Portuguese Banks: Work in Progress

... credit fundamentals improved materially in 2017, driving upside rating momentum for some banks. However, their Viability Ratings remain below investment grade on weak asset-quality and profitability metrics. Digesting the legacy stock of problem assets from the recession and turning around traditional business models that have been highly vulnerable to the prolonged period of low interest rates are the main challenges for Portuguese banks in the medium term. Capital Raisings Increase Breathing Space: Portuguese banks raised about EUR5 billion of capital in 2017 and used the proceeds to increase the reserve coverages for problem assets and to strengthen regulatory capital ratios. The banks' average fully loaded common equity Tier 1 (CET1) ratio increased to 12.4% at end-June 2017 (up by about 290bp year on year). Larger capital buffers over minimum requirements increase Portuguese banks' capacity to absorb further losses on problem assets....

Special Report