Macro View

Portuguese Banking Industry, November – Deposits outperforming, Loans starting to grow, while NIM smoothly adjusts

(reading time: 5 mins)     

Summing up, Deposits continue to outperform, +7.9%YoY/1.2%MoM; while total Loans are also starting to perform, 1.9%YoY/0.43%MoM, namely “Mortgage Loans” +2.9%YoY and “Consumer and Other Purposes Loans” +4.2%. Meanwhile, interest rates continue to adjust, so margin is smoothly adjusting, even so, the industry has been able to postpone a major impact at NIM.

The Bank of Portugal has just released November’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): +4.46% vs. Stock: 5.08% and compares with 12MMA (12 months moving average): +5.25% and 3MMA: +4.67%;

• Mortgages (new Loans): +3.29% vs. Stock: 4.14% and compares with 12MMA: +3.75% and 3MMA: 3.39%;

• Consumer Loans and Other Purposes (new Loans): +7.28% vs. Stock: 7.81% and compares with 12MMA: 7.65% and 3MMA: 7.50%.

* Banking Interest rates:

• Corporates (new time Deposits, up to 1 year): 2.70% vs. Stock: 2.72% and compares with 12MMA 3.19% and 3MMA of 2.83%;
• Individuals (new time Deposits; up to 1 year): 2.30% vs. Stock: 1.97% and compares with 12MMA  2.70% and 3MMA 2.42%.

* Net Interest Margin (new Loans/new deposits, proxy): +1.89% vs. Stock: 2.85%; and compares with 12MMA +2.03% and 3MMA 1.92%.

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

• Total Loans: +1.9%YoY vs. 12MMA: -0.12% and 3MMA: +1.47% (Corporates: -0.3%YoY; Mortgages: +2.9% vs. 12MMA: 0.38% and 3MMA: +2.33%; Consumption and Other Purposes: +4.2%)  
• Total Deposits: +7.88%YoY vs. 12MMA +3.84% and 3MMA 6.8%;

• Loan to Deposit ratio: 0.80 vs. 12MMA: 0.82 and 3MMA: 0.8072;  

• Overdue Loans ratios:

Corporates: 2.07% vs. 12MMA 2.06% and 3MMA 2.08%;

Mortgages: 0.26% vs. 12MMA 0.26% and 3MMA 0.27%;

Consumption and Other Purposes: 2.73% vs. 12MMA 2.68% and 3MMA: 2.74%.  

Our comments: The recent trend remains in place, Deposits growing 7.88%YoY; above moving averages and above Loans, so the ratio Loans to Deposits is consolidating at record low figure  0.8x. Meanwhile, volumes on Loans are smoothly becoming positive on a yearly basis, +1.9%YoY, clearly above moving averages, while volumes on Corporate Loans still growing negatively, -0.3%, however should become positive in the coming months. Net Interest rates are adjusting, Loans and Deposits, almost at the same speed, so the banking sector has been able to protect the NIM, despite a smooth negative trend.

Summing up, Deposits continue to outperform, +7.9%YoY/1.2%MoM; while total Loans are also starting to perform, 1.9%YoY/0.43%MoM, namely “Mortgage Loans” +2.9%YoY and “Consumer and Other Purposes Loans” +4.2%YoY. Meanwhile, interest rates continue to adjust, so margin is smoothly adjusting, even so the industry has been able to postpone a major impact.

Source: BoP, INE AS Independent Research