Banks not overly concerned about NPLs
The bosses of some of Portugal’s main banks said they were not generally concerned that they would face an avalanche of credit defaults over inflation and higher interest rates.
Speaking at the Business Sustainability Conference 2030 on Wednesday, representatives of Portugal ’s six main banks, Caixa Geral de Depósitos (CGD), BCP, BPI, Novobanco, Caixa de Crédito Agrícola and Bankinter shared their views about the current economic situation and the prospects for the future.
Paulo Macedo, the president of CGD believes that families and companies are in different situations. “There is a distinct behaviour between families and companies when it comes to meeting loan repayments”, he said.
“There is more pressure on families, a lot of (mortgage/loan) rescheduling, which has been positive in the majority of cases”, said Macedo, adding that there had been a greater number of clients paying down loans and mortgages”.
“People are rational, they approach the banks and pay down the debt if they think it is an advantageous option”, he added.
Macedo said that families had already benefitted from a “spread reduction effect” and when asked about the Government’s measure to provide a temporary relief on mortgage interest rate payments, Paulo Macedo said it was “positive” but stressed that there were outlines to the policy that “still need to defined”.
“We will have to see what absolute amounts are involved in practice”, he added “It is positive, but won’t solve the problem,” he warned.
In terms of companies, Paulo Macedo said that most sectors in Portugal had enjoyed “one of the best years ever in 2022” and that “some companies that had already been in bad shape before the pandemic saw their situation worsen”, but “we haven’t seen lots of new cases of defaults”, he said.
The CEO of the State-owned bank said that the situation for companies regarding high operational costs was “much more positive” with costs on transport” having gone down.
On the other hand, he said: “Many companies had to sort out new warehouses to hold stocks.” “The problems that companies have been facing have little to do with (higher) interest rates, rather more to do with energy and raw materials (costs).
The president of BCP was more “concerned at the situation” referring to the economic situation in Portugal as a whole.
“The crisis which resulted from the invasion of Ukraine has proved more complex than the pandemic”, said Miguel Maya, while on loan and mortgage defaults and late payments he added: “We have already noticed some situations of difficulty, particularly among families”.
However, taking the numbers as a whole, and despite some families and companies in difficulties, he said: “we’re not particularly worried”.
Maya advised that Portugal and the financial system needed to be ready for “a world that is being reshaped from a geopolitical point of view”. However, “we should not fall into the trap of thinking this means the end of globalisation”, he stressed, adding that it meant that “errors would be corrected and a new globalisation would open up”.
Carlos Brandão, Chief Risk Officer at Novobanco said that the bank was not seeing “any kind of increase in credit defaults”.
Alberto Ramos, Country Manager, Bankinter said that credit defaults were happening in companies that had already been weakened before the invasion.
With rising inflation at rates not seen in decades, the European Central Bank had increased interest rates to control it, with the BPI’s director of sustainability, Cristina Casalinho emphasising the speed at which these interest rate hikes were happening.
When asked if the rise in interest rates could put the sustainability of some companies at risk, the economist and former head of Portugal’s treasury and debt agency IGCP emphasised: “Companies are much better capitalised now”.
Licínio Pina, the president of Caixa de Crédito Agrícola on the question of loans policy, said: “We have improved (read tightened up) our risk criteria, and our results have been positive”, but that this had “forced us to exclude some clients”.
Photo Paulo Macedo, CEO of CGD (Ricardo Almeida – DR)