Profitability at leading Portuguese banks is typically weaker than many European peers because credit losses remain high and revenue models are limited.
Covid-19 has squeezed the country’s large and vital tourism sector, which analysts do not expect to recover to its pre-pandemic levels for at least a couple of years, and the widespread use of debt moratoriums during the crisis is likely to lead to rising loan losses.
The country’s private sector remains highly indebted — at 165% of gross domestic product at end-2020 — but it has nonetheless improved significantly over the past decade following the European debt crisis.
Portugal was among the worst affected of a clutch of eurozone countries that were unable to repay government debt or bail out troubled banks in the aftermath of the global financial crisis without the help of the European Central Bank and the International Monetary Fund (IMF).
The damage the debt crisis wrought on the country’s banking sector can be seen in the precipitous fall in profits at the country’s two biggest banks, Caixa Geral de Depósitos and Millennium bcp, over the past decade, while rival Banco Montepio mostly posted losses over the period.
A sustained economic rebound after the country left EU and IMF-imposed austerity programmes supported a resurgence in bank profitability between 2017 and 2019, but the onset of the pandemic caused pre-tax profits to fall 33% to $861m at Caixa Geral de Depósitos and 40% at $426m at Millennium bcp in 2020, according to The Banker Database.
Pre-tax profits, meanwhile, slumped 60% to $154m at Banco Portugues de Investimento last year, while Banco Montepio slipped to a $149m loss. The pace of the country’s economic rebound over the rest of 2021 may dictate whether this trend continues.
Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4,000 of the world's leading banks in 190 countries. Contact us.
