Annual Report • Sep 30, 2021
Annual Report
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2021 santander.pt
| Main Highlights and Table of Indicators | 3 |
|---|---|
| External Recognition | 5 |
| Social Responsibility | 7 |
| Governing Bodies | 9 |
| Business Framework | 11 |
| Major Risks and Uncertainties | 14 |
| Business Areas and Business Support Areas | 15 |
| Economic and Financial Information | 21 |
| Relevant Facts After the End of the Period | 28 |
| Risk Management | 29 |
| Additional Information | 40 |
| Alternative Performance Indicators | 41 |
| Consolidated Financial Statements | 45 |
| Notes to the Consolidated Financial Statements | 51 |
The results for the first half of 2021 continue to reflect the pandemic situation, and its effects on the economic activity in general.
The 1st half of 2021 was very challenging for all our teams. Conducting a digital transformation in a pandemic environment is a long, difficult, but urgent work. However, we know that our customers demand it from us, and we want to remain as our customers' bank of choice.
As a result of this collective effort and the trust placed on our Bank, the figures for the first six months of the year show a growth in both digital and loyal customers, in credit and in resources. We maintained robust market shares in new credit production, at 22.6% and 21.4%, for loans to companies and mortgages, respectively.
This semester, and despite the drop in profits, the Bank maintained a solid liquidity position and very high capitalization levels. Compared to the same period of the previous year, a slight increase in the commercial revenue, as a result of the positive evolution of commissions and fees, which more than offset the reduction in net interest income.
We cannot hesitate when it comes to managing our resources well, to controlling costs, and to ensure the Bank's future sustainability. The transformation and restructuring process has been conducted responsibly, with concern for people, maintaining dialogue, and pushing the commitment we have with our employees to the limit.
I believe that in the coming months, once the vaccination process is completed, we will be able to start a new cycle of hope for companies, for households, and for the economy. Banco Santander will be here as always — supporting, innovating and helping the Portuguese economy grow.
Pedro Castro e Almeida, Chief Executive Officer of Banco Santander Portugal
| BALANCE SHEET AND RESULTS (million euro) | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Total Net Assets | 55,504 | 57,083 | -2.8% |
| Loans and advances to customers (net) | 42,308 | 41,103 | +2.9% |
| Customers' Resources | 46,142 | 43,517 | +6.0% |
| Total shareholders' equity | 4,049 | 3,894 | +4.0% |
| Net Interest Income | 381.8 | 398.6 | -4.2% |
| Net Fees and Other Income | 208.9 | 190.8 | +9.5% |
| Operating Income | 727.5 | 684.6 | +6.3% |
| Net Operating Income | 446.9 | 401.1 | +11.4% |
| Income before taxes and non-controlling interests | 81.0 | 225.4 | -64.0% |
| Consolidated net income attributable to the shareholders of BST | 49.8 | 154.5 | -67.7% |
| RATIOS | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| ROE | 2.4% | 8.5% | -6.1 p.p. |
| ROA | 0.2% | 0.5% | -0.3 p.p. |
| Efficiency ratio | 38.6% | 41.4% | -2.8 p.p. |
| CET I ratio* | 22.1% | 19.8% | +2.3 p.p. |
| Tier I* ratio | 22.1% | 19.8% | +2.3 p.p. |
| Capital* ratio | 24.5% | 22.1% | +2.4 p.p. |
| Non-Performing Exposure Ratio | 2.5% | 2.8% | -0.3 p.p. |
| Non-Performing Exposure coverage ratio | 73.3% | 61.0% | +12.3 p.p. |
| Cost of credit | 0.36% | 0.27% | +0.09 p.p. |
| Loans-to-deposits ratio (transformation ratio) | 110.8% | 112.4% | -1.6 p.p. |
| RATING | Jun-21 | Jun-20 | |
|---|---|---|---|
| FitchRatings | BBB+ | BBB+ | |
| Moody´s | Baa3 | Baa3 | |
| Standard & Poor´s | BBB | BBB | |
| DBRS | A | A |
| Other Data | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Employees** | 5,751 | 6,151 | -400 |
| Employees in Portugal** | 5,721 | 6,119 | -398 |
| Branches | 418 | 525 | -107 |
| Total Branches and Corporate Centers in Portugal | 410 | 517 | -107 |
* Fully implemented with results net of payout
** Headcount criteria
| Best Bank in Portugal | Within the scope of the Awards for Excellence 2021, Santander Portugal was distinguished with the award "Best Bank in Portugal 2021" by Euromoney magazine. The awards distinguish the institutions that provided the best services to their customers, demonstrating leadership, innovation and dynamism in the markets in which they operate. |
|---|---|
| Best Investment Bank in Portugal |
In the Corporate Banking area, the Bank was distinguished as well, and Santander received the award "Best Investment Bank in Portugal 2021." The magazine pointed out that "the corporate and capital markets business" meant that, despite the competition of other international banks, "the best investment bank came to the fore." |
| Best Bank in Portugal | The North American Global Finance magazine distinguished Santander Portugal as the "Best Bank in Portugal 2021," within the scope of the "World's Best Banks 2021." Several objective criteria were taken into account for selecting the winners, such as profitability, evolution of assets, geographic scope, strategy relationships, development of new business, and product innovation, as well as opinions of financial executives from around the world. |
| Most Reputed and Relevant Banking Brand |
Within the scope of the Global RepScore Pulse study, published by the consultancy OnStrategy, Santander Portugal was ranked as the "Brand with the best banking reputation and the greatest relevance in Portugal 2021." The consultant highlights the brands that stood out the most in 2020, in a pandemic scenario, having assessed attributes such as notoriety, admiration, relevance, confidence, preference, and recommendation. |
| Best Trade Finance | Santander was distinguished by Euromoney magazine as the "Best Trade Finance Bank 2021" in Portugal, coming first in the "Market Leader" and "Best Service" categories. The magazine highlights the partnership that Santander has established with Portuguese companies, providing efficient, fast and secure services in foreign trade, as well as support provided to their internationalization in foreign markets. |
| Best Private Banking Services Overall |
Santander Portugal Private Banking was considered by Euromoney magazine as the "Best Private Banking Services Overall 2021." It is the tenth consecutive time that this publication distinguishes the outstanding service offered by the Bank to this segment. Euromoney again recognized the Bank's work in the ESG area, for the technological investment that has been made and for its commitment as a Responsible Bank. |
| Best Private Bank | Santander's Private Banking was distinguished by Global Finance magazine as the "Best Private Bank 2021" in Portugal, within the scope of "The World's Best Private Banks Awards for 2021." According to Global Finance, "the selected banks were the ones that best knew how to meet the specific needs of high-net worth clients, while at the same time they sought to improve, preserve and transmit their wealth. These were also the institutions that grew up to respond to those same needs." |
|---|---|
| Best Retail Bank | Santander was distinguished as "Best Retail Bank in Portugal" by the British magazine World Finance, in this publication's annual awards. The magazine highlighted the Bank's leadership, based on its global scale and local scope, its customer-centric strategy, and diversification. |
| Settlement & Custody | Santander was awarded in the "Settlement & Custody", category, which distinguishes the financial intermediary that carried out the largest number of issuances of shares and bonds registered with Interbolsa (and not admitted to trading), weighted by the respective amounts. |
| Book Runner Bonds | Santander was awarded in the "Book Runner Bonds", category for being the financial intermediary with the largest number of issuances and amounts placed in the securities identified in this category, listed on Euronext Lisbon. |
"NetWorth" Category : High Net Worth Clients (US\$ 5 million to US\$ 30 million); Mass Affluent Clients (US\$100k – US\$1m); Mega High Net Worth Clients (US\$250m+); Super Affluent Clients (US\$ 1 million to US\$ 5 million); Ultra High Net Worth Clients (>US\$30m - US\$250m).
"Services" Category: Capital Markets and Advisory; ESG/Impact Investing; Family Office Services; International Clients; Investment Management; Next Generation; Philanthropic Advice; Research and Asset Allocation Advice; Serving Business Owners.
"Technology" Category: Technology – Data Management and Security in Private Banking and Wealth Management; Technology – Innovative or Emerging Technology Adoption
These awards are the responsibility of the entities that grant them
ESG criteria incorporated in Santander Way
Banco Santander is committed to its mission of contributing towards the development of people and companies, supporting inclusive and sustainable growth.
In the 1st half of 2021 Santander remained committed to supporting the Community, with a special focus on supporting the most vulnerable sectors of society and projects of Higher Education Institutions. In terms of supporting Society, 84.066 people were supported during this period.
Santander actively participated in initiatives such as the "#AllTogether" campaign, which brought together 10 banks and more than 30 companies, in order to raise funds for
essential foodstuffs and medicines for vulnerable people and families. Through this initiative, €2,500,000 were raised, and more than 74,000 people were supported.
Santander also took part in the "Coronavirus Global Response – Donors Conference", organized by the European Commission, with the aim of speeding up the development, production and equitable access to vaccines, diagnoses and treatments. The Santander Group participated with €500,000, an amount shared between Santander Portugal and the Corporation.
Since the inclusion of everyone in Society is one of the Bank's main concerns, a 3-year partnership has been established with the
Portuguese Rugby Federation, an alliance in which the Bank and the Federation intend to support and inspire inclusion and social responsibility initiatives, through shared values.
Within this same rationale, the protocol between Santander and the Salvador Association has been renewed for another two years, whose main objective is to promote the employability of people with physical disabilities.
Internally, the Bank promoted the 4th edition of the "Participatory Donation", a project in which employees vote on social and environmental projects to be supported
by the Bank. The Portugal Alzheimer Association, Casa dos Rapazes, Ocean Alive, and the Hippotherapy Project were the chosen projects, having received a prize of €7,500 each.
Education remains as Santander's main focus, namely in promoting equal opportunities, such as the Santander Future Scholarships, aimed at young university students in need of financial support to begin or pursue their Higher Education
studies, and the Santander Global Scholarships aimed at supporting university students looking for an international experience. Santander recently
launched the Sara Carreira Association Scholarships, aimed at children and youngsters aged between 12 and 21, with financial constraints. Four thousand scholarships are expected to be awarded in 2021.
The Bank also supports innovative educational projects, such as "42 Lisboa", an academy with a revolutionary programming of international prestige, entirely free for students; the "U.Porto Santander Inspira-te" training course, aimed at encouraging the development of university projects with a positive impact on the community; or the Santander Skills | Innovation in Teaching Scholarships, in partnership with Laspau, aimed at university professors from 11 countries, to learn new teaching models from an innovative perspective.
Santander keeps supporting and encouraging the climate transition. It recently launched a new offer of biodegradable bank cards for the corporate segment, with a new image and various functionalities, in line with its commitment to sustainable, responsible banking.
As previously mentioned, Santander was a joint book runner in the issuance of €750 million of green hybrid debt by EDP, as well as in the issuance of €300 million of green bonds by REN.
In order to contribute to the sustainable development of the agricultural sector, the Bank took part in the 1st Iberian Agriculture Summit, supporting the sector with both its financial
and non-financial offer. In this area, the Agricultural Equipment Renewal Plan was also made available to speed up the digitization and
sustainability of Portuguese agriculture.
Santander was also present at the 15th Edition of GreenFest
Portugal, the country's largest sustainability festival. An initiative was launched at all branches across the country to celebrate
the World Environment Day, which took part in the collection of small household appliances and electrical equipment that were then delivered to the Local Voluntary Firefighter Associations. In a partnership with Electrão, the recycling of such equipment will raise funds to enable the purchase of a fire fighting vehicle.
This concern for the environment is also particularly present in the Bank's internal activities. The electricity consumed by Santander comes 100% from renewable energy sources and, since 2020, Santander has been carbon neutral by offsetting all the emissions generated by its daily activity.
In order to help its customers make more informed decisions regarding their finances, Santander makes its financial literacy blog available, having recently launched "O Salto – the Santander Community blog". Through this blog, the Bank provides content on a wide range of topics, including information on savings, moratoria, insurance, financial management or scholarships.
| Chair: | José Manuel Galvão Teles |
|---|---|
| Deputy-Chair: | António Maria Pinto Leite |
| Secretary | Company Secretary |
| BOARD OF DIRECTORS | |
| Chair: | José Carlos Brito Sítima |
| Deputy-Chair: | Pedro Aires Coruche Castro e Almeida |
| Members: | Amílcar da Silva Lourenço |
| Ana Isabel Abranches Pereira de Carvalho Morais | |
| Andreu Plaza Lopez | |
| Daniel Abel Monteiro Palhares Traça | |
| Inês Oom Ferreira de Sousa | |
| Isabel Cristina da Silva Guerreiro | |
| Isabel Maria de Lucena Vasconcelos Cruz de Almeida Mota (1) | |
| Manuel António Amaral Franco Preto | |
| Manuel Maria de Olazábal Albuquerque | |
| Maria Manuela Machado Costa Farelo Ataíde Marques | |
| Miguel Belo de Carvalho | |
| Remedios Ruiz Macia | |
| AUDIT COMMITTEE | |
| Chair: | Ana Isabel Abranches Pereira de Carvalho Morais |
| Members: | Daniel Abel Monteiro Palhares Traça |
| Isabel Maria de Lucena Vasconcelos Cruz de Almeida Mota | |
| Manuel Maria de Olazábal Albuquerque | |
| Maria Manuela Machado Costa Farelo Ataíde Marques | |
| STATUTORY AUDITOR | |
| PricewaterhouseCoopers & Associados, SROC, LDA., | |
| represented by Aurélio Adriano Rangel Amado | |
| EXECUTIVE COMMITTEE | |
| Chair: | Pedro Aires Coruche Castro e Almeida |
| Deputy-Chair: | Manuel António Amaral Franco Preto |
| Members: | Amílcar da Silva Lourenço |
| Inês Oom Ferreira de Sousa | |
| Isabel Cristina da Silva Guerreiro | |
| Miguel Belo de Carvalho | |
(1) Lead Independent Director
| Chair: | Manuel Maria de Olazábal Albuquerque |
|---|---|
| Members: | Daniel Abel Monteiro Palhares Traça |
| Maria Manuela Machado Costa Farelo Ataíde Marques | |
| Remedios Ruiz Macia | |
| REMUNERATION COMMITTEE | |
| Chair: | Isabel Maria de Lucena Vasconcelos Cruz de Almeida Mota |
| Members: | Daniel Abel Monteiro Palhares Traça |
| Manuel Maria de Olazábal Albuquerque | |
| Maria Manuela Machado Costa Farelo Ataíde Marques | |
| Remedios Ruiz Macia | |
| APPOINTMENT COMMITTEE | |
| Chair: | Daniel Abel Monteiro Palhares Traça |
| Members: | Ana Isabel Abranches Pereira de Carvalho Morais |
| Andreu Plaza Lopez | |
| Isabel Maria de Lucena Vasconcelos Cruz de Almeida Mota | |
| Manuel Maria de Olazábal Albuquerque | |
| SALARIES COMMITTEE | |
| Chair: | Jaime Pérez Renovales |
| Member: | Roberto di Bernardini |
| COMPANY SECRETARY | |
| Full Secretary: | João Afonso Pereira Gomes da Silva |
| Alternate Secretaries: | Bruno Miguel dos Santos de Jesus |
| Cristina Isabel Cristovam Braz Vaz Serra | |
More than a year after the onset of the pandemic, its effects are still being felt on the world economy, with new waves affecting most countries during the first half of 2021.
However, the economic policy measures implemented by the various Governments and Central Banks, as well as the good adaptation capacity of economic agents, plus the swift advancement of the vaccination process (in Europe and in the USA) mitigated, to a large extent, the adverse effects of successive pandemic waves. In this way, the ongoing recovery proceeded, at different speeds, but without being compromised.
| 2020 | 2021 E | 2022 P | |
|---|---|---|---|
| World | -3.2 | 6.0 | 4.9 |
| Advanced Economies | -4.6 | 5.6 | 4.4 |
| USA | -3.5 | 7.0 | 4.9 |
| Euro Area | -6.5 | 4.6 | 4.3 |
| United Kingdom | -9.8 | 7.0 | 4.8 |
| Japan | -4.7 | 2.8 | 3.0 |
| Developing Countries | -2.1 | 6.3 | 5.2 |
| Africa | -1.8 | 3.4 | 4.1 |
| Asia | -0.9 | 7.5 | 6.4 |
| China | 2.3 | 8.1 | 5.7 |
| Central and Eastern Europe | -2.0 | 4.9 | 3.6 |
| Middle East | -2.6 | 4.0 | 3.7 |
| Latin America | -7.0 | 5.8 | 3.2 |
| Brazil | -4.1 | 5.3 | 1.9 |
Source: IMF (July 2021)
The most recent projections made by the International Monetary Fund (IMF), in the July update of the World Economic Outlook, are examples of such adjustment and recovery capacity, although they also show the differences and latent risks arising from either the capacity for adopting economic support measures, or, in particular, of the dynamics of the vaccination process.
On the one hand, the world economy could grow by 6% in 2021, according to the IMF, maintaining the forecast made in April. However, there are differences, with an upwards revision for the advanced economies, in contrast to a downwards revision for developing economies, where the consolidation of the recovery process is hampered by delays in the vaccination process.
The US is the economy where the recovery process is progressing at a faster pace, with a solid recovery pace (+6.4% annualized quarterly growth in Q1 2021). This dynamic stems from, on the one hand, lesser restrictions on mobility and on the closure of activities than what occurred, for instance, in Europe and, on the other hand, by the various stimuli packages adopted by American authorities. Namely, the plan worth 1.9 trillion dollars, implemented as of March, which included direct support to families of up to 1,400 dollars per person (the 3rd "check", after a first one in the amount of 1.2 thousand dollars in Q2 2020, plus another one of 600 dollars last December).
However, while the impact of this growth on the labour market has been quite strong, pre-pandemic unemployment levels have not yet been resumed. The unemployment rate in June 2021 stood at 5.9%, above the 3.9% observed in February 2020.
In the Euro Area, the recovery process has been more gradual, but it is gaining momentum. The recovery was delayed by a pandemic wave in the beginning of 2021, which required new restrictive measures, although differentiated between countries, with no new general lockdown and/or general closure of activities.
IMF projections follow the more optimistic view of the ECB, with strong growth in 2021. The restrictive measures applied in the first quarter of the year have delayed the economic recovery, especially in countries where tourism has a greater weight on GDP, due to the restrictions on tourist travelling. Only towards the end of the semester, with the progress in vaccination and the entry into force of the "digital vaccination certificate" was there a greater revival of tourist activity.
However, the measures taken by European governments have mitigated the main adverse effects on the labour market, thus there was a limited increase in the unemployment rate, which, combined with a general increase in the savings rate, created the conditions for supporting the recovery of private consumption.
The European Commission and the Council have already approved most of the national recovery and resilience plans, with the first funds reaching Member States during the summer, which will help boost economic recovery. The Recovery and Resilience Mechanism counts on a financial envelope of €750 billion, equivalent to about 5% of the European GDP, to be rolled out until 2026.
In emerging economies, the IMF notes that economic recovery seems to be lagging behind, largely as a result of the vaccination dynamics, since although global restrictions on activity were, overall, less adverse, but government support measures were also lower.
This difference in the vaccination dynamics, in access to vaccines, and in inoculation capacity, may become a risk factor, as it contributes to keeping the virus in circulation, thus creating the conditions for the emergence of new variants, which even affect populations with a high percentage of individuals with complete vaccination (as occurred in July with the Delta variant).
The main Central Banks continued to carry out expansionary monetary policies, including in the guidance given to economic agents. In fact, in addition to the low levels of reference interest rates, the programs for the acquisition of financial assets were maintained (especially in the euro area), and it was signalled that Central Banks could accept higher inflation for some time, before starting to reverse the current stimuli.
In July, the ECB also announced the conclusions of its review of the monetary policy strategy, a process that it had already
started before the pandemic. The main change relates to the reviewed definition of price stability, which becomes inflation at 2.0% (instead of the previous "close to, but below 2%"). This results in a symmetry in the objective, making it easier for the ECB to act when inflation is below 2%. On the other hand, it allows for the accommodation of temporary increases in inflation that do not affect the medium-term horizon.
This proved to be a prominent topic in financial markets, as consumer prices accelerated in the first half of the year, particularly in the US, fuelling the debate on the emergence of inflationary pressures.
The rise in prices reflects the combination of several factors, including base effects (due to price drops for some goods and services when the pandemic started in 2020), and effects resulting from the faster recovery of activity, in 2021, without response capacity by producers, with the rise in the prices of metals, cereals and in the cost of transport. The oil price also rose to the highest value since 2018. The OPEC agreed to an increase in production, but with limited effects on the oil price (at 75 dollars a barrel at the end of July).
Fixed income markets initially reacted to the accelerated inflation, mainly with a rise in longer-term yields, but which was later reversed, with the message of policy stability by Central Banks. In the US, the 10-year yield reached a maximum of 1.7%, later setting at 1.3% at the end of July. In Germany, interest rates remained negative, but in May the 10-year yield rose to - 0.1%, later setting at -0.4% at the end of July. In the Euro Area, the ECB has kept its asset acquisition programme — the PEPP (Pandemic Emergency Purchase Program) — despite the almost constant discussion about the monthly pace of acquisitions.
In Portugal, the growth dynamics was quite similar, albeit with a slight delay, in the first quarter, due to the worsening of the pandemic situation, a new general lockdown was ordered between January 10th and March 15th, with the closure of all non-essential activities. Thus, GDP contracted by contagion effect in the first three months of 2021, after the stagnation recorded in the last quarter of 2020.
In the second quarter, a stronger growth was recorded, with a relatively broad-based recovery of economic activity.
| Macroeconomic Data | |||
|---|---|---|---|
| 2020 | 2021 E | 2022 P | |
| GDP | -7.6 | 3.8 | 4.1 |
| Private Consumption | -5.8 | 1.1 | 3.6 |
| Public Consumption | 0.4 | 2.2 | 2.2 |
| Investment | -4.7 | 11.0 | 6.0 |
| Exports | -18.6 | 11.6 | 9.6 |
| Imports | -11.9 | 9.6 | 8.8 |
| Inflation (average) | 0.1 | 0.3 | 0.4 |
| Unemployment | 7.0 | 7.7 | 7.5 |
| Fiscal Balance (% GDP) | -5.7 | -4.0 | -2.5 |
| Public Debt (% GDP) | 133.7 | 130.0 | 123.0 |
| Current Account Balance (% GDP) | 0.1 | 0.3 | 0.4 |
| In the second quarter, GDP grew by 15.5% year-on-year (+4.9% QoQ), consolidating the recovery momentum. This trend is validated by the evolution of the daily activity indicator calculated by the Bank of Portugal, but which reveals that, in July, economic activity has not yet recovered the 2019 levels. Such positive trend reflects the evolution of tourism, although its slower recovery was already expected, which in the first half of this year is still below the 2020 levels. Only in July was the threshold of 50% of the adult population with at least one dose of vaccine overcome, the same month when the digital vaccination certificate came into force, designed to facilitate the circulation of fully immunized people within the EU. Restrictions on possible quarantine periods are only lifted for those who |
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| have completed their vaccination scheme. Thus, the evolution in the export of services is mitigating the positive effects of the good performance of exports of goods, which, in the second quarter, were even above 2019 levels. |
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| Investment has also showed signs of recovery. The construction sector never stopped during the pandemic, as also happened during the first lockdown. Productive investment in machinery, equipment and transport material has also continued to recover, in line with sales of commercial vehicles and imports of capital goods. |
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| Private consumption also benefited from the lifting of lockdown measures, especially in terms of discretionary expenditure by households, namely on durable goods and on non-food goods and services. Consumption expenditure was supported, on the one hand, by the positive evolution of the labour market and, on the other, by the savings accumulated over the last quarters. |
Public measures to support the labour market helped minimize the adverse impacts of the pandemic on unemployment, which remained at about 7% in the first half of 2021.
The household savings rate rose to 14.2% of disposable income in the first quarter, a maximum in the last two decades, which was accompanied by an increase in household financial assets. This buffer enabled, on the one hand, the normal resumption of consumption, once activities were reopened, and also to accommodate the end of the private (APB) moratorium on credit.
The moratoria (while the legal moratorium is still in force, covering 37.5 billion euros at the end of June), and the Stateguaranteed credit facilities granted to companies explain part of the greater indebtedness of the private sector (to which is added the denominator effect, resulting from the GDP drop), but mortgage credit also continued to evolve positively, with an increase in new monthly production to the highest levels since 2008, above a billion euro monthly.
The level of indebtedness of the non-financial private sector increased to 203% of GDP (+15pp compared to Q120) in the first quarter. In the second quarter, it may come down by denominator effect, as happened with the public debt, whose ratio to GDP dropped by 5pp in the second quarter, to 132.8% of GDP, although still above pre-pandemic levels. (117% at the end of 2019).
Public support measures, as well as the recession resulting from the pandemic, had clear impacts on budget execution. In the 1st quarter, the general government balance recorded a 5.7% of GDP deficit, with the dynamics being explained by the decrease in tax revenues (especially indirect taxes), and by the increase in expenditure, in intermediate consumption, personnel and social benefits, but especially in subsidies (support to economic activity and job maintenance).
As mentioned above, the dynamics of the country's financing interest rates reflected the measures taken by the European Central Bank, particularly those arising from the PEPP. The 10 year yield, which in May reached a maximum of 0.6%, stood at 0.2% at the end of July.
The Country's credit rating by S&P, Fitch, and Moody's is BBB (stable), BBB (stable) and Baa3 (positive), respectively. DBRS still maintains the BBB high rating (stable).
Note: Text written with the information available up to July 31, 2021.
The main risks and uncertainties for the activity of Banco Santander Totta in the second half of 2021, are still related to the evolution of the pandemic resulting from the Covid-19 disease, as well as from the measures adopted to mitigate its economic effects.
On the one hand, we have the risks related to the recovery of economic activity, in terms of speed and sustainability. If the second general lockdown — in force between January and March 2021 — revealed the resilience of the business fabric, as a whole, it also worsened the conditions in some sectors of activity and in weaker companies, especially in sectors related to tourism, although not exclusively. A homogeneous recovery across sectors is an important factor in mitigating risks.
Additionally, despite advances in vaccination, both in Portugal and in Europe, there are still risks arising from the possible emergence of new variants, with greater resistance to vaccination. This may generate health situations that may require restrictive measures, which can affect economic recovery.
In September, the legal moratorium will end, which at the end of June covered 37.5 billion euros, of which 22.3 billion were for companies. The Government announced a set of measures to support companies in the most affected sectors, with the possibility of granting public guarantee to a portion of the loan, but the Bank, as the whole of the banking sector, will have the instruments and follow-up mechanisms to mitigate any risks of non-compliance.
The level of indebtedness of the private sector in Portugal, is also a risk factor, due to the high levels and increased indebtedness as a result of the economic recession. In 2020, the availability of credit facilities guaranteed by the State allowed companies to finance themselves to face possible liquidity risks. This anticipated financing, combined with the economic recovery, could reduce future financing needs, reducing the demand for credit by companies.
Another factor is related to the intervention of central banks, which are keeping the reference interest rates at negative levels, and also maintaining their asset acquisition programs. Short-term interest rates remained quite low during the first half of the year, putting pressure on bank profitability.
Possible inflationary risks are also a factor of uncertainty. Economic recovery has been accompanied by an acceleration in the prices of raw materials, further enhanced by the increase in transportation costs. Additionally, the health crisis led to an increase in the prices of some goods and services, amplified by base effects. Central banks consider that the recent acceleration of inflation thus reflects one-off factors, not requiring changes in the way the monetary policy is conducted. However, investors may react adversely, resulting in a more pronounced rise in long-term interest rates, as occurred last May.
Individuals and Businesses, Companies and Institutional
The 1st half of 2021 was very challenging for the commercial areas, not only due to the continuing pandemic situation, but also due to the accelerated transformation process of commercial areas, mainly in the Individuals and Business networks.
Commercial activity for Individual customers, in the 2nd quarter, continued on a positive trajectory, both in terms of Customer Experience (NPS), as well as in terms of commercial performance. New client service models were also developed with the introduction of remote tools at branch level, plus the reinforced weight of Santander Próximo (100% digital branch), together with an important improvement in processes and in the technological capacity of branches.
The focus on customer experience in all commercial banking activities and the constant measurement of NPS through Qualtrics has resulted in a gradual and consistent increase in NPS levels, both at the level of Bank NPS, at branch NPS, and at manager NPS. During the 1st quarter, Bank NPS grew by 3.8 points in the branch network, standing at 57.3 (within a maximum of 100).
A new customer service model was launched last March — Hubs Select — a team of qualified managers in large branches with remote management and contracting tools aimed at servicing customers with a digital profile and high financial capacity. This service is being offered to customers who had their account at that branch or in smaller surrounding branches where they could not find this specialized service. With this new model, customers can carry out all operations remotely, but if they need or want to meet in person with an account manager at the branch, they can do so, subject to prior appointment.
Hub Selects complete the existing service models for customers with high financial capacity, which already existed through Select account managers (a fully face-to-face service at the branch), or through Santander Próximo (a fully digital, remote service).
Under the SIMPLER, Programme, which started in the 1st quarter this year, a significant set of new processes came into
effect that will facilitate commercial
activity at branches and improve customer experience. Under this programme, new self-banking machines were also installed, in particular the VTM (automatic machines for depositing notes and coins and for change), and several advanced cashiers and corporate cashiers were also implemented (with greater efficiency in the processing of deposits at branch counters). On the other hand, a series of
internal paperless processes have been consolidated. The main examples are @credito (personal credit process), new card issuance process (for individuals and companies), new auto insurance contracting platform, an online account opening via the App, among others.
With the end of private moratoria (APB) at the end of March, the 2nd quarter necessarily started by paying special attention to clients who resumed their debt service. In some cases, the payment plan had to be adjusted, as the impact of the closure of some activities made it impossible for some households to return to their normal income levels and be able to meet their responsibilities. This process took place without major surprises, with close proximity to clients and very low default levels.
In the 2nd quarter, commercial activity was continued at branches and through remote sales, especially in the following families of banking products:
Protection insurance – It is worth highlighting the impact of the current situation on reinforcing customers' awareness towards the need for personal and family protection in the various dimensions of their lives. In this context, life and health insurance stood out, which kept their coverage strengthened in the context of the
pandemic. A new car insurance was also launched (a Mapfre Santander partnership) on the new contracting
platform, which, in the future, will be the same for all protection insurances in all channels.
Mortgage Loans – Despite the various limitations resulting from the pandemic, the mortgage loan market kept its upward trajectory, and Santander followed this growth, consolidating its leadership in the production of new mortgage loans with production market shares above 20%.
With the development of online trade in goods, is also worth mentioning Boutique Santander in this 2nd quarter, through which our clients can buy all types of items with a quality service, plus the possibility of being able to directly finance their purchases.
Santander continued to focus on strengthening its presence in the Business segment, committed to contributing to its sustainable development. In the current context, of sharp slowdown in economic activity resulting from the impact that the pandemic is still causing, making the initiatives promoted by the Government (credit facilities with State Guarantee) reach companies remained as a main priority for the Bank.
Among other initiatives, Santander launched the Agricultural Equipment Renewal Plan, in the 2nd quarter, to accelerate the digitization and sustainability of Portuguese agriculture, in order to enable investment in equipment, equipped with precision techniques, through which farmers can reduce up to 25% their CO2 emissions and induce cost savings in farm consumables.
The Bank kept its commitment to improving internal procedures and processes in order to ensure the availability of liquidity to companies, in a quick and timely manner, so that they can meet their commitments to third parties, namely employees, suppliers and the State.
The Bank also reinforced its omni-channel approach, in addition to the service provided by the physical network, with a strong investment in digital channels, which has greatly contributed to increasing our customers' autonomy, satisfaction and loyalty. This positioning of proximity and quality customer service allowed for the sustained growth of the business in the Corporate segment throughout the 1st half of 2021.
With regard to international business, the Trade Finance teams of specialists reinforced their proximity to Portuguese companies with a presence in foreign markets, seeking to support our clients in all the difficulties caused by the current situation. The support provided in operating foreign trade processes is worth highlighting, involving different countries and international operators, where the Bank had to continue to develop joint and coordinated work in order to successfully complete import and export operations.
Santander Portugal maintains a solid market share in most Trade Finance operations, an unmistakable sign of our customers' confidence in the Bank's professional structure, while also proving the Bank's image of solidity and credibility in international markets.
It is also worth noting the swift GPI offer to Portuguese companies, enabling the traceability of international transfers, both issued and received. Santander Portugal is the 1st and only national bank to offer this new capability to its customers, allowing them to validate the tracking and execution of international payments in real-time, as well as to check the status of transfers to be received from abroad.
With regard to Institutional Banking, Santander maintains its commitment to its customers in this segment, both in terms of public entities — due to its strong presence in the autonomous regions of the Azores and Madeira, and in municipalities —, as well as with private entities, with a special focus on the Social Economy, which have played a key role in supporting families with less resources during this pandemic period.
Portugal continues to be a country with an attractive legal framework for foreigners interested in investing in Portugal or living in Portugal permanently or with regular residence. On the other hand, the community of Portuguese emigrants residing abroad has a very significant importance.
Attentive to these two segments, the Bank has a team whose main objective is the creation of strong commercial ties and close proximity to the communities of Portuguese and Portuguese descendants living abroad, as well as the promotion and attraction of foreign customers who choose Portugal to invest and / or to establish their residence.
Last May, Santander launched a new remote service dedicated
to customers residing abroad – Santander Próximo International. It is a digital branch, providing an innovative customer service, with all the technology for remote monitoring and a team 100% dedicated to these clients.
With this solution, any Santander customer residing abroad will be able to interact with the Bank without any restrictions, just as any other customer
living in Portugal. With this service and with Group's geographic coverage in several countries, the network of representative offices has become redundant, and, as such, it has been gradually reduced. Since the end of June, all customers in Germany are already being supported through this service model.
After a 1st quarter with robust growth in all business indicators, the 2nd quarter confirmed this trend, with Santander Portugal's Private Banking having achieved, on June 30, very positive performances in most business indicators.
The macroeconomic context remained quite favourable, confirming the expectation of global economic recovery, and the effectiveness of the vaccine in protecting against Covid-19, as well as a significant reduction in serious situations and deaths. The main concern was related to possible inflationary pressures on both sides of the Atlantic, bringing some volatility to equity markets, however, without having changed the direction and the positive feeling of recovery, as evidenced by the appreciation of the Eurotoxx50 (Europe) and S&P500 (USA) indexes, with appreciations close to 15% in the year.
Thus, for most of Santander's Private Banking business indicators, the 1st half of 2021 was very positive, with a 7% growth in assets under management, as well as an 18% growth in off-balance sheet resources (funds, insurance, and discretionary portfolio management).
The robust growth of the Private Banking customer base is also worth highlighting, based not only on external prospecting activity, but also on the strong collaboration and support of the branch network and corporate centres in identifying clients in this segment.
For its part, Santander Asset Management (SAM) sought to actively manage its securities investment funds (SIF) and promote new solutions, within a framework marked by favourable investor sentiment. In this regard, stand out the launching of two new funds, Santander Investimento Global, and Santander Multi-Estratégia.
The semester was marked by a strong dynamic in the demand for investment funds, with net subscriptions of about 597 million. At the end of June 2021, the market share in securities investment funds reached 17.6%.
Real-estate investment funds totalled €281 million in June 2021, compared to €329 million at the end of 2020. Part of this drop resulted from a capital reduction operation of the Novimovest Fund, carried out at the beginning of the year.
Retirement solutions were a very important focus of the Bank's commercial activity, not least because of the needs brought to light by this pandemic, and because of a significant increase in the savings rate in Portugal. Products grew €94 million in Fund format (FPR's), and €29 million in Insurance format (PPR's), in the year.
In the financial insurance area, open financial insurances were quite actively promoted, in order to mitigate the maturities of insurances with defined maturity that occurred during the period, in the amount of about €216 million. An innovative product was also launched, oriented towards new trends, namely technology, sustainability and health.
The strategy developed had the desired effects, with the financial insurance portfolio increasing by seven million euros, reaching €3,571 million.
In the Corporate & Investment Banking area, the focus remained on customer proximity, and in offering solutions tailored to their needs. The focus on digital channels, highlighting the FX digital contracting platform (via NetBanco Corporate), proved to be fundamental in terms of customers' access to the Bank.
As from the beginning of the year, the loan portfolio increased by 0.7%. Compared to the same period last year, revenues showed a 4.5% reduction, justified by the delay in the completion of non-recurring operations. The net interest margin grew by 4.5%, compared to the same period in 2020.
It is important to highlight the distinction by Euromoney with the award "Best Investment Bank Portugal 2021."
In the Global Debt Financing area, the first six months of 2021 were marked by Santander's participation as bookrunner, in the following debt issuances: (i) EDP: issuance of a new 60-year maturity hybrid green bond, in the amount of €750 million; (ii) REN: issuance of a new 8-year maturity green bond, in the amount of €300 million.
During the first semester, several significant financing transactions were also completed in a wide range of sectors, with emphasis on several financing and refinancing operations in the real-estate sector, including property development for student residences, the retail sector, telecommunications infrastructure, and hospital infrastructure.
In the Corporate Finance area, it is worth highlighting the successful completion of financial advisory services to Atlantia in the announced sale of the 17.2% stake held in Lusoponte to MM Capital Partners, a subsidiary of Marubeni Corporation.
In the Treasury area, particularly in Corporate and Commercial Banking, the 1st half of 2021 represented the consolidation of an alternative client monitoring model, designed, tested and correctly implemented throughout 2020. Commercial dynamics and negotiation methodologies were renewed, new channels of communication and areas of collaboration came together, with the same focus and objective of maintaining service quality and the availability that our customers expect from us.
The rapid adaptation to this new reality was decisive for the growth of Santander's activity in exchange rate and interest rate risk management instruments, in the first six months of 2021. Specifically in the Foreign Exchange Area, it was possible to achieve activity growth based on the various contracting channel alternatives available to all clients. In this section, it is particularly noteworthy that, despite the widespread isolation that has kept many Santander customers working from their homes, all means for contracting foreign exchange transactions were always available, with a dedicated team permanently available in the Trading Desk, the commercial teams at the branches and commercial departments also available, and with the electronic platform available at NetBanco Empresas, ensuring an adequate response to all of our clients' needs.
The gradual reopening of trade, tourism and other economic activities, which took place throughout the quarter, supported the growth of spot and forward exchange contracting operations, leading to the 1st half of 2021 being one of the
most active, over the last 5 years, in terms of traded volume, number of operations and active clients.
The increased volatility in most financial markets, in a context of macroeconomic uncertainty, has justified an even greater proximity to companies when they renew their financing or contract new credit operations. The predictable escalation of the inflation rate, the sharp increase in commodity prices (with Brent in the spotlight), and the uncertainty surrounding the policies that will be followed by Central Banks, give rise to a greater need for hedging interest rate risk, either for new financing or for those already in progress.
In this context, we have witnessed a significant growth in formalized fixed-rate credit operations throughout the 1st half of 2021, which demonstrates the availability of credit alternatives and support for entrepreneurs' decisions.
In the Cash Equities area, the volumes traded in equity markets, during the period from January to May, recorded a significant growth compared to the previous year. In the online business, Santander continued to outperform the market, having achieved a slight gain in the share of the volume of stock orders. According to data released by CMVM, the volume of share orders received by FIs in Portugal grew by approximately 18% year-on-year, totalling about €9,668 million. In the same period, Santander grew by 21.9%, to €779 million, which represents a market share of 8.1% (7.8% in the same period of 2020).
In the online business (Internet Website), the market grew by 20% to € 6,922 million, Santander having contributed with € 689 million, representing a 38.7% increase over the same period in 2020, and a share of 10% in the first five months of the year (compared to 8.6% in the same period last year). Santander's business continued to show better performance than the market, evidenced by its increased market share.
During the first six months of the year, Santander continued to enhance its digital transformation process. This process boosted by the pandemic context — has the main objective of being closer to our customers and simplify processes through digital solutions.
At the end of the first half of 2021, the Bank had 981,000 digital customers, a 13% increase compared to the same period last year (150,000 more customers).
In June 2021, NetBanco had 439,000 users in NetBanco Private with logins in the last 30 days, a figure in line with the figure achieved at the end of 2020. On the other hand, the App showed a 10% growth in the number of users compared to the figure at the end of 2020 (+60 thousand users). Currently, 632,000 customers use the Private App at least once a month. This evolution reflects the growing trend towards "mobile first". Regarding the intensity of use, the average number of monthly logins per user was 8 logins for NetBanco, and 20 logins for the App. These figures are in line with those recorded at the end of the previous year.
The penetration of digital sales in individuals channels reached 59% at the end of the 1st half of the year, representing a significant increase of 16pp compared to the end of 2020, and 22pp compared to the same period of the previous year.
Regarding satisfaction indicators, in 2021, the NPS (Net Promoter Score) for digital channels kept its positive trajectory, particularly at NetBanco. Compared to the end of 2020, the NPS of the Private App rose by 4 points, whereas at NetBanco it grew by 11 points.
The digital channels for the individuals' segment have 3 main objectives for 2021: i) increased coverage in the offer of
products and services in digital channels; ii) lower the risks and impacts of non-compliance through the implementation of new digital "promise-to-pay" journeys and other recovery use cases; and iii) to develop features, improvements and initiatives that may contribute to increased satisfaction in the use of channels.
In this sense, the modernization process of NetBanco was continued. The implemented improvements reflect not only a more modern interface, but also a new information architecture, optimized for current client needs.
Regarding the increased offer of products through channels, the new SafeCare Saúde insurance was launched. The entire insurance offer existing in NetBanco was also made available through the Individuals App. NetBanco customers already have the possibility of making term deposits in different currencies, as well as the possibility of subscribing funds and PPRs on an occasional and periodic basis, simultaneously.
Customers with loans in arrears now have the possibility of paying a minimum amount, as well as the possibility to settle their debt through external accounts, with the Open Banking capabilities available in both channels.
In the Individuals App stands out the integration of the virtual assistant functionality ("Sandi") with the chat functionality with an agent. This feature allows our customers to get immediate clarification of various topics (e.g., products, channel navigation, among others). If the issue is not clarified, the client can talk in real time with an assistant. This functionality is also already available through NetBanco Individuals.
The functionality for opening a digital account through the Individuals App was also launched. With this feature, new customers can now open their first account with the Bank in a completely digital way, using a digital mobile key or through a video call.
At the same time, developments were continued for launching the new Individuals App that will bring new features and improvements in terms of usability. It is a project done in alignment with One Europe.
Throughout the semester, the strategy for strengthening the use of digital channels with Corporate clients was pursued, through continuous improvement and modernization of the existing functionalities.
Currently, at NetBanco Corporate, customers can consult new and improved pages for loans and escrow accounts. Our customers can also find out more information about their late payments and settle their situation through external accounts, with the Open Banking option. In addition, since last March, corporate customers can contract their Santander Business credit card through NetBanco Corporate, as well as manage their card limits completely online.
Through the App, our customers can consult their digital documents such as account statements and tax returns, as well as get proofs of their transfers from the details of account movements.
It is also possible to pay credit cards and provide simplified access to companies' credit card holders.
The number of App users increased by 14% (over 4 thousand users compared to the end of 2020), and the Bank is in the Top 2 in iOS (with a rate of 4.7), and in the Top 3 in Android (with a rate of 4.0) of Banking Apps for companies in App Stores.
The Technology area — in line with the business and digital transformation areas — acted on several initiatives aimed at providing employees and clients with more digital, simpler, and more integrated solutions, continuing to promote the adoption of new technologies, modern architectures, and agile development approaches.
Thus, several technological solutions were implemented and improved. Internally, namely the improvement of applications that support contracting processes, the monitoring of customers with more complete information, and greater efficiency in the execution of operations. Externally, improved solutions made available to our customers through more features and enhanced user experience.
In the first half of 2021, the particular context of the pandemic still had a relevant impact, in general terms, due to the challenges of the different work models, and, in particular, the need for a technological response to the management of public and private moratoria as an important support mechanism for households and businesses.
Along with the development and evolution of technological solutions, the Technology area kept an important focus on the compliance dimension, a fundamental pillar in Santander's operations, ensuring the implementation of initiatives to ensure compliance with legal and regulatory requirements, as well as the implementation of recommendations resulting from internal and external audits.
The IT strategy was updated during this period, considering the dimensions of technology, operating model and people, supported by a set of initiatives and measured through success metrics. The implementation of such IT strategy initiatives will help accelerate the transformation of information systems and the journey to the Cloud, the creation of enablers for digital transformation, and the promotion of a development model with greater agility and automation.
The Operations area pursued the transformation project with the same strategic objectives defined initially, including technological evolution, process automation, and the digitization of operations, guided by the quality of service provided to our clients and improved execution times (SLAs – Service Level Agreements) with a commitment to improve Customer NPS.
The first half of the year was essentially marked by the expansion of the Business Process Management (BPM) platform to commercial networks, where the integration of the platform in the commercial network framed with the ergonomics of the branch within the scope of its daily operations was guaranteed, enabling less duplication of activities with the automatic filling of data and validation within the context of the Bank's systems, the adoption of standardized forms, among others. This action helped to simplify operations, reduce the administrative burden, and offer a better user experience (e.g., end-to-end visibility of all tasks, assisted execution with a checklist of documents, among others).
Additionally, and along with these activities, all operation processes were assessed according to a joint vision of their execution, with the purpose of defining and implementing a set of automation and process reengineering initiatives, enabling the integration of transactions, easier execution and operational simplification, both in operations and in the commercial network. While also reinforcing sustainability and digitization criteria. The digital strategy aimed at operations increased its pace of implementation, with the aim of simplifying processes and reducing the consumption of physical documents in the workflow (leveraging the adoption of digital tools), thus helping to accelerate process execution and reduce costs by reducing paper consumption and space used for physical archives.
