BPF posts €207M credit line loss
Portugal’s Mutual Guarantee System has posted losses of €207 million according to the financial report for 2020 published by its development bank Banco Português de Fomento.
However, the development bank posted an overall profit of €9 million, for the most part thanks to €31.9 million that it charged in fund management and service fees. It spent €8.9 million in expenses on staff and €1.12 million on salaries for directors, management and supervisory staff.
The bank, which is being led by Beatriz Freitas, has just presenting its first financial report two years after its first full year in operation 2020.
The BoF says losses suffered by the Mutual Collateral Guarantee Fund increased by 3.54% on 2019, a lesser amount than registered in previous years due to the implementation of the Government’s credit moratorium which permitted companies to suspend capital and interest payments on loan contracts during the Covid-19 pandemic.
The annual financial report which was posted on the bank’s website on Monday, reveals “evaluating the losses suffered by FCGM from the counter guarantees liquidated, in 2020 this loss increased by around 3.54% relative to the amount accumulated at the end of 2019, an apparently favourable evolution when compared to values in previous years (8.67% in 2016, 6.61% in 2017, 6.55% in 2018, and 4.16% in 2019,” states the report.
This evolution in the “slowdown in the growth rate of loss” is explained by the “implementation of the legal credit moratorium introduced by the Government which enabled companies to opt to temporarily suspend repayments and or interest on bank loans previously contracted with credit institutions” in Portugal during the pandemic.
A 2018 study into the Mutual Guarantee System in Portugal prepared for Sistema Português de Garantia Mútua shows a positive coefficient during times of crisis. During the previous financial crises in Portugal between 2010-2013 the system increased the survival probability of firms throughout the crises until 2013 by 19.1 percentage points, according to one model, and 17 percentage points, according to another. Taking into consideration the 2011-2016 period (banking crisis, sovereign debt crisis and Great Recession) results showed that, during the period under review, the use of mutual guarantees substantially increased the survival probability of their users compared to non-users.
In total, Portugal’s Mutual Guarantee System has posted in accumulated terms “a total gross loss from guarantee payments to beneficiaries of €881,08 million, of which around €31.11 million were in respect of guarantees paid throughout 2020.
The Banco de Fomento was created at the end of 2019 by merging IFD and PME Investimento but was strongly impacted by the pandemic since in most sectors companies saw their activities suffer so that liquidity that had been earmarked for investments was frozen or channelled to a rolling fund.
Banco de Fomento and its products proved to be a lifeline for scores of Portuguese SMEs during the Covid-19 crisis.