Madrid, Nov. 19, 2024 (Lusa) - Financial rating agency Moody's on Tuesday upgraded the ratings of seven Portuguese banks, with the changes being motivated by improved operating conditions in Portugal, while also upgrading the country's macro profile to strong.

In a note released today, Moody's said it had upgraded the Individual Credit Risk Profile (BCA) of state-owned Caixa Geral de Depósitos (CGD), Millennium BCP, Santander Totta, Novo Banco, BPI, Montepio Geral and Crédito Agrícola Mútuo.

This indicator, which assesses the likelihood of a bank needing extraordinary support to avoid default, went up one level for all seven of these banks.

With the improvement in these banks' ratings, Portugal's macroeconomic profile also rose, from "strong-" to "strong".

"Financing conditions have improved in light of Portugal's stable economic growth, with real Gross Domestic Product (GDP) growth forecast at 1.8% for 2024 and 1.9% for 2025, well above the European average", notes Moody's.

In the note, the agency adds that credit conditions in the country "have also improved very significantly in recent years", with a strengthening of lending capacity to the real economy.

The announcement was made just a few days after the rating agency maintained Portugal's sovereign debt rating at A3 with a stable outlook.

Moody's also emphasised the decrease in non-performing loans, which fell to 2.9% in June this year, compared to 3.5% in the same period last year, although this is still above the European Union (EU) average of 2.2%.

CGD remained the bank with the best rating in this indicator among those announced today, moving up to a BCA of a3, an evolution that "reflects the bank's solid credit risk profile, namely the strong asset quality performance and excellent coverage levels".

The state-owned bank's long-term deposit rating was also revised from A3 to A2, while the senior unsecured debt rating was reaffirmed at Baa1.

Just behind CGD are Santander Totta and BPI, whose BCA received a baa1 rating.

Both banks belong to Spanish groups, with Santander Totta being included in Santander and BPI in Caixabank, and in the case of both, Moody's explained that the increase in the rating "reflects the improvement in the credit profile in the context of a more robust operating environment" for the sector in Portugal.

In the case of Santander, Moody's noted that the institution led by Pedro Castro e Almeida, the improvement also reflects the "improvement in asset risk indicators, following a considerable reduction in balance sheet risk, high levels of capital and a significant increase in recurring profitability".

Moody's also affirmed the long-term deposit ratings at A2.

In its assessment of the institution headed by João Pedro Oliveira e Costa, the rating agency considered "BPI's high levels of capitalisation which are, however, constrained by the risks arising from its exposure to Angola", as well as the improvement in the bank's profitability and its "adequate funding and liquidity profile".

Moody's also upgraded BPI's long-term deposits (from A1 to A2) and senior unsecured debt (from Baa1 to A2).

With this rating upgrade, BPI now has a higher BCA than its parent company, Caixabank.

In the update, Caixa Central de Crédito Agrícola Mútuo had its BCA raised from baa3 to baa2, which stems from an "overall improvement in group asset risk", a "solid capital position" and strengthened recurring profitability.

Although the institution still has a "relatively high level of non-performing assets", Moody's notes that this risk is mitigated by the group's "extensive and granular retail deposit base", as well as its "substantial reserve of liquid assets".

Long-term deposits were rated Baa1, up from Baa2 previously, while senior unsecured debt went from Ba1 to Baa3.

Novo Banco and BCP crossed the traditional ‘junk’ line, after their BCAs were upgraded from ba1 to baa3.

In the case of BCP, the institution listed on the stock market and with around 40% of its share capital divided between the Fosun (China) and Sonangol (Angola) groups, has seen its credit quality strengthened, "in particular the improvement in its asset risk indicators, as a result of a successful risk reduction strategy implemented in Portugal in recent years".

Similarly, Moody's highlighted the improvement, "albeit modest, in the profitability of the group's results", although it pointed out that this "will continue to be pressurised" by provisions related to the legal risk of loans in Swiss francs from its subsidiary in Poland.

The long-term deposit ratings were reaffirmed at A3, while the senior unsecured debt rating was raised from Baa2 to Baa1.

As for Novo Banco, Moody's emphasises that its credit profile "has improved significantly in recent years as a result of the successful conclusion of a restructuring plan agreed with the European Commission".

The rating agency emphasises that the rise in the bank's BCA was due to the improvement in its asset quality indicators, the "strong profitability indicators" and the improved capacity to absorb losses in a context of very high capital levels.

"The BCA also reflects Novo Banco's still high dependence on short-term funding and an adequate liquidity position," Moody's adds.

The ratings on long-term deposits were raised from EIS1 to A3 and on senior unsecured debt from Baa3 to Baa2.

Finally, the improvement in asset risk - following its risk reduction strategy - and the gradual strengthening of capital levels in recent years, despite modest profitability, have leveraged Montepio Geral into a rise in its BCA from ba2 to ba1.

The assessment also reflects, according to Moody's, "Banco Montepio's solid funding and liquidity position, underpinned by a resilient deposit base".

Long-term deposits were rated Baa1, up from Baa2 previously, while senior unsecured debt went from Ba1 to Baa3.

Regarding the conditions that could lead to improvements or reductions in the BCA of the banks analysed, Moody's says that in the case of BCP, Novo Banco and Montepio, this could happen if the improvements in their credit profiles continue over the next 12 to 18 months.

In the case of CGD, Santander Totta, BPI and Crédito Agrícola Mútuo, an improvement in this indicator is "unlikely as long as Portugal's public debt rating remains at A3".

Conversely, Moody's warns that these ratings "could be revised downwards if the current trajectory of their financial bases is reversed", as in a possible deterioration in asset quality and profitability.

JO/AYLS // AYLS

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