In a uniquely challenging context, accelerating the change processes in the banking sector motivated by the context of the Covid-19 pandemic led the Bank to become more digital, but also more secure, thus guiding the continued investment in the mitigation of cybersecurity risks, adding value and reinforcing
clients' trust in the pursuit of their activities. These initiatives translated into the promotion of a cyberculture, in which the Bank intends to assume an increasingly active role in collaborating and sharing information, including with external financial and governmental entities. Additionally, the cybersecurity area is developing the cyber-excellence initiative, which translates into continuous improvement, certification and excellence of processes and services provided to clients and employees, as well as developing the capacity of cybersecurity area resources.
As a result of the pandemic context, there was an increase in events related to cybercrime, which motivated the adoption of collaborative activities between the fraud prevention and cyber defence areas, reformulating the operating model in order to materialize a holistic view of financial crime as it evolves and develops, mitigating its potential impacts in terms of detection, prevention and containment.
Aligned with the business and digital transformation areas, with the intention of delivering solutions that meet the expectations of customers and employees, the processes of developing secure systems — including automation techniques — continued to be one of the focuses of the area's activity, promoting safe deliveries, with greater robustness. In terms of information protection, the strengthening of control policies and systems contributed to strengthening our clients' confidence in the way the Bank protects data.
At the end of the first half of 2021, Banco Santander Totta achieved a net profit of €49.8 million, compared to €154.5 million recorded in the same period of the previous year, down by 67.7%, in an economic environment constrained by the pandemic situation.
Return on Equity (ROE) stood at 2.4%, and the efficiency ratio at 38.6%. (2.8pp below the June 2020 figure).
Gross loans totalled €43.4 billion, representing a year-on-year increase of 3.0%. Credit to individuals increased by 5.3%, and credit to companies grew by 0.5%. At the end of June 2021, the moratoria covered about 43 thousand customers, in the amount of €6.1 billion of credit (14% of the total portfolio), down by 28% compared to December 2020, with maturity of the private moratoria at the end of March. Credit facilities guaranteed by the State amounted to €1.6 billion, reaching approximately 14 thousand clients.
The Non-Performing Exposure ratio stood at 2.5%, decreasing by 0.3 pp, compared to the 2.8% recorded in June 2020, with provisions coverage of 73.3% (12.3 percentage points more than in the same period last year).
Customer resources amounted to 46.1 billion euros, increasing by 6% over the same period last year, with an increase of 4.2% in deposits and 15.6% in off-balance sheet resources.
The Common Equity Tier 1 ratio (fully implemented) amounted to 22.1%, increasing by 2.3 percentage points compared to the same period last year.
The financing obtained from the European Central Bank, in the amount of €7.5 billion (€0.7 billion taken out in March 2021), was entirely based on long-term operations, through the TLTRO III (targeted longer-term refinancing operations) program. Net exposure to the Eurosystem stood at €0.7 billion.
In long-term financing, there are also €2.0 billion of mortgage bonds, €0.3 billion of subordinated Tier 2 instruments, and €0.6 billion of securitizations.
The liquidity reserve reached approximately €16.2 billion.
The Liquidity Coverage Ratio (LCR), calculated in accordance with the CRD IV rules, stood at 132%, thus meeting the regulatory requirement on the fully implemented basis.
Santander Totta has the best financial ratings in the sector. The Bank's current long-term debt rating notations compared to those of Portugal are as follows: Fitch – BBB+ (Portugal – BBB); Moody's – Baa3 (Portugal – Baa3); Standard & Poor's – BBB (Portugal – BBB); and DBRS – A (Portugal – BBB high).
million euro
154.5 49.8 Jun-20 Jun-21 -67.7%
| CONSOLIDATED INCOME STATEMENTS* (million euro) | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Net interest income | 381.8 | 398.6 | -4.2% |
| Income from equity instruments | 1.5 | 1.7 | -11.5% |
| Results from associated companies | 1.1 | 0.8 | +46.1% |
| Net fees | 205.8 | 185.2 | +11.2% |
| Other operating results | 3.1 | 5.6 | -45.2% |
| Commercial revenue | 593.4 | 591.9 | +0.3% |
| Gain/losses on financial assets | 134.1 | 92.7 | +44.7% |
| Operating income | 727.5 | 684.6 | +6.3% |
| Operating costs | (280.7) | (283.4) | -1.0% |
| Staff Costs | (157.3) | (160.0) | -1.7% |
| General Administrative Costs | (98.1) | (97.7) | +0.4% |
| Depreciation in the year | (25.2) | (25.7) | -2.0% |
| Net operating Income | 446.9 | 401.1 | +11.4% |
| Impairment, net provisions and other results | (365.8) | (175.8) | +108.1% |
| Income before taxes and non-controlling interests | 81.0 | 225.4 | -64.0% |
| Taxes | (31.2) | (70.8) | -56.0% |
| Income after taxes and before non-controlling interests | 49.8 | 154.5 | -67.7% |
| Non-controlling interests | (0.0) | (0.0) | +257.6% |
| Consolidated net income attributable to the shareholders of BST | 49.8 | 154.5 | -67.7% |
| * Non-audited results |
At the end of June 2021, net interest income totalled €381.8 million, down by 4.2% from the €398.6 million recorded in the same period of 2020. This was due to lower market interest rates, with repercussions on the portfolio's indexes; to the lower credit spread, in a competitive market context; to the lower demand for credit by companies outside the scope of credit facilities guaranteed by the State; and to the management of the public debt securities portfolio.
The result generated by associated companies amounted to €1.1 million, increasing 46.1%, compared to €0.8 million recorded in the same period last year.
Net fees and commissions reached €205.8 million, up by 11.2%, compared to €185.2 million recorded a year earlier, in which account commissions stand out, with the offer of bundled accounts with a set of associated services and payment methods, and also associated with the placement of funds and
insurances, reflecting the diversification of client resources and the strategic focus on autonomous insurances.
Other operating income stood at €3.1 million, 45.2% below the €5.6 million in the same period last year.
The commercial margin reached €593.4 million, 0.3% more than the €591.9 million recorded in the same period of 2020, with the favourable evolution of commissions, surpassing the reduction in the net interest income.
Income from financial operations amounted to €134.1 million, up by 44.7% compared to the €92.7 million obtained a year earlier, influenced by the result generated in the management of the public debt securities portfolio.
Operating income, in the amount of €727.5 million increased by 6.3% compared to the €684.6 million at the end of June 2020, reflecting the positive evolution in commissions and results from financial operations.
Operating costs totalled €280.7 million, down by 1%, compared to the €283.4 million recorded in the same period last year.
The transformation of the branch network, the simplification of product contracting processes, the development of new applications and technologies, the investment in digital channels and task automation, led to a reduction in costs and improved levels of satisfaction and experience by clients, further reinforcing their loyalty to Banco Santander.
The digitization and optimization of operational efficiency resulted, over the past year, in a reduction of 400 employees and 107 branches.
Staff costs totalled €157.3 million, down by 1.7%, compared to the €160.0 million in the same period last year.
Other administrative expenses reached €98.1 million, up by 0.4% compared to the €97.7 million in the same period last year.
Depreciations totalled €25.2 million, down by 2.0% compared to June 2020.
In the operating cost structure, staff costs account for 56% of the total, followed by overheads at 35%, and depreciations at 9%.
| Efficiency ratio | 38.6% | 41.4% | -2.8 p.p. |
|---|---|---|---|
| Operating costs | (280.7) | (283.4) | -1.0% |
| Depreciation in the year | (25.2) | (25.7) | -2.0% |
| General Administrative Costs | (98.1) | (97.7) | +0.4% |
| Staff costs | (157.3) | (160.0) | -1.7% |
| OPERATING COSTS (million euro) | Jun-21 | Jun-20 | Var. |
At the end of June 2021, the efficiency ratio reached 38.6%, decreasing 2.8pp, compared to the 41.4% in June 2020, given the 6.3% increase in operating income and the 1% decrease in operating costs.
Net operating income reached €446.9 million, increasing by 11.4%, compared to the €401.1 million recorded in the same period last year, translating the positive evolution in revenues and the downward trajectory of operating costs.
Impairments, net provisions and other results entailed a cost of €365.8 million, up by 108.1% when compared to the €175.8 million in the same period last year.
Net impairment of financial assets at amortized cost totalled €68.8 million, 31.8% less than the amount recorded a year earlier, keeping up with the preventive reinforcement of provisions for credit impairments, to cover potential losses with the non-payment of loans as a result of the pandemic situation, by incorporation of the forward looking component of the macroeconomic scenario, as evidenced by the various projections carried out by national and international institutions, which show a gradual recovery of economic activity, although differentiated between sectors of activity.
Net provisions and other results include an extraordinary provision of €235 million, for the Bank's transformation plan, through the optimization of the branch network and investments in processes, digitization and technology, with the consequent reduction in the number of employees, materialized in the preretirement and termination by mutual agreement programs.
There were also regulatory costs, with the Resolution Fund and with the Banking Sector Contribution in the amount of €67.2 million, higher than the €64.9 million in the first semester last year.
Income before taxes and non-controlling interests totalled €81 million, down by 64% compared to €225.4 million in the same period last year.
Taxes amounted to €31.2 million, a 56% decrease compared to €70.8 million recorded a year earlier.
At the end of the first half of 2021, Banco Santander Totta achieved a net profit of €49.8 million, down by 67.7% compared to the €154.5 million achieved in the same period of 2020, in an economic context affected by the effects of the pandemic situation.
At the end of June 2021, the business volume amounted to €89.5 billion, up by 4.5%, compared to the amount of €85.6 billion in the same period last year, resulting from the 3% increase in credit, and the 6% increase in customers' resources.
| BUSINESS VOLUME (million euro) | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Business Volume | 89,520 | 85,635 | +4.5% |
| Loans and advances to customers (gross) | 43,379 | 42,118 | +3.0% |
| Customers' Resources | 46,142 | 43,517 | +6.0% |
The transformation ratio, measured by the ratio of credit to deposits, reached 110.8% in June 2021, 1.6pp less than in the same period of the previous year, reflecting a growth in deposits above the growth of credit.
At the end of the first half of 2021, the (gross) loan portfolio totalled €43.4 billion, up by 3% compared to the same period last year, reflecting the application of moratoria to loans for households and businesses, and the production of credit
facilities to support the economy within the context of the health crisis, plus the favourable evolution of the production of mortgage credit.
| LOANS (million euro) | Jun-21 | Jun-20 | Var. | |
|---|---|---|---|---|
| Loans and advances to customers (gross) | 43,379 | 42,118 | +3.0% | |
| of which | ||||
| Loans to individuals | 23,332 | 22,168 | +5.3% | |
| of which | ||||
| Mortgage | 21,253 | 20,070 | +5.9% | |
| Consumer | 1,668 | 1,679 | -0.7% | |
| Loans to corporates | 16,569 | 16,488 | +0.5% |
Loans to individuals totalled €23.3 billion, corresponding to an increase of 5.3%, compared to the €22.2 billion in the same period last year.
Mortgage loans rose by 5.9% year-on-year. In the first half of the year, the Bank originated about €1.5 billion in mortgages. Consumer credit dropped by 0.7%, given the reduction in expenditure made by households, in an adverse economic context and with restricted mobility.
Credit to companies stood at €16.6 billion, growing by 0.5% compared to the same period last year, reflecting the volume associated with the protocoled credit facilities to support the economy, in order to deal with the slowdown in economic activity caused by the pandemic. The evolution of credit to companies was mitigated by the lower credited provided to large companies.
The end of private moratoria, at the end of March, led to the resumption of the respective debt service, and some operations had to adjust the payment plan, as the closure of some activities made it impossible for some clients to earn their normal income to be able to face their responsibilities. This process took place without deteriorating credit quality, translated into a reduction in the Non-Performing Exposure (NPE) ratio — calculated in accordance with the EBA definition — to 2.5%, compared to 2.8% in June 2020.
Coverage of Non-Performing Exposure by impairments reached 73.3% (12.3 percentage points more than the 61% a year earlier). The cost of credit stood at 0.36%, up by 0.09 percentage points, compared to the 0.27% in the same period last year, reflecting the preventive reinforcement of credit impairment, which was maintained to anticipate possible adverse effects of the pandemic.
| CREDIT RISK RATIOS | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Non-performing exposure Ratio | 2.5% | 2.8% | -0.3 p.p. |
| Non Performing Exposure coverage ratio | 73.3% | 61.0% | +12.3 p.p. |
| Cost of credit | 0.36% | 0.27% | +0.09 p.p. |
At the end of the first half of 2021, customer funds amounted to €46.1 billion, a growth of 6% compared to the same period last year, with a 4.2% growth in deposits and of 15.6% in off-balance sheet resources.
| RESOURCES (million euro) | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Customers' resources | 46,142 | 43,517 | +6.0% |
| On-balance sheet resources | 38,174 | 36,624 | +4.2% |
| Deposits | 38,174 | 36,624 | +4.2% |
| Off-balance sheet resources | 7,967 | 6,893 | +15.6% |
| Investment funds marketed by the Bank | 3,940 | 2,884 | +36.6% |
| Insurance and other resources marketed by the Bank | 4,027 | 4,009 | +0.5% |
Deposits amounted to €38.2 billion, up by 4.2% compared to the €36.6 billion in the same period last year, constituting the main source of funding of the balance sheet, and reflecting the contraction of household consumption, which favoured higher saving rates, plus the trust and connection of clients with the Bank, in a context of interest rates at historic lows.
Customers' off-balance sheet resources stood at €8.0 billion, up by 15.6%, when compared with the €6.9 billion in June 2020.
Investment funds managed or marketed by the Bank in the amount of €3.9 billion rose 36.6%, compared to €2.9 billion in the same period last year, in an environment of appreciation of the respective financial markets, favoured by the expectation of global economic recovery, and by the diversification of savings, given that investments in term deposits have minimal remuneration rates.
Insurance and other resources in the amount of €4 billion were down by 0.5% year-on-year.
At the end of June 2021, Banco Santander Totta had a Common Equity Tier 1 (CET 1) ratio — calculated according to CRR / CDR IV standards — of 22.1% (fully implemented), an increase of 2.3 p.p. compared to the 19.8% in the same period last year, reflecting the Bank's ability to generate organic capital and the management of risk-weighted assets.
Considering the recommendation of the European Central Bank (ECB/2020/19) of March 27, 2020, the Board of Directors of Santander Portugal decided not to distribute dividends.
The Bank has a very high capitalization, above the minimum requirements set by the European Central Bank within the scope of the Supervisory Review and Evaluation Process (SREP). In 2021, CET1 was 8.3%, Tier 1 was 10.1%, and Total was 12.5%, in full implementation.
| CAPITAL (million euro) | Jun-21 | Jun-20 | Var. |
|---|---|---|---|
| Common Equity Tier 1 | 3,879 | 3,491 | 11.1% |
| Tier 1 Capital | 3,879 | 3,491 | +11.1% |
| Total Capital | 4,292 | 3,896 | +10.2% |
| Risk Weighted Assets (RWA) | 17,532 | 17,599 | -0.4% |
| CET 1 ratio | 22.1% | 19.8% | +2.3 p.p. |
| Tier 1 ratio | 22.1% | 19.8% | +2.3 p.p. |
| Total Capital Ratio | 24.5% | 22.1% | +2.4 p.p. |
There were no relevant facts between July 1, 2021, and the publication of this Report.
Santander Portugal's risk management and control model is based on a set of common principles, an integrated risk culture across the Santander Group, a strong governance structure, and advanced risk management processes and tools.
Risk management and control principles are mandatory and must be applied at all times. They take into account regulatory requirements and best market practices. These principles are as follows:
These principles, together with a series of interrelated tools and processes included in the Bank's strategy planning, such as risk appetite, risk profile assessment, scenario analysis, and the structure of risk reports, plus budgetary processes, form a holistic control structure for the entire Bank.
The following key risks are established in the Corporate Risk Framework:
Market Risk: it is the risk incurred as a result of the effects that changes in market factors, interest rates, exchange rates, variable income and commodities, among others, may have on income or capital;
Liquidity Risk: it is the risk that the Bank might not have the necessary liquid financial resources to meet its obligations as they fall due, or that can only be obtained at a high cost;
In addition, the elements of climate-related risks — physical and transactional — are identified as factors that may exacerbate existing risks in the medium and long term.
The classification of risks is essential for their effective management and control. All identified risks must therefore be associated with the above-mentioned risk categories, in order to organize their management, control and related information.
Santander Portugal has a robust risk management structure that seeks to effectively control its risk profile, in accordance with the appetite defined by the Board of Directors.
This governance structure is based on the distribution of roles between the three lines of defence, a strong committee structure, and a close relationship with the corporation. All of this is supported by a risk culture implemented throughout the Bank — Risk Pro.
The Bank follows a three-pronged model (lines of defence) to ensure effective risk management and control:
While each of the three lines of defence has a separate organizational structure and a certain degree of independence, they must collaborate whenever necessary to ensure that business objectives are met. The Risk, Compliance and Conduct, and Internal Audit areas have direct access to the Board of Directors and to its Committees.
The business lines and all support functions that generate risk exposure constitute the first line of defence. The first line of defence identifies, measures, controls, tracks and reports the risks that they give rise to, and applies the policies, models and procedures that regulate risk management. Risk generation must be in accordance with the approved risk appetite and associated limits. The person in charge of any unit that gives rise to a risk is primarily responsible for managing that risk.
The first line of defence is responsible for the following:
The first line of defence shall support and promote the Bank's risk management culture.
The Risk, and the Compliance and Conduct areas, as the second line of defence, will independently oversee and challenge the risk management activities carried out by the first line of defence. This second line of defence shall ensure, within their respective scope of responsibility, that risks are managed in accordance with the risk appetite defined by top management,
and shall promote a strong risk management culture throughout the organisation.
The second line of defence is responsible for:
Within the Bank's structure, the second line of defence includes the Risks and the Compliance and Conduct areas, although the organizational structures within the second line of defence may vary by type of risk.
The responsibility of the second line of defence includes the obligation to report to the appropriate governing bodies, as required, the risks, risk appetite and breaches thereof.
The second line of defence shall adopt and promote a common risk management culture. It shall also provide guidance, advice and expert judgment on all relevant risk-related matters.
Internal Audit is a permanent function, independent of any other function or unit, whose mission is to provide the Board of Directors and Senior Management with an independent guarantee on the quality and effectiveness of the internal control, risk management (current or emerging countries), and governance processes and systems, thus contributing to protecting the organisation's value, solvency and reputation. To this end, the Internal Audit evaluates:
The Risk, Compliance and Conduct, and Internal Audit areas are
adequately separated and independent, and have direct access to the Board of Directors and to its Committees.
The Board of Directors is responsible for risk management and control and, in particular, for the approval and periodic review of risk appetite and for framing risk, as well as for promoting a strong risk culture throughout the organization. In order to perform these functions, the Board depends on several Committees with specific risk-related responsibilities.
The Chief Risk Officer (CRO) is responsible for monitoring all risks, and for questioning and advising business lines on risk management. The CRO has direct access to the Board of Directors and to the Executive Committee.
Other bodies that together form the highest level of risk governance, with powers delegated by the Executive Committee, are the Executive Risk Committee and the Risk Control Committee, which are detailed below.
Executive Risk Committee (ERC)
This Committee is the highest body in risk decisionmaking. The Executive Risk Committee takes decisions on risk-taking at the highest level, ensuring that they are within the limits set by the Bank's risk appetite.
Chair: Chief Executive Officer (CEO).
Risk Control Committee (RCC)
The Risk Control Committee is responsible for risk control, determining whether the risks arising from business lines are managed according to the risk appetite limits set by the Bank, taking into account a holistic view of all risks. This involves identifying and monitoring current and emerging risks, and assessing their impact on the Bank's risk profile.
In addition, each risk factor has its own regular forums and / or committees to manage and control the relevant risks.
With the objective of effectively controlling and managing risk, the Bank has a series of key processes and tools, as described below:
At the Bank, Risk Appetite (from the acronym RAS - Risk Appetite Statement), is defined as the amount and type of risks considered prudent to accept in the execution of the Bank's business strategy so that it can carry on with its normal business in the event of unexpected events. When establishing this appetite, various adverse scenarios that may have a negative impact on the levels of capital, liquidity, profitability and / or share prices are taken into account.
The Board of Directors establishes the risk appetite annually, and it is then transferred to management limits and policies
by type of risk, portfolio and business segment, within the defined rules.
The risk appetite is consistent with the Santander Group risk culture and business model. The main elements that define this business model and support risk appetite are the following:
The risk appetite in all entities belonging to the Santander Group, including Banco Santander Totta, is governed by the following principles:
Enterprise-wide risk, comparing and questioning the risk profile. The risk appetite must consider all significant risks, facilitating an aggregated view of the risk profile through the use of quantitative metrics and qualitative indicators.
Forward-looking view. Risk appetite should consider the desirable risk profile in the short and medium term, taking into account both the most likely circumstances, and the adverse or stress scenarios).
Risk appetite is expressed in qualitative terms and by limits, structured around 5 main axes:
Maximum risk profile.
Compliance with risk appetite limits is monitored regularly. The specialized control areas inform the Board and its Committees on a monthly basis regarding the risk profile.
Linking risk appetite limits to the limits used in managing business units and portfolios is a key element for ensuring the effectiveness of risk appetite as a management tool. Thus, the policies and limits used in management, for the various types and categories of risk, are directly related to the principles and limits defined for risk appetite.
Exercises are carried out at the Bank to identify and assess the various types of risks to which it is exposed, involving all lines of defence, establishing management standards that comply with regulatory requirements, reflecting the best market practices, and reinforcing the Bank's risk culture.
The results of Risk Identification and Assessment (RIA) exercises are included in the assessment of the Bank's risk profile, known as RPA. This exercise analysis the evolution of risks and identifies areas for improvement in each block:
Another fundamental instrument used by the Bank to ensure robust risk management and control is the analysis of the possible impacts arising from different scenarios related to the environment in which the Bank operates. These scenarios are expressed both in terms of macroeconomic variables, as well as through other variables that affect the Bank's risk profile.
This "scenario analysis" is a very useful tool for risk management at all levels.
In order to assess the Bank's resistance to stress scenarios, as well as to identify possible mitigation actions to be implemented, should the forecasted scenarios start to materialize. The objective is to reinforce income stability, as well as that of the capital and liquidity levels.
For Santander Portugal, quality in risk management is a fundamental axis of its activity, in keeping with the corporate policy of the Group to which it belongs. Prudence in risk management combined with the use of advanced management techniques was a decisive factor, in the last year and a half, not only due to the emergence of the pandemic that affected the entire world, but also due to the continued demands from the financial markets.
The Group's strong risk culture is embedded across the entire activity and structure of the Bank, decisively influencing the way in which all processes are carried out, taking into account not only the surrounding environment, but also attitudes, behaviours, values and the principles that each of us demonstrates in the face of the different types of risks we face. This risk culture is especially important in very challenging times, such as this last year and a half, enabling both the Bank and the various teams to swiftly adapt to different circumstances.
The first half of 2021 was marked by the continued careful management of the pandemic in the day-to-day commercial and risk management of our clients.
The intensity of the client monitoring and follow-up work was maintained, namely through the first line of defence (Commercial area), jointly with the second line of defence (Risk area).
Periodic analyses of the most critical and worrisome sectors were conducted, based on the study and analysis of client portfolios, consisting of 4 chapters:
All these studies were presented in a specific forum for each of them, in which members from the Commercial and Risk
areas took part. They were also presented and discussed in the Bank's last credit decision step.
For customers (private individuals and small companies) whose credit decision is made mostly through decisionmaking models considered as "automatic", factors have been incorporated that help mitigate and anticipate potential future problems arising from the pandemic and after the end of the moratoria.
The analysis and monitoring of behavioural metrics in these clients were strengthened in order to detect in advance the possible deterioration in their real payment capacity.
The maturity of private moratoria was monitored on a daily basis, monitoring the maturities of instalments and their respective settlement.
Commercial solutions were made available to clients who expressed the need to keep receiving support, so that they could balance themselves financially and meet their credit responsibilities.
The basic operating principles regarding the analysis and granting of credit risk remained unchanged:
In the standardised (or not portfolioed) risks, with a view to ongoing improvement and efficiency of the admission process, and bearing in mind the objective of portfolio quality, the Bank conducted the update and maintenance of the automatic decision models, particularly the scoring and behavioural systems used in the Individuals and Business segments;
Also, in the matter of standardised risks, the focus remained on ensuring portfolio quality, always seeking to anticipate the deterioration of the quality of the credit portfolio;
Credit risk is originated by the possibility of specific losses arising from non-fulfilment of all or part of the financial obligations contracted with the Bank by its clients.
The organisation of the credit-risk function at Banco Santander Portugal is specialised in the light of client typology, throughout the entire risk-management process, between portfolioed clients (made-to-measure or personalised treatment), and standardised or mass-treatment clients (not portfolioed).
Portfolioed clients are those that, fundamentally due to their level of risk, are assigned a risk analyst. This group includes wholesale banking companies, financial institutions and some of the retail banking companies. The assessment of these clients' risk is performed by the analyst, supplemented with decision-support tools based on in-house risk-assessment models.
Standardised clients are those that do not have an assigned risk analyst specifically assigned to monitor them. This group includes Private clients, Individual Entrepreneurs and nonportfolioed Retail Banking companies. Assessment of these risks is based on in-house valuation and automatic decisionmaking models, complemented by specialised risk-analyst teams in a subsidiary manner when the model is not sufficiently precise.
Santander Bank uses its own in-house classification or ratings for the various client segments, to measure the credit quality of a given client or transaction, each rating or scoring corresponding to a likelihood of default.
The overall classification tools are applied to the country-risk, financial institutions and global wholesale banking segments, both in determining their rating and in monitoring the risks
assumed. These tools assign a certain rating to each client as a result of a quantitative or automatic module, based on data/balance sheet ratios or macroeconomic variables, complemented by the analysis performed by the risk analyst assigned to monitor the given client.
In the case of retail banking companies and institutions, the assignment of a certain rating is based on the modules referred to above, in this case quantitative or automatic (analysing the borrowing behaviour of a sample of clients and its correlation with a set of data and accounting ratios), and qualitative, entrusted to a risk analyst for analysis, who shall perform the final review of the rating assigned.
The ratings assigned are reviewed periodically, incorporating new financial information that meanwhile becomes available, as well as, at qualitative level, the experience arising from assessment of the existing credit relationship. This frequency increases in the case of clients for whom the internal risk alert and classification systems so require.
For the standardised-risk portfolios, both of Private individuals and of not-portfolioed businesses, scoring tools and decision-making models are implemented, which automatically assign an assessment/decision of the transactions presented. These decision tools are complemented with a behavioural scoring model — an instrument that allows greater predictability of the risks assumed and are used both for pre-sale and for sale.
Client and/or transaction evaluation by rating or scoring constitutes an assessment of the creditworthiness, which is quantified by the likelihood of default (PD). In addition to evaluating the client, quantitative risk analysis considers other aspects such as the term of the transaction, the type of product and the existing collateral. What is thus taken into account is not just the likelihood that the client may not fulfil its contractual obligations (PD) but that the exposure at default (EAD) may be estimated as well as the percentage of the EAD that may not be recovered (loss given default or LGD).
These are the factors (PD, LGD and EAD) that constitute the main credit-risk parameters, and, taken jointly, allow a calculation of the expected loss and the unexpected loss. The expected (or likely) loss is considered an additional activity cost (reflecting the risk premium), and this cost is appropriately reflected in the price of the operations; and the unexpected loss, which is the basis of the calculation of regulatory capital under the rules the Basel capital accord (BIS II). This unexpected loss refers to a very large, though rather unlikely loss that, given its nature, is not considered recurrent and must therefore be duly covered by own funds.
In small and medium enterprises, the balance-sheet information serves not only to assign the rating, but also to obtain explanatory factors of the likelihood of default. In retail portfolios, the PD is calculated by observing the entries into default, correlating them with the scoring assigned to the
transactions. Excepted are portfolios in which, as a result of lesser in-house default experience, such as financial institutions, country risk, or global wholesale banking, the calculation of these parameters is performed on the basis of alternative sources of information, such as market prices or studies by agencies of recognised experience and expertise with a portfolio of a sufficient number of entities (these are designated as low-default portfolio).
LGD calculation is based on the observation of the process of recovery of defaulting transactions, taking into account not only the revenues and costs associated with this process, but also the moment they are produced and the indirect costs arising from the recovery activity.
The EAD estimate is based on comparing the use of the compromised credit facilities at the time of default and in a normal situation, in order to identify the real consumption of the credit facilities at the time of default.
The estimated parameters are immediately assigned to transactions that are in a normal situation, and are differentiated for low default portfolios and for the others.
The risk-management process consists of identifying, measuring, analysing, controlling, negotiating and deciding on the risks incurred by the Bank's operations.
This process begins in the business areas, which propose a certain propensity to risk. These risks are analysed by special committees, which act under powers delegated by the Executive Committee on the Executive Risk Committee (ERC). The ERC establishes the risk policies and procedures, and determines the limits and delegation of powers.
Establishing risk limits is conceived as a dynamic process that identifies the risk profiles that the Bank is willing to take through the assessment of the business proposals and the opinion of the Risks area.
A pre-classification model is used for large corporate groups, a model based on an economic capital measurement and monitoring system.
At the level of the portfolioed risks, the most basic level is that of the client and when certain characteristics are involved — usually a level of relative importance — it is subjected to an individual limit, usually called pre-classification, through a more simplified system and usually for those clients who meet certain requirements (good knowledge and rating, etc.).
At the level of standardised risks, the planning and limit setting process is undertaken by means of joint preparation, by the Risk and Business areas, of the Strategic Commercial Plans (PEC), where the expected results of the deal in terms of risk and profitability are reflected, as are the limits to which the activity, the management of the associated risks, and the means of support required must be subjected.
Study of the risk, transaction decision, and monitoring and control
Studying the risk involved is a prerequisite for authorising any credit operation at Banco Santander Portugal. This study consists of analysing the client's ability to fulfil its contractual obligations towards the Bank, entailing the credit quality of the client, its credit operations, its solvency and profitability. Additionally, a study and review are conducted of the valuation assigned when there is an alert or event that affects the client/transaction.
The purpose of the transactions-decision process is their analysis and decision, taking into account the risk profile and the relevant elements of the transaction in the definition of a balance between risk and profitability.
In order to maintain adequate quality control over the loan portfolio, in addition to the actions carried out by Internal Audit, there is a specific monitoring function within the Risk area, comprising teams and their heads. This function is also specialised in the light of client segmentation and is fundamentally based on a continuous process of observation, allowing advance detection of possible occurrences in the evolution of risk, of the transaction, and of the client, for the purpose of implementing measures, in advance, to mitigate them.
Recoveries management at Santander Portugal is a strategic, comprehensive and business activity. The specific objectives of the recoveries process are the following:
Recoveries activity is structured in keeping with the commercial segmentation of clients: Private Individuals, Businesses and Companies, with specific management models. The management of recoveries, so segmented, also respects the different management stages: preventive management, management of irregularities, and management of non-performing loans and bankruptcies, each of which has specific models, strategies and circuits. This activity is shared with the business areas.
In May 2020, the Bank initiated the development of an End to End transformation project, called "Collections and Recoveries," which aims at the massive management of (nonportfolioed) clients, through the development of strategies, procedures and commercial offers in an omnichannel environment (differentiated communication channels according to the type of client), constituting an advanced approach, to help manage any impacts after the end of the
moratoria in this segment of private clients and micro and small companies.
Counterparty risk, latent in contracts entered into in financial markets —organised or over-the counter (OTC) markets consists of the possibility of default by counterparties of the contracted terms, and subsequent occurrence of financial losses for the institution.
The types of transactions involved include the purchase and sale of securities, interbank money market transactions, contracting repos, loans of securities and derivative instruments.
Control of these risks is performed through an integrated system that allows approved limits to be recorded, and provides information as to their availability for the various products and maturities. The same system also allows transverse control of the concentration of risks by certain groups of clients/counterparties.
The risk in derivative positions, called Credit Risk Equivalent (CRE) is calculated as the sum of the present value of each contract (or current replacement cost) with the respective potential risk, a component that reflects an estimate of the maximum amount expected to maturity, depending on the volatilities of the underlying market factors and contracted flow structure.
During 2020 current exposure of the transactions on interestrate indexes (Euribor) decreased sharply, reflecting the evolution of medium- and long-term market rates. With regard to exposure to financial groups, structural interest-rate risk hedging transactions were maintained, having the LCH Clearnet as clearing house. BANIF's securitization operations were maintained. The amount of exposure of derivatives with the financial groups dropped significantly due to the increase of the risk coefficient of the long-term interest-rate operations.
This chapter focuses on risk management and control activities related to market risk, distinguishing trading activity, structural risks and liquidity risks. The main methodologies and metrics used by the Bank for this purpose are also briefly described.
The scope of activities subject to market risk includes the operations where equity risk is assumed as a result of possible changes in market factors (interest rate, exchange rate, variable income and credit spread, among others), as well as the liquidity risk of the various products and markets in which the Group operates and the liquidity risk of the balance sheet. It includes trading activity risks and structural risks, both affected by market movements.
The measurement and control of these risks are carried out by a unit independent from management.
The risks of trading activities arise from financial service activities for clients with non-complex instruments, focusing on hedging of exchange-rate and interest-rate risks. Transactions with clients are hedged with the market, so as to ensure a residual exposure to this type of risk.
The methodology applied in the 2021 financial year within the scope of Bank Santander Totta for the negotiation activity is the Value at Risk (VaR). The Historic Simulation Methodology is used as the basis, with a 99% confidence level and a oneday time horizon, while statistical adjustments were applied that allow the swift and effective inclusion of more recent events that condition the risk levels assumed.
Additionally, Stress Testing is used, which consists of defining the behavioural scenarios of differing financial variables and obtaining the respective impact on net income when applying them to the portfolios. These scenarios can replicate the behaviour of financial variables in the light of past events (such as crises) or, on the contrary, plausible scenarios can be determined that do not correspond to past events. In short, scenario analysis seeks to identify the potential risk under extreme market conditions and in the fringes of likelihood of occurrence not covered by the VaR.
Several sensitivity measures (BPV and Greeks), and equivalent volumes are also calculated
In parallel, there is daily monitoring of the positions and of the income statement, which includes credit valuation adjustment (CVA) and debit valuation adjustment (DVA).
The reliability of the VaR model is assessed periodically through a backtesting analysis. Backtesting is a comparative analysis between the calculations of the Value at Risk (VaR) and the daily "clean" results (clean P&L — result associated with the revaluation of the closing portfolios of the previous day at the closing prices of the next day), where the specific/sporadic deviations of the results found, compared to the estimated measurements, are analysed.
The backtesting analyses performed at the bank comply with the BIS recommendations as regards comparison of the internal systems used in the measurement and management of the financial risks. Additionally, hypotheses tests are carried out in backtesting: excess tests, normality tests, average excess measurements, among others.
Quantitative limits are used for the trading portfolios, which are classified into two groups established in the light of the following objectives:
limit is reached (stop loss), from which point it will be considered that the losses have reached an unacceptable level and the positions will be closed immediately.
The VaR remained at very low levels, standing at €6,000 towards the end of June 2021.
Control of the balance-sheet structural risk is directed at the interest-rate risk and the liquidity risk.
The interest-rate risk arises from mismatches between maturities, the repricing of assets and liabilities, and the impact that adverse movements in interest rates may have on the Bank's economic value or net interest income.
The liquidity risk is the risk that the Bank will not have the net financial resources required to meet its obligations when due or that it may incur in excessive costs to meet such obligations.
The interest rate risk in the consolidated balance sheet is measured through modelling the items in assets and liabilities sensitive to interest-rate variations in accordance with their indexing and re-appraisal structure. This model allows the measurement and control of the risk originating directly from the movement of the income curve, particularly its impact on net interest income and on the Bank's equity.
Additionally, other risk indicators are calculated, such as value at risk (VaR) and scenario analysis (stress test).
Liquidity risk is measured and controlled through the modelling of present and future flows of payments and receipts, as well as by conducting stress tests that seek to identify the potential risk under extreme market conditions. In parallel, ratios are estimated on the current items of the balance sheet that act as indicators of structural and shortterm liquidity requirements as well as intraday liquidity indicators in normal and stress situations.
The LCR (Liquidity Coverage Ratio) calculated in accordance with ECB rules stood at 131.8% in the end of the 1st half of 2021.
Control of the balance-sheet risks is ensured by applying a structure of quantitative limits that aim to keep exposures within the authorised levels. The limits focus on the following indicators:
Banco Santander Portugal defines operational risk as the risk of loss arising from shortcomings or errors in internal processes, human resources or internal systems, or derived from external circumstances.
Operational risk is inherent to all products, activities, processes and systems and is generated in all business and support areas. Thus, all employees are responsible for managing the operational risk inherent to their activities, processes and systems in their regular positions.
The main objective in the matter of operational risk control and management is the identification, evaluation, measurement, control, mitigation and reporting of that risk, while the identification and mitigation of the sources of risk constitute a priority for the Bank regardless of whether they have given rise to actual losses or not.
For the purpose of calculation of own-funds requirements, and in the matter of hedging the operational risk, the Group opted for the Standard Method laid down in the BIS II rules.
The Bank's organisational model, in terms of management and control of the Operational Risk results from the Group's adaptation to the Basel II approach.
Supervision and control of operational risk is carried out through its governing bodies. In this regard, the Board of Directors and the Executive Committee periodically include in their management, the review of relevant aspects in the management and mitigation of Operational Risk.
In order to comply with regulatory requirements and in accordance with the best practices in the banking sector, the Group defined an organizational model structured around three lines of defence.
The first line of defence therefore consists of all the business units and support functions, and is responsible for the operational risk originated in their areas, the main function of which is the identification, evaluation, monitoring, mitigation and reporting of this risk.
The second line of defence comprises the area that controls Operational Risk, and it is responsible, on the one hand, for supervising the actual control of operational risk in its various aspects, and, on the other, for assessing whether it is managed as defined and has due regard for the tolerance levels established for the purpose. The second line of defence is an independent function, and it complements the first line management and control functions.
The third line of defence consists of Internal Audit, an independent body with control functions that periodically evaluates whether the policies, methodologies and procedures are properly implemented.
The various stages of the management and control model help:
The operational-risk control model implemented provides us with the following benefits:
As regards the identification, measurement and assessment of operational risk, several quantitative and qualitative instruments were defined, which together facilitate diagnoses in the field of operational risk and rating/ evaluation of the various areas regarding management of their own risk.
Quantitative analysis is mainly conducted through instruments that record and quantify the potential level of losses associated with operational-risk events, in particular:
Database of internal events, the objective of which is to log operational-risk events, with or without possible accounting impacts. There are accounting-reconciliation procedures that ensure the quality of the information contained in the database;
The qualitative analysis allows an assessment of aspects related with the risk profile. The instruments used are mostly the following:
The Bank also develops specific supervisory and control models in terms of technological and cyber risk management in order to ensure the adequate follow-up of the Bank's information systems and the reinforcement of cyber protection. Nevertheless, the principle is one of standardisation and, therefore, the models are perfectly aligned with the tools and with the operational-risk management instruments previously mentioned.
Additionally, there is also a set of various tools that complete and ensure a solid control environment, in particular:
The Bank implemented an advanced operational-risk management programme, with the main objectives of involving all employees and management bodies in the control and mitigation of operational risk. The implementation and disclosure of Santander Portugal's risk culture enable a more efficient evaluation and monitoring of operational risk and simplify decision-making by the business areas and Management.
As in previous years, the Bank continues to act to improve the efficiency of its operational-risk management tools, including a specific application used by the first lines of defence and the various control areas. It is an integrated tool that enables synergies to be generated among the different areas, and fosters the use of common risk assessment and control methodologies. This application also incorporates the database of events, the control system, the metrics / indicators, and the institution's action / risk mitigation plans.
Compliance risk translates as the likelihood of occurrence of negative impacts for the institution, with projection on net income or share capital, arising from infringement of legal rules, specific determinations, contractual obligations, rules of conduct and relationships with clients, ethical principles and established practices concerning the business carried out, which give rise, in particular, to sanctions of a legal or regulatory nature, impairment of business opportunities, reduction of the potential for expansion or inability to demand fulfilment of contractual obligations by third parties.
In turn, Reputational Risk is understood to be the likelihood of occurrence of negative financial impacts for the Institution, reflected in net income or share capital, resulting from an unfavourable perception of its public image, reasoned or not, by clients, suppliers, analysts, employees, investors, the media and any other entities with which the institution is related, or by public opinion in general.
Banco Santander has a set of policies aimed at managing these risks, as defined in the previous paragraphs, establishing mechanisms and procedures that: i) help minimise the likelihood of their materialisation; ii) help identify, report to the Board and overcome situations that may have arisen; iii) ensure monitoring and control; and iv) show, if necessary, that these risks are among the Bank's main concerns, and that it has the organisation and means to prevent, detect, anticipate, mitigate, and, where appropriate, overcome them.
Without prejudice to all other aspects arising from the above and other existing internal regulations, it is justified to specifically mention the instruments identified in the list below, due to their particular impact on the prevention and management of the aforementioned risks.
Compliance risk management policies and instruments
Marketing and Product Follow-up Policies and Procedures;
Consumer Protection Policy;
Reputational risk policies
In this context, it is also worth mentioning that the Bank has an autonomous organic Responsible Banking area, and has specific internal regulations in force on this matter, such as the General Sustainability Policy, the Human Rights Policy, the Corporate Culture Policy, and the Policy on Contributions for Social Purposes.
Mention should also be made to the social and environmental sectoral policies (energy, mines and mining sector, and soft commodities), which are monitored by the Risk area, and define the criteria to be followed in all financial activities related to these sectors.
Bank Santander Portugal's compliance function in terms of money laundering and financing of terrorism (AML/CFT) is embodied in the AML/CFT area, integrated in the Compliance and Conduct area, which materializes the compliance function and that works independently and permanently.
The AML/CFT area has functional autonomy and reports to the Chief Compliance Officer.
Its main objective is to manage compliance risks relating to money laundering, financing of terrorism and sanctions, ensuring that the activity is carried out in accordance with all applicable regulations, in the prevention and minimization of damage, in particular resulting from any sanctions, as well as of a reputational nature.
For this purpose, in addition to a "Head of Regulatory Compliance" and a specialized, exclusively dedicated organic structure, there are internal regulations and specific procedures and controls in place, incorporating the internal control system in the field of AML/CFT, which is subject to an annual audit.
The head of regulatory compliance in this matter is responsible for:
The Chief Compliance Officer is responsible, in particular, for coordinating the AML/CFT area and for assessing the situations submitted to him by the head of Regulatory Compliance.
In 2021, the following reports were made to Supervisors:
| Shareholder | Nº of shares | % |
|---|---|---|
| Santander Totta, SGPS, S.A. | 1,241,179,513 | 98.76% |
| Taxagest - SGPS, S.A. | 14,593,315 | 1.16% |
In keeping with the resolution passed by the Annual General Meeting held on May 25, 2021, Banco Santander Totta, S. A., may directly or through a dependent company, acquire treasury shares as well as sell those purchased up to the limit and under the other conditions set by law.
Taking into account European Central Bank recommendation (ECB/2020/19) of March 27, 2020, the purchase of treasury shares is suspended until this recommendation has lapsed.
On June 30, 2021, Banco Santander Totta, S. A., held 416,525 treasury shares corresponding to 0.033% of its share capital. During the first half of 2021, Banco Santander Totta S. A. did not buy any own shares.
| TRANSACTION WITH OWN SHARES - 1st HALF 2021 | ||||||
|---|---|---|---|---|---|---|
| Number of shares | Average unit price (€) | Book value (€) | % of share capital | |||
| 31-12-20 | 416,525 | 5.23 | 2,177,699 | 0.033% | ||
| Purchases | - | - | - | - | ||
| Disposals | - | - | - | - | ||
| 30-06-21 | 416,525 | 5.23 | 2,177,699 | 0.033% |
A set of Alternative Performance Indicators (API) used in the Management Report is presented, prepared in accordance with guidelines issued by ESMA (European Securities and Markets Authority) on October 5, 2015 (ESMA/2015/1415pt).
For management analysis the Bank uses a set of indicators to measure profitability, efficiency and turnover dynamics. Most of these indicators are derived from the financial information disclosed in accordance with the accounting standards in force (IFRS information), but others are calculated using management information (MIS information), not directly relatable to the IFRS information. Similarly, some indicators might be calculated by correcting non-recurrent movements, aiming to translate the underlying dynamics of the Bank's business, profitability and efficiency.
The indicators are detailed hereunder with reference, as far as possible, to the IFRS information.
"Interest income" less "Interest expenses."
"Dividend income", as presented in the Income Statement.
"Proportion of profits or losses of investments in subsidiaries, joint ventures and associated companies accounted for by using the equity method", as presented in the Income Statement.
"Fee and commission income" less "Fee and commission expenses."
"Other operating income" less "Other operating expenses", as presented in the Income Statement.
Sum of "net interest income", "Income from equity instruments", "Results from associated companies" "Net fees" and "Other operating income."
Sum of "Gains or losses on derecognition of financial assets and liabilities not accounted for at fair value through profit or loss, net value," plus "Gains or losses on financial assets and liabilities, held for trading, net value," plus "Gains or losses on financial assets not held for trading mandatorily accounted for at fair value through profit or loss, net value," plus "Gains or losses from hedge accounting, net value," plus "Exchange differences, net value," plus "Gains or losses on derecognition of non-financial assets, net value," as presented in the Income Statement.
