Annual Report • Nov 20, 2017
Annual Report
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In accordance with Article 10 of the CMVM Regulation nr.5/2008 we are pleased to transcribe the
BANCO COMERCIAL PORTUGUÊS, S.A.
a public company (Sociedade Aberta) having its registered office at Praça D. João I, 28, Oporto, registered at the Commercial Registry of Oporto, with the single commercial and tax identification number 501 525 882 and the share capital of EUR 5,600,738,053.72.
The 3rd Quarter 2017 Interim Report and Accounts is a translation of the "Relatório e Contas do 3º Trimestre de 2017", a document delivered by Banco Comercial Português, S.A. to the Portuguese Securities and Market Commission (CMVM), in accordance with Portuguese law.
The sole purpose of the English version is to facilitate consultation of the document by English-speaking Shareholders, Investors and other Stakeholders, and, in case of any doubt or contradiction between the documents, the Portuguese version of the "Relatório e Contas do 3º Trimestre de 2017" prevails.
All mentions in this document to the application of any ruling mean the respective version currently in force.
| JOINT MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE CEO 4 | |
|---|---|
| JOINT MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE CEO5 | |
| INFORMATION ON THE BCP GROUP 7 | |
| BCP IN THE FIRST 9 MONTHS OF 2017 8 | |
| MAIN INDICATORS 9 | |
| BCP GROUP 10 | |
| GOVERNANCE 11 | |
| RD QUARTER OF 2017 MAIN EVENTS IN THE 3 13 |
|
| MAIN AWARDS 14 | |
| BCP SHARE 15 | |
| QUALIFIED HOLDINGS17 | |
| BUSINESS MODEL 18 | |
| ECONOMIC ENVIRONMENT19 | |
| RESULTS AND BALANCE SHEET 20 | |
| BUSINESS AREAS 27 | |
| LIQUIDITY AND FUNDING33 | |
| CAPITAL 34 | |
| STRATEGY 35 | |
| VISION, MISSION AND STRATEGY36 | |
| STRATEGY 38 | |
| PERFORMANCE VERSUS STRATEGIC PLAN41 | |
| REGULATORY INFORMATION42 | |
| INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS | |
| FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2017 45 | |
| GLOSSARY 47 | |
| CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2017 49 |
The Portuguese economy is showing strong signs of growth and is converging with Europe. Year-on-year growth registered in the 3rd quarter of 2017 was 2.5%, sustained by dynamic exports and the recovery of investment, in particular private investment.
Financial assets were strong in the period thanks to S&P's upgrading of the Portuguese Republic's Sovereign rating, which returned to investment grade levels. The benchmark PSI-20 index rose 5.0% in the quarter and there was a significant fall in sovereign bond yields.
This quarter saw the conclusion of the sale of Novo Banco to the Lone Star fund. This transaction, with implications for the national financial system, was the object of a request by Millennium bcp for a legal opinion regarding the legality of the mechanism for contingent capitalization. Our understanding is that this is the way to obtain further clarification of the future risks faced by the bank via its exposure to the Resolution Fund. We demonstrated our independence with this request and will do what is necessary to protect our shareholders.
Millennium bcp's earnings in the third quarter were of a recurring nature and are in line with the targets presented to the market. The operating efficiency of the bank continues to improve, allowing for a bolstering of coverage for non-performing loans. Another highlight is the reduction of non-performing exposures (NPEs), which are now already at a level below that targeted for 2017.
The net profit was €133.3 million, compared with a loss of €251.1 million in the same period the previous year. We kept on improving our efficiency and, as a result, the cost-to-core income ratio eased to 45.8%, which is already better than the target for 2018 (<50%).
We continued on the path of reducing NPEs, which is key to the bank's sustainability, at a very good pace, reducing by around €1.4 billion in the first nine months, better than expected and better than the published targets. Total coverage for NPEs in Portugal is more than 105%. This result is very important for confidence in our institution. Millennium bcp has been able to gradually improve its balance sheet, avoiding disruptive solutions that destroy capital.
In terms of our business, the Portuguese operation stands out for the accelerating pace at which it added new customers in 2017. In the first nine months of the year we added more than 150,000 new customers, with the base of active customers growing 3.6% compared with the previous year. There was also relevant growth in terms of digital customers, reaching a total of 850,000 active digital customers, a 15.5% increase from the previous year.
International operations contributed a total €131.3 million to the group's earnings, in line with the previous year.
In Poland, Bank Millennium announced earnings of €117.8 million. The Bank also announced its "Strategy 2020" plan, with ambitious objectives to achieve a net profit of 1 billion zloty, with core income rising 30% and the cost-to-income ratio dropping to 40%.
Millennium bim, in Mozambique, achieved net profit of €60.5 million – an increase of 28.2% in euro terms. Highlights include the mobile banking segment, which achieved a total of more than 400,000 active customers.
Banco Millennium Angola contributed €24.4 million to the group's profits. The bank remained a benchmark among Angolan private banks and our partnership with Banco Millennium Atlântico has been extremely positive.
Another important highlight for the whole group is the improved service quality for the customer experience. A very significant effort has been made to train employees and improve processes, with a visible impact on the market's evaluation as well as the customer sentiment about our service. In 2017, the bank has received more than 20 awards and other public recognition, including "Best Digital Bank" in Portugal and Poland and "Best Bank" in Mozambique. In Portugal, customer satisfaction indicators have been improving and in the latest Bank of Portugal Report on Banking Behavior we were acknowledged to be the bank with the fewest customer complaints in the Portuguese financial system. The emphasis on quality is a distinctive factor for Millennium bcp and is an area where we will continue to invest.
In general terms the results for the third quarter are positive. They confirm the bank's ability to generate positive results from its business quarter after quarter. The trend for the main business indicators is positive and reinforces our commitment to the goals we promised for 2018.
We have an unique positioning in Portugal and remain a reference in supporting the families, the companies and the societies where we are present.
Chief Executive Officer Chairman of the Board Vice-Chairman of the Board of Directors of Directors.
Nuno Amado António Monteiro
MILLENNIUM BCP: A SOLID BANK…
… READY FOR THE FUTURE!
| Financial Highlights | Euro million | ||
|---|---|---|---|
| 30 Sep. 17 | 30 Sep. 16 | Change 17 / 16 |
|
| Balance sheet | |||
| Total assets | 72,990 | 73,042 | -0.1% |
| Loans to customers (gross) | 50,754 | 52,610 | -3.5% |
| Total customer funds | 70,231 | 66,781 | 5.2% |
| Balance sheet total customer funds | 52,265 | 50,576 | 3.3% |
| Resources from customers | 50,690 | 48,937 | 3.6% |
| Loans to customers, net / Resources from customers (1) | 94% | 101% | |
| Loans to customers, net / Balance sheet total customer funds | 91% | 97% | |
| Results Net income |
133.3 | (251.1) | |
| Net interest income | 1,023.2 | 907.0 | 12.8% |
| Net operating revenues | 1,594.3 | 1,571.9 | 1.4% |
| Operating costs | 694.6 | 722.4 | -3.8% |
| Recurring operating costs (2) | 718.3 | 720.6 | -0.3% |
| Loan impairment charges (net of recoveries) | 458.6 | 870.2 | -47.3% |
| Other impairment and provisions | 169.9 | 242.8 | -30.0% |
| Income taxes | |||
| Current | 82.8 | 76.5 | |
| Deferred | (19.7) | (144.7) | |
| Profitability | |||
| Net operating revenues / Average net assets (1) (3) | 2.9% | 2.8% | |
| Return on average assets (ROA) (4) | 0.4% | -0.3% | |
| Income before tax and non-controlling interests / Average net assets (1) | |||
| (3) | 0.5% | -0.4% | |
| Return on average equity (ROE) | 3.2% | -7.7% | |
| Income before tax and non-controlling interests / Average equity (1) (3) | 5.6% | -5.5% | |
| Credit quality | |||
| Overdue loans and doubtful loans / Total loans (1) | 7.8% | 9.3% | |
| Overdue loans and doubtful loans, net / Total loans, net (1) | 1.2% | 2.3% | |
| Credit at risk / Total loans (1) | 9.7% | 11.4% | |
| Credit at risk, net / Total loans, net (1) | 3.3% | 4.5% | |
| Impairment for loan losses / Overdue loans by more than 90 days | 108.9% | 100.9% | |
| Efficiency ratios (1) (2) (3) | |||
| Operating costs / Net operating revenues | 45.1% | 45.8% | |
| Operating costs / Net operating revenues (Portugal activity) | 45.7% | 47.0% | |
| Staff costs / Net operating revenues | 25.3% | 26.0% | |
| Capital (5) | |||
| Common equity tier I phased-in | 13.2% | 12.2% | |
| Common equity tier I fully-implemented | 11.7% | 9.5% | |
| Branches | |||
| Portugal activity | 589 | 634 | -7.1% |
| Foreign activity Employees |
542 | 555 | -2.3% |
| Portugal activity | 7,281 | 7,429 | -2.0% |
| Foreign activity | 8,538 | 8,452 | 1.0% |
(1) According to Instruction from the Bank of Portugal no. 16/2004, as the currently existing version.
(2) Excludes specific items: Euro 23.7 million income in staff costs related to Collective Labour Agreement negotiation and restructuring costs in the first nine months of 2017 and Euro 1.7 million from restructuring costs in the first nine months of 2016.
(3) Given the booking of Banco Millennium Angola as a discontinued operation between March and May 2016, the consolidated balance sheet includes Banco Millennium Angola until its derecognition, determined by the completion of the merger with Banco Privado Atlântico, in May 2016, while the respective contribution to consolidated result is reflected in income from discontinued operations and non-controlling interests during that period, not influencing the remaining items of the consolidated income statement. (4) Considering net income before non-controlling interests.
(5) September 2017 and September 2016 include the accumulated net income of each period. September 2017 figures are estimated.
Banco Comercial Português, S.A. (BCP, Millennium bcp or Bank) is the largest Portuguese privatelyowned bank. The Bank, with its decision centre in Portugal, guides its action by the respect for people and institutions, by the focus on the Customer, by a mission of excellence, trust, ethics and responsibility, being a distinguished leader in various areas of financial business in the Portuguese market and a reference institution on an international level. The Bank also holds a prominent position in Africa through its banking operations in Mozambique (in Angola, Banco Millennium Angola merged with Banco Privado Atlântico), and in Europe through its banking operations in Poland and Switzerland. The Bank operates in Macau through a full branch since 2010, when a memorandum of understanding was signed with the Industrial and Commercial Bank of China with the objective of strengthening cooperation between the two banks, which is extended to other countries and regions beyond Portugal and China. In 2016, pursuant to a private placement Fosun became holder of 16.7% of the Bank's share capital having afterwards increased its holding to around 23.9% through the share capital increase completed in February 2017. Following the transactions carried out on September 8, 2017, Fosun held a 25.16% stake in BCP's share capital.
| Incorporation and organic growth to become a relevant player |
Development in Portugal through acquisitions and partnerships |
Internationalisation and creation of a single brand |
Restructuring Process involving the divesture in non-strategic assets |
|---|---|---|---|
| 1985: Incorporation | 1995: Acquisition of Banco | 1993: Beginning of the presence | 2005: |
| 1989: Launch of |
Português do Atlântico, |
in the East | - Sale of Crédilar |
| NovaRede | S.A. | 1995: Beginning of the presence | - Sale of BCM and maintenance of an off-shore |
| Up to 1994: Organic | 2000: Acquisition of Banco | in Mozambique | branch in Macao |
| growth, reaching a |
Pinto & Sotto Mayor from | 1998: Partnership agreement |
- Divesture in the insurance activity, following |
| market share of |
CGD and incorporation of | with BBG (Poland) | the partnership agreement with Ageas for the |
| approximately 8% in loans | José Mello Group (Banco | 1999: Set up of a greenfield | bancassurance activity |
| and deposits in 1994 | Mello and Império) | operation in Greece | 2006: |
| 2004: Agreement with |
2000: Integration of the |
- Sale of the financial holding of 50.001% in | |
| CGD Group and Fortis | insurance operation into Eureko | Interbanco | |
| (Ageas) for the insurance | 2003: | - Conclusion of the sale of 80.1% of the share | |
| business | - Banque Privée incorporation | capital of the Banque BCP in France and | |
| - Change of Poland operation's | Luxembourg | ||
| denomination to Bank Millennium | 2010: | ||
| 2006: Adoption of a single brand | - Sale of 95% of Millennium bank AS in Turkey | ||
| "Millennium" | and sale agreement for the entire branch | ||
| 2006: BMA incorporation | network and the deposit basis of Millennium | ||
| 2007: Beginning of activity in | bcpbank in USA | ||
| Romania | 2013: | ||
| 2008: Strategic partnership |
- Sale of the entire share capital of Millennium | ||
| agreement with Sonangol and BPA | Bank Greece (MBG) to Piraeus Bank | ||
| 2010: Transformation of Macau | - Sale of 10% of the share capital of Banque | ||
| branch from off-shore to on-shore | BCP in Luxembourg | ||
| - Sale of the full shareholding in Piraeus Bank | |||
| 2014: | |||
| - Sale of the entire share capital of Banca | |||
| Millennium Romania (BMR) to OTP Bank | |||
| - Sale of the entire share capital of 49% in the | |||
| non-life insurance business, held in Ocidental | |||
| and Médis | |||
| 2015: | |||
| - Sale of the entire share capital of Millennium | |||
| bcp Gestão de Ativos | |||
| - Sale of 15.41% of the share capital of Bank | |||
| Millennium | |||
| 2016: | |||
| - Merger between Banco Millennium Angola and | |||
| Banco Privado Atlântico |
Banco Comercial Português, S.A. has a one-tier management and supervision model, composed of a Board of Directors, which includes an Executive Committee and an Audit Committee composed only by non-executive directors. The Company also has a Remunerations and Welfare Board and an International Strategic Board.
In addition, the Group uses a Statutory Auditor and an external auditing firm to audit the individual and consolidated accounts of the Bank, whose appointment is resolved at the General Meeting.
The members of the governing bodies were elected at the General Meeting of Shareholders held on 11 May 2015 to perform duties for the three-year period 2015/2017.
The General Meeting is the highest governing body of the company, representing the entirety of the shareholders, and its resolutions are binding for all when adopted under the terms of law and the articles of association. The General Meeting is responsible for:
The Board of Directors (BD) is the governing body of the Bank with the most ample powers of management and representation, pursuant to the law and the articles of association.
Under the terms of the articles of association in effect, the Board of Directors is composed of a minimum of 17 and a maximum of 25 members with and without executive duties, elected by the General Meeting for a period of three years, who may be re-elected. The increase of the number of members of the Board of Directors to 25 was approved on 9 November 2016.
The Board of Directors in office, as at 30 June 2017, was composed of 19 permanent members, with 11 non-executive and 8 executive members.
The Board of Directors appointed an Executive Committee (EC) composed of 8 of its members, to which it delegates the day-to-day management of the Bank. During the first six months of 2017 the Executive Committee was assisted in its management functions by several commissions and sub-commissions which oversaw the monitoring of certain relevant issues.
The supervision of the company is made by an Audit Committee elected by the General Meeting of Shareholders and composed of 3 to 5 members, elected together with the majority of the remaining directors. The lists proposed for the Board of Directors should indicate the members to be part of the Audit Committee and indicate the respective Chairperson.
The Remuneration and Welfare Board is composed of 3 to 5 members, elected by the General Meeting, the majority of whom should be independent.
The Company Secretary and the Alternate Secretary are appointed by the Bank's Board of Directors, and their term-of-office matches that of the Board of Directors that appointed them.
| Board of | Executive | Audit | Remuneration and Welfare |
Board for International |
|
|---|---|---|---|---|---|
| Directors | Committee | Committee | Board | Strategy | |
| António Vitor Martins Monteiro (BD Chairman) | n | n | |||
| Carlos José da Silva (BD Vice-Chairman) | n | n | |||
| Nuno Manuel da Silva Amado (BD Vice-Chairman and CEO) | n | n | n | ||
| Álvaro Roque de Pinho Bissaia Barreto | n | ||||
| André Magalhães Luiz Gomes | n | ||||
| António Henriques de Pinho Cardão | n | ||||
| António Luís Guerra Nunes Mexia | n | ||||
| André Palma Mira David Nunes (*) | n | ||||
| Cidália Maria Mota Lopes | n | n | |||
| Jaime de Macedo Santos Bastos | n | n | |||
| João Manuel de Matos Loureiro (AC Chairman) | n | n | |||
| João Nuno de Oliveira Jorge Palma (**) | n | n | |||
| José Jacinto Iglésias Soares | n | n | |||
| José Miguel Bensliman Schorcht da Silva Pessanha | n | n | |||
| José Rodrigues de Jesus (*) | n | n | |||
| Lingjiang Xu (**) | n | ||||
| Maria da Conceição Mota Soares de Oliveira Callé Lucas | n | n | |||
| Miguel de Campos Pereira Bragança | n | n | |||
| Miguel Maya Dias Pinheiro | n | n | |||
| Raquel Rute da Costa David Vunge | n | ||||
| Rui Manuel da Silva Teixeira | n | n | |||
| José Gonçalo Ferreira Maury (Chariman of RWB) | n | ||||
| José Guilherme Xavier de Basto | n | ||||
| José Luciano Vaz Marcos | n | ||||
| Manuel Soares Pinto Barbosa | n | ||||
| Carlos Jorge Ramalho dos Santos Ferreira (Chairman of BIS) | n | ||||
| Francisco de Lemos José Maria | n | ||||
| Josep Oliu Creus | n |
(*) Members Appointed by the State for the period of enforcement of the public investment to strengthen the Bank's own funds.
(**) Pending authorization from BdP/ECB to exercise the respective functions
BCP share' price increased by 33.0% in the first nine months of 2017, outperforming both PSI 20 (+15.6%) and Eurostoxx 600 Banks (+11.0%) indexes.
BCP share performance is better explained when analysed by quarter:
1 st Quarter 2017 (+6.3%): After decreasing in the beginning of the year as a reaction to the €1.3 billion share capital increase announcement, BCP share price initiated a recovery following the completion of the share capital increase, the listing of new shares and the early repayment of the remaining amount of CoCos. Since 9 February (date of the listing of new shares), BCP share price increased by 67%.
2 nd Quarter 2017 (+20.2%): BCP share benefitted from a more positive environment for the European banking sector, resulting from a more favourable political environment following the Dutch and French elections and an improvement of the macro environment in Portugal, following the good results achieved on reduction of the public deficit and the upwards revision to GDP forecasts made by the Banco de Portugal and the IMF, which overcome the side effects of the resolution of Banco Popular, acquired by Santander in the beginning of June.
3 rd Quarter 2017 (+4.1%): BCP share performance was affected by i) the imposition by the ECB of the increase in NPEs coverage by LLRs to Bank of Cyprus in August and the announcement of Liberbank's share capital increase in the beginning of September, which motivated a read across for other banks and also to BCP; ii) market uncertainty as regards the probability and timing of ECB increasing official interest rates; iii) growing international political tensions resulting from North Korea's military actions; and iv) a new proposal of solution for the conversion of CHF loans in Poland which involves a high quarterly contribution (for a new restructuring fund) for an uncertain period of time. In spite of these factors the recent upgrade of the rating of the Portuguese Republic to investment grade by S&P and the improvement in the market perception of the value of BCP as a result of the NPEs reduction that exceeded market expectations, were responsible by the recovery.
Source: Euronext
| Units | 9M17 | 9M16 | |
|---|---|---|---|
| Adjusted prices | |||
| Maximum price | (€) | 0.2588 | 0.6459 |
| Average price | (€) | 0.2035 | 0.3730 |
| Minimum price | (€) | 0.1383 | 0.1886 |
| Closing price | (€) | 0.2453 | 0.1989 |
| Shares and equity | |||
| Number of ordinary shares | (M) | 15,114 | 59,039 |
| Shareholder's Equity attributable to the group | (M€) | 6,052 | 4,076 |
| Shareholder's Equity attributable to ordinary shares (1) | (M€) | 5,992 | 4,016 |
| Value per share | |||
| Adjusted net income (EPS) (2) (3) | (€) | 0.014 | -0.278 |
| Book value (4) | (€) | 0.396 | 0.068 |
| Market indicators | |||
| Closing price to book value | (PBV) | 0.62 | 0.23 |
| Market capitalisation (closing price) | (M€) | 3707 | 909 |
| Liquidity | |||
| Turnover | (M€) | 3,012 | 1,988 |
| Average daily turnover | (M€) | 16 | 10 |
| Volume (5) | (M) | 14,742 | 5,169 |
| Average daily volume (5) | (M) | 77 | 27 |
| Capital rotation (6) | (%) | 109.6% | 113.1% |
(1) Shareholder's Equity attributable to the group - Preferred shares.
(2) Considering the average number of shares outstanding
(3) Ajusted by the share capital increase completed in February 2017.
(4) Considering the average number of shares minus the number of treasury shares in portfolio.
(5) Ajusted by the share capital increase completed in February 2017.
(6) Total number of shares traded divided by the 9M average number of shares issued.
On 30 June 2017, the following Shareholders held more than 2% of the share capital of Banco Comercial Português, S.A.:
| 30 June 2017 | |||
|---|---|---|---|
| Shareholder | Nr. of shares | % of share capital |
% of voting rights |
| Chiado (Luxembourg) S.a.r.l., an affiliate of Fosun, whose parent company is Fosun International Holdings Ltd |
3,738,412,411 | 24.73% | 24.73% |
| Total of Fosun Group | 3,738,412,411 | 24.73% | 24.73% |
| Sonangol - Sociedade Nacional de Combustíveis de Angola, EP, directly | 2,303,640,891 | 15.24% | 15.24% |
| Total of Sonangol Group | 2,303,640,891 | 15.24% | 15.24% |
| EDP Pensions Fund * | 319,113,690 | 2.11% | 2.11% |
| Total of EDP Group | 319,113,690 | 2.11% | 2.11% |
| Norges Bank, directly | 327,405,240 | 2.17% | 2.17% |
| Total of Norges Group | 327,405,240 | 2.17% | 2.17% |
| BlackRock** | 307,981,328 | 2.04% | 2.04% |
| Total of BlackRock | 307,981,328 | 2.04% | 2.04% |
| Total of Qualified Shareholders | 6,996,553,560 | 46.3% | 46.3% |
* Allocation in accordance with subparagraph f) of paragraph 1 Art. 20 of the Portuguese Securities Code.
** In accordance with the announcement on 5 April 2017.
After 30 June 2017, there were several announcements with implications on those holdings, namely:
The voting rights referred to above are the result of the direct and indirect stakes of Shareholders in the share capital of Banco Comercial Português. No other imputation of voting rights foreseen in article 20 of the Securities Code was communicated or calculated.
Report and Accounts for the 3rd quarter of 2017
Business Model
The International Monetary Fund (IMF) projects an acceleration of the global economy in 2017 (3.6%), reflecting the improvement observed in the first half of the year in the activity indicators of most economies, in particular among the developed countries, as well as the favourable climate in the international financial markets. In the medium term the continuity of the global expansionary cycle is nonetheless subject to important risks, which according to the IMF relate to the stability of the global financial system and the resurgence of geopolitical tensions.
Despite the positive evolution of the global economic activity and investors' optimism, the monetary policy of the main central banks has not suffered any additional tightening. In effect, the European Central Bank pressed forward with its asset purchase program and the US Federal Reserve kept their key interest rates unaltered during the third quarter.
Notwithstanding the worsening of the world geopolitical risks, in particular, coming out of the Korean peninsula, the climate resulting from the combination of the improved global economy with the lingering degree of extreme accommodative global monetary conditions favoured the widespread appreciation of the main financial asset classes. Within the equity segment it should be highlighted that all of the main US indices have reached consecutive historical highs, in line to what occurred in the previous quarters. In the interest rates domain, the stability of the oil price and the modest wage growth in the developed economies contributed to reinforce the expectations of a slow normalisation of the monetary policy in the main economic blocks, which led to an absence of defined direction in the evolution of the government bond yields of the low-risk countries, such as Germany and the US. The elevated quantity of existing liquidity in the interbank money market of the Euro and the perspective that the ECB's key interest rates will remain at the current levels for a protracted period of time meant that the Euribor rates stood at negative values for all maturities.
According to Statistics Portugal, during the first six months of 2017, Portugal's GDP rose by 2.9% annually, which represents a strong acceleration relative to that recorded in the analogous period of 2016 (1.1%). The increased pace of economic activity reflected the strong recovery of investment and the improvement in the contribution of the net external demand, which attenuated the deceleration of private consumption and the contraction of public spending. The context of greater economic dynamism along with the process of stabilisation of the banking setor and the reduction of the fiscal balance to the levels demanded by the European Union contributed to the announcement by the ratings agency Standard & Poors' of an one notch upgrade of the rating of the Portuguese Republic to investment grade, which translated positively into the performance of the domestic financial assets. In the third quarter, the main Portuguese equity index appreciated by 5% and the risk premia of the Portuguese government debt securities vis-à-vis the German counterparts tightened significantly.
In Poland, the continuation of an expansionary fiscal policy together with the rise in construction investment co-funded with European funds translated into a strong acceleration of private consumption and the recovery of investment. The performance of these two components pushed GDP to annual growth levels around 4% in the first two quarters of 2017. Despite the dynamism of economic activity, inflationary pressures remained controlled, allowing the Polish central bank to maintain its monetary policy unaltered by keeping the key interest rate at 1.50%. The Zloty remained relatively stable during the third quarter when compared to the previous one.
After the strong deceleration of activity recorded in 2016, the Mozambican economy has been showing signs of recovery, stimulated by the strong rise in exports associated to the megaprojects, which has translated into an improvement of the current account deficit and the stabilisation of the foreign Exchange rate of the Metical against the dollar. At the same time, the government has been presenting a set of measures aimed at raising the robustness of the public finances. In this context of improvement of the economic situation, the IMF has forecast a GDP expansion rate of 4.7% in 2017, which compares with 3.8% in 2016. In Angola, despite the increase in oil prices relative to the previous year, the level of the net foreign exchange reserves continue to dwindle and the economic activity still presents important frailties, with the IMF forecasting GDP growth to be 1.5% this year.
In the context of the merger process between Banco Millennium Angola and Banco Privado Atlântico, Banco Millennium Angola was considered a discontinued operation in March 2016 with the impact of its results presented as "income arising from discontinued operations". On the consolidated balance sheet, the assets and liabilities of Banco Millennium Angola, S.A. continued to be consolidated by the full consolidation method up to April 2016.
After the completion of the merger, in May 2016, the assets and liabilities of Banco Millennium Angola were no longer considered in the consolidated balance sheet and the investment of 22.5% in Banco Millennium Atlântico, the new entity arising from the merger, started being consolidated using the equity method, while its contribution to the Group's results have been recognised in the consolidated accounts from May 2016 onwards.
The core net income of Millennium bcp increased 23.7% from Euro 665.8 million in the first nine months of 2016, amounting to Euro 823.2 million in the same period of 2017, benefiting, on the one hand, from the 12.8% growth in net interest income and 2.8% in net commissions and, on the other, from the 3.8% reduction of operating costs. Excluding the effect of specific items (a Euro 23.7 million income from the negotiation of the Bank's Collective Labour Agreement net of restructuring costs, in the first nine months of 2017, and a Euro 1.7 million cost in restructuring costs, in the first nine months of 2016), core net income achieved Euro 799.6 million in the first nine months of 2017, an increase of 19.8% comparing to the same period of the previous year.
The performance of core net income, on a comparable basis, reflects both the positive performance of the activity in Portugal (+13.9%) and of the international activity (+30.0%), leading to a decrease in the cost to income ratio, excluding specific items, to 45.1% in the first nine months of 2017, compared to 45.8% posted in the same period of 2016, highlighting that, without considering the adjustment of the specific items, the cost to income ratio of 30 September 2017 is more favorable and shows an even more positive progression from the end of September 2016.
Net income in the first nine months of 2017 achieved a profit of Euro 133.3 million, showing an increase compared to a loss of Euro 251.1 million registered in the same period of the previous year, sustained by the performance of the activity in Portugal.
In the activity in Portugal, net income increased by Euro 395.0 million compared to the first nine months of 2016, reaching Euro 0.8 million in the first nine months of 2017, supported by the reduction of impairments and provisions and by the growth of core net income.
The positive impact, net of tax, of the above-mentioned specific items, amounted to Euro 16.7 million, in the first nine months of 2017, which compares with the Euro 20.9 million gain (net of tax) related to the purchase of Visa Europe by Visa Inc in the same period of 2016.
In the international activity, net income totalled Euro 131.3 million in the first nine months of 2017 and Euro 134.8 million in the same period of the previous year, reflecting the lower contributions from the operations in Poland and Angola, despite the increase in the contribution of the remaining operations, notwithstanding negative exchange rate effects. However, it should be noted that the performance of the contribution of Poland is penalised by the gain booked in 2016 associated with the purchase of Visa Europe by Visa Inc (Euro 26.3 million) and by the recognition of the mandatory contributions, namely of the contribution to the Resolution Fund, which was accrued in 2016 and whose value of 2017 was fully recognised in March 2017, and the new Polish banking tax introduced in February 2016.
Net interest income increased 12.8% from Euro 907.0 million registered in the first nine months of 2016, reaching Euro 1,023.2 million in the first nine months of 2017. This performance benefited from the favourable contribution of both, Portugal and international activity.
In the activity in Portugal, net interest income achieved Euro 591.8 million in the first nine months of 2017, showing an increase of 9.0% compared to the same period of the previous year, essentially reflecting the lower cost of funding determined by the positive impact of CoCos' repayment and by the continued reduction of interest rates of term deposits, despite the lower gains in the loans and the securities portfolios.
In the international activity, net interest income excluding exchange rate effects increased 19.2% in the first nine months of 2017, compared to the same period of the previous year, reflecting the positive performance of all subsidiaries, in particular Mozambique and Poland.
Net interest margin in the first nine months of 2017 stood at 2.17%, which compares with 1.88% in the same period of 2016. Excluding the impact from the cost of CoCos, net interest margin reached 2.19% in the first nine months of 2017 and 1.98% in the same period of 2016.
| AVERAGE BALANCES | Euro million | |||
|---|---|---|---|---|
| 30 Sep.17 | 30 Sep.16 | |||
| Amount | Yield % | Amount | Yield % | |
| Deposits in banks | 2,937 | 0.91 | 3,208 | 0.58 |
| Financial assets | 11,090 | 2.27 | 10,540 | 2.07 |
| Loans and advances to customers | 48,033 | 3.30 | 49,750 | 3.22 |
| Interest earning assets | 62,060 | 3.00 | 63,498 | 2.90 |
| Discontinued operations (1) | 0 | 977 | ||
| Non-interest earning assets | 10,571 | 9,962 | ||
| 72,631 | 74,437 | |||
| Amounts owed to credit institutions | 9,354 | 0.24 | 10,624 | 0.30 |
| Resources from customers | 50,363 | 0.66 | 49,090 | 0.73 |
| Debt issued | 3,188 | 2.88 | 4,301 | 3.24 |
| Subordinated debt | 941 | 6.87 | 1,654 | 7.31 |
| Interest bearing liabilities | 63,846 | 0.80 | 65,669 | 0.99 |
| Discontinued operations (1) | 0 | 914 | ||
| Non-interest bearing liabilities Shareholders' equity and non-controlling |
2,166 | 2,457 | ||
| interests | 6,619 | 5,397 | ||
| 72,631 | 74,437 | |||
| Net interest margin | 2.17 | 1.88 | ||
| Net interest margin (excl. cost of CoCos) | 2.19 | 1.98 |
Note: Interest related to hedge derivatives were allocated, in September 2017 and 2016, to the respective balance sheet item. (1) Includes the activity of the subsidiary in Angola (in 2016), as well as the respective consolidation adjustments.
Net commissions reached Euro 494.6 million in the first nine months of 2017, increasing 2.8% from Euro 481.1 million registered in the same period of the previous year, boosted by the performance of the international activity, in particular in Poland (+16.5% excluding exchange rate effects), with the performance of the activity in Portugal being affected by a higher one-off amount recorded in other banking commissions in the first quarter of 2016.
The increase of net commissions in the first nine months of 2017 reflects both the performance of banking commissions and the increase in market commissions which grew 2.1% and 5.8%, respectively, compared to the same period of 2016.
Net trading income amounted to Euro 115.0 million in the first nine months of 2017, compared to Euro 212.5 million accounted in the same period of 2016, which reflects the gain of Euro 91.1 million related to the purchase, by Visa Inc., of the shareholdings held by the Bank in Portugal and by Bank Millennium in Poland in Visa Europe in the second quarter of 2016.
Other net operating income was negative by Euro 97.0 million in the first nine months of 2017, in line with the negative Euro 96.3 million accounted in the same period of the previous year.
This item includes the costs associated with mandatory contributions as well as with the Resolution Fund and the Deposit Guarantee Fund in both Portugal and the international activity.
In the activity in Portugal, other net operating income in the first nine months of 2017 were Euro 6.7 million lower than in the same period of 2016, mainly due to the higher amount of mandatory contributions recorded in 2017.
Inversely, other net operating income in the international activity increased 12.2% (15.2%, excluding exchange rate effects) in the first nine months of 2017, compared to the same period of the previous year, despite the accounting in the first half of 2017 of the estimated annual contribution for the Resolution Fund in Poland, which was accrued in 2016, and the new tax on Polish banks, which was only introduced in February 2016.
Dividends from equity instruments, which comprises dividends received from investments in financial assets available for sale, and equity accounted earnings, jointly totalled Euro 58.5 million in the first nine months of 2017, compared to Euro 67.6 million reached in the same period of 2016, with this performance being conditioned by the positive impact of the gains from UNICRE related to the transaction of its shareholding in Visa Europe during the first half of 2016, despite the higher gains in the first nine months of 2017 from the shareholding in Banco Millennium Atlântico, the new entity that resulted from the merger of Banco Millennium Angola with Banco Privado Atlântico, from May 2016 onwards.
| 30 Sep. 17 | 30 Sep. 16 | Change 17/16 |
|
|---|---|---|---|
| Net commissions | 494.6 | 481.1 | 2.8% |
| Banking commissions | 400.0 | 391.7 | 2.1% |
| Cards and transfers | 115.3 | 107.8 | 6.9% |
| Credit and guarantees | 117.9 | 117.9 | -0.1% |
| Bancassurance | 71.4 | 66.4 | 7.6% |
| Current account related | 69.4 | 68.1 | 1.8% |
| Other commissions | 26.1 | 31.4 | -16.7% |
| Market related commissions | 94.6 | 89.5 | 5.8% |
| Securities | 63.2 | 61.2 | 3.3% |
| Asset management | 31.4 | 28.3 | 11.0% |
| Net trading income | 115.0 | 212.5 | -45.9% |
| Other net operating income | (97.0) | (96.3) | -0.7% |
| Dividends from equity instruments | 1.7 | 7.0 | -75.8% |
| Equity accounted earnings | 56.8 | 60.6 | -6.3% |
| Total other net income | 571.1 | 664.9 | -14.1% |
| Other net income / Net operating revenues | 35.8% | 42.3% |
Operating costs, excluding the effect of specific items (a Euro 23.7 million profit that includes gains from the Collective Labour Agreement negotiation and restructuring costs in the first nine months of 2017, and Euro 1.7 million from restructuring costs in the first nine months of 2016) totalled Euro 718.3 million in the first nine months of 2017, a slightly lower level (-0.3%) than the same period of the previous year, reflecting the cost savings obtained in the activity in Portugal despite the increase of costs in the international activity.
In the activity in Portugal, operating costs, excluding the above-mentioned specific items, showed a decrease of 3.3% compared to the first nine months of 2016, determined by the decline of staff costs and also by other administrative costs savings, amounting to Euro 447.5 million in the first nine months of 2017.
In the international activity, excluding the exchange rate effect, operating costs increased 5.3%, from the amount accounted in the first nine months of 2016, mainly influenced by the performance of the subsidiary in Mozambique and Poland.
Staff costs, excluding the impact of the above mentioned specific items, amounted to Euro 403.8 million in the first nine months of 2017, showing a 1.2% reduction from Euro 408.7 million registered in the same period of the previous year. This reduction was determined by the performance of the activity in Portugal, which benefited from the impact of the decrease of 148 employees from the end of September 2016, notwithstanding the decision of the Board of Directors of the Bank to end, in advance, the temporary adjustment that has been in force since July 2014, following the full reimbursement of CoCos with effect from 30 June 2017.
In the international activity, staff costs increased 6.1%, excluding exchange rate effects induced by the operations in Poland and in Mozambique.
Other administrative costs stood at Euro 274.8 million in the first nine months of 2017 (Euro 274.9 million in the same period of the previous year), supported by the positive impact of the rationalisation and cost containment measures that have been implemented in Portugal, and which translated into a reduction of Euro 5.4 million from the first nine months of 2016.
In the international activity, excluding exchange rate effects, there was a 5.4% increase in other administrative costs mainly influenced by the activity in Mozambique.
Depreciation costs totalled Euro 39.7 million in the first nine months of 2017, comparing to Euro 37.0 million posted in the same period of 2016, determined by the performance of the activity in Portugal, namely by the higher IT equipment, real estate properties and software depreciation costs. In the international activity, not considering the exchange rate effect, depreciation costs decreased 1.7%
compared to the amount registered in the first nine months of 2016.
| OPERATING COSTS | Euro million | ||
|---|---|---|---|
| 30 Sep. 17 | 30 Sep. 16 | Change 17/16 |
|
| Staff costs | 403.8 | 408.7 | -1.2% |
| Other administrative costs | 274.8 | 274.9 | -0.1% |
| Depreciation | 39.7 | 37.0 | 7.3% |
| Subtotal (1) | 718.3 | 720.6 | -0.3% |
| Specific items | |||
| Restructuring costs and Collect. Lab. Agt. revision | (23.7) | 1.7 | |
| Operating costs | 694.6 | 722.4 | -3.8% |
| Of which: | |||
| Portugal activity (1) | 447.5 | 462.9 | -3.3% |
| Foreign activity | 270.8 | 257.7 | 5.1% |
(1) Excludes the impact of specific items presented in the table.
Impairment for loan losses (net of recoveries) fell by 47.3% from Euro 870.2 million accounted in the first nine months of 2016, to stand at Euro 458.6 million in the first nine months of 2017, due to the favourable performance of the activity in Portugal, shown on the improvement in the Group's cost of risk from 221 basis points in the first nine months of 2016 to 120 basis points in the same period of 2017.
Other impairment and provisions totalled Euro 169.9 million in the first nine months of 2017, decreasing 30.0% from Euro 242.8 million recorded in the same period of the previous year, reflecting the lower level of provisions related to corporate restructuring funds and other debt instruments, despite the reinforcement that occurred in other assets.
Income tax (current and deferred) stood at Euro 63.1 million, in the first nine months of 2017, compared to Euro -68.2 million posted in the same period of 2016.
These taxes include current tax costs of Euro 82.8 million (Euro 76.5 million in the first nine months of 2016), net of deferred tax income of Euro 19.7 million (Euro 144.7 million in the first nine months of 2016).
Total assets stood at Euro 72,990 million as at 30 September 2017, comparing to Euro 73,042 million as at 30 September 2016. It is worth noting the reduction of loans to customers and the increase in financial assets available for sale.
Loans to customers (gross) amounted to Euro 50,754 million as at 30 September 2017, down from Euro 52,610 million recorded as at 30 September 2016, influenced by the decrease of the activity in Portugal, partially offset by the increase showed by the international activity.
In the activity in Portugal, loans to customers decreased 5.8% from 30 September 2016, amounting to Euro 37,947 million as at 30 September 2017, as a result of the measures to reduce NPEs, since the continued development of initiatives to support financing needs of companies and individuals reflected on the significant increases in loans to individuals and to companies production, favoured the stabilization of the performing loans portfolio in the first nine months of 2017.
The performance of loans to companies was also accompanied by a structural change in order to reduce the weight of construction and real estate activities and non-financial holding companies against exporting industries.
In the international activity, loans to customers increased 4.0% (2.0% excluding exchange rate effects) from 30 September 2016, mainly supported by the contribution of the operations in Poland and Mozambique, namely the growth of loans to companies.
The structure of the loans to customers' portfolio showed identical and stable levels of diversification between the end of September 2016 and September 2017, with loans to companies representing 46% of total loans to customers as at 30 September 2017.
Credit quality, determined by loans overdue by more than 90 days as a percentage of total loans, showed a favourable performance, dropping from 7.2% as at 30 September 2016 to 6.1% as at 30 September 2017, while the corresponding coverage ratio for loans overdue by more than 90 days improved from 100.9% as at 30 September 2016 to 108.9% in the same date of 2017.
The credit at risk ratio reached 9.7% as at 30 September 2017, which compares favourably with 11.4% on the same date of the previous year. As at 30 September 2017, the restructured loans ratio stood at 8.9% of total loans, from 10.1% registered as at 30 September 2016, and the ratio of restructured loans not included in the credit at risk stood at 4.9% of total loans compared to 6.0% at the same date of 2016.
| LOANS TO CUSTOMERS (GROSS) | Euro million | ||
|---|---|---|---|
| 30 Sep. 17 | 30 Sep. 16 | Change 17/16 |
|
| Individuals | 27,174 | 28,346 | -4.1% |
| Mortgage | 23,406 | 24,273 | -3.6% |
| Consumer and others | 3,768 | 4,074 | -7.5% |
| Companies | 23,580 | 24,263 | -2.8% |
| Services | 8,831 | 9,474 | -6.8% |
| Commerce | 3,287 | 3,136 | 4.8% |
| Construction | 2,624 | 3,063 | -14.3% |
| Other | 8,838 | 8,590 | 2.9% |
| Total | 50,754 | 52,610 | -3.5% |
| Of which: | |||
| Portugal activity | 37,947 | 40,291 | -5.8% |
| Foreign activity | 12,807 | 12,319 | 4.0% |
| Euro million | ||||
|---|---|---|---|---|
| Overdue loans by more than 90 days |
Impairment for loan losses |
Overdue loans by more than 90 days /Total loans |
Coverage ratio (Impairment/ Overdue >90 days) |
|
| Individuals | 628 | 669 | 2.3% | 106.5% |
| Mortgage | 246 | 314 | 1.1% | 127.6% |
| Consumer and others | 382 | 355 | 10.1% | 92.9% |
| Companies | 2,481 | 2,718 | 10.5% | 109.6% |
| Services | 979 | 1,396 | 11.1% | 142.6% |
| Commerce | 218 | 194 | 6.6% | 89.1% |
| Construction | 706 | 622 | 26.9% | 88.1% |
| Other | 577 | 506 | 6.5% | 87.6% |
| Total | 3,109 | 3,387 | 6.1% | 108.9% |
Total customer funds were redefined, with reference to 30 September 2017 and, consequently, on a comparable basis to the end of September 2016, reflecting a broader concept in order to include amounts held by customers as part of existing agreements for its placement and management.
Total customer funds, increased 5.2% from Euro 66,781 million registered as at 30 September 2016, amounting to Euro 70,231 million as at 30 September 2017. This increase was supported by the performance of both, Portugal and the international activity.
In the activity in Portugal, total customers funds, reached Euro 51,493 million as at 30 September 2017, showing an increase of 4.5% comparing to Euro 49,294 million at the same date of the previous year, benefiting from both the growth in off-balance sheet customer funds (+ Euro 1,321 million), and on balance sheet customer funds, highlighting the performance of resources from customers, which increased by Euro 947 million from 30 September 2016.
Total customer funds in the international activity registered an increase of 7.2% from Euro 17,487 million as at 30 September 2016, reaching Euro 18,738 million as at 30 September 2017, mainly influenced by the performance of the subsidiary in Poland, particularly in customer deposits. Not considering the exchange rate effects, total customer funds of the international activity grew 5.8%.
As at 30 September 2017, balance sheet total customer funds represented 74% of total customer funds, with resources from customers representing 72% of total customer funds.
According to the Bank of Portugal's Instruction no. 16/2004, the loan to deposits ratio improved from 101% as at 30 September 2016 to 94% as at 30 September 2017. The same ratio, considering the total onbalance sheet customers' funds, stood at 91% (97% as at 30 September 2016).
| TOTAL CUSTOMER FUNDS | Euro million | ||
|---|---|---|---|
| 30 Sep. 17 | 30 Sep. 16 | Change 17/16 |
|
| Balance sheet total customer funds | 52,265 | 50,576 | 3.3% |
| Resources from customers | 50,690 | 48,937 | 3.6% |
| Debt securities | 1,575 | 1,638 | -3.9% |
| Off-balance sheet customer funds | 17,966 | 16,206 | 10.9% |
| Assets under management and investment funds | 8,354 | 7,505 | 11.3% |
| Capitalisation products | 9,612 | 8,701 | 10.5% |
| Total | 70,231 | 66,781 | 5.2% |
The securities portfolio reached Euro 13,487 million as at 30 September 2017, compared to Euro 12,352 million posted at the same date of the previous year, representing 18.5% of total assets as at 30 September 2017, above the 16.9% observed as at 30 September 2016, mainly reflecting the performance of Portugal's securities portfolio.
Millennium bcp conducts a wide range of banking activities and financial services in Portugal and abroad, with special focus on Retail Banking, Companies Banking and Private Banking business.
Following the commitment undertaken with the Directorate-General of the European Commission (DG Comp), an additional segment has been considered, the Non-Core Business Portfolio, in accordance with the criteria agreed therein.
| Business segment | Perimeter |
|---|---|
| Retail Banking | Retail Network of Millennium bcp (Portugal) |
| Retail Recovery Division | |
| Banco ActivoBank | |
| Companies, Corporate & Investment Banking | Companies Network of Millennium bcp (Portugal) |
| Specialised Recovery Division | |
| Real Estate Business Division | |
| Interfundos | |
| Corporate and Large Corporates Networks of Millennium bcp (Portugal) | |
| Specialised Monitoring Division | |
| Investment Banking | |
| Treasury and Markets International Division | |
| Private Banking | Private Banking Network of Millennium bcp (Portugal) |
| Millennium Banque Privée (Switzerland) (*) | |
| Millennium bcp Bank & Trust (Cayman Islands) (*) | |
| Non Core Business Portfolio | In accordance with the criteria agreed with DG Comp (**) |
| Foreign Business | Bank Millennium (Poland) |
| BIM - Banco Internacional de Moçambique | |
| Banco Millennium Atlântico (***) | |
| Millennium Banque Privée (Switzerland) (*) | |
| Millennium bcp Bank & Trust (Cayman Islands) (*) | |
| Other | Includes all other business and unallocated values in particular centralized management of financial investments, corporate activities and insurance activity. |
(*) For the purposes o f business segments, M illennium Banque Privée (Switzerland) and M illennium bcp Bank & Trust (Cayman Islands) are included in the Private Banking segment. In terms of geographic segments, both operations are considered Foreign Business.
(**) Loans Portfolios in Portugal to discontinue gradually under the commitments undertaken with the DG Comp.
Note: In December 2015, M illennium bcp Gestão de Activos is considered discontinued operation . (***) In the context o f the Banco M illennium in Angola merger process with Banco Privado Atlântico, Banco M illennium in Angola was considered as a discontinued operation in M arch 2016. After the completion of the merger, in M ay 2016, the new merged entity, Banco M illennium Atlântico, started being consolidated using the equity method.
The figures reported for each business segment resulted from aggregating the subsidiaries and business units integrated in each segment, also reflecting the impact from capital allocation and balancing process of each entity in the balance sheet and income statement, based on average figures. The balance sheet headings for each subsidiary and business unit were re-calculated, taking into account the replacement of the equity book values by the amounts attributed through the allocation process, based on the regulatory solvency criteria.
