Impairment in the mortagage loan portfolio: The example of Banco Popular portugal

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The recent financial crisis has highlighted the significant impact of external factors such as housing prices and GDP on banks. results. In the light of these events, the aim of this paper is to support Banco Popular Portugal in analyzing the influence of general economic indicators, specifically real estate prices, on credit impairment in the mortgage loan portfolio and developing methods to forecast impairment using these indicators. Based on secondary research in scientific journals and data from the bank, it can be shown that, while housing prices significantly influence both loss given default and probability of default, forecasting impairment purely on the basis of external indicators does not yield meaningful results in the specific case of this bank. A combination of external and internal indicators should therefore be drawn upon to assess future impairment.