The banking sector’s more cautious stance on lending is having a significant impact on the reduction of non-performing loans. In a challenging macroeconomic environment, marked by rising interest rates, high inflation and continued uncertainty surrounding the war waged by Russia in Ukraine, the sale of non-performing loan (NPL) portfolios in Portugal is not expected to exceed €1.7 billion in transaction volume in 2023, concludes Prime Yield in the latest edition of its annual report “Keep an Eye on the NPL & REO Markets – Portugal, Spain, Greece & Brazil”.

“Despite both indicators continuing to exhibit a downward trajectory over the last year, Portugal maintains the second highest NPL ratio in Southern Europe, only surpassed by Greece, where the weight of non-performing loans in total credit was 4.9%,” the Prime Yield report also states, adding that “despite the progress made in recent years, the Portuguese NPL ratio continues to almost double the European average, which positioned this indicator at 1.8% in the third quarter of 2022.

The current volume is identical to that recorded in 2022, a year in which NPL portfolio sales activity in Portugal fell by 44%, putting pressure on this market at the lowest levels of recent years. Only in 2020, in a context of business paralysis due to the pandemic, NPL sales activity was lower, standing at €1,000 million.

It should be recalled that the peak of non-performing loans transactions in Portugal was in 2019, when it reached around €8,000 million, and that after the fall in 2020 to the aforementioned €1,000 million, 2021 marked a recovery to the levels of 2017 and 2018, with around €3,000 million transacted, a trend that 2022 did not confirm.

In the third quarter of 2022, the national financial system recorded €7.2 billion in non-performing loans, an amount that corresponds to 3.1% of the total volume of credit granted in the country (NPL ratio).

Original Story: Visão| Newsroom
Photo: Big Stock Photo
Translation & Edition: Prime Yield

Central Portuguese bank Banco de Portugal (BoP) has identified increased default on home loans as one of the main risks to financial stability, according to the Financial Stability Report published on Wednesday.

In the document, the BdP said that in recent months, “risks to financial stability have remained high” and amongst the main risks and vulnerabilities it noted the possibility of an increase in loan defaults, particularly on mortgages, “due to high inflation, a rise in short-term interest rates and a potential worsening of the unemployment rate.

In Portugal, the preponderance of variable interest rates on home loans means that recent and rapid rises in interest rates immediately increase the burden of debt, making it difficult for private banking clients to pay back loans.

The potential default of the most vulnerable companies is also a risk for Banco de Portugal, which considers that, “despite recent evidence of resilience of the sector, a more unfavourable economic and financial context, characterised by lower economic growth and higher interest rates, will increase the percentage of companies in vulnerability”.

Original Story : TSF /LUSA
Photo: Banco de Portugal
Translation: Prime Yield

This is one of the main conclusions of Prime Yield, in the latest edition of its annual report “Keep an Eye on the NPL & REO Markets – Portugal, Spain, Greece & Brazil”. Despite the challenging macroeconomic context, Portugal should not go beyond 1,700 million euros of transacted volume in 2023.

This is an identical volume to that recorded in 2022, a year in which NPL portfolio sales activity in Portugal fell by 44%, not continuing the post-pandemic recovery trend of 2021 and putting pressure on this market at minimum levels of recent years.

Only in 2020 was NPL sales activity lower, standing then at €1 billion. Recall that it was a context of business paralysis due to the pandemic. The peak of ‘bad debt’ transactions in Portugal was recorded in 2019, when it amounted to around €8,000 million, and that after the 2020 drop to the aforementioned €1,000 million, the year 2021 marked a recovery to 2017 and 2018 levels, with around €3,000 million transacted, in a trend that 2022 did not confirm, the report recalls.

Portugal maintains the second highest NPL ratio in Southern Europe

In the third quarter of 2022, the national financial system recorded 7,200 million euros in non-performing loans, an amount that corresponds to 3.1% of the total volume of credit granted in the country (NPL ratio). Although both indicators continued to show a downward trend over the last year, Prime Yield said that Portugal still has the second highest NPL ratio in southern Europe, only surpassed by Greece, where the weight of non-performing loans in total credit was 4.9%. The Portuguese NPL ratio continues to almost double the European average, which positioned this indicator at 1.8% in the third quarter of 2022.

Between the 3rd quarter of 2021 and the 3rd quarter of 2022, the NPL stock in Portugal reduced by 14%, with €1.2 billion of defaults leaving the financial system, from €8.4 billion (3rd quarter 2021) to €7.2 billion (3rd quarter 2022).

