Portuguese Bank Profitability Improves in Q2 2021, but Asset Quality Risks Remain
The commentary analyses the H1 2021 results of the large Portuguese banks.Summary highlights:
• In H1 2021, Portuguese banks reported an aggregate net income of EUR 678 million up from a net loss of EUR 67 million in H1 2020, mainly on the back of lower credit provisions, as well as higher fees and trading income.
• Total provisions and impairments declined by 48% in Q2 2021 YoY, amid lower credit impairments, as the Portuguese economy begins to recover from the pandemic. However, total impairments increased slightly QoQ.
• The stock of NPLs has continued to fall in Q2 2021, although at a slower pace. The combination of support measures and improving economic prospects is helping asset quality for the time being.
• Moratoria still account for a high proportion of total loans, at a weighted average of 15%, well above the European level. The bulk of the loans under moratoria are loans to SME customers which are set to expire in the third quarter of 2021.
“Results for Portuguese banks improved in Q2 2021 as economic prospects developed more positively than previously anticipated. However, risks for future asset quality deterioration are likely to remain for some time. We expect an increase in default rates with the end of moratoria support scheme, especially in the corporate sector “said Nicola De Caro from DBRS Morningstar’ Global Financial Institutions team.
Banco Comercial Portugues is a privately-owned bank that provides a range of banking activities and financial services in Portugal and abroad, with a focus on commercial banking, corporate and investment banking and asset management and private banking. Co. operates in the following segments: Portugal, which consists of retail banking (including ActivoBank), companies (including companies and corporate and investment banking), asset management and private banking, and non-core business portfolio; and foreign activity, which consists of Poland, Angola, and Mozambique. As of Dec 31 2014, Co. had total assets of Euro76.36 billion.
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