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