Portugal's banks have grown rapidly in recent years through
consolidation and asset growth, but the warning lights have already
begun flashing, signalling a much-feared slowdown in the lending
business that accounts for some 60% of their profits.
The customer loan book skyrocketed by an annual 22% across the
sector in the 1995-2000 period and growth is still in the high
double-digit range. Now a slowdown in the growth of Portugal's
economy to 2.5% in the first quarter from 3.3% on average over the
past three years has raised doubts about the sustainability of this
lending boom.
The danger is that loan volume growth is rolling along at 10 times
the underlying GDP growth rate and up to five times the rate for
most EU member countries.
So in the context of a slowing eurozone economy, the
outcome is obvious: lending has to come down, casting a shadow over
Portuguese banks'...