Commercial margin plus results of financial transactions.
Sum of "Staff Costs," plus "Other administrative expenses," plus "Depreciation," as presented in the Income Statement.
Operating income minus Operating costs.
Sum of "provisions or reversal of provisions," plus "impairments or reversal of impairments of financial assets not accounted for at fair value through profit or loss," plus "impairments or reversal of impairments of non-financial assets," plus "other profit or loss, net value," plus "profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations," plus "cash contributions to resolution funds and deposit guarantee schemes," as presented in the Income Statement.
Net operating income less impairment, net provisions and other results.
"Tax expenses or income related to the results of continuing operations," as presented in the Income Statement.
Income before tax and non-controlling interests after deduction of taxes.
"Profits or losses for the period — attributable to minority interests," as presented in the Income Statement.
Income after taxes and before non-controlling interests, less "non-controlling interests."
Ratio between operating costs and operating income.
Calculated in accordance with Bank of Portugal Instruction 23/2011.
Difference between "loans granted and other receivable balances at amortised cost" and "clients' resources and other loans."
Sum of loans and advances to clients (gross) and clients' resources
Corresponds to the sum of the following balance sheet items: "Financial assets accounted for at fair value through other comprehensive income — loans and advances," plus "Financial assets at amortized cost — debt securities," plus "Financial assets at amortized cost — Loans and advances," excluding "Other balances receivable" and "Loans and advances — credit institutions," as set out in notes 8 and 9 of the chapter "Notes to the Consolidated Financial Statements," and notes 7 and 8 of the chapter "Notes to the Separate Financial Statements." Amounts before impairments.
Gross client loans, net of impairments. Impairments correspond to the sum of "Impairments for debt securities" plus "Impairments for loans and advances - clients and other balances receivable" as set out in note 9 of the chapter "Notes to the Consolidated Financial Statements," and in Note 8 of the chapter "Notes to the Separate Financial Statements."
Defined in accordance with the Management Information System (MIS).
Non-performing exposure (NPE), defined in accordance with the document "Guidance to banks on non-productive loans" of the European Central Bank (March 2017), as a ratio of total exposure, including off-balance sheet items.
Ratio between "impairment of financial assets at amortised cost" (from the income statement), and the average of "gross loans and advances to clients" (from the balance sheet).
Impairments of non-performing exposures in relation to total non-productive exposures (NPE).
Corresponds to the item "Deposits - customers" — see note 16 (in the chapter of the Notes to the Consolidated Financial Statements).
Sum of investment funds and insurance marketed and other resources, which information is obtained through Santander Asset Management and/or the Management Information System (MIS).
Sum of balance sheet customer funds (deposits) and off-balance sheet resources.
The LCR (liquidity coverage ratio), in accordance with article 412(1) of Regulation (EU) No. 575/2013, shall be equal to the ratio of the liquidity reserve of a credit institution and its net liquidity outflows during a 30-calendar day stress period.
Ratio between net income for the period and equity at the beginning of the period (annualised amounts).
Ratio between net income and net assets (annualised amounts).
Article 246(1)(c) of the Securities Code determines that each of the persons in charge of the company issue a declaration the content of which is defined therein.
The members of the Board of Directors of Banco Santander Totta, S. A., identified by name herein, each signed the declaration transcribed hereunder:
"I hereby declare, under the terms of and for the purposes set out in article 246(1)(c) of the Securities Code that, to the best of my knowledge, the condensed financial statements for the 1st six months of the 2021 period were prepared in accordance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, financial position and results of Banco Santander Totta, S. A., and of the companies included in the consolidation perimeter, and that the interim management report faithfully sets out the information required under article 246(2) of the Securities Code."
Board of Directors
| (Amounts expressed in thousand Euros) | |||
|---|---|---|---|
| Notes | 30-06-2021 | 31-12-2020 | |
| ASSETS | |||
| Cash, cash balances at central banks and other demand deposits | 5 | 7,631,016 | 4,535,815 |
| Financial assets held for trading | 6 | 748,749 | 916,039 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 7 | 131,587 | 132,905 |
| Equity instruments | 131,587 | 132,905 | |
| Debt securities | - | - | |
| Financial assets at fair value through other comprehensive income | 8 | 5,432,559 | 7,704,190 |
| Equity instruments | 73,254 | 72,634 | |
| Debt securities | 2,299,653 | 4,491,485 | |
| Loans and advances | 3,059,652 | 3,140,071 | |
| Financial assets at amortised cost | 9 | 40,298,061 | 39,820,582 |
| Debt securities | 3,861,490 | 3,965,219 | |
| Loans and advances | 36,436,571 | 35,855,363 | |
| Derivatives – Hedge accounting | 10 | 17,920 | 23,719 |
| Investments in subsidiaries, joint ventures and associates | 11 | 59,494 | 62,582 |
| Tangible assets | 12 | 587,220 | 584,451 |
| Investment property | 249,520 | 250,531 | |
| Property, Plant and Equipment | 337,700 | 333,920 | |
| Intangible assets | 12 | 35,446 | 36,573 |
| Tax assets | 13 | 368,201 | 370,942 |
| Other assets | 14 | 140,462 | 164,151 |
| Non-current assets and disposal groups classified as held for sale | 15 | 53,086 | 51,460 |
| TOTAL ASSETS | 55,503,801 | 54,403,409 | |
| LIABILITIES | |||
| Financial liabilities held for trading | 6 | 771,112 | 941,528 |
| Financial liabilities measured at amortised cost | 16 | 48,995,254 | 47,723,787 |
| Deposits | 45,889,333 | 44,610,781 | |
| Debt securities issued | 2,871,464 | 2,907,350 | |
| Other financial liabilities | 234,457 | 205,656 | |
| Derivatives – Hedge accounting | 10 | 354,896 | 522,283 |
| Provisions | 17 | 379,877 | 231,324 |
| Commitments and guarantees given | 57,897 | 57,466 | |
| Other provisions | 321,980 | 173,858 | |
| Tax liabilities | 13 | 347,584 | 374,991 |
| Share capital repayable on demand | 18 | 54,303 | 64,692 |
| Other liabilities | 19 | 551,970 | 433,448 |
| TOTAL LIABILITIES | 51,454,996 | 50,292,053 | |
| EQUITY | |||
| Capital | 20 | 1,256,723 | 1,256,723 |
| Share premium | 20 | 193,390 | 193,390 |
| Equity instruments issued other than capital | 20 | 135,000 | 135,000 |
| Accumulated other comprehensive income | 20 | (121,146) | (7,360) |
| Items that will not be reclassified to profit or loss | (629,791) | (658,910) | |
| Items that may be reclassified to profit or loss | 508,645 | 651,550 | |
| Retained earnings | 20 | 1,183,213 | 951,973 |
| Other reserves | 20 | 1,395,228 | 1,367,315 |
| Treasury shares | 20 | (44,061) | (44,061) |
| Profit or loss attributable to owners of the parent | 21 | 49,832 | 257,749 |
| Minority interests [Non-controlling interests] | 22 | 626 | 627 |
| TOTAL EQUITY | 4,048,805 | 4,111,356 | |
| TOTAL LIABILITIES AND EQUITY | 55,503,801 | 54,403,409 | |
The accompanying notes form an integral part of the consolidated balance sheet for the period ended June 30, 2021
| Notes 30-06-2021 30-06-2020 Interest income 24 551,461 578,035 Interest expenses 24 (169,616) (179,387) NET INTEREST INCOME 381,845 398,648 Dividend income 25 1,533 1,733 Proportion of profits or losses from investments in subsidiaries, joint ventures and associates accounted for using the equity method 26 1,097 751 Fee and commission income 27 256,476 237,493 Fee and commission expenses 27 (50,633) (52,317) Gains or losses on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net 28 129,180 80,688 Gains or losses on financial assets and liabilities held for trading, net 28 (2,623) 1,050 Gains or losses on non-trading financial assets mandatorily at fair value through profit or loss, net 28 1,313 5,091 Gains or (- losses from hedge accounting, net 28 - 147 Exchange differences, net 28 6,296 5,636 Gains or losses on derecognition of non-financial assets, net 29 (25) 61 Other operating income 30 9,239 10,391 Other operating expenses 30 (6,175) (4,797) TOTAL OPERATING INCOME, NET 727,523 684,575 Administrative expenses 31 (255,447) (257,732) Staff expenses (157,299) (160,015) Other administrative expenses (98,148) (97,717) Cash contributions to resolution funds and deposit guarantee schemes 32 (37,679) (35,624) Depreciation 12 (25,205) (25,708) Provisions or reversal of provisions 17 (238,749) (1,354) Commitments and guarantees given (431) (3,146) Other provisions (238,318) 1,792 Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss 17 (68,775) (100,914) Financial assets at fair value through other comprehensive income 1 72 Financial assets at amortised cost (68,776) (100,986) Impairment or reversal of impairment on non-financial assets 17 (1,384) (8,539) Other profit or loss, net 1.3 l) (29,565) (29,258) Profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations 33 10,303 (90) PROFIT OR LOSS BEFORE TAX FROM CONTINUING OPERATIONS 81,022 225,356 Tax expense or income related to profit or loss from continuing operations 13 (31,190) (70,840) PROFIT OR LOSS FOR THE PERIOD 49,832 154,516 Attributable to minority interest [non-controlling interests] 22 - - Attributable to owners of the parent 49,832 154,516 |
(Amounts expressed in thousand Euros) | ||
|---|---|---|---|
The accompanying notes form an integral part of the consolidated statement of profit and loss for the period ended June 30, 2021
| 30-06-2021 | (Amounts expressed in thousand Euros) 30-06-2020 |
||||
|---|---|---|---|---|---|
| Attributable to the shareholders of BST |
Attributable to non- controlling interests |
Attributable to the shareholders of BST |
Attributable to non controlling interests |
||
| Profit or loss for the period | 49,832 | - | 154,516 | - | |
| Other comprehensive income | (112,383) | - | 104,975 | - | |
| Items that will not be reclassified to profit or loss | |||||
| Actuarial gains or losses on defined benefit pension plans | |||||
| . Gross amount | 30,459 | - | (54,306) | - | |
| . Tax effect | - | - | - | - | |
| Fair value changes of equity instruments measured at fair value through other comprehensive income | |||||
| . Gross amount | (133) | - | - | - | |
| . Tax effect | - | - | - | - | |
| Share of other recognised income and expense of Investments in subsidaries, joint ventures and associates | |||||
| . Gross amount | 253 | - | 295 | - | |
| . Tax effect | 260 | - | (76) | - | |
| Items that may be reclassified to profit or loss | |||||
| Cash flow hedges | |||||
| . Fair value | 52,288 | - | 60,048 | - | |
| . Tax effect | (16,210) | - | (18,615) | - | |
| Debt instruments at fair value through other comprehensive income | |||||
| Valuation gains or (-) losses taken to equity | |||||
| . Fair value | (214,165) | - | (211,419) | - | |
| . Tax effect | 66,340 | - | 65,512 | - | |
| Change in business model (Note 1.3 c)) | |||||
| . Initial impact | |||||
| . Gross amount | - | - | 373,172 | - | |
| . Tax effect | - | - | (115,683) | - | |
| Fair value changes | |||||
| . Gross amount | (45,616) | - | 8,764 | - | |
| . Tax effect | 14,141 | - | (2,717) | - | |
| Total comprehensive income for the period | (62,551) | - | 259,491 | - |
The accompanying notes form an integral part of the consolidated statements of other comprehensive income for the period ended June 30, 2021
| Accumulated other comprehensive | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Share | Equity instruments | income | Profit or loss attributable | ||||||||
| Capital | premiun | issued other | Fair | Retained | Other | Treasury | to owners of the | Minority | Total | ||
| than capital | value | Taxes | earnings | reserves | shares | parent | interests | ||||
| Balances as at December 31, 2019 | 1,256,723 | 193,390 | 135,000 | (237,522) | 13,099 | 513,134 | 1,314,979 | (44,065) | 489,451 | 627 | 3,634,816 |
| Appropriation of net income | |||||||||||
| . Transfer to reserves | - | - | - | - | - | 438,839 | 50,612 | - | (489,451) | - | - |
| Acquisition of own shares | - | - | - | - | - | - | - | 4 | - | - | 4 |
| Sale of equity instruments at fair value | |||||||||||
| through other comprehensive income | - | - | - | (2,275) | 580 | - | 1,699 | - | - | - | 4 |
| Other | - | - | - | - | - | - | 25 | - | - | - | 25 |
| Consolidated comprehensive income in 2020 | - | - | - | 319,716 | (100,958) | - | - | - | 257,749 | - | 476,507 |
| Balances as at December 31, 2020 | 1,256,723 | 193,390 | 135,000 | 79,919 | (87,279) | 951,973 | 1,367,315 | (44,061) | 257,749 | 627 | 4,111,356 |
| Appropriation of net income | |||||||||||
| . Transfer to reserves | - | - | - | - | - | 231,240 | 26,509 | - | (257,749) | - | - |
| Acquisition of own shares | - | - | - | - | - | - | - | - | - | - | - |
| Sale of equity instruments at fair value | |||||||||||
| through other comprehensive income | - | - | - | (1,497) | 94 | - | 1,403 | - | - | - | - |
| Other | - | - | - | - | - | - | 1 | - | - | (1) | - |
| Consolidated comprehensive income in 1st. Half 2021 | - | - | - | (176,914) | 64,531 | - | - | - | 49,832 | - | (62,551) |
| Balances as at June 30, 2021 | 1,256,723 | 193,390 | 135,000 | (98,492) | (22,654) | 1,183,213 | 1,395,228 | (44,061) | 49,832 | 626 | 4,048,805 |
The accompanying notes form an integral part of the consolidated statements of changes in shareholders' equity for the period ended June 30, 2021
(Amounts expressed in thousand Euros)
| (Amounts expressed in thousand Euros) | ||
|---|---|---|
| 30-06-2021 | 30-06-2020 | |
| CASH FLOW FROM OPERATING ACTIVITIES: | ||
| Interest and commissions received | 781,166 | 773,680 |
| Payment of interest and commissions | (252,356) | (173,811) |
| Administrative expenses | (302,781) | (271,265) |
| Pension Fund contributions | - | - |
| Foreign exchange and other operating results | (28,318) | (24,394) |
| Recovery of uncollectable loans | 4,365 | 4,453 |
| Operating results before changes in operating assets and liabilities | 202,076 | 308,663 |
| (Increase) / decrease in operating assets | ||
| Loans and advances to credit institutions | 5,932 | 710,019 |
| Financial assets held for trading | 167,290 | 89,991 |
| Financial assets at amortized cost | (535,869) | (2,381,538) |
| Assets and liabilities at fair value through profit or loss | 27,285 | 16,129 |
| Non-current assets held for sale | (9,667) | 9,804 |
| Investment properties | 1,011 | (2,397) |
| Other assets | 9,023 | (4,166) |
| (334,995) | (1,562,158) | |
| Increase / (decrease) in operating liabilities | ||
| Financial liabilities at amortized cost - financial institutions | (580,110) | 3,551,633 |
| Financial liabilities at amortized cost - customers | 1,911,981 | 751,928 |
| Financial liabilities held for trading | (170,416) | (94,540) |
| Other liabilities | 115,837 | 86,795 |
| 1,277,292 | 4,295,816 | |
| Net cash flow from operating activities before income taxes | 1,144,373 | 3,042,321 |
| Income tax paid | (31,598) | (17,866) |
| Net cash flow from operating activities | 1,112,775 | 3,024,455 |
| CASH FLOW FROM INVESTING ACTIVITIES: | ||
| Dividends received | 1,533 | 1,733 |
| Purchase of financial assets at fair value through other comprehensive income | 7,255 | (152,451) |
| Sale of financial assets at fair value through other comprehensive income | 2,010,767 | 1,293,828 |
| Other financial assets mandatory at fair value through profit or loss | 2,837 | 6,902 |
| Income from financial assets at fair value through other comprehensive income | 27,800 | 13,602 |
| Purchase of tangible and intangible assets | (17,085) | (31,368) |
| Sale of tangible assets | 284 | 1,481 |
| Net cash flow from investing activities | 2,033,391 | 1,133,727 |
| CASH FLOW FROM INVESTING ACTIVITIES: | ||
| Issuance of securities and subordinated debt | - | (89,256) |
| Redemption of securities and subordinated debt | (40,008) | (10,013) |
| Interest paid on bonds issued | (10,957) | (2,376) |
| Net cash flow from financing activities Net cash flow from financing activities |
(50,965) | (101,645) |
| Net Increase / (Decrease) net in cash and cash equivalents | 3,095,201 | 4,056,537 |
| Cash and cash equivalents at the beginning of the period | 4,535,815 | 3,492,664 |
| Cash and cash equivalents at the end of the period | 7,631,016 | 7,549,201 |
The accompanying notes form an integral part of the consolidated statements of cash flows for the periods ended June 30, 2021
Banco Santander Totta, S. A. (hereinafter also "Bank" or "Group") was established in 1864 and was formerly known as Companhia Geral de Crédito Predial Português, S. A. (CPP), and it has its registered office in Portugal at Rua do Ouro, 88, Lisbon. The Bank was nationalised in 1975 and transformed into a state-owned public limited company in 1990. On December 2, 1992, the Bank was reprivatized by means of a public share offering at a special session of the Lisbon Stock Exchange.
As from December 2000, the Bank joined the Santander Group, following the acquisition of Banco Totta & Açores, S. A. (Totta) by the Group. The main balances and transactions maintained with companies of the Santander Group during the first half of 2021 and the financial year of 2020 are detailed in Note 37. The Bank is included in the Banco Santander, S. A. consolidation (ultimate parent).).
On December 16, 2004, the Totta demerger/merger operation was registered, under which its financial holdings in Foggia, SGPS, S. A. and in Totta Seguros – Companhia de Seguros de Vida, S. A., were spun off, the remainder of its business, together with Banco Santander Portugal, S. A. (BSP), having been incorporated by merger into CPP, which changed its name to the present one.
On May 3, 2010, the Bank carried out the merger by incorporation of Banco Santander de Negócios Portugal, S. A. (BSN). The transaction was recorded for accounting purposes with reference to January 1, 2010.
On April 1, 2011, the Bank carried out the merger by incorporation of Totta Crédito Especializado – Instituição Financeira de Crédito, S. A. (Totta IFIC).
On December 20, 2015, following the resolution measure applied by the Bank of Portugal to Banif – Banco Internacional do Funchal, S. A. (Banif), the Bank acquired the banking business and a set of assets, liabilities, offbalance-sheet items and assets under management of this entity.
Following the decision of the Single Resolution Board with regard to the application of a resolution measure to Banco Popular Español, S. A., taken on June 7, 2017, through the instrument for the sale of the whole of the business, with the transfer of the whole of the shares representing the share capital of Banco Popular Español, S. A., to Banco Santander, S. A., the latter came to hold indirectly the whole of the share capital and voting rights of Banco Popular Portugal, S. A. (BAPOP). In this regard, on December 27, 2017, the Bank purchased the entire capital and voting rights of BAPOP, carrying out on that date the merger by incorporation.
The Bank is engaged in obtaining third-party financial resources, in the form of deposits and otherwise, which it invests, together with its own funds, in every sector of the economy, mainly in the form of extending credit or in securities, while also providing other banking services in the country and abroad.
The Bank has a nationwide network of 378 branches (434 branches as at December 31, 2020). It also has several branches and representative offices abroad, and holdings in subsidiaries and associated companies.
The Bank's financial statements for the first half of 2021 were approved at the Board of Directors meeting on September 21, 2021.
The Group's consolidated financial statements have been prepared on a going concern basis, based on the books and accounting records maintained in accordance with the principles enshrined in the International Financial Reporting Standards (IAS/IFRS), as endorsed by the European Union, in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council, of July 19, transposed into the Portuguese legal framework by Decree-Law 35/2005, of February 17, and by Bank of Portugal Notice No. 5/2005 of December 30. As regards Group companies that use different accounting standards, adjustments are made for their conversion to the IAS/IFRS.
The accounting policies used by the Bank in the preparation of its consolidated financial statements as at June 30, 2021, are consistent with those used in the preparation of the consolidated financial statements as at December 31, 2020, applying in particular IAS 34 (Interim Financial Reporting ).
The consolidated financial statements are presented in thousands of euros, rounded to the nearest thousand.
In preparing the financial statements, the Bank follows the historical cost convention, modified when applicable, by measuring at fair value: - Financial assets held for trading; - Financial assets not mandatorily held for trading accounted for at fair value through profit or loss; - Financial assets carried at fair value through other comprehensive income; - Derivatives.
The preparation of financial statements in conformity with the IFRS requires the use of certain critical accounting estimates, implying also judgement by the Board as to the application of the Group's accounting policies. The areas of the financial statements involving a greater degree of judgement or complexity, or the areas in which the assumptions and estimates are significant in the preparation of this set of financial statements are detailed in Note 2.
The Bank's financial statements have been prepared on a going concern basis, as the Board of Directors considers that the Bank has the necessary resources to continue operating. The assessment made by the Board of Directors is based on a wide range of information related to current and future conditions, including projections of future profitability, cash flows, capital requirements and sources of financing. The projections made are based on different scenarios, and also include the impact on the Bank's activity of the uncertainty caused by the Covid - 19 pandemic.
Within the scope of the application of the IFRS as approved by the European Union, the Bank adopted the following standards, amendments and interpretations with reference to January 1, 2021:
Within the scope of the Reform of the reference interest rates, and in order to manage and control the revision of reference interest rates (which include, among others, EONIA, LIBOR and EURIBOR: The EONIA will be discontinued as of January 2022, LIBOR should be discontinued in December 2021, and EURIBOR remains a valid index), the Santander Group created a working group, which includes the Bank, to ensure a smooth transition in all entities and assess possible impacts.
In the wake of the standards and interpretations referred to above no material impacts were identified:
Additionally, by the date of approval of these financial statements, the following standards and improvements were issued and have not yet been adopted by the Bank by virtue of their application not yet being mandatory or they have not yet been endorsed by the European Union:
from changes in accounting policies. Accounting estimates are now defined as monetary values subject to uncertainty in their measurement, used to achieve the objective(s) of an accounting policy.
In the wake of the standards and interpretations referred to above, no material impacts were identified.
The consolidated financial statements now presented reflect the assets, liabilities, income, expenses, other comprehensive income and cash flows of the Group and of the entities directly or indirectly controlled by it (Note 4), including special-purpose entities.
Subsidiaries are entities controlled by the Group. The Group controls another entity when it has the power to manage that entity's relevant activities, and when it is exposed, or has right, to the variability in the returns generated by its involvement with that entity and can take possession thereof through the power it holds over that entity's relevant activities. The financial statements of subsidiary companies are consolidated using the full consolidation method as soon as the Group takes control over their business until such time as control ceases. All significant balances and transactions between the consolidated companies have been eliminated. Additionally, where applicable, consolidation adjustments are made in order to ensure consistency in the application of the accounting principles. The amount corresponding to the interests of third parties in subsidiary companies consolidated through the global integration method is presented under "Non-controlling Minority Interests" (Note 22). Additionally, as a result of applying IFRS 10 – "Consolidated Financial Statements", the Group includes entities with a special purpose in its consolidation perimeter, namely vehicles and funds created within the scope of securitization operations, when it exercises actual financial and operational control over them, and when it is exposed to most of the risks and benefits associated with the respective activity.
The accumulated losses of a subsidiary are allocated to the non-controlling interests in the proportion held, which might imply recognition of non-controlling interests of a negative amount.
In a step-acquisition transaction resulting in the acquisition of control, any non-controlling interest previously held is revalued at fair value with a contra entry in profit or loss at the time of calculation of the goodwill. At the time of a partial sale, resulting in loss of control over a subsidiary, any remaining non-controlling interest held is revalued at fair value on the date of sale and the gain or loss resulting from such revaluation is recorded with a contra entry in profit or loss.
On the other hand, the Group manages assets held by investment funds, whose participation units are held by third parties. The financial statements of investment funds are not included in the Group's consolidation perimeter, except when the Group controls these investment funds, namely when it has more than 50% of its participation units, in which case those funds are consolidated by the global integration method. In accordance with IAS 32 and IFRS 10, the amount corresponding to the participation of third parties in investment funds that were consolidated using the global integration method is presented as a liability under "Share capital repayable on demand." Interests that do not control the results of the Novimovest Fund are recognized as a deduction under the caption "Other operating income/expenses", given the nature of the main income earned by that fund.
Financial investments in associated companies are carried using the equity method as from the moment the Group comes to have significant control until such time as it ceases. Associated companies are entities in which the Group has significant influence but does not control them. Significant influence is understood to exist when one has a (direct or indirect) financial holding of more than 20% but less than 50% (with voting rights proportionate to the holding) or the power to take part in decisions on the financial and operational policies of an entity, but without control or joint control over it.
Under the equity method, the consolidated financial statements include the portion attributable to the Group's total equity and of the profits and losses recognised by the associated companies. Dividends allocated by associated companies reduce the amount of the investment made by the Group. The Group performs impairment tests for its investments in associated companies whenever there are signs of impairment. Impairment losses recorded in prior periods may be reversible, up to the limit of the accumulated losses.
Goodwill corresponds to the positive difference between the acquisition cost of the business and the actual equivalent percentage in the fair value of the assets, liabilities and contingent liabilities of the subsidiaries and associated companies acquired, as well as any equity instruments issued by the Group. With a minimum annual frequency, the Group performs goodwill impairment tests in accordance with the requirements of IAS 36 – "Impairment of assets." For this purpose, goodwill is allocated to cash-flow generating units, never greater that the group of assets comprising each of the Group's operational segments, determination of the respective recoverable amount being based on estimates of future cash flows updated on the basis of discount rates considered appropriate by the Group, based on appropriate, accepted methods. Impairment losses related to goodwill are recorded in profit or loss for the year and cannot be reversed. The goodwill of associated companies is included in the carrying amount of the holding, and is subject to impairment tests.
On the date of the first adoption of the IFRS, the Group decided not to apply IFRS 3 – "Business combinations" retrospectively. Thus, the goodwill resulting from acquisitions that occurred until January 1, 2004, is deducted from equity in keeping with the previous accounting policy. On the other hand, the negative consolidation differences previously recorded have been added to equity, as permitted by IFRS 1.
Acquisitions of subsidiaries and associated companies arising after January 1, 2004, were recorded using the purchase method. The Group recognised the fair value of the assets acquired and liabilities assumed or valued them in accordance with the International Financial Reporting Standards applicable to certain assets and liabilities in which the former is not the measurement principle laid down in IFRS 3 – Business combinations. The acquisition cost was equal to the amount determined on the date of purchase of the assets acquired and liabilities incurred or assumed and of the contingencies, under the terms of IFRS 3. In this way, the Group applied IAS 19 to the assets acquired and liabilities assumed related with employee benefits and IAS 12 to the assets acquired and liabilities assumed in connection with income taxes.
Additionally, whenever it is determined that the fair value of the assets acquired and liabilities incurred or assumed – and after its confirmation under the terms of IFRS 3 – is greater than the acquisition cost (gain on the purchase at a discount), the difference is recognised in the income statement. Under the terms of IFRS 3, the Group has a maximum period of one year, from the date of acquisition, to obtain missing information and possibly correct retrospectively the value of the assets acquired and liabilities assumed and, consequently, the result determined at the time of the purchase.
With application of the amendments to IFRS 3 and IAS 27, the Group defined as its accounting policy valuation at fair value through profit or loss in cases where there is change of control by acquisition of subsidiaries in different stages. In these cases, the holding acquired prior to the moment of change of control is revalued at fair value through profit or loss. Goodwill is determined on that date as the difference between the total acquisition cost and the proportion of the fair value of the assets and liabilities of the subsidiary. Similarly, on application of the amendments to the standards referred to above, the Group revalued in profit or loss the holdings in which it had lost control.
The accounting policies of subsidiaries and associated companies are altered, where necessary, to ensure that they are applied consistently by all Group companies.
The most significant accounting policies used in the preparation of the attached financial statements were as follows:
The Bank uses the accrual-accounting principle for most items of the financial statements. Thus, expenses and income are recorded as and when generated, regardless of the time of payment or receipt.
The Bank's accounts are prepared in the currency of the economic environment in which it operates ("functional currency"), and are expressed in euros.
Transactions in currencies other than the functional currency, and the corresponding income and expenses, are recorded at the exchange rate ruling on the date on which they occur. On each reporting date, assets and liabilities expressed in a currency other than the functional currency are translated at the closing exchange rate (Bank of Portugal fixing).
As of June 30, 2021, the exchange rates of the main currencies other than the functional currency were:
USD - 1.1884 GBP - 0.858050
c) Financial instruments
The classification of financial assets follows three main criteria:
In this connection, the categories of financial assets laid down for debt financial instruments are:
A financial debt instrument that (i) is managed under a business model whose objective involves keeping the financial assets in the portfolio and receiving all of their contractual cash flows and (ii) has contractual cash flows on specific dates that correspond exclusively to the payment of principal and of interest on the outstanding principal – must be measured at amortised cost unless designated at fair value through profit or loss under the fair value option – "Hold to Collect".
A financial debt instrument that (i) is managed under a business model whose objective is achieved either through the receipt of contractual cash flows or through the sale of financial assets and (ii) include contractual clauses that give rise to cash flows that correspond exclusively to the payment of principal and of interest on the outstanding principal – must be measured at fair value through the statement of other comprehensive income ("FVTOCI"), unless it is designated at fair value through profit or loss under the fair value option – "Hold to Collect & Sale".
The Bank assessed its business models on the basis of a broad set of indicators of which emphasis is given to its business plan and current risk-management policies. For the "Hold to Collect" business model, in order to assess the frequency and materiality of the sales, quantitative thresholds were defined based on past experience. The sales projected for the financial assets classified in this business model do not exceed the thresholds defined by the Group.
The other financial instruments, specifically equity instruments and derivatives, are by definition classified at fair value through profit or loss. For equity instruments, there is the irrevocable option of designating that all fair-value variations are recognised under other comprehensive income, in which case, only the dividends are recognised in profit or loss, because gains and losses are not reclassified to profit or loss even when they are derecognised/sold.
According to the requirements of IFRS 9, reclassification between financial instrument portfolios can only take place if the Bank decides to change the business model to management of a portfolio of financial assets. According to the mentioned standard, these changes must be infrequent, and must comply with the following requirements, namely:
In March 2020, due to the events mentioned in Note 8, the Bank's Management took the decision to discontinue the activity of granting loans that require stable financing and in large amounts and terms, within this activity is direct financing to the Portuguese state. This decision was (i) duly documented internally, (ii) disseminated throughout the Bank's structure, and (iii) duly communicated to all stakeholders. Management understands that credits impacted by changes in the business model have a significant impact on the Bank's balance sheet, as can be seen in Note 8.
In view of the above, and once all the impact requirements defined in IFRS 9 have been met, the Bank proceeded to reclassify the respective contracts, and they are now measured at fair value through other comprehensive income, when previously they were measured at amortized cost. The difference between the fair value and the respective balance sheet value on the reclassification date, was recognized in other comprehensive income, as shown:
| Measurement | |||||
|---|---|---|---|---|---|
| At fair value through | |||||
| At amortized | other comprehensive | ||||
| cost | income | ||||
| Credit granted | 2,300,000 | 2,300,000 | |||
| Interest receivable | 49,478 | 49,478 | |||
| Fair value | - | 373,172 | |||
| Value adjustments of hedged assets | 258,180 | 258,180 |
Gains and losses obtained on the sale of credits on a definitive basis are recorded in the income statement item "Impairment of financial assets at amortized cost." These gains or losses correspond to the difference between the selling price that was set and the carrying amount of those assets, net of impairment losses.
The Bank does not derecognise the credits sold in the securitisation operations when:
Credits sold and not derecognised are carried under "Financial assets at amortized cost," and are subject to accounting criteria identical to other credit operations. Interest and commissions associated with the securitised credit portfolio are accrued in keeping with the respective term of the credit operations.
Maintenance of the risk and/or benefit is represented by bonds of a higher risk issued by the securitisation vehicle. The amount carried under assets and liabilities represents the proportion of the risk/benefit held by the Bank (ongoing involvement).
The bonds issued by securitisation vehicles and held by Group entities are eliminated in the consolidation process.
Assets are derecognised when (i) the Bank's contractual right to receive their cash slows expires, (ii) the Bank has substantially transferred all the risks and benefits inherent in holding them; or (iii) notwithstanding retaining a part, but not substantially the whole, of the risks and benefits inherent in holding them, the Bank shall have transferred control over the assets.
Liabilities for guarantees provided and irrevocable commitments are recorded in off-balance sheet items for the value-at-risk, and interest flows, commissions or other income are recorded in profit or loss over the life of these transactions.
Performance guarantees are initially recognised at fair value, which is normally evidenced by the amount of the fees received over the duration of the contract. At the time of contractual termination, the Bank has the right to reverse the guarantee, the amounts being recognised under Financial assets at amortized cost after the transfer of the compensation of losses to the beneficiary of the guarantee.
Income from fees and commissions obtained in the execution of a significant act, such as commissions on loan syndications, are recognised in profit or loss when the significant act has been finalised.
Income from fees and commissions obtained as the services are provided are recognised in profit or loss for the period to which it refers.
Income from fees and commissions that form an integral part of the remuneration of financial instruments are recorded in profit or loss using the effective interest rate method.
Recognition of expenses with fees and commissions is carried out using the same criteria adopted for income.
Financial assets at fair value through other comprehensive income include equity and debt instruments that are recorded at the time of their initial recognition at fair value, plus transaction expenses, and they are subsequently measured at fair value. Gains and losses related to subsequent variation of the fair value are reflected under a specific equity heading named "Other Accumulated Comprehensive Income" until their sale, when they are reclassified to profit or loss for the period, with the exception of equity instruments that remain in share capital.
Interest is calculated in accordance with the effective interest-rate method, and carried in profit or loss under "Interest income."
Income from floating-rate securities is recognised in the income statement under "Dividend Income" on the date when they are allocated. In accordance with this criterion, interim dividends are recorded as income in the period in which its distribution is decided.
Financial assets held for trading include floating income securities traded on active markets acquired for the purpose of their sale in the short term. Trading derivatives with net amount receivable (positive fair value), as well as the options bought are included under Financial Assets held for trading. Trading derivatives with net amount payable (negative fair value), as well as the options sold are included under Financial Liabilities held for trading.
Financial assets and liabilities held for trading, and financial assets and liabilities not held for trading, must be carried at fair value through profit or loss are initially recognised at fair value, the expenses associated with the transactions being recognised in profit or loss at the initial moment. Gains and losses arising from subsequent valuation at fair value are recognised in the income statement under the headings "Gains or losses on financial assets and liabilities held for trading, net value" and "Gains or losses on financial assets not held for trading mandatorily carried at fair value through profit or loss, net value", respectively.
The fair value of financial assets held for trading and traded on active markets is their most representative bid-price, within the bid-ask interval, or their closing price on the reporting date. If a market price is not available, the fair value of the instrument is estimated on the basis of valuation techniques, including pricing models or discounted cash flow techniques. When discounted cash flow techniques are used, the future financial flows are estimated in keeping with management's expectations, and the discount rate used corresponds to the market rate for financial instruments of similar characteristics. In the price valuation models, the data used correspond to information on market prices.
The fair value of derivative financial instruments that are not traded on the stock market, including the credit-risk component assigned to the parties involved in the transaction (Credit Value Adjustments, and Debit Value Adjustments), is estimated based on the amount that would be received or paid to settle the contract on the date in question, considering current market conditions, as well as the credit rating of the parties involved.
Financial liabilities are initially valued at their fair value, which normally corresponds to the consideration received, net of transaction costs, and are subsequently recorded at amortized cost, in accordance with the effective interest rate method, with the exception of the requirement to recognize the changes in the fair value of financial liabilities resulting from changes in the entity's own credit risk, to be recognized in equity, rather than in results as previously required, unless this accounting treatment generates an "accounting mismatch". Subsequent reclassifications of these variations to profit or loss are not allowed, not even at the time of the repurchase of these liabilities.
Financial liabilities correspond mainly to the resources of central banks and of other credit institutions, customers' deposits and bond issues.
Securities sold with repurchase agreement are kept in the portfolio where they were originally recorded. Funds received are recorded on the settlement date, in a specific account under liabilities, with accrual of the respective interest payable.
The Bank repurchases bonds issued in the secondary market. Purchases and sales of own bonds are included proportionately under the respective issued debt items (principal, interest and
commissions), and the difference between the amount settled and the write-off, or the increase of liabilities, are recognised immediately in profit or loss.
The new IFRS 9 hedge accounting model aims not only to simplify the process of creating and maintaining hedging relationships, but also to align the accounting of these relationships with the risk-management activities of each institution, extending the eligibility of a greater number of hedged and hedging instruments, but also types of risk.
The new standard still does not provide rules for the accounting of hedges called macro-hedging, and these are still to be defined by the IASB. Because of this limitation of the IFRS 9, and with regard to hedge accounting, institutions may choose to maintain the accounting principles of IAS 39 (only for hedge accounting) until the completion of the macro-hedging project by the IASB. In this framework, the Bank decided to continue applying the hedge accounting defined within the scope of IAS 39.
The Bank uses derivative financial instruments in particular to hedge the interest-rate risk arising from financing and investment activities. Derivatives that qualify for hedge accounting are carried at their fair value and gains or losses are recognised in keeping with the Bank's hedge-accounting model.
Under the terms of the standard, application of hedge accounting is only possible when all the following requirements are met:
Hedge accounting is only applied once all those requirements are met. Likewise, if at any time the effectiveness of the hedge no longer lies in the interval between 80% and 125%, hedge accounting is discontinued.
Gains or losses on the revaluation of a hedging derivative financial instrument are recognized in profit or loss. Should the hedge be effective, the gains or losses resulting from the change in fair value of the hedged item relative to the risk being hedged are also recognised in profit or loss.
If a hedging instrument matures or is terminated early, the gain or loss recognised in the valuation of the hedged risk as value adjustments of the hedged items is amortised over its remaining term. If the hedged asset or liability is sold or settled, all amounts recognised in the valuation of the hedged risk are recognised in profit or loss for the period, and the derivative financial instrument is transferred to the trading portfolio. If the hedge is no longer effective, the gains or losses
recognised as value adjustments of the hedged items are amortised through profit or loss during their remaining term.
In the case of exchange-rate hedges of monetary items, hedge accounting is not applied, and the gain or loss on the derivative is recognised in the income statement, as are foreign-exchange variations of the monetary items.
Cash-flow hedges are understood to be the hedge of an exposure relating to the variability of future cash flows, which may be assigned to a specific risk associated with a recognised asset or liability, or to a highly probable future transaction, and may affect profit or loss.
In this sense, the Bank contracted financial derivatives to hedge the future interest flows of part of its mortgage loan portfolio remunerated at a floating rate. It also contracted financial derivatives instruments to hedge future flows from the sale of part of its portfolio at fair value through other comprehensive income.
Application of cash-flow hedge accounting is subject to the general requirements referred to above for hedge accounting and entails the following records:
Additionally, the gain or loss on the hedging instrument recognised in equity corresponds to the lesser of the following amounts:
In this sense, and if applicable, the part not recognised in equity of the gain or loss on the hedging instrument is reflected in profit or loss.
Cash-flow hedge accounting must be discontinued if the hedging instrument expires or is terminated early, if the hedge ceases to be effective or if it is decided to terminate the designation of the hedging relationship. In these cases, the cumulative gain or loss resulting from the hedging instrument must continue to be separately recognised in equity, and is reflected in profit or loss in the same period of time as the recognition in profit or loss of the gains or losses of the hedged item. Should the Bank hedge an operation that is not expected to be realised, the amount of derivative still recognised in Equity is immediately transferred to profit or loss, the derivative being transferred to the Bank's trading portfolio.
IFRS 9 determines that the concept of impairment based on expected losses is to be applied to all financial assets except for financial assets at fair value through profit or loss and equity instruments measured at fair value through other comprehensive income.
The Bank applies the IFRS 9 concept to financial assets at amortised cost, debt instruments and loans and advances measured at fair value through other comprehensive income, off-balance sheet exposures, finance leasing, other receivables, financial guarantees and loan commitments not carried at fair value.
With the exception of purchased or originated credit-impaired financial assets (referred to as POCI) (which are described separately below), impairment losses must be estimated through a provision for losses of an amount equal to:
The expected loss for credit risk is an estimate weighted by the probability of the present value of the loan losses. This estimate results from the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the effective interest rate of the financial instruments.
The Bank measures the expected loss individually or on a collective basis for portfolios of financial instruments that share similar risk characteristics. The adequacy of the provision for losses is based on the present value of expected cash flows of the asset using the original effective interest rate of the asset, regardless of being measured individually or collectively.
A financial asset is impaired when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred. Financial assets with a reduction of the recoverable amount of loans are referred to as Stage 3 assets. The Bank has adopted the internal definition of non-performing loans as the criterion for the identification of Stage 3 loans. The internal definition of non-performing loans is governed by objective and subjective criteria, and is used for the management of the Bank's credit risk and for the calculation of the regulatory capital using advanced credit-risk methods.
Financial assets classified as POCI are treated differently, in that they are in an impaired situation. In the revaluation of assets, the expected loss to maturity is applied. For these assets, the Bank classifies them in Stage 3 for the net amount of the expected loss. The associated interest is calculated by applying the effective interest rate to the net amount.
The Group monitors all financial assets in order to assess whether there has been a significant increase of the credit risk since their initial recognition. If there has been a significant increase of the credit risk, the Bank estimates the loan-loss provision to maturity (LTPD (lifetime probability of default)) and not over 12 months.
The Bank uses scorings and rating systems for internal credit-risk management. These notations allow an assessment of the risk level of the transactions or of the customer at all times and they are considered in the credit-risk approval and monitoring decisions. The models are based on series of data that are considered predictors of the risk of default, which apply judgements, that is, the credit-risk notations are defined using qualitative and quantitative factors that are indicative of the risk of default. The notations consider current characteristics and past events, and their significance for the level of risk is studied.
The Bank uses different criteria to determine if the credit risk has increased significantly per asset portfolio, in particular:
The main concepts used to measure the expected credit-risk loss are:
These concepts are calculated through statistical models developed internally, and are adjusted to reflect prospective information.
PD is an estimate of the likelihood of default over a given time horizon. The models that have been developed estimate this probability over sufficiently broad horizons for application in the residual maturity of the financial assets. The calculation is based on statistical classification models (rating and scoring) that detail the level of risk of the individual counterparties. The classification models (rating and scoring) are used in management and are based on internal data comprising both quantitative and qualitative factors. The estimate is based on current conditions, adjusted to take into account the estimates of future conditions that will affect the PD.
LGD is an estimate of the total loss, should the asset enter into default. It is based on the difference between the contractual cash flows due and those that the Bank expects to receive, taking into account the cash flows of existing guarantees. The LGD models for secured assets consider the valuation of the guarantees, taking into account selling expenses, the time to execute the guarantees, collateralisation level, etc. The LGD models for unsecured assets consider recovery time, recovery rates, and recovery expenses. The calculation is based on cash flows discounted at the original effective interest rate of the loan. The estimate is based on current conditions, adjusted to take into account the estimates of future conditions that will affect the LGD.
EAD is an estimate of exposure on a date of future default, taking into account the expected changes in the exposure after the reporting date. The Bank's modelling approach for EAD reflects the expected changes in the outstanding balance over the loan's lifetime exposure allowed by the current contractual terms, such as amortisation profiles, total or partial early repayment, and changes in the use of unused commitments before entry into default.
The Bank assesses the expected credit-risk loss for the purpose of impairment losses, considering the risk of default during the maximum contractual period during which the entity is exposed to the credit risk. However, for financial instruments such as credit cards, credit lines and overdraft facilities that include a loan and an unused commitment component, the Bank's contractual ability to demand repayment and to cancel the unused commitment does not limit the Bank's exposure to loan losses to the contractual period of notice. For such financial instruments, the Bank measures the Expected Credit Risk Loss for the period historically observed as the average life of these instruments.
When the expected credit-risk loss is measured collectively, the financial instruments are grouped on the basis of common risk characteristics, such as instrument type, customer type, credit risk degree as measured by the ratings or scoring system, type of collateral, date of initial recognition, relationship between loan and value of the guarantee (LTV).
The groupings are reviewed regularly to ensure that each group comprises homogeneous exposures.
The process of quantification of impairment losses through an individual analysis is applied to customers with individually significant Stage 3 exposure (assets impaired and in default) (exposure greater than €0.5 million).
The process involves calculation of an estimated loss, taking into account anticipated future cash flows under several different scenarios, each using specific factors and circumstances of the
customers, in particular, execution of guarantees in situations in which customers do not generate sufficient cash flows for payment of the debt, or projection and discount of the cash flows of the deal for the remaining customers. The net present value of cash flows is calculated considering the original effective interest rate of the contracts.
This evaluation process is updated at least every quarter, but more frequently if there are changes of circumstances that may affect the cash-flow scenarios.
The Bank's Economic Research department models economic-forecast scenarios for the Bank's various planning exercises, in particular, budget, strategic planning and ICAAP. In this connection, different macro-economic scenarios are generated, including two pessimistic scenarios, one base scenario and two optimistic scenarios.
For the purpose of impairment losses, a pessimistic scenario is used, the base scenario and an optimistic scenario. The Bank applies probabilities to the forecast scenarios identified. The base scenario is the most likely outcome and consists of information used by the Bank for strategic planning and budgeting. The estimates are updated at least once a year and are subject to annual monitoring exercises.