Thus, as the process of capital allocation complies with the regulatory criteria of solvency in force, the risk weighted assets, and consequently the capital allocated to the business segments, are determined in accordance with the Basel III framework, pursuant to the CRD IV/CRR. The capital allocated to each segment resulted from the application of 10% to the risks managed by each segment, reflecting the application of the Basel III methodologies. Each operation is balanced through internal transfers of funds, hence with no impact on consolidated accounts.
The net income of each segment includes the non-controlling interests, when applicable. Therefore, the values of net income presented incorporate the individual net income of the business units, regardless of the percentage stake held by the Group, and the impacts of the transfers of funds described above.
Operating costs related to the business segments do not include gains from the Collective Labour Agreement negotiation and restructuring costs in the first nine months of 2017, nor the restructuring costs recorded in the same period of 2016.
Total customer funds were redefined, with reference to 30 September 2017 and, consequently, on a comparable basis to the end of September 2016, reflecting a broader concept in order to include amounts held by customers as part of existing agreements for its placement and management.
The information presented below was based on the financial statements prepared in accordance with the IFRS and organisation of the Group's business areas as at 30 September 2017.
| Million euros | |||
|---|---|---|---|
| Retail Banking | |||
| 30 Set. 17 | 30 Set. 16 | Chg. 17/16 | |
| Profit and loss account | |||
| Net interest income | 304.4 | 287.9 | 5.8% |
| Other net income | 290.7 | 272.7 | 6.6% |
| 595.1 | 560.6 | 6.1% | |
| Operating costs | 353.6 | 363.1 | -2.6% |
| Impairment | 51.2 | 59.7 | -14.2% |
| Net (loss) / income before income tax | 190.3 | 137.8 | 38.0% |
| Income taxes | 55.9 | 40.6 | 37.4% |
| Net (loss) / income after income tax | 134.4 | 97.2 | 38.3% |
| Summary of indicators | |||
| Allocated capital | 506 | 523 | -3.2% |
| Return on allocated capital | 36.0% | 24.8% | |
| Risk weighted assets | 4,795 | 4,851 | -1.2% |
| Cost to income ratio | 59.1% | 64.8% | |
| Loans to Customers | 16,769 | 17,302 | -3.1% |
| Total Customer funds | 35,253 | 34,054 | 3.5% |
N o tes :
Customer funds and Loans to customers (net of recoveries) figures are on average monthly balance.
Net (loss)/income after income tax from continuing operations totalled 134.4 million Euros in the first nine months of 2017 (64.7 million Euros in the same period of 2016), mainly due to the increase in total operating income and to the reduction in operating costs:
Operating costs went 2.6% down from 2016, reflecting the continuous implementation of the initiatives that were set out in the Strategic Plan.
Impairment charges amounted to 51.2 million Euros in the first nine months of 2017, comparing favourably to 59.7 million Euros recorded in the same period of 2016.
| Million euros | |||
|---|---|---|---|
| Companies, Corporate & Investment Banking | |||
| 30 Set. 17 | 30 Set. 16 | Chg. 17/16 | |
| Profit and loss account | |||
| Net interest income | 195.5 | 209.1 | -6.5% |
| Other net income | 124.0 | 115.3 | 7.6% |
| 319.5 | 324.4 | -1.5% | |
| Operating costs | 68.2 | 72.5 | -5.9% |
| Impairment | 186.8 | 411.6 | -54.6% |
| Net (loss) / income before income tax | 64.5 | (159.7) | -140.4% |
| Impostos | 18.0 | (47.2) | -138.1% |
| Net (loss) / income after income tax | 46.5 | (112.5) | -141.4% |
| Summary of indicators | |||
| Allocated capital | 709 | 759 | -6.6% |
| Return on allocated capital | 8.8% | -19.8% | |
| Risk weighted assets | 7,063 | 7,226 | -2.2% |
| Cost to income ratio | 21.3% | 22.3% | |
| Loans to Customers | 10,609 | 10,858 | -2.3% |
| Total Customer funds | 10,776 | 10,094 | 6.8% |
N o tes :
Customer funds and Loans to customers (net of recoveries) figures are on average monthly balance.
Net (loss)/income after income tax from continuing operations totalled 46.5 million Euros in the first nine months of 2017, which compares to a loss of 112.5 million Euros in the same period of 2016, caused mainly by the decrease in impairment charges:
Impairment stood at 186.8 million Euros in the first nine months of 2017, 54.6% down from 411.6 million Euros recorded at the end of September 2016, translating the trend towards a normal cost of risk in the activity in Portugal, after the recognition of additional impairment in 2016, allowing the reinforcement of coverage levels.
As at September 2017, loans to customers totalled 10,609 million Euros (10,858 million Euros in 2016), due to the still slight recovery of the Portuguese economy, in spite of the continued focus on offering solutions to support the companies' businesses.
| Million euros | |||
|---|---|---|---|
| Private Banking | |||
| 30 Set. 17 | 30 Set. 16 | Chg. 17/16 | |
| Profit and loss account | |||
| Net interest income | 11.7 | 11.2 | 5.1% |
| Other net income | 30.7 | 22.8 | 34.3% |
| 42.4 | 34.0 | 24.7% | |
| Operating costs | 11.6 | 11.2 | 2.9% |
| Impairment | 1.9 | 1.6 | 19.8% |
| Net (loss) / income before income tax | 28.9 | 21.2 | 36.6% |
| Income taxes | 8.3 | 6.3 | 33.4% |
| Net (loss) / income after income tax | 20.6 | 14.9 | 38.0% |
| Summary of indicators | |||
| Allocated capital | 12 | 10 | 19.9% |
| Return on allocated capital | 219.9% | 197.4% | |
| Risk weighted assets | 135 | 95 | 42.5% |
| Cost to income ratio | 28.9% | 33.1% | |
| Loans to Customers | 220 | 177 | 24.6% |
| Total Customer funds | 7,046 | 6,315 | 11.6% |
N o tes :
Customer funds and Loans to customers (net of recoveries) figures are on average monthly balance.
From a geographic segmentation standpoint, net (loss)/income after income tax from continuing operations in the Private Banking business totalled 20.6 million Euros in the first nine months of 2017 comparing favourably to 14.9 million Euros recorded in the same period of 2016), mainly due to increase in the total operating income, slightly dimmed by the increase in operating costs and impairment:
| Million euros | |||
|---|---|---|---|
| Foreign Business | |||
| 30 Set. 17 | 30 Set. 16 | Chg. 17/16 | |
| Profit and loss account | |||
| Net interest income | 420.6 | 351.3 | 19.7% |
| Other net income (*) | 184.4 | 223.2 | -17.4% |
| of which: equity accounted earnings from BMA (*) | 24.4 | 10.0 | 142.8% |
| 605.0 | 574.5 | 5.3% | |
| Operating costs | 270.8 | 257.7 | 5.1% |
| Impairment | 70.1 | 62.0 | 12.8% |
| Net (loss) / income before income tax | 264.1 | 254.8 | 3.7% |
| Income taxes | 61.9 | 66.2 | -6.4% |
| Net (loss) / income after income tax from continuing operations | 202.2 | 188.6 | 7.2% |
| Net (loss) / income from discontinued operations (**) | - - |
36.8 | -100.0% |
| Net (loss) / income after income tax | 202.2 | 225.4 | -10.3% |
| Summary of indicators | |||
| Allocated capital | 1,283 | 1,218 | 5.3% |
| Return on allocated capital | 21.1% | 24.7% | |
| Risk weighted assets | 10,767 | 10,178 | 5.8% |
| Cost to income ratio | 44.8% | 44.8% | |
| Loans to Customers | 12,353 | 11,923 | 3.6% |
| Total Customer funds | 18,738 | 17,487 | 7.2% |
(*) Accounted earnings related to the investment in Banco M illennium Atlântico, the new merged entity resulted from the merger process of Banco M illennium Angola with Banco Privado Atlântico in M ay 2016. (**) Corresponds to total net income from Banco M illennium Angola (from the first four years of 2016).
Net income of Foreign Business, according to the geographic segments, stood at 202.2 million Euros in the first nine months of 2017 (225.3 million Euros achieved in the same period of 2016). This performance includes, in the first nine months of 2016, 52.4 million Euros in gains, after taxes, with the sale of Visa Europe by Bank Millennium in Poland; it also takes into consideration, under discontinued operations, the total net income of Banco Millennium Angola in the first four months of 2016 (36.8 million Euros) as well as the equity accounted earnings from Millennium bcp's shareholding in Banco Millennium Atlântico amounting to 24.4 million Euros in the first nine months of 2017 (10.0 million Euros in the period of May to September 2016):
The figures for Foreign Business show the following performance:
Operating costs amounted to 270.8 million Euros in the first nine months of 2017, 5.1% up from the same period of 2016. This evolution was mainly due to the contribution of Bank Millennium in Poland. Excluding foreign exchange effects, operating costs would have risen 5.3%, mainly influenced by the operations in Mozambique and Poland.
Impairment totalled 70.1 million Euros in the first nine months of 2017, standing above the 62.0 million Euros recorded in the same period in 2016; excluding foreign exchange effects it would have risen 13.5%, mainly caused by the performance of Mozambique and Poland.
During the first nine months of 2017 the consolidated wholesale funding needs of the Bank decreased by approximately Euro 1.8 billion, mainly due to the share capital increase of the Bank and to the reduction of the commercial gap in Portugal, the effects of which were partially offset by the increase of the securities debt portfolio.
In this period, the Bank fully repaid the CoCos (Euro 0.7 billion), slightly increased the use of REPOS in Portugal (by Euro 0.1 billion, to a balance of Euro 2.4 billion) and reduced the collateralised funding from the Eurosystem (by Euro 0.9 billion, to Euro 4.0 billion, which represents the balance of the targeted long term refinancing operations (TLTRO)).
As far as medium-long term debt is concerned, in addition to the amortisation of the remaining Medium Term Notes (MTN) in the amount of Euro 0.3 billion, the Bank also repaid in June the remaining issue of covered bonds placed in the market, and refinancing through a similar issue of Euro 1.0 billion, with a five year maturity. This issue marked the return of the Bank to the medium-long term debt market, three years after the placement of an MTN amortised in last February. The Bank also booked a new loan of Euro 0.3 billion from the European Investment Bank (EIB), which total balance grew to Euro 1.5 billion.
In net terms, the funding with the Eurosystem decreased by Euro 1.0 billion from December 2016, to Euro 3.4 billion. The significant decrease of the exposure to the Eurosystem allowed a reinforcement of the liquidity buffer with the ECB by Euro 1.5 billion compared with December 2016, to Euro 9.1 billion. On a pro forma basis the collateral currently allocated in excess to the covered bond program (which, under the form of an issue to be retained at the portfolio of ECB eligible assets, would allow its increase by an amount of at least Euro 1.0 billion after haircuts, assuming the use of the valuation criteria of the ECB concerning the other retained issues), were added to the buffer, as well as a portfolio of Treasury Bills amounting to USD 0.6 billion, its value would increase to Euro 10.6 billion, an increase of Euro 1.5 billion compared with December 2016.
CRD IV/CRR(1) establishes Pillar 1 capital requirements of 4.5%, 6% and 8% for CET1, Tier 1 and Total Capital, respectively. However, under SREP(2), the European Central Bank notified BCP about the need to comply with phased-in capital ratios, during 2017, of 8.15% (CET1), 9.65% (Tier 1) and 11.65% (Total), including 2.4% of additional Pillar 2 requirements and 1.25% of a capital conservation buffer.
The estimated phased-in and fully-implemented CET1 ratios as at 30 September 2017 stood at 13.2% and 11.7%, respectively, reflecting an increase of 102 and 222 basis points, compared to the 12.2% and 9.5% ratios recorded in the same period of 2016.
This reinforcement of the capital levels was mainly determined by the CET1 improvement, which included, on one hand, the share capital increases performed in the fourth quarter of 2016 and in the first quarter of 2017, even though these were partially used for the full reimbursement of the remaining CoCo bonds, and, on the other hand, the positive net income and the favourable contributions of the fair value and FX reserves during this period, notwithstanding a higher level of deductions related to deferred tax assets and to the shortfall of impairment to expected loss, as well as the phase-in effects that also affected the CET1 computed on this basis.
| 30 Sep. 17 | 30 Sep. 16 | 30 Sep. 17 | 30 Sep. 16 | |
|---|---|---|---|---|
| PHASED-IN | FULLY IMPLEMENTED | |||
| Own funds | ||||
| Common equity tier 1 (CET1) | 5,062 | 4,669 | 4,423 | 3,570 |
| Tier 1 | 5,062 | 4,669 | 4,491 | 3,583 |
| Total Capital | 5,448 | 5,052 | 4,813 | 3,914 |
| Risk weighted assets | 38,306 | 38,287 | 37,910 | 37,769 |
| Solvency ratios | ||||
| CET1 | 13.2% | 12.2% | 11.7% | 9.5% |
| Tier 1 | 13.2% | 12.2% | 11.8% | 9.5% |
| Total capital | 14.2% | 13.2% | 12.7% | 10.4% |
Notes:
The capital ratios of September 2017 are estimated and include the positive accumulated net income.
(1) Capital Requirements Directive IV / Capital Requirements Regulation (Directive 2013/36/EU and Regulation (EU) no. 575/2013).
(2) Supervisory Review and Evaluation Process.
Report and Accounts for the 3rd quarter of 2017
BCP's vision is to become the reference Bank in Customer service, based on innovative distribution platforms, where a relevant part of the resources will be allocated to Retail and Companies, in markets of high potential with excellent efficiency levels, translated into a commitment to an efficiency ratio placed at reference levels for the banking industry and with tighter discipline in capital, liquidity and cost management.
The Bank's mission is to create value for Customers through high quality banking and financial products and services, complying with rigorous and high standards of conduct and corporate responsibility, growing profitably and sustainably, so as to provide an attractive return for Shareholders, in a manner that supports and strengthens its strategic autonomy and corporate identity.
On 12 January 2017, the Bank confirmed its financial and operational business goals for 2018 pursuant to the recent share capital increase, as follows:
The figures provided above are goals not forecasts. There is no guarantee that such goals can or will be achieved, as such they cannot be construed as forecasts or earnings' estimates.
In the recent past, Millennium bcp overcame challenging and demanding times. Its Employees worked hard to turn the bank into a reference in commercial banking in Portugal.
The country went through a Financial Assistance Programme, showing a weakened economy and a financial system with its credibility damaged. Customers became increasingly demanding.
The contraction in banking activity was enormous, interest rates stood at historically low levels, banking supervision was transferred to the European Central Bank and the Supervisor became more demanding and distant. Our competitors are currently adjusting to this environment and the Employees of Millennium bcp worked daily to transform the bank in order to ensure its sustainability.
The Bank adapted to the changes in the world and responded with innovation and the capacity to adapt to a new reality, bearing in mind at all times the way it wishes to exercise banking.
Banking with values in the daily relations with Customer, Shareholders, Employees and remaining Stakeholders.
| Agile | Modern | Personal | Simple | Sustainable |
|---|---|---|---|---|
These are the principles defining how each Employee of Millennium bcp must act in their relations with other Employees, Customers, Shareholders, remaining Stakeholders and with the Community and the Surrounding Environment at large.
In September 2012, Millennium bcp presented a new 3-stage Strategic Plan, to be implemented by 2017 ("Strategic Plan"). The Strategic Plan was also updated in September 2013, following the approval of BCP's Restructuring Plan by the European Commission and in June 2013, after a share capital increase operation, its targets were also updated.
The three stages of the Strategic Plan are the following:
Stage 1 (2012 to 2013): Define the foundations for sustainable future development
During the first stage of the Strategic Plan, the key priority consisted in reinforcing the balance sheet by reducing the dependence on funding from the wholesale market and increasing regulatory capital ratios.
Stage 2 (2014 to 2015): Creation of conditions for growth and profitability
During the second stage of the Strategic Plan, the focus was on the recovery of profitability of the Bank's domestic operations, combined with the continued development of the international subsidiaries in Poland, Mozambique and in Angola. The improvement in domestic profitability was expected to be mainly driven by: i) the increase in net interest income by reducing the cost of deposits and changing the credit mix, with a focus on products with better margins; ii) the continued focus on the optimisation of operating costs by reducing the number of employees and eliminating administrative overlap; and iii) the adoption of rigorous credit risk limits thus reducing the need for provisions.
Stage 3 (2016 to 2017): Sustained growth
During the third phase, management is focused on achieving sustained growth of net income, benefiting from the successful implementation of the first two phases of the Strategic Plan, a better balance between the contributions of the domestic and international operations towards profitability and the conclusion of the winding down/divestment process of the Bank's non-core portfolio.
The main actions required to ensure a successful completion of the Strategic Plan are:
Consolidation of the Bank's leadership position in the private sector retail market and the SME/companies banking market: The Bank adopted a new business model based on a new Customer base segmentation, the review made to the products and services that it offers and on the adjustments to its backoffice units and branch network. This business model is being put into place with a view to expanding the Bank's territorial coverage, increasing the Customer base and sales capacity and simultaneously decreasing operating costs. For retail clients, the strategy is to re-balance the portfolio mix of less profitable mortgage loans with more profitable loans. In terms of SME/companies, the focus will be on exporting companies. The Bank intends to ensure that profits are sustainable in the medium to long-term, seeking to be the best in class in terms of operational efficiency, on account of both income generation and cost management, simultaneously keeping a high control of credit risk while preserving its strategic position in the Portuguese banking market for retail and SMEs.
International position: The Bank's international franchise is focused on the growing markets of Poland and Mozambique. In Poland, the Bank intends to continue to pursue customer acquisition, based on the existing branch network, on its comprehensive range of products and services and on the strength of the Bank's brand. Additionally, the Bank intends to continue to leverage its main franchise in the country by developing the branch network and offering new and innovative products and services to its customers.
For the 2016-2018 triennial, the Bank put in place a set of strategic priorities for the operation in Portugal aiming to build a sustainable Bank adapted to the new needs of the market and its Customers. In 2017, the Bank accelerated the implementation of strategic initiatives, focusing on innovation and customer experience.
The strategic agenda consists of 6 work fronts devoted to sales and 3 work fronts devoted to the organisation as a whole. Over 100 employees in total are involved in the execution of the various initiatives identified.
In relation to Millennium bcp's business model, 6 work fronts were adopted:
In order to transform the Bank into a healthier organisation and with greater involvement with the shareholders, there are three organisation-wide work fronts under way:
The new initiatives undertaken within the scope of the 2016-2018 Strategic Agenda can already be seen. Over 46% of Mass Market Branches and 67% of Prestige Branches had been redone by 30 September 2016. 35 branches have a new layout - the branch of the future, providing the perfect digital experience to customers and including the new Millennium Transaction Machines (MTM) that enable cashier transactions 24/7. In addition, the digital platforms have been improved and new tools were added, including online loan requests in the Millennium App, opening accounts online and a new app for company clients, helping them manage projects funded by EU grants. On the last Data E survey, Millennium bcp was considered the main Bank for Companies with funding from Portugal 2020.
On 12 January 2017, the Bank confirmed its financial and operational business goals1 for 2018 within the scope of the share capital increase operation concluded in February 2017, as follows:
| Goal | 9M2017 | 2018 |
|---|---|---|
| CT1 / CET12 | Phased-in 13.2% | ≈ 11% |
| Fully implemented: 11.7% | ||
| Loans -to-Deposits | 93% | <100% |
| Cost–Income | Stated: 43.6% | <43% |
| Excluding extraordinary items: 45.1% | ||
| Cost-Core Income 3 | Stated: 45.8% | <50% |
| Excluding extraordinary items: 47.3% | ||
| Cost of Risk | 120 bp | <75 bp |
| 4 Ro E |
4.2% | ≈ 10% |
On 30 September 2017, the regulatory capital ratio Common Equity Tier I (CET1), in accordance with the phased-in and fully implemented criteria stood at 13.2% and 11.7%, respectively, both above the target for 2018 of around 11%. The loan-to-deposits liquidity ratio stood at 93%, complying with the objective defined for 2018 (<100%).
Cost-to-Core income stated (45.8%) and without extraordinary items (47.3%) are aligned with the target for 2018 (<50%). The Cost-to-Income ratio stated stood at 43.6%, during the first nine months of 2017, below the 43% defined as the maximum threshold for 2018, however, if we exclude the extraordinary items, this ratio is still slightly above the target (45.1%).
The cost of risk is still above the objective set forth for 2018 (120 bp vs target of <75 bp), although it showed a favourable performance versus the same period of 2016 due to the relevant decrease in impairment and provisions.
The profitability of the average equity balance stood at 4.2%, below the objective of approximately 10% defined for 2018, but also evidencing a positive performance versus the same period of 2016.
1 The figures provided above are goals not forecasts. There is no guarantee that such goals can or will be achieved, as such they cannot be construed as forecasts or earnings' estimates.
2 Amounts estimated including the results of the 1st 9M 2017.
3 Core income = net interest income + fees.
4 Based on fully implemented CET1.
| Consolidated | Activity in Portugal | International activity | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Sep 17 | Sep 16 | Change | Sep 17 | Sep 16 | Change | Sep 17 | Sep 16 | Change | |
| Income statement | |||||||||
| Net interest income | 1,023.2 | 907.0 | 12.8% | 591.8 | 543.0 | 9.0% | 431.4 | 364.0 | 18.5% |
| Dividends from equity instruments | 1.7 | 7.0 | $-75.8%$ | 1.1 | 6.5 | $-83.3%$ | 0.6 | 0.5 | 29.4% |
| Net fees and commission income | 494.6 | 481.1 | 2.8% | 337.7 | 343.2 | $-1.6%$ | 157.0 | 138.0 | 13.8% |
| Other operating income | (97.0) | (96.3) | $-0.7%$ | (53.7) | (47.0) | $-14.3%$ | (43.3) | (49.4) | 12.2% |
| Net trading income | 115.0 | 212.5 | $-45.9%$ | 69.3 | 88.4 | $-21.6%$ | 45.7 | 124.1 | $-63.2%$ |
| Equity accounted earnings | 56.8 | 60.6 | $-6.3%$ | 32.4 | 50.6 | $-35.9%$ | 24.4 | 10.0 | 142.8% |
| Net operating revenues | 1,594.3 | 1,571.9 | 1.4% | 978.6 | 984.6 | $-0.6%$ | 615.7 | 587.2 | 4.8% |
| Staff costs | 380.1 | 410.4 | $-7.4%$ | 235.2 | 273.9 | $-14.1%$ | 144.9 | 136.5 | 6.2% |
| Other administrative costs | 274.8 | 274.9 | $-0.1%$ | 164.1 | 169.5 | $-3.2%$ | 110.7 | 105.4 | 5.0% |
| Depreciation | 39.7 | 37.0 | 7.3% | 24.5 | 21.2 | 15.4% | 15.2 | 15.8 | $-3.5%$ |
| Operating costs | 694.6 | 722.4 | $-3.8%$ | 423.8 | 464.7 | $-8.8%$ | 270.8 | 257.7 | 5.1% |
| Recurring operating costs (1) | 718.3 | 720.6 | $-0.3%$ | 447.5 | 462.9 | $-3.3%$ | 270.8 | 257.7 | 5.1% |
| Operating profit before impairment and provisions | 899.7 | 849.5 | 5.9% | 554.8 | 520.0 | 6.7% | 344.9 | 329.6 | 4.7% |
| Loans impairment (net of recoveries) | 458.6 | 870.2 | $-47.3%$ | 390.0 | 816.7 | $-52.3%$ | 68.6 | 53.4 | 28.4% |
| Other impairment and provisions | 169.9 | 242.8 | $-30.0%$ | 168.5 | 234.2 | $-28.1%$ | 1.4 | 8.6 | $-83.4%$ |
| Profit before income tax | 271.2 | (263.5) | >200% | (3.6) | (531.0) | 99.3% | 274.8 | 267.5 | 2.8% |
| Income tax | 63.1 | (68.2) | 192.5% | (0.9) | (136.4) | 99.3% | 64.0 | 68.2 | $-6.1%$ |
| Income after income tax from continuing operations | 208.1 | (195.3) | >200% | (2.7) | (394.6) | 99.3% | 210.8 | 199.3 | 5.8% |
| Income arising from discontinued operations | 1.3 | 45.2 | $-97.2%$ | 36.8 | $-100.0%$ | ||||
| Non-controlling interests | 76.0 | 101.0 | $-24.7%$ | (3.5) | (0.3) | >200% | 79.5 | 101.3 | $-21.5%$ |
| Net income | 133.3 | (251.1) | 153.1% | 0.8 | (394.3) | 100.2% | 131.3 | 134.8 | $-2.6%$ |
| Balance sheet and activity indicators | |||||||||
| Total assets | 72,990 | 73,042 | $-0.1%$ | 53,436 | 54,410 | $-1.8%$ | 19,554 | 18,632 | 4.9% |
| Total customer funds | 70,231 | 66,781 | 5.2% | 51,493 | 49,294 | 4.5% | 18,738 | 17,487 | 7.2% |
| Balance sheet total customer funds | 52,265 | 50,576 | 3.3% | 36,750 | 35,873 | 2.4% | 15,515 | 14,703 | 5.5% |
| Resources from customers | 50,690 | 48,937 | 3.6% | 35,281 | 34,334 | 2.8% | 15,410 | 14,603 | 5.5% |
| Debt securities | 1,575 | 1,638 | $-3.9%$ | 1,469 | 1,539 | $-4.5%$ | 105 | 100 | 5.6% |
| Off-balance sheet customer funds | 17,966 | 16,206 | 10.9% | 14,743 | 13,422 | 9.8% | 3,223 | 2,784 | 15.8% |
| Assets under management and investment funds | 8,354 | 7,505 | 11.3% | 5,635 | 5,168 | 9.0% | 2,719 | 2,337 | 16.4% |
| Capitalisation products | 9,612 | 8,701 | 10.5% | 9,108 | 8,254 | 10.3% | 504 | 447 | 12.9% |
| Loans to customers (gross) | 50,754 | 52,610 | $-3.5%$ | 37,947 | 40,291 | $-5.8%$ | 12,807 | 12,319 | 4.0% |
| Individuals | 27,174 | 28,346 | $-4.1%$ | 19,217 | 20,375 | $-5.7%$ | 7,957 | 7,971 | 0.2% |
| Mortgage | 23,406 | 24,273 | $-3.6%$ | 17,203 | 17,902 | $-3.9%$ | 6,202 | 6,371 | $-2.6%$ |
| Consumer and others | 3,768 | 4,074 | $-7.5%$ | 2,013 | 2,473 | $-18.6%$ | 1,755 | 1,600 | 9.7% |
| Companies | 23,580 | 24,263 | $-2.8%$ | 18,730 | 19,916 | $-6.0%$ | 4,850 | 4,347 | 11.6% |
| Services | 8,831 | 9,474 | $-6.8%$ | 7,844 | 8,641 | $-9.2%$ | 987 | 833 | 18.5% |
| Commerce | 3,287 | 3,136 | 4.8% | 2,231 | 2,164 | 3.1% | 1,056 | 973 | 8.6% |
| Construction | 2,624 | 3,063 | $-14.3%$ | 2,294 | 2,756 | $-16.8%$ | 330 | 307 | 7.6% |
| Other | 8,838 | 8,590 | 2.9% | 6,361 | 6,356 | 0.1% | 2,476 | 2,235 | 10.8% |
| Credit quality | |||||||||
| Total overdue loans | 3,216 | 3,914 | $-17.8%$ | 2,868 | 3,615 | $-20.7%$ | 349 | 299 | 16.6% |
| Overdue loans by more than 90 days | 3,109 | 3,770 | $-17.5%$ | 2,807 | 3,517 | $-20.2%$ | 302 | 253 | 19.3% |
| Overdue loans by more than 90 days /Total loans | 6.1% | 7.2% | 7.4% | 8.7% | 2.4% | 2.1% | |||
| Total impairment (balance sheet) | 3,387 | 3,804 | $-11.0%$ | 2,932 | 3,408 | $-14.0%$ | 455 | 396 | 14.9% |
| Total impairment (balance sheet) /Total loans | 6.7% | 7.2% | 7.7% | 8.5% | 3.6% | 3.2% | |||
| Total impairment (balance sheet) /Overdue loans by more than 90 days | 108.9% | 100.9% | 104.5% | 96.9% | 150.8% | 156.5% | |||
| Cost of risk (net of recoveries, in b.p.) | 120 | 221 | 137 | 270 | 71 | 58 | |||
| Restructured loans / Total loans (2) | 8.9% | 10.1% | |||||||
| Restructured loans not included in the credit at risk / Total loans (2) | 4.9% | 6.0% | |||||||
| Cost-to-income (1) | 45.1% | 45.8% | 45.7% | 47.0% | 44.0% | 43.9% |
| (Model applicable to companies subject to the Accounting Plan for Banks/Leasing/Factoring companies) | INDIVIDUAL/CONSOLIDATED QUARTERLY INFORMATION (Not Audited) | |||||
|---|---|---|---|---|---|---|
| Company: Banco Comercial Português, S.A._________ | ||||||
| Main Offices: Praça D. João I, 28 - 4000-295 Porto_______________ | NIPC: 501 525 882___ | |||||
| Period of Reference: | Reference values in 000Esc | in Euros | X | |||
| Quarter 1 Quarter 3 |
Quarter 5 (1) | Start: 01/01/2017 End: 30/09/2017 | ||||
| Individual | Consolidated | |||||
| Balance Sheet Items | n (IAS) | n-1 (IAS) | Var. (%) | n (IAS) | n-1 (IAS) | Var. (%) |
| ASSETS (NET) | ||||||
| Loans to other credit institutions (2) | 2,296,014,143 | 2,377,400,388 | -3.42% | 1,918,702,006 | 2,050,001,475 | -6.40% |
| Loans to clients | 33,188,752,794 | 34,822,383,011 | -4.69% | 47,367,178,384 | 48,805,818,462 | -2.95% |
| Fixed income securities | 6,712,859,932 | 4,940,279,838 | 35.88% | 11,555,585,373 | 10,151,460,080 | 13.83% |
| Variable yield securities | 2,764,813,715 | 2,892,862,561 | -4.43% | 1,931,274,208 | 2,200,536,167 | -12.24% |
| Investments | 3,358,302,959 | 3,593,134,362 | -6.54% | 612,806,692 | 574,626,228 | 6.64% |
| SHAREHOLDER'S AND EQUIVALENT EQUITY | ||||||
| Equity Capital | 5,600,738,054 | 4,094,235,362 | 36.80% | 5,600,738,054 | 4,094,235,362 | 36.80% |
| Nº of ordinary shares | 15,113,989,952 | 59,039,023,275 | - | 15,113,989,952 | 59,039,023,275 | - |
| Nº of other shares | 0 | 0 | - | 0 | 0 | - |
| Value of own shares | 0 | 0 | - | 79,413 | 3,105,909 | -97.44% |
| Nº of voting shares | 0 | 0 | - | 323,738 | 201,682,429 | - |
| Nº of preferred, non voting shares | 0 | 0 | - | - | ||
| Subordinate loans | 718,791,226 | 1,555,791,945 | -53.80% | 858,167,347 | 1,682,859,908 | -49.01% |
| Minority interests | 0 | 0 | - | 1,006,169,414 | 872,022,127 | 15.38% |
| LIABILITIES | ||||||
| Amounts owed to credit institutions | 9,814,529,211 | 11,061,893,463 | -11.28% | 9,185,514,468 | 11,302,736,544 | -18.73% |
| Amounts owed to clients | 35,149,261,373 | 34,622,097,422 | 1.52% | 50,690,359,477 | 48,937,144,348 | 3.58% |
| Debt securities | 2,457,855,276 | 3,141,874,860 | -21.77% | 3,096,180,907 | 3,919,170,458 | -21.00% |
| TOTAL ASSETS (NET) | 55,522,129,071 | 55,940,579,320 | -0.75% | 72,989,729,969 | 73,041,598,316 | -0.07% |
| TOTAL SHAREHOLDER'S EQUITY | 5,881,641,347 | 4,078,811,433 | 44.20% | 6,051,878,902 | 4,076,340,451 | 48.46% |
| TOTAL LIABILITIES | 49,640,487,724 | 51,861,767,887 | -4.28% | 65,931,681,653 | 68,093,235,738 | -3.17% |
| P & L Items | Individual | Consolidated | |||||
|---|---|---|---|---|---|---|---|
| n | n-1 | Var. (%) | n | n-1 | Var. (%) | ||
| Financial margin (3) | 580,251,993 | 534,026,450 | 8.66% | 1,023,201,728 | 906,987,145 | 12.81% | |
| Commissions and other oper. revenue (net) | 299,717,035 | 308,323,478 | -2.79% | 398,869,949 | 430,042,888 | -7.25% | |
| Securities yield and profits from financial transactions (net) 115,678,389 | -3,396,711 | -3505.60% | 68,200,033 | 40,823,712 | 67.06% | ||
| Banking Income | 995,647,417 | 838,953,217 | 18.68% | 1,490,271,710 | 1,377,853,745 | 8.16% | |
| Personnel, administ. and other costs | -404,268,118 | -450,165,421 | -10.20% | -654,882,110 | -685,354,106 | -4.45% | |
| Amortizations | -21,356,689 | -18,028,542 | 18.46% | -39,714,829 | -37,001,081 | 7.33% | |
| Provisions (net of adjustments) | -597,916,271 | -825,954,323 | -27.61% | -580,017,830 | -934,366,341 | -37.92% | |
| Extraordinary profit | 0 | 0 | n.a. | 0 | 0 | n.a. | |
| Profit before taxes | -27,893,661 | -455,195,069 | -93.87% | 215,656,941 | -278,867,783 | -177.33% | |
| Income tax (4) | 217,519 | 159,787,416 | -99.86% | -63,110,815 | 68,212,554 | -192.52% | |
| Minority interests and income excluded from consolidation | 0 | 0 | - | -19,236,977 | -40,424,805 | -52.41% | |
| Net profit / loss for the quarter | -27,676,142 | -295,407,653 | -90.63% | 133,309,149 | -251,080,034 | -153.09% | |
| Net profit / loss per share for the quarter | -0.0018 | -0.0050 | -63.40% | 0.0088 | -0.0043 | -307.40% | |
| Self financing (5) | 591,596,818 | 548,575,212 | 7.84% | 753,041,808 | 720,287,388 | 4.55% |
(1) Aplicable to the first economic period of companies adopting a fiscal year different from the calendar year
(Art.65.º - A of the Portuguese Commercial Company Code)
(2) Includes repayable on demand to credit institutions
(3) Financial margin = Interest income - Interest expense
(4) Estimated income tax
(5) Self financing = Net profits + amortization + provision
| 2017 | 2016 | |
|---|---|---|
| (Thousands of Euros) | ||
| Interest and similar income | 1,431,812 | 1,429,522 |
| Interest expense and similar charges | (408, 610) | (522, 534) |
| Net interest income | 1,023,202 | 906,988 |
| Dividends from equity instruments | 1,686 | 6,961 |
| Net fees and commission income | 494,640 | 481,146 |
| Net gains / (losses) arising from trading and hedging activities |
70,651 | 85,719 |
| Net gains / (losses) arising from available for sale financial assets |
44,348 | 126,794 |
| Net gains from insurance activity | 3,668 | 2,499 |
| Other operating income / (costs) | (102, 147) | (94, 586) |
| Total operating income | 1,536,048 | 1,515,521 |
| Staff costs | 380,118 | 410,409 |
| Other administrative costs | 274,764 | 274,946 |
| Depreciation | 39,715 | 37,001 |
| Operating costs | 694,597 | 722,356 |
| Operating net income before provisions and impairments | 841,451 | 793,165 |
| Loans impairment | (458, 594) | (870, 188) |
| Other financial assets impairment | (48, 485) | (178, 650) |
| Other assets impairment | (94, 036) | (35, 145) |
| Goodwill impairment for subsidiaries | (4) | (10, 097) |
| Goodwill impairment for associated companies | (9,006) | |
| Other provisions | (18, 378) | (18, 937) |
| Operating net income | 212,948 | (319, 852) |
| Share of profit of associates under the equity method | 56,791 | 60,608 |
| Gains / (losses) from the sale of subsidiaries and other assets | 1,459 | (4, 243) |
| Net (loss) / income before income tax Income tax |
271,198 | (263, 487) |
| Current | (82, 831) | (76, 537) |
| Deferred | 19,720 | 144,750 |
| Net (loss) / income after income tax from continuing operation | 208,087 | (195, 274) |
| Income arising from discontinued operations | 1,250 | 45,227 |
| Net income after income tax | 209,337 | (150, 047) |
| Attributable to: | ||
| Shareholders of the Bank | 133,309 | (251,080) |
| Non-controlling interests | 76,028 | 101,033 |
| Net income for the period | 209,337 | (150, 047) |
| arnings per share (in euros) | ||
| Basic | 0.014 | (0.278) |
| Diluted | 0.014 | (0.278) |
| 30 September 2017 |
31 December 2016 |
30 September 2016 |
|
|---|---|---|---|
| (Thousands of Euros) | |||
| Assets | |||
| Cash and deposits at central banks | 2, 144, 795 | 1,573,912 | 2,618,275 |
| Loans and advances to credit institutions | |||
| Repayable on demand | 1,113,371 | 448,225 | 421,850 |
| Other loans and advances | 805,331 | 1,056,701 | 1,628,151 |
| Loans and advances to customers | 47, 367, 178 | 48,017,602 | 48,805,818 |
| Financial assets held for trading | 922,677 | 1,048,797 | 1,090,767 |
| Other financial assets held for trading | |||
| at fair value through profit or loss | 142,253 | 146,664 | 145,605 |
| Financial assets available for sale | 11,914,693 | 10,596,273 | 10,680,030 |
| Assets with repurchase agreement | 70,959 | 20,525 | 19,983 |
| Hedging derivatives | 165,322 | 57,038 | 106,115 |
| Financial assets held to maturity | 436,278 | 511,181 | 415,611 |
| Investments in associated companies | 612,807 | 598,866 | 574,626 |
| Non current assets held for sale | 2,286,122 | 2,250,159 | 2,112,762 |
| Investment property | 14,234 | 12,692 | 61,929 |
| Other tangible assets | 478,975 | 473,866 | 463,459 |
| Goodwill and intangible assets | 164,560 | 162,106 | 188,823 |
| Current tax assets | 7,583 | 17,465 | 35,011 |
| Deferred tax assets | 3, 135, 169 | 3,184,925 | 2,790,693 |
| Other assets | 1,207,424 | 1,087,814 | 882,088 |
| 72,989,731 | 71,264,811 | 73,041,596 | |
| Liabilities | |||
| Resources from credit institutions | 9,185,514 | 9,938,395 | 11,302,736 |
| Resources from customers | 50,690,359 | 48,797,647 | 48,937,144 |
| Debt securities issued | 3,096,181 | 3,512,820 | 3,919,170 |
| Financial liabilities held for trading | 461,806 | 547,587 | 610,479 |
| Hedging derivatives | 216,295 | 383,992 | 383,149 |
| Provisions | 340,989 | 321,050 | 279,997 |
| Subordinated debt | 858,167 | 1,544,555 | 1,682,860 |
| Current tax liabilities | 8,835 | 35,367 | 5,508 |
| Deferred tax liabilities | 2,235 | 2,689 | 2,151 |
| Other liabilities | 1,071,302 | 915,528 | 970,040 |
| Total Liabilities | 65,931,683 | 65,999,630 | 68,093,234 |
| Equity Share capital |
5,600,738 | 4,268,818 | 4,094,235 |
| (282) | |||
| Treasury shares Share premium |
16,471 | (2,880) 16,471 |
(3, 106) 16,471 |
| Preference shares | 59,910 | 59,910 | 59,910 |
| Other capital instruments | 2,922 | 2,922 | 2,922 |
| Legal and statutory reserves | 252,806 | 245,875 | 245,875 |
| Fair value reserves | 44,033 | (130, 632) | (66, 067) |
| Reserves and retained earnings | (58, 028) | (102, 306) | (22, 820) |
| Net income for the period attributable to Shareholders | 133,309 | 23,938 | (251,080) |
| Total Equity attributable to Shareholders of the Bank | 6,051,879 | 4,382,116 | 4,076,340 |
| Non-controlling interests | 1,006,169 | 883,065 | 872,022 |
| Total Equity | 7,058,048 | 5,265,181 | 4,948,362 |
| 72,989,731 | 71,264,811 | 73,041,596 |
Balance sheet total customer funds - debt securities and customer deposits.
Capitalisation products – includes unit linked saving products and retirement saving plans ("PPR", "PPE" and "PPR/E").
Commercial gap – total loans to customers net of BS impairments accumulated for risk of credit minus on-balance sheet total customer funds.
Core income - net interest income plus net fees and commission income.
Core net income - corresponding to net interest income plus net fees and commission income deducted from operating costs.
Cost of risk, gross (expressed in bp) - ratio of impairment charges accounted in the period to loans to customers (gross).
Cost of risk, net (expressed in bp) - ratio of impairment charges (net of recoveries) accounted in the period to loans to customers (gross).
Cost to core income - operating costs divided by core income (net interest income and net fees and commission income).
Cost to income – operating costs divided by net operating revenues.
Coverage of credit at risk by balance sheet impairments – total BS impairments accumulated for risks of credit divided by credit at risk (gross).
Coverage of credit at risk by balance sheet impairments and real and financial guarantees – total BS impairments accumulated for risks of credit plus real and financial guarantees divided by credit at risk (gross).
Coverage of non-performing loans by balance sheet impairments – total BS impairments accumulated for risks of credit divided by NPL.
Credit at risk – definition broader than the non performing loans which includes also restructured loans whose changes from initial terms have resulted in the bank being in a higher risk position than previously; restructured loans which have resulted in the bank becoming in a lower risk position (e.g. reinforced collateral) are not included in credit at risk.
Credit at risk (net) – credit at risk deducted from BS impairments accumulated for risks of credit.
Credit at risk (net) ratio – credit at risk (net) divided by loans to customers deducted from total BS impairments accumulated for risks of credit.
Credit at risk ratio – credit at risk divided by loans to customers (gross).
Debt securities - debt securities issued by the Bank and placed with customers.
Dividends from equity instruments - dividends received from investments in financial assets held for trading and available for sale.
Equity accounted earnings - results appropriated by the Group related to the consolidation of entities where, despite having a significant influence, the Group does not control the financial and operational policies.
Loan to Deposits ratio (LTD) – Total loans to customers net of accumulated BS impairments for risks of credit divided by total customer deposits.
Loan to value ratio (LTV) – Mortgage amount divided by the appraised value of property.
Net interest margin (NIM) - net interest income for the period as a percentage of average interest earning assets.
Net operating revenues - net interest income, dividends from equity instruments, net commissions, net trading income, equity accounted earnings and other net operating income.
Net trading income - net gains/losses arising from trading and hedging activities, net gains/losses arising from available for sale financial assets, net gains/losses arising from financial assets held to maturity.
Non-performing exposures (NPE, according to EBA definition) – Non-performing loans and advances to customers more than 90 days past-due or unlikely to be paid without collateral realisation, even if they recognised as defaulted or impaired. Considers also all the exposures if the on-BS 90 days past due reaches 20% of the outstanding amount of total on-BS exposure of the debtor, even if no pull effect is used for default or impairment classification. Includes also the loans in quarantine period over which the debtor has to prove its ability to meet the restructured conditions, even if forbearance has led to the exit form default or impairments classes.
Non-performing loans (NPL) – Overdue loans more than 90 days including the non-overdue remaining principal of loans, i.e. portion in arrears, plus non-overdue remaining principal.
Non-performing loans ratio – Loans more than 90 days overdue and doubtful loans reclassified as overdue for provisioning purposes divided by total loans (gross).
Operating costs - staff costs, other administrative costs and depreciation.
Other impairment and provisions - other financial assets impairment, other assets impairment, in particular provision charges related to assets received as payment in kind not fully covered by collateral, goodwill impairment and other provisions.
Other net income – net commissions, net trading income, other net operating income, dividends from equity instruments and equity accounted earnings.
Other net operating income - other operating income, other net income from non-banking activities and gains from the sale of subsidiaries and other assets.
Overdue and doubtful loans - loans overdue by more than 90 days and the doubtful loans reclassified as overdue loans for provisioning purposes.
Overdue and doubtful loans (net) - overdue and doubtful loans deducted from BS impairments accumulated for risks of credit.
Overdue and doubtful loans (net) ratio - overdue loans and doubtful loans (net) divided by loans to customers deducted from total BS impairments accumulated for risks of credit.
Overdue and doubtful loans coverage by BS impairments - BS impairments accumulated for risks of credit divided by overdue loans and doubtful loans (gross).
Overdue and doubtful loans ratio - overdue and doubtful loans divided by loans to customers (gross).
Overdue loans - loans in arrears, not including the non-overdue remaining principal.
Overdue loans by more than 90 days coverage ratio - total BS impairments accumulated for risk of credit divided by total amount of loans overdue with installments of capital and interest overdue more than 90 days.
Overdue loans coverage ratio – total BS impairments accumulated for risks of credit divided by total amount of overdue loans.
Return on average assets (Instruction from the Bank of Portugal no. 16/2004) – Net income (before tax) divided by the average total assets.
Return on average assets (ROA) – Net income (before minority interests) divided by the average total assets.
Return on equity (Instruction from the Bank of Portugal no. 16/2004) – Net income (before tax) divided by the average attributable equity + non-controlling interests.
Return on equity (ROE) – Net income (after minority interests) divided by the average attributable equity, deducted from preference shares and other capital instruments.
Securities portfolio - financial assets held for trading, financial assets available for sale, assets with repurchase agreement, financial assets held to maturity and other financial assets held for trading at fair value through net income.
Spread - increase (in percentage points) to the index used by the Bank in loans granting or fund raising.
Total customer funds - balance sheet customer funds, capitalisation products, assets under management and investment funds.
