effects provoked by the pandemic”, reveals a study on ‘management of credit risk’ promoted by Spanish agencies Crédito y Caución and Iberform.

Original Story: Portugal Resident| Natasha Donn
Photo: Photo by Pasqualantonio from
Edition: Prime Yield

Brazil’s biggest banks battle for reinvention in digital era

Incumbents have enjoyed huge profits but low interest rates and fintech challengers are forcing change.

Brazil’s big banks had it good for years.

 A small club of institutions dominates the high street in Latin America’s largest economy, long notorious for its costly banking fees and borrowing rates, with their fat margins often the source of public anger. 

“Profits are enormous at the banks. They are really excessive,” was the verdict in 2019 by one politician — not a leftist firebrand, but the country’s pro-market economy minister, Paulo Guedes. 

But as the oligopoly faces a trifecta of low interest rates, the economic impact of Covid-19 and digital upstarts snapping at their heels, lenders are under pressure like never before to accelerate reforms and provide better value for money to clients. 

The chief executive of the country’s biggest private sector bank, Itaú Unibanco, puts a positive gloss on what he describes as “a fierce scenario” when it comes to competition 

“The Brazilian banking sector has been changing rapidly, and this is very good for both consumers and the so-called traditional banks,” said Milton Maluhy. But he admitted: “We need to be quicker and better for our products and services to outdo competition.”

The five giants that tower over the country’s financial system — Itaú, Bradesco and Santander Brasil, along with state-controlled Banco do Brasil and Caixa Econômica Federal — have in recent years embarked on investments in technology in a bid to stop customers switching to challengers such as Nubank, Brazil’s internet banking unicorn. 

Since the start of the coronavirus crisis, many have also deepened cost-cutting measures, with branch closures and redundancies. The need for reform is more urgent than ever with the pandemic having hastened the pace of digital change.

 Regulators are attempting to boost customer choice too: the central bank is rolling out an “open banking” initiative, aimed at giving clients greater control over their data and boosting competition, and last November introduced an instant payment system that is free for individuals.

Christened “Pix”, it offers a way for ordinary Brazilians to avoid at least some of the range of charges that banks have typically attached to standard services, such as current accounts and money transfers. 

Moody’s has estimated over the next year the banks could lose R$16bn ($2.9bn) of those fees, almost 10% of the total earned, as free or cheaper alternatives become available. Fees account for about 30% of bank earnings, according to the rating agency. 

As with many Latin American countries, margins in Brazil’s banking sector are the envy of peers elsewhere. The average return on equity (ROE), an important industry metric for profitability, stood at 17.2% in 2019, according to S&P Global Market Intelligence. That compared with 10.6% in the US, 8.8 per cent in Asia-Pacific and 5.8% in Europe. 

“There’s a big debate going on in Brazil [on] what’s going to happen to the profitability of the big banks,” said Mario Pierry, an analyst at Bank of America. “Now interest rates have come down, they can’t just survive buying government securities — they need to start lending more.” 

But the big lenders are not standing still. Along with around 1,500 branches closed and 13,000 job cuts last year, according to annual reports, many are pursuing copycat strategies to ape the fintechs’ success.

This has ranged from launching their own digital banks and investment brokerages to tap into the wave of new retail investors in Brazil, through to acquiring stakes in promising start-ups.

Itaú now offers third-party products in its insurance and asset management businesses, while Santander Brasil has followed rivals by introducing a virtual assistant bot. 

Bradesco has announced plans to float or sell a stake in its separate digital bank, Next, which does not charge fees and has 4m users, within the next couple of years.

 “When you have lower margins, the only remedy for this is to gain scale,” said chief executive Octavio de Lazari Junior. 

For consumers and businesses a shake-up is well overdue. Credit has traditionally been very expensive and often hard to access, partly a reflection of the high interest rates that were a legacy of the country’s long-running battles with inflation. 

For a long time, the banks made easy returns by stuffing cash into high-yielding government debt. However, with the central bank’s benchmark Selic rate at 2.75%, recently raised from an alltime low of 2%, that model has come under strain. 

The pandemic delivered a serious dent to earnings in 2020. Although lenders remained in the black, considerable provisions to cover bad loans contributed to the biggest percentage terms drop in two decades with sector-wide profits down almost a quarter, according to data provider Economatica. 

But it is the confluence of competitive forces and regulatory changes that has raised questions about the longer-term trajectory.

 Despite a downward trend over the past few years, borrowing costs in Brazil rank among the highest in the world.

The average annual interest on a loan has crept up to 22% for households and 11.3% for businesses, according to central bank data. 

