Last year, non-performing loans in the Portuguese financial system dropped markedly due to sound economic conditions, an increase in loans written off and the removal of assets from balance sheets, Moody's said in a note released on Tuesday.

Moody's added that the fall accelerated in the fourth quarter, with some major banks selling high volumes of non-performing loans.

The rating agency expects the Portuguese economy to grow 1.7% this year and said it hoped non-performing loans would fall even further in 2019 since most banks had committed publicly to keep reducing them.