Banks with record profits.jpg

Banks with record profits

By: Chris Graeme

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PORTUGUESE BANKS paid 73 per cent more taxes in 2006 thanks to record profits in an industry considered the most solid and efficient in the country.

In total, 69 million euros in corporation tax (IRC) was paid on profits from the banking sector, revealed the Governor of the Bank of Portugal, Vítor Constâncio, during a meeting with the Parliamentary Commission for the Economy and Finances.


According to the governor, the sector’s consolidated liquid profits were worth 2.7 billion euros (up 24.9 per cent on 2005), which was influenced in part by Millennium bcp’s decision to sell off its businesses in the insurance sector.

“The Portuguese banking sector is solid,” said Constâncio who presented various simulated scenarios on how the banks would behave given national and international crises. In the worst case scenario, the banking sector’s capital ratios would fall 1.30 percentage points.

The amount of credit which had been lent, worth 222.9 billion euros, had been financed by securing 156.6 billion euros in deposits and securities. The rest of the borrowing funds had been secured from foreign institutions, which meant that Portugal had huge accumulated debts to outside financial institutions.

The Governor of the Bank of Portugal also believed that it was “difficult to lower taxes” in the current context of the Portuguese economy. He considered that it was vital that the Portuguese government continued concentrating its efforts on reducing the public deficit.

Constâncio said that Portugal was the only country in the Euro Zone that, after having been rapped on the knuckles by the EU for excessive public deficits, continued to have a public deficit above the three per cent of GDP laid down by EU’s Growth & Stability Pact.


The governor also said that he thought the level of family and individual debt and borrowing in Portugal was “understandable, within sensible limits, and inevitable”, but warned that this would contribute to further interest rate hikes to cover lending risks.

He also said that Portugal’s overall lending was mainly concentrated in the housing and mortgage sector, which accounted for around 58 per cent of individual (non-company) lending.

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