Portuguese banking: The party is over
Portuguese banks were the golden boys of European finance for years, reaping the rewards of a consumer lending boom. But Portugal has landed with a bump, with GDP growth no longer outstripping the rest of Europe. The banks are suffering, both in wholesale finance and in retail, where intense competition makes it difficult to turn a profit. Even market leader Banco Comercial Português is feeling the pinch. With opportunities for domestic mergers limited, it has expanded abroad, with mixed results.
It doesn't take long for a rumour to spread in a city as small as Lisbon. At the moment, most of the rumours in the banking sector are about Banco Comercial Português.
Established as recently as 1985, the bank is a success story that has won the envy and respect of its rivals and international commentators. Established under chairman and CEO Jorge Jardim Gonçalves, BCP has established a domination in both retail and wholesale finance. And analysts still highlight it as a good bet for investors in Portuguese banking. The problem is, though, that those analysts are generally advising investors to keep out of the sector altogether.
The warning signs for all Portuguese banks have been around for some time. GDP growth has been slowing since midway through last year and growth in consumer loans has been steadily falling for longer. Nor is Portugal immune to the effects of plummeting brokerage commissions, which banks around the world are struggling to deal with.
Despite the slowdown in business growth Portuguese banks have remained confident and ambitious. They see European unity as an opportunity for expansion and not just in the Iberian peninsula.