Portuguese banks and the economic adjustment programme: balance sheet adjustments and impact on profitability

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

Testing for volatility persistence change: The effect of the credit crisis on the Portuguese banks

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

Millennium BCP: Portuguese banks: Equity Investment Report

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

Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances

In this paper we test for the impact of the regulatory environment on a bank’s discretionary provisioning practices. We develop a model that structures the dynamics of the provision policy for the two classes of provisions: generic provisions and specific provisions. The model is tested using a comprehensive database of all financial institutions operating in Portugal for 1990-2000. This unique dataset comprises banks subject to the Portuguese rules as well as bank subsidiaries subject to their home-country regulation and we were able to identify distinct behaviours between them. Our results show the importance of handling he two types of provisions separately. They support the hypothesis that banks have a discretionary behaviour in setting up their provisions, and find evidence of income smoothing and capital management. We also find that the regulatory regime impacts on discretionary provisioning policies because banks when forced to increase one type of provision react by reducing the iscretionary component of the other, a finding we designated as a substitution effect.

Is the Basel III Leverage Ratio countercyclical? A study for Portuguese banks

This work analyses how the leverage ratio behaves through the cycle, vis-à-vis other capital ratios. For a sample of the largest Portuguese banks, the Basel III leverage ratio is indeed countercyclical. This result is relevant from a regulatory perspective, since the introduction of a limit on the leverage ratio will function as a restriction in the banks’ balance sheet size, reducing the economic costs associated with the excessive growth of leverage in periods of economic expansion followed by aggressive deleveraging in the downturn. However, one cannot exclude that restrictions on banks’ leverage incentivize its transference to less regulated intermediaries.

Basel III: The impact of new capital requirements on profitability of Portuguese Banks

This empirical study aims to explore the impact of increased capital ratio requirements, on the ROE of the Portuguese banking sector. The paper employs both a quantitative- and qualitative approach, with the qualitative approach as the main method of research. The method adopted to conduct the qualitative research was semi structured elite interviews with banking executives. Higher capital requirements decrease the ROE of banks in Portugal, but huge impairments charges, macroeconomic factors and increased costs of deposits are clearly the dominant reasons for the reduced levels of ROE the past years. Among the measures taken to increase capital ratios, reduction of RWAs and non-core assets have been the main focus, but the issuance of CoCos is regarded as the most expensive measure due to high interest payments. However, the CoCos will not have any effect on the ROE in the long term. It is difficult to draw any conclusions on the impact of more equity in the balance sheet on the ROE of Portuguese banks, as many banks currently don’t generate enough money to pay back on shareholders´ investments.

How bank business models relate with risk?: The case of Portugal in times of financial crisis

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

Effect of European Sovereign debt crisis on banks’ stock market performances: application to Portuguese data

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

Regulation and disclosure about financial instruments: Evidence on financial reporting in the Portuguese banking sector

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

Rethinking the Portuguese banking sector in a post-crisis context

As the financial crisis hit the Portuguese banks, the profitability of the whole sector squeezed to historical minimums. Reinventing the banking business model in the post-crisis context is an overriding issue to achieve sustainable profits and a low cost-to-income ratio. We propose banks to adopt a true multichannel approach, proceeding to a branch network reformatting and a relocation of services to online channels; adopt a true customer-centric approach and reduce the product and services portfolio complexity; finally, industrialize operations and rationalize the structure. With these measures in place, Portuguese banks will become leaner and more efficient, aspiring to a cost-to-income ratio below 45%.

Millennium BCP- The almond hill credit extension proposal

This Work Project is a case study on the credit lending process and loan pricing policy of Millennium bcp, one of the main Portuguese banks. The goal of the case study is to provide an opportunity to understand the above mentioned process and policy in a major bank and to explore the issues and interests at play when a relevant credit decision must be taken. I would like to thank Dr. José Miguel Pessanha without whom this project would not have been possible.

On project finance and the first road concession in Portugal

In broad sense, Project Financing1 as a mean of financing large scale infrastructural projects worldwide has had a steady growth in popularity for the last 20 years. This growth has been relatively unscathed from most economic cycles. However in the wake of the 2007 systemic Financial Crisis, Project Financing was also in trouble. The liquidity freeze and credit crunch that ensued affected all parties involved. Traditional Lenders, of this type of financial instrument, locked-in long-term contractual obligations, were severely hit with scarcity of funding compounded by rapidly increasing cost of funding. All the while, Banks were “rescued” by the concerted actions of Central Banks and other Multi-Lateral Agencies around the world but at the same time “stressed” by upcoming regulatory effort (Basel Committee). This impact resulted in specific changes to this type of long-term financing. Changes such as Commercial Banks’ increased risk aversion; pricing increase and maturities decrease of credit facilities; enforcement of Market Disruption Event clauses; partial responsibility for project risk by Multilateral Agencies; and adoption of utility-like availability payments in other industrial sectors such as transportation and even social infrastructure. To the extent possible, this report is then divided in three parts. First, it begins with a more instructional part, touching academic literature (theory) and giving the Banks perspective (practice), but mostly as an overview of Project Finance for awareness’ sake. The renowned Harvard Business School professor – Benjamin Esty, states2 that Project Finance is a “relatively unexplored territory for both empirical and theoretical research” which means that academic research efforts are lagging the practice of Project Finance. Second, the report presents a practical case regarding the first Road Concession in Portugal in 1998 ending with the lessons learned 10 years after Financial Close. Lastly, the report concludes with the analysis of the current trends and changes to the industry post Financial Crisis of the late 2000’s. To achieve this I’ll reference relevant papers, books on the subject, online articles and my own experience in the Project Finance Department at a major Portuguese Investment Bank. Regarding the latter, with the signing of a confidentiality agreement, I’m duly omitting sensitive and proprietary bank information.

