Press Release

DBRS Morningstar Upgrades Banco Montepio’s Long-Term Issuer Rating to BB; Trend Stable

Banking Organizations
December 13, 2023

DBRS Ratings GmbH (DBRS Morningstar) upgraded the ratings of Caixa Económica Montepio Geral, S.A. (Banco Montepio, or the Bank), including the Long-Term Issuer Rating and Long-Term Senior Debt to BB from B (high), and the Long-Term Deposits to BB (high) from BB (low). The Trend on all ratings is Stable. The Bank’s Intrinsic Assessment (IA) was also raised to BB and the Support Assessment was maintained at SA3.

The Bank’s BB (high) Long-Term Deposits rating is one notch above the IA, reflecting the legal framework in place in Portugal which has full depositor preference in bank insolvency and resolution proceedings. The Bank’s Short-Term Deposits rating is R-3 with a Stable trend. See a full list of ratings at the end of this press release.


The rating upgrade takes into account the progress that Banco Montepio has made to strengthen its balance sheet and capital buffers, as well as simplify its operational structure. In 9M 2023, the Bank continued to reduce its stock of non-performing loans (NPLs) and non-core assets. The gross NPL ratio fell to 4.2% in 9M 2023 from 6.9% in the same period of 2022, while the CET1% increased to 15.2%, up by 150 bps compared to YE 2022. As part of the strategic re-focus on its core Portuguese market, Banco Montepio completed the sale of Finibanco Angola in August 2023. In addition, the Bank’s core profitability has improved also a result of the increase in net interest rate income on the back of rising interest rates and taking into account the Bank’s large exposure to floating rate loans.

Nonetheless, the ratings continue to reflect the Bank’s still large stock of non-performing loans (NPLs), its modest profitability levels relative to peers, and its limited capital flexibility. The Stable Trend reflects the expectations that risks are broadly balanced and that the Bank will cope with the asset quality risks posed by high interest rates and weaker economic prospects.


An upgrade would require sustained improvements in profitability and a further reduction in NPLs, while maintaining solid capital and liquidity buffers.

A downgrade would occur in the event of a material deterioration in the Bank’s capital position or liquidity position.


Franchise Combined Building Block (BB) Assessment: Moderate/Weak

Banco Montepio is a small Portuguese retail and commercial bank with total assets of around EUR 18 billion in 9M 2023 and is majority owned by the Montepio Geral Associação Mutualista (MGAM). As part of its turnround, the Bank has continued to streamline its branch footprint, with the closure of 5 branches in Portugal in 2023, and a reduction in the headcount. In addition, as part of the Bank’s strategic re-focus on its core Portuguese market, Banco Montepio completed the sale of Finibanco Angola in August 2023. Prior to that, the Bank completed the liquidation of Banco MG Cabo Verde, as well as the disposal of its stake in Banco Terra, S.A. in Mozambique.

Earnings Combined Building Block (BB) Assessment: Weak/Very Weak

Historically, the Bank’s profitability metrics and returns have been weak, mainly due to limited revenue diversification relative to its peers, a high cost to income ratio, as well as high provisioning costs due to weak asset quality. Results, however, have begun to improve supported by a series of restructuring initiatives, including de-risking. In 2022, Banco Montepio posted a net profit of around EUR 34 million, up from EUR 7.7 million in 2021, on the back of higher revenues, as well as lower impairments and provisions, and lower operating costs.

In 9M 2023, however, the Bank posted a loss of EUR 21 million as a result of a one-off item related to the disposal of Finibanco Angola which led to the recognition of a negative impact of EUR 116 million from FX reserve reclassification. Excluding this one-off, the Bank’s recurrent profit for 9M 2023 was reported at around EUR 95 million, up from EUR 24 million for the same period in 2022, driven by the strong growth in NII. Going forward, we expect the Bank’s profitability to begin to normalise reflecting lower impact from non-recurring items.

