The impact of the withdrawal of advanced measures due to the pandemic is not certain, but it should lead to an increase in non-performing loans. The deterioration will depend on the economic recovery of countries, says DBRS.

Portuguese banks managed to reduce non-performing loans (NPLs) during the pandemic, and this, along with the provisions made, improved the banks’ coverage ratio, according to rating agency DBRS. Still, it is necessary to wait and see the effects of the reversal of the support measures. In addition, DBRS also notes that Portugal still has several moratoria pending and the effect on credit is still uncertain.

According to the data from EBA, the NPLs of Portuguese banks “declined significantly between Q4 2019 and Q2 2021 (-42%), also leading to an improvement in the NPL ratio to 4.2% at the end of Q2 2021 from 6.5% at the end of Q4 2019″, DBRS signals in a commentary where it analysed the situation in Italy, Greece, Spain, Portugal, Ireland and Cyprus.

In addition, Portuguese banks have also increased provisions since the end of Q4 2019, which, together with the reduction in NPL, “resulted in the banks’ coverage ratio improving to 58.4% at the end of the second quarter of 2021 from 50.1% at the end of the fourth quarter of 2019”, they add.

The rating agency also notes that while Spain, Ireland, Greece and Cyprus “evenly distributed NPLs between households and non-financial companies”, in the remaining NPLs in Italy and Portugal non-financial companies have more weight. This suggests a pipeline skewed towards small and medium-sized enterprises and corporate loans, rather than individual borrowers, in Italy and Portugal.

Already looking at moratoria granted, EBA-covered banks in Portugal had 73% still outstanding at the end of Q2 2021, followed by EBA banks in Italy (23% of total moratoria granted) and Spain (13% of total moratoria granted) at the end of Q2 2021.

To do this analysis, DBRS also looked at the evolution of key metrics, forecasting that unemployment in Portugal will have a slight drop in 2022. Growth in the Portuguese economy will also be higher next year, unlike the other countries analysed. In terms of property prices, Portugal is well above the other countries, having shown a very sharp upward trend

DBRS thus concludes that the “comprehensive response from European governments and the EC has so far been effective in preventing an increase in NPLs” in these jurisdictions in the short term. Unemployment and residential property “have performed better than expected in these jurisdictions, with Portuguese property price increases outperforming other jurisdictions”, they stress.

The agency also notes that the effects of the reversal of the relief measures have yet to be assessed, with NPLs expected to increase, but “deterioration will depend on several factors, including the country’s full economic recovery.

Original Story: ECO | Mariana Espírito Santo 
Photo: Big Stock Photo
Translation & Edition: Prime Yield

Six of the main banks operating in Portugal had a combined €1.043 billion in profit in the first nine months of this year, contrasting with combined losses of €178 million in the same period of 2020.

Contributing to the turnaround was, above all, Novo Banco which went from losses of €853.1 million in the first nine months of 2020 to a profit of €154.1 million in the same period this year.

This year is the first in which the bank – which created in 2014 to carry on the commercial business of Banco Espírito Santo, which that bank was wound up – has had a positive result.

The highest nine-month profit was that of state-owned Caixa Geral de Depósitos (CGD), which reported €429 million, up 9.4%.

BPI, meanwhile, almost tripled its profit to €242 million.

BCP and Santander, by contrast, saw their profits fall. BCP’s fell 59.3% to €59.5 million and Santander’s 32% to €172.2 million.

Banco Montepio, for its part, narrowed its nine-month loss to €14 million from a €57 million loss a year earlier.

Despite the renewed profits for most banks, executives said that profitability in the sector remains very low in relation to the money invested by shareholders.

At CGD’s results presentation, CEO Paulo Macedo said that in recent years the aggregate profitability of banks has been negative and stressed that shareholders’ money has to be remunerated.

“There are those headlines that banking earns I don’t know how much a day, when Caixa has 9.4 billion euros in capital that it has to remunerate,” he said. “It has to return money to taxpayers.”

Macedo announced that CGD would pay in November an extraordinary dividend of €300 million to its sole shareholder, the Portuguese state, in addition to the €83.6 million already paid out this year.

He added that although the CGD results were very positive, the future business conditions it faces are “very difficult”.

Banking consolidation, a recurring issue in recent years, was one of the themes of the results presentations.

BCP’s CEO, Miguel Maya, said it was not looking to make any acquisitions: “Let that be clear.”

BPI’s CEO, João Pedro Oliveira e Costa, also said that the bank he runs took a similar view: “We are not focused there and it is not just talk, it is not our point.”

Novo Banco’s CEO, António Ramalho, by contrast, said that it may weigh up the purchase of smaller banks in good time.

“We will look at all growth hypotheses, especially in the second tier of banks,” he said, stressing that possible acquisitions can be made from the moment the bank concludes its own restructuring process.