Update on the population structure of MRSA causing infection in a central hospital and in healthcare centers in Portugal

RESUMO:Staphylococcus aureus é um dos principais agentes patogénicos humanos, sendo frequentemente associado a infecções nosocomiais e infecções na comunidade. A prevalência de S. aureus resistentes à meticilina (MRSA) em hospitais portugueses é uma das mais elevadas da Europa e tem sido caracterizada extensivamente; contrariamente, a prevalência e epidemiologia de MRSA na comunidade em Portugal não tem sido devidamente seguida. Com o objectivo de compreender as causas possíveis do aumento na frequência de MRSA num dos maiores hospitais centrais portugueses (HSM) ao longo de 17 anos, isolados de MRSA recolhidos em 1993 (n=54) e 2010 (n=180) de pus, sangue e urina foram analisados por PFGE, MLST, tipagem do spa e tipagem de SCCmec. Os resultados mostraram que ocorreu uma mudança global nos tipos clonais predominantes, onde o clone ST22-IVh substituiu os clones, ST239-IIIvar e ST247-I, representando mais de 70% da população actual. Além disso, entre 1993 e 2010 verificou-se um aumento na diversidade genética dos tipos clonais de MRSA. Para determinar a frequência e a natureza clonal de MRSA e S. aureus sensíveis à meticilina (MSSA) isolados de infecções de pele e tecidos moles (SSTI) em pessoas que frequentam centros de saúde em Portugal, 73 amostras foram recolhidas em nove centros de saúde (Rede Médicos Sentinela). Isolou-se um total de 40 S. aureus (55%), dos quais 17,5% eram MRSA. Os isolados de MRSA pertenciam aos clones ST22-IVh (n=4), ST5-IVc (n=2) e ST105-II (n=1), que foram descritos neste estudo como sendo clones de origem hospitalar. Os nossos resultados sugerem que o aumento da frequência de MRSA no HSM pode estar associado à emergência de um clone de MRSA com maior capacidade epidémica. Além disso, verificámos que a principal causa de SSTI em pessoas que frequentam centros de saúde em Portugal são MRSA de origem hospitalar e não MRSA associados à comunidade.------ABSTRACT: Staphylococcus aureus is one of the most important human pathogens, being a major cause of infections worldwide both in the hospital and in the community. In Portugal, the prevalence of methicillin resistant S. aureus (MRSA) in hospitals is one of the highest in Europe and has been characterized extensively; contrarily the prevalence and epidemiology of MRSA in the community has not been followed in a meaningful way. To understand the epidemiological events that could explain a steep increase in MRSA frequency in a major Portuguese central hospital (HSM) within a 17 year period, two MRSA collections recovered in 1993 (n=54) and 2010 (n=180) from pus, blood and urine were analyzed by PFGE, MLST, spa and SCCmec typing. The results showed that a major clonal shift occurred, wherein ST22-IVh clone has replaced the previous ST239-IIIvar and ST247-I clones and accounts for more than 70% of the present population. Moreover, an increase in genetic diversity of MRSA clonal types was observed between the two study periods. With the aim of determining the frequency and clonal nature of MRSA and methicillin-susceptible S. aureus (MSSA) causing skin and soft tissue infections (SSTI) in patients attending healthcare centers in Portugal, 73 samples were collected from nine healthcare centers (Medicos Sentinela Network). A total of 40 S. aureus were isolated, accounting for 55% of the SSTI, of which 17.5% were MRSA. MRSA isolates belonged to ST22-IVh (n=4), ST5-IVc (n=2) and ST105-II (n=1) that have also been described in the hospital in an equivalent period. Our results suggest that the increase in MRSA frequency in HSM may be associated to the emergence of a MRSA clone with higher epidemic potential. Moreover, we propose that the spillover of MRSA from the hospital rather than community-associated-MRSA was the main cause of SSTI in persons attending healthcare centers in Portugal.

Basel III: The impact of an increase in regulation in a recession framework

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

Lean construction and sustainability - complementary paradigms - a case study

Proceedings IGLC-19, July 2011, Lima, Perú