Annual Report • Nov 21, 2018
Annual Report
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Pursuant to article 10 of Regulation 5/2008 of the CMVM, please find herein the transcription of the
Report and Accounts for the nine months period ended 30 September 2018
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 Porto Commercial Registry, under the single registration and tax identification number 501 525 882
The "Report and Accounts for the nine months period ended 30 September 2018" document is a translation of the "Relatório e Contas para o periodo de nove meses findos em 30 de setembro de 2018", a document published by Banco Comercial Português, S.A. in the Portuguese Securities and Market Commission (CMVM) website, 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 para o periodo de nove meses findos em 30 de setembro de 2018" prevails.
All mentions in this document to the application of any regulation refer to the respective version currently in force.
| TABLE OF CONTENTS 2 JOINT MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS AND OF THE CEO 3 |
|
|---|---|
| INFORMATION ON THE BCP GROUP 5 | |
| BCP IN THE FIRST NINE MONTHS OF 2018 6 | |
| 6 MAIN INDICATORS 8 BCPGROUP 9 |
|
| GOVERNANCE 11 MAIN EVENTS IN FIRST NINE MONTHS OF 2018 13 |
|
| SUBSEQUENT EVENTS 15 BCP SHARE 16 QUALIFIED HOLDINGS 18 |
|
| BUSINESS MODEL 19 | |
| ECONOMIC ENVIRONMENT 20 BUSINESS MODEL 21 |
|
| FINANCIAL INFORMATION 26 | |
| RESULTS AND BALANCE SHEET 27 BUSINESS AREAS 34 LIQUIDITY AND FUNDING 39 CAPITAL 40 |
|
| STRATEGY 41 | |
| STRATEGIC PLAN 2021 42 | |
| REGULATORY INFORMATION 44 | |
| ALTERNATIVE PERFORMANCE MEASURES 49 RECONCILIATION OF ACCOUNTING INFORMATION WITH THE MANAGEMENT CRITERIA OF THE GROUP 51 GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES 53 |
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| CONSOLIDATED ACCOUNTS AND NOTES FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2018 55 |
In the first nine months of 2018 the world economy continued on the cycle of expansion that has been seen over the past few years, despite the geographic pattern of growth becoming more heterogeneous, with less dynamism among most emerging economies.
In Portugal, productive activity continued to benefit from the favorable external environment in terms of the economy and finance, and from the significant improvement in employment, which helped sustain robust levels of export and investment, alongside solid expansion of private consumption.
In Poland, the pace of economic expansion remained strong, reflected in a rise in family consumption as well as public and private investment. In Mozambique the stabilization of the metical and of aggregate prices allowed for a loosening of the restrictive monetary policy, with positive effects on the economy. In Angola the rise in the price of oil on international markets throughout 2018 has favored the process of economic and financial stabilization that is underway.
Millennium bcp's performance continues to show growth in all business areas, with a significant increase in the bank's profitability.
The consolidated net profit for the first nine months of 2018 totaled 257.5 million euros, a rise of 93.1% compared with the same period the previous year, powered by the strong activity in Portugal, which contributed 114.9 million euros, as well as the continued positive evolution of the international activity.
Highlights include the increase of net loans by around 700 million euros in the quarter, of which around 300 million euros from Portugal and 400 million euros from the international operations. This confirms the dynamic growth trend seen in the previous quarters and contributes to an accumulated growth of the performing loan portfolio by 5.1% in the 12 months since September 2017, up by 2.2 billion euros, of which 1.3 billion euros come from Portugal.
Total customer deposits rose 5.5% to reach 72.8 billion in September 2018, compared with September 2017.
Millennium bcp continues to be one of the most efficient banks in Portugal and in the Euro Zone, with cost to core income at 48%.
The trend for non-performing exposures (NPEs) continues on a notable downward path, with NPEs cut by approximately 1.8 billion euros between September 2017 and September 2018, with the reduction in Portugal totaling 1.6 billion euros. Coverage for NPE impairment rose to 51%, with total coverage rising to 107%.
The determined way in which this reduction of NPEs has been carried out is important, as it helps strengthen confidence and ensures Millennium bcp's sustainability, with the progressive improvement of asset quality.
The contribution from international activity to consolidated net profits in the first nine months of 2018 totaled 140.8 million euros, a rise of 7.2% compared with the same period the previous year.
In Poland the net result for Bank Millennium through the end of September 2018 rose to 129 million euros, up 9.3% compared with the same period the previous year, with ROE of 9.5%.
Millennium bim, in Mozambique, achieved a net profit of 72.3 million euros, up 20% from the same period the previous year, with ROE of 23.5%.
The stake in Banco Millennium Atlântico contributed 17.1 million euros to Millennium bcp's net results in the first nine months of 2018, confirming the value of this partnership in Angola.
At the end of September 2018 the CET1 ratio on a fully-implemented basis was 11.8%, well above the regulatory minimum and appropriate for the bank's risk profile, while liquidity remained at a comfortable level, as reflected in the loan-to-deposits ratio which remains below 90%.
In general terms the results of the third quarter of 2018 were very positive, aligned with the growth and profitability ambition that Millennium bcp proposed in the strategic plan and which has been amply recognized by customers, market analysts and ratings agencies.
Standard & Poor's and Moody's both recognized the progress Millennium bcp has made in recent years, and in October both upgraded the bank's risk ratings.
In November we received and published the results of the Europe-wide banking stress test run by the EBA and the ECB, in which Millennium bcp achieved a good result, substantially better than the results obtained in similar tests in 2014 and 2016. In the adverse scenario the CET1 ratio for Millennium bcp, on a fully-implemented basis, suffered an impact of 300 basis points, better than the average impact of 395 basis points achieved by the 48 banks tested by the EBA.
The start of the month was also marked by the agreement reached by Bank Millennium in Poland to acquire 99.79% of eurobank, an operation which, once all regulatory approvals are obtained, will allow the bank to strengthen its position and achieve its ambition for growth in the Polish market. The transaction is an opportunity for significant growth in value creation by taking advantage of the complementary businesses and significant synergies that exist between Bank Millennium and eurobank, with an estimated rise in earnings per share of Bank Millennium of 26% when the synergies are fully implemented.
Under the agreement Bank Millennium, financed by its own means, will pay 428 million euros for the acquisition, representing a P/BV ratio of 1.2x (below the P/BV of 1.3x at which listed Polish banks, including Bank Millennium, were trading at the time), which means this is a lucrative application of excess capital and liquidity.
Finally, in November there was a General Meeting of Banco Comercial Português S.A. shareholders, at which an ample majority approved: (1) the alteration of the bank's statutes to clarify the capital eligible for CET1 and (2) the reformulation of the items of own capital with the special purpose of unequivocally reinforcing the future conditions for the existence of funds classified by the regulators as distributable by means of the reduction of the amount of the share capital by 875.7 million euros, without changing the existing number of shares or altering the net equity, with the consequent alteration of the articles of association.
Miguel Maya Nuno Amado
Chief Executive Officer Chairman of the Board of Directors
• Improved profitability, with net earnings of €257.5 million in the first 9 months of 2018
• Improved credit quality, with NPEs decreasing by €1.8 billion from September 30, 2017
• Increasing business volumes in the third quarter of 2018, with total loans up by approximately €700 million and performing loans up by €1.0 billion
• +294,000 active Customers from September 30, 2017
Good performance on stress tests when compared to the average for banks tested
| Adverse scenario | ||
|---|---|---|
| Change 2017-2020 | ||
| CET1 ratio | BCP | Avg. for the EBA tested 48 banks |
| Phased-in | -384 bp | -410 bp |
| Fully implemented | -300 bp | -395 bp |
• Millennium bcp's CET1 phased-in ratio aggravated 384 basis points from end-2017 under the adverse scenario, comparing favourably to an average 410 basis points aggravation for the 48 banks tested by EBA
• Under a fully implemented basis, Millennium bcp's CET1 ratio aggravated 300 basis points, comparing favourably to an average 395 basis points aggravation for the 48 banks tested by EBA
| Euro million | |||
|---|---|---|---|
| 30 Sep. 18 | 30 Sep. 17 | Change 18/17 | |
| BALANCE SHEET | |||
| Total assets | 73,745 | 72,990 | 1.0% |
| Loans to customers (gross) | 51,150 | 50,754 | 0.8% |
| Total customer funds (2) | 72,786 | 68,984 | 5.5% |
| Balance sheet customer funds | 54,922 | 52,265 | 5.1% |
| Deposits and other resources from customers | 53,624 | 50,690 | 5.8% |
| Loans to customers (net) / Deposits and other resources from customers (3) | 89% | 93% | |
| Loans to customers (net) / Balance sheet customer funds | 87% | 91% | |
| RESULTS | |||
| Net income | 257.5 | 133.3 | 93.1% |
| Net interest income | 1,052.8 | 1,023.2 | 2.9% |
| Net operating revenues | 1,634.6 | 1,594.3 | 2.5% |
| Operating costs | 754.2 | 694.6 | 8.6% |
| Operating costs excluding specific items (4) | 742.2 | 718.3 | 3.3% |
| Loan impairment charges (net of recoveries) | 337.1 | 458.6 | -26.5% |
| Other impairment and provisions | 94.2 | 169.9 | -44.5% |
| Income taxes | |||
| Current | 77.6 | 82.8 | |
| Deferred | 32.0 | (19.7) | |
| PROFITABILITY | |||
| Net operating revenues / Average net assets (3) | 3.0% | 2.9% | |
| Return on average assets (ROA) | 0.6% | 0.4% | |
| Income before tax and non-controlling interests / Average net assets (3) | 0.8% | 0.5% | |
| Return on average equity (ROE) | 6.0% | 3.2% | |
| Income before tax and non-controlling interests / Average equity (3) | 8.8% | 5.6% | |
| CREDIT QUALITY | |||
| Total impairment (balance sheet) / Loans to customers | 6.3% | 6.7% | |
| Cost of risk (net of recoveries, in b.p.) | 88 | 120 | |
| Non-Performing Exposures / Loans to customers | 12.3% | 15.9% | |
| Restructured loans / Loans to customers | 7.7% | 8.9% | |
| EFFICIENCY RATIOS (3) (4) | |||
| Operating costs / Net operating revenues | 45.4% | 45.1% | |
| Operating costs / Net operating revenues (Portugal activity) | 46.3% | 45.7% | |
| Staff costs / Net operating revenues | 25.9% | 25.3% | |
| CAPITAL (5) | |||
| Common equity tier I phased-in ratio | 11.8% | 13.2% | |
| Common equity tier I fully implemented ratio | 11.8% | 11.7% | |
| BRANCHES | |||
| Portugal activity | 568 | 589 | -3.6% |
| Foreign activity | 548 | 542 | 1.1% |
| EMPLOYEES | |||
| Portugal activity | 7,130 | 7,281 | -2.1% |
| Foreign activity | 8,656 | 8,538 | 1.4% |
(1) Some indicators are presented according to management criteria of the Group, which descriptions and concepts are described and detailed at the glossary and at "Alternative Performance M easures" chapter, being reconciled with the accounting values published in the consolidated financial statements.
(3) According to Instruction from the Bank of Portugal no. 16/2004, as the currently existing version.
(4) Excludes specific items: negative impact of Euro 12.0 million in the first nine months of 2018, related to restructuring costs in the activity in Portugal and positive impact of Euro 23.7 million in the first nine months of 2017 related to restructuring costs and the revision of Collective Lab. Agt. also in the activity in Portugal, both in staff costs.
(5) September 2018 and September 2017 include the accumulated net income of each period. September 2018 figures are estimated.
(2) As at 30 June 2018, the concepts underlying the determination of off-balance sheet customer funds were adjusted to reflect the new legal and regulatory framework imposed by the Financial Instruments M arkets Directive II (M iFID II), as well as changes implemented regarding the perimeter considered and the criteria adopted, namely with regard to the inclusion of amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions ("assets placed with customers"). The information with reference to 30 September 2017 is presented according to the new criteria.
Banco Comercial Português, S.A. (BCP, Millennium bcp or Bank) is the largest Portuguese private sector bank. The Bank, with its decision centre in Portugal, operates and acts with respect for people and institutions, focusing on the Customer, pursuing a mission of excellence, trust, ethics and responsibility, and is a distinguished leader in various financial business areas 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 - BMA merged with Banco Privado Atlântico-BPA) and in Europe through its banking operations in Poland and Switzerland. Since 2010, the Bank operates in Macau through a full branch.
BCP was incorporated on 17 June 1985 as a limited liability company ("sociedade anónima") organised under the laws of Portugal following the deregulation of the Portuguese banking industry. BCP was founded by a group of over 200 shareholders and a team of experienced banking professionals who sought to capitalise on the opportunity to form an independent financial institution that would serve the then underdeveloped Portuguese financial market more effectively than state-owned banks.
While the Bank's development was initially characterised by organic growth, a series of strategic acquisitions helped solidify its position in the Portuguese market and increase its offering of financial products and services. In March 1995, BCP acquired control of Banco Português do Atlântico, S.A. ("Atlântico"), which was then the largest private sector bank in Portugal. This was followed by a joint takeover bid for the whole share capital of Atlântico. In June 2000, Atlântico was merged into BCP. In 2000, BCP also acquired Império, along with Banco Mello and Banco Pinto & Sotto Mayor.
In 2004, with a view to strengthening its focus on the core business of distribution of financial products and optimising capital consumption, BCP sold insurers Império Bonança, Seguro Directo, Impergesto and Servicomercial to the Caixa Geral de Depósitos group. BCP also entered into agreements with Fortis (currently Ageas) for the sale of a controlling stake and management control of insurers Ocidental - Companhia Portuguesa de Seguros, S.A., Ocidental - Companhia Portuguesa de Seguros de Vida, S.A. and Médis - Companhia Portuguesa de Seguros de Saúde, S.A., as well as the pension fund manager PensõesGere - Sociedade Gestora de Fundos de Pensões, S.A.
After the consolidation of its position in the Portuguese banking market, the Bank focused on the development of its retail business in new regions, with the goal of attaining significant positions in emerging markets in Europe and in Africa. The Bank concentrated on businesses with strong growth prospects in foreign markets with a close historical connection to Portugal or that have large communities of Portuguese origin (such as Angola, Mozambique, the United States, Canada, France, Luxembourg and Macao), as well as in markets where the Bank's successful Portuguese business model could be effectively exported and tailored to suit such local markets (such as Poland, Greece and Romania).The Bank has pursued a consistent strategy of market segmentation. Until 2003, these segments were served through autonomous distribution networks operating under a variety of brand names. In October 2003, BCP began the process of replacing these brands in Portugal with a single brand name Millennium bcp. The rebranding in other markets was completed in 2006. All operations of the Bank are now carried out under the "Millennium" brand. In Portugal, the Bank also operates under the "ActivoBank" brand.
In 2004, the Bank sold its non-life insurance businesses and divested a portion of its life insurance business by entering into a joint venture with Ageas (formerly Fortis), named Millenniumbcp Ageas, of which 51% is held by Ageas and 49% by the Bank.
In recent years, the Bank has refocused on operations that it considers core to its business. As part of this refocus, the Bank divested several of its international operations (in France, Luxembourg, United States, Canada, Greece, Turkey and Romania), while retaining commercial protocols to facilitate remittances from Portuguese emigrants in some markets. In 2010, the Bank transformed its Macao off-shore branch into an on-shore branch.
In February 2012, the Bank adopted a management restructuring through the introduction of a one-tier management and supervisory model, in which the Board of Directors includes an Executive Committee and an Audit Committee (the latter comprising non-executive members, in accordance with the applicable law).
In December 2012, the Bank prepared and presented to the Portuguese government a Restructuring Plan, required by national law and by the applicable European rules on matters of State aid. The Restructuring Plan was formally submitted by the Portuguese government to the EC and, In July 2013, the Bank agreed with the EC a Restructuring Plan, entailing an improvement of the profitability of the Bank in Portugal through continued cost reduction, among other drivers. On September 2013, the DG Comp announced its formal decision in connection with its agreement with the Portuguese authorities concerning the Bank's Restructuring Plan. Pursuant to the decision, the Bank's Restructuring Plan was found in compliance with the European Union's rules relating to State aid, demonstrating the Bank's viability without continued State support. The approved Restructuring Plan aimed at strengthening the Bank's strategy by focusing on its core activities.
In May 2014, as part of a process aiming to refocus on core activities defined as a priority in its Strategic Plan, the Bank announced that it agreed with the international insurance group Ageas a partial recast of the strategic partnership agreements entered into in 2004, which included the sale of its 49% interest in the (currently jointly owned) insurance companies that operate exclusively in the non-life insurance business, i.e. Ocidental – Companhia Portuguesa de Seguros, S.A. and Médis – Companhia Portuguesa de Seguros de Saúde, S.A.
In April 2016, the Bank announced the conclusion of the merger between Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A., resulting in the second-largest private sector bank in terms of loans to the economy, with a market share of approximately 10% in business volume.
BCP has announced in January 2017 a Euros1.3bn rights issue with transferable pre-emptive subscription rights. The aim of this transaction was to bring forward the full repayment of remaining Government Subscribed Securities and the removal of key State-aid related restrictions, including dividend ban, risk of potential sale of core businesses and tail risk of conversion. This transaction was designed to strengthening the balance sheet through the improvement of CET1 FL ratio and Texas ratio, bringing them in line with new industry benchmarks and above current regulatory requirements.
Millennium bcp has successfully executed an operational turnaround, reinforcing its financial and capital position despite the adverse setting of the banking sector in the core Portuguese market. This position reflects our relentless path and the compounding of multiple achievements, such as a more than 40% cost reduction in Portugal since 2011, and a 44% reduction in Group NPE since 2013 (from Euros 13.7 billion to Euros 7.7 billion in 2017). Three distinctive competences were at the core of this turnaround: a customer-oriented relationship model, market-leading efficiency, and a competitive international portfolio.
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 of only non-executive directors. The Company also has a Remuneration 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 30 May 2018 to perform duties for the four-year period 2018/2021. Nuno Amado (former CEO) was appointed Chairman of the Board of Directors and Miguel Maya appointed the CEO.
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 15 and a maximum of 19 members with and without executive duties, elected by the General Meeting for a period of three years, who may be re-elected.
The Board of Directors took office on July 23, 2018.
The Board of Directors appointed an Executive Committee (EC) composed of 6 of its members, to which it delegates the day-to-day management of the Bank. The Executive Committee is 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 elected by the General Meeting.
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 Directors |
Executive Committee |
Audit Committee |
Remuneration and Welfare Board |
Board for International Strategy * |
Committee for Corporate Governance, Ethics and Professional Conduct |
Committee for Nominations and Remunerations |
Committee for Risk Assessment |
|
|---|---|---|---|---|---|---|---|---|
| Nuno Manuel da Silva Amado (Presidente do CA) | | | ||||||
| Jorge Manuel Baptista Magalhães Correia (Vice-Presidente do CA e Presidente do CRP) | | | ||||||
| Valter Rui Dias de Barros (Vice-Presidente do CA) | | | | |||||
| Miguel Maya Dias Pinheiro (Vice-Presidente do CA e CEO) | | | | |||||
| Ana Paula Alcobia Gray | | | | |||||
| Cidália Maria Mota Lopes | | | ||||||
| João Nuno de Oliveira Jorge Palma | | | ||||||
| José Manuel Alves Elias da Costa (Presidente da CNR) | | | | | ||||
| José Miguel Bensliman Schorcht da Silva Pessanha | | | ||||||
| Lingjiang Xu (Presidente do CGSED) | | | | |||||
| Maria José Henriques Barreto de Matos de Campos | | | ||||||
| Miguel de Campos Pereira de Bragança | | | ||||||
| Rui Manuel da Silva Teixeira | | | ||||||
| Teófilo César Ferreira da Fonseca (Presidente da CAR) | | | | |||||
| Wan Sin Long | | | | |||||
| Xiao Xu Gu (Julia Gu) | | |||||||
| Norberto Emílio Sequeira da Rosa | | |||||||
| António Vitor Martins Monteiro | | |||||||
* Chairman and Vice- chairman to be nominated.
The European Investment Bank (EIB) and Millennium bcp joined forces to foster economic growth and employment creation in the areas impacted by the forest fires that spread in the north and centre of Portugal in 2017, with the funds provided to facilitate economic recovery in the affected areas reaching Euro 150 million.
BCP confirmed in the Sustainability Index "Ethibel Sustainability Index (ESI) Excellence Europe".
BCP share price decreased 6% in the first nine months of 2018, compared to a 15% decrease of the STOXX® Europe 600 Banks index.
The relative performance of BCP was therefore positive:
However, these gains were offset due to reasons related to the external environment:
Worries of a deceleration of the world economy, caused by the escalation of the commercial war between USA / China / Canada / Europe, present during the first 9M18, aggravated by the diplomatic tension between the US and Turkey, reflected in a significant depreciation of the Turkish lira, with a more significant impact on European stock markets during the 3Q18.
| Units | 9M18 | 9M17 | |
|---|---|---|---|
| ADJUSTED PRICES | |||
| Maximum price | (€) | 0.3339 | 0.2588 |
| Average price | (€) | 0.2758 | 0.2035 |
| Minimum price | (€) | 0.2367 | 0.1383 |
| Closing price | (€) | 0.2550 | 0.2453 |
| SHARES AND EQUITY | |||
| Number of ordinary shares (outstanding) | (M) | 15,114 | 15,114 |
| Shareholder's Equity attributable to the group | (M€) | 5,809 | 6,052 |
| Shareholder's Equity attributable to ordinary shares (1) | (M€) | 5,749 | 5,992 |
| VALUE PER SHARE | |||
| Adjusted net income (EPS) (2) (3) | (€) | 0.022 | 0.014 |
| Book value (4) | (€) | 0.380 | 0.396 |
| MARKET INDICATORS | |||
| Closing price to book value | (PBV) | 0.67 | 0.62 |
| Market capitalisation (closing price) | (M€) | 3,854 | 3,707 |
| LIQUIDITY | |||
| Turnover | (M€) | 2,693 | 3,012 |
| Average daily turnover | (M€) | 14.1 | 15.7 |
| Volume (3) | (M) | 9,600 | 14,742 |
| Average daily volume (3) | (M) | 50.3 | 76.8 |
| Capital rotation (5) | (%) | 63.5% | 109.6% |
(1) Shareholder's Equity attributable to the group - preference 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) Total number of shares traded divided by the average number of shares issued in the period
On 30 June 2018, the following Shareholders held more than 2% of the share capital of Banco Comercial Português, S.A.:
| 30 June 2018 | |||
|---|---|---|---|
| Shareholder | Nr. of Shares | % of share capital |
% of voting rights |
| Chiado (Luxembourg) S.à r.l., a company held by Fosun International Holdings Ltd (Fosun Group) |
4,089,789,779 | 27.06% | 27.06% |
| TOTAL FOR FOSUN GROUP | 4,089,789,779 | 27.06% | 27.06% |
| Sonangol - Sociedade Nacional de Combustíveis de Angola, E.P., directly |
2,946,353,914 | 19.49% | 19.49% |
| TOTAL FOR SONANGOL GROUP | 2,946,353,914 | 19.49% | 19.49% |
| BlackRock, Inc.* | 512,328,512 | 3.39% | 3.39% |
| TOTAL FOR BLACKROCK GROUP | 512,328,512 | 3.39% | 3.39% |
| EDP Pension Fund * | 319,113,690 | 2.11% | 2.11% |
| TOTAL FOR EDP GROUP | 319,113,690 | 2.11% | 2.11% |
| TOTAL OF QUALIFIED SHAREHOLDINGS | 7,867,585,895 | 52.1% | 52.1% |
* According to the announcement on March 5, 2018 (latest information available).
** Imputation in accordance to article 20 (1.f) of the Portuguese Securities Code.
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.
The International Monetary Fund (IMF) forecasts that the growth pace of the world economy is bound to remain robust in 2018 and 2019. The current phase of activity expansion has been, however, displaying greater disparity between the main economic blocs. Amid the developed countries the performance of the US has stood out, and amongst the emergent markets it is the commodity-exporting countries that have been more dynamic. This environment, together with the risks of a worsening of protectionist tensions and of added instability in international financial markets might jeopardise the on-going expansion trajectory of the world economy, according to the IMF.
The strong performance of the North-American economy translated into a high growth pace for activity and employment, and led the Federal Reserve to raise its key interest rate in September for the third consecutive time this year (to 2.25%), and also to keep in place the plan to wind down its portfolio of debt securities accumulated during the quantitative easing programmes. The European Central Bank (ECB) hasn't made any alteration to the course of its monetary policy during the third quarter, in a context of consolidation of the economic recovery and the absence of inflationary pressures in the euro area.
The stabilisation of the dollar, of long-term U.S. interest rates and of the financial situation of emerging markets allowed for a recovery of the equity markets in the US, with the respective key indices reaching new all-time highs in September, an evolution that contrasted with the debility of the European counterparts, which have been hurt by the strong devaluations recorded by the banking sector. In the interest rates domain, expectations that the rising trajectory of the Federal Reserve's key rates might extend into 2019 fuelled an increase of the yields of the US government bonds, with special acuteness in the shorter maturities, a development that ended up affecting, albeit in a rather mild fashion, European medium- and long-term interest rates. The expansionary stance of the fiscal policy of the new government of Italy continued to exert an upward pressure on the yields of Italian public debt, with contagion effects that proved quite limited to the Portuguese treasury bonds. The assurance given by the ECB officials that the Euro's key interest rates won't be raised until the summer of 2019 maintained the Euribor rates in negative territory for all the maturities.
The Portuguese Economy continues to record growth rates above its potential level. According to Statistics Portugal, in the first half of 2018, the Portuguese GDP increased 2.3% in annual terms, driven by the expansion of private consumption and the on-going recovery of investment, amid the improvement in the levels of business confidence. As for external demand, exports continue to advance in a very favourable manner, supported by the vigour of the tourism sector and of the auto cluster. However, in net terms the contribution of external demand to GDP growth worsened in the first half of the year as imports rose more than exports. Against this background, the falling trajectory of the unemployment rate has intensified in the second quarter to levels not witnessed since 2004 (6.7%). For the whole year, the IMF foresees a growth of the Portuguese GDP of 2.3% and, in 2019, the expectation is that the economy´s rate of expansion decelerates to 1.8%, in a climate marked by slowing external demand and of deceleration of private consumption, after the strong growth observed in the latest quarters.
In Poland, the economic climate continues to be characterised by a strong dynamism of aggregate demand, with GDP growing 5.0% in the first half of the year compared to the same period of last year. The robustness of consumption, in a setting of rising households' disposable incomes and increasing investment fed by the European Union structural funds have been the main drivers of economic activity. In terms of foreign exchange, in the third quarter the Zloty appreciated against the Euro, benefiting from a greater stability of international financial markets.
The Mozambican Economy has been showing moderate levels of GDP growth, which together with reduced inflationary pressures has allowed the central bank to keep in place the expansionary cycle started in mid-2017. According to the IMF, the Mozambican economy should continue to recover gradually, with GDP growth expected at 3.5% in 2018 and 4.0% in 2019. In the third quarter, the Metical deprecated, thereby interrupting the appreciation trajectory recorded in the preceding months. In Angola, the IMF revised downward its forecasts for economic growth in 2018, from 2.2% to -0.1%, but anticipates that in 2019 the GDP rate of expansion will reach 3.1%.
The Group provides a wide variety of banking services and financial activities in Portugal and abroad, where it is present in the following markets: Poland, Switzerland, Mozambique, Angola (through its associate BMA) and China. All its banking operations develop their activity under the Millennium brand. The Group also ensures its international presence through representation offices and/or commercial protocols.
The Bank offers a vast range of financial products and services: current accounts, payment systems, savings and investment products, private banking, asset management and investment banking, including mortgage loans, consumer credit, commercial banking, leasing, factoring and insurance, among others. The back-office operations for the distribution network are integrated to benefit from economies of scale.
In Portugal, Millennium bcp is focused on the retail market, providing services to its Customers in a segmented manner. The subsidiary companies generally provide their products through the Bank's distribution networks, offering a wide range of products and services.
Millennium bcp is Portugal's largest private sector banking institution, with a position of leadership and particular strength in various financial products, services and market segments based on a modern branch network with nationwide coverage. The Bank also offers remote banking channels (banking service by telephone, mobile banking and online), which operate as distribution points for its financial products and services.
* Core net income = net interest income + net fees and commission income – operating costs
The priorities, in accordance with the 2021 Strategic Plan, consist in redesigning the digital experience to an approach centred on mobile devices, transforming the top customer journeys, forming an appropriate and productive omnichannel model, transforming the operations through the implementation of NextGen technologies (such as robotics and natural language processing). At the same time, the Bank will adopt an IT strategy focused on the update of technology, information safety and promotion of new work forms.
The activity in the domestic market focuses on Retail Banking, which is segmented in order to best serve Customer interests, both through a value proposition based on innovation and speed targeted at Mass-market Customers, and through the innovation and personalised management of service for Prestige, Business, Companies, Corporate and Large Corporate Customers Retail Banking also through ActivoBank, a bank aimed specifically at Customers who are young in spirit, intensive users of new communication technologies and prefer a banking relationship based on simplicity and offering innovative products and services.
At the end of September 2018, Millennium bcp was the largest Portuguese private sector bank with a relevant position in the countries where it operates.
On 30 September 2018, operations in Portugal accounted for 72% of total assets, 74% of total loans to Customers (gross) and 73% of total customer funds. The Bank had 2.2 million active Customers in Portugal and market shares of 17.2% and 17.5% for loans to Customers and customer deposits, respectively in September 2018.
Millennium bcp is also present throughout the world through its banking operations, representation offices and/or commercial protocols, serving 4.8 million Customers, at the end of September 2018.
Concerning the operations in Africa, Millennium bcp operates through Millennium bim, a universal bank that has been operating since 1995 in Mozambique, where it has over 1.3 million Customers and is the leading bank in this country, with 25.0% of loans and advances to Customers and 26.5% of deposits, on 30 September 2018. Millennium bim is a highly reputed brand in the Mozambican market, associated with innovation, major penetration in terms of electronic banking and exceptional capacity to attract new Customers, as well as being a reference in terms of profitability.
The deed of the merger of Banco Millennium Angola, S.A. with Banco Privado Atlântico, S.A. was signed on 22 April 2016. The bank resulting from the merger is an associate of Banco Comercial Português.
In Poland, Bank Millennium has a well distributed network of branches, supported on a modern multi-channel infrastructure, a reference service quality, high recognition of the brand, a robust capital base, comfortable liquidity and solid risk management and control. As at 30 September 2018, Bank Millennium had a market share of 4.5% in loans to Customers and of 5.1% in deposits.
The Group has an operation in Switzerland since 2003, through a private banking platform offering personalised quality services to the Group's high net worth Customers, comprising asset management solutions based on rigorous research and profound knowledge of financial markets, underpinned by a robust commitment to risk management and an efficient IT platform.
The Group has also been present in the Far East since 1993, but it was only in 2010 that the activity of the existing branch in Macau was expanded, through the attribution of a full license (onshore) aimed at establishing an international platform for business operations between Europe, China and Portuguese-speaking African countries.
The Bank also has 10 representation offices (1 in the United Kingdom, 1 in Germany, 3 in Switzerland, 2 in Brazil, 1 in Venezuela, 1 in China, in Guangzhou, and 1 in South Africa), 5 commercial protocols (Canada, USA, Spain, France and Luxembourg).
Since its incorporation, the Bank has built a reputation associated with innovation. The Bank was the first Bank in Portugal to introduce specific innovative concepts and products, including direct marketing methods, layouts based on customer profiles, salary accounts, simpler branches ("NovaRede"), telephone banking services, through Banco 7, which later became the first online banking services platform, health insurance (Médis) and direct insurance, and a website dedicated to individual Customers and corporate banking. The Bank was also a pioneer in the launching of a new Internet Banking concept, based on the ActivoBank platform, which provides a simplified service to the customer, including the opening of a current account using Mobile Banking solutions.
One of the distinctive competences of Millennium bcp consists in a customer oriented relationship model:
1 In accordance with DataE, the "Business Financial Services Barometer - Banks (BFin Bancos)" is a study whose main target is to characterize the Portuguese banking sector from the companies standpoint, regarding products and services made available by the Banks. The results of the BFin 2018 are based on a sample pool of over1,300 companies. The information was collected from April to June 2018.
The resilience of the business model is primarily based on the Bank's concentration on retail banking, more stable and less volatile by nature. Millennium bcp successfully implemented an operational recovery in its core market, reinforcing its financial and capital position, despite of the challenging environment in the banking sector in the Portuguese market. It implemented a restructuring program based on a reduction of operating costs by more than 40% in Portugal since 2011 and a 44% reduction in the Group's NPE since 2013 (from Euros 13.7 billion to Euros 7.7 billion in 2017).
Three distinctive competences acted as the main pillars of this recovery: a customer oriented relationship model, market leadership in terms of efficiency and competitive international operations.
The purpose of the Bank is to ensure sustainable profitability in the medium and long term, seeking to become the best in class in terms of operational efficiency, improving operating profit in a sustainable manner and maintaining a high level of control on credit risk, thus preserving its strategic position in the Portuguese retail and SME banking services market. The Bank's main priority continues to be to improve the quality of its credit portfolio, reducing the stock of NPE (to 60% until 2021) and, simultaneously, reducing the cost of risk.
2 Satisfaction in Net Promoter Score (NPS) = % promoters - % detractors.
On 1 January 2018, IFRS 9 - Financial Instruments entered into force, replacing IAS 39 - Financial Instruments: recognition and measurement, and establishing new rules for the recognition of financial instruments, introducing relevant changes, particularly as regards the methodology for impairment calculation. The adoption of this accounting standard had an impact on the structure of the Millennium bcp financial statements compared to 31 December 2017, largely influenced by the adjustments associated with the transition, and did not materially affect the profit and loss account for the first nine months of 2018.
In this context, some indicators were defined according to management criteria intended to favour comparability with financial information of prior periods. Following the guidelines on Alternative Performance Measures published by the European Securities and Markets Authority (ESMA), the relevant indicators that allow a full understanding of the evolution of the Group's economic and financial position are detailed at the end of this document, being reconciled with the accounting values published in the consolidated financial statements.
The net income of Millennium bcp reached Euro 257.5 million, in the first nine months of 2018, an 93.1% increase from Euro 133.3 million registered in the same period of the previous year, driven strongly by the performance of the activity in Portugal, also benefiting from the favourable performance of the international activity.
In the activity in Portugal, net income increased significantly compared to Euro 0.8 million achieved in the first nine months of 2017, totalling Euro 114.9 million in the same period of 2018, highlighting the significant reduction of impairments and provisions.
In the international activity, net income in the first nine months of 2018 stood at Euro 140.8 million increasing 7.2% from Euro 131.3 million registered in the same period of the previous year, benefitting from the favourable performance of the subsidiaries in Poland and Mozambique, despite the lower contribution from Banco Millennium Atlântico.
Net interest income totalled Euro 1,052.8 million in the first nine months of 2018, comparing favourably to Euro 1,023.2 million in the same period of the previous year.
In the activity in Portugal, net interest income stood at Euro 595.8 million in the first nine months of 2018 compared to Euro 591.8 million accounted in the same period of the previous year, benefiting from the reduction of the cost of funding, namely the decrease of the cost of issued debt and the decreasing trend in costs for term deposits, despite the reduction in the interest from loans and debt securities portfolios.
In the international activity, net interest income reached Euro 457.0 million in the first nine months of 2018, reflecting a 5.9% increase from the Euro 431.4 million registered in the same period of 2017, mainly due to the performance of the subsidiary in Poland and also, to a lesser extent, to the subsidiary in Mozambique.
Net interest margin in the first nine months of 2018 stood at 2.20%, compared to 2.17% (2.19%, excluding the impact from the cost of CoCos) in the same period of 2017.
| Euro million | |||||||
|---|---|---|---|---|---|---|---|
| 30 Sep. 18 | 30 Sep. 17 | ||||||
| Amount | Yield % | Amount | Yield % |
||||
| Deposits in banks | 2,611 | 0.85 | 2,937 | 0.91 | |||
| Financial assets | 13,013 | 2.22 | 11,090 | 2.27 | |||
| Loans and advances to customers | 47,498 | 3.18 | 48,033 | 3.30 | |||
| INTEREST EARNING ASSETS | 63,122 | 2.89 | 62,060 | 3.00 | |||
| Non-interest earning assets | 9,943 | 10,571 | |||||
| 73,065 | 72,631 | ||||||
| Amounts owed to credit institutions | 7,414 | 0.07 | 9,354 | 0.24 | |||
| Resources from customers | 52,852 | 0.59 | 50,363 | 0.66 | |||
| Debt issued | 2,820 | 1.76 | 3,188 | 2.88 | |||
| Subordinated debt | 1,135 | 5.86 | 941 | 6.87 | |||
| INTEREST BEARING LIABILITIES | 64,221 | 0.68 | 63,846 | 0.80 | |||
| Non-interest bearing liabilities | 1,955 | 2,166 | |||||
| Shareholders' equity and non-controlling interests | 6,889 | 6,619 | |||||
| 73,065 | 72,631 | ||||||
| Net interest margin | 2.20 | 2.17 | |||||
| Net interest margin (excl. cost of CoCos) | 2.19 |
Note: Interest related to hedge derivatives was allocated, in September 2018 and 2017, to the respective balance sheet item.
Net commissions evolved positively, from Euro 494.6 million in the first nine months of 2017 to Euro 510.1 million in the same period of 2018. This evolution mainly benefited from the favourable performance of the activity in Portugal, where net commissions rose 4.4%.
The evolution of net commissions in the first nine months of 2018 reflects the increase of both banking and market related commissions, which improved 2.4% and 6.5% respectively, from the figures booked in the same period of the previous year.
Net trading income totalled Euro 89.6 million in the first nine months of 2018, compared to Euro 115.0 million accounted in the same period the previous year, conditioned by the performance of the activity in Portugal, mainly due to loan sales.
Other net operating income, which, among others, includes the costs associated with mandatory contributions as well as with the Resolution Fund and the Deposit Guarantee Fund in both Portugal and international activity, was negative by Euro 90.3 million in the first nine months of 2018, comparing favourably to the also negative Euro 97.0 million accounted in the same period of the previous year, induced by the performance of the activity in Portugal.
In the activity in Portugal, other net operating income stood negative by Euro 45.6 million in the first nine months of 2018, showing an improvement compared to the also negative Euro 53.7 million registered in the same period of the previous year, mainly benefiting from the increased income associated with non-current assets held for sale, despite the increase of costs related to mandatory contributions. In the first nine months of 2018, these contributions totalled Euro 66.5 million compared to Euro 57.9 million in the same period of the previous year.
In the international activity, other net operating income was negative by Euro 44.7 million in the first nine months of 2018, which compares with the also negative Euro 43.3 million registered in the same period of the previous year. This evolution was conditioned by the increase of mandatory contributions, which stood at Euro 55.7 million in the first nine months of 2018 compared to Euro 53.2 million in the same period of 2017, supported by the Polish subsidiary. The performance of other net operating income also reflects the recognized gains related to real estate disposal and indemnity received in the first nine months of 2017 by the Polish subsidiary and, in 2018, the higher income from the subsidiary in Mozambique.
Dividends from equity instruments, which comprise dividends received from investments classified as financial assets at fair value through other comprehensive income and as financial assets held for trading, together with equity accounted earnings, were up 23.9% from the amount achieved in the first nine months of 2017, totalling Euro 72.5 million in the same period of 2018.
| Euro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | Change 18/17 | |
| NET COMMISSIONS | 510.1 | 494.6 | 3.1% |
| Banking commissions | 418.3 | 408.5 | 2.4% |
| Cards and transfers | 122.3 | 115.3 | 6.1% |
| Credit and guarantees | 121.6 | 117.9 | 3.2% |
| Bancassurance | 71.7 | 71.4 | 0.4% |
| Current account related | 79.1 | 77.8 | 1.6% |
| Other commissions | 23.6 | 26.1 | -9.7% |
| Market related commissions | 91.8 | 86.2 | 6.5% |
| Securities | 59.0 | 54.7 | 7.7% |
| Asset management | 32.8 | 31.4 | 4.4% |
| NET TRADING INCOME | 89.6 | 115.0 | -22.1% |
| OTHER NET OPERATING INCOME | (90.3) | (97.0) | 6.9% |
| DIVIDENDS FROM EQUITY INSTRUMENTS | 0.6 | 1.7 | -64.9% |
| EQUITY ACCOUNTED EARNINGS | 71.9 | 56.8 | 26.5% |
| TOTAL OTHER NET INCOME | 581.8 | 571.1 | 1.9% |
| Other net income / Net operating revenues | 35.6% | 35.8% |
Operating costs, excluding the effect of specific items3 , stood at Euro 742.2 million in the first nine months of 2018, compared to Euro 718.3 million in the same period of the previous year.
In the activity in Portugal, operating costs, not considering the impact of specific items, totalled Euro 456.9 million in the first nine months of 2018, increasing 2.1% from the Euro 447.5 million accounted in the same period of 2017. This evolution was determined by the growth of staff costs mainly influenced by the salary replacement that occurred from July 2017 as well as, to a lesser extent, the higher level of depreciation costs, despite other administrative cost savings.
In the international activity, operating costs stood at Euro 285.3 million in the first nine months of 2018, increasing 5.4% from the amount accounted in the same period of the previous year, mainly due to the performance of the Polish subsidiary.
Staff costs, excluding the impact of specific items, totalled Euro 423.6 million in the first nine months of 2018 showing a 4.9% increase from the same period of previous year, justified by the higher level of costs in both the activity in Portugal and the international activity.
In the activity in Portugal, staff costs excluding the impact of specific items, totalled Euro 269.2 million in the first nine months of 2018, representing an increase of 4.0% from the amount of the same period of 2017. This increase was particularly influenced by the decision of the Board of Directors of the Bank to end, in advance, with effect from 30 June 2017, the temporary salary adjustment that had been in force since July 2014, following the full reimbursement of CoCos, despite the positive impact associated with the decrease of 151 employees, between the end of the third quarter of 2017 and 2018.
In the international activity, staff costs stood at Euro 154.4 million in the first nine months of 2018, showing an increase of 6.5% from the same period of the previous year, mainly due to the performance of the Polish subsidiary.
Other administrative costs amounted to Euro 275.8 million in the first nine months of 2018, in line with the amount accounted in the same period of the previous year (Euro 274.8 million), with the decrease of costs in the activity in Portugal offset by the growth of costs in the international activity.
