Portuguese banks haven’t had it so good in 25 years

Portugal’s banking sector has not been in such a healthy position in recent history as it is now.

Its transformation ratio or loan-to-deposit ratio is at its lowest level since March 1998 and is 1.6 times less than the average ratio since Portugal joined the Euro Zone reports ECO.
According to a report from a report from the Portuguese Banking Association (APB) it means that for each €100 in deposits, the banks currently lend out €79.
“This is the result of a more conservative policy and much regulation which focused on increasing the requirements for short and long-term liquidity”, João Duque, professor of Finances at Lisbon’s business management and economics university ISEG.
However, the reduction in the loan-deposit ratio does not mean that the bank is turning off the credit taps. Over the past four years, for example, loans to families (mortgages and consumption) and companies increased at an average rate of 2.5% per annum, culminating in €196,000 at the end of last year – the highest since 2015.
A large part of the deleveraging is down to a sharp increase in deposits from companies and private individuals: over the past two decades the banks only saw one occasion when there was a fall in deposits (2012).
Over the past four years, despite the interest on deposits being zero or close to zero, deposits grew at an annual average rate of 7.7% with banks having around €250Bn in deposits at the end of last year.

Image: President of the APB Vítor Bento  (APB)