Portugal faces “very hard” year says banker

Portugal’s most famous international banker has warned that 2023 will be a “very hard” year for the country.

In an interview with CNN, Sir António Horta Osório, the former CEO of Lloyd’s Banking Group (he was awarded a knighthood for turning the bank’s financial fortunes around, as well as voluntary work in mental health awareness) and ex-Chairman of Credit Suisse, warned that the Portuguese should be financially prepared so as not to have a “surprise shock” next year because GDP growth will be lower than in recent years.
The banker said that while Portugal had “some latitude to adjust to international shocks”, it was “a small economy” and there was limited slack.
Horta Osório said there was “no doubt that increasing food prices, the energy crisis, greatly exacerbated by the war in Ukraine, have led to inflation that is becoming pervasive – it is a hidden and unfair tax on society”.
He also dismissed the charge that the banks were flush with cash. “You only have to see that listed banks in Portugal, Spain and France are priced below their book value, which has mainly to do with the fact that the return that banks are having on capital – which is very high – is lower than the cost of capital”.
And although the banks do have a lot of liquidity, important as a security buffer, “I don’t think it’s true that the banks are making big gains because if you look at the return on equity it is well below 10%, and the minimum return required for a bank’s equity is around 10% to 12%.