Bank mergers on the horizon within two years
The CEO of Portuguese State bank Caixa Geral de Depósitos argued this week that Portugal’s banking sector will likely consolidate over the next two years.
That consolidation, which could involve mergers and acquisitions, is likely to be propelled by the financial results of the banks over the coming quarters said Paulo Macedo on a panel ‘What lies in store for the banking sector?’.
“There is a timeline of events. We will have the accounts for 2020, there will be general board meetings in May 2021, and several institutions will have to see what their prospects are in the face of these results and in terms of profitability and own capital,” said the CGD CEO when asked about possible bank mergers.
According to Paulo Macedo, bank consolidation will take place “over the next two years” since “there will be institutions which will have to look at their prospects as a result of their results,” he said without mentioning Banco Montepio which is widely believed to be in a weak position within the sector.
“Caixa, clearly, is not blind to consolidation and it will happen,” said Macedo at the conference ‘The Banking Sector of the Future’ (Banca do Futuro) organised by the newspaper Jornal de Negócios which took place on 27 October with the presence of the CEOs of the main national banks (CGD, BCP, Novo Banco, Santander and BPI).
Despite insisting that there was no acquisition on the horizon for CGD, Paulo Macedo said that CGD was not “in the least indifferent” to an eventual consolidation process.
CGD is currently following a strategic plan agreed with the European Commission which prohibits acquisitions, but that plan ends at the end of the year.
But should there be any mergers and acquisitions, “Caixa is clearly being overtaken by other banks,” he said.
“We’re not hung up on wether we are the first, second or third largest bank (in Portugal) but we do need to have size and scale in order to be a public bank,” he said, meaning that a public bank needed to be big in order to be relevant in the system.
Miguel Maya, CEO of BCP, said that he was “in no doubt” that consolidation would happen, but argued that this would be brought to bear by the influence of European consolidation. The incentives were being created which would lead to “sums of money moving away from Portugal”.
The specific position of Portugal was also favourable for European consolidation said the CEO of Millennium.
“Consolidation is something that will happen, it will be a future trend and the crisis will speed up this consolidation,” he said, giving several examples of situations which had left the Portuguese banking sector at a disadvantage against European competitors, the main one being the banking sector having to capitalise the National Resolution Fund to keep Novo Banco afloat, into which BCP pays €47 million a year.