Moody’s Sees Portugal Tapping State-Aid Fund for Banks Again

Portugal will probably need to tap a recapitalization fund for its banks a second time under a bailout plan because lenders’ asset quality is deteriorating, Moody’s Investors Service said.

“Despite the effort that has been made to improving the capital for banks, amid the deterioration of the economic environment, asset quality and profitability are going to continue to suffer.” Pepa Mori, an analyst at Moody’s, said in an interview in Lisbon today. In a January report, Moody’s estimated Portuguese banks’ needed about 8 billion euros ($10.5 billion) in capital, according to stress tests.

“This adverse scenario has become our central scenario for Portuguese banks,” Mori said. Portugal has already granted 5.6 billion euros in capital to banks that aren’t state-owned from a 12 billion-euro fund available under the country’s bailout plan.

In absolute numbers, capital has improved but looking at the “overall risk absorption capacity for banks” Moody’s sees “higher losses materializing and the deterioration of asset quality” affecting banks, Mori said. According to regulatory requirements, Portuguese banks were forced to raise their core Tier 1 capital ratios above 10 percent.

To contact the reporter on this story: Anabela Reis in Lisbon at

To contact the editor responsible for this story: Jerrold Colten at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.