Portuguese Banking
System
Recent Developments
Updated: 2nd quarter 2015
Prepared with data available up to 23 September 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 decreased slightly, driven by the reduction of credit to clients.
II.
Liquidity & Funding
•
Deposits remained resilient, although a growth is observed in deposits taken from domestic activity, mainly in the
households’ segment.
•
Eurosystem refinancing decreased in line with the trend observed in the former quarters, however at a slower pace.
•
The loans to deposits ratio remained stable over the first semester.
•
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.
•
The evolution of the ratio is mainly explained by the increase of credit at risk, although the impact of the
deleveraging process in this indicator remains significant.
•
To the variation of the overall ratio stands out the contribution of credit to the non-financial corporations’ segment.
IV.
Profitability
•
The banking system recorded positive profitability levels;
•
The observed improvement stemmed from the increase in net interest income and in results from financial
operations, as well as from the decrease in the flow of impairments on credit.
V.
Solvency
•
Solvency levels increased 0.5 p.p., to 11.6%.
3•
Macroeconomic and Financial Indicators (I/IV)
%
GDP growth rate – Volume
3
2
1
0
-1
-2
-3
-4
-5
1.9
0.9
0.5
0.5
//
-1.1
-1.8
-4.0
2010
2011
2012
2013
2014
1Q 2015
2Q 2015
Chart 1
 In the second quarter of 2015,
quarter-on-quarter GDP growth rate
was positive by the fifth consecutive
quarter. The year-on-year growth
rate of GDP was 1.6%.
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
1.4
1.5
2.1
1.6
//
1.4
-4
0.5
1.6
-2.0
 Current and capital account
recorded a surplus, reflecting the
ongoing adjustment of the external
imbalance of the Portuguese
economy.
1.4
-0.5
Capital Account
-6.0
-9
-14
1.0
1.5
Current Account
-10.1
2010
2011
2012
2013
2014
1Q 2015
2Q 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
12
15.8
12.0
16.4
14.1
12.9
13.5
12.4
 The rate of unemployment
decreased about 1.1 p.p. vis-à-vis the
previous quarter, reaching 2010
levels.
9
6
3
//
0
2010
2011
2012
2013
2014
1Q 2015
2Q 2015
Chart 3
Fiscal deficit, % GDP
96.2
111.1
125.8
129.0
129.9
129.2
128.7
2010
2011
2012
2013
2014
1Q 2015
2Q 2015
0
Public
Debt
(% GDP)
//
-3
-6
-5.6
-7.4
-9
-12
-11.2
-3.7
-4.8
-5.7
-7.2
Chart 4
Note: 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.
5•
Source: Banco de Portugal and INE
 Public debt as a percentage of GDP
stood at 128.7% at the end of the
second quarter of 2015, decreasing
in relation to the end of the previous
quarter. Deposits from General
Government represented about 11%
of GDP.
Macroeconomic and Financial Indicators (III/IV)
Net lending/borrowing of non-financial corporations, % GDP
2
1
0
-1
-2
-3
-4
-5
118.2
121.2
126.9
123.2
114.5
2010
2011
2012
2013
1.4
2014
113.9
n.d.
1T 2015
2T 2015
1.1
0.8
NFC debt
(% GDP)
0.5
 In the first quarter of 2015, nonfinancial
corporations’
debt
decreased slightly (0.6 p.p. of GDP)
compared to end-2014.
//
-0.3
-4.1
-3.5
Chart 5
 In the second quarter of 2015, nonfinancial corporations’ financing
capacity decreased 0.7 p.p. year-onyear.
Net lending/borrowing of households, % GDP
92.9
92.5
93.7
90.4
83.9
82.6
n.d.
6
4
Households
debt (%
GDP)
3.6
3.4
2.6
2.9
2.9
2.7
2.1
2
//
0
2010
2011
2012
2013
2014
1Q 2015
2Q 2015
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
 The households’ debt level
continued to decline, by about 1.3
p.p. of GDP, vis-à-vis end-2014.