3 Negative impact of Euro 12.0 million in the first nine months of 2018, related to restructuring costs in the activity in Portugal and positive impact of Euro 23.7 million in the first nine months of 2017, related to restructuring costs and the revision of Collective Lab. Agt, also in the activity in Portugal, both in staff costs.
The reduction of other administrative costs in Portugal, -2.1% compared to the amounts registered in the first nine months of 2017, was driven by cost containment measures, namely the resizing of the distribution network (589 branches as at 30 September 2017, compared to 568 branches at the end of September 2018).
The evolution of other administrative costs in the international activity, reflects the higher level of costs reported by the subsidiaries in Poland and in Mozambique, compared to the amounts accounted in the first nine months of 2017.
Depreciation costs totalled Euro 42.9 million in the first nine months of 2018, which compares to Euro 39.7 million registered in the same period of the previous year, mainly reflecting the increase in depreciation costs in the activity in Portugal, in particularly those related to software and IT equipment, but also, to a lesser extent, in the international activity, mainly due to the subsidiary in Mozambique.
| Euro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | Change 18/17 | |
| Staff costs | 423.6 | 403.8 | 4.9% |
| Other administrative costs | 275.8 | 274.8 | 0.4% |
| Depreciation | 42.9 | 39.7 | 8.0% |
| OPERATING COSTS EXCLUDING SPECIFIC ITEMS | 742.2 | 718.3 | 3.3% |
| OPERATING COSTS | 754.2 | 694.6 | 8.6% |
| Of which: | |||
| Portugal activity (1) | 456.9 | 447.5 | 2.1% |
| Foreign activity | 285.3 | 270.8 | 5.4% |
(1) Excludes the impact of specific items.
Impairment for loan losses (net of recoveries) showed a 26.5% reduction from Euro 458.6 million accounted in the first nine months of 2017, totalling Euro 337.1 million in the same period of 2018. In this evolution, it is worth noting the decrease in the activity in Portugal, but also the contribution of the international activity, which benefited from the favourable performance of all subsidiaries, highlighting the contribution of the operation in Poland and, to a lesser extent, the operation in Mozambique.
The Group's cost of risk (net) showed a favourable change, falling from 120 basis points in the first nine months of 2017 to 88 basis points in the same period of 2018.
Other impairment and provisions showed a significant decrease from Euro 169.9 million accounted in the first nine months of 2017, to Euro 94.2 million in the first nine months of 2018, determined essentially by the lower level of provisions required by other financial and non-financial assets of the Group, namely those related to real estate, despite the strengthening of provisions to guarantees and other commitments.
Income tax (current and deferred) totalled Euro 109.5 million in the first nine months of 2018, compared to Euro 63.1 million obtained in the same period of the previous year.
Income tax includes, in the first nine months of 2018, current tax costs of Euro 77.6 million (cost of Euro 82.8 million in the same period of 2017) and deferred tax costs of Euro 32.0 million (income of Euro 19.7 million in the first nine months of 2017).
Total assets rose to Euro 73,745 million as at 30 September 2018, compared to Euro 72,990 million registered at the same date of the previous year, reflecting essentially the growth of securities and loans to customers portfolios, partially offset by the reduction of loans and advances to credit institutions and of non-current assets held for sale, namely regarding foreclose assets.
Loans to customers (gross) stood at Euro 51,150 million as at 30 September 2018, compared to Euro 50,754 million as at 30 September 2017, boosted by the growth of the international activity.
In the activity in Portugal, loans to customers (gross) amounted to Euro 37,629 million as at 30 September 2018, comparing to Euro 37,947 million at the same date of the previous year.
The evolution of loans to customers in the activity in Portugal was determined, on the one hand, by an important reduction of NPE (Euro -1.6 billion from the end of September 2017, to Euro 5.5 billion as at 30 September 2018) and, on the other hand, by the 4.2% increase of performing loans in the same period.
In this context, it is worth noting the increase in new consumer and mortgage loans from the first nine months of 2017, largely supported by the significant development of digital channels in progress.
In the international activity, loans to customers (gross) amounted to Euro 13,521 million as at 30 September 2018, increasing 5.6% from Euro 12,807 million in the same date of the previous year, determined by the growth in the subsidiary in Poland.
The structure of the loans to customers' portfolio showed identical and stable levels of diversification between the end of September 2017 and 2018, with loans to companies representing 46% of total loans to customers as at 30 September 2018.
| Euro million | |||
|---|---|---|---|
| 30 Sep. 18 | 30 Sep. 17 | Change 18/17 | |
| INDIVIDUALS | 27,604 | 27,174 | 1.6% |
| Mortgage | 23,640 | 23,406 | 1.0% |
| Consumer and others | 3,965 | 3,768 | 5.2% |
| COMPANIES | 23,546 | 23,580 | -0.1% |
| Services | 8,882 | 8,831 | 0.6% |
| Commerce | 3,511 | 3,287 | 6.8% |
| Construction | 2,208 | 2,624 | -15.8% |
| Others | 8,945 | 8,838 | 1.2% |
| TOTAL | 51,150 | 50,754 | 0.8% |
| Of which: | |||
| Portugal activity | 37,629 | 37,947 | -0.8% |
| Foreign activity | 13,521 | 12,807 | 5.6% |
Credit quality evolved favourably, improving the respective indicators. The ratios of overdue loans by more than 90 days, NPLs by more than 90 days and NPE as a percentage of total loans to customers saw a generalized decrease as of 30 September 2018 compared to the same date of the previous year, mainly supported by the performance of the domestic loan portfolio. At the same time, there was an increase of coverage for impairment, common to all indicators, with the reinforcement of the coverage of NPE for impairment assuming particular relevance, standing at 50.8% as at 30 September 2018, compared to 41.9% on the same date of 2017. In Portugal, the same ratio increased from 40.9% as at 30 September 2017 to 48.4% as at 30 September 2018.
| Stock of loans (Euro million) |
As percentage of loans to customers |
Coverage by impairments |
||||
|---|---|---|---|---|---|---|
| 30 Sep. 18 |
30 Sep. 17 |
30 Sep. 18 |
30 Sep. 17 |
30 Sep. 18 |
30 Sep. 17 |
|
| OVERDUE LOANS > 90 DAYS | ||||||
| Group | 2,462 | 3,109 | 4.8% | 6.1% | 130.3% | 108.9% |
| Activity in Portugal | 2,175 | 2,807 | 5.8% | 7.4% | 123.4% | 104.5% |
| NON-PERFORMING LOANS (NPL) > 90 DAYS | ||||||
| Group | 3,792 | 4,729 | 7.4% | 9.3% | 84.5% | 71.6% |
| Activity in Portugal | 3,324 | 4,255 | 8.8% | 11.2% | 80.8% | 68.9% |
| NON-PERFORMING EXPOSURES (NPE) | ||||||
| Group | 6,307 | 8,079 | 12.3% | 15.9% | 50.8% | 41.9% |
| Activity in Portugal | 5,546 | 7,168 | 14.7% | 18.9% | 48.4% | 40.9% |
Total customer funds4 increased 5.5% from Euro 68,984 million booked as at 30 September 2017, reaching Euro 72,786 million at the same date of 2018, mainly benefiting from the performance of the activity in Portugal, but also from the positive performance of the international activity. The growth of customer funds reflects both, the performance of balance sheet customer funds, particularly deposits and other resources from customers, which increased 5.8% from September 2017, and of off-balance sheet customer funds, which went up 6.8% in the same period.
In the activity in Portugal, total customer funds increased 5.8% comparing to Euro 50,246 million registered at the end of September 2017, reaching Euro 53,171 million as at 30 September 2018, highlighting the Euro 2,146 million growth in deposits and other resources from customers and the Euro 1,051 million increase of offbalance sheet customer funds compared to the same date of the previous year.
Total customer funds in the international activity rose to Euro 19,614 million as at 30 September 2018, increasing 4.7% from Euro 18,738 million registered at 30 September 2017, based on the growth in deposits and other resources from customers, which registered an increase of 5.1%, boosted by the performance of the Polish subsidiary.
As at 30 September 2018, balance sheet customer funds represented 75% of total customer funds, with deposits and other resources from customers representing 74% of total customer funds.
The loans to deposits ratio, in accordance with the Bank of Portugal's Instruction no. 16/2004, improved from 93% as at 30 September 2017 to 89% at the same date of 2018. The same ratio, considering on-balance sheet customers' funds, stood at 87% as at 30 September 2018 (91% as at 30 September 2017).
4 As at 30 June 2018, the concepts underlying the determination of off-balance sheet customer funds were adjusted to reflect the new legal and regulatory framework imposed by the Financial Instruments Markets Directive II (MiFID II), as well as changes implemented regarding the perimeter considered and the criteria adopted, namely with regard to the inclusion of amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions ("assets placed with customers"). The information with reference to the end of September 2017 is presented according to the new criteria.
| Euro million | |||
|---|---|---|---|
| 30 Sep. 18 | 30 Sep. 17 | Change 18/17 | |
| BALANCE SHEET CUSTOMER FUNDS | 54,922 | 52,265 | 5.1% |
| Deposits and other resources from customers | 53,624 | 50,690 | 5.8% |
| Debt securities | 1,298 | 1,575 | -17.6% |
| OFF-BALANCE SHEET CUSTOMER FUNDS | 17,863 | 16,719 | 6.8% |
| Assets under management | 5,291 | 4,903 | 7.9% |
| Assets placed with customers | 4,151 | 3,707 | 12.0% |
| Insurance products (savings and investment) | 8,421 | 8,109 | 3.8% |
| TOTAL | 72,786 | 68,984 | 5.5% |
| Of which: | |||
| Portugal Activity | 53,171 | 50,246 | 5.8% |
| Foreign activity | 19,614 | 18,738 | 4.7% |
The securities portfolio stood at Euro 15,302 million as at 30 September 2018, compared to Euro 13,487 million posted as at 30 September 2017, representing 20.7% of total assets (18.5% at the same date of the previous year). This evolution was mainly due to the growth of the securities portfolio of the activity in Portugal, mainly from the increase in public debt portfolio, while the increase in the international activity was due to the operations in Mozambique and in Poland.
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.
| BUSINESS SEGMENT | PERIMETER |
|---|---|
| Retail Banking | Retail Network of Millennium bcp (Portugal) Retail Recovery Division |
| Banco ActivoBank | |
| Companies and Corporate Network of Millennium bcp (Portugal) | |
| Specialised Recovery Division | |
| Real Estate Business Division | |
| Companies, Corporate & Investment Banking | Interfundos |
| Large Corporate Network of Millennium bcp (Portugal) | |
| Specialised Monitoring Division | |
| Investment Banking | |
| Trade Finance Department (*) | |
| Private Banking Network of Millennium bcp (Portugal) | |
| Private Banking | Millennium Banque Privée (Switzerland) (**) |
| Millennium bcp Bank & Trust (Cayman Islands) (**) | |
| Bank Millennium (Poland) | |
| BIM - Banco Internacional de Moçambique | |
| Foreign Business | Banco Millennium Atlântico (***) |
| Millennium Banque Privée (Switzerland) (**) | |
| Millennium bcp Bank & Trust (Cayman Islands) (**) | |
| Includes all other business and unallocated values in particular centralized | |
| Other | management of financial investments, corporate activities and insurance |
| activity. |
(*) From Treasury and Markets International Division.
(**) For the purposes of business segments, Millennium Banque Privée (Switzerland) and Millennium bcp Bank & Trust (Cayman Islands) are included in the Private Banking segment. In terms of geographic segments, both operations are considered Foreign Business.
(***) Consolidated by 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 a target capital ratio to the risks managed by each segment, reflecting the application of the Basel III methodology previously referred. Each operation is balanced through internal transfers of funds, with impact on the net interest income and income taxes of each segment, hence with no impact on consolidated accounts.
Each segment's income 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.
Following the end of the commitment with the Directorate-General of the European Commission (DG Comp) as at 31 December 2017, the Non-Core Business Portfolio (PNNC) is no longer identified as an autonomous segment. Despite not being a business segment and therefore not being reported in the scope of this report, this fact determined the reallocation of the operations within its perimeter to the original business segments, leading to the reassessment of the allocation criteria and the restatement of the income statement and the main business indicators of the respective segments with reference to 30 September 2017 on a comparable basis to the position reported at the same period of 2018.
Operating costs related to the business segments do not include gains from the Collective Labour Agreement negotiation in 2017 and restructuring costs in 2018 and 2017.
As at 30 June 2018, the concepts underlying the determination of off-balance sheet customer funds were adjusted to reflect the new legal and regulatory framework imposed by the Financial Instruments Markets Directive (DMIF II), as well as changes implemented regarding the perimeter considered and the criteria adopted, namely with regard to the inclusion of amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions ("assets placed with customers"). The information with reference to 30 September of 2017 is presented according to the new criteria.
The information presented below was based on the financial statements prepared in accordance with IFRS and on the organization of the Group's business areas as at 30 September 2018.
| M illion euros | |||
|---|---|---|---|
| RETAIL BANKING | 30 Sep. 18 | 30 Sep. 17 Chg. 18/17 | |
| PROFIT AND LOSS ACCOUNT | |||
| Net interest income | 317 | 303 | 4.6% |
| Other net income | 288 | 266 | 8.1% |
| 605 | 569 | 6.2% | |
| Operating costs | 353 | 341 | 3.5% |
| Impairment | 15 | 55 | -73.2% |
| Income before tax | 237 | 173 | 37.0% |
| Income taxes | 74 | 50 | 46.6% |
| Income after tax | 163 | 123 | 33.0% |
| SUMMARY OF INDICATORS | |||
| Allocated capital | 971 | 774 | 25.5% |
| Return on allocated capital | 22.5% | 21.2% | |
| Risk weighted assets | 8,468 | 6,722 | 26.0% |
| Cost to income ratio | 58.3% | 59.9% | |
| Loans to Customers (net of impairment charges) | 21,064 | 20,747 | 1.5% |
| Total Customer funds | 37,557 | 35,398 | 6.1% |
| Notes: |
Allocated capital, Loans to customers (net of recoveries) and total Customer funds figures based on average balance.
As at 30 September 2018, income after tax from Retail Banking segment of Millennium bcp in Portugal totalled Euros 163 million, showing a 33.0% growth compared to Euros 123 million in the same period of 2017. This favourable performance is mainly explained by lower impairment charges and by the increase in banking income, despite the growth of operating costs. Regarding the evolution of the main Income Statement headings, the following aspects should be highlighted:
| M illion euros | |||
|---|---|---|---|
| C OMPANIE S, C ORPORATE & INVESTME NT BANKING | 30 Sep. 18 | 30 Sep. 17 Chg. 18/17 | |
| PROFIT AND LOSS ACCOUNT | |||
| Net interest income | 207 | 216 | -4.0% |
| Other net income | 106 | 109 | -2.8% |
| 313 | 325 | -3.6% | |
| Operating costs | 91 | 95 | -4.5% |
| Impairment | 315 | 331 | -4.7% |
| Income before tax | (93) | (101) | -7.9% |
| Income taxes | (30) | (31) | -2.8% |
| Income after tax | (63) | (70) | -10.1% |
| SUMMARY OF INDICATORS | |||
| Allocated capital | 1,069 | 1,042 | 2.5% |
| Return on allocated capital | -7.9% | -9.0% | |
| Risk weighted assets | 9,873 | 8,709 | 13.4% |
| Cost to income ratio | 29.1% | 29.4% | |
| Loans to Customers (net of impairment charges) | 12,981 | 13,505 | -3.9% |
| Total Customer funds | 10,665 | 10,911 | -2.3% |
Notes:
Allocated capital, Loans to customers (net of recoveries) and total Customer funds figures based on average balance.
Income after tax from Companies, Corporate and Investment Banking segment in Portugal totalled Euros -63 million in the nine months of 2018 (-70 million Euros in the same period of 2017), showing the maintenance of a high level of impairment. The performance of this segment is globally explained by the following changes:
| M illion euros | |||
|---|---|---|---|
| PRIVATE BANKING | 30 Sep. 18 | 30 Sep. 17 Chg. 18/17 | |
| PROFIT AND LOSS ACCOUNT | |||
| Net interest income | 10 | 13 | -23.8% |
| Other net income | 20 | 16 | 27.5% |
| 30 | 29 | 4.2% | |
| Operating costs | 13 | 11 | 15.4% |
| Impairment | (2) | 2 | -172.3% |
| Income before tax | 19 | 16 | 15.1% |
| Income taxes | 6 | 5 | 22.9% |
| Income after tax | 13 | 11 | 11.8% |
| SUMMARY OF INDICATORS | |||
| Allocated capital | 59 | 46 | 27.7% |
| Return on allocated capital | 29.0% | 33.1% | |
| Risk weighted assets | 518 | 435 | 19.1% |
| Cost to income ratio | 43.1% | 39.0% | |
| Loans to Customers (net of impairment charges) | 302 | 297 | 1.9% |
| Total Customer funds | 6,527 | 5,516 | 18.3% |
Notes:
Allocated capital, Loans to customers (net of recoveries) and total Customer funds figures based on average balance.
From a geographic segmentation perspective, income after tax from Private Banking business in Portugal totalled Euros 13 million in September 2018, a 11,8% growth comparing to Euros 11 million recorded in the same period of 2017, mainly due to the favourable performance of banking income and impairments, despite higher operating costs. Considering the main items of the income statement, the relevant situations are highlighted as follows:
| M illion euros | |||
|---|---|---|---|
| FOREIGN BUSINESS | 30 Sep. 18 | 30 Sep. 17 Chg. 18/17 | |
| PROFIT AND LOSS ACCOUNT | |||
| Net interest income | 453 | 421 | 7.4% |
| Other net income (*) | 190 | 185 | 3.2% |
| 643 | 606 | 6.2% | |
| Operating costs | 285 | 271 | 5.4% |
| Impairment | 65 | 70 | -8.3% |
| Income before tax | 293 | 265 | 10.8% |
| Income taxes | 66 | 63 | 5.9% |
| Income after income tax | 227 | 202 | 12.3% |
| SUMMARY OF INDICATORS | |||
| Allocated capital | 1,487 | 1,368 | 8.7% |
| Return on allocated capital | 20.4% | 19.8% | |
| Risk weighted assets | 12,358 | 10,719 | 15.3% |
| Cost to income ratio | 44.4% | 44.7% | |
| Loans to Customers (net of impairment charges) | 12,999 | 12,353 | 5.2% |
| Total Customer funds | 19,614 | 18,738 | 4.7% |
(*) Includes equity accounted earnings related to the investment in Banco M illennium Atlântico.
In terms of geographic segments, income after tax from Foreign Business stood at Euros 227 million in September 2018, reflecting a 12.3% growth compared to Euros 202 million achieved in the same period of 2017. This positive evolution is mainly explained by the increase of the net interest income, by higher other net income and by lower level of impairments, whose favourable performance was mitigated by higher operating costs. Taking into account the different items of the income statement, the performance of Foreign Business can be analyzed as follows:
The Liquidity Coverage Ratio (LCR) stood at 182% at the end of September 2018, on a consolidated basis, comfortably above the minimum requirement of 100%, supported by highly liquid asset portfolios in an amount compatible with the prudent management of the Group's short-term liquidity, having evolved favourably compared to the same date last year (158%).
At the same time, the Group has a strong and stable financing base, characterized by the large share of customer deposits in the funding structure, collateralized financing and medium and long-term instruments, which enabled the stable financing ratio (NSFR; Net Stable Funding Ratio) as determined in 30 September 2018 to stand at 128% (124% as at 30 September 2017).
The consolidated wholesale financing decreased, between the end of September 2017 and the end of September 2018, mainly attributable to the reduction in liquidity needs due to the decrease of the commercial gap in Portugal and to the cash flow of the activity, partially offset by the increase in the sovereign debt portfolio. The decrease in liquidity needs was mainly seen in the reduction of repo in Portugal, and incorporated an increase in the balance of subordinated loans placed with institutional investors, through an operation occurred at the end of 2017.
The net funding with the ECB stood at Euro 3.1 billion as at 30 September 2018, decreasing from Euro 3.4 billion on the same date of the last year, standing at a materially lower level than the average balance observed in 2017. The liquidity buffer with the ECB, of Euro 12.5 billion, remained in line with the amount of the previous quarter and showed a Euro 3.4 billion reinforcement compared to the same date of the previous year. Considering other assets that are highly liquid or likely to be converted into eligible collateral with the ECB in the short term, the buffer would amount to Euro 13.5 billion (Euro 10.6 billion at the end of September 2017).
The estimated CET1 ratio as at 30 September 2018 on a phased-in and on a fully implemented basis stood at 11.8%, -140 basis points and +10 basis points, respectively, comparing to the 13.2% and 11.7% ratios recorded in the same period of 2017 and above the minimum ratios defined in the SREP5 for 2018 (CET1 8.81%, T1 10.31% and Total 12.31%).
The favourable evolution of CET1 on a fully implemented basis was mainly determined by net income, partially offset by the IFRS9 adoption impact, by the deduction of irrevocable payment commitments for the Single Resolution Fund and the Deposits Guarantee Fund and by the increase of the Risk Weighted Assets. The fully implemented total capital ratio additionally benefited from subordinated bond placements in Poland and Portugal.
| Euro million | ||
|---|---|---|
| 30 Sep. 18 | 30 Sep. 17 | |
| FULLY IMPLEMENTED | ||
| Own funds | ||
| Common Equity Tier 1 (CET1) | 4,954 | 4,423 |
| Tier 1 | 5,034 | 4,491 |
| Total Capital | 5,622 | 4,813 |
| Risk weighted assets | 42,108 | 37,910 |
| Solvency ratios | ||
| CET1 | 11.8% | 11.7% |
| Tier 1 | 12.0% | 11.8% |
| Total capital | 13.4% | 12.7% |
| PHASED-IN | ||
| CET1 | 11.8% | 13.2% |
Note: The capital ratios as at September 2018 are estimated and include the positive accumulated net income.
The capital ratios as at September 2017 include the positive accumulated net income.
5 Supervisory Review and Evaluation Process.
Millennium bcp has successfully executed an operational turnaround, reinforcing its financial and capital position despite the adverse setting of the banking sector in the core Portuguese market. This position reflects its relentless path and the compounding of multiple achievements, such as a 44% cost reduction in Portugal since 2011, and a 44% reduction in Group NPE since 2013 (from Euros 13.7 to Euros 7.7 billion in 2017). Three distinctive competences were at the core of this turnaround: a customer-oriented relationship model, marketleading efficiency, and a competitive international portfolio.
Millennium is now ready to embark on a new cycle of growth with profitability, requiring complementary capabilities to cope with the evolving context and the need to secure a fully sustainable position. These include leading digital, mobile, and analytics capabilities (preparing the organization to be competitive in the new age) and integration in value chains and ecosystems (embedding into its Customers' needs and reach), complemented by a robust balance sheet and rigorous capital allocation and shaped by strong governance (continuing its effort to de-risk the portfolio and reinforcing focus on value-added business).
Against this backdrop, Millennium has defined five overarching priorities for the future:
Talent mobilization, which will entail energizing employees to drive the Bank's agenda as a team, promoting greater engagement and proactivity, and empowering decision making in a collaborative model. The Bank's talent will also to be reinvigorated by developing a merit-based growth model and fostering the development of new capabilities. Finally, the Bank will review its compensation processes across teams to ensure alignment with the new agenda and performance.
Mobile-centric digitization, aspiring to double down on efforts to transform customer experience and enable productivity gains across geographies, reemphasizing Millennium's innovation trademark. The main priorities consist of redesigning the digital experience from a mobile-centric approach, transforming top customer journeys, setting up a convenient and productive omnichannel model, and transforming operations through the deployment of NextGen technologies (such as robotics and natural language processing). In parallel, an IT strategy focused on upgrading technology, data, security, and ways of working will enable these levers.
Growth and leadership in Portugal, aiming to maximize the potential of the unique position in which the Bank emerges out of the financial crisis (the largest private Portuguese bank) implying a renewed commitment to grow the customer base and expand relationships. This will materialize into helping Portuguese businesses thrive (e.g., building a position as the preferred partner for sound small businesses), while serving its individual customers across their full range of needs. The Group further aspire to capture the full potential of ActivoBank's simple and value-based offer and assess potential internationalization options.
Growth in international footprint, with the objective of capitalizing on the opportunities offered by the highgrowth intrinsics of markets where the Bank has a presence and competitive advantage. This implies growing in Poland by deepening retail relationships and enlarging the customer business base; a step change in Switzerland by growing existing business and exploring new markets and digital advice; leveraging market leadership in Mozambique to focus on profitability and capturing the tailwinds of large commodity investments planned; building on its position in Angola as a trusted and sound business partner with unique local relationships; and exploring emerging Chinarelated opportunities (trade and investment flows, payments, private banking).
Business model sustainability, maintaining as a clear priority the improvement of its credit portfolio quality, by reducing the NPE stock (60% reduction by 2021) and simultaneously lowering the cost of risk. Risk and compliance governance will also be strengthened to ensure a sustainable growth of credit volume with a sound risk profile.
The successful execution of these priorities should enable us to accomplish a set of strategic objectives for 2021: franchise growth (>6 mn active customers6 ), readiness for the future (from 45% to >60% digital customers by 2021), a sustainable business model (60% reduction of NPE stock, reaching ~Euros3 bn), and attractive returns for shareholders (~40% cost-to-income and ~10% ROE in 2021).
6 Customers with a debit or credit card movement in the past three months, or who have assets greater than or equal to €100.
| 9M18 | 2021 | ||
|---|---|---|---|
| Franchise growth | Total active customers |
4.8 million | >6 million |
| Digital customers | 55% | >60% | |
| Mobile customers | 32% | >45% | |
| Value creation | Cost-to-income | 46% | ~40% |
| ROE | 6.0% | ~10% | |
| CET1 | 11.8% | ~12% | |
| LTD | 89% | <100% | |
| Dividend payout | -- | ~40% | |
| Asset quality | NPE stock | €6.3 billion | €3.0 billion |
| Cost-of-risk | 88 bp | <50 bp |
43
| Euro million | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| C ons olidate d | Activity in Por tugal | Inte rnational activity | |||||||
| S e p . 18 | S e p . 17 Change 18/17 |
S e p . 18 | S e p . 17 Change 18/17 |
S e p . 18 | S e p . 17 Change 18/17 |
||||
| INC OM E S TA TEM ENT | |||||||||
| Net interes t income | 1,052.8 | 1,023.2 | 2.9% | 595.8 | 591.8 | 0.7% | 457.0 | 431.4 | 5.9% |
| Div idends from equity ins truments | 0.6 | 1.7 | -64.9% | – | 1.1 | -100.1% | 0.6 | 0.6 | -1.0% |
| Net fees and commis s ion income | 510.1 | 494.6 | 3.1% | 352.5 | 337.7 | 4.4% | 157.6 | 157.0 | 0.4% |
| Net trading income | 89.6 | 115.0 | -22.1% | 41.5 | 69.3 | -40.1% | 48.0 | 45.7 | 5.1% |
| Other net operating income | (90.3) | ( 97.0) | 6.9% | (45.6) | (53.7) | 15.0% | (44.7) | (43.3) | -3.2% |
| Equity accounted earnings | 71.9 | 56.8 | 26.5% | 43.1 | 32.4 | 33.1% | 28.7 | 24.4 | 17.8% |
| Ne t o pe r ating r e ve nu e s | 1,634.6 | 1,594.3 | 2.5% | 987.4 | 978.6 | 0.9% | 647.2 | 615.7 | 5.1% |
| S taff cos ts | 435.6 | 380.1 | 14.6% | 281.2 | 235.2 | 19.5% | 154.4 | 144.9 | 6.5% |
| Other adminis trativ e cos ts | 275.8 | 274.8 | 0.4% | 160.6 | 164.1 | -2.1% | 115.1 | 110.7 | 4.0% |
| Depreciation | 42.9 | 39.7 | 8.0% | 27.1 | 24.5 | 10.6% | 15.8 | 15.2 | 3.9% |
| Ope r ating cos ts | 754.2 | 694.6 | 8.6% | 468.9 | 423.8 | 10.6% | 285.3 | 270.8 | 5.4% |
| Operating cos ts ex cluding s pecific items | 742.2 | 718.3 | 3.3% | 456.9 | 447.5 | 2.1% | 285.3 | 270.8 | 5.4% |
| Profit be fore im pairm e nt and provis ions | 880.3 | 899.7 | -2.2% | 518.5 | 554.8 | -6.5% | 361.9 | 344.9 | 4.9% |
| Loans impairment (net of recov eries ) | 337.1 | 458.6 | -26.5% | 288.5 | 390.0 | -26.0% | 48.6 | 68.6 | -29.2% |
| Other impairment and prov is ions | 94.2 | 169.9 | -44.5% | 78.6 | 168.5 | -53.4% | 15.7 | 1.4 | >200% |
| Pro fit be for e incom e tax | 449.0 | 271.2 | 65.6% | 151.3 | (3.6) | >200% | 297.6 | 274.8 | 8.3% |
| Income tax | 109.5 | 63.1 | 73.5% | 42.8 | (0.9) | >200% | 66.7 | 64.0 | 4.2% |
| Incom e afte r incom e tax fro m continuing o pe ratio ns | 339.5 | 208.1 | 63.1% | 108.6 | (2.7) | >200% | 230.9 | 210.8 | 9.5% |
| Income aris ing from dis continued operations | 1.8 | 1.3 | 40.0% | – | – | - | – | – | - |
| Non-controlling interes ts | 83.8 | 76.0 | 10.2% | (6.3) | (3.5) | -81.8% | 90.1 | 79.5 | 13.3% |
| Ne t inco m e | 257.5 | 133.3 | 93.1% | 114.9 | 0.8 | >200% | 140.8 | 131.3 | 7.2% |
| BA L A NC E S HEET AND A C TIV ITY INDIC ATORS | |||||||||
| Total as s ets | 73,745 | 72,990 | 1.0% | 53,364 | 53,436 | -0.1% | 20,381 | 19,554 | 4.2% |
| Total cus tom e r funds ( 1) | 72,786 | 68,984 | 5.5% | 53,171 | 50,246 | 5.8% | 19,614 | 18,738 | 4.7% |
| Balance s he e t cus to m e r funds | 54,922 | 52,265 | 5.1% | 38,625 | 36,750 | 5.1% | 16,297 | 15,515 | 5.0% |
| Depos its and other res ources from cus tomers | 53,624 | 50,690 | 5.8% | 37,427 | 35,281 | 6.1% | 16,198 | 15,410 | 5.1% |
| Debt s ecurities | 1,298 | 1,575 | -17.6% | 1,198 | 1,469 | -18.5% | 100 | 105 | -5.1% |
| Off-b alance s he e t cu s tom e r funds | 17,863 | 16,719 | 6.8% | 14,547 | 13,496 | 7.8% | 3,317 | 3,223 | 2.9% |
| A s s ets under management | 5,291 | 4,903 | 7.9% | 3,058 | 2,571 | 19.0% | 2,233 | 2,333 | -4.3% |
| A s s ets placed w ith cus tomers | 4,151 | 3,707 | 12.0% | 3,595 | 3,320 | 8.3% | 556 | 386 | 43.8% |
| Ins urance products ( s avings and inv es tment) | 8,421 | 8,109 | 3.8% | 7,893 | 7,605 | 3.8% | 528 | 504 | 4.8% |
| L oans to cus tom e rs (gros s ) | 51,150 | 50,754 | 0.8% | 37,629 | 37,947 | -0.8% | 13,521 | 12,807 | 5.6% |
| Individuals | 27,604 | 27,174 | 1.6% | 19,148 | 19,217 | -0.4% | 8,456 | 7,957 | 6.3% |
| Mortgage | 23,640 | 23,406 | 1.0% | 17,141 | 17,203 | -0.4% | 6,499 | 6,202 | 4.8% |
| Cons umer and others | 3,965 | 3,768 | 5.2% | 2,008 | 2,013 | -0.3% | 1,957 | 1,755 | 11.5% |
| C om panie s | 23,546 | 23,580 | -0.1% | 18,481 | 18,730 | -1.3% | 5,066 | 4,850 | 4.4% |
| C REDIT QUA L ITY | |||||||||
| Total overdue loans | 2,566 | 3,216 | -20.2% | 2,213 | 2,868 | -22.8% | 352 | 349 | 1.0% |
| Overdue loans by more than 90 day s | 2,462 | 3,109 | -20.8% | 2,175 | 2,807 | -22.5% | 287 | 302 | -4.9% |
| Overdue loans by more than 90 day s / Loans to cus tomers | 4.8% | 6.1% | 5.8% | 7.4% | 2.1% | 2.4% | |||
| Total impairment (balance s heet) | 3,206 | 3,387 | -5.3% | 2,684 | 2,932 | -8.5% | 522 | 455 | 14.9% |
| Total impairment (balance s heet) / Loans to cus tomers | 6.3% | 6.7% | 7.1% | 7.7% | 3.9% | 3.6% | |||
| Total impairment (balance s heet) /Ov erdue loans by more than 90 days | 130.3% | 108.9% | 123.4% | 104.5% | 182.1% | 150.8% | |||
| Non-Performing Ex pos ures | 6,307 | 8,079 | -21.9% | 5,546 | 7,168 | -22.6% | 761 | 911 | -16.5% |
| Non-Performing Ex pos ures / Loans to cus tomers | 12.3% | 15.9% | 14.7% | 18.9% | 5.6% | 7.1% | |||
| Res tructured loans | 3,934 | 4,509 | -12.8% | 3,390 | 3,954 | -14.3% | 544 | 555 | -2.0% |
| Res tructured loans / Loans to cus tomers | 7.7% | 8.9% | 9.0% | 10.4% | 4.0% | 4.3% | |||
| Cos t of ris k (net of recoveries , in b.p.) | 88 | 120 | 102 | 137 | 49 | 71 | |||
| Cos t-to-income (2) | 45.4% | 45.1% | 46.3% | 45.7% | 44.1% | 44.0% | |||
( 2) Ex cludes the impact of s pecific itens . ( 1) A s at 30 J une 2018, the concepts underlying the determination of off-balance s heet cus tomer funds w ere adjus ted to reflect the new legal and regulatory framew ork impos ed by the Financial Ins truments Markets Directiv e II (MiFID II), as w ell as changes implemented regarding the perimeter cons idered and the criteria adopted, namely w ith regard to the inclus ion of amounts held by cus tomers in the contex t of the placement of third-party products that contribute to the recognition of commis s ions ( "as s ets placed w ith cus tomers "). The information w ith reference to 30 S eptember 2017 is pres ented according to the new criteria.
(Model applicable to companies subject to the Accounting Plan for Banks/Leasing/Factoring companies)
Company: Banco Comercial Português, S.A. Head office: Praça D. João I, 28 - 4000-295 Porto
| (Euros) | ||||||
|---|---|---|---|---|---|---|
| Individual | Consolidated | |||||
| 30 September 2018 | 30 September 2017 | Var. (% ) | 30 September 2018 | 30 September 2017 | Var. (% ) | |
| ASSETS (NET) | ||||||
| Loans to other credit institutions (1) | 2,306,500,282 | 2,296,014,143 | 0.46% | 1,198,507,101 | 1,918,702,006 | -37.54% |
| Loans to clients | 33,354,879,864 | 33,188,752,794 | 0.50% | 47,665,384,344 | 47,367,178,384 | 0.63% |
| Fixed income securities | 6,736,802,835 | 6,712,859,932 | 0.36% | 13,473,892,939 | 11,555,585,373 | 16.60% |
| Variable yield securities | 2,444,776,020 | 2,764,813,715 | -11.58% | 1,827,725,994 | 1,931,274,208 | -5.36% |
| Investments | 3,207,496,275 | 3,358,302,959 | -4.49% | 488,174,989 | 612,806,692 | -20.34% |
| SHAREHOLDER'S AND EQUIVALENT EQUITY | ||||||
| Equity Capital | 5,600,738,054 | 5,600,738,054 | 0.00% | 5,600,738,054 | 5,600,738,054 | 0.00% |
| Nº of ordinary shares | 15,113,989,952 | 15,113,989,952 | - | 15,113,989,952 | 15,113,989,952 | - |
| Nº of other shares | - | - - | - | - - | ||
| Value of own shares | - | - - | 82,553 | 79,413 | 3.95% | |
| Nº of voting shares | - | - - | 323,738 | 323,738 | - | |
| Nº of preferred, non voting shares | - | - - | - | - - | ||
| Subordinated loans | 840,665,996 | 718,791,226 | 16.96% | 1,097,692,193 | 858,167,347 | 27.91% |
| Minority interests | - | - - | 1,136,035,528 | 1,006,169,414 | 12.91% | |
| LIABILITIES | ||||||
| Amounts owed to credit institutions | 8,032,657,691 | 9,814,529,211 | -18.16% | 7,563,524,083 | 9,185,514,468 | -17.66% |
| Amounts owed to clients | 36,831,874,181 | 35,149,261,373 | 4.79% | 53,624,370,354 | 50,690,359,477 | 5.79% |
| Debt securities | 2,196,459,727 | 2,457,855,276 | -10.64% | 2,675,776,470 | 3,096,180,907 | -13.58% |
| TOTAL ASSETS (NET) | 54,885,023,044 | 55,522,129,071 | -1.15% | 73,744,604,506 | 72,989,729,969 | 1.03% |
| TOTAL SHAREHOLDER'S EQUITY | 5,638,385,319 | 5,881,641,347 | -4.14% | 5,808,616,013 | 6,051,878,902 | -4.02% |
| TOTAL LIABILITIES | 49,246,637,725 | 49,640,487,724 | -0.79% | 66,799,952,965 | 65,931,681,653 | 1.32% |
| (Euros) | |||||||
|---|---|---|---|---|---|---|---|
| Individual | Consolidated | ||||||
| 30 September 2018 | 30 September 2017 | Var. (% ) | 30 September 2018 | 30 September 2017 | Var. (% ) | ||
| Financial Margi n(2) | 578,110,992 | 580,251,993 | -0.37% | 1,052,805,108 | 1,023,201,728 | 2.89% | |
| Commissions and other oper. revenue (net) | 311,063,152 | 299,717,035 | 3.79% | 421,479,049 | 398,869,949 | 5.67% | |
| Securities yield and profits from | |||||||
| financial transactions (net) | 219,393,824 | 115,678,389 | 89.66% | 95,243,329 | 68,200,033 | 39.65% | |
| Banking Income | 1,108,567,968 | 995,647,417 | 11.34% | 1,569,527,486 | 1,490,271,710 | 5.32% | |
| Personnel, administ. and other costs | (446,817,441) | (404,268,118) | 10.53% | (711,328,456) | (654,882,110) | 8.62% | |
| Amortizations | (24,069,456) | (21,356,689) | 12.70% | (42,895,563) | (39,714,829) | 8.01% | |
| Impairment and Provisions (net of adjustments) | (519,476,382) | (597,916,271) | -13.12% | (436,424,691) | (580,017,830) | -24.76% | |
| Extraordinary profit | - | - - | - | - - | |||
| Profit before taxes | 118,204,689 | (27,893,661) | - | 378,878,776 | 215,656,941 | 75.69% | |
| Income tax (3) | (30,733,620) | 217,519 | - | (109,505,301) | (63,110,815) | 73.51% | |
| Minority interests and income excluded | |||||||
| from consolidation | - | - - | (11,904,743) | (19,236,977) | -38.12% | ||
| Net profit / loss for the quarter | 87,471,069 | (27,676,142) | - | 257,468,732 | 133,309,149 | 93.14% | |
| Net profit / loss per share for the quarter | 0.0058 | -0.0018 | - | 0.0170 | 0.0088 | 93.14% | |
| (4) Self financing |
631,016,907 | 591,596,818 | 6.66% | 736,788,986 | 753,041,808 | -2.16% |
(1) Includes repayable on demand to credit institutions
(2) Financial margin = Interest income - Interest expense (3) Estimated income tax
(4) Self financing = Net profits + amortization + provision
| 2018 2017 (*) Interes t income 1,407,861 1,431,812 Interes t ex pens e (355,056) (408,610) NET INTERES T INC OM E 1,052,805 1,023,202 592 1,686 Dividends from equity ins truments 510,068 494,640 Net fees and commis s ions income Net gains / (los s es ) from financial operations at fair value through profit or los s 12,315 17,848 Net gains / (los s es ) from foreign ex change 53,846 63,402 Net gains / (los s es ) from hedge accounting operations (1,547) (6,672) Net gains / (los s es ) from derecognition of as s ets and financial liabilities at amortis ed cos t (21,598) (3,927) Net gains / (los s es ) from derecognition of financial as s ets at fair value through other comprehens ive income 46,560 n.a. Net gains / (los s es ) from financial as s ets available for s ale 44,348 n.a. Net gains / (los s es ) from ins urance activity 4,001 3,668 Other operating income / (los s es ) (121,592) (102,147) TOTA L OPERAT ING INC OM E 1,535,450 1,536,048 S taff cos ts 435,551 380,118 Other adminis trative cos ts 275,778 274,764 A mortiz ations and depreciations 42,896 39,715 TOTA L OPERAT ING EXPENS ES 754,225 694,597 OPERAT ING NET INC OM E BEFORE PROV IS IONS A ND IM PA IRM ENT S 781,225 841,451 Impairment for financial as s ets at amortis ed cos t (335,668) (458,594) Impairment for financial as s ets at fair value through other comprehens ive income 3,643 n.a. Impairment for financial as s ets available for s ale (48,485) n.a. Impairment for other as s ets (68,398) (103,046) Other provis ions (30,928) (18,378) NET OP ERA TING INC OM E 349,874 212,948 S hare of profit of as s ociates under the equity method 71,868 56,791 Gains / (los s es ) aris ing from s ales of s ubs idiaries and other as s ets 27,255 1,459 NET INC OM E BEFORE INC OM E TA XES 448,997 271,198 Income tax es Current (77,550) (82,831) Deferred (31,955) 19,720 INC OM E A FTER INC OM E TA XES FROM C ONTINUING OPERA TIONS 339,492 208,087 Income aris ing from dis continued or dis continuing operations 1,750 1,250 NET INC OM E AFTER INC OM E TA XES 341,242 209,337 Net income for the period attributable to: Bank's S hareholders 257,469 133,309 Non-controlling interes ts 83,773 76,028 NET INC OM E FOR THE PERIOD 341,242 209,337 Earnings per s hare (in Euros ) Bas ic 0.023 0.014 Diluted 0.023 0.014 |
30 S EP TEM BER | (Thousands of euros) 30 S EPT EM BER |
|---|---|---|
(*) The balances for the nine months period ended 30 S eptember 2017, corres pond to the s tatutory accounts at that date. Thes e balances are pres ented ex clus ively for comparative purpos es and have not been res tated follow ing the adoption of IFRS 9, w ith reference to 1 J anuary 2018, as allow ed by IFRS 9.
| (Thousands of euros) | |||
|---|---|---|---|
| 30 SEPTEMBER | 31 DECEMBER | 30 SEPTEMBER | |
| 2018 | 2017 (*) | 2017 (*) | |
| ASSETS | |||
| Cash and deposits at Central Banks | 2,192,517 | 2,167,934 | 2,144,795 |
| Loans and advances to credit institutions repayable on demand | 330,321 | 295,532 | 1,113,371 |
| Financial assets at amortised cost | |||
| Loans and advances to credit institutions | 868.186 | 1,065,568 | 805,331 |
| Loans and advances to customers | 45,355,357 | 45,625,972 | 45,199,645 |
| Debt instruments | 3,347,745 | 2,007,520 | 2,167,534 |
| Financial assets at fair value through profit or loss | |||
| Financial assets held for trading | 1,024,778 | 897.734 | 922,677 |
| Financial assets not held for trading mandatorily at fair value through profit or loss | 1,405,460 | n.a. | n.a. |
| Financial assets designated at fair value through profit or loss | 32,921 | 142,336 | 142,253 |
| Financial assets at fair value through other comprehensive income | 12,063,815 | n.a. | n.a. |
| Financial assets available for sale | n.a. | 11,471,847 | 11,914,693 |
| Financial assets held to maturity | n.a. | 411,799 | 436,278 |
| Assets with repurchase agreement | 15,531 | 70,959 | |
| Hedging derivatives | 76,598 | 234,345 | 165,322 |
| Investments in associated companies | 488,175 | 571,362 | 612,807 |
| Non-current assets held for sale | 1,940,000 | 2,164,567 | 2,286,122 |
| Investment property | 12,020 | 12,400 | 14,234 |
| Other tangible assets | 484,236 | 490,423 | 478,975 |
| Goodwill and intangible assets | 168,745 | 164,406 | 164,560 |
| Current tax assets | 12,892 | 25,914 | 7,583 |
| Deferred tax assets | 2,945,304 | 3,137,767 | 3,135,169 |
| Other assets | 980,005 | 1,052,024 | 1,207,424 |
| TOTAL ASSETS | 73,744,606 | 71,939,450 | 72,989,732 |
| LIABILITIES | |||
| Financial liabilities at amortised cost | |||
| Resources from credit institutions | 7,563,524 | 7,487,357 | 9,185,514 |
| Resources from customers | 50,760,519 | 48,285,425 | 47,825,589 |
| Non subordinated debt securities issued | 1,707,696 | 2,066,538 | 2,187,133 |
| Subordinated debt | 1,097,692 | 1,169,062 | 858,167 |
| Financial liabilities at fair value through profit or loss | |||
| Financial liabilities held for trading | 310,597 | 399,101 | 461,807 |
| Financial liabilities at fair value through profit or loss | 3,831,932 | 3,843,645 | 3,773,817 |
| Hedging derivatives | 170,474 | 177,337 | 216,295 |
| Provisions | 331,896 | 324,158 | 340,989 |
| Current tax liabilities | 4,742 | 12,568 | 8,835 |
| Deferred tax liabilities | 4,993 | 6,030 | 2,235 |
| Other liabilities | 1,015,889 | 988,493 | 1,071,303 |
| TOTAL LIABILITIES | 66,799,954 | 64,759,714 | 65,931,684 |
| EQUITY | |||
| Share capital | 5,600,738 | 5,600,738 | 5,600,738 |
| Share premium | 16,471 | 16,471 | 16,471 |
| Preference shares | 59,910 | 59,910 | 59,910 |
| Other equity instruments | 2,922 | 2,922 | 2,922 |
| Legal and statutory reserves | 264,608 | 252,806 | 252,806 |
| Treasury shares | (291) | (293) | (282) |
| Reserves and retained earnings | (393, 211) | (38, 130) | (13,995) |
| Net income for the period attributable to Bank's Shareholders | 257,469 | 186,391 | 133,309 |
| TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS | 5,808,616 | 6,080,815 | 6,051,879 |
| Non-controlling interes ts | 1,136,036 | 1,098,921 | 1,006,169 |
| TOTAL EQUITY | 6,944,652 | 7,179,736 | 7,058,048 |
| 73,744,606 | 71,939,450 | 72,989,732 |
(*) The balances as at 31 December 2017 and 30 S eptember 2017, corres pond to the s tatutory accounts at that date. Thes e balances are pres ented ex clus ively for comparative purpos es and have not been res tated follow ing the adoption of IFRS 9, w ith reference to 1 J anuary 2018, as allow ed by IFRS 9.
