Banks continue credit clampdown

Portugal’s banking sector is continuing to err on the side of caution and prudence when it comes to providing credit to companies.

Business daily Negócios reports that month-on-month the amount of credit granted to Portuguese companies fell in 2023, a situation exacerbated by a difficult and unpredictable global context.
According to João Vieira Lopes, President of the Confederation of Trade and Services of Portugal, the financial system is not helping, telling the newspaper: “There is a tendency from the banking sector to create increasing difficulties in their criteria for granting business loans or providing finance, either for investments or current finance, the mechanisms for approval, and the time taken to reach a decision”.
And adds that the banking sector maxim that they have money to “support all good projects and companies” in a fair number of cases often is little more than a statement of intentions, or a marketing slogan with “many companies, particularly SMEs, sharing difficult experiences”.
João Vieira Lopes points out various other factors that contribute to the month-on-month reductions in the number of credit applications being accepted by the banks. In the case of commerce and services, the amount of credit conceded fell 2% in December.
These reasons include the ongoing effects of the pandemic, with savings that families had made during that period having run out, sectors that still have difficulties recovering from the pandemic, such as clothing, footwear, and telework because of changes in consumer spending habits and falling sales in quantity in various areas.
Increased interest rates have made the cost of servicing current loans more expensive, while at the same time families have suffered a fall in net income as interest rates on mortgages have risen.
The Vice-President of the Portuguese Association of Portugal Metals (AIMMAP), Rafael Campos Pereira, adds that credit is “an important facility for companies and the lack of it is complicating operations and limiting the road to competitiveness.
Both the CIP and AIMMAP stress that reduced credit (in the case of energy and industry a fall of 4.4%) is partly the result in a fall in confidence indices within those sectors, increases in interest rates throughout 2022 and, on the other hand, a fall in confidence among business owners against a backdrop of great uncertainties, including two wars.
Rafael Campos Pereira argues that “successive constraints” in supply chains since the pandemic, energy market instability, political instability (a home), and geopolitical instability overseas are just “one side of the coin” taking into account the demands of Europe, and often replicated in more radical ways internally in Portugal, particularly in the domains of sustainability, labour, and others, all of which end up being “suffocating for companies”.
Nevertheless, metal manufacturing companies have managed to survive and even grow in times of adversity, closing 2023 with a new record in overseas sales to €12Bn.
For 2024, Rafael Campos Pereira sees little change to the current situation, given a more difficult economic situation in Germany and Spain (two of Portugal’s most important markets), added to the political instability in Spain and Portugal, which will have negative repercussions in Portugal.