Taking into account the NPL sale processes underway in the 1st quarter of 2023, a potential transaction volume of close to €1.5 billion is observed, Prime Yield’s report points out. However, it should progressively increase in the coming months, as new mandates are launched on the market, and it is expected that the year will close with a level of activity identical to 2022, at around €1,700 million.

Caixa Geral de Depósitos stands out as the most active entity, leading two ongoing sale processes: the Saturno project, valued at €600 million, and another portfolio worth €500 million, including assets with and without collateral.

“The expectation for 2023 is that we will see a stabilisation of activity throughout Europe”

Original Story: Iberian Property | Felipe Ribeiro
Photo: CGD website (headquarters)
Edition: Prime Yield

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

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

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

Portugal’s largest listed bank, Millennium bcp, posted a 50.3% jump in 2022 consolidated net profit, with interest rate hikes boosting the group’s core income, despite heavy losses at its Polish subsidiary.

The bank netted €207.5 million last year, up from €138 million in 2021. Profit in its domestic business more than doubled to €353.6 million.

Its Polish subsidiary, Bank Millennium (MILP.WA), said last month it reduced losses by 26% to €217 million in 2022, despite 525.6 million euros of costs related to legal risks over its portfolio of foreign currency mortgage loans.

“We are not afraid of the risks and what I’ve seen, quarter after quarter, is that Poland is an interesting market, the business has evolved very positively,” chief executive Miguel Maya told a news conference.

He said that, given the current uncertainty as a result of the war in Ukraine, legal risks in Poland and a much more fragmented world, “the priority is to strengthen capital ratios.”

“It is what we are doing,” he said, pointing out that the common equity Tier 1 ratio – ‘fully implemented’ – improved to 12.5% in December 2022, up from 11.7% a year earlier and “clearly above regulatory requirements.”

After years of record low rates putting pressure on lenders’ financial margins, Millennium bcp benefited in 2022 from interest rate hikes by the European Central Bank and the Polish central bank to control inflation.

Millennium bcp’s consolidated net interest income, or earnings on loans minus deposit costs, rose 35.3% to €2.15 billion in 2022. Its fees and commissions grew 6.1% to €771.9 million.

Its recurring core income grew by 44.4% to €1.86 billion, while its recurring operating costs increased only 3% to around €1 billion.

The bank also reduced total non-performing exposures by 19.4% to €2.22 billion in 2022 from a year earlier.

Original Story: Reuters |Sérgio Gonçalves
Photo: Millennium bcp website
Edition: Prime Yield

Portugal’s State bank, Caixa Geral de Depósitos, hired KPMG to trigger the sale of a €500 million non-performing loans portfolio, including both secured and unsecured assets.

The package, which has not even been named, is composed of €100 million in secured credit (with collaterals) and another €400 million unsecured debt. According to the newspaper, the bank already named KPMG to look for potential buyers.

This process was launched while another operation – also with the support of KPMG – is on the way and about to be closed: the sale of the “Saturn” portfolio, valued at almost €600 million and for which CGD has received non-binding proposals from the investors like LX Partners, Cabot Financial and EOS Group. 

Though Caixa Geral de Depósitos (CGD) has one of the lowest NPL ratios in the Portuguese market, that does not prevent it from being the market’s biggest seller of problem asset portfolios.

Original Story: Jornal Económico | Maria Teixeira Alves 
Photo: Caixa Geral de Depósitos Headquarters
Edition and translation: Prime Yield

Portuguese banks are generally well positioned at their rating level to withstand a likely increase in impaired loans in 2023 resulting from the economic slowdown, high inflation and rising interest rates, Fitch Ratings says.

“We expect the sector’s impaired loans ratio to increase only modestly, partly due to tighter underwriting guidelines introduced in 2018. Moreover, banks have improved their ability to absorb impaired loans through write-offs and sales in recent years by developing in-house loans restructuring teams. Profitability will benefit from higher interest rates, supporting capacity to absorb higher loan impairment charges”, the rating agency states in a release.

Most major Portuguese banks are entering the economic downturn from more favourable positions than before the pandemic due to the active management of legacy impaired loans (cures, granular sales and write-offs) and Portugal’s swift post-pandemic recovery, the analysts conclude. The sector impaired loans ratio was about 3.4% at end-June 2022, according to Banco de Portugal, compared with a peak of about 18% at end-June 2016.

