The main banks have restructured more than 62,000 loans due to the difficulty of families to bear the sharp rise in interest rates, but consider that there is no widespread problem, although admitting that the situation may worsen.
Santander Totta has renegotiated around 18,000 home loans since the beginning of the year, with a total value of around €2 billion.
Caixa Geral de Depósitos (CGD) restructured 17,000 housing loans (only 1,024 were under the Government’s decree-law that forced banks to restructure these loans), for a total amount of €1,760 million. The public bank has more than 320,000 ‘live’ housing loans.
BCP made 9,600 loan renegotiations in the first half of the year, 1,885 of which were under the government’s decree-law. The bank does not disclose the total value of renegotiated loans.
BPI renegotiated 9,000 home loans (8% of the total home loan portfolio) for a total amount of €1.1 billion, 2,400 of which under the decree-law.
Finally, Novo Banco said that there have been around 9,000 since the beginning of the year and that of these around 90% were commercial renegotiations.
Credit renegotiations can be done in several ways, by lowering the spread (the bank’s commercial profit margin), increasing the credit payment term or a grace period on the payment of capital (for example, for one year the customer only pays interest, which lowers the monthly installment but capitalizing the missing amount in the future).
At the press conferences to present the half-yearly accounts, the presidents of the main banks operating in Portugal considered that there is no generic problem with mortgage loans, despite the difficulties that families feel in accommodating the increase in interest rates in their monthly budget, and that the problems have been more focused on some bangs of customers (people with lower incomes and those who have applied for credit more recently, mainly middle class).
However, bankers also say problems will worsen if the cycle of rising interest rates continues, and more loan restructurings are expected. Consumer protection association Deco has reported that many families are already trying to sell homes because they can’t pay the bank.
“There are clearly a number of families in difficulty, but the cases have been resolved and solutions have been found. If rates continue to rise and remain prolonged, there will be a worsening of situations that have been accommodated so far,” said CGD President Paulo Macedo at the presentation of results.
The president of BPI, João Pedro Oliveira e Costa, considered, for his part, that the issue of housing loans “has been stable” and that renegotiations have low overall values, but admitted that the bank has estimated that renegotiations “may increase”.
The European Central Bank (ECB) raised interest rates again last week and left the door open for more increases, although they may not be as early as September. “We are entering a period where we will depend on economic data,” said ECB President Christine Lagarde.
To mitigate the impact of rising interest rates, the government is providing a subsidy on housing loans to families with greater effort. Bank presidents considered the measure a help to families but that it does not make much difference (at BCP the bonus was, on average, 37 euros).
Last week, in an interview with Público, Finance Minister Fernando Medina said the government wants to change the measure to cover more families.
Despite the difficulties that rising interest rates have imposed on households, for banks it has been the major profit factor as high interest rates on loans and slowly rising interest rates on deposits benefit net interest income (net interest income, usually the main source of a bank’s revenue, is the difference in interest charged on loans and interest paid on deposits).
The aggregate profits of the five largest banks operating in Portugal amounted to €1.994 billion in the first half, €735 million more than in the first quarter of 2022 (an increase of 58.4%).
CGD earned €607.9 million, 25% more than in June 2022, with net interest income up 124.7% to €1.316 billion.
BCP’s profits multiplied almost sevenfold to €423.2 million and its net interest income rose 39.5% to €1,374 million.
Novo Banco had profits of €373.2 million (up 39.9%), with net interest income growing 95.5% to €524 million. This was the only one of the big banks that did not present results at a press conference, in fact, since Marke Bourke has been CEO he has never held a press conference to present accounts. In February, Lusa questioned the Ministry of Finance and the Resolution Fund on the subject, since the State and the Resolution Fund are shareholders, but received no response.
Santander’s profits were €333.7 million (up 38.3%), with net interest income up 58.4% to €586.5 million, and BPI reported profits of €256.2 million (up 26.1%), with net interest income up 85% to €435 million.