BCP and Fidelidade unfazed by Fosun woes

Portugal’s insurance company Fidelidade and bank BCP are unlikely to be affected by financial problems reported by the Chinese company Fosun.

The Chinese authorities have asked China’s largest banks and Chinese state companies to declare their degree of financial exposure to the Fosun Group – one of China’s largest non-State conglomerations.

Fosun has a 85% stake in the share capital of insurer Fidelidade and a 30% stare in bank Millennium bcp according to Bloomberg. The new cased a fall in BCP shares by 5.69% to €0.14.
Sources close to BCP and Fidelidade remained unruffled as to exposure and possible fallout, largely because they do not hold Fosun securities and do not expect Fosun to collapse.

Officially, neither BCP nor Fidelidade have commented on the financial woes at Fosun and their exposure.

In July, the president of Fosun, Guo Guangchang in a written interview with Expresso said that the company had no plans to divest in Portugal”.

Fosun also owns the Luz Saúde Group because of its 85% stake in Fidelidade. The purchase of the insurer was its first acquisition in 2014, sharing capital at the time with Caixa Geral de Depósitos, holding a 15% stake. Fosun also holds a 5% stake in REN.

Original Story: Essential Business | News 
Photo: Millennium bcp website
Edition: Prime Yield

New worries over NPLs

Banks and companies that manage bad loans are concerned in view of the upcoming difficult winter in terms of energy rates, the new increase in interest rates that the ECB is expected to announce, and the increased obligations this period creates for households at the start of the school year.

Officials at banks and servicers are considering the possibility of measures to help borrowers, and despite the fact that so far the course of loan servicing is progressing smoothly, they all recognize the expediency of having an arsenal of measures if conditions worsen.

According to sources, emphasis should be placed on borrowers who are consistent with their repayments, with the aim of keeping alive banks’ serviced portfolios, and especially on those who have settled their debts and continue to comply with regulations. The aim is to prevent these loans from turning nonperforming and protect the arrangements made to date.

Competent banking sources insist that for now there are no thoughts on horizontal measures and that any arrangements be made at the request of debtors on the basis of individualized solutions, such as reducing their loan installments for a few months to be able to meet their obligations before being forced to default on a payment.

Banking sources explain that any intervention in performing portfolios in the form of a horizontal facility will have a serious impact on the provisions that the banks will have to take. This is because even if a loan is rearranged – that is, without turning bad – it goes into another category that requires increased provisions, which directly hits the banks’ profitability and undermines the effort to distribute dividends.

The test run for decisions in the near future will be the loans included so far in the state-subsidized Gefyra 1 and 2 programs, for loans which have started to expire and whose behavior will judge the endurance of households and businesses in continuing to service their debts.

Original Story: Kathimerini | Evgenia Tzortzi
Photo: Photo by Lotus Head in FreeImages
Edition: Prime Yield

Uncertainty and inflation may pressure Portuguese banks, DBRS warns

The performance of the Portuguese banks in the first half of the year was positive, but some factors, such as inflation, pose risks to their future performance, rating agency DBRS warns.

Portugal’s banking sector is striving so much that the net income of the largest Portuguese banks has almost doubled compared to the same period in 2021. However, the uncertainty and macroeconomic scenario may pressure future profitability and assets, warned DBRS.

In an analysis of Portuguese banking, the agency concludes that higher revenues and lower provisioning and impairment expenses boosted earnings in the first half. Banks reported an aggregate net income of €1,293 million, up from €678 million in the first half of 2021.

Fee and commission income was up 12% year-on-year, “with solid performance across the board reflecting the progressive normalisation of economic activities postpandemic”. Meanwhile, The aggregate stock of NPLs “continued to decrease Quarter on Quarter (QoQ) and Year on Year (YoY), as asset quality remained largely resilient following the winddown of the moratoria.”

