Portuguese Banking
System
Recent Developments
Updated: 1st quarter 2015
Prepared with data available up to 24 June 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 continued to decrease, though marginally.
II.
Liquidity & Funding
•
Deposits remained resilient;
•
Eurosystem refinancing decreased in line with the trend observed in the former quarters;
•
The loans to deposits ratio remained stable over the quarter in analysis.
III.
Asset/Credit Quality
•
The credit at risk ratio increased, particularly in the non-financial corporations’ segment.
IV.
Profitability
•
The banking system recorded positive profitability levels;
•
The flow of credit impairments decreased, though remaining at a high level.
V.
Solvency
•
Solvency levels decreased slightly.
3•
Macroeconomic and Financial Indicators (I/IV)
%
GDP growth rate – Volume
3
2
1
0
-1
-2
-3
-4
-5
1.9
0.9
0.4
0.4
4Q 2014
1Q 2015
 In the first quarter of 2015,
quarter-on-quarter GDP growth rate
was positive by the fourth
consecutive quarter. The year-onyear growth rate of GDP was 1.5%.
//
-1.6
-1.8
-4.0
2010
2011
2012
2013
2014
Chart 1
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
1.7
1.5
1
1.2
 Current and capital account
recorded a surplus, reflecting the
ongoing adjustment of the external
imbalance of the Portuguese
economy.
//
1.4
-4
0.6
0.6
2.0
-2.1
Capital Account
-6.0
-9
Current Account
-10.1
-14
2010
2011
2012
2013
2014
4Q 2014
1Q 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
16.4
14.1
15
12.0
13.5
12.9
13.5
 The rate of unemployment
remained stable and below the
annual average of 2014.
12
9
6
3
//
0
2010
2011
2012
2013
2014
4Q 2014
1Q 2015
Chart 3
Fiscal deficit, % GDP
96.2
111.1
125.8
129.7
130.2
2010
2011
2012
2013
2014
130.0
Public
Debt
(% GDP)
1Q 2015
//
0
-3
-6
-5.6
-4.5
-5.8
-7.4
-9
-12
-4.8
-11.2
5•
Chart 4
Source: Banco de Portugal and INE
 Public debt as a percentage of GDP
stood at 130.0% at the end of the
first quarter of 2015. Deposits from
General Government represented
about 12% of GDP.
Macroeconomic and Financial Indicators (III/IV)
Net lending/borrowing of non-financial corporations, % GDP
118.2
121.2
126.9
123.8
114.7
2010
2011
2012
2013
2014
1Q 2014
1Q 2015
0.9
0.6
0.7
0.9
2
1
121.3
n.d.
NFC debt
(% GDP)
//
0
-1
-0.4
-2
-3
-4
-5
 In 2014, non-financial corporations’
debt was about 9 p.p. of GDP lower
when compared to 2013.
-4.1
Chart 5
-3.5
 In the first quarter of 2015, nonfinancial corporations’ financing
capacity increased on a year-on-year
basis.
Net lending/borrowing of households, % GDP
92.9
92.5
93.1
91.3
84.1
88.9
n.d.
6
Households
debt (%
GDP)
4.3
4
3.7
3.4
2.6
3.0
2.5
2.3
2
Chart 6
//
0
2010
2011
2012
2013
2014
1Q 2014
1Q 2015
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•
 The households’ indebtedness level
continued to decline during 2014 by
about 7.2 p.p. of GDP.
Source: Banco de Portugal and INE
 In the first quarter of 2015,
households’
financing
capacity
remained
positive,
despite
decreasing by about 1.4 p.p. year-onyearly.
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
0
Jan-13 Mar-13 May-13 Jul-13
Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14
Portugal
Spain
Italy
Sep-14 Nov-14 Jan-15 Mar-15
Germany
Greece
Chart 7
Euribor and ECB main refinancing rate
2.00
1.75
1.50
1.25
%
 The
Portuguese
10-year
government bond yield rates
achieved a historical low in March
2015 (1.6%). More recently, yields
increased in a context of rising
volatility.
2,4%
1.00
2,3%
 During the first 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%).
0.75
0.50
0.25
0.00
Euribor 3M
7•
Euribor 6M
 The implementation of the public
securities purchase program by the
European Central Bank might have
conditioned
the
recent
developments in the financial
markets.
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
2.9
532
513
496
2.7
460
2.5
2.5
430
427
Assets / GDP
Other Assets
400
Investment in Credit
Institutions
Capital Instruments
200
Debt Instruments
 Bank total assets recorded
marginal decrease.
a
Credit
//
0
2010
2011
2012
2013
2014
1Q 2015
Chart 9
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
Chart 10
Source: Banco de Portugal
 Customer
stable.
deposits
remained
 The weight of resources of central
banks, mainly from the Eurosystem,
in bank financing structure continued
to decrease.