Consolidated Financial Statements and Notes to the Consolidated Financial Statements for the nine months ended 30 September 2017
| Notes | 30 September 2017 |
30 September 2016 |
|
|---|---|---|---|
| (Thousands of Euros) | |||
| Interest and similar income | 3 | 1,431,812 | 1,429,522 |
| Interest expense and similar charges | 3 | (408,610) | (522,534) |
| Net interest income | 1,023,202 | 906,988 | |
| Dividends from equity instruments | 4 | 1,686 | 6,961 |
| Net fees and commissions income | 5 | 494,640 | 481,146 |
| Net gains / (losses) arising from trading and hedging activities | 6 | 70,651 | 85,719 |
| Net gains / (losses) arising from financial assets available for sale | 7 | 44,348 | 126,794 |
| Net gains from insurance activity | 3,668 | 2,499 | |
| Other operating income / (costs) | 8 | (102,147) | (94,586) |
| Total operating income | 1,536,048 | 1,515,521 | |
| Staff costs | 9 | 380,118 | 410,409 |
| Other administrative costs | 10 | 274,764 | 274,946 |
| Amortizations and depreciations | 11 | 39,715 | 37,001 |
| Total operating expenses | 694,597 | 722,356 | |
| Operating net income before provisions and impairments | 841,451 | 793,165 | |
| Loans impairment | 12 | (458,594) | (870,188) |
| Other financial assets impairment | 13 | (48,485) | (178,650) |
| Other assets impairment | 27 and 32 | (94,036) | (35,145) |
| Goodwill impairment of subsidiaries | (4) | (10,097) | |
| Goodwill impairment of associated companies | (9,006) | - | |
| Other provisions | 14 | (18,378) | (18,937) |
| Net operating income / (loss) | 212,948 | (319,852) | |
| Share of profit of associates under the equity method | 15 | 56,791 | 60,608 |
| Gains / (losses) arising from sales of subsidiaries and | |||
| other assets | 16 | 1,459 | (4,243) |
| Net income / (loss) before income taxes | 271,198 | (263,487) | |
| Income taxes | |||
| Current | 31 | (82,831) | (76,537) |
| Deferred | 31 | 19,720 | 144,750 |
| Income / (loss) after income taxes from continuing operations | 208,087 | (195,274) | |
| Income arising from discontinued or discontinuing operations | 17 | 1,250 | 45,227 |
| Net income / (loss) after income taxes | 209,337 | (150,047) | |
| Net income / (loss) for the period attributable to: | |||
| Bank's Shareholders | 133,309 | (251,080) | |
| Non-controlling interests | 44 | 76,028 | 101,033 |
| Net income / (loss) for the period | 209,337 | (150,047) | |
| Earnings per share (in Euros) | |||
| Basic | 18 | 0.014 | (0.278) |
| Diluted | 18 | 0.014 | (0.278) |
CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE
| 30 September 2017 | (Thousands of Euros) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Attributable to | |||||||||
| Continuing operations | Discontinued or discontinuing operations | Bank's | Non controlling |
||||||
| Gross value | Taxes | Net value | Gross value | Taxes | Net value | Total | Shareholders | interests | |
| Net income / (loss) for the period | 271,198 | (63,111) | 208,087 | 1,250 | - | 1,250 | 209,337 | 133,309 | 76,028 |
| Items that may be reclassified to the income statement |
|||||||||
| Fair value reserves | 253,988 | (60,922) | 193,066 | - | - | - | 193,066 | 174,665 | 18,401 |
| Exchange differences arising on consolidation | 23,635 | - | 23,635 | - | - | - | 23,635 | (708) | 24,343 |
| 277,623 | (60,922) | 216,701 | - | - | - | 216,701 | 173,957 | 42,744 | |
| Items that will not be reclassified to the income statement |
|||||||||
| Actuarial gains for the period | |||||||||
| BCP Group Pensions Fund | 74,664 | (7,773) | 66,891 | - | - | - | 66,891 | 66,891 | - |
| Pension Fund - other associated companies | (2,658) | - | (2,658) | - | - | - | (2,658) | (2,658) | - |
| 72,006 | (7,773) | 64,233 | - | - | - | 64,233 | 64,233 | - | |
| Other comprehensive income / (loss) for the period | 3 49,629 |
(68,695) | 280,934 | - | - | - | 280,934 | 238,190 | 42,744 |
| Total comprehensive income / (loss) for the period | 6 20,827 |
(131,806) | 489,021 | 1,250 | - | 1,250 | 490,271 | 371,499 | 118,772 |
| 30 September 2016 | (Thousands of Euros) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Attributable to | |||||||||
| Gross value | Continuing operations Taxes |
Net value | Discontinued or discontinuing operations Gross value |
Taxes | Net value | Total | Bank's Shareholders |
Non controlling interests |
|
| Net income / (loss) for the period | (263,487) | 68,213 | (195,274) | 50,355 | (5,128) | 45,227 | (150,047) | (251,080) | 101,033 |
| Items that may be reclassified to the income statement |
|||||||||
| Fair value reserves | (144,762) | 38,311 | (106,451) | (4,316) | 1,295 | (3,021) | (109,472) | (89,317) | (20,155) |
| Exchange differences arising on consolidation | (182,2 17) |
- | (182,217) | 80,575 | - | 80,575 | (101,642) | (73,842) | (27,800) |
| (326,979) | 38,311 | (288,668) | 76,259 | 1,295 | 77,554 | (211,114) | (163,159) | (47,955) | |
| Items that will not be reclassified to the income statement |
|||||||||
| Actuarial losses for the period | |||||||||
| BCP Group Pensions Fund Pension Fund - other associated companies |
(180,261) 223 |
49,560 - |
(130,701) 223 |
- - |
- - |
- - |
(130,701) 223 |
(130,701) 223 |
- - |
| (180,038) | 49,560 | (130,478) | - | - | - | (130,478) | (130,478) | - | |
| Other comprehensive income / (loss) for the period | ( 507,017) |
87,871 | (419,146) | 76,259 | 1,295 | 77,554 | (341,592) | (293,637) | (47,955) |
| Total comprehensive income / (loss) for the period | ( 770,504) |
156,084 | (614,420) | 126,614 | (3,833) | 122,781 | (491,639) | (544,717) | 53,078 |
| Third quarter 2017 |
Third quarter 2016 |
|
|---|---|---|
| (Thousands of Euros) | ||
| Interest and similar income | 475,230 | 464,046 |
| Interest expense and similar charges | (130,527) | (157,862) |
| Net interest income | 344,703 | 306,184 |
| Dividends from equity instruments | 81 | 1,157 |
| Net fees and commissions income | 164,316 | 160,815 |
| Net gains / (losses) arising from trading and hedging activities | 12,055 | 11,155 |
| Net gains / (losses) arising from financial assets available for sale | 13,040 | 18,535 |
| Net gains from insurance activity | 955 | (249) |
| Other operating income / (costs) | (16,278) | (8,258) |
| Total operating income | 518,872 | 489,339 |
| Staff costs | 138,638 | 136,723 |
| Other administrative costs | 92,155 | 90,061 |
| Amortizations | 13,596 | 11,521 |
| Total operating expenses | 244,389 | 238,305 |
| Operating net income before provisions and impairments | 274,483 | 251,034 |
| Loans impairment | (153,604) | (251,510) |
| Other financial assets impairment | (16,559) | (6,654) |
| Other assets impairment | (32,769) | (21,174) |
| Goodwill impairment of subsidiaries | - | (7,585) |
| Other provisions | (10,269) | (9,465) |
| Operating net income / (loss) | 61,282 | (45,354) |
| Share of profit of associates under the equity method | 21,687 | 22,892 |
| Gains / (losses) arising from the sale of subsidiaries and | ||
| other assets | 4,925 | 237 |
| Net income / (loss) before income taxes | 87,894 | (22,225) |
| Income taxes | ||
| Current | (28,283) | (20,090) |
| Deferred | 8,611 | 10,002 |
| Net income / (loss) after income taxes | 68,222 | (32,313) |
| Net income / (loss) for the period attributable to: | ||
| Bank's Shareholders | 43,381 | (53,829) |
| Non-controlling interests | 24,841 | 21,516 |
| Net income / (loss) for the period | 68,222 | (32,313) |
CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE
| Third quarter 2017 | (Thousands of Euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Discontinued or discontinuing | Attributable to | |||||||||
| Continuing operations | operations | Non | ||||||||
| Gross | Gross | Bank's | controlling | |||||||
| value | Taxes | Net value | value | Taxes | Net value | Total | Shareholders | interests | ||
| Net income / (loss) for the period | 87,894 | (19,672) | 68,222 | - | - | - | 68,222 | 43,381 | 24,841 | |
| Items that may be reclassified | ||||||||||
| to the income statement | ||||||||||
| Fair value reserves | 102,304 | (26,621) | 75,683 | - | - | - | 75,683 | 67,295 | 8,388 | |
| Exchange differences arising on consolidation | (45,13 1) |
- | (45,131) | - | - | - | (45,131) | (23,111) | (22,020) | |
| 57,173 | (26,621) | 30,552 | - | - | - | 30,552 | 44,184 | (13,632) | ||
| Items that will not be reclassified to the income statement |
||||||||||
| Actuarial gains for the period | ||||||||||
| BCP Group Pensions Fund | 28,740 | (3,807) | 24,933 | - | - | - | 24,933 | 24,933 | - | |
| Pension Fund - other associated companies | (763) | - | (763) | - | - | - | (763) | (763) | - | |
| 27,977 | (3,807) | 24,170 | - | - | - | 24,170 | 24,170 | - | ||
| Other comprehensive income / (loss) for the period | 85,150 | (30,428) | 54,722 | - | - | - | 54,722 | 68,354 | (13,632) | |
| Total comprehensive income / (loss) for the period | 173,044 | (50,100) | 122,944 | - | - | - | 122,944 | 111,735 | 11,209 |
| Third quarter 2016 | (Thousands of Euros) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Discontinued or discontinuing | Attributable to | ||||||||
| Continuing operations | operations | Non | |||||||
| Gross | Gross | Bank's | controlling | ||||||
| value | Taxes | Net value | value | Taxes | Net value | Total | Shareholders | interests | |
| Net income / (loss) for the period | (22,225) | (10,088) | (32,313) | - | - | - | (32,313) | (53,829) | 21,516 |
| Items that may be reclassified to the income statement |
|||||||||
| Fair value reserves | (24,842) | 8,978 | (15,864) | 586 | (176) | 410 | (15,454) | (13,945) | (1,509) |
| Exchange differences arising on consolidation | (22,17 5) |
- | (22,175) | - | - | - | (22,175) | (26,192) | 4,017 |
| (47,017) | 8,978 | (38,039) | 586 | (176) | 410 | (37,629) | (40,137) | 2,508 | |
| Items that will not be reclassified to the income statement |
|||||||||
| Actuarial losses for the period | |||||||||
| BCP Group Pensions Fund | 8,726 | 2,644 | 11,370 | - | - | - | 11,370 | 11,370 | - |
| Pension Fund - other associated companies | - | - | - | - | - | - | - | - | - |
| 8,726 | 2,644 | 11,370 | - | - | - | 11,370 | 11,370 | - | |
| Other comprehensive income / (loss) for the period | (38,291) | 11,622 | (26,669) | 586 | (176) | 410 | (26,259) | (28,767) | 2,508 |
| Total comprehensive income / (loss) for the period | (60,516) | 1,534 | (58,982) | 586 | (176) | 410 | (58,572) | (82,596) | 24,024 |
| Notes | 30 September 2017 |
31 December 2016 |
|
|---|---|---|---|
| (Thousands of Euros) | |||
| Assets | |||
| Cash and deposits at Central Banks | 19 | 2,144,795 | 1,573,912 |
| Loans and advances to credit institutions | |||
| Repayable on demand | 20 | 1,113,371 | 448,225 |
| Other loans and advances | 21 | 805,331 | 1,056,701 |
| Loans and advances to customers | 22 | 47,367,178 | 48,017,602 |
| Financial assets held for trading | 23 | 922,677 | 1,048,797 |
| Other financial assets held for trading | |||
| at fair value through profit or loss | 23 | 142,253 | 146,664 |
| Financial assets available for sale | 23 | 11,914,693 | 10,596,273 |
| Assets with repurchase agreement | 70,959 | 20,525 | |
| Hedging derivatives | 24 | 165,322 | 57,038 |
| Financial assets held to maturity | 25 | 436,278 | 511,181 |
| Investments in associated companies | 26 | 612,807 | 598,866 |
| Non-current assets held for sale | 27 | 2,286,122 | 2,250,159 |
| Investment property | 28 | 14,234 | 12,692 |
| Other tangible assets | 29 | 478,975 | 473,866 |
| Goodwill and intangible assets | 30 | 164,560 | 162,106 |
| Current tax assets | 7,583 | 17,465 | |
| Deferred tax assets | 31 | 3,135,169 | 3,184,925 |
| Other assets | 32 | 1,207,424 | 1,087,814 |
| Total Assets | 72,989,731 | 71,264,811 | |
| Liabilities | |||
| Resources from credit institutions | 33 | 9,185,514 | 9,938,395 |
| Resources from customers | 34 | 50,690,359 | 48,797,647 |
| Debt securities issued | 35 | 3,096,181 | 3,512,820 |
| Financial liabilities held for trading | 36 | 461,806 | 547,587 |
| Hedging derivatives | 24 | 216,295 | 383,992 |
| Provisions | 37 | 340,989 | 321,050 |
| Subordinated debt | 38 | 858,167 | 1,544,555 |
| Current tax liabilities | 8,835 | 35,367 | |
| Deferred tax liabilities | 31 | 2,235 | 2,689 |
| Other liabilities | 39 | 1,071,302 | 915,528 |
| Total Liabilities | 65,931,683 | 65,999,630 | |
| Equity | |||
| Share capital | 40 | 5,600,738 | 4,268,818 |
| Share premium | 40 | 16,471 | 16,471 |
| Preference shares | 40 | 59,910 | 59,910 |
| Other equity instruments | 40 | 2,922 | 2,922 |
| Legal and statutory reserves | 41 | 252,806 | 245,875 |
| Treasury shares | 42 | (282) | (2,880) |
| Fair value reserves | 43 | 44,033 | (130,632) |
| Reserves and retained earnings | 43 | (58,028) | (102,306) |
| Net income for the period attributable to Shareholders | 133,309 | 23,938 | |
| Total Equity attributable to Bank's Shareholders | 6,051,879 | 4,382,116 | |
| Non-controlling interests | 44 | 1,006,169 | 883,065 |
| Total Equity | 7,058,048 | 5,265,181 | |
| 72,989,731 | 71,264,811 |
CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE
| 30 September 2017 |
30 September 2016 |
|
|---|---|---|
| (Thousands of Euros) | ||
| Cash flows arising from operating activities Interests received |
1,252,499 | 1,324,670 |
| Commissions received | 617,500 | 575,190 |
| Fees received from services rendered | 99,792 | 49,735 |
| Interests paid | (390,343) | (489,945) |
| Commissions paid | (103,287) | (73,720) |
| Recoveries on loans previously written off | 12,920 | 25,500 |
| Net earned insurance premiums | 14,998 | 11,520 |
| Claims incurred of insurance activity | (7,938) | (6,772) |
| Payments to suppliers and employees Income taxes (paid) / received |
(817,231) (95,535) |
(833,045) (58,403) |
| 583,375 | 524,730 | |
| Decrease / (increase) in operating assets: | ||
| Receivables from / (Loans and advances to) credit institutions | 238,346 | (688,820) |
| Deposits held with purpose of monetary control | 12,411 | 69,286 |
| Loans and advances to customers receivable | 183,096 | 1,273,178 |
| Short term trading account securities | (17,778) | (18,745) |
| Increase / (decrease) in operating liabilities: | ||
| Deposits from credit institutions repayable on demand | (6,108) | 174,545 |
| Deposits from credit institutions with agreed maturity date | (745,060) | 2,588,895 |
| Deposits from clients repayable on demand | 2,537,146 | 1,371,347 |
| Deposits from clients with agreed maturity date | (575,763) | (2,238,716) |
| Cash flows arising from investing activities | 2,209,665 | 3,055,700 |
| Sale of shares in subsidiaries and associated companies | ||
| which results loss control (*) | - | (496,178) |
| Acquisition of shares in subsidiaries and associated companies | (787) | - |
| Dividends received | 48,790 | 18,005 |
| Interest income from available for sale financial assets and held to maturity financial assets |
186,094 | 159,637 |
| Sale of available for sale financial assets and | ||
| held to maturity financial assets | 4,727,819 | 4,672,666 |
| Acquisition of available for sale financial assets and | ||
| held to maturity financial assets | (26,065,135) | (24,182,666) |
| Maturity of available for sale financial assets and | ||
| held to maturity financial assets | 20,495,207 | 18,433,586 |
| Acquisition of tangible and intangible assets | (52,981) | (45,527) |
| Sale of tangible and intangible assets | 6,118 | 7,352 |
| Decrease / (increase) in other sundry assets | (278,583) | 176,447 |
| Cash flows arising from financing activities | (933,458) | (1,256,678) |
| Issuance of subordinated debt | 5,127 | 1,434 |
| Reimbursement of subordinated debt | (702,204) | (166) |
| Issuance of debt securities | 1,291,240 | 130,495 |
| Reimbursement of debt securities | (1,831,593) | (1,042,635) |
| Issuance of commercial paper and other securities | 141,201 | 57,588 |
| Reimbursement of commercial paper and other securities | (3,957) | (19,202) |
| Share capital increase | 1,294,903 | - |
| Dividends paid to non-controlling interests | (7,787) | (20,907) |
| Increase / (decrease) in other sundry liabilities and non-controlling interests | (250,743) | (380,592) |
| (63,813) | (1,273,985) | |
| Exchange differences effect on cash and equivalents | 23,635 | (101,642) |
| Net changes in cash and equivalents | 1,236,029 | 423,395 |
| Cash (note 19) | 540,290 | 625,311 |
| Deposits at Central Banks (note 19) Loans and advances to credit institutions repayable on demand (note 20) |
1,033,622 448,225 |
1,215,006 776,413 |
| Cash and equivalents at the beginning of the year | 2,022,137 | 2,616,730 |
| Cash (note 19) | 479,270 | 487,526 |
| Deposits at Central Banks (note 19) | 1,665,525 | 2,130,749 |
| Loans and advances to credit institutions repayable on demand (note 20) | 1,113,371 | 421,850 |
| Cash and equivalents at the end of the period | 3,258,166 | 3,040,125 |
(*) As in 2016 the Banco Millennium Angola, S.A. started to be considered as discontinuing operation, the related values net of intercompany operations, were incorporated in cash flows arising from investing activities.
| for the nine months period ended 30 September 2017 | |
|---|---|
| (Thousands of Euros) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net (loss) | ||||||||||||
| / income for | ||||||||||||
| Reserves | the period | Equity | Non | |||||||||
| Other | Legal and | and | attributable | attributable | -controlling | |||||||
| Share | Share | Preference | equity | statutory | Treasury | Fair value | retained | to Bank's | to Bank's | interests | Total | |
| capital | premium | shares | instruments | reserves | shares | reserves | earnings | Shareholders Shareholders | (note 44) | equity | ||
| Balance as at 31 December 2016 | 4,268,818 | 16,471 | 59,910 | 2,922 | 245,875 | (2,880) | (130,632) | (102,306) | 23,938 | 4,382,116 | 883,065 | 5,265,181 |
| Net income for the period | - | - | - | - | - | - | - | - | 133,309 | 133,309 | 76,028 | 209,337 |
| Fair value reserves (note 43) | - | - | - | - | - | - | 174,665 | - | - | 174,665 | 18,401 | 193,066 |
| Actuarial gains | - | - | - | - | - | - | - | 64,233 | - | 64,233 | - | 64,233 |
| Exchange differences | ||||||||||||
| arising on consolidation | - | - | - | - | - | - | - | (708) | - | (708) | 24,343 | 23,635 |
| Total comprehensive income | - - | - | - | - | - | 174,665 | 63,525 | 133,309 | 371,499 | 118,772 | 490,271 | |
| Transfers of reserves: | ||||||||||||
| Legal reserve (note 41) | - | - | - | - | 6,931 | - | - | - | (6,931) | - | - | - |
| Results application | - | - | - | - | - | - | - | 17,007 | (17,007) | - | - | - |
| Share capital increase (note 40) | 1,331,920 | - | - | - | - | - | - | - | - | 1,331,920 | - | 1,331,920 |
| Costs related to the share capital increase | - | - | - | - | - | - | - | (37,017) | - | (37,017) | - | (37,017) |
| Dividends (a) | - | - | - | - | - | - | - | - | - | - | (7,787) | (7,787) |
| Treasury shares (note 42) | - | - | - | - | - | 2,598 | - | 1,084 | - | 3,682 | - | 3,682 |
| Other reserves (note 43) | - | - | - | - | - | - | - | (321) | - | (321) | 12,119 | 11,798 |
| Balance as at 30 September 2017 | 5,600,738 | 16,471 | 59,910 | 2,922 | 252,806 | (282) | 44,033 | (58,028) | 133,309 | 6,051,879 | 1,006,169 | 7,058,048 |
(a) Dividends of BIM - Banco Internacional de Moçambique, S.A. and SIM - Seguradora Internacional de Moçambique, S.A.R.L.
| Net (loss) / income for |
(Thousands of Euros) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital |
Share premium |
Preference shares |
Other equity instruments |
Legal and statutory reserves |
Treasury shares |
Fair value reserves |
Reserves and retained earnings |
the period attributable to Bank's |
Equity attributable to Bank's Shareholders Shareholders |
Non -controlling interests (note 44) |
Total equity |
||
| Balance as at 31 December 2015 | 4,094,235 | 16,471 | 59,910 | 2,922 | 223,270 | (1,187) | 23,250 | (31,046) | 235,344 | 4,623,169 | 1,057,402 | 5,680,571 | |
| Net income for the period | - | - | - | - | - | - | - | - | (251,080) | (251,080) | 101,033 | (150,047) | |
| Fair value reserves (note 43) | - | - | - | - | - | - | (87,598) | - | - | (87,598) | (18,443) | (106,041) | |
| Actuarial losses | - | - | - | - | - | - | - | (130,478) | - | (130,478) | - | (130,478) | |
| Efect in fair value reserves | |||||||||||||
| related to the merger (a) | - | - | - | - | - | - | (1,719) | - | - | (1,719) | (1,712) | (3,431) | |
| Efect in reserves of the exchange | |||||||||||||
| differences arising on consolidation | |||||||||||||
| related to the merger (a) | - | - | - | - | - | - | - | 78,554 | - | 78,554 | 78,240 | 156,794 | |
| Exchange differences | |||||||||||||
| arising on consolidation | - | - | - | - | - | - | - | (152,396) | - | (152,396) | (106,040) | (258,436) | |
| Total comprehensive income | - - | - | - | - | - | (89,317) | (204,320) | (251,080) | (544,717) | 53,078 | (491,639) | ||
| Transfers of reserves: | |||||||||||||
| Legal reserve | - | - | - | - | 22,605 | - | - | - | (22,605) | - | - | - | |
| Results application | - | - | - | - | - | - | - | 212,739 | (212,739) | - | - | - | |
| Costs related to the share capital increase | - | - | - | - | - | - | - | 25 | - | 25 | - | 25 | |
| Tax related to costs arising from the | |||||||||||||
| share capital increase | - | - | - | - | - | - | - | (5) | - | (5) | - | (5) | |
| Merger of Banco Millennium Angola, S.A. | |||||||||||||
| with Banco Privado Atlântico, S.A. | - | - | - | - | - | - | - | - | - | - | (210,395) | (210,395) | |
| Dividends (b) | - | - | - | - | - | - | - | - | - | - | (20,907) | (20,907) | |
| Treasury shares | - | - | - | - | - | (1,919) | - | 1 | - | (1,918) | - | (1,918) | |
| Other reserves | - | - | - | - | - | - | - | (214) | - | (214) | (7,156) | (7,370) | |
| Balance as at 30 September 2016 | 4,094,235 | 16,471 | 59,910 | 2,922 | 245,875 | (3,106) | (66,067) | (22,820) | (251,080) | 4,076,340 | 872,022 | 4,948,362 | |
| Net income for the period | - | - | - | - | - | - | - | - | 275,018 | 275,018 | 20,844 | 295,862 | |
| Fair value reserves (note 43) | - | - | - | - | - | - | (64,565) | - | - | (64,565) | (7,468) | (72,033) | |
| Actuarial losses | - | - | - | - | - | - | - | (103,657) | - | (103,657) | (341) | (103,998) | |
| Exchange differences | |||||||||||||
| arising on consolidation | - | - | - | - | - | - | - | 31,580 | - | 31,580 | (2,046) | 29,534 | |
| Total comprehensive income | - - | - | - | - | - | (64,565) | (72,077) | 275,018 | 138,376 | 10,989 | 149,365 | ||
| Increase in capital (note 40) | 174,583 | - | - | - | - | - | - | - | - | 174,583 | - | 174,583 | |
| Regrouping of shares | - | - | - | - | - | - | - | (1,047) | - | (1,047) | - | (1,047) | |
| Costs related to the share capital increase | - | - | - | - | - | - | - | (6,462) | - | (6,462) | - | (6,462) | |
| Tax related to costs arising from the | |||||||||||||
| share capital increase | - | - | - | - | - | - | - | 1,357 | - | 1,357 | - | 1,357 | |
| Treasury shares | - | - | - | - | - | 226 | - | - | - | 226 | - | 226 | |
| Other reserves | - | - | - | - | - | - | - | (1,257) | - | (1,257) | 54 | (1,203) | |
| Balance as at 31 December 2016 | 4,268,818 | 16,471 | 59,910 | 2,922 | 245,875 | (2,880) | (130,632) | (102,306) | 23,938 | 4,382,116 | 883,065 | 5,265,181 |
(a) Under the scope of the merger of Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A.
(b) Dividends of Banco Millennium Angola S.A., BIM - Banco Internacional de Moçambique, S.A. and SIM - Seguradora Internacional de Moçambique, S.A.R.L.
Banco Comercial Português, S.A. Sociedade Aberta (the 'Bank') is a private capital bank, established in Portugal in 1985. It started operating on 5 May 1986, and these consolidated financial statements reflect the results of the operations of the Bank and all its subsidiaries (together referred to as the 'Group') and the Group's interest in associates, for the nine months ended 30 September 2017 and 2016.
In accordance with Regulation (EC) no. 1606/2002 from the European Parliament and the Council, of 19 July 2002 and Bank of Portugal Notice no. 1/2005 (revoked by Bank of Portugal Notice no. 5/2015), the Group's consolidated financial statements are required to be prepared in accordance with International Financial Reporting Standards ('IFRS') as endorsed by the European Union ('EU') since 2005. IFRS comprise accounting standards issued by the International Accounting Standards Board ('IASB') as well as interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC') and their predecessor bodies. The consolidated financial statements presented were approved on 31 October 2017 by the Bank's Executive Committee. The financial statements are presented in thousands of Euros, rounded to the nearest thousand.
All the references in this document related to any normative always report to current version.
These interim condensed consolidated financial statements are a translation of financial statements originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.
The interim condensed consolidated financial statements, for the nine month period ended 30 September 2017, were prepared in terms of recognition and measurement in accordance with the IAS 34 - Interim Financial Reporting adopted by the EU and therefore it does not include all the information required in accordance with IFRS adopted by the EU. Consequently, the adequate comprehension of the interim condensed consolidated financial statements requires that it should be reading with the consolidated financial statements with reference to 31 December 2016.
The Group has adopted IFRS and interpretations mandatory for accounting periods beginning on or after 1 January 2017. The accounting policies in this note were applied consistently to all entities of the Group and are consistent with those used in the preparation of the financial statements of the previous period.
The Group's financial statements are prepared under the historical cost convention, as modified by the application of fair value for derivative financial instruments, financial assets and liabilities at fair value through profit or loss and financial assets available for sale, except those for which a reliable measure of fair value is not available. Financial assets and liabilities that are covered under hedge accounting are stated at fair value in respect of the risk that is being hedged, if applicable. Other financial assets and liabilities and non-financial assets and liabilities are stated at amortised cost or historical cost. Non-current assets and disposal groups held for sale are stated at the lower of carrying amount or fair value less costs to sell. The liability for defined benefit obligations is recognised as the present value of the defined benefit obligation net of the value of the fund's assets.
The preparation of the financial statements in accordance with IFRS requires the Board of Directors, on the advice of the Executive Committee to make judgments, estimates and assumptions that affect the application of the accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The issues involving a higher degree of judgment or complexity or for which assumptions and estimates are considered to be significant are presented in note 1 ad).
As from 1 January 2010, the Group applied IFRS 3 (revised) for the accounting of business combinations. The changes in the accounting policies resulting from the application of IFRS 3 (revised) are applied prospectively.
The consolidated financial statements now presented reflect the assets, liabilities, income and expenses of the Bank and its subsidiaries (the Group), and the results attributable to the Group financial investments in associates.
Subsidiaries are entities controlled by the Group (including structure entities and investment funds). The Group controls an entity when it holds the power to direct the relevant activities of the entity, and when it is exposed or has rights to variable returns from its involvement with the entity and is able to take possession of those results through the power it holds over the relevant activities of that entity (de facto control). The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Accumulated losses are attributed to non-controlling interests in the respective proportion, implying that the Group can recognise negative noncontrolling interests.
On a step acquisition process resulting in the acquisition of control, the revaluation of any participation previously acquired, is booked against the profit and loss account when goodwill is calculated. On a partial disposal resulting in loss of control over a subsidiary, any participation retained is revaluated at market value on the sale date and the gain or loss resulting from this revaluation is booked against the income statement.
Investments in associated companies are consolidated by the equity method from the date that the Group acquires significant influence until the date it ceases to exist. Associates are those entities in which the Group has significant influence but not control over the financial and operating policy decisions of the investee. It is assumed that the Group has significant influence when it holds, directly or indirectly, more than 20% or of the voting rights of the investee. If the Group holds, directly or indirectly less than 20% of the voting rights of the investee, it is presumed that the Group does not have significant influence, unless such influence can be clearly demonstrated.
30 September 2017
The existence of significant influence by the Group is usually evidenced in one or more of the following ways:
The consolidated financial statements include the part that is attributable to the Group of the total reserves and results of associated companies accounted on an equity basis. When the Group's share of losses exceeds its interest in the associate, the carrying amount is reduced to zero and recognition of further losses is discontinued except to the extent that the Group has incurred in a legal obligation to assume those losses on behalf of an associate.
Business combinations are accounted under the purchase method. The acquisition cost corresponds to the fair value, determined at the acquisition date, of the assets given and liabilities incurred or assumed. Costs directly attributable to the acquisition of a subsidiary are booked directly in the income statement.
Positive goodwill arising from acquisitions is recognised as an asset carried at acquisition cost and is not subject to amortisation. Goodwill arising on the acquisition of subsidiaries and associates is defined as the difference between the cost of acquisition and the total or corresponding share of the fair value of the net assets and contingent liabilities acquired, depending on the option taken.
Negative goodwill arising on an acquisition is recognised directly in the income statement in the year the business combination occurs.
Goodwill is not adjusted due to changes in the initial estimate of the contingent purchase price and the difference is booked in the income statement, or in equity, when applicable.
The recoverable amount of the goodwill registered in the Group's asset is assessed annually in the preparation of the accounts with reference at the end of the year or whenever there are indications of eventual loss of value. Impairment losses are recognised in the income statement. The recoverable amount is determined based on the higher between the assets value in use and the market value deducted of selling costs, calculated using valuation methodologies supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks.
The acquisition of the non-controlling interests that does not impact the control position of a subsidiary is accounted as a transaction with shareholders and, therefore, is not recognised additional goodwill resulting from this transaction. The difference between the acquisition cost and the fair value of non-controlling interests acquired is recognised directly in reserves. On this basis, the gains and losses resulting from the sale of controlling interests, that does not impact the control position of a subsidiary, are always recognised against reserves.
The gains and losses resulting from the dilution or sale of a financial position in a subsidiary, with loss of control, are recognised by the Group in the income statement.
In the dilutions of controlling interests not resulting in a loss of control, the difference between the fair value of the non-controlling interests acquired and the acquisition value, is accounted against reserves.
The financial statements of the foreign subsidiaries and associates of the Group are prepared in their functional currency, defined as the currency of the primary economic environment in which they operate or the currency in which the subsidiaries obtain their income or finance their activity. In the consolidation process, assets and liabilities, including goodwill, of foreign subsidiaries are converted into euros at the official exchange rate at the balance sheet date. The exchange rates used by the Group are presented in note 51.
Regarding the investments in foreign operations that are consolidated under the full consolidation or equity methods, for exchange differences between the conversion to Euros of the opening equity at the beginning of the year and their value in Euros at the exchange rate ruling at the balance sheet date for consolidated accounts are charged against consolidated reserves - exchange differences. The exchange differences from hedging instruments related to foreign operations are registered in equity in item "Reserves and retained earnings". Whenever the hedge is not fully effective, the ineffective portion is accounted against profit and loss of the year.
The income and expenses of these subsidiaries are converted to Euros at an approximate rate of the rates ruling at the dates of the transactions, and it is used a monthly average taking into account the initial and final exchange rate of each month. Exchange differences from the conversion to Euros of the profits and losses for the reporting period, arising from the difference between the exchange rate used in the income statement and the exchange rate prevailing at the balance sheet date, are recognised in Reserves and retained earnings - exchange differences resulting from the consolidation of Group's companies.
On disposal of investments in foreign subsidiaries for which there is loss of control, exchange differences related to the investment in the foreign operation and to the associated hedge transaction previously recognised in reserves, are transferred to profit and loss as part of the gains or loss arising from the disposal.
The balances and transactions between Group's companies, or any unrealised gains and losses arising from these transactions, are eliminated in the preparation of the consolidated financial statements. Unrealised gains and losses arising from transactions with associates and jointly controlled entities are eliminated in the proportion of the Group's investment in those entities.
Loans and advances to customers includes loans and advances originated by the Group which are not intended to be sold in the short term and are recognised when cash is advanced to customers.
The derecognition of these assets occurs in the following situations: (i) the contractual rights of the Group have expired; or (ii) the Group transferred substantially all the associated risks and rewards.
Loans and advances to customers are initially recognised at fair value plus any directly attributable transaction costs and fees and are subsequently measured at amortised cost using the effective interest method, being presented in the balance sheet net of impairment losses.
The Group's policy consists in a regular assessment of the existence of objective evidence of impairment in the loan portfolios. Impairment losses identified are charged against results and subsequently, if there is a reduction of the estimated impairment loss, the charge is reversed against results, in a subsequent period.
After the initial recognition, a loan or a loan portfolio, defined as a group of loans with similar credit risk characteristics, can be classified as impaired when there is an objective evidence of impairment as a result of one or more events and when these have an impact on the estimated future cash flows of the loan or of the loan portfolio that can be reliably estimated.
According to IAS 39, there are two methods of calculating impairment losses: (i) individually assessed loans; and (ii) collective assessment.
Impairment losses on individually assessed loans are determined by an evaluation of the exposures on a case-by-case basis. For each loan considered individually significant, the Group assesses, at each balance sheet date, the existence of any objective evidence of impairment. In determining such impairment losses on individually assessed loans, the following factors are considered:
Impairment losses are calculated by comparing the present value of the expected future cash flows, discounted at the original effective interest rate of the loan, with its current carrying value, being the amount of any loss charged in the income statement. The carrying amount of impaired loans is presented in the balance sheet net of impairment loss. For loans with a variable interest rate, the discount rate used corresponds to the effective annual interest rate, which was applicable in the period that the impairment was determined.
Loans that are not identified as having an objective evidence of impairment are grouped on the basis of similar credit risk characteristics, and assessed collectively.
Impairment losses are calculated on a collective basis under two different scenarios:
for homogeneous groups of loans that are not considered individually significant; or
losses which have been incurred but have not yet been reported (IBNR) on loans for which no objective evidence of impairment is identified (see last paragraph (i)).
The collective impairment loss is determined considering the following factors:
The methodology and assumptions used to estimate the future cash flows are reviewed regularly by the Group.
Loans, for which no evidence of impairment has been identified, are grouped together based on similar credit risk characteristics for calculating a collective impairment loss. This analysis allows the Group's recognition of losses whose identification in individual terms only occurs in future periods.
Loans and advances to customers are written-off when there is no realistic expectation, from an economic perspective, and for collateralised loans when the funds from the realization of the collateral have already been received, by the use of impairment losses when they correspond to 100% of the credits value considered as non-recoverable.
Financial assets are recognized on the trade date, thus, in the date that the Group commits to purchase the asset and are classified considering the intent behind them, according to the categories described below:
1) Financial assets and liabilities at fair value through profit and loss
The financial assets and liabilities acquired or issued with the purpose of sale or re-acquisition on the short term, namely bonds, treasury bills or shares, those which are part of a financial instruments portfolio and for which there is evidence of a recent pattern of short-term profit taking or that can be included in the definition of derivative (except in the case of a derivative classified as hedging) are classified as trading. The dividends associated to these portfolios are accounted in Net gains / (losses) arising on trading and hedging activities.
The interest from debt instruments is recognised as net interest income.
Trading derivatives with a positive fair value are included in Financial assets held for trading and the trading derivatives with negative fair value are included in Financial liabilities held for trading.
The Group has adopted the Fair Value Option for certain own bond issues, loans and time deposits that contain embedded derivatives or with related hedging derivatives. The variations of the Group's credit risk related to financial liabilities accounted under the Fair Value Option are disclosed in the note Net gains / (losses) arising from trading and hedging activities (note 6).
The designation of other financial assets and liabilities at fair value through profit and losses (Fair Value Option) may be performed whenever at least one of the following requirements is fulfilled:
Considering that the transactions carried out by the Group in the normal course of its business are in market conditions, the assets and liabilities financial instruments at fair value through profit or loss are recognised initially at their fair value, with the costs or income associated with the transactions recognised in results at the initial moment, with subsequent changes in fair value recognized in profit or loss. Patrimonial variations in the fair value are recorded in Net gains / (losses) arising from trading and hedging activities (note 6). The accrual of interest and the premium / discount (when applicable) is recognised in the Net interest income based on the effective interest rate of each transaction, as well as the accrual of interest from derivatives associated with financial instruments classified in this category.
Financial assets available for sale held with the purpose of being maintained by the Group, namely bonds, treasury bills or shares, are classified as available for sale, except if they are classified in another category of financial assets. The financial assets available for sale are initially accounted at fair value, including all expenses or income associated with the transactions. The financial assets available for sale are subsequently measured at fair value. The changes in fair value are accounted for against "Fair value reserves". On disposal of the financial assets available for sale or if impairment loss exists, the accumulated gains or losses recognised as fair value reserves are recognised under "Net gains / (losses) arising from available for sale financial assets" or "Impairment for other financial assets", in the income statement, respectively. Interest income from debt instruments is recognised in Net interest income based on the effective interest rate, including a premium or discount when applicable. Dividends are recognised in profit and losses when the right to receive the dividends is attributed.
The financial assets held-to-maturity include non-derivative financial assets with fixed or determinable payments and fixed maturity, for which the Group has the intention and ability to maintain until the maturity of the assets and that were not included in other categories of financial assets. These financial assets are initially recognised at fair value and subsequently measured at amortised cost. The interest is calculated using the effective interest rate method and recognised in Net interest income. The impairment losses are recognised in profit and loss when identified.
Any reclassification or disposal of financial assets included in this category that does not occur close to the maturity of the assets, or if it is not framed in the exceptions stated by the rules, will require the Group to reclassify the entire portfolio as Financial assets available for sale and the Group will not be allowed to classify any assets under this category for the following two years.
Non-derivative financial assets with fixed or determined payments, that are not quoted in a market and which the Group does not intend to sell immediately or in a near future, may be classified in this category.
In addition to loans granted, the Group recognises in this category unquoted bonds and commercial paper. The financial assets recognised in this category are initially accounted at fair value and subsequently at amortised cost net of impairment. The transaction costs are included in the effective interest rate for these financial instruments. The interest accounted based on the effective interest rate method are recognised in Net interest income.
The impairment losses are recognised in profit and loss when identified.
30 September 2017
Other financial liabilities are all financial liabilities that are not recognised as financial liabilities at fair value through profit and loss. This category includes money market transactions, deposits from customers and from other financial institutions, issued debt, and other transactions.
These financial liabilities are initially recognised at fair value and subsequently at amortised cost. The related transaction costs are included in the effective interest rate. The interest calculated at the effective interest rate is recognised in Net interest income.
The financial gains or losses calculated at the time of repurchase of other financial liabilities are recognised as Net gains / (losses) from trading and hedging activities, when occurred.
At each balance sheet date, an assessment is made of the existence of objective evidence of impairment. A financial asset or group of financial assets are impaired when there is objective evidence of impairment resulting from one or more events that occurred after its initial recognition, such as: (i) for listed securities, a prolonged devaluation or a significant decrease in its quoted price, and (ii) for unlisted securities, when that event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be estimated reasonably. According to the Group's policies, 30% depreciation in the fair value of an equity instrument is considered a significant devaluation and the 1 year period is assumed to be a prolonged decrease in the fair value below the acquisition cost.
If an available for sale asset is determined to be impaired, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the profit or loss) is removed from fair value reserves and recognised in profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurred after the impairment loss was recognised in the profit or loss, the impairment loss is reversed through the income statement. Reversal of impairment losses on equity instruments, classified as financial assets available for sale, is recognised as a gain in fair value reserves when it occurs (there is no reversal in profit and losses).
Embedded derivatives should be accounted for separately as derivatives, if the economic risks and benefits of the embedded derivative are not closely related to the host contract, as long as the hybrid (combined) instrument is not initially measured at fair value with changes through profit and loss. Embedded derivatives are classified as trading and recognised at fair value with changes through profit and loss.
The Bank has four residential mortgage credit securitizations operations (Magellan Mortgages No.1, No.2, No.3 e No.4) which portfolios were accounted derecognized of the individual balance of the Bank, as the residual notes of the referred operations were sold to institutional investors and consequently, the risks and the benefits were substantially transferred.
With the purchase of a part of the residual note, the Group maintained the control of the assets and the liabilities of Magellan Mortgages No.2 e No.3, these Special Purpose Entities (SPE or SPV) are consolidated in the Group Financial Statements, in accordance with accounting policy referred in note 1 b).
The four operations are traditional securitizations, where each mortgage loan portfolio was sold to a Portuguese Loan Titularization Fund, which has financed this purchase through the sale of titularization units to an SPE with office in Ireland. At the same time this SPE issued and sold in the capital markets a group of different classes of bonds.
The Group has two synthetic operations. Caravela SME No.3, which operation started on 28 June 2013, based on a medium and long term loans portfolio of current accounts and authorized overdrafts granted by BCP, mainly to small and medium companies.
Caravela SME No.4 is a similar operation, initiated on 5 June 2014, which portfolio contains car, real estate and equipment leasing granted between the Bank and a group of clients that belong to the same segment (small and medium companies).
In both operations, the Bank hired a Credit Default Swap (CDS) with a Special Purpose Vehicle (SPV), buying by this way the protection for the total portfolio referred. Both cases, the synthetic securitizations, the same CDS, the risk of the respective portfolios were divided in 3 classes: senior, mezzanine and equity. The mezzanine and part of the equity (20%) were placed in the market through an SPV, and the subscription by investors, the Credit Linked Notes (CLNs). The Bank retained the senior risk and part of the equity remaining (80%). The product of the CLNs issue was invested by the SPV in a deposit which total collateral the responsibilities in the presence of the Bank, in accordance of the CDS.
The Group designates derivatives and other financial instruments to hedge its exposure to interest rate and foreign exchange risk, resulting from financing and investment activities. Derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative hedging instruments are stated at fair value and gains and losses on revaluation are recognised in accordance with the hedge accounting model adopted by the Group. A hedge relationship exists when:
at the inception of the hedge there is formal documentation of the hedge;
the hedge is expected to be highly effective;
the effectiveness of the hedge can be reliably measured;
the hedge is valuable in a continuous basis and highly effective throughout the reporting period; and
for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss.
When a derivative financial instrument is used to hedge foreign exchange variations arising from monetary assets or liabilities, no hedge accounting model is applied. Any gain or loss associated to the derivative is recognised through profit and loss, as well as changes in currency risk of the monetary items.
Changes in the fair value of derivatives that are designated and qualify as fair value hedge instruments are recognised in profit and loss, together with changes in the fair value attributable to the hedged risk of the asset or liability or group of assets and liabilities. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative gains and losses due to variations of hedged risk linked to the hedge item recognised until the discontinuance of the hedge accounting are amortised through profit and loss over the residual period of the hedged item.
In a hedge relationship, the effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity - cash flow hedge reserves in the effective part of the hedge relations. Any gain or loss relating to the ineffective portion of the hedge is immediately recognised in profit and loss when occurred.
Amounts accumulated in equity are reclassified to profit and loss in the periods in which the hedged item will affect profit or loss.
In case of hedging variability of cash-flows, when the hedge instrument expires or is disposed or when the hedging relationship no longer meets the criteria for hedge accounting, or when the hedge relation is revoked, the hedge relationship is discontinued on a prospective basis. Therefore, the fair value changes of the derivative accumulated in equity until the date of the discontinued hedge accounting can be:
In the case of a discontinued hedge of a forecast transaction, the change in fair value of the derivative recognised in equity at that time remains in equity until the forecasted transaction is ultimately recognised in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profit and loss.
For a hedge relationship to be classified as such according to IAS 39, effectiveness has to be demonstrated. As such, the Group performs prospective tests at the beginning date of the initial hedge, if applicable and retrospective tests in order to demonstrate at each reporting period the effectiveness of the hedging relationships, demonstrating that the variations in fair value of the hedging instrument are hedged by the fair value variations of the hedged item in the portion assigned to the risk covered. Any ineffectiveness is recognised immediately in profit and loss when incurred.
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any exchange gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is immediately recognised in profit and loss. Gains and losses accumulated in equity related to the investment in a foreign operation and to the associated hedge operation are recognised in equity are transferred to profit and loss, on the disposal of the foreign operation as part of the gain or loss from the disposal.
In October 2008, the IASB issued a change to IAS 39 – Reclassification of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments Disclosures). This change allowed an entity to transfer financial assets from Financial assets at fair value through profit and loss – trading to Financial assets available for sale, to Loans and Receivables - Loans represented by securities or to Financial assets held-to-maturity, as long as the requirement referred in the standard namely when there is some event that is uncommon and highly improbable that will occur again in the short term, that is, the event can be classified as a rare circumstance. The Group adopted this possibility for a group of financial assets.
30 September 2017
Transfers of financial assets recognised in the category of Financial assets available-for-sale to Loans and receivables - Loans represented by securities and to Financial assets held-to-maturity are allowed, in determined and specific circumstances.
Transfers from and to Other financial assets and financial liabilities at fair value through profit and loss (Fair value option) are prohibited.
The Group derecognises financial assets when all rights to future cash flows have expired. In a transfer of assets, derecognition can only occur either when risks and rewards have been substantially transferred or the Group does not maintain control over the assets.
The Group derecognises financial liabilities when these are cancelled or extinguished.
A financial instrument is an equity instrument only if (a) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity and (b) if the instrument will or may be settled in the issuer's own equity instruments, it is either a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments or a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments.
An equity instrument, independently from its legal form, evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Transaction costs directly attributable to an equity instruments' issuance are recognised in equity as a deduction to the amount issued. Amounts paid or received related to sales or acquisitions of equity instruments are recognised in equity, net of transaction costs.
Preference shares issued by the Group are considered as an equity instrument when redemption of the shares is solely at the discretion of the Group and dividends are paid at the discretion of the Group.
Income from equity instruments (dividends) are recognised when the right to receive this income is established and are deducted to equity.
Financial instruments that contain both a liability and an equity component (example: convertible bonds) are classified as compound financial instruments. For those instruments classified as compound financial instruments, the terms of its conversion to ordinary shares (number of shares) cannot change with changes in its fair value. The financial liability component corresponds to the present value of the future interest and principal payments, discounted at the market interest rate applicable to similar financial liabilities that do not have a conversion option. The equity component corresponds to the difference between the proceeds of the issue and the amount attributed to the financial liability. Financial liabilities are measured at amortised cost through the effective interest rate method. The interests are recognised in Net interest income.
Securities lent under securities lending arrangements continue to be recognised in the balance sheet and are measured in accordance with the applicable accounting policy. Cash collateral received in respect of securities lent is recognised as a financial liability. Securities borrowed under securities borrowing agreements are not recognised. Cash collateral placements in respect of securities borrowed are recognised under loans and advances to either banks or customers. Income and expenses arising from the securities borrowing and lending business are recognised on an accrual basis over the period of the transactions and are included in interest income or expense (net interest income).
The Group performs acquisition/sale of securities under reselling/repurchase agreements of securities substantially equivalent in a future date at a predetermined price ('repos'/'reverse repos'). The securities related to reselling agreements in a future date are not recognised on the balance sheet. The amounts paid are recognised in loans and advances to customers or loans and advances to credit institutions. The receivables are collateralised by the related securities. Securities sold through repurchase agreements continue to be recognised in the balance sheet and are revaluated in accordance with the applicable accounting policy. The amounts received from the proceeds of these securities are considered as deposits from customers and deposits from credit institutions. The difference between the acquisition/sale and reselling/repurchase conditions is recognised on an accrual basis over the period of the transaction and is included in interest income or expenses.
Non-current assets, groups of non-current assets held for sale (groups of assets together with related liabilities that include at least a non current asset) and discontinued operations are classified as held for sale when it is intention to sell the referred assets and liabilities and when the referred assets or group of assets are available for immediate sale and its sale is highly probable. In order for the sale to be considered highly probable, the Group must be committed to a plan to sell the asset (or disposal group), and must have been initiated an active program to locate a buyer and complete the plan. In addition, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. Furthermore, it should be expected the sale to qualify for recognition as a completed sale within one year from the date of classification, except as permitted by paragraph 9 of IFRS 5 and the actions required to complete the plan should indicate the improbability of significant changes in the plan or of the plan to be withdrawn.
