(reading time: 4 mins)

Summing up, the banking environment remains positive. NIM continues to leverage on low time-deposit interest rates, namely the individual segment, while interest rates on Loans continue to adjust upwards, in line with Euribors. Nevertheless, individual time-deposits are growing at a slower pace, in August only +3.71%YoY, below moving averages and the lowest figure since early 2024. So, seems fair to assume that interest rates that remunerate individual time-deposit will have to adjust upwards, at a faster pace.

The Bank of Portugal released by the end of last week, August’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): 4.16% vs. Stock: 4.07% and compares with 12MMA (12 months moving average): 3.80%/3MMA: 4.10%;

• Mortgages (new Loans): 3.00% vs. Stock: 3.21% and compares with 12MMA: 2.88%/3MMA: 2.97%;

• Consumer Loans and Other Purposes (new Loans): 7.24% vs. Stock: 7.42% and compares with 12MMA: 7.08%/3MMA: 7.16%.

* Banking Interest rates:

• Corporates (new time Deposits, up to 1 year): 1.97% vs. Stock: 1.88% and compares with 12MMA 1.79%/3MMA 1.97%;
• Individuals (new time Deposits; up to 1 year): 1.62% vs. Stock: 1.11% and compares with 12MMA 1.44%/3MMA 1.59%.

* Net Interest Margin (new Loans/new deposits, proxy): +2.32% vs. Stock: 2.82%; and compares with 12MMA +2.30%/3MMA 2.30%.

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

• Total Loans: +8.5%YoY vs. 12MMA: +7.38%/3MMA: +8.43% (Corporates: +4.6%YoY; Mortgages: +11.2% vs. 12MMA: 9.96%/3MMA: +11.01% and Consumption and Other Purposes: +8.6%)  
• Total Deposits: +5.9%YoY vs. 12MMA 6.1% and 3MMA 6.4%;

• Loan to Deposit ratio: 0.8253 vs. 12MMA: 0.8145/3MMA: 0.8229;  

• Overdue Loans ratios:

Corporates: 1.87% vs. 12MMA 1.94%/3MMA 1.85%;

Mortgages: 0.17% vs. 12MMA 0.19% and 3MMA 0.17%;

Consumption and Other Purposes: 2.56% vs. 12MMA 2.48% and 3MMA: 2.52%.  

Our comments: the Banking environment remains positive, namely because Individual Time-Deposit Interest rates, stock, remain abnormally low, at 1.11%, while average new time-deposit interest rates up to one year, are at 1.62%. Meanwhile, Loans Interest rates are increasing, so NIM’s proxy, stock; remains at attractive levels. Nevertheless, Time Deposits are growing at a lower pace, 5,9%YoY below moving averages, actually, Individual time Deposits grew only 3.71%YoY in August, clearly below moving averages and the lowest figure since early 2024.

So, seems fair to assume that individual time-deposits interest rates will continue to increase, as the banking sector needs to pay for deposits to finance Balance Sheet Assets, namely Government Bonds, longer maturities, that are mainly at Book value.

Source: BoP, INE AS Independent Research