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Bank Executives Flatly Reject Existence of Real Estate Bubble and Risky Loans
25 September 2018
The recent rise in prices in the real estate market corresponds to a normal market correction and is not the beginning of a speculative bubble, some of Portugal’s principal banking executives argue. Simultaneously, the governor of Portugal’s central bank warned against the risk of euphoria.
The current rise in real estate prices is the result of many years of weak investment in the sector and not the symptom of the formation of a speculative bubble. That belief was expounded by a group of bankers that met at a conference on the future of banking on Tuesday, which was held by the Jornal de Negócios in Lisbon.
The chief executive of BCP, Miguel Maya, stated that, after years in which Portugal’s banks had reduced lending for real estate development (Brussels had also barred BCP entirely from lending to the sector while it was benefiting from the injection of state funds), the current rise is a simple adjustment.
“I do not see that it is a major problem. The market has heated up,” Maya said, in a statement seconded by António Ramalho. “Portugal is no suffering from a housing bubble as yet because, until now, we have had almost 15 years of divestment from the real estate market and we had stopped building and licensing,” the chief executive of Novo Banco noted. Therefore, the current increases constitute “a manageable situation.”
Pablo Forero, of BPI, stated that he lived through the real estate bubble in Spain, and noted that in comparison, ” the situation in Portugal is quite reasonable.”
“Of course we have to avoid excesses, but the banks are doing serious and prudent work,” the bank’s president, which is owned by the Spanish group Caixabank, stated.
The president of BCP, Paulo Macedo, also noted that difference between the prices of “residential real estate in Lisbon and Porto and industrial real estate in those same areas, where prices are still depressed.”
The statements by the bank executives contrast with those of the governor of the Bank of Portugal, who, at a separate conference on behavioural supervision organised by the regulator, warned of euphoria in the real estate market.
Lending is under control
The recent pace in the growth of credit was also greeted with equanimity by the banks. When asked whether Portugal’s banks were returning to the aggressive lending practices of the past, the bankers at the Business Journal conference rejected the notion.
Miguel Maya (Millennium BCP) and Paulo Macedo (CGD) noted that “our risk modelling has improved and our governance is different than in the past”, which has led the banks to understand that “the degree of loans in default is not out of the norm.”
Paulo Macedo recalled that in the past, “the banks’ big exposures were the root of the problem, and these are clearly smaller today.”
Original Story: Jornal Expresso – Lusa
Translation: Richard Turner