Banks with highest bailouts in EU
Government and banking sector bailouts for Portugal’s banks have been the highest in the European Union.
More than a decade after the global financial crisis, which led to various countries in the EU to intervene in the financial sector, Portugal is the country where capital injections into the banking system had the greatest impact on the budget balance in 2020-2021.
The accumulated impact of funds injected into banks such as Novobanco and Caixa Geral de Depósitos stands at around 10% of GDP reports the business daily Negócios.
And the Portuguese Association of Banks says that the banking sector is still not profitable despite making profits in 2021 and will have to make more structural cuts.
In an interview with Lusa, the general secretary of the APB, Norberto Rosa said that it was one thing to speak about the absolute results banks make in a financial year (Portugal’s banks had aggregated profits of €2.013Bn in 2021, which were down to reductions in credit impairments and an increase in bank product, particularly financial operational performance because of the recovery in the financial markets in 2021), when what is most important is “capital remuneration”.
Because of this, Rosa argues that these results have to be looked at in relative terms. The return on equity for banks operating in Portugal was 5.4% in December 2021 (above the 0.5% in 2020 and 4.8% in 2019).
However, despite the improvement, it is still below the Euro Zone average of 7%, which means that the “cost of investment opportunity in the banking sector is not positive”. The value that would permit a capital return is a Return on Equity of between 8% and 10%.