The Group also classifies as non-current assets held for sale those non-current assets or groups of assets acquired exclusively with a view to its subsequent disposal, which are available for immediate sale and its sale is highly probable. Immediately before classification as held for sale, the measurement of the non-current assets or all assets and liabilities in a disposal group, is performed in accordance with the applicable IFRS. After their reclassification, these assets or disposal groups are measured at the lower of their cost and fair value less costs to sell.
Discontinued operations and the subsidiaries acquired exclusively with the purpose to sell in the short term are consolidated until the moment of its sale.
The Group also classifies as non-current assets held for sale, the investments arising from recovered loans that are measured initially by the lower of its fair value net of selling costs and the loan's carrying amount on the date that the recovery occurs or the judicial decision is formalised.
The fair value is determined based on the expected selling price estimated through periodic valuations performed by external valuation experts properly accredited, according to the periodicity defined in the Bank's regulations. The subsequent measurement of these assets is determined based on the lower of the carrying amount and the corresponding fair value less costs to sell, not subjected to depreciation. In case of unrealised losses, these should be recognised as impairment losses against results.
In accordance with IAS 17, the lease transactions are classified as financial whenever their terms transfer substantially all the risks and rewards associated with the ownership of the property to the lessee. The remaining leases are classified as operational. The classification of the leases is done according to the substance and not the form of the contract.
At the lessee's perspective, finance lease transactions are recorded at the beginning as an asset and liability at fair value of the leased asset, which is equivalent to the present value of the future lease payments. Lease rentals are a combination of the financial charge and the amortisation of the capital outstanding. The financial charge is allocated to the periods during the lease term to produce a constant periodic rate of interest on the remaining liability balance for each period.
At the lessor's perspective, assets held under finance leases are recorded in the balance sheet as a receivable at an amount equal to the net investment in the lease. Lease rentals are a combination of the financial income and amortization of the capital outstanding. Recognition of the financial result reflects a constant periodical return rate over the remaining net investment of the lessor.
Assets received arising from the resolution of leasing contracts and complying with the definition of assets held for sale classified in this category, are measured in accordance with the accounting policy defined in note 1k).
At the lessee's perspective, the Group has various operating leases for properties and vehicles. The payments under these leases are recognised in Other administrative costs during the life of the contract, and neither the asset nor the liability associated with the contract is evidenced in its balance sheet.
Interest income and expense for financial instruments measured at amortised cost are recognised in the interest income or expenses (net interest income) through the effective interest rate method. The interest related to financial assets available for sale calculated at the effective interest rate method are also recognised in net interest income as well as those from assets and liabilities at fair value through profit and loss.
The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument (or, when appropriate, for a shorter period), to the net carrying amount of the financial asset or financial liability.
For calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument (for example: early payment options) but without considering future impairment losses. The calculation includes all fees paid or received considered as included in the effective interest rate, transaction costs and all other premiums or discounts directly related to the transaction, except for assets and liabilities at fair value through profit and loss.
If a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised based on the interest rate used to discount the future cash flows for the purpose of measuring the impairment loss.
Specifically regarding the accounting policy for interest on overdue loans' portfolio, the following aspects are considered:
interest income for overdue loans with collaterals are accounted for as income, up to the limit of the valuation of the collateral on a prudent basis, in accordance with IAS 18, assuming that there is a reasonable probability of recoverability; and
the interests accrued and not paid for overdue loans for more than 90 days that are not covered by collaterals are written-off from the Bank's financial statements and are recognised only when received, in accordance with IAS 18, on the basis that its recoverability is considered to be remote.
For derivative financial instruments, except those classified as hedging instruments of interest rate risk, the interest component is not separated from the changes in the fair value and is classified under Net gains / (losses) from trading and hedging activities. For hedging derivatives of interest rate risk and those related to financial assets or financial liabilities recognised in the Fair Value Option category, the interest component is recognised under interest income or expense (Net interest income).
n) Recognition of income from services and commissions
Income from services and commissions are recognised according to the following criteria:
Income from services and commissions, that are an integral part of the effective interest rate of a financial instrument, are recognised in net interest income.
o) Financial net gains / losses (Net gains / losses arising from trading and hedging activities, from financial assets available for sale and from financial assets held to maturity)
The caption Financial net gains / losses includes gains and losses arising from financial assets and financial liabilities at fair value through profit and loss, that is, fair value changes and interest on trading derivatives and embedded derivatives, as well as the corresponding dividends received. This caption also includes the gains and losses arising from the sale of available for sale financial assets and financial assets held to maturity. The changes in fair value of hedging derivatives and hedged items, when fair value hedge is applicable, are also recognised in this caption.
Assets held in the scope of fiduciary activities are not recognised in the Group's consolidated financial statements. Fees and commissions arising from this activity are recognised in the income statement in the period in which they occur.
Other tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses. Subsequent costs are recognised as a separate asset only when it is probable that future economic benefits will result for the Group. All other repairs and maintenance expenses are charged to the income statement during the financial period in which they are incurred.
Depreciation is calculated on a straight-line basis, over the following periods which correspond to their estimated useful life:
| Number of years | |
|---|---|
| Buildings | 50 |
| Expenditure on freehold and leasehold buildings | 10 |
| Equipment | 4 to 12 |
| Other tangible assets | 3 |
Whenever there is an indication that a fixed tangible asset might be impaired, its recoverable amount is estimated and an impairment loss shall be recognised if the net value of the asset exceeds its recoverable amount. The recoverable amount is determined as the highest between the fair value less costs to sell and its value in use calculated based on the present value of future cash-flows estimated to be obtained from the continued use of the asset and its sale at the end of the useful life.
The impairment losses of the fixed tangible assets are recognised in profit and loss for the period.
r) Investment property
Real estate properties owned by the investment funds consolidated in the Group, are recognised as Investment properties considering, that the main objective of these buildings is the capital appreciation on a long term basis and not its sale in a short term period, or its maintenance for own use.
These investments are initially recognised at its acquisition cost, including the transaction costs and subsequently revaluated at its fair value. The fair value of the investment property should reflect the market conditions at the balance sheet date. Changes in fair value are recognised in results as Other operating income / (costs) (note 8).
The experts responsible for the valuation of the assets are properly certified for that purpose, being registered in CMVM.
The Group does not capitalise any research and development costs. All expenses are recognised as costs in the period in which they occur.
The Group accounts, as intangible assets, the costs associated to software acquired from external entities and depreciates them on a straight line basis by an estimated lifetime of three years. The Group does not capitalise internal costs arising from software development.
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months' maturity from the balance sheet date, including cash and deposits with Central Banks and loans and advances to credit institutions.
Financial assets and liabilities are offset and recognised at their net book value when: i) the Group has a legal right to offset the amounts recognised and transactions can be settled at their net value; and ii) the Group intends to settle on a net basis or perform the asset and settle the liability simultaneously. Considering the current operations of the Group, no compensation of material amount is made. In case of reclassifications of comparative amounts, the provisions of IAS 1.41 are disclosed: a) the nature of the reclassification; b) the amount of each item (or class of items) reclassified and c) the reason for the reclassification.
Transactions in foreign currencies are translated into the respective functional currency of the operation at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currency of the operation at the foreign exchange rate at the reporting date. Foreign exchange differences arising on translation are recognised in the profit and loss. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into the respective functional currency of the operation at the foreign exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the respective functional currency of the operation at the foreign exchange rate at the date that the fair value was determined against profit and loss, except for financial assets available-for-sale, for which the difference is recognised against equity.
The Group has the responsibility to pay to their employees' retirement pensions and widow and orphan benefits and permanent disability pensions, in accordance with the agreement entered with the two collective labour arrangements. These benefits are estimated in the pension's plans 'Plano ACT' and 'Plano ACTQ' of the Pension Plan of BCP Group.
Until 2011, along with the benefits provided in two planes above, the Group had assumed the responsibility, under certain conditions in each year, of assigning a complementary plan to the Group's employees hired before 21 September, 2006 (Complementary Plan). The Group at the end of 2012 decided to extinguish ("cut") the benefit of old age Complementary Plan. As at 14 December 2012, the ISP ("Instituto de Seguros de Portugal" - Portuguese Insurance Institute) formally approved this change to the benefit plan of the Group with effect from 1 January 2012. The cut of the plan was made, having been assigned to the employees, individual rights acquired. On that date, the Group also proceeded to the settlement of the related liability.
From 1 January 2011, banks' employees were integrated in the General Social Security Scheme which now covers their maternity, paternity, adoption and pension benefits. However, the Banks remain liable for those benefits as concern illness, disability and life insurance (Decree-Law no. 1-A/2011, of 3 January).
The contributory rate is 26.6% divided between 23.6% supported by the employer and 3% supported by the employees, replacing the Banking Social Healthcare System which was extinguished by the decree law referred above. As a consequence of this amendment the capability to receive pensions by the actual employees are covered by the General Social Security Scheme regime, considering the service period between 1 January 2011 and the retirement age. The Bank supports the remaining difference for the total pension assured in Collective Labor Agreement.
This change has led to a decrease in the present value of the total benefits reported to the retirement age to be borne by the Pension Fund, and this effect is to be recorded in a linear way during the average lifetime of the pension until the normal retirement age is reached.
Following the approval by the Government of the Decree-Law no. 127/2011, which was published on 31 December, was established an agreement between the Government, the Portuguese Banking Association and the Banking Labour Unions in order to transfer, to the Social Security, the liabilities related to pensions currently being paid to pensioners and retirees, as at 31 December 2011.
This agreement established that the responsibilities to be transferred related to the pensions in payment as at 31 December 2011 at fixed amounts (discount rate 0%) in the component established in the IRCT - Instrument of Collective Regulation of Work of the retirees and pensioners. The responsibilities related to the increase in pensions as well as any other complements namely, contributions to the Health System (SAMS), death benefit and death before retirement benefit continued to be under the responsibility of the Financial Institutions.
At the end of December 2016, a revision of the Collective Labour Agreement (ACT) was reached between the BCP Group and the two unions representive of the Group's employees, which introduced changes in the Social Security chapter and consequently in the pension plan financed by the BCP Group Pension Fund. The new ACT has already been published by the Ministry of Labor in Bulletin of Labor and Employment, and their effects were recorded in the financial statements of 31 December 2016, for employees associated with these two unions..
The negotiation with the " Sindicato dos Bancários do Norte"" ("SBN"), which was also involved in the negotiations of the new ACT, was concluded in April 2017 with the publication of the Bulletin of Labor and Employment, with the effects of this new ACT recorded in the financial statements as at 30 September 2017, for employees associates of SBN.
The most relevant changes occurred in the ACT were the change in the retirement age (presumed disability) that changed from 65 years to 66 years and two months in 2016, and the subsequent update of a further month for each year, at the beginning of each calendar year,and can not, in any case, be higher than which it is in force at any moment in the General Regime of Social Security, the change in the formula for determining the employer's contribution to the SAMS and a new benefit called the End of career premium that replaces the Seniority premium.
These changes described above were framed by the Group as a change to the pension plan under the terms of IAS 19, as such had an impact on the present value of the liabilities with services rendered and were recognised in the income statement for the year under "Staff costs ".
The Group's net obligation in respect of pension plans (defined benefit pensions plan) is calculated on a half year basis at 31 December and 30 June of each year, and whenever there are significant market fluctuations or significant specific events, such as changes in the plan, curtailments or settlements since the last estimate. The responsibilities with past service are calculated using the Unit Credit Projected method and actuarial assumptions considered adequate.
Pension liabilities are calculated by the responsible actuary, who is certified by the Insurance Supervision Authority and Pension Fund (ASF).
The Group's net obligation in respect of defined benefit pension plans and other benefits is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. The benefit is discounted in order to determine its present value, using a discount rate determined by reference to interest rates of high-quality corporate bonds that have maturity dates approximating the terms of the Group's obligations. The net obligations are determined after the deduction of the fair value of the Pension Plan's assets.
Extra-fund liability refers to pension supplements allocated to various employees under the retirement's negotiation processes with the aim of encouraging them to join staff reduction programs.
The income / cost of interests with the pension plan is calculated, by the Group, multiplying the net asset / liability with retirement pension (liabilities less the fair value of the plan's assets) by the discount rate used in the determination of the retirement pension liabilities, mentioned before. On this basis, the income / cost net of interests includes the interest costs associated with retirement pension liabilities and the expected return of the plan's assets, both measured based on the discount rate used to calculate the liabilities.
Gains and losses from the re-measurement, namely (i) actuarial gains and losses resulting from differences between actuarial assumptions used and the amounts actually observed (experience gains and losses) and changes in actuarial assumptions and (ii) gains and losses arising from the difference between the expected return of the plan's assets and the amounts obtained, are recognised against equity under other comprehensive income.
The Group recognises in its income statement a net total amount that comprises (i) the current service cost, (ii) the income / cost net of interest with the pension plan, (iii) the effect of early retirement, (iv ) past service costs and (v) the effects of any settlement or curtailment occurred during the period. The net income / cost with the pension plan is recognised as interest and similar income or interest expense and similar costs depending on their nature. The costs of early retirements correspond to the increase in liabilities due to the employee's retirement before reaching the age of retirement.
Employee benefits, other than pension plans, namely post retirement health care benefits and benefits for the spouse and sons for death before retirement are also included in the benefit plan calculation.
The contributions to the funds are made annually by each Group company according to a certain plan contributions to ensure the solvency of the fund. The minimum level required for the funding is 100% regarding the pension payments and 95% regarding the past services of active employees.
For Defined Contribution Plan, the responsibilities related to the benefits attributed to the Group's employees are recognised as expenses when incurred.
As at 30 September 2017, the Group has two defined contribution plans. One plan covers employees who were hired before 1 July 2009. For this plan, called non-contributory, Group's contributions will be made annually and equal to 1% of the annual remuneration paid to employees in the previous year. Contributions shall only be made if the following requirements are met: (i) the Bank's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português.
The other plan covers employees who have been hired after 1 July 2009. For this plan, designated contributory, monthly contributions will be made equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Group and employees. This contribution has a mandatory character and is defined in the Collective Labor Agreement of the BCP Group, and does not have a performance criterion.
iii) Share based compensation plan
As at 30 September 2017 there are no share based compensation plans in force.
iv) Variable remuneration paid to employees
The Executive Committee decides on the most appropriate criteria of allocation among employees, whenever it is attributed. This variable remuneration is charged to income statement in the period to which it relates.
x) Income taxes
The Group is subject to the regime established by the Income Tax Code ("CIRC"). Additionally, deferred taxes resulting from the temporary differences between the accounting net income and the net income accepted by the Tax Authorities for Income Taxes calculation are accounted for, whenever there is a reasonable probability that those taxes will be paid or recovered in the future.
Income tax registered in net income for the year comprises current and deferred tax effects. Income tax is recognised in the income statement, except when related to items recognised directly in equity, which implies its recognition in equity. Deferred taxes arising from the revaluation of financial assets available for sale and cash flow hedging derivatives are recognised in shareholders' equity and are recognised after in the income statement at the moment the profit and loss that originated the deferred taxes are recognised.
Current tax is the value that determines the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred taxes are calculated in accordance with the liability method based on the balance sheet, considering temporary differences, between the carrying amounts of assets and liabilities and the amounts used for taxation purposes using the tax rates approved or substantially approved at balance sheet date and that is expected to be applied when the temporary difference is reversed.
Deferred tax liabilities are recognised for all taxable temporary differences except for goodwill not deductible for tax purposes, differences arising on initial recognition of assets and liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that probably they will not reverse in the foreseeable future.
Deferred taxes assets are recognised to the extent when it is probable that future taxable profits will be available to absorb deductible temporary differences for taxation purposes (including reportable taxable losses).
The Group, as established in IAS 12, paragraph 74, compensates the deferred tax assets and liabilities if, and only if: (i) has a legally enforceable right to set off current tax assets against current tax liabilities; and (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
In 2016, a group of entities of the BCP Group adhered to the Special Regime for the Taxation of Groups of Companies ("RETGS") for the purposes of taxation of income tax.
Under the scope of taxation under this regime, the Group chose to consider that the effects of the determination of the taxable income according to RETGS are reflected in the tax calculation of each entity's fiscal year, which includes the effect on the current tax due to the use of tax loss carry forwards generated by another entity of the Group.
The Group adopted the IFRS 8 - Operating Segments for the purpose of disclosure financial information by operating and geographic segments. A business segment is a Group's component: (i) which develops business activities that can obtain revenues or expenses; (ii) whose operating results are regularly reviewed by the management with the aim of taking decisions about allocating resources to the segment and assess its performance, and (iii) for which separate financial information is available.
The Group controls its activity through the following major operating segments:
Portugal activity:
"Other" (Portugal activity) includes the activities that are not allocated to remaining segments namely centralized management of financial investments, corporate activities and insurance activity.
Foreign activity:
"Other" (foreign activity) includes the activity developed by subsidiaries in Switzerland and Cayman Islands and also the contribution of the participation in an associate in Angola.
In the context of the Banco Millennium in Angola merger process with Banco Privado Atlântico, which agreement occurred in 22 April 2016 and the conclusion of the process of the necessary authorizations in 3 May 2016, Banco Millennium Angola was considered as a discontinued operation in March 2016, with the impact of its results presented in the balance Income / (loss) arising from discontinued or discontinuing operations and restated for the previous periods. At the consolidated balance, the assets and liabilities of Banco Millennium Angola, S.A. continued to be consolidated by the purchase method till April 2016.
After the completion of the merger, in May 2016, the assets and liabilities of Banco Millennium in Angola stopped being considered in the consolidated balance sheet and the investment of 22.5 % in Banco Millennium Atlântico, the new merged entity, started being consolidated using the equity method and its contribution to the Group's results have been recognised in the consolidated accounts from May 2016 onwards, in the balance "Share of profit of associates under the equity method".
Provisions
Provisions are recognised when (i) the Group has a present obligation (legal or resulting from past practices or published policies that imply the recognition of certain responsibilities); (ii) it is probable that a payment will be required to settle (iii) a reliable estimate can be made of the amount of the obligation.
The measurement of provisions takes into account the principles set in IAS 37 regarding the best estimate of the expected cost, the most likely result of current actions and considering the risks and uncertainties inherent in the process result. On the cases that the discount effect is material, provision corresponds to the actual value of the expected future payments, discounted by a rate that considers the associated risk of the obligation.
30 September 2017
Provisions are reviewed at each balance sheet date and adjusted to reflect the best estimate, being reverted through profit and loss in the proportion of the payments that are probable.
The provisions are derecognised through their use for the obligations for which they were initially accounted or for the cases that the situations were not already observed.
Contingent liabilities are not recognised in the financial statements, being framed under IAS 37 whenever the possibility of an outflow of resources regarding economic benefits is not remote.
The group registers a contingent liability when:
(a) it is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability
The contingent liabilities identified are subject to disclosure, unless the possibility of an outflow of resources incorporating economic benefits is remote.
Contingent assets are not recognised in the financial statements and are disclosed when a future economic inflow of resources is probable.
Basic earnings per share are calculated by dividing net income attributable to shareholders of the Group by the weighted average number of ordinary shares outstanding, excluding the average number of ordinary shares purchased by the Group and held as treasury shares.
For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to consider conversion of all dilutive potential ordinary shares. Potential or contingent share issues are treated as dilutive when their conversion to shares would decrease net earnings per share. If the earnings per share are changed as a result of an issue with premium or discount or other event that changed the potential number of ordinary shares or as a result of changes in the accounting policies, the earnings per share for all presented periods should be adjusted retrospectively.
The Group issues contracts that contain insurance risk, financial risk or a combination of both insurance and financial risk. A contract, under which the Group accepts significant insurance risk from another party, by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract.
A contract issued by the Group without significant insurance risk, but on which financial risk is transferred with discretionary participating features is classified as an investment contract recognised and measured in accordance with the accounting policies applicable to insurance contracts. A contract issued by the Group that transfers only financial risk, without discretionary participating features, is accounted for as a financial instrument.
Premiums of life insurance and investment contracts with discretionary participating features, which are considered as long-term contracts are recognised as income when due from the policyholders. The benefits and other costs are recognised concurrently with the recognition of income over the life of the contracts. This specialization is achieved through the establishment of provisions / liabilities of insurance contracts and investment contracts with discretionary participating features.
The responsibilities correspond to the present value of future benefits payable, net of administrative expenses directly associated with the contracts, less the theoretical premiums that would be required to comply with the established benefits and related expenses. The liabilities are determined based on assumptions of mortality, costs of management or investment at the valuation date.
For contracts where the payment period is significantly shorter than the period of benefit, premiums are deferred and recognised as income in proportion to the duration period of risk coverage. Regarding short-term contracts, including contracts of non-life insurance, premiums are recorded at the time of issue. The award is recognised as income acquired in a pro-rata basis during the term of the contract. The provision for unearned premiums represents the amount of issued premiums on risks not occurred.
Gross premiums written are recognised for as income in the period to which they respect independently from the moment of payment or receivable, in accordance with the accrual accounting principle. Reinsurance premiums ceded are accounted for as expense in the period to which they respect in the same way as gross premiums written.
The provision for unearned gross premiums is based on the evaluation of the premiums written before the end of the year but for which the risk period continues after the year end. This provision is calculated using the pro-rata temporis method applied to each contract in force.
At each reporting date, the Group evaluates the adequacy of liabilities arising from insurance contracts and investment contracts with discretionary participating features. The evaluation of the adequacy of responsibilities is made based on the projection of future cash flows associated with each contract, discounted at market interest rate without risk. This evaluation is done product by product or aggregate of products when the risks are similar or managed jointly. Any deficiency, if exists, is recorded in the Group's results as determined.
The Banco Comercial Português and Banco ActivoBank are entities authorized by the 'Autoridade de Supervisão de Seguros e Fundos de Pensões' (Portuguese Insurance Regulation) to practice the activity of insurance intermediation in the category of Online Insurance Broker, in accordance with Article 8., Paragraph a), point i) of Decree-Law n. º 144/2006, of July 31, developing the activity of insurance intermediation in life and nonlife.
Within the insurance intermediation services, these banks perform the sale of insurance contracts. As compensation for services rendered for insurance intermediation, they receive commissions for arranging contracts of insurance and investment contracts, which are defined in the agreements / protocols established with the Insurance Companies.
Commissions received by insurance intermediation are recognised in accordance with the accrual accounting principle, so the commissions which receipt occurs at different time period to which it relates are subject to registration as an amount receivable under Other Assets.
IFRS set forth a range of accounting treatments that requires that the Board of Directors, on the advice of the Executive Committee, to apply judgments and to make estimates in deciding which treatment is most appropriate. The most significant of these accounting estimates and judgments used in the accounting principles application are discussed in this section in order to improve understanding of how their application affects the Group's reported results and related disclosure.
Considering that in some cases there are several alternatives to the accounting treatment chosen by the Board of Directors, on the advice of the Executive Committee, the Group's reported results would differ if a different treatment was chosen. The Board of Directors, on the advice of the Executive Committee, believes that the choices made are appropriate and that the financial statements present the Group's financial position and results fairly in all material relevant aspects.
The alternative outcomes discussed below are presented solely to assist the reader in understanding the financial statements and are not intended to suggest that other alternatives or estimates would be more appropriate.
The Group reviews its loan portfolios to assess impairment losses on a regularly basis, as described in note 1 c). The evaluation process in determining whether an impairment loss should be recorded is subject to numerous estimates and judgments. The probability of default, risk ratings, value of associated collaterals recovery rates and the estimation of both the amount and timing of future cash flows received, among other things, are considered in making this evaluation.
Alternative methodologies and the use of different assumptions and estimates could result in a higher level of impairment losses recognised with a consequent impact in Group's Income Statement.
The Group is subject to income taxes in numerous jurisdictions. Significant interpretations and estimates are required in determining the total amount for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Different interpretations and estimates would result in a different level of income taxes, current and deferred, recognised in the year.
This aspect assumes greater relevance for the purposes of the analysis of the recoverability of deferred taxes, in which the Group considers projections of future taxable income based on a set of assumptions, including the estimate of income before tax, adjustments to the taxable and the interpretation of the tax legislation. Thus, the recoverability of deferred tax assets depends on the implementation of the Bank's Board of Directors, namely the ability to generate estimated taxable income and the interpretation of the tax legislation.
The taxable profit or tax loss reported by the Bank or its subsidiaries located in Portugal can be corrected by the Portuguese tax authorities within four years except in the case it has been made any deduction or used tax credit, when the expiration date is the period of this right report. The Executive Committee believes that any corrections resulting mainly from differences in the interpretation of tax law will not have material effect on the financial statements.
Regarding the activity in Portugal, the specific rules regarding the tax regime for credit impairment and guarantees for the tax periods beginning on or after 1 January 2017 are not defined, since the reference to the Bank of Portugal Notice No. 3/95 was only applicable until 31 December 2016 and the regime that will be effective as at 1 January 2017 has not yet been defined. In this context, the Executive Committee is considering, for the purpose of calculating taxable income and the deferred tax recording with reference to 30 September 2017, that the impairment of the credit and guarantees recorded which is deductible for IRC purpose is limited to the amount of the deductible provisions that would have been verified if the Bank of Portugal Notice No. 3/95 still remained in force.
In the projections of future taxable income, the Bank considered the approximation between the tax rules and the accounting rules underlying a draft bill amending the article 28-C of the IRC Code which was publicly referred to by the Secretary of State of Fiscal Issues in functions until 13 July 2017, under the terms described in note 31, since it is considered that a diploma is likely to be approved without substantial changes in relation to referred draft bill.
The properties registered in the portfolio of non-current assets held for sale are subject to periodic real estate valuations, carried out by independent experts registered at the CMVM, from their registration and until their derecognition, to be carried out on a property by property basis, according to the circumstances in which each property is and consistent with the disposal strategy. The preparation of these evaluations involves the use of several assumptions. Different assumptions or changes occurred in them may affect the recognised value of these assets.
Determining pension liabilities requires the use of assumptions and estimates, including the use of actuarial projections, estimated returns on investment, and other factors, such as discount rate, pensions and salary growth rate, mortality table, that could impact the cost and liability of the pension plan.
As defined by IAS 19, the discount rate used to update the responsibilities of the Bank's pension fund is based on an analysis performed over the market yield regarding a bond issues universe – with high quality (low risk), different maturities (appropriate to the period of liquidation of the fund's liabilities) and denominated in Euros - related to a diverse and representative range of issuers.
The Group determines that financial assets available for-sale are impaired when there has been a significant or prolonged decrease in the fair value. This determination of what is significant or prolonged requires judgment. In making this judgment, the Group evaluates among other factors, the volatility in the prices of the financial assets. According to the Group's policies, 30% of depreciation in the fair value of an equity instrument is considered a significant devaluation and the 1 year period is assumed to be a prolonged decrease in the fair value below the acquisition cost.
In addition, valuations are generally obtained through market quotation or valuation models that may require assumptions or judgment in making estimates of fair value.
Alternative methodologies and the use of different assumptions and estimates could result in a higher level of impairment losses recognised with a consequent impact in profit and loss of the Group.
Fair values are based on listed market prices if available, otherwise fair value is determined either by dealer price quotations (either for that transaction or for similar instruments traded) or by pricing models, based on net present value of estimated future cash flows which take into account market conditions for the underlying instruments, time value, yield curve and volatility factors. These pricing models may require assumptions or judgments in estimating their fair values. Consequently, the use of a different model or of different assumptions or judgments in applying a particular model could result in different results from the ones reported.
The Group follows the guidance of IAS 39 on classifying some of its non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgment.
In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than for the specific circumstances — for example, selling an insignificant amount close to maturity — it will be required to reclassify the entire class as available-for-sale with its consequently fair value measure and not at the amortization cost. The investments would therefore be measured at fair value instead of amortised cost. Held-to-maturity investments are subject to impairment tests made by the Group. The use of different assumptions and estimates could have an impact in profit and loss of the Group.
For the purposes of determining entities to include in the consolidation perimeter, the Group assess whether it is exposed to, or has rights to, the variable returns from its involvement with the entity and it is able to take possession of those results through the power it holds (de facto control). The decision if an entity needs to be consolidated by the Group requires the use of judgment, estimates and assumptions to determine what extend the Group is exposed to the variable returns and its ability to use its power to affect those returns. Different estimates and assumptions could lead the Group to a different scope of consolidation perimeter with a direct impact in consolidated income.
The recoverable amount of the goodwill recorded in the Group's asset is assessed annually in the preparation of accounts with reference to the end of the year or whenever there are indications of eventual loss of value. For this purpose, the carrying amount of the business units of the Group for which goodwill has been recognised is compared with the respective recoverable amount. A goodwill impairment loss is recognised when the carrying amount of the business unit exceeds the respective recoverable amount.
In the absence of an available market value, the recoverable amount is determined using cash flows predictions, applying a discount rate that includes a risk premium appropriated to the business unit being tested. Determining the cash flows to discount and the discount rate, involves judgment.
Events occurring after the date of the statement of financial position that provide information on situations occurring after that date, if significant, are disclosed in the notes to the consolidated financial statements.
IFRS requires separate disclosure of net interest income and net gains arising from trading and hedging activities and from financial assets available for sale, as presented in notes 3, 6 and 7. A particular business activity can generate impact in each of these captions, whereby the disclosure requirement demonstrates the contribution of the different business activities for the net interest margin and net gains from trading and hedging and from financial assets available for sale.
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Net interest income (note 3) | 1,023,202 | 906,988 |
| Net gains from trading and hedging assets (note 6) | 70,651 | 85,719 |
| Net gains from financial assets available for sale (note 7) | 44,348 | 126,794 |
| 1,138,201 | 1,119,501 |
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Interest and similar income | ||
| Interest on loans | 1,140,158 | 1,157,616 |
| Interest on trading securities | 3,758 | 5,051 |
| Interest on other financial assets valued at fair | ||
| value through profit or loss account | 2,585 | 2,777 |
| Interest on available for sale financial assets | 17 2,070 |
151,341 |
| Interest on held to maturity financial assets | 13,3 19 |
6,790 |
| Interest on hedging derivatives | 67,523 | 74,513 |
| Interest on derivatives associated to financial | ||
| instruments through profit or loss | 7,468 | 10,086 |
| Interest on deposits and other investments | 24,931 | 21,348 |
| 1,431,812 | 1,429,522 | |
| Interest expense and similar charges | ||
| Interest on deposits and other resources | (276,201) | (297,982) |
| Interest on securities issued | (64,458) | (110,974) |
| Interest on subordinated debt | ||
| Hybrid instruments eligible as core tier 1 (CoCos) | ||
| underwritten by the Portuguese State | (6,343) | (49,146) |
| Others | (42,507) | (42,698) |
| Interest on hedging derivatives | (15,506) | (12,045) |
| Interest on derivatives associated to financial | ||
| instruments through profit or loss | (3,595) | (9,689) |
| (408,610) | (522,534) | |
| 1,023,202 | 906,988 |
The balance Interest on loans includes the amount of Euros 32,057,000 (30 September 2016: Euros 31,600,000) related to commissions and other gains accounted for in accordance with the effective interest method, as referred in the accounting policy described in note 1 m).
The balances Interest on securities issued and Interest on subordinated debt include the amount of Euros 33,101,000 (30 September 2016: Euros 53,271,000) related to commissions and other costs accounted for under the effective interest method, as referred in the accounting policy described in note 1 m).
| The amount of this account is comprised of: | Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|---|---|---|
| Dividends from financial assets available for sale | 1,682 | 6,956 |
The balance of Dividends from financial assets available for sale includes dividends and income from investment fund units received during the period.
6,961 1,686
Dividends from financial assets held for trading 4 5
The amount of this account is comprised of:
| Sep 2017 | Sep 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Fees and commissions received | ||
| From guarantees | 47,186 | 50,917 |
| From commitments | 3,407 | 2,899 |
| From banking services | 355,187 | 303,529 |
| From insurance activity commissions | 865 | 988 |
| From securities operations | 70,629 | 70,193 |
| From management and maintenance of accounts | 69, 352 |
68,141 |
| From fiduciary and trust activities | 525 | 604 |
| From other commissions | 30,809 | 58,374 |
| 577,960 | 555,645 | |
| Fees and commissions paid | ||
| From guarantees received provided by third parties | (4,203) | (4,097) |
| From banking services | (60,714) | (51,475) |
| From insurance activity commissions | (1,181) | (921) |
| From securities operations | (7,427) | (9,022) |
| From other commissions | (9,795) | (8,984) |
| (83,320) | (74,499) | |
| 494,640 | 481,146 |
The balance Fees and commissions received - From banking services includes the amount of Euros 58,823,000 (30 September 2016: Euros 57,897,000) related to insurance mediation commissions.
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Gains arising on trading and hedging activities | ||
| Foreign exchange activity | 1,329,466 | 1,263,004 |
| Transactions with financial instruments recognised | ||
| at fair value through profit or loss | ||
| Held for trading | ||
| Securities portfolio | ||
| Fixed income | 6,525 | 5,878 |
| Variable income | 699 | 23,680 |
| Certificates and structured securities issued | 43,365 | 30,545 |
| Derivatives associated to financial | ||
| instruments at fair value through profit or loss | 20,682 | 31,402 |
| Other financial instruments derivatives | 315, 374 |
291,904 |
| Other financial instruments at fair value | ||
| through profit or loss | ||
| Other financial instruments | 3,055 | 5,162 |
| Repurchase of own issues | 1,039 | 2,964 |
| Hedging accounting | ||
| Hedging derivatives | 94,990 | 67,536 |
| Hedged items | 25,421 | 132,546 |
| Credit sales | 14,239 | 26,449 |
| Other operations | 3,507 | 1,609 |
| 1,858,362 | 1,882,679 | |
| Losses arising on trading and hedging activities | ||
| Foreign exchange activity | (1,266,064) | (1,196,076) |
| Transactions with financial instruments recognised | ||
| at fair value through profit or loss | ||
| Held for trading | ||
| Securities portfolio | ||
| Fixed income | (3,849) | (5,463) |
| Variable income | (516) | (24,244) |
| Certificates and structured securities issued | (101,161) | (12,211) |
| Derivatives associated to financial | ||
| instruments through profit or loss | (12,788 ) |
(22,703) |
| Other financial instruments derivatives | (243 ,352) |
(311,371) |
| Other financial instruments at fair value | ||
| through profit or loss | ||
| Securities portfolio | ||
| Fixed income | (2,889) | (4,900) |
| Other financial instruments | (9,607) | (10,232) |
| Repurchase of own issues | (362) | (1,966) |
| Hedging accounting | ||
| Hedging derivatives | (115,263) | (168,681) |
| Hedged items | (11,820) | (22,975) |
| Credit sales | (18,861) | (13,710) |
| Other operations | (1,179) | (2,428) |
| (1,787,711) | (1,796,960) | |
| 70,651 | 85,719 |
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Gains arising from financial assets available for sale | ||
| Fixed income | 30,901 | 36,051 |
| Variable income | 15,852 | 94,091 |
| Losses arising from financial assets available for sale | ||
| Fixed income | (2,047) | (1,613) |
| Variable income | (358) | (1,735) |
| 44,348 | 126,794 |
The balance Gains arising from financial assets available for sale - Fixed income - includes, as at 30 September 2017, the amount of Euros 9,242,000 (30 September 2016: Euros 10,638,000) related to gains resulting from the sale of Portuguese Treasury bonds.
The balance Gains arising from financial assets available for sale - Variable income included, as at 30 September 2016, the amount of Euros 91,061,000 (of which Euros 64,708,000 regards to Bank Millennium, S.A and Euros 26,353,000 to BCP) related to gains arising from the sale of the investment held in Visa Europe.
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Operating income | ||
| Income from services | 18,626 | 18,736 |
| Cheques and others | 9,468 | 9,998 |
| Gains on leasing operations | 5,747 | 2,292 |
| Rents | 1,782 | 1,967 |
| Other operating income | 11,996 | 11,883 |
| 47,619 | 44,876 | |
| Operating costs | ||
| Taxes | (20,080) | (18,009) |
| Donations and contributions | (2,867) | (3,437) |
| Contribution over the banking sector | (31,037) | (24,820) |
| Resolution Funds Contribution | (8,490) | (5,651) |
| Contribution for the Single Resolution Fund | (18,24 6) |
(21,156) |
| Contributions to Deposit Guarantee Fund | (20,385) | (15,645) |
| Tax for the Polish banking sector | (32,881) | (29,248) |
| Losses on financial leasing operations | (777) | (201) |
| Other operating costs | (15,003) | (21,295) |
| (149,766) | (139,462) | |
| (102,147) | (94,586) |
During 2017, the Group delivered the amount of Euros 18,246,000 (30 September 2016: Euros 21,156,000) to the Single Resolution Fund. The total value of the contribution attributable to the Group amounted to Euros 21,466,000 (30 September 2016: Euros 24,967,000) and the Group opted to constitute an irrevocable commitment, through a constitution of a bailment for this purpose, in the amount of Euros 3,220,000 (30 September 2016: Euros 3,811,000), not having this component been recognised as a cost, as defined by the Single Resolution Council in accordance with the methodology set out in Delegated Regulation (EU) No 2015/63 of the Commission of 21 October 2014 and with the conditions laid down in the Implementing Regulation (EU) 2015/81 of the Council of 19 December 2014.
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Salaries and remunerations | 317,087 | 312,318 |
| Mandatory social security charges | 43,061 | 76,631 |
| Voluntary social security charges | 4,590 | 11,425 |
| Other staff costs | 15,380 | 10,035 |
| 380,118 | 410,409 |
The amount of this account is comprised of:
| Sep 2017 | Sep 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Rents and leases | 72,295 | 74,591 |
| Outsourcing and independent labour | 57,926 | 55,519 |
| Advertising | 19,222 | 17,920 |
| Communications | 15,839 | 17,062 |
| Maintenance and related services | 12,592 | 13,967 |
| Information technology services | 13,011 | 13,938 |
| Water, electricity and fuel | 11,536 | 11,909 |
| Advisory services | 9,925 | 8,192 |
| Transportation | 5,630 | 6,281 |
| Travel, hotel and representation costs | 5,583 | 5,601 |
| Legal expenses | 4,961 | 4,500 |
| Consumables | 3,508 | 3,265 |
| Insurance | 3,332 | 3,112 |
| Credit cards and mortgage | 4,499 | 2,928 |
| Training costs | 1,392 | 796 |
| Other specialised services | 14,940 | 16,410 |
| Other supplies and services | 18,573 | 18,955 |
| 274,764 | 274,946 |
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Intangible assets amortizations (note 30): | ||
| Software | 8,064 | 7,725 |
| Other intangible assets | 624 | 290 |
| 8,688 | 8,015 | |
| Other tangible assets depreciations (note 29): | ||
| Properties | 14,253 | 14,251 |
| Equipment | ||
| Computer equipment | 6,947 | 5,583 |
| Motor vehicles | 3,482 | 3,237 |
| Interior installations | 1,513 | 1,349 |
| Furniture | 1,452 | 1,262 |
| Security equipment | 1,220 | 1,190 |
| Machinery | 483 | 522 |
| Other equipment | 1,677 | 1,592 |
| 31,027 | 28,986 | |
| 39,715 | 37,001 |
The amount of this account is comprised of:
| Sep 2017 | Sep 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Loans and advances to customers: | ||
| Impairment charge for the period | 760,191 | 1,067,456 |
| Write-back for the period | (288,677) | (171,767) |
| Recovery of loans and interest charged-off (note 22) | (12,920) | (25,499) |
| 458,594 | 870,190 | |
| Loans and advances to credit institutions: | ||
| Write-back for the period | - | (2) |
| 458,594 | 870,188 |
The balance Loans impairment is related to an estimate of the incurred losses determined according with the methodology for a regular evaluation of objective evidence of impairment, as referred in accounting policy described in note 1 c).
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Impairment of financial assets available for sale | ||
| Charge for the period | 48,485 | 178,650 |
| 14. Other provisions | ||
| The amount of this account is comprised of: | ||
| Sep 2017 | Sep 2016 | |
| Euros '000 | Euros '000 | |
| Provision for guarantees and other commitments (note 37) | ||
| Charge for the period | 16,494 | 28,271 |
| Write-back for the period | (12,908) | (5,927) |
| 3,586 | 22,344 | |
| Other provisions for liabilities and charges (note 37) | ||
| Charge for the period | 16,054 | 8,329 |
| Write-back for the period | (1,262) | (11,736) |
| 14,792 | (3,407) | |
| 18,378 | 18,937 |
30 September 2017
The main contributions of the investments accounted for under the equity method are analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. | 27,165 | 18,178 |
| Banco Millennium Atlântico, S.A. | 24,392 | 10,046 |
| Unicre - Instituição Financeira de Crédito, S.A. | 4,8 14 |
25,556 |
| Banque BCP, S.A.S. | 2,896 | 2,399 |
| SIBS, S.G.P.S, S.A. | 2,583 | 4,791 |
| Banque BCP (Luxembourg), S.A. | 8 | 44 |
| Other companies | (5,067) | (406) |
| 56,791 | 60,608 |
In April 2016, the Banco Comercial Português, S.A. agreed to carry out a merger of Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A. in which the Group was entitled to hold 22.5% of the new entity the Banco Millennium Atlântico, S.A., that started to be accounted by the equity method from May 2016. Thus, with reference to 30 September 2016, the contribution of Banco Millennium Atlântico, S.A is equivalent to 5 months.
The amount of this account is comprised of:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Sale of 3.7% investment held in Banque BCP, S.A (Luxembourg) | - | 465 |
| Liquidation of Propaço related to the 52.7% of investment held | (2) | - |
| Sale of 41.1% investment held in Nanium | (3,821) | - |
| Other assets | 5,282 | (4,708) |
| 1,459 | (4,243) |
The caption Gains / (losses) arising from sales of subsidiaries and other assets - Other assets corresponds, namely, to the losses arising from the sale of assets of the Group classified as non-current assets held for sale (note 27), as also the gains/ (losses) arising on sales and revaluations of investment properties (note 28).
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Appropriated net income / (loss) before income taxes | ||
| Net income before income taxes of Banco Millennium Angola, S.A. | - | 41,934 |
| Gains arising from the merger of Banco Millennium | ||
| Angola, S.A. and Banco Privado Atlântico, S.A. | - | 7,329 |
| Gains arising from the sale of Millennium bcp Gestão de Activos | ||
| - Sociedade Gestora de Fundos de Investimento, S.A. | 1,250 | 1,092 |
| 1,250 | 50,355 | |
| Taxes | ||
| Banco Millennium Angola, S.A. | - | (5,128) |
| 1,250 | 45,227 |
The earnings per share are calculated as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Continuing operations | ||
| Net income / (loss) | 208,087 | (195,274) |
| Non-controlling interests | (76,028) | (82,667) |
| Appropriated net income / (loss) | 132,059 | (277,941) |
| Discontinued or discontinuing operations | ||
| Net income / (loss) | 1,250 | 45,227 |
| Non-controlling interests | - | (18,366) |
| Appropriated net income / (loss) | 1,250 | 26,861 |
| Adjusted net income / (loss) | 133,309 | (251,080) |
| Average number of shares | 12,717,384,960 | 1,205,801,483 |
| Basic earnings per share (Euros): | ||
| from continuing operations | 0.014 | (0.308) |
| from discontinued or discontinuing operations | 0,0 00 |
0.030 |
| 0.014 | (0.278) | |
| Diluted earnings per share (Euros): | ||
| from continuing operations | 0.014 | (0.308) |
| from discontinued or discontinuing operations | 0,0 00 |
0.030 |
| 0.014 | (0.278) |
The Bank's share capital, as at 30 September 2017, amounts to Euros 5,600,738,053.72 and is represented by 15,113,989,952 ordinary, book-entry and nominats shares, without nominal value, which is fully paid.
The average number of shares in 2016 was adjusted retrospectively by both the capital increase carried out in 2017 and the reverse stock split and by the increase in private subscription capital, both made in 2016, but after 30 June.
In September 2016 there were not considered in the calculation of diluted earnings per share, the qualifying hybrid instruments as common equity tier 1 issued in June 2012 and subscribed fully by the State (CoCos), due to the negative net losses for the period (there is no dilution effect). It should be noted that on 9 February 2017, BCP has reimbursed in advance to the Portuguese State, the remaining amount of these instruments (Euros 700 million).
There were not identified another dilution effects of the earnings per share as at 30 September 2017 and 2016, so the diluted result is equivalent to the basic result.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Cash | 479,270 | 540,290 |
| Central Banks | ||
| Bank of Portugal | 614,321 | 433,534 |
| Central Banks abroad | 1,051,204 | 600,088 |
| 2,144,795 | 1,573,912 |
The balance Central Banks includes deposits at Central Banks of the countries where the Group operates in order to satisfy the legal requirements to maintain a cash reserve calculated based on the value of deposits and other effective liabilities. According to the European Central Bank System for Euro Zone, the cash reserve requirements establishes the maintenance of a deposit with the Central Bank equivalent to 1% of the average value of deposits and other liabilities, during each reserve requirement period. The rate is different for countries outside the Euro Zone.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Credit institutions in Portugal | 5,250 | 659 |
| Credit institutions abroad | 917,831 | 232,152 |
| Amounts due for collection | 190,290 | 215,414 |
| 1,113,371 | 448,225 |
The balance Amounts due for collection represents essentially cheques due for collection on other financial institutions. These balances are settled in the first days of the following month.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Other loans and advances to Central Banks abroad | 50 | 12,461 |
| Other loans and advances to credit institutions in Portugal | ||
| Loans | 36,774 | 15,586 |
| Other applications | 4,496 | 4,801 |
| 41,270 | 20,387 | |
| Other loans and advances to credit institutions abroad | ||
| Very short-term applications | 242,271 | 180,347 |
| Short-term applications | 239,807 | 548,564 |
| Loans | 1 | 4 |
| Other applications | 281,269 | 294,439 |
| 763,348 | 1,023,354 | |
| 804,668 | 1,056,202 | |
| Overdue loans - Over 90 days | 663 | 499 |
| 805,331 | 1,056,701 |
Under the scope of derivative financial instruments operations (IRS and CIRS) with institutional counterparties, and as defined in the respective contracts ("Cash collateral"), the caption Other loans and advances to credit institutions includes the amounts detailed below:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Other loans and advances to credit institutions in Portugal | ||
| Other applications | 3,050 | 2,840 |
| Other loans and advances to credit institutions abroad | ||
| Short-term applications | 51,250 | 242,896 |
| Other applications | 275,458 | 275,180 |
| 329,758 | 520,916 |
This balance is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Public sector | 961,176 | 1,041,191 |
| Asset-backed loans | 27,862,242 | 29,011,503 |
| Other guaranteed loans | 4,037,302 | 3,985,120 |
| Unsecured loans | 7,384,793 | 6,821,163 |
| Foreign loans | 1,859,123 | 2,099,860 |
| Factoring operations | 1,959,518 | 1,794,778 |
| Finance leases | 3,473,404 | 3,373,561 |
| 47,537,558 | 48,127,176 | |
| Overdue loans - less than 90 days | 107,666 | 134,934 |
| Overdue loans - Over 90 days | 3,108,800 | 3,496,343 |
| 50,754,024 | 51,758,453 | |
| Impairment for credit risk | (3,386,846) | (3,740,851) |
| 47,367,178 | 48,017,602 |
As at 30 September 2017, the balance Loans and advances to customers includes the amount of Euros 12,391,044,000 (31 December 2016: Euros 12,027,960,000) regarding credits related to mortgage loans issued by the Group.
The Group, as part of the liquidity risk management, holds a pool of eligible assets that can serve as collateral in funding operations with the European Central Bank and other Central Banks in countries where the Group operates, which include loans and advances to customers.
As at 30 September 2017 and as referred in note 51, the Group performed a set of sales of loans and advances to customers for Specialized Loan Funds in the amount of Euros 1,586,114,000 (31 December 2016: Euros: 1,586,114,000). During the first nine months of 2017, no credits have been sold to these funds.
