Fitch reiterates assessment of Portuguese banks and forecasts improvements for the medium and long term

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Page created: Wednesday, 5 April 2017 11:59 GMT | Updated: Thursday, 6 April 2017 10:43 GMT

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BCP   BPI   Caixa Geral de Depósitos  CGD   Fitch   Montepio   Supervision

Caixa Geral de Depósitos reports losses of 1 859.5 million euros and successfully recapitalizes

Rating agency Fitch has released the valuation review to the four main Portuguese banks maintaining the stable outlooks and stating that the restructuring will contribute to a greater efficiency of the banks. This revision was published 6 days after Caixa Geral de Depósitos reported the worst result ever, a loss of 1 859.5 million euros, due to the impairments recognized by the bank last year.

On 16 March, Fitch made its periodic review of the valuation to Portuguese banks BPI, Caixa Geral de Depósitos (CGD), Millenium BCP and Montepio maintaining the stable outlooks. Montepio’s rating remains at ‘B’, BPI’s rating remains at ‘BBB-‘ – which corresponds to the fifth level of the sub-investment category, also known as ‘junk’. The BCP and CGD ratings continue to be ‘BB-‘, which is the third level of ‘junk’.

In this assessment, the rating agency highlights the weak operating environment in Portugal that has led to a deterioration of banks’ asset quality metrics and the persistently low interest rates that have reduced margins. However, it also points out that the restructuring made by all will contribute to greater efficiency and to the improvement of capital creation. The credit rating agency believes that significant improvements in the credit profile will emerge in the medium and long term.

This report was released six days after CGD presented the results for the year 2016 and its Strategic Plan until 2020. The results disclosed were the worst ever. CGD reported losses of 1 859.5 million euros. This record loss reflects the high impairments recognized by the bank last year, which was already foreseen under the recapitalization program. But without this effect, the results have increased. Core operating income in 2016 increased 68.7% to 368.1 million euros, benefiting from net interest income growth of 5.5% and operating costs, which decreased 9.2%. With regard to the Strategic Plan up to 2020, it provides for a reduction in the number of staff in 2,218 jobs and the closure of 181 branches. This plan aims to strengthen commercial capacity to ensure competitiveness, restructure international operations with an economic and strategic logic, and restructure the risk management and governance models. The objectives by 2020 are, in terms of efficiency, to reduce operating costs by around 20%, in terms of capital ratio, to reach a CET1 above 14% and, in terms of profitability, to achieve a ROE above 9%.

Following the disclosure of the 2016 accounts and after obtaining the authorization of the European Commission for recapitalization amounting to EUR 4.9 billion, the Portuguese Government increased CGD’s share capital by 2 500 million euros. As planned, this capital increase was only realized after the issuance of additional Tier 1 (AT1) own funds, amounting to EUR 500 million at a cost of 10.75%.

Still in March, the Government announced that it will move forward with the creation of a new independent entity for macro-prudential supervision and bank resolution, replacing the National Council of Financial Supervisors and the National Financial Stability Board. With this change, the Bank of Portugal will no longer be directly responsible for supervising the banks or vehicles that result from banking resolutions, such as Novo Banco or Oitante (ex-Banif).

According to the finance minister, Mário Centeno, Portugal will be “endowed with a supervisory authority of the national supervisory system, with a global vision of the systemic risks, transversal to the entire financial system”.

Tuesday, 21 March 2017 14:52

Portuguese bank Caixa Geral de Depósitos is in London to roadshow a subordinated bond this week, in what marks a major return to capital markets for the country’s financial sector following a troubled 2016.    ...

Monday, 20 March 2017 15:06

Lisbon, March 20 (Lusa) – Portuguese state banking group Caixa Geral de Depósitos (CGD) said on Monday that the Government had signed off an authorisation for a capital increase at the bank of €2.5 billion. In a market fil...

Friday, 17 March 2017 9:05

LONDON, March 16 (Fitch) Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDR) of: Banco BPI S.A. at 'BBB-'; Caixa Geral de Depositos, S.A. (CGD) and Banco Comercial Portugues, S.A. (Millenium bcp) at 'BB...

Monday, 13 March 2017 8:55

The European Commission said on Friday it had cleared Portugal's 3.9 billion euro ($4.16 billion) recapitalisation of state-owned Caixa Geral de Depositos (CGD) as it was carried out on market terms and therefore involve...


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