Banco Comercial Portugues S.a. · EURONEXT:BCP

Banco Comercial Portugues — FY2017 Earnings Presentation

61 slides from Banco Comercial Portugues's earnings presentation, Feb 14, 2018

  1. Slide 1: Earnings Presentation 2017

    Millennium bcp C7) EARNINGS @ MODERN PRESENTATION @ PERSONAL 2017 Q

  2. Slide 2: Disclaimer

    Disclaimer The information in this presentation has been prepared under the scope of the International Financial Reporting Standards (‘IFRS’) of BCP Group for the purposes of the preparation of the consolidated financial statements under Regulation (CE) 1606/2002 The figures presented do not constit

  3. Slide 3: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 3

  4. Slide 4: Summary

    Summary •1 Net profit of €186.4 million (€23.9 million in 2016), on the back of improved earnings from the domestic activity. Stable recurring international contribution 2 NPEs in Portugal, down by €1.8 billion in the year to €6.8 billion at year-end 2017, were clearly lower than the €7.5 billion ta

  5. Slide 5: Highlights: improved profitability

    1 Highlights: improved profitability (Million euros) Net income Not including extraordinary gains on Portuguese sovereign • Net earnings of €186.4 million in 2017, a debt of €272 million substantial improvement from previous years 235.3 186.4 • Improved earnings from domestic activity, -36.6 whose c

  6. Slide 6: Highlights: improved asset quality

    2 Highlights: improved asset quality (Million euros) Non-performing exposures (NPEs) • NPEs in Portugal down to €6.8 billion as at December 31, 2017, showing a strong pace 12,783 of reduction from 2013 (-€1.5 billion per 10,921 year, in average) 9,777 8,538 6,754 • €1.8 billion NPE reduction in 2017

  7. Slide 7: Highlights: credit now growing in Portugal

    3 Highlights: credit now growing in Portugal (Billion euros) Performing portfolio 34.5 • The performing portfolio increased in 32.9 Portugal in 2017 for the first time in 8 31.8 31.2 years 30.8 • Structural change to the portfolio of loans to companies over recent years, with a lower weight of const

  8. Slide 8: Highlights: strong business performance, Customers and service

    Highlights: strong business performance, especially 4 as long as Customers and service are concerned Group Awards 4Q17 Customer 5.4 million active Customers base (>300,000 vs 2016) Consumer choice bank Consumer choice award| Portugal Best bank in Mozambique Digital 2.5 million active digital The Ban

  9. Slide 9: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 9

  10. Slide 10: Profit of €186.4 million in 2017

    Profit of €186.4 million in 2017 Impact on (million euros) 2016 2017 YoY earnings Net interest income + Commissions 1,874.0 2,058.0 +9.8% +184.0 €965.7 million excluding impact from Operating costs revision of collective labour agreement, -780.0 -954.2 +22.3% -174.2 net of restructuring costs (€185.

  11. Slide 11: Net interest income boosted by lower cost of deposits and CoCo repayment

    Net interest income boosted by the continued reduction in the cost of deposits and by CoCo repayment (Million euros) Net interest income Consolidated Portugal Net interest margin 1.6% 1.8% Net interest margin 1.9% 2.2% +9.7% +13.1% 736.1 807.8 1,391.3 1,230.1 2016 2017 International operations Net i

  12. Slide 12: Increase of commissions in international operations, stable in Portugal

    Increase of commissions in international operations stands out, stable in Portugal (Million euros) Fees and commissions Consolidated Portugal -0.2% 2016 2017 YoY 456.6 455.5 Banking fees and commissions 532.3 546.6 +2.7% Cards and transfers 144.4 155.5 +7.7% Loans and guarantees 157.9 158.0 +0.1% 20

  13. Slide 13: Other income influenced by mandatory contributions and Visa gains

    Other income* influenced by higher mandatory contributions and by gains on Visa transaction in 2016 (Million euros) Other income* Consolidated Portugal 133.5 222.7 88.3 2016 2017 139.5 Visa transaction 26.4 0.0 Mandatory contributions 51.7 57.9 • Bank. sector extra cont. PT: 31.0 International opera

  14. Slide 14: Operating costs

    Operating costs (Million euros) Operating costs Consolidated Portugal €965.7 million excluding impact from revision of collective labour agreement, €624.0 million net of restructuring costs (€185.7 million) excluding impact from revision of 587.6 954.2 collective labour agreement, net of 438.3 53.6

