PORTUGUESE BANKS AND THE strongECONOMICstrong ADJUSTMENT PROGRAMME.pdfVIP

UNIVERSITE CATHOLIQUE DE LOUVAIN LOUVAIN SCHOOL OF MANAGEMENT and NOVA SCHOOL OF BUSINESS AND ECONOMICS PORTUGUESE BANKS AND THE ECONOMIC ADJUSTMENT PROGRAMME: BALANCE SHEET ADJUSTMENTS AND IMPACT ON PROFITABILITY Supervisor at LSM: Prof. ROBERT PEIRCE Supervisor at NOVA SBE: Prof. PAULO SOARES DE PINHO Research Master’s Thesis Submitted by YONATHAN GRIGIAC - #793 With a view of getting the degrees in Master in Finance Master in Business Engineering ACADEMIC YEAR 2013-2014 Abstract This thesis studies the different strategies and initiatives followed by Portuguese banks to achieve the targets set by the economic adjustment programme and their impact on the banking sector’s profitability. I analyse what banks have undertaken in terms of capital level and other sources of financing. I also address the issue of deleveraging by studying the evolution of the loan portfolio as well as risk weighted assets. Finally, I analyse the impact of those changes on the bank’s net interest incomes and cost to income ratio. Using a sample composed of four major Portuguese banks, I conclude that banks have become safer but still need to make some effort to achieve stability. Key Words : Economic Adjustment Programme; Banks; Deleveraging; Portugal 2 Introduction Portuguese banks, as opposed to many other European banks, managed the first part of the crisis pretty well mainly because of their lack of exposure