Portuguese Banking
System
Recent Developments
Updated: 3rd quarter 2015
Prepared with data available up to 1 December 2015
Outline
• Portuguese banking system – Main highlights
• Macroeconomic and financial indicators
• Portuguese banking system
•
•
•
•
•
Balance sheet
Liquidity & funding
Asset quality
Profitability
Solvency
• Recent measures with impact on the banking system
2•
Portuguese Banking System – Main Highlights
I.
Balance Sheet
•
Banking system total assets persist in a decreased trend driven by the reduction of credit to clients.
II.
Liquidity & Funding
•
Deposits remained resilient in the third quarter which along with the credit reduction justifies a slight decrease of
the loans to deposits and the commercial gap.
•
Eurosystem refinancing decreased in line with the trend observed in the former quarters.
•
The banking system liquidity position improved in all maturity buckets (as measured by liquidity gaps).
III.
Asset/Credit Quality
•
The credit at risk ratio increased slightly driven by the credit at risk.
•
To the variation of the overall ratio stands out the contribution of credit to the non-financial corporations’ segment.
IV.
Profitability
•
In the third quarter of 2015 the banking system recorded positive profitability levels.
•
On a year-on-year basis, the observed improvement stemmed mostly from the decrease in the flow of impairments
and provisions.
V.
Solvency
•
Solvency levels remained broadly stable in the third quarter of 2015.
3•
Macroeconomic and Financial Indicators (I/IV)
GDP growth rate – Volume
1.9
0.9
%
3
2
1
0
-1
-2
-3
-4
-5
0.5
 In the third quarter, quarter-onquarter GDP growth rate was
virtually null.
0.0
//
-1.1
-1.8
-4.0
2010
2011
2012
2013
2014
2Q 2015
3Q 2015
Chart 1
 The year-on-year growth rate of
GDP was 1.4%.
Note: Quarterly figures correspond to q-on-q rates of change. National Accounts and Balance of Payments figures are
already presented according the rules of the European System of National and Regional Accounts (ESA 2010) and Balance
of Payments and International Investment Position Manual (BPM6).
Current account and capital account, % GDP
6
1.4
1.5
2.1
1.6
1.5
1
1.4
-4
1.4
//
0.5
-0.3
1.4
 At September 2015, the current
and capital account recorded a
surplus of 3.0% of GDP, reflecting the
ongoing adjustment of the external
imbalance of the Portuguese
economy. The current account
recorded 1.6%.
1.6
-2.0
Capital Account
-6.0
-9
Current Account
-10.1
-14
2010
2011
2012
2013
2014
2Q 2015
3Q 2015
Chart 2
Note: Quarterly figures are seasonally adjusted.
4•
Source: Banco de Portugal and INE
Macroeconomic and Financial Indicators (II/IV)
Unemployment rate, % of active population
18
15.8
15
12.0
16.4
14.1
12.9
12.4
12.3
12
 The unemployment rate was
12.3%, reaching almost 2010 levels.
It decreased 1.3 p.p. when compared
to 3Q2014.
9
6
3
//
0
2010
2011
2012
2013
2014
2Q 2015
3Q 2015
Chart 3
Fiscal deficit, % GDP
96.2
111.4
126.2
129.0
130.2
2010
2011
2012
2013
2014
128.7
130.5
2Q 2015
3Q 2015
Public
Debt
(% GDP)
//
0
 Public debt as a percentage of GDP
stood at 130.5% at the end of the
third quarter of 2015. Deposits from
the General Government amount to
about 14% of GDP.
n.d.
-3
-3.7
-6
-5.7
-7.4
-9
-12
-11.2
-4.8
-7.2
Chart 4
Note: : The unemployment rate corresponds to the figure of the central month of each quarter published by the National
Statistical Institute. The fiscal deficit of 2014 was revised in the context of the second notification of 2015 to Eurostat
related to the Excessive Deficit Procedure. The revision of the balance of 2014 reflects, mainly, the inclusion of 4.9 billion
Euros related to the capitalization of Novo Banco as a capital transfer.
Source: Banco de Portugal and INE
5•
Macroeconomic and Financial Indicators (III/IV)
Net lending/borrowing of non-financial corporations, % GDP
118.2
121.2
127.1
122.4
116.1
114.8 (1H2015)
NFC debt
(% GDP)
 In the first half of 2015, nonfinancial
corporations’
debt
decreased about 1.3 p.p. of GDP
from the end-2014.
