Bank of Portugal uses 1.1 billion in provisions and avoids losses
The central bank recorded a profit of 2 million euros in 2024, but had to go ‘to the financial cushion’ to find 1.1 billion to avoid losses. "I wouldn't expect dividends so soon", warns Centeno.
The Bank of Portugal made a profit of two million euros last year, but had to use 1.14 billion euros from its financial cushion to cover losses related to monetary policy assets. Losses that it expects to still have in 2025. Faced with the need to reinforce the buffers, governor Mário Centeno has already warned: “I wouldn’t expect dividends from the Bank of Portugal any time soon.”
Without the use of provisions for general risks, the central bank would have recorded losses of 1.14 billion euros, according to what the Bank of Portugal revealed on Wednesday in the 2024 Board of Directors’ Report.
The negative results — which other central banks are also recording — are the result of the European Central Bank’s (ECB) tightening of monetary policy in recent years to curb inflation. By raising official interest rates, the ECB has put pressure on Banco de Portugal’s balance sheet, causing returns on assets to be lower than the cost of liabilities — the so-called interest rate mismatch.
At a press conference, Clara Raposo, deputy governor, anticipated that the Bank of Portugal’s results would once again be pressurised by this situation in 2025, but assured that the institution has buffers that she considers to be “adequate” to cover the losses.
Positive results could return in 2026, but Clara Raposo emphasised that the high level of uncertainty could change the accounts.
“I wouldn’t expect dividends from the Bank of Portugal so soon”
At the end of last year, the Bank of Portugal still had a cushion of 1.7 billion euros — but well below the 3.9 billion it had in 2022.
Faced with this scenario, Mário Centeno — whose term ends in July — said that when it returns to profit, the Bank of Portugal will have to reinforce the cushion and that’s why he warned the finance minister: “I wouldn’t expect dividends from the Bank of Portugal so soon.”
Regarding the choice of the next governor, Centeno was elusive, although he has expressed his desire to continue. “The decision is institutionally very well defined. It has taken place in the past with complete stability, I don’t foresee anything different happening”, he said today.
The report was presented at the Bank of Portugal’s new (and temporary) premises in the Álvaro Pais Building (formerly the Marconi building) in Entrecampos, Lisbon.
The supervisor has just announced that it will concentrate all its activity in the new building being built on the former Feira Popular site, which it bought from the insurance company Fidelidade for 190 million euros.