DBRS projects that in the short term, the stock of NPLs may continue to decline, albeit at a slower pace, or even stabilise. However, persistent inflationary pressure and high energy costs will add to borrower stress and increase asset quality risks over the medium term.

As for funding and liquidity conditions, DBRS said these “remained adequate” but noted that “the recent market volatility is contributing to increased refinancing costs in the wholesale market.” 

Although the first half of the year was positive for Portuguese banks, “the growing uncertainty and more challenging macroeconomic environment due to the high energy prices and persistent inflationary pressure will likely pressure future profitability and asset quality,” the rating agency explained.

Original Story: ECO News | Luís Alexandre 
Photo: Photo by Svilen Milev from FreeImages
: Prime Yield

After “aggressive” hikes, Brazil Central Bank must stay vigilant, says head

Brazil’s central bank has been “quite aggressive” in raising interest rates, with much of that policy shift still to impact the economy, its head said, cautioning that policymakers could however not afford to “let their guard down.”

Roberto Campos Neto, speaking at event hosted by investment firm 1618 Investimentos, also noted that, while Brazil’s latest inflation figure came in above expectations, markets were not anticipating more rate hikes.

Brazilian consumer prices fell 0.73% in the month to mid-August. Inflation decelerated to 9.6% over 12 months, still far above the central bank’s target of 3.5% plus or minus 1.5 percentage points.  

“We think we cannot let our guard down,” Campos Neto said. “In this last inflation number, food still came much higher than we expected, we have some inflation components that we expected would slow down more quickly.”

The central bank has hiked interest rates to 13.75% from a record low of 2% in March 2021, but given signs that it will stop its tightening at its next rate-setting meeting in September.  

Campos Neto, who recently predicted inflation would be 6.5% this year, said it was important to emphasize that the central bank remained “vigilant.”

He acknowledged that much of the inflationary slowdown for this year comes from government measures after Congress passed tax cuts on key consumables including energy and fuel.

Part of the measures will expire this year, but President Jair Bolsonaro, seeking re-election in October, has already promised their renewal in 2023. Campos Neto said it was necessary to see which measures would continue next year and what the fiscal impact would be.

He added that market expectations for inflation in 2023 and 2024 had begun to settle and would fall “at some point.”

Original Story: Reuters | Marcela Ayres 
Edition: Prime Yield

Attica Bank restructuring plan to include NPL securitization

Attica Bank has only a few days to submit its capital restructuring plan to the Bank of Greece, which would include the third, and largest, securitization of bad loans, subject to loan assessment by credit rating agency DBRS. 

The Omega portfolio would include €1.3 billion in bad loans and its sale will also determine the bank’s needed capital increase. 

Original Story: Ekathimerini | Newsroom 
Photo: Attica Bank Linked IN
Edition: Prime Yield

Eleven banks in Spain recorded losses in the first half of the year

A total of eleven banks lost money between January and June 2022 in Spain, two fewer than in the same period a year earlier, according to individual data from the Bank of Spain.

The Bank of Spain reported that eleven banks lost money in the first half of 2022 – seven of these institutions (JPMorgan Chase Bank, Banco Europeo de Finanzas, Targobank, WiZink, Evo Banco, Credit Suisse AG Sucursal en España and Singular Bank) were already in the red in the first half of 2021.

JPMorgan Chase Bank National Association S.E. increased its losses by 17.3% in the first half of 2022, to €3.8 million, Singular Bank increased its losses by 84.6%, to €11.6 million, and Banco Europeo de Finanzas lost €141,000 until June, 4% more.

Targobank reduced its losses by 51.4%, to €4.26 million; WiZink cut its losses by 53%, to €12 million, Evo Banco reduced its losses by 30.2%, to €7.4 million, and Credit Suisse AG S.E. reduced its losses by 1.7%, to €5.07 million.

Deutsche Bank España and Banco Occidental, both of which reported a profit in the first half of last year, also posted losses.