IFRS 16 defines a set of new requirements for applying this standard, namely regarding the classification and measurement of leasing operations from the lessee's perspective. As lessee, the Bank records a right-of-use asset that is recognized under Tangible Assets and Intangible Assets (Note 12), and a lease liability that is recognized under Financial Liabilities accounted for at amortized cost — other financial liabilities — commitments with future rents (Note 16), on the effective date of the respective operation:
i. The lease liability is measured by the present value of future lease payments to be incurred during the life of the contract, using a discount rate differentiated by maturity. In the estimate of the liabilities consideration is given to the fixed payments, the variable ones that depend on a rate or index, amounts relating to the exercise of the purchase option when the Bank is reasonably certain that it will exercise its right.
The lease liability is remeasured whenever a contractual amendment occurs, and at the time the lease liability is revalued, the effects of the revaluation are recognized against the right to use (asset). In the event of a change in the term of the contract or of an alteration as to the valuation of the exercise of the option a new discount rate must be estimated and, consequently, the liability remeasured.
Tangible assets used by the Bank to carry on its business are carried at acquisition cost (including directly attributable expenses), less accumulated depreciation and impairment losses, as and when applicable.
Depreciation of tangible assets is accrued systematically, in monthly instalments, over the period of the estimated useful life of the assets, which corresponds to the period during which the assets are expected to be available for use, as detailed hereunder:
| Years of useful life | |
|---|---|
| Premises | 50 |
| Equipment | 4 to 10 |
Non-recoverable expenses incurred with construction works on buildings that are not owned by the Bank (leased) are depreciated over a period of time compatible with their expected useful life or of the lease, if less, which on average corresponds to a period of ten years. Maintenance and repair expenses are recognized under "Other administrative expenses."
Whenever there is an indication that the tangible fixed asset may be impaired, an estimate of its recoverable value is made. To this end, the branches are considered cash-flow generating units, and impairment losses are recorded in situations where the recoverable amount of property where the branch is located — through its use in the operations or through its sale —, is less than its net carrying amount. Impairment losses are recognised in the income statement, and they are reversed in subsequent reporting periods when the reasons for their initial recognition cease. To this end, the new depreciable amount shall not exceed its carrying amount had impairment losses not been assigned to the asset, considering the depreciation that it would have undergone.
The criteria followed in the valuation of the properties normally consider the market comparison method, and the amount detailed in the valuation corresponds to the market value of the property in its current state.
The Bank's premises that are undergoing sale are carried under "Other assets." These assets were transferred at their net carrying amount in accordance with IAS 16 (acquisition cost, net of accumulated depreciation and impairment losses), and are tested for impairment at the time of their reclassification and subsequently subject to periodic valuations to determine possible impairment losses.
Gains and losses on the sale of these assets are recognized under "Profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operational units."
The Bank records under this heading expenses incurred at the stage of development of projects relating to information technologies implemented and at the implementation stage, as well as those relating to software purchased, in every case where their expected impact has to be reflected in years subsequent to that in which they are made.
Amortisation of intangible assets is accrued, in twelfths, over their estimated period of useful life, which is three years on average.
Internally developed software is recognized under intangible assets when, among other requirements, it can be seen that they are usable and capable of being sold and, additionally, they are identifiable, and it is possible to demonstrate their ability to generate future economic benefits.
Investment properties comprise buildings and land held by Novimovest - Fundo de Investimento Imobiliário Aberto (Novimovest) to earn income or for capital appreciation or both, and not for use in the provision of goods or services or for management purposes.
Investment properties are carried at fair value, determined by periodic valuations performed by specialised independent entities. Variations of the fair value of investment properties are recognised directly in the income statement for the period.
Costs incurred with investment properties in use, namely maintenance, repairs, insurance and property taxes (municipal property tax) are recognized in the income statement for the period to which they refer. Ameliorations that are expected to generate additional future economic benefits are capitalised.
The Bank essentially recognizes under "Non-current assets and disposal groups classified as held for sale," real estate, equipment and other assets received by way of payment in kind or auction for the payment of overdue loan transactions when they are available for immediate sale in their present condition and there is a likelihood of their sale within a one-year period. If they do not meet these criteria, those assets are carried under "Other assets" (Note 14).
Their initial recognition is at the lower of their fair value, less expected selling costs and the carrying amount of the loans granted constituting the object of the recovery, being tested for impairment on the date of reclassification to non-current assets held for sale. Subsequently, these assets are measured at the lesser of the initial recognition amount and fair value less costs to sell, and they are not depreciated. Unrealized losses on these assets, thus determined, are recorded in profit or loss.
If, on a subsequent date, the facts that led to the recording of impairment losses no longer exist due to an increase of the fair value less sales expense, the impairment losses will be reverted up to the limit of the amount that the assets would have had they not been reclassified to non-current assets held for sale.
When it is a matter of discontinued operational units, in accordance with the provisions of IFRS 5 – "Non-current assets held for sale and discontinued operations," the Bank does not recognise potential gains on these assets.
A provision is set aside where there is present (legal or constructive) obligation resulting from past events in respect of which there will be a probable outflow of funds that can be determined reliably. The amount of the provision corresponds to the best estimate of the amount to be disbursed to settle the liability on the reporting date, in accordance with the information provided by the Bank's legal and tax consultants.
In this way, the liabilities item "Provisions" includes provisions set aside to cover, inter alia, the post-employment benefits specific to certain members of the Bank's Board of Directors, the restructuring plan approved by the Executive Committee, ongoing legal proceedings, and other specific risks arising from its business
The Bank endorsed the Collective Bargaining Agreement (ACT) for the banking industry, and therefore its employees or their families are entitled to retirement, disability and survivors' pensions.
For employees admitted to the Bank up until December 31, 2008, the existing pension plan was a defined-benefit plan, in that it established the criteria for the determination of the value of the pension that an employee would receive during retirement in the light of the length of service provided and the respective remuneration on retirement, the pensions being updated annually on the basis of the remuneration provided for in the ACT for personnel in service. For these employees, the Bank is liable for the full amount of the pensions provided for in the ACT.
To cover the liabilities under this defined-benefit plan, the Bank has a Pension Fund.
As from January 1, 2009, employees taken on by the Bank came to be included in Social Security, and are covered by a supplementary defined-contribution pension plan and by the rights acquired under Clause 93 of the ACT. The plan is funded through contributions by employees (1.5%) and by the Bank (1.5%), calculated on the basis of the actual monthly remuneration. For this purpose, each employee can opt for an open pension fund at his or her choice. Employees of the former Totta have always been enrolled in Social Security, and therefore the Bank's liability with regard to the defined-benefit plan in respect of those employees has consisted of payment of supplements.
In October 2010 an agreement was concluded between the Ministry of Labour and Social Solidarity, the Portuguese Banks Association and the Financial Sector Federation (FEBASE), for the inclusion of banking sector employees in the General Social Security Regime. As a result of that agreement, Decree-Law 1-A/2011, of January 3, was published in 2011, which determined that banking sector workers who were in active service on the date of its entry into force (January 4, 2011) would be covered by the General Social Security Regime, as regards old-age pension and in the event of maternity, paternity and adoption. In view of the supplementary nature laid down in the rules of the Collective Bargaining Agreement of the Banking Sector, the Bank continues to
cover the difference between the amount of the benefits paid under the General Social Security Regime for the events included and for those laid down under the terms of that Agreement.
Liabilities for past services recognized as at December 31, 2010, were not altered with the publication of the aforesaid Decree-Law, since the reduction of the amount of the pensions payable by the Bank related with workers in active service was applicable to the future services of the employees, beginning on January 1, 2011. Thus, the cost of the current service fell as from that date, but the Bank came to bear the Single Social Charge (TSU) of 23.6%. On the other hand, the Bank is still liable for the payment of invalidity and survivors' pensions and of sickness benefits.
Following the approval by the Government of Decree-Law 127/2011, of December 31, a Tripartite Agreement has been established between the Government, the Portuguese Banks Association and the Banks Employees Trade Unions on the transfer to the sphere of social security of the liabilities for pensions payable to retirees and pensioners as of December 31, 2011.
This Decree-Law established that the liabilities to be transferred correspond to pensions payable as of December 31, 2011, at constant values (update rate of 0%) in the component provided for in the ACT. The liabilities in respect of the updates of the pensions, supplementary benefits, contributions to the SAMS on retirement and surviving relative pensions, death allowances and deferred survival pensions are still the responsibility of the institutions.
Additionally, employees of the Bank's former London Branch (now representative office) are covered by a defined-benefit pension plan, for which the Bank has a separate pension fund.
On the other hand, in February 2010, a supplementary defined-contribution pension plan was approved for a number of directors of the Bank, insurance having been taken out for the purpose.
On December 20, 2015, following the resolution measure applied by the Bank of Portugal to Banif, the Bank took over the pension liabilities of a number of Banif workers.
On August 8, 2016, the Ministry of Labour published a new ACT in the Work and Employment Bulletin (BTE). The most significant changes were the following:
On December 27, 2017, within the scope of the purchase and merger of BAPOP, the Bank assumed the pension liabilities of all this entity's workers.
The Bank's liabilities for retirement pensions are calculated by external experts (Mercer (Portugal), Limitada) on the basis of the Projected Unit Credit method. The discount rate used in actuarial studies is determined based on the market rates of the bonds of companies of high quality in terms of credit risk, denominated in the currency in which the benefits will be paid (euros) and with maturity similar to the end date of the obligations of the plan. The post-employment benefits of employees also include medical care (SAMS), as well as the death benefit and the bonus on retirement.
According to IAS 19 — "Employee Benefits" remunerations are recorded directly in equity (other comprehensive income), and under the heading "Staff Costs" of the income statement, the following components being recognized:
The net interest with the pension plan is calculated by the Bank by multiplying the net asset/liability involved in retirement pensions (liabilities less the fair value of the Fund's assets) by the discount rate used in determining the retirement-pension liabilities. Thus, net interest represents the interest cost associated with the retirement-pension liabilities net of the theoretical return on the Fund's assets, both measured on the basis of discount rate used in the calculation of the liabilities.
Remeasurement gains and losses, namely: (i) actuarial gains and losses resulting from differences between actuarial assumptions used and the amounts actually incurred (gains and losses of experience), as well as changes of actuarial assumptions, and (ii) gains and losses arising from the difference between the theoretical returns on the Fund's assets and the amounts obtained, are recognized in the income statement with a contra-entry in "Other comprehensive income."
Pension liabilities, less the fair value of the assets of the Pension Fund, are carried under "Other assets" or "Other liabilities," depending on the existence of surplus or insufficient funding. Recognition of a surplus of fair value of the plan's assets over its discounted liabilities depends on the existence of a reduction of future contributions, or on the reimbursement of contributions made.
Bank of Portugal Notice No. 4/2005 determines the obligation of full funding by the Pension Fund of the liabilities for pensions payable and a minimum level of funding of 95% of the past-service liabilities of personnel in service.
k) Corporation Tax
The Bank is subject to the tax system established in the Corporation Tax Code (IRC). Current taxes are calculated based on the Bank's taxable income and that of the Group companies, determined in accordance with the tax rules approved or substantively approved on the financial reporting date.
Following the enactment of Law 2/2014, of January 16 (IRC Reform), and of the wording provided by the 2021 State Budget Act (Law 75-B/2020 of December 31), the taxation of corporate earnings for 2021 and 2020 came to be the following:
between €1,500k and €7,500k3%
between €7,500k and €35,000k 5%
In this way, the changes mentioned above imply that the tax rate used by the Bank in determining and recording deferred taxes was 31%.
With the publication of the Supplementary Budget for 2020 (Law No. 27-A/2020, of July 24), tax losses calculated in the 2020 tax periods can be used in the twelve subsequent tax periods. Additionally, the counting of the period for reporting tax losses is suspended for two tax periods.
Thus, tax losses generated between fiscal years 2014 and 2016, inclusive, may be used in the fourteen subsequent taxation periods, while those generated between 2017 and 2020, inclusive, may be used in the seven subsequent taxation periods.
The deduction of losses to be carried out each year may not exceed 70% of the respective taxable income (80%, in the case of tax losses generated in 2020), and the remainder may be used by the end of the reporting period.
Law 98/2019 of September 4 approved a new regime in the matter of the impairments of credit institutions and other financial institutions, also establishing the regime applicable to impairment losses recorded in previous taxation periods not yet accepted for tax purposes.
Since this new system is of optional nature during a five-year adjustment period commencing on or after January 1, 2019, the expected accession to the new tax regime, applicable in the matter of impairments of credit institutions and other financial institutions, is dependent on a communication addressed to the Director General of the Tax and Customs Authority by the end of the tenth month of the current tax period (see Article 4.1 of this law). In this sense, the Bank adhered to the definitive regime established in Articles 2 and 3 of this law.
The Santander Group decided to apply as from 2017 the Special Taxation of Groups of Companies Regime (RETGS). Under this regime, the Group's taxable profit/tax loss corresponds to the sum of the taxable profit/tax loss that comes to be determined by the parent company through the algebraic sum of tax results determined in the periodic separate statements of each company. The companies covered by this scheme are Santander Totta, SGPS — the controlling company —, and Taxagest, Banco, Santander Totta Seguros, TottaUrbe and Gamma — controlled companies. The gain obtained by application of the RETGS is allocated to the entities in question in a manner proportional to the taxable income of each company.
Deferred tax assets and liabilities correspond to the amount of the tax recoverable and payable in future periods resulting from temporary differences between the carrying amount of an asset or liability and its taxation base. Tax credits are also recorded as deferred tax assets.
Deferred tax liabilities are recognized on all taxable temporary differences, except those related to: i) the initial recognition of goodwill; or ii) the initial recognition of assets and liabilities, which do not result from a concentration of business activities, and which at the date of the transaction do not affect the accounting or tax results.
The Bank does not recognize deferred tax assets or liabilities for the deductible or taxable temporary differences associated with investments in subsidiaries and associates, as it is not likely that the difference will revert in the foreseeable future.
Deferred tax assets are recognized when they are expected to be recoverable and up to the amount that it is likely that there are future taxable profits that will accommodate the deductible temporary differences.
Deferred tax assets and liabilities have been calculated on the basis of the tax rates approved or substantially approved on the reporting date, which constitute the best estimate of the rate to be in force for the period when it is expected that the asset will be realised, or the liability incurred.
Current taxes and deferred taxes are reflected in profit or loss, with the exception of taxes relating to transactions directly recorded in equity, in particular, potential gains and losses on Financial assets at fair value through other comprehensive income in cash-flow hedging derivatives, as well as those associated with actuarial deviations relating to pension liabilities, which are also recorded in equity.
Management periodically reviews the position taken in preparing tax returns regarding situations in which the application of the tax regime is subject to interpretation, and assesses the likelihood that the Tax Administration will accept the adopted tax treatment. The Bank measures assets / liabilities arising from uncertain income tax positions, considering the most likely amount or the expected amount, whichever is more appropriate in each circumstance.
The Bank is covered by the banking sector contribution scheme defined in Law No. 55-A/2010 of December 31.
With the publication of Law 27-A/2020, of July 27, the Bank is now covered by the Solidarity Tax on the banking sector. This contribution aims to strengthen the financing mechanisms of the social security system.
Treasury shares are recoded as a debit in the capital accounts for the purchase price and are not subject to revaluation, the portion of the dividend to be distributed in respect of these shares being retained under equity. Gains and losses realised on the sale of treasury shares, as well as the respective taxes, are recorded directly in equity, and do not affect the year's profit or loss.
An instrument is classified as an equity instrument when there is no contractual obligation for its settlement to be made through the delivery of cash or another financial asset, regardless of its legal form, showing a residual interest in the assets of an entity after deducting all its liabilities.
Costs directly attributable to the issuance of equity instruments are recorded against equity as a deduction from the amount of the issuance. Amounts paid and received for purchases and sales of equity instruments are recorded under equity, net of transaction costs. Allocations made on account of equity instruments are deducted from equity as dividends when declared.
Basic earnings per share are calculated by dividing the net income attributable to the Bank's shareholders by the weighted average number of outstanding common shares, excluding the average number of common shares acquired by the Bank and held as own shares.
For the calculation of diluted earnings per share, the weighted average number of outstanding common shares is adjusted to reflect the effect of all potential diluting common shares.
The Bank uses the accrual-accounting principle in relation to income from the provision of insurance brokerage services - commissions. Thus, income is recorded as and when generated, regardless of the time of payment or receipt. The amounts receivable are subjected to impairment loss analyses.
The Bank does not collect insurance premiums on behalf of insurers, nor does it handle funds relating to insurance contracts. There is therefore no other asset, liability, income or expense to report in respect of insurance brokerage business carried on by the Bank, other than those already disclosed.
For purposes of the preparation of the cash-flow statement, the Bank considers as "Cash and cash equivalents" the balance of "Cash and deposits at central banks and other current deposits," in that the items carried under this heading have a maturity period not exceeding 3 months, and their risk of variation of value is immaterial.
Estimates and judgements impacting on the Bank's financial statements are continually assessed, representing on each reporting date the Board of Directors' best estimate, taking into account historical performance, accumulated experience and expectations as to future events that, in the circumstances at issue, are believed to be reasonable.
The intrinsic nature of the estimates may mean that the actual reflection of the situations that have been estimated may, for financial reporting purposes, differ from the estimated amounts.
Retirement and survivor pensions are estimated based on actuarial evaluations carried out by external experts certified by the Insurance and Pension Fund Supervisory Authority (ASF). These estimates incorporate a set of financial and demographic assumptions, including the discount rate, mortality and invalidity tables, pension and salary growth, among others. The discount rate used to determine the liabilities was calculated by reference to the market rates of low-risk corporate bonds of a term similar to that of the settlement of the liabilities. Estimated salary and pension growths take into account the country's current situation and the consequent prospect of smaller increases in the future, or even maintenance of current values. The mortality table used was based on the recommendation of the actuary. The assumptions adopted correspond to the best estimate of the Bank's Board of Directors as to the future behaviour of the above variables.
In the valuation of financial instruments not traded on active markets valuation models or techniques are used. Accordingly, the valuations obtained correspond to the best estimate of the fair value of those instruments on the reporting date.
The fair value of the instrument is estimated using valuation techniques that include price valuation models or discounted cash flow techniques. When discounted cash flow techniques are used, the future cash flows are estimated in accordance with management's expectations, and the discount rate used corresponds to the market rate for financial instruments of similar characteristics.
To ensure an appropriate segregation of duties, the value of those financial instruments is determined by a body independent of the trading function.
Impairment losses on loans are calculated as indicated in Note 1.3 (c). In this way, determination of the impairment through individual analysis corresponds to the judgement of the Board of Directors regarding the economic and financial situation of its customers, and to its estimate of the value of the guarantees associated with the respective loans, with the consequent impact on expected future cash flows. Determination of the impairment through collective analysis is performed on the basis of parameters for comparable types of operations, such as instrument type, customer type, credit-risk degree as measured by the ratings or scoring system, type of collateral, date of initial recognition, relationship between loan and collateral value (LTV), and inclusion of prospective information.
Properties, equipment and other goods received as payment in kind or acquired in payment of past-due credit operations are carried at the amount agreed by negotiation or judicial means, after deduction of the lesser of the costs the Bank expects to incur with their sale, or their quick-sale value, if lower. Properties are subject to periodic appraisal conducted by independent evaluators, which incorporate various assumptions, particularly as to the evolution of the property market and, where applicable, expectations as to the development of real-estate projects. The assumptions used in the appraisal of these properties have an impact on their valuation and hence on the calculation of the impairment. Whenever the value resulting from these valuations (net of selling expenses) is lower than the value at which such properties are accounted for, impairment losses are recorded.
Recognition of deferred tax assets assumes the existence of profits and future taxable matter. Additionally, current and deferred taxes were determined on the basis of the interpretation of current tax legislation. Thus, changes to tax laws or to their interpretation by the competent authorities may have an impact on the amount of current and deferred taxes. For the purpose of analysis of the recoverability of deferred tax assets (tax losses), the Bank projects taxable profits on the basis of assumptions. Thus, the recoverability of deferred tax assets depends on the implementation of the strategy of the Bank's Board of Directors.
A provision is recognized where there is a present (legal or constructive) obligation resulting from past events in respect of which there will be a probable outflow of funds that can be determined reliably. The outcome of the legal proceedings in progress, as well as the respective amount of the provision corresponding to the best estimate of the amount to be spent to settle the liability on the balance/sheet date, is assessed in accordance with the opinion of the Bank's lawyers/legal advisers and decisions of the courts to date, which, however, might not come about. Regarding the restructuring plans, the charges arising from the constructive obligation of reorganizing were considered, with the definition of the actions to be developed supported in a detailed formal plan with minimum elements of approach and quantification and identification of the impacted factors.
Under the terms of IFRS 8, disclosures by operating segment are presented below in accordance with information as analysed by the Bank's management (Executive Committee) bodies:
Essentially includes the Bank's business on the financial markets and with large enterprises, involving provision of financial advisory services, Corporate and Project Finance in particular, as well as brokering, custody and settlement of securities services.
Essentially refers to operations of granting loans and attracting resources related to private customers and businesses with a turnover of less than €10 million, channelled through the branch network, and services provided by complementary channels.
This area comprises businesses with turnover between €10 million and €125 million. This business is underpinned by the branch network, corporate centres and specialised services, and includes several products, namely loans, project finance, trade, exports and real estate.
This area includes the entire business carried on at the Bank that supports the main activities but is not directly related to the customers' business areas, including liquidity management, balance-sheet hedging, and the Bank's structural funding.
The breakdown of the income statement by operating segment for the six-month period ending on at June 30, 2020 and 2021, is as follows:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Corporate | ||||||||
| Investment | Retail | Commercial | Corporate | Total | ||||
| Banking | Banking | Banking | Activities | Consolidated | ||||
| Net interest income | 26.299 | 220.172 | 43.345 | 92.029 | 381.845 | |||
| Dividend income | - | - | - | 1.533 | 1.533 | |||
| Share of the profit or (-) loss of investments in subsidaries, | ||||||||
| joint ventures and associates measured at equity method | - | - | - | 1.097 | 1.097 | |||
| Fee and commission income | 22.051 | 177.122 | 12.141 | (5.472) | 205.843 | |||
| Gains/Losses on financial operations | 4.048 | 3.203 | 290 | 126.599 | 134.141 | |||
| Other operating income | - | 1.551 | - | 1.513 | 3.064 | |||
| Total operating income, net | 52.399 | 402.049 | 55.776 | 217.299 | 727.523 | |||
| Administrative expenses | (12.638) | (226.104) | (14.749) | (1.956) | (255.447) | |||
| Cash contributions to | ||||||||
| resolution funds and deposit guarantee systems | - | - | - | (37.679) | (37.679) | |||
| Depreciation | (1.666) | (23.326) | (213) | - | (25.205) | |||
| Profit before impairment and provisions | 38.094 | 152.619 | 40.813 | 177.664 | 409.191 | |||
| Impairment and provisions, net of reversals | 1.078 | (30.520) | (8.206) | (271.259) | (308.907) | |||
| Profit or loss from non-current assets held for sale | - | - | - | 10.303 | 10.303 | |||
| Other results | - | - | - | (29.565) | (29.565) | |||
| Profit or loss before tax from continuing operations | 39.172 | 122.099 | 32.607 | (112.857) | 81.022 | |||
| Taxes | (12.143) | (37.851) | (10.108) | 28.913 | (31.190) | |||
| Profit or loss for the period | 27.029 | 84.248 | 22.499 | (83.945) | 49.832 |
| 30-06-2020 | |||||
|---|---|---|---|---|---|
| Corporate Investment Banking |
Retail Banking |
Commercial Banking |
Corporate Activities |
Total Consolidated |
|
| Net interest income | 35.802 | 234.618 | 43.433 | 84.795 | 398.648 |
| Dividend income | - | - | - | 1.733 | 1.733 |
| Share of the profit or (-) loss of investments in subsidaries, | |||||
| joint ventures and associates measured at equity method | - | - | - | 751 | 751 |
| Fee and commission income | 24.298 | 166.671 | 12.200 | (17.993) | 185.176 |
| Gains/Losses on financial operations | 3.392 | 2.860 | 209 | 86.212 | 92.673 |
| Other operating income | - | 1.651 | - | 3.943 | 5.594 |
| Total operating income, net | 63.492 | 405.800 | 55.842 | 159.441 | 684.575 |
| Administrative expenses | (12.797) | (224.112) | (19.051) | (1.772) | (257.732) |
| Cash contributions to | |||||
| resolution funds and deposit guarantee systems | - | - | - | (35.624) | (35.624) |
| Depreciation | (1.605) | (23.222) | (881) | - | (25.708) |
| Profit before impairment and provisions | 49.090 | 158.466 | 35.910 | 122.045 | 365.511 |
| Impairment and provisions, net of reversals | (6.769) | 15.016 | 3.491 | (122.545) | (110.807) |
| Profit or loss from non-current assets held for sale | - | - | - | (90) | (90) |
| Other results | - | - | - | (29.258) | (29.258) |
| Profit or loss before tax from continuing operations Profit or loss before tax from continuing operations |
42.321 | 173.482 | 39.401 | (29.848) | 225.356 |
| Taxes | (13.120) | (53.789) | (12.214) | 8.283 | (70.840) |
| Profit or loss for the period | 29.201 | 119.693 | 27.187 | (21.565) | 154.516 |
As at June 30, 2021, and December 31, 2020, the breakdown of the assets and liabilities under management of each business segment, in accordance with information used by the Bank's Management for decision-making, is as follows:
| 30-06-2021 | |||||
|---|---|---|---|---|---|
| Corporate | |||||
| Investment | Retail | Commercial | Corporate | Total | |
| Banking | Banking | Banking | Activities | Consolidated | |
| Assets | |||||
| Financial assets at fair value through | |||||
| other comprehensive income | - | - | - | 3,059,652 | 3,059,652 |
| Financial assets measured at amortized cost | |||||
| Mortgage loans | - | 21,253,040 | - | - | 21,253,040 |
| Credit for consumption | - | 1,667,743 | - | - | 1,667,743 |
| Other loans | 3,469,160 | 6,355,413 | 6,503,045 | - | 16,327,618 |
| Other balances receivable | - | 73,665 | - | 975,996 | 1,049,661 |
| Total allocated assets | 3,469,160 | 29,349,860 | 6,503,045 | 4,035,648 | 43,357,713 |
| Total non-allocated assets | 12,146,088 | ||||
| Total Assets | 55,503,801 | ||||
| Liabilities | |||||
| Financial liabilities measured at amortised cost | |||||
| Deposits - customers | 1,103,699 | 29,827,296 | 6,823,130 | 420,028 | 38,174,154 |
| Debt securities issued | - | - | - | 2,871,464 | 2,871,464 |
| Total allocated resources | 1,103,699 | 29,827,296 | 6,823,130 | 3,291,492 | 41,045,618 |
| Total non-allocated Liabilities | 10,409,378 | ||||
| Total Liabilities | 51,454,996 | ||||
| Guarantees and sureties given | 144,735 | 530,887 | 964,926 | - | 1,640,548 |
| 31-12-2020 | |||||
| Corporate | |||||
| Investment | Retail | Commercial | Corporate | Total | |
| Banking | Banking | Banking | Activities | Consolidated | |
| Assets | |||||
| Financial assets at fair value through other comprehensive | |||||
| income | - | - | - | 3,140,071 | 3,140,071 |
| Credit granted and other balances receivable at amortized cost | |||||
| Mortgage loans | - | 20,669,687 | - | - | 20,669,687 |
| Consumer loans | - | 1,680,477 | - | - | 1,680,477 |
| Other loans | 3,742,161 | 6,326,349 | 6,121,296 | - | 16,189,805 |
| Other balances receivable | - | 52,845 | - | 1,227,768 | 1,280,613 |
| Total allocated assets | 3,742,161 | 28,729,358 | 6,121,296 | 4,367,839 | 42,960,653 |
| Total non-allocated assets | 11,442,756 | ||||
| Total Assets | 54,403,409 | ||||
| Liabilities | |||||
| Resources in the balance sheet | |||||
| Resources of customers and other debts | 1,331,680 | 29,070,914 | 5,529,016 | 338,382 | 36,269,992 |
| Debt securities | - | - | - | 2,907,350 | 2,907,350 |
| Total allocated resources | 1,331,680 | 29,070,914 | 5,529,016 | 3,245,732 | 39,177,342 |
| Total non-allocated Liabilities | 11,114,711 | ||||
| Total Liabilities | 50,292,053 | ||||
| Guarantees and sureties given | 180,289 | 520,765 | 911,701 | - | 1,612,755 |
| As at June 30, 2021, and December 31, 2020, the Bank did not have relevant business in any distinct geography other than that of the domestic business. The accounting policies used in preparing the financial information by segments were consistent with those |
|||||
| described in Note 1.3 of these Notes. |
As at June 30, 2021, and December 31, 2020, the Bank did not have relevant business in any distinct geography other than that of the domestic business.
The accounting policies used in preparing the financial information by segments were consistent with those
(Expressed in thousands of euros, except where otherwise stated)
| Direct (%) | Effective (%) | Total assets | Shareholders' | Net income | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| participation | participation | (net) | equity | of the period | ||||||
| Company | 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 |
| BANCO SANTANDER TOTTA, S.A. | Headquarters | Headquarters | Headquarters | Headquarters | 58.365.231 | 57.448.833 | 3.931.683 | 3.990.610 | 53.973 | 275.210 |
| TOTTA (IRELAND), PLC (2) | 100,00 | 100,00 | 100,00 | 100,00 | 584.371 | 536.675 | 456.339 | 461.336 | 5.675 | 1.455 |
| TOTTAURBE - EMP.ADMIN. E CONSTRUÇÕES, S.A. (1) | 100,00 | 100,00 | 100,00 | 100,00 | 133.383 | 134.313 | 129.410 | 127.726 | 1.683 | 583 |
| TAXAGEST,SGPS,SA | 99,00 | 99,00 | 99,00 | 99,00 | 55.738 | 55.746 | 55.734 | 55.744 | (9) | (3) |
| NOVIMOVEST - Fundo de Investimento Imobiliário Aberto | 78,74 | 78,74 | 78,71 | 78,71 | 261.507 | 311.513 | 255.461 | 304.335 | 1.629 | 341 |
| GAMMA, Sociedade Financeira de Titularização de Créditos, S.A. | 100,00 | 100,00 | 100,00 | 100,00 | 7.268 | 7.249 | 6.992 | 6.810 | 181 | 63 |
| HIPOTOTTA NO. 4 PLC | - | - | - | - | 535.840 | 562.050 | (5.095) | (3.564) | 1.615 | 1.088 |
| HIPOTOTTA NO. 5 PLC | - | - | - | - | 546.808 | 572.173 | (12.813) | (10.508) | 2.271 | 923 |
| HIPOTOTTA NO. 4 FTC | - | - | - | - | 475.217 | 500.515 | 472.855 | 499.365 | 1.690 | 168 |
| HIPOTOTTA NO. 5 FTC | - | - | - | - | 483.433 | 504.601 | 480.956 | 503.853 | 1.764 | 398 |
| Operações de Securitização geridas pela GAMMA, STC | - | - | - | - | 2.629.938 | 2.804.742 | - | - | - | - |
| UNICRE - INSTITUIÇÃO FINANCEIRA DE CRÉDITO, S.A. | 21,86 | 21,86 | 21,86 | 21,86 | 353.140 | 368.375 | 96.251 | 110.136 | 5.172 | 23.919 |
| LUSIMOVEST - FUNDO DE INVESTIMENTO IMOBILIÁRIO | 25,76 | 25,76 | 25,76 | 25,76 | 107.604 | 107.131 | 101.951 | 101.807 | 144 | 1.210 |
As at June 30, 2021, and December 31, 2020, the business, the location of the registered office and the consolidation method used for the companies included in the consolidation were as follows:
| Company | Activity | Headquarters | Consolidation Method |
|---|---|---|---|
| BANCO SANTANDER TOTTA, S.A. | Banking | Portugal | Headquarters |
| TOTTA (IRELAND), PLC (2) | Investment management | Ireland | Full |
| TOTTA URBE - Emp.Admin. e Construções, S.A. (1) | Property management | Portugal | Full |
| TAXAGEST, SGPS, S.A. | Holding company | Portugal | Full |
| UNICRE - INSTITUIÇÃO FINANCEIRA DE CRÉDITO, S.A. | Issuance and management of credit cards | Portugal | Equity |
| HIPOTOTTA nº 4 PLC | Investment management | Ireland | Full |
| HIPOTOTTA nº 5 PLC | Investment management | Ireland | Full |
| HIPOTOTTA nº 4 FTC | Securitized loans fund | Portugal | Full |
| HIPOTOTTA nº 5 FTC | Securitized loans fund | Portugal | Full |
| Operações de Securitização geridas pela GAMMA, STC | Securitized loans fund | Portugal | Full |
| NOVIMOVEST - Fundo de Investimento Imobiliário Aberto | Real Estate Fund | Portugal | Full |
| GAMMA, Sociedade Financeira de Titularização de Créditos, S.A. | Securitized loans | Portugal | Full |
| LUSIMOVEST - FUNDO DE INVESTIMENTO IMOBILIÁRIO | Real Estate Fund | Portugal | Equity |
In accordance with IFRS 10, which superseded IAS 27 and SIC 12, the Group includes in its consolidated financial statements the special purpose entities (SPEs) created within the scope of the securitisation operations when it controls them, that is, when it has the majority of the risks and benefits associated with their business, in particular the bonds that they issued with a higher degree of subordination – equity pieces.
As at June 30, 2021, and December 31, 2020, the composition of the Novimovest Fund balance sheet was as follows:
| as follows: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Real estate portfolio | 249,520 | 250,531 |
| Accounts receivable | 7,092 | 8,070 |
| Cash and banks | 4,696 | 52,874 |
| Accruals and deferrals | 199 | 38 |
| 261,507 | 311,513 | |
| Fund capital | 255,461 | 304,335 |
| Adjustments and provisions | 2,843 | 3,867 |
| Accounts payable | 1,072 | 1,461 |
| Accruals and deferrals | 2,131 | 1,850 |
| 261,507 | 311,513 |
As at June 30, 2021, and December 31, 2020, the consolidated net income includes a profit of €1.283k and €268k, respectively, attributable to the Novimovest Fund.
The composition of this heading is as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Cash | 250,735 | 336,121 |
| Demand deposits in central banks | ||
| European Central Bank | 6,919,212 | 3,932,058 |
| Other demand deposits at credit institutions | ||
| Demand deposits | 461,069 | 267,636 |
| 7,631,016 | 4,535,815 | |
In accordance with the regulations in force, credit institutions established in participating Member States are subject to setting aside minimum reserves in accounts held with the participating National Central Banks. The basis of incidence includes all deposits at central banks and with financial and monetary institutions located outside the Euro Zone, and all client deposits with maturities less than two years. A coefficient of 1% is applied to this base and an amount of €100,000 is deducted. Compliance with the mandatory minimum deposits, for a given observation period, is carried out taking into consideration the average of balances of deposits at the Bank of Portugal during that period. The minimum required reserves are remunerated at the RFI rate (on these dates this rate is zero).
On September 12, 2019, the ECB Council decided to introduce a two-tier system for the remuneration of excess reserves, exempting part of the surplus liquidity of the institutions, that is, the part of the reserves that exceeds the mandatory reserves, of the negative remuneration at the interest rate applicable to the permanent deposit facility. The ECB Council decided, inter alia, to exempt a multiple of the mandatory reserves of the institutions, and decided to set at six the initial multiplier 'm' of the mandatory reserves of the institutions that is used to calculate the portion exempt from the excess reserves of the institutions in relation to all eligible institutions, and at zero per cent the initial interest rate applicable to the exempt excess reserves. The said multiplier 'm' and the interest rate applicable to the exempt free reserves can be adjusted over time by the ECB Council.
The headings of financial assets and liabilities held for trading have the following composition:
| 30-06-2021 | 31-12-2020 |
|---|---|
| 748,749 | 916,039 |
| 771,112 | 941,528 |
| 30-06-2021 | 31-12-2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Notional value | Assets | Liabilities | Net | Notional value | Assets | Liabilities | Net | |
| OTC markets | ||||||||
| Forwards | ||||||||
| Purchases | 407,706 | 401,114 | ||||||
| Sales | 407,102 | 5,782 | 5,300 | 482 | 401,024 | 6,820 | 6,736 | 8 4 |
| Swaps | ||||||||
| Currency swaps | ||||||||
| Purchases | 606,533 | 1,084,783 | ||||||
| Sales | 605,453 | 1,386 | 355 | 1,031 | 1,086,821 | 512 | 3,335 | (2,823) |
| Interest rate swaps | 25,647,816 | 677,139 | 701,490 | (24,351) | 26,590,746 | 840,596 | 863,588 | (22,992) |
| Equity swaps | 697,444 | 33,721 | 33,245 | 476 | 705,726 | 26,014 | 25,869 | 145 |
| Options | ||||||||
| Currency swaps | ||||||||
| Purchases | 61,642 | 7,961 | ||||||
| Sales | 61,642 | 549 | 551 | (2) | 7,961 | 309 | 311 | (2) |
| Equity swaps | ||||||||
| Purchases | 31,378 | 46,765 | ||||||
| Sales | 31,378 | 1,338 | 1,339 | (1) | 46,765 | 2,115 | 2,113 | 2 |
| Caps & Floors | 926,572 | 28,834 | 28,832 | 2 | 961,240 | 39,673 | 39,576 | 9 7 |
| 29,484,666 | 748,749 | 771,112 | (22,363) | 31,340,906 | 916,039 | 941,528 | (25,489) |
As at June 30, 2021, the assets and liabilities headings relating to "Derivative financial instruments" are reduced by the amounts of approximately €5.033k and €1.982k of "Credit Value Adjustments and Debit Value Adjustments", respectively (€5.300k and €5.053k as at December 31, 2020, respectively), in accordance with the method described in Note 38.
As at June 30, 2021, and December 31, 2020, almost all the trading derivative financial instruments were hedged back-to-back with Banco Santander, S. A.
The composition of this heading is as follows:
| Fair value | ||
|---|---|---|
| Description | 30-06-2021 | 31-12-2020 |
| Equity Instruments | 131,587 | 132,905 |
The composition of this heading is as follows:
| 30-06-2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Fair Value Reserve | |||||||||||
| Acquisition | Interest | Hedge | Book | ||||||||
| cost | receivable | adjustment | Positive | Negative | Total | Other | Impairment | Value | |||
| Debt instruments | (Note 20) | (Note 17) | |||||||||
| Issued by residents | |||||||||||
| Public residentes | 1,953,585 | 21,952 | 44,962 | 280,093 | (48) | 280,045 | (2,354) | - | 2,298,190 | ||
| Other residents | 1,458 | - | - | 1 8 |
18 | - | (13) | 1,463 | |||
| 1,955,043 | 21,952 | 44,962 | 280,111 | (48) | 280,063 | (2,354) | (13) | 2,299,653 | |||
| Equity instruments | 72,907 | - | - | 347 | - | 347 | - | - | 73,254 | ||
| 2,027,950 | 21,952 | 44,962 | 280,458 | (48) | 280,410 | (2,354) | (13) | 2,372,907 | |||
| Loans and advances | 2,300,000 | 67,803 | 243,027 | 448,822 | - | 448,822 | - | - | 3,059,652 | ||
| 4,327,950 | 89,755 | 287,989 | 729,280 | (48) | 729,232 | (2,354) | (13) | 5,432,559 |
| 31-12-2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Acquisition | Interest | Hedge | Book | ||||||
| cost | receivable | adjustment | Positive | Negative | Total | Other | Impairment | Value | |
| (Nota 20) | (Nota 17) | ||||||||
| 3,527,984 | 62,248 | 58,098 | 463,036 | (45) | 462,991 | 36,676 | - | 4,147,997 | |
| 1,603 | - | - | - | (78) | (78) | - | (14) | 1,511 | |
| 309,246 | 1,416 | - | 31,315 | - | 31,315 | - | - | 341,977 | |
| 3,838,833 | 63,664 | 58,098 | 494,351 | (123) | 494,228 | 36,676 | (14) | 4,491,485 | |
| 72,154 | - | - | 480 | - | 480 | - | - | 72,634 | |
| 3,910,987 | 63,664 | 58,098 | 494,831 | (123) | 494,708 | 36,676 | (14) | 4,564,119 | |
| 2,300,000 | 31,153 | 314,480 | 494,438 | - | 494,438 | - | - | 3,140,071 | |
| 6,210,987 | 94,817 | 372,578 | 989,269 | (123) | 989,146 | 36,676 | (14) | 7,704,190 | |
| Fair Value Reserve |
In order to place greater emphasis on the development of its core business (retail banking - mortgages and SMEs), during the first quarter of 2020, the Bank changed its business plan having revised its financing strategy and allocation of resources, which will imply the discontinuation of activities (through sale or maturity) that require stable financing and in large amounts and terms. In view of the Bank's strategic change, and taking into account its new business model ("hold to collect and sale"), this type of credit, which was previously measured at amortized cost, is now measured at fair value through other comprehensive income, the respective impacts of which can be seen in Note 1.3 c).
| 31-12-2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Acquisition cost |
Interest receivable |
Gain/losses and other |
Book value | Acquisition cost |
Interest receivable |
Gain/losses and other |
Book value |
| National public issuers | ||||||||
| Maturing up to three years | - | - | - | - | 22,217 | 185 | 929 | 23,331 |
| Maturing between three and five years | 1,797,656 | 20,730 | 307,052 | 2,125,438 | 593,309 | 3,379 | 44,735 | 641,423 |
| Maturing between five and ten years | 155,443 | 1,218 | 15,649 | 172,310 | 2,911,971 | 58,680 | 512,146 | 3,482,797 |
| Maturing in more than 10 years | 486 | 4 | (48) | 442 | 487 | 4 | (45) | 446 |
| Foreign public issuers | ||||||||
| Maturing up to three years | - | - | - | - | 1,503 | 4 | 1 7 |
1,524 |
| Maturing between five and ten years | - | - | - | - | 307,743 | 1,412 | 31,298 | 340,453 |
| 1,953,585 | 21,952 | 322,653 | 2,298,190 | 3,837,230 | 63,664 | 589,080 | 4,489,974 |
The Debt securities sub-heading has the following composition:
| The Debt securities sub-heading has the following composition: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Secured credit | 3,836,569 | 3,925,660 |
| Interest receivable | 16,350 | 15,704 |
| Value adjustments of hedged assets | 20,684 | 36,021 |
| Commissions associated with amortized cost (net) | (962) | (1,021) |
| 3,872,641 | 3,976,364 | |
| Impairment of debt securities (Note 17) | (11,151) | (11,145) |
| 3,861,490 | 3,965,219 |
| The Loans and Advances sub-heading has the following composition: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Loans and advances - customers | ||
| To corporate clients | ||
| Discount and other credit securities | 400,052 | 412,444 |
| Loans | 8,494,266 | 8,085,223 |
| Current account loans | 844,213 | 826,486 |
| Overdrafts | 104,897 | 89,114 |
| Factoring | 1,536,865 | 1,675,690 |
| Finance leasing | 1,094,378 | 1,086,732 |
| Other credits | 29,581 | 47,989 |
| To individuals | ||
| Mortgage loans | 21,202,403 | 20,603,727 |
| Consumer credit and others | 2,237,912 | 2,236,858 |
| 35,944,567 | 35,064,263 | |
| Overdue loans and interest | 459,561 | 451,255 |
| Interest receivable | 51,993 | 56,694 |
| Values adjustments of hedged assets | 11,846 | 21,143 |
| Deferred expenses | 119,679 | 108,086 |
| Commissions associated with amortized cost (net) | (141,284) | (136,721) |
| 501,795 | 500,457 | |
| 36,446,362 | 35,564,720 | |
| Other balances receivable | ||
| Margin accounts | 651,612 | 865,734 |
| Checks payable | 73,665 | 52,845 |
| Sundry debtors and other cash equivalents | 318,018 | 345,540 |
| 1,043,295 | 1,264,119 | |
| Loans and advances - credit instituitions | ||
| Deposits | 13,174 | 13,173 |
| Loans | 1,193 | 7,127 |
| Interest receivable | 1 | 3 |
| Commissions associated at amortized cost | (7) | (7) |
| 14,361 | 20,296 | |
| Loans and advances | 37,504,018 | 36,849,135 |
| Impairment of loans and advances - customers and other balances receivable | (1,067,336) | (993,646) |
| Impairment of loans and advances - credit instituitions | (111) | (126) |
| Impairment of loans and advances (Note 17) | (1,067,447) | (993,772) |
| 36,436,571 | 35,855,363 |
In the first half of 2021 and in the financial period ended on December 31, 2020, portfolios of loans granted to individuals and companies were sold, with a carrying amount of €514k and €114.639k, respectively. As a result of these transactions, in the first half of 2021 and in 2020 gains were recorded in the net amount of €98k, and of €2.620k, respectively (Note 17).
In the first half of 2021 and in the financial period of 2020, the heading "Domestic loans – To individuals - Residential" included loans assigned to the autonomous property of the mortgage loans issued by the Bank in the amounts of €10.033.671k and €10.278.006k, respectively (Note 16).
Movements under impairments of credit during the first halves of 2021 and 2020 are presented in note 17.
