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15 Oct 2015
Madrid, October 15, 2015 -- Moody's Investors Service has changed the outlook on Portugal's
banking system to stable from negative, reflecting the rating agency's
view that improving operating conditions in Portugal will benefit the
country's banking system. The outlook on Portugal's
banking system had been negative since 2008.
Moody's report, entitled "Banking System Outlook -
Portugal: Economic Recovery, Weaker Problem Loan Inflow Drive
Stable Outlook," is available on www.moodys.com.
Moody's subscribers can access this report via the link provided at the
end of this press release.
"The country's modest economic recovery will help stabilise
Portuguese banks' credit fundamentals, and improving operating conditions
are translating into a gradual deceleration in asset quality deterioration
," says Maria Vinuela, an Assistant Vice President at
Moody's and author of the report.
Portuguese banks are now better able to absorb potential losses,
after they were recapitalised, restructured and have bolstered loan
loss provisions in recent years, although their loss-absorption
capacity is still weaker than that of banks in other European systems.
"We also forecast that over the next 12-18 months the banking
sector will return to profitability, albeit at weak levels,
thanks to a reduction in the cost of risk," says Ms Vinuela.
However, Moody's expects that the capacity of Portugal's banks
to generate recurrent earnings will continue to be constrained by low
interest rates, a still substantial amount of non-earning
assets and reduced business volumes. Weak recurrent earnings will
also continue to inhibit their capacity to generate capital internally.
Portuguese banks' funding and liquidity position has improved on
the back of deleveraging and a stable retail deposit base, which
has allowed them to continue to reduce their loan-to-deposit
ratio and the use of wholesale and central bank funding.
Finally, the European Union's new banking resolution framework is
now in place in Portugal, setting rules to guide the resolution
of banks and reducing any uncertainty on government support. Moody's
now considers that government support will only translate into a meaningful
reduction in credit risk for those senior creditors and junior depositors
of Portuguese banks considered to be systemically significant.
Moody's expectation of lower loss rates in the event of resolution is
mitigating the impact on bank ratings of the new resolution framework
and the reduction of public support.
Subscribers can access the report at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1008065
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This publication does not announce a credit rating action. For
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Maria Vinuela
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's changes outlook on Portugal's banking system to stable
No Related Data.
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