Portugal's frozen bank loan repayments in decline, withdrawal going well

LISBON, June 30 (Reuters) - Portugal’s gradual withdrawal of a freeze on bank loan repayments is progressing well, with bad debt at very low levels and suspended repayments in decline, central bank chief Mario Centeno said on Wednesday.

The scheme, designed to help businesses and individuals through the pandemic, is due to end in September, and authorities in April started removing some suspensions, especially mortgage-related.

Bank of Portugal data showed the volume of loan repayments suspended by Portuguese banks, including capital and interest, slipped in May for the eight month in a row, to 38.5 billion euros from 39.7 billion euros in the previous month.

That was their lowest mark since April 2020.

“There is a dynamic of exit (from the moratoriums) fortunately with good results. So far, the information we have from banks is that default situations are very low,” Centeno told a parliamentary committee.

The repayment freeze was aimed at avoiding a jump in bad loans amid the economic impact from the pandemic.

Private individuals suspended 14.7 billion euros of loan repayments, or 11.7% of their total loans, the central bank said, adding that mortgage loans made up 90% of that amount.

“Bad loans on household mortgage loans are very low, less than 2% of all mortgage loans,” Centeno said.

Centeno said that the monetary policy of the European Central Bank must be adapted to the evolution of the crisis, but warned that “the final phase of the recovery process is always more difficult as it is when the reallocation of resources in the economies takes place.”

He said it would be “a mistake for policy makers to withdraw support prematurely, complacently convinced of the economy’s recovery”. “The recovery we have today also exists because of the measures that were adopted,” he said.

$1 = 0.8415 euros Reporting by Sergio Goncalves; Editing by Steve Orlofsky