Risk Combined Building Block (BB) Assessment: Moderate/Weak

The Bank’s loan portfolio is exposed to mortgages to households and loans to corporates, mainly in the manufacturing, wholesale and retail trade, and accommodation and food services sectors. In 9M 2023, Banco Montepio has continued to reduce its stock of problem loans and non-core assets. The Bank’s gross NPE ratio fell to 4.2% from 6.9% in the same period in 2022, supported by disposals and higher cures and recoveries. Total NPL outflows continued to outpace the new defaults in 9M 2023. At the same time, the total NPE coverage by provisions increased to 67.2% from 56.1% at YE 2022. Asset quality has continued to benefit from a benign economic environment in Portugal, improved labour market conditions, as well as the public guarantee schemes available for SMEs and corporates. Nonetheless, asset quality risks remain, taking into account the ongoing economic slowdown and the pressure for borrowers’ debt affordability due to a rapid increase in interest rates.

The Bank maintains a large exposure to Sovereign bonds. This security portfolio amounted to around EUR 4.2 billion in 9M 2023, corresponding to around 24% of the total assets. Most of this portfolio is classified at amortised cost. The increase in interest rates has led to the formation of unrealised losses on this portfolio, although we expect this to be manageable given the Bank’s adequate liquidity profile and access to central bank funding.

Funding and Liquidity Combined Building Block (BB) Assessment: Moderate

Banco Montepio's funding profile is underpinned by its customer deposits, which represent the main source of funding. The bulk of deposits are with retail customers. The Bank’s deposit base has stabilised after the sector-wide outflows experienced in Q1 2023 due to increased market volatility and rising interests rates which led depositors to invest in alternative products, such as the certificates issued by the Portuguese Government. Overall, the deposits are evenly split in sight and term deposits, although in recent months, there was a shift to term deposits with higher remuneration. In 9M 2023, the Loan to Deposit (LtD) ratio remained broadly unchanged YoY to 89% on the back of lower lending volumes.

As part of the plan to meet its MREL requirement of 23.54% for January 2025, the Bank returned to the wholesale market with the issuance of EUR 200 million in senior preferred bonds in October 2023. The Bank maintained an adequate liquidity profile with a buffer of around EUR 3.9 billion, including unencumbered assets, net of haircuts, and cash and deposits at Central banks. LCR ratio and NSFR ratio were reported at 238% and 119% respectively in 9M 2023, down compared to the levels at YE 2022.

Capitalisation Combined Building Block (BB) Assessment: Weak

In 2023, Banco Montepio continued to strengthen its capital buffers. In 9M 2023, the Bank’s phased-in CET1 stood at 15.2%, up from 13.7% at end-2022. The total capital ratio was reported at 17.9% up from 16.2% at end-2022, which compares with a total regulatory requirement of 14.0%. The improvement was mainly due to the reduction in RWAs, on the back of the Bank’s strategy of reducing non-strategic assets, real estate exposures and NPL disposals, as well as net income for the period and securitisation.

Further details on the Scorecard Indicators and Building Block Assessments can be found at


The Governance factor has a relevant effect on the ratings. In the past, the Bank has experienced high management turnover and reputational issues, and was also subject to administrative proceedings and fines by the Portuguese supervisory authorities in relation to alleged past failures in internal controls. DBRS Morningstar views that the bank has made progress in resolving some of these proceedings, and has not faced any new significant issue. As a result, we consider the “Corporate Governance” risk subfactor as relevant to Banco Montepio’s ratings, and this is reflected in the assessment of the Risk building block.

There were no Environmental and Social factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023)

All figures are in EUR unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (22 June 2023) In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at:

The sources of information used for this credit rating include Morningstar Inc. and Company Documents, 2016-2022 Montepio Annual Reports, 2016-2023 Montepio Quarterly Reports, 2016-2023 Montepio Quarterly Presentations. DBRS Morningstar considers the information available to it for the purposes of providing this credit rating to be of satisfactory quality.

DBRS Morningstar does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and credit ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

The sensitivity analysis of the relevant key credit rating assumptions can be found at

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Nicola De Caro, Senior Vice President, Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Global Head of Financial Institutions
Initial Rating Date: June 27, 2011
Last Rating Date: March 30, 2023

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