“Nevertheless, high household indebtedness and a large proportion of variable-rate loans pose a risk to asset quality as interest rates rise. The risk is mitigated by the Bank of Portugal’s 2018 macroprudential recommendations. These set more conservative guidelines for the underwriting of new lending to households, including limits on loan-to-value (LTV) ratios and stress-testing customers’ repayment capacity under a 300bp interest rate rise”, says the same document.

The guidelines quickly led to the near elimination of new residential mortgage lending with LTV ratios above 90%.

By end-2021, 92% of residential mortgages had an LTV ratio of below 80%, which should limit credit losses for banks if home prices fall moderately. Mortgages originated before the 2018 guidelines took effect should not pose a significant risk. Lending volumes before 2018 were low as Portugal was still recovering from the eurozone sovereign debt crisis and private-sector deleveraging. In addition, the loans were originated when interest rates were higher and their LTVs have since reduced.

“Fitch expects banks to closely monitor borrowers’ repayment capacity and to implement early restructuring of loans, consistent with government measures approved in late 2022 to mitigate the impact of rising interest rates on vulnerable borrowers. This should help to prevent a significant rise in Stage 3 loans”.

In the meanwhile, Portuguese banks are well positioned to benefit from rising interest rates. “The positive effects were already evident in 3Q22 and 4Q22 results, and we expect an acceleration in 2023. Most of the banks’ loans are variable-rate, including 90% of residential mortgage loans, and most of their funding is deposits that will reprice more slowly than assets. Pre-impairment profits should also be supported by the reduction of branch networks and cost-saving initiatives in recent years, partly offsetting the impact of inflation on operating costs”, stress these specialists. 

Original Story: Fitch Wire | Press-Release
Photo: BPI Facebook
Edition: Prime Yield

In total credit granted in Portugal in 2022, 11.4% of the amount went to people of foreign nationality (up from 9.36% in 2021).

The proportion of foreign people in the credit granted by banks grew between 2021 and 2022, representing more than 16% of credit granted to people between 41 and 50 years old and 45% to people over 61 years old, according to the Bank of Portugal.

In total credit granted in Portugal in 2022, 11.4% of the amount went to people of foreign nationality (up from 9.36% in 2021).

Among customers of foreign nationality who obtained credit, most went to people with a nationality of Brazil (25%) and the United Kingdom (10%), similar figures to 2021.

In home loans alone, foreign nationals accounted for 14% of the total amount borrowed in 2022 (up from 10.81% in 2021).

The leading nationalities were Brazil (20% in 2022 and 21% in 2021) and the United Kingdom (12% and 13%, respectively).

In 2022, nationals from the United States came in third place (9%), followed by those from France (8%) and Angola (7%).

There is also a noticeable increase in the weight of loans to foreigners as the age bracket rises.

In 2022, foreigners represented only 6.77% of mortgage loans to people aged 18 to 30, but 11.8% of loans to people aged 31 to 40.

In the 41 to 50 age group, foreigners obtained 16.4% of total mortgage credit and in the 51 to 60 age group the proportion was 27.8%. Over the age of 61, 45% of all mortgages went to foreigners in 2022.

Original Story: Portugal Global | News 
Photo: Big stock photo
Edition: Prime Yield

Portugal’s Novo Banco should be ready to seize the opportunity for an initial public offering when markets open up to listings, as it seeks to remain independent, its new CEO Mark Bourke told Reuters.

Analysts have speculated that profit-making Novo Banco, which emerged from the ruins of collapsed Banco Espirito Santo in 2014 and is controlled by U.S. private equity fund Lone Star, could be merged with another lender looking to consolidate its position in Portugal.

But Bourke, who took over in August, said that “Portugal is not like some of the north European countries, which are massively over-banked”, as the five largest players own 80%-85% of the banking assets, a high level of concentration.

Novo Banco is now “a profitable, well-capitalised bank that can actually compete, endure, remain independent in the Portuguese market, and can invest and expand,” he said.

The bank should build on its recovery track record and “be ready when and if the IPO opportunity arises to take advantage of it”, he said.

Bourke, who had been chief financial officer since 2019, would not say where the bank could seek to be listed, although Portuguese companies usually choose Euronext Lisbon.

MASSIVE BAD LOANS CLEAN-UP

Since Lone Star bought its 75% stake in 2017, Novo Banco has focused on de-risking, closing subsidiaries abroad, offloading bad loans and real estate under tough restructuring commitments agreed with Brussels. Portugal’s Resolution Fund has the remaining 25% stake.