The analysis of loans and advances to customers, by type of credit, is as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Loans not represented by securities | ||
| Discounted bills | 237,454 | 284,378 |
| Current account credits | 1,674,004 | 1,625,812 |
| Overdrafts | 1,494,434 | 1,339,874 |
| Loans | 13,261,759 | 13,689,736 |
| Mortgage loans | 23,300,776 | 23,952,257 |
| Factoring operations | 1,959,518 | 1,794,778 |
| Finance leases | 3,473,404 | 3,373,561 |
| 45,401,349 | 46,060,396 | |
| Loans represented by securities | ||
| Commercial paper | 1,860,652 | 1,843,345 |
| Bonds | 275,557 | 223,435 |
| 2,136,209 | 2,066,780 | |
| 47,537,558 | 48,127,176 | |
| Overdue loans - less than 90 days | 107,666 | 134,934 |
| Overdue loans - Over 90 days | 3,108,800 | 3,496,343 |
| 50,754,024 | 51,758,453 | |
| Impairment for credit risk | (3,386,846) | (3,740,851) |
| 47,367,178 | 48,017,602 |
The analysis of loans and advances to customers, by sector of activity, is as follows:
| Sep 2017 | Dec 2016 | |||
|---|---|---|---|---|
| Euros '000 | % | Euros '000 | % | |
| Agriculture and forestry | 347,157 | 0.68% | 340,577 | 0.66% |
| Fisheries | 53,594 | 0.11% | 53,382 | 0.10% |
| Mining | 91,344 | 0.18% | 102,242 | 0.20% |
| Food, beverage and tobacco | 655,013 | 1.29% | 604,397 | 1.17% |
| Textiles | 473,701 | 0.93% | 470,765 | 0.91% |
| Wood and cork | 246,002 | 0.49% | 222,993 | 0.43% |
| Paper, printing and publishing | 250,091 | 0.49% | 207,963 | 0.40% |
| Chemicals | 956,925 | 1.89% | 748,720 | 1.45% |
| Machinery, equipment and basic metallurgical | 1,127,6 31 |
2.22% | 1,061,729 | 2.05% |
| Electricity and gas | 613,362 | 1.21% | 578,499 | 1.12% |
| Water | 196,986 | 0.39% | 209,693 | 0.41% |
| Construction | 2,623,966 | 5.17% | 2,859,301 | 5.52% |
| Retail business | 1,292,521 | 2.55% | 1,272,782 | 2.46% |
| Wholesale business | 1,994,804 | 3.93% | 1,917,220 | 3.70% |
| Restaurants and hotels | 1,098,338 | 2.16% | 974,176 | 1.88% |
| Transports | 1,367,539 | 2.69% | 1,491,856 | 2.88% |
| Post offices | 5,126 | 0.01% | 6,340 | 0.01% |
| Telecommunications | 441,176 | 0.87% | 379,594 | 0.73% |
| Services | ||||
| Financial intermediation | 3,358,409 | 6.62% | 4,060,971 | 7.85% |
| Real estate activities | 1,366,711 | 2.69% | 1,485,709 | 2.87% |
| Consulting, scientific and technical activities | 1 ,072,930 |
2.11% | 894,047 | 1.73% |
| Administrative and support services activities | 50 4,499 |
0.99% | 497,982 | 0.96% |
| Public sector | 1,115,905 | 2.20% | 740,839 | 1.43% |
| Education | 135,281 | 0.27% | 125,974 | 0.24% |
| Health and collective service activities | 304,532 | 0.60% | 281,158 | 0.54% |
| Artistic, sports and recreational activities | 352, 091 |
0.69% | 381,572 | 0.74% |
| Other services | 620,920 | 1.22% | 635,861 | 1.23% |
| Consumer credit | 3,768,288 | 7.43% | 4,057,789 | 7.84% |
| Mortgage credit | 23,405,560 | 46.12% | 24,018,307 | 46.41% |
| Other domestic activities | 6,639 | 0.01% | 7,888 | 0.02% |
| Other international activities | 906,983 | 1.79% | 1,068,127 | 2.06% |
| 50,754,024 | 100.00% | 51,758,453 | 100.00% | |
| Impairment for credit risk | (3,386,846) | (3,740,851) | ||
| 47,367,178 | 48,017,602 |
The balance Loans and advances to customers includes the following amounts related to finance leases contracts:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Amount of future minimum payments | 3,902,269 | 3,810,114 |
| Interest not yet due | (428,865) | (436,553) |
| Present value | 3,473,404 | 3,373,561 |
Regarding operational leasing, the Group does not present relevant contracts as leasor.
The loan to customers' portfolio includes contracts that resulted in a formal restructuring with the customers and the consequent establishment of a new funding to replace the previous. The restructuring may result in a reinforce of guarantees and / or liquidation of part of the credit and involve an extension of maturities or a different interest rate. The analysis of the non-performing restructured loans, by sector of activity, is as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Agriculture and forestry | 23,719 | 23,330 |
| Fisheries | 12,671 | 12,996 |
| Mining | 6,213 | 140 |
| Food, beverage and tobacco | 995 | 1,326 |
| Textiles | 499 | 694 |
| Wood and cork | 2,772 | 2,832 |
| Paper, printing and publishing | 424 | 1,899 |
| Chemicals | 3,560 | 4,277 |
| Machinery, equipment and basic metallurgical | 33,990 | 16,156 |
| Electricity and gas | 477 | 270 |
| Water | 142 | 98 |
| Construction | 25,704 | 34,029 |
| Retail business | 90,961 | 8,529 |
| Wholesale business | 10,924 | 8,928 |
| Restaurants and hotels | 12,618 | 12,822 |
| Transports | 7,385 | 9,656 |
| Post offices | 29 | 28 |
| Telecommunications | 21,042 | 238 |
| Services | ||
| Financial intermediation | 456 | 452 |
| Real estate activities | 10,651 | 6,760 |
| Consulting, scientific and technical activities | 1 ,869 |
1,866 |
| Administrative and support services activities | 2, 308 |
721 |
| Public sector | 92,924 | 746 |
| Education | 230 | 540 |
| Health and collective service activities | 552 | 54 |
| Artistic, sports and recreational activities | 405 | 399 |
| Other services | 1,938 | 1,626 |
| Consumer credit | 121,666 | 113,151 |
| Mortgage credit | 106,013 | 102,303 |
| Other international activities | 11,051 | 11,524 |
| 604,188 | 378,390 |
The analysis of overdue loans, by sector of activity, is as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Agriculture and forestry | 40,591 | 39,686 |
| Fisheries | 13,091 | 11,981 |
| Mining | 6,570 | 6,875 |
| Food, beverage and tobacco | 15,559 | 19,221 |
| Textiles | 26,072 | 26,075 |
| Wood and cork | 12,330 | 14,702 |
| Paper, printing and publishing | 6,216 | 10,010 |
| Chemicals | 64,052 | 66,517 |
| Machinery, equipment and basic metallurgical | 55,986 | 63,945 |
| Electricity and gas | 274 | 971 |
| Water | 4,098 | 3,884 |
| Construction | 727,475 | 826,013 |
| Retail business | 91,250 | 120,173 |
| Wholesale business | 131,542 | 153,696 |
| Restaurants and hotels | 95,688 | 117,557 |
| Transports | 32,870 | 72,317 |
| Post offices | 584 | 471 |
| Telecommunications | 105,636 | 106,998 |
| Services | ||
| Financial intermediation | 407,361 | 565,769 |
| Real estate activities | 235,910 | 344,475 |
| Consulting, scientific and technical activities | 3 6,291 |
42,432 |
| Administrative and support services activities | 29 ,902 |
38,371 |
| Public sector | 386 | 979 |
| Education | 2,665 | 3,388 |
| Health and collective service activities | 3,229 | 4,491 |
| Artistic, sports and recreational activities | 14,3 84 |
15,811 |
| Other services | 269,031 | 16,304 |
| Consumer credit | 412,116 | 538,843 |
| Mortgage credit | 270,548 | 308,450 |
| Other domestic activities | 6,634 | 7,879 |
| Other international activities | 98,125 | 82,993 |
| 3,216,466 | 3,631,277 |
The changes occurred in impairment for credit risks are analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Balance on 1 January | 3,740,851 | 3,468,084 |
| Transfers resulting from changes in the | ||
| Group's structure | - | (40,109) |
| Other transfers | 38 | 6,277 |
| Impairment charge for the period | 760,191 | 1,067,456 |
| Write-back for the period | (288,677) | (171,767) |
| Loans charged-off | (829,337) | (487,427) |
| Exchange rate differences | 3,780 | (38,771) |
| Balance on 30 September | 3,386,846 | 3,803,743 |
If the impairment loss decreases in a subsequent period to its initial accounting and this decrease can be objectively associated to an event that occurred after the recognition of the loss, the reduction of the impairment is reversed through profit and loss.
The analysis of impairment, by sector of activity, is as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Agriculture and forestry | 42,085 | 38,705 |
| Fisheries | 19,505 | 18,921 |
| Mining | 10,484 | 5,048 |
| Food, beverage and tobacco | 14,621 | 14,806 |
| Textiles | 25,439 | 26,595 |
| Wood and cork | 16,109 | 16,957 |
| Paper, printing and publishing | 12,313 | 14,694 |
| Chemicals | 54,877 | 55,849 |
| Machinery, equipment and basic metallurgical | 45,042 | 47,664 |
| Electricity and gas | 2,665 | 3,198 |
| Water | 12,098 | 9,937 |
| Construction | 622,019 | 614,394 |
| Retail business | 77,374 | 92,880 |
| Wholesale business | 116,772 | 127,132 |
| Restaurants and hotels | 102,751 | 113,459 |
| Transports | 38,395 | 119,507 |
| Post offices | 495 | 500 |
| Telecommunications | 34,958 | 19,591 |
| Services | ||
| Financial intermediation | 812,926 | 1,052,162 |
| Real estate activities | 182,000 | 208,729 |
| Consulting, scientific and technical activities | 1 19,585 |
60,709 |
| Administrative and support services activities | 42 ,429 |
33,880 |
| Public sector | 3,744 | 3,584 |
| Education | 6,592 | 7,438 |
| Health and collective service activities | 4,389 | 4,617 |
| Artistic, sports and recreational activities | 86,1 60 |
89,892 |
| Other services | 138,192 | 50,564 |
| Consumer credit | 354,616 | 473,800 |
| Mortgage credit | 314,466 | 316,087 |
| Other domestic activities | 374 | 555 |
| Other international activities | 73,371 | 98,997 |
| 3,386,846 | 3,740,851 |
The analysis of loans charged-off, by sector of activity, is as follows:
| Sep 2017 | Sep 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Agriculture and forestry | 1,541 | 6,515 |
| Fisheries | 344 | - |
| Mining | 824 | 297 |
| Food, beverage and tobacco | 3,847 | 963 |
| Textiles | 4,242 | 5,800 |
| Wood and cork | 2,211 | 2,700 |
| Paper, printing and publishing | 3,496 | 1,959 |
| Chemicals | 5,760 | 5,597 |
| Machinery, equipment and basic metallurgical | 10,945 | 18,703 |
| Electricity and gas | 43 | 44 |
| Water | 329 | 114 |
| Construction | 84,328 | 124,074 |
| Retail business | 31,374 | 31,275 |
| Wholesale business | 35,060 | 16,834 |
| Restaurants and hotels | 10,015 | 15,853 |
| Transports | 90,460 | 3,656 |
| Post offices | 122 | 27 |
| Telecommunications | 3,226 | 9,184 |
| Services | ||
| Financial intermediation | 244,836 | 47,340 |
| Real estate activities | 45,281 | 33,811 |
| Consulting, scientific and technical activities | 5 ,209 |
11,122 |
| Administrative and support services activities | 8, 502 |
2,391 |
| Public sector | - | 2 |
| Education | 779 | 71 |
| Health and collective service activities | 737 | 598 |
| Artistic, sports and recreational activities | 946 | 730 |
| Other services | 3,964 | 4,244 |
| Consumer credit | 199,845 | 124,327 |
| Mortgage credit | 12,816 | 12,543 |
| Other domestic activities | 13,996 | 474 |
| Other international activities | 4,259 | 6,179 |
| 829,337 | 487,427 |
In compliance with the accounting policy described in note 1 c), loans and advances to customers are charged-off when there are no feasible expectations, of recovering the loan amount and for collateralised loans, the charge-off occurs when the funds arising from the execution of the respective collaterals are effectively received. This charge-off is carried out by the utilization of impairment losses when they refer to 100% of the loans that are considered unrecoverable.
The analysis of recovered loans and interest, during the first nine months of 2017 and 2016, by sector of activity, is as follows (note 12):
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Agriculture and forestry | 55 | 41 |
| Fisheries | 42 | 3 |
| Mining | 125 | 174 |
| Food, beverage and tobacco | 193 | 103 |
| Textiles | 273 | 753 |
| Wood and cork | 215 | 304 |
| Paper, printing and publishing | 267 | 52 |
| Chemicals | 141 | 203 |
| Machinery, equipment and basic metallurgical | 243 | 143 |
| Electricity and gas | - | 13 |
| Construction | 2,881 | 16,182 |
| Retail business | 1,063 | 320 |
| Wholesale business | 1,997 | 811 |
| Restaurants and hotels | 123 | 68 |
| Transports | 979 | - |
| Telecommunications | 20 | 10 |
| Services | ||
| Financial intermediation | 162 | 58 |
| Real estate activities | 356 | 531 |
| Consulting, scientific and technical activities | 6 3 |
183 |
| Administrative and support services activities | 29 0 |
61 |
| Health and collective service activities | 10 | - |
| Artistic, sports and recreational activities | 6 | 2,170 |
| Other services | 6 | 100 |
| Consumer credit | 2,849 | 2,992 |
| Mortgage credit | 15 | 70 |
| Other domestic activities | 13 | 101 |
| Other international activities | 533 | 52 |
| 12,920 | 25,499 |
Notes to the Interim Condensed Consolidated Financial Statements
30 September 2017
The balance Financial assets held for trading, Other financial assets held for trading at fair value through profit or loss and Financial assets available for sale is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Bonds and other fixed income securities | ||
| Issued by public entities | 9,468,242 | 7,612,491 |
| Issued by other entities | 1,580,107 | 2,099,070 |
| 11,048,349 | 9,711,561 | |
| Overdue securities | 3,722 | 18,022 |
| Impairment for overdue securities | (3,722) | (13,079) |
| 11,048,349 | 9,716,504 | |
| Shares and other variable income securities | 1,180, 834 |
1,226,456 |
| 12,229,183 | 10,942,960 | |
| Trading derivatives | 750,440 | 848,774 |
| 12,979,623 | 11,791,734 |
The portfolio of Financial assets held for trading, Other financial assets held for trading at fair value through profit or loss and Financial assets available for sale securities, net of impairment, as at 30 September 2017, is analysed as follows:
| Sep 2017 | ||||
|---|---|---|---|---|
| Trading Euros '000 |
Other financial assets at fair value through profit or loss Euros '000 |
Available for sale Euros '000 |
Total Euros '000 |
|
| Fixed income: | ||||
| Bonds issued by public entities | ||||
| Portuguese issuers | 10,097 | 142,253 | 4,079,868 | 4,232,218 |
| Foreign issuers | 95,111 | - | 3,673,890 | 3,769,001 |
| Bonds issued by other entities | ||||
| Portuguese issuers | 4,980 | - | 1,254,991 | 1,259,971 |
| Foreign issuers | 53,258 | - | 270,600 | 323,858 |
| Treasury bills and other | ||||
| Government bonds | ||||
| Portuguese issuers | 5,000 | - | 707,477 | 712,477 |
| Foreign issuers | - | - | 754,546 | 754,546 |
| 168,446 | 142,253 | 10,741,372 | 11,052,071 | |
| Impairment for overdue securities | - | - | (3,722) | (3,722) |
| 168,446 | 142,253 | 10,737,650 | 11,048,349 | |
| Variable income: | ||||
| Shares in Portuguese companies | 2,170 | - | 30,192 | 32,362 |
| Shares in foreign companies | 38 | - | 17,168 | 17,206 |
| Investment fund units | 963 | - | 1,129,683 | 1,130,646 |
| Other securities | 620 | - | - | 620 |
| 3,791 | - | 1,177,043 | 1,180,834 | |
| Trading derivatives | 750,440 | - | - | 750,440 |
| 922,677 | 142,253 | 11,914,693 | 12,979,623 |
The trading and available for sale portfolios, are recorded at fair value in accordance with the accounting policy described in note 1 d).
As referred in the accounting policy presented in note 1 d), the available for sale securities are presented at market value with the respective fair value accounted against fair value reserves. As at 30 September 2017, the fair value reserves are positive in the amount of Euros 4,015,000 (31 December 2016: negative amount of Euros 233,799,000).
As at 30 September 2017, the balances Financial assets held for trading and Financial assets available for sale include bonds issued with different levels of subordination associated with the traditional securitization transactions Magellan Mortgages No.1 and No. 4, referred in note 1 d) 6) i), in the amount of Euros 1,050,000 (31 December 2016: Euros 1,379,000) and Euros 123,000 (31 December 2016: Euros 121,000), respectively.
The portfolio of Financial assets held for trading, Other financial assets held for trading at fair value through profit or loss and Financial assets available for sale securities, net of impairment, as at 31 December 2016, is analysed as follows:
| Dec 2016 | ||||
|---|---|---|---|---|
| Trading Euros '000 |
Other financial assets at fair value through profit or loss Euros '000 |
Available for sale Euros '000 |
Total Euros '000 |
|
| Fixed income: | ||||
| Bonds issued by public entities | ||||
| Portuguese issuers | 11,803 | 146,664 | 3,310,289 | 3,468,756 |
| Foreign issuers | 108,010 | - | 3,290,307 | 3,398,317 |
| Bonds issued by other entities | ||||
| Portuguese issuers | 13,491 | - | 1,292,207 | 1,305,698 |
| Foreign issuers | 57,523 | - | 753,871 | 811,394 |
| Treasury bills and other | ||||
| Government bonds | ||||
| Portuguese issuers | 5,642 | - | 649,286 | 654,928 |
| Foreign issuers | - | - | 90,490 | 90,490 |
| 196,469 | 146,664 | 9,386,450 | 9,729,583 | |
| Impairment for overdue securities | - | - | (13,079) | (13,079) |
| 196,469 | 146,664 | 9,373,371 | 9,716,504 | |
| Variable income: | ||||
| Shares in Portuguese companies | 2,083 | - | 40,333 | 42,416 |
| Shares in foreign companies | 25 | - | 13,292 | 13,317 |
| Investment fund units | 1,063 | - | 1,169,277 | 1,170,340 |
| Other securities | 383 | - | - | 383 |
| 3,554 | - | 1,222,902 | 1,226,456 | |
| Trading derivatives | 848,774 | - | - | 848,774 |
| 1,048,797 | 146,664 | 10,596,273 | 11,791,734 |
The portfolio of financial assets available for sale, as at 30 June 2017, is analysed as follows: The portfolio of financial assets available for sale, as at 30 September 2017, is analysed as follows:
| Sep 2017 | ||||||
|---|---|---|---|---|---|---|
| Amortised cost Euros '000 |
Impairment Euros '000 |
Amortised cost net of impairment Euros '000 |
Fair value reserves Euros '000 |
Fair value hedge adjustments Euros '000 |
Total Euros '000 |
|
| Fixed income: | ||||||
| Bonds issued by public entities | ||||||
| Portuguese issuers | 4,013,598 | - | 4,013,598 | (88,685) | 154,955 | 4,079,868 |
| Foreign issuers | 3,667,598 | - | 3,667,598 | 6,292 | - | 3,673,890 |
| Bonds issued by other entities | ||||||
| Portuguese issuers | 1,280,623 | (87,362) | 1,193,261 | 60,871 | (2,863) | 1,251,269 |
| Foreign issuers | 265,496 | (1,467) | 264,029 | 6,933 | (362) | 270,600 |
| Treasury bills and other | ||||||
| Government bonds | ||||||
| Portuguese issuers | 707,630 | - | 707,630 | (153) | - | 707,477 |
| Foreign issuers | 754,722 | - | 754,722 | (176) | - | 754,546 |
| 10,689,667 | (88,829) | 10,600,838 | (14,918) | 151,730 | 10,737,650 | |
| Variable income: | ||||||
| Shares in Portuguese companies | 93,037 | (69,351) | 23,686 | 6,506 | - | 30,192 |
| Shares in foreign companies | 15,066 | (459) | 14,607 | 2,561 | - | 17,168 |
| Investment fund units | 1,528,530 | (408,713) | 1,119,817 | 9,866 | - | 1,129,683 |
| 1,636,633 | (478,523) | 1,158,110 | 18,933 | - | 1,177,043 | |
| 12,326,300 | (567,352) | 11,758,948 | 4,015 | 151,730 | 11,914,693 |
The portfolio of financial assets available for sale, as at 31 December 2016, is analysed as follows:
| Dec 2016 | ||||||
|---|---|---|---|---|---|---|
| Amortised cost Euros '000 |
Impairment Euros '000 |
Amortised cost net of impairment Euros '000 |
Fair value reserves Euros '000 |
Fair value hedge adjustments Euros '000 |
Total Euros '000 |
|
| Fixed income: | ||||||
| Bonds issued by public entities | ||||||
| Portuguese issuers | 3,527,771 | - | 3,527,771 | (295,463) | 77,981 | 3,310,289 |
| Foreign issuers | 3,295,644 | - | 3,295,644 | (5,337) | - | 3,290,307 |
| Bonds issued by other entities | ||||||
| Portuguese issuers | 1,379,626 | (130,588) | 1,249,038 | 31,032 | (942) | 1,279,128 |
| Foreign issuers | 747,833 | (1,582) | 746,251 | 7,830 | (210) | 753,871 |
| Treasury bills and other | ||||||
| Government bonds | ||||||
| Portuguese issuers | 649,256 | - | 649,256 | 30 | - | 649,286 |
| Foreign issuers | 90,490 | - | 90,490 | - | - | 90,490 |
| 9,690,620 | (132,170) | 9,558,450 | (261,908) | 76,829 | 9,373,371 | |
| Variable income: | ||||||
| Shares in Portuguese companies | 116,404 | (86,197) | 30,207 | 10,126 | - | 40,333 |
| Shares in foreign companies | 12,672 | (281) | 12,391 | 901 | - | 13,292 |
| Investment fund units | 1,506,136 | (353,941) | 1,152,195 | 17,082 | - | 1,169,277 |
| 1,635,212 | (440,419) | 1,194,793 | 28,109 | - | 1,222,902 | |
| 11,325,832 | (572,589) | 10,753,243 | (233,799) | 76,829 | 10,596,273 |
The analysis of Financial assets held for trading, Other financial assets held for trading at fair value through profit or loss and Financial assets available for sale by sector of activity as at 31 September 2017 is as follows:
| Sep 2017 | |||||
|---|---|---|---|---|---|
| Bonds Euros '000 |
Shares Euros '000 |
Other Financial Assets Euros '000 |
Overdue Securities Euros '000 |
Total Euros '000 |
|
| Textiles | - | - | - | 203 | 203 |
| Wood and cork | - | - | - | 998 | 998 |
| Paper, printing and publishing | - | 11 | - | - | 11 |
| Chemicals | 26,586 | 7 | - | - | 26,593 |
| Machinery, equipment and basic metallurgical | - | 6 | - | - | 6 |
| Electricity and gas | 9,313 | - | - | - | 9,313 |
| Construction | - | 8 | - | 2,394 | 2,402 |
| Retail business | 4,334 | 1,612 | - | - | 5,946 |
| Wholesale business | - | 1,310 | - | 126 | 1,436 |
| Restaurants and hotels | - | 46 | - | - | 46 |
| Transports | 764,647 | 766 | - | - | 765,413 |
| Telecommunications | - | 9,661 | - | - | 9,661 |
| Services | |||||
| Financial intermediation (*) | 647,257 | 23,611 | 1,123,336 | - | 1,794,204 |
| Consulting, scientific and technical activities | 9 3 |
102 | - | - | 195 |
| Administrative and support services activities | - | 11,653 | - | - | 11,653 |
| Health and collective service activities | 111,194 | - | - | - | 111,194 |
| Artistic, sports and recreational activities | 16,6 83 |
16 | - | - | 16,699 |
| Other services | - | 753 | 7,310 | 1 | 8,064 |
| Other international activities | - | 6 | 620 | - | 626 |
| Government and Public securities | 1,580,107 8,001,219 |
49,568 - |
1,131,266 1,467,023 |
3,722 - |
2,764,663 9,468,242 |
| Impairment for overdue securities | - | - | - | (3,722) | (3,722) |
| 9,581,326 | 49,568 | 2,598,289 | - | 12,229,183 |
(*) The balance Other financial assets includes restructuring funds in the amount of Euros 1,065,120,000, which are classified in the sector of activity Services - Financial intermediation, but which have the core segment as disclosed in note 51.
The analysis of Financial assets held for trading, Other financial assets held for trading at fair value through profit or loss and Financial assets available for sale by sector of activity as at 31 December 2016 is as follows:
| Dec 2016 | |||||
|---|---|---|---|---|---|
| Bonds Euros '000 |
Shares Euros '000 |
Other Financial Assets Euros '000 |
Overdue Securities Euros '000 |
Total Euros '000 |
|
| Textiles | - | - | - | 203 | 203 |
| Wood and cork | - | - | - | 998 | 998 |
| Paper, printing and publishing | - | 11 | - | - | 11 |
| Chemicals | 26,193 | 7 | - | - | 26,200 |
| Machinery, equipment and basic metallurgical | - | 4 | - | - | 4 |
| Electricity and gas | 8,742 | - | - | - | 8,742 |
| Construction | - | 7 | - | 2,395 | 2,402 |
| Retail business | 4,501 | 1,667 | - | - | 6,168 |
| Wholesale business | - | 655 | - | 126 | 781 |
| Restaurants and hotels | - | 46 | - | - | 46 |
| Transports | 672,408 | 766 | - | - | 673,174 |
| Telecommunications | - | 21,054 | - | - | 21,054 |
| Services | |||||
| Financial intermediation (*) | 1,104,702 | 20,216 | 1,120,810 | 14,299 | 2,260,027 |
| Real estate activities | - | - | 43,251 | - | 43,251 |
| Consulting, scientific and technical activities | 1 76,390 |
102 | - | - | 176,492 |
| Administrative and support services activities | - | 10,441 | - | - | 10,441 |
| Health and collective service activities | 89,450 | - | - | - | 89,450 |
| Artistic, sports and recreational activities | 16,6 83 |
16 | - | - | 16,699 |
| Other services | 1 | 736 | 6,278 | 1 | 7,016 |
| Other international activities | - | 5 | 384 | - | 389 |
| 2,099,070 | 55,733 | 1,170,723 | 18,022 | 3,343,548 | |
| Government and Public securities | 6,867,073 | - | 745,418 | - | 7,612,491 |
| Impairment for overdue securities | - | - | - | (13,079) | (13,079) |
| 8,966,143 | 55,733 | 1,916,141 | 4,943 | 10,942,960 | |
(*) The balance Other financial assets includes restructuring funds, in the amount of Euros 1,113,482,000, which are classified in the sector of activity Services - Financial intermediation, but which have the core segment as disclosed in note 51.
The Group, as part of the management process of the liquidity risk, holds a pool of eligible assets that can serve as collateral in funding operations in the European Central Bank and other Central Banks in countries were the Group operates, which includes fixed income securities.
This balance is analysed, by hedging instruments, as follows:
| Sep 2017 | Dec 2016 | ||||
|---|---|---|---|---|---|
| Assets Euros '000 |
Liabilities Euros '000 |
Assets Euros '000 |
Liabilities Euros '000 |
||
| Swaps | 46,286 | 113,436 | 51,717 | 122,121 | |
| Others | 119,036 | 102,859 | 5,321 | 261,871 | |
| 165,322 | 216,295 | 57,038 | 383,992 |
The balance Financial assets held to maturity is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Bonds and other fixed income securities | ||
| Issued by public entities | 138,319 | 152,119 |
| Issued by other entities | 297,959 | 359,062 |
| 436,278 | 511,181 |
The analysis of Bonds and other fixed income securities portfolio, net of impairment, included in Financial assets held to maturity, by sector of activity, is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Transports and communications | 176,091 | 173,287 |
| Services | ||
| Financial intermediation | 82,747 | 146,723 |
| Consulting, scientific and technical activities | 39,121 | 39,052 |
| 297,959 | 359,062 | |
| Government and Public securities | 138,319 | 152,119 |
| 436,278 | 511,181 |
As part of the management process of the liquidity risk, the Group holds a pool of eligible assets that can be used as collateral in funding operations with the European Central Bank and other Central Banks in countries were the Group operates, in which are included fixed income securities.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
||
|---|---|---|---|
| Portuguese credit institutions | 33,203 | 46,271 | |
| Foreign credit institutions | 245,639 | 253,478 | |
| Other Portuguese companies | 321,149 | 277,454 | |
| Other foreign companies | 21,822 | 21,663 | |
| 621,813 | 598,866 | ||
| Impairment | (9,006) | - | |
| 612,807 | 598,866 |
The balance Investments in associated companies is analysed as follows:
| Sep 2017 | |||||
|---|---|---|---|---|---|
| Ownership on | Goodwill | ||||
| equity Euros '000 |
Goodwill Euros '000 |
impairment Euros '000 |
Total Euros '000 |
Dec 2016 Euros '000 |
|
| Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. | 290,813 | - | - | 290,813 | 244,497 |
| Banco Millennium Atlântico, S.A. | 112,688 | 98,871 | - | 211,559 | 219,754 |
| Unicre - Instituição Financeira de Crédito, S.A. | 25,767 | 7,436 | - | 33,203 | 46,271 |
| Banque BCP, S.A.S. | 34,080 | - | - | 34,080 | 32,438 |
| SIBS, S.G.P.S, S.A. | 23,269 | - | - | 23,269 | 25,575 |
| Webspectator Corporation | 89 | 18,011 | (9,006) | 9,094 | 18,111 |
| Mundotêxtil - Indústrias Têxteis, S.A. | 6,538 | - | - | 6,538 | 6,854 |
| Banque BCP (Luxembourg), S.A. | - | - | - | - | 1,286 |
| Others | 4,251 | - | - | 4,251 | 4,080 |
| 497,495 | 124,318 | (9,006) | 612,807 | 598,866 |
These investments correspond to unquoted companies. According to the accounting policy described in note 1 b), these investments are measured at the equity method.
The Group's companies included in the consolidation perimeter are presented in note 52.
This balance is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Gross value | ||
| Real estate | ||
| Assets arising from recovered loans results | 1 ,854,280 |
1,798,040 |
| Assets belong to investments funds and | ||
| real estate companies | 548,122 | 529,261 |
| Assets for own use (closed branches) | 73,824 | 77,323 |
| Equipment and other | 31,423 | 31,577 |
| Other assets | 33,757 | 41,537 |
| 2,541,406 | 2,477,738 | |
| Impairment | ||
| Real estate | ||
| Assets arising from recovered loans results | ( 204,262) |
(203,020) |
| Assets belong to investments funds and | ||
| real estate companies | (30,759) | (7,277) |
| Assets for own use (closed branches) | (10,514) | (7,106) |
| Equipment and other | (9,749) | (10,176) |
| (255,284) | (227,579) | |
| 2,286,122 | 2,250,159 |
The assets included in this balance are accounted for in accordance with the accounting policy note 1 k).
The balance Real estate - Assets arising from recovered loans includes, essentially, real estate resulted from recovered loans or judicial auction following the resolution of credit agreements to customers who are accounted following the establishment of the contract or promise of recovered loans and the respective irrevocable power of attorney issued by the client on behalf of the Bank. Additional information on these assets is presented in note 51.
These assets are available for sale in a period less than one year and the Bank has a strategy for its sale, according to the characteristic of each asset. However, taking into account the actual market conditions, it was not possible in all instances to conclude the sales in the expected time. The sale strategy is based in an active search of buyers, with the Bank having a website where advertises these properties and through partnerships with the mediation of companies having more ability for the product that each time the Bank has for sale. Prices are periodically reviewed and adjusted for continuous adaptation to the market.
The Group requests, regularly, to the Bank of Portugal, following the Article 114º of the General Regime of Credit Institutions and Financial Companies, the extension of the period of holding these properties.
The referred balance includes real estate for which the Group has already established contracts for the sale in the amount of Euros 80,726,000 (31 December 2016: Euros 92,682,000), which impairment associated is Euros 4,204,000 (31 December 2016: Euros 17,435,000), that was calculated considering the value of the contracts.
The changes occurred in impairment for non-current assets held for sale are analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Balance on 1 January | 227,579 | 265,170 |
| Transfers | 448 | (13,787) |
| Impairment for the period | 74,551 | 27,374 |
| Write-back for the period | (3,242) | (508) |
| Amounts charged-off | (43,865) | (42,144) |
| Exchange rate differences | (187) | (1,455) |
| Balance on 30 September | 255,284 | 234,650 |
The balance Investment property corresponds to real estate evaluated in accordance with the accounting policy presented in note 1 r), based on independent assessments and compliance with legal requirements.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Gross value | ||
| Land and buildings | 830,375 | 841,497 |
| Equipment | ||
| Furniture | 82,790 | 82,947 |
| Machinery | 44,467 | 44,642 |
| Computer equipment | 294,787 | 286,268 |
| Interior installations | 139,677 | 136,563 |
| Motor vehicles | 27,852 | 24,857 |
| Security equipment | 71,029 | 71,391 |
| Other equipment | 30,221 | 29,696 |
| Work in progress | 16,563 | 16,532 |
| Other tangible assets | 228 | 219 |
| 1,537,989 | 1,534,612 | |
| Accumulated depreciation | ||
| Charge for the period (note 11) | (31,027) | (39,100) |
| Charge for the previous periods | (1,027,987) | (1,021,646) |
| (1,059,014) | (1,060,746) | |
| 478,975 | 473,866 |
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Intangible assets | ||
| Gross value | ||
| Software | 107,122 | 101,739 |
| Other intangible assets | 55,025 | 52,509 |
| 162,147 | 154,248 | |
| Accumulated amortization | ||
| Charge for the period (note 11) | (8,688) | (10,724) |
| Charge for the previous periods | (118,843) | (111,349) |
| (127,531) | (122,073) | |
| 34,616 | 32,175 | |
| Differences arising on consolidation (Goodwill) | ||
| Gross value | ||
| Bank Millennium, S.A. (Poland) | 125,447 | 125,447 |
| Real estate and mortgage credit | 40,859 | 40,859 |
| Others | 21,167 | 31,354 |
| 187,473 | 197,660 | |
| Impairment | ||
| Real estate and mortgage credit | (40,859) | (40,859) |
| Others | (16,670) | (26,870) |
| (57,529) | (67,729) | |
| 129,944 | 129,931 | |
| 164,560 | 162,106 |
The deferred income tax assets and liabilities, are analysed as follows:
| Sep 2017 | Dec 2016 | |||||
|---|---|---|---|---|---|---|
| Assets Euros '000 |
Liabilities Euros '000 |
Net Euros '000 |
Assets Euros '000 |
Liabilities Euros '000 |
Net Euros '000 |
|
| Deferred taxes not depending | ||||||
| on the future profits (a) | ||||||
| Impairment losses | 929,934 | - | 929,934 | 927,675 | - | 927,675 |
| Employee benefits | 789,000 | - | 789,000 | 789,000 | - | 789,000 |
| 1,718,934 | - | 1,718,934 | 1,716,675 | - | 1,716,675 | |
| Deferred taxes depending | ||||||
| on the future profits | ||||||
| Impairment losses | 936,773 | 50,303 | 886,470 | 928,645 | 50,303 | 878,342 |
| Tax losses carried forward | 493,513 | - | 493,513 | 494,785 | - | 494,785 |
| Employee benefits | 35,576 | 4,323 | 31,253 | 60,083 | 27,248 | 32,835 |
| Financial assets available for sale | 20,845 | 23,695 | (2,850) | 60,828 | 5,458 | 55,370 |
| Derivatives | - | 6,980 | (6,980) | - | 7,444 | (7,444) |
| Intangible assets | 39 | - | 39 | 39 | - | 39 |
| Other tangible assets | 11,148 | 3,288 | 7,860 | 8,289 | 3,547 | 4,742 |
| Others | 22,248 | 17,553 | 4,695 | 34,258 | 27,366 | 6,892 |
| 1,520,142 | 106,142 | 1,414,000 | 1,586,927 | 121,366 | 1,465,561 | |
| Total deferred taxes | 3,239,076 | 106,142 | 3,132,934 | 3,303,602 | 121,366 | 3,182,236 |
| Offset between deferred tax assets | ||||||
| and deferred tax liabilities | (103,907) | (103,907) | - | (118,677) | (118,677) | - |
| Net deferred taxes | 3,135,169 | 2,235 | 3,132,934 | 3,184,925 | 2,689 | 3,182,236 |
The Extraordinary General Meeting of the Bank, held on 15 October 2014, approved the Bank's adherence to the special regime applicable to deferred tax assets, approved by Law no. 61/2014, of August 26, applicable to expenses and negative equity variations recorded in taxable periods beginning on or after 1 January 2015 and the deferred tax assets that are recorded in the annual accounts of the taxpayer to the last period prior to that date and the taxation of the expenses and negative equity variations that are associated with them. Pursuant to Law no. 23/2016, of 19 August, this special regime is not apply to expenses and negative equity changes recorded in the tax periods beginning on or after 1 January 2016, or to tax assets associated with them.
The Law no. 61/2014, of 26 August, provides an optional framework with the possibility of subsequent resignation, according to which, in certain situations (those of negative net result in individual annual accounts or liquidation by voluntary dissolution, insolvency decreed in court or revocation of the respective authorization), there will be a conversion into tax credits of the deferred tax assets that have resulted from the non-deduction of expenses and reductions in the value of assets resulting from impairment losses on credits and from post-employment or long-term employee benefits. In this case, it should be constituted a special reserve corresponding to 110% of its amount, which implies the simultaneous constitution of conversion rights attributable to the State of equivalent value, which rights can be acquired by the shareholders through payment to the State of that same amount. Tax credits can be offset against tax debts of the beneficiaries (or from an entity based in Portugal of the same prudential consolidation perimeter) or reimbursable by the State. Under the regime described, the recovery of deferred tax assets covered by the optional regime approved by Law no. 61/2014, of 26 August, is not dependent on future profits.
The above-mentioned legal framework was densified by ordinance no. 259/2015, of 4 October, about the control and use of tax credits, and by the ordinance No. 293-A / 2016, of 18 November, which establishes the conditions and procedures for the acquisition by the shareholders of the referred rights of the State. According to this legislation, among other aspects, these rights are subject to a right of acquisition by the shareholders on the date of creation of the rights of the State, exercisable in periods that will be established by the Board of Directors until 10 years after the date of its creation, and the issuing bank shall deposit in the name of the State the amount of the price corresponding to all the rights issued, within 3 months of date of its creation, in advance and independently of its acquisition. Such deposit shall be redeemed when and to the extent that the rights of the State are acquired by the shareholders, or exercised by the State.
Deferred taxes are calculated based on the tax rates expected to be in force when the temporary differences are reversed, which correspond to the approved rates or substantively approved at the balance sheet date. The deferred tax assets and liabilities are presented on a net basis whenever, in accordance with applicable law, current tax assets and current tax liabilities can be offset and when the deferred taxes are related to the same tax.
The deferred tax rate for Banco Comercial Português, S.A. is analysed as follows:
| Description | Sep 2017 | Dec 2016 |
|---|---|---|
| Income tax | 21% | 21% |
| Municipal surtax rate | 1.5% | 1.5% |
| State tax rate | 7% | 7% |
| Total | 29.5% | 29.5% |
The tax applicable to deferred taxes related to tax losses of the Bank is 21% (31 December 2016: 21%).
The average deferred tax rate associated with temporary differences of the Bank is 29.43% (31 December 2016: 29.43%). The income tax rate in the other main countries where the Group operates is 19% in Poland, 32% in Mozambique, 0% (exemption) in the Cayman Islands and 24.24% in Switzerland.
The reporting period of tax losses in Portugal is 5 years for the losses of 2012, 2013 and 2017 and 12 years for the losses of 2014, 2015 and 2016. In Poland, the term is 5 years, in Mozambique it is 5 years and in Switzerland it is 7 years.
In 2016, Banco Comercial Português, S.A. opted for the Special Regime for Taxation of Groups of Companies (RETGS).
The balance of deferred tax assets, with reference to 30 September 2017, related to expenses and negative equity variations with post-employment or long-term employee benefits and to specific credit impairment losses registered up to 31 December 2014 amounts to Euros 1,640,215,000, of which Euros 210,686,000 and Euros 4,020,000 were recorded in 2015 and 2016, respectively, assets which are considered eligible for the scheme approved by Law no. 61/2014, of 26 August.
The differed income tax assets associated to tax losses carried forward, by expire date, is presented as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Maturity | Euros '000 | Euros '000 |
| 2018 | 2,702 | 4,069 |
| 2019-2025 | 99 | 4 |
| 2026 | 212,833 | 201,812 |
| 2028 and following | 277,879 | 288,900 |
| 493,513 | 494,785 |
Regarding the activity in Portugal, the specific rules regarding the tax regime for credit impairment and guarantees for the tax periods beginning on or after 1 January 2017 are not defined, since the reference to the Bank of Portugal Notice No. 3/95 was only applicable until 31 December 2016 and the regime that will be effective as at 1 January 2017 has not yet been defined. In this context, the Bank is considering, for the purpose of calculating taxable income and the deferred tax recording with reference to 30 September 2017, that the impairment of the credit and guarantees recorded which is deductible for IRC purpose is limited to the amount of the deductible provisions that would have been verified if the Bank of Portugal Notice No. 3/95 still remained in force.
In the projections of future taxable income, the Executive Committee considered the approximation between the tax rules and accounting rules underlying a bill amending article 28-C of the IRC Code and publicly referred to by the Secretary of State of Fiscal Issues in office until July 13, 2017, on the understanding that it is probable the approval of a diploma without substantial changes in relation to the referred bill.
Briefly, in accordance with referred bill, the impairment losses resulting from individual analysis are deductible up to the amount corresponding to the application of the maximum reference percentages set by the Bank of Portugal (provided in the Circular Letter n. 2/2014) on the value of the exposure not covered by assets given as collateral for the respective payment and impairment losses resulting from a collective analysis are deductible at 75% of the amount of the difference, when positive, calculated annually between the accumulated amount of these losses and the balance that has been accepted for tax purposes in previous taxation years, with a transition period of 15 years with increasing percentages for the tax deductibility of impairment losses for credit and guarantees not accepted fiscally until 31 December 2016 and which become deductible under the terms provided in the bill. In this context, in the projections of future taxable income, were considered the scenario in which the impairment losses resulting from individual analysis are fully deductible.
Additionally, as part of the analysis of the recoverability of deferred tax assets, the Bank prepared a sensitivity analysis on the assumption of future maintenance of the tax regime applicable to impairment for credit and guarantees that was in force in 2016 (Bank of Portugal Notice No 3/95). According to this sensitivity analysis, the Bank also concluded the recoverability of all deferred tax assets recorded as at 30 September 2017.
In accordance with the accounting policy 1 ad. ii), and with the requirements of IAS 12, the deferred tax assets were recognized based on the Group's expectation of their recoverability.
The recoverability of deferred taxes depends on the implementation of the strategy of the Bank's Board of Directors, namely the generation of estimated taxable income and its interpretation of tax legislation. Any changes in the assumptions used in estimating future profits or tax legislation may have material impacts on deferred tax assets.
The assessment of the recoverability of deferred tax assets was carried out for each entity included in the Group's consolidation perimeter based on the respective financial statements prepared under the budget process for 2017 and which support future taxable income for each Group's entity considering the macroeconomic and competitive environment, at the same time that incorporate the Group's strategic priorities.
The projections made take into consideration, in addition to the Group's strategic priorities, certain assumptions of the Funding and Capital Plan requested by Bank of Portugal, namely in terms of interest rate evolution, and are globally consistent with the Reduction Plan of Non-Performing Assets 2017-2021 sent it to the supervisory entity, underlining:
Improvement of the net interest income, considering interest rate curves used under the scope of the projections of net interest income in line with the market forecasts;
Stabilization of the ratio loans and advances over the balance sheet resources from customer by approximately 100%, simultaneously with a reduction of NPE of loans and advances in Portugal;
Decrease in the cost of risk, supported by the expectation of a gradual recovery of economic activity, consubstantiating a stabilization of the business risk, as well as the reduction of the non-core portfolio. In this way, the gradual convergence of the cost of credit risk (up to 2021) is estimated to be close to those currently observed in other European countries, including in the Iberian Peninsula.
Control of the operating expenses, in line with the targets defined in the Group's strategic priorities;
Positive net results, projecting the favourable evolution of the ROE and maintaining of the CET1 ratio fully implemented at levels appropriate to the requirements and benchmarks. From 2021 onwards, it is estimated an annual growth of the RAI, which reflects a partial convergence to the estimated Cost of Equity.
Additionally, the deductions related to impairment of financial assets were projected based on the destination (sale or settlement) and the estimated date of the respective operations. The deductions related to employee benefits are projected based on their estimated payments or deduction plans, in accordance with information provided by the actuary of the pension fund.
The analyses made allow the conclusion of the recoverability of the total deferred tax assets recognised as at 30 September 2017.
| Tax losses carried forward | Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|---|---|---|
| 2017 | 2,418 | 2,453 |
| 2018 | 1,595 | 1,594 |
| 2019-2025 | 8,739 | 3 |
| 2026 | 878 | 917 |
| 2027 and following | 241,044 | 172,552 |
| 254,674 | 177,519 |
The impact of income taxes in Net income / (loss) and in other captions of Group's equity, as at 30 September 2017, is analysed as follows:
| Sep 2017 | |||
|---|---|---|---|
| Net income / (loss) for the period Euros '000 |
Reserves and retained earnings Euros '000 |
Exchange differences Euros '000 |
|
| Deferred taxes | |||
| Deferred taxes not depending | |||
| on the future profits (a) | |||
| Impairment losses | 2,259 | - | - |
| 2,259 | - | - | |
| Deferred taxes depending | |||
| on the future profits | |||
| Impairment losses | 8,248 | - | (120) |
| Tax losses carried forward | (825) | (745) | 298 |
| Employee benefits | 6,511 | (7,781) | (312) |
| Financial assets available for sale | - | (60,176) | 1,956 |
| Derivatives | 654 | - | (190) |
| Other tangible assets | 3,083 | - | 35 |
| Others | (210) | - | (1,987) |
| 17,461 | (68,702) | (320) | |
| 19,720 | (68,702) | (320) | |
| Current taxes | |||
| Actual period | (84,413) | 7 | - |
| Correction of previous periods | 1,582 | - | - |
| (82,831) | 7 | - | |
| (63,111) | (68,695) | (320) |
(a) Deferred tax related to expenses and negative equity variations covered by the special arrangements for deferred tax assets (Law No. 61/2014 of 26 August). Under the Law No. 23/2016 of 19 August, this special scheme is not applicable to expenses and negative equity variations accounted in the taxable periods beginning on or after 1 January 2016, neither to deferred tax assets associated with them.
