Fewer costs and bad debts, more profits and deposits: that’s how 2024 looked for Portuguese banks. Not everything was positive: the transformation ratio fell again.

Bank profits in Portugal rose by 13 per cent to a record €6.323 billion in 2024, a year marked by the reversal of interest rates, according to the latest data published by the Bank of Portugal.

At the end of last year, the Portuguese banking system had a return on equity (ROE) of 15.2 per cent, 0.4 percentage points higher than in 2023.

Several factors contributed to the Portuguese banking system’s historic profit last year, including income from interest and commissions, but also the release of provisions and impairments, among others.

On the other hand, banks kept costs relatively under control, with the cost-income ratio rising slightly to 39.7 per cent, 2.7 percentage points higher than a year earlier, but almost 20 percentage points below the level recorded in 2020.

In terms of asset quality, the non-performing loan (NPL) ratio fell again to 2.4 percent in December, 0.3 percentage point lower than a year earlier.

Nevertheless, banks’ balance sheets still contained €7.8 billion euro of NPL, 700 million less than a year ago. Toxic loans net of provisions totalled 3.48 billion.

Indicators for the Portuguese banking system also show that although banks’ total assets grew from 442.2 billion in 2023 to 467.8 billion in 2024, the weight of banks’ assets in relation to GDP fell slightly to 164.2 per cent.

Customer deposits accounted for 73.9 per cent of banks’ assets, up 1 percentage point year-on-year.

The banks’ transformation ratio fell again, reflecting the challenges for banks to inject liquidity into the economy in the form of loans, falling from 78 per cent in 2023 to 75 per cent last year.

Original Story: ECO | Author: Alberto Teixeira
Edition and translation: Prime Yield