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

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

The Crédito Agrícola group added a first-quarter profit of €35.7 million, which compares with earnings of €72.5 million in the same period last year.

Crédito Agrícola posted a net profit of €35.7 million in the first quarter of this year, 50.7% less than in the same period last year, the group led by Licínio Pina said in a statement.

Net interest income fell 12.3% to €75.3 million, but the bank’s net commissions rose 23.3% to €33.2 million euros, the financial institution said.

Operating income ultimately fell 27% year-on-year to €132.2 million.

According to Crédito Agrícola, the fall in first quarter profit was influenced by the results, non-recurring, obtained in the first quarter of 2021, related to net gains from financial operations, amounting to €51.3 million, and retroactive interest, relating to 2020, received under the ECB – European Central Bank financing programme.

Included in the result of the Crédito Agrícola group are contributions from the insurance business in the amounts of €2.7 million in the case of CA Vida and €3.4 million via CA Seguros.

In the first quarter the loans and advances to customers portfolio grew 3.5%, to €11.5 billion.

The NPL (non-performing loans) ratio improved from 7.2% at the end of 2021 to 6.7% at the end of March.

“At the end of the first quarter of 2022, the Crédito Agrícola Group’s solidity and liquidity levels remain above the recommended minimum levels,” indicates the group, which reports CET1 and total equity ratios of 18.8% (including net income for the 2021 financial year), a leverage ratio of 8.2%, a liquidity coverage ratio (LCR) of 429% and a stable funding ratio (NSFR) of 155.2%.

Original Story:  Expresso | Miguel Prado 
Photo: Crédito Agricola Website
Edition & Translation: Prime Yield

According to the latest data from Bank of Portugal, at the end of the 1st quarter of 2022, the balance of the volume of loans granted to non-financial companies (NFCs) was 2.1 billion euros, 98.6 million euros more than at the end of March 2021 and 21.7 million euros more than in December 2021. And, now the Regional Directorate of Statistics (DREM) from Madeira released its analysis of these figures, highlighting them as another indicator of market confidence among consumers.

This is because “the overdue credit ratio for this type of company increased 0.4 percentage points (p.p.) in relation to the end of 2021 at 2.4% at the end of the reference period”, the directorate stresses,  but “compared with the same quarter of the previous year, there was a reduction of 1.2 p.p.”,. “On a national level, the overdue loans ratio fell 0.1 p.p. in comparison with the previous quarter and 1.1 p.p. in homologous terms, not exceeding 2.2% at the end of the first quarter of 2022”.

It should be noted that “the amount of non-performing loans (NPL) among non-financial companies, headquartered in the Region [Madeira], stood, in the period in question, at 49.0 million euros (+8.1 million euros than last December and -22.3 million euros compared to March of the previous year)”, which can still be seen as a warning sign to be taken into account.

In the case of debtors in the NFC sector (companies) with overdue loans, at the end of March 2022, the percentage “was 14.4%, and this indicator has remained below the national average (15.0% in the same period) since July 2020,” says the DREM.

“In the sector of households and Non-Profit Institutions Serving Households (NPISHs) there was a year-on-year increase of € 62.6 million in the balance of loans granted, bringing it to € 3.2 billion at the end of the 1st quarter of 2022,” it reveals. “When the balance is compared with the previous quarter, there is also an increase of around €35.5 million. If the analysis is more detailed, it can be seen that 67.5% of that balance referred to the housing segment and the remaining 32.5%, to consumption and other purposes”, the document explains.

With regard to non-performing loans (NPL) “in the housing segment, these did not exceed €11.9 million euros, representing a NPL ratio of 0.5%, thus maintaining the historical minimum for the available series, which began in March 2009. This percentage is slightly above the national value (0.4%). Between March 2021 and March 2022, the ratio of overdue housing loans ratio was reduced by 0.3 p.p. in the Region” of Madeira, the DREM guarantees.

To attest to this good wave of banking, “the number of debtors of the institutional sector households and NPISHs grew in relation to the previous quarter to 100.100, and at the end of the 1st quarter of 2022, there were around 44,400 debtors with mortgages and 83,500 with consumer credit and other purposes”, almost double.

Original Story:  Diário de Notícias Madeira  | Francisco José Cardoso 
Photo: Photo by Svilen Milev in FreeImages
Edition & Translation: Prime Yield

In its annual assessment of Portugal, the International Monetary Fund (IMF) considers that the risks of rising real estate prices should be “closely monitored”.

The IMF suggests that the Bank of Portugal (BdP) consider a countercyclical capital buffer or a sectoral systemic risk buffer against potential risks from banks’ exposure to real estate and advocates a gradual recomposition of capital levels.