In terms of the moratoria on loans, which ended for most at the end of September, the bank CEOs said they were not too worried about defaults, noting that – despite there being problems – the vast majority of customers were paying their debts regularly. But they also said that the situation would evolve depending on economic developments and employment.

In August, the government approved legislation to force banks to restructure oustanding loans to customers who, after the moratoria, have problems paying their debts. CGD has already restructured loans to 3,000 households (totalling €330 million) and 600 companies (with a total €150 million); other banks have not disclosed these figures.

Original Story: Macau Business |Lusa 
Photo: Photo by Armindo Caetano in FreeImages.com
Edition: Prime Yield

Bank Montepio is analysing the transfer of between 1 and 2 billion euro in toxic assets to a specialised vehicle, aiming to perform a «carve-out» operation. And has already placed a new 300 million euros NPL portfolio on the market.

Named “Project Gerês”, this is a granular NPL portfolio, whose sale process is being managed by KPMG. The 300 million euro concern the gross value of the credits, excluding the impairments registered by the bank for this set of contracts and loans.

The bank has one of Portugal’s highest toxic asset rates, having registered in June an NPE (Non-Performing Exposure) ratio of 9.3%, according to the second quarter’s statements. During the same period, the banking system showed an NPL rate of 4.3%, below the 5% rate required by the European authorities.

Original Story: Iberian Property |Ana Tavares 
Photo: Montepio website
Edition: Prime Yield

Millennium bcp bank has put for sale the Project Lucia, a portfolio consisting of 60 million euros in nonperforming loans (NPL) and further 50 million euros in real estate owned (REO) assets. The sales process is being led by KPMG.This isn’t the only portfolio that the Portuguese bank has currently in the market. In August, bcp had already put Project Green up for sale, a 160 million euros portfolio composed of NPLs and REO from the Castro Marim and Monte Rei luxury resorts, both in Algarve.

However, the Castro Marim resort properties would be excluded from the portfolio, due to the low bid values offered by investors. The assets from Monte Rei remain though, but it isn’t certain that the deal will be concluded due to the value of the offers on the table, according to what several sources knowers of the process told to ECO. Bank of America Merrll Lynch and Bybrook are the bidders.

Original Story: ECO News | News 
Photo: Millennium bcp website
Edition: Prime Yield

The Bank of Portugal (BoP) announced that deposits by companies in resident banks increased 16.3% in August compared to the same month in 2020, reaching a new historic high of 58.8 billion euros.

“Concerning deposits by individuals in resident banks, which in July had reached a record €169.9 billion, grew by 7.1% in August, year-on-year, adding 169.3 billion euros (they had increased by 6.6% in the previous month).”

According to the BoP, “since March 2020, households have increased their deposits with banks”, with this growth “a trend and values close to those of the euro area”.

Regarding the total amount of loans granted to households for housing, it grew by 4% year-on-year to 95.6 billion euros, after increasing by 3.9% in the previous month.

Consumer loans grew by 1.3% year-on-year to 19 billion euros in August 2020 (they had increased by 1.6% in the previous month).

Regarding companies, the total amount of loans granted in August 2021 grew by 5.2% year-on-year to 76.2 billion euros, decelerating slightly from the 5.9% increase in the previous month.

“Contrary to the evolution seen in 2020 and early 2021, largely related to the impact of the lines of support for the economy granted in the context of the pandemic, the pace of growth in loans to companies has once again slowed for the fourth consecutive month,” says the central bank.

“Still – it adds – loans to businesses have been increasing at a faster pace than observed in the euro area.”In August, the reduction in the pace of growth of loans to businesses “was across all size classes”

Original Story: Eco  News |  Lusa
Photo: Bank of Portugal website
Edition: Prime Yield

As the Portuguese banks continue to clean up their balance sheets, this has been reflected in an improvement in the levels of non-performing loans (NPL), despite the impact of the pandemic. The NPL ratio stood at 4.3% at the end of June, down 0.6 percentage points from the end of 2020. Still, NPL stock amounted to €13.5 billion.

After peaking in 2016 (17.9%), the NPL ratio have maintained a downward trajectory in recent years; a trend that the Covid-19 pandemic has not yet halted, although the reduction has been at a less intense pace in recent quarters.

Over the past four and a half years domestic banks have cleared more than €30 billion of non-performing loans from their balance sheets and managed to achieve a ratio below the 5% that is required by national authorities. The NPL ratio is today at its lowest level since 2008, according to official statistics.

If we count impairments, the NPL ratio is even lower: 1.9%, representing about €5.99 billion in toxic loans.

Original Story: Eco | Alberto Teixeira 
Photo: Photo by Armindo Caetano in FreeImages.com
Edition & Translation: Prime Yield