Portuguese Banks 1H 2024: So Far Outperforming A Historic 2023

The largest Portuguese banks closed the first half of 2024 ahead on key financial metrics relative to results from a year ago. Total net income for the banks through the six months to June 2024 increased 38% year-over-year (YOY). Strong first half earnings -- following already the historic 2023 results -- benefited from the continued positive evolution of net interest income (NII), and from higher lending volumes and lower cost of risk. In YOY terms, NII increased by double-digits, and provisioning and impairments declined by nearly half. Resilient asset quality due in part to the favourable macroeconomic environment, and improved capital and liquidity positions also characterise the first half performance. These trends point to the possibility of another extraordinary year for the Portuguese banks. This commentary incorporates the aggregated data for the largest Portuguese banks: Caixa Geral de Depósitos, Banco Comercial Português, Novo Banco, Caixa Económica Montepio, Banco BPI, and Banco Santander Totta.

Key points:

-- Profitability of Portuguese banks remained at a historic high in the first half of 2024.
-- There are reasons, including interest rate trends and the healthy Portuguese economy, to expect another year of strong results.
-- Improved liquidity and capital positions also characterised the first half performance.

"We expect trends on deposit costs, interest rates, and lending volumes to influence the banks' net income over the remainder of 2024," said Jason Graffam, Senior Vice President Global Sovereign & Financial Institution Ratings. "Deposit rates appear to have peaked at the end of last year, and we anticipate both deposit and lending rates to gradually decline along with monetary policy rates and settle at structurally higher levels. Thus, bank earnings will continue to be supported by the recovery in lending volume."