  15. Slide 15: Millennium bcp: one of the most efficient banks in the Eurozone

    Millennium bcp: one of the most efficient banks in the Eurozone Cost to core income* Cost to core income* Latest available data 80% -4pp 76% vs. peers in vs. Euro-zone Portugal banks 86% -40pp 46% 46% 46% Bank 1 51% 59% 2013 2017 Bank 2 78% 85% Cost to income 67% -3pp 64% Bank 3 68% 103% -30pp 73% B

  16. Slide 16: Strengthening the balance sheet: cost of risk normalising

    Strengthening the balance sheet: cost of risk now trending towards normalisation (Million euros) Impairment and provision charges Consolidated Portugal Cost of risk 266bp 140bp Cost of risk 216bp 122bp -48.1% -42.1% 1,515.9 1,598.0 Other 470.6 786.9 253.8 Loans 1,045.2 Other 481.1 533.1 2016 2017 Lo

  17. Slide 17: Lower delinquency and increased coverage

    Lower delinquency and increased coverage (Million euros) Credit quality Consolidated Portugal -18.3% -20.9% NPEs 8,538 NPEs 9,374 6,754 7,658 Other 3,989 3,131 Dec 16 Dec 17 NPL>90d 5,385 4,527 International operations Down from €944 Dec 16 Dec 17 million at June 30 +8.1% NPEs 836 904 Dec 16 Dec 17

  18. Slide 18: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 18

  19. Slide 19: Growing Customer funds in Portugal and international operations

    Strong business dynamics results in growing Customer funds in Portugal and in international operations (Million euros) Total Customer funds* Consolidated Total Customer funds* in Portugal +6.3% including OTRVs +6.6% +5.4% 71,386 49,274 51,949 66,978 Other 15,252 16,659 Off-BS 18,698 Term 16,544 19,9

  20. Slide 20: Credit volumes reflect increasing performing portfolio

    Credit volumes reflect increasing performing portfolio, in spite of continued NPE reduction (Million euros) Loans to customers (gross) Consolidated Portugal NPE: -20.9% NPE: -18.2% Performing: +1.4% Performing: +2.1% -3.5% -1.6% 39,361 37,996 51,758 50,955 Mortgage 24,018 23,408 Dec 16 Dec 17 Consum

  21. Slide 21: Comfortable liquidity position

    Comfortable liquidity position Net loans to deposits ratio ECB funding (Billion euros) Eligible -5pp assets 12.1 12.8 98% 4.4 3.0 93% Dec 16 Dec 17 Liquidity ratios (CRD IV/CRR) 158% 124% Dec 16 Dec 17 NSFR (Net stable LCR (Liquidity funding ratio) coverage ratio) 21

  22. Slide 22: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 22

  23. Slide 23: Strengthened capital, in line with European peers

    Strengthened capital, in line with European peers Common Equity Tier 1 ratio Common Equity Tier 1 ratio* ECB requirement (SREP) for CET1 in 2018: 8.8% Phased-in, latest available data vs. Euro-zone 12.8% 13.2% 11.1% 11.9% banks 13.2% * Dec 16** Dec 17 Dec 16** Dec 17 Phased-in Fully implemented Tota

  24. Slide 24: Successful subordinated debt issue signals return to Tier 2 market

    Successful subordinated debt issue signals Millennium bcp’s return to Tier 2 market 5 yr subordinated debt issue Breakdown by type of Investor Insurers and PFunds 5% Issuer: Banco Comercial Português, S.A. Issue rating (S/M/F/D): B3/B-/B+/BB(L) Banks 10% Amount: €300 million Asset Managers Issue dat

  25. Slide 25: Capital at comfortable levels, strong leverage ratios

    Capital at comfortable levels, strong leverage ratios Leverage ratio Leverage ratio Phased-in, latest available data 7.4% 7.2% 6.0% 6.5% 7.2% 6.5% 5.8% 4.5% 4.2% Dec 16 Dec 17 Dec 16 Dec 17 FR DE ES IT Phased-in Fully implemented RWA density Texas ratio* RWAs as % of assets, latest available informa

  26. Slide 26: Pension fund

    Pension fund Key figures Pension fund (Million euros) Shares 12% Dec 16 Dec 17 Cash and Pension liabilities 3,093 3,050 Others 47% Pension fund 3,124 3,166 Bonds 33% Liabilities' coverage 101% 104% Fund's profitability -2.6% +4.2% Actuarial differences (303) +29 Real Estate 8% Assumptions Dec 16 Dec

