The study, which characterises the main levers that will affect the performance of Portuguese banks, also recommends "large scale cost reduction" and the creation of a large national bank.

In a statement sent to Portuguese news agency Lusa, the consultancy said that Portuguese banks will face "a significant set" of challenges, which will require the transformation of their business models.

According to the study, national banking is currently characterised by an "excessive weight of defaults in its credit portfolio, an insufficient efficiency ratio and deterioration of the profitability of the sector to levels below the cost of capital, which creates major challenges for banks' capitalisation.

In addition to a 58 percent higher number of bank branches than the European average, national banking is also characterised by "low employee productivity, accumulation of excess liquidity and the small size of Portuguese banks compared to other markets".

In order to deal with this scenario, and to ensure the future of national banking, the Roland Berger Portugal study pointed to several possible solutions, including "deepening the consolidation process in the area of the largest Portuguese banks (where we find, for example, Caixa Geral de Depósitos, Millennium bcp and Novo Banco), leading to the creation of a large national bank with assets worth €200 billion.

"On the other hand, the medium-sized structure should be strengthened, with Crédito Agrícola being pointed out as a potential bank consolidator," the same note said.

As an example of medium-sized banks that Crédito Agrícola could consolidate, Roland Berger points to Montepio or EuroBIC, reinforcing the structure of medium-sized banks, with assets between €80 and €120 billion.

The study carried out by Roland Berger, with the support of the global Financial Services Competence Centre, also points to consolidation movements among small banks that ensure a minimum of critical mass in the sector, reinforcing the structure of banks in the range between €10 and €20 billion.

"Here too, some small banks may face challenges over time if they do not grow, such as Eurobic or BNI Europa, and some (such as Abanca) may become consolidators and others will be consolidated," the same note states.

However, the future of national banking, according to Roland Berger Portugal, will also have to go through a "disruptive cost reduction," with the closure of over 1,500 branches (around 30 percent), accompanied by a "strong reduction in employees" and a review of the organisational structure, which would represent a cost reduction of 20 percent.