In particular, Deutsche Bank España lost €5.2 million from the beginning of the year to June, compared with a profit of €5.6 million a year earlier, while Banco Occidental lost €3,000, compared with a net profit of €1,000 a year earlier.

Credit Suisse Bank (Europe) and Miralta Finance Bank presented their individual financial statements to the Bank of Spain for the first time, with losses of €15 million and €1.85 million euros, respectively.

Europa Press reported that Banco de Depósitos, Banco Alcalá, Wealthprivat Bank, Banco Pichincha and Andbank España, which recorded losses a year ago, entered into profit in the first half of 2022.

Andbank España earned €2.13 million until June, Banco Pichincha earned €827,000 and Wealthprivat Bank earned €150,000.

The profit amounted to €46,000 for Banco de Depósitos and €5,000 for Banco de Alcalá.

Liberbank, which was on the list of money-losing banks in Spain a year ago, has legally disappeared following its integration into Unicaja Banco.

Original Story: Euroweekly News |  Matthew Roscoe 
Photo: Bank of Spain
Edition: Prime Yield

Banks sell 1.6 billion in NPL and real estate during the holidays

In the middle of the holiday period, Portuguese banks are closing big deals like ECS, for 850 million. Novobanco sold its headquarters for 112 million. BCP, BPI, Montepio and Parvalorem also have portfolios on the market.

August is synonymous with holidays, but not for Portuguese banks, which are taking advantage of the good market conditions to do €1.6 billion worth of deals with non-performing loans (NPL) and real estate portfolios, according to information obtained by ECO.

“Most banks don’t need to sell these portfolios, but are doing so to take advantage of the good moment in the market and are getting prices they couldn’t imagine getting,” explains Marco Freire, CEO of Portuguese company Whitestar, which manages more than 10 billion euros in NPL and REO.

Half of this amount relates to the sale of ECS restructuring funds that the banks have just closed with the Davidson Kempner fund, in what will be the “real estate deal of the year” in Portugal, for a value of around 850 million euros, according to Jornal Económico.

Novobanco has also just sold the historic BES headquarters, on Lisbon’s Avenida da Liberdade, for 112 million euros to Spanish company Merlin Properties. BPI has sold the “Citrus” portfolio valued at around 100 million to LX Partners, a market source told ECO.

Other ongoing deals include BCP (with the “Aurora” NPL and REO portfolio worth 80 million), Santander (with the “Guadiana” property portfolio worth 100 million) and Montepio (with the “Alqueva” NPL secured portfolio worth 130 million), while Parvalorem, the vehicle that manages the spoils of the former BPN, has just unveiled plans to put the Imofundos property fund worth 250 million back on the market.

All in all, that’s €1.622 billion in business that is not part of the banks’ core activity. 

At this stage, banks are putting smaller portfolios on the market, when they were used to seeing large portfolios in recent years. This is mainly a reflection of the huge effort to reduce non-performing loans in recent years, which left banks with a level of problem loans at lows at 3.6% at the end of March.

Yet banks still had around €11.9 billion in hard-to-collect loans on their balance sheets, which will already correspond to the most problematic cases that have not yet been resolved. They also have more than a billion in restructuring funds.

Moment of inflection in the market

Whitestar’s CEO admits that the market may be nearing a “moment of inflection and transformation”, given the high-inflation environment and rising interest rates by central banks.

“Until two or three months ago, the market was overcompetitive. Investors were looking for low levels of returns, given the level of product risk, and there was a lot of liquidity and capital available. From the moment we started to see a rise in inflation and interest rates, investors started to have alternatives,” explains Freire.

There are already signs of these changes. There are “more aggressive” investors that are “temporarily” leaving the market “to try to understand where things are going”, according to the head of Whitestar. The other issue is the price, insofar as there are divergent expectations in relation to the values banks are demanding for portfolios.

Even so, Portugal continues to register “a good binomial demand / supply in the market,” ensures Marco Freire.

