Novo Banco ‘not being sold off’ to rival but strengthened for IPO

Novo Banco’s CEO, Irishman Mark Bourke, said that the bank “is not currently in the process of being sold.”

The CEO of Novo Banco, one of Portugal’s largest banks, has said that it is not in the process of being sold off and that the aim of the current management is to strengthen the institution with a view to a “very viable” operation to float its shares on the stock exchange.

In an interview with Lusa, on the day that Novo Banco posted a 2022 profit of €560.8 million, its CEO, Irishman Mark Bourke, said that Novo Banco “is not currently in the process of being sold.” 

He cited a recent statement from the bank’s largest shareholder, US investment fund Lone Star, in which it denied having started drawing up contacts to sell its stake, and that it does not intend to start doing so this year. That was after reports in Spain that Lone Star was sounding out that country’s major banks to sell Novo Banco for around €2 billion.

“Spanish newspapers started talking about a valuation and talks,” Bourke told Lusa in an interview, citing the shareholder’s statement. “Lone Star then made a statement saying that there was no process.” 

As for whether Novo Banco itself is on the lookout for assets to buy, Bourke said that “it is more likely that it will buy activities or portfolios” that are complementary to its business – such as payments, asset management, “apps” – “rather than buying banks.”

However, he said, as is customary in the financial sector, management will always look at possible opportunities: “There are not many banks. But there are opportunities that come up and we look at every opportunity that comes up.” 

According to Bourke, the “best and most viable option” for Novo Banco is to move towards an initial public offering of shares on the stock exchange, even though that decision is one for the shareholders, in order to strengthen the bank. 

“We do not have an IPO process underway, but we see it as a very viable option,” he said. 

The conclusion of the Novo Banco restructuring process means that there is increasing talk of bank consolidation in Portugal. On the one hand, it is known that Lone Star bought Novo Banco with a view to first making it profitable and then selling it, so turning a profit; on the other, there is talk in the sector that other banks may have more or less weak shareholders, and that Lone Star may now have the initiative there. 

Original Story: Eco News | Lusa 
Photo: Novo Banco
Edition: Prime Yield

Interest rate spread is widening

All categories of new loans, especially business loans, saw an increase in interest rates of up to 0.50% in January, in contrast to deposit rates, where the increases are only up to 0.13%. This trend pushed the spread between new loan and deposit rates to 5.24% and 5.22% for existing balances, from 4.96% and 4.93% respectively in December.

The average increase in new loans is, according to Bank of Greece data, at 30 basis points (at 29 basis points for existing loan balances) and makes the cost of new borrowing as well as the servicing cost for existing loans extremely expensive in the country, burdening family budgets as well as the financing needs of businesses.

The increase is a result of the rise in interest rates by the European Central Bank, which drags the Euribor up as well. It should be noted that the data for January do not fully reflect the upward trend in interest rates, after the last increase decided by the ECB in February, but they do monitor the course of the 3-month Euribor, which, based on the latest data, has risen to 2.8%.

The ECB has already discounted a rise in the key interest rate by 50 basis points and, according to estimates, the 3-month Euribor will stabilize at 4% by the end of the year, while the start of the de-escalation process is not expected before the middle of 2024.

BoG data on interest rate developments for new loans in January 2023 show that business loans have been the hardest hit, rising by up to 50 basis points, with a focus on lending rates for microbusinesses and specifically for loans up to 250,000 euros, which have increased to 6.34%, but also for loans from €250,000 to €1 million, which have increased to 5.63%.

The average cost of financing large companies – i.e. for loans over €1 million – is also high, having increased to 4.85% from 4.49% in December, while the average cost of business loans has climbed to 7.20% from 7.06% in December. 

Original Story: Kathimerini | Evegenia Tzortzi 
Photo: Photo by Svilen Milev from FreeImages
Edition: Prime Yield

CGD sees €843 million profit in 2022 and is available to make acquisitions

After recording a €843 million profit in 2022, Portugal’s State-owned Caixa Geral de Depósitos (CGD) bank and is now focused on returning capital to the state. However it may make acquisitions, whether large or small, according to its Chairman, Paulo Macedo.

At the press conference of the 2022 results (profits of €843 million), Paulo Macedo was asked about possible mergers in banking in Portugal, especially when there is talk of Novo Banco coming on the market, which should move the sector. According to Macedo, the focus of Caixa Geral de Depósitos (CGD) is to maintain solidity and return to the state the capital it has injected into the bank. “That is what we have been doing and we would like to intensify,” he said. Then, he said, the bank will look at possible purchases.