The BCP Group prepares financial information in accordance with International Financial Reporting Standards (IFRS) endorsed by European Union. As a complement to that information, the BCP Group uses a set of alternative performance measures that allow monitoring the evolution of its activity over the time. Following the guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on October 2015 (ESMA/2015/1415), the BCP Group presents some indicators related to the assessment of profitability and efficiency and the quality of the credit portfolio, among others, which are intended to facilitate comprehension of the evolution of the economic and financial position of the Group. The information presented in this context has not been audited and does not, under any circumstance, replace the financial information prepared in accordance with IFRS. It should also be noted that the definitions and concepts used by the BCP Group for the calculation of these indicators may differ from those used by other entities in the determination of other similar measures and may therefore not be directly comparable. In accordance with the above-mentioned guidelines, alternative performance measures, which are detailed below, are presented together with additional information that reconciles the accounting figures presented in the consolidated financial statements prepared in accordance with IFRS and financial information reflecting the management criteria adopted by the BCP Group. These indicators and their components are also described in more detail in the glossary.
Relevance of the indicator: loans to deposits ratio is an indicator of liquidity that allows the evaluation of the Group's retail funding structure.
| E uro million | |||
|---|---|---|---|
| S e p. 18 | S e p . 17 | ||
| L oa ns to c us tom e rs (ne t) (1) | 47,944 | 47,367 | |
| B a la nc e s he e t c us tom e r funds (2) | 54,922 | 52,265 | |
| (1) / (2) | 87% | 91% |
Relevance of the indicator: it allows evaluation of the level of efficiency of the Group, measuring its capacity to generate results with the volume of available assets.
| E uro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | ||
| N et inc om e (1) | 257 | 133 | |
| N on-c ontrolling inte re s ts 2) | 84 | 76 | |
| A ve ra ge tota l a s s e ts (3) | 73,065 | 72,631 | |
| [(1) + (2), a nnua lis e d] / (3) | 0.6% | 0.4% |
Relevance of the indicator: allows assessment of the capacity of the Group to remunerate its shareholders, assessing the level of profitability generated by the funds invested by the shareholders in the Group.
| E uro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | ||
| N et inc om e (1) | 257 | 133 | |
| A ve ra ge e quity (2) | 5,736 | 5,590 | |
| [ (1), a nnua lis e d] / (2) | 6.0% | 3.2% |
Relevance of the indicator: it allows for the monitoring of the level of efficiency of the Group, evaluating the volume of operating costs (excluding specific items) to generate net operating revenues.
| Euro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | ||
| Operating costs (1) | 754 | 695 | |
| Specific items (2) | 12 | $-24$ | |
| Net operating revenues (3) | 1.635 | 1,594 | |
| $[(1) - (2)] / (3)$ | 45.4% | 45.1% |
Relevance of the indicator: allows assessment of the quality of the loan portfolio by evaluating the ratio between impairment charges (net of reversals and recoveries of credit and interest) recognized in the period and the stock of loans to customers at the end of that period.
| Euro million | |||
|---|---|---|---|
| 9M 18 | 9M 17 | ||
| Loans to customers at amortised cost, before impairment (1) | 50.856 | 50.754 | |
| Loan impairment charges (net of recoveries) (2) | 337 | 459 | |
| $(2)$ , annualised] / $(1)$ | 88 | 120 |
Relevance of the indicator: allows to assess the level of credit risk to which the Group is exposed based on the proportion of the NPE loan portfolio in the loans to customers total portfolio (gross).
| Euro million | |||
|---|---|---|---|
| Sep. 18 | Sep. 17 | ||
| Non-Performing Exposures (1) | 6.307 | 8.079 | |
| Loans to customers (gross) (2) | 51.150 | 50.754 | |
| (1) / (2) | 12.3% | 15.9% |
Relevance of the indicator: it allows assessing the level of coverage of the NPE portfolio by balance sheet impairment.
| Euro million | |||
|---|---|---|---|
| Sep. 18 | Sep. 17 | ||
| Non-Performing Exposures (1) | 6.307 | 8.079 | |
| Loans impairments (balance sheet) (2) | 3.206 | 3.387 | |
| (2) / (1) | 50.8% | 41.9% |
| Euro million | |
|---|---|
| S e p. 18 | |
| Loans to cus tomers at amortis ed cos t (dis clos ed B alance S heet) | 45,355 |
| Debt ins truments at amortis ed cos t as s ociated to credit operations | 2,310 |
| B alance s heet amount of loans to cus tomers at fair value through profit or los s | 279 |
| L oa n to custome rs (ne t) conside ring ma na ge m e nt crite ria | 47,944 |
| B alance s heet impairment related to loans to cus tomers at amortis ed cos t | 3,149 |
| B alance s heet impairment as s ociated with debt ins truments at amortis ed cos t related to credit operations | 41 |
| F air value adjus tments related to loans to cus tomers at fair value through profit or los s | 16 |
| L oa n to custome rs (gross) conside ring m a na ge me nt crite ria | 51,150 |
| Euro million | |
|---|---|
| 9M 18 | |
| Impairment of financial as s ets at amortis ed cos t (dis clos ed P &L) (1) | 336 |
| Impairment of financial as s ets at amortis ed cos t not as s ociated with credit operations (2) | -1 |
| L oa ns im pa irme nt conside ring m a na ge me nt crite ria * (1)-(2) | 337 |
* Includes impairment for loans and advances to credit ins titutions (0.4M€), which is ex cluded for purpos es of cos t of ris k calculation.
| B a la nce she e t custome r funds conside ring m a na ge m e nt crite ria (1)+(2) | 54,922 |
|---|---|
| De bt se curitie s pla ce d w ith custom e rs conside ring m a na ge m e nt crite ria (2) | 1,298 |
| Non s ubordinated debt s ecurities placed with ins titucional cus tomers | -1,378 |
| Debt s ecurities at fair value through profit or los s and certificates | 968 |
| Non s ubordinated debt s ecurities is s ued at amortis ed cos t (dis clos ed B alance s heet) | 1,708 |
| De posits a nd othe r re source s from custom e rs conside ring m a na ge m e nt crite ria (1) | 53,624 |
| R es ources from cus tomers at amortis ed cos t (dis clos ed B alance s heet) | 50,761 |
| Custome r de posits a t fa ir va lue through profit or loss conside ring m a na ge m e nt crite ria | 2,864 |
| Debt s ecurities at fair value through profit or los s and certificates | -968 |
| F inancial liabilities at fair value through profit or los s (dis clos ed B alance s heet) | 3,832 |
| S e p. 18 | |
| Euro million |
| Euro million | |
|---|---|
| S e p. 18 | |
| Debt ins truments at amortis ed cos t (dis clos ed B alace s heet) | 3,348 |
| Debt ins truments at amortis ed cos t as s ociated to credit operations net of impairment | -2,310 |
| De bt instrum e nts a t a m ortise d cost conside ring m a na ge me nt crite ria (1) | 1,038 |
| F inancial as s ets not held for trading mandatorily at fair value through profit or los s (dis clos ed B alance s heet) |
1,405 |
| B alance s heet amount of loans to cus tomers at fair value through profit or los s | -279 |
| F ina ncia l a sse ts not he ld for tra ding m a nda torily a t fa ir va lue through profit or loss conside ring m a na ge m e nt crite ria (2) |
1,127 |
| F inancial as s ets held for trading (dis clos ed B alance s heet) (3) | 1,025 |
| F inancial as s ets des ignated at fair value through profit or los s (dis clos ed B alance s heet) (4) | 33 |
| F inancial as s ets at fair value through other comprehens ive income (dis clos ed B alance s heet) (5) | 12,064 |
| As s ets with repurchas e agreement (dis clos ed B alance s heet) (6) | 16 |
| S e curitie s portfolio conside ring ma na ge m e nt crite ria (1)+(2)+(3)+(4)+(5)+(6) | 15,302 |
Assets placed with customers – amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions.
Balance sheet customer funds – deposits and other resources from customers and debt securities placed with customers.
Commercial gap – loans to customers (gross) minus on-balance sheet customer funds.
Core income - net interest income plus net fees and commissions income.
Core net income - net interest income plus net fees and commissions income deducted from operating costs.
Cost of risk, net (expressed in basis points) - ratio of loan impairment charges for loans to customers at amortised cost and debt instruments at amortised cost related to credit operations (net of recoveries) accounted in the period to loans to customers at amortised cost and debt instruments at amortised cost related to credit operations before impairment.
Cost to core income - operating costs divided by core income.
Cost to income – operating costs divided by net operating revenues.
Coverage of non-performing exposures by impairments – loans impairments (balance sheet) divided by the stock of NPE.
Coverage of non-performing loans by impairments – loans impairments (balance sheet) divided by the stock of NPL.
Coverage of overdue loans by impairments - loans impairments (balance sheet) divided by overdue loans.
Coverage of overdue loans by more than 90 days by impairments - loans impairments (balance sheet) divided by overdue loans by more than 90 days.
Debt instruments – non-subordinated debt instruments at amortised cost and financial liabilities measured at fair value through profit or loss (debt securities and certificates).
Debt securities placed with customers - debt securities issued by the Bank and placed with customers.
Deposits and other resources from customers – resources from customers at amortised cost and customer deposits at fair value through profit or loss.
Dividends from equity instruments - dividends received from investments classified as financial assets at fair value through other comprehensive income and from financial assets held for trading and, until 2017, financial assets 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.
Insurance products – includes unit linked saving products and retirement saving plans ("PPR", "PPE" and "PPR/E").
Loans impairment (balance sheet) – balance sheet impairment related to loans to customers at amortised cost, balance sheet impairment associated with debt instruments at amortised cost related to credit operations and fair value adjustments related to loans to customers at fair value through profit or loss.
Loans impairment (P&L) – impairment of financial assets at amortised cost for loans and advances of credit institutions, for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations.
Loans to customers (gross) – loans to customers at amortised cost before impairment, debt instruments at amortised cost associated to credit operations before impairment and loans to customers at fair value through profit or loss before fair value adjustments.
Loans to customers (net) - loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss.
Loan to Deposits ratio (LTD) – loans to customers (net) divided by deposits and other resources from customers.
Loan to value ratio (LTV) – mortgage amount divided by the appraised value of property.
Net commissions - net fees and commissions income.
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, other net operating income and equity accounted earnings.
Net trading income – results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost, results from derecognition of financial assets measured at fair value through other comprehensive income and results from financial assets available for sale (till 2017).
Non-performing exposures (NPE) – non-performing loans and advances to customers (loans to customers at amortised cost and loans to customers at fair value through profit or loss) more than 90 days past-due or unlikely to be paid without collateral realisation, if they recognised as defaulted or impaired.
Non-performing loans (NPL) – overdue loans (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss) more than 90 days past due including the nonoverdue remaining principal of loans, i.e. portion in arrears, plus non-overdue remaining principal.
Off-balance sheet customer funds – assets from customers under management, assets placed with customers and insurance products (savings and investment) subscribed by customers.
Operating costs - staff costs, other administrative costs and depreciation.
Other impairment and provisions – impairment of financial assets (at fair value through other comprehensive income, at amortised cost not associated with credit operations and available for sale, in this case till 2017), other assets impairment, in particular provision charges related to assets received as payment in kind not fully covered by collateral, investments in associated companies and goodwill of subsidiaries and other provisions.
Other net income – dividends from equity instruments, net commissions, net trading income, other net operating income and equity accounted earnings.
Other net operating income – net gains from insurance activity, other operating income/(loss) and gains/(losses) arising from sales of subsidiaries and other assets.
Overdue loans – total outstanding amount of past due loans to customers (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests.
Overdue loans by more than 90 days – total outstanding amount of past due loans to customers by more than 90 days (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests.
Resources from credit institutions – resources and other financing from Central Banks and resources from other credit institutions.
Return on average assets (Instruction from the Bank of Portugal no. 16/2004) – net income (before tax) divided by the average total assets (weighted average of the average of monthly net assets in the period).
Return on average assets (ROA) – net income (before minority interests) divided by the average total assets (weighted average of the average of monthly net assets in the period).
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 (weighted average of the average of monthly equity in the period).
Return on equity (ROE) – net income (after minority interests) divided by the average attributable equity, deducted from preference shares and other capital instruments (weighted average of the average of monthly equity in the period).
Securities portfolio - debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income (net of impairment), assets with repurchase agreement, financial assets available for sale and financial assets held to maturity (in the latter two cases until 2017).
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 and off-balance sheet customer fund
| (Thousands of euros) | |||
|---|---|---|---|
| Notes | 30 September 2018 |
30 September 2017 (*) |
|
| Interest income | 2 | 1,407,861 | 1,431,812 |
| Interest expense | 2 | (355,056) | (408,610) |
| NET INTEREST INCOME | 1,052,805 | 1,023,202 | |
| Dividends from equity instruments | 3 | 592 | 1,686 |
| Net fees and commissions income | 4 | 510,068 | 494,640 |
| Net gains / (losses) from financial operations at fair value through profit or loss | 5 | 12,315 | 17,848 |
| Net gains / (losses) from foreign exchange | 5 | 53,846 | 63,402 |
| Net gains / (losses) from hedge accounting operations | 5 | (1,547) | (6,672) |
| Net gains / (losses) from derecognition of financial | |||
| assets and liabilities at amortised cost | 5 | (21,598) | (3,927) |
| Net gains / (losses) from derecognition of financial assets at fair value | |||
| through other comprehensive income | 5 | 46,560 | n.a. |
| Net gains / (losses) from financial assets available for sale | 5 | n.a. | 44,348 |
| Net gains / (losses) from insurance activity | 4,001 | 3,668 | |
| Other operating income / (losses) | 6 | (121,592) | (102,147) |
| TOTAL OPERATING INCOME | 1,535,450 | 1,536,048 | |
| Staff costs | 7 | 435,551 | 380,118 |
| Other administrative costs | 8 | 275,778 | 274,764 |
| Amortizations and depreciations | 9 | 42,896 | 39,715 |
| TOTAL OPERATING EXPENSES | 754,225 | 694,597 | |
| OPERATING NET INCOME BEFORE PROVISIONS AND IMPAIRMENTS | 781,225 | 841,451 | |
| Impairment for financial assets at amortised cost | 10 | (335,668) | (458,594) |
| Impairment for financial assets at fair value | |||
| through other comprehensive income | 11 | 3,643 | n.a. |
| Impairment for financial assets available for sale | 11 | n.a. | (48,485) |
| Impairment for other assets | 12 | (68,398) | (103,046) |
| Other provisions | 13 | (30,928) | (18,378) |
| NET OPERATING INCOME | 349,874 | 212,948 | |
| Share of profit of associates under the equity method | 14 | 71,868 | 56,791 |
| Gains / (losses) arising from sales of subsidiaries and other assets | 15 | 27,255 | 1,459 |
| NET INCOME BEFORE INCOME TAXES | 448,997 | 271,198 | |
| Income taxes | |||
| Current | 31 | (77,550) | (82,831) |
| Deferred | 31 | (31,955) | 19,720 |
| INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS | 339,492 | 208,087 | |
| Income arising from discontinued or discontinuing operations | 16 | 1,750 | 1,250 |
| NET INCOME AFTER INCOME TAXES | 341,242 | 209,337 | |
| Net income for the period attributable to: | |||
| Bank's Shareholders | 257,469 | 133,309 | |
| Non-controlling interests | 45 | 83,773 | 76,028 |
| NET INCOME FOR THE PERIOD | 341,242 | 209,337 | |
| Earnings per share (in Euros) | |||
| Basic | 17 | 0.023 | 0.014 |
| Diluted | 17 | 0.023 | 0.014 |
(*) The balances for the nine months periods ended 30 September 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9 (note 57).
| (Thousands of euros) | ||
|---|---|---|
| Third quarter 2018 |
Third quarter 2017 (*) |
|
| Interest income | 471,912 | 475,230 |
| Interest expense | (106,762) | (130,527) |
| NET INTEREST INCOME | 365,150 | 344,703 |
| Dividends from equity instruments | (28) | 81 |
| Net fees and commissions income | 169,854 | 164,316 |
| Net gains / (losses) from financial operations at fair value through profit or loss | (3,912) | (666) |
| Net gains / (losses) from foreign exchange | 17,054 | 23,505 |
| Net gains / (losses) from hedge accounting operations | (2,948) | (4,888) |
| Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost | 1,002 | (5,896) |
| Net gains / (losses) from derecognition of financial assets at fair value | ||
| through other comprehensive income | 1,362 | n.a. |
| Net gains / (losses) from financial assets available for sale | n.a. | 13,040 |
| Net gains / (losses) from insurance activity | 2,346 | 955 |
| Other operating income / (losses) | (18,169) | (16,278) |
| TOTAL OPERATING INCOME | 531,711 | 518,872 |
| Staff costs | 145,776 | 138,638 |
| Other administrative costs | 93,104 | 92,155 |
| Amortizations and depreciations | 14,545 | 13,596 |
| TOTAL OPERATING EXPENSES | 253,425 | 244,389 |
| OPERATING NET INCOME BEFORE PROVISIONS AND IMPAIRMENTS | 278,286 | 274,483 |
| Impairment for financial assets at amortised cost | (116,254) | (153,604) |
| Impairment for financial assets at fair value through other comprehensive income | (8) | n.a. |
| Impairment for financial assets available for sale | n.a. | (16,559) |
| Impairment for other assets | (26,925) | (32,769) |
| Other provisions | (8,360) | (10,269) |
| NET OPERATING INCOME | 126,739 | 61,282 |
| Share of profit of associates under the equity method | 30,485 | 21,687 |
| Gains / (losses) from sales of subsidiaries and other assets | 15,601 | 4,925 |
| NET INCOME BEFORE INCOME TAXES | 172,825 | 87,894 |
| Income taxes | ||
| Current | (27,645) | (28,283) |
| Deferred | (9,965) | 8,611 |
| INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS | 135,215 | 68,222 |
| Income arising from discontinued or discontinuing operations | - | - |
| NET INCOME AFTER INCOME TAXES | 135,215 | 68,222 |
| Net income for the period attributable to: | ||
| Bank's Shareholders | 106,826 | 43,381 |
| Non-controlling interests | 28,389 | 24,841 |
| NET INCOME FOR THE PERIOD | 135,215 | 68,222 |
(*) The balances for the three months period between 1 July and 30 September 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9.
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||
| Attributable to | ||||||
| Continuing operations |
Discontinued operations |
Total | Bank's Shareholders |
Non controlling interests |
||
| NET INCOME FOR THE PERIOD | 339,492 | 1,750 | 341,242 | 257,469 | 83,773 | |
| ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT | ||||||
| Debt instruments at fair value through other comprehensive income | ||||||
| Gains / (losses) for the period | (15,139) | - | (15,139) | (18,428) | 3,289 | |
| Reclassification of (gains) / losses to profit or loss | (46,560) | - | (46,560) | (44,719) | (1,841) | |
| Cash flows hedging | ||||||
| Gains / (losses) for the period | 11,911 | - | 11,911 | 8,417 | 3,494 | |
| Other comprehensive income from investments in associates and others | (3,134) | - | (3,134) | (3,064) | (70) | |
| Exchange differences arising on consolidation | (126,229) | - | (126,229) | (102,031) | (24,198) | |
| IAS 29 application | ||||||
| Effect on equity of Banco Millennium Atlântico, S.A (note 44) | 14,256 | - | 14,256 | 14,256 | - | |
| Others | (1,151) | - | (1,151) | (1,151) | - | |
| Fiscal impact | 13,106 | - | 13,106 | 14,046 | (940) | |
| (152,940) | - | (152,940) | (132,674) | (20,266) | ||
| ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT | ||||||
| Equity instruments at fair value through other comprehensive income | ||||||
| Gains / (losses) for the period | 1,867 | - | 1,867 | 1,943 | (76) | |
| Changes in credit risk of financial liabilities at | ||||||
| fair value through profit or loss | 1,321 | - | 1,321 | 1,321 | - | |
| Actuarial gains / (losses) for the period | ||||||
| BCP Group Pensions Fund | (10,417) | - | (10,417) | (10,417) | - | |
| Pension Fund - other associated companies | 696 | - | 696 | 696 | - | |
| Fiscal impact | (17,456) | - | (17,456) | (17,471) | 15 | |
| (23,989) | - | (23,989) | (23,928) | (61) | ||
| Other comprehensive income / (loss) for the period | (176,929) | - | (176,929) | (156,602) | (20,327) | |
| TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD | 162,563 | 1,750 | 164,313 | 100,867 | 63,446 |
(Thousands of euros)
| Attributable to | |||||
|---|---|---|---|---|---|
| Continuing operations |
Discontinued operations |
Total | Bank's Shareholders |
Non controlling interests |
|
| NET INCOME / (LOSS) FOR THE PERIOD | 208,087 | 1,250 | 209,337 | 133,309 | 76,028 |
| ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT | |||||
| Available-for-sale financial assets | |||||
| Gains / (losses) for the period | 316,949 | - | 316,949 | 302,825 | 14,124 |
| Reclassification of (gains) / losses to profit or loss | (44,348) | - | (44,348) | (43,836) | (512) |
| Cash flows hedging | |||||
| Gains / (losses) for the period | (18,613) | - | (18,613) | (27,394) | 8,781 |
| Exchange differences arising on consolidation | 23,635 | - | 23,635 | (708) | 24,343 |
| Fiscal impact | (60,922) | - | (60,922) | (56,930) | (3,992) |
| 216,701 | - | 216,701 | 173,957 | 42,744 | |
| ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT | |||||
| Actuarial gains / (losses) for the period | |||||
| BCP Group Pensions Fund | 74,664 | - | 74,664 | 74,664 | - |
| Pension Fund - other associated companies | (2,658) | - | (2,658) | (2,658) | - |
| Fiscal impact | (7,773) | - | (7,773) | (7,773) | - |
| 64,233 | - | 64,233 | 64,233 | - | |
| Other comprehensive income / (loss) for the period | 280,934 | - | 280,934 | 238,190 | 42,744 |
| TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD | 489,021 | 1,250 | 490,271 | 371,499 | 118,772 |
(*) The balances as at 30 September 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9 (note 57).
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Third quarter 2018 | ||||||
| Attributable to | ||||||
| Continuing operations |
Discontinued operations |
Total | Bank's Shareholders |
Non controlling interests |
||
| NET INCOME FOR THE PERIOD | 135,215 | - | 135,215 | 106,826 | 28,389 | |
| ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT | ||||||
| Debt instruments at fair value through other comprehensive income | ||||||
| Gains / (losses) for the period | (7,007) | - | (7,007) | (7,471) | 464 | |
| Reclassification of (gains) / losses to profit or loss | (1,362) | - | (1,362) | (536) | (826) | |
| Cash flows hedging | ||||||
| Gains / (losses) for the period | (47,529) | - | (47,529) | (48,481) | 952 | |
| Other comprehensive income from investments in associates and others | (4,345) | - | (4,345) | (4,377) | 32 | |
| Exchange differences arising on consolidation | (7,543) | - | (7,543) | (22,514) | 14,971 | |
| IAS 29 application | ||||||
| Effect on equity of Banco Millennium Atlântico, S.A (note 44) | 4,009 | - | 4,009 | 4,009 | - | |
| Others | (417) | - | (417) | (417) | - | |
| Fiscal impact | 17,054 | - | 17,054 | 17,169 | (115) | |
| (47,140) | - | (47,140) | (62,618) | 15,478 | ||
| ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT | ||||||
| Equity instruments at fair value through other comprehensive income | ||||||
| Gains / (losses) for the period | (708) | - | (708) | (663) | (45) | |
| Changes in credit risk of financial liabilities at | ||||||
| fair value through profit or loss | (563) | - | (563) | (563) | - | |
| Actuarial gains / (losses) for the period | ||||||
| BCP Group Pensions Fund | (37,149) | - | (37,149) | (37,149) | - | |
| Pension Fund - other associated companies | (122) | - | (122) | (122) | - | |
| Fiscal impact | 723 | - | 723 | 714 | 9 | |
| (37,819) | - | (37,819) | (37,783) | (36) | ||
| Other comprehensive income / (loss) for the period | (84,959) | - | (84,959) | (100,401) | 15,442 | |
| TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD | 50,256 | - | 50,256 | 6,425 | 43,831 |
| Third quarter 2017 (*) | |||||
|---|---|---|---|---|---|
| Attributable to | |||||
| Continuing operations |
Discontinued operations |
Total | Bank's Shareholders |
Non controlling interests |
|
| NET INCOME / (LOSS) FOR THE PERIOD | 68,222 | - | 68,222 | 43,381 | 24,841 |
| ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT | |||||
| Available-for-sale financial assets | |||||
| Gains / (losses) for the period | 89,505 | - | 89,505 | 83,802 | 5,703 |
| Reclassification of (gains) / losses to profit or loss | (13,040) | - | (13,040) | (13,040) | - |
| Cash flows hedging | |||||
| Gains / (losses) for the period | 25,839 | - | 25,839 | 19,162 | 6,677 |
| Exchange differences arising on consolidation | (45,131) | - | (45,131) | (23,111) | (22,020) |
| Fiscal impact | (26,621) | - | (26,621) | (22,629) | (3,992) |
| 30,552 | - | 30,552 | 44,184 | (13,632) | |
| ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT | |||||
| Actuarial gains / (losses) for the period | |||||
| BCP Group Pensions Fund | 28,740 | - | 28,740 | 28,740 | - |
| Pension Fund - other associated companies | (763) | - | (763) | (763) | - |
| Fiscal impact | (3,807) | - | (3,807) | (3,807) | - |
| 24,170 | - | 24,170 | 24,170 | - | |
| Other comprehensive income / (loss) for the period | 54,722 | - | 54,722 | 68,354 | (13,632) |
| TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD | 122,944 | - | 122,944 | 111,735 | 11,209 |
(*) The balances for the three months period between 1 July and 30 September 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9.
| Notes | 30 September 2018 |
(Thousands of euros) 31 December 2017 (*) |
|
|---|---|---|---|
| ASSETS | |||
| Cash and deposits at Central Banks | 18 | 2,192,517 | 2,167,934 |
| Loans and advances to credit institutions repayable on demand | 19 | 330,321 | 295,532 |
| Financial assets at amortised cost | |||
| Loans and advances to credit institutions | 20 | 868,186 | 1,065,568 |
| Loans and advances to customers | 21 | 45,355,357 | 45,625,972 |
| Debt instruments | 22 | 3,347,745 | 2,007,520 |
| Financial assets at fair value through profit or loss | |||
| Financial assets held for trading | 23 | 1,024,778 | 897,734 |
| Financial assets not held for trading mandatorily at fair value through profit or loss | 23 | 1,405,460 | n.a. |
| Financial assets designated at fair value through profit or loss | 23 | 32,921 | 142,336 |
| Financial assets at fair value through other comprehensive income | 23 | 12,063,815 | n.a. |
| Financial assets available for sale | 23 | n.a. | 11,471,847 |
| Financial assets held to maturity | 24 | n.a. | 411,799 |
| Assets with repurchase agreement | 15,531 | - | |
| Hedging derivatives | 25 | 76,598 | 234,345 |
| Investments in associated companies | 26 | 488,175 | 571,362 |
| Non-current assets held for sale | 27 | 1,940,000 | 2,164,567 |
| Investment property | 28 | 12,020 | 12,400 |
| Other tangible assets | 29 | 484,236 | 490,423 |
| Goodwill and intangible assets | 30 | 168,745 | 164,406 |
| Current tax assets | 12,892 | 25,914 | |
| Deferred tax assets | 31 | 2,945,304 | 3,137,767 |
| Other assets | 32 | 980,005 | 1,052,024 |
| TOTAL ASSETS | 73,744,606 | 71,939,450 | |
| LIABILITIES Financial liabilities at amortised cost |
|||
| Resources from credit institutions | 33 | 7,563,524 | 7,487,357 |
| Resources from customers | 34 | 50,760,519 | 48,285,425 |
| Non subordinated debt securities issued | 35 | 1,707,696 | 2,066,538 |
| Subordinated debt | 36 | 1,097,692 | 1,169,062 |
| Financial liabilities at fair value through profit or loss | |||
| Financial liabilities held for trading | 37 | 310,597 | 399,101 |
| Financial liabilities at fair value through profit or loss | 38 | 3,831,932 | 3,843,645 |
| Hedging derivatives | 25 | 170,474 | 177,337 |
| Provisions | 39 | 331,896 | 324,158 |
| Current tax liabilities | 4,742 | 12,568 | |
| Deferred tax liabilities | 31 | 4,993 | 6,030 |
| Other liabilities | 40 | 1,015,889 | 988,493 |
| TOTAL LIABILITIES | 66,799,954 | 64,759,714 | |
| EQUITY Share capital |
41 | 5,600,738 | 5,600,738 |
| Share premium | 41 | 16,471 | 16,471 |
| Preference shares | 41 | 59,910 | 59,910 |
| Other equity instruments | 41 | 2,922 | 2,922 |
| Legal and statutory reserves | 42 | 264,608 | 252,806 |
| Treasury shares | 43 | (291) | (293) |
| Reserves and retained earnings | 44 | (393,211) | (38,130) |
| Net income for the period attributable to Bank's Shareholders | 257,469 | 186,391 | |
| TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS | 5,808,616 | 6,080,815 | |
| Non-controlling interests | 45 | 1,136,036 | 1,098,921 |
| TOTAL EQUITY | 6,944,652 | 7,179,736 | |
| TOTAL LIABILITIES AND EQUITY | 73,744,606 | 71,939,450 |
(*) The balances as at 31 December 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9 (note 57).
| 30 September | (Thousands of euros) 30 September |
|
|---|---|---|
| 2018 | 2017 (*) | |
| CASH FLOWS ARISING FROM OPERATING ACTIVITIES | ||
| Interests received | 1,236,022 | 1,252,499 |
| Commissions received | 651,130 | 617,500 |
| Fees received from services rendered | 58,979 | 99,792 |
| Interests paid | (325,189) | (390,343) |
| Commissions paid | (103,908) | (103,287) |
| Recoveries on loans previously written off | 8,425 | 12,920 |
| Net earned insurance premiums | 14,795 | 14,998 |
| Claims incurred of insurance activity | (6,544) | (7,938) |
| Payments (cash) to suppliers and employees | (882,780) | (817,231) |
| Income taxes (paid) / received | (47,826) | (95,535) |
| 603,104 | 583,375 | |
| Decrease / (increase) in operating assets: | ||
| Receivables from / (Loans and advances to) credit institutions | 144,086 | 238,346 |
| Deposits held with purpose of monetary control | 50,114 | 12,411 |
| Loans and advances to customers receivable | (922,267) | 183,096 |
| Short term trading account securities | (200,440) | (17,778) |
| Increase / (decrease) in operating liabilities: | ||
| Loans and advances to credit institutions repayable on demand | 39,309 | (6,108) |
| Deposits from credit institutions with agreed maturity date | 56,199 | (745,060) |
| Loans and advances to customers repayable on demand | 3,266,373 | 2,537,146 |
| Deposits from customers with agreed maturity date | (824,608) | (575,763) |
| 2,211,870 | 2,209,665 | |
| CASH FLOWS ARISING FROM INVESTING ACTIVITIES | ||
| Acquisition of investments in subsidiaries and associated companies | - | (787) |
| Dividends received | 67,169 | 48,790 |
| Interest income from financial assets at fair value through other comprehensive income and at amortised cost | 222,728 | n.a. |
| Sale of financial assets at fair value through other comprehensive income and at amortised cost | 4,331,558 | n.a. |
| Acquisition of financial assets at fair value through other comprehensive income and at amortised cost | (44,364,628) | n.a. |
| Maturity of financial assets at fair value through other comprehensive income and at amortised cost | 37,703,120 | n.a. |
| Interest income from financial assets available for sale and financial assets held to maturity | n.a. | 186,094 |
| Sale of financial assets available for sale and financial assets held to maturity | n.a. | 4,727,819 |
| Acquisition of financial assets available for sale and financial assets held to maturity | n.a. | (26,065,135) |
| Maturity of financial assets available for sale and financial assets held to maturity | n.a. | 20,495,207 |
| Acquisition of tangible and intangible assets | (47,530) | (52,981) |
| Sale of tangible and intangible assets | 6,630 | 6,118 |
| Decrease / (increase) in other sundry assets | 480,047 | (278,583) |
| (1,600,906) | (933,458) | |
| CASH FLOWS ARISING FROM FINANCING ACTIVITIES | ||
| Issuance of subordinated debt | 100 | 5,127 |
| Reimbursement of subordinated debt | (95,576) | (702,204) |
| Issuance of debt securities | 266,076 | 1,291,240 |
| Reimbursement of debt securities | (596,648) | (1,831,593) |
| Issuance of commercial paper and other securities | 28,412 | 141,201 |
| Reimbursement of commercial paper and other securities | (12,775) | (3,957) |
| Share capital increase | - | 1,294,903 |
| Dividends paid to non-controlling interests | (9,088) | (7,787) |
| Increase / (decrease) in other sundry liabilities and non-controlling interests | (5,864) | (250,743) |
| (425,363) | (63,813) | |
| Exchange differences effect on cash and equivalents | (126,229) | 23,635 |
| Net changes in cash and equivalents | 59,372 | 1,236,029 |
| Cash (note 18) | 540,608 | 540,290 |
| Deposits at Central Banks (note 18) | 1,627,326 | 1,033,622 |
| Loans and advances to credit institutions repayable on demand (note 19) | 295,532 | 448,225 |
| CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 2,463,466 | 2,022,137 |
| Cash (note 18) | 506,866 | 479,270 |
| Deposits at Central Banks (note 18) | 1,685,651 | 1,665,525 |
| Loans and advances to credit institutions repayable on demand (note 19) | 330,321 | 1,113,371 |
| CASH AND EQUIVALENTS AT THE END OF THE PERIOD | 2,522,838 | 3,258,166 |
(*) The balances as at 30 September 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9 (note 57).
| Reserves for the period Equity Non Other Legal and and attributable attributable -controlling Share Share Preference equity statutory Treasury retained to Bank's to Bank's interests Total capital premium shares instruments reserves shares earnings Shareholders Shareholders (note 45) equity BALANCE AS AT 31 DECEMBER 2016 4,268,818 16,471 59,910 2,922 245,875 (2,880) (232,938) 23,938 4,382,116 883,065 5,265,181 Net income for the period -- - - - - - 133,309 133,309 76,028 209,337 Other comprehensive income - - - - - - 238,190 - 238,190 42,744 280,934 TOTAL COMPREHENSIVE INCOME -- - - - - 238,190 133,309 371,499 118,772 490,271 Results application: Legal reserve -- - - 6,931 - - (6,931) - - - Transfers for reserves and retained earnings - - - - - - 17,007 (17,007) - - - Share capital increase 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 -- - - - 2,598 1,084 - 3,682 - 3,682 Other reserves -- - - - - (321) - (321) 12,119 11,798 BALANCE AS AT 30 SEPTEMBER 2017 () 5,600,738 16,471 59,910 2,922 252,806 (282) (13,995) 133,309 6,051,879 1,006,169 7,058,048 Net income for the period -- - - - - - 53,082 53,082 27,138 80,220 Other comprehensive income - - - - - - (15,966) - (15,966) 31,818 15,852 TOTAL COMPREHENSIVE INCOME -- - - - - (15,966) 53,082 37,116 58,956 96,072 Costs related to the share capital increase - - - - - - 245 - 245 - 245 Tax related to costs arising from the share capital increase (b) -- - - - - (8,264) - (8,264) - (8,264) Treasury shares -- - - - (11) (1) - (12) - (12) Other reserves -- - - - - (149) - (149) 33,796 33,647 BALANCE AS AT 31 DECEMBER 2017 () 5,600,738 16,471 59,910 2,922 252,806 (293) (38,130) 186,391 6,080,815 1,098,921 7,179,736 Transition adjustments IFRS 9 (note 57) Gross value -- - - - - (217,979) - (217,979) (36,999) (254,978) Taxes -- - - - - (155,472) - (155,472) 6,888 (148,584) -- - - - - (373,451) - (373,451) (30,111) (403,562) BALANCES AS AT 1 JANUARY 2018 5,600,738 16,471 59,910 2,922 252,806 (293) (411,581) 186,391 5,707,364 1,068,810 6,776,174 Net income for the period -- - - - - - 257,469 257,469 83,773 341,242 Other comprehensive income - - - - - - (156,602) - (156,602) (20,327) (176,929) -- - - - - (156,602) 257,469 100,867 63,446 164,313 TOTAL COMPREHENSIVE INCOME Results application: Legal reserve -- - - 11,802 - - (11,802) - - - Transfers for reserves and retained earnings - - - - - - 174,589 (174,589) - - - Constitution and acquisition of subsidiaries - - - - - - - - - 12,840 12,840 Preferred share dividends -- - - - - (460) - (460) - (460) Dividends from other equity instruments - - - - - - (74) - (74) - (74) Dividends (a) -- - - - - - - - (9,088) (9,088) Treasury shares (note 43) -- - - - 2 - - 2 - 2 Other reserves (note 44) -- - - - - 917 - 917 28 945 |
(Thousands of euros) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net income | ||||||||||||
| BALANCE AS AT 30 SEPTEMBER 2018 | 5,600,738 | 16,471 | 59,910 | 2,922 | 264,608 | (291) | (393,211) | 257,469 | 5,808,616 | 1,136,036 | 6,944,652 |
(*) The balances as at 30 September 2017 and 31 December 2017 correspond to the statutory accounts at that date. These balances are presented exclusively for comparative purposes and have not been restated following the adoption of IFRS 9, with reference to 1 January 2018, as allowed by IFRS 9 (note 57).
(a) Dividends of BIM - Banco Internacional de Moçambique, S.A. and SIM - Seguradora Internacional de Moçambique, S.A.R.L.
(b) Includes the derecognition of deferred taxes related to tax losses from previous periods associated to costs arising from the share capital increase
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 2018 and 2017.
