Earnings Release • Jul 31, 2020
Earnings Release
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Porto, 31 July 2020
In the 1st half of 2020 BPI registered €83 million of net loan impairment charges, preemptively including non-allocated impairments arising from the update of the macroeconomic scenario in the context of COVID-19, which largely explains the reduction in the period's net profit (-68% yoy). The contribution of the equity holdings in BFA and BCI totalled €36.1 million in the 1st half of 2020.
In the current context of the COVID-19 crisis, BPI was able to maintain its commercial dynamism. The Bank remained fully operational during the long period of lock-up, growing in deposits and loans and achieving market share gains.
The Bank pursued and further accelerated its digital transformation process, now with specific developments to tackle the immediate needs arising from the COVID‐19 crisis.
BPI took several measures in support of families, companies and society, stepping up its social commitment within the scope of the joint action with the "la Caixa" Foundation.
BPI has a strong financial position that allows it to face potentially adverse scenarios with confidence, supporting its customers and the recovery of the Portuguese economy:
The commercial activity had a good performance during the first half of the year, notwithstanding the significant slowdown of the Portuguese economic activity in the context of the COVID-19 crisis.
Customer deposits registered meaningful increase of 8.3% in the first half of the year, with €1,877 million new deposits collected since December 2019. The growth of deposits in the last 12 months was 10.8%.
Deposits represent 68% of assets and are the main source of funding.
Assets under management fell 5.2%, to €9,288 million, this decrease being in part explained by the drop in the market prices of the underlying financial assets portfolios due to market volatility.
Total customer resources grew by 3.7% ytd, to €35,658 million at the end of June 2020.
The total customer loans portfolio (gross) expanded by €596 million, or +2.4% since December 2019, to €24,977 million. In the last 12 months, the loan portfolio grew by 5.6%. The market share in total loans continued to rise, having reached 10.5% in May 2020.
The corporate loan book in Portugal grew by 2.9%, to €9,788 million, relative to December 2019, and by 7.1% since June 2019.
Mortgage loan production expanded by 54% yoy, to €809 million in the first half of 2020. BPI reached its highest mortgage-loan portfolio market share of the last 10 years (12.1% in May). The market share in new mortgage loans production was 16.1% in the first quarter and 14% in April and May 2020.
The mortgage loans portfolio grew by 2.3% ytd, totalling €11,638 million in June 2020.
The portfolio of other loans to individuals remained stable, totalling €1,673 million. New consumer loans production contracted by 26% yoy, to €266 million, due to the situation of pandemic. May and June saw a gradual rebound in new production, with BPI posting a market share of 16% (production in April and May).
BPI maintained a positive trend in the Non-performing Exposures (NPE) ratio - the best in the financial sector in Portugal -, which dropped by 0.5 p.p., to 2% (EBA criteria), reflecting the high quality of the Bank's loan assets. The coverage of NPEs by impairments and collaterals increased to 134%.
The NPL ratio ("crédito duvidoso") decreased from 2.9% in December 2019 to 2.8% in June 2020. At the end of June 2020, the coverage of non-performing loans by impairments and collaterals was 125%.
BPI registered €87 million of gross loan impairments in the 1st half 2020, preemptively including non‐allocated impairments resulting from the update of the macroeconomic scenario in the context of Covid-19. In the first half of 2020 BPI registered €4 million in recoveries of loans previously written off. The cost of credit risk, measured by impairments net of loan recoveries previously written off, was €83 million (0.32% of the loan portfolio, non-annualised) in the first half of 2020.
Net interest income proved resilient to the challenging environment, rising by 2.4% yoy, to €220 million, driven by the growth of the loan book.
Net fee and commission income dropped by 7.1% yoy, to €118.1 million, due to the slowdown of economic activity resulting from the pandemic - including the impact of the measures implemented by the Bank to support its clients -, and the performance of the capital markets, with an impact on fee and commission income from investment funds and capitalisation insurance. Commercial banking gross income in Portugal fell €5.9 million (-1.7% yoy), to €348.1 million.
The capital ratios increased in the 1st half of 2002 (June 20 vs Dec. 2019): the CET1 ratio rose to 13.8% (13.4% in Dec.19), the Tier 1 ratio to 15.3% (14.9% in Dec.19) and the total capital ratio to 17.0% (16.6% in Dec.19). The leverage ratio stood at 7.2% in June 2020. BPI meets by a significant margin the European Central Bank (ECB)'s minimum requirements for the CET1, Tier 1 and total ratios.