The impact of income taxes in Net income / (loss) and in other captions of Group's equity, as at 30 September 2016, is analysed as follows:
| Sep 2016 | ||||
|---|---|---|---|---|
| Net income / (loss) for the period Euros '000 |
Reserves and retained earnings Euros '000 |
Exchange differences Euros '000 |
Discontinued operations and other variations Euros '000 |
|
| Deferred taxes | ||||
| Deferred taxes not depending | ||||
| on the future profits (a) | ||||
| Impairment losses | 376,757 | (418,125) | - | - |
| Employee benefits | 20,514 | 1,380 | - | - |
| 397,271 | (416,745) | - | - | |
| Deferred taxes depending | ||||
| on the future profits | ||||
| Impairment losses | (363,143) | 439,171 | (1,684) | 13,683 |
| Tax losses carried forward | 114,813 | (18,052) | (51) | - |
| Employee benefits | 3,333 | 38,727 | 781 | - |
| Financial assets available for sale | - | 45,897 | (4,908) | - |
| Derivatives | 1,051 | - | (887) | - |
| Other tangible assets | 965 | - | (24) | - |
| Others | (9,540) | - | 1,699 | (511) |
| (252,521) | 505,743 | (5,074) | 13,172 | |
| 144,750 | 88,998 | (5,074) | 13,172 | |
| Current taxes | ||||
| Actual period | (77,368) | 226 | - | 2 |
| Correction of previous periods | 831 | (63) | - | - |
| (76,537) | 163 | - | 2 | |
| 68,213 | 89,161 | (5,074) | 13,174 |
(a) Deferred tax related to expenses and negative equity variations covered by the special arrangements for deferred tax assets (Law No. 61/2014 of 26 August). Under the Law No. 23/2016 of 19 August, this special scheme is not applicable to expenses and negative equity variations accounted in the taxable periods beginning on or after 1 January 2016, neither to deferred tax assets associated with them.
The reconciliation between the nominal tax rate and the effective tax rate is analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Net income / (loss) before income taxes | 271,198 | (263,487) |
| Current tax rate (%) | 29.5% | 29.5% |
| Expected tax | (80,003) | 77,729 |
| Non-deductible impairment | 11,141 | (8,305) |
| Contribution to the banking setor | (15,403) | (7,322) |
| Results of companies consolidated by the equity method | 16,753 | 17,879 |
| Other accruals for the purpose of calculating the taxable income | (28,166) | (18,627) |
| Employees' benefits | 17,002 | - |
| Effect of difference of rate tax and deferred tax | ||
| not recognised previously | 13,923 | (3,162) |
| Correction of previous periods | 2,965 | 11,387 |
| (Autonomous tax) / tax credits | (1,323) | (1,366) |
| Total | (63,111) | 68,213 |
| Effective rate | 23.3% | 25.9% |
This balance is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Deposit account applications | 126,428 | 280,675 |
| Associated companies | 569 | 6,247 |
| Subsidies receivables | 6,521 | 5,084 |
| Prepaid expenses | 34,239 | 31,662 |
| Debtors for futures and options transactions | 104, 122 |
49,422 |
| Debtors | ||
| Residents | ||
| Insurance activity | 3,471 | 4,386 |
| Advances to suppliers | 1,031 | 1,663 |
| SIBS | 6,746 | 6,340 |
| Prosecution cases / agreements with the Bank | 1 1,688 |
11,481 |
| Receivables from real estate, transfers | ||
| of assets and other securities | 48,224 | 55,693 |
| Others | 88,124 | 81,432 |
| Non-residents | 23,486 | 26,014 |
| Receivable dividends | - | 18,063 |
| Interest and other amounts receivable | 43,701 | 47,763 |
| Amounts receivable on trading activity | 173,450 | 37,223 |
| Gold and other precious metals | 3,600 | 3,635 |
| Other financial investments | 6,086 | 20,426 |
| Other recoverable tax | 24,249 | 24,558 |
| Artistic patrimony | 28,850 | 28,811 |
| Capital supplementary contributions | 7,941 | 7,648 |
| Reinsurance technical provision | 16,470 | 11,999 |
| Obligations with post-employment benefits | 163,702 | 31,681 |
| Capital supplies | 219,575 | 214,810 |
| Amounts due for collection | 29,303 | 29,618 |
| Amounts due from customers | 217,054 | 227,376 |
| Sundry assets | 114,155 | 91,493 |
| 1,502,785 | 1,355,203 | |
| Impairment for other assets | (295,361) | (267,389) |
| 1,207,424 | 1,087,814 |
The balance Deposit account applications includes the amount of Euros 6,954,000 (31 December 2016: Euros 3,726,000) related to the irrevocable commitment payment to the Single Resolution Fund, as referred in note 8.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Resources and other financing from Central Banks | ||
| Bank of Portugal | 3,986,254 | 4,851,574 |
| Central Banks abroad | 101,274 | 300,098 |
| 4,087,528 | 5,151,672 | |
| Resources from credit institutions in Portugal | ||
| Sight deposits | 104,951 | 126,260 |
| Term Deposits | 114,122 | 428,861 |
| Loans obtained | 1,105 | 2,978 |
| Other resources | 1,780 | 1,240 |
| 221,958 | 559,339 | |
| Resources from credit institutions abroad | ||
| Very short-term deposits | 3 | 11 |
| Sight deposits | 170,378 | 151,516 |
| Term Deposits | 501,316 | 240,712 |
| Loans obtained | 1,758,066 | 1,450,724 |
| Sales operations with repurchase agreement | 2,432 ,649 |
2,317,772 |
| Other resources | 13,616 | 66,649 |
| 4,876,028 | 4,227,384 | |
| 9,185,514 | 9,938,395 |
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Deposits from customers: | ||
| Repayable on demand | 24,555,007 | 22,017,099 |
| Term deposits | 19,778,387 | 20,459,067 |
| Saving accounts | 3,002,404 | 2,841,677 |
| Deposits at fair value through profit and loss | 2, 864,770 |
2,985,741 |
| Treasury bills and other assets sold | ||
| under repurchase agreement | 120,322 | 137,707 |
| Cheques and orders to pay | 358,907 | 320,159 |
| Others | 10,562 | 36,197 |
| 50,690,359 | 48,797,647 |
In the terms of the Law, the Deposit Guarantee Fund was established to guarantee the reimbursement of funds deposited in Credit Institutions. The criteria to calculate the annual contributions to the referred fund are defined in the Regulation no. 11/94 of the Bank of Portugal. The contribution to the Deposit Guarantee Fund, as at 30 September 2017, amounts to Euros 20,385,000 (note 8).
The caption Deposits from customers - Deposits at fair value through profit and loss is measured at fair value in accordance with internal valuation techniques considering mainly observable internal inputs. In accordance with the hierarchy of the valuation sources,.
The nominal amount of the caption Deposits from customers - Deposits at fair value through profit and loss amounts to, as at 30 September 2017, Euros 2,864,000,000 (31 December 2016: Euros 2,992,567,000).
| This balance is analysed as follows: | Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|---|---|---|
| Debt securities at amortized cost | ||
| Bonds | 826,790 | 967,289 |
| Covered bonds | 992,708 | 926,793 |
| MTNs | 10,638 | 415,460 |
| Securitizations | 350,457 | 382,412 |
| 2,180,593 | 2,691,954 | |
| Accruals | 6,541 | 35,202 |
| 2,187,134 | 2,727,156 | |
| Debt securities at fair value through profit and loss | ||
| Bonds | 21,953 | 38,709 |
| MTNs | 162,391 | 157,873 |
| 184,344 | 196,582 | |
| Accruals | 1,941 | 3,566 |
| 186,285 | 200,148 | |
| Certificates at fair value through profit and loss | 7 22,762 |
585,516 |
| 3,096,181 | 3,512,820 |
As referred in note 46, Banco Comercial Português, S.A. issued covered mortgage bonds, under its Covered Bond Program, with subscription date on 31 May.
The issue, in the amount of Euros 1,000 million, has a term of 5 years, an issuance price of 99.386% and an annual interest rate of 0.75%, reflecting a spread of 65 basis points over 5-year swaps.
The balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Short selling securities | 49,066 | 24,228 |
| Trading derivatives (note 23): | ||
| Swaps | 388,687 | 498,702 |
| Options | 3,926 | 4,457 |
| Embedded derivatives | 10,422 | 6,111 |
| Forwards | 7,116 | 6,225 |
| Others | 2,589 | 7,864 |
| 412,740 | 523,359 | |
| 461,806 | 547,587 |
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Provision for guarantees and other commitments (note 22) | 131,719 | 128,056 |
| Technical provision for the insurance activity | ||
| For direct insurance and reinsurance accepted | ||
| Unearned premium | 9,357 | 10,490 |
| Life insurance | 34,988 | 34,751 |
| For participation in profit and loss | 4,088 | 431 |
| Other technical provisions | 22,175 | 15,816 |
| Other provisions for liabilities and charges | 138,662 | 131,506 |
| 340,989 | 321,050 |
Changes in Provision for guarantees and other commitments are analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Balance on 1 January | 128,056 | 74,710 |
| Transfers resulting from changes in the | ||
| Group's structure | - | (930) |
| Charge for the period (note 14) | 16,494 | 28,271 |
| Write-back for the period (note 14) | (12,908) | (5,927) |
| Exchange rate differences | 77 | (2,163) |
| Balance on 30 September | 131,719 | 93,961 |
Changes in Other provisions for liabilities and charges are analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Balance on 1 January | 131,506 | 136,908 |
| Transfers resulting from changes in the | ||
| Group's structure | 3 | (1,879) |
| Other transfers | (523) | 14,282 |
| Charge for the period (note 14) | 16,054 | 8,329 |
| Write-back for the period (note 14) | (1,262) | (11,736) |
| Amounts charged-off | (7,294) | (15,508) |
| Exchange rate differences | 178 | (1,828) |
| Balance on 30 September | 138,662 | 128,568 |
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Bonds | ||
| Non Perpetual | 813,851 | 804,547 |
| Perpetual | 27,119 | 28,955 |
| CoCos | - | 703,421 |
| 840,970 | 1,536,923 | |
| Accruals | 17,197 | 7,632 |
| 858,167 | 1,544,555 |
The balance Subordinated debt - CoCos corresponds to hybrids subordinated debt instruments that qualify as Core Tier I Capital, issued on 29 June 2012, by Banco Comercial Português, S.A. with an initial amount of Euros 3,000,000,000 and fully subscribed by the Portuguese State. These instruments are fully reimbursable by the Bank through a five years period and only in specific circumstances, such as delinquency or lack of payment are susceptible of being converted in Bank's ordinary shares.
The referred instruments were issued under the scope of the recapitalisation program of the bank, using the Euros 12,000,000,000 line made available by the Portuguese State, under the scope of the IMF intervention program, in accordance with the Law no. 150-A/2012. Following the restructuring process agreed with DGComp, these instruments are eligible for prudential effects as Core Tier I. However, under the IAS 32 - Financial Instruments: Presentation for accounting purposes, these instruments are classified as liability according to its characteristics, namely: (i) mandatory obligation to pay capital and interests; and (ii) in case of settlement through the delivery of equity securities, the number of securities to delivery is depending on the market value at the date of conversion, in order to have the value of the bond settled.
Thus, the classification as liability results from the fact that the investor, as holder of the instrument issued, is not exposed to the company equity instruments risk, and will always receive the equivalent amount of the value invested, in cash or in ordinary shares of the Bank. The operation has an increasing interest rate beginning in 8.5% and ending at the maturity at 10% in 2017.
Throughout 2014 and following the capital increase and the assessment of the evolution of capital ratios, the Bank repaid in May the amount of Euros 400,000,000 of core tier I capital instruments (CoCos) issued by the Portuguese State, and in August 2014 repaid Euros 1,850,000,000 of common equity tier I capital instruments (CoCos), after having received the authorization from the Bank of Portugal.
Under the Restructuring Plan approved by the European Commission following the injection of State funds in June 2012, Banco Comercial Português, S.A. became bound to a compromise catalogue that includes the need to sell its holding in Bank Millennium S.A. (Poland) if outstanding Core Tier 1 hybrid capital instruments subscribed by the Portuguese State ("CoCos") exceed Euros 700,000,000 as at 31 December 2016. Thus, the Bank repaid Euros 50,000,000 of CoCos during December 2016, thus meeting once again the deadlines established under the CoCos repayment plan agreed with the European Commission.
As referred in note 46, Banco Comercial Português, S.A. has proceeded, on 9 February 2017, to the early repayment to the Portuguese state of the remaining Core Tier 1 hybrid capital instruments, in the amount of Euros 700 million. This repayment, key to the return to normalisation of BCP's activity, was previously approved by the European Central Bank, subject to the success of the rights issue completed in this date.
As at 30 September 2017, the subordinated debt issues are analysed as follows:
| Issue | Issue date |
Maturity date |
Interest rate | Nominal value Euros '000 |
Book value Euros '000 |
Own funds value Euros '000 |
|---|---|---|---|---|---|---|
| Non Perpetual Bonds | ||||||
| Banco Comercial Português: | ||||||
| Mbcp Ob Cx Sub 1 Serie 2008-2018 | September, 2008 September, 2018 (i) See reference (viii) | 52,445 | 52,445 | 5,130 | ||
| Mbcp Ob Cx Sub 2 Serie 2008-2018 | October, 2008 | October, 2018 (ii) | See reference (viii) | 14,887 | 14,887 | 1,612 |
| Bcp Ob Sub Jun 2020 - Emtn 727 | June, 2010 | June, 2020 (iii) | See reference (ix) | 14,791 | 14,791 | 2,210 |
| Bcp Ob Sub Aug 2020 - Emtn 739 | August, 2010 | August, 2020 (iv) | See reference (x) | 9,278 | 9,278 | 758 |
| Bcp Ob Sub Mar 2021 - Emtn 804 | March, 2011 | March, 2021 | Euribor 3M + 3.75% | 114,000 | 114,000 | 79,673 |
| Bcp Ob Sub Apr 2021 - Emtn 809 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 64,100 | 64,100 | 44,906 |
| Bcp Ob Sub 3S Apr 2021 - Emtn 812 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 35,000 | 35,000 | 24,908 |
| Bcp Sub 11/25.08.2019 - Emtn 823 | August, 2011 | August, 2019 | Fixed rate 6.383% | 7,500 | 7,879 | 2,854 |
| Bcp Subord Sep 2019 - Emtn 826 | October, 2011 | September, 2019 | Fixed rate 9.31% | 50,000 | 54,912 | 19,944 |
| Bcp Subord Nov 2019 - Emtn 830 | November, 2011 | November, 2019 | Fixed rate 8.519% | 40,000 | 43,908 | 16,844 |
| Mbcp Subord Dec 2019 - Emtn 833 | December, 2011 | December, 2019 | Fixed rate 7.15% | 26,600 | 29,501 | 11,660 |
| Mbcp Subord Jan 2020 - Emtn 834 | January, 2012 | January, 2020 | Fixed rate 7.01% | 14,000 | 15,246 | 6,401 |
| Mbcp Subord Feb 2020 - Vm Sr. 173 | April, 2012 | February, 2020 | Fixed rate 9% | 23,000 | 24,463 | 11,091 |
| Bcp Subord Apr 2020 - Vm Sr 187 | April, 2012 | April, 2020 | Fixed rate 9.15% | 51,000 | 53,911 | 25,585 |
| Bcp Subord 2 Serie Apr 2020 - Vm 194 | April, 2012 | April, 2020 | Fixed rate 9% | 25,000 | 26,377 | 12,667 |
| Bcp Subordinadas Jul 20-Emtn 844 | July, 2012 | July, 2020 | Fixed rate 9% | 26,250 | 27,181 | 14,467 |
| Bank Millennium: | ||||||
| MB Finance AB | December, 2007 | December, 2017 | Euribor 6M + 2% | 150,157 | 150,157 | 6,674 |
| BCP Finance Bank: | ||||||
| BCP Fin Bank Ltd EMTN - 828 | October, 2011 | October, 2021 | Fixed rate 13% | 94,280 | 75,771 | 18,413 |
| Magellan No. 3: | ||||||
| Magellan No. 3 Series 3 Class F | June, 2005 | May, 2058 | - | 44 | 44 | - |
| 813,851 | 305,797 | |||||
| Perpetual Bonds | ||||||
| Obrigações Caixa Perpétuas | ||||||
| Subord 2002/19jun2012 | June, 2002 | See reference (v) | See reference (xi) | 85 | 69 | - |
| TOPS BPSM 1997 | December, 1997 | See reference (vi) | Euribor 6M + 0,9% | 22,035 | 22,064 | 22,035 |
| BCP Leasing 2001 | December, 2001 | See reference (vii) | Euribor 3M + 2,25% | 4,986 | 4,986 | 4,986 |
| 27,119 | 27,021 | |||||
| Accruals | 17,197 | - | ||||
| 858,167 | 332,818 | |||||
References:
Date of exercise of the next call option - It is considered the first date after the end of the restructuring period (31 December 2017). Subject to prior approval of the Supervisory Authorities.
(i) March 2018; (ii) - April 2018; (iii) - June 2018; (iv) - February 2018; (v) - March 2018; (vi) - June 2018 ; (vii) March 2018
Interest rate
(viii) - 1st year 6%; 2nd to 5th year Euribor 6M + 1%; 6th year and following Euribor 6M + 1.4%;
(ix) - Until the 5th year Fixed rate 3.25%; 6th year and following years Euribor 6M + 1%;
(x) - 1st year: 3%; 2nd year 3.25%; 3rd year 3.5%; 4th year 4%; 5th year 5%; 6th year and following Euribor 6M + 1.25%;
(xi) - Until 40th coupon 6.131%; After 40th coupon Euribor 3M + 2.4%.
As at 31 December 2016, the subordinated debt issues are analysed as follows:
| Own funds | ||||||
|---|---|---|---|---|---|---|
| Issue | Issue date |
Maturity date |
Interest rate | Nominal value Euros '000 |
Book value Euros '000 |
value Euros '000 |
| Non Perpetual Bonds | ||||||
| Banco Comercial Português: | ||||||
| MBCP Ob Cx Sub 1 Serie 2008-2018 | September, 2008 September, 2018 (i) See reference (viii) | 52,587 | 52,587 | 7,740 | ||
| MBCP Ob Cx Sub 2 Serie 2008-2018 | October, 2008 | October, 2018 (ii) | See reference (viii) | 14,887 | 14,887 | 2,357 |
| BCP Ob Sub jun 2020 - EMTN 727 | June, 2010 | June, 2020 (iii) | See reference (ix) | 14,791 | 14,791 | 1,471 |
| BCP Ob Sub ago 2020 - EMTN 739 | August, 2010 | August, 2020 (iv) | See reference (x) | 9,278 | 9,278 | 1,222 |
| BCP Ob Sub mar 2021 - EMTN 804 | March, 2011 | March, 2021 | Euribor 3M + 3.75% | 114,000 | 114,000 | 96,773 |
| BCP Ob Sub abr 2021 - EMTN 809 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 64,100 | 64,100 | 54,521 |
| BCP Ob Sub 3S abr 2021 - EMTN 812 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 35,000 | 35,000 | 30,158 |
| BCP Sub 11/25.08.2019 - EMTN 823 | August, 2011 | August, 2019 | Fixed rate 6.383% | 7,500 | 8,011 | 3,979 |
| BCP Subord set 2019 - EMTN 826 | October, 2011 | September, 2019 | Fixed rate 9.31% | 50,000 | 53,933 | 27,444 |
| BCP Subord nov 2019 - EMTN 830 | November, 2011 | November, 2019 | Fixed rate 8.519% | 40,000 | 42,675 | 22,844 |
| MBCP Subord dez 2019 - EMTN 833 | December, 2011 | December, 2019 | Fixed rate 7.15% | 26,600 | 28,260 | 15,650 |
| MBCP Subord jan 2020 - EMTN 834 | January, 2012 | January, 2020 | Fixed rate 7.01% | 14,000 | 14,490 | 8,501 |
| MBCP Subord fev 2020 - Vm Sr. 173 | April, 2012 | February, 2020 | Fixed rate 9% | 23,000 | 23,730 | 14,541 |
| BCP Subord abr 2020 - Vm Sr 187 | April, 2012 | April, 2020 | Fixed rate 9.15% | 51,000 | 52,485 | 33,235 |
| BCP Subord 2 Serie abr 2020 - Vm 194 | April, 2012 | April, 2020 | Fixed rate 9% | 25,000 | 25,650 | 16,417 |
| BCP Subordinadas jul 20-EMTN 844 | July, 2012 | July, 2020 | Fixed rate 9% | 26,250 | 26,370 | 18,404 |
| Bank Millennium: | ||||||
| MB Finance AB | December, 2007 | December, 2017 | Euribor 6M + 2% | 150,466 | 150,466 | 29,257 |
| BCP Finance Bank: | ||||||
| BCP Fin Bank Ltd EMTN - 828 | October, 2011 | October, 2021 | Fixed rate 13% | 94,413 | 73,791 | 19,470 |
| Magellan No. 3: | ||||||
| Magellan No. 3 Series 3 Class F | June, 2005 | May, 2058 | - | 44 | 44 | - |
| 804,548 | 403,984 | |||||
| Perpetual Bonds | ||||||
| Obrigações Caixa Perpétuas | ||||||
| Subord 2002/19jun2012 | June, 2002 | See reference (v) | See reference (xi) | 95 | 75 | - |
| TOPS BPSM 1997 | December, 1997 | See reference (vi) | Euribor 6M + 0.9% | 23,216 | 23,332 | 23,216 |
| BCP Leasing 2001 | December, 2001 | See reference (vii) | Euribor 3M + 2.25% | 5,548 | 5,548 | 5,548 |
| 28,955 | 28,764 | |||||
| CoCos | ||||||
| BCP Coco Bonds 12/29.06.2017 | December, 2001 | June, 2017 | See reference (xii) | 700,000 | 703,420 | 700,000 |
| Accruals | 7,632 | - | ||||
| 1,544,555 | 1,132,748 |
Date of exercise of the next call option - It is considered the first date after the end of the restructuring period (31 December 2017). Subject to prior approval of the Supervisory Authorities.
(i) March 2018; (ii) - April 2018; (iii) - June 2018; (iv) - February 2018; (v) - March 2018; (vi) - June 2018; (vii) March 2018
(viii) - 1st year 6%; 2nd to 5th year Euribor 6M + 1%; 6th year and following Euribor 6M + 1.4%;
(ix) - Until the 5th year Fixed rate 3.25%; 6th year and following years Euribor 6M + 1%;
(x) - 1st year: 3%; 2nd year 3.25%; 3rd year 3.5%; 4th year 4%; 5th year 5%; 6th year and following Euribor 6M + 1.25%;
(xi) - Until 40th coupon 6.131%; After 40th coupon Euribor 3M + 2.4%;
(xii) - 1st year: 8.5%; 2nd year 8.75%; 3rd year 9%; 4th year 9.5%; 5th year 10%.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Creditors: | ||
| Suppliers | 28,435 | 28,430 |
| From factoring operations | 13,684 | 13,717 |
| Deposit account applications and others applications | 67,003 | 23,615 |
| Associated companies | 9 | 108 |
| For futures and options transactions | 8,030 | 6,517 |
| For direct insurance and reinsurance operations | 7,342 | 9,853 |
| Obligations not covered by the Group Pension | ||
| Fund - amounts payable by the Group | 27,076 | 47,989 |
| Other creditors | ||
| Residents | 31,666 | 51,241 |
| Non-residents | 36,637 | 36,573 |
| Negative equity in associated companies | ||
| Luanda Waterfront Corporation | 14,110 | 9,473 |
| Nanium, S.A. | - | 2,367 |
| Holiday pay and subsidies | 68,112 | 50,910 |
| Interests and other amounts payable | 16,786 | 65,147 |
| Operations to be settled - foreign, transfers | ||
| and deposits | 275,030 | 301,696 |
| Amounts payable on trading activity | 126,496 | 803 |
| Other administrative costs payable | 2,838 | 2,856 |
| Deferred income | 65,627 | 10,930 |
| Loans insurance received and to amortized | 55,469 | 52,164 |
| Public sector | 30,523 | 32,643 |
| Other liabilities | 196,429 | 168,496 |
| 1,071,302 | 915,528 |
The Bank's share capital, as at 30 September 2017, amounts to Euros 5,600,738,053.72 and is represented by 15,113,989,952 ordinary, book-entry and nominates shares, without nominal value, which is fully paid.
As referred in note 46, the Board of Directors of BCP has resolved on 9 January 2017, to increase the share capital of BCP from Euros 4,268,817,689.20 to Euros 5,600,738,053.72, through an offering to existing holders of BCP's ordinary shares pursuant to their respective pre-emption rights, and other investors who acquire subscription rights, to subscribe for 14,169,365,580 new ordinary, book entry and registered shares, without nominal value. The resulting number of BCP ordinary shares is 15,113,989,952.
In November 2016, and in accordance with the resolution of the General Meeting of Shareholders of 21 April 2016 to suppress the pre-emptive right of the shareholders, the Board of Directors of BCP has approved a resolution for the increase of BCP's share capital, from Euros 4,094,235,361.88 to Euros 4,268,817,689.20, by way of a private placement of 157,437,395 new shares offered for subscription by Chiado at a subscription price of Euros 1.1089 per new share.
In October 2016, Banco Comercial Português proceeded with a reverse stock split, without decrease of the share capital, of the shares representing the Bank's share capital, by applying a regrouping ratio of 1:75, every 75 shares prior to the reverse split corresponding to 1 share thereafter, which is applicable to all the shares, in the same proportion. Thus, BCP's share capital at that date, in the amount of Euros 4,094,235,361.88, was represented by 787,186,977 shares.
The share premium amounts to Euros 16,470,667.11, corresponding to the difference between the issue price (Euros 0.0834 per share) and the issue value (Euros 0.08 per share) determined under the scope of the Exchange Offer occurred in June 2015.
As at 30 September 2017, the balance preference shares amounts to Euros 59,910,000.
The preference shares includes two issues by BCP Finance Company Ltd which considering the rules established in IAS 32 and in accordance with the accounting policy presented in note 1 h), were considered as equity instruments. The issues are analysed as follows:
The balance Other equity instruments, in the amount of Euros 2,922,000 includes 2,922 perpetual subordinated debt securities with conditional coupons, issued on 29 June 2009, with a nominal value of Euros 1,000 each.
Banco Comercial Português, S.A. issued on 29 June 2012 hybrids subordinated debt instruments qualified as Core Tier I Capital, (CoCos) fully subscribed by the Portuguese State. These instruments are fully reimbursable by the Bank through a five years period and only in specific circumstances, such as delinquency or lack of payment are susceptible of being converted in Bank's ordinary shares.
These instruments are eligible for prudential effects as Core Tier I. However, under the IAS 32 - Financial Instruments: Presentation for accounting purposes, these instruments are classified as liability (note 38) according to its characteristics, namely: (i) mandatory obligation to pay capital and interests; and (ii) in case of settlement through the delivery of equity securities, the number of securities to delivery is depending on the market value at the date of conversion, in order to have the value of the bond settled. Thus, the classification as liability results from the fact that the investor, as holder of the instrument issued, is not exposed to the company equity instruments risk, and will always receive the equivalent amount of the value invested, in cash or in ordinary shares of the Bank.
Under the Restructuring Plan approved by the European Commission following the injection of State funds in June 2012, Banco Comercial Português, S.A. (BCP) became bound to a compromise catalogue that includes the need to sell its holding in Bank Millennium S.A. (Poland) if outstanding Core Tier 1 hybrid capital instruments subscribed by the Portuguese State ("CoCos") exceed Euros 700 million as at 31 December 2016. Thus, the Bank reimbursed Euros 50,000,000 of Core Tier 1 hybrid instruments (CoCos) during the month of December 2016, thus meeting once again the deadlines established under the CoCos repayment plan agreed with the European Commission.
As referred in note 46, on 9 February 2017, BCP reimbursed the remaining CoCos to the Portuguese State in the amount of Euros 700 million. This repayment, which marks the return to the normalization of BCP's activity, had previously been approved by the European Central Bank, subject to the success of the capital increase that BCP concluded on that date.
Pursuant to the conditions of the issue of Core Tier I Capital Instruments underwritten by the State, under Law no. 63-A/2008 and Implementing Order no. 150- A/2012 (CoCos), the Bank could not distribute dividends until the issue was fully reimbursed.
Under Portuguese legislation, the Bank is required to set-up annually a legal reserve equal to a minimum of 10 percent of annual profits until the reserve equals the share capital. Such reserve is not normally distributable. In accordance with the proposal for the application of results for the year 2016 approved at the General Shareholders' Meeting held on 10 May 2017, the Bank increased its legal reserve in the amount of Euros 6,931,000. As at 30 September 2017, the amount of Legal reserves amounts to Euros 222,806,000 (31 December 2016: Euros 215,875,000).
In accordance with current legislation, the Group companies must set-up annually a reserve with a minimum percentage between 5 and 20 percent of their net annual profits depending on the nature of their economic activity.
The amount of Statutory reserves amounts to Euros 30,000,000 (31 December 2016: Euros 30,000,000) and corresponds, as at 30 September 2017, to a reserve to steady dividends that, according to the bank's by-laws, can be distributed.
This balance is analysed as follows:
| Banco Comercial Português, S.A. |
Other treasury |
||
|---|---|---|---|
| shares | stock | Total | |
| Sep 2017 | |||
| Net book value (Euros '000) | 79 | 203 | 282 |
| Number of securities | 323,738 | (*) | |
| Average book value (Euros) | 0.24 | ||
| Dec 2016 | |||
| Net book value (Euros '000) | 2,880 | - | 2,880 |
| Number of securities | 2,689,098 | (*) | |
| Average book value (Euros) | 1.07 |
The own shares held by the companies included in the consolidation perimeter are within the limits established by the Bank's by-laws and by "Código das Sociedades Comerciais".
(*) As at 30 September 2017, Banco Comercial Português, S.A. does not held treasury shares and does not performed any purchases or sales of own shares during the period. However, this balance includes 323,738 shares (31 December 2016: 2,689,098 shares) owned by clients. Considering the fact that for some of these clients there is evidence of impairment, the shares of the Bank owned by these clients were considered as treasury shares, and, in accordance with the accounting policies, written off from equity.
| This balance is analysed as follows: | ||
|---|---|---|
| Sep 2017 | Dec 2016 | |
| Euros '000 | Euros '000 | |
| Fair value reserves | ||
| Gross value | ||
| Financial assets available for sale (nte 23) | 4,015 | (233,799) |
| Financial assets held to maturity (*) | (3,662) | (6,517) |
| Of associated companies and others | 21,888 | 3,568 |
| Cash-flow hedge | 29,448 | 56,842 |
| 51,689 | (179,906) | |
| Tax | ||
| Financial assets available for sale | ||
| Potential gains and losses recognised in fair value reserves | 2,079 | 67,936 |
| Financial assets held to maturity | 152 | 207 |
| Cash-flow hedge | (9,887) | (18,869) |
| (7,656) | 49,274 | |
| 44,033 | (130,632) | |
| Reserves and retained earnings | ||
| Exchange differences arising on consolidation: | ||
| Bank Millennium, S.A. | (25,634) | (33,196) |
| BIM - Banco Internacional de Moçambique, S.A. | (156,934) | (166,996) |
| Others | (2,459) | 15,873 |
| (185,027) | (184,319) | |
| Actuarial losses | (2,511,423) | (2,575,656) |
| Other reserves and retained earnings | 2,638,422 | 2,657,669 |
| (58,028) | (102,306) |
(*) Refers to the amount not accrued of the fair value reserve at the date of reclassification for securities subject to reclassification.
This balance is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Exchange differences arising on consolidation | (117,2 74) |
(141,617) |
| Deferred taxes | 908 | 4,900 |
| Actuarial losses (net of taxes) | (1,069) | (1,069) |
| Fair value reserves | (6,260) | (28,653) |
| (123,695) | (166,439) | |
| Other reserves and retained earnings | 1,129,864 | 1,049,504 |
| 1,006,169 | 883,065 |
The balance Non-controlling interests is analysed as follows:
| Balance Sheet | Income Statement | |||
|---|---|---|---|---|
| Sep 2017 | Dec 2016 | Sep 2016 | ||
| Euros '000 | Euros '000 | Euros '000 | Euros '000 | |
| From continuing operations | ||||
| Bank Millennium, S.A. | 880,322 | 785,357 | 58,760 | 64,999 |
| BIM - Banco Internacional de Moçambique, SA (*) | 125,152 | 106,377 | 20,751 | 17,941 |
| Other subsidiaries | 695 | (8,669) | (3,483) | (273) |
| 1,006,169 | 883,065 | 76,028 | 82,667 | |
| From discontinued or discontinuing operations | ||||
| Banco Millennium Angola, S.A. | - | - | - | 18,366 |
| 1,006,169 | 883,065 | 76,028 | 101,033 |
(*) Includes the non-controlling interests of BIM Group related to SIM - Seguradora Internacional de Moçambique, S.A.R.L.
This balance is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Guarantees granted (note 22) | ||
| Guarantees | 3,737,981 | 3,859,747 |
| Stand-by letter of credit | 65,637 | 68,301 |
| Open documentary credits | 388,987 | 506,160 |
| Bails and indemnities | 360,031 | 401,837 |
| 4,552,636 | 4,836,045 | |
| Commitments to third parties | ||
| Irrevocable commitments | ||
| Term deposits contracts | 11,645 | 18,383 |
| Irrevocable credit lines | 2,697,624 | 2,184,968 |
| Securities subscription | 1,394 | - |
| Other irrevocable commitments | 279,657 | 294,046 |
| Revocable commitments | ||
| Revocable credit lines | 3,801,729 | 3,931,708 |
| Bank overdraft facilities | 614,673 | 615,795 |
| Other revocable commitments | 34,410 | 62,571 |
| 7,441,132 | 7,107,471 | |
| Guarantees received | 26,318,354 | 27,051,441 |
| Commitments from third parties | 10,854,332 | 11,043,835 |
| Securities and other items held for safekeeping | 66,7 82,888 |
59,903,424 |
| Securities and other items held under custody | ||
| by the Securities Depository Authority | 61,813,680 | 55,380,653 |
| Other off balance sheet accounts | 127,636,224 | 131,179,648 |
The amounts of Guarantees granted and Commitments to third parties are analysed as follows: The guarantees granted by the Group may be related to loans transactions, where the Group grants a guarantee in connection with a loan granted to a client by a third entity. According to its specific characteristics it is expected that some of these guarantees expire without being executed and therefore these transactions do not necessarily represent a cash-outflow. The estimated liabilities are recorded under provisions (note 37).
Stand-by letters and open documentary credits aim to ensure the payment to third parties from commercial deals with foreign entities and therefore financing the shipment of the goods. Therefore the credit risk of these transactions is limited since they are collateralised by the shipped goods and are generally short term operations.
Irrevocable commitments are non-used parts of credit facilities granted to corporate or retail customers. Many of these transactions have a fixed term and a variable interest rate and therefore the credit and interest rate risk is limited.
The financial instruments accounted as Guarantees and other commitments are subject to the same approval and control procedures applied to the credit portfolio, namely regarding the analysis of objective evidence of impairment, as described in the accounting policy in note 1 c). The maximum credit exposure is represented by the nominal value that could be lost related to guarantees and commitments undertaken by the Group in the event of default by the respective counterparties, without considering potential recoveries or collaterals.
Resolutions of the Annual General Meeting of Shareholders
The amounts of Guarantees granted and Commitments to third parties are analysed as follows: Banco Comercial Português, S.A. concluded on 10 May 2017, with 54.17% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions:
Item One – Approval of the individual and consolidated annual reports, balance sheet and financial statements for 2016;
Item Two – Approval of the proposal for the application of year-end results;
Item Three – Approval of a vote of trust and praise addressed to the Board of Directors, including to the Executive Committee and to the Audit Committee and each one of their members, as well as to the Chartered Accountant and its representative;
Item Four – Approval of the statement on the remuneration policy of the Members of the Management and Supervision Bodies;
Item Five – Approval of the appointment of two new directors: Lingiang Xu as non-executive member of the Board of Directors of BCP and João Nuno de Oliveira Palma as executive member of the Board of Directors of BCP;
Item Six - Approval of the acquisition and sale of own shares and bonds;
Item Seven – Election of the members of the Board of the General Meeting of Banco Comercial Português for the term-of-office of 2017/2019.
Banco Comercial Português, S.A. fixed on 23 May 2017, the terms and conditions for a new issue of covered mortgage bonds, under its Covered Bond Program, with subscription date on 31 May. The issue, in the amount of Euros 1,000 million has a term of 5 years, an issuance price of 99.386% and an annual interest rate of 0.75%, reflecting a spread of 65 basis points over 5-year swaps.
The operation was placed successfully with a very diverse group of European institutional investors. Demand for the issue was more than 180% the amount on offer, and the speed with which the placement was completed demonstrate unequivocally the confidence of the market in the Bank and its clear ability to access this important source of financing.
The Board of Directors of Banco Comercial Português, S.A. ("BCP") has resolved on 9 January 2017, with the favourable prior opinion of the Audit Committee, to increase the share capital of BCP, from Euros 4,268,817,689.20 to Euros 5,600,738,053.72, through an offering to existing holders of BCP's ordinary shares pursuant to their respective pre-emption rights, and other investors who acquire subscription rights, to subscribe for 14,169,365,580 new ordinary, book entry and registered shares, without nominal value. The resulting number of ordinary shares will be 15,113,989,952.
The subscription price was set at Euros 0.0940 per share. Each holder of BCP's ordinary shares will receive one subscription right for each ordinary share it owns.
Further to the subscription by Chiado (Luxembourg) S.à r.l. ("Chiado"), a member of the Fosun group, of the reserved capital increase completed on 18 November 2016, through which Chiado holds a shareholding of approximately 16.67% of the total share capital of BCP, Chiado presented an irrevocable anticipated subscription order of an amount of shares that, if satisfied in full, will increase its holding in BCP's share capital to 30% after the Rights Offering, to be achieved through the exercise of the subscription rights corresponding to the number of shares presently held by it and, in addition, an oversubscription order and/or the potential exercise of further subscription rights that may be acquired by Chiado. This order may not be withdrawn except under certain circumstances where material adverse changes have occurred, as long as the same circumstances have led to the termination of the Underwriting Agreement referred to below by the Joint Global Coordinators.
Under the terms of the subscription order, Chiado has committed to (i) a lock-up period related to the sale of shares subscribed by it through its proportional subscription rights corresponding to the number of shares acquired as part of the Reserved Capital Increase, for a period of three years starting from 18 November 2016 and (ii) taking all reasonably appropriate actions to avoid the sale or transfer, within 30 days of closing of the Offering, of any of the shares obtained by Chiado in the Rights Offering. For the avoidance of doubt, this limitation does not prohibit Chiado from pledging the shares subscribed by it.
The Bank was informed that, in the context of the change to the voting cap provided in the articles of association of BCP to 30%, Sonangol has requested and obtained authorisation from the ECB to increase its stake in the share capital of BCP to up to 30%, but BCP has no information regarding Sonangol's decision with reference to the Rights Offering, notably as to the exercise, sale and/or purchase of subscription rights.
In connection with the Rights Offering, BCP has entered into an underwriting agreement with a syndicate of banks, pursuant to which the banks have agreed, and subject to certain conditions, to procure subscribers for, or failing which to subscribe for, any remaining offered shares in the Rights Offering, but excluding the shares to be subscribed by Chiado under its irrevocable anticipated subscription order.
The 14,169,365,580 new ordinary shares issued pursuant to the Rights Offering, as well as the 157,437,395 shares fully subscribed and paid-up by the shareholder Chiado (Luxembourg) S.à r.l. in the BCP's reserved share capital increase (in the amount of Euros 174,582,327.32) completed on 18 November 2016, was admitted to trading on Euronext Lisbon as at 9 February 2017.
As such, the BCP's share capital from this date amounts to Euros 5,600,738,053.72, represented by 15,113,989,952 ordinary, registered, book-entry shares without nominal value.
Banco Comercial Português, S.A. has proceeded, on 9 February 2017, to the early repayment to the Portuguese state of the remaining Core Tier 1 hybrid capital instruments, in the amount of Euros 700 million. This repayment, key to the return to normalisation of BCP's activity, was previously approved by the European Central Bank, subject to the success of the share capital increase completed in this date.
Banco Comercial Português, after having conveyed reservations regarding the contingent capitalization obligation by the Portuguese Resolution Fund) which was announced to be included in a sale agreement of Novo Banco, has decided, in light of the legal deadline and for caution, to request the respective appreciation through administrative legal proceedings. This diligence does not comprise nor entail, the production of any suspensive effects on the sale of Novo Banco, S.A. and, consequently, brings legally no impediment to such sale within the foreseen delays, which centers exclusively on the referred capitalization contigent obligation,.
Banco Comercial Português, Caixa Geral de Depósitos and Novo Banco have today signed a memorandum of understanding for the creation of "Plataforma de Gestão de Créditos Bancários, ACE" ("the Platform"), a tool that will allow for an enhanced co-ordination among lenders, aimed at increasing the effectiveness and speed of credit and companies' restructuring processes.
Under this memorandum, the three parties involved have stated their intention to create the Platform, with the purpose of managing, in an integrated manner, an array of credits granted to a number of shared debtors and classified as NPE ("Non Performing Exposures").
On an initial phase, the Platform will manage credits with a nominal aggregate value not lower than Euros 5,000,000 (five million euros) per eligible debtor. Assets to be managed by the Platform will remain in each of the banks' balance sheets.
The Platform is designed as to allow other financial institutions or financial societies, sharing debtors with other members, to join on a voluntary basis in the future.
The Platform is to pursue the following goals:
Recovering credit and speeding-up the reduction of NPE portfolios held by banks;
Supporting the recovery of several sectors of the Portuguese economy, through credit and debtors' restructuring, and increasing asset viability;
Fostering companies' re-composition and consolidation, when necessary to ensure debtors viability and soundness;
Facilitating and fostering the access of companies, either already restructured or under restructuring, to public or private sources of new capital or of funding;
Accelerating and facilitating debtors' negotiations with banks, aimed at corporate restructuring;
Lobbying the Government and the Bank of Portugal for changes to the legal, judicial and fiscal framework, as to render corporate restructuring processes swifter and more efficient.
The Group assumed the liability to pay to their employees pensions on retirement or disability and other obligations, in accordance with the accounting policy described in note 1 w).
As at 30 September 2017 and 31 December 2016,, the number of participants in the Pension Fund of Banco Comercial Português covered by this pension plan and other benefits is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Number of participants | ||
| Pensioners | 16,565 | 16,524 |
| Former Attendees Acquired Rights | 3,358 | 3,386 |
| Employees | 7,465 | 7,537 |
| 27,388 | 27,447 |
In accordance with the accounting policy described in note 1 w), the Group's pension obligation and other benefits and the respective coverage for the Group based on the projected unit credit method are analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Projected benefit obligations | ||
| Pensioners | 1,982,334 | 1,959,977 |
| Former attendees acquired rights | 205,004 | 221,860 |
| Employees | 866,150 | 910,812 |
| 3,053,488 | 3,092,649 | |
| Pension fund value | (3,217,190) | (3,124,330) |
| Net (assets) / liabilities in balance sheet (notes 32 and 39) | (163,702) | (31,681) |
| Accumulated actuarial losses and changing assumptions effect recognised in Other comprehensive income |
3,145,937 | 3,220,601 |
As at 30 September 2017, the projected benefit liabilities include Euros 313,766,000 (31 December 2016: Euros 324,210,000) which correspond to Extra-fund liabilities and as such are not covered by the Pension Fund. As at 30 September 2017, these liabilities include Euros 11,617,000 (31 December 2016: Euros 9,864,000) corresponding to responsibilities with the End of Career Premium, which resulted from the changes made at the end of 2016 in the Collective Labor Agreement (CLA).
The change in the projected benefit obligations is analysed as follows:
| Sep 2017 | Dec 2016 | ||||||
|---|---|---|---|---|---|---|---|
| Pension benefit obligations Euros '000 |
Extra-Fund Euros '000 |
Total Euros '000 |
Pension benefit obligations Euros '000 |
Extra-Fund Euros '000 |
Total Euros '000 |
||
| Balance as at 1 January | 2,768,439 | 324,210 | 3,092,649 | 2,824,165 | 311,522 | 3,135,687 | |
| Service cost | (12,414) | 418 | (11,996) | (741) | - | (741) | |
| Interest cost / (income) | 43,006 | 4,948 | 47,954 | 69,715 | 7,537 | 77,252 | |
| Actuarial (gains) and losses | |||||||
| Not related to changes | |||||||
| in actuarial assumptions | 22,450 | (2,238) | 20,212 | 21,828 | (1,690) | 20,138 | |
| Arising from changes | |||||||
| in actuarial assumptions | - | - | - | 93,570 | 18,553 | 112,123 | |
| Payments | (53,771) | (15,208) | (68,979) | (70,534) | (21,576) | (92,110) | |
| Early retirement programmes | 7,736 | - | 7,736 | 4,164 | - | 4,164 | |
| Contributions of employees | 5,909 | - | 5,909 | 8,398 | - | 8,398 | |
| Changes occurred in the Collective | |||||||
| Labour Agreement (CLA) | (41,633) | 1,636 | (39,997) | (182,126) | 9,864 | (172,262) | |
| Balance at the end of the period | 2,739,722 | 313,766 | 3,053,488 | 2,768,439 | 324,210 | 3,092,649 |
As at 30 September 2017 the value of the benefits paid by the Pension Fund, excluding other benefits included on Extra-fund, amounts to Euros 53,771,000 (31 December 2016: Euros 70,534,000).
The liabilities with health benefits are fully covered by the Pension Fund and correspond, as at 30 September 2017, to the amount of Euros 310,181,000 (31 December 2016: Euros 313,509,000).
Additionally, regarding the coverage of some benefit obligations related to pensions, the Bank contracted with Ocidental Vida the acquisition of perpetual annuities for which the total liability as at 30 September 2017 amounts to Euros 66,162,000 (31 December 2016: Euros 68,530,000), in order to pay:
i) pensions of former Group's Board Members in accordance with the Bank's Board Members Retirement Regulation;
ii) pensions and complementary pension to pensioners in accordance with the Pension Fund of the BCP Group employees established in 28 December 1987, as also to pensioners, in accordance with other Pension Funds, that were incorporated after on the BCP Group Pension Fund and which were planed that the retirement benefits should be paid through the acquisition of insurance policies, in accordance with the Decree - Law no. 12/2006.
Ocidental Vida is 100% owned by Ageas Group and Ageas Group is 49% owned by the BCP Group.
At the end of December 2016, a revision of the Collective Labour Agreement (CLA) was reached between the BCP Group and the Workers' Trade Unions, "Federação dos Sindicatos Independentes da Banca" and" Federação Nacional do Sector Financeiro", resulted in a profit of Euros 191,507,000 (of which Euros 19,245,000 do not correspond to benefits post-employment). Regarding the "Sindicato dos Bancários do Norte" ("SBN"), which was also involved in the negotiations of the new CLA, formalize the acceptance of the amendments to the CLA in April 2017 and, as such, the Bank only recognise the impact of changes from CLA to employees associates of SBN in 2017. The profit arising from the changes amounts to Euros 44,924,000 (of which Euro 4,927,000 do not correspond to benefits post-employment).
The new CLAs have already been published by the Ministry of Labor in Bulletin of Labor and Employment.
The most relevant changes that occurred in the CLA and can be described as follows:
Change in the retirement age (presumed disability) from 65 years to 66 years and 2 months in 2016. This age is not fixed and increases at the beginning of each calendar year one month. So in 2017 the retirement age is 66 years and 3 months. It was agreed that the retirement age in each year, fixed by the application of the above mentioned rule, cannot exceed in any case the normal retirement age in force in the General Social Security Regime. For the actuarial calculation, a progressive increase in retirement age was considered up to 67 years and 2 months.
It was introduced a change into the formula for determining the employer's contribution to the SAMS, which is no longer a percentage of the Pensions (Euros 88 per beneficiary and Euros 37.93 in the case of pensioners). This amount will be updated by the salary table update rate. This change has no impact on participants and beneficiaries, both in terms of their contributions and in their benefits.