“Then we may also be available to make acquisitions, whether large or small,” he said. In any acquisition, he added, there has to be “the conviction that the result is superior, of concrete gains” and “feel that there is an advantage for Caixa, for the state.” The manager said that CGD’s aim was to “maintain its leadership, substantially lower its risk, be profitable and continue to be the largest Portuguese bank.

Asked whether to do so it has to do an operation with Novo Banco, for CGD to remain leader, Macedo said that in CGD there is no obsession for leadership, “but it has value to be leader”. “It makes no sense to be a public bank and have a share that does not allow you to intervene in the economy or influence, Caixa clearly influences commissions (by having cheaper), ‘spreads’ (by having cheaper), etc. etc.,” he said.

Original Story: ECO News |News
Photo: Caixa Geral de Depósitos headquarters
Edition: Prime Yield

Rising rates push mortgage repayments to their highest since 2015

Spanish households reduced more than 2.7 billion in loans for house purchases in January, in the midst of the rise in the Euribor, and reaching a volume not seen since May eight years ago.

The outstanding mortgage balance accelerated its fall in January. All the signs are that the Euribor will continue to be on the rocks for the rest of the year, as the European Central Bank (ECB) will have to be more aggressive if it wants to tame an inflation rate that still shows no signs of slowing down. And with the fear that mortgage repayments will continue to rise, families have opted to amortize mortgages as a measure of protection against their escalation and to save themselves an increase in interest, which is already eating into disposable income.

Thus, according to data from the Bank of Spain, in January, the outstanding mortgage balance decreased by €2,758 million, to €508,199 million, 0.54% less than in December 2022. This is the largest month-on-month reduction since May 2015, when households repaid €2,798 million. If the sum of December and January are taken into account, this volume fell by just over €5 billion (in total €5.207 billion). Moreover, the reductions in December and January are equivalent to those experienced between August and November 2022, months in which this trend could already be seen.

Everything points to the fact that the outstanding mortgage balance will continue to fall throughout the year. At the same time, so will the volume of new mortgages granted. Thus, according to data from the supervisory body, 2022 ended up exceeding 2021 (with €62,220 million granted compared with just over €59,000 million in 2021), although at the start of the year there has been a decrease compared with December, of just over €4,100 million, the lowest figure for the whole of 2022 (and in line with August due to lower activity).

And except for the months of August, we would have to go back to 2020, the year of the pandemic (where the granting of credit was impacted by restrictions not only on mobility, but also by greater caution on the part of banks) to see similar figures. 

This is nothing new; financial institutions were already expecting a slowdown in lending for house purchases at the beginning of the year, which would last throughout 2023. If we add to this a contained unemployment rate, this is yet another reason that financial institutions can use to avoid having to significantly increase provisions to cover doubtful loans. Indeed, the Bank of Spain has also noted a further tightening of access to credit.

Original Story: La Información | Cristina Casillas 
Photo: Photo by Philipp K in FreeImages
Edition and translation: Prime Yield

Low-rate mortgages for young people

The Public Employment Service (DYPA) is expected to issue a public invitation to banks in order to pave the way, toward the end of March, for the granting of at least 10,000 low-interest mortgage loans to young people aged 24 to 39.

Young citizens with an income of between €10,000 and €16,000 per year or couples with a joint income of up to €24,000, plus €3,000 for each child, have the right to participate in the housing program.

According to the joint ministerial decision published in the Government Gazette, the loan is 75% financed by DYPA with no interest due on this section of the loan, while the remaining 25% is granted by the banks. This means that three quarters of the loan is interest-free, so that the final interest rate that the borrower pays for the entire amount is a quarter of the cost of a normal mortgage.

Therefore, in practice, to obtain a loan of €150,000 (which is also the maximum allowable limit) in order to buy a property worth €200,000, instead of an interest rate of 4.7% for 30 years, the beneficiary of the program will pay an interest rate of 1.17%. If it concerns a couple with three children, and with at least one of the two adults under the age of 39, the interest rate will be zero, as the loan will be fully covered by DYPA.

The houses for which young people will be able to get a mortgage loan must be over 15 years old, with a building permit issued up until 2007, and not exceed 150 sqm.

Before a loan’s disbursement, the bank is obliged to inform the Hellenic Development Bank and DYPA about the check it has carried out on the beneficiary’s eligibility and the property to be acquired.

In the event of a delay in paying an installment of more than 30 days, the bank will classify the borrower as non-cooperative, and if they do not pay after 90 days of continuous arrears, the bank can terminate the contract.

Original Story: Kathimerini |Roula Salourou 
Photo: Photo by Matthew Bowden in FreeImages
Edition: Prime Yield

Almost a third of Brazilian women are in default

Research released by the CNC also shows that 79.5% of women had some debt in February this year.

