portuguese banking system · 5 •-11.2-7.4-5.6-4.8 -4.5-5.8-12-9-6-3 0 2010 2011 2012 2013 2014 1q...
TRANSCRIPT
Portuguese Banking System Recent Developments Updated: 1st quarter 2015
Prepared with data available up to 24 June 2015
2 •
Outline
• Portuguese Banking System – Main Highlights
• Macroeconomic and Financial Indicators
• Portuguese Banking System
• Balance Sheet
• Liquidity & Funding
• Asset Quality
• Profitability
• Solvency
• Recent Measures with Impact on the Banking System
3 •
Portuguese Banking System – Main Highlights
I. Balance Sheet
• Banking system total assets continued to decrease, though marginally.
II. Liquidity & Funding
• Deposits remained resilient;
• Eurosystem refinancing decreased in line with the trend observed in the former quarters;
• The loans to deposits ratio remained stable over the quarter in analysis.
III. Asset/Credit Quality
• The credit at risk ratio increased, particularly in the non-financial corporations’ segment.
IV. Profitability
• The banking system recorded positive profitability levels;
• The flow of credit impairments decreased, though remaining at a high level.
V. Solvency
• Solvency levels decreased slightly.
4 •
-10.1
-6.0
-2.1
1.4 0.6 0.6 2.0
1.4 1.5 2.11.6
1.5 1.71.2
-14
-9
-4
1
6
2010 2011 2012 2013 2014 4Q 2014 1Q 2015
Capital Account
Current Account
1.9
-1.8
-4.0
-1.6
0.90.4 0.4
-5
-4
-3
-2
-1
0
1
2
3
2010 2011 2012 2013 2014 4Q 2014 1Q 2015
%
GDP growth rate – Volume
Macroeconomic and Financial Indicators (I/IV)
Current account and capital account, % GDP
In the first quarter of 2015, quarter-on-quarter GDP growth rate was positive by the fourth consecutive quarter. The year-on-year growth rate of GDP was 1.5%.
Current and capital account recorded a surplus, reflecting the ongoing adjustment of the external imbalance of the Portuguese economy.
Source: Banco de Portugal and INE
Chart 2
Chart 1
Note: Quarterly figures correspond to q-on-q rates of change. National Accounts and Balance of Payments figures are already presented according the rules of the European System of National and Regional Accounts (ESA 2010) and Balance of Payments and International Investment Position Manual (BPM6).
Note: Quarterly figures are seasonally adjusted.
//
//
5 •
-11.2
-7.4
-5.6-4.8 -4.5
-5.8
-12
-9
-6
-3
0
2010 2011 2012 2013 2014 1Q 2015
12.012.9
15.816.4
14.1 13.5 13.5
0
3
6
9
12
15
18
2010 2011 2012 2013 2014 4Q 2014 1Q 2015
Unemployment rate, % of active population
Fiscal deficit, % GDP
The rate of unemployment remained stable and below the annual average of 2014.
Public debt as a percentage of GDP stood at 130.0% at the end of the first quarter of 2015. Deposits from General Government represented about 12% of GDP.
Source: Banco de Portugal and INE
Chart 4
Chart 3
Macroeconomic and Financial Indicators (II/IV)
Public Debt
(% GDP)
//
//
96.2 111.1 125.8 129.7 130.2 130.0
6 •
Net lending/borrowing of non-financial corporations, % GDP
Net lending/borrowing of households, % GDP
In 2014, non-financial corporations’ debt was about 9 p.p. of GDP lower when compared to 2013.
In the first quarter of 2015, non-financial corporations’ financing capacity increased on a year-on-year basis.
The households’ indebtedness level continued to decline during 2014 by about 7.2 p.p. of GDP.
In the first quarter of 2015, households’ financing capacity remained positive, despite decreasing by about 1.4 p.p. year-on-yearly.
Chart 6
NFC debt (% GDP)
Households debt (%
GDP)
Source: Banco de Portugal and INE
Macroeconomic and Financial Indicators (III/IV)
Chart 5
Note: National Sector Accounts were revised when Statistics Portugal released the Accounts for the fourth quarter of 2014. These revisions reflect changes introduced in detailed Annual National Accounts for 2012 (final results), with an impact on subsequent years.
