ECB’s Centeno sees more consolidation in Portuguese banking sector

LISBON, Nov 23 (Reuters) – Further consolidation in Portugal’s banking sector is inevitable, Mario Centeno, a member of the European Central Bank, told Reuters on Wednesday, calling recent progress by the country’s banks as “remarkable”. capital strengthening and risk reduction.

Analysts said Portuguese banks should bet on M&A deals to secure better terms of competition, despite the five biggest players holding 80-85% of banking assets.

Centeno said the system had made “remarkable progress” in recent years as banks strengthened their capital and improved their risk profiles, while non-performing loans (NPLs) fell to levels nearly in line with the European average. .

“After this strengthening, the consolidation of the banking system (in Portugal) and the strengthening of its institutions are absolutely crucial and it is inevitable that the system, the market, will face it,” said Centeno, who is also governor of the Bank. from Portugal. said in an interview.

While the COVID-19 pandemic and the current crisis had delayed this process, “we will do it, as always, with great tranquility”, he added.

Portuguese banks are still marked by a debt crisis and a surge in NPLs after the 2010-13 recession. They have since reduced NPLs to a total of 11.4 billion euros ($11.85 billion) in June 2022, from a peak of 50 billion euros in June 2016, according to the latest data from the Bank of Portugal.

The NPL ratio for Portuguese lenders was 3.4% of total credit in June, down from 17.9% in mid-2016.

“Although I’m very happy with the development…there’s no point in resting, we have to challenge ourselves,” Centeno said.

“It is important that this maturation takes place with a continuous strengthening of the institutions in their size, their capitalization and above all in their ability to respond to the challenges of digitalization, climate action, because all of this goes through the balance sheets of the banks. “

The largest bank is the state-owned Caixa Geral de Depositos; follow-up of Millennium bcp (BCP.LS); SantanderPortugal; Novo Banco, spun off from the collapse of Banco Espirito Santo in 2014 and controlled by US private equity fund Lone Star; and BPI, owned by the Spanish CaixaBank (CABK.MC).

($1 = 0.9623 euros)

Reporting by Sergio Goncalves and Andrei Khalip; Editing by David Latona and Leslie Adler

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