As at June 30, 2021, and December 31, 2020, the division by stage of the financial assets portfolio by the amortized cost, has the following breakdown:
| 30-06-2021 | 31-12-2020 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gross | Gross | ||||||||
| value | Impairment | Coverage | value | Impairment | Coverage | ||||
| Stage 1 | 34,619,095 | (96,130) | 0.28% | 35,182,147 | (92,478) | 0.26% | |||
| Stage 2 | 5,395,768 | (219,495) | 4.07% | 4,252,383 | (163,132) | 3.84% | |||
| Stage 3 | 1,361,796 | (762,973) | 56.03% | 1,390,969 | (749,307) | 53.87% | |||
| 41,376,659 | (1,078,598) | 40,825,499 | (1,004,917) | ||||||
The evolution that occurred in the exposure and in the impairment for financial assets at amortized cost in the first half of 2021 and in the financial year of 2020 was as follows:
| Loans and advances at amortized cost | Impairment | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| Balance as at 01-01-2019 | 37,343,803 | 2,022,691 | 1,622,680 | 40,989,174 | 64,526 | 72,855 | 784,127 | 921,508 |
| Transfers | ||||||||
| Stage 1 to 2 | (755,816) | 755,816 | - | - | (2,576) | 16,815 | - | 14,239 |
| Stage 1 to 3 | (42,407) | - | 42,407 | - | (319) | - | 9,694 | 9,375 |
| Stage 2 to 3 | - | (55,117) | 55,117 | - | - | (3,716) | 21,766 | 18,050 |
| Stage 2 to 1 | 466,874 | (466,874) | - | - | 1,432 | (20,191) | - | (18,759) |
| Stage 3 to 2 | - | 49,114 | (49,114) | - | - | 3,963 | (18,141) | (14,178) |
| Stage 3 to 1 | 4,731 | - | (4,731) | - | 5 1 |
- | (1,777) | (1,726) |
| Change in business model | (2,331,153) | - | - | (2,331,153) | - | - | - | - |
| Idiosyncratic overlay | (2,433,000) | 2,433,000 | - | - | - | 57,000 | - | 57,000 |
| Macro Overlay | - | - | - | - | 39,400 | 46,700 | 47,300 | 133,400 |
| Write offs and sales | - | - | (133,327) | (133,327) | - | - | (91,621) | (91,621) |
| Origination net of amortization | 2,929,115 | (486,247) | (142,063) | 2,300,805 | (10,036) | (10,294) | (2,041) | (22,371) |
| Balance as at 31-12-2020 | 35,182,147 | 4,252,383 | 1,390,969 | 40,825,499 | 92,478 | 163,132 | 749,307 | 1,004,917 |
| Transfers | ||||||||
| Stage 1 to 2 | (729,198) | 729,198 | - | - | (2,597) | 30,017 | - | 27,420 |
| Stage 1 to 3 | (26,714) | - | 26,714 | - | (165) | - | 5,967 | 5,802 |
| Stage 2 to 3 | - | (29,637) | 29,637 | - | - | (1,834) | 10,147 | 8,313 |
| Stage 2 to 1 | 433,164 | (433,164) | - | - | 1,532 | (17,110) | - | (15,578) |
| Stage 3 to 2 | - | 24,648 | (24,648) | - | - | 1,823 | (7,324) | (5,501) |
| Stage 3 to 1 | 2,434 | - | (2,434) | - | 3 3 |
- | (311) | (278) |
| Overlay Re-rating | (1,000,000) | 1,000,000 | - | - | - | 39,000 | - | 39,000 |
| Write offs and sales | - | - | (1,368) | (1,368) | - | - | (1,173) | (1,173) |
| Origination net of amortization | 757,262 | (147,660) | (57,074) | 552,528 | 4,849 | 4,467 | 6,360 | 15,676 |
| Balance as at 30-06-2021 | 34,619,095 | 5,395,768 | 1,361,796 | 41,376,659 | 96,130 | 219,495 | 762,973 | 1,078,598 |
The composition of this heading is as follows:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Book Value | Notional amounts | |||||||
| Up to 3 | Between 3 | Over 1 | ||||||
| Type of financial instrument | Assets | Liabilities | months | and 1 year | year | Total | ||
| Hedging derivatives | ||||||||
| Fair value hedge | ||||||||
| Interest rate swaps | ||||||||
| Liabilities and loans | 2,962 | 65,981 | 171,770 | 21,602 | 2,884,456 | 3,077,828 | ||
| Financial assets at fair value | ||||||||
| through other comprehensive income | - | 288,915 | - | - | 3,380,000 | 3,380,000 | ||
| Equity swaps | 422 | - | 8,946 | 14,205 | 8,227 | 31,378 | ||
| Cash flow hedge | ||||||||
| Interest rate swaps | ||||||||
| Cash flows | 14,536 | - | - | 3,000,000 | - | 3,000,000 | ||
| 17,920 | 354,896 | 180,716 | 3,035,807 | 6,272,683 | 9,489,206 |
| 31-12-2020 | ||||||
|---|---|---|---|---|---|---|
| Book Value | Notional amounts | |||||
| Up to 3 | Between 3 | Over 1 | ||||
| Type of financial instrument | Assets | Liabilities | months | and 1 year | year | Total |
| Hedging derivatives | ||||||
| Fair value hedge | ||||||
| Interest rate swaps | ||||||
| Liabilities and loans | 250 | 85,727 | 441 | 329,362 | 2,752,466 | 3,082,269 |
| Financial assets at fair value | ||||||
| through other comprehensive income | - | 374,018 | - | - | 3,380,000 | 3,380,000 |
| Equity swaps | 563 | - | 10,512 | 20,503 | 15,750 | 46,765 |
| Cash flow hedge | ||||||
| Interest rate swaps | ||||||
| Cash flows | 22,906 | - | - | 3,000,000 | - | 3,000,000 |
| Forward sale | - | 62,538 | 2,049,092 | - | - | 2,049,092 |
| 23,719 | 522,283 | 2,060,045 | 3,349,865 | 6,148,216 | 11,558,126 |
The Bank carries out derivatives transactions within the scope of its business, managing its positions based on expectations of the evolution of the markets, satisfying the needs of its customers, or hedging positions of a structural nature. The interest-rate risk implicit in the securitisation and mortgage loans issues are also managed by the Bank through contracting derivative financial instruments.
The Bank trades derivatives, namely in the form of exchange-rate or interest-rate contracts or a combination of both. These transactions are carried out in over-the-counter (OTC) markets).
Over-the-counter derivatives trading is usually based on a standard bilateral contract, which encompasses the set of operations on derivatives existing between the parties. In the case of inter-professionals relations, a Master Agreement of the ISDA – International Swaps and Derivatives Association. In the case of relations with customers, a contract of the Bank.
In this type of contract, offsetting liabilities is provided for in the event of default (the coverage of this offset is provided for in the contract and is governed by Portuguese law, and, for contracts with foreign counterparts or executed under foreign law, in the relevant jurisdictions).
The derivatives' contract may also include a collateralisation agreement of the credit risk generated by the transactions governed by it. It should be noted that the derivatives contract between two parties usually covers all OTC derivative transactions carried out between these two parties, be they used to hedging or not.
In accordance with the standard, parts of operations commonly known as "embedded derivatives" are also separated and carried as derivatives, in a manner such as to recognize the fair value of these operations in profit or loss.
All derivatives (embedded or autonomous) are carried at fair value.
Derivatives are also recorded in off-balance-sheet accounts at their theoretical value (notional value). The notional value is the reference value for the calculation of flows of payments and receipts originated by the operation.
The fair value corresponds to the estimated value that the derivatives would have if they were traded on the market on the reference date. The evolution of the fair value of derivatives is recognized in the relevant balance sheet accounts and has immediate impact on profit or loss.
The composition of this heading is as follows:
| 30-06-2021 | 31-12-2020 | ||||
|---|---|---|---|---|---|
| Effective participation (%) |
Book value | Effective participation (%) |
Book value | ||
| Lusimovest - Fundo de Investimento Imobiliário | 25.76 | 26,272 | 25.76 | 26,235 | |
| Unicre - Instituição Financeira de Crédito, S.A. | 21.86 | 33,222 | 21.86 | 36,347 | |
| 59,494 | 62,582 |
As at June 30, 2021, and December 31, 2020, the financial investments held with Unicre included goodwill. The impairment test conducted on the goodwill at Unicre revealed no impairment losses in this financial investment.
As of this day, there are no liabilities to be met before the associated companies, nor are there any contingent liabilities to be recognized by the Company arising from the holdings therein.
The breakdown of this heading is as follows:
During 2013, following the subscription of several participation units, the Bank came to consolidate, using the full consolidation method, the Novimovest Real Estate Fund, whose main asset is rental properties.
As at June 30, 2021, and December 31, 2020, the characteristics of properties held by the Novimovest Real Estate Fund were as follows:
| Estate Fund were as follows: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Land | ||
| Urbanized | 13,485 | 13,485 |
| Non-urbanized | 1,141 | 1,141 |
| Finished constructions | ||
| Rented | 176,464 | 172,173 |
| Not rented | 48,004 | 39,824 |
| Other construction projects | 10,426 | 23,908 |
| 249,520 | 250,531 |
| 2021 | |||||
|---|---|---|---|---|---|
| Balances at | Fair value | Balances at | |||
| 31-12-2020 | Increases | valuation | Sales | 30-06-2021 | |
| Properties held by Novimovest Fund | 250,531 | 176 | (176) | (1,011) | 249,520 |
| 2020 | |||||
| Balances at | Fair value | Balances at | |||
| 31-12-2019 | Increases | valuation | Sales | 30-06-2020 | |
| Properties held by Novimovest Fund | 252,513 | 4,084 | (689) | (999) | 254,909 |
The effect of the valuation at fair value of the properties held by the Novimovest Real Estate Fund is recorded in the income statement under "Other Operating Gains / Losses - Investment Properties" (Note 30).
Investment properties held by the Group are appraised bi-annually, or more frequently if an event occurs in the meantime giving rise to doubts as to the value of the latest appraisal conducted by specialised, independent entities in accordance with the method described in Note 15.
As at June 30, 2021, and December 31, 2020, the way of calculating the fair value of the investment properties in accordance with the levels set out in IFRS 13 is as follows:
| Level 3 | ||||
|---|---|---|---|---|
| 30-06-2021 31-12-2020 |
||||
| Investment properties | 249,520 | 250,531 |
| 31-12-2020 | Transfers | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| From/to non-current | Transfers | |||||||||||
| Write-offs and sales | assets held for sale | other | 30-06-2021 | |||||||||
| Accumulated | Gross | Accumulated Gross | Accumulated | Gross | Gross | Accumulated | Net | |||||
| depreciation Impairment Acquisitions | amount | depreciation amount | depreciation amount | Impairment Depreciation | amount depreciation Impairment | amount | ||||||
| (Note 17) | (Note 14) | (Note 17) | (Note 17) | |||||||||
| (141,579) (23,623) |
778 (10,528) | 10,520 | (7,949) | 2,670 | - | 17,477 | (4,064) | 385,127 | (132,453) | (6,146) | 246,528 | |
| (21,871) - |
221 | (4,630) | 4,562 | - | - | - | - | (315) | 22,361 | (17,624) | - | 4,737 |
| (80) - |
- | - | - | - | - | - | - | (1) | 167 | (81) | - | 8 6 |
| (12,335) - |
- | - | - | - | - | - | - | (2,356) | 37,155 | (14,691) | - | 22,464 |
| (175,865) (23,623) |
999 (15,158) | 15,082 | (7,949) | 2,670 | - | 17,477 | (6,736) | 444,810 | (164,849) | (6,146) | 273,815 | |
| - | 5,935 | (4,284) | 3,272 | (530) | 194 | (32) | - | (7,158) | 171,477 | (109,699) | - | 61,778 |
| - | - | (1) | - | - | - | - | - | (1) | 2,183 | (76) | - | 2,107 |
| - | 5,935 | (4,285) | 3,272 | (530) | 194 | (32) | - | (7,159) | 173,660 | (109,775) | - | 63,885 |
| (23,623) | 6,934 | (19,443) | 18,354 | (8,479) | 2,864 | (32) | 17,477 | (13,895) | 618,470 | (274,624) | (6,146) | 337,700 |
| - | 8,647 | - | - | - | - | 2,029 | - | (11,310) | 122,631 | (88,545) | - | 34,086 |
| - | 1,504 | - | - | - | - | (1,997) | - | - | 4,586 | (4,386) | - | 200 |
| - - |
- | - | - | - | - | - | - | - | 1,160 | - | - | 1,160 |
| - | 10,151 | - | - | - | - | 3 2 |
- | (11,310) | 128,377 | (92,931) | - | 35,446 |
| (106,007) (75) (106,082) (281,947) (77,235) (4,386) (81,621) |
(Expressed in thousands of euros, except where otherwise stated)
| 2020 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Transfers | ||||||||||||||
| From/to non-current | Transfers | |||||||||||||
| 31-12-2019 | Write-offs and sales | assets held for sale | other | Depreciation | 30-06-2020 | |||||||||
| Gross | Accumulated | Gross | Accumulated | Gross | Accumulated | Gross | in the | Gross | Accumulated | Net | ||||
| amount | depreciation | Impairment | Acquisitions | amount | depreciation | amount | depreciation | amount | period | amount | depreciation | Impairment | amount | |
| (Nota 17) | (Nota 12) | (Nota 17) | ||||||||||||
| Tangible assets | ||||||||||||||
| Property | ||||||||||||||
| Property for own use | 413.714 | (137.398) | (6.146) | 2.584 | (15) | - | (4.806) | 1.418 | - | (4.257) | 411.477 | (140.237) | (6.146) | 265.094 |
| Leasehold expenditure | 28.211 | (22.336) | - | 312 | (94) | 110 | - | - | - | (1.015) | 28.429 | (23.241) | - | 5.188 |
| Other property | 167 | (79) | - | - | - | - | - | - | - | - | 167 | (79) | - | 88 |
| Rights of use (IFRS 16) | 41.288 | (6.190) | - | - | - | - | - | - | - | (3.072) | 41.288 | (9.262) | - | 32.026 |
| 483.380 | (166.003) | (6.146) | 2.896 | (109) | 110 | (4.806) | 1.418 | - | (8.344) | 481.361 | (172.819) | (6.146) | 302.396 | |
| Equipment | 159.795 | (96.547) | - | 11.107 | (2.282) | 1.755 | (95) | 33 | - | (7.068) | 168.525 | (101.827) | - | 66.698 |
| Other tangible assets | 2.184 | (70) | - | - | - | - | - | - | - | (3) | 2.184 | (73) | - | 2.111 |
| 161.979 | (96.617) | - | 11.107 | (2.282) | 1.755 | (95) | 33 | - | (7.071) | 170.709 | (101.900) | - | 68.809 | |
| 645.359 | (262.620) | (6.146) | 14.003 | (2.391) | 1.865 | (4.901) | 1.451 | - | (15.415) | 652.070 | (274.719) | (6.146) | 371.205 | |
| Intangible assets | ||||||||||||||
| Software | 84.819 | (55.479) | - | 15.236 | - | - | - | - | (2.069) | (10.293) | 97.986 | (65.772) | - | 32.214 |
| Other intangible assets | 4.620 | (4.386) | - | 2.128 | - | - | - | - | 2.069 | - | 8.817 | (4.386) | - | 4.431 |
| Positive consolidation differences | 1.160 | - | - | - | - | - | - | - | - | - | 1.160 | - | - | 1.160 |
| 90.599 | (59.865) | - | 17.364 | - | - | - | - | - | (10.293) | 107.963 | (70.158) | - | 37.805 |
The breakdown of these headings is as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Current tax assets | 36,349 | 47,924 |
| Deferred tax assets | 331,852 | 323,018 |
| 368,201 | 370,942 | |
| Current tax liabilities | 61,327 | 1,677 |
| Deferred tax liabilities | 286,257 | 373,314 |
| 347,584 | 374,991 | |
| Deferred taxes | 45,595 | (50,296) |
Taxes in the income statement have the following composition:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Current taxes | (62,811) | (70,890) |
| Deferred taxes | 31,621 | 5 0 |
| (31,190) | (70,840) |
The operations under deferred tax assets and liabilities during the first half of 2021 and in 2021 were as follows:
| Balances at | Comprehensive | Income | Balances at | ||
|---|---|---|---|---|---|
| 31-12-2020 | Income | statement | Other | 30-06-2021 | |
| 159,564 | - | 35,108 | - | 194,672 | |
| (5,222) | - | - | - | (5,222) | |
| 1,430 | - | 5 | - | 1,435 | |
| (1,980) | - | 83 | - | (1,897) | |
| 12,809 | - | 12,809 | |||
| 21,644 | - | (8,480) | - | 13,164 | |
| 40,750 | - | (305) | - | 40,445 | |
| 3,555 | - | (162) | - | 3,393 | |
| (326,920) | 80,481 | - | (246,439) | ||
| 13,836 | (16,210) | - | (2,374) | ||
| 45,787 | - | (584) | - | 45,203 | |
| (23,977) | - | 428 | - | (23,549) | |
| 6,558 | - | 5,803 | - | 12,361 | |
| 1,870 | - | (275) | (1) | 1,594 | |
| (50,296) | 64,271 | 31,621 | (1) | 45,595 | |
| Outro | |||||
|---|---|---|---|---|---|
| Saldos em | rendimento | Saldos em | |||
| 31-12-2019 | integral | Resultados | Outros | 31-12-2020 | |
| Provisions/Impairment temporarily not accepted for tax purposes | |||||
| Deferred tax assets | 188,261 | - | (28,697) | - | 159,564 |
| Deferred tax liabilities | (5,222) | - | - | - | (5,222) |
| Revaluation of tangible assets | |||||
| Deferred tax assets | 1,568 | - | (138) | - | 1,430 |
| Deferred tax liabilities | (2,123) | - | 143 | - | (1,980) |
| Reportable tax losses | 185,508 | - | (15,000) | (157,699) | 12,809 |
| Pensions: | |||||
| Actuarial deviations | 38,158 | - | (16,514) | - | 21,644 |
| Early retirement pensions | 39,803 | - | 947 | - | 40,750 |
| Transfer of pension liabilities to the | |||||
| Social Security | 3,878 | - | (323) | - | 3,555 |
| Financial assets at fair value through other comprehensive income | (226,051) | (98,055) | (2,814) | - | (326,920) |
| Hedging derivatives - cash flows | 16,436 | (2,600) | - | - | 13,836 |
| Financial assets at fair value through profit or loss | 37,517 | - | 8,270 | - | 45,787 |
| Securitization operations | (24,120) | - | 143 | - | (23,977) |
| Integration costs | 10,530 | - | (3,972) | - | 6,558 |
| Other | 1,879 | - | (8) | (1) | 1,870 |
| 266,022 | (100,655) | (57,963) | (157,700) | (50,296) | |
In order to use the deferred taxes carried over from BANIF, on May 29, 2018, the Bank submitted a replacement Model 22 (Corporate Income Tax) statement, regarding the 2015 financial year. The presentation of that tax statement was motivated by the calculation of the result of BANIF's 2015 financial year and the approval, by the Minister of Finance, of the request for the transfer of BANIF's deferred taxes to the Bank (see Order No. 138/2018/MF, of March 30, 2018). However, by Order of the Deputy Director of the Major Taxpayers Unit dated November 26, 2019 ("Order of the Tax Authority"), the Bank was only recognized the right to use BANIF's deferred taxes for the years 2009 to 2014. As it disagreed with the Order of the Tax Authority, on January 13, 2020, the Bank filed a hierarchical appeal to the Minister of Finance. On June 30, 2020, the Deputy-Director-General of the Tax Management - Income Taxes area decided to dismiss the hierarchical appeal submitted. Since the Order of the Tax Authority and the Order of the Deputy Director-General only recognized the Bank's right to take advantage of BANIF's deferred taxes in the total amount of €92,301k, the Bank may demand — under the agreement with the Portuguese authorities involved in Banif's termination proceedings — a compensation of €157,699k, either in cash or treasury bills. In order to comply with this decision, the Bank transferred the amount in question, from this heading to the heading "Other balances receivable."
Dividends distributed to the Bank by subsidiaries and associated companies located in Portugal or in a European Union Member State are not taxed within the sphere of the latter as a result of the application of the arrangements provided for in Article 51 of the Corporate Tax Code that provides for the elimination of double taxation of distributed profits.
The tax authorities are entitled to review the Bank's tax situation during a period of four years (five years for Social Security), except in cases where there are tax losses carried forward and any other tax deduction or credit, situations in which the expiry is that of the exercise of that right.
The Bank was subject to a tax inspection up to and including 2017. As a result of the inspection, it was subject to an additional Corporate Tax assessment and to various corrections to the tax loss used in that year. In the matter of Stamp Duty, the Bank was also subject to an additional assessment. The corrections made to taxable income covered various matters and most are merely temporary corrections.
As for the additional assessments received, the Bank paid off the amounts assessed. Nevertheless, the majority of the additional assessments were subject to administrative claim and/or judicial review.
The Group decided to apply as from 2017 the Special Taxation of Groups of Companies Regime (RETGS). This new regime is reflected in the algebraic sum of the tax results determined in the separate periodic returns of each company. The companies covered by this scheme are Santander Totta, SGPS — the controlling company —, and Taxagest, Banco, Santander Totta Seguros, TottaUrbe and Gamma controlled companies.
The composition of this heading is as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Gold, other precious metals, coins and medals | 3,145 | 3,145 |
| Promises and other assets received | ||
| as settlement in lieu of payment | 209,353 | 233,480 |
| Income receivable and deferred income | 24,028 | 20,946 |
| Deferred costs | 1,706 | 1,486 |
| Other assets pending regularization | 2,726 | 8,379 |
| 240,958 | 267,436 | |
| Impairment losses for assets received in lieu of payment (Note 17) | (100,496) | (103,285) |
| 140,462 | 164,151 | |
The "Income Receivable and Revenue with Deferred Income" heading mainly includes fees receivable from insurers for the marketing of their insurance (Note 34).
The "Loan operations pending settlement" includes loan/borrowing operations pending settlement as detailed below:
| 30-06-2021 | 31-12-2020 | ||||
|---|---|---|---|---|---|
| Other | Other | Other | Other | ||
| assets | liabilities | assets | liabilities | ||
| (Note 19) | (Note 19) | ||||
| Values in transit and other transactions to be settled | 1.089 | (12.869) | 1.885 | (5.842) | |
| Transfers within SEPA | - | (228.215) | 30 | (110.761) | |
| Balances to be settled in ATM's | - | - | 1.991 | - | |
| Other | 1.637 | (69.755) | 4.473 | (76.717) | |
| 2.726 | (310.839) | 8.379 | (193.320) |
The operations under "Payment in kind promises, auctions and other assets received as payment in kind" during the six-month period ended on June 30, 2021, and in 2020 were as follows:
| 31-12-2020 | 30-06-2021 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross | Net | Transfers from/to ANCDV | Tranfers/ | Other | Impairment (Note 17) | Gross | Net | ||||||||||
| amount Impairment amount Increases | Sales | Capital | Impairment tangible assets Impairment Increases | Reversals | Utilisation | amount | Impairment | amount | |||||||||
| (Note 17) | (Note 17) | (Note 12) | (Note 17) | (Note 17) | |||||||||||||
| Assets received as settlement of defaulting | |||||||||||||||||
| Real estate | 51,356 | (29,489) | 21,867 | - | - | (7,843) | 1,643 | - | - | - | - | - | 43,513 | (27,846) | 15,667 | ||
| Lieu of payment | 1,856 | (64) | 1,792 | 8 3 |
- | (551) | - | - | - | (45) | 2 1 |
- | 1,388 | (88) | 1,300 | ||
| Auctions | 15,783 | (6,316) | 9,467 | 3,949 | (2,265) | (9,594) | - | - | - | (1,675) | 3,534 | 1,516 | 7,873 | (2,941) | 4,932 | ||
| Other | 32,546 | (25,942) | 6,604 | 1,461 | (949) | (92) | - | - | - | (1,178) | 428 | 234 32,966 | (26,458) | 6,508 | |||
| Own real estate properties for sale | 47,071 | (29,980) | 17,091 | 268 | (6,387) | - | - | 5,615 | (3,650) | (587) | 2,731 | 3,022 | 46,567 | (28,464) | 18,103 | ||
| Other property for sale | 84,867 | (11,494) | 73,373 | - | (7,821) | - | - | - | - | (3,620) | - | 415 77,046 | (14,699) | 62,347 | |||
| 233,479 | (103,285) | 130,194 | 5,761 | (17,422) | (18,080) | 1,643 | 5,615 | (3,650) | (7,105) | 6,714 | 5,187 | 209,353 | (100,496) | 108,857 |
| 31-12-2019 | 30-06-2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross | Net | Transfers from/to | Tranfers/ | Impairment (Note 17) | Gross | Net | |||||||
| amount Impairment amount Increases | Sales | ANCDV | tangible assets | Increases | Reversals | Utilisation | amount | Impairment | amount | ||||
| (Note 17) | (Note 15) | (Note 12) | (Note 17) | ||||||||||
| Assets received as settlement of defaulting | |||||||||||||
| Real estate | 64.026 | (28.141) | 35.885 | - | - | 12.956 | - | - | - | (17.239) | 76.982 | (45.380) | 31.602 |
| Lieu of payment | 1.976 | (86) | 1.890 | - | - | (176) | - | (1) | - | - | 1.800 | (87) | 1.713 |
| Auctions | 16.474 | (5.203) | 11.271 | 3.411 | - | (2.970) | - | (1.259) | 62 | - | 16.915 | (6.400) | 10.515 |
| Other | 33.454 | (26.911) | 6.543 | 1.451 | (1.816) | (155) | - | (710) | 709 | 120 | 32.934 | (26.792) | 6.142 |
| Own real estate properties for sale | 42.407 | (27.467) | 14.940 | 40 | (2.503) | - | 3.450 | (1.627) | 634 | 687 | 43.394 | (27.773) | 15.621 |
| Other property for sale | 97.206 | (384) | 96.822 | 7.065 | (8.797) | - | - | (7.021) | 387 | 102 | 95.474 | (6.916) | 88.558 |
| 255.543 | (88.192) | 167.351 | 11.967 | (13.116) | 9.655 | 3.450 | (10.618) | 1.792 | (16.330) | 267.499 | (113.348) | 154.151 | |
The determination of impairment losses is performed according to the methodology described in Note 15.
As at June 30, 2020, and December 31, 2020, the method for determining the fair value of assets received by donation in payment in accordance with the levels defined in IFRS 13 is level 3.
| 31-12-2020 | Transfers | Impairment (Note 17) | U | 30-06-2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross | Accumulated | Utilisation | t | Accumulated | |||||||||
| amount | impairment | Increases | Sales | Capital | Impairment | Increases | Reversals | and other | i Gross amount | impairment | Net value | ||
| (Note 17) | (Note 14) | (Note 17) | (Note 17) | ||||||||||
| Real estate property | 92.345 | (41.292) | 505 | (17.745) | 18.080 | (1.643) | (3.770) | 3.319 | 2.957 | 93.185 | (40.429) | 52.756 | |
| Equipment | 2.006 | (1.599) | 1.534 | (1.198) | - | - | (636) | 94 | 129 | 2.342 | (2.012) | 330 | |
| 94.351 | (42.891) | 2.039 | (18.943) | 18.080 | (1.643) | (4.406) | 3.413 | 3.086 | 95.527 | (42.441) | 53.086 | ||
| 31-12-2019 | Impairment (Note 17) | 30-06-2020 | |||||||||||
| Gross | Accumulated | Transfers from / to | Utilisation | Gross | Accumulated | ||||||||
| amount | impairment | Increases | Sales | other assets | Increases | Reversals | and other | amount | impairment | Net value | |||
| (Note 17) | (Note 14) | (Nota 17) | |||||||||||
| Real estate property | 74.822 | (31.223) | 33.190 | (10.833) | (9.655) | (3.560) | 3.840 | (2.332) | 87.524 | (33.275) | 54.249 | ||
| Equipment | 2.047 | (1.603) | 635 | (582) | - | (68) | 75 | 75 | 2.100 | (1.521) | 579 | ||
| 76.869 | (32.826) | 33.825 | (11.415) | (9.655) | (3.628) | 3.915 | (2.257) | 89.624 | (34.796) | 54.828 | |||
The operations under this heading were as follows:
These assets are carried at the amount agreed by negotiation or judicial means, after deduction of the lesser of the expenses the Bank expects to incur with their sale, or their quick-sale value. On the other hand, assets recovered following the termination of finance lease contracts are carried under Assets for the amount of principal outstanding on the date of termination of the contract.
Real estate is subject to periodic appraisals performed by independent appraisers. Whenever the amount arising from these appraisals (net of selling expenses) is lower than the amount at which the properties are carried, impairment losses are recorded. If, on a subsequent date, the facts that led the Bank to record impairment losses no longer exist, the Bank will reverse the impairment losses, up to the limit of the amount that the assets would have had they not been reclassified to non-current assets held for sale.
The appraisal of these properties is carried out in accordance with one of the following methods, applied according to the specific situation of the asset:
The market comparison criterion is based on real-estate transaction figures for similar properties comparable to the property constituting the object of the study obtained through market research conducted in the area where the property is located.
This method is intended to estimate the value of the property based on the capitalisation of its net rent, updated to the present moment, using the discounted cash flows method.
The appraisals performed on the properties referred to above are performed by independent, specialised entities accredited by the Securities Markets Commission (CMVM).
As at June 30, 2021, and December 31, 2020, the method for determining the fair value of non-current assets held for sale in accordance with the levels defined in IFRS 13 is level 3.
The Deposits sub-heading has the following composition:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Deposits - Central Banks | ||
| Resources from Bank of Portugal - Deposits | 7.428.642 | 6.781.961 |
| Resources from other Central Banks - Deposits | 500 | 9.859 |
| 7.429.142 | 6.791.820 | |
| Deposits - Credit institutions | ||
| Resources from domestic credit institutions | ||
| Short-term resources | 63.110 | 52.970 |
| Deposits | 210.067 | 228.329 |
| Sale operations with repurchase agreement | 207 | 1.255.805 |
| Other resources | 12.684 | 11.571 |
| Interest payable | 143 | 156 |
| Revenue with deferred income | (174) | 138 |
| 286.037 | 1.548.969 | |
| Deposits - Customers | ||
| Term deposits | 14.332.589 | 14.533.260 |
| Demand deposits | 23.057.699 | 20.977.020 |
| Structured deposits | 23.235 | 38.643 |
| Saving deposits | 628.165 | 686.479 |
| Others | 126.826 | 27.421 |
| Interest payable | 5.518 | 6.932 |
| Value adjustments for hedging operations | 122 | 237 |
| 38.174.154 | 36.269.992 | |
| Deposits | 45.889.333 | 44.610.781 |
| 30-06-2021 | 31-12-2020 | |||||
|---|---|---|---|---|---|---|
| Issued | Reacquired | Balance | Issued | Reacquired | Balance | |
| Mortgage bonds | ||||||
| Opening balance | 8,800,000 | (6,800,000) | 2,000,000 | 8,050,000 | (5,300,000) | 2,750,000 |
| Issued | - | - | - | 1,500,000 | - | 1,500,000 |
| Reacquired | - | - | - | - | (1,500,000) | (1,500,000) |
| Redeemed | (200,000) | 200,000 | - | (750,000) | - | (750,000) |
| Final balance | 8,600,000 | (6,600,000) | 2,000,000 | 8,800,000 | (6,800,000) | 2,000,000 |
| Interest payable | - | - | 11,127 | - | - | 9,314 |
| Cost-related commissions | - | - | (20,822) | - | - | (23,161) |
| 8,600,000 | (6,600,000) | 1,990,305 | 8,800,000 | (6,800,000) | 1,986,153 | |
| Bonds issued in the scope of securitization operations | ||||||
| Opening balance | 3,806,917 | (3,192,235) | 614,682 | 4,269,015 | (3,525,534) | 743,481 |
| Redeemed | (228,235) | 182,689 | (45,546) | (462,098) | 333,299 | (128,799) |
| Final balance | 3,578,682 | (3,009,546) | 569,136 | 3,806,917 | (3,192,235) | 614,682 |
| Interest payable | - | - | - | - | - | 676 |
| Cost-related commissions | - | - | (45,241) | - | - | (48,659) |
| 3,578,682 | (3,009,546) | 523,895 | 3,806,917 | (3,192,235) | 566,699 | |
| Structured bonds | ||||||
| Issued | 8,227 | - | 8,227 | 8,227 | - | 8,227 |
| Interest payable | - | - | 143 | - | - | 9 7 |
| Value adjustments for hedging operations | - | - | 183 | - | - | 250 |
| Subordinated liabilities | 8,227 | - | 8,553 | 8,227 | - | 8,574 |
| Subordinated liabilities | ||||||
| Opening balance | 554,791 | (209,100) | 345,691 | 522,099 | (225,362) | 296,737 |
| Issued | - | - | - | 320,000 | - | 320,000 |
| Redeemed | - | - | - | (287,308) | 16,262 | (271,046) |
| Final balance | 554,791 | (209,100) | 345,691 | 554,791 | (209,100) | 345,691 |
| Interest payable | - | - | 3,020 | - | - | 233 |
| 554,791 | (209,100) | 348,711 | 554,791 | (209,100) | 345,924 | |
| 12,741,700 | (9,818,646) | 2,871,464 | 13,169,935 | (10,201,335) | 2,907,350 | |
Under the law, holders of the covered bonds have a special creditor privilege over the autonomous assets and liabilities, which constitutes a guarantee of the debt to which the bondholders will have access in the event of the issuer's insolvency.
The conditions of the covered bonds, of the bonds issued within the scope of securitisation operations, and cash bonds are described in Annex I, and those of the subordinated liabilities in Annex II.
Between May 2008 and June 2021, the Bank undertook twenty-six covered-bond issuances under the €12.5 billion Covered Bonds Programme. As at June 30, 2020, and December 31, 2020, the covered bonds had an autonomous assets and liabilities consisting of:
| 30-06-2021 | 31-12-2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Loans and advances (Note 9) | 10,033,671 | 10,278,006 | ||||||
| Credit interests | 5,566 | 6,682 | ||||||
| Derivatives | (137,099) | (184,234) | ||||||
| 9,902,138 | 10,100,454 | |||||||
The Other Financial Liabilities sub-heading has the following composition:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Cheques and orders payable | 101,243 | 62,261 |
| Creditors and other resources | ||
| Creditors for other futures transactions | 8,960 | 8,494 |
| Contributions to other health systems | 1,708 | 1,788 |
| Public sector | 21,614 | 31,222 |
| Creditors by factoring contract | 47,047 | 47,418 |
| Creditors for supplies of goods | 6,007 | 2,266 |
| Others | 25,009 | 26,975 |
| Commitments to future income (IFRS16 application) | 22,869 | 25,232 |
| 234,457 | 205,656 |
Commitments with future rents corresponds to the adoption of IFRS 16, and their movement during the first half of 2021 and 2020 was as follows:
| Liability to rent | Right to use | |
|---|---|---|
| (Note 12) | ||
| Balances as at January 1, 2019 | 35,356 | 35,098 |
| Depreciation 2020 | (6,557) | (6,145) |
| Outs | (5,604) | (6,170) |
| Ins | 1,617 | 1,617 |
| Rent extentions and modification | 420 | 420 |
| Balances as at December, 2020 | 25,232 | 24,820 |
| Depreciation 2021 | (2,363) | (2,356) |
| Balances as at June, 2021 | 22,869 | 22,464 |
| The operations under Provisions during the first half of 2021 and in 2020, were as follows: | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | |||||||||
| 31-12-2020 | Increases | Reversals | Utilization | Tranfers/Others | 30-06-2021 | ||||
| Impairment for guarantees and commitments | |||||||||
| given (Note 23) | 57,466 | 1,428 | (997) | - | - | 57,897 | |||
| Other provisions | 173,858 | 246,055 | (7,737) | (61,346) | (28,850) | 321,980 | |||
| 231,324 | 247,483 | (8,734) | (61,346) | (28,850) | 379,877 | ||||
| 2020 | |||||||||
| 31-12-2019 | Increases | Reversals | Utilization | Tranfers/Others | 30-06-2020 | ||||
| Impairment for guarantees and commitments | |||||||||
| given (Note 23) | 53,248 | 4,236 | (1,090) | - | - | 56,394 | |||
| Other provisions | 169,781 | 2,323 | (4,115) | (14,887) | (1,305) | 151,797 | |||
| 223,029 | 6,559 | (5,205) | (14,887) | (1,305) | 208,191 | ||||
| As at June 30, 2021, and December 30, 2020, the breakdown of Other Provisions was as follows: | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | |||||||
| Pensions and other post-employment defined benefit obligations | 14,279 | 14,201 | ||||||
| Restructuring | 233,893 | 54,369 | ||||||
| Legal issues and and pending tax disputes | 10,245 | 11,622 | ||||||
| Other provisions | 63,563 | 93,666 | ||||||
| 321,980 | 173,858 | |||||||
| 2021 | ||||||
|---|---|---|---|---|---|---|
| Reversals of | Recoveries | |||||
| impairment | Utilization | of past | Gain/loss from | |||
| 31-12-2020 | Increases | losses | and others | 30-06-2021 | due loans | loan sales |
| 11,145 | 8,195 | (8,189) | - | 11,151 | - | - |
| 993,772 | 237,567 | (166,127) | 2,235 | 1,067,447 | (2,769) | 9 8 |
| 1 4 |
- | (1) | - | 1 3 |
- | - |
| 1,004,931 | 245,762 | (174,317) | 2,235 | 1,078,611 | (2,769) | 9 8 |
| 23,623 | - | - | (17,477) | 6,146 | - | - |
| 103,285 | 7,105 | (6,714) | (3,180) | 100,496 | - | - |
| 42,891 | 4,406 | (3,413) | (1,443) | 42,441 | - | - |
| 169,799 | 11,511 | (10,127) | (22,100) | 149,083 | - | - |
| Gain/loss from | ||||||
| 31-12-2019 | Increases | losses | and others | 30-06-2020 | due loans | loan sales |
| - | ||||||
| 1,059 | ||||||
| - | ||||||
| 1,059 | ||||||
| - | ||||||
| (1,792) | 16,330 | 113,348 | - | - | ||
| 88,192 | 10,618 | |||||
| 32,826 | 3,628 | (3,915) | 2,257 | 34,796 - |
- - |
- |
| Impairment or reversal of impairment on financial assets not measured at Impairment or reversal of impairment on financial assets not measured at 4,057 917,451 8 9 921,597 6,146 |
4,599 356,603 5 7 361,259 - |
Reversals of impairment (5,143) (251,681) (129) (256,953) - |
2020 Utilization - (7,328) - (7,328) - |
3,513 1,015,045 1 7 1,018,575 6,146 |
Recoveries of past - (4,451) - (4,451) - |
As at June 30, 2021, and December 31, 2020, this item represented participation units of the Novimovest Fund not held by the Group.
The composition of this heading is as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| General administrative expenses | 107,580 | 81,822 |
| Personnel expenses | ||
| Vacation and vacation subsidies | 31,386 | 41,294 |
| Other variable remuneration | 19,447 | 20,226 |
| End career prize (BAPOP) | 1,389 | 1,377 |
| Christmas subsidies | 9,668 | - |
| Other personnel expenses | 1,543 | 3,918 |
| Other charges | 7,072 | 6,172 |
| Other deferred income | 10,215 | 9,687 |
| Advances for sale of real estate received as payment | 1,263 | 946 |
| Integration costs | 4,412 | 6,024 |
| Liabilities with pensions and other benefits (Note 35) | ||
| Santander liabilities | 1,122,949 | 1,123,784 |
| Santander pension fund book value | (1,140,792) | (1,143,046) |
| London branch liabilities | 53,068 | 56,628 |
| London branch pension fund book value | (49,467) | (48,718) |
| Former Banif liabilities | 160,103 | 160,544 |
| Former Banif pension fund book value | (97,395) | (93,369) |
| Former BAPOP liabilities | 181,293 | 181,921 |
| Former BAPOP pension fund book value | (190,054) | (186,718) |
| Liability operations to be settled | 7,451 | 17,636 |
| Other (Note 14) | 310,839 | 193,320 |
| 551,970 | 433,448 |
As at June 30, 2021, and December 31, 2020, the Bank's share capital was represented by 1,256,723,284 shares, each of a par value of €1, fully subscribed and paid up by the following shareholders:
| Number | % of | ||
|---|---|---|---|
| of shares | participation | Amount | |
| Santander Totta, SGPS, S.A. | 1.241.179.513 | 98,76% | 1.241.180 |
| Own shares | 15.009.840 | 1,19% | 15.009 |
| Other | 533.931 | 0,04% | 534 |
| 1.256.723.284 | 100,00% | 1.256.723 |
Under the terms of Order-in-Council No. 408/99, of June 4, published in Official Gazette of Portugal – 1st series B, No. 129, the share issuance premiums, in the amount of €193,390k, cannot be used for the allocation of dividends or for the acquisition of treasury shares.
The "Equity instruments issued other than share capital" refer to the ancillary capital contributions granted by shareholder Santander Totta, SGPS, S. A., which neither bear interest nor have a defined reimbursement period. Those contributions can be reimbursed only by resolution of the Board of Directors, upon prior authorisation of the Bank of Portugal.
As at June 30, 2021, and December 31, 2020, the breakdown of reserves for accumulated comprehensive income was as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Other accumulated comprehensive income | ||
| Other comprehensive income - Gross amount | ||
| Financial assets at fair value through other comprehensive income (Note 8) | 729,233 | 989,146 |
| Revaluation reserves of companies in equity method | 1,171 | 2,413 |
| Cash-flow hedging instruments | 7,657 | (44,631) |
| Actuarial gains and losses (Note 35) | ||
| Pension Fund of BST | (779,271) | (795,764) |
| Pension Fund of the Lond branch of BST | (12,203) | (16,573) |
| Pension fund of Former Banif | (38,780) | (43,248) |
| Pension fund of Former BAPOP | (2,336) | (7,464) |
| Actuarial gains and losses of equity-accounted companies | (3,963) | (3,960) |
| (98,492) | 79,919 | |
| Other comprehensive income - Tax impact | ||
| For temporary differences | ||
| Reserves resulting from the fair value valuation | ||
| Financial assets at fair value trough other comprehensive income | (225,224) | (305,705) |
| Revaluation reserves of companies under the equity method | (299) | (615) |
| Cash-flow hedging instruments | (2,374) | 13,836 |
| Tax impact of actuarial deviations | 204,286 | 204,286 |
| Tax impact due to actuarial deviations of companies in the equity method | 957 | 919 |
| (22,654) | (87,279) | |
| (121,146) | (7,360) |
Deferred taxes were calculated based on legislation currently in force and correspond to the best estimate of the impact of the realisation of the potential gains and losses included in the revaluation reserves.
Revaluation reserves cannot be used for the allocation of dividends or to increase share capital.
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Retained earnings | 1,183,213 | 951,973 |
| Other reserves | ||
| Legal reserve | 539,357 | 511,836 |
| Reserves of consolidated companies | 157,662 | 161,092 |
| Reserves of companies consolidated under the equity method | 11,725 | 8,045 |
| Merger reserve | ||
| By incorporation of Totta and BSP | 541,334 | 541,334 |
| By incorporation of BSN | 35,405 | 35,405 |
| By incorporation of Totta IFIC | 90,520 | 90,520 |
| By incorporation of BAPOP | (8,411) | (8,411) |
| Other reserves | 27,636 | 27,494 |
| 1,395,228 | 1,367,315 |
The headings "Retained Earnings" and "Other Reserves" has the following composition:
In accordance with the provisions of Decree-Law 298/92, of December 31, amended by Decree-Law 201/2002, of September 26, the Bank sets aside a legal reserve until it equals the share capital, or the sum of the free reserves formed and of the retained earnings, if greater. To this end, a fraction of not less than 10% of the net income for the period of the separate business is annually transferred to this reserve, until the said amount is achieved. This reserve may be used only to cover accumulated losses or to increase the share capital.
In accordance with legislation in force, the merger reserve is considered equivalent to the legal reserve, and may only be used to cover accumulated losses or increase the share capital.
This heading includes the revaluation reserves, in 1998, under Decree-Law 31/98 of February 11, and the Bank revalued its tangible fixed assets, increasing their value, net of accumulated depreciation, by approximately €23,245k, which was recorded in revaluation reserves. The net amount resulting from the revaluation carried out can only be used for share capital increases or to cover losses, as and when they are used (amortized) or the assets to which they relate are sold.
In the first half of 2021 and of 2020, the determination of the consolidated profit can be summarised as follows:
| 30-06-2021 | 30-06-2020 | |||
|---|---|---|---|---|
| Contribution | Contribution | |||
| Net Income | to the | Net Income | to the | |
| for the | consolidated | for the | consolidated | |
| period | net income | period | net income | |
| Net income of BST (individual basis) | 53.973 | 53.973 | 157.611 | 157.611 |
| Net income of other Group companies: | ||||
| Totta (Ireland), Plc. | 4.127 | 4.127 | 5.904 | 5.904 |
| Novimovest - Fundo de Investimento Imobiliário Aberto | 1.629 | 1.283 | 558 | 439 |
| Unicre, Instituição Financeira de Crédito, S.A. | 5.172 | 1.131 | 2.549 | 557 |
| Gamma, Sociedade Financeira de Titularização de Créditos, S.A. | 181 | 181 | 38 | 38 |
| Totta Urbe, Empresa de Administração e Construções, S.A. | 1.683 | 1.683 | 1.033 | 1.033 |
| Lusimovest Fundo de Investimento Imobiliário | 144 | 37 | 724 | 187 |
| Taxagest, S.A. | (9) | (9) | (1) | (1) |
| 12.927 | 8.433 | 10.805 | 8.157 | |
| Elimination of intragroup dividends received: | ||||
| Totta (Ireland), Plc. | (9.124) | - | ||
| Unicre, Instituição Financeira de Crédito, S.A. | (4.704) | (3.192) | ||
| (13.828) | (3.192) | |||
| Adjustments related to securitization operations | 1.424 | (3.122) | ||
| Other | (171) | (4.938) | ||
| Consolidated net income attributable to the shareholders of BST | 49.832 | 154.516 |
Basic earnings per share are calculated by dividing the consolidated net income attributable to the Bank's shareholders by the weighted average number of common shares in circulation during the year.