118.2 121.2 126.9 123.8 114.7 121.3 n.d.
92.9 92.5 93.1 91.3 84.1 88.9 n.d.
-4.1-3.5
-0.4
0.9 0.6 0.7 0.9
-5
-4
-3
-2
-1
0
1
2
2010 2011 2012 2013 2014 1Q 2014 1Q 2015
3.4
2.63.0
4.3
2.5
3.7
2.3
0
2
4
6
2010 2011 2012 2013 2014 1Q 2014 1Q 2015
//
//
7 •
Sovereign debt yields 10 Y
Macroeconomic and Financial Indicators (IV/IV)
Euribor and ECB main refinancing rate
The Portuguese 10-year government bond yield rates achieved a historical low in March 2015 (1.6%). More recently, yields increased in a context of rising volatility.
The implementation of the public securities purchase program by the European Central Bank might have conditioned the recent developments in the financial markets.
During the first quarter of 2015, the ECB kept unchanged the main refinancing rate (0.05%), the deposit facility rate (-0.20%) and the marginal lending facility rate (0.30%).
Chart 8
Chart 7
2,3% 2,4%
Source: Bloomberg and ECB
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15
%%
Portugal Spain Italy Germany Greece
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
%
Euribor 3M Euribor 6M ECB Main Refinancing Rate
8 •
Portuguese Banking System
The banking system data present a break in time series in the third quarter of 2014 due to the resolution measure applied to Banco Espírito Santo (BES). The break in time series stems, in particular, from the fact that the assets/liabilities not transferred to the balance sheet of Novo Banco (NB) are not considered in the aggregate of the banking system from August 2014 onwards.
In the absence of accounting information for BES on a consolidated basis for the period from 30 June 2014 to the day of implementation of the resolution measure (closing balance sheet and statement of profit or loss), the reporting of BES on individual basis, with reference to 31 July 2014, was considered when determining the aggregate results of the banking system for the third quarter of 2014. However, it must be stressed the fact that the adjustments stemming from the resolution measure applied to BES were not considered.
Comment on accounting and prudential information
9 •
0
200
400
600
2010 2011 2012 2013 2014 1Q 2015
Capital & Others
Resources from Central Banks
Interbank Market
Securities
Deposits
532 513 496460
430 427
0
200
400
600
2010 2011 2012 2013 2014 1Q 2015
Other Assets
Investment in Credit Institutions
Capital Instruments
Debt Instruments
Credit
Assets (€Bn) – Value at end of period
Balance Sheet
Bank financing structure (€Bn) - Value at end of period
Bank total assets recorded a marginal decrease.
Customer deposits remained stable.
The weight of resources of central banks, mainly from the Eurosystem, in bank financing structure continued to decrease.
Source: Banco de Portugal
//
Chart 9
//
Assets / GDP
Chart 10
3.0 2.9 2.9 2.7 2.5 2.5
10 •
158
140128
117107 107
0
30
60
90
120
150
180
2010 2011 2012 2013 2014 1Q 2015
40.946.0
52.847.9
31.2 28.2
8.34.7
3.43.3
2.52.3
0
20
40
60
2010 2011 2012 2013 2014 1Q 2015
Monetary policy operations with Banco de PortugalOther resources from central banks
Chart 12
Central Banks Financing (€Bn) - Value at end of period
Liquidity & Funding (I/II)
Loan-To-Deposits ratio (%) - Value at end of period
Eurosystem refinancing recorded a reduction, cumulating a €33.7 billion decrease since its historical high in June 2012.
The loans to deposits ratio remained stable.
Source: Banco de Portugal
//
//
Chart 11
11 •
133
98
70
4318
17
0
40
80
120
160
2010 2011 2012 2013 2014 1Q 2015
-3.9-2.8
5.0
8.410.0
8.6
-7.3 -6.3
2.2
6.28.5
7.4
-11.5-9.6
-0.3
2.2
6.35.1
-15
-10
-5
0
5
10
15
2010 2011 2012 2013 2014 1Q 2015
Up to 3 months Up to 6 months Up to 1 year
Liquidity gap in cumulative maturity ladders (% stable assets) – Value at end of period
Commercial gap (€Bn) – Value at end of period
Liquidity & Funding (II/II)
The commercial gap decreased marginally, remaining at significantly low levels when compared to the beginning of the financial crisis.