Inflation could lead to an increase in NPLs

In relation to 2023, specialists anticipate the continuation of this trend, essentially appearing portfolios around 100 million euros. And although rising interest rates could leave many families struggling to pay off their home loans, with an impact on the increase in bank bad debt, the effect will not come about immediately, but in two or three years.

For Marco Freire, “the main question is to know how long this situation will last” of escalating inflation and rising interest rates. “If we continue with this level of inflation for a long time, NPL levels will rise considerably,” he says.

Original Story: ECO | Alberto Teixeira 
Photo: Novo Banco website
Edition & Translation: Prime Yield

Collection agencies to start selling distressed loans back to banks

Debt collection agencies will start selling back to the banks portfolios of distressed loans that have been put back on a payment schedule.

The first such transaction, by loan recovery fund doValue, involves a portfolio of €100 million in mostly mortgages and is expected to take place late in 2022 or early 2023.

Original Story: Kathimerini | Newsroom 
Photo: Photo by Takis Kolokotronis in FreeImages
Edition: Prime Yield

Bank NPLs fall to 3.88% in June, at lowest level since 2008

Non-performing loans (NPL) granted by all credit institutions in Spain to companies and individuals fell in June to 3.88%, marking a low since December 2008.

According to provisional data from the Bank of Spain, this is the first month in which the NPL ratio fell below 4% since January 2009.

The June figure is 30 basis points lower than in May (4.18%) and 52 basis points below the NPL ratio of a year ago, which stood at 4.4%.

The reduction in the private sector NPL ratio reflects both an increase in credit granted and a decrease in the volume of NPL.

Specifically, credit to the resident private sector increased by €12.44 billion in June to €1.234 trillion, while the total volume of non-performing loans fell by €3.148 billion to €47.916 billion (the lowest figure since August 2008).

Compared with June 2021, total lending increased by €2.075 billion and the doubtful balance decreased by €6.302 billion.

The figures include the methodological change in the classification of Financial Credit Establishments (EFCs), which since January 2014 are no longer considered within the category of credit institutions. Excluding the change, the NPL ratio would stand at 3.98%, since the credit balance was €1.2 trillion in June, when excluding the credit of CFCs.

The data broken down by type of institution show that the doubtful assets ratio of all deposit institutions (banks, savings banks and cooperatives) closed June at 3.8%, compared with 4.08% in May and 4.34% a year earlier.

The NPL ratio of financial credit institutions stood at 6.22% in the sixth month of the year, down from 7.15% in the previous month and 6.51% in June 2021.

According to data from the Bank of Spain, the provisions of all credit institutions fell to €33.358 billion euros in June, down €2.033 billion euros in the month and €6.310 billion euros in the year.

Original Story: Estrategias de Inversion | Europa Press 
Photo: Photo by Victor Iglesias from FreeImages
Edition & Translation: Prime Yield

US’s Davidson Kempner to pay €850 million for the ECS funds

The ECS funds – FLIT and Recuperação Turismo Funds – will be sold for around €850 million to US investment management company Davidson Kempner Partners. The banks, which own these funds, have already reached a final agreement, but the operation still depends on regulators and is only expected to be concluded at the end of the year, according to the Portuguese newspaper Jornal Económico.

Caixa Geral de Depósitos, BCP, Novo Banco, Santander Portugal and Oitante (ex-Banif) reached an agreement with the North Americans for the sale of FLIT and Recuperação Turismo funds, according to a source close to the process. 

The agreement did not include the Recovery Fund, which will remain on the banks’ side. In this context, the banks may earn more money when this third fund is sold. The deal now depends on the market regulators, but the operation should be concluded at the end of this year.