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, since 2005, in accordance with International Financial Reporting Standards ('IFRS') as endorsed by the European Union ('EU'). 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 6 November 2018 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 2018, 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 they should be read with the consolidated financial statements with reference to 31 December 2017.
The Group has adopted IFRS and interpretations mandatory for accounting periods beginning on or after 1 January 2018. The accounting policies 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, except for the changes resulting from the adoption of the following standards with reference to January 1, 2018: IFRS 9 - Financial instruments and IFRS 15 - Revenue from contracts with customers. IFRS 9 has replaced IAS 39 - Financial Instruments - Recognition and Measurement and provides new requirements in accounting for financial instruments with significant changes specifically regarding impairment requirements.
The requirements presented by IFRS 9 are generally applied retrospectively by adjusting the opening balance sheet to the date of initial application (1 January 2018). The impacts arising from the implementation of IFRS 9 with reference to 1 January 2018 are detailed in note 57. No significant impacts on the interim consolidated financial statements related to the adoption of IFRS 15 were found.
The reconciliation between the balance sheet balances as at 31 December 2017 and the balance sheet balances as at 1 January 2018, in accordance with IFRS 9, is detailed in note 57. The balances included in the financial statements for 30 September 2017 and 31 December 2017, are presented exclusively for comparative purposes.
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 at fair value through other comprehensive income. 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 past liabilities with pensions 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 Z.
As from 1 January 2010, the Group began to apply 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 non-controlling 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 registered 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.
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.
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.
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 changes in fair value resulting from instruments that are designated and qualified as hedging instruments related to foreign operations are registered in equity in "Reserves and retained earnings". Whenever the hedge is not fully effective, the ineffective portion is accounted against profit and loss of the year.
c. Loans and advances to customers 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 considering 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".
The exchange rates used by the Group are presented in note 52.
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 Group applies IAS 29 - Financial reporting in hyperinflationary economies in financial statements of entities that present accounts in functional currency of an economy that has hyperinflation.
In applying this policy, non-monetary assets and liabilities are adjusted based on the price index from the date of acquisition or the date of the last revaluation to the balance sheet date. The restated values of assets are reduced by the amount that exceeds their recoverable amount, in accordance with the applicable IFRS.
Equity components are also updated considering the price index from the beginning of the period or date of the contribution, if it is earlier.
When the classification as a hyperinflationary economy is applied to associated companies, its effects are included in the Group's financial statements by applying the equity method of accounting on the financial statements restated in accordance with the requirements of IAS 29. The effects of the application of IAS 29 with impact on capital items are recorded against the item "Reserves and retained earnings".
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.
As described in note A. Basis of Presentation, the Group adopted IFRS 9 - Financial Instruments on 1 January 2018, replacing IAS 39 - Financial Instruments: Recognition and Measurement, which was in force until 31 December 2017. The Group did not adopt any of the requirements of IFRS 9 in prior periods.
As permitted by the transitional provisions of IFRS 9, the Group chose not to restate the comparative balances of the previous period. All the adjustments to the book values of the financial assets and liabilities at the transition date were recognised in shareholders' equity with reference to 1 January 2018. Consequently, the changes occurred in the information disclosed in the notes to the financial statements arising from the amendments to IFRS 7, following the adoption of IFRS 9, were applied only to the current reporting period. The information included in the notes to the financial statements for the comparative period corresponds to what disclosed in the previous period.
The accounting policies in force after the adoption of IFRS 9 on 1 January 2018 applicable to the Group's consolidated financial statements as at 30 September 2018, are described below. The accounting policies applicable to the comparative period (in IAS 39) are described in Note 1.D
At the initial recognition, financial assets are classified into one of the following categories:
iii) Financial assets at fair value through profit or loss.
The classification is made taking into consideration the following aspects:
With reference to 1 January 2018, the Group carried out an evaluation of the business model in which the financial instrument is held at the portfolio level, since this approach reflects the best way in which assets are managed and how that information is available to the management. The information considered in this evaluation included:
the policies and purposes established for the portfolio and the practical operability of these policies, including how the management strategy focuses on receiving contractual interest, maintaining a certain interest rate profile, adjusting the duration of financial assets to the duration of liabilities that finance these assets or in the realization of cash flows through the sale of the assets;
how the performance of the portfolio is evaluated and reported to the Group's management;
-the evaluation of the risks that affect the performance of the business model (and of the financial assets held under this business model) and the way these risks are managed;
the remuneration of business managers – e.g. in which way the compensation depends on the fair value of the assets under management or contractual cash flows received; and
the frequency, volume and sales periodicity in previous periods, the reasons for those sales and the expectations about future sales. However, sales information should not be considered singly but as part of an overall assessment of how the Group establishes financial asset management objectives and how cash flows are obtained.
Financial assets held for trading and financial assets managed and evaluated at fair value option are measured at fair value through profit or loss because they are not held either for the collection of contractual cash flows (HTC) nor for the collection of cash flows and sale of these financial assets (HTC and Sell).
For the purposes of this assessment, "principal" is defined as the fair value of the financial asset at initial recognition. "Interest" is defined as the counterparty for the time value of money, the credit risk associated with the amount owed over a given period of time and for other risks and costs associated with the activity (e.g. liquidity risk and administrative costs), and as a profit margin.
In the evaluation of the financial instruments in which contractual cash flows refer exclusively to the receipt of principal and interest, the Group considered the original contractual terms of the instrument. This evaluation included the analysis of the existence of situations in which the contractual terms can modify the periodicity and the amount of the cash flows so that they do not fulfil the SPPI condition. In the evaluation process, the Group considered that:
contingent events that may change the periodicity and the amount of the cash flows;
characteristics that result in leverage;
terms of prepayment and extension of maturity;
terms that may limit the right of the Group to claim cash flows in relation to specific assets (e.g. contracts with – terms which prevent access to assets in case of default - non-recourse asset); and
characteristics that may change the time value of money.
In addition, an advanced payment is consistent with the SPPI criterion if:
the financial asset is acquired or originated with a premium or discount in relation to the contractual nominal value;
the prepayment represents substantially the nominal amount of the contract plus accrued contractual interest, but not paid (may include reasonable compensation for prepayment); and
the prepaid fair value is insignificant at initial recognition.
A financial asset is classified under the category "Financial assets at amortized cost" if both of the following conditions are met:
the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and;
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI).
The "Financial assets at amortized cost" category includes Loans and advances to credit institutions, Loans and advances to customers and debt instruments managed based on a business model whose purpose is to receive their contractual cash flows (government bonds, bonds issued by companies and commercial paper).
Loans and advances to credit institutions and Loans and advances to customers are recognised at the date the funds are made available to the counterparty (settlement date). Debt instruments are recognised on the trade date, that is, on the date the Group accepts to acquire them.
Financial assets at amortised cost are initially recognised at fair value, plus transaction costs, and are subsequently measured at amortized cost. In addition, they are subject, from their initial recognition, to the measurement of impairment losses for expected credit losses (note C1.5.), which are recorded in "'Impairment of financial assets measured at amortised cost".
Interest on financial assets at amortized cost is recognised under "Interest and similar income", based on the effective interest rate method and in accordance with the criteria described in note C3.
Gains or losses generated at the time of derecognition are recorded in the caption "Gains / (losses) with derecognition of financial assets and liabilities at amortized cost".
A financial asset is classified under the category of "Financial assets at fair value through other comprehensive income" if both of the following conditions are met:
the financial asset is held within a business model whose objective is to both collect contractual cash flows and sell financial assets and;
the contractual cash flows occur on specified dates and are solely payments of principal and interest on the principal amount outstanding (SPPI).
In addition, in the initial recognition of an equity instrument that is not held for trading, nor a contingent retribution is recognised by an acquirer in a business combination which applies IFRS 3, the Group may irrevocably choose to classify it in the category of "Financial assets at fair value through other comprehensive income". This option is exercised on a case-by-case basis and is only available for financial instruments that comply with the definition of equity instruments provided for in IAS 32 and cannot be used for financial instruments whose classification as an equity instrument under the scope of the issuer is made under the exceptions provided for in paragraphs 16A to 16D of IAS 32.
Debt instruments at fair value through other comprehensive income are initially recognised at fair value, plus transaction costs, and are subsequently measured at fair value. Changes in the fair value of these financial assets are recorded against other comprehensive income and, at the time of their disposal, the respective gains or losses accumulated in other comprehensive income are reclassified to a specific income statement "Gains or losses on derecognition of financial assets at fair value through other comprehensive income. "
Debt instruments at fair value through other comprehensive income are also subject, from their initial recognition, to the measurement of impairment losses for expected credit losses (note C1.5.). Impairment losses are recognised in the income statement under "Impairment for financial assets at fair value through other comprehensive income", against Other comprehensive income, and do not reduce the carrying amount of the financial asset in the balance sheet.
Interest, premiums or discounts on financial assets at fair value through other comprehensive income are recognised in "Interest and similar income" based on the effective interest rate method and in accordance with the criteria described in note C3.
Equity instruments at fair value through other comprehensive income are initially recognised at fair value, plus transaction costs, and are subsequently measured at fair value. The changes in the fair value of these financial assets are recorded against Other comprehensive income. Dividends are recognised in profit or losses when the right to receive them is attributed.
Impairment is not recognised for equity instruments at fair value through other comprehensive income, and the respective accumulated gains or losses recorded in fair value changes are transferred to retained earnings at the time of their derecognition.
A financial asset is classified in the category "Financial assets at fair value through profit and loss" if the business model defined by the Bank for its management or the characteristics of its contractual cash flows does not meet the conditions described above to be measured at amortised cost or at fair value through other comprehensive income (FVOCI).
In addition, the Group may irrevocably designate a financial asset at fair value through profit or loss that meets the criteria to be measured at amortised cost or at FVOCI at the time of its initial recognition if this eliminates or significantly reduces measurement or recognition inconsistency (accounting mismatch), that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different basis.
The Group classified "Financial assets at fair value through profit and loss" in the following captions:
These financial assets are acquired with the purpose of short term selling; on the initial recognition are part of a identified financial instruments portfolio that are managed together and for which there is evidence of short-term profit-taking; or are a derivative (except for hedging derivative).
b) Financial assets not held for trading mandatorily at fair value through profit or loss
This item classifies debt instruments whose contractual cash flows do not correspond only to repayments of principal and interest on the principal amount outstanding (SPPI).
c) Financial assets designated at fair value through profit or loss
This item includes the financial assets that the Group has chosen to designate at fair value through profit or loss to eliminate accounting mismatch.
Considering that the transactions carried out by the Group in the normal course of its business are in market conditions, financial assets at fair value through profit or loss are initially recognised at their fair value, with the costs or income associated with the transactions recognised in profit or loss at the initial moment, with subsequent changes in fair value recognised in profit or loss.
The accrual of interest and the premium / discount (when applicable) is recognised in "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. Dividends are recognised in profit or losses when the right to receive them is attributed.
Trading derivatives with a positive fair value are included under the heading "Financial assets held for trading", trading derivatives with negative fair value are included in "Financial liabilities held for trading".
Financial assets should be reclassified to other categories only if the business model used in their management has changed. In this case, all financial assets affected must be reclassified.
The reclassification must be applied prospectively from the date of reclassification, and any gains, losses (including related to impairment) or interest previously recognised should not be restated.
Reclassifications of investments in equity instruments measured at fair value through other comprehensive income, or financial instruments designated at fair value through profit or loss, are not permitted.
i) The Group shall derecognise a financial asset when, and only when:
the contractual rights to the cash flows from the financial asset expire, or
it transfers the financial asset as set out in notes ii) and iii) bellow and the transfer qualifies for derecognition in accordance with note iv).
ii) The Group transfers a financial asset if, and only if, it either:
transfers the contractual rights to receive the cash flows of the financial asset, or
retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions in note iii).
iii) When the Group retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but assumes a contractual obligation to pay those cash flows to one or more entities (the 'eventual recipients'), the Bank shall treat the transaction as a transfer of a financial asset if all of the following three conditions are met:
There is no obligation of the Group to pay amounts to the eventual recipients unless it collects equivalent amounts from the original asset. Short-term advances by the Bank with the right of full recovery of the amount lent plus accrued interest at market rates do not violate this condition.
The Group is contractually prohibited from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows.
The Group has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Bank is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents (as defined in IAS 7 Statement of Cash Flows) during the short settlement period from the collection date to the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients.
iv) When the Bank transfers a financial asset (see note ii) above), it shall evaluate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case:
if the Group transfers substantially all the risks and rewards of ownership of the financial asset, shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.
if the Group retains substantially all the risks and rewards of ownership of the financial asset, it shall continue to recognize the financial asset.
if the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it shall determine whether it has retained control of the financial asset. In this case:
a) if the Group has not retained control, it shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.
b) if the Group has retained control, it shall continue to recognise the financial asset to the extent of its continuing involvement in the financial asset.
v) The transfer of risks and rewards (see prior note) is evaluated by comparing the Group's exposure, before and after the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset.
vi) The question of whether the Bank has retained control (see note iv above) of the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer, the entity has not retained control. In all other cases, the entity has retained control.
In the context of the general principles listed in the prior section and considering that contract modification processes may lead in some circumstances to the derecognition of the original financial assets and recognition of new ones (subject to POCI identification) the purpose of this section is to set the criteria and circumstances that may lead to the derecognition of a financial asset.
The Group considers that a modification in the terms and conditions of a credit exposure will result in derecognition of the transaction and on recognition of a new transaction when the modification translates into at least one of the following conditions:
Origination of a new exposure that results from a debt consolidation, without any of the derecognised instruments have a nominal amount higher than 90% of the nominal amount of the new instrument;
Double extension of residual maturity, provided that the extension is not shorter than 3 years compared with the residual maturity at the moment of the modification;
Increase of on-balance exposure by more than 10% compared to the nominal amount (refers to the last approved amount on the operation subject to modification);
Change in qualitative features, namely:
a) change of the currency unless the exchange rate between the old and new currencies is pegged or managed within narrow bounds by law or relevant monetary authorities;
b) deletion or addition of a substantial equity conversion feature to a debt instrument, unless it is not reasonably possible that it will be the exercised over its term;
c) Transfer of the credit risk of the instrument to another borrower, or a significant change in the structure of borrowers within the instrument.
The Group write off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety or a portion thereof. This registration occurs after all the recovery actions developed by the Group prove to be fruitless. Loans written off are recorded in off-balance sheet accounts.
Purchase or originated credit impaired (POCI) assets are credit-impaired assets on initial recognition. An asset is credit-impaired if one or more events have occurred that have a detrimental impact on the estimated future cash flows of the asset.
The two events that lead to the originations of a POCI exposure are presented as follows:
financial assets arising from a recovery process, where there have been changes to the terms and conditions of the original agreement, which presented objective evidence of impairment that resulted in its derecognition (note C1.3) and recognition of a new contract that reflects the credit losses incurred;
financial assets acquired with a significant discount, that the existence of a significant discount reflects credit losses incurred at the time of its initial recognition.
On initial recognition, POCI assets do not carry an impairment allowance. Instead, lifetime expected credit losses (ECL's) are incorporated into the calculation of the effective interest rate (EIR). Consequently, at initial recognition, the gross book value of POCI (initial balances) is equal to the net book value before being recognised as POCI (difference between the initial balance and the total discounted cash flows).
The Group recognises impairment losses for expected credit losses on financial instruments recorded in the following accounting items:
Impairment losses on financial assets at amortised cost reduce the balance sheet value of these financial assets against the balance "Impairment for financial assets at amortised cost" (in statement of income).
Impairment losses for debt instruments at fair value through other comprehensive income are recognised in statement of income under "Impairment for financial assets at fair value through other comprehensive income", against other comprehensive income (do not reduce the balance sheet of these financial assets).
Impairment losses associated with credit commitments, documentary credits and financial guarantees are recognised in liabilities, under the balance "Provisions for guarantees and other commitments", against "Other provisions" (in statement of income).
| Changes in credit risk from the initial recognition | ||||
|---|---|---|---|---|
| Stage 1 | Stage 2 | Stage 3 | ||
| Classification criterion | Initial recognition | Significant increase in credit risk since initial recognition |
Impaired | |
| 12-month expected credit | Lifetime expected credit losses | |||
| Impairment losses | losses |
The Group determines the expected credit losses of each operation as a result of the deterioration of credit risk since its initial recognition. For this purpose, operations are classified into one of the following three stages:
Stage 1: are classified in this stage the operations in which there is no significant increase in credit risk since its initial recognition. Impairment losses associated with operations classified at this stage correspond to expected credit losses resulting from a default event that may occur within 12 months after the reporting date (12-month expected credit losses).
Stage 2: are classified in this stage the operations in which there is a significant increase in credit risk since its initial recognition (note C.1.5.3.), but are not impaired (note C.1.5.4). Impairment losses associated with operations classified at this stage correspond to the expected credit losses resulting from default events that may occur over the expected residual life of the operations (lifetime expected credit losses).
Stage 3: are classified in this stage the impaired operations. Impairment losses associated with operations classified at this stage correspond to lifetime expected credit losses.
Significant increase in credit risk (SICR) is determined according to a set of mostly quantitative but also qualitative criteria. These criteria are mainly based on the risk grades of customers in accordance with the Bank's Rating Master Scale and its evolution in order to detect significant increases in Probability of Default (PD), complemented by other information regarding the customers behaviour towards the financial system.
Customers who meet at least one of the following criteria are considered to be in default:
a) Customers that are in default or with a limit exceeded for more than 90 days above the materiality applicable;
b) Customers subjected to individual analysis of impairment, for which the amount of impairment represents more than 20% of total exposure;
c) Customers submitted to the individual analysis of impairment and for which impairment value exceeds Euros 5 million;
d) Clients declared insolvent;
e) Customers that are subject to judicial recovery, excluding guarantors;
f) Customers with financial difficulties restructured operations for which it is registered at the time of restructuring a higher economic loss to Euros 5 million or 20% of total exposure;
g) Customers with restructured operations by financial difficulties, due for more than 45 days above the customer applicable materiality considering all its the credit operations;
h) Customers that have a recurrence of operations restructured due to financial difficulties within 24 months from the default resulting from the previous restructuring. If, from the previous restructuring, it did not result in default, the 24 months count from the previous restructuring;
i) Customers whose part or all of their exposure was sold with a loss greater than 20% or Euros 5 million (excluding sales that results from balance sheet management decision and not from disposal of problem loans);
j) Customers taking place a new sale with loss, regardless of the amount, during a period of 24 months as from the triggering of the previous sale;
k) Guarantors of operations overdue with more than 90 days above the defined materiality, since that the respective guarantee has been activated;
l) Cross default at the BCP Group level;
m) Customers with restructured operations at a lower interest rate than the refinancing rate of the European Central Bank (unproductive credit).
Customers are considered to have objective signs of impairment (i.e. Impaired):
i) Customers in default, i.e. marked as grade 15 on the Bank's Rating Master Scale;
ii) Customers who submitted to a questionnaire for analysis of financial difficulties indications are considered with objective signs of impairment;
iii) Customers whose contracts values are due for more than 90 days, represent more than 20% of its total exposure in the balance sheet;
iv) The Non-Retail customers with one or more contracts in default for more than 90 days and whose total overdue amount exceeds Euros 500;
v) The Retail customers contracts in default for more than 90 days and in which the overdue amount exceeds Euros 200;
vi) Contracts restructured due to financial difficulties in default for more than 30 days and in which the overdue amount exceeds Euros 200.
Expected credit losses are estimated on an individual and collective basis, as described below.
| Customers in | Customers in litigation or insolvency since the total exposure of the group members in these situations exceed Euros 1 million |
|---|---|
| default | Customers integrated into groups with an exposure of more than Euros 5 million, since they have a risk grade15 |
| Other customers belonging to groups in the above conditions | |
| Groups or Customers who are not in default |
Groups or Customers with exposure of more than Euros 5 million since a group member has a risk grade14 |
| Groups or customers with exposure of more than 5 million euros, since a member of the Group have a restructured loans and a risk grade 13 |
|
| Groups or customers with exposure of more than Euros 10 million, since at least one member of the group is in stage 2 |
|
| Groups or customers, not included in the preceding paragraphs, the exposure exceeds Euros 25 million. |
2 Regardless of the criteria described in the previous point, the individual analysis is only performed for customers with a credit exposure in excess of Euros 500,000, not considering customers with exposure below this limit for the purpose of determining the exposure referred to in the previous point.
3.Other customers, that do not meet the criteria above, will also be subject to individual analysis if under the following conditions:
i) Have impairment as a result of the latest individual analysis; or ii) According to recent information, show a significant deterioration in risk levels; or iii) are Special Purpose Vehicle (SPV);
The individual analysis includes the following procedures:
For customers not in default, the analysis of financial difficulties indicators to determine whether the customer has objective signs of impairment, or whether it should be classified in Stage 2 given the occurrence of a significant increase in credit risk, considering the effect a set of predetermined signs
For customers in default or for which the previous analysis has allowed to conclude that the customer has objective signs of impairment, determination of the loss.
The individual analysis is the responsibility of the managing director of customers and the Credit Department, the latter with respect to the customers managed by the Commercial Networks.
Impairment losses on individually assessed loans were determined by an evaluation of the exposures on a case-by-case basis. For each loan considered individually significant, the Group assessed, 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 were considered:
group's aggregate exposure to the customer and the existence of overdue loans;
the viability of the customer's business and capability to generate sufficient cash flow to service their debt obligations in the future;
the existence, nature and estimated value of the collaterals associated to each loan;
a significant downgrading in the customer's rating;
the assets available on liquidation or insolvency situations;
the ranking of all creditors claims;
the amount and timing of expected receipts and recoveries.
Each of the units referred to in the previous point is responsible for assigning an expectation and a recovery period to exposures relating to customers subject to individual analysis, which must be transmitted to the Risk Office as part of the regular process of collecting information, accompanied by detailed justification of the proposed impairment.
The expected recovery shall be represented by a recovery rate of the total outstanding exposure, which may be a weighted rate considering the different recovery prospects for each part of the Customer's liabilities.
The recovery estimate referred to in the previous point should be influenced by future prospects (forward looking), contemplating not only a more expected scenario but also alternative scenarios (an unbiased and probability-weighted amount). The application and weighting of the scenarios should be carried out both in a global perspective and in an individualized perspective, the latter when cases that, due to their specificity, have a high degree of uncertainty as to the expected recovery estimate are identified.
The macroeconomic adjustment set out in point 8 should be analysed annually and weighted according to the type of recovery strategy associated with the exposure under analysis:
-For Going Concern strategies (i.e. the estimation is based on the cash flows of the business), the possibility of applying the 2 additional macroeconomic scenarios (optimistic and pessimistic) should be analysed in a global way, to ascertain if there is the risk of a skewed view of the expected losses from the consideration of only one account.
-For "Gone Concern" strategies (i.e. the recovery estimate is based on the realization of the collateral), the impact of the macroeconomic scenario on collaterals should be analysed, for example, to what extent the projected real estate index allows anticipate significant changes to the current valuation values.
It is the responsibility of the units referred to in point 5 to consider in their projection macroeconomic expectations that may influence the recoverability of the debt
For the purposes of the preceding paragraphs, the Studies, Planning and ALM Department shall disclose the macroeconomic data that allow the estimates to be made.
The decision to consider global impacts related to the going and gone concern scenarios should be made by the Risk Committee, as proposed by the Risk Office.
For specific cases with a high degree of uncertainty, the allocation of alternative scenarios should be considered casuistically. Examples of recovery situations with a degree of uncertainty include:
Recovery of collateral in geographies in which the Bank has no relevant recovery experience;
Recovery of debt related to geographies in which there is a strong political instability;
Recovery of debt related to debtors for whom there is a strong negative public exposure.
The Risk Office is responsible for reviewing the information collected and for clarifying all identified inconsistencies, which is the final decision on the Customer's impairment.
Customers that have objective signs of impairment, but an individual impairment amount is equal to zero, are included in the collective analysis, assuming a PD equivalent to the risk grade of the customer.
The individual impairment analysis must be carried out at least annually. In case of significant signs of deterioration or improvement in the customer's economic and financial situation are detected, as well as the macroeconomic conditions affecting the customer's ability to accomplish debt, it is the responsibility of the Risk Office to promote the review anticipated impairment of this Customer.
Transactions that are not subject to an individual impairment analysis are grouped considering their risk characteristics and subject to a collective impairment analysis. The Group's credit portfolio is divided by internal risk grades and according to the following segments:
a) Segments with a reduced history of defaults, designated "low default": Large corporate exposures, Project finance, Institutions (banks / financial institutions) and Sovereigns.
b) Segments not "low default": - Retail: Mortgages; Overdrafts; Credit cards; Small and medium enterprises - Retail ("SME Retail"); and others. - Corporate: Small and medium enterprises - Corporate ("Large SME"); and Real Estate.
The Group performs statistical tests in order to prove the homogeneity of the segments mentioned above, with a minimum period of one year:
Expected credit losses are estimates of credit losses that are determined as follows:
Financial assets with no signs of impairment at the reporting date: the present value of the difference between the contractual cash flows and the cash flows that the Group expects to receive;
Financial assets with impairment at the reporting date: the difference between the gross book value and the present value of the estimated cash flows;
Unused credit commitments: the present value of the difference between the resulting contractual cash flows if the commitment is made and the cash flows that the Group expects to receive;
Financial guarantees: the current value of the expected repayments less the amounts that the Group expects to recover.
The main inputs used to measure ECLs on a collective basis should include the following variables:
Probability of Default – PD;
Loss Given Default LGD; and
These parameters are obtained through internal statistical models and other relevant historical data, considering the already existing regulatory models adapted to the requirements of IFRS 9.
PDs are estimated based on a certain historical period and will be calculated based on statistical models. These models are based on internal data including both quantitative and qualitative factors. If there is a change in the risk of the counterparty or exposure, the estimate of the associated PD will also vary. The PDs will be calculated considering the contractual maturities of exposures.
The risk grades are a highly relevant input for determining the PD's associated with each exposure.
Group collects performance and default indicators about their credit risk exposures with analysis by types of customers and products.
LGD is the magnitude of the loss that is expected to occur if exposure goes into default. The Group estimates the LGD parameters based on the historical recovery rates after entry into counterparty defaults. The LGD models consider the associated collaterals, the counterparty activity sector, the default time, as well as the recovery costs. In the case of contracts secured by real estate, it is expected that the LTV (loan-to-value) ratios are a parameter of high relevance in the determination of LGD.
The EAD represents the expected exposure if the exposure and / or customer defaults. The Group obtains the EAD values from the counterparty's current exposure and potential changes to its current value as a result of the contractual conditions, including amortizations and prepayments. For commitments and financial guarantees, the value of the EAD will consider both the amount of credit used and the expectation of future potential value that may be used in accordance with the agreement.
As described above, with the exception of financial assets that consider a 12-month PD as they do not present a significant increase in credit risk, the Group will calculate the ECL value considering the risk of default during the maximum contractual maturity period of the contract, even if, for the purpose of risk management, it is considered to be a longer period. The maximum contractual period shall be considered as the period up to the date on which the Group has the right to require payment or end the commitment or guarantee.
The Group adopted as a residual term criterion for renewable operations, when in stage 2, a term of 5 years. This term was determined based on the behavioural models of this type of products applied by the Bank in the liquidity risk and interest rate (ALM) analysis. According to these models, the maximum period of repayment of these operations is the 5 years considered conservatively in the scope of the calculation of credit impairment.
The Group uses models to forecast the evolution of the most relevant parameters to the expected credit losses, namely probability of default, which incorporate forward-looking information. This incorporation of forward looking information is carried out in the relevant elements considered for the calculation of expected credit losses (ECL).
The PD point in time considered for the determination of the probability of performing exposures at the reference date becoming defaulted exposures considers the expected values (in each scenario considered in the ECL calculation) for a set of macroeconomic variables. These relationships were developed specifically based on the Bank's historical information on the behaviour of this parameter (PDpit) in different economic scenarios and are different by customer segment and risk grade.
At initial recognition, financial liabilities are classified in one of the following categories:
Financial liabilities classified under "Financial liabilities at fair value through profit or loss" include:
In this balance are classified the issued liabilities with the purpose of repurchasing it in the near term, the ones that form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or is a derivative (except for a derivative classified as hedging instrument).
b) Financial liabilities designated at fair value through profit or loss.
The Group may irrevocably assign a financial liability at fair value through profit or loss at the time of its initial recognition if at least one of the following conditions is met:
the financial liability is managed, evaluated and reported internally at its fair value;
the designation eliminates or significantly reduces the accounting mismatch of transactions.
Considering that the transactions carried out by the Group in the normal course of its business are made in market conditions, financial liabilities at fair value through profit or loss are initially recognised at fair value with the costs or income associated with the transactions recognised in profit or loss at the initial moment.
Subsequent changes in the fair value of these financial liabilities are recognized as follows:
-The amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income;
The accrual of interest and the premium / discount (when applicable) is recognised on "Interest expense and similar charges" based on the effective interest rate of each transaction.
If they are not designated at fair value through profit or loss at the time of initial recognition, the financial guarantee contracts are subsequently measured at the highest of the following amounts:
the provision for losses determined according to the criteria described in note C1.5;
the amount initially recognised deducted, where appropriate, from the accumulated amount of income recognised according with IFRS 15 - Revenue recognition.
Financial guarantee contracts that are not designated at fair value through profit or loss are presented under "Provisions".
Financial liabilities that were not classified at fair value through profit or loss, or correspond to financial guarantee contracts, are measured at amortised cost.
The category "Financial assets at amortised cost" includes Resources from credit institutions, Resources from customers and subordinated and non-subordinated debt securities.
Financial liabilities at amortized cost are initially recognised at fair value, plus transaction costs, and are subsequently measured at amortized cost. Interests on financial liabilities at amortized cost are recognised on "Interest expense and similar charges", based on the effective interest rate method.
Reclassifications of financial liabilities are not allowed.
The Group derecognises financial liabilities when they are cancelled or extinct.
Interest income and expense for financial instruments measured at amortised cost are recognised in "Interest and similar income" and "Interest expense and similar charges" (Net interest income) through the effective interest rate method. The interest at the effective rate related to financial assets at fair value through other comprehensive income are also recognised in net interest income.
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.
Interests income recognised in income associated with contracts classified in stage 1 or 2 are determined by applying the effective interest rate for each contract on its gross book value. The gross balance of a contract is its amortized cost, before deducting the respective impairment. For financial assets included in stage 3, interests are recognised in the income statement based on its net book value (less impairment). The interest recognition is always made in a prospective way, i.e. for financial assets entering stage 3 interests are recognised on the amortized cost (net of impairment) in subsequent periods.
For purchase or originated credit impaired assets (POCIs), the effective interest rate reflects the expected credit losses in determining the expected future cash flows receivable from the financial asset.
As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements set forth in IAS 39.
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 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:
Deferred over the residual period of the hedged instrument; or
Recognised immediately in results, if the hedged instrument is extinguished.
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 IFRS 9, 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.
An embedded derivative is a component of a hybrid agreement, which also includes a non-derived host instrument.
If the main instrument included in the hybrid contract is considered a financial asset, the classification and measurement of the entire hybrid contract is carried out in accordance with the criteria described in note C1.1.3.
Derivatives embedded in contracts that are not considered financial assets are treated separately where the economic risks and benefits of the derivative are not related to those of the main instrument, since the hybrid instrument is not initially recognised at fair value through profit or loss. Embedded derivatives are recorded at fair value with subsequent fair value changes recorded in profit or loss for the period and presented in the trading derivatives portfolio.
The Group's consolidated financial statements for the year 2017 were prepared in accordance with IAS 39 - Financial instruments - Recognition and measurement, as follows:
The balances Loans and advances to customers included loans and advances originated by the Group which were not intended to be sold in the short term and were recognised when cash was advanced to customers.
The derecognition of these assets occurred 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 were initially recognised at fair value plus any directly attributable transaction costs and fees and were subsequently measured at amortised cost using the effective interest method, being presented in the balance sheet net of impairment losses.
The Group's policy consisted in a regular assessment of the existence of objective evidence of impairment in the loan portfolios. Impairment losses identified were charged against results and subsequently, if there was a reduction of the estimated impairment loss, the charge was 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, could be classified as impaired when there was 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 were two methods of calculating impairment losses: (i) individually assessed loans; and (ii) collective assessment.
Impairment losses on individually assessed loans were determined by an evaluation of the exposures on a case-by-case basis. For each loan considered individually significant, the Group assessed, 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 were considered:
group's aggregate exposure to the customer and the existence of overdue loans;
the viability of the customer's business and capability to generate sufficient cash flow to service their debt obligations in the future;
Impairment losses were 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 was presented in the balance sheet net of impairment loss. For loans with a variable interest rate, the discount rate used corresponded to the effective annual interest rate, which was applicable in the period that the impairment was determined.
Loans that were not identified as having an objective evidence of impairment are grouped on the basis of similar credit risk characteristics, and assessed collectively.
Impairment losses were calculated on a collective basis under two different scenarios:
for homogeneous groups of loans that were 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 was identified (see last paragraph (i)).
The collective impairment loss was 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, were grouped together based on similar credit risk characteristics for calculating a collective impairment loss. This analysis allowed the Group's recognition of losses whose identification in individual terms only occurs in future periods.
Loans and advances to customers were 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 were recognised on the trade date, thus, in the date that the Group commits to purchase the asset and were classified considering the intent behind them, according to the categories described below:
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 were part of a financial instruments portfolio and for which there was 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) were classified as trading. The dividends associated to these portfolios were 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 were included in Financial assets held for trading and the trading derivatives with negative fair value were included in "Financial liabilities held for trading".
D2.1.1.2. Other financial assets and liabilities at fair value through profit and loss ("Fair Value Option")
The Group had 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 were disclosed in the note Net gains / (losses) arising from accounting (note 5).
The designation of other financial assets and liabilities at fair value through profit and losses (Fair Value Option) could be performed whenever at least one of the following requirements was fulfilled:
the financial assets and liabilities are managed, evaluated and reported internally at its fair value;
the designation eliminates or significantly reduces the accounting mismatch of the transactions;
the financial assets and liabilities include derivatives that significantly change the cash-flows of the original contracts (host contracts).
Considering that the transactions carried out by the Group in the normal course of its business were in market conditions, the assets and liabilities financial instruments at fair value through profit or loss were 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) on financial operations" (note 5). The accrual of interest and the premium / discount (when applicable) is recognised in "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, were classified as available for sale, except if they were classified in another category of financial assets. The financial assets available for sale were initially accounted at fair value, including all expenses or income associated with the transactions. The financial assets available for sale were subsequently measured at fair value. The changes in fair value were 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 were 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 was recognised in Net interest income based on the effective interest rate, including a premium or discount when applicable. Dividends were recognised in profit and losses when the right to receive the dividends is attributed.
The financial assets held-to-maturity included non-derivative financial assets with fixed or determinable payments and fixed maturity, for which the Group had 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 were initially recognised at fair value and subsequently measured at amortised cost. The interest was calculated using the effective interest rate method and recognised in Net interest income. The impairment was recognised in profit and loss when identified.
Any reclassification or disposal of financial assets included in this category that did not occur close to the maturity of the assets, or if it was not framed in the exceptions stated by the rules, would require the Group to reclassify the entire portfolio as Financial assets available for sale and the Group would 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 were not quoted in a market and which the Group did not intend to sell immediately or in a near future, should be classified in this category.
In addition to loans granted, the Group recognised in this category unquoted bonds and commercial paper. The financial assets recognised in this category were initially accounted at fair value and subsequently at amortised cost net of impairment. The transaction costs were included in the effective interest rate for these financial instruments. The interest accounted based on the effective interest rate method were recognised in Net interest income.
The impairment losses were recognised in profit and loss when identified.
Other financial liabilities were all financial liabilities that are not recognised as financial liabilities at fair value through profit and loss. This category included money market transactions, deposits from customers and from other financial institutions, issued debt, and other transactions.
These financial liabilities were initially recognised at fair value and subsequently at amortised cost. The related transaction costs were included in the effective interest rate. The interest calculated at the effective interest rate was recognised in "Net interest income".
The financial gains or losses calculated at the time of repurchase of other financial liabilities were recognised as "Net gains / (losses) from trading and hedging activities", when occurred.
At each balance sheet date, an assessment was made of the existence of objective evidence of impairment. A financial asset or group of financial assets were 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 was 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) was 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 increased 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 was reversed through the income statement. Reversal of impairment losses on equity instruments, classified as financial assets available for sale, was 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 were 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 were classified as trading and recognised at fair value with changes through profit and loss.
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.
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 Financial assets and financial liabilities at fair value through profit and loss (Fair value option) were prohibited.
Interest income and expense for financial instruments measured at amortised cost were 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 were 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 estimated future cash flows considering all contractual terms of the financial instrument (for example: early payment options) but without considering future impairment losses. The calculation included 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.
For financial asset or a group of similar financial assets for which impairment losses were recognised, 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).
As referred in note 21, 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.
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 unfavourable 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 obligation to pay is established and are deducted to equity.
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, subject to the terms of sale usually applicable to these types of assets, 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 that the Group remains committed to the asset sales plan and the delay is caused by events or circumstances beyond its control.
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 non-current assets held for sale the non-operating real estate (INAE), which include properties acquired by the Group as a result of the resolution of customer credit processes, as well as own properties that are no longer used by the Group's services.
Properties held by real estate companies and real estate investment funds, which are part of the Group's consolidation perimeter, whose capital or units acquired by the Group as a result of the recovery loans are treated as INAE.
At the time of acquisition, real estate classified as INAE is recognised at the lower of the value of the loans existing on the date on which the recovery occurs or the judicial decision is formalised, and the fair value of the property, net of estimated costs for sale. Subsequent measurement of INAE is made at the lower of their book value and the corresponding fair value, net of the estimated costs for their sale and are not subject to amortization. Impairment losses are recorded in the results of the period in which they arise. The fair value is determined based on the market value, which is determined based on the expected sales price obtained through periodic evaluations made by expert external evaluators accredited to the CMVM.
The principles used to determine the net fair value of selling costs of a property apply, whenever possible, apply, whenever possible, to real estate similar to INAE held by Real Estate Companies and Real Estate Investment Funds for the purpose of consolidating Group accounts.
Whenever the net fair value of the selling costs calculated for an INAE is less than the amount by which the same is recognized in the Group's balance sheet, an impairment loss is recorded in the amount of the decrease in value ascertained. Impairment losses are recorded against income for the year.
If the net fair value of the selling costs of an INAE, after recognition of impairment, indicates a gain, the Bank may reflect that gain up to the maximum of the impairment that has been recorded on that property.
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.
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.
These balances include gains and losses arising from financial assets and 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 balance also includes the gains and losses arising from the sale of financial assets at fair value through other comprehensive income and financial assets and financial liabilities at amortised cost. The changes in fair value of hedging derivatives and hedged items, when fair value hedge is applicable, are also recognised in this balance, as well as the net gains or losses from foreign exchange.
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.
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 / (losses)" (note 6).
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: i) the nature of the reclassification; ii) the amount of each item (or class of items) reclassified and iii) 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 Labour Agreement.
This integration 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 accordance with the "Unit Credit Projected" during the average lifetime of the pension until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognized under the heading "Current service costs".
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 that represented 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 Labour in Bulletin of Labour and Employment on 15 February 2017 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 Labour and Employment, with the effects of this new ACT recorded in the financial statements as at 31December 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 ".
In 2017, after the authorization of the Insurance and Pension Funds Supervision Authority (ASF), the BCP group's pension fund agreement was amended. The main purpose of the process was to incorporate into the pension fund the changes introduced in the Group's ACT in terms of retirement benefits and also to pass to the pension fund, the responsibilities that were directly chargeable to the company's (extra-fund liabilities). The pension fund has a part exclusively affected to the financing of these liabilities, which in the scope of the fund are called Additional Complement. The End of career premium also became the responsibility of the pension fund under the basic pension plan.
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 highquality 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.
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 2018, 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 Labour Agreement of the BCP Group and does not have a performance criterion.
As at 30 September 2018 there are no share based compensation plans in force.
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.
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, with BCP being the dominant entity.
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:
Companies, Corporate and Investment Banking;
Private Banking;
Other.
"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:
Poland;
Mozambique;
Other.
The balance 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.
y. Segmental reporting 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 considers 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.
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 assets are not recognised in the financial statements and are disclosed when a future economic inflow of resources is probable.
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 nonoccurrence of one or more uncertain future events not wholly within the control of the Group; or
The contingent liabilities identified are subject to disclosure, unless the possibility of an outflow of resources incorporating economic benefits is remote.
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 non-life.
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 in "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.
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.
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 impairment for loans and advances to customers and provisions for guarantees for the tax periods beginning on or after 1 January 2018 are not defined, since the reference to the Bank of Portugal Notice No. 3/95, provided for in Regulatory Decree No. 11/2017, of 28 December 28, is only applicable for the taxation period of 2017, and the regime applicable from 1 January 2018 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 2018, that the impairment for loans and advances to customers and provisions for 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.
In the projections of future taxable income, the Bank considered the future maintenance of the tax regime applicable to impairment of loans and guarantees, based on the minimum limits applicable under Bank of Portugal Notice 3/95, which was in force in 2015 (pursuant to Regulatory Decree No. 19/2015 of 30 December), 2016 (pursuant to Regulatory Decree No. 5/2016 of 18 November) and 2017 (under the terms of Regulatory Decree n. 11/2017, of 28 December).
In 2018, the Bank adopted IFRS 9 - Financial Instruments. Since there is no transitional regime that establishes the tax treatment to be applied to the transition adjustments to IFRS 9, the treatment given resulted from the interpretation of the general rules application of the IRC Code. The Bank carried out a review of the recoverability of deferred tax assets with reference to1 January 2018, considering the impacts related to the adoption of IFRS 9 and the current interpretation of the tax implications applicable to the transition adjustments to IFRS 9.
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 classification and measurement of financial assets depends on the results of the SPPI test (analysis of the characteristics of the contractual cash flows to determine if they correspond only to payments of principal and interest on the outstanding capital) and the test of the business model.
The Group determines the business model at a level that reflects how financial asset groups are managed together to achieve a specific business objective. This evaluation requires judgment, since the following aspects, among others, have to be considered: the way in which the performance of assets is evaluated; the risks that affect the performance of the assets and the way these risks are managed; and how asset managers are rewarded.
