Bank shakes with moratoria

Portuguese banks escaped, for the time being, unscathed from the effects of the pandemic. Caixa Geral de Depósitos, BPI, Santander Totta, novobanco and BCP – profited over a billion in the first nine months of the year. The pandemic crisis, the application of moratoriums and the constitution of provisions still allowed financial institutions to profit nearly four million a day. However, defaults continue to hang over the financial system, particularly with regard to companies. Despite the fact that the Governor of Banco de Portugal mentioned the “extraordinarily positive effects”, as a result of the application of this measure and pointing to a “very low” number of corporate insolvencies, he acknowledged that “we have to be weighed up”.

An issue that gains greater importance when the total amount of credit from companies in default – which totaled 2,707 million euros, according to the latest data, corresponds to 3.6% of total credit to this segment – the majority (51, 3%) is concentrated in the sectors most affected by the crisis.

In addition to the companies, it is also necessary to count on individuals. And as had already been advanced by Sunrise, the real headaches begin at the beginning of the year. The explanation is simple: the credits covered by this measure could not be subject to legal action for 90 days after its end. “These 90 days end in December, as such it is only in January that there will be a notion of who is not able to fulfill the contract and then the banks can pass more drastic measures, such as foreclosure”, resulting from the amendment to the decree 227/2012, I had already assured our newspaper, Natália Nunes, director of the Financial Protection Office (GPF) at Deco.

And for the responsible, the prospects are not encouraging. “In 2022 we can see an increase in non-compliance, with families being faced with enforcement actions and with the loss of their homes and with a greater number of families resorting to insolvency proceedings with the consequent loss of the home”, he even admitted to our newspaper.

mergers will be inevitable step

Faced with these possible impairments, the financial system will have to take large steps towards merger processes, as has been the case throughout Europe. This scenario has already been recognized by Mário Centeno when he defended that mergers and acquisitions are a “natural” next step for Portuguese banks, pressured by record low interest rates. And the obstacles did not stop there. The Governor of Banco de Portugal also recalled that, while European banks were betting on restructuring processes, the national financial system “desperately tried to cut bad debts and strengthen capital ratios”.

And he went further: “There are processes for the sale of banking institutions taking place in Portugal, this is a way of having this type of consolidation, and there are strategies that I think are converging between banks and that can lead to these phenomena”, he added. that “mergers are a market phenomenon, they should result from market developments and should be seen naturally” and, as such, argues that “they are more likely in markets where there are negative shocks to the profitability of banks”.

For the official, there is no room for doubt: «It is a market response to the need for gains, synergies, between institutions when they come together».
The purchase of Montepio by BCP was discussed, but rejected by the two financial institutions. But new year, new life.

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Bank shakes with moratoria