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Fitch: Banco BPI voting rights cap removal positive for Portuguese banks

The removal of a 20% cap on 's voting rights ispositive for Portuguese banks, Fitch Ratings said.

The rating agency said the removal of the cap represents an in 's takeover processfor BPI that, if successful, will enable the Portuguese lender's new owners toimplement a rationalization plan, potentially encouraging other Portuguesebanks to follow suit. Once the Spanish bank takes control of BPI, it will beeasier to implement strategic changes that are essential to improve BPI'sprofitability and credit profile, Fitch added.

A successful takeover will have positive implications forBPI's ratings in the short to medium term, according to the agency, whichexpects to rate BPI up to two notches below CaixaBank, taking into accountsovereign rating constraints. Fitch currently has CaixaBank's long-term ratingat BBB, with a positive outlook.

Fitch noted that a sluggish operating environment makes itdifficult for Portuguese banks to build up capital, while banks' weak assetquality weigh down their ability to deliver adequate profits. Fitchsaid cost-cutting measures could provide some relief.

The agency said it expects CaixaBank to implement therestructuring plan announced in April and cut BPI's operating costs by about13% from the third year after consolidation. "We view this positivelybecause maintaining cost efficiency in the persistently low interest rateenvironment is crucial for Portuguese banks," Fitch noted.