Ilan Goldfajn, chair of Credit Suisse in Brazil and central bank president between 2016 and 2019, believes that low rates are here to stay and will eventually feed through into credit.

 “Lending rates are still very high and they’re now going down over time — it’s a process.”

 A jolt to the incumbents and their comfortable ways of operating has come from a band of homegrown fintechs with lower overheads and no branches. 

Leading the pack is Nubank, which boasts almost 35 million customers in Brazil out of a population of 213 million. Following a $400m fundraising this year, it has a valuation of about $25bn, according to two people familiar with the situation. Other rising brands include Neon and C6.

Rafael Schiozer, a professor at the Fundação Getúlio Vargas, said while traditional banks had adapted their investment products they were still behind fintechs on the lending side. “They need to go faster, because the fintechs have credit operations that are easier to use and with better prices.

However, there is some scepticism about how much of the lending pie the fintechs can grab. “At the end of the day, the new entrants in digital credit don’t have the balance sheet to keep all of the [loan] origination on their books,” said Jorg Friedemann, an analyst at Citi.

For the time being, incumbents still have the advantage of scale, brand power and physical presence. 

Although low interest rates tend to squeeze bank earnings, they provide the conditions to expand lending in a country with a weak level of credit penetration. 

“Brazil has never had a time like this in terms of [low] rates to stimulate mortgages,” said Ceres Lisboa, analyst at Moody’s.

 Publicly-owned Caixa Econômica Federal is seeking to boost financial inclusion for the poorest one-third of Brazilians.

 Already the biggest lender by customer numbers, Caixa created 35 million new accounts last year to pay government coronavirus benefits to people who were previously “unbanked” and is now opening new branches and promoting its digital arm. 

“We are going to launch micro-credit for 10 to 30 million people through mobile phones,” said chief executive Pedro Guimarães. “These clients of [our app] who are entering the financial market can get micro-insurance and a cheap credit card, step by step.”

Original Story: Financial Times | Michael Pooler 
Photo: Photo by Carlos Eduardo Livino from
Edition: Prime Yield

Almagro Capital plans to invest €1 billion in reverse mortgages

The investment strategy of reverse mortgage purchase by Socimi Almagro Capital consists of acquiring real estate from older people when they decide to monetize their illiquid savings concentrated in their habitual residence, but staying in the same home for life.

In this sense, the company has an ambitious growth plan for the coming years. Currently, it has a portfolio of a portfolio of 83 homes and an investment of about 40 million. But the objective of the Socimi is to multiply the assets by 20 in the next three or five years, according to Bruno Bodega, CEO of Almagro Capital, to El Economista.

For this, the firm expects to have a capital of 500 million that will allow them to make an investment of 1,000 million in that period. From the Socimi they assure that they already have the “commitment” of some of the partners who entered the last capital increase.

However, the CEO of the Socimi points out that beyond large investors, they want many individuals to enter, because it is a good and comfortable investment. In this regard, he clarifies that «we believe that it is better to participate in 0.1% of a thousand houses than to have one». According to the manager, the share offers an annualized return of 5%.

In Spain, only Almagro Capital operates in the reverse housing model, but in Europe its use is much more widespread. For example, in England and France it is a formula that is highly developed and transactions worth around 4,000 million euros are closed.

Original Story: Iberian Property | Alexandre Lima 
Photo: Almagro Capital site
Edition: Prime Yield

Greek banks will absorb additional NPL disposals, says DBRS Morningstar

A few days after upgrading the outlook of the Greek credit sector from stable to positive, DBRS Morningstar said in a commentary it believes that recent subordinated debt issuance and capital actions should enable the banks to absorb the impact of additional nonperforming exposure (NPE) disposals.

Nevertheless, the global credit rating agency considers external factors such as investor appetite and the macroeconomic environment to be key to the banks’ success. It noted that the Greek banks combined reduced their NPE stock by 50% year-on-year on a pro forma basis as of end-2020 and have announced further NPE disposal plans.

Strengthened capital bases through restored and ongoing access to the subordinated debt capital markets along with capital actions should enable the banks to absorb the impact of the newly announced NPE disposal plans, DBRS Morningstar said, adding that continuous investor demand and the pace of the economic recovery, which will likely dictate the performance of the loans that have been granted payment holidays, will be crucial for the banks to achieve their targets.

Following significant NPE reduction in a challenging year and recent announcements for further de-risking, we consider that strengthened capital bases should enable the Greek banks to absorb the impact of the additional NPE disposals. The economic recovery along with the level of investor demand will be key in the banks’ meeting their targets.” the rating agency commented.