The Group monitors the financial assets measured at amortized cost and at fair value through other comprehensive income that are derecognised prior to their maturity to understand the underlying reasons for their disposal and to determine whether they are consistent with the purpose of the business model defined for those assets. This monitoring is part of a process of continuous evaluation made by the Group of the business model of the financial assets that remain in the portfolio, to determine if it is adequate and, if it is not, if there was a change in the business model and consequently a prospective change classification of these financial assets.
The determination of impairment losses on financial instruments involves judgments and estimates regarding, among others, the following:
Impairment losses correspond to the expected losses on a 12-month for the assets in stage 1 and the expected losses considering the probability of a default event occurring at some point up to the maturity date of the instrument financial assets for assets in stages 2 and 3. An asset is classified in stage 2 whenever there is a significant increase in its credit risk since its initial recognition. In assessing the existence of a significant increase in credit risk, the Group considers qualitative and quantitative information, reasonable and sustainable.
When expected credit losses are measured on a collective basis, the financial instruments are grouped based on common risk characteristics. The Group monitors the adequacy of credit risk characteristics on a regular basis to assess whether it maintains its similarity. This procedure is necessary to ensure that, in the event of a change in the credit risk characteristics, the asset segmentation is reviewed. This review may result in the creation of new portfolios or in transferring assets to existing portfolios that better reflect their credit risk characteristics.
In estimating expected credit losses, the Group uses reasonable and sustainable forecasting information that is based on assumptions about the future evolution of different economic drivers and how each of the drivers impacts the remaining drivers.
The probability of default represents a determining factor in the measurement of expected credit losses. The probability of default corresponds to an estimate of the probability of default in a given time period, which is calculated on the basis of historical data, assumptions and expectations about future conditions.
It corresponds to a loss estimate in a default scenario. It is based on the difference between the contractual cash flows and those that the Bank expects to receive, through the cash flows generated by the customers' business or credit collaterals. The calculation of the estimate of loss given default based on, among other aspects, the different recovery scenarios, historical information, the costs involved in the recovery process and the estimation of the valuation of collaterals associated with credit operations.
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 considers the 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 Bank analyses events occurring after the balance sheet date, that is, favourable and / or unfavourable events occurring between the balance sheet date and the date the financial statements were authorized for issue. In this context, two types of events can be identified:
i) those that provide evidence of conditions that existed at the balance sheet date (events after the balance sheet date that give rise to adjustments); and
ii) those that are indicative of the conditions that arose after the balance sheet date (events after the balance sheet date that do not give rise to adjustments).
Events occurring after the date of the statement of financial position that are not considered as adjustable events, if significant, are disclosed in the notes to the consolidated financial statements.
The amount of this account is comprised of:
| 30 September 2018 |
(Thousands of euros) 30 September 2017 |
|
|---|---|---|
| Interest and similar income | ||
| Interest on loans and advances to credit institutions repayable on demand | 710 | 4,427 |
| Interest on financial assets at amortised cost | ||
| Loans and advances to credit institutions | 16,161 | 16,922 |
| Loans and advances to customers | 1,035,943 | 1,102,961 |
| Debt instruments | 126,622 | 37,197 |
| Interest on financial assets at fair value through profit or loss | ||
| Financial assets held for trading | ||
| Debt instruments | 4,842 | 3,758 |
| Derivatives associated to financial instruments at fair value through profit or loss | 12,265 | 7,468 |
| Financial assets not held for trading mandatorily at fair value through profit or loss | 16,993 | n.a. |
| Financial assets designated at fair value through profit or loss | 1,905 | 2,585 |
| Interest on financial assets at fair value through other comprehensive income | 117,700 | n.a. |
| Interest on financial assets available for sale | n.a. | 172,070 |
| Interest on financial assets held to maturity | n.a. | 13,319 |
| Interest on hedging derivatives | 69,132 | 67,523 |
| Interest on other assets | 5,588 | 3,582 |
| 1,407,861 | 1,431,812 | |
| Interest expense and similar charges | ||
| Interest on financial liabilities at amortised cost | ||
| Resources from credit institutions | (6,156) | (19,527) |
| Resources from customers | (236,340) | (249,196) |
| Non subordinated debt securities issued | (22,884) | (55,834) |
| Subordinated debt | ||
| Hybrid instruments eligible as core tier 1 (CoCos) underwritten by the Portuguese State | - | (6,343) |
| Others | (50,300) | (42,507) |
| Interest on financial liabilities at fair value through profit or loss | ||
| Financial liabilities held for trading | ||
| Derivatives associated to financial instruments at fair value through profit or loss | (2,498) | (3,595) |
| Financial liabilities at fair value through profit or loss | ||
| Resources from customers | (11,298) | (6,383) |
| Non subordinated debt securities issued | (5,535) | (8,624) |
| Interest on hedging derivatives | (18,812) | (15,506) |
| Interest on other liabilities | (1,233) | (1,095) |
| (355,056) | (408,610) | |
| 1,052,805 | 1,023,202 |
The balance Interest on financial assets at amortised cost - Loans and advances to customers includes the amount of Euros 35,954,000 (30 September 2017: Euros 32,038,000) related to commissions and other gains accounted for under the effective interest method, as referred in the accounting policy described in note 1 C3. (2017: note 1 D2).
The balances Interest on non subordinated debt securities issued and Interest on subordinated debt include the amount of Euros 19,236,000 (30 September 2017: Euros 33,101,000) related to commissions and other costs accounted for under the effective interest method, as referred in the accounting policy described in note 1 C3 (2017: nota 1 D2).
The balances Interest on financial assets at amortised cost - Loans and advances to customers and Debt instruments include the amounts of Euros 29,430,000 and Euros 179,000, related to the adjustment on interest on loans to customers classified in stage 3, under the scope of application of IFRS 9.
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Dividends from financial assets held for trading | 4 | 4 |
| Dividends from financial assets through other comprehensive income | 588 | n.a. |
| Dividends from financial assets available for sale | n.a. | 1,682 |
| 592 | 1,686 |
The balances Dividends from financial assets through other comprehensive income and Dividends from financial assets available for sale include dividends and income from investment fund units received during the period.
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Fees and commissions received | ||
| From banking services | 388,691 | 355,187 |
| From management and maintenance of accounts | 79,069 | 69,352 |
| From securities operations | 67,345 | 70,629 |
| From guarantees provided | 42,904 | 47,186 |
| From commitments | 3,276 | 3,407 |
| From fiduciary and trust activities | 520 | 525 |
| From insurance activity commissions | 700 | 865 |
| Other commissions | 33,138 | 30,809 |
| 615,643 | 577,960 | |
| Fees and commissions paid | ||
| From banking services | (81,325) | (60,714) |
| From guarantees received | (3,937) | (4,203) |
| From securities operations | (8,388) | (7,427) |
| From insurance activity commissions | (821) | (1,181) |
| Other commissions | (11,104) | (9,795) |
| (105,575) | (83,320) | |
| 510,068 | 494,640 |
The balance Fees and commissions received - From banking services includes the amount of Euros 71,676,000 (30 September 2017: Euros 71,408,000) related to insurance mediation commissions in Portugal.
The amount of this account is comprised of:
| 30 September 30 September 2018 2017 Net gains / (losses) from foreign exchange 53,846 63,402 Net gains / (losses) from hedge accounting (1,547) (6,672) Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost (21,598) (3,927) Net gains / (losses) from financial assets at fair value through profit or loss Net gains / ( losses) from financial assets held for trading 10,872 85,103 Net gains / ( losses) from financial assets not held for trading mandatorily at fair value through profit or loss (1,571) n.a. Net gains / ( losses) from financial assets and liabilities designated at fair value through profit or loss 3,014 (67,255) 12,315 17,848 Net gains / (losses) from derecognition of financial assets at fair value through other comprehensive income 46,560 n.a. Net gains / (losses) from financial assets available for sale n.a. 44,348 |
(Thousands of euros) | |
|---|---|---|
| 89,576 | 114,999 |
The balances Net gains / (losses) from foreign exchange, Net gains / (losses) from hedge accounting and Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost, are presented as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Net gains / (losses) from foreign exchange | ||
| Gains | 839,796 | 1,329,466 |
| Losses | (785,950) | (1,266,064) |
| 53,846 | 63,402 | |
| Net gains / (losses) from hedge accounting | ||
| Gains | ||
| Hedging derivatives | 75,712 | 94,990 |
| Hedged items | 8,653 | 25,421 |
| 84,365 | 120,411 | |
| Losses | ||
| Hedging derivatives | (71,292) | (115,263) |
| Hedged items | (14,620) | (11,820) |
| (85,912) | (127,083) | |
| (1,547) | (6,672) | |
| Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost | ||
| Gains | ||
| Credit sales | 5,696 | 14,239 |
| Debt securities issued | 1,643 | 1,039 |
| 7,339 | 15,278 | |
| Losses | ||
| Credit sales | (27,315) | (18,861) |
| Debt securities issued | (1,622) | (344) |
| (28,937) | (19,205) | |
| (21,598) | (3,927) |
The balances Net gains / (losses) from financial assets at fair value through profit or loss is comprised of:
| (Thousands of euros) | |
|---|---|
| 30 September | 30 September |
| 2018 | 2017 |
| Net gains /( losses) from financial assets held for trading | |
| Gains | |
| Debt securities portfolio 12,470 |
6,525 |
| Equity instruments 1,760 |
699 |
| Derivative financial instruments 207,442 |
336,056 |
| Other operations 1,147 |
3,507 |
| 222,819 | 346,787 |
| Losses | |
| Debt securities portfolio (9,299) |
(3,849) |
| Equity instruments (1,551) |
(516) |
| Derivative financial instruments (199,794) |
(256,140) |
| Other operations (1,303) |
(1,179) |
| (211,947) | (261,684) |
| 10,872 | 85,103 |
| Net gains /( losses) from financial assets not held for trading mandatorily at fair value through profit or loss | |
| Gains | |
| Loans and advances to customers 20,619 |
n.a. |
| Debt securities portfolio 36,035 |
n.a. |
| 56,654 | n.a. |
| Losses | |
| Loans and advances to customers (23,753) |
n.a. |
| Debt securities portfolio (34,472) |
n.a. |
| (58,225) | n.a. |
| (1,571) | n.a. |
| Net gains /( losses) from financial assets and liabilities designated at fair value through profit or loss | |
| Gains | |
| Resources from customers 3,933 |
61 |
| Debt securities issued | |
| Certificates and structured securities issued 25,253 |
43,365 |
| Other debt securities issued 18,189 |
2,994 |
| 47,375 | 46,420 |
| Losses | |
| Debt securities portfolio (3,205) |
(2,889) |
| Resources from customers - |
(7,595) |
| Debt securities issued | |
| Certificates and structured securities issued (40,446) |
(101,161) |
| Other debt securities issued (710) |
(2,030) |
| (44,361) | (113,675) |
| 3,014 | (67,255) |
The balances Net gains / (losses) from derecognition of financial assets at fair value through other comprehensive income and Net gains / (losses) from financial assets available for sale is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Net gains / (losses) from derecognition of financial assets at fair value | ||
| through other comprehensive income | ||
| Gains | ||
| Debt securities portfolio | 55,786 | n.a. |
| Losses | ||
| Debt securities portfolio | (9,226) | n.a. |
| 46,560 | n.a. | |
| Net gains / (losses) from financial assets available for sale | ||
| Gains | ||
| Debt securities portfolio | n.a. | 30,901 |
| Equity instruments | n.a. | 15,852 |
| n.a. | 46,753 | |
| Losses | ||
| Debt securities portfolio | n.a. | (2,047) |
| Equity instruments | n.a. | (358) |
| n.a. | (2,405) | |
| n.a. | 44,348 |
During the first nine months of 2018, the balance Gains arising from financial assets at fair value through other comprehensive income includes the amount of Euros 17,814,000 related to gains resulting from the sale of Portuguese Treasury bonds. In 2017, the balance Net gains / (losses) from financial assets available for sale - Gains - Debt securities portfolio included the gains resulting from the sale of Portuguese Treasury bonds in the amount of Euros 9,242,000.
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Operating income | ||
| Gains on leasing operations | 2,740 | 5,747 |
| Income from services | 17,971 | 18,626 |
| Rents | 1,958 | 1,782 |
| Sales of cheques and others | 8,890 | 9,468 |
| Other operating income | 7,945 | 11,996 |
| 39,504 | 47,619 | |
| Operating costs | ||
| Donations and contributions | (2,611) | (2,867) |
| Contribution over the banking sector | (33,066) | (31,037) |
| Resolution Funds Contributions | (20,298) | (19,393) |
| Contribution for the Single Resolution Fund | (21,185) | (18,246) |
| Contributions to Deposit Guarantee Fund | (12,630) | (9,482) |
| Tax for the Polish banking sector | (34,954) | (32,881) |
| Taxes | (16,915) | (20,080) |
| Losses on financial leasing operations | - | (777) |
| Other operating costs | (19,437) | (15,003) |
| (161,096) | (149,766) | |
| (121,592) | (102,147) |
The balance Contribution over the banking sector is estimated according to the terms of the Decree-Law no. 55-A/2010. The determination of the amount payable is based on: (i) the annual average liabilities deducted by core capital (Tier 1) and supplementary capital (Tier 2) and deposits covered by the Deposit Guarantee Fund, and (ii) notional amount of derivatives.
The balance Resolution Fund Contributions includes the periodic contributions that must be paid to the Portuguese Fund, as stipulated in Decree-Law No 24/2013. The periodic contributions are determined by a base rate, established by the Bank of Portugal through regulatory instruments, to be applied in each year and which may be adjusted to the credit institution's risk profile based on the objective incidence of those contributions. The period contributions affect the liabilities of the credit institutions members of the Fund, as per the article 10 of the referred Decree-Law, deducted from the liability elements that are part of the core capital and supplementary and from the deposits covered by the Deposit Guarantee Fund.
The balance Resolution Funds Contributions also includes, as at 30 September 2018 and 2017, the mandatory contributions made by Bank Millennium, S.A to the Bank Guarantee Fund in Poland.
The balance Contribution to the Single Resolution Fund ('SRF') corresponds to the Bank's annual ex-ante contribution to support the application of resolution measures at EU level. The SRF has been established by Regulation (EU) No 806/2014 (the "SRM Regulation"). The SRF is financed from ex-ante contributions paid annually at individual level by all credit institutions within the Banking Union. Contributions to the SRF consider the annual target level as well as the size and the risk profile of institutions.
In calculating the ex-ante contributions, the SRF applies the methodology as set out in the Commission Delegated Regulation (EU) No 2015/63 and European Parliament and of the Council Regulation (EU) No 806/2014. The annual contribution to the Fund is based on the institution's liabilities excluding own funds and covered deposits considering adjustments due to derivatives and intra group liabilities and on a risk factor adjustment that depends on the risk profile of the institution.
In accordance with Article 67(4) of SRM Regulation and in accordance with the Intergovernmental Agreement on the transfer and mutualisation of contributions to the SRF, the ex-ante contributions are collected by national resolution authorities and transferred to the SRF by 30 June of each year.
During 2018, the Group delivered the amount of Euros 21,185,000 (30 September 2017: Euros 18,246,000) to the Single Resolution Fund. The total value of the contribution attributable to the Group amounted to Euros 24,922,000 (30 September 2017: Euros 21,466,000) and the Group opted to constitute an irrevocable commitment, through a constitution of a bailment for this purpose, in the amount of Euros 3,737,000 (30 September 2017: Euros 3,220,000), 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:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Remunerations | 340,961 | 317,087 |
| Mandatory social security charges | ||
| Post-employment benefits (note 49) | ||
| Service cost | (11,566) | (11,996) |
| Net interest cost / (income) in the liability coverage balance | 2,273 | 3,402 |
| Cost / (income) with early retirement programs and mutually agreed terminations | 6,938 | 6,442 |
| Collective Labour Agreement | - | (39,997) |
| (2,355) | (42,149) | |
| Other mandatory social security charges | 79,399 | 85,210 |
| 77,044 | 43,061 | |
| Voluntary social security charges | 7,341 | 4,590 |
| Other staff costs | 10,205 | 15,380 |
| 435,551 | 380,118 |
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Water, electricity and fuel | 11,175 | 11,536 |
| Credit cards and mortgage | 5,041 | 4,499 |
| Communications | 16,916 | 15,839 |
| Maintenance and related services | 11,626 | 12,592 |
| Legal expenses | 4,832 | 4,961 |
| Travel, hotel and representation costs | 6,733 | 5,583 |
| Advisory services | 15,412 | 9,925 |
| Training costs | 2,077 | 1,392 |
| Information technology services | 27,297 | 13,011 |
| Consumables | 3,175 | 3,508 |
| Outsourcing and independent labour | 56,555 | 57,926 |
| Advertising | 19,888 | 19,222 |
| Rents and leases | 55,120 | 72,295 |
| Insurance | 2,842 | 3,332 |
| Transportation | 7,541 | 5,630 |
| Other specialised services | 15,214 | 14,940 |
| Other supplies and services | 14,334 | 18,573 |
| 275,778 | 274,764 |
The balance Rents and lease includes the amount of Euros 53,099,000 (30 September 2017: Euros 59,417,000) related to rents paid regarding buildings used by the Group as lessee.
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Intangible assets amortizations (note 30): | ||
| Software | 9,761 | 8,064 |
| Other intangible assets | 1,037 | 624 |
| 10,798 | 8,688 | |
| Other tangible assets depreciations (note 29): | ||
| Properties | 13,895 | 14,253 |
| Equipment | ||
| Computers | 8,202 | 6,947 |
| Security equipment | 1,117 | 1,220 |
| Installations | 1,758 | 1,513 |
| Machinery | 474 | 483 |
| Furniture | 1,655 | 1,452 |
| Motor vehicles | 3,483 | 3,482 |
| Other equipment | 1,514 | 1,677 |
| 32,098 | 31,027 | |
| 42,896 | 39,715 |
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Loans and advances to credit institutions (note 20) | ||
| Impairment charge for the period | 478 | - |
| Reversals for the period | (127) | - |
| 351 | - | |
| Loans and advances to customers (note 21) | ||
| Impairment charge for the period | 688,272 | 756,531 |
| Reversals for the period | (338,438) | (288,676) |
| Recoveries of loans and interest charged-off | (8,425) | (12,920) |
| 341,409 | 454,935 | |
| Debt securities (note 22) | ||
| Associated to credit operations | ||
| Impairment charge for the period | - | 3,660 |
| Reversals for the period | (4,660) | (1) |
| (4,660) | 3,659 | |
| Not associated to credit operations | ||
| Impairment charge for the period | 121 | n.a. |
| Reversals for the period | (1,553) | n.a. |
| (1,432) | n.a. | |
| (6,092) | 3,659 | |
| 335,668 | 458,594 |
The detail of these balances is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Impairment for financial assets at fair value through other comprehensive income | ||
| Charge for the period | 298 | n.a. |
| Reversals for the period | (3,941) | n.a. |
| (3,643) | n.a. | |
| Impairment for financial assets available for sale | ||
| Charge for the period | n.a. | 48,485 |
| n.a. | 48,485 |
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Impairment for investments in associated companies (nota 26) | ||
| Charge for the period | 11,617 | 9,006 |
| 11,617 | 9,006 | |
| Impairment for non-current assets held for sale (note 27) | ||
| Charge for the period | 64,045 | 74,551 |
| Reversals for the period | (12,448) | (3,242) |
| 51,597 | 71,309 | |
| Impairment for goodwill of subsidiaries (note 30) | ||
| Charge for the period | - | 4 |
| - | 4 | |
| Impairment for other assets (note 32) | ||
| Charge for the period | 6,048 | 23,609 |
| Reversals for the period | (864) | (882) |
| 5,184 | 22,727 | |
| 68,398 | 103,046 |
This balance is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Provision for guarantees and other commitments (note 39) | ||
| Charge for the period | 46,697 | 16,494 |
| Reversals for the period | (30,802) | (12,908) |
| 15,895 | 3,586 | |
| Other provisions for liabilities and charges (note 39) | ||
| Charge for the period | 15,300 | 16,053 |
| Reversals for the period | (267) | (1,261) |
| 15,033 | 14,792 | |
| 30,928 | 18,378 |
The main contributions of the investments accounted for under the equity method are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Banco Millennium Atlântico, S.A. | ||
| Appropriation relating to the current period (note 26) | 15,524 | 24,392 |
| Appropriation relating to the previous period (note 26) | 18 | - |
| Effect of the application of IAS 29: | ||
| Revaluation of the net non-monetary assets of the BMA (note 26) | 1,574 | - |
| Revaluation of the goodwill associated to the investment in BMA | 11,617 | - |
| 13,191 | - | |
| 28,733 | 24,392 | |
| Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. (note 26) | 27,107 | 27,165 |
| SIBS, S.G.P.S, S.A. | 7,096 | 2,583 |
| Unicre - Instituição Financeira de Crédito, S.A. | 5,665 | 4,814 |
| Banque BCP, S.A.S. | 2,864 | 2,896 |
| Banque BCP (Luxembourg), S.A. | - | 8 |
| Other companies | 403 | (5,067) |
| 71,868 | 56,791 |
This balance is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Sale of 41.1% of the investment held in Nanium | - | (3,821) |
| Settlement of Propaço regarding the investment of 52.7% | - | (2) |
| Settlement of S & P Reinsurance Limited regarding the investment of 100% | 7 | - |
| Settlement of bcp holdings (usa), Inc regarding the investment of 100% | 2,769 | - |
| Other assets | 24,479 | 5,282 |
| 27,255 | 1,459 |
The balance Other assets includes gains / (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).
The amount of this account is comprised of:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Appropriated net income | ||
| Gains arising from the sale of Millennium bcp Gestão de Activos - Sociedade Gestora de Fundos de Investimento, S.A. | 1,750 | 1,250 |
The earnings per share are calculated as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Continuing operations | ||
| Net income | 339,492 | 208,087 |
| Non-controlling interests | (83,773) | (76,028) |
| Appropriated net income | 255,719 | 132,059 |
| Gains / (losses) in equity instruments | (276) | - |
| Adjusted net income | 255,443 | 132,059 |
| Discontinued or discontinuing operations | ||
| Appropriated net income | 1,750 | 1,250 |
| Adjusted net income | 257,193 | 133,309 |
| Average number of shares | 15,113,989,952 | 12,717,384,960 |
| Basic earnings per share (Euros): | ||
| from continuing operations | 0.023 | 0.014 |
| from discontinued or discontinuing operations | 0,000 | 0,000 |
| 0.023 | 0.014 | |
| Diluted earnings per share (Euros): | ||
| from continuing operations | 0.023 | 0.014 |
| from discontinued or discontinuing operations | 0,000 | 0,000 |
| 0.023 | 0.014 |
The Bank's share capital, as at 30 September 2018, 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.
There were not identified another dilution effects of the earnings per share as at 30 September 2018 and 2017, so the diluted result is equivalent to the basic result.
This balance is analysed as follows:
| (Thousands of euros) | |
|---|---|
| 30 September 2018 |
31 December 2017 |
| Cash 506,866 |
540,608 |
| Central Banks | |
| Bank of Portugal 887,673 |
939,852 |
| Central Banks abroad 797,978 |
687,474 |
| 2,192,517 | 2,167,934 |
The balance Central Banks includes deposits at Central Banks of the countries where the Group operates 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:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Credit institutions in Portugal | 11,197 | 8,394 |
| Credit institutions abroad | 124,898 | 160,389 |
| Amounts due for collection | 194,226 | 126,749 |
| 330,321 | 295,532 | |
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:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Loans and advances to Central Banks abroad | - | 50,114 |
| Loans and advances to credit institutions in Portugal | ||
| Very short-term applications | - | 39,742 |
| Short-term applications | 2,693 | - |
| Loans | 41,103 | 39,220 |
| Other applications | 3,436 | 10,328 |
| 47,232 | 89,290 | |
| Loans and advances to credit institutions abroad | ||
| Very short-term applications | - | 388,327 |
| Short-term applications | 628,091 | 262,339 |
| Loans | 32 | - |
| Other applications | 192,948 | 274,837 |
| 821,071 | 925,503 | |
| 868,303 | 1,064,907 | |
| Overdue loans - less than 90 days | 163 | - |
| Overdue loans - Over 90 days | 666 | 661 |
| 869,132 | 1,065,568 | |
| Impairment for loans and advances to credit institutions | (946) | - |
| 868,186 | 1,065,568 | |
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 Loans and advances to credit institutions includes the amounts detailed below:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Loans and advances to credit institutions in Portugal | ||
| Other applications | 20 | 1,010 |
| Loans and advances to credit institutions abroad | ||
| Short-term applications | 173,048 | 27,639 |
| Other applications | 185,107 | 269,284 |
| 358,175 | 297,933 |
These deposits are held by the counterparties and are given as collateral of the referred operations (IRS and CIRS), whose revaluation is negative for the Group.
The changes occurred in impairment for Loans and advances to credit institutions are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance on 1 January | - | - |
| Adjustments due to the implementation of IFRS 9 (note 57) | 703 | - |
| Impairment charge for the period (note 10) | 478 | - |
| Reversals for the period (note 10) | (127) | - |
| Loans charged-off | (108) | - |
| Balance at the end of the period | 946 | - |
The analysis of loans and advances to customers, by type of credit, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Mortgage loans | 23,554,991 | 23,307,977 |
| Loans | 12,840,118 | 13,766,729 |
| Finance leases | 3,846,781 | 3,525,058 |
| Factoring operations | 2,238,934 | 2,106,173 |
| Current account credits | 1,799,053 | 1,556,279 |
| Overdrafts | 1,500,908 | 1,456,141 |
| Discounted bills | 226,690 | 232,169 |
| 46,007,475 | 45,950,526 | |
| Overdue loans - less than 90 days | 102,209 | 88,500 |
| Overdue loans - Over 90 days | 2,394,977 | 2,865,992 |
| 48,504,661 | 48,905,018 | |
| Impairment for credit risk | (3,149,304) | (3,279,046) |
| 45,355,357 | 45,625,972 |
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Outstanding loans |
Overdue loans |
Gross amount |
Impairment | Net amount |
|
| Public sector | 733,665 | 821 | 734,486 | (6,013) | 728,473 |
| Asset-backed loans | 28,101,445 | 1,365,315 | 29,466,760 | (1,952,280) | 27,514,480 |
| Other guaranteed loans | 3,678,600 | 225,203 | 3,903,803 | (371,438) | 3,532,365 |
| Unsecured loans | 5,402,768 | 628,235 | 6,031,003 | (441,780) | 5,589,223 |
| Foreign loans | 2,005,282 | 144,800 | 2,150,082 | (182,611) | 1,967,471 |
| Factoring operations | 2,238,934 | 29,178 | 2,268,112 | (48,631) | 2,219,481 |
| Finance leases | 3,846,781 | 103,634 | 3,950,415 | (146,551) | 3,803,864 |
| 46,007,475 | 2,497,186 | 48,504,661 | (3,149,304) | 45,355,357 |
The balance Loans and advances to customers, as at 31 December 2017, is analysed as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 31 December 2017 | |||||
| Outstanding loans |
Overdue loans |
Gross amount |
Impairment | Net amount |
|
| Public sector | 853,393 | 265 | 853,658 | (2,678) | 850,980 |
| Asset-backed loans | 27,885,255 | 1,502,718 | 29,387,973 | (2,013,212) | 27,374,761 |
| Other guaranteed loans | 3,932,216 | 335,606 | 4,267,822 | (434,783) | 3,833,039 |
| Unsecured loans | 5,856,207 | 820,704 | 6,676,911 | (536,805) | 6,140,106 |
| Foreign loans | 1,792,224 | 149,805 | 1,942,029 | (117,851) | 1,824,178 |
| Factoring operations | 2,106,173 | 23,892 | 2,130,065 | (32,162) | 2,097,903 |
| Finance leases | 3,525,058 | 121,502 | 3,646,560 | (141,555) | 3,505,005 |
| 45,950,526 | 2,954,492 | 48,905,018 | (3,279,046) | 45,625,972 |
As at 30 September 2018, the balance Loans and advances to customers includes the amount of Euros 12,292,278,000 (31 December 2017: Euros 12,146,649,000) 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 referred in note 50, the Group provides loans and/or guarantees to qualifying shareholders holding individually or together with their affiliates, 2% or more of the share capital identified in the Board of Directors report and in note 41.
As at 30 September 2018, the Group granted credit to qualifying shareholders and entities controlled by them, in the amount of Euros 104,040,000 (31 December 2017: Euros 62,822,000), as referred in note 50 a). The amount of impairment recognised for these contracts amounts to Euros 147,000 (31 December 2017: Euros 77,000).
The business conducted between the company and qualifying shareholders or natural or legal persons related to them, pursuant to article 20 of the Securities Code, regardless of the amount, is always subject to appraisal and deliberation by the Board of Directors, through a proposal by the Credit Committee and the Executive Committee, supported by an analysis and technical opinion issued by the Internal Audit Division, and after a prior opinion has been obtained from the Audit Committee.
The balance Loans and advances to customers includes the following amounts related to finance leases contracts:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Amount of future minimum payments | 4,326,290 | 3,956,596 |
| Interest not yet due | (479,509) | (431,538) |
| Present value | 3,846,781 | 3,525,058 |
Regarding operational leasing, the Group does not present relevant contracts as lessee.
The analysis of loans and advances to customers, as at 30 September 2018, by sector of activity, is as follows:
| 30 September 2018 | (Thousands of euros) | |||||
|---|---|---|---|---|---|---|
| Outstanding loans |
Overdue loans |
Gross amount |
Impairment | Net amount |
% Gross amount |
|
| Agriculture and forestry | 289,789 | 11,239 | 301,028 | (10,016) | 291,012 | 0.62% |
| Fisheries | 31,823 | 51 | 31,874 | (894) | 30,980 | 0.07% |
| Mining | 56,336 | 4,830 | 61,166 | (11,121) | 50,045 | 0.13% |
| Food, beverage and tobacco | 655,081 | 16,585 | 671,666 | (18,283) | 653,383 | 1.39% |
| Textiles | 366,815 | 18,786 | 385,601 | (27,266) | 358,335 | 0.80% |
| Wood and cork | 244,758 | 9,230 | 253,988 | (22,024) | 231,964 | 0.52% |
| Paper, printing and publishing | 193,981 | 5,408 | 199,389 | (16,377) | 183,012 | 0.41% |
| Chemicals | 692,215 | 46,115 | 738,330 | (48,171) | 690,159 | 1.52% |
| Machinery, equipment and basic metallurgical | 1,189,439 | 58,339 | 1,247,778 | (58,967) | 1,188,811 | 2.57% |
| Electricity and gas | 304,037 | 117 | 304,154 | (1,346) | 302,808 | 0.63% |
| Water | 250,725 | 2,253 | 252,978 | (18,844) | 234,134 | 0.52% |
| Construction | 1,705,774 | 494,392 | 2,200,166 | (500,902) | 1,699,264 | 4.54% |
| Retail business | 1,095,740 | 86,295 | 1,182,035 | (89,457) | 1,092,578 | 2.44% |
| Wholesale business | 2,061,966 | 98,653 | 2,160,619 | (109,332) | 2,051,287 | 4.45% |
| Restaurants and hotels | 1,122,469 | 57,627 | 1,180,096 | (98,313) | 1,081,783 | 2.43% |
| Transports | 1,302,488 | 21,082 | 1,323,570 | (33,500) | 1,290,070 | 2.73% |
| Post offices | 6,846 | 342 | 7,188 | (637) | 6,551 | 0.02% |
| Telecommunications | 300,302 | 6,953 | 307,255 | (17,254) | 290,001 | 0.63% |
| Services | ||||||
| Financial intermediation | 1,485,974 | 176,409 | 1,662,383 | (370,371) | 1,292,012 | 3.43% |
| Real estate activities | 1,330,875 | 252,942 | 1,583,817 | (173,360) | 1,410,457 | 3.27% |
| Consulting, scientific and technical activities | 1,276,8 81 |
176,945 | 1,453,826 | (497,378) | 956,448 | 3.00% |
| Administrative and support services activities | 530,3 44 |
23,877 | 554,221 | (77,156) | 477,065 | 1.14% |
| Public sector | 1,057,358 | 946 | 1,058,304 | (9,461) | 1,048,843 | 2.18% |
| Education | 127,743 | 1,863 | 129,606 | (7,760) | 121,846 | 0.27% |
| Health and collective service activities | 287,638 | 2,235 | 289,873 | (4,572) | 285,301 | 0.60% |
| Artistic, sports and recreational activities | 291,856 | 5,270 | 297,126 | (78,942) | 218,184 | 0.61% |
| Other services | 190,947 | 266,208 | 457,155 | (183,393) | 273,762 | 0.94% |
| Consumer loans | 3,355,395 | 319,990 | 3,675,385 | (340,773) | 3,334,612 | 7.58% |
| Mortgage credit | 23,398,490 | 241,155 | 23,639,645 | (238,231) | 23,401,414 | 48.74% |
| Other domestic activities | 1,316 | 501 | 1,817 | (169) | 1,648 | 0.00% |
| Other international activities | 802,074 | 90,548 | 892,622 | (85,034) | 807,588 | 1.84% |
| 46,007,475 | 2,497,186 | 48,504,661 | (3,149,304) | 45,355,357 | 100% |
| 31 December 2017 | ||||||
|---|---|---|---|---|---|---|
| Outstanding loans |
Overdue loans |
Gross amount |
Impairment | Net amount |
% Gross amount |
|
| Agriculture and forestry | 290,910 | 16,167 | 307,077 | (33,190) | 273,887 | 0.63% |
| Fisheries | 30,344 | 237 | 30,581 | (1,003) | 29,578 | 0.06% |
| Mining | 57,054 | 8,059 | 65,113 | (10,931) | 54,182 | 0.13% |
| Food, beverage and tobacco | 659,345 | 17,287 | 676,632 | (15,048) | 661,584 | 1.38% |
| Textiles | 366,916 | 24,668 | 391,584 | (24,302) | 367,282 | 0.80% |
| Wood and cork | 226,041 | 11,704 | 237,745 | (22,013) | 215,732 | 0.49% |
| Paper, printing and publishing | 164,872 | 5,915 | 170,787 | (11,984) | 158,803 | 0.35% |
| Chemicals | 594,773 | 45,707 | 640,480 | (40,589) | 599,891 | 1.31% |
| Machinery, equipment and basic metallurgical | 1,119,654 | 62,540 | 1,182,194 | (55,162) | 1,127,032 | 2.42% |
| Electricity and gas | 312,384 | 150 | 312,534 | (1,232) | 311,302 | 0.64% |
| Water | 265,175 | 4,410 | 269,585 | (13,210) | 256,375 | 0.55% |
| Construction | 1,703,791 | 604,806 | 2,308,597 | (537,703) | 1,770,894 | 4.72% |
| Retail business | 1,180,700 | 84,765 | 1,265,465 | (73,020) | 1,192,445 | 2.59% |
| Wholesale business | 1,938,869 | 128,818 | 2,067,687 | (116,365) | 1,951,322 | 4.23% |
| Restaurants and hotels | 993,812 | 75,955 | 1,069,767 | (110,249) | 959,518 | 2.19% |
| Transports | 1,282,627 | 31,780 | 1,314,407 | (37,316) | 1,277,091 | 2.69% |
| Post offices | 4,629 | 381 | 5,010 | (671) | 4,339 | 0.01% |
| Telecommunications | 308,656 | 6,490 | 315,146 | (16,228) | 298,918 | 0.64% |
| Services | ||||||
| Financial intermediation | 1,691,952 | 243,631 | 1,935,583 | (456,655) | 1,478,928 | 3.96% |
| Real estate activities | 1,266,905 | 357,905 | 1,624,810 | (227,753) | 1,397,057 | 3.32% |
| Consulting, scientific and technical activities | 1,583,4 63 |
217,534 | 1,800,997 | (497,382) | 1,303,615 | 3.68% |
| Administrative and support services activities | 514,0 78 |
29,603 | 543,681 | (66,757) | 476,924 | 1.11% |
| Public sector | 991,311 | 312 | 991,623 | (2,731) | 988,892 | 2.03% |
| Education | 133,401 | 2,642 | 136,043 | (6,342) | 129,701 | 0.28% |
| Health and collective service activities | 300,352 | 2,532 | 302,884 | (3,975) | 298,909 | 0.62% |
| Artistic, sports and recreational activities | 318,003 | 6,030 | 324,033 | (78,627) | 245,406 | 0.66% |
| Other services | 321,694 | 261,021 | 582,715 | (163,246) | 419,469 | 1.19% |
| Consumer loans | 3,413,299 | 381,412 | 3,794,711 | (373,513) | 3,421,198 | 7.76% |
| Mortgage credit | 23,154,719 | 253,257 | 23,407,976 | (240,546) | 23,167,430 | 47.86% |
| Other domestic activities | 15 | 5,096 | 5,111 | (76) | 5,035 | 0.01% |
| Other international activities | 760,782 | 63,678 | 824,460 | (41,227) | 783,233 | 1.69% |
| 45,950,526 | 2,954,492 | 48,905,018 | (3,279,046) | 45,625,972 | 100% |
The caption Loans and advances to customers includes the effect of traditional securitization transactions owned by Special Purpose Entities (SPEs) consolidated following the application of IFRS 10, in accordance with accounting policy 1 B) and synthetic securitization. The characterization of these operations is described in note 1 E).
Securitization transactions engaged by the Group refer to mortgage loans and are set through securitization funds and special purpose entities (SPEs). As at 30 September 2018, the loans and advances referred to these traditional securitization transactions amounts to Euros 420,682,000 (31 December 2017: Euros 464,513,000) As referred in accounting policy 1 B), when the substance of the relationships with the referred SPEs indicates that the Group holds control of its activities, those are consolidated by the full method.
On 20 October 2003, the Group sold a mortgage loans portfolio owned by Banco Comercial Português, S.A. and by Banco de Investimento Imobiliário, S.A. to the SPE "Magellan Mortgages No. 2 PLC". Considering that, by having acquired the total subordinated tranches issued by the SPE, the Group holds the control of the referred assets, the SPE is consolidated in the Group's Financial Statements, as established in the accounting policy 1 B). As at 30 September 2018, the SPE's credit portfolio associated with this operation amounts to Euros 107,410,000, and the bonds issued with different subordination levels amount to Euros 96,048,000 (this amount excludes bonds already acquired by the Group in the amount of Euros 12,106,000 and Euros 14,000,000 of the most subordinated tranche fully acquired).
On 24 June 2005, the Bank transferred, through securitization funds, an owned mortgage loans portfolio to the SPE "Magellan Mortgages No. 3 PLC". Considering that, by having acquired part of the subordinated tranche of the bonds issued by that SPE, the Bank holds the control of the referred assets, the SPE is consolidated in the Group's Financial Statements, as established in the accounting policy 1 B). As at 30 September 2018, the SPE's credit portfolio associated with this operation amounts to Euros 313,272,000, and bonds issued with different subordination levels amount to Euros 228,474,000 (this amount excludes bonds already acquired by the Group in the amount of Euros 102,828,000) and the most subordinated tranche amounts to Euros 44,000 (this amount excludes bonds already acquired by the Group in the amount Euros 206,000).
The Group has two operations in progress which form structures of synthetic securitization.
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. The legal maturity date is 25 March of 2036 and as at 30 September 2018, the operation amounts to Euros 1,316,906,000. The fair value of the relative Credit Default Swap (CDS) is recorded in the amount of Euros 204,053,000 and the associated cost in the first nine months of 2018 amounts to Euros 7,396,000.
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). The legal maturity date is 21 September of 2043 and as at 30 September 2018, the operation amounts to Euros 989,834,000. The fair value of the relative CDS is recorded at the amount of Euros 65,000,000 and their associated cost in the first nine months of 2018 amounts to Euros 979,000.
In both operations, the Bank hired a CDS with a Special Purpose Vehicle (SPV), buying by this way the protection for part of the credit risk inherent to the referenced portfolio. 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 SPE, and the subscription by investors, the Credit Linked Notes (CLN). The Bank retained the senior risk and part of the equity remaining (80%). The product of the CLN issue was invested by the referred SPE the constitution of a deposit that collateralizes, in full, their responsibilities towards its creditors under the operation, including the Group under the CDS context.
These operations involve the Bank's reduced exposure to the risks associated with the credit granted, but it did not transfer to third parties most of the rights and obligations arising from the credits included in them, thus not meeting the derecognition criteria in the accounting policy presented in note C1.3.
As at 30 September 2018, the Total credit portfolio, which includes further than loans and advances to customers, the guarantees granted, split by stage according with IFRS 9, is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
1 January 2018 |
|
| Total credit | 53,340,621 | 53,191,852 |
| Stage 1 | ||
| Gross amount | 39,256,586 | 37,748,689 |
| Impairment | (111,966) | (122,158) |
| 39,144,620 | 37,626,531 | |
| Stage 2 | ||
| Gross amount | 7,434,332 | 7,930,520 |
| Impairment | (190,713) | (255,083) |
| 7,243,619 | 7,675,437 | |
| Stage 3 | ||
| Gross amount | 6,649,703 | 7,512,642 |
| Impairment | (3,005,756) | (3,291,013) |
| 3,643,947 | 4,221,629 | |
| 50,032,186 | 49,523,597 |
As at 31 December 2017, the Total credit portfolio, which includes further than loans and advances to customers, the guarantees granted and commitments to third parties, split between loans with or without signs of impairment according with IAS 39, is analysed as follows:
| (Thousands of euros) | |
|---|---|
| 31 December 2017 |
|
| Total credit | 53,446,741 |
| Loans and advances to customers with signs of impairment | |
| Individually significant | |
| Gross amount | 5,159,931 |
| Impairment | (2,483,378) |
| 2,676,553 | |
| Collective analysis | |
| Gross amount | 2,720,976 |
| Impairment | (805,976) |
| 1,915,000 | |
| Loans and advances to customers without signs of impairment | 45,565,834 |
| Impairment (IBNR) | (120,567) |
| 50,036,820 |
The total credit portfolio presented in the tables above includes loans and advances to customers in the amount of Euros 48,504,661,000 (31 December 2017: Euros: 48,905,018,000) and guarantees granted and commitments to third parties balance (note 46), in the amount of Euros 4,835,960,000 (31 December 2017: Euros 4,541,723,000).
The balances of Impairment were determined in accordance with the accounting policy described in note 1 C1.5 (2017: note 1 D1.1), including the provision for guarantees and other commitments to third parties (note 39), in the amount of Euros 159,131,000 (31 December 2017: Euros 130,875,000). The balance Impairment includes amounts related to the provision for irrevocable and revocable commitments of Euros 13,828,000 and Euros 6,160,000, respectively (31 December 2017: Euros 1,383,000 and Euros 0, respectively).
