Targeting a troubled sector

Portugal's leading banks may soon find themselves fighting a battle for profitability on two fronts. Not only are they suffering from an economic slowdown that has now become a full-blown recession; in addition Lisbon is rife with rumours of an impending assault on the market by one or more major European competitors. The speculation comes in permutations to suit all tastes, but the most widely accepted version points to the Spanish banks.

From a price perspective, this would certainly be the right time to move in on Portuguese banks. For instance, Banco Comercial Português (BCP), the country's leading private-sector bank, has underperformed the European bank index by 60% since January 1999. As BCP's chairman and chief executive Jorge Jardim Gonçalves points out [see Focus lies abroad, this issue], banking profitability is heavily dependent on economic trends at home and abroad, and most analysts see little scope for a...