In February, 30.3% of the Brazilian women were in default, reveals the the Consumer Indebtedness and Default Survey (PEIC), carried out by the (Confederação Nacional do Comércio de Bens, Serviços e Turismo (National Confederation of Commerce in Goods Services and Tourism (CNC). Men, in the same category, account for 29.1% of defaulters.

The study also shows that 79.5% of women were in debt in February, which represents an increase of 1.1 percentage points compared to January. In the opposite direction, men had a drop of 0.1% in debt, compared to the same period. The survey points out that informal employment is among the factors responsible for women’s higher indebtedness, which causes income vulnerability.

The specialist in institutional, governmental relations and public management at the Fundação da Liberdade Econômica, Eduardo Fayet, explains that other factors within the Brazilian context also contribute to the increase in defaults in this period, such as the rise in inflation and, consequently, the loss of income.

“The second factor that has influenced a lot is the increase in interest rates. When a person goes into debt, with high interest rates, he obviously needs to pay more for the money he needs to take so that he can pay his bills. Another important factor is the employment/income ratio,” says Fayet.

Among the short-term modalities that have concentrated the indebtedness of the female public is the credit card (86.5%). Next is indebtedness in store books (19%) and payroll loans (5.9%). In other modalities, such as overdraft, personal credit, pre-dated checks, home and car financing and other debts, men outnumber the debtors.

Original Story: Diário do Comércio | News 
Photo: Photo by Bruno Neves in FreeImages
Translation & Edition: Prime Yield

Spain’s falling deposit rates highlight uneven impact of interest rate hikes

With European Central Bank policy makers preparing to hike interest rates yet again at their March meeting, Spanish banks have been paying their customers even less for their savings.

Spain’s lenders paid 0.37% on new household deposits with an agreed maturity of as long as one year in January, down from 0.42% in December, according to ECB data. By comparison, the rate for the savings of French families jumped to 2.34% from 2.13%, while Dutch banks paid 2.03%.

The trend for Iberian savers to get paid less is also seen at Openbank, the digital banking business that’s operated across several European markets by Banco Santander SA, Spain’s biggest lender.

A Spanish or Portuguese client earns a maximum annual rate of 0.2% on the savings account at Openbank, while a customer in the Netherlands can earn up to 1.5% for parking as much as €200,000 ($212,540) in a similar product, the bank said in response to questions. An account at Openbank’s German franchise pays 1%.

The issue of what lenders pay for savings is important because encouraging consumers to save instead of spend is key to the ECB’s efforts to bring inflation to heel. A further hike of 50 basis points in March — described as very likely by ECB President Christine Lagarde — would take its rate increases since July to 350 basis points.

“If credit is getting more expensive but savings are not getting the benefit, the transfer mechanism for monetary policy is not being fully employed,” Angel Talavera, head of European economics at Oxford Economics, said by phone. “Banks are just making more money and their balance sheets are getting stronger.”

Spanish lenders such as Santander are awash with customer funds and under no immediate pressure to offer more to attract savings.

“What really works in an economy is competition so we are in very competitive markets and we are adjusting to each market,” Santander Chairman Ana Botin said in an interview with Bloomberg TV last week.

Original Story: Bloomberg | Charles Penty and Macarena Muñoz 
Photo:Photo by Victor Iglesias from FreeImages
Edition: Prime Yield

Households have already renegotiated €400 million in housing loans

Portuguese households have already renegotiated with the banks housing loans worth around €400 million since the revision of the rules to prevent risks of default for families in greater difficulties due to the rise in interest rates, at the end of last year.

 The figure was advanced by the Minister of Finance, Fernando Medina, in Parliament, with Eco writing that at least 8,000 families have advanced with requests for the conditions of the loans to be reviewed.

The renegotiation requests, writes the newspaper, represent less than 1% of 1.3 million housing credit contracts with variable rate.

But, only a small part of the renegotiation processes will have been completed according to the most recent balance sheet of the banks, says Eco.

At BCP, were identified 4,000 higher risk situations that could lead to contract renegotiation. At BPI, around 2,000 customers requested renegotiation. At Santander Totta there will also be around 2,000 cases that fall under the Action Plan for Default Risk (PARI).

Original Story: Jornal de Negócios | News 
Photo: Photo by Hugo Humberto Plácido da Silva in FreeImages
Edition and translation: Prime Yield

Risk of credit crisis may lead to an interest rate drop

A report by the BC’s Financial Stability Committee (Comef) shows that there has been a slowdown in the pace of credit growth.

At its last meeting, the Financial Stability Committee (Comef), a body of the Central Bank, highlighted the issue of interest rates in the country in assessing the economic and financial scenario.