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Consolidated net income attributable to the shareholders of BST | 49,832 | 154,516 |
| Weighted average number of ordinary shares issued | 1,256,723,284 | 1,256,723,284 |
| Weighted average number of own shares | 15,009,840 | 15,009,875 |
| Weighted average number of ordinary shares outstanding | 1,241,713,444 | 1,241,713,409 |
| Basic earnings per share attributable to the shareholders of BST (Euros) | 0.04 | 0.12 |
Basic earnings per share are the same as diluted earnings per share since there are no contingently issuable common shares, including options, warrants or equivalent financial instruments as of the reporting date.
The value of third-party holdings in Group companies is broken down by entity as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Taxagest, S.A. | 557 | 557 |
| Other | 69 | 70 |
| 626 | 627 |
The breakdown of off-balance-sheet liabilities is as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Guarantees given and other contingent liabilities | ||
| Guarantees and sureties | 635,531 | 648,253 |
| Commitments for credit granted | ||
| Revocable | Revogáveis 6,107,507 | 6,140,567 |
| Irrevocable | 629,733 | 949,459 |
| 6,737,240 | 7,090,026 | |
| Other commitments granted | ||
| Non-financial guarantees and sureties | 1,005,017 | 964,502 |
| Open Documentary Credits | 387,934 | 363,131 |
| Deposit Guarantee Fund | 68,969 | 68,969 |
| Investor Indemnity System | 7,138 | 7,507 |
| Other commitments granted | - | 200,215 |
| 1,469,058 | 1,604,324 | |
| 8,841,829 | 9,342,603 | |
| Assets pledged as guarantee | ||
| Bank of Portugal | 152,325 | 148,206 |
| Deposit Guarantee Fund | 78,901 | 87,998 |
| Investor Indemnity System | 8,416 | 8,516 |
| Assets pledged as guarantee in monetary policy operations | 16,921,590 | 15,995,107 |
| 17,161,232 | 16,239,827 | |
| Liabilities for services provided | ||
| Deposit and custodial services | 40,459,290 | 40,923,924 |
| Amounts received for collection | 528,125 | 444,411 |
| Other values | 133,359 | 113,603 |
| 41,120,774 | 41,481,938 |
Assets pledged as collateral for monetary policy operations correspond to the collateral pool that the Bank has with the European Central Bank, to ensure operational liquidity.
Guarantees and other contingent commitments have the following exposure per stage:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Exposure | Impairment (Note 17) | |||||||
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| Commitments for credit granted | 6,116,605 | 610,487 | 10,148 | 6,737,240 | 4,767 | 890 | 97 | 5,754 |
| Financial guarantees | 569,271 | 26,449 | 39,811 | 635,531 | 532 | 394 | 26,456 | 27,382 |
| Other commitments granted | 1,287,190 | 42,107 | 139,761 | 1,469,058 | 379 | 215 | 24,167 | 24,761 |
| 7,973,066 | 679,043 | 189,720 | 8,841,829 | 5,678 | 1,499 | 50,720 | 57,897 | |
| 31-12-2020 | ||||||||
| Exposure | Impairment (Note 17) | |||||||
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
| Commitments for credit granted | 6,485,022 | 596,264 | 8,740 | 7,090,026 | 4,618 | 658 | 13 | 5,289 |
| Financial guarantees | 570,269 | 36,870 | 41,114 | 648,253 | 541 | 434 | 25,587 | 26,562 |
| Other commitments granted | 1,400,980 | 52,668 | 150,676 | 1,604,324 | 361 | 149 | 25,105 | 25,615 |
| 8,456,271 | 685,802 | 200,530 | 9,342,603 | 5,520 | 1,241 | 50,705 | 57,466 |
Pursuant to Decree-Law 298/92 of December 31, the Deposit Guarantee Fund was established in November 1994 in order to secure the deposits made at credit institutions, in accordance with the limits established in the General Credit Institutions Regime. The initial contribution to the Fund, established by an Order-in-Council of the Ministry of Finance, was made through the delivery of cash and deposit securities, and has been amortised over 60 months as from January 1995. Except for what is referred to in the following paragraph, the regular annual contributions to the Fund are recognised as an expense for the period to which they relate.
Until 2011, as permitted by the Bank of Portugal, the Bank paid 90% of the annual contribution to the Deposit Guarantee Fund, having also entered into an irrevocable commitment to the Deposit Guarantee Fund to pay up the 10 % of the annual contribution, if and when so requested. The total unpaid accumulated amount as at June 30, 2021, and December 31, 2020, for which this commitment was entered into totalled €68,969k. The assets pledged to the Bank of Portugal are reflected under off-balance-sheet headings at their market value. In the first half of 2021 and in the financial year of 2020, the Bank paid 100% of the annual contribution in the amounts of €50k and €48k, respectively (Note 32).
Liabilities to the Investor Compensation System are not recognised as expenses. These liabilities are covered through the acceptance of an irrevocable commitment to make their payment, if it comes to be required, a part of which (50%) is secured by pledge of Portuguese Treasury securities. As at June 30, 2021, and December 30, 2020, these liabilities amounted to €7.138k and €7.507k, respectively.
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Interest income | ||
| Interest on cash and deposits at central banks and credit institutions | 2 7 |
172 |
| Interest on non-trading financial assets mandatorily at fair | ||
| value through profit or loss | 450 | 148 |
| Interest on financial assets at fair value through other comprehensive income | 67,489 | 48,317 |
| Interest on financial assets at amortized cost | ||
| Loans and advances - Credit instituitions | 6 5 |
1,255 |
| Debt securities | 28,523 | 28,630 |
| Loans and advances - customers | 273,876 | 332,894 |
| Interest on resources at Central Banks and other Credit institutions | 45,524 | 7,031 |
| Interests on hedging derivatives | 135,046 | 157,639 |
| Others | 461 | 1,949 |
| 551,461 | 578,035 | |
| Interest expenses | ||
| Interest on financial liabilities measured at amortized cost | ||
| Deposits - Credit instituitions | (2,436) | (2,289) |
| Deposits- customers | (3,340) | (13,231) |
| Debt securities issued | (14,928) | (21,315) |
| Interest on assets from central banks and credit institutions | (9,391) | (941) |
| Interest on individual's assets | (1,151) | (415) |
| Interests on hedging derivatives | (134,189) | (137,124) |
| Interest on lease liabilities | (199) | (283) |
| Others | (3,982) | (3,789) |
| (169,616) | (179,387) | |
| 381,845 | 398,648 |
This item refers to dividends received and is broken down as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| SIBS – Sociedade Interbancária de Serviços, S.A. | 1,533 | 1,733 |
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Unicre - Instituição Financeira de Crédito, S.A. | 1,060 | 564 |
| Others | 3 7 |
187 |
| 1,097 | 751 |
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Fee and commission income | ||
| On guarantees given | 8.324 | 8.775 |
| On commitments to third parties | 3.030 | 2.507 |
| By services provided | ||
| Deposit and custodial services | 2.948 | 3.153 |
| Collection and administration of values | 7.139 | 7.897 |
| Real estate and mutual fund management | 15.144 | 11.524 |
| Transfers | 894 | 636 |
| Card management | 43.269 | 40.534 |
| Annuities | 21.468 | 15.514 |
| Credit operations | 24.937 | 25.228 |
| Other services rendered | 3.148 | 6.798 |
| On operations carried out on behalf of third parties | ||
| On securities | 7.868 | 8.584 |
| Other | 23 | 40 |
| Other commission received | ||
| Insurance companies (Note 34) | 55.092 | 50.969 |
| Demand deposits | 49.662 | 42.969 |
| Checks | 2.501 | 2.806 |
| Other | 11.029 | 9.559 |
| 256.476 | 237.493 |
| Fee and commission expenses | ||
|---|---|---|
| On guarantees received | (1,446) | (1,353) |
| On banking services rendered by third parties | ||
| Collection and administration of values | (918) | (896) |
| Cards | (32,224) | (30,956) |
| Credit operations | (1,618) | (1,575) |
| Other services rendered | (3,349) | (3,416) |
| On operations carried out by third parties | ||
| Securities | (1,731) | (1,566) |
| Others | (3,546) | (3,388) |
| Other commissions paid | (5,801) | (9,167) |
| (50,633) | (52,317) | |
The composition of these headings is as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Gains or losses on derecognition of financial assets and liabilities not measured at fair | ||
| value through profit or loss, net | 129.180 | 80.688 |
| Financial assets at fair value through other comprehensive income | 126.898 | 79.564 |
| Debt instruments | 126.898 | 79.564 |
| Others | 40 | 1.124 |
| Financial assets at amortized cost (Debt instruments) | 2.242 | - |
| Gains or losses on financial assets and liabilities held for trading, net | (2.623) | 1.050 |
| Derivative instruments | (2.623) | 1.050 |
| Gains or losses on non-trading financial assets mandatorily at fair value through profit | ||
| or loss, net | 1.313 | 5.091 |
| Debt securities | 1.496 | 3.013 |
| Equity instruments | (183) | 2.078 |
| Gains or losses from hedge accounting, net | - | 147 |
| Hedging derivatives | (109.406) | (178.819) |
| Hedged element | 109.406 | 178.966 |
| Exchange differences, net | 6.296 | 5.636 |
In the period ended on June 30, 2021, and 2020, the gains recorded under "Financial assets accounted for at fair value through other comprehensive income" were essentially justified by the sale of public debt bonds.
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 | |
|---|---|---|
| Gains on investment properties | 3 8 |
106 |
| Losses on investment properties | (63) | (45) |
| (25) | 6 1 |
| The composition of this heading is as follows: | ||
|---|---|---|
| 30-06-2021 | 30-06-2020 | |
| Other operating income | ||
| Income from services rendered | 1,235 | 1,491 |
| Rents earned | 4,814 | 5,528 |
| Change in fair value of investment properties | - | 1,637 |
| Others | 3,190 | 1,735 |
| 9,239 | 10,391 | |
| Other operating expenses | ||
| Change in fair value of investment properties | (176) | (2,368) |
| Expenses with customers | (3,710) | (2,326) |
| Others | (2,289) | (103) |
| (6,175) | (4,797) | |
During the first six months of 2021 and 2020, the heading "Rents earned" includes the amounts of €4.811k and €5.474k, respectively, in respect of the rents received by the Novimovest Real Estate Fund (Note 12).
The heading "Costs with Clients" includes expenses with internal and external fraud.
The composition of this heading is as follows:
| Staff costs | ||
|---|---|---|
| 30-06-2021 | 30-06-2020 | |
| Remuneration | ||
| Management and supervisory boards | 2,326 | 2,731 |
| Employees | 106,259 | 111,364 |
| Other variable remuneration | 10,461 | 6,161 |
| 119,046 | 120,256 | |
| Mandatorily social charges | ||
| Charges on remuneration | 29,384 | 30,500 |
| Pension Funds (Note 35) | 3,953 | 4,106 |
| Other mandatorily social charges | 457 | 486 |
| 33,794 | 35,092 | |
| Other staff expenses | ||
| Complementary pension plan (Note 35) | 210 | 291 |
| Staff transfers | 586 | 609 |
| Others | 3,663 | 3,767 |
| 4,459 | 4,667 | |
| 157,299 | 160,015 |
| Other administrative expenses | ||
|---|---|---|
| 30-06-2021 | 30-06-2020 | |
| External services | ||
| Specialized services | 37,994 | 37,262 |
| Maintenance of software and hardware | 32,022 | 27,366 |
| Other lease operations (short-term and low-value leases) | 2,196 | 2,396 |
| Communications | 3,299 | 4,273 |
| Advertising and publishing | 3,857 | 6,517 |
| Travel, lodging and representation expenses | 739 | 1,305 |
| Maintenance and repairs | 2,035 | 2,228 |
| Transportation | 2,057 | 2,138 |
| Insurance | 953 | 1,080 |
| Other services | 3,312 | 3,147 |
| External supplies | 4,388 | 5,434 |
| Subscriptions and donations | 3,466 | 3,217 |
| Other taxes | 1,830 | 1,354 |
| 98,148 | 97,717 |
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 |
|---|---|
| (12,853) | (12,875) |
| (24,776) | (22,701) |
| (50) | (48) |
| (37,679) | (35,624) |
Decree-Law 24/2013 of February 19, established the regime governing bank contributions to the new Resolution Fund, created for the purpose of prevention, mitigation and containment of the systemic risk. According to Bank of Portugal Notice No. 1/2013 and Instructions Nos. 6/2013 and 7/2013, payment is laid down of an initial contribution and periodic contributions to the Resolution Fund.
Within the scope of the single Resolution mechanism, the annual contributions will be transferred to the Single Resolution Fund, in accordance with article 3(3) of the agreement on the transfer and pooling of the contributions to the Single Resolution Fund, signed in Brussels on May 21, 2014. The Bank of Portugal, as the liquidation authority, determines the amount of the contribution of each institution depending on the risk profile of each entity. In December 2015 the Bank paid an additional contribution to the Resolution Fund in the amount of €13,318k, in accordance with a letter received from the Bank of Portugal in November 2015. In 2021 and 2020, and as provided for in the Bank of Portugal's letter, the Single Resolution Council (CUR) allowed banking institutions, in these years, to opt for the use of irrevocable payment commitment, in the proportion of 15% of the amount of the annual contribution. The annual contribution amounted to €29.149k and €26.707k, respectively.
The composition of this heading is as follows:
| 30-06-2021 | 30-06-2020 | |||||
|---|---|---|---|---|---|---|
| Gain | Loss | Net | Gain | Loss | Net | |
| Assets received in lieu of payment | 3,918 | (241) | 3,677 | 2,870 | (5,562) | (2,692) |
| Other non-financial assets | 15,065 | (8,439) | 6,626 | 18,298 | (15,696) | 2,602 |
| 18,983 | (8,680) | 10,303 | 21,168 | (21,258) | (90) |
Income from the provision of insurance brokerage services relates primarily to commissions billed for the marketing of life and non-life insurance, as follows:
| marketing of life and non-life insurance, as follows: | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30-06-2021 | 30-06-2020 | ||||||||
| Life | Non-Life | Life | Non-Life | ||||||
| Products | Products | Total | Products | Products | Total | ||||
| (Note 27) | (Note 27) | ||||||||
| Santander Totta Seguros - Companhia de Seguros de Vida, S.A. | 19,702 | - | 19,702 | 20,246 | - | 20,246 | |||
| Aegon Santander Portugal Vida - Companhia de Seguros de Vida, S.A. | 21,543 | - | 21,543 | 18,932 | - | 18,932 | |||
| Aegon Santander Portugal Não Vida - Companhia de Seguros, S.A. | - | 12,850 | 12,850 | - | 11,007 | 11,007 | |||
| Others | - | 997 | 997 | - | 784 | 784 | |||
| 41,245 | 13,847 | 55,092 | 39,178 | 11,791 | 50,969 | ||||
As at June 30, 2021, and December 30, 2020, the heading "Other Assets – Income Receivable and Revenue with Deferred Income" (Note 14) includes commissions receivable from insurers as detailed hereunder:
| with Deferred Income" (Note 14) includes commissions receivable from insurers as detailed hereunder: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Santander Totta Seguros - Companhia de Seguros de Vida, S.A. | 9,961 | 9,706 |
| Aegon Santander Portugal Vida - Companhia de Seguros de Vida, S.A. | 3,743 | 3,063 |
| Aegon Santander Portugal Não Vida - Companhia de Seguros, S.A. | 2,243 | 2,025 |
| Others | 61 | 12 |
| 16,008 | 14,806 | |
These amounts refer essentially to the commissions determined and not yet paid in respect of premiums of insurance marketed during the second quarter of 2021 and 2020.
To determine the liabilities for past services of the Bank (Santander and BAPOP Plan) in respect of employees in service and those already retired, actuarial studies were conducted by Mercer (Portugal), Limitada. The current value of the past-service liabilities, as well as the related costs of current services, were calculated based on the Projected Unit Credit method.
The Bank's liabilities for retirement pensions, health care and death benefits as at June 20, 2021, and December 31, 2020, as well as the respective coverage, are detailed as follows:
| Santander | BAPOP | ||||
|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 31-12-2020 | |||
| 64,619 | |||||
| 54,574 | 52,496 | 7,698 | 7,806 | ||
| 588,874 | 583,248 | 95,515 | 95,972 | ||
| 939,230 | 939,186 | 167,664 | 168,397 | ||
| 168,776 | 169,721 | 12,880 | 12,782 | ||
| 6,421 | 6,399 | 749 | 742 | ||
| 8,522 | 8,478 | - | - | ||
| 1,122,949 | 1,123,784 | 181,293 | 181,921 | ||
| 1,140,792 | 1,143,046 | 190,054 | 186,718 | ||
| 17,843 | 19,262 | 8,761 | 4,797 | ||
| - | - | - | - | ||
| 6,397 | 4,984 | (992) | (80) | ||
| (22,890) | (8,445) | (4,136) | (493) | ||
| (16,493) | (3,461) | (5,128) | (573) | ||
| (16,493) | (3,461) | (5,128) | (573) | ||
| 295,782 | 303,442 | 30-06-2021 64,451 |
The main assumptions used by the Bank to determine its liabilities for retirement pensions as at June 31, 2021, and December 31, 2020, were as follows:
| Mortality Table | |
|---|---|
| Female | TV 88/90 (-1 ) |
| Male | TV 88/90 |
| Rate of return on pension fund assets | 1.10% |
| Technical actuarial rate (discount rate) | 1.10% |
| Wage growth rate | 0.75% |
| Pension growth rate | 0.50% |
| Inflation rate | 0.45% |
Decree-Law 167-E/2013, of December 31, changed the normal age of access to retirement under the general Social Security regime to 66 years (in 2019 the normal retirement age is 66 years and 5 months), though the sustainability factor was no longer applicable to beneficiaries who retire at that age.
The discount rate used to determine the liabilities was calculated by reference to the market rates of lowrisk corporate bonds of a term similar to that of the settlement of the liabilities.
The operations under liabilities for past services during the first half of 2021 and in 2020, can be detailed as follows:
| Santander | BAPOP | |||||
|---|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 31-12-2020 | ||||
| Responsibilities at beginning of year | 1,123,784 | 1,131,980 | 181,921 | 181,503 | ||
| Cost of current services | 2,733 | 5,580 | 683 | 1,348 | ||
| Cost of interests | 5,970 | 12,023 | 819 | 1,634 | ||
| Actuarial (Gains) / Losses | 6,397 | 4,984 | (992) | (80) | ||
| Early retirements | 15,179 | 21,682 | 481 | 785 | ||
| Amounts paid | (32,371) | (54,946) | (1,929) | (3,889) | ||
| Employee Contributions | 1,257 | 2,481 | 310 | 620 | ||
| Responsabilities at end of period | 1,122,949 | 1,123,784 | 181,293 | 181,921 |
The expenses for the year relating to pensions includes the cost of current services and interest expenses, deducted from the expected return of the Pension Fund assets. In the first half of 2021 (Note 31) and in the fiscal year of 2020, the expenses with pensions have the following composition:
| fiscal year of 2020, the expenses with pensions have the following composition: | |||||
|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | ||||
| Cost of current services | 3,416 | 6,928 | |||
| Cost of interests | 6,789 | 13,657 | |||
| Income from assets calculated using the discount rate | (6,789) | (13,657) | |||
| Defined benefit plan | 3,416 | 6,928 | |||
| Defined contribution plan | 475 | 1,131 | |||
| London branch plan | 6 2 |
119 | |||
| 3,953 | 8,178 | ||||
As from January 1, 2009, the employees taken on by the Bank came to be included in Social Security, and are covered by a supplementary defined-contribution pension plan and by the rights acquired under Clause 93 of the ACT. The plan is funded through contributions by employees (1.5%) and by BST (1.5%), calculated on the basis of the actual monthly remuneration. For this purpose, each employee can opt for an open pension fund at his or her choice into which the Bank transfers its contribution.
Estimated salary and pension growths take into account the country's current situation, and the consequent prospect of smaller increases in the future, or even maintenance of current values.
The average duration of pension liabilities of the employees of Santander, of BAPOP and of Banif, is 15 years, including those in active service and pensioners.
The operations under actuarial deviations in the first half of 2021 and in the fiscal year of 2020, were as follows:
| Santander | BAPOP | ||
|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 |
| 795,764 | 799,225 | 7,464 | 8,037 |
| 6,397 | 4,984 | (992) | (80) |
| (22,890) | (8,445) | (4,136) | (493) |
| 779,271 | 795,764 | 2,336 | 7,464 |
The Santander Pension Fund is managed by Santander Pensões - Sociedade Gestora de Fundos de Pensões, S. A., and the BAPOP Pension Fund is managed by Santander Totta Seguros – Companhia de Seguros de Vida, S. A.. As at June 31, 2021, and December 31, 2020, the number of participants of the Funds was the following:
| Santander | BAPOP | ||
|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 |
| 3,667 | 3,885 | 692 | 722 |
| 470 | 460 | 111 | 119 |
| 1,307 | 1,282 | 2 8 |
3 4 |
| 5,603 | 5,773 | 160 | 157 |
| 11,047 | 11,400 | 991 | 1,032 |
The operations under the Bank's Pension Fund during the first half of 2021 and in 2020 were as follows:
| Santander | BAPOP | ||||
|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 | ||
| Fund Value at the beginning of the year | 1,143,046 | 1,160,573 | 186,718 | 185,459 | |
| Bank contribution (monetary) | - | 14,470 | - | 2,401 | |
| Employee contribution | 1,257 | 2,481 | 310 | 620 | |
| Net income of the fund: | |||||
| Income from assets using discount rate | 5,970 | 12,023 | 819 | 1,634 | |
| Income of the fund above the discount rate | 22,890 | 8,445 | 4,136 | 493 | |
| Amounts paid | (32,371) | (54,946) | (1,929) | (3,889) | |
| Fund Value at the end of the year | 1,140,792 | 1,143,046 | 190,054 | 186,718 |
The yields of the Pension Fund amounted to Santander 2.56% and BAPOP 2.8% in 2021, and Santander 1.92% and BAPOP 2.06% in 2020.
The investments and allocation policy of the Pension Fund determines that the asset portfolio be structured in compliance with security, profitability and liquidity criteria, through a diverse set of investments, namely shares, bonds, other debt securities, holdings in collective-investment institutions, bank deposits, other monetary assets, and land and buildings included in the land registry.
On the other hand, that policy is guided by risk-diversification and profitability criteria, and the Managing Company may opt for a more or less conservative policy by increasing or decreasing the exposure to equities or bonds, according to its expectations as to the evolution of the markets, and in accordance with the defined investment limits.
The investment policy in force provides for the following limits:
| Bonds 40% a 95% Real estate 0% a 25% Equities 0% a 20% Liquidity 0% a 15% Alternatives 0% a 10% Commodities 0% a 5% |
Asset Class | Expected buckets |
|---|---|---|
As at June 30, 2021, and December 31, 2020, the composition of the Pension Fund was as follows:
| Santander | BAPOP | ||||
|---|---|---|---|---|---|
| 30-06-2021 | 31-12-2020 | 30-06-2021 | 31-12-2020 | ||
| Debt instruments: | |||||
| . Rating A | 97,089 | 88,135 | 10,861 | 19,894 | |
| . Rating BBB | 349,907 | 370,511 | 78,857 | 67,661 | |
| . Rating BB | 29,437 | 13,764 | 8,132 | 3,476 | |
| . Without rating to the issuance and issuer | 53,773 | 67,857 | 1,489 | 10,937 | |
| Real estate funds | 116,483 | 125,008 | 913 | 913 | |
| Mutual funds | 365,648 | 352,167 | 75,145 | 72,747 | |
| Deposits | 52,210 | 53,779 | 11,509 | 7,382 | |
| Properties | |||||
| . Commercial spaces | 19,480 | 19,515 | - | - | |
| . Land | 1,149 | 1,149 | - | - | |
| Equity instruments: | |||||
| . Portuguese shares – listed | 140 | 136 | - | - | |
| . Foreign shares – listed | 33,467 | 29,893 | - | - | |
| Derivative financial instruments | 805 | 632 | 117 | 110 | |
| Others | 21,204 | 20,500 | 3,031 | 3,598 | |
| 1,140,792 | 1,143,046 | 190,054 | 186,718 | ||
The method for calculating the fair value of the assets and liabilities mentioned above (except for deposits and other), adopted by the Managing Companies, as recommended in IFRS 13 (Note 38), was as follows:
| 30-06-2021 | 31-12-2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Debt instruments | 574,283 | - | 55,262 | 629,545 | 563,806 | - | 78,794 | 642,600 |
| Investment Funds | 440,793 | - | 117,396 | 558,189 | 424,914 | - | 125,921 | 550,835 |
| Equity instruments | 33,607 | - | - | 33,607 | 30,029 | - | - | 30,029 |
| Derivative financial instruments | 922 | - | 922 | 742 | - | 742 | ||
| Real estate properties | - | - | 20,629 | 20,629 | - | - | 20,664 | 20,664 |
| 1,049,605 | - | 193,287 | 1,242,892 | 1,019,491 | - | 225,379 | 1,244,870 |
In 2010 insurance was taken out at Santander Totta Seguros – Companhia de Seguros de Vida, S. A., to meet the liabilities of a new supplementary defined-contribution pension plan attributed to the Bank's senior management. The initial contribution to the new plan amounted to €4,430k. In the half-year period ended in June 30, 2021, and 2020 the premium paid by the Bank amounted to €210k and €291k, respectively (Note 31).
This plan covers the contingencies of retirement, death and permanent absolute disability for customary work or invalidity.
For all these contingencies, the benefits to be received by the beneficiaries will equal the accumulated balance in the supplementary plan on the date on which the benefits are realised. In the case of the beneficiary's death this amount will be further increased by €6,000.
As at June 30, 2021, and December 31, 2020, the main assumptions used in the calculation of retirement pension liabilities related with the pension plans covering the employees of Bank's London Branch were as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| 100% S3NMA_Light/ | 100% S3NMA_Light/ | |
| Mortality table | 100% S3NFA_Light | 100% S3NFA_Light |
| Technical actuarial rate (discount rate) | 1.8% | 1.2% |
| Wage growth rate | 3.0% | 2.7% |
| Pension growth rate | 2.2% | 2.1% |
| Inflation rate | 3.4% | 2.7% |
As at June 30, 2021, and December 31, 2020, the liabilities for the defined-benefit pension plan and its coverage presented the following detail:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Estimated liabilities for past service | 53,068 | 56,628 |
| Coverage of responsibilities | 49,467 | 48,718 |
| Excess / (insufficient funding) (Note 19) | (3,601) | (7,910) |
The operations under liabilities for past services can be detailed as follows:
| 30-06-2021 | 31-12-2020 |
|---|---|
| 56,628 | 51,848 |
| 1 3 |
1 7 |
| 353 | 921 |
| (3,425) | 5,036 |
| (501) | (1,194) |
| 53,068 | 56,628 |
The operations under the Fund during the first half of 2021 and in the financial year of 2020 was as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Book value at the beginning of the year | 48,718 | 44,654 |
| Net income of the fund: | ||
| . Income from assets using discount rate | 305 | 819 |
| . Income of the fund above/(bellow) the discount rate | 945 | 1,910 |
| Contribution of the Branch | - | 2,529 |
| Amounts paid | (501) | (1,194) |
| Book value at the end of the year | 49,467 | 48,718 |
The operations under actuarial deviations in the first half of 2021 and in the fiscal year of 2020, were as follows:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| Deviations at the beginning of the year (Note 20) | 16,573 | 13,447 |
| Actuarial (gains)/ losses | (3,425) | 5,036 |
| Financial (gains)/ losses | (945) | (1,910) |
| Deviations at the end of the year (Note 20) | 12,203 | 16,573 |
As at June 30, 2021, and December 31, 2020, the portfolio of the Pension Fund of the London Branch included the following assets:
| included the following assets: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Debt instruments | 25,506 | 25,299 |
| Equity instruments | 21,224 | 20,771 |
| Others | 2,738 | 2,648 |
| Fund value | 49,467 | 48,718 |
Liabilities for defined-benefit pension plans expose the Bank to the following risks:
As a result of the liquidation measure applied to Banif on December 20, 2015, a number of employees were transferred to the Bank, as were the corresponding liabilities for past services. Also transferred were the liabilities for retired employees, employees who retired early, pensioners and former participants with vested rights. On January 27, 2016, authorisation was requested to the Insurance and Pension Funds Supervisory Authority for the transfer to the Bank of Banif's position as associate of the Banif Pension Fund, with regard to the defined-benefit pension plan, subpopulations A and B, and in defined-contribution
pension plans II and III. By letter dated June 7, 2016, the Bank of Portugal stated that the parties should revise some of the terms of the Contract for the Termination of the Share of the Pension Fund. The process is undergoing final assessment by the Insurance and Pension Funds Supervisory Authority. Banif employees were covered by different types of pension plans:
Banif had two defined-contribution pension plans:
The breakdown of the estimated liabilities for past services as at June 30, 2020, and December 31, 2019, using the Bank's assumptions, is as follows for the defined-benefit pension plan (considering both the Banif and the former BBCA sub-populations):
| Liabilities | |||||
|---|---|---|---|---|---|
| Healthcare | |||||
| systems | Death | Prize in | |||
| Pensions | (SAMS) | Subsidy | retirement | Total | |
| Current Employees | 19,433 | 8,498 | 120 | 1,149 | 29,200 |
| Retired staff and pensioners | 113,752 | 10,679 | 486 | - | 124,917 |
| Former participants with vested rigths | 3,540 | 2,446 | - | - | 5,986 |
| Total liabilities for past services | 136,725 | 21,623 | 606 | 1,149 | 160,103 |
| Book value of the pension fund | 97,395 | ||||
| Insufficient fund | (62,708) |
| 31-12-2020 | ||||||
|---|---|---|---|---|---|---|
| Liabilities | ||||||
| Healthcare | ||||||
| systems | Death | Prize in | ||||
| Pensions | (SAMS) | Subsidy | retirement | Total | ||
| Current Employees | 20,612 | 8,597 | 124 | 1,140 | 30,473 | |
| Retired staff and pensioners | 112,917 | 10,680 | 482 | - | 124,079 | |
| Former participants with vested rigths | 3,530 | 2,462 | - | - | 5,992 | |
| Total liabilities for past services | 137,059 | 21,739 | 606 | 1,140 | 160,544 | |
| Book value of the pension fund | 93,369 | |||||
| Insufficient fund | (67,175) | |||||
The breakdown of the portfolio of the Banif Pension Fund associated with the defined-benefit pension plan by asset type is as follows:
| 30-06-2021 | 31-12-2020 | |||
|---|---|---|---|---|
| Relative | Relative | |||
| Type of Asset | Total | weight | Total | weight |
| Debt Instruments | 60,103 | 60.04% | 40,269 | 41.97% |
| Securities investment funds | 1,644 | 1.64% | 3,294 | 3.43% |
| Real estate fund | 57 | 0.06% | 387 | 0.40% |
| Real estate properties | 13,734 | 13.72% | 13,734 | 14.31% |
| Equity instruments | 18,018 | 18.00% | 32,607 | 33.98% |
| Other | 6,544 | 6.54% | 5,663 | 5.90% |
| 100,100 | 95,954 | |||
| Assets to be transfered | (2,705) | (2,585) | ||
| 97,395 | 93,369 |
The value of the assets to be transferred corresponds to the amount of the assets of the Pension Fund's portfolio to be allocated to the coverage of the liabilities relating to Banif employees who were not transferred to the Bank.
Between July 2003 and January 2018, the Bank securitised part of its mortgage-loan portfolio through thirteen operations, the initial amount of which was €25,450,000k. In the older transactions the loans were sold for their par (book) value to loan securitisation funds denominated Fundos Hipototta FTC. A substantial part of the securitisations was repurchased by the Bank under the said agreements, while the Hipototta No. 4 and Hipototta No. 5 were maintained. In January 2018 the Bank carried out a new securitisation in the amount of €2,266,000k, in which mortgage loans were assigned. The loans were assigned to Gamma – Sociedade de Titularização de Créditos (Gamma STC), which financed the transaction through the issue of Hipototta 13 bonds, classes A, B and C, with different levels of subordination and rating and, consequently, remuneration. These bonds were fully acquired by the Bank.
The Hipototta Funds (No. 4 and No. 5) are managed by Navegator – Sociedade Gestora de Fundos de Titularização de Créditos, S. A. The Bank continues to manage the loan contracts, delivering to the Hipototta Funds (No. 4 and No. 5) all amounts received thereunder. The Santander Group has no direct or indirect holding in Navegator.
As a form of funding, Hipototta Funds (No. 4 and No. 5) issued securitisation units of an amount identical to the loan portfolios acquired, which were fully subscribed by Hipototta Funds (No. 4 and No. 5) PLC, having its registered office in Ireland.
On the other hand, Hipototta Funds (No. 4 and No.º 5) FTC delivered all amounts received from the Bank and from the Directorate General of the Treasury to Hipototta Funds (No. 4 and No. 5) PLC, separating the instalments into principal and interest.
As a form of funding, Hipototta Funds (No. 4 and No. 5) PLC issued bonds with different levels of subordination and rating and, consequently, of remuneration.
As at June 30, 2021, bonds issued that are still alive have the following characteristics:
| Hipototta nº 4 PLC | ||||||||
|---|---|---|---|---|---|---|---|---|
| Amount Rating |
Remuneration | |||||||
| Debt | Early redemption | |||||||
| issued | Initial | Current | Fitch | Redemption date | date | Until early redemption | After early redemption | |
| Class A | 2,616,040 | 413,016 | A | September, 2048 | December, 2014 | 3M Euribor + 0,12% | 3M Euribor + 0,24% | |
| Class B | 44,240 | 15,026 | A | September, 2048 | December, 2014 | 3M Euribor + 0,19% | 3M Euribor + 0,40% | |
| Class C | 139,720 | 47,454 | BB- | September, 2048 | December, 2014 | 3M Euribor + 0,29% | 3M Euribor + 0,58% | |
| 2,800,000 | 475,496 | |||||||
| Class D | 14,000 | 7,000 | NR | September, 2048 | December, 2014 | Residual income generated by the securitized portfolio | ||
| 2,814,000 | 482,496 |
| Hipototta nº 5 PLC | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P Moody´s | Redemption date | Early redemption date |
Until early redemption | After early redemption | |||
| Class A1 | 200.000 | - | February, 2060 | February, 2014 | 3M Euribor + 0,05% | 3M Euribor + 0,10% | ||||
| Class A2 | 1.693.000 | 376.044 | A | Aa3 | February, 2060 | February, 2014 | 3M Euribor + 0,13% | 3M Euribor + 0,26% | ||
| Class B | 26.000 | 26.000 | A | Aa3 | February, 2060 | February, 2014 | 3M Euribor + 0,17% | 3M Euribor + 0,34% | ||
| Class C | 24.000 | 24.000 | A | A1 | February, 2060 | February, 2014 | 3M Euribor + 0,24% | 3M Euribor + 0,48% | ||
| Class D | 26.000 | 26.000 | A | Baa2 | February, 2060 | February, 2014 | 3M Euribor + 0,50% | 3M Euribor + 1,00% | ||
| Class E | 31.000 | 31.000 BBB | Ba2 | February, 2060 | February, 2014 | 3M Euribor + 1,75% | 3M Euribor + 3,50% | |||
| 2.000.000 | 483.044 | |||||||||
| Class F | 10.000 | 6.000 CCC- | Ca | February, 2060 | February, 2014 | Residual income generated by the securitized portfolio | ||||
| 2.010.000 | 489.044 | |||||||||
The bonds issued by Hipototta No. 4 PLC earn interest quarterly on March, June, September and December 30 each year. The bonds issued by Hipototta No. 5 PLC earn interest quarterly on February 28, and on May, August and November 30 each year.
The Bank has the option to redeem the bonds in advance on the dates indicated above. For all the Hipototta, the Bank has call option to repurchase the loan portfolios at par when these are equal to or less than 10% of the initial amount of the operations.
Additionally, up to 5 days before the interest-payment dates in each quarter, the Hipototta are entitled to make partial repayments of bonds issued of classes A, B and C, as well as of classes D and E in the case of Hipototta No. 5 PLC, in order to adjust the amount of the liabilities to that of the assets (loan portfolio).
The Hipototta No. 4 class D bonds, and the Hipototta No. 5 class F bonds constitute the last liability to be settled.
The remuneration of the bonds of these classes corresponds to the difference between the yield of the securitised loan portfolios and the sum of all costs of the operations, namely:
On the date on which the securitisations were contracted, subordinated loans were concluded between the Bank and Hipototta, which correspond to credit facilities/lines in case of a need for liquidity on the part of Hipototta. Swap Agreements were also concluded between the Santander Group and securitisation vehicles, and between the Bank and the Santander Group intended to hedge the interest-rate risk.
In the wake of the liquidation measure applied to Banif, the Bank acquired a number of securitisation operations issued by the said entity, and the corresponding securitised loans and bonds issued were transferred.
An operation concluded in March 2008, in which mortgage loans were assigned. The loans were assigned to Gamma STC, which financed the operation through the issuance of Atlantes Mortgage No. 2, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration.
| Atlantes Mortgage nº 2 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 349,100 | 94,115 AA(sf) | AA | September, 2060 | 3M Euribor + 0,33% | |||||
| Class B | 18,400 | 11,717 AA(sf) | A+ | September, 2060 | 3M Euribor + 0,95% | |||||
| Class C | 7,500 | 4,776 BBB(sf) BBB+ | September, 2060 | 3M Euribor + 1,65% | ||||||
| 375,000 | 110,608 | |||||||||
| Class D | 16,125 | 9,837 | NR | NR | September, 2060 | Residual income generated by the securitized portfolio | ||||
| 391,125 | 120,445 |
An operation carried out in July 2008, when the mortgage loans originated at the former BBCA were assigned to Gamma STC. To finance itself, Gamma STC issued Azor Mortgages No. 2 Class A, B and C bonds with different levels of subordination and rating and, consequently, of remuneration.
| Azor mortgage nº 2 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 253,500 | 69,032 | AA (sf) | A (sf) | December, 2065 | Euribor 3 m + 0,3% | ||||
| Class B | 46,500 | 43,080 | NR | NR | December, 2065 | Euribor 3 m + 0,8% | ||||
| 300,000 | 112,112 | |||||||||
| Class C | 6,750 | 6,750 | NR | NR | December, 2065 | Residual income generated by the securitized portfolio | ||||
| 306,750 | 118,862 |
An operation concluded in October 2008, in which mortgage loans were assigned. The loans were assigned to Gamma STC, which financed the operation through the issuance of Atlantes Mortgage No. 3, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration.
| Atlantes Mortgage nº 3 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 558,600 | 164,865 | AA | AA (sf) | August, 2061 | 3M Euribor + 0,2% | ||||
| Class B | 41,400 | 23,644 | NR | NR | August, 2061 | 3M Euribor + 0,5% | ||||
| 600,000 | 188,509 | |||||||||
| Class C | 57,668 | 42,110 | NR | NR | August, 2061 | Residual income generated by the securitized portfolio | ||||
| 657,668 | 230,619 |
An operation concluded in February 2009, in which mortgage loans were assigned. The loans were assigned to Gamma STC, which financed the operation through the issuance of Atlantes Mortgage No. 4, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration.
| Atlantes Mortgage nº 4 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 514,250 | 183,163 | A+ | A+ | December, 2064 | 3M Euribor + 0,15% | ||||
| Class B | 35,750 | 20,171 | NR | NR | December, 2064 | 3M Euribor + 0,3% | ||||
| 550,000 | 203,334 | |||||||||
| Class C | 74,250 | 55,975 | NR | NR | December, 2064 | Residual income generated by the securitized portfolio | ||||
| 624,250 | 259,309 |
An operation concluded in December 2009, in which mortgage loans were assigned. The loans were assigned to Gamma STC, which financed the operation through the issuance of Atlantes Mortgage No. 5, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration.
| Atlantes Mortgage nº 5 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 455,000 | 148,247 | AAA | AA- | November, 2068 | 3M Euribor + 0,15% | ||||
| Class B | 45,000 | 27,370 | NR | NR | November, 2068 | 3M Euribor + 0,3% | ||||
| 500,000 | 175,617 | |||||||||
| Class C | 66,250 | 47,415 | NR | NR | November, 2068 | Residual income generated by the securitized portfolio | ||||
| 566,250 | 223,032 | |||||||||
An operation concluded in November 2010, in which a portfolio of residential mortgage loans was assigned. The loans were assigned to Gamma STC, which financed the operation through the issuance of Atlantes Mortgage No. 7, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration.
| Atlantes Mortgage nº 7 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Rating | Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | ||||
| Class A | 357,300 | 116,142 | A+ | AA- | August, 2066 | 3M Euribor + 0,15% | ||||
| Class B | 39,700 | 21,583 | NR | NR | August, 2066 | 3M Euribor + 0,3% | ||||
| 397,000 | 137,725 | |||||||||
| Class C | 63,550 | 47,058 | NR | NR | August, 2066 | Residual income generated by the securitized portfolio | ||||
| 460,550 | 184,783 | |||||||||
In January 2018 the Bank carried out a new securitisation in the amount of €2,266,000k, in which mortgage loans were assigned. The loans were assigned to Gamma STC, which financed the transaction through the issuance of Hipototta 13, classes A, B and C bonds, with different levels of subordination and rating, and consequently, remuneration. The whole of these bonds was acquired by the Bank.
| Hipototta 13 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Amount Rating |
Remuneration | ||||||||
| Debt issued | Initial | Current | S&P | Fitch | Redemption date | Until early redemption | |||
| Class A | 1,716,000 | 944,065 | NR | A+(sf) | October, 2072 | Euribor 3 m + 0,6% | |||
| Class B | 484,000 | 484,000 | NR | NR | October, 2072 | Euribor 3 m + 1% | |||
| 2,200,000 | 1,428,065 | ||||||||
| Class C | 66,000 | 44,027 | NR | NR | October, 2072 | Residual income generated by the securitized portfolio | |||
| 2,266,000 | 1,472,092 | ||||||||
| VFN | 0.001 | 0.001 | NR | NR | October, 2072 | No remuneration |
During the financial year of 2021 the Azor Mortgage No. 1 operation was wound up.