//
Chart 5
Net lending/borrowing of households, % GDP
92.9
92.6
93.7
89.8
86.8
84.9 (1H2015)
 In the year ending in June 2015,
net
lending
of
non-financial
corporations stood in 0.5% of GDP
which compares with 0.8 in
December 2014.
Households
debt (%
GDP)
 The households’ debt level
continued to decline, by about 1.9
p.p. of GDP, vis-à-vis end-2014.
//
Chart 6
Note: National Sector Accounts were revised when Statistics Portugal released the Accounts for the fourth quarter of
2014. These revisions reflect changes introduced in detailed Annual National Accounts for 2012 (final results), with an
impact on subsequent years.
6•
Source: Banco de Portugal and INE
 In the year ending in June 2015,
the net lending of households stood
in 2.1% of GDP which compares with
2.9 in December 2014.
Macroeconomic and Financial Indicators (IV/IV)
Sovereign debt yields 10 Y
12
12
10
10
8
8
6
6
4
4
2
2
%
14
%
14
0
 The
Portuguese
10-year
government bond yield decreased
over the third quarter, approaching
the levels of the first quarter. This
variation occurs in a context of rising
volatility in the international financial
markets.
0
Jan-13
May-13
Sep-13
Portugal
Jan-14
May-14
Spain
Sep-14
Italy
Jan-15
Germany
May-15
Sep-15
Greece
Chart 7
 Interbank interest rates remain at
negative levels, reflecting the ECB
non-conventional monetary policy.
ECB main refinancing rate
1,75
1,50
 At the begin of December 2015,
the ECB reduced the interest rate on
the deposit facility by 10 basis points
to -0.30%. The interest rates on the
main refinancing operations and on
the
marginal
lending
facility
remained unchanged at 0.05% and
0.30%, respectively.
1,25
%
1,00
2,4%
0,75
2,3%
0,50
0,25
0,00
ECB Main Refinancing Rate
Chart 8
7•
Source: Reuters and ECB
Portuguese Banking System
Comment on accounting and prudential information
The banking system data present a break in time series in the third quarter of 2014 due to the resolution
measure applied to Banco Espírito Santo (BES). The break in time series stems, in particular, from the fact that the
assets/liabilities not transferred to the balance sheet of Novo Banco (NB) are not considered in the aggregate of
the banking system from August 2014 onwards.
In the absence of accounting information for BES on a consolidated basis for the period from 30 June 2014
to the day of implementation of the resolution measure (closing balance sheet and statement of profit or loss),
the reporting of BES on individual basis, with reference to 31 July 2014, was considered when determining the
aggregate results of the banking system for the third quarter of 2014. However, it must be stressed that the
adjustments stemming from the resolution measure applied to BES were not considered.
8•
Balance Sheet
Assets (€Bn) – Value at end of period
600
3.0
2.9
2.9
532
513
496
2.7
460
2.5
2.5
2.3
430
424
414
Assets / GDP
Other Assets
Investment in Credit
Institutions
Capital Instruments
400
Debt Instruments
200
Credit
 Over the third quarter, total assets
of the Portuguese banking system
decreased by 2.3%.
This evolution reflects the decrease
in total credit and deposits in credit
institutions.
//
0
2010
2011
2012
2013
2014
Chart 9
2Q 2015 3Q 2015
Bank financing structure (€Bn) - Value at end of period
600
Capital & Others
400
Resources from Central
Banks
Interbank Market
Securities
200
Deposits
0
//
2010
9•
2011
2012
2013
2014
2Q 2015 3Q 2015
Chart 10
Source: Banco de Portugal
 In terms of bank financing
structure, in the third quarter of
2015 there was a decrease of the
Eurosystem refinancing and the
interbank market funding.
Liquidity & Funding (I/II)
Central Banks Financing (€Bn) - Value at end of period
60
3.4
40
8.3
3.3
4.7
2.5
20
40.9
46.0
52.8
2.6
47.9
31.2
2.6
27.7
25.1
2Q 2015
3Q 2015
 Central banks financing decreased
over the quarter, representing 6.7 %
of banking assets as of September
2015.
