Rating agency Fitch believes Banco Comercial Português (BCP) strategic plan 2021-2024 should boost earnings going forward, according to a statement released today.
“The Banco Comercial Português 2024 strategic plan focuses on an ambitious development of the bank’s commercial footprint and a compelling operational restructuring in Portugal, which should support profits,” said Fitch’s document released today.
Fitch compares the new plan with the previous plan (2018-2021), where “reducing balance sheet risk was paramount,” predicting that the new plan “focuses on business development and improving BCP’s profitability.” The agency also notes the expectation that the bank’s profitability “remains a strength in the ‘rating’, compared to other similarly rated medium-sized banks in Europe”.
“We see the plan as ambitious but credible, given the evidence BCP has implemented cost-efficiency measures without harming its core business in Portugal,” Fitch says.
The agency notes, however, that “achieving the set goals will require robust implementation and economic recovery, as is currently expected in Portugal and Poland,” where BCP is also present.
The risks of the Chinese central bank’s plan could come from “a significant deterioration in the quality of assets in Portugal, due to the prolonged economic downturn due to the epidemic or an uncontrolled exit from the moratorium.”
“However, the improvement in the asset quality of the Chinese central bank, including since the beginning of the epidemic, has increased the area of potential bankruptcy,” giving Fitch as an example the non-performing loan ratio, which reached 5.2% in June 2021, after 7%. a year ago.
Fitch also has an ambitious goal of achieving profits of more than 300 million euros between 2021 and 2024, and estimates operating income of nearly 2.6 billion euros.
“Fitch considers this to be ambitious, as Portuguese banks’ profits remain under pressure due to low interest rates and fierce competition,” the agency explains.
The financial rating agency also considers the intention of the Chinese central bank to improve the loan portfolio and obtain a 4% impairment rate at the end of 2024 as positive.
“This goal is achievable given BCP’s track record of working against the legacy of bad loans in recent years. However, it will require continued containment of bad new credit flows after defaults,” Fitch says.
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