 In the second quarter of 2015,
households’
financing
capacity
remained
positive,
despite
decreasing by about 1.1 p.p. year-onyear.
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
Jan-13
May-13
Sep-13
Portugal
Jan-14
Spain
May-14
Italy
Sep-14
Jan-15
Germany
May-15
Greece
 After a historical low achieved in
March 2015 (1.6%), the Portuguese
10-year government bond yield rates
increased in the second quarter. This
variation occurs in a context of rising
volatility in the international financial
markets.
0
Chart 7
Euribor and ECB main refinancing rate
2.00
1.75
 In the euro area, the developments
in the financial markets might have
continued
to
reflect
the
implementation of the public
securities purchase program by the
European Central Bank.
1.50
%
1.25
2,4%
1.00
 During the second quarter of 2015,
the ECB kept unchanged the main
refinancing rate (0.05%), the deposit
facility rate (-0.20%) and the
marginal lending facility rate (0.30%).
2,3%
0.75
0.50
0.25
0.00
Euribor 3M
7•
Euribor 6M
ECB Main Refinancing Rate
Chart 8
Source: Bloomberg 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 the fact 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
532
513
2.9
496
2.7
460
2.5
2.5
430
427
2.4
424
Assets / GDP
Other Assets
400
Investment in Credit
Institutions
Capital Instruments
200
Debt Instruments
Credit
//
0
2010
2011
2012
2013
assets
decreased
 The main driver of this reduction
was the evolution of credit to clients,
partially compensated by the
increase in debt instruments
portfolio.
Chart 9
1Q 2015 2Q 2015
2014
 Bank total
slightly.
Bank financing structure (€Bn) - Value at end of period
600
Capital & Others
400
Resources from Central
Banks
Interbank Market
200
Securities
Deposits
0
//
2010
9•
2011
2012
2013
2014
1Q 2015 2Q 2015
Chart 10
Source: Banco de Portugal
 Deposits from clients remained
stable. Deposits taken in domestic
activity increased, mainly in the
households’ segment.
 Deleveraging continued associated
to a reduction of the weight of
securities in the banking system’s
financing.
Liquidity & Funding (I/II)
Central Banks Financing (€Bn) - Value at end of period
60
3.4
8.3
40
40.9
20
4.7
46.0
52.8
3.3
2.5
47.9
31.2
2.3
2.6
28.2
27.7
//
0
2010
2011
2012
2013
2014
1Q 2015
Monetary policy operations with Banco de Portugal
Other resources from central banks
2Q 2015
Chart 11
 Central banks financing remained
on a downward trend, although at a
slower pace compared to previous
quarters.
 Central banks financing represents
7.2% of total assets, comparing to its
historical high of 12.5% reached in
June 2012.
Loan-To-Deposits ratio (%) - Value at end of period
180
158
140
150
128
120
117
107
107
106
90
 The loans to deposits ratio
remained stable in the first semester.
60
30
//
0
2010
2011
2012
2013
2014
1Q 2015
2Q 2015
Chart 12
10 •
Source: Banco de Portugal
Liquidity & Funding (II/II)
Commercial gap (€Bn) – Value at end of period
160
Chart 13
133
120
98
80
 The commercial gap decreased
marginally, remaining at significantly
low levels when compared to the
beginning of the financial crisis.
70
43
40
18
0
17
14
1Q 2015
2Q 2015
//
2010
2011
2012
2014
2013
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
6.3
-10
-15
10.4
7.4
5.1
8.5
6.7
2.2
//
0
-5
8.6
-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
1Q 2015
2Q 2015
Up to 1 year
Source: Banco de Portugal
 The improvement of the liquidity
gaps 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
5
10.3
4.3
5.9
12.2
9.9
5.8
15.6
13.8
6.1
5.6
17.0
16.6 16.1
20.2
17.6
19.0
15.9
 However, the impact of the decrease
of gross credit (denominator) on this
indicator continues to be significant.
6.1
6.0
5.9
 The credit at risk ratio increased
slightly to 12.6%, stemming from the
rise of credit at risk, in particular in the
non-financial corporations’ segment.
