Portugal's banking system will become more stable this year, but profitability will be held back by limited credit demand and bad loans, Moody's analyst Pepa Mori said on Tuesday. The ratings agency has a stable outlook for Portuguese banks, which have been among the most fragile in the euro zone after two rescues in 2014 and 2015, for the next 12-18 months.
"Overall, the fundamentals are weak but they are on a stabilising trend after years of deterioration... Our view is that the trend will continue. That will be the trend for 2017," she told Reuters at a conference in Lisbon. After years of capital shortages and growing provisions for bad loans, state-owned Caixa Geral de Depositos is being recapitalised to the tune of 5 billion euros, while Millennium bcp completed a 1.3 billion euro capital increase. "The good news is that the stock of problem loans has stabilised.