Shift to digital favours merger of Novobanco, BCP, says Mário Centeno

The governor of the Bank of Portugal, Mário Centeno, has said that a merger between Novobanco and BCP, two of the country’s largest banks, would be beneficial “in a digitalisation scenario,” in an interview with the daily newspaper Jornal de Negócios, published on Thursday.

Asked whether a merger between the two banks would bring stability to the sector, Centeno said he believed that “the synergies [that] may arise from this pairing or any other that is sustainable in the Portuguese market, would be beneficial to the banking system.”

Still, he stressed, he is “being pedagogical in relation to the market and how” he sees banking.

“Every sentence you say in relation to this business can move the market and the role of the central bank is not to move the market,” he said, while stressing that there could be benefits regarding the importance of these operations in the face of digital.

“In a scenario of digitalisation, of competition with digital assets that will pose increased challenges to traditional banking, that these mergers result from these market mechanisms is what I most want,” he said.

Centeno, however, stressed the “stability” of these institutions, saying that the situation is not one where there is a need for restructuring due to any difficulties.

“Any of the institutions in the Portuguese banking system today have a very low level of capital, liquidity ratios, solvency and risk exposure levels,” he said. “Or rather, very low those that have to be low, and very high those that have to be high. In other words, we are not facing a situation where the need to restructure arises due to situations of difficulties in institutions.

“This does not arise under any circumstances,” he reiterated.

In the newspaper interview, Centeno noted that banking is currently “more attractive for the right reasons” – that is, due to its resilience, results and low risk levels.

The central bank governor also expressed confidence about the economic outlook.

“The recession is still avoidable,” he said. “It is not in any of the base scenarios presented by the ECB, OECD and the European Commission. It is not part of the base scenario that we have for the Portuguese economy.”

Conversely, a continued rise in interest rates is “an inevitability” according to the governor.

“More rises are inevitable and the predictability of monetary policy, which is highly desirable, will become more obvious to everyone as soon as inflation starts to fall,” he predicted.