Morningstar DBRS Upgrades Caixa Geral De Depósitos, S.A.'s Long-Term Issuer Rating to A (High) From "A"; Stable Trend

Why It Matters

The rating lift signals heightened confidence in CGD’s creditworthiness, potentially lowering borrowing costs and attracting investors as the bank leverages its strong capital and liquidity position. It also underscores the resilience of Portugal’s banking sector amid global macro‑uncertainty.

Key Takeaways

• CGD's long‑term rating upgraded to A (high) from "A"
• Short‑term rating lifted to R‑1 (middle) from low
• FY2025 net profit €1.9 bn ($2.07 bn), up 9.8%
• CET1 capital ratio rose to 21.2%, 97 bps higher YoY
• Deposit funding covers 97% of total funding, loan‑to‑deposit 66%

Pulse Analysis

Morningstar DBRS’s recent upgrade of Caixa Geral de Depósitos (CGD) to an A (high) long‑term issuer rating reflects a broader trend of strengthening credit profiles among European banks. By matching Portugal’s sovereign rating, the move signals that CGD’s fundamentals—size, market leadership, and diversified geographic exposure—are now viewed on par with the country’s fiscal health. The positive trend on long‑term deposits further highlights the bank’s ability to attract stable funding, a critical factor in an environment where interest rates are normalising after years of ultra‑low policy.

Financially, CGD posted a record FY2025 net profit of €1.9 bn (approximately $2.07 bn), driven by significant provision releases and a modest tax benefit. Despite a 9.9% drop in net interest income, the bank maintained a net interest margin of 2.4%, well above many European peers, and kept operating costs in check with a cost‑to‑income ratio near 31%. Asset quality improved, with non‑performing loans falling to a 1.4% ratio and a net NPL ratio of –0.8%, underscoring effective risk management. Capital strength is evident in a CET1 ratio of 21.2%, providing a comfortable buffer above regulatory minima and supporting continued internal capital generation.

For investors and counterparties, the rating upgrade could translate into tighter funding spreads and greater appetite for CGD’s debt issuances, such as the recent €500 million ($545 million) green senior bond. The bank’s liquidity coverage ratio of 314% and net stable funding ratio of 176% further cement its resilience. While geopolitical tensions and potential inflationary pressures remain, CGD’s strong deposit franchise and prudent balance‑sheet management position it to navigate medium‑term challenges, making it an attractive credit prospect in the Iberian market.