LISBON, February 4 (Reuters) – Portugal’s BPI sees no end to a loan repayment freeze for pandemic-hit businesses and families, leading to a huge spike in bad debts for the country’s banking industry.
The block will be lifted for around a quarter of the loans affected – mainly mortgages – in March, but will last until September for the rest.
CEO Joao Oliveira e Costa said at an online press conference that BPI, owned by Spanish Caixabank, had 97,500 customer contracts that benefited from the December repayment freeze, 11,000 fewer than three months earlier.
These loans are valued at 5.6 billion euros ($ 6.7 billion), or 22% of the bank’s total loan portfolio.
“We are following these moratoriums very closely,” said Oliveira e Costa. “More than 98% of our customers who benefit from these moratoriums have not worsened their financial situation and for this reason we do not see any significant problem yet.”
“The same thing is happening with the other banks,” he said, adding that Portuguese banks were well capitalized and had significantly reduced non-performing loans (NPLs) before the pandemic began.
“Right now it is premature to think about an alarming situation,” he said.
Portugal’s banks have suspended principal and interest repayments on € 46 billion in corporate and household debt to avoid spikes in bad loans, according to the latest data from the Bank of Portugal by the end of September.
This included repayment freezes on € 24.4 billion in corporate loans, which is 32% of total corporate loans, and € 21.6 billion in household loans, or 17% of the total.
Oliveira e Costa said BPI’s NPL ratio fell 1 percentage point to 2.1% of total loans in 2020 and 141% of bad loans were covered by impairment and collateral.
BPI’s core tier 1 capital ratio, an important measure of financial strength, is a “comfortable” 14.1%, he said.
1 $ = 0.8363 euros reporting by Sergio Goncalves. Adaptation by Catarina Demony and Mark Potter