The exposure of Portuguese banks to commercial real estate is small.

Recently, Christine Lagarde warned about potential risks that we will face this year, including an increase in problematic loans and the vulnerability of European banks due to their investments in commercial real estate. However, according to estimates, this will not affect the situation in Portugal, where the commercial real estate sector holds a minor position in the banking system, and the risk from it is significantly lower. This is because the lending policy in Portugal has been stricter compared to other European countries.

We already discussed this issue in mid-February.

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In its economic materials, the publication Jornal Económico refers to the opinions of experts who claim that there is no need to panic.“Our risks are significantly lower for several reasons.”“Firstly, the share of commercial real estate in banks' loan portfolios is relatively small overall. Secondly, the lending conditions were stricter than in other regions. During the global financial crisis, when Portugal entered international financial assistance programs, banks were forced to significantly change their lending criteria,” explains Nuno Nunes, a capital markets expert at the consulting firm CBRE, referring to previously published information.

He also noted:“Unlike most other European and American markets, almost all commercial loans in Portugal include amortization payments.”"So the initial amount of loans is significantly lower compared to the value of the assets, and then it is repaid during the payment process."

Economist António Nogueira Leite adds that Portuguese banks have a low level of involvement in the commercial real estate sector.“Not only is the scale of their participation small, but the requirements for the level of leverage have also changed.”“If there are significant changes in the form of a decrease in real estate prices, I believe that this will have only a minimal impact on Portuguese banks,” the expert is confident.

According to the latest financial stability report prepared by the Bank of Portugal, as of June 2023, the total amount of loans granted to non-financial corporations (NFCs) secured by real estate was 25 billion euros, which is approximately 30% of the total lending to NFCs.This level is considered "moderate" compared to the rest of the eurozone.

Thus, the limited influence of the commercial real estate sector on the lending system and the strict credit issuance policy protect the Portuguese banking sector from the high risks faced by other countries.Considering all the factors mentioned above, economic experts are confident that Portugal is quite resilient to external shocks in the current economic context.