Portuguese banking sector profits shrank 40 per cent in 2008.jpg

Portuguese banking sector profits shrank 40 per cent in 2008

Despite not suffering the scale of losses seen by United States and British banks, the Portuguese banking sector saw 40 per cent of its profits wiped out last year.

The five main banks in Portugal, Banco Espírito Santo (BES), Banco Comercial Português (BCP), Banco Português de Investimento (BPI), Caixa Geral de Depósitos (CGD) and Santander, have all presented profits, albeit significantly lower than in 2007, with the exception of Spanish bank Santander which registered an increase.

The five banks operating in Portugal closed 2008 with total profits of 1.7 billion euros – 40 per cent down on 2007.

Although faced with a combination of particularly difficult circumstances in terms of the international financial crisis, lack of liquidity and internal scandals and boardroom scuffles throughout 2007 and the first half of 2008, the Portuguese banking sector faired better than many of its counterparts in larger, more economically powerful European neighbours.

This is largely because the Portuguese banking sector did not, because of its small scale, invest heavily in high-risk, complicated financial vehicles and hedge funds derived from the United States sub-prime mortgage market resulting in the now so-called ‘toxic debts’.

Millennium bcp, which endured months of instability because of boardroom struggles over the reluctant departure of its founder Jardim Gonçalves last year, mal-administered funds and less than transparent offshore business deals, not surprisingly suffered the worst results, seeing its liquid assets plummet by 64 per cent from 563 million euros to 201 million euros.

BPI too had a difficult year following its failure in 2007 to take-over Millennium bcp in a hostile take-over bid as well as its previous failed merger with BES.

BPI saw its profits shrink by 58 per cent and in 2008 and shares shrivel by 15.4 per cent since January, making it extremely vulnerable to a take-over bid from a larger Spanish entity such as La Caixa which opened a delegation office in Lisbon two years ago and is now seeking an opportunity to expand its operations in the Portuguese market.

Shrinking shares

Even the prudent BES has seen the value of its shares shrink by 27 per cent on the Lisbon Stock Market with a third of its profits (200 million Euros) being wiped out, from 607 million Euros in 2007 to 402 million Euros in 2008.

Santander was the only bank that managed to increase its profits – by 1.5 per cent – to 517 million euros in 2008 from 509 million euros in 2007.

Despite its ‘first aid’ exposure to losses incurred by private investment bank Banco Privado Português (BPP) and Banco Português de Negócios, state-held CGD managed to limit its damages to a 46 per cent fall in profits from 856 million euros in 2007 to 459 million euros in 2008.

And with less than optimistic news coming out of the United States Federal Reserve and continued shock-waves from troubled United Kingdom banks, the outlook for 2009 for Portuguese banks in terms of share values, profits and liquidity does not look over optimistic despite record levels of savings deposits from a worried Portuguese public.

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