  27. Slide 27: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 27

  28. Slide 28: Increased net income

    Increased net income (Million euros) Net income Banking income 39.0 1,326 1,352 -157.3 2016 2017 2016 2017 Operating costs  Net income of €39.0 million in 2017, + €196.3 million €624.0 million excluding impact from compared to the loss of €157.3 million booked in 2016 revision of collective labour

  29. Slide 29: Lower cost of time deposits compensates lower credit volumes

    Lower cost of time deposits more than compensates for the decreases of credit volumes and Euribor Net interest income (Million euros) +9.7% +57.6 +4.1 807.8 736.1 +59.2 +11.8 NIM 1.6% -24.5 -36.5 1.8% 2016 Effect of lower Performing NPL CoCo Effect of cost Other 2017 Euribor on loans volume effect r

  30. Slide 30: Continued effort to reduce the cost of deposits

    Continued effort to reduce the cost of deposits Spread on the book of term deposits Spread on the performing loan book (vs 3m Euribor) (vs 3m Euribor) 2016 2017 2.9% 2.7% -0.7% -0.9% 2016 2017 NIM  Continued improvement of the spread of the portfolio of term deposits: from -0.9% in 2016 to -0.7% in

  31. Slide 31: Commissions and other income

    Commissions and other income* (Million euros) Fees and commissions Other income* -33.9% 133.5 2016 2017 YoY 88.3 Banking fees and commissions 397.0 392.2 -1.2% Cards and transfers 100.2 104.9 +4.7% 2016 2017 Visa transaction 26.4 0.0 Loans and guarantees 107.6 104.6 -2.8% Mandatory contributions 51.

  32. Slide 32: Operating costs

    Operating costs (Million euros) Operating costs Employees €624.0 million excluding impact from revision of 587.6 -144 collective labour agreement, net of restructuring costs 33.2 7,333 7,189 (€185.7 million) 438.3 222.1 Depreciation 29.4 Dec 16 Dec 17 Other Branches administrative 232.7 costs 332.3

  33. Slide 33: Lower NPL>90d, with reinforced coverage

    Lower NPL>90d, with reinforced coverage (Million euros) NPL>90d Loan-loss reserves As a % of 66.5% 70.6% NPL>90d -19.3% 3,346 2,864 5,029 4,058 Dez 16 Dez 17 Loan impairment (net of recoveries) Cost of 266bp 140bp risk 1,045.2 533.1 Dec 16 Dec 17 2016 2017 33

  34. Slide 34: Lower NPEs

    Lower NPEs (Million euros) Non-performing exposures (NPEs) NPE build-up Dec 17 Dec 17 -20.9% vs.Dec 16 vs.Sep 17 8,538 Opening balance 8,538 7,168 +/- Net entries -613 -218 - Write-offs -500 -99 6,754 - Sales -670 -97 Other NPEs 3,509 Ending balance 6,754 6,754 2,696  NPEs in Portugal down by €1.8

  35. Slide 35: Reinforced NPE coverage

    Reinforced NPE coverage NPE total coverage* NPE total coverage* 100% 106% 107% 105% 106% Real estate 36% Real estate 46% 45% collateral 45% collateral 71% 19% 15% 18% Cash, other fin. 18% Cash, other fin. collat., EL gap collat., EL gap 14% 50% 39% 42% LLRs 42% LLRs 22% Dec 16 Dec 17 Individuals Com

  36. Slide 36: Foreclosed assets and corporate restructuring funds

    Foreclosed assets and corporate restructuring funds Foreclosed assets Corporate restructuring funds (Million euros) (Million euros) Original credit exposure: €2,006 million Book value (31 Dec 2017): €1,019 million Total impairment (credit+restr. funds): €986 million 1,782 1,778 (49% coverage) 200 23

  37. Slide 37: Increased Customer funds and performing credit portfolio

    Strong business dynamics leads to increased Customer funds and performing credit portfolio (Million euros) Total Customer funds* Loans to Customers (gross) +5.4% 51,949 49,274 NPE: -20.9% Performing: +1.4% 15,268 -3.5% Off-BS 13,707 funds 39,361 37,996 Other BS 1,545 1,391 funds Mortgage 17,698 17,1

  38. Slide 38: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 38

  39. Slide 39: Contribution from international operations

    Contribution from international operations (Million euros) Δ% Δ% 2016 2017 ROE local currency euros Poland 164.9 160.2 -2.9% -0.0% 9.3% Mozambique 69.1 85.1 +23.2% +19.5% 24.2% Angola* Before IAS 29 impact 30.3 28.5 IAS 29 impact -- -28.4 Total Angola including IAS 29 impact 30.3 0.1 Other 13.2 9.0