The Bank's related entities with which it maintained balances or transactions in the first half of 2021 are as follows:
| Name of the related entity | Headquarters |
|---|---|
| Entities that directly or indirectly control the Group | |
| Santander Totta, SGPS | Portugal |
| Banco Santander, S.A. | Spain |
| Entities that directly or indirectly are controlled by the Group | |
| GAMMA, Sociedade Financeira de Titularização de Créditos, S.A. | Portugal |
| Fundo de Investimento Imobiliário Novimovest | Portugal |
| Taxagest, S.G.P.S., S.A. | Portugal |
| Totta (Ireland), PLC | Ireland |
| Tottaurbe - Emp.Admin. e Construções, S.A. | Portugal |
| Entities significantly influenced by the Group | |
| Unicre-Instituição Financeira de Crédito | Portugal |
| Lusimovest - Fundo de Inv. Imobiliario | Portugal |
| Companies that directly or indirectly are under common control by the Bank | |
| Abbey National Treasury Services plc | United Kingdom |
| Aegon Santander Portugal Não Vida - Companhia de Seguros, S.A. | Portugal |
| Aegon Santander Portugal Vida - Companhia de Seguros Vida, S.A. | Portugal |
| Banco Santander (México), S.A. | Mexico |
| Banco Santander (Suisse), S.A. | Switzerland |
| Banco Santander Brasil, S.A. | Brazil |
| Banco Santander Consumer Portugal S.A. | Portugal |
| Bank Zachodni WBK SA | Poland |
| Caceis | France |
| Consulteam - Consultores de Gestão, Lda | Portugal |
| CCPT - ComprarCasa Rede Serviços Imobiliários, S.A. | Portugal |
| Financeira El Corte Inglés, Portugal, S.F.C., S.A. | Portugal |
| PSA Gestao Comercio&Aluguer Veiculos,SA | Portugal |
| Gesban Servicios Administrativos Globais | Spain |
| Ibérica de Compras Corporativas | Spain |
| Open Bank Santander Consumer S.A. | Spain |
| Mapfre Santander Portugal - Co. de Seguros S.A. | Portugal |
| Portal Universia Portugal, Prestaçao de Serviços de Informática, S.A. | Portugal |
| Retama Real Estate, S.L. | Spain |
| Santander Asset Management SGFIM, S.A. | Portugal |
| Santander Back-Office Globales Mayorista | Spain |
| Santander Bank & Trust Ltd. | Bahamas |
| Santander Bank,National Association | United States |
| Santander Consumer Bank AG | Germany |
| Santander Consumer Finance S.A. | Spain |
| Santander Consumer, EFC, S.A. | Spain |
| Santander Global Thechnology, S.L. | Spain |
| Santander Investment, S.A. | Spain |
| Santander Pensões - Sociedade Gestora de Fundos de Pensões, S.A. | Portugal |
| Santander Securities Services, S.A. | Spain |
| Santander Totta Seguros, Companhia de Seguros de Vida, S.A. | Portugal |
| Santander UK plc | United Kingdom |
| Santander Asset Management, S.A. SGIIC. | Spain |
| Santander Global Facilities, S.L. | Spain |
| Geoban, S.A. | Spain |
| UCI Mediação de Seguros, Unipessoal Lda. | Portugal |
| Union de Créditos Inmobiliários,SA | Spain |
| Name of the related entity | Headquarters |
|---|---|
| Entities that directly or indirectly control the Group | |
| Santander Totta, SGPS | Portugal |
| Banco Santander, S.A. | Spain |
| Entities that directly or indirectly are controlled by the Group | |
| GAMMA, Sociedade Financeira de Titularização de Créditos, S.A. | Portugal |
| Fundo de Investimento Imobiliário Novimovest | Portugal |
| Taxagest, S.G.P.S., S.A. | Portugal |
| Totta (Ireland), PLC | Ireland |
| Tottaurbe - Emp.Admin. e Construções, S.A. | Portugal |
| Entities significantly influenced by the Group Primestar Servicing |
|
| Unicre-Instituição Financeira de Crédito | Portugal |
| Lusimovest - Fundo de Inv. Imobiliario | Portugal |
| Companies that directly or indirectly are under common control by the Bank | |
| Abbey National Treasury Services plc | United Kingdom |
| Aegon Santander Portugal Não Vida - Companhia de Seguros, S.A. | Portugal |
| Aegon Santander Portugal Vida - Companhia de Seguros Vida, S.A. | Portugal |
| Banco Santander (México), S.A. | Mexico |
| Banco Santander (Suisse), S.A. | Switzerland |
| Banco Santander Brasil, S.A. | Brazil |
| Banco Santander Consumer Portugal S.A. | Portugal |
| Bank Zachodni WBK SA | Poland |
| Caceis Consulteam - Consultores de Gestão, Lda |
France Portugal |
| Financeira El Corte Inglés, Portugal, S.F.C., S.A. | Portugal |
| PSA Gestao Comercio&Aluguer Veiculos,SA | Portugal |
| Gesban Servicios Administrativos Globais | Spain |
| Ibérica de Compras Corporativas | Spain |
| Open Bank Santander Consumer S.A. | Spain |
| Mafre Santander Portugal - Co. de Seguros S.A. | Portugal |
| Portal Universia Portugal, Prestaçao de Serviços de Informática, S.A. | Portugal |
| Retama Real Estate, S.L. | Espanha |
| Santander Asset Management SGFIM, S.A. | Portugal |
| Santander Back-Office Globales Mayorista | Spain |
| Santander Bank,National Association | United States |
| Santander Consumer Bank AG | Germany |
| Santander Consumer Finance S.A. | Spain |
| Santander Consumer, EFC, S.A. | Spain |
| Santander Global Thechnology, S.L. | Spain |
| Santander Investment, S.A. | Spain |
| Santander Pensões - Sociedade Gestora de Fundos de Pensões, S.A. | Portugal |
| Santander Securities Services, S.A. | Spain |
| Santander Totta Seguros, Companhia de Seguros de Vida, S.A. | Portugal |
| Santander UK plc | United Kingdom |
| UCI Mediação de Seguros, Unipessoal Lda. | Portugal |
| Union de Créditos Inmobiliários,SA | Spain |
The Bank's related entities with which it maintained balances or transactions in 2020 are as follows:
| 30-06-2021 | |||
|---|---|---|---|
| Entities that | Entities that are | Entities under | |
| directly or indirectly | significantly influenced | direct or indirect | |
| control the Group | by the Group | common control by the Group | |
| Assets: | |||
| Balances due from other credit instituitons | 44,465 | - | 1,636 |
| Financial assets held for trading | 293,645 | - | 10,989 |
| Financial assets available-for-sale | |||
| Financial liabilities measured at amortised cost | |||
| Loans and advances | 652,509 | 49,237 | 2,522 |
| Hedging derivatives | 3,384 | - | - |
| Investments in subsidiaries, joint ventures and associates | - | 59,494 | - |
| Tax assets | 33,292 | - | - |
| Other assets | 13 | 7,896 | 16,183 |
| Liabilities: | |||
| Financial liabilities held for trading | 728,723 | - | 31,485 |
| Financial liabilities measured at amortised cost | |||
| Deposits - Credit Instituitions | 14,592 | 2,732 | |
| Deposits - Customers | 289,451 | 26,141 | 447,841 |
| Debt securities issued | |||
| Debt securities issued | 374,800 | - | 12,846 |
| Derivatives – Hedge accounting | 75,284 | - | - |
| Tax liabilities | 60,286 | - | - |
| Other liabilities | 4,399 | 8 | 11,480 |
| Expenses: | |||
| Interest expenses | 131,423 | - | 255 |
| Fee and commission expense | 718 | - | 681 |
| Results of financial assets and liabilities measured at fair value through profit or loss | 282,072 | - | 57,915 |
| Other administrative expenses | 4,393 | - | 20,297 |
| Income: | |||
| Interest income | 115,597 | 136 | 36 |
| Fee and commission income | 420 | 251 | 56,197 |
| Results of financial assets and liabilities measured at fair value through profit or loss | 337,785 | - | 47,650 |
| Gains on financial assets available-for-sale | |||
| Exchange differences, net | 1,228 | - | - |
| Proportion of profit or loss from investments in subsidiaries, joint ventures and associates accounted for | |||
| using other than equity method | - | 1,097 | - |
| Other operating income | 14 | 1 | 105 |
| Off balance sheet items: | |||
| Guarantees provided and other contingent liabilities | 71,918 | 22 | 184,875 |
| Guarantees received | 1 | - | 162 |
| Commitments to third parties | 112,170 | 2,002 | 67,523 |
| Currency operations and derivatives | 26,787,139 | - | 459,485 |
| Responsibilities for services rendered | 2,024,750 | - | 10,007,507 |
| 31-12-2020 | |||
|---|---|---|---|
| Entities that | Entities that are | Entities under | |
| directly or indirectly | significantly influenced | direct or indirect | |
| control the Group | by the Group | common control by the Group | |
| Assets: | |||
| Balances due from other credit instituitons | 22,417 | - | 98,764 |
| Financial assets held for trading | 311,568 | - | 15,029 |
| Financial liabilities measured at amortised cost | |||
| Loans and advances | 791,508 | 45,793 | 2,899 |
| Derivatives – Hedge accounting | 813 | - | - |
| Investments in subsidiaries, joint ventures and associates | - | 62,582 | - |
| Tax assets | 33,287 | - | - |
| Other assets | 436 | 3,193 | 9,938 |
| Liabilities: | |||
| Financial liabilities held for trading | 896,236 | - | 23,057 |
| Financial liabilities measured at amortised cost | |||
| Deposits - Credit Instituitions | 6,489 | - | 2,371 |
| Deposits - Customers | 49,479 | 21,825 | 328,408 |
| Debt securities issued | 373,935 | - | 12,869 |
| Derivatives – Hedge accounting | 97,877 | - | - |
| Tax liabilities | 450 | - | - |
| Other liabilities | - | - | 9,310 |
| Expenses: | |||
| Interest expenses | 213,028 | - | 2,335 |
| Fee and commission expense | 3,077 | - | 1,410 |
| Results of financial assets and liabilities measured at fair value through profit or loss | 767,415 | - | 187,401 |
| Other administrative expenses | 7,872 | - | 44,063 |
| Income: | |||
| Interest income | 192,088 | 263 | 65 |
| Fee and commission income | 340 | 444 | 42,085 |
| Results of financial assets and liabilities measured at fair value through profit or loss | 680,132 | - | 191,515 |
| Gains on financial assets available-for-sale | |||
| Exchange differences, net | 8,768 | - | - |
| Proportion of profit or loss from investments in subsidiaries, joint ventures and associates accounted for using other than equity method |
|||
| Other operating income | - - |
5,617 - |
- 97 |
| Off balance sheet items: | |||
| Guarantees provided and other contingent liabilities | 54,890 | 22 | 190,060 |
| Guarantees received | 1 | - | 162 |
| Commitments to third parties | 114,170 | 1,971 | 106,877 |
| Currency operations and derivatives | 27,822,340 | - | 465,183 |
| Responsibilities for services rendered | 1,634,922 | - | 10,061,165 |
Transactions with related entities arise from normal business and are carried out under market conditions.
As at June 30, 2021, and December 31, 2020, advances or loans granted to members of the governing bodies, considered key management personnel of the Bank, amounted to €915k and €945k respectively. The deposits of members of the governing bodies were allocated under market conditions. As at June 30, 2021, and 2020, fixed and variable remuneration totalled €2.326 k and €2.731k, respectively.
With regard to post-retirement benefits, the members of the Board of Directors who have an employment tie with the Bank are included in the pension plan of the Collective Bargaining Agreement (ACT) for the banking sector subscribed by the Bank. The general conditions of this plan are described in Note 1.3(j).
The Shareholders' General Meeting of the Bank on May 30, 2007, approved the "Regulation on the supplementary award of an old-age or disability pension" to the executive members of the former Totta Board of Directors who came to become executive members (executive committee) of the Bank's Board of Directors in line with what had previously been defined in the former Totta Regulation. Members of the Board of Directors whose length of service is at least fifteen consecutive or interpolated years will be entitled to a pension supplement amounting to 80% of their gross annual salary. For terms of office less than fifteen years, the amount of the retirement pension supplement will be determined by the Remuneration Committee. For these persons, it is currently determined that the retirement pension supplement shall be 65% of the annual gross salary, for terms of office equal to or greater than ten years, and 75% of the annual gross salary for terms of office equal to or greater than twelve years. This definedbenefit pension plan is a supplementary plan and is dependent on the General Social Security Regime.
As at June 30, 2021, and December 31, 2020, liabilities with this plan amounted to €14.279k and €14,201k, respectively, and were covered by a provision in the same amount carried under "Provisions and other postemployment defined-benefit obligations."
With regard to termination of employment benefits, as provided for in the Companies Code, whenever, by decision of the Bank, the term of office of a member of the governing bodies ends early, the Bank shall compensate the member of the governing body with the future remuneration to which he or she is entitled up until the end of his or her term of office.
The following table summarizes, for each group of financial assets and liabilities, their fair values with reference to June 30, 2021, and December 31, 2020:
| 30-06-2021 | ||||
|---|---|---|---|---|
| Measured at | Measured at | Book | Measured at | |
| fair value | amortized cost | Value | fair value | |
| Assets | ||||
| Cash, cash balances at central banks and other demand deposits | - | 7,631,016 | 7,631,016 | 7,719,334 |
| Financial assets held for trading | 748,749 | - | 748,749 | 748,749 |
| Non-trading financial assets mandatorily | ||||
| at fair value through profit or loss | 131,587 | - | 131,587 | 131,587 |
| Financial assets at fair value | ||||
| through other comprehensive income | 5,432,559 | - | 5,432,559 | 5,432,559 |
| Financial assets at amortised cost | 3,113,253 | 37,184,808 | 40,298,061 | 40,319,934 |
| Derivatives – Hedge accounting | 17,920 | - | 17,920 | 17,920 |
| 9,444,068 | 44,815,824 | 54,259,892 | 54,370,083 | |
| Liabilities | ||||
| Financial liabilities held for trading | 771,112 | - | 771,112 | 771,112 |
| Financial liabilities measured at amortised cost | ||||
| Deposits | 25,494 | 45,863,839 | 45,889,333 | 45,822,314 |
| Debt securities issued | 8,553 | 2,862,911 | 2,871,464 | 2,988,007 |
| Other financial liabilities | - | 234,457 | 234,457 | 234,457 |
| Derivatives – Hedge accounting | 354,896 | - | 354,896 | 354,896 |
| 1,160,055 | 48,961,207 | 50,121,262 | 50,170,786 | |
| 31-12-2020 | ||||
|---|---|---|---|---|
| Justo | Custo | Valor | Justo | |
| valor | amortizado | contabilistico | valor | |
| Assets | ||||
| Cash, cash balances at central banks and other demand deposits | - | 4,535,815 | 4,535,815 | 4,626,255 |
| Financial assets held for trading | 916,039 | - | 916,039 | 916,039 |
| Non-trading financial assets mandatorily | ||||
| at fair value through profit or loss | 132,905 | - | 132,905 | 132,905 |
| Financial assets at fair value | ||||
| through other comprehensive income | 7,704,190 | - | 7,704,190 | 7,704,190 |
| Financial assets at amortised cost | 3,147,625 | 36,672,957 | 39,820,582 | 39,968,932 |
| Derivatives – Hedge accounting | 23,719 | - | 23,719 | 23,719 |
| 11,924,478 | 41,208,772 | 53,133,250 | 53,372,040 | |
| Liabilities | ||||
| Financial liabilities held for trading | 941,528 | - | 941,528 | 941,528 |
| Financial liabilities at amortised cost | ||||
| Deposits | 41,789 | 44,568,992 | 44,610,781 | 44,535,723 |
| Debt securities issued | 8,574 | 2,898,776 | 2,907,350 | 3,048,179 |
| Other financial liabilities | - | 205,656 | 205,656 | 205,656 |
| Derivatives – Hedge accounting | 522,283 | - | 522,283 | 522,283 |
| 1,514,174 | 47,673,424 | 49,187,598 | 49,253,369 | |
For Loans at amortized cost, customer deposits and issued debt securities, the financial assets and liabilities for which hedge accounting was applied were considered to be measured at fair value, though they were only subject to value correction in relation to the risk hedged.
The following table summarizes, by valuation levels for each group of financial assets and liabilities, their fair values with reference to June 30, 2021, and December 31, 2020:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | |||||
| Assets | ||||||||
| Cash, cash balances at central banks and other demand deposits | - | 7,719,334 | - | 7,719,334 | ||||
| Financial assets held for trading | - | 748,749 | - | 748,749 | ||||
| Non-trading financial assets mandatorily | ||||||||
| at fair value through profit or loss | 383 | - | 131,204 | 131,587 | ||||
| Financial assets at fair value | ||||||||
| through other comprehensive income | 207,190 | 5,220,394 | 4,975 | 5,432,559 | ||||
| Financial assets at amortised cost | - | 3,659,550 | 36,660,384 | 40,319,934 | ||||
| Derivatives – Hedge accounting | - | 17,920 | - | 17,920 | ||||
| 207,573 | 17,365,947 | 36,796,563 | 54,370,083 | |||||
| Liabilities | ||||||||
| Financial liabilities held for trading | - | 771,112 | - | 771,112 | ||||
| Financial liabilities at amortised cost | ||||||||
| Deposits | - | 7,670,760 | 38,151,554 | 45,822,314 | ||||
| Debt securities issued | - | 2,064,953 | 923,054 | 2,988,007 | ||||
| Other financial liabilities | - | - | 234,457 | 234,457 | ||||
| Derivatives – Hedge accounting | - | 354,896 | - | 354,896 | ||||
| - | 10,861,721 | 39,309,065 | 50,170,786 | |||||
| 31-12-2020 | ||||||
|---|---|---|---|---|---|---|
| Nível 1 | Nível 2 | Nível 3 | Total | |||
| Assets | ||||||
| Cash, cash balances at central banks and other demand deposits | - | 4,626,255 | - | 4,626,255 | ||
| Financial assets held for trading | - | 888,867 | 27,172 | 916,039 | ||
| Non-trading financial assets mandatorily | ||||||
| at fair value through profit or loss | 778 | - | 132,127 | 132,905 | ||
| Financial assets at fair value | ||||||
| through other comprehensive income | 2,334,516 | 5,365,269 | 4,405 | 7,704,190 | ||
| Financial assets at amortised cost | - | 3,742,791 | 36,226,141 | 39,968,932 | ||
| Derivatives – Hedge accounting | - | 23,719 | - | 23,719 | ||
| 2,335,294 | 14,646,901 | 36,389,845 | 53,372,040 | |||
| Liabilities | ||||||
| Financial liabilities held for trading | - | 911,551 | 29,977 | 941,528 | ||
| Financial liabilities at amortised cost | ||||||
| Deposits | - | 8,303,306 | 36,232,417 | 44,535,723 | ||
| Debt securities issued | - | 2,089,334 | 958,845 | 3,048,179 | ||
| Other financial liabilities | - | - | 205,656 | 205,656 | ||
| Derivatives – Hedge accounting | - | 522,283 | - | 522,283 | ||
| - | 11,826,474 | 37,426,895 | 49,253,369 | |||
The valuation at fair value of the Bank's financial assets and liabilities comprises three levels under IFRS 7 and IFRS 13:
| Derivative instrument | Main valuation techniques | |||
|---|---|---|---|---|
| Forwards | Present value model | |||
| Interest rate swaps | Present value model | |||
| Currency swaps | Present value model | |||
| Equity swaps | Present value model | |||
| Exchange rate options | Black-Scholes model, Monte Carlo model | |||
| Contracts on prices (options) | Black-Scholes model, Heston model | |||
| Interest rate options | Black-Scholes model, Heath-Jarrow-Morton model | |||
| Options-other | Black-Scholes model, Monte Carlo model, Heath-Jarrow-Morton model | |||
| Caps/Floors | Black-Scholes model, Monte Carlo model, Heath-Jarrow-Morton model |
For derivative financial instruments, the main valuation techniques are presented below:
The Bank calculates the "Credit Value Adjustment" (CVA) and the "Debit Value Adjustment" (DVA) for hedged financial instruments from financial assets held for trading and hedging derivatives from the perspective of aggregate exposure by counterparty. It simulates the evolution of the joint exposure of all derivatives, with a given counterparty, through stochastic processes. This evolution is grouped into time frames that represent the expected positive and negative future exposures (Positive and Negative Expected Future Exposures). To these exposures is applied an expected loss factor and discount factor for the respective term. The CVA and DVA calculated for each counterparty then result from the sum of expected losses in each term.
Additionally, for the purposes of calculating Credit Value Adjustments and Debit Value Adjustments to derivative financial instruments, the following inputs were used:
To calculate the fair value of financial instruments recorded at amortized cost, the valuation methods used where the valuation techniques, namely through updating future cash flows.
The main assumptions used in determining fair value, by type of financial instrument, were as follows:
In the first half of 2021 and in the fiscal year ended in December 31, 2020, the movement in financial instruments classified in Level 3 was as follows:
| Non-trading financial assets | Financial assets at fair value | |||
|---|---|---|---|---|
| Financial assets | mandatorily at fair value through | through other comprehensive | ||
| held for trading | profit or loss | income | Total | |
| December 31, 2019 | - | 144,244 | 6,393 | 150,637 |
| Acquisitions | - | 528 | 3,689 | 4,217 |
| Alienations | - | (3,160) | (4,713) | (7,873) |
| Reimbursement | - | (7,252) | (724) | (7,976) |
| Changes in fair value | 27,712 | (2,233) | (315) | 25,163 |
| Impairment recognized in the year | - | - | 75 | 75 |
| December 31, 2020 Sales |
27,712 | 132,127 | 4,405 | 164,244 |
| Acquisitions | - | 39 | 2,103 | 2,141 |
| Alienations | - | - | (1,351) | (1,351) |
| Reimbursement | - | (750) | (146) | (896) |
| Changes in fair value | (27,712) | (212) | (37) | (27,961) |
| Impairment recognized in the year | - | - | 1 | 1 |
| June 30, 2021 | - | 131,204 | 4,975 | 136,179 |
The interest rate curves for the most representative terms and currencies used in the valuation of financial instruments were as follows:
| 30-06-2021 | 31-12-2020 | |||
|---|---|---|---|---|
| EUR | USD | EUR | USD | |
| Overnight | -0.52% | 0.15% | -0.53% | 0.27% |
| 1 month | -0.52% | 0.15% | -0.53% | 0.27% |
| 3 months | -0.52% | 0.15% | -0.52% | 0.24% |
| 6 months | -0.52% | 0.15% | -0.52% | 0.20% |
| 9 months | -0.51% | 0.17% | -0.52% | 0.19% |
| 1 year | -0.50% | 0.18% | -0.52% | 0.19% |
| 3 years | -0.40% | 0.56% | -0.51% | 0.24% |
| 5 years | -0.26% | 0.93% | -0.46% | 0.44% |
| 7 years | -0.11% | 1.18% | -0.39% | 0.66% |
| 10 years | 0.10% | 1.40% | -0.26% | 0.94% |
As at June 30, 2021, and December 31, 2020, the detail of hedging derivatives and financial instruments designated as hedged items was as follows:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Hedged item Hedging instrument |
||||||||
| Nominal | Value net | Fair value | Book | Nominal | Fair | |||
| value | of impairment | adjustments | value | Value | Value | |||
| Fair value hedge: | ||||||||
| Financial assets at amortised cost | 3,068,989 | 3,080,723 | 32,530 | 3,113,253 | 3,075,656 | (63,123) | ||
| Financial assets at fair value | ||||||||
| through other comprehensive income | 3,380,000 | 3,398,422 | 287,989 | 3,686,411 | 3,380,000 | (288,915) | ||
| Financial liabilities measured at amortised cost | ||||||||
| Deposits- Customers | (25,260) | (25,372) | (122) | (25,494) | 25,323 | 222 | ||
| Debt securities issued | (8,226) | (8,370) | (183) | (8,553) | 8,227 | 304 | ||
| Cash flow hedge | ||||||||
| Financial assets at amortised cost | 3,000,000 | 3,000,000 | - | 3,000,000 | 3,000,000 | 14,536 | ||
| 9,415,503 | 9,445,403 | 320,214 | 9,765,617 | 9,489,206 | (336,976) |
| 31-12-2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Instrumento de cobertura | ||||||||
| Valor | Valor liquido | Correções | Valor de | Valor | Justo | |||
| nominal | de imparidade | de justo valor | balanço | nominal | valor | |||
| Fair value hedge: | ||||||||
| Financial assets at amortised cost | 3,079,393 | 3,090,461 | 57,164 | 3,147,625 | 3,079,393 | (85,641) | ||
| Financial assets at fair value | ||||||||
| through other comprehensive income | 3,380,000 | 3,423,945 | 372,578 | 3,796,523 | 3,380,000 | (374,018) | ||
| Financial liabilities measured at amortised cost | ||||||||
| Deposits- Customers | (41,353) | (41,552) | (237) | (41,789) | 41,414 | 405 | ||
| Debt securities issued | (8,227) | (8,324) | (250) | (8,574) | 8,227 | 322 | ||
| Cash flow hedge | ||||||||
| Financial assets at fair value through other comprehensive income | 1,819,500 | 1,819,500 | - | 1,819,500 | 2,049,092 | (62,538) | ||
| Financial assets at amortised cost | 3,000,000 | 3,000,000 | - | 3,000,000 | 3,000,000 | 22,906 | ||
| 11,229,313 | 11,284,030 | 429,255 | 11,713,285 | 11,558,126 | (498,564) |
The expected periods for the occurrence of cash flows that will affect the results for the period present the following detail:
| 30-06-2021 | ||||||
|---|---|---|---|---|---|---|
| Up to 3 | From 3 months | From 6 months | From 1 | Over | ||
| months | to 6 months | to 1 year | to 3 years | 3 years | Total | |
| Interest rate swaps | 4,151 | 10,385 | - | - | - | 14,536 |
| 31-12-2020 | ||||||
|---|---|---|---|---|---|---|
| Up to 3 | From 3 months | From 6 months | From 1 | Over | ||
| months | to 6 months | to 1 year | to 3 years | 3 years | Total | |
| Interest rate swaps | 4,027 | 4,157 | 14,722 | - | - | 22,906 |
Gains and losses recognised in the income statements for first halves of 2021 and 2020, with fair-value hedge transactions, were as follows:
| 30-06-2021 | 30-06-2020 | |||||
|---|---|---|---|---|---|---|
| Hedged | Hedging | Hedged | Hedging | |||
| item | instrument | Net | item | instrument | Net | |
| Financial assets at amortised cost | (24,634) | 24,634 | - | 161,572 | (161,572) | - |
| Financial assets at fair value | ||||||
| through other comprehensive income | (84,590) | 84,590 | - | (340,574) | 340,574 | - |
| Financial liabilities measured at amortised cost | ||||||
| Deposits- Customers | (249) | 249 | - | 100 | (100) | - |
| Debt securities issued | 67 | (67) | - | 83 | (83) | - |
| (109,406) | 109,406 | - | (178,819) | 178,819 | - | |
Credit risk management at the Bank covers the identification, measurement, integration and evaluation of the various credit exposures and an analysis of their profitability adjusted to the respective risk, both from an overall viewpoint and within every area of activity.
Credit-risk management is carried out by an independent body, the Risks Area, which is responsible, in particular, for managing the special customer monitoring system, for the segmentation of the credit risk in the light of the characteristics of the customers and of the products, and for the scoring systems (applicable to mortgage-loan and consumer-credit operations, credit and business cards) and the rating used at the Bank.
The counterparty risk consists of the latent credit risk in financial markets transactions corresponding to the possibility of default by the counterparties of the terms contracted and subsequent occurrence of financial losses for the Bank. The types of transactions covered include the purchase and sale of securities, contracting repos, securities lending and derivative instruments. Given the high complexity and volume of transactions, as well as the requirements of adequate control of the consolidated risks in certain customer segments, the control perimeter is defined in keeping with the segments at issue.
Control of these risks is performed on a daily basis in accordance with an integrated system that allows registration of the approved limits and real-time updating of positions, and provides information on the availability of limits and aggregate exposure, also in real time, for the various products and maturities. The system also allows transverse control (at different levels) of the concentration of risks by groups of customers/counterparties.
The risk in derivative positions (called Credit Risk Equivalent) is calculated as the sum of the present value of each contract (or current replacement cost) with the respective Potential Risk, a component that reflects an estimate of the maximum value expected to maturity, depending on the volatilities of the underlying market factors and the flow structure contracted. The credit risk in derivatives positions is captured through determination of the CVA/DVA.
For specific customer segments (namely global corporate clients) emphasis is given to the implementation of economic-capital limits, incorporating in the quantitative control the variables associated with the creditworthiness of each counterparty.
Risk analyses for customers or economic groups where the Bank has an exposure of more than €500,000 are performed by risk analysts who monitor the customers and are supported by rating models developed by the Bank and approved by the regulatory entities. Preparation of these models is mandatory. The assignment of various internal rating levels, ranging from 1.0 to 9.3, is underlain by the degree of risk inherent to the customer and a default probability at one year that the Bank monitors and calibrates on a constant and regular basis.
In concrete terms, the rating is determined by the analysis of the following factors to which are assigned a rating from 1.0 (minimum) to 9.3 (maximum), in accordance with the following weighting:
| Department | Weighting |
|---|---|
| . Demand/Market; | 20% |
| . Partners/Management; | 15% |
| . Access to credit; | 10% |
| . Profitability; | 15% |
| . Flow generation; | 25% |
| . Solvency. | 15% |
The rating is calculated by the analysts, based on information provided by the customer, general information about the sector and external databases. The final rating is introduced in each of the valuation areas in the Bank's information technology system.
In this way, the Bank's internal rating system can be described as follows:
Rating 1.0 – 3.9: Customer of high-default probability; Rating 4.0 – 6.0: Customer of moderate-default probability; Rating 6,1 – 9,3: Customer of low-default probability
As of June 30, 2021, and December 31, 2020, the maximum exposure to credit risk and the respective balance sheet value of financial instruments presented the following detail:
| 30-06-2021 | 31-12-2020 | |||
|---|---|---|---|---|
| Book | Maximum | Book | Maximum | |
| value | exposure | value | exposure | |
| Cash, cash balances at central banks and other demand deposits | 7,631,016 | 7,631,016 | 4,535,815 | 4,535,815 |
| Financial assets held for trading | 748,749 | 748,749 | 916,039 | 916,039 |
| Non-trading financial assets mandatorily | ||||
| at fair value through profit or loss | 131,587 | 131,587 | 132,905 | 132,905 |
| Financial assets at fair value | ||||
| through other comprehensive income | 5,432,559 | 5,432,559 | 7,704,190 | 7,704,190 |
| Financial assets at amortised cost | 40,298,061 | 47,035,300 | 39,820,582 | 46,910,608 |
| Derivatives – Hedge accounting | 17,920 | 17,920 | 23,719 | 23,719 |
| 54,259,892 | 60,997,131 | 53,133,251 | 60,223,277 | |
| Guarantees provided | 2,028,482 | 2,028,482 | 1,975,886 | 1,975,886 |
| Guarantees provided (Note 23) | ||||
| Financial guarantees and sureties | 635,531 | 635,531 | 648,253 | 648,253 |
| Non financial guarantees and sureties | 1,005,017 | 1,005,017 | 964,502 | 964,502 |
| Documentary credits | 387,934 | 387,934 | 363,131 | 363,131 |
| 2,028,482 | 2,028,482 | 1,975,886 | 1,975,886 | |
The maximum exposure in "Financial assets at amortized cost" as of June 30, 2021, and December 31, 2020, is as follows:
| 2020, is as follows: | ||
|---|---|---|
| 30-06-2021 | 31-12-2020 | |
| Balance sheet value | 40,298,061 | 39,820,582 |
| Other committments (Note 23) | ||
| Revocable | 6,107,507 | 6,140,567 |
| Irrevocable | 629,733 | 949,459 |
| Maximum exposure | 47,035,301 | 46,910,608 |
In accordance with the requirements set out in Bank of Portugal Instruction No. 4/2018, the Bank began to publish Non-Performing Exposures and Forborne Exposures.
In this sense, as at June 30, 2020, and December 31, 2020, the breakdown of performing and nonperforming exposures was as follows:
| 30-06-2021 | 31-12-2020 | |||||
|---|---|---|---|---|---|---|
| Book | Book | |||||
| value | Impairment | Coverage | value | Impairment | Coverage | |
| Performing exposures | 40,015,704 | (315,839) | 0.8% | 39,434,530 | (255,610) | 0.6% |
| Non-performing exposures | ||||||
| . Households | 378,311 | (191,172) | 50.5% | 408,592 | (210,498) | 51.5% |
| . Corporates | 982,644 | (571,587) | 58.2% | 982,377 | (538,809) | 54.8% |
| 1,360,955 | (762,759) | 1,390,969 | (749,307) | |||
| 41,376,659 | (1,078,598) | 40,825,499 | (1,004,917) |
For the periods in question, the degree of coverage of non-productive exposures net of impairment by real guarantees was as follows:
| 30-06-2021 | 31-12-2020 | ||||||
|---|---|---|---|---|---|---|---|
| Book | Book | ||||||
| value | Collateral | Coverage | value | Collateral | Coverage | ||
| Non-performing exposures | |||||||
| . Loans represented by securities | - | - | - | - | - | - | |
| . Households | 187,139 | 173,511 | 92.7% | 198,094 | 180,684 | 91.2% | |
| . Corporates | 411,057 | 299,160 | 72.8% | 443,568 | 314,480 | 70.9% | |
| 598,196 | 472,671 | 641,662 | 495,164 |
In accordance with Bank of Portugal Instruction No. 04/2018, institutions must identify and mark, in their information systems, loan contracts of a customer in financial difficulties, whenever there are changes to the terms and conditions of such contracts (including extension of the repayment term, introduction of grace periods, capitalisation of interest, reduction of interest rates, pardon of interest or principal) or the institution contracts new credit facilities for the (total or partial) settlement of the service of the existing debt.
| 30-06-2021 | 31-12-2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Book | Book | |||||||
| value | Impairment | Coverage | value | Impairment | Coverage | |||
| Performing exposures | 476,553 | (19,478) | 4.1% | 446,717 | (19,038) | 4.3% | ||
| Non-performing exposures | ||||||||
| . Households | 224,923 | (96,815) | 43.0% | 255,007 | (101,886) | 40.0% | ||
| . Corporates | 752,268 | (391,948) | 52.1% | 738,656 | (378,467) | 51.2% | ||
| 977,191 | (488,763) | 993,663 | (480,353) | |||||
| 1,453,744 | (508,241) | 1,440,380 | (499,391) |
The balance sheet liquidity-management policy is decided by the 1st level body of the organisational structure responsible for Asset and Liability Management (ALM), the Asset-Liability Committee (ALCO), chaired by the chair of the Executive Committee, which includes the directors responsible for the Financial, Treasury, Commercial, Marketing and International areas. Committee meetings are held monthly, and at these meetings the balance-sheet risks are analysed, and strategic options decided.
For the ALM area the following balance-sheet management limits are defined:
The Bank's funding policy considers the evolution of the balance-sheet aggregates, the structural situation of the maturities of assets and liabilities, the net interbank debt level in the light of the available lines, maturity dispersal and minimization of the costs associated with the funding activity.
It should be noted that the Bank does not perform any liquidity-risk analysis for trading financial instruments.).
As at June 30, 2021, and December 31, 2020, the breakdown of the projected (not discounted) cash flows of the financial instruments, in keeping with their maturities, was as follows:
| 30-06-2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Up to 3 | From 3 months From 1 to | From 3 to | Over | ||||||
| On demand | months | to 1 year | 3 years | 5 years | 5 years | Undetermined Derivatives | Total | ||
| Assets | |||||||||
| Cash, cash balances at central banks and other demand deposits | 711,804 | - | - | - | 6,919,212 | - | - | - | 7,631,016 |
| Financial assets held for trading | - | - | - | - | - | - | - | 748,749 | 748,749 |
| Non-trading financial assets mandatorily | |||||||||
| at fair value through profit or loss | - | - | - | - | - | - | 131,587 | - | 131,587 |
| Financial assets at fair value | |||||||||
| through other comprehensive income | 2 | 73,304 | 61,788 | 270,165 | 2,066,214 | 2,974,829 | 73,254 | - | 5,519,556 |
| Financial assets at amortised cost | 751,849 | 1,940,610 | 5,137,668 | 10,182,338 | 7,794,001 | 18,575,388 | - | - | 44,381,854 |
| Derivatives – Hedge accounting | - | - | - | - | - | - | 17,920 | 17,920 | |
| Investments in subsidaries, joint ventures and associates | - | - | - | - | - | - | 59,494 | - | 59,494 |
| 1,463,655 | 2,013,914 | 5,199,456 | 10,452,503 | 16,779,427 | 21,550,217 | 264,335 | 766,669 | 58,490,176 | |
| Liabilities | |||||||||
| Financial liabilities held for trading | - | - | - | - | - | - | - | 771,112 | 771,112 |
| Financial liabilities measured at amortised cost | |||||||||
| Deposits - central banks | 500 | - | - | 7,264,073 | - | - | - | - | 7,264,573 |
| Deposits - credit institutions | 236,359 | 12,623 | 34,219 | - | - | - | - | - | 283,201 |
| Deposits - customers | 23,210,943 | 6,040,491 | 6,622,376 | 866,655 | 1,323,065 | 67,698 | - | - | 38,131,228 |
| Debt securities issued | - | 68,130 | 121,850 | 1,307,245 | 132,298 | 1,461,912 | - | - | 3,091,435 |
| Derivatives – Hedge accounting | - | - | - | - | - | - | - | 354,896 | 354,896 |
| 23,447,802 | 6,121,244 | 6,778,445 | 9,437,973 | 1,455,363 | 1,529,610 | - | 1,126,008 | 49,896,445 | |
| 31-12-2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Up to 3 | From 3 months From 1 to | From 3 to | Over | ||||||
| On demand | months | to 1 year | 3 years | 5 years | 5 years | Undetermined Derivatives | Total | ||
| Assets | |||||||||
| Cash, cash balances at central banks and other demand deposits | 603,758 | - | - | - | 3,932,057 | - | - | - | 4,535,815 |
| Financial assets held for trading | - | - | - | - | - | - | - | 916,039 | 916,039 |
| Non-trading financial assets mandatorily | |||||||||
| at fair value through profit or loss | - | - | - | - | - | - | 132,905 | - | 132,905 |
| Financial assets at fair value | |||||||||
| through other comprehensive income | 1,299,742 | 620,270 | 74,873 | 270,190 | 300,190 | 4,801,198 | 72,634 | - | 7,439,097 |
| Financial assets at amortised cost | 607,876 | 1,971,950 | 5,528,160 | 10,125,880 | 7,274,485 | 18,773,061 | - | - | 44,281,412 |
| Derivatives – Hedge accounting | - | - | - | - | - | - | - | 23,719 | 23,719 |
| Investments in subsidaries, joint ventures and associates | - | - | - | - | - | - | 62,582 | - | 62,582 |
| 2,511,376 | 2,592,220 | 5,603,033 | 10,396,070 | 11,506,732 | 23,574,259 | 268,121 | 939,758 | 57,391,569 | |
| Liabilities | |||||||||
| Financial liabilities held for trading | - | - | - | - | - | - | - | 941,528 | 941,528 |
| Financial liabilities measured at amortised cost | |||||||||
| Deposits - central banks | 9,859 | - | - | 6,593,892 | - | - | - | - | 6,603,751 |
| Deposits - credit institutions | 621,415 | 857,756 | 64,727 | 3,706 | - | - | - | - | 1,547,604 |
| Deposits - customers | 21,245,887 | 5,969,677 | 6,185,668 | 1,208,346 | 1,601,815 | 69,108 | - | - | 36,280,501 |
| Debt securities issued | - | 36,134 | 130,414 | 301,880 | 1,188,943 | 1,498,149 | - | - | 3,155,520 |
| Derivatives – Hedge accounting | - | - | - | - | - | - | - | 522,283 | 522,283 |
| 21,877,161 | 6,863,567 | 6,380,809 | 8,107,824 | 2,790,758 | 1,567,257 | - | 1,463,811 | 49,051,187 | |
Determination of the projected cash flows from financial instruments was based on principles and assumptions used by the Bank in management and control of liquidity arising from its business, namely:
The projected cash flows of variable-remuneration assets and liabilities associated with the interest rate curve are calculated considering the forward interest rate curve;
Financial instruments classified as "non-structural" were considered to be payable "on demand", with the exception of equity instruments carried as Financial assets at fair value through other comprehensive income, which were considered as having indeterminate maturity. Non-structural financial assets and liabilities correspond to assets not subject to interest-rate variations (cash, deposits at credit institutions and equity instruments classified as Financial assets carried at fair value through other comprehensive income), financial assets not held for trading mandatorily carried at fair value through profit or loss, and assets and liabilities held for trading, whose management is based on control of the exposure to market risk. In this connection, the Bank considers the fair value of the assets and liabilities held for trading as their transactional value payable on demand;
Market risk generally consists of the potential variation of the value of a financial instrument due to unexpected changes of market variables, such as interest rates, exchange rates, credit spreads, and prices of equity instruments, precious metals and commodities.
The standard method applied for the Bank's trading activity is Value at Risk (VaR). The Historic Simulation standard is used as the basis with a confidence level of 99% and a time horizon of one day, statistical adjustments being applied in order to include the more recent events that condition the risk levels assumed.
The calculated VaR is a daily estimate of the maximum potential loss under normal market conditions (individually by portfolios/business areas, and for the whole of the positions), within the assumptions defined in the construction of the model.
At the same time other measures are implemented that allow additional monitoring of the market risk. For unusual market conditions, scenarios are analysed (Stress Testing), which consists of defining extreme scenarios for the behaviour of different financial variables and obtaining their potential impact on profit or loss. In short, the scenario analysis seeks to identify the potential risk under extreme market conditions, and in the fringes of likely occurrence not covered by the VaR.
In parallel, there is daily monitoring of the positions, and an exhaustive control is performed of the changes that occur in the portfolios, in order to detect the possible impacts that may exist for their correction. The daily preparation of the profit and loss account is intended to identify the impact of variations in financial variables or of the alteration of the composition of the portfolios.
The Bank also uses sensitivity measures and equivalent positions. In the case of the interest rate, use is made of the Basis Point Value (BPV) – estimated impact on profit or loss for parallel movements in the interest-rate curves. For the control of derivatives activities, due to their atypical nature, specific daily sensitivity measures are carried out, including calculation and analysis of sensitivities to movements of the underlying price (delta and gamma), volatility (Vega), and time (theta).
Quantitative limits are used for the trading portfolios, which are classified into two groups, in the light of the following objectives:
With regard to the structural interest-rate risk, it is measured through modelling the asset and liability positions sensitive to interest-rate variations in accordance with their indexing and re-appraisal structure. This model allows the measurement and control of the risks originating directly from the movement of the income curve, particularly their impact on net interest income and on the Bank's equity. Additionally, other risk indicators are calculated, such as Value at Risk (VaR) and scenario analysis (Stress Test).
The liquidity risk is measured and controlled through the modelling of present and future flows of payments and receipts, as well as by conducting stress tests that seek to identify the potential risk under extreme market conditions. In parallel, ratios are estimated on the current items of the balance sheet that act as indicators of structural and short-term liquidity requirements.
As at June 30, 2021, and December 31, 2020, the breakdown of financial instruments by exposure to the interest-rate risk was as follows:
| 30-06-2021 | |||||||
|---|---|---|---|---|---|---|---|
| Not subject | |||||||
| Fixed rate | Floating rate | Total | |||||
| - | 6,919,212 | 711,804 | - | 7,631,016 | |||
| - | - | - | 748,749 | 748,749 | |||
| - | - | 131,587 | - | 131,587 | |||
| 4,255,043 | - | 1,177,516 | - | 5,432,559 | |||
| 9,270,054 | 31,495,079 | (467,072) | - | 40,298,061 | |||
| - | - | - | 17,920 | 17,920 | |||
| 13,525,097 | 38,414,291 | 1,553,835 | 766,669 | 54,259,892 | |||
| - | - | - | 771,112 | 771,112 | |||
| 7,492,530 | - | (63,388) | - | 7,429,142 | |||
| 139,391 | 146,677 | (31) | - | 286,037 | |||
| 15,091,992 | 23,076,522 | 5,640 | - | 38,174,154 | |||
| 2,335,826 | 587,228 | (51,590) | - | 2,871,464 | |||
| - | - | 234,457 | - | 234,457 | |||
| - | - | - | 354,896 | 354,896 | |||
| 25,059,739 | 23,810,427 | 125,088 | 1,126,008 | 50,121,262 | |||
| Exposure to | to interest rate risk Derivatives |
| Exposure to Fixed rate |
Floating rate | Not subject | ||
|---|---|---|---|---|
| to interest rate risk Derivatives | Total | |||
| - | 3,932,058 | 603,757 | - | 4,535,815 |
| - | - | - | 916,039 | 916,039 |
| - | - | 132,905 | - | 132,905 |
| 6,137,230 | 1,603 | 1,565,357 | - | 7,704,190 |
| 6,942,978 | 32,932,979 | (55,375) | - | 39,820,582 |
| - | - | - | 23,719 | 23,719 |
| 13,080,208 | 36,866,640 | 2,246,644 | 939,758 | 53,133,250 |
| - | - | - | 941,528 | 941,528 |
| 6,809,859 | - | (18,039) | - | 6,791,820 |
| 118,496 | 1,430,179 | 294 | - | 1,548,969 |
| 15,257,392 | 21,005,431 | 7,169 | - | 36,269,992 |
| 2,335,826 | 632,774 | (61,250) | - | 2,907,350 |
| - | - | 205,656 | - | 205,656 |
| - | - | - | 522,283 | 522,283 |
| 24,521,573 | 23,068,384 | 133,830 | 1,463,811 | 49,187,598 |
The method of calculation of the sensitivity of the asset value involves simulation of the change in the market value of the assets and liabilities, based on 100 basis point (bp) shifts of the forward interest-rate curve. This methodology uses the following parameters and assumptions:
The interest-rate gap allows an approximation of the sensitivity of the asset value and of the net interest income in the light of market-rate variations. This approach has the following assumptions:
From the perspective of variation of the asset value, interest-rate increases entail a decrease of value in the intervals with positive gaps, and an increase of value in the negative gaps. Interest rate reductions have the opposite effect.
Indices the indices defined contractually are considered, and the spot curve of the date of analysis with the underlying forward curve is used for the simulation; and
Characteristics of New Business operations (term, repricing, volumes, spread , index, etc.) – the conditions entered in the budget for each product are used. When these characteristics begin to lie outside the market for certain products, the average conditions applied during the previous month or the new commercial guidelines for each of the products at issue are used.
As at June 30, 2021, and December 31, 2020, the sensitivity of the asset value of the Bank's financial instruments to positive and negative variations of 100 basis points (bp's) for a one-year time horizon was:
| 30-06-2021 | 31-12-2020 | ||||
|---|---|---|---|---|---|
| + 100 bp's | - 100 bp's | + 100 bp's | - 100 bp's | ||
| variation | variation | variation | variation | ||
| Assets | |||||
| Cash, cash balances at central banks | (1,615) | 353,288 | (2,135) | 59,081 | |
| Financial assets at fair value | |||||
| through other comprehensive income | (102,057) | 107,219 | (114,692) | 36,461 | |
| Financial assets at amortized cost | (974,157) | 1,177,285 | (1,020,001) | 553,086 | |
| (1,077,829) | 1,637,792 | (1,136,828) | 648,628 | ||
| Derivatives – Hedge accounting | 324,217 | (360,378) | 315,516 | (182,329) | |
| Liabilities | |||||
| Financial liabilities at amortised cost | |||||
| Deposits - central banks | 302 | 134,174 | 1,260 | 32,731 | |
| Deposits - credit institutions | (230) | 231 | (1,230) | 285 | |
| Deposits - customers | (1,188,262) | 1,257,738 | (1,141,738) | 379,403 | |
| Debt securities issued | (126,347) | 140,682 | (143,800) | 58,577 | |
| Other financial assets | (23,192) | 23,616 | (25,028) | 13,289 | |
| Other financial liabilities | (1,337,729) | 1,556,441 | (1,310,536) | 484,285 | |
The basic parameters for calculation of the VaR applicable in general are, besides the calculation method itself, as follows:
The calculation of the VaR Percentile gives equal weighting to the set of 520 observations considered. The Weighted Percentile VaR gives a significantly higher weighting to the most recent observations in relation to the reference date of the analysis.
