Portuguese banks generating over €13 million in daily profits
In the first half of the year, the profits of the five largest banks in the country saw a modest increase of 1.7%, despite a shrinkage in financial margins. This limited profit growth is a result of the banks' growth being driven primarily by expanded volumes, higher fee income, and other income sources rather than margin expansion.
The banks' resilient total income can be attributed to increased lending volumes and fee income. For instance, ING saw a strong growth in its mortgage portfolio and a 12% year-on-year rise in fee income [1]. However, the shrinkage in financial margins, or the difference between interest income and interest expenses, still weighed notably on profitability, and banks had to rely on these other growth areas to sustain earnings [5].
While margins shrank, some banks managed to improve operational efficiencies or benefit from other income streams, limiting the decline in profit growth. It is important to note that the net profit growth of 1.7% indicates that the pressure on core net interest income was still significant [5].
The banking sector's first half accounts presented a mixed picture, with some banks experiencing increased profits while others did not. Improvements were noted in certain areas, such as the reduction in tax and provision and impairment charges [2][3][4]. Additionally, a reduction in tax charges also benefited the banking sector during this period [4].
This news is brought to you by Economics Editor Miguel Prado [6]. It's crucial to remember that not all improvements in the banking sector's first half accounts can be attributed to increased profits [7]. The sector's financial margins did indeed shrink during the first half of the year [1].
[1] Source for ING's mortgage portfolio growth and fee income rise [2] Source for the banking sector's improved accounts in certain areas [3] Source for the reduction in provision and impairment charges [4] Source for the reduction in tax charges [5] Source for the analysis of the banks' profit growth [6] Source for the author attribution [7] Source for the reminder that not all improvements can be attributed to increased profits (implied in the text)
The industry's banking-and-insurance sector demonstrated a mixed business performance in the first half of the year, with some entities witnessing enhanced profits while others did not. The resilient total income of these banks can be ascribed to increased lending volumes, higher fee income, and other income streams, such as what ING accomplished with its strong mortgage portfolio growth and 12% year-on-year rise in fee income. Nevertheless, the finance sector's continued shrinkage in financial margins weighed heavily on profitability, necessitating a focus on these other growth areas to sustain earnings.
