ECB's Centeno sees more consolidation in Portugal's banking sector

Banco Espirito Santo SA em Liquidacao

23/11/2022 19:41

By Sergio Goncalves and Andrei Khalip
       LISBON, Nov 23 (Reuters) - Further consolidation of
Portugal's banking sector is inevitable, European Central Bank
member Mario Centeno told Reuters on Wednesday, calling
"remarkable" the recent progress the country's banks have made
on strengthening capital and reducing risk.
    Analysts have said that Portuguese banks should bet on M&A
operations to achieve better competitive conditions, despite the
five largest players' owning 80% to 85% of banking assets.
    Centeno said the system had made "remarkable progress" in
recent years as banks strengthened their capital and improved
risk profiles, while non-performing loans (NPLs) dropped to
levels practically in line with the European average. 
    "After this reinforcement, consolidation of the banking
system (in Portugal) and strengthening of its institutions is
absolutely crucial and it is inevitable that the system, the
market, will face that," Centeno, who is also governor of the
Bank of Portugal, said in an interview.
    While the COVID-19 pandemic and the current crisis had
postponed this process, "we will do it, as always, with great
tranquillity," he added. 
    Portugal's banks are still scarred from a debt crisis and a
spike in NPLs after the 2010-13 recession. They have since
reduced NPLs to a total of 11.4 billion euros ($11.85 billion)
in June 2022 from a peak of 50 billion euros in June 2016,
according to the latest Bank of Portugal data.
    The NPL ratio for Portugal's lenders was 3.4% of total
credit in June, versus 17.9% in mid-2016.
    "Although I am very satisfied with the evolution...there is
no point in resting, we have to challenge ourselves," Centeno
said.
    "It is important that this maturation takes place with a
continued reinforcement of the institutions in their size, their
capitalisation and mainly in their capacity to respond to the
challenges of digitalization, climate action, because this all
goes through the banks' balance sheets."
    The largest bank is state-owned Caixa Geral de Depositos;
followed by Millennium bcp  BCP.LS ; Santander Portugal
 SAN.LS ; Novo Banco, which emerged from the collapsed Banco
Espirito Santo in 2014 and is controlled by U.S. private equity
fund Lone Star; and BPI, owned by Spain's CaixaBank  CABK.MC .
($1 = 0.9623 euros)
 (Reporting by Sergio Goncalves and Andrei Khalip; Editing by
David Latona and Leslie Adler)
 ((sergio.goncalves@thomsonreuters.com; +351213509204; Reuters
Messaging: sergio.goncalves.reuters.com@reuters.net))