  40. Slide 40: Poland: net earnings adjusted by Visa transaction

    Strong performance of net earnings adjusted by Visa transaction in 2016 (Million euros) Net income Banking income ROE 10.4% 9.3% 581.5 594.0 164.9 160.2 Impact from Visa 71.9 Impact from Visa transac., before tax transac., net of tax 58.2 +16.5% 509.6 106.7 +50.1% 2016 2017 2016 2017 Operating costs

  41. Slide 41: Increased net interest income and commissions

    Increased net interest income and commissions (Million euros) Net interest income* Operating costs NIM 2.4% 2.6% Cost to income 45.0% 45.8% +11.6% +3.9% 261.6 272.0 366.1 408.5 Other 130.2 +1.1% 131.7 Staff costs 131.4 +6.8% 140.3 2016 2017 2016 2017 Commissions and other income Employees Branches -

  42. Slide 42: Credit quality

    Credit quality (Million euros) NPL>90d Loan-loss reserves Credit ratio Dec 16 Dec 17 Coverage ratio Dec 16 Dec 17 NPL>90d 2.6% 2.8% NPL>90d 109% 109% 300.4 327.6 326.9 358.6 Dec 16 Dec 17 Dec 16 Dec 17 Loan impairment (net of recoveries)  NPL>90d ratio at 2.8% of total credit as at Cost of 49bp Dec

  43. Slide 43: Growing volumes

    Growing volumes (Million euros) Customer funds Loans to Customers (gross) +5.3% +12.7% excluding FX 15,948 mortgage loans Off-BS 15,149 funds +27.0% +1.1% 2,122 1,671 11,588 11,713 Other BS 97 +13.4% 110 funds Mortgage 2,308 +16.6% 2,691 local currency 5,812 Term 6,252 -7.0% deposits Mortgage 4,353

  44. Slide 44: Growing net earnings

    Growing net earnings (Million euros) Net income Banking income +13.2% ROE 23.1% 24.2% 224.1 +23.2% 198.0 85.1 69.1 2016 2017 2016 2017 Operating costs  Net income up by 23.2%, with ROE at 24.2%  13.2% increase in banking income, on the back of +9.2% higher net interest income (+27.9%) and commissi

  45. Slide 45: Growing income partially offset by higher operating costs

    Growing income partially offset by the increase in operating costs (Million euros) Net interest income Operating costs Cost to income 39.3% 37.9% NIM 8.3% 10.2% +9.2% 77.8 84.9 +27.9% 173.2 135.5 47.9 Other 43.0 +11.5% Staff costs 34.8 +6.4% 37.0 2016 2017 2016 2017 Commissions and other income Empl

  46. Slide 46: Credit quality

    Credit quality (Million euros) NPL>90d Loan-loss reserves Credit ratio Dec 16 Dec 17 Coverage ratio Dec 16 Dec 17 NPL>90d 6.0% 14.3% NPL>90d 121% 68% Down from €162 million as reported in 137.8 June 87.3 93.3 71.9 Dec 16 Dec 17 Dec 16 Dec 17 Loan impairment (net of recoveries) Cost of  NPL>90d rati

  47. Slide 47: Growing deposits and lower credit

    Growing deposits and lower credit (Million euros) Customer funds Loans to Customers (gross) +1.8% 1,389 1,414 -19.5% 1,199 Mortgage 14 -16.3% Term Consumer 215 965 621 +10.8% 688 deposits and other 11 -22.6% 167 Companies 970 -18.8% On- 768 -5.4% 787 726 demand deposits Dec 16 Dec 17 Dec 16 Dec 17 F

  48. Slide 48: Agenda

    Agenda  Highlights  Group • Profitability • Liquidity • Capital  Portugal  International operations  Conclusions 48

  49. Slide 49: Road to 2018: targets

    Road to 2018: targets Consolidated 2016 2017 2018 Phased-in: 12.8%2 Phased-in: 13.2% CT1 / CET11 ≈11% Fully implemented: 11.1%2 Fully implemented: 11.9% Loans to Deposits 98% 93% <100% Cost–Income 37.2% 43.4% <43% (48.5% excluding non-usual items) Cost-Core Income3 41.6% 46.4% <50% (51.5% excluding

  50. Slide 50: Millennium bcp: a bank ready for the future

    Millennium bcp: a bank ready for the future 1• Largest private sector bank based in Portugal with a balanced shareholder structure and a sound balance sheet (phased-in CET1 ratio of 13.2%, loans to deposits of 93%) 2• Successful implementation of the NPE reduction plan in Portugal: €1.8 billion down