Historical simulation consists of using the historical variations as the distribution model of possible variations in the risk factors. For this reason, the chosen period is sufficiently long and significant for all interactions between the market factors, its volatilities and the correlations among them, to be duly mirrored in the historical period selected.
On the other hand, the complete revaluation of the portfolio requires a valuation of each of the instruments, using the respective mathematical expression to obtain the market value of each individual position. In using forms of revaluation, non-linear effects implicit in certain financial products as a result of changes in market factors are calculated and collected on the VaR values.
As at June 30, 2021, and December 31, 2020, the VaR associated with the interest-rate risk corresponded to:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| VaR 99% percentile | (1) | (1) |
| VaR Weighted 99% percentile | - | - |
The profile defined for the exchange-risk is quite conservative and is embodied in the hedging policy used. Its implementation is the responsibility of the Treasury Area, so the risks involved are not very relevant, and it is implemented primarily through the use of currency swaps. Risk limits are stipulated for the exchangerate risk that are controlled by the Market Risks area.
As at June 30, 2021, and December 31, 2020, the detail of the financial instruments by currency was as follows:
| follows: | ||||||
|---|---|---|---|---|---|---|
| 30-06-2021 | ||||||
| U S |
Other | |||||
| Euros | Dollars | currencies | Total | |||
| Assets | ||||||
| Cash, cash balances at central banks and other demand deposits | 7,258,998 | 154,280 | 217,738 | 7,631,016 | ||
| Financial assets held for trading | 745,182 | 987 | 2,580 | 748,749 | ||
| Non-trading financial assets mandatorily | ||||||
| at fair value through profit or loss | 131,587 | - | - | 131,587 | ||
| Financial assets at fair value | ||||||
| through other comprehensive income | 5,432,505 | 5 4 |
- | 5,432,559 | ||
| Financial assets at amortised cost | 39,643,803 | 615,685 | 38,573 | 40,298,061 | ||
| Derivatives – Hedge accounting | 14,943 | - | 2,977 | 17,920 | ||
| Investments in subsidaries, joint ventures and associates | 59,494 | - | - | 59,494 | ||
| 53,286,512 | 771,006 | 261,868 | 54,319,386 | |||
| Liabilities | ||||||
| Financial liabilities held for trading | 767,605 | 988 | 2,519 | 771,112 | ||
| Financial liabilities measured at amortised cost | ||||||
| Deposits - central banks | 7,429,142 | - | - | 7,429,142 | ||
| Deposits - credit institutions | 169,191 | 115,939 | 907 | 286,037 | ||
| Deposits - customers | 36,695,937 | 1,227,052 | 251,165 | 38,174,154 | ||
| Debt securities issued | 2,871,464 | - | - | 2,871,464 | ||
| Other financial liabilities | 222,936 | 9,326 | 2,195 | 234,457 | ||
| Derivatives – Hedge accounting | 342,947 | 306 | 11,643 | 354,896 | ||
| 48,499,222 | 1,353,611 | 268,429 | 50,121,262 |
| 31-12-2020 | ||||
|---|---|---|---|---|
| U S |
Other | |||
| Euros | Dollars | currencies | Total | |
| Assets | ||||
| Cash, cash balances at central banks and other demand deposits | 4,353,824 | 28,489 | 153,502 | 4,535,815 |
| Financial assets held for trading | 913,609 | 1,748 | 682 | 916,039 |
| Non-trading financial assets mandatorily | ||||
| at fair value through profit or loss | 132,905 | - | - | 132,905 |
| Financial assets at fair value | ||||
| through other comprehensive income | 7,704,138 | 5 2 |
- | 7,704,190 |
| Financial assets at amortised cost | 39,143,852 | 637,742 | 38,988 | 39,820,582 |
| Derivatives – Hedge accounting | 23,478 | 241 | - | 23,719 |
| Investments in subsidaries, joint ventures and associates | 62,582 | - | - | 62,582 |
| 52,334,388 | 668,272 | 193,172 | 53,195,832 | |
| Liabilities | ||||
| Financial liabilities held for trading | 939,085 | 1,749 | 694 | 941,528 |
| Financial liabilities measured at amortised cost | ||||
| Deposits - central banks | 6,791,820 | - | - | 6,791,820 |
| Deposits - credit institutions | 1,431,446 | 117,260 | 263 | 1,548,969 |
| Deposits - customers | 34,498,895 | 1,413,677 | 357,420 | 36,269,992 |
| Debt securities issued | 2,907,350 | - | - | 2,907,350 |
| Other financial liabilities | 205,656 | - | - | 205,656 |
| Derivatives – Hedge accounting | 520,761 | 1,507 | 1 5 |
522,283 |
| 47,295,013 | 1,534,193 | 358,392 | 49,187,598 |
As at June 30, 2021, and December 31, 2020, the VaR associated with the exchange-rate risk corresponded to:
| 30-06-2021 | 31-12-2020 | |
|---|---|---|
| VaR 99% percentile | 4 | (8) |
| VaR Weighted 99% percentile | (4) | (6) |
As at June 30, 2021, and December 31, 2020, the Bank had no risk associated with asset prices with regard to its trading financial instruments, and so the VaR associated with this risk is zero.
The Bank seeks a high financial solidity based on the maintenance of a capital adequacy ratio - relationship between Eligible Equity Funds and risk-weighted assets. The policy for the distribution of results is
conditioned by the maintenance of capital levels that allow the Group to sustain the development of its operations within its risk policy.
The Bank uses the mixed method for credit risk, namely the advanced method (IRB) for most credit segments, and the standard method for manual operations, Banif portfolio and BAPOP portfolio. The Bank uses the standard method to calculate the market risk. In June 2012, the Bank began using the standard method for the determination of the operational risk requirements, having till then used the basic indicator method.
As of January 1, 2014, it started reporting capital ratios in accordance with the new regulatory framework of BIS III, which, although it provides for a phasing in period, is more demanding for the core capital ratio (or Common Equity Tier I, CET1), in particular through additional deductions and higher weights in the computation of exposures.
On June 28, 2019, the Bank operationalized the first synthetic securitization operation originated by the Bank. The operation is based on a portfolio of Corporates, SMEs, City Councils and ENI's in the amount of € 2.4Bn, in relation to which the Bank buys protection corresponding to a mezzanine tranche with a 1% attachment point and an 8.5% detachment point. The € 181.3Mn mezzanine tranche was fully placed with foreign institutional investors, in the form of a CLN with an 8.7% premium.
The following table summarizes the composition of the Bank's regulatory capital and prudential ratios on June 30, 2021, and December 31, 2020 (both in BIS III — Phasing In):
| Amounts in million Euros | |||||
|---|---|---|---|---|---|
| Jun-21 | Dec-20 | ||||
| A - LEVEL 1 OWN FUNDS (TIER I) | 4,002 | 3,759 | |||
| Share Capital (includes addicional instruments eligible as Tier I) | 1,541 | 1,541 | |||
| Reserves and Retained earnings (excluding Non-controlling interests) | 2,457 | 2,312 | |||
| Eligible minority interests | - | - | |||
| Deduction to base own funds | 3 | (94) | |||
| B - LEVEL 2 OWN FUNDS (TIER II) | 413 | 410 | |||
| Subordinated liabilities due Undetermined | 346 | 346 | |||
| Eligible minority interests | - | - | |||
| Other elements/deductions to complementary own funds | 6 8 |
6 4 |
|||
| C - DEDUCTIONS TO TOTAL OWN FUNDS | - | - | |||
| D - TOTAL OWN FUNDS (A+B+C) | 4,415 | 4,169 | |||
| E - RISK WEIGHTED ASSETS | 17,552 | 17,982 | |||
| RATIOS | |||||
| TIER I (A/E) | 22.8% | 20.9% | |||
| CORE CAPITAL (CET1) | 22.8% | 20.9% | |||
| TIER II (B/E) | 2.4% | 2.3% | |||
| CAPITAL ADEQUACY RATIO (D/E) | 25.2% | 23.2% | |||
| LEVERAGE | 7.9% | 6.5% |
Note: Non audited information
The Resolution Fund is a legal person under public law with administrative and financial autonomy, established by Decree-Law 31-A/2012 of February 10, which is governed by the General Credit Institutions and Financial Companies Regime ("RGICSF") and by its regulation, the mission of which is to provide financial support for the liquidation measures implemented by the Bank of Portugal, in its capacity as the national liquidation authority, and to perform all other functions conferred by law within the scope of implementation of such measures.
The Bank, like the majority of the financial institutions operating in Portugal, is one of the institutions taking part in the Resolution Fund, making contributions resulting from the application of a rate set annually by the Bank of Portugal essentially on the basis of the amount of their liabilities. In 2021, the periodic contribution made by the Bank amounted to €12.853k, based on a contribution rate of 0.048%.
Within the scope of its responsibility as supervision and liquidation authority of the Portuguese financial sector, on August 3, 2014, the Bank of Portugal decided to apply to Banco Espírito Santo, S. A. ("BES") a liquidation measure under Article 145-G(5) of the RGICSF, which consisted of the transfer of most of its business to a transition bank called Novo Banco, S. A. ("Novo Banco") created especially for the purpose.
To pay up the Novo Banco share capital, the Resolution Fund, as its sole shareholder, provided €4,900 million, of which €365 million corresponded to own financial resources. A loan was also granted by a banking syndicate to the Resolution Fund in the amount of €635 million, with the participation of each credit institution weighted in the light of several factors, including the respective dimension. The remainder (€3,900 million) consisted of a repayable loan granted by the Portuguese State.
Following the implementation of the said liquidation measure, on July 7, 2016, the Resolution Fund stated that it would review and assess the steps to be taken following the publication of the report on the results of the independent evaluation conducted to estimate the credit recovery level for each class of creditors in a hypothetical scenario of a process of normal insolvency of BES on August 3, 2014. Under applicable law, if it is found that creditors whose credits have not been transferred to Novo Banco entail a larger loss than would hypothetically be the case if BES had entered into liquidation at a moment immediately preceding that of the application of the liquidation measure, those creditors would be entitled to receive the difference from the Resolution Fund.
On March 31, 2017, the Bank of Portugal reported that it had selected the Lone Star Fund for the purchase of Novo Banco, which purchase was completed on October 17, 2017, with the injection, by the new shareholder, of €750 million, which will be followed a new inflow of share capital in the amount of €250 million, to be implemented over a period of up to three years. This operation put an end to Novo Banco's status as a transition bank, the Lone Star Fund having acquired 75% of the Novo Banco share capital and the Resolution Fund the remaining 25%, albeit without voting rights.
On February 26, 2018, the European Commission released the non-confidential version of the decision approving the State aid underlying the Novo Banco sale process, which includes a contingent capitalisation mechanism, under which the Resolution Fund may be called upon to inject capital in the event of occurrence of certain conditions relating to the performance of a restricted set of Novo Banco's assets and to the evolution of the bank's capital levels.
This mechanism is triggered every year on the basis of Novo Banco's annual accounts certified by the respective auditor, and there is a possibility of intra-annual determinations only in the event of default, by Novo Banco, of the prudential requirements. For the purpose of this mechanism, consideration is given to the asset valuation differences (positive or negative) compared to their carrying amounts, net of impairment, as at June 30, 2016 (around €7.9 billion according to information provided by Novo Banco). Thus, economic losses or gains are considered, resulting, for example, from the sale of assets or restructuring of loans, as well as impairments, or their reversal, which are recorded at Novo Banco in
accordance with the accounting rules, as well as the financing costs associated with maintaining the assets in the Novo Banco balance sheet.
Under that mechanism, to date, the Resolution Fund made a payment of €2,978 million to Novo Banco in respect of the 2017 to 2019 accounts, having used for the purpose its own financial resources resulting from the contributions paid up, directly or indirectly, by the banking sector, complemented by a State loan of €2,130 million within the scope of the framework agreement between the Portuguese State and the Resolution Fund.
This mechanism will be in force until December 31, 2025 (which may be extended until December 31, 2026), and is limited to an absolute maximum of €3,890 million.
On May 31, 2021, the Resolution Fund entered into a new loan agreement in the amount of €475 million with a number of banks to meet the Fund's financing needs arising from the commitments assumed with Novo Banco under the Contingent Capital Agreement. The Bank's share was €104 million.
On December 19, 2015, the Bank of Portugal decided to declare that Banif - Banco Internacional do Funchal, S. A. ("Banif") was "at risk of or was in a situation of insolvency," and began a process of urgent liquidation of the institution in the form of partial or total sale of its business, which came about with the sale, on December 20, 2015, to Banco Santander Totta S. A. ("Santander Totta") of the rights and obligations including assets, liabilities, off-balance sheet items, and assets under Banif management, for €150 million.
Most of the assets that were not sold were transferred to an asset-management vehicle called Oitante, S. A. ("Oitante"), created specifically for the purpose, which has the Resolution Fund as its sole shareholder. Oitante issued bonds representing the debt, in the amount of €746 million, a guarantee having been provided by the Resolution Fund and a counter-guarantee by the Portuguese State.
This operation also involved public support estimated at €2,255 million, which aimed to cover future contingencies, of which €489 million was financed by the Resolution Fund, and €1,766 million directly by the Portuguese State.
On July 21, 2016, the Resolution Fund made a payment to the State in the amount of €136 million by way of partial early repayment of the liquidation measure applied to Banif, allowing the amount owed to fall from €489 million to €353 million.
To date the findings of the independent evaluation exercise, conducted to estimate the credit recovery level for each class of creditors in the hypothetical scenario of normal insolvency proceedings of Banif as of December 20, 2015, are not yet known. As mentioned above for BES, if it is found that creditors entail a larger loss than would hypothetically be the case if Banif had entered into liquidation at a moment
immediately preceding that of the application of the liquidation measure, those creditors would be entitled to receive the difference from the Resolution Fund.
Following the liquidation measures applied to BES and Banif, and the agreement for the sale of Novo Banco to Lone Star, the Resolution Fund contracted the loans referred to above and assumed liabilities and contingent liabilities arising from:
In order to preserve financial stability by promoting the conditions that lend predictability and stability to the contribution effort for the Resolution Fund, the Portuguese government reached an agreement with the European Commission to alter the conditions of the loans granted by the Portuguese State and by the participating banks to the Resolution Fund. To this end, an addendum to the Resolution Fund funding agreements was formalised, which introduced a number of amendments to the repayment plans, remuneration rates and other terms and conditions associated with these loans so that they are suited to the Resolution Fund's ability to fulfil its obligations in full on the basis of its regular revenues, that is, without a need for the banks participating in the Resolution Fund to be charged special contributions or any other type of extraordinary contribution.
According to the announcement of the Resolution Fund of March 31, 2017, the review of the conditions of the funding granted by the Portuguese State and the participating banks aimed to ensure the sustainability and the financial balance of the Resolution Fund, on the basis of a stable, predictable and affordable charge for the banking sector. Based on this review, the Resolution Fund considered that full payment of its liabilities is assured, as well as the respective remuneration, with no need for recourse to special contributions or any other type of extraordinary contributions on the part of the banking sector.
Notwithstanding the possibility provided for in applicable legislation governing the collection of special contributions, given the renegotiation of the conditions of the loans granted to the Resolution Fund by the Portuguese State and by a banking syndicate, in which the Bank is included, the public announcements made by the Resolution Fund and the Office of the Minister of Finance state that this possibility will not be used. These financial statements reflect the Board of Directors' expectation that no special contributions or any other type of extraordinary contributions will be required of the Bank to finance the Resolution Fund.
Any significant changes regarding this matter may have relevant implications for the Bank's financial statements.
In 2012 administrative-offence proceedings were instituted by the Competition Authority ("AdC"), for alleged signs of infringement of Article 9 of Law 19/2012, of May 8 (Competition Act).
Within the scope of these proceedings, search and seizure measures were carried out at the premises of the Bank and other credit institutions on March 6, 2013, and indiscriminate documentation was seized to determine possible evidence of infringement of the aforesaid legal precept.
On June 3, 2015, the Bank, like other 14 credit institutions, was notified of the Statement of Objections issued by the AdC regarding the administrative offence under appraisal (Case No. PRC 9/2012), accused of taking part in an exchange of certain commercially sensitive information between competitors.
On September 9, 2019, the Competition Authority issued the final decision, essentially maintaining the theory presented in the 2015 Statement of Objections, namely the presumption of anti-competitive conduct based on the exchange of information between competitors on Mortgage Loans, Consumer Credit and Loans to Companies. Bank Santander Totta was sentenced to a fine of €35 million, plus a fine of €650k applied to BAPOP.
The fine imposed - which could amount to a maximum equivalent to 10% of the annual turnover of the infringing company in the year before the decision -, came to be applied for an amount corresponding to about 2.02% of that indicator (considering not only the penalty imposed on the Bank, but also on BAPOP).
Nevertheless, on October 21, 2019, the Bank judicially challenged the final decision of the Competition Authority, the case now pending before the Competition, Regulation and Supervision Court.
In December 2020, a hearing was held at the Competition Court, in which a consensual solution was reached between the Competition Authority and the appealing banks, including the Bank, regarding the amount of the fine and the types of collateral to be provided, in order to suspend the contested decision. In this regard, the Bank presented a bank guarantee in the amount of €17,825k, issued by the Bank itself, as a way to fulfil the mentioned collateral.
In line with what has been its position throughout the proceedings, the Bank strongly refutes all the arguments underlying the decision of the Competition Authority, and its judicial challenges through the Competition, Regulation and Supervision Court has been supported, in particular, by the opinion of distinguished Law Professors, attesting to the absence of any unlawful conduct by the institution.
The Bank will now await the judgement and subsequent decision on the judicial challenge submitted, and will not waive the exercise of all the legal and judicial faculties ensuring the protection of its interests.
Taking the foregoing into consideration, the Bank's Board of Directors is convinced that probabilities of the Bank not being ordered to pay a fine are greater than being so ordered, and therefore no provision for this process has been recorded in the financial statements as at June 30, 2021.
The current economic crisis caused by the Covid-19 pandemic has increased the risks for the financial system, with special relevance for those related to credit risk. In this context, the adoption of a significant set of measures, both exceptional and temporary, to support families and companies in a situation of insufficient liquidity associated with the economic slowdown should be highlighted. In particular, moratoria schemes were created — of both a legislative and non-legislative nature — to fulfil credit obligations towards the banking system, and for obtaining new financing (for companies) through the contracting of credit facilities with State guarantees (which guarantee the payment of the capital in case of default) in a percentage that varies between 80% - 90%, depending on the size of the company, thus avoiding immediate disruptions in the beneficiaries' liquidity positions.
The European Banking Authority, through the guideline EBA/GL/2020/02, came to detail the conditions that moratoria regimes must fulfil so that covered exposures are not automatically classified as restructured due to the debtors' financial difficulties or to them being in a situation of default. However, this guideline also reinforces the need for credit institutions to keep - also during the period in which the moratoria are in force - a timely monitoring of their exposures that will help them identify any indications that the debtor is unable to fully comply with its credit obligations (unlikeliness to pay), and its consequent marking.
In this context, it is crucial that credit institutions, on the one hand, develop an appropriate strategy to ensure sustainable solutions for debtors who, despite having financial difficulties, remain viable, thus contributing to preserve the Bank's economic value in the medium and long term; while, on the other hand, adopting measures that may allow them to monitor and evaluate the evolution of the risks incurred and the timely marking of the exposures in question, in order to mitigate the negative effects that may arise from the termination of the moratoria ("cliff effects").
From the very first moment, the Bank has had a leading position in supporting its clients affected by the economic crisis resulting from the Covid-19 health crisis, both in terms of the granting of moratoria, and as a leading Bank in the agreed support credit facilities for the economy.
In order to establish the criteria for the admission and classification of refinancing, renegotiation, and / or new credit operations, derived from economic impacts, in particular upon our clients' liquidity as a result of the Covid-19 pandemic, the Extraordinary Policy for Admission and Classification of Covid-19 Risks has been developed and approved by the Bank's own bodies.
In fact, given the strong economic impacts of the health crisis on families and companies, exceptional measures had to be adopted to support them, forcing the definition of a specific Policy that, with both a temporary and extraordinary nature, would define the criteria for admission and rating of renegotiation operations and / or the granting of new credits related to the financial needs of customers arising from liquidity problems.
This Policy incorporated the directions, guidelines and recommendations of the European Banking Authority (EBA), the European Central Bank (ECB), the European Securities and Markets Authority (ESMA), and the International Accounting Standards Board (IASB), and was applied equally to legislative and non-legislative moratoria. Although it is accepted that in the short term it is difficult to carry out a detailed analysis, and it is therefore recognized that there should be no immediate impacts upon the risk ratings of clients, the importance of carrying out an individual analysis of the client's real likelihood of being able to overcome the situation resulting from this crisis, as well as the importance of adequate risk measurement, are both stressed, hoping that institutions prioritise individual assessments of the likelihood of payment by debtors whenever possible.
The current economic context is characterized by a high level of uncertainty regarding the duration and depth of the pandemic, both globally and in Portugal.
Despite the authorities' efforts to mitigate negative impacts on the economy, lockdown measures have resulted in reductions in economic activity, and high uncertainty in the recovery dynamics.
Thus, the processes used in calculating impairments require adaptations to take due account of changes in clients' capacity and, consequently, of the impact on expected credit losses.
In order to ensure a consistent approach within the banking industry, the ECB issued a general recommendation on IFRS9 in the context of the Covid-19 pandemic on April 1, 2020 (SSM-2020-0154), indicating in particular that the modelling assumptions and methodologies used in normal situations might have gaps in the current context of extraordinary uncertainty. Thus, particular attention must be paid to the adjustments and overlays that will be required, due to the scarcity of forward-looking information.
Given the level of uncertainty, the ECB gives each institution the necessary degree of freedom to set the speed at which each economy will revert to its level of potential growth, provided it is duly substantiated.
Taking into account the aforementioned guidelines from the supervisor, a Long Run based macroeconomic scenario (hereinafter, the Covid scenario) was defined by the Bank's Study Department.
Thus, the adjustment to be made in this stage of the cycle, framed in the current methodology, is the updating of the Forward-Looking component in the PD and LGD models, based on the Covid scenario.
Based on the information available, and in line with the scenarios used at the Bank, a base scenario was used for the purposes of calculating the macroeconomic overlay.
Since the beginning of the Covid-19 pandemic, a number of critical sectors have been identified by the Bank and by the various relevant authorities regarding which there is an increased concern with regard to their future, due to the uncertainty that this pandemic has brought to the whole of society. Since the beginning of April, and in compliance with both the policies instituted at the Bank and with the guidelines of the ECB and
EBA, namely that during the term of the moratoria, the monitoring and follow-up activity of clients would have to be reinforced, in order to identify in a timely manner any indications that debtors may not be able to meet their credit obligations after the end of the moratoria. This monitoring and follow-up of clients is being carried out, first through the first line of defence (Commercial Area), and jointly with the second line of defence (Risk Area).
Countries and economic agents linked to the sectors most exposed to international and internal movements of people and goods, were immediately considered as the most vulnerable. Within this universe are the sectors linked to tourism and leisure activities, including the catering sector and the transport sectors (especially air transport), as well as trade in goods and services, including the Automobile Business. In a second line, and possibly due to the impact induced by the progressive closing of economies and the reduction of domestic and international consumption, the industrial, textile and footwear sectors - which are very relevant in the Portuguese economy - were also considered to have a significant potential impact. Other sectors were also listed for special monitoring, due to their traditional relevance in the national productive structure and in the exposure volume of the banking sector, as well as due to the impact they suffered in the previous economic crisis, as are all real estate and construction sector exposures.
As far as the private sector, the negative impact of the pandemic on household income is quite significant, but the effects vary widely from case to case. The impact on disposable income depends largely on the number of people in the household who get their income from work, as well as their employment status (whether they are permanent workers or self-employed), and the sector for which they work.
After having identified the most critical sectors, studies were carried out on the various client portfolios, subdivided into 4 chapters:
In May 2020, the Bank initiated the development of an End to End transformation project, called "Collections and Recoveries", which aims at the massive and anticipatory management of (non-portfolio) clients, through the development of strategies, procedures and commercial offers in an omnichannel environment (differentiated communication channels according to the type of client), constituting an advanced approach, to help manage any impacts after the end of the moratoria in this segment of private clients and micro and small companies.
The identification of potential impairment needs will depend on the evolution of the Bank's portfolio and on the specific environment at each moment. It is not possible to present a priori an exhaustive list of criteria that require an impairment analysis of segments or sub-segments. The idiosyncratic situations identified by the Portfolio Manager led to a reclassification of €2.4 billion from Stage 1 to Stage 2, and the endowment of an idiosyncratic overlay impairment. In the first half of 2021 and for a group of portfolio companies, the Bank carried out a simulation of the impact on the internal rating of the update of the most recent financial statements. This simulation led to a €1.0 billion reclassification from stage 1 to stage 2 and the provision of an overlay re-rating impairment.
Operations subject to legislative and non-legislative moratoria, and new loans granted under new public guaranteed schemes in response to the current economic crisis caused by the Covid-19 pandemic
The following tables show the characterization of the transactions that, as at June 30 and December 30, 2020, were subject to legislative and non-legislative moratoria, as well as the new loans granted under new public guaranteed schemes.
The gross amount of loans and advances covered by the moratoria is as follows:
| 30-06-2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Gross Value | ||||||||
| Performing | ||||||||
| Of which: subject to restructuring measures |
Of which: Stage 2 |
Of which: subject to restructuring measures |
Of which: with reduced probability of payment |
Total | ||||
| Loans and advances subject to moratorium | 5.649.098 | 156.180 | 1.450.615 | 498.351 | 404.860 | 481.200 | 6.147.449 | |
| of which: Households | 2.791.561 | 114.793 | 323.401 | 48.218 | 43.714 | 46.447 | 2.839.779 | |
| of which: secured by housing real estate | 2.726.623 | 113.287 | 213.004 | 47.618 | 43.121 | 45.883 | 2.774.241 | |
| of which: non-financial corporations | 2.857.537 | 41.387 | 1.127.214 | 450.133 | 361.146 | 434.753 | 3.307.670 | |
| of which: small and medium-sized companies | 1.858.579 | 32.877 | 303.290 | 271.510 | 219.395 | 262.123 | 2.130.089 | |
| of which: secured by commercial real estate | 1.285.430 | 15.604 | 124.980 | 299.370 | 259.280 | 286.663 | 1.584.800 |
| 31-12-2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Gross Value | ||||||||
| Of which: subject | Of which: | Of which: subject | Of which: with | |||||
| to restructuring | to restructuring | reduced probability | Total | |||||
| measures | Stage 2 | measures | of payment | |||||
| Loans and advances subject to moratorium | 8,004,249 | 294,628 | 910,217 | 545,727 | 450,657 | 525,377 | 8,549,976 | |
| of which: Households | 4,981,154 | 235,313 | 480,080 | 139,891 | 126,294 | 130,999 | 5,121,045 | |
| of which: secured by housing real estate | 4,551,971 | 216,345 | 401,358 | 115,590 | 107,741 | 109,957 | 4,667,561 | |
| of which: non-financial corporations | 3,023,095 | 59,315 | 430,136 | 405,836 | 324,363 | 394,378 | 3,428,931 | |
| of which: small and medium-sized companies | 1,992,188 | 46,157 | 370,691 | 252,725 | 198,296 | 241,661 | 2,244,913 | |
| of which: secured by commercial real estate | 1,297,684 | 21,100 | 151,825 | 282,193 | 243,321 | 275,718 | 1,579,877 | |
| 30-06-2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Impairment | ||||||||||||
| Performing | Non Performing | Gross value | ||||||||||
| Of which: subject Of which: to restructuring Stage 2 measures |
Of which: subject to restructuring measures |
Of which: with reduced probability of payment |
Total | Entries to non performing exposures |
||||||||
| Loans and advances subject to moratorium | 76.288 | 10.251 | 51.117 | 232.083 | 183.929 | 223.310 | 308.371 | 34.161 | ||||
| of which: Households | 16.014 | 6.014 | 12.695 | 21.773 | 20.456 | 20.937 | 37.787 | 1.894 | ||||
| of which: secured by housing real estate | 14.423 | 5.827 | 11.428 | 21.233 | 19.920 | 20.423 | 35.656 | 1.844 | ||||
| of which: non-financial corporations | 60.274 | 4.237 | 38.422 | 210.310 | 163.473 | 202.373 | 270.584 | 32.267 | ||||
| of which: small and medium-sized companies | 46.279 | 3.730 | 29.334 | 127.020 | 100.819 | 124.821 | 173.299 | 18.600 | ||||
| of which: secured by commercial real estate | 25.722 | 1.165 | 15.794 | 117.531 | 101.116 | 111.786 | 143.253 | 5.214 |
| 31-12-2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Productive | Non productive | Gross value | ||||||||||
| Of which: subject | Of which: with | Entries to non | ||||||||||
| to restructuring | Of which: Stage 2 |
to restructuring | reduced probability | Total | productive | |||||||
| measures | measures | of payment | exposures | |||||||||
| Loans and advances subject to moratorium | 50,396 | 16,489 | 37,641 | 223,478 | 181,246 | 216,352 | 273,875 | 24,157 | ||||
| of which: Households | 19,427 | 9,224 | 15,549 | 49,475 | 45,513 | 45,576 | 68,902 | 6,126 | ||||
| of which: secured by housing real estate | 14,041 | 7,825 | 11,648 | 36,572 | 34,335 | 34,638 | 50,613 | 3,981 | ||||
| of which: non-financial corporations | 30,969 | 7,266 | 22,092 | 174,003 | 135,733 | 170,776 | 204,972 | 18,031 | ||||
| of which: small and medium-sized companies | 26,180 | 7,001 | 20,470 | 106,401 | 85,218 | 103,374 | 132,581 | 9,596 | ||||
| of which: secured by commercial real estate | 10,079 | 791 | 7,282 | 100,991 | 88,264 | 100,290 | 111,070 | 1,559 |
The breakdown of loans and advances subject to legislative and non-legislative moratoria and by residual term of the moratoria is as follows:
| 30-06-2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Amount | ||||||||||||
| Performing | Residual term | |||||||||||
| Of which: | Of which: | <= 3 | > 3 months | > 6 months | > 9 months | |||||||
| Number of debtors | legislative | Expired | months | <= 6 months | <= 9 months | <= 12 | ||||||
| Loans and advances that have been offered a moratorium | 92,076 | 9,740,101 | ||||||||||
| Loans and advances subject to moratorium | 90,976 | 9,123,677 6,933,513 2,976,228 | 6,015,426 | 132,023 | - - |
|||||||
| of which: Households | 5,302,613 3,118,741 2,462,833 | 2,755,701 | 84,078 | - - |
||||||||
| of which: secured by housing real estate | 4,866,721 3,040,868 2,092,481 | 2,690,729 | 83,512 | - - |
||||||||
| of which: non-financial corporations | 3,821,065 3,814,772 | 513,395 | 3,259,725 | 47,945 | - - |
|||||||
| of which: small and medium-sized companies | 2,398,352 2,392,497 | 268,262 | 2,099,439 | 30,650 | - - |
|||||||
| of which: secured by commercial real estate | 1,717,798 1,716,110 | 132,998 | 1,562,917 | 21,883 | - - |
|||||||
| 31-12-2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Amount | |||||||||||
| Performing | |||||||||||
| Number of debtors |
Of which: legislative moratorium |
Of which: Expired |
<= 3 months |
> 3 months <= 6 months |
> 6 months <= 9 months |
> 9 months <= 12 months |
|||||
| Loans and advances that have been offered a moratorium | 94,008 | 9,918,579 | |||||||||
| Loans and advances subject to moratorium | 92,862 | 9,303,867 6,684,126 | 753,891 | 1,909,225 | 282,110 | 17,205 | 6,341,436 | ||||
| of which: Households | 5,426,937 3,068,796 | 305,892 | 1,899,864 | 280,996 | 17,161 | 2,923,024 | |||||
| of which: secured by housing real estate | 4,951,592 2,997,252 | 284,031 | 1,813,146 | 3,958 | 179 | 2,850,276 | |||||
| of which: non-financial corporations | 3,876,930 3,615,331 | 447,999 | 9,361 | 1,113 | 4 4 |
3,418,412 | |||||
| of which: small and medium-sized companies | 2,464,511 2,343,773 | 219,598 | 9,041 | 876 | 4 4 |
2,234,952 | |||||
| of which: secured by commercial real estate | 1,724,109 1,659,676 | 144,233 | 3,781 | 590 | - | 1,575,505 |
The loans and advances granted under new public guaranteed schemes in response to the current economic crisis caused by the Covid-19 pandemic, are as follows:
| 30-06-2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gross Amount | amount of | Gross Amount | |||||||
| Of which: restructured |
Public guarantees received |
Entries to non productive exposures |
|||||||
| Loans and advances subject to moratorium | 1,642,336 | - | 1,163,291 | 233 | |||||
| of which: Households of which: secured by housing real estate |
46,140 - |
3 1 - |
|||||||
| of which: non-financial corporations | 1,596,196 | - | 1,124,079 | 4,372 | |||||
| of which: small and medium-sized companies of which: secured by commercial real estate |
1,018,061 - |
594 - |
|||||||
| 31-12-2020 | |||||||||
| Maximum | |||||||||
| Gross Amount | amount of | Gross Amount | |||
|---|---|---|---|---|---|
| Of which: restructured |
Public guarantees received |
Entries to non productive exposures |
|||
| Loans and advances subject to moratorium | 1,331,672 | - | 1,069,839 | 233 | |
| of which: Households | 36,090 | 4 3 |
|||
| of which: secured by housing real estate | - | - | |||
| of which: non-financial corporations | 1,295,582 | - | 1,039,263 | 190 | |
| of which: small and medium-sized companies | 877,449 | 150 | |||
| of which: secured by commercial real estate | - | - |
On the date of approval of these consolidated financial statements by the Bank's Board of Directors, there was no event subsequent to June 30, 2021, the reference date of these financial statements, which requires adjustments or modifications of the amounts of assets and liabilities under the terms of IAS 10 – Events after the reporting period.
These financial statements were approved by the Board of Directors on September 21, 2021.
These financial statements are a free translation of the financial statements originally issued in the Portuguese language. In the event of discrepancies, the Portuguese language version prevails.
| Securities issued | Currency | Total | Amount issued Subscribed by the Group |
Balance sheet | interest to pay / commission to defer |
Value adjustment from hedge operations |
Total | Interest rate |
Issue date |
Maturity date |
Index |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Structured bonds | |||||||||||
| OB.BST INDEX LINKED NOTES 2024 23/12/2024 | EUR Total |
8,227 8,227 |
- - |
8,227 8,227 |
143 143 |
183 183 |
8,553 8,553 |
Floating | 20/12/2019 | 23/12/2024 | Index basket |
| Covered Bonds | |||||||||||
| Hipotecária XIV | EUR | 750,000 | 750,000 | - | (150) | - | (150) | 0.754% | 04/03/2015 | 04/03/2022 | Fixed interest rate |
| Hipotecária XVII | EUR | 750,000 | 750,000 | - | (196) | - | (196) | 0.902% | 15/04/2016 | 15/04/2023 | Fixed interest rate |
| Hipotecária XVIII | EUR | 750,000 | 750,000 | - | (452) | - | (452) | 0.652% | 26/07/2016 | 26/07/2023 | Fixed interest rate |
| Hipotecárias XX - 1ª | EUR | 750,000 | 750,000 | - | (1,062) | - | (1,062) | 1.201% | 07/12/2017 | 07/12/2027 | Fixed interest rate |
| Hipotecárias XXI | EUR | 1,000,000 | 1,000,000 | - | (1,214) | - | (1,214) | 1.481% | 10/04/2017 | 10/04/2027 | Fixed interest rate |
| Hipotecárias XXII | EUR | 1,000,000 | - | 1,000,000 | (3,253) | - | 996,747 | 0.875% | 25/04/2017 | 25/04/2024 | Fixed interest rate |
| Hipotecárias XXIII | EUR | 1,000,000 | - | 1,000,000 | 754 | - | 1,000,754 | 1.250% | 05/07/2019 | 05/07/2029 | Fixed interest rate |
| Hipotecária XXIV | EUR | 1,100,000 | 1,100,000 | - | (2,001) | - | (2,001) | 0.412% | 05/07/2019 | 05/07/2029 | Fixed interest rate |
| Hipotecárias XXV | EUR | 750,000 | 750,000 | - | (606) | - | (606) | 0.51% | 27/03/2020 | 27/03/2025 | Fixed interest rate |
| Hipotecária XXVI | EUR | 750,000 | 750,000 | - | (1,515) | - | (1,515) | 0.00% | 28/10/2020 | 28/10/2030 | Fixed interest rate |
| Total | 8,600,000 | 6,600,000 | 2,000,000 | (9,695) | - | 1,990,305 |
Bonds issued on securitization operations from mortgage credit
| Hipototta 4 - Class A - Notes | EUR | 413,016 | 302,242 | 110,774 | (367) | - | 110,407 | Floating | 09/12/2005 | 30/12/2048 | Euribor 3m+0.12% (up to early redemption date in December 2014); Euribor 3m+0.24% (After early redemption date) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Hipototta 4 - Class B - Notes | EUR | 15,026 | 15,026 | - | - | - | - | Floating | 09/12/2005 | 30/12/2048 | Euribor 3m+0.19% (up to early redemption date in December 2014); Euribor 3m+0.40% (After early redemption date) |
| Hipototta 4 - Class C - Notes | EUR | 47,455 | 47,455 | - | - | - | - | Floating | 09/12/2005 | 30/12/2048 | Euribor 3m+0.29% (up to early redemption date in December 2014); Euribor 3m+0.58% (After early redemption date) |
| Hipototta 4 - Class D - Notes | EUR | 7,000 | 7,000 | - | - | - | - | Floating | 09/12/2005 | 30/12/2048 | Residual return generated by securitized portfolio |
| Hipototta 5 - Class A2 - Notes | EUR | 376,044 | 308,442 | 67,601 | (119) | - | 67,482 | Floating | 22/03/2007 | 28/02/2060 | Euribor 3m+0.13% (up to early redemption date in February 2014); Euribor 3m+0.26% (After early redemption date) |
| Hipototta 5 - Class B - Notes | EUR | 26,000 | 26,000 | - | - | - | - | Floating | 22/03/2007 | 28/02/2060 | Euribor 3m+0.17% (up to early redemption date in February 2014); Euribor |
| Hipototta 5 - Class C - Notes | EUR | 24,000 | 24,000 | - | - | - | - | Floating | 16/03/2007 | 28/02/2060 | Euribor 3m+0.24% (up to early redemption date in February 2014); Euribor |
| 3m+0.48% (After early redemption date) | |||||||||||
| Hipototta 5 - Class D - Notes | EUR | 26,000 | 26,000 | - | - | - | - | Floating | 22/03/2007 | 28/02/2060 | Euribor 3m+0.50% (up to early redemption date in February 2014); Euribor |
| 3m+1.00% (After early redemption date) | |||||||||||
| Hipototta 5 - Class E - Notes | EUR | 31,000 | 31,000 | - | - | - | - | Floating | 22/03/2007 | 28/02/2060 | Euribor 3m+1,75% (até ao reembolso antecipado a Fevereiro de 2014); |
| Euribor 3m+3,50% (após data de reembolso antecipado) | |||||||||||
| Hipototta 5 - Class F - Notes | EUR | 6,000 | 6,000 | - | - | - | - | Floating | 22/03/2007 | 28/02/2060 | Residual return generated by securitized portfolio |
| Azor Mortgages 2 - Class A | EUR | 69,032 | 69,032 | - | - | - | - | Floating | 24/07/2008 | 14/12/2065 | 3mth Euribor + 0,30% |
| Azor Mortgages 2 - Class B | EUR | 43,080 | 43,080 | - | - | - | - | Floating | 24/07/2008 | 14/12/2065 | 3mth Euribor + 0,8% |
| (Amounts expressed in thousand euros) | ||
|---|---|---|
| Amount issued | Value adjustment | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Subscribed | interest to pay / | from hedge | Interest | Issue | Maturity | ||||||
| Securities issued | Currency | Total | by the Group | Balance sheet | commission to defer | operations | Total | rate | date | date | Index |
| Azor Mortgages 2 - Class C | EUR | 6,750 | 6,750 | - | - | - | - | Floating | 24/07/2008 | 14/12/2065 | Residual return generated by securitized portfolio |
| Atlantes Mortage 2 - Class A | EUR | 94,115 | - | 94,115 | (11,868) | - | 82,247 | Floating | 05/03/2008 | 18/09/2060 | 3mth Euribor + 0,33% |
| Atlantes Mortage 2 - Class B | EUR | 11,717 | 11,717 | - | - | - | - | Floating | 05/03/2008 | 18/09/2060 | 3mth Euribor + 0,95% |
| Atlantes Mortage 2 - Class C | EUR | 4,776 | 4,776 | - | - | - | - | Floating | 05/03/2008 | 18/09/2060 | 3mth Euribor + 1,65% |
| Atlantes Mortage 2 - Class D | EUR | 9,837 | 9,837 | - | - | - | - | Floating | 05/03/2008 | 18/09/2060 | Residual return generated by securitized portfolio |
| Atlantes Mortage 3 - Class A | EUR | 164,865 | 51,382 | 113,483 | (8,642) | - | 104,841 | Floating | 30/10/2008 | 20/08/2061 | 3mth Euribor + 0,20% |
| Atlantes Mortage 3 - Class B | EUR | 23,644 | 23,644 | - | - | - | - | Floating | 30/10/2008 | 20/08/2061 | 3mth Euribor + 0,50% |
| Atlantes Mortage 3 - Class C | EUR | 42,110 | 42,110 | - | - | - | - | Floating | 30/10/2008 | 20/08/2061 | Residual return generated by securitized portfolio |
| Atlantes Mortage 4 - Class A | EUR | 183,163 | - | 183,163 | (24,246) | - | 158,917 | Floating | 16/02/2009 | 30/12/2064 | 3mth Euribor + 0,15% |
| Atlantes Mortage 4 - Class B | EUR | 20,171 | 20,171 | - | - | - | - | Floating | 16/02/2009 | 30/12/2064 | 3mth Euribor + 0,30% |
| Atlantes Mortage 4 - Class C | EUR | 55,975 | 55,975 | - | - | - | - | Floating | 16/02/2009 | 30/12/2064 | Residual return generated by securitized portfolio |
| Atlantes Mortage 5 - Class A | EUR | 148,247 | 148,247 | - | - | - | - | Floating | 21/12/2009 | 23/11/2068 | 3mth Euribor + 0,15% |
| Atlantes Mortage 5 - Class B | EUR | 27,370 | 27,370 | - | - | - | - | Floating | 21/12/2009 | 23/11/2068 | 3mth Euribor + 0,30% |
| Atlantes Mortage 5 - Class C | EUR | 47,415 | 47,415 | - | - | - | - | Floating | 21/12/2009 | 23/11/2068 | Residual return generated by securitized portfolio |
| Hipototta nº13 Class A | EUR | 944,065 | 944,065 | - | - | - | - | Floating | 09/01/2018 | 23/10/2072 | 3mth Euribor + 0,60% |
| Hipototta nº13 Class B | EUR | 484,000 | 484,000 | - | - | - | - | Floating | 09/01/2018 | 23/10/2072 | 3mth Euribor + 1% |
| Hipototta nº13 Class C | EUR | 44,027 | 44,027 | - | - | - | - | Floating | 09/01/2018 | 23/10/2072 | Residual return generated by securitized portfolio |
| Hipototta nº13 Class D | EUR | 0 | 0 | - | - | - | - | Floating | 09/01/2018 | 23/10/2072 | |
| Atlantes Mortage 7 - Class A | EUR | 116,142 | 116,142 | - | - | - | - | Floating | 19/11/2010 | 23/08/2066 | 3mth Euribor + 0,15% |
| Atlantes Mortage 7 - Class B | EUR | 21,583 | 21,583 | - | - | - | - | Floating | 19/11/2010 | 23/08/2066 | 3mth Euribor + 0,30% |
| Atlantes Mortage 7 - Class C | EUR | 45,058 | 45,058 | - | - | - | - | Floating | 19/11/2010 | 23/08/2066 | Residual return generated by securitized portfolio |
| 3,578,682 | 3,009,546 | 569,136 | (45,241) | - | 523,894 | ||||||
| Total | 12,186,909 | 9,609,546 | 2,577,363 | (54,793) | 183 | 2,522,752 |
| Amount issued | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Securities issued | Currency | Issued | Repurchased | Balance sheet | Accrual | Total Balance Sheet |
Interest rate | Maturity | Early repayment as from |
| Obrigações Perpétuas Subordinadas CPP 2001 | EUR | 54,359 | 50,084 | 4,275 | 18 | 4,293 | Floating | 1.23% Perpetual | 23/02/2011 |
| Obrigações Perpétuas subordinadas BSP 2001 | EUR | 172,833 | 159,016 | 13,817 | 59 | 13,876 | Floating | 1.23% Perpetual | 23/02/2011 |
| OB.BANCO SANTANDER TOTTA SA 7.5% 06/10/2026 | EUR | 7,599 | - | 7,599 | 419 | 8,018 | Fixed interest rate | 7.50% Perpetual | 06/10/2026 |
| OB. BST 2030 TIER2 | EUR | 320,000 | - | 320,000 | 2,524 | 322,524 | Floating | 1.58% Not Perpetual | 31/12/2025 |
| 554,791 | 209,100 | 345,691 | 3,020 | 348,711 |
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