Liquidity gaps decreased. This reduction is mainly due to the decrease of liquid assets.
Source: Banco de Portugal
//
//
Chart 14
Chart 13
12 •
4.3
5.85.6 6.1 5.9 6.0
10.312.2
15.6 16.6 17.0 17.6
5.9
9.9
13.8
16.1
19.0 20.2
0
5
10
15
20
25
2010 2011 2012 2013 2014 1Q 2015
Housing Consumption & other purposes Non-financial corporations Total
3.2
4.2
5.56.2
7.7 7.8
0
3
6
9
2010 2011 2012 2013 2014 1Q 2015
Credit at Risk ratio (% of gross credit) - Value at end of period
Asset Quality
Credit Impairments as % of gross credit - Value at end of period
The credit at risk ratio increased, stemming from the rise of the numerator, in particular in the non-financial corporations’ segment.
The stock of impairments as a percentage of gross loans increased residually.
Chart 15
2,4%
Source: Banco de Portugal
//
//
Chart 16
13 •
-160
-120
-80
-40
0
40
80
120
2010 2011 2012 2013 2014 1Q 2014 1Q 2015
Other income
Commissions
Net interest income
Impairments
Operational costs
Other costs
7.7
-6.3 -5.5
-11.6
-19.1
-0.4
6.7
0.5 -0.4 -0.3
-0.8
-1.3
0.00.5
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
-25
-20
-15
-10
-5
0
5
10
2010 2011 2012 2013 2014 1Q 2014 1Q 2015
%
Return on Equity (ROE) Return on Assets (ROA) - rhs
%
ROA & ROE – Value in the period
Profitability (I/II)
Income and costs as a % of gross income - Value in the period
Over the first quarter of 2015, return on assets and return on equity were positive for the first time since 2012 on a year-on-year basis.
The decrease of both the flow of impairments and operational costs, contributed to the aforementioned year-on-year improvement of banking system returns.
On a year-on-year basis, the weight of “other income” on gross income, mainly returns in financial operations, increased significantly.
Source: Banco de Portugal
//
Chart 17
Chart 18
//
Note: Return is measured by earnings before taxes and minority interests.
14 •
0
20
40
60
80
0
2
4
6
8
10
2010 2011 2012 2013 2014 1Q 2014 1Q 2015
%
€m
M
Operational Costs Cost-to-Income - rhs
0
2
4
6
8
2010 2011 2012 2013 2014 4Q 2014 1Q 2015
Loans to non-financial corporations Loans to households (housing)
Deposits of non-financial corporations Deposits of households
Cost-to-Income (%), Operational Costs (€Bn) - Value in the period
Profitability (II/II)
Banking interest rates (new business) - Average value of period (%)
The reduction of the cost-to-income ratio in the first quarter of 2015, vis-à-vis 2014, was simultaneously driven by an increase in gross income and a reduction of operational costs.
Interest rates on new loans, either granted to households (for housing purposes), or to non-financial corporations, decreased slightly vis-à-vis the fourth quarter of 2014 (24 b.p. and 19 b.p. respectively).
The cost of new deposits kept a downward trend, recording reductions of 22 b.p. for the households’ segment and 12 b.p. for the non-financial corporations’ segment.
Chart 20
2,3% 2,4%
Source: Banco de Portugal
Chart 19
//
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15 •
7.4
8.7
11.512.3
11.3 11.1
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014 1Q 2015
5.5 5.4
7.0 7.16.9 7.0
0
2
4
6
8
2010 2011 2012 2013 2014 1Q 2015
Tier 1 capital to Total Assets ratio - Value at end of period (%)
Solvency
Core Tier 1 ratio (until 2013) and CET 1 ratio (from 2014) - Value at end of period (%)
The ratio between Tier 1 capital and total assets* remained stable.
The CET 1 ratio* reached 11.1% for the aggregate of the Portuguese banking system, decreasing slightly vis-à-vis the end of 2014.
