CGD: a domestic retail focus
Given the dynamism of the Portuguese banking market, outside observers are sometimes surprised to find out that Caixa Geral de Depósitos, the number two bank in the market – which often trades places with Millennium BCP for first place – is still wholly owned by the state. Although the bank is not now explicitly supported by the state, its ownership does give it an implicit guarantee – the government would be unlikely to allow the bank to collapse – that undoubtedly helps its rating and lowers its borrowing costs.
As sole shareholder, the government appoints CGD’s board of directors, chairman and statutory audit. But, as José Ramalho, the bank’s CFO, points out CGD is managed autonomously, with no obligation to lend to certain sectors and no day-to-day interference from the state. “It is subject to the same banking rules, regulation and supervision that apply to the rest of the financial system in Portugal,” he says. “We are a player in a competitive market.”
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There appears to be no likelihood of disruption to the status quo: the government has given no indication that it intends to sell a stake in CGD and – unusually – rival banks appear to have no objection to competition with a state-owned bank.