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Press Release of Banco de Portugal on the Retail Banking Markets Monitoring Report

Today Banco de Portugal publishes the Retail Banking Markets Monitoring Report. The report presents developments in the markets for simple term deposits, structured deposits, mortgage credit and consumer credit in 2014.

Retail banking markets developments in 2014

Simple term deposits

1. The simple term deposits offered in 2014 continued to have fixed interest rates almost exclusively.

2. The decreasing interest rates were accompanied by an increased offering of deposits over shorter maturities. Around 85 per cent of the fixed-rate term deposits offered had a maturity of up to one year, inclusive, which is 2 percentage points more than in the previous year.

3. The interest rates of term deposits fell more sharply than the fall recorded by the reference rates of the interbank lending market. Only around 7 per cent of the fixed-rate term deposits had an interest rate over 2 per cent, compared to around 30 per cent in 2013.

4. Around 36 per cent of deposits offered continued to target specific bank customer groups (e.g. emigrants, young and seniors), customers who have other banking products or services from the same credit institution (i.e. cross-selling) or specific purposes (e.g. retirement, housing and condominium).

Structured deposits

5. Structured deposits experienced significant growth in 2014 in terms of number of deposits offered, depositors and the amount invested.

6. 214 deposits of this type were offered (65 more than in 2013), subscribed by 277,000 customers (63 per cent more), who invested around EUR 4.46 billion (80 per cent more).

7. Deposits with maturities between four and five years were offered for the first time.

8. The return paid by indexed deposits that matured in 2014 (116) was at the lowest rate given in the prospectus in around 46 per cent of cases (11 per cent with zero return) and was at the maximum rate in 24 per cent of cases. The remainder, around 30 per cent of cases, paid a return between these values.

9. The return paid by 57 of the 116 maturing structured deposits was higher than the interest rate of the simple term deposits with the same maturity from the same credit institution. In 55 cases it was lower and in the other four it was the same.

Mortgage credit

10. The amount of mortgage credit granted in 2014 increased 15.3 per cent and the number of contracts concluded increased 8 per cent, sustaining the recovery that began the year before.

11. The average value of new contracts increased to EUR 82,136 (6.8 per cent more than in 2013). The average maturity of new contracts went from 29.5 years in 2013 to 30.6 years. The average spread was 300 basis points, a similar level to 2013.

12. The proportion of variable-rate credit increased. About 90 per cent of the contracts were concluded at variable rates, compared to 87 per cent in 2013. Of these, around 64 per cent were indexed to 6-month Euribor and 31 per cent to 3-month Euribor.

13. In the renegotiated contracts, the conditions that changed the most included the introduction or increase of a grace period and the increase of the contract's maturity, either on its own or in conjunction with other conditions. These changes are common in the restructuring of loans to prevent and settle situations of arrears. Around 17 per cent of the renegotiated contracts were already in default, the same percentage as in 2013.

Consumer credit

14. In 2014, the amount of credit granted to consumers increased again. Despite the slight fall in the number of contracts concluded, the amount of credit granted grew 11.4 per cent, after the 14.8 per cent growth observed in 2013.

15. Consumer credit's growth was driven mainly by car loans, which increased 33.2 per cent, followed by personal credit, which grew 10.7 per cent. Revolving credit fell 7.8 per cent.

16. Car loans' growth was mainly due to the financing of purchases of new cars.

17. The relative weight of the institutions specialising in consumer credit went from 40.7 per cent to 45.8 per cent, growing at the expense of the universal banking institutions.

18. The fall in the cost of credit was broad-based. It was sharper in revolving credit, with the average annual percentage rate of charge (APR) falling around 3 percentage points since the end of 2013. In personal credit and car loans APR fell 0.9 and 0.6 percentage points respectively.

Lisbon, 8 July 2015