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

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
Edition: Prime Yield

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

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: Photo by Armindo Caetano in FreeImages
Edition: Prime Yield

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

After the deal with Mário Palhares failed, Banco Montepio has already found a buyer for its Angolan bank, in an operation that could represent losses of up to €100 million.

The Associação Mutualista Montepio Geral (AMMG) bank agreed to sell Finibanco Angola to a Nigerian bank, Access Bank, but the operation is not yet closed, according to information gathered by ECO. The bank headed by Pedro Leitão is still doing its sums for the operation. And they are not exactly the best. It is estimated that the sale could represent losses of between €80 million and €100 million, two sources told ECO.

The impact of the transaction (if it goes ahead) is not insignificant for a financial institution that has posted poor results in recent years (6.6 million in 2021 and 11 million in the first quarter of this year) and where the financial capacity has to be managed carefully. 

Officially, the bank makes no comments on this process. ECO knows that there is still no final decision regarding the sale, which may not materialise. 

The buyers have already been presented to the National Bank of Angola (BNA), the Angolan banking supervisor, which has to allow the sale. Access Bank, which has been in existence for around 30 years, is headquartered in Lagos, the Nigerian capital and is present in ten other markets, including the United Kingdom, South Africa and Mozambique. 

In Lisbon, the Bank of Portugal is also closely monitoring this dossier, which it wants to see resolved so that the next board can focus on the core business of a bank which, after restructuring over the last two years, continues to make its way towards profitability. 

Finibanco Angola joined the Montepio group in 2010, when Finibanco was acquired for €250 million

Original Story: ECO News
Photo: Montepio website
Edition: Prime Yield

Novobanco has sold a portfolio of logistics assets in Portugal for €208 million and says the deal will have a positive impact of €62 million on this year’s accounts, as well as a 35 basis point improvement in the capital ratio. 

Without giving figures on the deal, the bank revealed an agreement for the sale of a real estate portfolio comprising predominantly logistics assets, held by real estate funds NB Património and NB Logística, both managed by GNB Real Estate, and in which the banking institution held, on average, a stake of around 75%.

Later, the Portuguese lender made a new clarification to the market, informing the price of the sale after a competitive bid process and the impact it will have on the bank’s income statement if the transaction is completed. It did not indicate who the buyer would be.

In the previous statement, the bank spoke of the success of the operation, which “reflects the positive moment of the market in this real estate segment, with a significant reduction in yield over the last 12 months and consequent increase in price, given the higher demand for logistics assets post-pandemic.

This deal will give an even bigger boost to Novobanco’s profits, which doubled in the first quarter of the year to €142.7 million. 

Since it was sold to the Lone Star fund, the bank has been undergoing deep restructuring and making portfolio sales of troubled and deemed non-core assets. Many of these operations generated million-dollar losses for the bank, forcing the Resolution Fund to inject money (more than €3 billion) into the institution to offset the losses and restore the capital balance.

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