Portugal

Non-performing loans held by Portuguese banks are declining at a substantial rate as the economy expands but remain “very high” by European standards, Moody’s said on Wednesday. The rating agency said the ratio of NPLs to gross lending fell to 15.2 per cent at the end of 2017, down from 19.5 per cent a year earlier, the Financial Times reported. The ratio had peaked at 20.1 per cent in 2016 in the wake of the eurozone debt crisis, which forced Portugal to seek an international bailout.

Weaker growth in the eurozone would “significantly affect Portugal”, the International Monetary Fund warned on Tuesday, saying “lingering domestic vulnerabilities” would amplify any external shock to the former bailout country’s economic recovery, the Financial Times reported. The caution came as fallout from the Italian political crisis pushed Portugal’s 10-year debt yield up 12 basis points on Tuesday. Lisbon’s PSI 20 stock market index fell 2.4 per cent. Within this, shares in Millennium BCP, the country’s largest listed bank, shed more than 7 per cent.

Portuguese lender Novo Banco has reported a net loss of €1.4bn, underlining how southern European banks are still struggling to repair their balance sheets after its new US private equity owners booked big provisions on bad loans, the Financial Times reported. The beleaguered bank, born out of the wreckage of Banco Espírito Santo and taken over by Lone Star of the US last year, said it would draw €792m of previously committed funding from a resolution fund owned by Portugal’s other banks.

Millennium BCP, Portugal’s largest listed bank, has successfully completed the first issue of subordinated Tier 2 notes by a Portuguese lender since the eurozone sovereign debt crisis, despite a boycott of the offer by some of the world’s leading fixed-income investors, the Financial Times reported. BCP, which priced the 10-year medium-term notes on Wednesday, said the €300m issue attracted orders for three times that amount from a wide range of mainly European institutional investors. The notes were priced at an interest rate of 4.5 per cent for the first five years.

Portugal’s three biggest banks have agreed to create a jointly managed platform to tackle their bad loans, one of Europe’s largest problem debt piles, the Financial Times reported. Millennium BCP, Novo Banco and state-owned Caixa Geral de Depósitos said in statements to the CMVM, Portugal’s stock market watchdog, late on Thursday that the platform was aimed at “speeding up the reduction of non-performing exposures”. The three banks account for most of an estimated €25bn to €30bn of bad debt in the Portuguese banking system, about 15 per cent of total credit portfolios.

Portugal's three biggest banks plan to manage jointly some of their bad loans to avoid more writedowns, effectively taking on the task of trying to tackle one of Europe's biggest bad-debt burdens, the International New York Times reported on a Reuters story. The banks - state-owned Caixa Geral de Depositos as well as Novo Banco and Millennium bcp - will set up a private platform to manage loans that at least two of them have made to the same corporate borrowers, Deputy Finance Minister Ricardo Mourinho Felix told Reuters in an interview.

Major Novo Banco bondholder Pimco plans to support a restructuring deal at the state-rescued Portuguese lender in a vote this Friday, though the bank could still struggle to get the necessary backing, a source familiar with the matter said. The agreed sale of Novo Banco to U.S. fund Lone Star hinges on investors agreeing to sell back bonds at a discount in the so-called liability management exercise (LME) that runs until Monday, the International New York Times reported on a Reuters story.

Portuguese bonds staged their biggest rally in more than seven years on Monday after the country won back its investment-grade credit rating, marking one of the most significant milestones in the currency union’s return to fiscal health, the Financial Times reported. Portugal had been in junk territory since 2012 after it became the third eurozone country forced into an international bailout, receiving a €78bn rescue from the International Monetary Fund and EU after Greece and Ireland were subjected to similar programmes.

Portugal’s economic growth hit the brakes in the second quarter, in a surprise slowdown for one of the eurozone’s standout economies in recent months, the Financial Times reported. Gross domestic product expanded 0.2 per cent in the three months to June, down from 1 per cent at the start of the year and below a forecast of 0.6 per cent. It means year on year growth held steady at 2.8 per cent – still the best rate in a decade, according to stats office INE.

Novo Banco SA, the Portuguese lender created from the collapse of Banco Espírito Santo SA three years ago, has launched a plan to raise €500 million ($582 million) from a bond exchange—a condition of its takeover by U.S. private-equity firm Lone Star Funds, The Wall Street Journal reported. Pacific Investment Management Co. and other Novo Banco bondholders who wanted to mount their own takeover have challenged the Lone Star arrangement. A successful bond exchange would put the bank a big step closer to securing the Lone Star deal.