CGD's CEO defends that bank consolidation will take place “in the next two years”

Banking consolidation could be driven by the results of banks in the coming quarters, defended the CEO of CGD, who believes that a public bank must be large in order to be relevant in the market. BCP argues that the consolidation will be cross border. Capital increases to overcome the crisis? BCP's CEO and BPI's CEO reject this need.

Cristina Bernardo

“There is a chronology of events. We will have the 2020 accounts, there will be general meetings in May next year, there are several institutions that will have to see what the prospects are, in view of the results [that they will present], in terms of profitability and equity [ said without naming], ”was the CEO's response to Caixa, questioned in the panel“ What future for banking? ” on a likely consolidation process in banking in the future.

According to Paulo Macedo, bank consolidation will take place "in the next two years", not least because this need will be revealed as the annual accounts are closed. “There will be institutions that have to see what perspectives are in view of the results”. It was not possible to know whether he was talking, for example, about Banco Montepio.

But what seems evident is that the CEO of CGD foresees that the sector will enter a consolidation process in the coming years and that it will start to be designed within months, when the banks present accounts.

“To Caixa, of course, consolidation is not indifferent. And it will happen, ”said CGD's executive committee chairman, Paulo Macedo, at the Banca do Futuro conference, organized by Jornal de Negócios, which took place this Tuesday, October 27, with the CEO of the main banks (CGD, BCP, Novo Banco, Santander and BPI).

Despite guaranteeing that “any acquisition is not on the horizon” for CGD, Paulo Macedo stressed that the consolidation process “is something that is not at all indifferent” to the public bank. "In terms of intervention, it is something that is not on our horizon, but it is also not indifferent to us," he said.

CGD is currently under a strategic plan agreed with the European Commission that prevents acquisitions, but that ends at the end of this year.

But if there is consolidation, "Caixa is clearly overtaken by other banks" and, said the banker, "we do not have a fixation on whether we are the first bank, the second or the third, but we need the dimension to be a public bank". That is, a public bank needs to be the largest to be relevant in the system.

In turn, Miguel Maya, CEO of BCP, said that he has “no doubts” that the consolidation will happen. But, he defended that “the framework is designed to force European consolidation. Incentives are created to take the value shift outside Portugal ”. The specific framework of Portugal is favorable to European consolidation, defended the president of Millennium BCP.

“The topic of consolidation is something that will happen, it is a fundamental trend and this crisis will accelerate consolidation. First in domestic consolidations and then in consolidations cross border as the regulatory framework becomes transversal ”, said Miguel Maya, who once again criticized the regulatory framework in Portugal that forces a“ European consolidation ”. The president of BCP gave several examples of what leaves national banks at a disadvantage compared to European competitors, but his favorite is the existence of the requirement for banks to capitalize the national Resolution Fund (owner of 25% of Novo Banco). Contributions that cost 47 million euros per year to BCP.

But Miguel Maya has not forgotten the criticism of the ban imposed by Parliament on banks to charge some commissions or the fact that they cannot charge interest on deposits.

On the other hand, António Ramalho, CEO of Novo Banco, the institution that may go onto the market after 2021, defended that the market has been stabilized in five banking entities for decades. “These five institutions were the subject of a major revolution in 2020, maintaining the principle of the five institutions, which prevails”. But it does not deny that there is a "proclaimed desire" by the European authorities to promote cross-border consolidation.

What has existed, recalled the CEO of the bank held 75% by Lone Star, is the “Iberian consolidation”.

"This consolidation alone has not been very harmful, because Spanish colleagues perceive the characteristics of Portuguese banking", he defended.

João Oliveira e Costa, BPI's CEO, argued that “there is room for a reduction in the number of players”. The CEO of the CaixaBank bank stressed the need for institutions to grow in size to face “crushed margins” and high regulatory costs.

Asked about the possibility of having to increase capital in the face of the pandemic crisis, the two CEOs of BPI and BCP ruled out this need. “I am absolutely convinced that BCP will not need any capital increase to deal with the challenges ahead, based on the knowledge we have today. I withdraw outright, ”said Miguel Maya.

“From what we envision, we are not seeing, for now, the need to increase capital or change what we have been following as a strategy,” said João Pedro Oliveira e Costa, BPI designate executive chairman,

João Pedro Oliveira e Costa considers that there will be a competition for the dimension, taking into account the “extremely crushed margins, and the regulation costs almost independent of the dimension”. The banks will have to have a great capacity for intervention, even in the name of a cutting-edge offer to customers. "There needs to be a lot of investment and, for that investment, there needs to be a lot of capital".

Finally, the CEO of Santander in Portugal, Pedro Castro e Almeida, said that it was the foreign-owned banks that managed to support the country in getting out of the sovereign debt crisis.

The point that is not being discussed, defends Pedro Castro Almeida, is another: “What kind of capital are we attracting to this country? Why don't we attract pension funds from Norway, the USA, Canada? ”Asked the executive president of Santander Totta.

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