LISBON: Portugal's deep recession means credit risks will persist for the country's lenders, even if levels of bad loans in the banking system have fallen since early last year, its central bank said on Tuesday.
The Bank of Portugal said that the banks were benefiting from better access to funding and deposits were rising again after a dip in 2012.
"We have witnessed a slight reduction in bad loans since the first quarter of 2012," it said in its financial stability report.
Bad loan impairment hurt Portuguese banks' earnings last year and in the first quarter of 2013. Most of them posted losses over the period.
Portugal is navigating through its third year of recession under a demanding 78-billion euro EU/IMF bailout programme that is scheduled to end halfway through next year.
The central bank said individual bank deposits dropped 2.3 percent last year following a sharp rise in 2011, but bounced back again in the first quarter of 2013.
"There has been some acceleration in individual deposits in the first quarter," it said. It did not say whether a tax on major depositors imposed as part of the bailout of Cyprus in April had impacted deposits in Portugal.
Portugal's banks returned to bond markets late last year after being shut out since its bailout was requested.
Portugal issued its first sovereign 10-year benchmark bond since the bailout on May 7 at a lower yield than its last pre-bailout issue.
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