A new benefit and retirement was introduced called End of Career Premium. At the retirement date the participant is entitled to a capital equal to 1.5 times the amount of the monthly remuneration earned at the retirement date. This benefit replaces the Seniority premium that was awarded during active life. This benefit, to be attributed at the retirement date or in the event of death, is considered to be a post-employment benefit by which it becomes part of retirement liabilities. This benefit is not included in the pension fund agreement and as such was considered as Extra-Fund.
During the first nine months of 2017 and during 2016, the changes in the value of plan's assets is analysed as follows:
| Sep 2017 Euros '000 |
Dec 2016 Euros '000 |
|
|---|---|---|
| Balance as at 1 January | 3,124,330 | 3,157,869 |
| Contributions to the Fund | - | 125,000 |
| Employees' contributions | 5,909 | 8,398 |
| Actuarial gains and (losses) | 94,876 | (170,384) |
| Payments | (53,771) | (70,534) |
| Expected return on plan assets | 44,552 | 72,750 |
| Amount transferred to the Fund resulting from acquired | ||
| rights unassigned related to the Complementary Plan | 1,294 | 1,231 |
| Balance at the end of the period | 3,217,190 | 3,124,330 |
The elements of the Pension Fund's assets are analysed as follows:
| Sep 2017 | Dec 2016 | |||||
|---|---|---|---|---|---|---|
| Asset class | Assets with market price in active market Euros '000 |
Remaining Euros '000 |
Total Portfolio Euros '000 |
Assets with market price in active market Euros '000 |
Remaining Euros '000 |
Total Portfolio Euros '000 |
| Shares | 306,378 | 95,718 | 402,096 | 423,343 | 102,756 | 526,099 |
| Bonds and other fixed income securities | 1,189,530 | 3,951 | 1,193,481 | 1,187,721 | 159,618 | 1,347,339 |
| Participations units in investment funds | - | 640,453 | 640,453 | - | 259,312 | 259,312 |
| Participation units in real estate funds | - | 263,746 | 263,746 | - | 243,680 | 243,680 |
| Properties | - | 282,437 | 282,437 | - | 282,673 | 282,673 |
| Loans and advances to credit | ||||||
| institutions and others | - | 434,977 | 434,977 | - | 465,227 | 465,227 |
| 1,495,908 | 1,721,282 | 3,217,190 | 1,611,064 | 1,513,266 | 3,124,330 |
The caption Shares includes an investment of 2.71% held in the Dutch unlisted insurance group "Achmea BV", whose valuation as at 30 September 2017 amounts to Euros 94,382,000 (31 December 2016: Euros 101,471,000). This valuation was determined by the Management Company based on an independent valuation carried out by Achmea solicitation with reference to 31 December 2016.
The balance Properties includes buildings owned by the Fund and used by the Group's companies which as at 30 September 2017, amounts to Euros 281,996,000 (31 December 2016: Euros 281,991,000), mostly a set of properties called "Taguspark" whose book value as at 30 September 2017 amounts to Euros 269,292,000 (31 December 2016: Euros 269,287,000). This book value was calculated on the basis of valuations performed by independent expert evaluators performed in 2016, whose assumptions considered in these evaluations include the expectation of the Bank to make renewals of the current lease.
The securities issued by Group's companies accounted in the portfolio of the Fund are analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Fixed income securities | 130,544 | 129,966 |
| Loans and advances to credit institutions and others | 323,730 | 351,766 |
| 454,274 | 481,732 |
The evolution of net (assets) / liabilities in the balance sheet is analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Balance as at 1 January | (31,681) | (22,182) |
| Recognised in the income statement: | ||
| Changes occurred in the Collective Labour Agreement | (39,997) | (172,262) |
| Service cost | (11,996) | (741) |
| Interest cost / (income) net of the | ||
| balance liabilities coverage | 3,402 | 4,502 |
| Cost with early retirement programs | 7,736 | 4,164 |
| Amount transferred to the Fund resulting from acquired rights | ||
| unassigned related to the Complementary Plan | (1,294) | (1,231) |
| Recognised in the statement of comprehensive income: | ||
| Actuarial (gains) and losses | ||
| Not related to changes in actuarial assumptions | ||
| Deviation between the estimated and the actual income of the fund | (94,876) | 170,384 |
| Difference between expected and effective obligations | 20,212 | 20,138 |
| Arising from changes in actuarial assumptions | - | 112,122 |
| Contributions to the fund | - | (125,000) |
| Payments | (15,208) | (21,575) |
| Balance at the end of the period | (163,702) | (31,681) |
During the first nine months of 2017, no contributions were made to the Pension Fund by the Group's companies (31 December 2016: contributions in cash of Euros 125,000,000).
In accordance with IAS 19, as at 30 September 2017, the Group accounted post-employment benefits as a gain in the amount of Euros 42,149,000 (30 September 2016: loss of Euros 2,024,000), which is analysed as follows:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Current service cost | (11,996) | (280) |
| Net interest cost in the liability coverage balance Cost / (income) with early retirement programs |
3,402 | 3,378 |
| and mutually agreed terminations | 6,442 | (889) |
| Changes occurred in the Collective Labour Agreement | (39,997) | - |
| Others | - | (185) |
| (Income) / Cost of the period | (42,149) | 2,024 |
As the Board of Directors Retirement Regulation establish that the pensions are increased annually, and as it is not common in the insurance market the acquisition of perpetual annuities including the increase in pensions, the Bank determined, the liability to be recognised on the financial statements taking into consideration current actuarial assumptions.
In accordance with the remuneration policy of the Board Members, the Group has the responsibility of supporting the cost with the retirement pensions of former Group's Executive Board Members, as well as the Complementary Plan for these members in accordance with the applicable rules funded through the Pension Fund, Extra-fund and perpetual annuities.
In order to cover liabilities with pensions to former members of the Executive Board of Directors, under the Bank's Board of Directors Retirement Regulation the Bank contracted with Ocidental Vida to purchase immediate life annuity insurance policies.
To cover the update of contracted responsibilities through perpetual annuities policies, based on the actuarial calculations, the Group recognised a provision of Euros 3,837,000 (31 December 2016: Euros 3,837,000).
The changes occurred in responsibilities with retirement pensions payable to former members of the Executive Board of Directors, included in the balance Other liabilities (note 39), are analysed as follows:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Euros '000 | Euros '000 | |
| Balance as at 1 January | 3,837 | 4,245 |
| Charge / (Write-back) | - | (408) |
| Balance at the end of the period | 3,837 | 3,837 |
Considering the market indicators, particularly the inflation rate estimates and the long term interest rate for Euro Zone, as well as the demographic characteristics of its employees, the Group considered the following actuarial assumptions for calculating the liabilities with pension obligations:
| Sep 2017 | Dec 2016 | |
|---|---|---|
| Salary growth rate | 0,25% until 2019 0,75% after 2019 |
0,25% until 2019 0,75% after 2019 |
| Pensions growth rate | 0% until 2019 0,5% after 2019 |
0% until 2019 0,5% after 2019 |
| Discount rate / Projected Fund's rate of return | 2.1% | 2.1% |
| Mortality tables | ||
| Men | TV 88/90 | TV 88/90 |
| Women | TV 88/90 - 3 years | TV 88/90 - 3 years |
| Disability rate | Non applicable | Non applicable |
| Turnover rate | Non applicable | Non applicable |
| Normal retirement age (a) | 66 years and 3 months |
66 years and 2 months |
| Total salary growth rate for Social Security purposes | 1.75% | 1.75% |
| Revaluation rate of wages / pensions of Social Security | 1% | 1% |
a) The retirement age is variable. In 2017 it is 66 years and 3 months and will increase by 1 month for each calendar year. This age cannot be higher than the normal retirement age in force in the General Social Security System (RGSS). The normal retirement age in RGSS is variable and depends on the evolution of the average life expectancy at 65 years. For the purposes of the actuarial calculation, it was assumed that the increase in life expectancy in future years will be one year in every 10 years. However, as a prudential factor the maximum age was 67 years and 2 months
The assumptions used on the calculation of the actuarial value of the liabilities are in accordance with the requirements of IAS 19. No disability decreases are considered in the calculation of the liabilities.
As defined by IAS 19, the discount rate used to update the responsibilities of the Bank's pension fund was determined on 31 December 2016, based on an analysis performed over the market yield regarding a bond issues universe – with high quality (low risk), different maturities (appropriate to the period of liquidation of the fund's liabilities) and denominated in Euros - related to a diverse and representative range of issuers.
As at 30 September 2017 and 31 December 2016, the Bank used a discount rate of 2.1% to measure its liability for defined benefit pension plans of its employees and managers.
As at 31 December 2016 the Group taking into consideration the positive deviations observed in the last financial year and the current trend of wages evolution and the economic situation at this time, determined a growth rate of wages progressive of 0.25% by 2019 and 0.75% from 2019 and a growth rate of pensions from 0% by 2019 and 0.50% from 2019. As at 30 September 2017, no changes were made to these actuarial assumptions.
Net actuarial gains amounts to Euros 74,664,000 (31 December 2016: actuarial losses amounts to Euros 302,644,000) and are related to the difference between the actuarial assumptions used for the estimation of the liabilities and the values actually verified and the change in actuarial assumptions, are analysed as follows:
| Actuarial (gains) / losses | ||||
|---|---|---|---|---|
| Sep 2017 | Dec 2016 | |||
| Deviation between expected and actual liabilities Changes on the assumptions: Discount rate Salary growth rate and total salary rate for Social Security purposes Pensions increase rate Mortality tables Other changes* Return on Fund |
Values effectively verified in % |
Euros '000 | Values effectively verified in % |
Euros '000 |
| 20,212 | 20,138 | |||
| - | 224,619 | |||
| - | (88,973) | |||
| - | (39,621) | |||
| - | 24,537 | |||
| - | (8,440) | |||
| 5.56% | (94,876) | -2.62% | 170,384 | |
| (74,664) | 302,644 |
(*) Change in the methodology for determining the retirement age in accordance with the General Social Security System.
The change in the wage growth assumption includes the effect of changing the growth rate of the pensionable wage and the change in the rate of growth of the total salary used for the purposes of calculating social security responsibility.
As at 30 September 2017, the actuarial losses not resulting from changes in assumptions amount to Euros 20,212,000 (31 December 2016: Euros 20,138,000).
According to what is described in accounting policy 1 w ii), in the scope of the Defined Contribution Plan provided for the BCP Pension Fund of the BCP Group, no contributions were made in 2016, for employees who have been admitted until 1 July 2009, because the following requirements have not been met: (i) Bank's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português.
For employees who have been admitted after 1 July 2009, are made monthly contributions equal to 1.5% of the monthly remuneration received by employees in the current month, either by themselves or by the Group and employees. This contribution has a mandatory character and is defined in the Collective Labor Agreement of the BCP Group, and does not have a performance criterion. The Group accounted as staff costs the amount of Euros 43,000 (31 December 2016: Euros 48,000) related to this contribution.
Notes to the Interim Condensed Consolidated Financial Statements
30 September 2017
The segments presented are in accordance with IFRS 8. In accordance with the Group's management model, the segments presented correspond to the segments used for Executive Committee's management purposes. The Group offers a wide range of banking activities and financial services in Portugal and abroad, with a special focus on Commercial Banking, Companies Banking and Private Banking.
Following the commitment agreed with the Directorate-General for Competition of the European Commission (DG Comp), an additional segment named non-Core Business Portfolio was considered, respecting the criteria agreed.
Segments description
The Group operates in the Portuguese market, and also in a few affinity markets of recognised growth potential. Considering this, the geographical segments are structured in Portugal and Foreign Business (Poland, Mozambique and Other). Portugal segment reflects, essentially, the activities carried out by Banco Comercial Português in Portugal, ActivoBank and Banco de Investimento Imobiliário.
Portugal activity includes: i) Retail Banking; ii) Companies, Corporate & Investment Banking; iii) Private Banking; iv) Non-core business portfolio; v) Other.
Retail Banking includes the following business areas:
Retail network where the strategic approach is to target "Mass Market" customers, who appreciate a value proposition based on innovation and speed, as well as Prestige and Small Business customers, whose specific characteristics, financial assets or income imply a value proposition based on innovation and personalisation, requiring a dedicated Account Manager;
Retail Recovery Division that accompanies and manages the responsibilities of Customers or economic groups in effective default, as well as customers with bankruptcy requirement or other similar mechanisms, looking through the conclusion of agreements or payment restructuring processes that minimizes the economic loss to the Bank; and
ActivoBank, a bank focused on clients who are young, intensive users of new communication technologies and who prefer a banking relationship based on simplicity, offering modern products and services.
Companies, Corporate and Investment Banking segment includes:
Companies network that covers the financial needs of companies with an annual turnover between Euros 2,500,000 and Euros 50,000,000, and focuses on innovation, offering a wide range of traditional banking products complemented by specialised financing;
Corporate and Large Corporates networks in Portugal, targeting corporate and institutional customers with an annual turnover in excess of Euros 50,000,000, providing a complete range of value-added products and services;
Specialised Monitoring Division which carries out the monitorisation of business groups that have high and complex credit exposures or that show relevant signs of impairment;
Investment Banking unit, that ensures the offer of products and specific services, in particular financial advice, capital market transactions and analysis and financing structuring in the medium to long term, in particular with regard to Project and Structured Finance;
Treasury and Markets International Division, in particular the area of coordination of business with banks and financial institutions, boosting international business with the commercial networks of the Bank and institutional custody services for securities;
Specialised Recovery Division which ensures efficient tracking of customers with predictable or effective high risk of credit, from Companies, Corporate, Large Corporate and retail networks (exposure exceeding Euros 1,000,000);
Real Estate Business Division, which ensures integrated and specialized management of real estate business of the Group; and
Interfundos. with the activity of management of real estate investment funds.
The Private Banking segment, for purposes of geographical segments, comprises the Private Banking network in Portugal. For purposes of business segments also includes Banque Privée BCP in Switzerland and Millennium bcp Bank & Trust in Cayman Islands that are considered Foreign Business on geographical segmentation.
Following the process for obtaining authorisation from the European Commission (EC) to the State aid, business portfolios were identified that the Bank should gradually disinvest/demobilise, ceasing grant new credit. This demobilisation is subject to a framework which dominant criterion is the capital impact optimisation, in particular through the minimisation of expected losses. In this context, the Bank proceeded with the segregation of these portfolios, highlighting them in a separate segment defined as Non Core Business Portfolio (PNNC).
PNNC includes the business with clients for which credit has been granted for securities-backed lending, loans collateralised with other assets for those which the debt ratio over asset value is not less than 90%, historical subsidised mortgage loans, construction subcontractors focused almost exclusively on the Portuguese market, football clubs and Real Estate development.
The separate disclosure for those types of loans resulted, exclusively, from the need to identify and monitoring the segments described in the previous paragraph, in the scope of the authorisation process abovementioned. Thus, the PNNC portfolio has not been aggregated based on risk classes or any other performance criteria.
It should be noted that, in 30 September 2017, 70% of this portfolio benefited from asset backed loans, including 70% with real estate collateral and 4% with other assets guarantee.
All other businesses not previously discriminated are allocated to the segment Other (Portugal) and include the centralized management of financial investments, corporate activities and operations not integrated in the remaining business segments and other values not allocated to segments.
Poland, where the Group is represented by Bank Millennium, a universal bank offering a wide range of financial products and services to individuals and companies nationwide;
Mozambique, where the Group is represented by BIM – Banco Internacional de Moçambique, a universal bank targeting companies and individual customers; and
Other, which includes other countries activity such as Switzerland where the Group is represented by Banque Privée BCP, a Private Banking platform under Swiss law and Cayman Islands by Millennium bcp Bank & Trust, a bank designed for international services in the area of Private Banking to customers with high financial assets (Affluent segment); The segment Other also includes the contribution of the associate in Angola.
Foreign Business segment, indicated within the business segment reporting, comprises the Group's operations developed in other countries already mentioned excluding the activity of Banque Privée BCP in Switzerland and Millennium bcp Bank & Trust in the Cayman Islands which are considered in Private Banking segment.
In the context of the Banco Millennium in Angola merger process with Banco Privado Atlântico, which agreement occurred in 22 April 2016 and the conclusion of the process of the necessary authorizations in 3 May 2016, Banco Millennium Angola was considered as a discontinued operation in March 2016, with the impact of its results presented in the balance Income / (loss) arising from discontinued operations and restated for the previous periods. At the consolidated balance, the assets and liabilities of Banco Millennium Angola, S.A. continued to be consolidated by the full consolidation method till April 2016. After the completion of the merger, in May 2016, the assets and liabilities of Banco Millennium in Angola stopped being considered in the consolidated balance sheet and the investment of 22.5 % in Banco Millennium Atlântico, the new merged entity, started being accounted using the equity method and its contribution to the Group's results have been recognized in the consolidated accounts from May 2016 onwards.
The figures reported for each business segment result from aggregating the subsidiaries and business units integrated in each segment, including the impact from capital allocation and the balancing process of each entity, both at the balance sheet and income statement levels, based on average figures. Balance sheet headings for each subsidiary and business unit are re-calculated, given the replacement of their original own funds by the outcome of the capital allocation process, according to regulatory solvency criteria.
Considering that the capital allocation process complies with regulatory solvency criteria currently in place, the weighted risk, as well as the capital allocated to segments, is based on Basel III methodology, in accordance with the CRD IV/CRR, with reference to 30 September 2017 and 2016. The capital allocation for each segment on those dates, resulted from the application of 10% to the risks managed by each segment, reflecting the application of Basel III methodologies. Each operation is balanced through internal transfers of funds, with no impact on consolidated accounts.
Operating costs determined for each business area rely on one hand on the amounts accounted directly in the respective cost centres, and on the other hand, on the amounts resulting from internal cost allocation processes. As an example, in the first set of costs are included costs related to phone communication, travelling accommodation and representation expenses and to advisory services and in the second set are included costs related to correspondence, water and electricity and to rents related to spaces occupied by organic units, among others. The allocation of this last set of costs is based on the application of previously defined criteria, related to the level of activity of each business area, like the number of current accounts, the number of customers or employees, the business volume and the space occupied.
The following information has been prepared based on the individual and consolidated financial statements of the Group prepared in accordance with international financial reporting standards (IFRS), as adopted by the European Union (EU), and with the Organization of the Group's business areas in force on 30 September 2017. Information relating to prior periods is restated whenever it occur changes in the internal organization of the entity so susceptible to change the composition of the reportable segments (business and geographical).
The information in the financial statements of reportable segments is reconciled, at the level of the total revenue of those same segments, with the revenue from the demonstration of the consolidated financial position of the reportable entity for each date on which is lodged a statement of financial position.
As at 30 September 2017, the net contribution of the major operational segments, for the income statement, is analysed as follows:
| Companies, Corporate and |
(Thousands of Euros) | |||||||
|---|---|---|---|---|---|---|---|---|
| Commercial banking | Investment | Non-core | ||||||
| Retail | Foreign | banking | Private | business | ||||
| in Portugal | business (1) | Total | in Portugal | banking | portfolio | Other | Consolidated | |
| Income statement | ||||||||
| Interest and similar income Interest expense and similar charges |
352,557 (48,147) |
627,155 (212,060) |
979,712 (260,207) |
244,276 (48,776) |
28,698 (11,415) |
87,787 (66,136) |
91,339 (22,076) |
1,431,812 (408,610) |
| Net interest income | 304,410 | 415,095 | 719,505 | 195,500 | 17,283 | 21,651 | 69,263 | 1,023,202 |
| Commissions and other income Commissions and other costs |
302,264 (11,596) |
190,146 (96,423) |
492,410 (108,019) |
130,549 (6,524) |
52,517 (4,141) |
7,192 (21) |
(42,632) (123,484) |
640,036 (242,189) |
| Net commissions and other income | 290,668 | 93,723 | 384,391 | 124,025 | 48,376 | 7,171 | (166,116) | 397,847 |
| Net gains arising from trading activity | 11 | 64,920 | 64,931 | - | (19,232) | - | 69,300 | 114,999 |
| Share of profit of associates under the equity method |
- | 24,392 | 24,392 | - | - | - | 32,399 | 56,791 |
| Gains / (losses) arising from the sale of subsidiaries and other assets |
- | 2,782 | 2,782 | - | - | - | (1,323) | 1,459 |
| Net operating revenue | 595,089 | 600,912 | 1,196,001 | 319,525 | 46,427 | 28,822 | 3,523 | 1,594,298 |
| Staff costs and administrative costs Amortizations and depreciations |
351,846 1,785 |
238,248 15,093 |
590,094 16,878 |
67,716 451 |
28,893 120 |
14,101 14 |
(45,922) 22,252 |
654,882 39,715 |
| Operating expenses | 353,631 | 253,341 | 606,972 | 68,167 | 29,013 | 14,115 | (23,670) | 694,597 |
| Impairment for credit and financial assets | (51,149) | (68,310) | (119,459) | (186,984) | (2,209) | (178,040) | (20,387) | (507,079) |
| Other impairments and provisions | (45) | (1,437) | (1,482) | 143 | 1 | (25,597) | (94,489) | (121,424) |
| Net income / (loss) before income tax | 190,264 | 277,824 | 468,088 | 64,517 | 15,206 | (188,930) | (87,683) | 271,198 |
| Income tax | (55,868) | (60,534) | (116,402) | (17,989) | (9,732) | 55,888 | 25,124 | (63,111) |
| Income / (loss) after income tax from continuing operations |
134,396 | 217,290 | 351,686 | 46,528 | 5,474 | (133,042) | (62,559) | 208,087 |
| Income / (loss) arising from discontinued operations (2) |
- | - | - | - | - | - | 1,250 | 1,250 |
| Net income / (loss) for the period | 134,396 | 217,290 | 351,686 | 46,528 | 5,474 | (133,042) | (61,309) | 209,337 |
| Non-controlling interests | - | (79,511) | (79,511) | - | - | - | 3,483 | (76,028) |
| Net income / (loss) for the period attributable to Shareholders of the Bank |
134,396 | 137,779 | 272,175 | 46,528 | 5,474 | (133,042) | (57,826) | 133,309 |
As at 30 September 2017, the net contribution of the major operational segments, for the balance sheet, is analysed as follows:
| Cash and Loans and advances | ||||||||
|---|---|---|---|---|---|---|---|---|
| to credit institutions | 10,159,950 | 1,185,054 | 11,345,004 | 289,631 | 2,414,788 | 4,224 | (9,990,150) | 4,063,497 |
| Loans and advances to customers | 16,769,284 | 12,041,032 | 28,810,316 | 10,608,947 | 531,665 | 7,038,299 | 377,951 | 47,367,178 |
| Financial assets (2) | 20,703 | 4,538,539 | 4,559,242 | - | 2,629 | 661,473 | 8,428,838 | 13,652,182 |
| Other assets | 175,331 | 582,899 | 758,230 | 53,817 | 15,012 | 911,280 | 6,168,535 | 7,906,874 |
| Total Assets | 27,125,268 | 18,347,524 | 45,472,792 | 10,952,395 | 2,964,094 | 8,615,276 | 4,985,174 | 72,989,731 |
| Resources from other credit | ||||||||
| institutions | 1,037,529 | 1,578,217 | 2,615,746 | 2,098,107 | 371,770 | 8,155,282 | (4,055,391) | 9,185,514 |
| Resources from customers | 24,530,959 | 14,627,252 | 39,158,211 | 8,097,529 | 2,468,856 | 270,198 | 695,565 | 50,690,359 |
| Debt securities issued | 820,786 | 276,815 | 1,097,601 | 528 | 44,074 | 3,007 | 1,950,971 | 3,096,181 |
| Other financial liabilities | - | 164,022 | 164,022 | - | 2,465 | - | 1,369,781 | 1,536,268 |
| Other liabilities | 43,268 | 426,170 | 469,438 | 44,410 | 8,187 | 4,461 | 896,865 | 1,423,361 |
| Total Liabilities | 26,432,542 | 17,072,476 | 43,505,018 | 10,240,574 | 2,895,352 | 8,432,948 | 857,791 | 65,931,683 |
| Equity and non-controlling interests |
692,726 | 1,275,048 | 1,967,774 | 711,821 | 68,742 | 182,328 | 4,127,383 | 7,058,048 |
| Total Liabilities, Equity and non-controlling interests |
27,125,268 | 18,347,524 | 45,472,792 | 10,952,395 | 2,964,094 | 8,615,276 | 4,985,174 | 72,989,731 |
| Number of employees | 4,781 | 8,461 | 13,242 | 609 | 269 | 148 | 1,551 | 15,819 |
(1) Includes the contribution associated with the Bank's investments in Angola, in Banco Millennium Atlântico, recorded since May 2016 by the equity method;
(2) Includes financial assets held for trading, financial assets held for trading at fair value through profit or loss, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
Note: As at 30 September 2017, the goodwill disclosed in the financial statements that is reflected in Foreign business is Euros 2 million and Euros 128 million in Other Portugal, as described in note 30.
30 September 2017
As at 30 September 2016, the net contribution of the major operational segments, for the income statement, is analysed as follows:
| Companies, | (Thousands of Euros) | |||||||
|---|---|---|---|---|---|---|---|---|
| Commercial banking | Corporate and Investment |
Non-core | ||||||
| Retail | Foreign | banking | Private | business | ||||
| in Portugal | business (1) | Total | in Portugal | banking | portfolio | Other | Consolidated | |
| Income statement | ||||||||
| Interest and similar income Interest expense and similar charges |
386,471 (98,615) |
537,327 (189,826) |
923,798 (288,441) |
275,069 (65,955) |
31,235 (16,248) |
116,448 (88,878) |
82,972 (63,012) |
1,429,522 (522,534) |
| Net interest income | 287,856 | 347,501 | 635,357 | 209,114 | 14,987 | 27,570 | 19,960 | 906,988 |
| Commissions and other income Commissions and other costs |
282,784 (9,974) |
165,637 (95,534) |
448,421 (105,508) |
119,916 (4,660) |
44,323 (4,326) |
7,471 (27) |
2,224 (111,814) |
622,355 (226,335) |
| Net commissions and other income | 272,810 | 70,103 | 342,913 | 115,256 | 39,997 | 7,444 | (109,590) | 396,020 |
| Net gains arising from trading activity | (53) | 121,942 | 121,889 | - | 2,170 | 23,893 | 64,561 | 212,513 |
| Share of profit of associates under the equity method |
- | 10,047 | 10,047 | - | - | - | 50,561 | 60,608 |
| Gains / (losses) arising from the sale of subsidiaries and other assets |
4 | 1,785 | 1,789 | - | 9 | - | (6,041) | (4,243) |
| Net operating revenue | 560,617 | 551,378 | 1,111,995 | 324,370 | 57,163 | 58,907 | 19,451 | 1,571,886 |
| Staff costs and administrative costs Amortizations and depreciations |
361,507 1,595 |
224,267 15,631 |
585,774 17,226 |
72,101 368 |
28,897 140 |
16,095 14 |
(17,512) 19,253 |
685,355 37,001 |
| Operating expenses | 363,102 | 239,898 | 603,000 | 72,469 | 29,037 | 16,109 | 1,741 | 722,356 |
| Impairment for credit and financial assets | (59,622) | (52,379) | (112,001) | (411,686) | (2,639) | (390,682) | (131,830) | (1,048,838) |
| Other impairments and provisions Net income / (loss) before income tax |
(45) 137,848 |
(8,649) 250,452 |
(8,694) 388,300 |
45 (159,740) |
- 25,487 |
(6,445) (354,329) |
(49,085) (163,205) |
(64,179) (263,487) |
| Income tax | (40,650) | (65,068) | (105,718) | 47,259 | (7,345) | 104,527 | 29,490 | 68,213 |
| Income / (loss) after income tax from continuing operations |
97,198 | 185,384 | 282,582 | (112,481) | 18,142 | (249,802) | (133,715) | (195,274) |
| Income / (loss) arising from | ||||||||
| discontinued operations (2) | - | 36,806 | 36,806 | - | - | - | 8,421 | 45,227 |
| Net income / (loss) for the period | 97,198 | 222,190 | 319,388 | (112,481) | 18,142 | (249,802) | (125,294) | (150,047) |
| Non-controlling interests | - | (107,729) | (107,729) | - | - | - | 6,696 | (101,033) |
| Net income / (loss) for the period attributable to Shareholders of the Bank |
97,198 | 114,461 | 211,659 | (112,481) | 18,142 | (249,802) | (118,598) | (251,080) |
As at 31 December 2016, the net contribution of the major operational segments, for the balance sheet, is analysed as follows:
| Cash and Loans and advances | ||||||||
|---|---|---|---|---|---|---|---|---|
| to credit institutions | 9,334,906 | 1,067,882 | 10,402,788 | 1,059,177 | 2,527,926 | 5,375 | (10,916,428) | 3,078,838 |
| Loans and advances to customers | 16,917,689 | 11,701,120 | 28,618,809 | 10,934,311 | 473,707 | 8,065,466 | (74,691) | 48,017,602 |
| Financial assets (3) | 20,960 | 4,260,453 | 4,281,413 | - | 6,083 | 634,878 | 7,458,104 | 12,380,478 |
| Other assets | 183,848 | 562,980 | 746,828 | 55,424 | 17,967 | 847,921 | 6,119,753 | 7,787,893 |
| Total Assets | 26,457,403 | 17,592,435 | 44,049,838 | 12,048,912 | 3,025,683 | 9,553,640 | 2,586,738 | 71,264,811 |
| Resources from other credit | ||||||||
| institutions | 1,344,914 | 1,419,154 | 2,764,068 | 3,751,972 | 352,081 | 9,101,255 | (6,030,981) | 9,938,395 |
| Resources from customers | 23,893,851 | 13,966,967 | 37,860,818 | 7,668,144 | 2,499,795 | 329,361 | 439,529 | 48,797,647 |
| Debt securities issued | 556,065 | 297,902 | 853,967 | 1,795 | 62,353 | 584 | 2,594,121 | 3,512,820 |
| Other financial liabilities | - | 335,073 | 335,073 | - | 5,984 | - | 2,135,077 | 2,476,134 |
| Other liabilities | 19,505 | 404,346 | 423,851 | 42,332 | 7,005 | 4,025 | 797,421 | 1,274,634 |
| Total Liabilities | 25,814,335 | 16,423,442 | 42,237,777 | 11,464,243 | 2,927,218 | 9,435,225 | (64,833) | 65,999,630 |
| Equity and non-controlling interests | 643,068 | 1,168,993 | 1,812,061 | 584,669 | 98,465 | 118,415 | 2,651,571 | 5,265,181 |
| Total Liabilities, Equity | ||||||||
| and non-controlling interests | 26,457,403 | 17,592,435 | 44,049,838 | 12,048,912 | 3,025,683 | 9,553,640 | 2,586,738 | 71,264,811 |
| Number of employees | 4,854 | 8,395 | 13,249 | 588 | 264 | 148 | 1,558 | 15,807 |
(1) Includes the activity of the subsidiary in Angola, considered as discontinued operation;
(2) The amount considered for Angola in discontinued operations corresponds to the book value. The impact of capital allocation in segments base, is reflected in net interest income item;
(3) Includes financial assets held for trading, financial assets held for trading at fair value through profit or loss, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
Note: As at 31 December 2016, the goodwill disclosed in the financial statements is reflected, in Foreign business, Euros 2 million and Euros 128 million in Other Portugal, as described in note 30.
Notes to the Interim Condensed Consolidated Financial Statements 30 September 2017
| Companies, Corporate and Non-core Retail Investment Private business Other (1) banking banking banking portfolio Other Total Poland Mozambique Consolidated Income statement Interest and similar income 352,557 244,276 17,499 87,787 91,339 793,458 418,598 215,069 4,687 1,431,812 Interest expense and similar charges (48,147) (48,776) (5,763) (66,136) (22,076) (190,898) (131,076) (86,887) 251 (408,610) Net interest income 304,410 195,500 11,736 21,651 69,263 602,560 287,522 128,182 4,938 1,023,202 Commissions and other income 302,264 130,549 30,812 7,192 (42,632) 428,185 148,274 41,871 21,706 640,036 Commissions and other costs (11,596) (6,524) (161) (21) (123,484) (141,786) (82,155) (14,267) (3,981) (242,189) Net commissions and other income 290,668 124,025 30,651 7,171 (166,116) 286,399 66,119 27,604 17,725 397,847 Net gains arising from trading activity 11 - - - 69,300 69,311 36,968 8,297 423 114,999 Share of profit of associates under the equity method - - - - 32,399 32,399 - - 24,392 56,791 Gains / (losses) arising from the sale of subsidiaries and other assets - - - - (1,323) (1,323) 2,691 91 - 1,459 Net operating revenue 595,089 319,525 42,387 28,822 3,523 989,346 393,300 164,174 47,478 1,594,298 Staff costs and administrative costs 351,846 67,716 11,572 14,101 (45,922) 399,313 180,299 57,949 17,321 654,882 Amortizations and depreciations 1,785 451 5 14 22,252 24,507 9,356 5,737 115 39,715 Operating expenses 353,631 68,167 11,577 14,115 (23,670) 423,820 189,655 63,686 17,436 694,597 Impairment for credit and financial assets (51,149) (186,984) (1,888) (178,040) (20,387) (438,448) (45,251) (23,059) (321) (507,079) Other impairments and provisions (45) 143 - (25,597) (94,489) (119,988) (4,167) 2,730 1 (121,424) Net income / (loss) before income tax 190,264 64,517 28,922 (188,930) (87,683) 7,090 154,227 80,159 29,722 271,198 Income tax (55,868) (17,989) (8,330) 55,888 25,124 (1,175) (41,374) (19,339) (1,223) (63,111) Income / (loss) after income tax from continuing operations 134,396 46,528 20,592 (133,042) (62,559) 5,915 112,853 60,820 28,499 208,087 Income / (loss) arising from discontinued operations (2) - - - - 1,250 1,250 - - - 1,250 Net income / (loss) for the period 134,396 46,528 20,592 (133,042) (61,309) 7,165 112,853 60,820 28,499 209,337 Non-controlling interests - - - - 3,483 3,483 (56,314) (20,653) (2,544) (76,028) Net income / (loss) for the period attributable to Shareholders 134,396 46,528 20,592 (133,042) (57,826) 10,648 56,539 40,167 25,955 133,309 |
(Thousands of Euros) | |||||
|---|---|---|---|---|---|---|
As at 30 September 2017, the net contribution of the major geographic segments, for the balance sheet is analysed as follows:
| Cash and Loans and advances | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| to credit institutions | 10,159,950 | 289,631 | 1,526,691 | 4,224 | (9,990,150) | 1,990,346 | 935,730 | 462,975 | 674,446 | 4,063,497 |
| Loans and advances to | ||||||||||
| customers | 16,769,284 | 10,608,947 | 220,152 | 7,038,299 | 377,951 | 35,014,633 | 11,056,432 | 984,601 | 311,512 | 47,367,178 |
| Financial assets (2) | 20,703 | - | - | 661,473 | 8,428,838 | 9,111,014 | 4,168,113 | 370,426 | 2,629 | 13,652,182 |
| Other assets | 175,331 | 53,817 | 10,881 | 911,280 | 6,168,535 | 7,319,844 | 208,145 | 163,194 | 215,691 | 7,906,874 |
| Total Assets | 27,125,268 | 10,952,395 | 1,757,724 | 8,615,276 | 4,985,174 | 53,435,837 | 16,368,420 | 1,981,196 | 1,204,278 | 72,989,731 |
| Resources from other | ||||||||||
| credit institutions | 1,037,529 | 2,098,107 | - | 8,155,282 | (4,055,391) | 7,235,527 | 1,631,564 | 94,914 | 223,509 | 9,185,514 |
| Resources from customers | 24,530,959 | 8,097,529 | 1,686,599 | 270,198 | 695,565 | 35,280,850 | 13,166,619 | 1,460,633 | 782,257 | 50,690,359 |
| Debt securities issued | 820,786 | 528 | 44,074 | 3,007 | 1,950,971 | 2,819,366 | 276,815 | - | - | 3,096,181 |
| Other financial liabilities | - | - | - | - | 1,369,781 | 1,369,781 | 164,022 | - | 2,465 | 1,536,268 |
| Other liabilities | 43,268 | 44,410 | 1,576 | 4,461 | 896,865 | 990,580 | 300,665 | 125,505 | 6,611 | 1,423,361 |
| Total Liabilities | 26,432,542 | 10,240,574 | 1,732,249 | 8,432,948 | 857,791 | 47,696,104 | 15,539,685 | 1,681,052 | 1,014,842 | 65,931,683 |
| Equity and non-controlling | ||||||||||
| interests | 692,726 | 711,821 | 25,475 | 182,328 | 4,127,383 | 5,739,733 | 828,735 | 300,144 | 189,436 | 7,058,048 |
| Total Liabilities, Equity | ||||||||||
| and non-controlling interests | 27,125,268 | 10,952,395 | 1,757,724 | 8,615,276 | 4,985,174 | 53,435,837 | 16,368,420 | 1,981,196 | 1,204,278 | 72,989,731 |
| Number of employees | 4,781 | 609 | 192 | 148 | 1,551 | 7,281 | 5,852 | 2,609 | 77 | 15,819 |
(1) Includes the contribution associated with the Bank's investments in Angola, in Banco Millennium Atlântico, recorded since May 2016 by the equity method;
(2) Includes financial assets held for trading, financial assets held for trading at fair value, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
Note: As at 30 September 2017, the goodwill disclosed in the financial statements that is reflected in Mozambique is Euros 2 million and Euros 128 million in Other Portugal, as described in note 30.
Notes to the Interim Condensed Consolidated Financial Statements 30 September 2017
As at 30 September 2016, the net contribution of the major geographic segments, for the income statement, is analysed as follows:
| Portugal | (Thousands of Euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Retail banking |
Companies, Corporate and Investment banking |
Private banking |
Non-core business portfolio |
Other | Total | Poland | Mozambique | Other (1) | Consolidated | |
| Income statement | ||||||||||
| Interest and similar income | 386,471 | 275,069 | 21,113 | 116,448 | 82,972 | 882,073 | 389,241 | 153,744 | 4,464 | 1,429,522 |
| Interest expense and similar charges | (98,615) | (65,955) | (9,948) | (88,878) | (63,012) | (326,408) | (142,572) | (52,911) | (643) | (522,534) |
| Net interest income | 287,856 | 209,114 | 11,165 | 27,570 | 19,960 | 555,665 | 246,669 | 100,833 | 3,821 | 906,988 |
| Commissions and other costs | 282,784 | 119,916 | 23,081 | 7,471 | 2,224 | 435,476 | 121,220 | 44,417 | 21,242 | 622,355 |
| Commissions and other costs | (9,974) | (4,660) | (256) | (27) | (111,814) | (126,731) | (78,015) | (17,519) | (4,070) | (226,335) |
| Net commissions and other income | 272,810 | 115,256 | 22,825 | 7,444 | (109,590) | 308,745 | 43,205 | 26,898 | 17,172 | 396,020 |
| Net gains arising from | ||||||||||
| trading activity | (53) | - | - | 23,893 | 64,561 | 88,401 | 98,283 | 23,658 | 2,171 | 212,513 |
| Share of profit of associates under the equity method |
- | - | - | - | 50,561 | 50,561 | - | - | 10,047 | 60,608 |
| Gains / (losses) arising from | ||||||||||
| the sale of subsidiaries | ||||||||||
| and other assets | 4 | - | - | - | (6,041) | (6,037) | 1,697 | 88 | 9 | (4,243) |
| Net operating revenue | 560,617 | 324,370 | 33,990 | 58,907 | 19,451 | 997,335 | 389,854 | 151,477 | 33,220 | 1,571,886 |
| Staff costs and | ||||||||||
| administrative costs Amortizations and depreciations |
361,507 1,595 |
72,101 368 |
11,244 5 |
16,095 14 |
(17,512) 19,253 |
443,435 21,235 |
168,468 9,464 |
55,799 6,167 |
17,653 135 |
685,355 37,001 |
| Operating expenses | 363,102 | 72,469 | 11,249 | 16,109 | 1,741 | 464,670 | 177,932 | 61,966 | 17,788 | 722,356 |
| Impairment for credit | ||||||||||
| and financial assets | - | - | - | - | - | - | - | - | - | - |
| Other impairments and provisions Net income / (loss) before |
(45) | 45 | - | (6,445) | (49,085) | (55,530) | (8,791) | 142 | - | (64,179) |
| income tax | 197,470 | 251,946 | 22,741 | 36,353 | (31,375) | 477,135 | 203,131 | 89,653 | 15,432 | 785,351 |
| Income tax | (40,650) | 47,259 | (6,244) | 104,527 | 29,490 | 134,382 | (44,791) | (20,276) | (1,102) | 68,213 |
| Income / (loss) after income tax from continuing operations |
156,820 | 299,205 | 16,497 | 140,880 | (1,885) | 611,517 | 158,340 | 69,377 | 14,330 | 853,564 |
| Income / (loss) arising from discontinued operations (2) |
- | - | - | - | 1,092 | 1,092 | - | - | 44,135 | 45,227 |
| Net income / (loss) for the period | 156,820 | 299,205 | 16,497 | 140,880 | (793) | 612,609 | 158,340 | 69,377 | 58,465 | 898,791 |
| Non-controlling interests | - | - | - | - | 6,696 | 6,696 | (61,514) | (17,802) | (28,413) | (101,033) |
| Net income / (loss) for the period | ||||||||||
| attributable to Shareholders | 156,820 | 299,205 | 16,497 | 140,880 | 5,903 | 619,305 | 96,826 | 51,575 | 30,052 | 797,758 |
As at 31 December 2016, the net contribution of the major geographic segments, for the balance sheet, is analysed as follows:
| Balance sheet Cash and Loans and advances |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| to credit institutions | 9,334,906 | 1,059,177 | 1,595,368 | 5,375 | (10,916,428) | 1,078,398 | 690,787 | 437,922 | 871,731 | 3,078,838 |
| Loans and advances | ||||||||||
| to customers | 16,917,689 | 10,934,311 | 172,165 | 8,065,466 | (74,691) | 36,014,940 | 10,661,642 | 1,039,478 | 301,542 | 48,017,602 |
| Financial assets (3) | 20,960 | - | - | 634,878 | 7,458,104 | 8,113,942 | 4,031,817 | 228,636 | 6,083 | 12,380,478 |
| Other assets | 183,848 | 55,424 | 11,729 | 847,921 | 6,119,753 | 7,218,675 | 211,494 | 131,782 | 225,942 | 7,787,893 |
| Total Assets | 26,457,403 | 12,048,912 | 1,779,262 | 9,553,640 | 2,586,738 | 52,425,955 | 15,595,740 | 1,837,818 | 1,405,298 | 71,264,811 |
| Resources from other | ||||||||||
| credit institutions | 1,344,914 | 3,751,972 | - | 9,101,255 | (6,030,981) | 8,167,160 | 1,303,029 | 121,268 | 346,938 | 9,938,395 |
| Resources from customers | 23,893,851 | 7,668,144 | 1,691,628 | 329,361 | 439,529 | 34,022,513 | 12,668,085 | 1,298,883 | 808,166 | 48,797,647 |
| Debt securities issued | 556,065 | 1,795 | 62,353 | 584 | 2,594,121 | 3,214,918 | 297,902 | - | - | 3,512,820 |
| Other financial liabilities | - | - | - | - | 2,135,077 | 2,135,077 | 335,073 | - | 5,984 | 2,476,134 |
| Other liabilities | 19,505 | 42,332 | 639 | 4,025 | 797,421 | 863,922 | 280,870 | 123,527 | 6,315 | 1,274,634 |
| Total Liabilities | 25,814,335 | 11,464,243 | 1,754,620 | 9,435,225 | (64,833) | 48,403,590 | 14,884,959 | 1,543,678 | 1,167,403 | 65,999,630 |
| Equity and non-controlling interests |
643,068 | 584,669 | 24,642 | 118,415 | 2,651,571 | 4,022,365 | 710,781 | 294,140 | 237,895 | 5,265,181 |
| Total Liabilities, Equity and non-controlling interests |
26,457,403 | 12,048,912 | 1,779,262 | 9,553,640 | 2,586,738 | 52,425,955 | 15,595,740 | 1,837,818 | 1,405,298 | 71,264,811 |
| Number of employees | 4,854 | 588 | 185 | 148 | 1,558 | 7,333 | 5,844 | 2,551 | 79 | 15,807 |
(1) Includes the activity of the subsidiary in Angola, considered as discontinued operation;
(2) The amount considered for Angola in discontinued operations corresponds to the book value. The impact of capital allocation in segments base, is reflected in net interest income item; (3) Includes financial assets held for trading, financial assets held for trading at fair value through profit or loss, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
Note: As at 31 December 2016, the goodwill disclosed in the financial statements that is reflected in Mozambique is Euros 2 million and Euros 128 million in Other Portugal, as described in note 30.
30 September 2017
Description of materially relevant reconciliation items:
| Sep 2017 Euros '000 |
Sep 2016 Euros '000 |
|
|---|---|---|
| Net contribution: | ||
| Retail banking in Portugal | 134,396 | 97,198 |
| Companies, Corporate and Investment banking | 46,528 | (112,481) |
| Private Banking | 20,592 | 14,922 |
| Non-core business portfolio | (133,042) | (249,802) |
| Foreign business (continuing operations) (1) | 202,172 | 188,604 |
| Non-controlling interests (2) | (79,511) | (107,729) |
| 191,135 | (169,288) | |
| Income from discontinued or discontinuing operations (3) | - | 44,135 |
| 191,135 | (125,153) | |
| Amounts not allocated to segments: | ||
| Interests of hybrid instruments | (6,343) | (49,146) |
| Net interest income of the bond portfolio | 29,212 | 30,045 |
| Interests written off | 12,909 | (1,034) |
| Own credit risk | 46 | 4,734 |
| Foreign exchange activity | 25,757 | 20,056 |
| Equity accounted earnings | 32,399 | 50,561 |
| Impairment and other provisions (4) | (114,875) | (180,914) |
| Operational costs (5) | 23,670 | (1,741) |
| Mandatory contributions | (57,860) | (51,727) |
| Gains on the acquisition of Visa Europe by Visa Inc. (1) | - | 26,353 |
| Gain arising from the sale of Banco Millennium Angola | - | 7,329 |
| Taxes (6) | 25,124 | 29,489 |
| Income from discontinued or discontinuing operations (7) | 1,250 | 1,092 |
| Non-controlling interests | 3,483 | 6,696 |
| Others (8) | (32,598) | (17,720) |
| Total not allocated to segments | (57,826) | (125,927) |
| Consolidated net income | 133,309 | (251,080) |
(1) The net contribution of the Foreign Business (continuing operations) segment includes, in the first nine months of 2016, the gain of Euros 64.7 million arising from the sale of Visa Europe by Bank Millennium in Poland. The caption Gains on the acquisition of Visa Europe by Visa Inc. only includes the amount of Euros 26.4 million related to the gains obtained from the same operation in Portugal, as referred in note 7.
(2) Corresponds mainly to the income attributable to third parties related to the subsidiaries in Poland, in Mozambique and in Angola (2016). Does not include values not allocated to the segments.
(3) In 2016, includes the book value of the subsidiary in Angola considered as a discontinued operation. Concerning Angola, only includes the figures of the first three months of the year, since from May 2016 on, the contribution of the new merged entity, Banco Millennium Atlântico, resulted from the merger process of Banco Millennium in Angola with Banco Privado Atlântico started being accounted using the equity method. It does not include the value of the Other segment (Portugal).
(4) Includes provisions for property in kind and for funds specialized in the recovery of loans, administrative infractions, various contingencies and other unallocated to business segments.
(5) Corresponds to costs related to the impacts arising from the revision of the Collective Labour Agreement and to restructuring costs .
(6) Includes deferred tax revenue, net of current non-segment tax expense, namely the tax effect associated with the impacts of the previous items, calculated based on a marginal tax rate.
(7) Gains arising from the sale of Millennium bcp Gestão de Ativos - Sociedade Gestora de Fundos de Investimento, S.A.
