DBRS Predicts Worsening Credit Ratios in 2021

12 August 2020 – DBRS Morningstar, a credit rating agency, published a note predicting a “more pronounced” worsening of the quality of Portuguese banking assets in 2021, given the lessened support of moratoria, state-guaranteed loans and other public measures designed to ameliorate the pandemic’s impact.

In addition to an expected increase in non-performing loans as a consequence of the reduced support, credit risk has increased significantly since loans were initially assessed. At the same time, the economy’s deterioration makes it much more difficult for banks to continue to reduce their pre-Covid-19 exposure to non-performing loans.

According to DBRS, “the sectors most vulnerable to the pandemic are those directly and indirectly linked to the tourism industry, which is a key driver of the Portuguese economy, such as hotels, restaurants and transport, as well as various industrial sectors”, and while “the real estate sector has so far remained stable, it may come under pressure should the unemployment rate increase significantly.”

Original Story: Diário Imobilário – Rita Neto

Translation/Summary: Richard D. Turner