//
0
2010
2011
2012
2013
2014
Monetary policy operations with Banco de Portugal
Other resources from central banks
Chart 11
Loan-To-Deposits ratio (%) - Value at end of period
180
Chart 12
158
140
150
128
117
120
107
106
104
2Q 2015
3Q 2015
90
60
30
0
//
2010
10 •
2011
2012
2013
2014
Source: Banco de Portugal
 The
loan-to-deposits
ratio
decreased slightly from the previous
quarter, reflecting the decrease in
credit and the stabilization of
deposits.
Liquidity & Funding (II/II)
Commercial gap (€Bn) – Value at end of period
160
Chart 13
133
120
98
80
 The commercial gap decreased
more sharply over the third quarter
of 2015 when compared with the
other quarters of the year.
70
43
18
40
0
15
11
2Q 2015
3Q 2015
//
2010
2011
2012
2013
2014
Liquidity gap in cumulative maturity ladders (% stable assets) – Value at
end of period
15
8.4
10
5.0
5
2.2
10.0
6.2
8.5
10.1
6.3
-10
-15
5.9
9.8
7.5
2.2
//
0
-5
11.2
8.1
-0.3
-2.8
-3.9
-7.3
-11.5
2010
-6.3
-9.6
2011
Chart 14
2012
Up to 3 months
11 •
2013
2014
Up to 6 months
2Q 2015
3Q 2015
Up to 1 year
Source: Banco de Portugal
 The improvement of the liquidity
gap for all maturity buckets
benefited
from
a
positive
contribution from all the ratio
components.
Asset Quality
Credit at Risk ratio (% of gross credit) - Value at end of period
25
20
15
10.3
10
5
4.3
5.9
12.2
9.9
5.8
15.6
13.8
6.1
5.6
17.0
16.6 16.1
21.7
21.1
19.0
5.9
 The credit at risk ratio increased
slightly to 12.9%, stemming from the
rise of credit at risk, in particular in the
non-financial corporations’ segment.
17.4
16.4
6.0
6.1
2Q 2015
3Q 2015
//
0
2010
Housing
2011
2012
2013
2014
Consumption & other purposes
Non-financial corporations
Chart 15
Total
Credit Impairments as % of gross credit - Value at end of period
9
8.0
7.7
8.0
6.2
6
2,4%
5.5
 The stock of credit impairments as a
percentage of gross credit remained
stable.
4.2
3.2
3
//
0
2010
12 •
2011
2012
2013
2014
2Q 2015
3Q 2015
Chart 16
Source: Banco de Portugal
Profitability (I/II)
ROA & ROE – Value in the period
//
 Return on assets and return on
equity improved significantly yearon-year. Excluding BES/Novo Banco,
ROA and ROE would stay at 0.5 and
7.1% in September 2015, which
compares with 0.2 e 2.3% in
September 2014.
Chart 17
Note: Return is measured by earnings before taxes and minority interests.
 The improvement in profitability
was due to an significant reduction
of impairments and other costs.
Income and costs as a % of gross income - Value in the period
 The weight of net interest income
in gross income remained stable
year-on-year, while the weight of
returns in financial operations
(included in other income) increased.
//
Chart 18
13 •
Source: Banco de Portugal
Profitability (II/II)
Cost-to-Income (%), Operational Costs (€Bn) - Value in the period
 Cost-to-income ratio decreased 6.7
p.p. year-on-year due to a reduction
of operational costs and to a less
extent to the increase of gross
income.
//
Chart 19
Banking interest rates (new business) - Average value of period (%)
8
6
 Interest rates on new loans
remained on a downward trend. The
interest rate on new operations to
households for housing purposes and
to
non-financial
corporations
decreased by 14 and 23b.p.
respectively.
4
2,4%
2,3%
2
0
//
2010
2011
2012
2013
2014
2Q 2015
Loans to non-financial corporations
Loans to households (housing)
Deposits of non-financial corporations
Deposits of households
14 •
3Q 2015
Chart 20
Source: Banco de Portugal
 The cost of new deposits kept on a
downward
trend,
recording
reductions of 13 b.p. for the
households’ segment and 11 b.p. for
the
non-financial
corporations’
segment.
Solvency
Tier 1 capital to Total Assets ratio - Value at end of period (%)
8
6
5.5
5.4
2010
2011
7.0
7.1
2012
2013
6.9
7.2
7.2
2Q 2015
3Q 2015
 The ratio between Tier 1 capital
and total assets* remained stable
and above 7%.