Original Story: EkathimeriniAuthor: newsroom
Photo: Photo by Lotus Head in
Edition: Prime Yield

World Bank forecasts put Brazil among the Latin-American worst performing economies in 2021

The World Bank projects growth of 3% for the Brazilian economy in 2021, a figure close to government and private sector estimates and which places the country in the top ten with the weakest results expected for 29 Latin American and Caribbean economies, according to a report released on March 29th.

In 2020, the Brazilian economy shrank 4.1%, the sixth smallest drop and a result above the average of -6.7% in the region, which should expand by 4.4% in 2021, according to the World Bank. Due to emergency aid, Brazil spent the most to combat the pandemic.

Latin America and the Caribbean suffered more health and economic damage due to the Covid-19 pandemic than any other region, although there is the potential for significant transformation in key sectors as the region begins to recover, says the report of the Bank.

The number of deaths, for example, grew by almost 90% in the region, triple the increase seen in the world average, while the economic downturn was greater than in other country blocs. In 2021, there is no prospect of a vaccination rhythm that will grant immunity to the population of Latin America this year, according to the bank.

Original Story: Folha de São Paulo| Eduardo Cucolo 
Photo: Photo by Cesar Fermino from
Edition: Prime Yield

Unicaja and Liberbank shareholders approved their merger to create Spain’s 5th largest bank

Shareholders of Spanish lenders Unicaja and Liberbank approved their merger, paving the way for the creation of the country’s fifth biggest bank in terms of assets.

The merger – under the terms of which Unicaja will fully absorb its rival to create a bank with 110 billion euros in assets – will bring Spain’s number of banks to 10, down from 55 prior to the 2008 economic crisis.

This marks a further acceleration of the sector’s consolidation in Spain after the merger between state-owned Bankia and Caixabank was completed last week to create the largest domestic lender.

The Unicaja-Liberbank deal will allow the combined bank to save 192 million euros annually and reach a capital ratio of 12.4% following 1.2 billion euros of merger-related costs, the banks said.

“The (merged) bank expects to be more profitable and efficient, which will result in higher organic capital generation to finance its growth, and higher recurring dividends,” Liberbank Chief Executive Manuel Menendez told shareholders.

Banks across Europe are struggling to cope with record low interest rates, and the economic downturn sparked by the coronavirus pandemic is forcing a focus on further cost-cuts, including through tie-ups.

Unicaja shareholders approved a total payment of 16.91 million euros against 2020 results, while Liberbank approved 7.86 million, both in accordance with the 15% dividend cap set by the European Central Bank (ECB).In December the ECB decided to let banks pay out part of their cumulative 2019-2020 profits to shareholders if they have enough capital, easing a blanket ban on dividends and buybacks set during the first wave of the coronavirus crisis.

Original Story: Reuters
Photo: Unicaja site
Edition: Prime Yield

Portugal’s frozen loan repayments decline further in the beginning of the year

The volume of loan repayments suspended by Portuguese banks under a scheme to help businesses and individuals through the pandemic slipped in January to 45.7 billion euros ($54 billion), further retreating from a peak in September.

The latest figure released by the Bank of Portugal compares with 46.1 billion euros of the so-called loan moratoriums, including capital and interest, in December and an all-time high of 48.1 billion in September.

The central bank said 54,000 companies had access to the scheme in January, for a total of 24 billion euros, or 33.2% of total corporate loans.

“The accommodation and restaurant companies were the ones that stood out the most, with 57% of their total loans covered by this measure,” it said, without giving further details.

Portugal’s once-booming tourism sector suffered its worst results since the mid-1980s last year due to the pandemic.

Private individuals suspended 20 billion euros of loan repayments, or 16% of their total loans, the financial authority said, adding that mortgage loans made up 86% of that amount.

The freeze, in part aimed at avoiding a jump in bad loans at banks that spent the past five years reducing their ratios of non-performing loans, will end on Sept. 30. Some loans, namely mortgage loans, will start paying interest as of April.

Portugal’s largest listed bank Millennium bcp wants the government to extend the loan repayments freeze for pandemic-hit tourism companies beyond September if the health crisis has not been overcome by then, Chief Executive Officer Miguel Maya said in February.

Portugal’s lenders have cut their average non-performing loan (NPL) ratio to around 5% of total credit, but it is still almost twice the European average. 

Original Story: Reuters | Sérgio Gonçalves 
Photo: Photo by Armindo Caetano from
Edition: Prime Yield

Piraeus Bank gets shareholder approval for 1bln euro equity offering

Piraeus Bank, one of Greece’s four largest lenders, got the green light for a planned equity offering to raise about 1.0 billion euros from shareholders at an extraordinary meeting.

