Portuguese banks’ margins and returns fell in Q1
Portuguese banks earned less from lending and saw costs rise in the first quarter, a sign that the sector’s recent profitability boom is starting to fade.
Portuguese banks started 2026 with lower lending margins, higher operating costs and weaker profitability, according to a Bank of Portugal report published on Thursday.
The central bank said the sector’s net interest margin narrowed in the first quarter as lower interest income from loans to households and companies more than offset a decline in interest paid on customer deposits. That reduced a key source of bank revenue at a time when the tailwind from high interest rates is easing.
At the same time, operating costs increased. The cost-to-income ratio rose to 44% in the first three months of the year, up 0.9 percentage points from a year earlier. Higher wage costs were the main driver, followed by spending on information technology, according to the Bank of Portugal.
The combined effect pushed down the sector’s main profitability indicators. Return on assets fell to 1.27%, down 0.02 percentage points year on year, while return on equity slipped to 13.65%, down 0.29 percentage points. Even so, the report said Portuguese banks remain among the most profitable in the euro zone, with non-performing loans stable at 2.1% and the tier 1 capital ratio at 18%.
Originally published at Eco.pt