As at 30 September 2018, the analysis of the exposure covered by collateral associated with loans and advances to customers' portfolio, by stage according with IFRS 9, considering its fair value, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 1 January | |
| 2018 | 2018 | |
| Stage 1 | ||
| Securities and other financial assets | 1,591,909 | 1,716,294 |
| Residential real estate | 18,542,181 | 18,135,303 |
| Other real estate | 2,880,319 | 2,638,248 |
| Other guarantees | 3,265,167 | 3,290,036 |
| 26,279,576 | 25,779,881 | |
| Stage 2 | ||
| Securities and other financial assets | 267,172 | 300,757 |
| Residential real estate | 2,812,715 | 2,878,869 |
| Other real estate | 1,002,386 | 1,147,361 |
| Other guarantees | 494,724 | 541,780 |
| 4,576,997 | 4,868,767 | |
| Stage 3 | ||
| Securities and other financial assets | 440,046 | 524,419 |
| Residential real estate | 1,218,408 | 1,555,504 |
| Other real estate | 1,148,763 | 1,419,984 |
| Other guarantees | 490,294 | 719,007 |
| 3,297,511 | 4,218,914 | |
| 34,154,084 | 34,867,562 |
As at 31 December 2017, the analysis of the exposure covered by collateral associated with loans and advances to customers' portfolio, split between loans with or without signs of impairment according with IAS 39, considering its fair value, is as follows:
| (Thousands of euros) | |
|---|---|
| 31 December | |
| 2017 | |
| Loans and advances to customers with impairment | |
| Individually significant | |
| Securities and other financial assets | 491,535 |
| Residential real estate | 372,672 |
| Other real estate | 1,188,360 |
| Other guarantees | 644,484 |
| 2,697,051 | |
| Collective analysis | |
| Securities and other financial assets | 21,452 |
| Residential real estate | 1,336,562 |
| Other real estate | 197,310 |
| Other guarantees | 76,546 |
| 1,631,870 | |
| Loans and advances to customers without impairment | |
| Securities and other financial assets | 1,795,781 |
| Residential real estate | 20,775,733 |
| Other real estate | 3,657,581 |
| Other guarantees | 3,613,709 |
| 29,842,804 | |
| 34,171,725 |
The balance Other guarantees include debtors, assets subject to leasing transactions and personal guarantees, among others. Considering the policy of risk management of the Group (note 52), the amounts presented do not include the fair value of the personal guarantees provided by clients with lower risk rating. When considered, the fair value of the personal guarantees corresponds to the guaranteed amount.
The Group is applying physical collaterals and financial guarantees as instruments to mitigate the credit risk. The physical collaterals are mainly mortgages on residential buildings for the mortgage portfolio and other mortgages on other types of buildings related to other types of loans. To reflect the market value, these collaterals are regularly reviewed based on independent and certified valuation entities or through the application of revaluation coefficients that reflect the market trends for each specific type of building and geographical area. The financial guarantees are reviewed based on the market value of the respective assets, when available, with the subsequent application of haircuts that reflect the volatility of their prices. Considering the current real estate and financial markets conditions, the Group continued to negotiate additional physical and financial collaterals with its customers.
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:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Agriculture and forestry | 4,529 | 8,464 |
| Fisheries | 19 | 2,019 |
| Mining | 4,997 | 13,338 |
| Food, beverage and tobacco | 1,045 | 1,020 |
| Textiles | 265 | 554 |
| Wood and cork | 2,946 | 2,977 |
| Paper, printing and publishing | 398 | 450 |
| Chemicals | 2,055 | 2,108 |
| Machinery, equipment and basic metallurgical | 31,468 | 17,755 |
| Electricity and gas | 499 | 431 |
| Water | 123 | 250 |
| Construction | 38,728 | 32,135 |
| Retail business | 14,475 | 95,818 |
| Wholesale business | 92,487 | 16,888 |
| Restaurants and hotels | 12,770 | 10,252 |
| Transports | 4,229 | 13,372 |
| Post offices | 29 | 30 |
| Telecommunications | 20,552 | 80,701 |
| Services | ||
| Financial intermediation | 436 | 495 |
| Real estate activities | 4,965 | 5,969 |
| Consulting, scientific and technical activities | 16,746 | 8,110 |
| Administrative and support services activities | 5,301 | 7,436 |
| Public sector | 64,794 | 41,070 |
| Education | 267 | 390 |
| Health and collective service activities | 880 | 89 |
| Artistic, sports and recreational activities | 386 | 381 |
| Other services | 5,882 | 1,546 |
| Consumer loans | 135,172 | 125,646 |
| Mortgage credit | 105,726 | 107,182 |
| Other international activities | 12,306 | 10,434 |
| 584,475 | 607,310 |
The restructured loans are subject to an impairment analysis resulting from the revaluation of expectation to meet new cash flows inherent to the new contract terms, discounted at the original effective interest rate and considering new collaterals.
Regarding the restructured loans, the impairment associated to these operations amounts to Euros 176,461,000 (31 December 2017: Euros 169,912,000).
The Group has implemented a process for marking operations restructured due to clients' financial difficulties. This marking is part of the credit analysis process, being in charge of the respective decision-making bodies, according to the corresponding competencies, established in the regulations in force.
The information on operations restructured due to financial difficulties is available in the Group's information systems, having a relevant role in the processes of credit analysis, in the marking of customers in default and in the process of determining impairment. In particular:
there are several default triggers related to restructurings due to financial difficulties (restructuring with loss of value, recidivism of restructuring, unproductive credit, default on customers with restructured operations);
in the process of individual impairment analysis, in addition to the existence of operations restructured due to financial difficulties, is a reason for customer selection, the loss inherent to the change in the conditions resulting from the restructuring is determined;
The demarcation of an operation can only take place at least 2 years after the date of marking, provided that a set of conditions exist that allow to conclude by the improvement of the financial condition of the client.
The definition of Non-Performing Loans for more than 90 days (NPL> 90) incorporates total credit (past due + outstanding) associated with past due operations for more than 90 days. As at 30 September 2018, the amount calculated is Euros 3,739,473,000 (31 December 2017: Euros 4,459,412,000).
The definition of Non-Performing Exposure (NPE) is as follows:
a) Total exposure of defaulted customers;
b) Total exposure of customers with signs of impairment;
c) Total exposure of customers whose overdue operations for more than 90 days represents more than 20% of their total on-balance sheet exposure;
d) Total exposure of non-retail customers with at least one overdue operation for more than 90 days;
e) Retail operations overdue for more than 90 days;
f) Operations restructured due to financial difficulties overdue for more than 30 days.
As at 30 September 2018, the NPE amounts to Euros 6,307,614,000 (31 December 2017: Euros 7,658,392,000).
The changes occurred in impairment for credit risks are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance on 1 January | 3,279,046 | 3,706,346 |
| Adjustments due to the implementation of IFRS 9 (note 57) | ||
| Remeasurement under IFRS 9 | 235,111 | n.a. |
| Reclassification under IFRS 9 | 8,508 | n.a. |
| Charge for the period in net income interest (note 2) | 29,430 | n.a. |
| Other transfers (*) | (56,871) | (32,606) |
| Impairment charge for the period (note 10) | 688,272 | 929,403 |
| Reversals for the period (note 10) | (338,438) | (299,245) |
| Loans charged-off | (688,408) | (1,039,290) |
| Exchange rate differences | (7,346) | 14,438 |
| Balance at the end of the period | 3,149,304 | 3,279,046 |
(*) The balance Transfers refers to impairments that, as at 31 December 2017, were accounted in loans to customers. In the context of the financial restructuring of a group of customers, in the first nine months of 2018, the associated credits were liquidated, and the Group received a set of assets in kind.
The analysis of loans charged-off, by sector of activity, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Agriculture and forestry | 4,571 | 1,843 |
| Fisheries | 147 | 22,020 |
| Mining | 1,911 | 773 |
| Food, beverage and tobacco | 1,807 | 4,107 |
| Textiles | 10,248 | 8,200 |
| Wood and cork | 3,745 | 3,213 |
| Paper, printing and publishing | 1,490 | 4,563 |
| Chemicals | 2,156 | 9,099 |
| Machinery, equipment and basic metallurgical | 19,462 | 13,492 |
| Electricity and gas | 5 | 103 |
| Water | 4,810 | 397 |
| Construction | 142,557 | 100,260 |
| Retail business | 20,342 | 38,479 |
| Wholesale business | 52,112 | 41,691 |
| Restaurants and hotels | 21,503 | 14,239 |
| Transports | 15,625 | 94,008 |
| Post offices | 48 | 181 |
| Telecommunications | 1,106 | 3,967 |
| Services | ||
| Financial intermediation | 107,653 | 282,630 |
| Real estate activities | 54,287 | 54,842 |
| Consulting, scientific and technical activities | 72,351 | 18,541 |
| Administrative and support services activities | 8,998 | 9,442 |
| Public sector | 4 | - |
| Education | 645 | 825 |
| Health and collective service activities | 339 | 830 |
| Artistic, sports and recreational activities | 397 | 5,867 |
| Other services | 5,151 | 4,037 |
| Consumer loans | 122,783 | 264,426 |
| Mortgage credit | 10,615 | 18,725 |
| Other domestic activities | 769 | 14,740 |
| Other international activities | 771 | 3,750 |
| 688,408 | 1,039,290 |
In compliance with the accounting policy described in note 1 C1.3 (2017: note 1 D1.1), loans and advances to customers are chargedoff 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 loans charged-off, by type of credit, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Public sector | 4 | - |
| Asset-backed loans | 11,626 | 7,076 |
| Other guaranteed loans | 35,315 | 13,845 |
| Unsecured loans | 626,986 | 984,157 |
| Factoring operations | 2,910 | 1,841 |
| Finance leases | 11,567 | 32,371 |
| 688,408 | 1,039,290 |
The analysis of recovered loans and interest occurred during the first nine months of 2018 and 2017 by sector of activity, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Agriculture and forestry | 37 | 55 |
| Fisheries | - | 42 |
| Mining | - | 125 |
| Food, beverage and tobacco | 127 | 193 |
| Textiles | 115 | 273 |
| Wood and cork | 53 | 215 |
| Paper, printing and publishing | 171 | 267 |
| Chemicals | 132 | 141 |
| Machinery, equipment and basic metallurgical | 104 | 243 |
| Electricity and gas | 1 | - |
| Construction | 1,041 | 2,881 |
| Retail business | 287 | 1,063 |
| Wholesale business | 224 | 1,997 |
| Restaurants and hotels | 25 | 123 |
| Transports | 193 | 979 |
| Post offices | 6 | - |
| Telecommunications | 1 | 20 |
| Services | ||
| Financial intermediation | 2,238 | 162 |
| Real estate activities | 130 | 356 |
| Consulting, scientific and technical activities | 42 | 63 |
| Administrative and support services activities | 128 | 290 |
| Health and collective service activities | - | 10 |
| Artistic, sports and recreational activities | 4 | 6 |
| Other services | 96 | 6 |
| Consumer loans | 2,529 | 2,849 |
| Mortgage credit | 24 | 15 |
| Other domestic activities | 48 | 13 |
| Other international activities | 669 | 533 |
| 8,425 | 12,920 |
The analysis of recovered loans and interest occurred during the first nine months of 2018 and 2017, by type of credit, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Asset-backed loans | 24 | 12 |
| Other guaranteed loans | 1,057 | 1,884 |
| Unsecured loans | 6,321 | 10,470 |
| Foreign loans | 670 | 98 |
| Factoring operations | - | 74 |
| Finance leases | 353 | 382 |
| 8,425 | 12,920 |
The balance Debt securities is analysed as follows:
| (Thousands of euros) | |||
|---|---|---|---|
| 30 September 2018 |
31 December 2017 |
||
| Debt securities held associated with credit operations | |||
| Portuguese issuers | |||
| Bonds | 185,615 | 241,381 | |
| Commercial paper | 2,054,312 | 1,681,476 | |
| Foreign issuers | |||
| Bonds | 36,395 | 38,731 | |
| Commercial paper | 19,703 | 21,465 | |
| 2,296,025 | 1,983,053 | ||
| Overdue securities - over 90 days | 55,353 | 67,353 | |
| 2,351,378 | 2,050,406 | ||
| Impairment | (41,351) | (42,886) | |
| 2,310,027 | 2,007,520 | ||
| Debt securities held not associated with credit operations | |||
| Public entities | |||
| Portuguese issuers | 47,019 | n.a. | |
| Foreign issuers | 668,082 | n.a. | |
| Other entities | |||
| Portuguese issuers | 256,508 | n.a. | |
| Foreign issuers | 66,893 | n.a. | |
| 1,038,502 | n.a. | ||
| Impairment | (784) | n.a. | |
| 1,037,718 | n.a. | ||
| 3,347,745 | 2,007,520 |
The analysis of debt securities portfolio, net of impairment, by sector of activity, is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Debt securities held associated with credit operations | ||
| Mining | 20,694 | 18,353 |
| Food, beverage and tobacco | 54,421 | 42,566 |
| Textiles | 73,548 | 79,794 |
| Wood and cork | 10,855 | 6,001 |
| Paper, printing and publishing | 17,290 | 62,038 |
| Chemicals | 224,657 | 223,932 |
| Machinery, equipment and basic metallurgical | 56,353 | 50,887 |
| Electricity and gas | 199,157 | 219,537 |
| Construction | 7,736 | 86,678 |
| Retail business | 98,009 | 73,560 |
| Wholesale business | 68,107 | 64,559 |
| Restaurants and hotels | 8,504 | 12,794 |
| Transports | 50,282 | 23,627 |
| Telecommunications | 10,338 | 12,571 |
| Services | ||
| Financial intermediation | 235,883 | 269,246 |
| Real estate activities | 14,577 | 35,091 |
| Consulting, scientific and technical activities | 1,077,362 | 643,484 |
| Administrative and support services activities | 17,047 | 16,004 |
| Health and collective service activities | 4,999 | 2,496 |
| Other services | 4,112 | 4,106 |
| Other international activities | 56,098 | 60,196 |
| 2,310,029 | 2,007,520 | |
| Debt securities held not associated with credit operations | ||
| Chemicals | 25,434 | n.a. |
| Construction | 39,203 | n.a. |
| Transports and communications | 176,649 | n.a. |
| Services | ||
| Financial intermediation | 66,892 | n.a. |
| Consulting, scientific and technical activities | 14,969 | n.a. |
| 323,147 | n.a. | |
| Government and Public securities | 714,569 | n.a. |
| 1,037,716 | n.a. | |
| 3,347,745 | 2,007,520 |
The changes occurred in impairment for debt securities are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Debt securities held associated with credit operations | ||
| Balance on 1 January | 42,886 | 34,505 |
| Adjustments due to the implementation of IFRS 9 (note 57) | 2,946 | - |
| Charge for the period in net income interest (note 2) | 179 | - |
| Other transfers | - | (581) |
| Impairment charge for the period (note 10) | - | 10,516 |
| Reversals for the period (note 10) | (4,660) | - |
| Loans charged-off | - | (1,554) |
| Balance at the end of the period | 41,351 | 42,886 |
| Debt securities held not associated with credit operations | ||
| Balance on 1 January | n.a. | n.a. |
| Adjustments due to the implementation of IFRS 9 (note 57) | 2,217 | n.a. |
| Impairment charge for the period (note 10) | 121 | n.a. |
| Reversals for the period (note 10) | (1,553) | n.a. |
| Exchange rate differences | (1) | n.a. |
| Balance at the end of the period | 784 | n.a. |
The balance Financial assets at fair value through profit or loss, Financial assets at fair value through other comprehensive income and Financial assets available for sale is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Financial assets at fair value through profit or loss | ||
| Financial assets held for trading | ||
| Debt securities portfolio | 360,233 | 152,711 |
| Equity instruments | 2,656 | 3,739 |
| Trading derivatives | 661,889 | 741,284 |
| 1,024,778 | 897,734 | |
| Financial assets not held for trading mandatorily at fair value through profit or loss | ||
| Loans and advances to customers at fair value | 278,603 | n.a. |
| Debt securities portfolio | 1,106,217 | n.a. |
| Equity instruments | 20,640 | n.a. |
| 1,405,460 | n.a. | |
| Financial assets designated at fair value through profit or loss | ||
| Debt securities portfolio | 32,921 | 142,336 |
| 32,921 | 142,336 | |
| Financial assets at fair value through other comprehensive income | ||
| Debt securities portfolio | 12,010,744 | n.a. |
| Equity instruments | 53,071 | n.a. |
| 12,063,815 | n.a. | |
| Financial assets available for sale | ||
| Debt securities portfolio | n.a. | 10,338,522 |
| Equity instruments | n.a. | 1,133,325 |
| n.a. | 11,471,847 | |
| 14,526,974 | 12,511,917 |
The balance Trading derivatives includes the valuation of the embedded derivatives separated in accordance with the accounting policy 1C.5. (2017: note 1D.2.3) in the amount of Euros 895,000 (31 December 2017: Euros 2,000).
The balance Loans to customers at fair value is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Public sector | 40 | n.a. |
| Asset-backed loans | 10 | n.a. |
| Unsecured loans | 274,784 | n.a. |
| 274,834 | n.a. | |
| Overdue loans - less than 90 days | 951 | n.a. |
| Overdue loans - Over 90 days | 2,818 | n.a. |
| 278,603 | n.a. |
The analysis of loans and advances to customers at fair value, by sector of activity is as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 31 December | ||||
| 30 September 2018 | 2017 | |||
| Gross value | Fair value adjustments |
Net value | Net value | |
| Agriculture and forestry | 19 | (7) | 12 | n.a. |
| Mining | 7 | - | 7 | n.a. |
| Food, beverage and tobacco | 68 | (3) | 65 | n.a. |
| Textiles | 51 | (8) | 43 | n.a. |
| Wood and cork | 44 | (6) | 38 | n.a. |
| Paper, printing and publishing | 50 | (2) | 48 | n.a. |
| Chemicals | 116 | (8) | 108 | n.a. |
| Machinery, equipment and basic metallurgical | 311 | (14) | 297 | n.a. |
| Electricity and gas | 8 | (1) | 7 | n.a. |
| Water | 30 | (1) | 29 | n.a. |
| Construction | 325 | (31) | 294 | n.a. |
| Retail business | 834 | (103) | 731 | n.a. |
| Wholesale business | 605 | (75) | 530 | n.a. |
| Restaurants and hotels | 135 | (21) | 114 | n.a. |
| Transports | 588 | (67) | 521 | n.a. |
| Post offices | 16 | - | 16 | n.a. |
| Telecommunications | 14 | - | 14 | n.a. |
| Services | ||||
| Financial intermediation | 91 | (4) | 87 | n.a. |
| Real estate activities | 45 | (1) | 44 | n.a. |
| Consulting, scientific and technical activities | 436 | (40) | 396 | n.a. |
| Administrative and support services activities | 795 | (24) | 771 | n.a. |
| Public sector | 3 | - | 3 | n.a. |
| Education | 115 | (5) | 110 | n.a. |
| Health and collective service activities | 45 | (3) | 42 | n.a. |
| Artistic, sports and recreational activities | 43 | (1) | 42 | n.a. |
| Other services | 292 | (23) | 269 | n.a. |
| Consumer loans | 289,357 | (15,392) | 273,965 | n.a. |
| 294,443 | (15,840) | 278,603 | n.a. |
The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair value) and Financial assets at fair value through other comprehensive income, net of impairment, as at 30 September 2018, is analysed as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Financial assets at fair value through profit or loss |
|||||
| Held for trading | Not held for trading mandatorily at fair value through profit or loss |
Designated at fair value through profit or loss |
At fair value through other comprehensive income |
Total | |
| Debt securities portfolio | |||||
| Bonds issued by public entities | |||||
| Portuguese issuers | 4,476 | - | 32,921 | 5,279,630 | 5,317,027 |
| Foreign issuers | 296,506 | - | - | 3,916,386 | 4,212,892 |
| Bonds issued by other entities | |||||
| Portuguese issuers | 13,892 | 16,747 | - | 1,252,144 | 1,282,783 |
| Foreign issuers | 45,359 | - | - | 251,482 | 296,841 |
| Treasury bills and other Government bonds | |||||
| Portuguese issuers | - | - | - | 970,968 | 970,968 |
| Foreign issuers | - | - | - | 343,856 | 343,856 |
| Investment fund units | - | 1,089,470 | - | - | 1,089,470 |
| 360,233 | 1,106,217 | 32,921 | 12,014,466 | 13,513,837 | |
| Impairment for overdue securities | - | - | - | (3,722) | (3,722) |
| 360,233 | 1,106,217 | 32,921 | 12,010,744 | 13,510,115 | |
| Equity instruments | |||||
| Shares | |||||
| Portuguese companies | 2,028 | - | - | 25,486 | 27,514 |
| Foreign companies | 28 | 20,640 | - | 27,581 | 48,249 |
| Other securities | 600 | - | - | 4 | 604 |
| 2,656 | 20,640 | - | 53,071 | 76,367 | |
| Trading derivatives | 661,889 | - | - | - | 661,889 |
| 1,024,778 | 1,126,857 | 32,921 | 12,063,815 | 14,248,371 | |
| Level 1 | 324,707 | - | 32,921 | 11,374,211 | 11,731,839 |
| Level 2 | 367,794 | - | - | 662,493 | 1,030,287 |
| Level 3 | 332,277 | 1,126,857 | - | 27,111 | 1,486,245 |
As at 30 September 2018, portfolios are recorded at fair value in accordance with the accounting policy described in note 1 C). As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 48.
As at 30 September 2018, the balances Financial assets at fair value through other comprehensive income and Financial assets held for trading 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 E) in the amount of Euros 623,000 and Euros 118,000, respectively.
The portfolio of Financial assets at fair value through profit or loss and Financial assets available for sale, net of impairment, net of impairment, as at 31 December 2017, is analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 31 December 2017 | ||||
| Financial assets at fair value through profit or loss |
||||
| Held for trading | Designated at fair value through profit or loss |
Available for sale |
Total | |
| Debt securities portfolio | ||||
| Bonds issued by public entities | ||||
| Portuguese issuers | 10,035 | 142,336 | 2,898,293 | 3,050,664 |
| Foreign issuers | 81,267 | - | 3,219,421 | 3,300,688 |
| Bonds issued by other entities | ||||
| Portuguese issuers | 6,790 | - | 1,295,359 | 1,302,149 |
| Foreign issuers | 54,619 | - | 1,560,504 | 1,615,123 |
| Treasury bills and other Government bonds | ||||
| Portuguese issuers | - | - | 584,908 | 584,908 |
| Foreign issuers | - | - | 783,759 | 783,759 |
| 152,711 | 142,336 | 10,342,244 | 10,637,291 | |
| Impairment for overdue securities | - | - | (3,722) | (3,722) |
| 152,711 | 142,336 | 10,338,522 | 10,633,569 | |
| Equity instruments | ||||
| Shares | ||||
| Portuguese companies | 2,100 | - | 28,729 | 30,829 |
| Foreign companies | 24 | - | 18,132 | 18,156 |
| Investment fund units | 764 | - | 1,086,464 | 1,087,228 |
| Other securities | 851 | - | - | 851 |
| 3,739 | - | 1,133,325 | 1,137,064 | |
| Trading derivatives | 741,284 | - | - | 741,284 |
| 897,734 | 142,336 | 11,471,847 | 12,511,917 | |
| Level 1 | 149,910 | 142,336 | 8,224,992 | 8,517,238 |
| Level 2 | 442,373 | - | 1,946,229 | 2,388,602 |
| Level 3 | 305,451 | - | 1,300,626 | 1,606,077 |
As at 31 December 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 E) in the amount of Euros 945,000 and Euros 125,000, respectively.
The portfolio of financial assets at fair value through other comprehensive income, as at 30 September 2018, is analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||
| Amortised cost | Impairment | Amortised cost net of impairment |
Fair value hedge adjustments |
Fair value adjustments |
Total | |
| Bonds and other fixed income securities | ||||||
| Bonds issued by public entities | ||||||
| Portuguese issuers | 5,211,822 | - | 5,211,822 | 140,542 | (72,734) | 5,279,630 |
| Foreign issuers | 3,910,380 | - | 3,910,380 | - | 6,006 | 3,916,386 |
| Bonds issued by other entities | ||||||
| Portuguese issuers (*) | 1,220,303 | (3,722) | 1,216,581 | 75 | 31,766 | 1,248,422 |
| Foreign issuers | 251,236 | (1,220) | 250,016 | 152 | 1,314 | 251,482 |
| Treasury bills and other Government bonds | ||||||
| Portuguese issuers | 970,719 | - | 970,719 | - | 249 | 970,968 |
| Foreign issuers | 343,856 | - | 343,856 | - | - | 343,856 |
| 11,908,316 | (4,942) | 11,903,374 | 140,769 | (33,399) | 12,010,744 | |
| Shares and other variable income securities | ||||||
| Shares | ||||||
| Portuguese companies | 63,772 | - | 63,772 | - | (38,286) | 25,486 |
| Foreign companies | 24,589 | - | 24,589 | - | 2,992 | 27,581 |
| Other securities | 2 | - | 2 | - | 2 | 4 |
| 88,363 | - | 88,363 | - | (35,292) | 53,071 | |
| 11,996,679 | (4,942) | 11,991,737 | 140,769 | (68,691) | 12,063,815 |
(*) This caption includes the amount related to impairment of overdue securities
The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2017, is analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 31 December 2017 | ||||||
| Amortised cost | Impairment | Amortised cost net of impairment |
Fair value hedge adjustments |
Fair value adjustments |
Total | |
| Bonds and other fixed income securities | ||||||
| Bonds issued by public entities | ||||||
| Portuguese issuers | 2,809,521 | - | 2,809,521 | 146,381 | (57,609) | 2,898,293 |
| Foreign issuers | 3,211,861 | - | 3,211,861 | - | 7,560 | 3,219,421 |
| Bonds issued by other entities | ||||||
| Portuguese issuers (*) | 1,309,425 | (87,369) | 1,222,056 | (1,973) | 71,554 | 1,291,637 |
| Foreign issuers | 1,555,832 | (1,427) | 1,554,405 | (391) | 6,490 | 1,560,504 |
| Treasury bills and other Government bonds | ||||||
| Portuguese issuers | 585,072 | - | 585,072 | - | (164) | 584,908 |
| Foreign issuers | 784,264 | (1) | 784,263 | - | (504) | 783,759 |
| 10,255,975 | (88,797) | 10,167,178 | 144,017 | 27,327 | 10,338,522 | |
| Shares and other variable income securities | ||||||
| Shares | ||||||
| Portuguese companies | 94,953 | (73,106) | 21,847 | - | 6,882 | 28,729 |
| foreign companies | 15,191 | (250) | 14,941 | - | 3,191 | 18,132 |
| Investment fund units | 1,475,207 | (408,226) | 1,066,981 | - | 19,483 | 1,086,464 |
| 1,585,351 | (481,582) | 1,103,769 | - | 29,556 | 1,133,325 | |
| 11,841,326 | (570,379) | 11,270,947 | 144,017 | 56,883 | 11,471,847 |
(*) This caption includes the amount related to impairment of overdue securities
The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of activity, as at 30 September 2018 is as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Other | |||||
| Financial | Overdue | ||||
| Fisheries | Bonds 2,000 |
Shares - |
Assets - |
Securities - |
Total 2,000 |
| Textiles | - | - | - | 203 | 203 |
| Wood and cork | - | - | - | 998 | 998 |
| Paper, printing and publishing | 49,797 | 1 | - | - | 49,798 |
| Chemicals | - | 2 | - | - | 2 |
| Machinery, equipment and basic metallurgical | 4,062 | 443 | - | - | 4,505 |
| Construction | - | 10 | - | 2,394 | 2,404 |
| Retail business | 4,195 | 1,556 | - | - | 5,751 |
| Wholesale business | 56,868 | 786 | - | 126 | 57,780 |
| Restaurants and hotels | - | 19,464 | - | - | 19,464 |
| Transports | 725,582 | - | - | - | 725,582 |
| Telecommunications | - | 7,751 | - | - | 7,751 |
| Services | |||||
| Financial intermediation (*) | 397,271 | 27,482 | 1,039,890 | - | 1,464,643 |
| Real estate activities | - | - | 42,115 | - | 42,115 |
| Consulting, scientific and technical activities | 158,33 0 |
227 | - | - | 158,557 |
| Administrative and support services activities | - | 11,326 | - | - | 11,326 |
| Public sector | 161,113 | - | 491 | - | 161,604 |
| Artistic, sports and recreational activities | 16,683 | 16 | - | - | 16,699 |
| Other services | 1 | 6,693 | 7,578 | 1 | 14,273 |
| Other international activities | - | 6 | - | - | 6 |
| 1,575,902 | 75,763 | 1,090,074 | 3,722 | 2,745,461 | |
| Government and Public securities | 9,529,919 | - | 1,314,824 | - | 10,844,743 |
| Impairment for overdue securities | - | - | - | (3,722) | (3,722) |
| 11,105,821 | 75,763 | 2,404,898 | - | 13,586,482 |
(*) The balance Other financial assets includes restructuring funds in the amount of Euros 1,022,927,000, which are classified in the sector of activity Services - Financial intermediation, but which have the core segment as disclosed in note 56.
The analysis of Financial assets at fair value through profit or loss and Financial assets available for sale, by sector of activity, as at 31 December 2017 is as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 31 December 2017 | |||||
| Other | |||||
| Financial | Overdue | ||||
| Bonds | Shares | Assets | Securities | Total | |
| Textiles | - | - | - | 203 | 203 |
| Wood and cork | - | - | - | 998 | 998 |
| Paper, printing and publishing | - | 2 | - | - | 2 |
| Chemicals | 26,753 | 2 | - | - | 26,755 |
| Machinery, equipment and basic metallurgical | - | 5 | - | - | 5 |
| Construction | - | 4 | - | 2,394 | 2,398 |
| Retail business | 4,378 | 1,621 | - | - | 5,999 |
| Wholesale business | 49,619 | 852 | - | 126 | 50,597 |
| Restaurants and hotels | - | 46 | - | - | 46 |
| Transports | 828,640 | 2,168 | - | - | 830,808 |
| Telecommunications | - | 6,424 | - | - | 6,424 |
| Services | |||||
| Financial intermediation (*) | 1,655,277 | 23,912 | 1,038,421 | - | 2,717,610 |
| Real estate activities | - | - | 41,543 | - | 41,543 |
| Consulting, scientific and technical activities | 220,36 7 |
365 | - | - | 220,732 |
| Administrative and support services activities | - | 12,779 | - | - | 12,779 |
| Public sector | 111,833 | - | - | - | 111,833 |
| Artistic, sports and recreational activities | 16,683 | 16 | - | - | 16,699 |
| Other services | - | 781 | 7,265 | 1 | 8,047 |
| Other international activities | - | 8 | 850 | - | 858 |
| 2,913,550 | 48,985 | 1,088,079 | 3,722 | 4,054,336 | |
| Government and Public securities | 6,351,352 | - | 1,368,667 | - | 7,720,019 |
| Impairment for overdue securities | - | - | - | (3,722) | (3,722) |
| 9,264,902 | 48,985 | 2,456,746 | - | 11,770,633 |
(*) The balance Other financial assets includes restructuring funds, in the amount of Euros 1,022,068,000, which are classified in the sector of activity Services - Financial intermediation, but which have the core segment as disclosed in note 56.
As at 31 December 2017, the balance Financial assets held to maturity was analysed as follows:
| (Thousands of euros) 31 December 2017 |
|
|---|---|
| Bonds and other fixed income securities | |
| Issued by public entities | 119,873 |
| Issued by other entities | 291,926 |
| 411,799 |
This balance is analysed, by hedging instruments, as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||
| Assets | Liabilities | Assets | Liabilities | |
| Swaps | 76,402 | 170,474 | 234,345 | 164,438 |
| Others | 196 | - | - | 12,899 |
| 76,598 | 170,474 | 234,345 | 177,337 |
Hedging derivatives are measured in accordance with internal valuation techniques considering observable market inputs and, when not available, on information prepared by the Group by extrapolation of market data. In accordance with the hierarchy of the valuation sources, as referred in IFRS 13, these derivatives are classified in level 2. The Group resources to derivatives to hedge interest and exchange rate exposure risks. The accounting method depends on the nature of the hedged risk, namely if the Group is exposed to fair value changes, variability in cash flows or highly probable forecast transactions.
As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements in accordance with IAS 39 (note 1 C.4), using mainly interest rate and exchange rate derivatives. The fair value hedge model is adopted for debt securities, loans granted at fixed rate and money market loans and deposits, securities and combined hedge of variable rate financial assets and fixed rate financial liabilities. The cash flows hedge model is adopted for future transactions in foreign currency to cover dynamic changes in cash flows from loans granted and variable rate deposits in foreign currency and foreign currency mortgage loans.
During the first nine months of 2018, reclassifications were made from fair value reserves to results, related to cash flow hedge relationships, in a positive amount of Euros 17,448,000 (31 December 2017: positive amount Euros 26,586,000).
The accumulated adjustment on financial risks covered performed on the assets and liabilities which includes hedged items is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| Hedged items | 2018 | 2017 |
| Loans | 3,865 | 4,825 |
| Deposits | 4,338 | 4,194 |
| Debt issued | (41,556) | (48,415) |
| (33,353) | (39,396) |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Portuguese credit institutions | 40,907 | 35,249 |
| Foreign credit institutions | 233,556 | 331,617 |
| Other Portuguese companies | 270,475 | 284,611 |
| Other foreign companies | 21,752 | 21,897 |
| 566,690 | 673,374 | |
| Impairment | (78,515) | (102,012) |
| 488,175 | 571,362 | |
The balance Investments in associated companies is analysed as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 31 December | |||||
| 30 September 2018 | 2017 | ||||
| Ownership on equity |
Goodwill | Impairment for investments in associated companies |
Total | Total | |
| Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. | 229,926 | - | - | 229,926 | 252,577 |
| Banco Millennium Atlântico, S.A. | 98,234 | 99,143 | (60,504) | 136,873 | 212,797 |
| Unicre - Instituição Financeira de Crédito, S.A. | 33,471 | 7,436 | - | 40,907 | 35,249 |
| Banque BCP, S.A.S. | 36,179 | - | - | 36,179 | 34,819 |
| SIBS, S.G.P.S, S.A. | 31,382 | - | - | 31,382 | 23,954 |
| Mundotêxtil - Indústrias Têxteis, S.A. | 6,632 | - | - | 6,632 | 6,198 |
| Webspectator Corporation | 90 | 18,011 | (18,011) | 90 | 87 |
| Others | 6,186 | - | - | 6,186 | 5,681 |
| 442,100 | 124,590 | (78,515) | 488,175 | 571,362 |
These investments correspond to unquoted companies. According to the accounting policy described in note 1 B), these investments are measured at the equity method. In 2018 the impairment of the period for investments in associated companies amounts to Euros 11,617,000 related to Banco Millennium Atlântico, S.A. (note 12).
The Group's companies included in the consolidation perimeter are presented in note 58.
This balance is analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||||
| Gross value | Impairment | Net value | Gross value | Impairment | Net value | |
| Real estate | ||||||
| Assets arising from recovered loans | 1,537,589 | (207,743) | 1,329,846 | 1,799,228 | (234,840) | 1,564,388 |
| Assets belong to investments funds | ||||||
| and real estate companies | 575,385 | (79,652) | 495,733 | 536,911 | (56,552) | 480,359 |
| Assets for own use (closed branches) | 56,449 | (15,779) | 40,670 | 67,092 | (14,886) | 52,206 |
| Equipment and other | 57,479 | (14,083) | 43,396 | 48,045 | (11,877) | 36,168 |
| Other assets | 30,355 | - | 30,355 | 31,446 | - | 31,446 |
| 2,257,257 | (317,257) | 1,940,000 | 2,482,722 | (318,155) | 2,164,567 |
The assets included in this balance are accounted for in accordance with the accounting policy note 1 H).
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 being accounted for at the time the Group assumes control of the asset, which is usually associated with the transfer of their legal ownership. Additional information on these assets is presented in note 52.
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, considering the formal constraints, 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 68,458,00 (31 December 2017: Euros 77,152,000), of which Euros 11,226,000 (31 December 2017: Euros 7,079,000) relate to properties held by investment funds. The impairment associated with all the established contracts is Euros 8,496,000 (31 December 2017: Euros 4,832,000), of which Euros 3,009,000 (31 December 2017: Euros 0) relate to properties held by investment funds which was calculated considering the value of the respective contracts.
The changes occurred in impairment for non-current assets held for sale are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance on 1 January | 318,155 | 227,579 |
| Transfers | 11,141 | - |
| Charge for the period (note 12) | 64,045 | 155,236 |
| Reversals for the period (note 12) | (12,448) | (4,618) |
| Amounts charged-off | (63,603) | (60,173) |
| Exchange rate differences | (33) | 131 |
| Balance at the end of the period | 317,257 | 318,155 |
The balance Transfers refers to impairments that, as at 31 December 2017, were accounted in loans to customers. In the context of the financial restructuring of a group of customers, in the first nine months of 2018, the associated credits were liquidated, and the Group received a set of assets in kind.
The balance Investment property corresponds to real estate evaluated in accordance with the accounting policy presented in note 1 N), based on independent assessments and compliance with legal requirements.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Real estate | 814,422 | 830,989 |
| Equipment: | ||
| Computer equipment | 301,641 | 300,310 |
| Security equipment | 71,452 | 70,960 |
| Interior installations | 141,295 | 140,628 |
| Machinery | 45,241 | 45,279 |
| Furniture | 84,224 | 83,202 |
| Motor vehicles | 32,167 | 30,597 |
| Other equipment | 31,322 | 31,394 |
| Work in progress | 20,661 | 20,288 |
| Other tangible assets | 234 | 230 |
| 1,542,659 | 1,553,877 | |
| Accumulated depreciation | ||
| Charge for the period (note 9) | (32,098) | (41,685) |
| Charge for the previous periods | (1,026,325) | (1,021,769) |
| (1,058,423) | (1,063,454) | |
| 484,236 | 490,423 |
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Transfers and | ||||||
| Balance on | Acquisitions | Disposals | changes in | Exchange | Balance on | |
| 1 January | / Charge | / Charged-off | perimeter | differences | 30 September | |
| Real estate | 830,989 | 511 | (21,048) | 6,462 | (2,492) | 814,422 |
| Equipment: | ||||||
| Computer equipment | 300,310 | 6,009 | (6,086) | 2,177 | (769) | 301,641 |
| Security equipment | 70,960 | 1,162 | (644) | 10 | (36) | 71,452 |
| Interior installations | 140,628 | 1,347 | (3,253) | 2,665 | (92) | 141,295 |
| Machinery | 45,279 | 850 | (582) | 203 | (509) | 45,241 |
| Furniture | 83,202 | 1,569 | (917) | 415 | (45) | 84,224 |
| Motor vehicles | 30,597 | 5,576 | (3,723) | 40 | (323) | 32,167 |
| Other equipment | 31,394 | 37 | (923) | 1,515 | (701) | 31,322 |
| Work in progress | 20,288 | 17,222 | (421) | (16,303) | (125) | 20,661 |
| Other tangible assets | 230 | - | - | 2 | 2 | 234 |
| 1,553,877 | 34,283 | (37,597) | (2,814) | (5,090) | 1,542,659 | |
| Accumulated depreciation | ||||||
| Real estate | (442,632) | (13,895) | 17,888 | 1,343 | 1,521 | (435,775) |
| Equipment: | ||||||
| Computer equipment | (274,652) | (8,202) | 5,792 | 3 | 546 | (276,513) |
| Security equipment | (65,726) | (1,117) | 644 | 67 | 25 | (66,107) |
| Interior installations | (128,313) | (1,758) | 3,144 | 98 | 41 | (126,788) |
| Machinery | (42,093) | (474) | 580 | - | 470 | (41,517) |
| Furniture | (74,571) | (1,655) | 830 | 32 | 19 | (75,345) |
| Motor vehicles | (12,876) | (3,483) | 2,622 | - | 85 | (13,652) |
| Other equipment | (22,555) | (1,514) | 923 | (26) | 482 | (22,690) |
| Other tangible assets | (36) | - | - | - | - | (36) |
| (1,063,454) | (32,098) | 32,423 | 1,517 | 3,189 | (1,058,423) | |
| 490,423 | 2,185 | (5,174) | (1,297) | (1,901) | 484,236 |
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Transfers and | ||||||
| Balance on | Acquisitions | Disposals | changes in | Exchange | Balance on | |
| 1 January | / Charge | / Charged-off | perimeter | differences | 31 December | |
| Real estate | 841,497 | 5,760 | (25,548) | 807 | 8,473 | 830,989 |
| Equipment: | ||||||
| Computer equipment | 286,268 | 10,734 | (3,442) | 4,258 | 2,492 | 300,310 |
| Security equipment | 71,391 | 707 | (1,558) | 181 | 239 | 70,960 |
| Interior installations | 136,563 | 1,808 | (761) | 2,403 | 615 | 140,628 |
| Machinery | 44,642 | 444 | (1,130) | 129 | 1,194 | 45,279 |
| Furniture | 82,947 | 2,391 | (2,696) | 280 | 280 | 83,202 |
| Motor vehicles | 24,857 | 13,311 | (8,448) | - | 877 | 30,597 |
| Other equipment | 29,696 | 55 | (2,913) | 3,043 | 1,513 | 31,394 |
| Work in progress | 16,532 | 29,699 | (1,181) | (25,309) | 547 | 20,288 |
| Other tangible assets | 219 | 1 | (1) | - | 11 | 230 |
| 1,534,612 | 64,910 | (47,678) | (14,208) | 16,241 | 1,553,877 | |
| Accumulated depreciation | ||||||
| Real estate | (450,020) | (19,417) | 25,231 | 5,462 | (3,888) | (442,632) |
| Equipment: | ||||||
| Computer equipment | (266,480) | (9,572) | 3,327 | 4 | (1,931) | (274,652) |
| Security equipment | (65,590) | (1,609) | 1,548 | 103 | (178) | (65,726) |
| Interior installations | (126,747) | (2,050) | 756 | 34 | (306) | (128,313) |
| Machinery | (41,485) | (644) | 1,130 | 1 | (1,095) | (42,093) |
| Furniture | (75,123) | (1,964) | 2,543 | 102 | (129) | (74,571) |
| Motor vehicles | (13,192) | (4,233) | 4,983 | 10 | (444) | (12,876) |
| Other equipment | (22,072) | (2,196) | 2,794 | (10) | (1,071) | (22,555) |
| Other tangible assets | (37) | - | 1 | - | - | (36) |
| (1,060,746) | (41,685) | 42,313 | 5,706 | (9,042) | (1,063,454) | |
| 473,866 | 23,225 | (5,365) | (8,502) | 7,199 | 490,423 |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Goodwill - Differences arising on consolidation | ||
| Bank Millennium, S.A. (Poland) | 112,269 | 115,094 |
| Real estate and mortgage credit | 40,859 | 40,859 |
| Others | 26,779 | 20,976 |
| 179,907 | 176,929 | |
| Impairment | ||
| Real estate and mortgage credit | (40,859) | (40,859) |
| Others | (16,473) | (16,473) |
| (57,332) | (57,332) | |
| 122,575 | 119,597 | |
| Intangible assets | ||
| Software | 131,756 | 122,124 |
| Other intangible assets | 56,588 | 56,731 |
| 188,344 | 178,855 | |
| Accumulated amortization | ||
| Charge for the period (note 9) | (10,798) | (11,897) |
| Charge for the previous periods | (131,376) | (122,149) |
| (142,174) | (134,046) | |
| 46,170 | 44,809 | |
| 168,745 | 164,406 |
The changes occurred in Goodwill and intangible assets balances, during the first nine months of 2018, are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Transfers and | ||||||
| Balance on | Acquisitions | Disposals | changes in | Exchange | Balance on | |
| 1 January | / Charge | / Charged-off | perimeter | differences | 30 September | |
| Goodwill - Differences arising | ||||||
| on consolidation | 176,929 | 5,807 | - | - | (2,829) | 179,907 |
| Impairment for goodwill | (57,332) | - | - | - | - | (57,332) |
| 119,597 | 5,807 | - | - | (2,829) | 122,575 | |
| Intangible assets | ||||||
| Software | 122,124 | 13,241 | (604) | (1,246) | (1,759) | 131,756 |
| Other intangible assets | 56,731 | 6 | - | 1,246 | (1,395) | 56,588 |
| 178,855 | 13,247 | (604) | - | (3,154) | 188,344 | |
| Accumulated depreciation: | ||||||
| Software | (80,286) | (9,761) | 2 | 132 | 1,344 | (88,569) |
| Other intangible assets | (53,760) | (1,037) | - | (132) | 1,324 | (53,605) |
| (134,046) | (10,798) | 2 | - | 2,668 | (142,174) | |
| 44,809 | 2,449 | (602) | - | (486) | 46,170 | |
| 164,406 | 8,256 | (602) | - | (3,315) | 168,745 |
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Transfers and | ||||||
| Balance on | Acquisitions | Disposals | changes in | Exchange | Balance on | |
| 1 January | / Charge | / Charged-off | perimeter | differences | 31 December | |
| Goodwill - Differences arising | ||||||
| on consolidation | 197,660 | 4 | (10,401) | - | (10,334) | 176,929 |
| Impairment for goodwill | (67,729) | (4) | 10,401 | - | - | (57,332) |
| 129,931 | - | - | - | (10,334) | 119,597 | |
| Intangible assets | ||||||
| Software | 101,739 | 22,211 | (5,829) | - | 4,003 | 122,124 |
| Other intangible assets | 52,509 | 1,272 | (1) | - | 2,951 | 56,731 |
| 154,248 | 23,483 | (5,830) | - | 6,954 | 178,855 | |
| Accumulated depreciation: | ||||||
| Software | (72,229) | (11,060) | 5,828 | 275 | (3,100) | (80,286) |
| Other intangible assets | (49,844) | (837) | - | (275) | (2,804) | (53,760) |
| (122,073) | (11,897) | 5,828 | - | (5,904) | (134,046) | |
| 32,175 | 11,586 | (2) | - | 1,050 | 44,809 | |
| 162,106 | 11,586 | (2) | - | (9,284) | 164,406 |
The changes occurred in Goodwill and intangible assets balances, during 2017, are analysed as follows:
According to the accounting policy described in note 1 B3), the recoverable amount of the Goodwill is annually assessed in the second semester of each year or whenever there are indications of eventual loss of value.
