Banking NPLs plunge. They fell by 9.3 billion euros in a year

Nonperforming loans remain a heavy burden for the Portuguese banking. It still is, but the sector is accelerating the solutions for the problem, clearing it from the balance at a much higher rate. The fourth quarter had the most expressive reduction ever, in a quarterly basis, having “cleared” in 2017 a total of 9.3 billion euros in toxic credits.

“The NPL stock continued decreasing in the fourth quarter of 2017. This plunge, of 2.9 billion euros, is the largest quarterly reduction since the beginning of the publication of the European Banking Authority series (EBA, since December of 2015)”, according to statistic data from the Bank of Portugal.

“The NPL stock was reduced by 9.3 billion in comparison to December of 2016 and 13.5 billion euros in comparison to the peak achieved in June of 2016”, the same document states. In spite of the favorable contribution from all sectors, the Bank of Portugal highlights companies’ NPL, which decreased 5.9 billion in comparison to December of 2016.

“Therefore, the NPL ratio decreased 1.3 percentage points in the quarter, standing at 13.3%, which is a 3.9 percentage points’ reduction in comparison to 2016 and of 4.6 percentage points in comparison to June of 2016. On the other hand, the NPL ratio of the non-financial private sector decreased 0.6 percentage points in comparison to September of 2017″.

"The NPL stock was reduced by 9.3 billion in comparison to December of 2016 and 13.5 billion euros in comparison to the peak achieved in June of 2016.”

While the NPL ratio plunges, the coverage of those loans in the banking is increasing. The same is to say that banks are more proactive: “in December of 2017, the NPL hedge ratio for impairments was of 49.3%, increasing 2.8 percentage points in comparison to the previous quarter”. The Bank of Portugal justifies this evolution with “an addition of 3.4 percentage points of the hedge ratio of the non financial societies’ segment”.