21.1
//
0
2010
Housing
2011
2012
2013
Consumption & other purposes
2014
1Q 2015
Non-financial corporations
2Q 2015
Chart 15
Total
Credit Impairments as % of gross credit - Value at end of period
9
7.8
7.7
2,4%
6
5.5
 The stock of impairments as a
percentage of gross credit increased
residually.
8.0
6.2
 This evolution was mainly due to an
increase in the stock of impairments,
but also reflected a reduction in gross
credit.
4.2
3.2
3
0
//
2010
12 •
2011
2012
2013
2014
1Q 2015
2Q 2015
Chart 16
Source: Banco de Portugal
Profitability (I/II)
ROA & ROE – Value in the period
10
7.7
%
5
0
0.5
-0.4
-5
-10
0.5
-1.3
-1
-19.2
-25
2013
2014
1H2014
Return on Equity (ROE)
-2
-26.7
-30
2012
-1.5
-1.8
-20
2011
0
-0.5
-11.7
2010
0.5
-0.8
-5.5
-6.3
-15
//
-0.3
 Over the first half of 2015, return
on assets and return on equity
improved significantly year-on-year.
Excluding BES and Novo Banco, the
increase in profitability was still
significant (about 5 p.p. in ROE and
0.4 p.p. in ROA).
1
6.3
-2.5
1H 2015
Chart 17
Return on Assets (ROA) - rhs
 To this improvement contributed
both net interest income and, mainly,
results from financial operations.
Note: Return is measured by earnings before taxes and minority interests.
Income and costs as a % of gross income - Value in the period
120
Other income
80
Commissions
40
Net interest
income
Impairments
//
0
-40
-80
Operational
costs
Other costs
-120
-160
2010
13 •
2011
2012
2013
2014
1H2014 1H 2015
Chart 18
Source: Banco de Portugal
 The reduction of the flow of
impairments and, at a lower extent,
the operational costs, had also a
positive contribution.
 The weight of net interest income
and commissions on gross income
decreased, counterbalanced by the
significant increase of the weight of
“other income”, essentially reflecting
returns in financial operations.
Profitability (II/II)
Cost-to-Income (%), Operational Costs (€Bn) - Value in the period
10
80
60
6
40
4
%
€ mM
8
 The reduction of the cost-to-income
ratio in the first half of 2015, vis-à-vis
2014, was simultaneously driven by
an increase in gross income and a
reduction of operational costs.
20
2
//
0
2010
2011
2012
2013
0
2014
1H2014
Operational Costs
1H 2015
Chart 19
Cost-to-Income - rhs
Banking interest rates (new business) - Average value of period (%)
8
6
 Interest rates on new loans, either
granted to households (for housing
purposes), or to non-financial
corporations, decreased slightly vis-àvis the first quarter of 2015 (39 b.p.
and 44 b.p. respectively).
4
2,4%
2,3%
2
//
0
2010
14 •
2011
2012
2013
2014
1Q 2015
Loans to non-financial corporations
Loans to households (housing)
Deposits of non-financial corporations
Deposits of households
2Q 2015
Chart 20
Source: Banco de Portugal
 The cost of new deposits kept a
downward
trend,
recording
reductions of 28 b.p. for the
households’ segment and 7 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
7.0
7.2
1Q 2015
2Q 2015
 The ratio between Tier 1 capital
and total assets* remained stable.
4
2
//
0
2014
Chart 21
Core Tier 1 ratio (until 2013) and CET 1 ratio (from 2014) - Value at end of
period (%)
10.3
9.8
14
11.5
12
13.3
12.3
12.3
12.0
11.3
11.1
12.5
Total
Solvency
Ratio (%)
11.6
8.7
10
8
12.6
(*) 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
 The CET 1 ratio* increased to 11.6%
for the aggregate of the Portuguese
banking system, reflecting both an
increase of regulatory capital and a
decrease of risk-weighted assets.
