© Reuters. FILE PHOTO: European Central Financial institution (ECB) governing council member Mario Centeno speaks throughout an interview with Reuters, in Lisbon, Portugal, March 15, 2021. REUTERS/Pedro Nunes
By Sergio Goncalves and Andrei Khalip
LISBON (Reuters) – Additional consolidation of Portugal’s banking sector is inevitable, European Central Financial institution member Mario Centeno informed Reuters on Wednesday, calling “exceptional” the current progress the nation’s banks have made on strengthening capital and lowering danger.
Analysts have mentioned that Portuguese banks ought to wager on M&A operations to attain higher aggressive circumstances, regardless of the 5 largest gamers’ proudly owning 80% to 85% of banking property.
Centeno mentioned the system had made “exceptional progress” in recent times as banks strengthened their capital and improved danger profiles, whereas non-performing loans (NPLs) dropped to ranges virtually in step with the European common.
“After this reinforcement, consolidation of the banking system (in Portugal) and strengthening of its establishments is totally essential and it’s inevitable that the system, the market, will face that,” Centeno, who can also be governor of the Financial institution of Portugal, mentioned in an interview.
Whereas the COVID-19 pandemic and the present disaster had postponed this course of, “we’ll do it, as all the time, with nice tranquillity,” he added.
Portugal’s banks are nonetheless scarred from a debt disaster and a spike in NPLs after the 2010-13 recession. They’ve since lowered NPLs to a complete of 11.4 billion euros ($11.85 billion) in June 2022 from a peak of fifty billion euros in June 2016, in keeping with the newest Financial institution of Portugal information.
The NPL ratio for Portugal’s lenders was 3.4% of complete credit score in June, versus 17.9% in mid-2016.
“Though I’m very happy with the evolution…there isn’t a level in resting, we’ve got to problem ourselves,” Centeno mentioned.
“It will be significant that this maturation takes place with a continued reinforcement of the establishments of their dimension, their capitalisation and primarily of their capability to reply to the challenges of digitalization, local weather motion, as a result of this all goes by the banks’ stability sheets.”
The biggest financial institution is state-owned Caixa Geral de Depositos; adopted by Millennium bcp; Santander (BME:) Portugal; Novo Banco, which emerged from the collapsed Banco Espirito Santo in 2014 and is managed by U.S. non-public fairness fund Lone Star; and BPI, owned by Spain’s CaixaBank.
($1 = 0.9623 euros)