Non-performing loans (NPLs) fell to €1.6 billion, or 5% of total credit, in September from 2.2 billion a year earlier. In 2017, its NPLs were 10.1 billion or 28% of total loans.

“The major part of the job is done. But we need to be looking at the European average, which is in the 2.5%-3% range… in the short to medium-term,” Bourke said.

Novo Banco’s nine-month net profit almost tripled to €428 million, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

“This was the seventh straight quarter of profitability. We can generate 80 to 100 bps of capital through underlying profitability a year – that means we control our own destiny,” Bourke said.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to higher funding costs of senior debt issuance and other factors, NII rose by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

The average rate of its net interest margin stood at 1.29%, but the impact of the upward repricing of the portfolios should come in the fourth quarter and Novo Banco should end the year “well above 1.5%”, the upper bound of its forecast range, he said.

Original Story: Reuters |Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

Portuguese lender Novo Banco’s nine-month net profit almost tripled from a year earlier, the bank said, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

The bank, which emerged from the ruins of collapsed Banco Espirito Santo in 2014, netted €428 million in the nine month’s to Sept. 30, up from €154 million a year earlier.

Novo Banco, 75% owned by U.S. private equity firm Lone Star and 25% by Portugal’s Resolution Fund, said its pretax return on tangible equity (ROTE) rose to 12.4% in September from 11% in June.

It said in a statement the results showed sustainable growth and “ability to generate revenue and capital despite the uncertain macro (economic) background” and high inflation.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to the higher funding cost of senior debt issuance and other factors, NII increased by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

After a major clean-up of its balance sheet, impairments and provisions fell by 86% to €22.5 million, while non-performing loans(NPL) fell to €1.75 billion, or 5% of total credit, in September from 2.2 billion a year ago

Fees and commissions rose 3.8% to €215.7 million in the nine months, while capital markets results increased 34.5% to €68.2 million.

Novo Banco’s fully loaded Common Equity Tier 1 solvency ratio improved to 12.1% in September, 90 basis points higher than in June.

Original Story: Reuters | Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

The bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

Portugal’s Banco Montepio had consolidated net income of €23.9 million in the first nine months of the year, against a loss of €14.2 million in the same period in 2021, according to a release sent to the Securities Markets Commission (CMVM. In a statement, the bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

“Notwithstanding the increases in mandatory contributions related to the banking sector, the Resolution Fund and the Deposit Guarantee Fund of, in aggregate, €3.2 million,” the bank added.

Consolidated net results for the first nine months of 2022 include, in the third quarter, “an estimated impact of -€22.7 million (after considering non-controlling interests) from the agreement signed for the sale of the stake held by Banco Montepio Group in Finibanco Angola S.A.” Even so, the bank added, “the consolidated net results for the quarter were positive, confirming the favourable trend seen over the last five quarters.”

Banco Montepio also noted the five consecutive quarters with positive net results and the increase in “core banking product” of €7.5 million, as compared to the first nine months of 2021, with net interest income up 1% and commissions up 7% on a year earlier.

Loans to customers (net of impairments) increased to €11.8 billion at the end of the period, 1.5% above the value recorded at the end of December. Customer deposits totalled €12.9 billion, up 1.8% from end-year. 

In the statement, Montepio also states that the cost of credit risk stood at 0.1%, down from 0.6% in the period a year earlier.

 In terms of operating adjustments, the bank said operating costs had fallen by €16.1 million or 8.5% as a result of lower staff costs, general administrative costs and depreciation and amortisation.

It also mentions the closure of nine branches compared with the same period in 2021 and the reduction in the number of Banco Montepio Group employees by 138 or 3.8% compared with September 30, 2021.

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

Caixa Geral de Depositos SA (CGD) said just under 1% of clients at the Portuguese state-owned bank are significantly vulnerable to rising inflation and interest rates. 

“What we see is a little under 1% of our customer base where we do see significant vulnerabilities,” Chief Financial Officer Maria Joao Carioca said at the Bloomberg Portugal Capital Markets Forum in Lisbon.  It’s a “relatively comfortable” situation for Caixa Geral at this stage, she said. 

Portuguese lenders have been shedding assets and selling soured debt over recent years to reduce their bad loan ratios. The ratio of non-performing loans at Portuguese banks fell to 3.4% at the end of June, according to the Bank of Portugal.

The European Central Bank last week doubled its key interest rate to 1.5% — the highest level in more than a decade. Bank of Portugal Governor Mario Centeno said in February that the impact of a euro-zone interest-rate hike would be quickly felt by Portuguese companies and families as credit in the country is dominated by variable interest rates.

