Portugal's banking sector has been whipped into a frenzy of consolidation speculation in the wake of the merger plans of Banco Santander and Banco Central Hispano of Spain and Paribas and Société Général in France. Every day new rumours surface about which of the top five Portuguese banks is going to acquire, merge or form an alliance with which of the other five. While everybody is probably talking to everybody about potential combinations, none of these clandestine discussions has yet born fruit. But analysts believe that something has to happen within the next year. What that something will be is anybody's guess.
In the meantime, Portuguese banks are continuing to consolidate their franchises, strengthen their brand names, and battle it out for market share in the retail arena. The advent of the euro should fuel the growth of asset management and private banking, as Portuguese investors develop a growing interest in foreign stocks. The handful of large companies in Portugal are overbanked and not nearly as lucrative a client base as retail customers, but they are beginning to raise money in the capital markets.