Banks return nearly 70% of profits to shareholders

Portuguese banks are distributing close to 70% of their profits to shareholders, according to an ECO analysis, underscoring how record earnings are being channelled primarily into dividends and share buybacks rather than retained capital.

In recent years, the sector has combined high profitability with increasingly generous payout ratios, with several major banks adopting distribution policies that return a majority of net income to investors. In some cases, payouts exceed 80% of profits, reflecting strong capital positions and limited pressure to retain earnings.

This trend comes as Portugal’s banking sector posts historic results. The five largest banks generated more than €5.2 billion in profits in 2025, a 6% increase year-on-year, supported by interest margins, fees and lower provisions.

ECO’s analysis indicates that foreign-owned banks in particular tend to be among the most generous, as dividends are upstreamed to parent groups abroad, while the Portuguese State also benefits from high payouts at Caixa Geral de Depósitos (CGD), the country’s largest bank: from a record profit of almost two billion euros, it will pay 1.25 billion euros to the State, representing a payout of 66%.

Following profits in excess of one billion euros, BCP has moved to strengthen its profit distribution policy with a payout ratio of up to 90%. However, only 50% of profits will be distributed as dividends, amounting to around €509 million. The remaining 40% will be returned to shareholders through share buybacks, a programme that has been expanded compared to the previous policy (which provided for a 25% share buyback plan).

As for Novobanco, which is about to pass into French hands, if BPCE wishes to ‘recoup’ part of its €6.4 billion investment in the purchase of the Portuguese bank, it could already take a dividend of around €500 million.

Although Novobanco is still owned by Lone Star and the Portuguese state until the end of this month, last year’s profits ‘belong’ to the French group. The bank led by Mark Bourke posted a profit of €828 million in 2025, 11% more than the previous year. And it is part of the bank’s policy to distribute 60% of the profit to its owners. The new French owner has the final say.

At Banco Montepio, which Pedro Leitão is leaving, a dividend of €36 million will be paid out — representing 35% of last year’s profits. The Associação Mutualista Montepio Geral (AMMG) owns over 99% of the bank and will ‘swallow’ virtually the entire dividend. The payout rises by 20% to a record high for the second year running; even so, the shareholder believes it should be double that amount.

The high distribution levels reinforce the attractiveness of Portuguese banks in a period of strong profitability, but they also raise questions about long-term capital allocation, especially as interest rates fall and earnings growth may moderate.