Fitch improves the debt rating outlook of BPI and Santander Totta

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Page created: Friday, 7 July 2017 15:44 GMT | Updated: Tuesday, 11 July 2017 15:14 GMT

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banco popular   BPI   Debt Rating  Fitch   Outlook  Rating agencies  Santander Totta

According to S&P, the Portuguese banking sector should only return to profits in 2018

Financial rating agency Fitch has upgraded BPI and Santander Totta’s debt rating outlook from “stable” to “positive”. Banco de Portugal praises improvements in the solvency and shareholder base of some banking institutions of systemic importance, but stresses that the effort to reduce the stock of non-performing loans and to adjust the business model and cost structure should continue. In Spain, the Santander group acquired Banco Popular Español for the symbolic price of one euro.

In the Financial Stability Report of June 2017, Banco de Portugal (BdP) reiterates that the high indebtedness of the public sector and the private sector and the low potential growth continue to pose risks to the country’s financial stability. Regarding the financial sector, Banco de Portugal highlights the positive developments recently registered in the solvency and shareholder base of some institutions of systemic importance that have reinforced the resilience of the banking system in Portugal in the face of identified risks. However, BdP notes that the high level of non-performing assets, poor profitability and exposure to sovereign debt and emerging market economies with declining activity tend to aggravate investors’ perceptions about the quality of assets of credit institutions, thus condition the institutions’ access to international financial markets. The Central Bank states that institutions must comply with plans to reduce the stock of non-performing loans and continue to adjust the business model and the cost structure.

The rating agency Fitch improved the BPI and Santander Totta’s debt rating outlook from “stable” to “positive”. This improvement comes after the rise in the Portuguese sovereign debt rating outlook. Regarding Banco BPI, Fitch points out “the high probability of Banco BPI’s support by CaixaBank.”

Standard & Poor’s (S&P) has made an analysis on the Portuguese banks, highlighting the still high level of problematic assets and the low profitability caused by the low interest rates practiced, as factors of major concern. S&P believes it is “unlikely” that banks will be able to quickly reduce the level of non-performing assets, and it predicts that “the ratio of problematic assets will remain at 20% by 2019.” The credit rating agency highlights the recent progress of Portuguese banks, but considers that most are still undergoing restructuring, so it expects the Portuguese banking system to return to profits only in 2018.

In Spain, on 7 June, Banco Popular Español was acquired for the symbolic price of one euro by the Santander group by decision of the Single Resolution Board. In the agreement reached, the Santander group committed to a capital increase of 7 000 million euros however, according to the Spanish press, the run to deposits in the days following the transaction already forced Santander to inject 13 000 million of euros. With the acquisition of Banco Popular’s operations in Portugal, and after having already purchased Banif in December 2015, the Santander Group increases its market share in Portugal through Banco Santander Totta.

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