While most mortgages in Portugal are floating rate, “at least in the last periods, we were already originating close to 30% of mortgages with fixed rates,” Banco Comercial Portugues SA CFO Miguel Bragança said at the same event.

Fiscal Discipline

Carioca, who has served as a board member of Euronext NV, said Portugal should maintain a disciplined fiscal policy to ensure that the country’s bond yields remain in line with other major European economies. Portugal’s government forecasts the budget deficit will narrow to 1.9% of gross domestic product this year.

“It’s crucial that we do not see our spreads broadening a lot versus European cores,” said Carioca. “I think we are very well positioned to ensure that.”

Bragança said that Portugal’s ability to cut public debt and fiscal discipline has been crucial for the southern European country to keep borrowing costs low. 

“Being able to maintain this discipline will be very important,” he said.

Original Story: Bloomberg| Henrique Almeida and Zoe Schneeweiss 
Photo:Edificio sede da CGD
Edition: Prime Yield

Portugal’s largest listed bank, Millennium bcp, posted a 63.4% jump in nine-month net profit thanks to a robust rise in core income stemming from policy rate hikes and despite losses at its Polish subsidiary.

The lender netted €97.2 million between January and September, up from €59.5 million a year earlier. Profit in its domestic business more than doubled to €295.7 million.

Its half-owned Polish subsidiary, Bank Millennium, reported a nine-month loss of €270.5 million as it counted the cost of loan repayment holidays imposed on Polish banks in July. r

Millennium bcp benefited from interest rate hikes by the European Central Bank to control inflation, after years of record low rates pressured lenders’ financial margins, and by central banks in other countries where it operates: Poland, Angola and Mozambique.

Millennium bcp’s consolidated net interest income, or earnings on loans minus deposit costs, rose 32.7% to €1.54 billion in the nine months. Its fees and commissions grew 3.7% to €573.8 million.

Chief Executive Miguel Maya said that “performance was supported by a 24.7% increase in the group’s core income and a strict management of operating costs”, but were hampered by results in Poland.

Original Story: Reuters | Sérgio Gonçalves  
Photo: Millennium bcp website
Edition: Prime Yield

Novo Banco (NB) should reach its 5% target for non-performing loans (NPL) “this year in a very short space of time”, the financial institution’s CEO believes.

Interviewed on Bloomberg TV, Mark Bourke said that once this goal is met, the second phase will involve reducing the bad debt ratio between 3% and 4%, a figure that will be achieved in two to three years through a “combination of restructuring and sales”.

The development has happened despite the war in Ukraine and rising rates. “If we look at the situation in historical terms, we are still normalising,” the CEO said. And at least for now this normalisation has not yet brought a significant increase in NPL. In Novo Banco and the Portuguese economy “we don’t see a significant rise in NPL formation”, he said. “And this would be a shared experience among banks.”

Asked whether he is aware of contacts by shareholder Lone Star with potential buyers of the bank, Mark Bourke replied with a peremptory “no, absolutely not”, adding however that “shareholders talk to lots of people”. But management’s role is to “prepare the bank and have it in good shape”.

Original Story: Jornal de Negócios |Hugo Neutel
Photo: Novo Banco
 Edition and translation: Prime Yield

System banks show good results against bad debts as well as good profitability levels in the second quarter of the year, says the Bank of Portugal.

In the second quarter of the year, the total assets within the Portuguese banking sector increased 1.7%, a result leveraged by the increased in loans ad advances to customers and deposits at central banks by 0.68% and 0.63%, respectively.

Although loans to customers rose by 1.2%, there was a 2.3% increase in deposits, resulting in a decrease in the transformation ratio (difference between loans and deposits).

NPL ratio falls 3.4%

In the period under review, and according to banking system data released by Banco de Portugal, the gross non-performing loans (NPL) ratio fell 0.2 percentage points to 3.4%, which reflected “the decrease in NPLs (-4.0%) and the increase in performing loans (+1.8%)”. In net terms, the NPL ratio fell marginally by 0.1 percentage points to 1.6%.

Also, the NPL ratios of companies and individuals decreased. In companies 0.4 percentage points to 7.6% and in individuals 0.1 percentage points to 2.6%.

The supervisor led by Mário Centeno adds that “the decrease in NPLs had a greater contribution than the increase in productive loans in the reduction of both ratios”.

Profitability at 8.8%

Between April and June, return on equity (ROE) rose compared to the first quarter by 3.7% to 8.8%, a significant improvement on previous years, particularly 2020.

