Portuguese banks’ exposure to commercial real estate “is small”

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“Our risk is much lower,” says the expert, pointing out that “almost all commercial loans in Portugal have amortization”.

Christine Lagarde recently warned of risks this year, with more non-performing loans and the exposure of European banks to vulnerable sectors such as commercial real estate. Despite the warning issued by the president of the European Central Bank (ECB), this is a scenario that should not affect Portugal, where commercial real estate has a lower weight and risk in the national banking sector, due to the fact that the policy of granting credit has been much more restrictive than in other European countries.

This is a topic we already wrote about in mid-February. Quoting some experts, Jornal Económico says that there is therefore no cause for alarm.

“Our risk is much lower for several reasons. The first has to do with the relatively small weight that commercial real estate has in the banks ‘ portfolios as a whole. And then the lending policy was much more restrictive than in other countries. In other words, during the great financial crisis and when Portugal entered the financial assistance programs, it was forced to change its lending criteria a lot,” explains Nuno Nunes, head of Capital Markets at real estate consultancy CBRE, quoted by the publication.

“Unlike most other European and American markets, almost all commercial loans in Portugal have amortization. In other words, we start from a reality in which, right from the start, the money that is lent is lower, in proportion to the value of the asset, and then we amortize it over the course of the loan,” he adds.

Recent data from the Bank of Portugal ‘s (BdP) latest financial stability report also indicates that in June 2023 loans to non-financial corporations (NFCs) secured by real estate totaled 25 billion euros, around 30% of total loans to NFCs on a consolidated basis, a “contained” level in the context of the eurozone.

Economist António Nogueira Leite says he has no doubt that “the [Portuguese] banks have a relatively small exposure to commercial real estate”. “Not only is it small, but they require a degree of leverage that is quite different from what they required in the past. If there is any significant change in the direction of lower real estate prices, I think the impact on Portuguese banks will be relatively insignificant,” he anticipates.

Hervé Hubert
Hervé Hubert
Hervé Hubert is a 55-year-old writer and journalist based in Porto, Portugal. Born in France, he brings a unique blend of French and Portuguese perspectives to his work. Education Hervé studied Journalism and Literature at the University of Lyon in France. After completing his studies, he gained valuable experience working with various French media outlets (Portugal France also). Career He worked for several years as a journalist in France before making the move to Portugal. In Porto, he joined the Portugal Pulse team as a staff writer. Skills Hervé specializes in storytelling, investigative journalism, and cultural commentary. He has a flair for capturing complex issues in a relatable way. Personal Life He currently resides in Porto and enjoys the city's rich culture, from Fado music to Francesinha cuisine. Hervé continues to maintain strong ties to his French heritage, often traveling back to France for family visits and cultural exploration. With his unique background and diverse skill set, Hervé Hubert adds a layered, multicultural lens to every story he covers.

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