Macro View

(reading time: 5 mins)

Summing up, demand on Consumer Loans and Mortgages remains quite strong and increasing, slightly above 5%YoY and 6%, respectively. So the banking sector has been able to postpone adjustments on interest rates, in fact Consumer Loans interest rates are almost stable over the last 5 to 6 months, while on Mortgage, the average interest rates on new mortgages, 3.06% in April compares with 12MMMA: 3.40% and figures close to 3.20%/3.30% by the end of 2024; only 20bp lower. So, in an environment where reference interest rates are coming down, Interest rates on new Consumer Loans and interest rates on new Mortgages are slowly adjusting, contributing to postpone the adjustment on the NIM.   

The Bank of Portugal has just released April’s second set of banking data, namely Interest rates on new Loans and Interest rates on new time Deposits.

We would highlight the following points:    

*  Banking Interest rates:
     *     Corporates (new Loans): +4.02% vs. Stock: 4.41% and compares with 12MMA (12 months moving average): +4.68% and 3MMA: +4.12%;

• Mortgages (new Loans): +3.06% vs. Stock: 3.58% and compares with 12MMA: +3.40% and 3MMA: 3.12%;

• Consumer Loans and Other Purposes (new Loans): +7.51% vs. Stock: 7.61% and compares with 12MMA: 7.53% and 3MMA: 7.50%.

* Banking Interest rates:

• Corporates (new time Deposits, up to 1 year): 2.01% vs. Stock: 2.04% and compares with 12MMA 2.74% and 3MMA of 2.15%;
• Individuals (new time Deposits; up to 1 year): 1.65% vs. Stock: 1.45% and compares with 12MMA  2.27% and 3MMA 1.73%.

* Net Interest Margin (new Loans/new deposits, proxy): +2.31% vs. Stock: 2.86%; and compares with 12MMA +2.07% and 3MMA 2.28%.

Separately, the BoP released, by the end of last week, the first set of banking data, namely Loans and Deposits volumes in April, we highlight the following:

• Total Loans: +3.8%YoY vs. 12MMA: +1.63% and 3MMA: +3.40% (Corporates: +0.1%YoY; Mortgages: +6.1% vs. 12MMA: 2.76% and 3MMA: +5.46%; Consumption and Other Purposes: +5.1%)  
• Total Deposits: +6.23%YoY vs. 12MMA +6.35% and 3MMA 6.64%;

• Loan to Deposit ratio: 0.8043 vs. 12MMA: 0.8071 and 3MMA: 0.8042;  

• Overdue Loans ratios:

Corporates: 2.02% vs. 12MMA 2.01% and 3MMA 1.96%;

Mortgages: 0.25% vs. 12MMA 0.26% and 3MMA 0.25%;

Consumption and Other Purposes: 2.61% vs. 12MMA 2.64% and 3MMA: 2.57%.  

Our comments: the banking sector, over the last 5/6 months has been able to defend the NIM. In fact our NIM’s proxy, Loans and Deposits in stock, has been stable at 2.8%/2.9%; while the NIM in new Loans/Deposits improved from figures below 2% to currently 2.3% (important to highlight that figures are proxies, the impact from lower interest rates on sights deposits is not taken in consideration). The main reason, to a flat/improved NIM (proxy), relates with interest rates on Consumer Loans that remains almost flat and interest rates on new mortgages that went down only roughly 20bp/30bp, over the last 5/6 months. Meanwhile, “Consumption Loans and Other Purposes” keep growing slightly above 5%YoY and Mortgages, slightly above 6%. So strong demand on Consumer Loans and Mortgages is postponing the interest rates adjustment and contributing to a better NIM than our forecasts.

Source: BoP, INE AS Independent Research