In the second quarter of the year banks as a whole recorded a 1.7% increase in total assets. Contributing to this were the increase in loans and advances to customers and central bank assets by 0.68 percentage points (pp) and 0.63 pp, respectively.

Although loans to customers rose by 1.2%, there was a 2.3% increase in deposits, resulting in a decrease in the transformation ratio (difference between loans and deposits).

Original Story: Expresso | Isabel Vicente 
Photo: Photo by Armindo Caetano in FreeImages.com
Edition and translation: Prime Yield

BPI has completed the sale of the €140 million non-performing loans (NPL) portfolio Project Citron to funds managed by LX Investment Partners, the Portuguese bank informed. 

With a gross value of approximately € 140 million, the Project Citron is made of 15,000 contracts from about 5,000 clients, including both mortgage-backed and non-mortgage-backed loans.

“This transaction reinforces the strong position of BPI, which maintains the best  non-performong exposure (NPE) risk ratio in the Portuguese financial sector,” the bank said.

In the end of the 1^st semesters, BPI’s NPE ratio stood at 1.6%.

Original story: Jornal de Negócios | Hugo Neutel 
Photo: BPI Facebook
Edition and translation: Prime Yield

Banks should be “vigilant” with the possible increase in defaults by families and companies due to the current economic context of rising prices and rising interest rates, warned Rui Pinto, who was speaking in Parliament about his appointment as a director of the Bank of Portugal.

He explained that the rise in interest rates and inflation will reduce the income of families, which will consume less with companies.

In a scenario of cooling economic activity, which is already beginning to be felt, Pinto noted, this context would create “pressure on the ability of families and companies, particularly in economies with high levels of debt, to meet their debts.

This “will create some pressure on the evolution of default” in relation to which banks should be “vigilant”, said the current administrator of the Securities Market Commission (CMVM) in the Budget and Finance Committee.

Rui Pinto stressed two aspects: “We are not yet seeing a negative evolution” in defaults; on the other hand, banks have had a very significant reduction in non-performing loans in recent years, so the level of problematic credit “is now relatively low and in line with other jurisdictions”.

With the rise in interest rates, banks may benefit from an increase in financial margins, Pinto continued. But this increase in margin “may be offset by a need to increase impairments, as there may be pressure on credit quality,” he said, noting that “banks have profitability that is not yet desirable.

Rui Pinto was heard in parliament as part of his appointment by the Finance Ministry to the board of directors of the Bank of Portugal.

Original Story: ECO |Alberto Teixeira
Photo: Bank of Portugal
Edition and translation: Prime Yield

In August, the total amount of loans for house purchase grew, year-on-year, less than it had grown in July. It’s the first slowdown since October 2020.

Mortgage lending in Portugal recorded its first slowdown in almost two years in August. This news should be seen in light of the tightening of monetary conditions by the European Central Bank.

In that month, the total amount of loans for house purchase grew 4.6% in year-on-year terms. This is a slowdown of 0.2 percentage points which, although slight, is the first to be recorded since October 2020, the Bank of Portugal said.

In August, banks had contracted housing loans with individuals totaling €99.7 billion. The growth recorded represents a rise of €200 million compared to the end of July.

In consumer credit, the amount totalled €20.5 billion at the end of August. This is also an increase of €200 million in comparison to July. But in this case there was an acceleration in the year-on-year growth rate, from 5.5% last month to 5.9% in August.

As for deposits by individuals, there was a reduction of €1.3 billion, but a growth of 6.8% compared to August 2021, to 181.4 billion. Deposits tended to shrink in August, recalls the Bank of Portugal, a period marked by summer holidays. The reduction was mainly in demand deposits.

Credit to companies also slows down

From households to companies, the Bank of Portugal reports that the amount of loans was €76.4 billion at the end of August. Loans to companies grew 1.5% year-on-year, which is 0.1 percentage points less than the growth recorded in July.

“This deceleration was more expressive in small and medium-sized companies and in companies in the manufacturing and accommodation and catering sectors. Loans granted to large companies and companies in the trade and transport sectors accelerated,” the supervisor’s statement said.

Finally, corporate deposits increased by €1.5 billion in August to 64.8 billion. It is a growth rate of almost 10%, but “represents a deceleration for the fifth consecutive month”.

Original Story: ECO | Flávio Nunes 
Photo: Photo by Miguel Saavedra in FreeImages.com
Edition and translation: Prime Yield