LISBON, Dec 4 (Reuters) - Portugal’s eight largest banks need to set aside only another 474 million euros ($620 million) until the end of the year to cover their exposure to Portuguese and Spanish real estate, the central bank estimates.
The core Tier 1 ratios of the banks, which hold 80 percent of the country’s banking assets, would be largely unaffected by these adjustments, the Bank of Portugal said in a study.
Spain and Portugal are struggling financially and economically after the bursting of a credit bubble that funded a real estate boom. Portugal has taken an international bailout and Spain is widely expected to ask for help in coming months.
Portugal’s construction sector has been hammered by the worst recession since the 1970s with many companies going bankrupt, driving up bad loan ratios. Still, the central bank said the financial sector’s capital ratios would not be hit.
“The estimated impact of this (impairment) reinforcement on the banks’ aggregate Core Tier 1 ratio for the end of the year is irrelevant, and does not compromise the Bank of Portugal’s capital ratio requirement of 10 percent from the end of the year,” it wrote in a statement published late on Monday.
It said the banks had already incorporated impairments of around 390 million euros, which together with the ones still to be covered would have an impact worth just 0.1 percent on core Tier 1 ratios.
The central bank’s core Tier 1 target for that period was 9 percent and the banks have comfortably exceeded that.
The on-site audit reviewed the books of the leading banks including Millennium BCP, Banco BPI, state-owned Caixa Geral de Depositos and Banco Espirito Santo . ($1 = 0.7650 euros) (Reporting by Sergio Goncalves and Daniel Alvarenga; Editing by Ruth Pitchford)