Moody's lifts Portuguese banks' outlook on economic recovery prospects
- Portugal's tourism-dependent economy shrank 7.6% in 2020 in its worst contraction since the 1930s. Moody's pointed to expectations of 3.7% and 4% growth in 2021 and 2022, respectively.
- Moody's said banks' capital position was expected to hold steady, suffering "little change" over the outlook period and lenders would, for the most part, be able to avoid losses that could hurt capital.
LISBON: Rating agency Moody's upgraded the credit outlook for Portugal's banks to stable from negative on Thursday citing prospects of economic recovery after 2020's steep pandemic-induced slump, even as it expected their asset quality to deteriorate.
Portugal's tourism-dependent economy shrank 7.6% in 2020 in its worst contraction since the 1930s. Moody's pointed to expectations of 3.7% and 4% growth in 2021 and 2022, respectively.
Moody's said banks' capital position was expected to hold steady, suffering "little change" over the outlook period and lenders would, for the most part, be able to avoid losses that could hurt capital.
However, it expected "an increase in Portuguese banks' problem loans this year as government support measures that protected their asset quality in 2020 start to wind down", while provisions set aside last year were unlikely to offset an expected deterioration.
Portuguese banks have suspended over 45 billion euros worth of loan repayments under a scheme to help businesses and individuals through the pandemic, but also to avoid a jump in bad loans.
The freeze will end on Sept. 30. Some loans, namely mortgage loans, will start paying interest as of April.
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