Portugal's Cabral Says Some Banks Might Need More Capital

Portuguese Economy Minister on Banks, Economy
  • Economy minister sees no `widespread problem' with banks
  • Losses on Novo bonds made some investors `a bit unhappy'

Portuguese Economy Minister Manuel Caldeira Cabral said some of his country’s banks might need more capital and he’d welcome foreign investment.

“There are specific cases where reinforcement is positive, but I don’t think there is a widespread problem with Portuguese banks,” Cabral said in an interview with Bloomberg Television’s Jonathan Ferro at the World Economic Forum in Davos. “I won’t rule out the need for more capital. I would welcome foreign investors to use the opportunity and the lower prices of the assets in the banking system to reinforce capitals.”

Manuel Caldeira Cabral in Davos
Manuel Caldeira Cabral in Davos
Photographer: Simon Dawson/Bloomberg

Portugal’s eight biggest banks raised more than 26 billion euros ($28 billion) in capital from 2008 through 2014, including state aid during the country’s international bailout and the Banco Espirito Santo SA rescue by the central bank’s Resolution Fund, according to a Jan. 6 presentation from the Bank of Portugal.

The country is facing criticism from some investors after the Bank of Portugal in December decided to impose losses on certain senior bondholders of Novo Banco SA, which emerged from the 2014 breakup of lender Espirito Santo. Socialist Prime Minister Antonio Costa on Jan. 15 said he expressed his concern to the central bank about how those bondholders were treated.

Cabral on Friday reiterated that the Novo Banco decision was taken independently by the central bank and said he doesn’t think more “operations” like these will be needed. “Of course it wasn’t positive for investors and we are looking into that to guarantee the confidence in the country,” he added.

‘Bit Unhappy’

“There is some speculation and some of the agents in the market are a bit unhappy about the central bank’s solutions for Novo Banco,” Cabral said. While Portugal’s 10-year yield rose to a six-month high this week, the country auctioned treasury bills at negative yields on Wednesday and sold 4 billion euros of 10-year securities last week.

The government on Thursday forecast growth will accelerate to 2.1 percent this year and announced a narrower target for its 2016 budget deficit. Debt will decline 2.7 percentage points to 126 percent of gross domestic product at the end of 2016.

“We have a strong commitment to reduce our debt,” Cabral said in the interview. “We’re going to have stronger growth, in line with increasing growth in Europe.”

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