In February, BPI issued €450 million of senior non-preferred debt, fully subscribed by CaixaBank, with the objective of reinforcing eligible assets for compliance with the future MREL requirement.
In April 2020, Banco BPI, together with its shareholder CaixaBank, decided to suspend the distribution of dividends on the 2019 results, thus reinforcing its capacity to support the economy.
BPI's operating expenses decreased by 3.6% yoy, largely due to the reduction in amortisation and depreciation of fixed assets (software) as well as in other administrative expenses. Staff expenses remained practically unchanged.
The core efficiency ratio (core cost to income) stood at 59.6% at the end of June 2020 (last 12 months).
In June 2020 Banco BPI had a workforce of 4,817 employees (a net reduction of 23 since December 2019). On the same date the Bank's distribution network comprised 448 commercial units, including 377 branches, 36 premier centres, 1 mobile branch, and 34 corporate centres.
In the last 12 months BPI reached a recurring return on tangible equity (ROTE) in the domestic activity of 5.4%.
In the first half of 2020, both Moody's and Fitch rose by 1 notch BPI's long-term debt rating, to Baa3 and BBB+, respectively. Standard & Poor's maintains its rating of BPI at the second investment grade level (BBB).
Banco BPI's long-term debt is rated investment grade by the three big international agencies – Fitch Ratings, Moody's and S&P Global Ratings –, while its long-term deposits are also rated investment grade by Fitch Ratings and Moody's.
These ratings are a strong sign of the Bank's strength and of its capacity to provide support to the Portuguese economy.
BPI has been making a strong investment in innovation and digital transformation across all the areas of the Bank. This permitted BPI to deliver an agile and efficient response to the clients in the present circumstances, by expanding the array of digital banking solutions, and simplifying processes for easier access to all categories of financial services. The high level of the Bank's digital development also allowed it to make a seamless transition to teleworking in just a few days.
In the first half of the 2020, the total number of regular users of BPI's digital banking services increased by 7% yoy, to 690 thousand. The number of BPI App's regular mobile users increased by 26% yoy, to 430 thousand.
BPI is the market leader in internet and mobile banking penetration (individual clients), according to BASEF data, and ranks first in the digital channels satisfaction index (ECSI). In the corporate segment, BPI holds the 2nd position in internet banking and in the digital channels satisfaction index (DATAE). 46% of the Bank's customers are active digital clients.
Amongst the measures taken to support its Clients in the context of the pandemic, BPI facilitated the subscription to the digital channels and expanded the functionalities for contact between Clients and their account managers, significantly reinforcing remote service capabilities and the subscription of new products and services (iFactoring 100% digital; BPI Drive for car dealers; enlarged retirement savings plans offering in the digital channels; among others).
In June, the PWM magazine (Financial Times Group) elected BPI's private banking as the best in Europe in terms of the digitisation of the customers portfolio ("Best Private Bank for portfolio management technology – Europe"). The PWM Wealth Tech Awards distinguish private banking entities that demonstrate excellence in their digital transformation strategy and stand out for their constant innovation.
Since the outbreak of the crisis, BPI has developed an intense activity to support the Portuguese Companies and Families, including the most vulnerable groups. Among others, the following measures were taken:
Since 16 March, BPI's commercial networks have operated "behind closed doors", with conditional access to the service area, to ensure the safety of customers and employees. During lock-up the Bank always maintained in operation approximately nine in each 10 branches. At the end of June, the Bank maintained 46% of its employees in teleworking: 90% from the central services and 24% from the distribution network. As from June the Bank initiated a gradual return to onsite working in the central services (~20% in the 1st phase), under a rotation scheme.
Other support measures to the employees:
o Employees on leave of absence to look after their children, due to the closure of schools: 100% of salary + meals allowance
Support to society - In the social area, the "la Caixa" Foundation, in association with BPI, has maintained all the programmes scheduled for 2020, to which an annual budget of €30 million has been committed.
Since the onset of the crisis, the two entities have endorsed new initiatives of support to the most vulnerable:
BANCO BPI, S.A. Registered office: Rua Tenente Valadim, 284, Porto Share capital: € 1 293 063 324.98 Registered at Commercial Registry of Porto under registration number PTIRNMJ 501 214 534 and tax identification number 501 214 534
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