Bad Debts Continues to Fall, But Portugal’s Banks Still Have Another €30-Billion Worth
3 January 2019 Banks are pursuing efforts to clean up their balance sheets, as the industry attempts to unload much of the bad debt that has accumulated on the banks' books since the financial crisis. Since then, those banks have already sold off €19.2 billion worth of non-performing loans, the Bank of Portugal reported. Bad debts are a heavy burden for Portugal’s banking sector. That burden is slowly getting less onerous, however, as the level of non-performing loans (NPLs) continues to decline gradually quarter after quarter, according to data from the Bank of Portugal. Nonetheless, even after Portugal’s banks have sold or recovered 19.2 billion euros worth of these defaulted loans since the peak, they still have another €30 billion of bad debts on their books and no immediate solution. "In the third quarter of 2018, the NPL ratio fell by 0.4 percentage points to 11.3%, benefiting from a 1.3-billion-euro (4%) reduction in the stock of non-performing loans," the Bank of Portugal revealed. "The ratio fell more significantly for individuals," it noted. Portugal’s banks thus managed to maintain the recent trend of reducing their exposure to non-performing loans, as the total level of non-performing loans fell from its high in June 2016 by 19.2 billion euros. The NPL ratio declined by 6.6%. The Bank of Portugal pointed out that the drop reflects "a 38% reduction of the total NPL stock." In other words, in spite of the significant decrease over a period of just over two years, the banks have yet to reach the half-way mark. Another €30 billion in bad debts still requires a solution. Portugal’s banks reached the 20-billion-euro mark at the end of last year. Almost all of the banks are making efforts to sell off or otherwise reduce their bad debts, and Novo Banco contributed a significant part of that total, selling a portfolio of bad debt valued at 2.15 billion euros.