(8) It includes other operations not allocated previously namely funding for non-interest bearing assets and strategic financial investments, net commissions and other operating income / expenses and other income from financial operations.
In accordance with accounting policy 1 (z), the main contingent liabilities and other commitments under IAS 37 are as follows:
The Portuguese Competition Authority has declared that the administrative proceedings are to stay under judicial secrecy, once it considered that the interests dealt with in the investigation, as well as the parties' rights, would not be compatible with the publicity of the process.
The Bank received on 2 June 2015, the notice of an illicit act issued by the Competition Authority relating to the administrative offence proceedings nr. 2012/9, and was charged of taking part in the exchange of information amongst Banks of the system relating to pricing already approved and mortgage and consumption loan operations already approved or granted. Concerning the charges brought forward, the Bank will present its reply to the notice and afterwards, if need be, will present its legal objections. We must point out that a notice of an illicit act does not imply the making of a final decision concerning the proceedings. If the Competition Authority were to issue a conviction, the Bank could be sentenced to pay a fine within the limits set forth by the law, which foresees a maximum amount equivalent to 10% of the consolidated annual turnover registered in the year prior to the making of the decision. Notwithstanding, such a decision may be contested in court. The proceedings were suspended by the Competition Authority until the legal decision of the various pending interlocutory appeals.
In October 2016, the Lisbon Court of Appeal overruled the decision of the Competition, Regulation and Supervision Court which had decided for the proceedings to be suspended.The Bank appealed to the Constitutional Court on this sentence. The Constitutional Court denied the appeal and the decision became final.
On 4 July 2017, the Competition Authority notified the Bank on the decision regarding the withdrawal of the suspension concerning the access to documents deemed as confidential and of the extension of the term for the making of a decision on the illicit act for more 40 days. The Bank has already present its reply.
On 17 February 2016 the Claimant filed a submission with the Regional Court in Warsaw, extending the claim again by a further 1,041 group members. The Bank has not yet been notified of this submission. On 2 August 2016 the Regional Court in Warsaw issued a decision ordering the publication of an announcement in the press concerning the commencement of group action proceedings.
Following the Bank's motion to repeal this decision, the Court suspended its execution, but, on 8 August 2016, it issued another decision for the case to be heard in group action proceedings. On 31 August 2016 the Bank appealed against this decision. On 16 December 2016 the Court of Appeal in Warsaw overruled decision of the Regional Court for the case to be heard in group action proceedings and referred the request for the case to be heard in group action proceedings to the Regional Court for re-examination. At a hearing on 15 March 2017 the Regional Court issued decision for the case to be heard in group action proceedings. On 18 April 2017 the Bank filed an appeal against the above decision; currently the date of reviewing the case by the the Court of Appeal in Warsaw has not been scheduled yet. On 30 June 2017 the Claimant filed a submission with the Regional Court in Warsaw, extending the claim again by further 676 group members. The new value of the subject matter of the dispute was indicated as approx. PLN 132.7 million (Euros 30,8 million, including the values provided in the statement of claim and the previous submissions concerning extension of the claim dated 4 March 2015 and 17 February 2016). On 28 September 2017 the Court of Appeal in Warsaw issued a decision dismissing the Bank's appeal against the decision the Regional Court in Warsaw dated 15 March 2017; thus, the decision for the case to be heard in group action proceedings became final.
On 3 December 2015 the Bank received notice of a class action lawsuit lodged by a group of 454 borrowers represented by the Municipal Consumer Ombudsman in Olsztyn pertaining to low down payment insurance used with CHF - indexed mortgage loans. The plaintiffs demand the payment of the amount of PLN 3.5 million (Euros 0.83 millions) claiming for some clauses of the agreements pertaining to low down payment insurance to be declared null and void. On 3 March 2016 the Bank filed the response to the lawsuit demanding its dismissal. The first court hearing took place on 13 September 2016 and the court issued the decision on the admissibility of the class action in this case. On 16 February 2017, the Court of Appeal denied the appeal brought forward by the Bank and the previous sentence became definitive. On 30 March 2017 the Regional Court in Warsaw dismissed Bank's motion to oblige the plaintiff to provide security for costs of proceedings. On 10 April 2017 Bank filed a complaint to the Court of Appeal in Warsaw against the decision dismissing the motion to provide security. The decision is final.
On 28 December 2015 and 5 April 2016, Bank Millennium was notified of two cases filed by clients (PCZ SA and Europejska Fundacja Współpracy Polsko - Belgijskiej / European Foundation for Polish-Belgian Cooperation (EFWP-B)), in the amount of PLN 150 million (Euros 34.8 million) and of PLN 521.9 million (Euros 121.2 million) respectively. The authors allege in their petitions that Bank Millennium misrepresented certain contractual clauses, which determined the maturity of the credits, causing losses to the Authors. A decision of the Warsaw Regional Court is awaited. As regards the case brought by PCZ, the Wrocław Regional Court (first instance) on 7 April 2017 issued a verdict favorable to Bank Millennium by rejecting the case.
On 21 March 2017, a lawsuit was filed against the subsidiary Bank Millennium by a client in which the amount of PLN 200 million (Euros 46.5 million) was claimed for the payment of damages and compensation following the blocking of accounts in the context of insolvency proceedings. The process is currently at an early stage of assessment. In the Bank's opinion, the probability of the customer winning the process is marginal.
On 15 January 2016 a presidential proposal of legislation aimed at supporting FX mortgage borrowers was put forward, however without an assessment of impact for the banking sector. According to estimations later announced by Polish Financial Supervision Authority, the overall direct costs for the polish banking sector could reach PLN 66,900 million (Euros 15,500 million).
On 2 August 2016 another presidential proposal of legislation aimed at supporting FX mortgage borrowers was put forward, this time mainly focusing on repayment part of fx spreads charged on the disbursement of the credit and in foreign exchange transactions related to the payment of mortgage loans in foreign currency. On 10 August the Financial Stability Committee of Poland (CEFP) (composed of the governor of the National Bank of Poland, the Minister of Finance responsible for the CEFP and the person responsible for the Banking Guarantee Fund), following the initiative of the National Bank of Poland, set up a working group to analyse this issue, which included representatives of the institutions represented in the CEFP.
On 13 January 2017, the CEFP issued Resolution No 14/2017, which included the recommendation of a set of measures to create a framework of encouraging voluntary agreements between banks and customers. The CEFP considers that after the analysis and evaluation of risk related to weight significant part of this loan portfolio, the restructuring of this portfolio should begin. However, this restructuring must be gradually, through negotiation between banks and customers, should be voluntary and should ensure the stability of the financial system.
On 1 August 2017, the Polish president introduced a bill to amend the Law to support borrowers in difficult financial situations who obtained mortgage loans. The proposed law is designed to facilitate the provision of assistance to people who, for objective reasons, is in a difficult financial situation, and introduces a new instrument which encourages and supports the voluntary restructuring of mortgage loans in foreign currency and determines the mechanisms for their financing. This bill was initially positively evaluated by the Polish Financial Supervisory Authority and the National Bank of Poland.
In these circumstances, it is not possible at this time to assess the actual entry into force and content of this (these) bill (s) of law, as well as the impact of the bill (s), but the implementation of some or all of the measures in it, may have a significant impact on the results and capital ratios of the banks, including the subsidiary Bank Millennium.
As at 30 September 2017, the requirements of International Accounting Standard 37 - Provisions, Liabilities and Contingent Assets are not met to establish any provision as it cannot be made a reliable estimate of the possible obligation, and so this situation is being treated as a contingent liability.
a) deny the obligation to settle those debts to the Bank, arguing that the respective agreement is null, but without the corresponding obligation of returning the amounts already paid;
b) have the Bank sentenced to pay amounts of around Euros 90 million and Euros 34 million for other debts owed by those entities to other banking institutions, as well as other amounts, totalling around Euros 26 million, supposedly already paid by the debtors within the scope of the loan agreements; c) have the Bank be given ownership of the object of the pledges associated to the aforementioned loan agreements, around 340 million shares of the Bank, allegedly purchased on behalf of the Bank, at its request and in its interest.
The Bank presented its defence and counterclaim, demanding the payment of the debt. The Plaintiffs submitted their defence against the counterclaim and the Bank answered in July 2016. The proceedings are waiting for the schedule of a prior hearing or the issue of a conclusive opening order.
On 3 August 2014, with the purpose of safeguarding the stability of the financial system, the Bank of Portugal applied a resolution measure to Banco Espírito Santo, S.A. (BES) in accordance with the provisos of article 145 C (1.b) of the Legal Framework for Credit Institutions and Financial Companies (RGICSF), namely by the partial transfer of assets, liabilities, off-balance sheet items and assets under management into a transition bank, Novo Banco, S.A. (Novo Banco), incorporated on that date by a decision issued by the Bank of Portugal. Within the scope of this process, the Resolution Fund made a capital contribution to Novo Banco amounting to Euros 4,900 million, becoming the sole shareholder.
Within this context, the Resolution Fund asked for loans amounting to Euros 4,600 million, Euros 3,900 million of which were granted by the State and Euros 700 million by a group of credit institutions, including the Bank.
As announced on 29 December 2015, the Bank of Portugal transferred to the Resolution Fund the liabilities emerging from the "eventual negative effects of future decisions regarding the resolution process and which may result in liabilities or contingencies".
On 7 July 2016, the Resolution Fund declared that it would analyse and evaluate the diligences to make, following the publication of the report on the result of the independent evaluation, made to estimate the level of credit recovery for each category of creditors under a hypothetical scenario of a normal insolvency process of BES on 3 August 2014.
In accordance with the applicable law, when the liquidation process is over, if it is ascertained that the creditors, whose credits were not transferred to Novo Banco, would take on a loss higher than the one they would hypothetically take if BES had gone into liquidation right before the application of the resolution measure, such creditors shall be entitled to receive the difference from the Resolution Fund.
Moreover, following this process, a significant number of lawsuits against the Resolution Fund was filed and is underway.
On 20 February 2017, the Bank of Portugal communicated that it decided to select the potential investor Lone Star to be part of an exclusive definitive negotiation stage for the conditions under which the sale of the investment that the Resolution Fund held in Novo Banco, S.A. could be carried out.
On 31 March 2017, the Bank of Portugal made a communication about the sale of Novo Banco, where it states the following:
"The Bank of Portugal selected today the company Lone Star to conclude the sale of Novo Banco. The sale agreement documentation has already been signed by the Resolution Fund. In accordance with the sale agreement, Lone Star will make capital injections into Novo Banco totalling Euros 1,000 million, of which Euros 750 million at the moment the operation is completed and Euros 250 million during the following 3 years. Via this capital injection, the company Lone Star will become the owner of 75% of the share capital of Novo Banco and the Resolution Fund will own the remaining 25%.
The conditions agreed also include the existence of a contingent capitalization mechanism up to a maximum of Euros 3,890 million, according to which the Resolution Fund, as shareholder, commits to carry out capital injections if certain cumulative conditions materialize, related with: i) the performance of a defined group of assets of Novo Banco and ii) the performance shown by the bank's capitalization levels.
The eventual capital injections to be made in accordance with this contingent mechanism benefit from a capital buffer resulting from the capital injection to be made, in accordance with the terms and conditions of the operation, and are subject to an absolute maximum threshold.
The conditions agreed also foresee mechanisms to safeguard the interests of the Resolution Fund, to line up the incentives and supervision, despite the limitations resulting from the application of State aid rules.
On 7 July 2017, the European Commission declared its non-opposition to this sale operation.
On 2 October 2017, by Resolution of the Council of Ministers (Resolution n. 151-A / 2017), the Portuguese State, as the ultimate guarantor of financial stability, is authorized to enter into a framework agreement with the Resolution Fund, with a view to making financial resources available to the Resolution Fund, if and when it is considered necessary, in order to satisfy any contractual obligations that may arise from the sale of the 75% of share capital of Novo Banco.
On 18 October 2017, according to a press release of Banco de Portugal, and following the resolution of the Council of Ministers n.° 151-A/2017, on 2 October 2017, Banco de Portugal and the Resolution Fund concluded the sale of Novo Banco to Lone Star, with an injection by the new shareholder of Euros 750 million, which will be followed by a further injection of Euros 250 million to be delivered by the end of 2017.
As of this date, Novo Banco is held by Lone Star and the Resolution Fund, which hold 75% and 25% of the share capital respectively.
On 19 December 2015, the Board of Directors of the Bank of Portugal resolved to announce that Banif was "at risk of insolvency or insolvent" and to open the process for the urgent resolution of the institution through the partial or total sale of its activity, which was completed on 20 December 2015 through the sale to Banco Santander Totta S.A. (BST) of the rights and obligations of Banif, formed by the assets, liabilities, off-balance sheet items and assets under management.
The largest portion of the assets that were not sold, were transferred into an asset management vehicle denominated Oitante, S.A. (Oitante) specifically created for that purpose, of which the Resolution Fund is the sole shareholder. For that purpose, Oitante issued bonds representing debt amounting to Euros 746 million. The Resolution Fund provided a guarantee and the Portuguese State a counter-guarantee, for which the Oitante has already made a partial early repayment in the amount of Euros 90 million.
The operation involved state aid, Euros 489 million of which were provided by the Resolution Fund. The Euros 489 million taken by the Resolution Fund were funded through a loan granted by the State.
In a statement of 21 July 2016, the Resolution Fund announced it had proceeded to the early partial repayment, amounting to Euros 136 million, of the loan obtained from the State in December 2015 to finance the resolution measures applied to Banif. This amount corresponds to the income of the contribution collected, until 31 December 2015, from the institutions covered by the Regulation of the Single Resolution Mechanism that was not transferred to the Single Resolution Fund. This amount will be paid to the Single Resolution Fund by credit institutions that are covered by this scheme over a period of 8 years, starting in 2016.
Pursuant to the resolution measures applied to BES and Banif, on 31 December 2016 the Resolution Fund held the entire share capital of Novo Banco and of Oitante, position which is believed unchanged as of 30 September 2017 (however amended with the above mentioned sale to Lone Star).
Within the scope of these measures, the Resolution Fund asked for loans and took on other responsibilities and contingent liabilities, including:
effects of the application of the principle that no creditor of the credit institution under resolution may take on a loss greater than the one it would take if that institution did not go into liquidation.
negative effects of the resolution process that result in additional liabilities or contingencies for Novo Banco, S.A. and that must be neutralized by the Resolution Fund.
legal proceedings filed against the Resolution Fund.
guarantee granted to the bonds issued by Oitante S.A. totalling Euros 746 million, of which Oitante, S.A. reimbursed Euros 90 million early. This guarantee is counter-guaranteed by the Portuguese State.
To reimburse the loans obtained and to face other liabilities that it may take on, the Resolution Fund has only the revenues from the initial and regular contributions from the participating institutions (including the Bank) and from the contribution over the banking sector by Law 55-A/2010. It also provides for the possibility of the member of the Government in charge of finances determining, issuing an ordinance, that the participating institutions should make special contributions, in the situations foreseen in the applicable legislation, namely in case of the Resolution Fund not having own resources for fulfilling its obligations.
Pursuant to Decree-Law no. 24/2013 of 19 February, which establishes the method for determining the initial, periodic and special contributions to the Resolution Fund, provided for in the RGICSF, the Bank has been proceeding, since 2013, to the mandatory contributions, as provided for in the decree-law.
On 3 November 2015, the Bank of Portugal issued a Circular Letter under which it is clarified that the periodic contribution to the RF should be recognised as an expense at the time of the occurrence of the event which creates the obligation to pay the contribution, i.e. on the last day of April of each year, as stipulated in Article 9 of the referred Decree-Law, thus the Bank is recognising as an expense the contribution to the RF in the year in which it becomes due.
The RF issued, on 15 November 2015, a public statement declaring: "...it is further clarified that it is not expected that the Resolution Fund will propose the setting up of a special contribution to finance the resolution measure applied to Banco Espírito Santo, S.A., ('BES'). Therefore, the eventual collection of a special contribution appears to be unlikely."
The regime established in Decree-Law no. 24/2013 establishes that the Bank of Portugal fixes, by instruction, the rate to be applied each year on the basis of objective incidence of periodic contributions. The Instruction No. 21/2016 of the Bank of Portugal, published on 26 December established the base rate to be effective in 2017 for the determination of periodic contributions to the FR by 0.0291%.
Thus, during the first nine months of 2017, the Group made periodic contributions to the Resolution Fund in the amount of Euros 8,490,000. The amount related to the contribution on the banking sector for the first nine months of 2017 was Euros 31,037,000. These contributions were recognised as cost in the months of April and June, in accordance with IFRIC No. 21 – Levies.
In 2015, following the establishment of the Single Resolution Fund ('SRF'), the Group had to make an initial contribution in the amount of Euros 31,364,000. In accordance with the Intergovernmental Agreement on the transfer and mutualisation of contributions to the SRF, this amount was not transferred to the SRF but was used instead to partially cover for the disbursements made by the RF in respect of resolution measures prior to the date of application of this Agreement. This amount will have to be reinstated over a period of 8 years (starting in 2016) through the periodic contributions to the SRF. The total amount of the contribution, in the first nine months of 2017, attributable to the Group was Euros 21,466,000, of which the Group delivered Euros 18,246,000 and the remaining was constituted as irrevocable payment commitment. The Single Resolution Fund does not cover undergoing situations with the National Resolution Fund as at 31 December 2015.
By a public statement on 28 September 2016, the RF and the Ministry of Finance communicated the agreement on the basis of a review of the terms of the Euros 3,900,000 million loan originally granted by the State to the FR in 2014 to finance the resolution measure applied to BES. According to the Resolution Fund, the extension of the maturity of the loan was intended to ensure the ability of the Resolution Fund to meet its obligations through its regular revenues, regardless of the contingencies to which the Resolution Fund is exposed. On the same day, the Office of the Minister of Finance also announced that increases in the liabilities arising from the materialization of future contingencies will determine the maturity adjustment of State and Bank loans to the Resolution Fund, in order to maintain the contributory effort required to the banking sector at current levels.
According to the communication of the Resolution Fund of 21 March 2017:
The conditions of the loans obtained by the Fund to finance the resolution measures applied to Banco Espírito Santo, S.A. and to Banif – Banco Internacional do Funchal, S.A. were changed ." These loans in the amount of Euros 4,953 million, of which Euros 4,253 million granted by the Portuguese State and Euros 700 million granted by a group of banks.
"Those loans are now due in December 2046, without prejudice to the possibility of being repaid early based on the use of the Resolution Fund's revenues. The due date will be adjusted so that it enables the Resolution Fund to fully meet its liabilities based on regular revenues and without the need for special contributions or any other type of extraordinary contributions. The liabilities resulting from the loans agreed between the Resolution Fund and the Sate and the banks pursuant to the resolution measures applied to BES and Banif are handled pari-passu with one another.
"The revision of the loans' conditions aimed to ensure the sustainability and financial balance of the Resolution Fund".
"The new conditions enable the full payment of the liabilities of the Resolution Fund, as well as the respective remuneration, without the need to ask the banking sector for special contributions or any other type of extraordinary contributions".
It is not possible, on this date, to assess the effects on the Resolution Fund due to: (i) the sale of the shareholding in Novo Banco in accordance with the communication of Banco de Portugal dated 18 October 2017; (ii) the application of the principle that no creditor of the credit institution under resolution may take on a loss greater than the one it would take if that institution did not go into liquidation; (iii) additional liabilities or contingencies for Novo Banco, S.A. which need to be neutralized by the Resolution Fund; (iv) legal proceedings against the Resolution Fund, including the legal proceeding filed by those who have been defrauded by BES; and (v) the guarantee provided to the bonds issued by Oitante.
Despite the possibility foreseen in the applicable legislation concerning the payment of special contributions, taking into consideration the recent developments in the renegotiation of the conditions of the loans granted to the Resolution Fund by the Portuguese State and by a group of banks, including the Bank, and the public notice made by the Resolution Fund and by the Office of the Portuguese Ministry of Finance mentioning that such a possibility will not be used, the interim financial statements as at 30 September 2017 translate the Bank's expectation that no special contributions or other type of extraordinary contributions will be required of the institutions part of the Resolution Fund to finance the resolution measures applied to BES and to Banif.
Eventual alterations regarding this matter may have relevant implications in future financial statements of the Bank.
In the last week of 2016, the negotiation that had been held since October 2016 with some labour unions was completed with the objective of reviewing the Collective Labour Agreement ("CLA"), whose main objective was the Bank's ability to maintain adequately the evolution of short-term staff costs with the lowest possible impact on employees' lives.
This revision of the CLA, which has been in force since February 2017, covered several matters, among which the most relevant are (i) the commitment to anticipate, by July 2017, the salary replacement that was scheduled for January 2018 and (ii) to raise the retirement age in order to bring it into line with that of Social Security, which will make it possible to strengthen the sustainability of pension funds.
With the implementation of the Restructuring Plan, the Bank was able to anticipate the full repayment of public funding in February 2017 and for this reason, the Board of Directors decided to bring forward by the end of the transitional period of the wage adjustment to July 2017.
The Bank recorded provisions or deferred tax liabilities at the amount considered adequate to offset the tax or tax loss carry forwards, as well as the contingencies related to the fiscal years not yet reviewed by the tax administration.
Following a period of deceleration in economic activity and increase of inflation, of revisions to the rating of the Republic of Mozambique, depreciation of the metical and of decrease in foreign direct investment, the Bank of Mozambique has adopted a restrictive policy, with increases in the reference rate since December 2015, as well as increasing the reserve ratio. This set of factors constrained commercial banking in Mozambique, pushing it to pursue strict liquidity management, with a focus on raising funds, despite contributing to the improvement of net interest income.
According to an International Monetary Fund (IMF) statement dated 23 April 2016, it existed debt guaranteed by the State of Mozambique in an amount over USD 1 billion that had not been disclosed to the IMF. Following this disclosure, the economic program supported by the IMF was suspended. According to an IMF statement dated 13 December 2016, discussions were initiated on a possible new agreement with the Government of Mozambique, and were agreed the terms of reference for an external audit.
In a statement dated 16 January 2017 and 17 July 2017, the Ministry of Economy and Finance of Mozambique informed the bonds holders issued by the Republic of Mozambique "US\$726.524 million, 10.5%, repayable securities in 2023" that the interest payment due on 18 January 2017 and 18 July 2017, would not be paid by the Republic of Mozambique.
In June 2017, the Attorney General's Office of the Republic of Mozambique published an Executive Summary regarding the above-mentioned external audit. On 24 June 2017, the IMF released in a statement that due to the existence of information gaps in this audit, an IMF mission would visit the country to discuss audit results and possible follow-up measures. Following this visit, the IMF requested the Government of Mozambique to obtain additional information on the use of the funds.
According to public information provided by the IMF, there are credits granted in default to Mozambican companies, non-state, guaranteed by the Mozambican State.
This situation does not change the expectations of the Group on the ability of the Government of Mozambique and public enterprises to fully reimburse their commitments and about the development of the activity of their subsidiary Banco Internacional de Moçambique (BIM).
As at 30 September 2017, considering the 66.7% indirect investment in BIM Group, the Bank's interest in BIM's equity amounted to Euros 246,198,000, being the exchange translation reserve associated with this participation a negative amount of Euros 156,934,000. BIM's contribution to consolidated net income for the first nine months of 2017, attributable to the shareholders of the Bank, amounts to Euros 40,364,000
On that date, the subsidiary BIM's exposure to the State of Mozambique includes public debt securities denominated in metical classified as Financial assets available for sale financial assets and Financial assets held to maturity in the amounts of Euros 281,558,000 and Euros 88,055,000 respectively. These public debt securities mostly have a maturity of less than 1 year.
As at 30 September 2017, the Group has also registered in the balance Loans and advances to costumers, a direct exposure to the Mozambican State in the amount of Euros 370,977,000 (of which Euros 288,834,000 are denominated in metical, Euros 81,755,000 denominated in USD and Euros 388,000 denominated in Euros) and an indirect exposure resulting from sovereign guarantees received in the amount of Euros 290.351.000 (of which Euros 141,093,000 are denominated in metical and Euros 149,258,000 denominated in USD) and in the balance Guarantees granted and irrevocable commitments, an amount of Euros 31,044,000 (of which Euros 1,110,000 are denominated in metical and Euros 29,934,000 denominated in USD).
Ongoing discussions and inspections by the supervisor will lead to a reduction in the locally reported capital ratios due to certain locally applicable rules with no impact on the financial statements of BIM. Such locally reported ratios are, and will remain, comfortably above the required levels locally. These developments will have no bearing on the Group´s reported capital ratios or consolidated financial statements.
The Group performed a set of transactions of sale of financial assets (namely loans and advances to customers) for Funds specialized in the recovery of loans. These funds take the responsibility for management of the borrower companies or assets received as collateral with the objective of ensuring a pro-active management through the implementation of plans to explore/increase the value of the companies/assets.
The specialized funds in credit recovery that acquired the financial assets are closed funds, in which the holders of the participation units have no possibility to request the reimbursement of its participation units throughout the useful life of the Fund. These participation units are held by several banks, which are the sellers of the loans, in percentages that vary through the useful life of the Funds, ensuring however that, separately, none of the banks hold more than 50% of the capital of the Fund.
The Funds have a specific management structure (General Partner), fully independent from the assignor banks and that is selected on the date of establishment of the Fund. The management structure of the Fund has as main responsibilities to: (i) determine the objective of the Fund and (ii) administrate and manage exclusively the Fund, determining the objectives and investment policy and the conduct in management and business of the Fund. The management structure is remunerated through management commissions charged to the Funds.
These funds (in which the Group holds minority positions) establish companies in order to acquire the loans to the banks, which are financed through the issuance of senior and junior securities. The value of the senior securities fully subscribed by the Funds that hold the share capital match the fair value of the asset sold, determined in accordance with a negotiation based on valuations performed by both parties.
The value of the junior securities is equivalent to the difference between the fair value based on the valuation of the senior securities and the value of the transfer of credits. These junior securities, when subscribed by the Group, provide the right to a contingent positive value if the recovered amount for the assets transferred is above the nominal value amount of senior securities plus it related interest. Thus, considering these junior assets reflect a difference between the valuations of the assets sold based on the appraisals performed by independent entities and the negotiation between the parties, the Group performs the constitution of impairment losses for all of them.
30 September 2017
Therefore, as a result of the transfer of assets occurred operations, the Group subscribed:
Senior securities (participation units) of the funds, for which the cash-flows arise mainly from a set of assets transferred from the participant banks. These securities are booked in the available for sale portfolio and are accounted for at fair value based on the last available quote, as disclosed by the Management companies and audited at year end, still being analysed by the Bank;
Junior securities (with higher subordination degree) issued by the Portuguese law companies held by the funds and which are fully provided to reflect the best estimate of impairment of the financial assets transferred.
Within this context, not withholding control but maintaining an exposure to certain risks and rewards, the Group, in accordance with IAS 39.21 performed an analysis of the exposure to the variability of risks and rewards in the assets transferred, before and after the transaction, having concluded that it does not hold substantially all the risks and rewards.
Considering that it does not hold control and does not exercise significant influence on the funds or companies management, the Group performed, under the scope of IAS 39.20 c, the derecognition of the assets transferred and the recognition of the assets received in return as follows:
| Sep 2017 | ||||
|---|---|---|---|---|
| Assets transferred Euros '000 |
Net assets transferred Euros '000 |
Received value Euros '000 |
Net gain / (loss) Euros '000 |
|
| Fundo Recuperação Turismo FCR (a) | 304,400 | 268,318 | 294,883 | 26,565 |
| Fundo Reestruturação Empresarial FCR (b) | 84,112 | 82,566 | 83,212 | 646 |
| FLIT-PTREL (c) | 577,803 | 399,900 | 383,821 | (16,079) |
| Vallis Construction Sector Fund (d) | 238,325 | 201,737 | 238,325 | 36,588 |
| Fundo Recuperação FCR (b) | 343,266 | 243,062 | 232,267 | (10,795) |
| Fundo Aquarius FCR (c) | 132,635 | 124,723 | 132,635 | 7,912 |
| Discovery Real Estate Fund (c) | 211,388 | 152,155 | 138,187 | (13,968) |
| Fundo Vega FCR (e) | 113,665 | 113,653 | 109,599 | (4,054) |
| 2,005,594 | 1,586,114 | 1,612,929 | 26,815 |
| Dec 2016 | ||||
|---|---|---|---|---|
| Assets transferred Euros '000 |
Net assets transferred Euros '000 |
Received value Euros '000 |
Net gain / (loss) Euros '000 |
|
| Fundo Recuperação Turismo FCR (a) | 304,400 | 268,318 | 294,883 | 26,565 |
| Fundo Reestruturação Empresarial FCR (b) | 84,112 | 82,566 | 83,212 | 646 |
| FLIT-PTREL (c) | 577,803 | 399,900 | 383,821 | (16,079) |
| Vallis Construction Sector Fund (d) | 238,325 | 201,737 | 238,325 | 36,588 |
| Fundo Recuperação FCR (b) | 343,266 | 243,062 | 232,267 | (10,795) |
| Fundo Aquarius FCR (c) | 132,635 | 124,723 | 132,635 | 7,912 |
| Discovery Real Estate Fund (c) | 211,388 | 152,155 | 138,187 | (13,968) |
| Fundo Vega FCR (e) | 113,665 | 113,653 | 109,599 | (4,054) |
| 2,005,594 | 1,586,114 | 1,612,929 | 26,815 |
The Restructuring of the Fund activity segments are as follows: a) Tourism; b) Diversified; c) Real estate and tourism; d) Construction and e) Property.
The net gain/ (loss) was obtained at the date of the transfer of assets and was recorded in the item Net gains / (losses) arising from trading and hedging activities - Credit sales (note 6).
As at 30 September 2017, the assets received under the scope of these operations are comprised of:
| Sep 2017 | |||||
|---|---|---|---|---|---|
| Senior securities | Junior securities | ||||
| Participation units (note 23) Euros '000 |
Participation units (note 23) Euros '000 |
Capital supplies (note 32) Euros '000 |
Capital supplementary contributions (note 32) Euros '000 |
Total Euros '000 |
|
| Fundo Recuperação Turismo FCR | |||||
| Gross value | 287,930 | - | 31,625 | - | 319,555 |
| Impairment | (45,787) | - | (31,625) | - | (77,412) |
| 242,143 | - | - | - | 242,143 | |
| Fundo Reestruturação Empresarial FCR | |||||
| Gross value | 85,209 | - | - | - | 85,209 |
| Impairment | (6,105) | - | - | - | (6,105) |
| 79,104 | - | - | - | 79,104 | |
| FLIT-PTREL | |||||
| Gross value | 300,639 | - | 38,154 | 2,939 | 341,732 |
| Impairment | (4,578) | - | (38,154) | (2,939) | (45,671) |
| 296,061 | - | - | - | 296,061 | |
| Vallis Construction Sector Fund | |||||
| Gross value | 203,172 | 36,292 | - | - | 239,464 |
| Impairment | (196,886) | (36,292) | - | - | (233,178) |
| 6,286 | - | - | - | 6,286 | |
| Fundo Recuperação FCR | |||||
| Gross value | 204,269 | - | 78,514 | - | 282,783 |
| Impairment | (77,624) | - | (78,514) | - | (156,138) |
| 126,645 | - | - | - | 126,645 | |
| Fundo Aquarius FCR | |||||
| Gross value | 138,045 | - | - | - | 138,045 |
| Impairment | (10,490) | - | - | - | (10,490) |
| 127,555 | - | - | - | 127,555 | |
| Discovery Real Estate Fund | |||||
| Gross value | 150,409 | - | - | - | 150,409 |
| Impairment | (8,268) | - | - | - | (8,268) |
| 142,141 | - | - | - | 142,141 | |
| Fundo Vega FCR | |||||
| Gross value | 47,087 | - | 69,883 | - | 116,970 |
| Impairment | (1,902) | - | (69,883) | - | (71,785) |
| 45,185 | - | - | - | 45,185 | |
| Total Gross value | 1,416,760 | 36,292 | 218,176 | 2,939 | 1,674,167 |
| Total Impairment | (351,640) | (36,292) | (218,176) | (2,939) | (609,047) |
| Total | 1,065,120 | - | - | - | 1,065,120 |
30 September 2017
| Dec 2016 | |||||
|---|---|---|---|---|---|
| Senior securities | Junior securities | ||||
| Participation units (note 23) Euros '000 |
Participation units (note 23) Euros '000 |
Capital supplies (note 32) Euros '000 |
Capital supplementary contributions (note 32) Euros '000 |
Total Euros '000 |
|
| Fundo Recuperação Turismo FCR | |||||
| Gross value | 287,929 | - | 31,274 | - | 319,203 |
| Impairment | (45,611) | - | (31,274) | - | (76,885) |
| 242,318 | - | - | - | 242,318 | |
| Fundo Reestruturação Empresarial FCR | |||||
| Gross value | 84,112 | - | - | - | 84,112 |
| Impairment | (5,463) | - | - | - | (5,463) |
| 78,649 | - | - | - | 78,649 | |
| FLIT-PTREL | |||||
| Gross value | 299,479 | - | 38,155 | 2,939 | 340,573 |
| Impairment | (4,713) | - | (38,155) | (2,939) | (45,807) |
| 294,766 | - | - | - | 294,766 | |
| Vallis Construction Sector Fund | |||||
| Gross value | 203,172 | 36,292 | - | - | 239,464 |
| Impairment | (173,799) | (36,292) | - | - | (210,091) |
| 29,373 | - | - | - | 29,373 | |
| Fundo Recuperação FCR | |||||
| Gross value | 215,996 | - | 77,085 | - | 293,081 |
| Impairment | (70,698) | - | (77,085) | - | (147,783) |
| 145,298 | - | - | - | 145,298 | |
| Fundo Aquarius FCR | |||||
| Gross value | 136,111 | - | - | - | 136,111 |
| Impairment | (8,967) | - | - | - | (8,967) |
| 127,144 | - | - | - | 127,144 | |
| Discovery Real Estate Fund | |||||
| Gross value | 151,086 | - | - | - | 151,086 |
| Impairment | - | - | - | - | - |
| 151,086 | - | - | - | 151,086 | |
| Fundo Vega FCR | |||||
| Gross value | 44,848 | - | 66,950 | - | 111,798 |
| Impairment | - | - | (66,950) | - | (66,950) |
| 44,848 | - | - | - | 44,848 | |
| Total Gross value | 1,422,733 | 36,292 | 213,464 | 2,939 | 1,675,428 |
| Total Impairment | (309,251) | (36,292) | (213,464) | (2,939) | (561,946) |
| Total | 1,113,482 | - | - | - | 1,113,482 |
Notes to the Interim Condensed Consolidated Financial Statements
30 September 2017
As at 30 September 2017, the Group's subsidiary companies included in the consolidated accounts using the full consolidation method were as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| Subsidiary companies | Head office |
Share capital |
Currency | Activity | % economic effective interests |
% held |
% direct held |
| Banco de Investimento Imobiliário, S.A. | Lisbon | 17,500,000 | EUR | Banking | 100.0 | 100.0 | 100.0 |
| Banco ActivoBank, S.A. | Lisbon | 17,500,000 | EUR | Banking | 100.0 | 100.0 | – |
| Bank Millennium, S.A. | Warsaw | 1,213,116,777 | PLN | Banking | 50.1 | 50.1 | 50.1 |
| Banque Privée BCP (Suisse) S.A. | Geneva | 70,000,000 | CHF | Banking | 100.0 | 100.0 | – |
| BCP África, S.G.P.S., Lda. | Funchal | 682,965,800 | EUR | Holding company | 100.0 | 100.0 | 100.0 |
| BCP Capital - Sociedade de Capital de Risco, S.A. | Oeiras | 2,000,000 | EUR | Venture capital | 100.0 | 100.0 | 100.0 |
| BCP International B.V. | Amsterdam | 18,000 | EUR | Holding company | 100.0 | 100.0 | 100.0 |
| BCP Investment B.V. | Amsterdam | 620,774,050 | EUR | Holding company | 100.0 | 100.0 | 100.0 |
| BCP Finance Bank, Ltd. | George Town | 246,000,000 | USD | Banking | 100.0 | 100.0 | – |
| BCP Finance Company | George Town | 90,911,185 | EUR | Financial | 100.0 | 34.1 | – |
| bcp holdings (usa), Inc. | Newark | 250 | USD | Holding company | 100.0 | 100.0 | – |
| BG Leasing, S.A. | Gdansk | 1,000,000 | PLN | Leasing | 74.0 | 37.1 | – |
| BIM - Banco Internacional de Moçambique, S.A. | Maputo | 4,500,000,000 | MZN | Banking | 66.7 | 66.7 | – |
| Millennium bcp Bank & Trust | George Town | 340,000,000 | USD | Banking | 100.0 | 100.0 | – |
| Millennium BCP - Escritório de Representações e Serviços, Ltda. |
São Paulo | 52,270,768 | BRL | Financial Services | 100.0 | 100.0 | 100.0 |
| Millennium bcp Participações, S.G.P.S., Sociedade Unipessoal, Lda. |
Funchal | 25,000 | EUR | Holding company | 100.0 | 100.0 | 100.0 |
| MB Finance AB | Stockholm | 500,000 | SEK | Financial | 100.0 | 50.1 | – |
| Enerparcela - Empreendimentos Imobiliários, S.A. | Oeiras | 37,200,000 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Interfundos - Gestão de Fundos de Investimento Imobiliários, S.A. |
Oeiras | 1,500,000 | EUR | Investment fund management | 100.0 | 100.0 | 100.0 |
| Adelphi Gere, Investimentos Imobiliários, S.A. | Oeiras | 10,706,743 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Sadamora - Investimentos Imobiliários, S.A. | Oeiras | 11,737,399 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Monumental Residence - Investimentos Imobiliários, S.A. |
Funchal | 30,300,000 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Millennium bcp - Prestação de Serviços, A.C.E. | Lisbon | 331,000 | EUR | Services | 93.9 | 93.5 | 83.5 |
| Millennium bcp Teleserviços - Serviços de Comércio Electrónico, S.A. |
Lisbon | 50,004 | EUR | Videotext services | 100.0 | 100.0 | 100.0 |
| Millennium Dom Maklerski, S.A. | Warsaw | 16,500,000 | PLN | Brokerage services | 100.0 | 50.1 | – |
| Millennium Goodie Sp.z.o.o. | Warsaw | 500,000 | PLN | Consulting and services | 100.0 | 50.1 | – |
| Millennium Leasing, Sp.z o.o. | Warsaw | 48,195,000 | PLN | Leasing | 100.0 | 50.1 | – |
| Millennium Service, Sp.z o.o. | Warsaw | 1,000,000 | PLN | Services | 100.0 | 50.1 | – |
| Millennium Telecomunication, Sp.z o.o. | Warsaw | 100,000 | PLN | Brokerage services | 100.0 | 50.1 | – |
| Millennium TFI - Towarzystwo Funduszy Inwestycyjnych, S.A. |
Warsaw | 10,300,000 | PLN | Investment fund management | 100.0 | 50.1 | – |
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| Subsidiary companies | Head office |
Share capital |
Currency | Activity | % economic effective interests |
% held |
% direct held |
| Millennium bcp Imobiliária, S.A. | Oeiras | 50,000 | EUR | Real-estate management | 99.9 | 99.9 | 99.9 |
| MULTI 24 - Sociedade Imobiliária, SA | Lisbon | 44,919,000 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Servitrust - Trust Management Services S.A. | Funchal | 100,000 | EUR | Trust services | 100.0 | 100.0 | 100.0 |
| Setelote - Aldeamentos Turísticos S.A. | Oeiras | 200,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Irgossai - Urbanização e construção, S.A. | Oeiras | 50,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Imábida - Imobiliária da Arrábida, S.A. (*) | Oeiras | 1,750,000 | EUR | Real-estate company | 100.0 | 100.0 | 100.0 |
| Bichorro – Empreendimentos Turísticos e Imobiliários S.A. |
Oeiras | 2,150,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Finalgarve – Sociedade de Promoção Imobiliária Turística, S.A. |
Oeiras | 250,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Fiparso – Sociedade Imobiliária S.A | Oeiras | 50,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
(*) - Company classified as non-current assets held for sale.
As at 30 September 2017, the investment funds included in the consolidated accounts using the full consolidation method as referred in the accounting policy presented in note 1 b) were as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Subsidiary companies | Head office |
Nominal Value Units |
Currency | Activity | economic effective interests |
held | direct held |
| Fundo de Investimento Imobiliário Imosotto Acumulação |
Oeiras | 153,883,066 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo de Investimento Imobiliário Gestão Imobiliária |
Oeiras | 11,718,513 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo de Investimento Imobiliário Imorenda | Oeiras | 155,507,815 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo Especial de Investimento Imobiliário Oceânico II |
Oeiras | 304,320,700 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo Especial de Investimento Imobiliário Fechado Stone Capital |
Oeiras | 17,122,497,300 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo Especial de Investimento Imobiliário Fechado Sand Capital |
Oeiras | 16,149,800,900 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo de Investimento Imobiliário Fechado Gestimo |
Oeiras | 6,653,257 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundo Especial de Investimento Imobiliário Fechado Intercapital |
Oeiras | 7,791,600 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Millennium Fundo de Capitalização - Fundo de Capital de Risco |
Oeiras | 120,307,000 | EUR | Venture capital fund | 100.0 | 100.0 | 100.0 |
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| Subsidiary companies | Head office |
Nominal Value Units |
Currency | Activity | % economic effective interests |
% held |
% direct held |
| Funsita - Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 15,820,000 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Imoport - Fundo de Investimento Imobiliário Fechado |
Oeiras | 4,682,827,000 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Multiusos Oriente - Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 491,610 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Grand Urban Investment Fund - Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 134,023,100 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Fundial – Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 21,850,850 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| DP Invest – Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 4,785,000 | EUR | Real estate investment fund | 54.0 | 54.0 | 54.0 |
| Fundipar – Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 11,945,000 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| MR – Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 31,056,099 | EUR | Real estate investment fund | 100.0 | 100.0 | 100.0 |
| Domus Capital– Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 2,600,000 | EUR | Real estate investment fund | 50.0 | 50.0 | 50.0 |
| Predicapital – Fundo Especial de Investimento Imobiliário Fechado |
Oeiras | 1,800,000 | EUR | Real estate investment fund | 60.0 | 60.0 | 60.0 |
The Group held a set of securitization transactions regarding mortgage loans which were set through specifically created SPE. As referred in accounting policy 1 b), when the substance of the relationships with the SPEs indicates that the Group holds control of its activities, the SPE are fully consolidated, following the application of IFRS 10.
As at 30 September 2017, the SPEs included in the consolidated accounts under the full consolidation method are as follows:
| Group | |||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Special Purpose Entities | office | capital | Currency | Activity | interests | held | held |
| Magellan Mortgages No.2 Limited | Dublin | 40,000 - |
EUR | Special Purpose Entities | 100.0 | 100.0 | 100.0 |
| Magellan Mortgages No.3 Limited | Dublin | 40,000 | EUR | Special Purpose Entities | 82.4 | 82.4 | 82.4 |
As at 30 September 2017, the BCP Group's subsidiary insurance companies included in the consolidated accounts under the full consolidation method were as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Subsidiary companies | office | capital | Currency | Activity | interests | held | held |
| S&P Reinsurance Limited | Dublin | 1,500,000 | EUR | Life reinsurance | 100.0 | 100.0 | 100.0 |
| SIM - Seguradora Internacional de | Maputo | 147,500,000 | MZN | Insurance | 92.0 | 61.4 | – |
Moçambique, S.A.R.L.
As at 30 September 2017, the Group's associated companies included in the consolidated accounts under the equity method are as follows:
| Share capital |
Currency | Activity | Group | Bank | |||
|---|---|---|---|---|---|---|---|
| Associated companies | Head office |
% economic effective interests |
% held |
% direct held |
|||
| Banco Millennium Atlântico, S.A. | Luanda | 53,821,603,000 | AOA | Banking | 22.7 | 22.5 | – |
| Banque BCP, S.A.S. | Paris | 126,955,886 | EUR | Banking | 19.9 | 19.9 | 19.9 |
| ACT-C-Indústria de Cortiças, S.A. | Sta.Maria Feira | 17,923,610 | EUR | Extractive industry | 20.0 | 20.0 | 20.0 |
| Baía de Luanda - Promoção, Montagem e Gestão de Negócios, S.A. (**) |
Luanda | 100,000,196 | USD | Services | 10.0 | 10.0 | – |
| Beiranave Estaleiros Navais Beira SARL | Beira | 2,849,640 | MZN | Naval shipyards | 22.8 | 14.0 | – |
| Constellation, S.A. | Maputo | 1,053,500,000 | MZN | Property management | 20.0 | 12.3 | – |
| Luanda Waterfront Corporation (**) | George Town | 10,810,000 | USD | Services | 10.0 | 10.0 | – |
| Lubuskie Fabryki Mebli, S.A. | Swiebodzin | 13,400,050 | PLN | Furniture manufacturer | 50.0 | 25.1 | – |
| Mundotêxtil - Indústrias Têxteis, S.A. | Vizela | 11,150,000 | EUR | Textile products, except clothing |
25.1 | 25.1 | – |
| SIBS, S.G.P.S., S.A. | Lisbon | 24,642,300 | EUR | Banking services | 22.8 | 21.9 | – |
| Sicit - Sociedade de Investimentos e Consultoria em Infra-Estruturas de Transportes, S.A |
Oeiras | 50,000 | EUR | Advisory | 25.0 | 25.0 | 25.0 |
| UNICRE - Instituição Financeira de Crédito, S.A. | Lisbon | 10,000,000 | EUR | Credit cards | 32.0 | 32.0 | 0.6 |
| Webspectator Corporation | Delaware | 950 | USD | Digital advertising services | 25.1 | 25.1 | 25.1 |
(**) Given the nature of the Group's involvement, the Board of Directors believes that the Group maintains a significant influence on these companies.
As at 30 September 2017 the Group's associated insurance companies included in the consolidated accounts under the equity method were as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| Head | Share | % economic effective |
% | % direct |
|||
| Associated companies | office | capital | Currency | Activity | interests | held | held |
| Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. |
Oeiras | 775,002,375 | EUR | Holding company | 49.0 | 49.0 | – |
| Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. |
Oeiras | 22,375,000 | EUR | Life insurance | 49.0 | 49.0 | – |
| Ocidental - Sociedade Gestora de Fundos de Pensões, S.A. |
Oeiras | 1,200,000 | EUR | Pension fund management | 49.0 | 49.0 | – |
During the first nine months of 2017, the Group liquidated its subsidiaries Propaço - Sociedade Imobiliária de Paço D'Arcos, Lda , M Inovação - Fundo de Capital de Risco BCP Capital and Caracas Financial Services, Limited and the associated company Imbondeiro Development Corporation and sold the associated company Nanium SA.
As regards to the 3.6% investment held in Banque BCP (Luxembourg), S.A., it was no longer considered as associated company because the Group no longer maintains a significant influence on the bank.
Regarding the entries in the consolidation perimeter, were included the investment funds Domus Capital– Fundo Especial de Investimento Imobiliário Fechado and Predicapital – Fundo Especial de Investimento Imobiliário Fechado.
Report and Accounts for the 3rd quarter of 2017
© Millennium bcp
Banco Comercial Português, S.A., Company open to public investment
Registered Office: Praça D. João I, 28 4000-295 Porto
Share Capital: 5,600,738,053.72 Euros
Registered at Commercial Registry Office of Oporto under the Single Registration and Tax Identification Number 501 525 882
Investor Relations Division Av. Professor Doutor Cavaco Silva Edifício 1 Piso 0 Ala B 2744-002 Porto Salvo Phone: (+351) 211 131 084 [email protected]
Communication Division Av. Professor Doutor Cavaco Silva Edifício 3 Piso 1 Ala C 2744-002 Porto Salvo Phone: (+351) 211 131 243 [email protected]
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