The bank, 61.3% owned by Greece’s bank rescue fund, the Hellenic Financial Stability Fund (HFSF), has said the offering of new shares will dilute the HFSF’s stake to a minority holding without any blocking power, meaning below 33%.

Chief Executive Christos Megalou told shareholders that the plan would help the bank to cut the ratio of bad loans within its overall debt portfolio.

The reduction of our stock of non-performing exposures (NPEs) is the priority of the ‘Sunrise’ plan … to get us to a single-digit NPE ratio,” Megalou said.

Piraeus Bank’s NPE ratio at the end of last year was 45%, not counting two securitisations that will be concluded later this year.

He said cleansing of the bank’s balance sheet of bad loans would “allow the sustainable funding of Greece’s economy”.

The bank said 99.3% of shareholders at the meeting voted in favour of the plan to issue new shares.

The equity offering will be a combined international placement with institutional investors via bookbuilding, and a domestic public offering that will take place simultaneously.

The issue price of the new shares will be determined in the bookbuilding and will be the same for both institutional and domestic investors.

Original Story: Reuters
Photo: Piraeus Bank Site
Edition: Prime Yield

Brazil’s credit conditions improve in February ahead of COVID-19 spike

Credit conditions in Brazil improved in February, central bank figures showed, as a broad measure of consumer and business default ratios held steady at a decade-low, bank lending spreads narrowed, and credit growth rose.

The figures tie in with other indicators that suggest the full force of the deadly second wave of the COVID-19 pandemic now battering the country had yet to be felt by corporates and households in the first couple of months of the year.

A broad 90-day default ratio covering households and businesses was 2.9% in February for a third straight month, central bank figures showed. That is the lowest since the data series began in March 2011.

The default ratio for households, including borrowing such as auto loans and overdrafts, was unchanged at a series low of 4.1%, while the default ratio for non-financial companies was also unchanged at 1.6%, just up from December’s low of 1.45%.

Lending spreads narrowed to 22.9 percentage points in February from 23.5 points in January, the central bank said.

The central bank made available more than 1.2 trillion reais ($208 billion) worth of credit and liquidity to businesses, banks and financial markets last year to cushion the economic shock of the pandemic.

Many of these measures expired on Dec. 31, but the monetary authority has said some will be extended.

The stock of outstanding loans in Brazil rose 0.7% in February to 4 trillion reais, the central bank said. Personal loans rose 0.8% to 2.3 trillion reais, and business loans rose 0.6% to 1.8 trillion reais.

The total stock of loans rose 16.1% in the 12 months through February, with personal loans rising 11.3% and business loans up 22.9%, the central bank said.

Original Story: Reuters | Jamie McGeever 
Photo: Photo by Bruno Neves from FreeImages
Edition: Prime Yield

SPAIN Spain’s decade-old ‘bad bank’ liabilities push debt to 120% of GDP

Spain’s public debt reached 120% of gross domestic product last year, above the previously reported 117.1%, the Bank of Spain said on the end of March, after adding ‘bad bank’ liabilities stemming from the financial crisis a decade ago as demanded by Brussels.

The debt-to-GDP ratio spiked from 95.5% at the end of 2019 and 114% in the third quarter of 2020, mostly due to increased spending to cushion the effect of the COVID-19 pandemic and a simultaneous economic slump.

The higher final debt ratio confirms what a senior government source told Reuters last week.

The ‘bad bank’, known as SAREB, was created to take on over 50 billion euros in bad loans and other toxic assets from nine Spanish savings banks during the financial crisis in 2012 as part of an international bailout for Spain’s financial sector.

The accounting change follows demands from Eurostat, the European Union’s statistics body, that the bad bank, known as SAREB, should be considered a public entity. 

Original Story: ReutersAuthor: Aida Pelaez-Fernandez 
Photo: Photo by Victor Iglesias from FreeImages
Edition: Prime Yield

Moody’s upgrades Greek Bank’s outlook to positive

Moody’s Investors Service changed Greek banks’ outlook to positive from stable.

In a report, the credit rating agency said that its decision reflected mainly expectations for a further improvement in reducing the high levels of non-performing loans, as banks sell off legacy problem loans and move on with securitizations, combined with expectations for a gradual strengthening of Greek banks’ profits (core earnings).

The outlook reflects Moody’s assessment of the basic credit conditions that will affect Greek banks’ credit rating in the next 12-18 months.

Original Story: The National HeraldAuthor: Athens News Agency
Photo: Photo by Jonte Remos in
Edition: Prime Yield