(*) In 2014, the transition to a new prudential regime determined the existence of breaks in the series of solvency indicators justified by methodological differences in the calculation of own funds components, affecting the comparability of ratios with previous years.
Chart 22
Chart 21
Source: Banco de Portugal
Total Solvency Ratio (%)
10.3 9.8 12.6 13.3 12.3 12.0
//
//
16 •
Recent Measures with Impact on the Banking System (I/II)
Topic Institution Latest Measures (1Q 2015)
Solvency and
liquidity ECB
Implementation of the Governing Council Decision of 20 March 2013 regarding the own-use of uncovered
government-guaranteed bank bonds that, after 1 March 2015, may no longer be used as collateral for the
Eurosystem credit operations.
On 22 January 2015 the Governing Council approved an expanded asset purchase program to include a
secondary market public sector asset purchase program (PSPP). This program started on 9 March 2015.
The Governing Council of the ECB decided, on 22 January 2015, that the interest rate for the remaining six
targeted longer-term refinancing operations (TLTROs) would be equal to the rate on the main refinancing
operations (MROs) prevailing at the time when each TLTRO is conducted, eliminating the 10 basis point
spread over the MRO rate which was applied in the first two TLTROs.
Legal framework Portuguese
Parliament
Law No 23-A/2015, of 26 March, which transposes into Portuguese Law (i) Directive 2014/49/EU of the
European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes and (ii) Directive
2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for
recovery and resolution of credit institutions and investment firms, amending the Legal Framework of Credit
Institutions and Financial Companies, the Organic Law of Banco de Portugal, Decree-Law No 345/98 of 9
November 1998, the Securities Code (Código dos Valores Mobiliários), Decree-Law No 199/2006 of 25
October 2006, and Law No 63-A/2008 of 24 November 2008.
Law No 16/2015, of 24 February, which transposes in part (i) Directives 2011/61/EU of the European
Parliament and of the Council of 8 June 2011 and (ii) 2013/14/EU of the European Parliament and of the
Council of 21 May 2013, amending the legal framework of undertakings for collective investment and
rewording the Legal Framework of Credit Institutions and Financial Companies and the Securities Code.
Approves the Legal Framework of Undertakings for Collective Investment annexed thereto.
17 •
Recent Measures with Impact on the Banking System (II/II)
Topic Institution Latest Measures (1Q 2015)
Legal framework
ECB
Publication of Regulation (EU) 2015/534 of the European Central Bank of 17 March 2015 (ECB/2015/13),
which lays down requirements concerning reporting of supervisory financial information to be submitted to
national competent authorities (NCAs) by significant supervised groups and less significant supervised
groups. In accordance with this Regulation, 31 December 2015 shall be the first reference date for reporting
of supervisory financial information concerning: (a) significant supervised groups; (b) significant supervised
entities which are not part of a supervised group; 30 June 2016 shall be the first reference date for reporting
of supervisory financial information concerning: (a) significant supervised entities which are part of a
supervised group; (b) subsidiaries of significant supervised groups established in a non-participating Member
State or a third country; 30 June 2017 shall be the first reference date for reporting of supervisory financial
information concerning: (a) less significant supervised groups; (b) less significant supervised entities.
Other
Banco de
Portugal
Amendment to Instruction of Banco de Portugal No 3/2009, in order to allow, under exceptional
circumstances, the exemption of direct participants in SICOI from the obligation to contract with Banco de
Portugal an intraday credit line on TARGET2-PT.
EU General
Court
Decision of the EU General Court, dated 4 March, that annuls the location policy for Central Counterparties
(CCP), within the Eurosystem oversight policy framework, considering that the ECB does not have
autonomous regulatory powers in relation to securities clearing systems under the Treaty on the Functioning
of the EU.
ECB
Recommendation of the European Central Bank of 28 January 2015 (ECB/2015/2) on dividend distribution
policies. This recommendation is addressed to significant supervised entities and significant supervised
groups as defined in Article 2 (16) and (22) of Regulation (EU) No 468/2014 of 16 April 2014.
Portuguese Banking System Recent Developments – 1st quarter 2015