Portuguese banks lowered the spread between the interest rate they charge on housing loans and the benchmark Euribor rate in the second quarter, as competition increased for one of the fastest-growing loan types. Four of the five banks in a Bank of Portugal survey said they reduced the spreads. One said it cut them "considerably," the central bank said on its Web site. Another said it "slightly" increased them.
Two cited increased competition as the reason for the lower spreads.
With few opportunities for acquisitions, foreign banking companies, including Santander Totta SGPS SA, a unit of Spain's Santander Central Hispano SA, and Barclays PLC, are using aggressive mortgage pricing to gain market share. "It's an area that's less risky, and it brings a client into the bank for a number of years," said Pedro Mendes, an analyst at Banco Comercial Portugues SA in Lisbon. "Banks can make up for the smaller margins on mortgages by selling other products."
The mortgage portfolios of Portuguese banks grew 11% in the 12 months through May, compared with 6.8% for other loans to individuals and 7.3% for loans to nonfinancial companies, the Bank of Portugal said in a previous report. The survey, issued last week, did not identify the five banks it covers. Portugal's five biggest banks are Caixa Geral de Depositos SA, Banco Comercial Portugues SA, Banco Espirito Santo SA, Santander Totta, and Banco BPI SA.
