Portugal’s banks enjoyed a “tremendous increase” in profits in 2023 on the back of increased interest rates but expect lower profits in 2024 according to the ratings agency DBRS.
Despite higher interest rates having meant significantly less new mortgages and other loans, this was more than made up for by high net interest margins since the banks have been slow to pass on interest rates on savings and deposit accounts, while also benefiting from higher bank charges.
At the same time here was not a significant increase in problematic or Non-Performing Loans (NPLs) with clients managing to meet their obligations with the banks (In Portugal there were thousands of cases of loan rescheduling by lowering monthly repayments).
Santander Totta, Novobanco and BPI had the best results ever, with profits of €1.0Bn, €743 million, and €524 million respectively.
Caixa Geral de Depósitos (CGD) and BCP made €987 million and €651 million respectively, all banks in Portugal exceeding the previous record year of 2007.
All told, Portugal’s banks raked in almost €2.9Bn. While the banks have been pleased with the results, they have also played them down to avoid being caught up with electioneering pledges from some parties to create an extraordinary tax on the sector’s profits.
Santander Totta emphasised a recurrent profit of €894.6 million that excluded gains made by selling on of the group’s insurance companies and warned that next year would not see such buoyant profits.
In an article in Público, the President of the Portuguese Association of Banks, Vítor Bento, said that the volume of profits had to be compared with the high amount of capital invested in the sector which “interfered administratively or fiscally with what was a transitory profitability”. In others words the amounts the banks had invested in restructuring and modernising offset profits that were almost certainly a one-off because of high interest rates that would not remain as high indefinitely.
He said the profits were “diluted down” when looking at the bigger picture of investments made, and that taxing the banks with an exceptional tax on their windfall profits would not only be counterproductive but also harmful to the interests of companies and families that depend on a solid and profitable banking sector to support them with corporate loans and mortgages.
The President of Santander Totta, António Maria Pinto Leite, has pointed out that the bank was the private company that paid the most IRC in Portugal with €431 million in 2023, and added “any more fiscal burdens would mean less credit available with which to support the economy”.
The President of BPI, João Oliveira e Costa, dismissed the public perception of greedy banks coining it in as “ideological” stressing that there was “nothing wrong with having high profits providing that the banks paid their due taxes.”
He dismissed the idea of demonising bankers as people who are “uncaring” and added that the social function of the bank he runs was clear when despite financial difficulties faced by families BPI did not seize their houses over mortgage default, but helped them by renegotiating their contracts.