Banks Consumed €31.5 Billion in Capital Between 2008 and 2017

7 May 2018

Banks are more solid and better prepared for the future, the president of APB, Faria de Oliveira, believes. However, they still face challenges to their profit margins.

Over the last nine years, the largest banks in Portugal consumed €25.7 billion of capital (in cash) and 5.8 billion in CoCos (contingent convertible instruments loaned to banks by the state). From 2008 to 2017, “there was an effort to capitalise the banks, fewer impairments were registered in 2017, and the coverage ratio went up,” Mr Oliveira stated.

However, the president of the Portuguese Banking Association says that despite an improvement in profitability, which reached 3.5% in 2017, there is still a long way to go. “We continue to have problems with profitability,” and that be must addressed. Otherwise, the banks will need to raise more capital, the executive said.

In a meeting with journalists, Mr Oliveira presented the APB’s report on banking indicators for 2017,  highlighting the banks’ efforts to reduce their non-performing assets (known as NPLs) and an improvement in the NPL coverage ratio from 40.8% in 2015 to 49.3% in 2017.

One of the problems that persists, he says, “is a reputational problem that has yet to be overcome.” These ongoing problems are due to the extensive legal proceedings against the bank and to frequent criticisms of increases in commissions and loans. Moreover, he explains that banks must be more aware of the risks of the loans they are granting.

The indicators for 2017 show that the banks’ equity has increased to more comfortable levels since 2007, that NPLs are decreasing, that the transformation ratio (loans vs deposits) stood at 92.6% in 2017 against 95.3% in 2016 (160% in 2007). The banking system’s core tier 1 ratio also increased to 13.9% in 2017.

Original Story: Expresso – Isabel Vicente

Translation: Richard Turner