“Once the recovery is well established, the BoP could consider introducing a positively-rated countercyclical capital buffer or a sectoral systemic risk buffer against potential macro-financial risks from banks’ real estate exposures,” the IMF suggests in the conclusions of its annual assessment of Portugal, released on 16 May 2022.

At a press briefing, Rupa Duttagupta, who led the IMF mission to Portugal, pointed out that the banking system has withstood the two double shocks – pandemic and war – “relatively well” so far.

“Capital levels have increased in the past year, non-performing loans (NPL) are down and overall bank profitability is slightly higher. All of this is good news,” he said. However, he warned that “there are some domestic risks that fortunately have not materialised, but they have not disappeared”.

Real estate prices should be “closely monitored

In the conclusions of its assessment of Portugal, the IMF notes that close monitoring of banks’ credit quality remains essential, warning that the impact of the end of moratoria and new risks, including from the property market, on credit quality are likely to remain sources of uncertainty for some time.

“Prudential authorities are actively monitoring the credit quality of banks and confirm that the materialisation of credit risk so far has not been as significant as expected at the start of the pandemic. Strategies to reduce NPLs are bearing fruit, but some banks have not yet completed their adjustment processes,” the findings read.

Even so, Rupa Duttagupta said that Portugal should continue to be “attentive” to the impact of the end of the moratoriums. The IMF considers that the risks of rising property prices, although contained, should also be “closely monitored”. Rupa Duttagupta said that “these risks are not high at the moment,  but could increase if house prices continue to rise”.

For the IMF official, in order to avoid these risks, it is necessary to “gradually build buffers” (when, in the capital structure, the regulatory capital maintained is greater than the minimum required by the regulator) of capital where they are smaller, but also to make the banking system more resilient.

“The recomposition of capital buffers should be done gradually and dividend distributions and share repurchases should be cautious until the uncertainties about capital needs, also in light of new economic shocks, are better assessed,” the institution explains.

Original Story: Idealista | Lusa 
Photo: Photo by Hugo Humberto Plácido da Silva in FreeImages
Edition & Translation:Prime Yield

Portugal’s Bison Bank became the first authorized bank to get a crypto license from Portugal’s central bank.

Banco de Portugal, the country’s central bank, shared the announcement regarding the new move, revealing that Bison Bank will develop a new division for dealing with the crypto industry. This new, special business division will be known as the Bison Digital Assets.

Its purpose will be to operate as a virtual asset exchange. This will also make it the first entity in Portugal to be owned by an official bank, authorized by a central bank, and a division dealing with cryptocurrencies, offering custody and trading services.

On top of that, Bison Bank is also an institution that offers services such as wealth management, depositary and investment banking — available for individual and institutional clients alike — and more. The bank is actually owned by a Chinese private capital group based in Hong Kong.

Portugal’s central bank’s decision to grant the licenses to Bison Bank is not that surprising given that there were past activities and signals pointing toward Portugal warming up to crypto. For example, back in March of this year, the central bank granted the first full all-categories VASP license to a Portugal-based on-chain crypto payments firm, Ultrust. This was a piece of big news at the time.

Before that, in June 2021, Banco de Portugal also granted trading licenses to two digital currency exchanges — Mind The Coin and Criptoloja. The licenses allowed the platform to operate as VASPs. Finally, the central bank also granted an additional license to another platform called Luso Digital Asset.

All of this signaled that Portugal is slowly getting more and more comfortable with the idea of the crypto industry, and now that its first financial institution became a licensed crypto trading/custody service, it is only a matter of time before institutional investors of Portugal rush to enter the crypto industry through the bank. This will, in turn, attract other banks, and more crypto and retail investors, continuing to push adoption in Portugal.

Original Story: Securities.o | Ali Raza 
Photo:Photo by Lotus Head on FreeImages
Edition: Prime Yield

Almost two-thirds of people with mortgages in Portugal will only finish paying for their house after they reach the age of 70.

“Given the aging of the Portuguese population and the significant reduction in the income of borrowers in the transition from working life to a retirement situation, despite the reduction in expenses that may occur, the high concentration of loans in borrowers over 70 years of age in the term of the loan could pose a risk to the financial system,” says the BdP in the report.

According to the regulator, at the end of 2021, “almost two-thirds of the housing loan stock was associated with borrowers whose age at the end of the loan will be over 70 years and around a quarter was associated with borrowers whose age will be over 75 years”.

“Most of these borrowers took out their loans between 27 and 40 years of age”, the document also reads.

For the BdP, the granting of loans with very long maturities means that, very often, “the term of the loans exceeds the active life of the borrowers”.