Comef pointed out that there was a slowdown in the pace of credit granting both to companies and individual consumers. More expensive money, with rising interest for the customer, despite the Selic rate being stationary since August last year at 13.75%, also makes institutions more judicious in granting credit, says the Committee.

The Americana’s bailout is one of the reasons that are leading this movement of institutions, since it helped to change the credit market perspectives in the country.

In part, this movement of institutions was motivated by the bankruptcy of Americanas, which helped to change the perspectives for the credit market in the country

Aod Cunha, CNN’s Economy commentator, assesses that the continuation of the current level of interest rates should generate a challenging situation in the credit market.

“The maintenance of a high rate, the extension of that rate, evidently, at some point, would generate a situation of more acute credit restriction. We need to reduce the interest rate. An that must be done correctly, so that a poorly made reduction later does not lead to an additional increase in interest rates and a greater credit restriction, ”he explains.

In a report sent to clients, consultancy Verde Asset pointed out that there are incipient signs of a possible credit crisis hitting the Brazilian economy and that, therefore, “good public policies” will be necessary to manage the situation.

In the practical life of companies, high interest rates indicate the need to have more money to pay debts, often contracted in a scenario where the rate was close to the minimum, as it was in 2021.

It is also worth mentioning that Brazil has the highest real interest rates (which discount inflation) in the world, at 7.4%, second only to Argentina, a relevant challenge for business.

Interest rates are the tool used by the Central Bank (BC) to contain inflation.

Despite the side effects they may have on the economy, making credit more expensive and reducing the pace of activity in general, economists argue that it is a necessary remedy and a forced reduction in rates would have the opposite effect on prices.

In a recent interview with CNN, former Finance Minister Maílson da Nóbrega, founding partner of Tendência Consultoria, explains this unwanted effect. 

“The perception (if the BC reduced interest rates “by force”) would be that the independence of the Central Bank ended”.

Future interest would rise sharply, impacting the cost of the National Treasury and credit in the economy, and this would further slowdown growth. Capital flight would provoke a sharp depreciation of the exchange rate, which would increase the acceleration of inflation. In other words, a complete and perfect disaster,” he says.

Interest rates are moving down

Recently, it has been possible to observe a movement in the interest rate futures market.

Figures show that the contract for January 2024, accounted for on December 14, were at 14.07%. On February 13, the index fell to 13.80%. On March 8, future interest rates were at 13.05%.

The assessment is that this movement is beginning to indicate some drop in interest rates. And economists forecast the possibility of the BC to start cutting interest rates in May or June grows.

This analysis takes place in the context of risk in the credit market, but also in view of the perspective that exists in Brasilia for the new rules that will guide and serve as a reference for public accounts.

Aod Cunha explains that a good proposal presented by the government can help to bring about a drop in the Selic rate.

“The fiscal rule cannot be just a projected target for the debt. It needs to show a clear rule about how public spending growth will be controlled. We know that it will not be a proposal like the spending ceiling was, but it has to be a rule that shows that spending growth will not generate a sharp growth in the public debt. If this is done, interest expectations fall,” he said.

Original Story: CNN Brasil | News 
Photo: Photo by Magda S from FreeImages
Translation & Edition: Prime Yield

Piraeus Bank posts higher fourth-quarter profit on net interest income boost

Piraeus Bank, Greece’s fourth-largest lender by market value, reported higher quarterly net earnings, helped by lower costs and an increase in net interest income and fees.

The bank, which is 27% owned by the country’s HFSF bank rescue fund, reported net earnings of €170 million in the fourth quarter of 2022, compared with a profit of €78 million in the same period a year earlier.

Piraeus Bank’s book of so-called non-performing exposures (NPE) continued to shrink to a ratio of 6.8% at the end of 2022 from 9% in September.

According to the company’s updated business plan it aims to shrink NPE to below 6% this year and possibly start paying dividends from 2024 onwards.

“Piraeus has delivered strong financial results, outperforming its targets across the board,” the bank’s Chief Executive Christos Megalou said.

In 2022, the company reported normalised earnings per share of 0.42 euro, beating its target of 0.37 euro.

Net interest income in the fourth quarter rose to €405 million from €205 million in the same period a year earlier, due to loan book expansion and a favourable interest rate environment, Piraeus Bank said.

For the full year, the company posted a net profit of €899 million, compared with a loss of €3 billion a year earlier.

Greek banks have been working to reduce a pile of non-performing credit, the legacy of a decade-long financial crisis that shrank the economy by a quarter.

Original Story: Reuters|Lefteris Papadimas
Photo: Piraeus Bank
Edition: Prime Yield