4
2
//
0
2014
Chart 21
 The CET 1 and the Total Solvency
ratios* stabilized in the third quarter
of 2015.
Core Tier 1 ratio (until 2013) and CET 1 ratio (from 2014) - Value at end of
period (%)
10.3
9.8
12.6
14
11.5
12
12.3
12.5
11.3
11.6
12.3
12.5
Total
Solvency
Ratio (%)
11.5
8.7
10
8
13.3
(*) In 2014, the transition to a new
prudential regime determined the existence
of breaks in the series of solvency indicators
justified by methodological differences in
the calculation of own funds components,
affecting the comparability of ratios with
previous years.
7.4
6
4
2
//
0
2010
15 •
2011
2012
2013
2014
2Q 2015
3Q 2015
Chart 22
Source: Banco de Portugal
Recent Measures with Impact on the Banking
System (I/II)
Topic
Institution
Latest Measures (Q3 2015)
Notice of Banco de Portugal No 1/2015 of 7 September
Banco de
Portugal
Solvency and
liquidity
This Notice entered into force on 8 September 2015.
ECB
Legal framework
Regulates the implementation of the capital conservation buffer established in Article 138-D of the Legal
Framework of Credit Institutions and Financial Companies, approved by Decree-Law No 298/92 of 31
December 1992, which is aimed at making financial institutions more resilient, by increasing their capacity to
absorb unexpected losses, thus contributing to the maintenance of financial stability. Establishes the
introduction of a capital conservation buffer of 2.5 %, with effect from 1 January 2016.
ECB
On 16 September 2015, the ECB Governing Council decision on the new communication policy on
Emergency Liquidity Assistance (ELA) was published. From that date onwards, national central banks have
the option to communicate publicly about the provision of ELA to the banks in their country, in cases where
they deem that such communication is necessary.
Publication of Guideline (EU) 2015/1938 of the European Central Bank of 27 August 2015, which amends
Guideline (EU) 2015/510 on the implementation of the Eurosystem monetary policy framework
(ECB/2015/27), (i) reflecting the revised Eurosystem counterparty framework as defined by the Governing
Council, in particular by specifying the financial soundness eligibility criterion; and, (ii) introducing a new
class of eligible assets in the Eurosystem collateral framework, namely the “ non-marketable debt
instruments backed by eligible credit claims”, DECCs. This Guideline took effect on 2 November 2015.
The Guideline was implemented at national level, taking into account the national specificities, by the
amended Instruction of Banco de Portugal No 3/2015.
16 •
Recent Measures with Impact on the Banking
System (II/II)
Topic
Institution
Latest Measures (Q3 2015)
Decree-Law No 190/2015 of 10 September
Approves the legal framework of savings banks. It breaks down savings banks into two types –
Portuguese
Government
affiliated savings banks (caixas económicas anexas) and full-service savings banks (caixas económicas
bancárias) – depending on the volume of assets.
It envisages transitional schemes for both types of savings banks.
This Decree-Law entered into force on 10 October 2015.
Law No 153/2015 of 14 September
Regulates the access and activities of real estate appraisers providing services to entities within the
Portuguese financial system.
This Decree-Law entered into force on 13 November 2015.
Law No 119/2015 of 31 August
Approves the Código Cooperativo (Cooperative Code). This Law is applicable to cooperatives of all types
and similar organisations, as expressly mentioned in special legislation.
Legal framework
This Law entered into force on 30 September 2015.
Law No 66/2015 of 6 July
Portuguese
Parliament
Establishes the compulsory provision of minimum banking services by all credit institutions that provide the
services included in the minimum banking services set out in Decree-Law No 27-C/2000 of 10 March, in the
wording in force. In addition, this legislation is also enabling people over 65 years old and with a degree of
permanent disability equal to or greater than 60% to be account holders of minimum banking services
together with individuals who hold other deposit accounts.
Prohibits the charging of fees to the beneficiary (the person who accepts a check in payment) for returning
the check, in situations of lack of or insufficient funds, closed, blocked or suspended bank account and
irregular withdrawal.
17 •
Requires credit institutions to send annually, in January, to the current account holder an invoice-receipt
itemizing all fees and expenses associated with the deposit current account supported during the previous
calendar year.
This Law entered into force on 4 October 2015.
Portuguese Banking System
Recent Developments – 3rd quarter 2015