Original Story: The Portugal News |TPN 
Photo: Big Stock Photo
Edition: Prime Yield

The non-performing loan (NPL) ratio within the Portuguese banking sector decreased to 3.6% at the end of 2021, 0.4 percentage points less than in September and 1.3 percentage points below 2020, the BdP said.

According to the latest report from the Bank of Portugal (BdP) on the Portuguese banking system for the fourth quarter of 2021, the gross NPL ratio decreased 0.4 percentage points from the previous quarter to 3.6 percent, reflecting the decrease in NPLs and the increase in productive loans, with contributions of -0.3 percentage points and -0.1 percentage points, respectively. The NPL ratio net of impairments stood at 1.7% (1.8% in September 2021).

Data released by the BdP indicate that the gross value of NPL owned by Portuguese banks fell by €1.012 billion between September and December 2021, standing at €12.032 billion at the end of last year. In year-on-year terms, the decrease in the value of NPL was €2.384 billion.

Net of impairments, NPL totalled €5.747 billion at the end of 2021, down from €5.775 billion in September and €6.494 billion year-on-year. According to the BdP, the gross NPL ratios of companies (non-financial corporations – NFCs) and individuals stood at 8.1% (-0.3 percentage points) and 2.8% (-0.2 percentage points), respectively, with their variation “reflecting, in particular, the reduction in NPLs”.

The NPL coverage ratio by impairments decreased 3.5 percentage points in relation to the previous quarter, to 52.2%, reflecting “the decrease in accumulated impairments, partially offset by the reduction in NPLs”.

In companies there was a decrease of 3.8 percentage points, to 52.9%, while in individuals the coverage ratio fell to 50.9%, with an increase of 0.3 percentage points in consumption and other purposes, to 64.8%, and a decrease of 1.5 percentage points in the housing segment, to 32.6%.

Original story: ECO| Lusa 
Photo: Photo by Svilen Milev on FreeImages
Translation and Edition: Prime Yield

Even though the fact that Portuguese banks have shown “resilience” throughout the pandemic, in general, “it may take some time” before some credits that were under moratorium may go into default, warns DBRS.

According to the rating agency says, it is necessary to keep an eye on “post-Covid” impacts and monitor risks associated with rising interest rates, rising energy costs on businesses, difficulties in supply chains and developments in the conflict in Ukraine.

In a recent report, DBRS Morningstar points out that “even despite the pandemic, the stock of non-performing loans (NPL) continued to fall, thanks to continued sales of old problematic assets”. The (aggregate) NPL ratio in Portuguese banking fell, on average, to 4.7% at the end of 2021, down from 5.9% the previous year and below the important psychological threshold of 5%.

“At the same time, the end of most moratoria (in September 2021) has not resulted in a sharp increase in new non-performing loans,” says DBRS, stressing that this is an analysis that is valid “at least at this time”. DBRS’s caution is justified by the fact that there has been “an increase in the percentage of loans that are classified as Stage 2″ and were previously under moratorium.

At issue is the qualification that banks have to make, under the accounting rules in force, on each loan they grant and on the risk that each of these loans will suffer a default.

DBRS also notes that there has been an average increase of eight percentage points in the proportion of loans classified as stage 2, which justifies an “expectation of a moderate deterioration in asset quality in the medium term”. In other words, DBRS argues that the soundness of some of these loans could be in question, especially if economic conditions are not the most favourable.

There are some sectors, such as hotels and part of the manufacturing industry, that have not yet fully recovered,” DBRS says.

Original story: Observador | Edgar Caetano 
Photo: Photo by Ricardo Gurgel on FreeImages
Translation and Edition: Prime Yield

The Portuguese bank reports its first annual profit ever, a total of €184.5 million.

After accumulated losses of €8.4 billion since the resolution of former BES bank in August 2014, Portugal’s Novobanco finally reached the light at the end of the tunnel by achieving an unprecedented profit of €184.5 million last year.

This positive result compares with losses of €1,329 million in 2020, but does not, however, prevent a new request to the Resolution Fund for €209.2 million.

On the possibility of a new capital injection, the Resolution Fund and also the finance minister, João Leão, had already responded negatively to the bank even though the request had not been publicly announced, so a new dispute between the two parties is expected. And this surges at a time when the contingent capital mechanism ceiling of 3.89 billion, valid until 2026, is about to run out – with this request, another 200 million remain, and there are disputes in the arbitration court in the amount of €170 million.

A year of profits was already forecast for the financial institution, according to the signs that were being given by António Ramalho throughout last year, and which were confirmed quarter after quarter.

The bank justifies the first positive results in its eight-year history with the improvement in the bank’s operating results (with a contribution of €377.7 million), a lower level of impairments and provisions (down 70.4% to 352 million) and and by the recording in 2020 of the 300.2 million loss on the revaluation of restructuring funds.

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