DBRS: Portuguese Banks Reached Turning Point In 1H18

Portuguese banks’ 1H18 results reflect consistent progress in asset quality and profitability, in DBRS’s view. Banks have continued to reduce non-performing loans for a number of consecutive quarters and domestic profitability is slowly recovering. As a result, DBRS considers the challenges facing most Portuguese banks are reducing, after reaching a turning point in 1H18.

In 2Q18 Portuguese Banks continued to show the same positive trends as in the last quarters. Profitability, albeit weak, is slowly improving at all banks, supported by significantly lower provisions and some growth of core revenues. DBRS expects all banks, excluding Novo Banco, to post profits for the full year 2018.

Portuguese banks continue to make progress on asset quality and have reduced their Non-Performing Loans (NPLs) further in 1H18. But although asset quality challenges are reducing, further NPL reduction is still required.

Summary highlights include:

• Portuguese Banks have demonstrated consistent progress over the last four quarters.
• Portuguese banks posted aggregated net profits in 1H18 for the first time since 2011.
• DBRS considers that whilst NPLs are still high, the banks are tackling their asset quality issues and most banks are reducing the cost of risk.

For further information see the full commentary titled “DBRS: Portuguese Banks Reached A Turning Point In 1H18”. The commentary is available at www.dbrs.com.