In accordance with IAS 36 the recoverable amount of goodwill resulting from the consolidation of the subsidiaries, should be the greater between its value in use (the present value of the future cash flows expected from its use) and its fair value less costs to sell. Based on these criteria, the Group made in 2017, valuations of their investments for which there is goodwill recognised considering among other factors:
(i) an estimate of future cash flows generated by each cash generating unit;
(iv) a risk premium associated with the uncertainty by holding the asset; and
(v) other factors associated with the current situation of financial markets.
The valuations are based on reasonable and sustainable assumptions representing the best estimate of the Executive Committee on the economic conditions that affect each subsidiary, the budgets and the latest projections approved for those subsidiaries and their extrapolation to future periods. The assumptions made for these valuations might vary with the change in economic conditions and in the market.
During the first nine months of 2018, there were no factors showing the deterioration of the value of those financial participations that could lead to impairment charges in respect of goodwill.
The estimated cash flows of the business were projected based on current operating results and assuming the business plan and projections approved by the Executive Committee up to 2022. After that date, perpetuity was considered based on the average longterm expected rate of return for this activity in the Polish market. Additionally, it was taken into consideration the market performance of Bank Millennium, S.A. in the Polish capital market and the direct percentage of shareholding. Based on this analysis and the expectations of future development, the Group concluded that there is no reason to book impairment charges regarding this subsidiary.
The business plan of Bank Millennium, S.A. comprises a five-year period, from 2018 to 2022, considering, along this period, a compound annual growth rate of 6.1% for Total Assets and of 9.6% for Total Equity, while considering a ROE evolution from 8.9% in 2018 to 9.2% by the end of the period. The exchange rate EUR/PLN considered was 4.1756 at the end of 2017 (December 2017 average: 4.2020). The Cost of Equity considered was 9.625% for the period 2018-2022 and in perpetuity. The annual growth rate in perpetuity (g) was 2.6%.
The deferred income tax assets and liabilities are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||||
| Assets | Liabilities | Net | Assets | Liabilities | Net | |
| Deferred taxes not depending | ||||||
| on the future profits (a) | ||||||
| Impairment losses | 973,317 | - | 973,317 | 976,535 | - | 976,535 |
| Employee benefits | 836,580 | - | 836,580 | 838,769 | - | 838,769 |
| 1,809,897 | - | 1,809,897 | 1,815,304 | - | 1,815,304 | |
| Deferred taxes depending | ||||||
| on the future profits | ||||||
| Impairment losses | 801,954 | (50,303) | 751,651 | 1,001,097 | (50,303) | 950,794 |
| Tax losses carried forward | 320,282 | - | 320,282 | 321,774 | - | 321,774 |
| Employee benefits | 37,599 | (608) | 36,991 | 32,026 | (1,804) | 30,222 |
| Financial assets at fair value | ||||||
| through other comprehensive income | 138,016 | (139,243) | (1,227) | n.a. | n.a. | n.a. |
| Financial assets available for sale | n.a. | n.a. | n.a. | 33,531 | (26,461) | 7,070 |
| Derivatives | - | (6,250) | (6,250) | - | (6,821) | (6,821) |
| Intangible assets | 39 | - | 39 | 39 | - | 39 |
| Other tangible assets | 10,417 | (3,053) | 7,364 | 9,827 | (3,409) | 6,418 |
| Others | 40,571 | (19,007) | 21,564 | 26,344 | (19,407) | 6,937 |
| 1,348,878 | (218,464) | 1,130,414 | 1,424,638 | (108,205) | 1,316,433 | |
| Total deferred taxes | 3,158,775 | (218,464) | 2,940,311 | 3,239,942 | (108,205) | 3,131,737 |
| Offset between deferred tax assets | ||||||
| and deferred tax liabilities | (213,471) | 213,471 | - | (102,175) | 102,175 | - |
| Net deferred taxes | 2,945,304 | (4,993) | 2,940,311 | 3,137,767 | (6,030) | 3,131,737 |
(a) Special Regime applicable to deferred tax assets
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 applied 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. 259/2016, 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 the confirmation of the conversion of the deferred tax asset into tax credit. 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:
| 30 September 2018 |
31 December 2017 |
|
|---|---|---|
| Income tax | 21% | 21% |
| Municipal surtax rate (on taxable net income) | 1.5% | 1.5% |
| State tax rate (on taxable net income) | ||
| More than 1,500,000 to 7,500,000 | 3% | 3% |
| From more than 7,500,000 to 35,000,000 | 5% | 5% |
| More than 35,000,000 (a) | 9% | 7% |
(a) Law 114/2017 dated 29 December (State Budget Law for 2018) establishes the increase of the state tax rate for the portion of the taxable income above Euros 35,000,000 from 7% to 9% for taxation periods beginning on or after 1 January 2018.
The tax applicable to deferred taxes related to tax losses of the Bank is 21% (31 December 2017: 21%).
The average deferred tax rate associated with temporary differences of the Banco Comercial Português, S.A. is 31.30% (31 December 2017: 31.30%). 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, 2017 and 2018 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 not depending 'on the future profits (covered by the scheme approved by Law no. 61/2014, of 26 August), include the amounts of Euros 210,686,000 and Euros 4,020,000 recorded in 2015 and 2016, respectively, 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.
The deferred income tax assets associated to tax losses carried forward, by expire date, is presented as follows:
| (Thousands of euros) | ||
|---|---|---|
| Maturity | 30 September 2018 |
31 December 2017 |
| 2018 | 243 | 1,870 |
| 2019-2025 | 247 | 112 |
| 2026 | 80,758 | 80,758 |
| 2028 and following | 239,034 | 239,034 |
| 320,282 | 321,774 |
Following the publication of the Notice of the Bank of Portugal No. 5/2015, the entities that presented their financial statements in Adjusted Accounting Standards issued by the Bank of Portugal (NCA), since 1 January 2016, began to apply the International Financial Reporting Standards as adopted in the European Union, including, among others, the Bank's individual financial statements.
As a result of this change, in the Bank's individual financial statements, the loans portfolio, guarantees provided and other operations of a similar nature became subject to impairment losses calculated in accordance with the requirements of International Accounting Standard (IAS 39 - Financial Instruments: Recognition and Measurement until 31 December 2017 and IFRS 9 - Financial Instruments from1 January 2018), replacing the registration of provisions for specific risk, for general credit risks and for country risk, in accordance with Bank of Portugal Notice No. 3/95.
The Regulatory Decree No. 5/2016, of November 18, established the maximum limits of impairment losses and other corrections of value for specific credit risk deductible for calculating the taxable profit in 2016. This Decree declares that Bank of Portugal Notice No. 3/95 (Notice that was relevant to the determination of provisions for credit in the financial statements presented in the NCA basis) should be considered for the purposes of calculating the maximum loss limits for impairment losses accepted for tax purposes in 2016. This methodology was also applied for the treatment of the transition adjustments related to credit impairment of entities that previously presented their financial statements on an NCA basis.
This Regulatory Decree includes a transitional rule that provides for the possibility of the positive difference between the value of the provisions for credit created on 1 January 2016 under the Notice of Bank of Portugal No. 3/95 and the impairment losses recorded on 1 January 2016 referring to the same credits, will be considered in the calculation of the taxable income of 2016 only in the part that exceeds the tax losses generated in periods of taxation started on or after 1 January 2012 and not used. The Bank opted to apply this transitional standard.
The Regulatory Decree No. 11/2017, of 28 December, established the maximum limits of impairment losses and other corrections of value for specific credit risk deductible for the purposes of calculating taxable income in 2017, establishing that the Notice of Bank of Portugal No. 3/95 should be considered for the purposes of calculating the maximum limits of impairment losses accepted for tax purposes in 2017, similar to the regime for 2016.
In the absence of specific rules regarding the tax regime for credit impairment and guarantees for the taxation periods beginning on or after 1 January 2018, in the estimate of taxable profit for the period was considered the maintenance of the tax rules in force in 2017, which stipulate that Bank of Portugal Notice No. 3/95 should be considered for calculating the maximum limits of impairment losses accepted for tax purposes.
In 2018, the Bank adopted IFRS 9 - Financial Instruments. Since there is no transitional regime that establishes the tax treatment to be applied to the transition adjustments to IFRS 9, the treatment given resulted from the interpretation of the general rules application of the IRC Code.
In accordance with the accounting policy 1 Z.3), 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 considering the respective financial statements prepared under the budget process for 2018 and which support future taxable income for each Group's entity considering the macroeconomic and competitive environment, while incorporate the Group's strategic priorities.
To estimate taxable profits for the periods 2018 and following, the following main assumptions were considered:
In the absence of specific rules regarding the tax regime for credit impairment and guarantees for taxation periods beginning on or after 1 January 2018, the tax rules that were in force in 2015, 2016 and 2017 were considered and of Decree-Laws published at the end of each of the referred years established that the Notice of Bank of Portugal No. 3/95 should be considered for the purposes of calculating the maximum limits of impairment losses accepted for tax purposes;
In the absence of a transitional regime that establishes the tax treatment to be given to the transition adjustments resulting from the adoption of IFRS 9, the general rules of the IRC Code have been applied;
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.
In addition, as part of the analysis of the recoverability of deferred tax assets, the Bank prepared a sensitivity analysis that considered the possibility of approving a document with changes to the tax treatment of impairment losses for credit and guarantees, in the same proposal for amendment to the State Budget Law Proposal for 2018. This proposal provided for modifications to Articles 28-A, 28-C and 39 of the IRC Code, to approximate fiscal rules and accounting rules and introduced a transition period of 19 years with increasing percentages for the tax deductibility of losses due to credit impairment and guarantees not accepted by tax until 31 December 2017 and which became deductible under the envisaged changes.
According to this sensitivity analysis, the Bank also concluded the recoverability of all deferred tax assets recorded as at 30 September 2018.
The projections made take into consideration, in addition to the Group's strategic priorities, essentially reflecting the projection of the Bank's medium-term business in Portugal in terms of results generation, and are broadly consistent with the Reduction Plan of Non-Performing Assets 2018-2020 sent it to the supervisory entity in March 2018, 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;
Evolution of the ratio loans and advances over the balance sheet resources from customer by approximately 100% 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 2023) is estimated to be close to those currently observed in other European countries, including in the Iberian Peninsula.
Control of the operating expenses, notwithstanding the investments planned by the Bank in the context of the expected deepening of the digitization and expansion of its commercial activities;
Positive net income, projecting the favourable evolution of the ROE and maintaining of the CET1 ratio fully implemented at levels appropriate to the requirements and benchmarks. From 2024 onwards, it is estimated an annual growth of the Net income before income taxes, which reflects a partial convergence to the expected level of ROE stabilized term.
The analyses made allow the conclusion of the recoverability of the total deferred tax assets recognised as at 30 September 2018.
In accordance with this assessment, the amount of unrecognised deferred tax, by year of expiration, is as follows:
| (Thousands of euros) | ||
|---|---|---|
| Tax losses carried forward | 30 September 2018 |
31 December 2017 |
| 2017 | - | 2,258 |
| 2018 | 1,567 | 1,595 |
| 2019-2025 | 152,561 | 1,772 |
| 2026 | 132,888 | 132,901 |
| 2027 and following | 279,859 | 279,887 |
| 566,875 | 418,413 |
The impact of income taxes in Net income and in other captions of Group's equity, as at 30 September 2018, is analysed as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Reserves and retained earnings | |||||
| Net income for the period |
Impact of adoption of IFRS 9 |
Movement of the period |
Exchange differences |
||
| Deferred taxes | |||||
| Deferred taxes not depending on the future profits (a) | |||||
| Impairment losses | (3,494) | 276 | - | - | |
| Employee benefits | (2,189) | - | - | - | |
| (5,683) | 276 | - | - | ||
| Deferred taxes depending on the future profits | |||||
| Impairment losses (b) | (20,055) | (182,551) | 4,945 | (1,482) | |
| Tax losses carried forward | (10,370) | - | 8,856 | 22 | |
| Employee benefits | 7,533 | - | (669) | (95) | |
| Financial assets at fair value through other comprehensive income | (10,076) | 40,038 | (26,433) | (4,756) | |
| Financial assets available for sale | n.a. | (7,070) | n.a. | n.a. | |
| Derivatives | 407 | - | - | 164 | |
| Other tangible assets | 964 | - | - | (18) | |
| Others | 5,325 | (324) | 9,909 | (283) | |
| (26,272) | (149,907) | (3,392) | (6,448) | ||
| (31,955) | (149,631) | (3,392) | (6,448) | ||
| Current taxes | |||||
| Actual period | (79,010) | 1,047 | (958) | - | |
| Correction of previous periods | 1,460 | - | - | - | |
| (77,550) | 1,047 | (958) | - | ||
| (109,505) | (148,584) | (4,350) | (6,448) |
(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.
(b) - The tax on reserves and retained earnings refers to the impact of the transition adjustment resulting from the adoption of IFRS 9 at the level of deferred tax assets.
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:
| 30 September 2017 | |||
|---|---|---|---|
| Net income / (loss) for the period |
Reserves and retained earnings |
Exchange differences |
|
| 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 reconciliation between the nominal tax rate and the effective tax rate is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Net income / (loss) before income taxes | 448,997 | 271,198 |
| Current tax rate (%) | 31.5% | 29.5% |
| Expected tax | (141,433) | (80,003) |
| Employees' benefits | 5,657 | 17,002 |
| Tax benefits | 10,940 | 6,403 |
| Correction of previous periods | (907) | 2,965 |
| Effect of difference of rate tax and deferred tax recognised / not recognised previously | 15,285 | 7,520 |
| Impact of the Special Regime for Taxation of Companies Groups | 6,238 | - |
| Non-deductible impairment and provisions | (2,786) | 11,141 |
| Other accruals and deductions for calculating the taxable income | (2,451) | (28,166) |
| Results of companies accounted by the equity method | 22,638 | 16,753 |
| Autonomous tax | (1,719) | (1,323) |
| Contribution to the banking sector | (20,967) | (15,403) |
| Total | (109,505) | (63,111) |
| Effective rate (%) | 24.39% | 23.27% |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Deposit account applications | 106,651 | 136,255 |
| Associated companies | 3,818 | 579 |
| Subsidies receivables | 7,482 | 3,794 |
| Prepaid expenses | 42,999 | 31,063 |
| Debtors for futures and options transactions | 109,543 | 97,830 |
| Insurance activity | 6,539 | 8,256 |
| Debtors | ||
| Residents | ||
| Advances to suppliers | 999 | 887 |
| Prosecution cases / agreements with the Bank | 11,010 | 12,126 |
| SIBS | 6,496 | 7,136 |
| Receivables from real estate, transfers of assets and other securities | 40,466 | 31,012 |
| Others | 68,606 | 86,780 |
| Non-residents | 30,234 | 28,904 |
| Interest and other amounts receivable | 44,411 | 41,119 |
| Amounts receivable on trading activity | 36,845 | 108,410 |
| Gold and other precious metals | 3,665 | 3,639 |
| Other financial investments | 165 | 165 |
| Other recoverable tax | 24,395 | 24,693 |
| Artistic patrimony | 28,843 | 28,845 |
| Capital supplementary contributions | 5,279 | 8,318 |
| Reinsurance technical provision | 5,506 | 12,930 |
| Obligations with post-employment benefits (note 49) | 108,719 | 116,781 |
| Capital supplies | 225,580 | 221,055 |
| Amounts due for collection | 34,369 | 36,636 |
| Amounts due from customers | 201,129 | 130,954 |
| Sundry assets | 110,005 | 156,503 |
| 1,263,754 | 1,334,670 | |
| Impairment for other assets | (283,749) | (282,646) |
| 980,005 | 1,052,024 |
As referred in note 56, the balance Capital supplies includes the amount of Euros 222,810,000 (31 December 2017: Euros 219,656,000) and the balance Capital supplementary contributions included, in 31 December 2017, the amount of Euros 2,939,000 arising from the transfers of assets to Specialized recovery funds which have impairment in the same amount.
As at 30 September 2018, the caption Deposit account applications includes the amount of Euros 67,086,000 (31 December 2017: Euros 94,770,000) on the Clearing houses / Clearing derivatives.
The caption Amounts receivable on trading activity includes amounts receivable within 3 business days of stock exchange operations.
Considering the nature of these transactions and the age of the amounts of these items, the Group's procedure is to periodically assess the collectability of these amounts and whenever impairment is identified, an impairment loss is recognised in the income statement.
The changes occurred in impairment for other assets are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance on 1 January | 282,646 | 267,389 |
| Other transfers | 48,892 | 41,243 |
| Charge for the period (note 12) | 6,048 | 13,616 |
| Reversals for the period (note 12) | (864) | (1,029) |
| Amounts charged-off | (52,964) | (38,635) |
| Exchange rate differences | (9) | 62 |
| Balance at the end of the period | 283,749 | 282,646 |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Resources and other financing from Central Banks | ||
| Bank of Portugal | 3,985,947 | 3,969,732 |
| Central Banks abroad | 141,358 | 172,226 |
| 4,127,305 | 4,141,958 | |
| Resources from credit institutions in Portugal | ||
| Very short-term deposits | - | 19,993 |
| Sight deposits | 119,329 | 104,155 |
| Term Deposits | 298,962 | 89,247 |
| Loans obtained | 1,142 | 1,095 |
| Other resources | 3,211 | 1,569 |
| 422,644 | 216,059 | |
| Resources from credit institutions abroad | ||
| Very short-term deposits | - | 83 |
| Sight deposits | 145,651 | 121,208 |
| Term Deposits | 227,095 | 454,713 |
| Loans obtained | 1,795,514 | 1,715,246 |
| Sales operations with repurchase agreement | 835,486 | 827,913 |
| Other resources | 9,829 | 10,177 |
| 3,013,575 | 3,129,340 | |
| 7,563,524 | 7,487,357 |
The caption Resources from credit institutions abroad includes, under the scope of transactions involving derivative financial instruments (IRS and CIRS) with institutional counterparties, and in accordance with the terms of their respective agreements ("Cash collateral"), the amount of Euros 30,934,000 (31 December 2017: Euros 231,621,000). These deposits are held by the Group and are reported as collateral for the referred operations (IRS and CIRS), whose revaluation is positive.
The caption Resources from credit institutions - Resources from credit institutions abroad - Sales operations with repurchase agreement, corresponds to repo operations carried out in the money market and is a tool for the Bank's treasury management.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Deposits from customers: | ||
| Repayable on demand | 28,714,589 | 25,447,443 |
| Term deposits | 18,136,998 | 19,310,419 |
| Saving accounts | 3,337,765 | 3,016,883 |
| Treasury bills and other assets sold under repurchase agreement | 91,729 | 129,764 |
| Cheques and orders to pay | 478,111 | 370,295 |
| Others | 1,327 | 10,621 |
| 50,760,519 | 48,285,425 |
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.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Bonds | 322,335 | 709,225 |
| Covered bonds | 993,937 | 992,725 |
| Medium term notes (MTNs) | 77,900 | 20,365 |
| Securitizations | 307,970 | 338,011 |
| 1,702,142 | 2,060,326 | |
| Accruals | 5,554 | 6,212 |
| 1,707,696 | 2,066,538 |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Bonds | ||
| Non Perpetual | 1,041,193 | 1,133,427 |
| Perpetual | 27,021 | 27,092 |
| 1,068,214 | 1,160,519 | |
| Accruals | 29,478 | 8,543 |
| 1,097,692 | 1,169,062 | |
As at 30 September 2018, the subordinated debt issues are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Issue | Maturity | Interest | Nominal | Book | Own funds | |
| Issue | date | date | rate | value | value | value |
| Non Perpetual Bonds | ||||||
| Banco Comercial Português: | ||||||
| Bcp Ob Sub Mar 2021 - Emtn 804 | March, 2011 | March, 2021 | Euribor 3M + 3.75% | 114,000 | 114,000 | 56,873 |
| Bcp Ob Sub Apr 2021 - Emtn 809 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 64,100 | 64,100 | 32,086 |
| Bcp Ob Sub 3S Apr 2021 - Emtn 812 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 35,000 | 35,000 | 17,908 |
| Bcp Sub 11/25.08.2019 - Emtn 823 | August, 2011 | August, 2019 | Fixed rate 6.383% | 7,500 | 7,688 | 1,354 |
| Bcp Subord Sep 2019 - Emtn 826 | October, 2011 | September, 2019 | Fixed rate 9.31% | 50,000 | 54,714 | 9,944 |
| Bcp Subord Nov 2019 - Emtn 830 | November, 2011 | November, 2019 | Fixed rate 8.519% | 40,000 | 44,213 | 8,844 |
| Mbcp Subord Dec 2019 - Emtn 833 | December, 2011 | December, 2019 | Fixed rate 7.15% | 26,600 | 30,044 | 6,340 |
| Mbcp Subord Jan 2020 - Emtn 834 | January, 2012 | January, 2020 | Fixed rate 7.01% | 14,000 | 15,674 | 3,601 |
| Mbcp Subord Feb 2020 - Vm Sr. 173 | April, 2012 | February, 2020 | Fixed rate 9% | 23,000 | 24,893 | 6,491 |
| Bcp Subord Apr 2020 - Vm Sr 187 | April, 2012 | April, 2020 | Fixed rate 9.15% | 51,000 | 54,758 | 15,385 |
| Bcp Subord 2 Serie Apr 2020 - Vm 194 | April, 2012 | April, 2020 | Fixed rate 9% | 25,000 | 26,840 | 7,667 |
| Bcp Subordinadas Jul 20-Emtn 844 | July, 2012 | July, 2020 | Fixed rate 9% | 26,250 | 27,799 | 9,217 |
| Bcp Fix Rate Reset Sub Notes-Emtn 854 | December, 2017 | December, 2027 | See reference (ii) | 300,000 | 298,672 | 300,000 |
| Bank Millennium | ||||||
| Bank Millennium - BKMO_071227R | December, 2017 | December, 2027 | Wibor 6M 1,81% | 163,525 | 163,525 | 45,756 |
| + 2,3% | ||||||
| BCP Finance Bank: | ||||||
| BCP Fin Bank Ltd EMTN - 828 | October, 2011 | October, 2021 | Fixed rate 13% | 94,354 | 79,229 | 16,651 |
| Magellan No. 3: | ||||||
| Magellan No. 3 Series 3 Class F | June, 2005 | May, 2058 | - | 44 | 44 | - |
| 1,041,193 | 538,117 | |||||
| Perpetual Bonds | ||||||
| Banco Comercial Português: | ||||||
| TOPS BPSM 1997 | December, 1997 | See reference (i) | Euribor 6M+0,9% | 22,035 | 22,035 | 22,035 |
| BCP Leasing 2001 | December, 2001 | See reference (i) | Euribor 3M+2,25% | 4,986 | 4,986 | 4,986 |
| 27,021 | 27,021 | |||||
| Accruals | 29,478 | - | ||||
| 1,097,692 | 565,138 |
References:
Date of exercise of the next call option - The dates of the next call options are the dates provided in the Issues Terms and Conditions.
(i) - December 2018.
Interest rate
(ii) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%.
As at 31 December 2017, the subordinated debt issues are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Issue date |
Maturity date |
Interest | Nominal | Book | Own funds | |
| Issue Non Perpetual Bonds |
rate | value | value | value | ||
| Banco Comercial Português: | ||||||
| MBCP Ob Cx Sub 1 Serie 2008-2018 | September, 2008 | September, 2018 (i) | See reference (viii) | 52,420 | 52,420 | 2,549 |
| MBCP Ob Cx Sub 2 Serie 2008-2018 | October, 2008 | October, 2018 (ii) | See reference (viii) | 14,887 | 14,887 | 868 |
| BCP Ob Sub jun 2020-EMTN 727 | June, 2010 | June, 2020 (iii) | See reference (ix) | 14,791 | 14,791 | 1,470 |
| BCP Ob Sub ago 2020-EMTN 739 | August, 2010 | August, 2020 (iv) | See reference (x) | 9,278 | 9,278 | 294 |
| BCP Ob Sub mar 2021-EMTN 804 | March, 2011 | March, 2021 | Euribor 3M + 3.75% | 114,000 | 114,000 | 73,973 |
| BCP Ob Sub abr 2021-EMTN 809 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 64,100 | 64,100 | 41,701 |
| BCP Ob Sub 3S abr 2021-EMTN 812 | April, 2011 | April, 2021 | Euribor 3M + 3.75% | 35,000 | 35,000 | 23,158 |
| BCP Sub 11/25.08.2019-EMTN 823 | August, 2011 | August, 2019 | Fixed rate 6.383% | 7,500 | 7,832 | 2,479 |
| BCP Subord set 2019-EMTN 826 | October, 2011 | September, 2019 | Fixed rate 9.31% | 50,000 | 55,251 | 17,444 |
| BCP Subord nov 2019-EMTN 830 | November, 2011 | November, 2019 | Fixed rate 8.519% | 40,000 | 44,338 | 14,844 |
| MBCP Subord dez 2019-EMTN 833 | December, 2011 | December, 2019 | Fixed rate 7.15% | 26,600 | 29,945 | 10,330 |
| MBCP Subord jan 2020-EMTN 834 | January, 2012 | January, 2020 | Fixed rate 7.01% | 14,000 | 15,504 | 5,701 |
| MBCP Subord fev 2020-Vm Sr. 173 | April, 2012 | February, 2020 | Fixed rate 9% | 23,000 | 24,722 | 9,941 |
| BCP Subord abr 2020-Vm Sr 187 | April, 2012 | April, 2020 | Fixed rate 9.15% | 51,000 | 54,412 | 23,035 |
| BCP Subord 2 Ser abr 2020-Vm 194 | April, 2012 | April, 2020 | Fixed rate 9% | 25,000 | 26,632 | 11,417 |
| BCP Subordinadas jul 20-EMTN 844 | July, 2012 | July, 2020 | Fixed rate 9% | 26,250 | 27,465 | 13,154 |
| Bcp Fix Rate Reset Sub Notes-Emtn 854 | December, 2017 | December, 2027 | See reference (xi) | 300,000 | 298,583 | 300,000 |
| Bank Millennium | ||||||
| Bank Millennium - BKMO_071227R | December, 2017 | December, 2027 | Wibor 6M 1,81% | 167,641 | 167,639 | 66,145 |
| + 2,3% | ||||||
| BCP Finance Bank: | ||||||
| BCP Fin Bank Ltd EMTN - 828 | October, 2011 | October, 2021 | Fixed rate 13% | 94,254 | 76,584 | 17,312 |
| Magellan No. 3: | ||||||
| Magellan No. 3 Series 3 Class F | June, 2005 | May, 2058 | - | 44 | 44 | - |
| 1,133,427 | 635,815 | |||||
| Perpetual Bonds | ||||||
| Banco Comercial Português: Obrigações Caixa Perpétuas |
||||||
| Subord 2002/19jun2012 | June, 2002 | See reference (v) | See reference (xii) | 85 | 71 | - |
| TOPS BPSM 1997 | December, 1997 | See reference (vi) | Euribor 6M + 0.9% | 22,035 | 22,035 | 22,035 |
| BCP Leasing 2001 | December, 2001 | See reference (vii) | Euribor 3M + 2.25% | 4,986 | 4,986 | 4,986 |
| 27,092 | 27,021 | |||||
| Accruals | 8,543 1,169,062 |
- 662,836 |
||||
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) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%; (xii) - Until 40th coupon 6.131%; After 40th coupon Euribor 3M + 2.4%.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Short selling securities | 12,257 | - |
| Trading derivatives (note 23): | ||
| Swaps | 282,164 | 377,553 |
| Options | 4,335 | 2,385 |
| Embedded derivatives | 7,541 | 10,274 |
| Forwards | 3,528 | 6,334 |
| Others | 772 | 2,555 |
| 298,340 | 399,101 | |
| 310,597 | 399,101 | |
| Level 1 | 255 | 1,019 |
| Level 2 | 290,091 | 387,157 |
| Level 3 | 20,251 | 10,925 |
As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 48.
The balance Financial liabilities held for trading includes, as at 30 September 2018, the embedded derivatives valuation separated from the host contracts in accordance with the accounting policy presented in note 1C.5. (2017: nota 1D.2.3) in the amount of Euros 7,541,000 (31 December 2017: Euros 10,274,000). This note should be analysed together with note 23.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Deposits from customers | 2,863,851 | 2,902,392 |
| Debt securities at fair value through profit and loss | ||
| Bonds | 1,034 | 13,368 |
| Medium term notes (MTNs) | 187,055 | 160,466 |
| 188,089 | 173,834 | |
| Accruals | 434 | 3,500 |
| 188,523 | 177,334 | |
| Certificates | 779,558 | 763,919 |
| 3,831,932 | 3,843,645 |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Provision for guarantees and other commitments | 159,131 | 130,875 |
| Technical provisions for the insurance activity - For direct insurance and reinsurance accepted: | ||
| Unearned premiums | 8,130 | 8,627 |
| Life insurance | 4,606 | 27,531 |
| For participation in profit and loss | 169 | 3,863 |
| Other technical provisions | 17,537 | 18,013 |
| Other provisions for the insurance activity | 8 | - |
| Other provisions for liabilities and charges | 142,315 | 135,249 |
| 331,896 | 324,158 |
Changes in Provisions for guarantees and other commitments are analysed as follows:
| (Thousands of euros) | |
|---|---|
| 30 September 2018 |
31 December 2017 |
| Balance on 1 January 130,875 |
128,056 |
| Adjustments due to the implementation of IFRS 9 (note 57) 14,714 |
- |
| Other transfers (2,125) |
- |
| Charge for the period (note 13) 46,697 |
18,537 |
| Reversals for the period (note 13) (30,802) |
(15,953) |
| Exchange rate differences (228) |
235 |
| Balance at the end of the period 159,131 |
130,875 |
Changes in Other provisions for liabilities and charges are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance on 1 January | 135,249 | 131,506 |
| Transfers resulting from changes in the Group's structure | 653 | 3 |
| Other transfers | 1,856 | (655) |
| Charge for the period (note 13) | 15,300 | 16,463 |
| Reversals for the period (note 13) | (267) | (2,337) |
| Amounts charged-off | (10,063) | (10,364) |
| Exchange rate differences | (413) | 633 |
| Balance at the end of the period | 142,315 | 135,249 |
The Other provisions for liabilities and charges were based on the probability of occurrence of certain contingencies related to risks inherent to the Group's activity, being reviewed at each reporting date to reflect the best estimate of the amount and respective probability of payment. This caption includes provisions for contingencies in the sale of Millennium Bank (Greece), lawsuits, fraud and tax contingencies. The provisions constituted to cover tax contingencies totalled Euros 62,650,000 (31 December 2017: Euros 63,669,000) and are associated, essentially, to contingencies related to VAT and Stamp Duty.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Creditors: | ||
| Associated companies | 28 | 82 |
| Suppliers | 36,386 | 39,197 |
| From factoring operations | 26,750 | 24,937 |
| For futures and options transactions | 19,208 | 10,972 |
| For direct insurance and reinsurance operations | 3,519 | 6,056 |
| Deposit account and other applications | 56,361 | 56,467 |
| Obligations not covered by the Group Pension Fund - amounts payable by the Group | 13,058 | 21,281 |
| Other creditors | ||
| Residents | 39,841 | 32,259 |
| Non-residents | 37,953 | 38,568 |
| Holiday pay and subsidies | 68,493 | 56,685 |
| Interests and other amounts payable | 37,406 | 19,821 |
| Operations to be settled - foreign, transfers and deposits | 275,107 | 333,205 |
| Amounts payable on trading activity | 22,721 | 1,441 |
| Other administrative costs payable | 3,581 | 3,527 |
| Deferred income | 69,817 | 67,009 |
| Loans insurance received and to amortised | 59,081 | 57,010 |
| Public sector | 29,034 | 35,631 |
| Other liabilities | 217,545 | 184,345 |
| 1,015,889 | 988,493 |
The caption Obligations not covered by the Group Pension Fund - amounts payable by the Group includes the amount of Euros 6,574,000 (31 December 2017: Euros 9,309,000) related to the actual value of benefits attributed associated with mortgage loans to employees, retirees and former employees and the amount of Euros 3,733,000 (31 December 2017: Euros 3,733,000), related to the obligations with retirement benefits already recognised in Staff costs, to be paid to former members of the Executive Board of Directors, as referred in note 49. This balance also includes the amount of Euros 5,000,000 regarding to restructuration costs. These obligations are not covered by the Group Pension Fund and therefore, correspond to amounts payable by the Group.
The caption Amounts payable on trading activity includes amounts payable within 3 business days of stock exchange operations.
The Bank's share capital, as at 30 September 2018, 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 at 30 September 2018, 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 2018, the balance preference shares amounts to Euros 59,910,000.
As at 30 September 2018, 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.
The balance 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 F), were considered as equity instruments.
The issues are analysed as follows:
439,684 preference shares with par value of Euros 100 each, perpetual without voting rights in the total amount of Euros 43,968,400, issued on 9 June 2004.
15,942 preference shares with par value of Euros 1,000 each, perpetual without voting rights, in the total amount of Euros 15,942,000, issued on 13 October 2005.
As at 30 September 2018, the shareholders who individually or jointly hold 2% or more of the capital of the Bank, are the following:
| Shareholder | number of shares | % share capital | % voting rights |
|---|---|---|---|
| Fosun Group - Chiado (Luxembourg) S.a.r.l. held by Fosun International Holdings Ltd | 4,089,789,779 | 27.06% | 27.06% |
| Sonangol - Sociedade Nacional de Combustíveis de Angola, EP, directly | 2,946,353,914 | 19.49% | 19.49% |
| BlackRock, Inc. (*) | 512,328,512 | 3.39% | 3.39% |
| EDP Pension Fund (**) | 319,113,690 | 2.11% | 2.11% |
| Total Qualified Shareholdings | 7,867,585,895 | 52.06% | 52.06% |
(*) In accordance with the announcement on March 5, 2018 (last information available).
(**) Allocation in accordance with Art. 20 (1.f) of the Portuguese Securities Code.
Under Portuguese legislation, the Bank is required to annually set-up 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 the 2017 results approved at the General Shareholders' Meeting on 30 May 2018, the Bank increased its legal reserve in the amount of Euros 11,802,000. Thus, as at 30 September 2018, the amount of Legal reserves amounts to Euros 234,608,000 (31 December 2017: Euros 222,806,000).
In accordance with current Portuguese 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 and are recorded in Other reserves and retained earnings in the Bank's consolidated financial statements (note 44).
The amount of Statutory reserves amounts to Euros 30,000,000 (31 December 2017: Euros 30,000,000) and correspond 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. shares |
Other treasury stock |
Total | |
|---|---|---|---|
| 30 September 2018 | |||
| Net book value (Euros '000) | 83 | 208 | 291 |
| Number of securities | 323,738 (*) | ||
| Average book value (Euros) | 0.26 | ||
| 31 December 2017 | |||
| Net book value (Euros '000) | 88 | 205 | 293 |
| Number of securities | 323,738 (*) | ||
| Average book value (Euros) | 0.27 |
(*) As at 30 September 2018, Banco Comercial Português, S.A. does not hold treasury shares and did not purchased or sold own shares during the period. However, this balance includes 323,738 shares (31 December 2017: 323,738 shares) owned by clients. Since 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.
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".
Regarding treasury shares owned by associated companies of the BCP Group, as at 30 September 2018, the Millenniumbcp Ageas Group owned 142,601,002 BCP shares (31 December 2017: 142,601,002 shares) in the amount of Euros 36,363,000 (31 December 2017: Euros 38,531,000), as referred in note 50.
This balance is analysed as follows:
| (Thousands of euros) | |||
|---|---|---|---|
| 30 September 2018 |
31 December 2017 |
||
| Fair value changes - Gross amount | |||
| Financial assets at fair value through other comprehensive income (note 23) | |||
| Debt instruments (*) | (33,399) | n.a. | |
| Equity instruments | (35,292) | n.a. | |
| Financial assets available for sale (note 23) | |||
| Debt instruments (*) | n.a. | 27,327 | |
| Equity instruments | n.a. | 29,556 | |
| Financial assets held to maturity (**) | n.a. | (3,049) | |
| Of associated companies and others | 25,065 | 29,199 | |
| Cash-flow hedge | 21,402 | 12,985 | |
| From financial liabilities designated at fair value through profit or loss related to changes in own credit risk | 3,279 | - | |
| (18,945) | 96,018 | ||
| Fair value changes - Tax | |||
| Financial assets at fair value through other comprehensive income | |||
| Debt instruments | 14,625 | n.a. | |
| Equity instruments | 3,701 | n.a. | |
| Financial assets available for sale | |||
| Debt instruments | n.a. | (830) | |
| Equity instruments | n.a. | (7,545) | |
| Financial assets held to maturity | n.a. | 141 | |
| Cash-flow hedge | (7,836) | (5,694) | |
| From financial liabilities designated at fair value through profit or loss related to changes in own credit risk | (1,026) | n.a. | |
| 9,464 | (13,928) | ||
| (9,481) | 82,090 | ||
| Reserves and retained earnings | |||
| Exchange differences arising on consolidation: | |||
| Bank Millennium, S.A. | (37,165) | (26,733) | |
| BIM - Banco International de Moçambique, S.A. | (154,734) | (151,710) | |
| Banco Millennium Atlântico, S.A. | (96,664) | (10,841) | |
| Others | 2,413 | 5,165 | |
| (286,150) | (184,119) | ||
| Actuarial losses | |||
| Gross amount | (3,265,238) | (3,256,068) | |
| Taxes | 664,034 | 665,251 | |
| (2,601,204) | (2,590,817) | ||
| Application of IAS 29 | |||
| Effect on equity of Banco Millennium Atlântico, S.A. | 42,684 | 28,428 | |
| Others | (5,116) | (3,965) | |
| 37,568 | 24,463 | ||
| Other reserves and retained earnings | 2,456,575 | 2,712,343 | |
| (393,211) | (38,130) |
(*) Includes the effects arising from the application of hedge accounting.
(**) Refers to the amount not accrued of the fair value reserve at the date of reclassification for securities subject to reclassification.
The fair value changes correspond to the accumulated changes of the Financial assets at fair value through other comprehensive income and Cash flow hedge, in accordance with the accounting policy presented in note 1 C (2017:1 D).
