Portuguese banks reduced €18bn of non-performing loans in two years

  • ECO News
  • 4 October 2018

During the second quarter of 2018, clients' deposits increased by 3.6%, according to the Bank of Portugal (BdP). Liquidity indicators remain at high levels.

Portuguese banks have reduced by €18bn the bad debt weighing down on their liquidity, over the course of the last two years, according to the data released by the BdP. They also showed a fall in the requests for this type of loans.

According to BdP’s report on the Portuguese banking system, released this Thursday, the ratio of non-performing-loans (NPL) reduced by 6.2 percentage points which meant that there was a 36% reduction in terms of total NPL stock, a percentage that corresponds to €18bn.

During the second quarter of 2018. the NPL ratio decreased one percentage point, to 11.7%, benefiting mostly from the reduction in NPL stock, which had lowered by €2.3bn (6.5%), and from a slight non-NPL increase.

Also according to the BdP, during the second quarter of 2018, deposits of clients increased by 3.6% “an increase which was witnessed in all the main institutions in the banking system”.

The evolution was more noticeable in the non-financial sector and in other financial institutions (non-including credit institutions), which recorded increases of about €4.1bn and €2.5bn, respectively.

Central banking financing also continued its downward trend, registering a low that hadn’t been hit since the first quarter of 2010. The liquidity indicators remained very high, having improved in all maturities. The total of assets for the banking system increased in the second quarter of 2018, inverting the downward trend witnessed in the last few years.

This evolution shows, according to the BdP, that central banks and public debt securities portfolios are increasing their availability, especially in the Portuguese system.

The rentability of the banking system increased significantly in the first semester of 2018 in comparison to the previous year, causing a reduction in the flow of impairments and provisions, alongside a reduction in costs with staff, the BdP added.