Macro View

reading time: 5 mins

The NIM continues to increase, while volumes are still growing, which surprises. So, the environment to the banking sector remains positive, meanwhile Overdue Loans ratios remain at low levels, however are slowly increasing in line with the unemployment rate, also historically low, but moving slightly upwards

The Bank of Portugal has just released October’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 - New Loans (average):
     *     Corporates: +3.72% vs. 12MMA (12 months moving average): +2.3% and 3MMA: +3.2%;

• Mortgages: +2.86% vs. 12MMA: +1.4% and 3MMA: 2.4%;

• Consumer Loans and Other Purposes: +6.82% vs. 12MMA: 6.2% and 3MMA: 6.7%.

* Banking Interest rates – New time deposits (up to 1 year; average):

• Corporates: 0.44% vs. 12MMA 0.11% and 3MMA of 0.26%;
• Individuals: 0.23% vs. 12MMA  0.07% and 3MMA 0.12%.

* Net Interest Margin (NIM, proxy) +3.45% vs. 12MMA +2.37% and 3MMA 3.12%.

Separately, the BoP released one week ago, the first set of banking data, namely Loans and Deposits volumes in October, we would highlight the following:

• Total Loans: +2.4%YoY vs. 12MMA: 3.1% and 3MMA: 2.6% (Corporates: +0.2%; Mortgages: +3.9%YoY - 12MMA: 3.0% and 3MMA: 4.1%; Consumption and Other Purposes: +3.1%YoY)  
• Total Deposits: +8.17% vs. 12MMA 8.7% and 3MMA 8.1%;

• Loan to Deposit ratio: 0.845 vs. 12MMA 0.8613 and 3MMA: 0.8482;  

• Overdue Loans ratios:

Corporates: 2.42% vs. 12MMA 2.35% and 3MMA 2.39%;

Mortgages: 0.32% vs. 12MMA 0.41% and 3MMA 0.34%;

Consumption and Other Purposes: 3.60% vs. 12MMA 4.05% and 3MMA: 3.53%.  

Our comments: Average Interest rates on new Loans remain on the upwards trend, which is not a surprise, however interest rates in time Deposits are finally moving upwards, even that the NIM’s proxy reached a new maximum, in October, since we collect data (Jan 2012). Meanwhile Loans volumes keep growing YoY, +2.4%YoY; mainly Mortgages: +3.7%YoY still above 12MMA and Consumption +3.06%YoY; while Corporate loans are almost flat YoY. Finally, Overdue Loans ratios remain in historical terms, at low levels, however the trend is slightly reversing, namely at Corporate level; in line with the unemployment rate that is also slightly increasing, even so at low levels.

Summing up, the NIM continues to increase, while volumes are still growing, which surprises. So, the environment to the banking sector remains positive, meanwhile Overdue Loans ratios remain at low levels, however are very slightly increasing in line with the unemployment rate, also historically low, but slightly moving upwards       

BoP, INE AS Independent Research