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
 Eurosystem refinancing recorded a
reduction, cumulating a €33.7 billion
decrease since its historical high in
June 2012.
2.3
47.9
31.2
28.2
//
0
2010
2011
2012
2013
2014
1Q 2015
Monetary policy operations with Banco de Portugal
Other resources from central banks
Chart 11
Loan-To-Deposits ratio (%) - Value at end of period
180
158
140
150
128
117
 The loans to
remained stable.
107
107
120
90
60
30
//
0
2010
10 •
2011
2012
2013
2014
1Q 2015
Chart 12
Source: Banco de Portugal
deposits
ratio
Liquidity & Funding (II/II)
Commercial gap (€Bn) – Value at end of period
160
133
120
98
80
70
 The commercial gap decreased
marginally, remaining at significantly
low levels when compared to the
beginning of the financial crisis.
43
18
40
17
//
0
2010
2011
2012
2013
2014
1Q 2015
Chart 13
Liquidity gap in cumulative maturity ladders (% stable assets) – Value at
end of period
15
10.0
8.4
10
5
2.2
8.6
8.5
6.3
6.2
5.0
 Liquidity gaps decreased. This
reduction is mainly due to the
decrease of liquid assets.
7.4
5.1
2.2
//
0
-0.3
-5
-10
-15
-2.8
-3.9
-7.3
-11.5
2010
-6.3
-9.6
2011
2012
Up to 3 months
11 •
2013
Up to 6 months
2014
1Q 2015
Chart 14
Up to 1 year
Source: Banco de Portugal
Asset Quality
Credit at Risk ratio (% of gross credit) - Value at end of period
25
15
10.3
17.6
17.0
16.6 16.1
 The credit at risk ratio increased,
stemming from the rise of the
numerator, in particular in the nonfinancial corporations’ segment.
9.9
5.9
4.3
15.6
13.8
12.2
10
5
20.2
19.0
20
5.8
6.1
5.6
6.0
5.9
//
0
2010
Housing
2011
2012
2013
Consumption & other purposes
2014
1Q 2015
Non-financial corporations
Total
Chart 15
Credit Impairments as % of gross credit - Value at end of period
9
7.8
7.7
6.2
6
2,4%
 The stock of impairments as a
percentage of gross loans increased
residually.
5.5
4.2
3.2
3
0
//
2010
12 •
2011
2012
2013
2014
1Q 2015
Chart 16
Source: Banco de Portugal
Profitability (I/II)
ROA & ROE – Value in the period
10
%
5
0
-0.4
0.5
-0.4
0
 Over the first quarter of 2015,
return on assets and return on equity
were positive for the first time since
2012 on a year-on-year basis.
%
-0.5
-1.3
-5.5
-15
0.5
//
-0.8
-6.3
0.5
0.0
-0.3
-5
-10
1
6.7
7.7
-1
-1.5
-11.6
-20
-2
-19.1
-25
2010
2011
2012
2013
-2.5
2014
1Q 2014
1Q 2015
Chart 17
Return on Equity (ROE)
Return on Assets (ROA) - rhs
Note: Return is measured by earnings before taxes and minority interests.
 The decrease of both the flow of
impairments and operational costs,
contributed to the aforementioned
year-on-year
improvement
of
banking system returns.
Income and costs as a % of gross income - Value in the period
120
Other
income
Commissions
80
40
0
Net interest
income
Impairments
//
-40
-80
 On a year-on-year basis, the weight
of “other income” on gross income,
mainly
returns
in
financial
operations, increased significantly.
Operational
costs
Other costs
-120
-160
Chart 18
2010
13 •
2011
2012
2013
2014
1Q 2014 1Q 2015
Source: Banco de Portugal
Profitability (II/II)
Cost-to-Income (%), Operational Costs (€Bn) - Value in the period
10
80
8
 The reduction of the cost-to-income
ratio in the first quarter of 2015, visà-vis 2014, was simultaneously driven
by an increase in gross income and a
reduction of operational costs.
60
40
%
€ mM
6
4
20
2
//
0
2010
2011
2012
2013
Operational Costs
2014
0
1Q 2014
1Q 2015
Chart 19
 Interest rates on new loans, either
granted to households (for housing
purposes), or to non-financial
corporations, decreased slightly vis-àvis the fourth quarter of 2014 (24 b.p.
and 19 b.p. respectively).
