Portuguese Banking Industry, January – Loans volumes continue to grow, namely Mortgages and Consumer Loans, +9.9%YoY, and 7.2%YoY, respectively, while interest rates on new Loans are performing surprisingly well, namely on “Consumer loans and Other Purposes”, +64bpMoM/-20bpYoY. As a result, our proxy of NIM on new Loans/Deposits increased monthly

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Summing up, January’s banking data confirmed a “virtual trend” in the banking sector, loans volumes increasing namely, Mortgages, +9.9%YoY and “Consumption and Other Purposes” +7.2%YoY, while average interest rates at Mortgages are almost flat MoM and increased on “Consumer Loans…” +64bpMoM/-20bpYoY to 7.29%. The impact at NIM is obviously positive, our proxy to new Loans/Deposits increased +13bpMoM/+24bpYoY.   

The Bank of Portugal released yesterday January’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): 3.70% vs. Stock: 3.85% and compares with 12MMA (12 months moving average): 3.78% and 3MMA: 3.68%;

• Mortgages (new Loans): 2.83% vs. Stock: 3.12% and compares with 12MMA: 2.94% and 3MMA: 2.83%;

• Consumer Loans and Other Purposes (new Loans): 7.29% vs. Stock: 7.31% and compares with 12MMA: 7.12% and 3MMA: 6.93%.

* Banking Interest rates:

• Corporates (new time Deposits, up to 1 year): 1.69% vs. Stock: 1.62% and compares with 12MMA 1.81% and 3MMA 1.69%;
• Individuals (new time Deposits; up to 1 year): 1.35% vs. Stock: 1.10% and compares with 12MMA 1.47% and 3MMA 1.36%.

* Net Interest Margin (new Loans/new deposits, proxy): +2.37% vs. Stock: 2.77%; and compares with 12MMA +2.31% and 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 January, we highlight the following:

• Total Loans: +6.8%YoY vs. 12MMA: +5.27% and 3MMA: +6.72% (Corporates: +2.3%YoY; Mortgages: +9.9% vs. 12MMA: 7.54% and 3MMA: +9.56%; Consumption and Other Purposes: +7.2%)  
• Total Deposits: 5.08%YoY vs. 12MMA 6.08% and 3MMA 5.52%;

• Loan to Deposit ratio: 0.8141 vs. 12MMA: 0.807 and 3MMA: 0.808;  

• Overdue Loans ratios:

Corporates: 1.98% vs. 12MMA 1.95% and 3MMA 1.98%;

Mortgages: 0.19% vs. 12MMA 0.22% and 3MMA 0.19%;

Consumption and Other Purposes: 2.34% vs. 12MMA 2.48% and 3MMA: 2.40%.  

Our comments: the banking sector in January, performed strongly, mainly because interest rates in new loans increased, namely in “Consumer Loans and Other Purposes”, roughly +64bpMoM to 7.29% (only “Consumer loans”, +53bpMoM to 9.15%), also in Corporate Loans, average interest rates increase 5bp MoM to 3.70%; while at Mortgages interest rates were almost flat at 2.83% (-2bpMoM). As a result, Net Interest Margin on New Loans/Deposits proxy increased in January, roughly +13bpMoM, while the proxy on Stock Loans/Deposits remained almost flat MoM. Concerning volumes, Loans +6.8%YoY, o/w Corporate: 2.3%YoY, Mortgages, 9.2%YoY and “Consumption and Other Purposes”, +7.2%YoY, while Deposits are still growing 5.08% but slightly lower than in the recent past. Finally, Overdue Loans remained at abnormal low levels

All in all, the banking sector, in January kept the positive trend, actually it was able to improve the trend, namely leveraging on higher interest rates on “Consumption Loans and Other Purposes” and higher volumes, Mortgages, +9.9%YoY and “Consumption and Other Purposes” +7.2%. So, the impact at NII (Net Interest Income) was double, higher interest rates and better volumes.   

Source: BoP, INE AS Independent Research