1Q 2015
2Q 2015
Chart 22
Source: Banco de Portugal
Recent Measures with Impact on the Banking
System (I/II)
Topic
Institution
Latest Measures (Q2 2015)
Monitoring and
supervision
Banco de
Portugal
Approval of Circular Letter No 26/2015/DSC which transmits Banco de Portugal’s understanding regarding
the application of EURIBOR rates to credit and financing agreements, should this index attain negative
values.
Decision (EU) 2015/774 of the European Central Bank of 4 March (ECB/2015/10), OJ L 121, 14.5.2015.
Decision on a secondary markets public sector asset purchase programme (PSPP). The Eurosystem hereby
establishes the PSPP under which the Eurosystem central banks shall purchase eligible marketable debt
securities on the secondary markets from eligible counterparties, under specific conditions.
Enters into force on the day following its publication on the ECB's website and applies from 9 March 2015.
Decision (EU) 2015/509 of the European Central Bank of 18 February 2015 (ECB/2015/9), OJ L 91,
2.4.2015.
Solvency and
liquidity
ECB
Repeals Decision ECB/2013/6 on the rules concerning the use as collateral for Eurosystem monetary policy
operations of own-use uncovered government-guaranteed bank bonds, Decision ECB/2013/35 on additional
measures relating to Eurosystem refinancing operations and eligibility of collateral (Article 1 of the Decision),
and Articles 1, 3 and 4 of Decision ECB/2014/23 on the remuneration of deposits, balances and holdings of
excess reserves (Article 2 of the Decision).
Article 1 enters into force on 1 May 2015 and Article 2 entered into force on 3 April.
Decision (EU) 2015/656 of the European Central Bank of 4 February (ECB/2015/4), OJ L 107, 25.4 2015.
Decision on the conditions under which credit institutions are permitted to include interim or year-end profits
in Common Equity Tier 1 capital in accordance with Article 26(2) of Regulation (EU) No 575/2013.
Enters into force on 6 February 2015 and applies from the reporting reference date of 31 December 2014 in
accordance with Article 2 of Implementing Regulation (EU) No 680/2014.
16 •
Recent Measures with Impact on the Banking
System (II/II)
Topic
Institution
Banco de
Portugal
Latest Measures (Q2 2015)
On 1 May entry into force of Guideline ECB/2014/60, regarding the implementation of the monetary policy in
the Eurosystem, amended by Guideline ECB/2015/20, which repeals Guideline ECB/2011/14. It was
implemented at national level, taking into account the national specificities, by Instruction of Banco de
Portugal No 3/2015 which repeals and replaces the Instruction No 1/99.
Decree-Law No 100/2015 of 2 June.
Legal framework
Portuguese
Government
European
Parliament and
Council
Publication of Regulation (EU) 2015/751 of the European Parliament and of the Council, of 29 April 2015, on
interchange fees for card-based payment transactions. This Regulation lays down uniform technical and
business requirements for card-based payment transactions carried out within the Union, where both the
payer's payment service provider and the payee's payment service provider are located therein.
Banco de
Portugal
Amendment of Instruction No 54/2012 on 15 January 2013 – TARGET2-PT Regulation, following the
publication, on 2 April 2015, of Guideline (EU) 2015/930 (ECB/2015/15), which incorporates the Eurosystem
service for securities settlement in central bank money (TARGET2-Securities/T2S).
ECB
Publication of Guideline (EU) 2015/930 of the European Central Bank of 2 April 2015, which amends
Guideline ECB/2012/27 on a Trans-European Automated Real-time Gross settlement Express Transfer
system (TARGET2) (ECB/2015/15), establishing a Eurosystem service for securities settlement in central
bank money (TARGET2-Securities/T2S).
Other
17 •
Approves the legal system of credit financial companies and amends the legal systems of investment
companies, financial leasing companies, factoring companies and mutual guarantee companies, updating
them in line with the amendments introduced by Decree-Law No 26/2015 of 6 February to Article 349 of the
Commercial Companies Code.
Portuguese Banking System
Recent Developments – 2nd quarter 2015