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Press release of Banco de Portugal on the Retail Banking Markets Monitoring Report for 2018

Today, Banco de Portugal publishes the Retail Banking Markets Monitoring Report. The report depicts developments in the deposits, housing and other mortgage credit and consumer credit markets in 2018.

The remuneration rate on simple term deposits continued its downward trend in 2018.

All simple term deposits available were remunerated at a fixed interest rate. Continuing the trend observed since 2012, the average remuneration rate decreased across all maturities compared with the end of 2017, except for three-year deposits. This decline was also seen in deposits targeted at new customers or new amounts for most maturities.

At the end of 2018, institutions offered 307 simple term deposits in the most representative maturities: 203 available to the general public and 104 with special conditions. Approximately one-fifth of the deposits were available exclusively on digital channels.

Most simple term deposits offered to the general public required minimum opening amounts below €500 (60.5%), allowed the early withdrawal of funds (91.1%) and paid interest at maturity (81.2%).

The structured deposits market contracted for the third consecutive year.

In 2018 the supply of structured deposits fell by 40.9%. Demand also decreased: in the course of the year, 75,249 depositors invested a total of €1,731.3 million in this type of deposit, 28,007 fewer depositors and €266.3 million less than in 2017. At the end of 2018, €5,468.5 million had been invested in structured deposits, 26.4% less than in the previous year. The weight of structured deposits in the total amount invested by households in time deposits also declined, from 8.1% in 2017 to 6.1% in 2018.

Throughout the year, 161 structured deposits matured, paying €3,693.5 million to 203,374 depositors with a gross remuneration of €43.9 million. In 65.8% of the deposits, depositors received the minimum remuneration rate set out in the respective information leaflet; in 14.3% of the cases, the remuneration was zero. The maximum gross annual nominal rate set out in the information leaflets, which ranged from 0.789% to 3.5%, was paid in 16.1% of deposits. Approximately two-thirds of matured structured deposits paid a remuneration rate equal to or below that of simple time deposits offered by the same institution for the same maturity.

The housing credit market grew, albeit less markedly than in previous years.

In 2018, €9.5 billion were granted for housing loans in 87,906 new credit agreements, i.e. 23.4% and 13.4% more, respectively, than in 2017.

In the second half of 2018 the number of new credit agreements slowed down. The amount of credit granted grew by 22.3% and 10.4% in the third and fourth quarters of the year respectively compared with the same period one year earlier, while in the first and second quarters of 2018, it had increased respectively by 24.6% and 38.7% year on year. This slowdown coincided with the first months of the macroprudential measure adopted by Banco de Portugal, which introduced limits to the criteria used by institutions to assess borrowers’ creditworthiness.

The average amount of new credits grew from €99,670 in 2017 to €108,419 in 2018. The average maturity of new credit agreements increased by one month, to 33.4 years. As in 2017, most of these credit agreements were granted at a variable interest rate (85.9%); among these, nearly all were indexed to the 12-month Euribor (93.8%). The average spread on new variable-rate credit agreements stood at 151 basis points, 23 basis points below the average spread in 2017. The average annual percentage rate of charge stood at 2.7% in variable-rate agreements, 3.2% in mixed-rate agreements and 3.6% in fixed-rate agreements.

In 2018 the increase in new housing credit agreements was not enough to offset portfolio sales, matured agreements and early repayments, which is why the end-period housing credit portfolio decreased further. As at 31 December 2018 the outstanding amount of housing credit was €86.7 billion, 1.1% less than at the end of 2017.

In 2018, 73,654 total early repayments were made in housing credit agreements, to the overall amount of €4,204 million. The number of total early repayments and the corresponding amount repaid increased by 1.6% and 8.3% respectively from 2017.

Consumer credit also continued to grow, although less markedly than in previous years.

In 2018, €612.9 million were granted in consumer credit agreements, 10.1% more than in 2017. More than half of consumer credit was granted by specialised institutions, which have become increasingly prominent over the past few years. Almost half of the amount of consumer credit was granted through credit intermediaries in an ancillary capacity, i.e. the business where the financed product or service is sold.

Also in tandem with the first months of the macroprudential measure adopted by Banco de Portugal: in the third and fourth quarters of the year, the amount of credit granted grew by 6.2% and 0.5% from the same period in 2017, after 15.7% and 20.1% increases in the first and second quarters.

In 2018 the amount of credit granted rose by 12.0% in car loans and 11.8% in personal loans. The number of credit agreements also increased in both cases: 9.9% and 10.1% respectively. In revolving credit, the amount of credit granted increased negligibly, while the number of credit agreements decreased by 3% from 2017.

The cost of credit declined. In the fourth quarter of 2018 the average annual percentage rate of charge applied in consumer credit agreements stood at 10.4%, 0.3 percentage points below the average rate in the last quarter of 2017.