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Banking

Portugal’s banks consider their next move

The country’s banks are successful and stable. But a small domestic market leaves a difficult choice: concentrate on building at home or seek to expand overseas. Laurence Neville reports.

Millennium BCP: Leveraging knowledge overseas | CGD: a domestic retail focus | Euronext: internationalizing Portugal

PERHAPS THE GREATEST compliment that can be paid to a country’s banking system is that it is not the cause of much excitement. Not because it is dull, of course. But because it is so stable. Portugal’s banking system can be praised in that way: after decades of impressive expansion, the market has settled into a period of steady growth with a relatively small, but fiercely competitive, group of banks offering efficient services.

The market has had its upsets and some observers still harbour fears that mortgage and other consumer lending is growing at an unsustainable rate, especially given fairly stagnant savings growth rates. Overall, though, the Portuguese banking system appears to be a model of how banks in a medium-size European country should operate – with strong management, comprehensive risk control and a good breadth of products available.

The success of Portugal’s banks in the 22 years since the market was opened up highlights the fact that financial services is the country’s most competitive industry. Paulo Teixeira Pinto, chairman and chief executive of Millennium BCP, one of the largest banks in the country, says: “The banking sector has been a landmark in the Portuguese economy in terms of modernization and innovation.”

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