Cost-to-Income - rhs
Banking interest rates (new business) - Average value of period (%)
8
6
4
2,4%
2,3%
2
//
0
2010
2011
2012
2013
2014
4Q 2014
Loans to non-financial corporations
Loans to households (housing)
Deposits of non-financial corporations
Deposits of households
14 •
1Q 2015
Chart 20
Source: Banco de Portugal
 The cost of new deposits kept a
downward
trend,
recording
reductions of 22 b.p. for the
households’ segment and 12 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
 The ratio between Tier 1 capital
and total assets* remained stable.
7.0
6.9
4
2
//
0
2014
1Q 2015
Chart 21
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
12.0
11.3
11.1
Total
Solvency
Ratio (%)
12.3
(*) 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.
8.7
10
8
13.3
7.4
6
4
2
//
0
2010
15 •
2011
 The CET 1 ratio* reached 11.1% for
the aggregate of the Portuguese
banking system, decreasing slightly
vis-à-vis the end of 2014.
2012
2013
2014
1Q 2015
Chart 22
Source: Banco de Portugal
Recent Measures with Impact on the Banking System (I/II)
Topic
Institution
Latest Measures (1Q 2015)
Implementation of the Governing Council Decision of 20 March 2013 regarding the own-use of uncovered
government-guaranteed bank bonds that, after 1 March 2015, may no longer be used as collateral for the
Eurosystem credit operations.
Solvency and
liquidity
ECB
On 22 January 2015 the Governing Council approved an expanded asset purchase program to include a
secondary market public sector asset purchase program (PSPP). This program started on 9 March 2015.
The Governing Council of the ECB decided, on 22 January 2015, that the interest rate for the remaining six
targeted longer-term refinancing operations (TLTROs) would be equal to the rate on the main refinancing
operations (MROs) prevailing at the time when each TLTRO is conducted, eliminating the 10 basis point
spread over the MRO rate which was applied in the first two TLTROs.
Legal framework
Portuguese
Parliament
Law No 23-A/2015, of 26 March, which transposes into Portuguese Law (i) Directive 2014/49/EU of the
European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes and (ii) Directive
2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for
recovery and resolution of credit institutions and investment firms, amending the Legal Framework of Credit
Institutions and Financial Companies, the Organic Law of Banco de Portugal, Decree-Law No 345/98 of 9
November 1998, the Securities Code (Código dos Valores Mobiliários), Decree-Law No 199/2006 of 25
October 2006, and Law No 63-A/2008 of 24 November 2008.
Law No 16/2015, of 24 February, which transposes in part (i) Directives 2011/61/EU of the European
Parliament and of the Council of 8 June 2011 and (ii) 2013/14/EU of the European Parliament and of the
Council of 21 May 2013, amending the legal framework of undertakings for collective investment and
rewording the Legal Framework of Credit Institutions and Financial Companies and the Securities Code.
Approves the Legal Framework of Undertakings for Collective Investment annexed thereto.
16 •
Recent Measures with Impact on the Banking System (II/II)
Topic
Legal framework
Other
Institution
Latest Measures (1Q 2015)
ECB
Publication of Regulation (EU) 2015/534 of the European Central Bank of 17 March 2015 (ECB/2015/13),
which lays down requirements concerning reporting of supervisory financial information to be submitted to
national competent authorities (NCAs) by significant supervised groups and less significant supervised
groups. In accordance with this Regulation, 31 December 2015 shall be the first reference date for reporting
of supervisory financial information concerning: (a) significant supervised groups; (b) significant supervised
entities which are not part of a supervised group; 30 June 2016 shall be the first reference date for reporting
of supervisory financial information concerning: (a) significant supervised entities which are part of a
supervised group; (b) subsidiaries of significant supervised groups established in a non-participating Member
State or a third country; 30 June 2017 shall be the first reference date for reporting of supervisory financial
information concerning: (a) less significant supervised groups; (b) less significant supervised entities.
Banco de
Portugal
Amendment to Instruction of Banco de Portugal No 3/2009, in order to allow, under exceptional
circumstances, the exemption of direct participants in SICOI from the obligation to contract with Banco de
Portugal an intraday credit line on TARGET2-PT.
EU General
Court
Decision of the EU General Court, dated 4 March, that annuls the location policy for Central Counterparties
(CCP), within the Eurosystem oversight policy framework, considering that the ECB does not have
autonomous regulatory powers in relation to securities clearing systems under the Treaty on the Functioning
of the EU.
ECB
17 •
Recommendation of the European Central Bank of 28 January 2015 (ECB/2015/2) on dividend distribution
policies. This recommendation is addressed to significant supervised entities and significant supervised
groups as defined in Article 2 (16) and (22) of Regulation (EU) No 468/2014 of 16 April 2014.
Portuguese Banking System
Recent Developments – 1st quarter 2015