  51. Slide 51: Appendix

    Appendix AGILE | MODERN | PERSONAL | SIMPLE| SUSTAINABLE 5

  52. Slide 52: Sovereign debt portfolio

    Sovereign debt portfolio Sovereign debt portfolio Sovereign debt maturity (Million euros) >8y, ≤10y >10y 1% 1% Dec 16 Sep 17 Dec 17 YoY QoQ ≤1y >5y, ≤8y 29% Portugal 4,124 4,945 3,636 -12% -26% 22% T-bills 655 712 585 -11% -18% Bonds 3,469 4,232 3,051 -12% -28% >2y, ≤5y >1y, ≤2y Poland 3,324 3,734 3

  53. Slide 53: Sovereign debt portfolio

    Sovereign debt portfolio (Million euros) Portugal Poland Mozambique Other Total Trading book* 152 81 0 1 234 ≤ 1 year 114 6 0 0 120 > 1 year and ≤ 2 years 0 34 0 0 34 > 2 years and ≤ 5 years 37 27 0 0 64 > 5 years and ≤ 8 years 1 8 0 0 10 > 8 years and ≤ 10 years 0 6 0 0 6 > 10 years 0 0 0 1 1 Banki

  54. Slide 54: Diversified and collaterised portfolio

    Diversified and collaterised portfolio Loan portfolio Consolidated Companies 47% Loans per collateral Mortgage 58% 25% 17% 46% Real guarantees Other guarentees Unsecured LTV of the mortgage portfolio in Portugal 15% 11% 13% 28% 11% 11% 11% 0-40 40-50 50-60 60-75 75-80 80-90 >90 Consumer / other 7% L

  55. Slide 55: Consolidated earnings

    Consolidated earnings Impact on (million euros) 2016 2017 YoY earnings Net interest income 1,230.1 1,391.3 13.1% +161.1 Net fees and commissions 643.8 666.7 3.6% +22.9 Other income* 222.7 139.5 -37.4% -83.2 Banking income 2,096.7 2,197.5 4.8% +100.8 Staff costs -356.6 -526.6 47.7% -170.0 Other admin

  56. Slide 56: Consolidated balance sheet

    Consolidated balance sheet (Million euros) 31 December 31 December 31 December 31 December 2017 2016 2017 2016 Assets Liabilities Cash and deposits at central banks 2,167.9 1,573.9 Resources from credit institutions 7,487.4 9,938.4 Loans and advances to credit institutions Resources from customers 5

  57. Slide 57: Consolidated income statement

    Consolidated income statement Per quarter (Million euros) 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 Net interest income 323.1 332.3 346.2 344.7 368.1 Dividends from equity instruments 0.8 0.1 1.5 0.1 0.1 Net fees and commission income 162.7 160.8 169.5 164.3 172.1 Other operating income -9.5 -15.2 -71.4 -10.4 -

  58. Slide 58: Income statement (Portugal and International operations)

    Income statement (Portugal and International operations) For the 12-month periods ended December 31st, 2016 and 2017 (Million euros) Int e rna t io na l o pe ra t io ns G ro up P o rt uga l T o tal B a nk M ille nnium ( P o la nd) M ille nnium bim ( M o z.) O t he r int . o pe ra t io ns D ec 16 D e

  59. Slide 59: Glossary (1/2)

    Glossary (1/2) Balance sheet total customer funds - debt securities and customer deposits. Capitalisation products – includes unit linked saving products and retirement saving plans (“PPR”, “PPE” and “PPR/E”). Commercial gap – total loans to customers net of BS impairments accumulated for risk of cr

  60. Slide 60: Glossary (2/2)

    Glossary (2/2) Operating costs - staff costs, other administrative costs and depreciation. Other impairment and provisions - other financial assets impairment, other assets impairment, in particular provision charges related to assets received as payment in kind not fully covered by collateral, good

  61. Slide 61: Investor Relations Division

    illenniu INVESTOR RELATIONS DIVISION Rui Coimbra, Head EQUITY DEBT AND RATINGS Luis Pedro Monteiro and Paula Dantas Henriques Luis Morais and Lina Fernandes +351 21 1131 084 +351 21 1131 337 investors@millenniumbcp.pt Banco Comercial Portugués, S.A., a public company (sociedade aberta) having its re

Banco Comercial Português, S.A. (Millennium bcp) — FY2017 Earnings Presentation on 6ix