Original Story: ECO News |News 
Photo by Armindo Caetano in FreeImages
Edition: Prime Yield

Santander Brazil to make R$1 billion available in lending to SME’s through a BNDES programme

On Wednesday 24 August, Santander Brazil commenced an emergency facility, the FGI PEAC (Fundo Garantidor para Investimentos do Programa Emergencial de Acesso a Crédito — Emergency Access to Credit Programme Investment Guarantee Fund), intended for individual microentrepreneurs and small- and medium-sized enterprises, via an initiative by BNDES (the Brazilian Development Bank). The resumption of the programme, which aims to stimulate lending through secured guarantees to financial institutions, gives businesses with a yearly turnover of up to R$300 million the green light to apply for a loan with Santander. This time around, the Bank plans to pay out R$1 billion in lending through the Brazilian Federal Government’s programme.

The bank’s corporate customers must apply for this facility exclusively through branches. The sums range from R$1000 to R$10 million, depending on the size of the business, which will be able to use this financial stimulus for rebalancing cash flow, for working capital or for carrying out investments in the business. Payment  terms range up to 60 months (five years) and the average rate could reach up to 1.75% per month.

According to Alexandre Fontenelle, executive superintendent of the Corporate segment at Santander Brazil, the BNDES emergency programme is very alluring for micro-, small- and medium-sized entrepreneurs, and it is also very beneficial to businesses in need of financial respite. The programme serves as a two-way street, since it’s a way for banks with below-average default rates on this facility to increase their appetite for extending credit. 

There is a very precise compromise to be had between product pricing and customer risk analysis, among other requirements guaranteeing the programme’s sustainability“, concludes Fontenelle.

Original Story: Santander BR | PR
Photo: Santander
Edition: Prime Yield

Credit to construction companies falls by 2.4% in 2021, to €27.2 billion

Credit granted to construction companies fell by 2.4% in 2021, following the general trend in business financing, according to the report ‘Evolución del crédito a empresas por sectores de actividad en España 20210, published by AIS Group, a consultancy firm specialising in the application of artificial intelligence solutions to risk management.

The report puts the balance of the credit portfolio in this sector at 27.235 billion euros in 2021, which is up to 660 million euros less than in the previous year, with construction being the sector that has most accelerated the decline in the need for financing.

According to the study, the indebtedness of construction companies is returning to the downward trend that began in 2008 and was only interrupted in 2020 due to the arrival of the coronavirus, when it grew by more than 7%.

As far as defaults are concerned, the trend has also been downward for decades and the pandemic has not reversed it either. Specifically, as of December 2021, the balance of non-performing loans (NPL) granted to construction companies had fallen by around 250 million euros, to just over 2.3 billion euros.

In any case, despite the fact that its portfolio of doubtful loans continues to shrink, construction reaffirmed its position in 2021 as the sector with the highest NPL ratio, at 8.5%. The Bank of Spain has already issued repeated warnings in recent months that institutions should be very vigilant because a considerable increase in NPLs is expected in the short term.

Original Story: Original Story: El Confidencial Digital |Europa Press 
Photo: Photo by Svilen Milev in FreeImages
Edition and translation: Prime Yield

Portuguese banks are in no rush to raise interest rates on savers deposits

Portugal’s banks are in no rush to raise interest rates on savers’ deposits even though the European Central Bank has done so by 0.5%.

Portugal’s five main banks Santander Totta, CGD, Novobanco, BPI and BPC say that competition will dictate if interests rates on savings will go up or not and not Euribor rates as happens with renumeration of mortgages.

Interest on new mortgages in Portugal have risen since the start of the year, from 0.81% in January 2022 to 1.47% in June; in the Euro area, increases have been taking place since December, from 1.32% to 1.9% for the same period, according to data from the Bank of Portugal.

However, regarding personal deposits, interest only changed in June with the European Central Bank rate increasing from -0.5% to 0%.

Nevertheless, savers continue to put their savings in banks despite there being no incentives. In June, the Portuguese deposited around €180 billion even though they received negligible interest.

Original Story: The Portugal Resident | Portugal 
Photo: BPI Facebook
Edition: Prime Yield