According to the Bank of Portugal’s most recent data, amounts were reduced by €2.1 billion in February, with deposits totalling €177.8 billion.

By the end of February, resident banks also saw the stock of corporate deposits at 64.1 billion euros, 1.8 billion euros less than the previous month. In both cases, these figures are markedly less than January’s, yet still higher than the year-on-year comparison to February last year. The growth rate, however, dropped, with only a 2.1% increase from February 2022, compared to the 3.7% increase seen in January. Likewise, the growth of corporate deposits saw only a 5.1% increase from February 2022 to 2023, while January saw a year-on-year increase of 9.1%.

At the same time, Portugal saw an increase of €2.6 billion in net subscriptions to savings certificates.

Portuguese banks reduce staff and close branches

These figures come on the heels of the news that five of the main banks, with headquarters in Portugal, have reduced their staff this year by 635 workers. At the same time, they have lowered points of service by 104.

Caixa Geral de Depósitos, for example, reduced the number of employees significantly, going from 6,117 employees at the end of December 2021 to 5,837 on December 31 last year. Meanwhile, the number of public bank branches fell from 542 to 515.

Santander Totta has similarly downsized, losing 141 workers in 2022, going from 4,805 employees to 4,664, while dropping eight branches. Novo Banco, meanwhile, lost 103 employees in 2022 while closing 19 branches. BPI dropped 74 workers and 24 branches, while BCP lost 37 members of their workforce and 26 branches last year.

Of those banks with data available, 2022 saw a total of 25,247 employees and 1,879 branches vanishing.

Rents In Portugal Hit A Record High

While the situation with the banks is seeing deposits, growth, staff and branches dropping, the opposite is true of the Portuguese economy, which is currently experiencing record highs. According to official data, the last quarter of 2022 saw housing rental prices in Portugal jump by almost 11% to the highest they’ve been on record. All this is amidst soaring prices that are seeing the cost of living rising seemingly exponentially.

Towering interest rates, high inflation, and low wages have led to protests in Portugal, demanding affordable housing be made available, particularly among the residents of the country’s capital in Lisbon, where prices are at their highest.

While this issue is by no means limited to Portugal - the cost of living is rapidly rising throughout Europe - the Portuguese government is concerned enough to be taking steps to ensure the poorest in the country can afford necessities. This includes announcing an end to the popular Golden Visa - which has invited heavy foreign investment in the country for years and proven very popular - and subsidised food costs.

According to the data, new leases on both houses and apartments have seen the asking price jump by 10.6% year-on-year to a median of 6.91 euros ($7.49) per square metre. This is similar to the 11.3% spike recently seen in house prices, the most significant annual increase ever. The latter is particularly noticeable, despite rising mortgage rates and an economic slowdown.

Current circumstances are doing nothing to cool the property market in Portugal, which may have dropped by 3.3% - according to the National Statistics Office - but is still red-hot.

Rents in the greater Lisbon area have reached 10.38 euros/m2, while the popular Algarve region - beloved by British holidaymakers and expats for the sunshine - hit 8 euros/m2. Inflation may have slowed slightly in February, dropping to 8.2%, but the cost of unprocessed food products skyrocketed by 20.11%.

Portugal remains one of the poorest countries in Western Europe, as government data shows over 50% of workers earned under 1,000 euros ($1,055) per month in 2021.

Implications For The Future - But what does all this mean?

The world is no stranger to inflation and rising living costs. Everywhere we look in Europe, currently, we are seeing a similar pattern. The backlash of the COVID pandemic, the unpredictable situation in Ukraine, and various other world events have left economies feeling the strain.

For those looking to the future and wondering the best course to take where investments are concerned, it is in the banks that we see the answer to that question. Now may be the time to move towards alternative investment and savings opportunities, such as a global diversified bond inclusive portfolio offered by Nexus Global’s Cautious Fund, designed to provide an incandescent alternative to bank deposits.

To discuss this article or get in touch with Antonio, please email or call the Lisbon office on +351 214 648 220