During first nine months of 2018, the changes occurred in Fair value reserves, excluding the effect of hedge accounting and changes in credit risk associated with financial liabilities at fair value through profit or loss, are analysed as follows:
| (Thousands of euros) | |||||||
|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2017 |
Adjustments due to the implementation of IFRS 9 |
Fair value changes |
Fair value hedge adjustment |
Impairment in profit or loss |
Disposals | Balance as at 30 September 2018 |
|
| Millenniumbcp Ageas | 25,032 | - | (4,679) | - | - | - | 20,353 |
| Portuguese public | |||||||
| debt securities | (57,774) | (381) | (2,490) | 5,839 | - | (17,678) | (72,484) |
| Visa Inc. | 2,927 | (2,927) | - | - | - | - | - |
| Other investments | 112,848 | (88,997) | (11,986) | (2,591) | (3,643) | 2,874 | 8,505 |
| 83,033 | (92,305) | (19,155) | 3,248 | (3,643) | (14,804) | (43,626) |
The negative amount of Euros 92,305,000 of adjustments due to the implementation of IFRS 9 corresponds, as described in note 57, to the impact arising from the adoption of IFRS in the balance Investments in associates and changes due to changes in the classification of securities.
As at 30 September 2018, the Disposals regards to the derecognition of debt securities and equity instruments at fair value through other comprehensive income, corresponding to a gain of Euros 44,718,000 and a loss of Euros 29,914,000, respectively.
The changes occurred in Fair value reserves, excluding the effect of hedge accounting, during 2017, are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Balance as at 1 January 2017 |
Fair value changes |
Fair value hedge adjustment |
Impairment in profit or loss |
Disposals | Balance as at 31 December 2017 |
|
| Millenniumbcp Ageas | (976) | 26,008 | - | - | - | 25,032 |
| Portuguese public debt securities | (295,433) | 361,778 | (68,400) | - | (55,719) | (57,774) |
| Visa Inc. | 644 | 2,283 | - | - | - | 2,927 |
| Other investments | 59,017 | 33,520 | 1,212 | 63,421 | (44,322) | 112,848 |
| (236,748) | 423,589 | (67,188) | 63,421 | (100,041) | 83,033 |
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Exchange differences arising on consolidation | (111,207) | (87,009) |
| Actuarial losses (net of taxes) | 256 | 256 |
| Fair value changes | ||
| Debt instruments | 8,960 | 6,214 |
| Equity instruments | 2,938 | 850 |
| Cash-flow hedge | (9,705) | (13,199) |
| Other | 18 | 88 |
| Deferred taxes | ||
| Debt instruments | (1,702) | (1,427) |
| Equity instruments | (558) | (161) |
| Cash-flow hedge | 1,844 | 2,508 |
| (109,156) | (91,880) | |
| Other reserves and retained earnings | 1,245,192 | 1,190,801 |
| 1,136,036 | 1,098,921 |
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Balance Sheet | Income Statement | |||
| 30 September | 31 December | 30 September | ||
| 2018 | 2017 | 2018 | 2017 | |
| Bank Millennium, S.A. | 945,544 | 928,855 | 64,371 | 58,760 |
| BIM - Banco International de Moçambique, SA (*) | 151,877 | 137,958 | 25,735 | 20,751 |
| Other subsidiaries | 38,615 | 32,108 | (6,333) | (3,483) |
| 1,136,036 | 1,098,921 | 83,773 | 76,028 | |
(*) Includes the non-controlling interests of BIM Group related to SIM - Seguradora International de Moçambique, S.A.R.L.
This balance is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Guarantees granted | ||
| Guarantees | 4,322,558 | 3,913,735 |
| Stand-by letter of credit | 60,987 | 60,991 |
| Open documentary credits | 312,865 | 375,384 |
| Bails and indemnities | 139,550 | 191,613 |
| 4,835,960 | 4,541,723 | |
| Commitments to third parties | ||
| Irrevocable commitments | ||
| Term deposits contracts | 8,848 | 17,322 |
| Irrevocable credit lines | 2,980,655 | 3,400,460 |
| Securities subscription | 99,570 | 106,419 |
| Other irrevocable commitments | 114,829 | 111,605 |
| Revocable commitments | ||
| Revocable credit lines | 4,124,373 | 4,027,811 |
| Bank overdraft facilities | 526,111 | 612,248 |
| Other revocable commitments | 32,817 | 50,679 |
| 7,887,203 | 8,326,544 | |
| Guarantees received | 24,660,058 | 26,084,077 |
| Commitments from third parties | 9,501,910 | 11,031,241 |
| Securities and other items held for safekeeping | 68,112,776 | 67,670,271 |
| Securities and other items held under custody by the Securities Depository Authority | 68,339,499 | 62,485,697 |
| Other off balance sheet accounts | 127,037,089 | 129,631,680 |
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 39).
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 are 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.
O Banco Comercial Português, S.A. conclude on 30 May 2018, with 63.04% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions:
Item One - Approval of the individual and consolidated annual report, balance sheet and financial statements of 2017;
Item Two - Approval of the proposal for the appropriation of profits from 2017;
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 remuneration policy of Members of Management and Supervision Bodies;
Item Five - Approval of the proposal to change the Retirement Regulations for Executive Directors of Banco Comercial Português, S.A. contemplating the possibility of attribution of a unique contribution for the purposes of retirement supplement of the members of the Executive Committee;
Item Six - Approval of the internal policy for the selection and evaluation of the adequacy of the members of the management and supervision bodies;
Item Seven - Regarding the articles of association, approval of: alteration of articles 10.º, 13.º, 15.º, 17.º, 25.º, 28.º, 29.º, 35.º, 36.º, 37.º and 38.º; addition of new articles 40.º to 45.º; renumbering of current articles 40.º and following, changing the current articles 40.º, 41.º and 48.º; and amendment of article 29.º, the entering into force of the latter being subject to the suspensive condition of approval by the European Central bank;
Item Eight - Election of the Board of Directors for the term-of-office beginning in 2018, including the Audit Committee. The effects of this proposal are subject to obtaining from the European Central Bank the authorization for the exercise of functions for the majority of the members of the Board of Directors, Audit Committee and Executive Committee.
Item Nine - Election of the Remuneration and Welfare Board for the term-of-office beginning in 2018;
Item Ten - Approval of the acquisition and sale of own shares and bonds.
Following the European Central Bank authorization, the Board of Directors elected at the Annual General Meeting of Shareholders held on 30 May 2018, took office on 23 July 2018.
On 12 September 2018, BCP Finance Company announced the early redemption of the Preference Shares Series C and the Preference Shares Series D, through the exercise of an Issuer's call-option in accordance with the corresponding Terms and Conditions. As so, Series D and Series C will be redeemed, in full and at its nominal value plus any accrued and unpaid Dividends, on its next Dividend Dates, i.e., 15 October 2018 and 10 December 2018, respectively.
Fair value is based on market prices, whenever these are available. If market prices are not available, as occurs regarding many products sold to clients, fair value is estimated through internal models based on cash-flow discounting techniques. Cash-flows for the different instruments sold are calculated according to its financial characteristics and the discount rates used include both the market interest rate curve and the current conditions of the Group's pricing policy.
Thus, the fair value obtained is influenced by the parameters used in the evaluation model that have some degree of judgment and reflects exclusively the value attributed to different financial instruments. However, it does not consider prospective factors, as the future business evolution. Therefore, the values presented cannot be understood as an estimate of the economic value of the Group.
The main methods and assumptions used in estimating the fair value for the financial assets and financial liabilities are presented as follows:
Considering the short term of these financial instruments, the amount in the balance sheet is a reasonable estimate of its fair value.
The fair value of these financial instruments is calculated discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. This update is made based on the prevailing market rate for the term of each cash flow plus the average spread of the production of the most recent 3 months of the same. For the elements with signs of impairment, the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment.
For resources from Central Banks it was considered that the book value is a reasonable estimate of its fair value, given the nature of operations and the associated short-term. The rate of return of funding with the European Central Bank is -0.4% as at 30 September 2018 (31 December 2017: 0.00%).
For the remaining loans and advances and deposits, the discount rate used reflects the current conditions applied by the Group on identical instruments for each of the different residual maturities (rates from the monetary market or from the interest rate swap market).
Considering the short maturity of these financial instruments, the conditions of the portfolio are similar to conditions used at the date of the report. Therefore, the amount in the balance sheet is a reasonable estimate of its fair value.
The fair value of these instruments is calculated by discounting the expected principal and interest future cash flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates. For loans with signs of impairment, the net impairment of these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is realized in the determination of this impairment.
The discount rate used is the one that reflects the current rates of the Group for each of the homogeneous classes of this type of instruments and with similar residual maturity. The discount rate includes the market rates for the residual maturity date (rates from the monetary market or from the interest rate swap market, at the end of the period) and the spread used at the date of the report, which was calculated from the average production of the three most recent months compared to the reporting date.
The fair value of these financial instruments is calculated by discounting the expected principal and interest future cash flows for the referred instruments, considering that payments occur in the contractually defined dates. The discount rate used reflects the current conditions applied by the Group in similar instruments with a similar maturity. The discount rate includes the market rates of the residual maturity date (rates of monetary market or the interest rate swap market, at the end of the period) and the actual spread of the Group. This was calculated from the average production of the three most recent months compared to the reporting date.
As at 30 September 2018, the average discount rates for Loans and advances to credit institutions, Loans and advances to customers, Resources from credit institutions and Resources from customers are analysed as follows:
| Loans and advances to credit institutions |
Loans and advances to customers |
Resources from credit institutions |
Resources from customers |
|
|---|---|---|---|---|
| EUR | 0.77% | 3.51% | 0.24% | -0.06% |
| AUD | n.a. | n.a. | n.a. | 2.47% |
| CAD | n.a. | n.a. | n.a. | 2.31% |
| CHF | n.a. | 2.95% | -0.22% | -0.56% |
| CNY | n.a. | n.a. | n.a. | 4.27% |
| DKK | n.a. | n.a. | n.a. | -0.16% |
| GBP | n.a. | n.a. | n.a. | 0.95% |
| HKD | n.a. | 2.84% | n.a. | 2.82% |
| MOP | 3.48% | n.a. | n.a. | 2.48% |
| MZN | n.a. | 23.81% | n.a. | 7.32% |
| NOK | 0.98% | 5.96% | n.a. | 1.49% |
| PLN | 1.49% | 6.08% | 1.43% | 1.20% |
| SEK | -0.36% | n.a. | n.a. | -0.06% |
| USD | 3.02% | 6.66% | 2.89% | 1.59% |
| ZAR | 7.38% | 16.16% | n.a. | -0.69% |
As at 31 December 2017, the average discount rates for Loans and advances to credit institutions, Loans and advances to customers, Resources from credit institutions and Resources from customers are analysed as follows:
| Loans and advances to credit institutions |
Loans and advances to customers |
Resources from credit institutions |
Resources from customers |
|
|---|---|---|---|---|
| EUR | 0.67% | 3.70% | 0.28% | 0.08% |
| AOA | 20.91% | n.a. | n.a. | n.a. |
| AUD | n.a. | n.a. | n.a. | 2.08% |
| CAD | n.a. | 1.66% | n.a. | 1.90% |
| CHF | n.a. | 2.67% | -0.11% | -0.42% |
| CNY | n.a. | n.a. | n.a. | 3.95% |
| DKK | n.a. | n.a. | n.a. | -0.02% |
| GBP | 0.80% | 3.39% | n.a. | 0.77% |
| HKD | n.a. | 1.51% | n.a. | 1.16% |
| MOP | n.a. | 1.25% | n.a. | 1.51% |
| MZN | 22.26% | 42.48% | n.a. | 32.48% |
| NOK | 0.80% | 4.36% | n.a. | 1.25% |
| PLN | 1.91% | 6.24% | 1.90% | 1.69% |
| SEK | n.a. | n.a. | n.a. | 0.02% |
| USD | 1.99% | 16.76% | 2.08% | 3.21% |
| ZAR | 7.28% | 29.12% | n.a. | 17.11% |
These financial instruments are accounted for at fair value. Fair value is based on market prices ("Bid-price"), whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame.
Market interest rates are determined based on information released by the suppliers of financial content - Reuters and Bloomberg - more specifically because of the prices of interest rate swaps. The values for the very short-term rates are obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The same interest rate curves are used in the projection of the non-deterministic cash flows such as indexes.
When optionality is involved, the standard templates (Black-Scholes, Black, Ho and others) are used considering the volatility areas applicable. Whenever there are no references in the market of sufficient quality or that the available models do not fully apply to meet the characteristics of the financial instrument, specific quotations supplied by an external entity are applied, typically a counterparty of the business.
These financial instruments are accounted at amortised cost net of impairment. Fair value is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame.
All derivatives are recorded at fair value. In case of derivative contracts that are quoted in organised markets their market prices are used. As for derivatives traded "Over-the-counter", it is applied methods based on numerical cash-flow discounting techniques and models for assessment of options considering variables of the market, particularly the interest rates on the instruments in question, and where necessary, their volatilities.
Interest rates are determined based on information disseminated by the suppliers of financial content - Reuters and Bloomberg - more specifically those resulting from prices of interest rate swaps. The values for the very short-term rates are obtained from a similar source but regarding interbank money market. The interest rate curve obtained is calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined by appropriate interpolation methods. The interest rate curves are used in the projection of the non-deterministic cash flows such as indexes.
For these financial instruments the fair value was calculated for components for which fair value is not yet reflected in the balance sheet. Fixed rate instruments for which the Group adopts "hedge-accounting", the fair value related to the interest rate risk is already recognised.
For the fair value calculation, other components of risk were considered, in addition to the interest rate risk already recorded. The fair value is based on market prices, whenever these are available. If market prices are not available, fair value is estimated through numerical models based on cash-flow discounting techniques, using the market interest rate curve adjusted by associated factors, predominantly credit risk and trading margin, the latter only in the case of issues placed on non-institutional customers of the Group.
As original reference, the Group applies the curves resulting from the market interest rate swaps for each specific currency. The credit risk (credit spread) is represented by an excess from the curve of interest rate swaps established specifically for each term and class of instruments based on the market prices on equivalent instruments.
For own issued debts placed among non-institutional customers of the Group, one more differential was added (commercial spread), which represents the margin between the financing cost in the institutional market and the cost obtained by distributing the respective instrument in the owned commercial network.
The average of the reference rates of the yield curve obtained from the market prices of the different currencies used in the determination of the fair value of the issues is analysed as follows:
| 30 September 2018 | 31 December 2017 | |||
|---|---|---|---|---|
| EUR | PLN | EUR | PLN | |
| Placed in the institutional market | ||||
| Subordinated | 5.72% | - | 6.42% | - |
| Senior (including guaranteed by the State and mortgage) | 0.08% | 2.65% | 0.13% | 2.45% |
| Placed in retail | ||||
| Subordinated | 2.20% | - | 2.01% | - |
| Senior and collateralised | 0.57% | 2.50% | 1.06% | 2.92% |
For debt securities, the fair value calculation focused on all the components of these instruments, as a result the difference determined is a negative amount of Euros 14,785,000 (31 December 2017: a negative amount of Euros 14,199,000) and includes a payable amount of Euros 7,541,000 (31 December 2017: a payable amount of Euros 10,272,000) which reflects the fair value of embedded derivatives and are recorded in financial assets and liabilities held for trading.
As at 30 September 2018, the following table presents the interest rates used in the definition of the interest rate curves of main currencies, namely EUR, USD, GBP and PLN used to determine the fair value of the financial assets and liabilities of the Group:
| Currencies | |||||
|---|---|---|---|---|---|
| EUR | USD | GBP | PLN | ||
| 1 day | -0.43% | 2.25% | 0.80% | 1.49% | |
| 7 days | -0.43% | 2.35% | 0.81% | 1.49% | |
| 1 month | -0.42% | 2.38% | 0.80% | 1.54% | |
| 2 months | -0.39% | 2.43% | 0.84% | 1.58% | |
| 3 months | -0.36% | 2.76% | 0.95% | 1.62% | |
| 6 months | -0.32% | 2.81% | 1.00% | 1.69% | |
| 9 months | -0.26% | 2.94% | 1.10% | 1.72% | |
| 1 year | -0.24% | 2.76% | 1.17% | 1.77% | |
| 2 years | -0.10% | 2.96% | 1.15% | 1.98% | |
| 3 years | 0.07% | 3.02% | 1.28% | 2.18% | |
| 5 years | 0.39% | 3.04% | 1.44% | 2.52% | |
| 7 years | 0.66% | 3.05% | 1.55% | 2.75% | |
| 10 years | 0.99% | 3.08% | 1.66% | 3.00% | |
| 15 years | 1.32% | 3.12% | 1.75% | 3.29% | |
| 20 years | 1.48% | 3.12% | 1.77% | 3.42% | |
| 30 years | 1.53% | 3.09% | 1.75% | 3.42% |
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Fair value through profit or loss |
Fair value through other comprehensive income |
Amortised cost | Book value | Fair value | |
| Assets | |||||
| Cash and deposits at Central Banks | - | - | 2,192,517 | 2,192,517 | 2,192,517 |
| Loans and advances to credit | |||||
| institutions repayable on demand | - | - | 330,321 | 330,321 | 330,321 |
| Financial assets at amortised cost | |||||
| Loans and advances to credit institutions | - | - | 868,186 | 868,186 | 866,999 |
| Loans and advances to customers (i) | - | - | 45,355,357 | 45,355,357 | 44,021,578 |
| Debt instruments | - | - | 3,347,745 | 3,347,745 | 3,356,346 |
| Financial assets at fair value through profit or loss | |||||
| Financial assets held for trading | 1,024,778 | - | - | 1,024,778 | 1,024,778 |
| Financial assets not held for trading mandatorily | |||||
| at fair value through profit or loss | 1,405,460 | - | - | 1,405,460 | 1,405,460 |
| Financial assets designated at fair value | |||||
| through profit or loss | 32,921 | - | - | 32,921 | 32,921 |
| Financial assets at fair value through | |||||
| other comprehensive income | - | 12,063,815 | - | 12,063,815 | 12,063,815 |
| Assets with repurchase agreement | - | - | 15,531 | 15,531 | 15,531 |
| Hedging derivatives (ii) | 76,598 | - | - | 76,598 | 76,598 |
| 2,539,757 | 12,063,815 | 52,109,657 | 66,713,229 | 65,386,864 | |
| Liabilities | |||||
| Financial liabilities at amortised cost | |||||
| Resources from credit institutions | - | - | 7,563,524 | 7,563,524 | 7,516,814 |
| Resources from customers (i) | - | - | 50,760,519 | 50,760,519 | 50,798,168 |
| Non subordinated debt securities issued (i) | - | - | 1,707,696 | 1,707,696 | 1,692,901 |
| Subordinated debt (i) | - | - | 1,097,692 | 1,097,692 | 1,206,322 |
| Financial liabilities at fair value through profit or loss | |||||
| Financial liabilities held for trading | 310,597 | - | - | 310,597 | 310,597 |
| Financial liabilities designated | |||||
| at fair value through profit or loss | 3,831,932 | - | - | 3,831,932 | 3,831,932 |
| Hedging derivatives (ii) | 170,474 | - | - | 170,474 | 170,474 |
| 4,313,003 | - | 61,129,431 | 65,442,434 | 65,527,208 |
(i) - The book value includes the effect of the adjustments resulting from the application of hedge accounting;
(ii) - Includes a portion that is recognized in reserves in the application of accounting cash flow hedge.
The following table shows the fair value of financial assets and liabilities of the Group, as at 31 December 2017:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 31 December 2017 | |||||
| Fair value | |||||
| through profit or loss |
Fair value through reserves |
Amortised cost | Book value | Fair value | |
| Assets | |||||
| Cash and deposits at Central Banks | - | - | 2,167,934 | 2,167,934 | 2,167,934 |
| Loans and advances to credit | |||||
| institutions repayable on demand | - | - | 295,532 | 295,532 | 295,532 |
| Financial assets at amortised cost | |||||
| Loans and advances to credit institutions | - | - | 1,065,568 | 1,065,568 | 1,064,736 |
| Loans and advances to customers (i) | - | - | 45,625,972 | 45,625,972 | 43,270,523 |
| Debt instruments | - | - | 2,007,520 | 2,007,520 | 2,017,084 |
| Financial assets at fair value through profit or loss | |||||
| Financial assets held for trading | 897,734 | - | - | 897,734 | 897,734 |
| Financial assets designated at fair value | |||||
| through profit or loss | 142,336 | - | - | 142,336 | 142,336 |
| Financial assets available for sale | - | 11,471,847 | - | 11,471,847 | 11,471,847 |
| Financial assets held to maturity | - | - | 411,799 | 411,799 | 406,335 |
| Hedging derivatives (ii) | 234,345 | - | - | 234,345 | 234,345 |
| 1,274,415 | 11,471,847 | 51,574,325 | 64,320,587 | 61,968,406 | |
| Liabilities | |||||
| Financial liabilities at amortised cost | |||||
| Resources from credit institutions | - | - | 7,487,357 | 7,487,357 | 7,441,083 |
| Resources from customers (i) | - | - | 48,285,425 | 48,285,425 | 48,275,865 |
| Non subordinated debt securities issued (i) | - | - | 2,066,538 | 2,066,538 | 2,052,339 |
| Subordinated debt (i) | - | - | 1,169,062 | 1,169,062 | 1,331,397 |
| Financial liabilities at fair value through profit or loss | |||||
| Financial liabilities held for trading | 399,101 | - | - | 399,101 | 399,101 |
| Financial liabilities designated | |||||
| at fair value through profit or loss | 3,843,645 | - | - | 3,843,645 | 3,843,645 |
| Hedging derivatives (ii) | 177,337 | - | - | 177,337 | 177,337 |
| 4,420,083 | - | 59,008,382 | 63,428,465 | 63,520,767 |
(i) - The book value includes the effect of the adjustments resulting from the application of hedge accounting;
(ii) - Includes a portion that is recognized in reserves in the application of accounting cash flow hedge.
The Group classified the financial instruments recorded in the balance sheet at fair value in accordance with the hierarchy established in IFRS 13. The fair value of financial instruments is determined using quotations recorded in active and liquid markets, considering that a market is active and liquid whenever its stakeholders conduct transactions on a regular basis giving liquidity to the instruments traded. When it is verified that there are no transactions that regularly provide liquidity to the traded instruments, valuation methods and techniques are used to determine the fair value of the financial instruments.
In this category are included, in addition to financial instruments traded on a regulated market, bonds and units of investment funds valued based on the prices disclosed through trading systems.
The classification of the fair value of level 1 is used when:
i) - There is a firm daily enforceable quotation for the financial instruments concerned, or;
ii) - There is a quotation available in market information systems that aggregate multiple prices of various stakeholders, or;
iii) - Financial instruments have been classified in level 1, at least 90% of trading days in the year (at the valuation date).
Financial instruments, when there are no regular transactions in the active and liquid markets (level 1), are classified in level 2, according to the following rules:
i) - Failure to comply with the rules defined for level 1, or;
ii) - They are valued based on valuation methods and techniques that use mostly observable market data (interest rate or exchange rate curves, credit curves, etc.).
Level 2 includes over-the-counter derivative financial instruments contracted with counterparties with which the Bank maintains collateral agreements (ISDAs with Credit Support Annex (CSA)), in particular with MTA (Minimum Transfer Amount) which contributes to the mitigation of the counterparty credit risk, so that the CVA (Credit Value Adjustment) component is not significant. In addition, derivative financial instruments traded in the over-the-counter market, which, despite not having CSA agreements, the non-observable market data component (i.e. internal ratings, default probabilities determined by internal models, etc.) incorporated in valuation of CVA is not significant in the value of the derivative as a whole. In order to assess the significance of this component, the Bank defined a quantitative relevance criterion and performed a qualitative sensitivity analysis on the valuation component that includes unobservable market data.
If the level 1 or level 2 criteria are not met, financial instruments should be classified in level 3, as well as in situations where the fair value of financial instruments results from the use of information not observable in the market, such as:
i) - They are valued using comparative price analysis of financial instruments with risk and return profile, typology, seniority or other similar factors, observable in the active and liquid markets;
ii) - They are valued based on performance of impairment tests, using performance indicators of the underlying transactions (e.g. default probability rates of the underlying assets, delinquency rates, evolution of the ratings, etc.);
iii) - They are valued based on NAV (Net Asset Value) disclosed by the management entities of securities/real estate/other investment funds not listed on a regulated market.
Level 3 includes over-the-counter derivative financial instruments that have been contracted with counterparties with which the Bank does not maintain collateral exchange agreements (CSAs), and whose unobservable market data component incorporated in the valuation of CVA is significant in the value of the derivative as a whole. In order to assess the significance of this component, the Bank defined a quantitative relevance criterion and performed a qualitative sensitivity analysis on the valuation component that includes unobservable market data.
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 30 September 2018 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Assets | ||||
| Cash and deposits at Central Banks | 2,192,517 | - | - | 2,192,517 |
| Loans and advances to credit institutions repayable on demand | 330,321 | - | - | 330,321 |
| Financial assets at amortised cost | ||||
| Loans and advances to credit institutions | - | - | 866,999 | 866,999 |
| Loans and advances to customers | - | - | 44,021,578 | 44,021,578 |
| Debt instruments | 129,187 | 684,047 | 2,543,112 | 3,356,346 |
| Financial assets at fair value through profit or loss | ||||
| Financial assets held for trading | 324,707 | 367,794 | 332,277 | 1,024,778 |
| Financial assets not held for trading mandatorily | ||||
| at fair value through profit or loss | - | - | 1,405,460 | 1,405,460 |
| Financial assets designated at fair value through profit or loss | 32,921 | - | - | 32,921 |
| Financial assets at fair value through other comprehensive income | 11,374,211 | 662,493 | 27,111 | 12,063,815 |
| Assets with repurchase agreement | - | - | 15,531 | 15,531 |
| Hedging derivatives | 258 | 76,340 | - | 76,598 |
| 14,384,122 | 1,790,674 | 49,212,068 | 65,386,864 | |
| Liabilities | ||||
| Financial liabilities at amortised cost | ||||
| Resources from credit institutions | - | - | 7,516,814 | 7,516,814 |
| Resources from customers | - | - | 50,798,168 | 50,798,168 |
| Non subordinated debt securities issued | - | - | 1,692,901 | 1,692,901 |
| Subordinated debt | - | - | 1,206,322 | 1,206,322 |
| Financial liabilities at fair value through profit or loss | ||||
| Financial liabilities held for trading | 255 | 290,091 | 20,251 | 310,597 |
| Financial liabilities designated at fair value through profit or loss | 779,558 | - | 3,052,374 | 3,831,932 |
| Hedging derivatives | - | 170,474 | - | 170,474 |
| 779,813 | 460,565 | 64,286,830 | 65,527,208 | |
The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Group, as at 31 December 2017:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 31 December 2017 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Assets | ||||
| Cash and deposits at Central Banks | 2,167,934 | - | - | 2,167,934 |
| Loans and advances to credit institutions repayable on demand | 295,532 | - | - | 295,532 |
| Financial assets at amortised cost | ||||
| Loans and advances to credit institutions | - | - | 1,064,736 | 1,064,736 |
| Loans and advances to customers | - | - | 43,270,523 | 43,270,523 |
| Debt instruments | - | - | 2,017,084 | 2,017,084 |
| Financial assets at fair value through profit or loss | ||||
| Financial assets held for trading | 149,910 | 442,373 | 305,451 | 897,734 |
| Financial assets designated at fair value through profit or loss | 142,336 | - | - | 142,336 |
| Financial assets available for sale | 8,224,992 | 1,946,229 | 1,300,626 | 11,471,847 |
| Financial assets held to maturity | 192,710 | 133,009 | 80,616 | 406,335 |
| Hedging derivatives | - | 234,345 | - | 234,345 |
| 11,173,414 | 2,755,956 | 48,039,036 | 61,968,406 | |
| Liabilities | ||||
| Financial liabilities at amortised cost | ||||
| Resources from credit institutions | - | - | 7,441,083 | 7,441,083 |
| Resources from customers | - | - | 48,275,865 | 48,275,865 |
| Non subordinated debt securities issued | 763,919 | - | 1,288,420 | 2,052,339 |
| Subordinated debt | - | - | 1,331,397 | 1,331,397 |
| Financial liabilities at fair value through profit or loss | ||||
| Financial liabilities held for trading | 1,019 | 387,157 | 10,925 | 399,101 |
| Financial liabilities designated at fair value through profit or loss | 763,919 | - | 3,079,726 | 3,843,645 |
| Hedging derivatives | - | 177,337 | - | 177,337 |
| 1,528,857 | 564,494 | 61,427,416 | 63,520,767 |
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 S).
As at 30 September 2018 and 31 December 2017, the number of participants in the Pension Fund of Banco Comercial Português covered by this pension plan and other benefits is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Number of participants | ||
| Pensioners | 16,784 | 16,711 |
| Former Attendees Acquired Rights | 3,313 | 3,375 |
| Employees | 7,282 | 7,368 |
| 27,379 | 27,454 |
In accordance with the accounting policy described in note 1 S), 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:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Projected benefit obligations | ||
| Pensioners | 2,017,330 | 1,993,181 |
| Former attendees acquired rights | 196,231 | 206,687 |
| Employees | 837,427 | 849,702 |
| 3,050,988 | 3,049,570 | |
| Pension fund value | (3,159,707) | (3,166,351) |
| Net (assets) / liabilities in balance sheet (notes 32) | (108,719) | (116,781) |
| Accumulated actuarial losses and changing assumptions | ||
| effect recognised in Other comprehensive income | 3,202,025 | 3,191,607 |
In 2017, following the authorization of the Insurance and Pension Funds Supervisory Authority, the BCP group's pension fund agreement was amended. The main purpose of this process was to incorporate into the pension fund the changes made to the Group's Collective Labour Agreement (CLA) in terms of retirement benefits and to pass on to the pension fund the responsibilities that were directly in charge by the companies (extra-fund liabilities). The pension fund has a share exclusively related to the financing of these liabilities, which in the scope of the fund is called an Additional Complement, which as at 30 September 2018 amounts to Euro 289,319,000 (31 December 2017: Euro 297,146,000). The End of Career Premium also came to be borne by the pension fund under the basic pension plan.
The change in the projected benefit obligations is analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||
| Pension benefit obligations |
Pension benefit obligations |
Extra-Fund | Total | |
| Balance as at 1 January | 3,049,570 | 2,768,439 | 324,210 | 3,092,649 |
| Service cost | (11,566) | (16,391) | - | (16,391) |
| Interest cost / (income) | 47,243 | 57,548 | 6,390 | 63,938 |
| Actuarial (gains) and losses | ||||
| Not related to changes | ||||
| in actuarial assumptions | 25,424 | 26,082 | (2,336) | 23,746 |
| Payments | (72,437) | (79,847) | (16,759) | (96,606) |
| Early retirement programmes and | ||||
| terminations by mutual agreement | 6,938 | 13,957 | - | 13,957 |
| Contributions of employees | 5,816 | 8,274 | - | 8,274 |
| Changes occurred in the Collective | ||||
| Labour Agreement (CLA) | - | (39,997) | - | (39,997) |
| Transfer between plans | - | 311,505 | (311,505) | - |
| Balance at the end of the period | 3,050,988 | 3,049,570 | - | 3,049,570 |
As at 30 September 2018, the amount of pensions paid by the Fund, including the Additional Complement, amounts to Euros 72,437,000. As at 31 December 2017, the amount of pensions paid by the Fund, excluding other benefits included in the Extra-Fund, amounted to Euros 79,847,000.
The liabilities with health benefits are fully covered by the Pension Fund and correspond to Euros 302,530,000 as at 30 September 2018 (31 December 2017: Euros 306,822,000).
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 2018 amounts to Euros 63,357,000 (31 December 2017: Euros 65,266,000), 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". 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 44,853,000 (of which Euro 4,856,000 do not correspond to benefits postemployment). The new CLA has already been published by the Ministry of Labour in Bulletin of Labour 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 2018 the retirement age is 66 years and 4 months (66 years and 3 months in 2017). 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 a postemployment benefit by which it becomes part of retirement liabilities. This benefit is not included in the pension fund agreement in force at 2016 and as such was considered as Extra-Fund. The End of Career Premium also came to be borne by the pension fund under the basic pension plan.
During the first nine months of 2018 and in the year 2017, the changes in the value of plan's assets is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Balance as at 1 January | 3,166,351 | 3,124,330 |
| Employees' contributions | 5,816 | 8,274 |
| Actuarial gains / (losses) | 15,007 | 52,740 |
| Payments | (72,437) | (79,847) |
| Expected return on plan assets | 44,970 | 59,402 |
| Amount transferred to the Fund resulting from acquired | ||
| rights unassigned related to the Complementary Plan | - | 1,452 |
| Balance at the end of the period | 3,159,707 | 3,166,351 |
The elements of the Pension Fund's assets are analysed as follows:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||||
| Asset class | Assets with market price in active market |
Remaining | Total Portfolio |
Assets with market price in active market |
Remaining | Total Portfolio |
| Shares | 296,400 | 102,992 | 399,392 | 278,231 | 95,757 | 373,988 |
| Bonds and other fixed income securities | 1,083,900 | 4,333 | 1,088,233 | 1,058,953 | 4,922 | 1,063,875 |
| Participations units in investment funds | - | 825,724 | 825,724 | - | 808,873 | 808,873 |
| Participation units in real estate funds | - | 274,548 | 274,548 | - | 264,025 | 264,025 |
| Properties | - | 245,392 | 245,392 | - | 254,317 | 254,317 |
| Loans and advances to credit | ||||||
| institutions and others | - | 326,418 | 326,418 | - | 401,273 | 401,273 |
| 1,380,300 | 1,779,407 | 3,159,707 | 1,337,184 | 1,829,167 | 3,166,351 |
The balance Shares includes an investment of 2.61% held in the Dutch unlisted insurance group "Achmea BV", whose valuation as at 30 September 2018 amounts to Euros 101,618,000 (31 December 2017: Euros 94,382,000). This valuation was determined by the Management Company based on the last independent valuation carried out by Achmea solicitation.
The balance Properties includes buildings owned by the Fund and used by the Group's companies which as at 30 September 2018, amounts to Euros 245,392,000 (31 December 2017: Euros 253,971,000), mostly a set of properties called "Taguspark" whose book value as at 30 September 2018 amounts to Euros 243,750,000 (31 December 2017: Euros 243,750,000). This book value was calculated based on valuations performed by independent expert evaluators performed in 2017.
The securities issued by Group's companies accounted in the portfolio of the Fund are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Fixed income securities | 9,649 | 41 |
| Loans and advances to credit institutions and others | 237,134 | 326,562 |
| 246,783 | 326,603 |
The evolution of net (assets) / liabilities in the balance sheet is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance as at 1 January | (116,781) | (31,681) |
| Recognised in the income statement: | ||
| Changes occurred in the Collective Labour Agreement (CLA) | - | (39,997) |
| Service cost | (11,566) | (16,391) |
| Interest cost / (income) net of the balance liabilities coverage | 2,273 | 4,536 |
| Cost with early retirement programs | 6,938 | 13,957 |
| Amount transferred to the Fund resulting from acquired rights | ||
| unassigned related to the Complementary Plan | - | (1,452) |
| (2,355) | (39,347) | |
| Recognised in the statement of comprehensive income: | ||
| Actuarial (gains) / losses | ||
| Not related to changes in actuarial assumptions | ||
| Deviation between the estimated and the actual income of the fund | (15,007) | (52,740) |
| Difference between expected and effective obligations | 25,424 | 23,746 |
| 10,417 | (28,994) | |
| Payments related to Extra-Fund | - | (16,759) |
| Balance at the end of the period | (108,719) | (116,781) |
In accordance with IAS 19, during the first nine months of 2018, the Group accounted post-employment benefits as a gain in the amount of Euros 2,355,000 (30 September 2017: gain of Euros 42,149,000), which is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Current service cost | (11,566) | (11,996) |
| Net interest cost in the liability coverage balance | 2,273 | 3,402 |
| Cost / (income) with early retirement programs and mutually agreed terminations | 6,938 | 6,442 |
| Changes occurred in the Collective Labour Agreement | - | (39,997) |
| (Income) / Cost of the period | (2,355) | (42,149) |
Within the framework of the three-party agreement between the Government, the Banking and the Trade Unions, the bank's employees in activity as at 31 December 2010 under the CAFEB / ACT regime were integrated into the General Social Security System (RGSS) with effect from 1 January 2011. The integration led to an effective decrease in the present value of the total benefits reported at the retirement age to be borne by the Pension Fund, and this effect is recorded on a straight-line basis over the average period of active life until the normal retirement age is reached. The calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount of the effect recognised until the date. The component of this effect for the year is recognized under the heading "Current service costs".
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: i) the retirement pensions of former Group's Executive Board Members; and ii) 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 3,733,000 (31 December 2017: Euros 3,733,000).
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 40), are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Balance as at 1 January | 3,733 | 3,837 |
| Reversal | - | (104) |
| Balance at the end of the period | 3,733 | 3,733 |
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:
| 30 September 2018 |
31 December 2017 |
|
|---|---|---|
| 0,25% until 2019 | 0,25% until 2019 | |
| Salary growth rate | 0,75% after 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 (a) | 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 (b) | 66 years and 4 months |
66 years and 3 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 mortality table considered for women corresponds to TV 88/90 adjusted in less than 3 years (which implies an increase in hope life expectancy compared to that which would be considered in relation to their effective age).
b) The retirement age is variable. In 2017 it is 66 years and 4 months (2017: 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 it was used a maximum age of 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 2018 and 31 December 2017, 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 30 September 2018, the Net actuarial gains amount to Euros 26,732,000 (31 December 2017: actuarial losses amount to Euros 28,994,000) and are related to the difference between the actuarial assumptions used for the estimation of the liabilities and the values verified and the change in actuarial assumptions, are analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Actuarial (gains) / losses | ||||
| 30 September 2018 31 December 2017 |
||||
| Values effectively verified in % |
Amount of deviations |
Values effectively verified in % |
Amount of deviations |
|
| Deviation between expected and actual liabilities | 25,424 | 23,746 | ||
| Deviation between expected income and income from funds | 2.75% | (15,007) | 4.16% | (52,740) |
| 10,417 | (28,994) |
As at 30 September 2018, the actuarial losses not resulting from changes in assumptions amount to Euros 25,424,000 (31 December 2017: Euros 23,746,000).
In accordance with IAS 19, the sensitivity analysis to changes in assumptions, is as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| Impact resulting from changes in financial assumptions | |||||
| 30 September 2018 31 December 2017 |
|||||
| -0.25% | 0.25% | -0.25% | 0.25% | ||
| Discount rate | 127,636 | (119,925) | 132,021 | (124,057) | |
| Pension's increase rate | (127,220) | 143,114 | (129,840) | 122,024 | |
| Salary growth rate | (33,580) | 35,937 | (35,094) | 37,265 |
| Impact resulting from changes in demographic assumptions | ||||
|---|---|---|---|---|
| 30 September 2018 | 31 December 2017 | |||
| - 1 year | + 1 year | - 1 year | + 1 year | |
| Changes in mortality table | 99,057 | (99,273) | 97,661 | (98,209) |
During the first nine months of 2018 and in the year 2017, a sensitivity analysis was performed to a positive variation and a negative variation of one percentage point in the value of the health benefits costs, the impact of which is analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Positive variation of 1% Negative variation of 1% |
||||
| 30 September | 31 December | 30 September | 31 December | |
| 2018 | 2017 | 2018 | 2017 | |
| Pension cost impacts | 27 | 27 | (27) | (27) |
| Liabilities impacts | 3,025 | 3,068 | (3,025) | (3,068) |
According to what is described in accounting policy 1 S2), in the scope of the Defined Contribution Plan provided for the BCP Pension Fund of the BCP Group, no contributions were made in during the first nine months of 2018 and during 2017, 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 Labour Agreement of the BCP Group and does not have a performance criterion. The Group accounted as staff costs the amount of Euros 55,000 (31 December 2017: Euros 62,000) related to this contribution.
As defined by IAS 24, are considered related parties of the Group, the companies detailed in note 58 - List of subsidiary and associated companies of Banco Comercial Português Group, the Pension Fund, the members of the Board of Directors and key management members. The key management members are the first line Directors. Beyond the members of the Board of Directors and key management members, are also considered related parties people who are close to them (family relationships) and entities controlled by them or in whose management they have significant influence.
As the transactions with subsidiaries are eliminated in consolidation, these are not included in the notes to the Group's consolidated financial statements.
According to Portuguese law, namely under Articles 109 of the General Law for Credit Institutions and Financial Companies, are also considered related parties, the qualified shareholders of Banco Comercial Português, S.A. and the entities controlled by them or with which they are in a group relationship. The list of the qualified shareholders is detailed in note 41.
The balances reflected in assets of consolidated balance sheet with qualified shareholders, are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Assets | ||
| Financial assets at amortised cost | ||
| Loans and advances to customers | 104,040 | 62,822 |
| Debt instruments | 151,448 | 150,614 |
| Financial assets at fair value through profit or loss | ||
| Financial assets held for trading | 9,072 | 11,704 |
| Financial assets at fair value through other comprehensive income | 12,430 | n.a. |
| Financial assets available for sale | n.a. | 61,356 |
| 276,990 | 286,496 | |
| Liabilities | ||
| Resources from customers | 128,335 | 282,970 |
| 128,335 | 282,970 |
Loans and advances to customers are net of impairment in the amount of Euros 147,000 (31 December 2017: Euro 77,000).
During the first nine months of 2018 and 2017, the transactions with qualified shareholders, reflected in the consolidated income statement items, are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Income | ||
| Interest and similar income | 3,518 | 5,704 |
| Commissions | 3,676 | 3,418 |
| 7,194 | 9,122 | |
| Costs | ||
| Interest and similar expenses | 115 | 700 |
| Commissions | 189 | 31 |
| 304 | 731 |
The balances with qualified shareholders, reflected in the guarantees granted and revocable and irrevocable credit lines, are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Guarantees granted | 89,769 | 39,164 |
| Revocable credit lines | 203,353 | 242,565 |
| Irrevocable credit lines | 121 | 121 |
| 293,243 | 281,850 |
The balances with related parties discriminated in the following table, included in asset items on the consolidated balance sheet, are analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Loans and advances to customers | Financial assets held for trading | |||
| 30 September | 31 December | 30 September | 31 December | |
| Board of Directors | 2018 | 2017 | 2018 | 2017 |
| Non-executive directors | 5 | 24 | - | - |
| Executive Committee | 111 | 124 | - | - |
| Closely related people | 306 | 13 | - | - |
| Controlled entities | - | - | - | 22 |
| Key management members | ||||
| Key management members | 7,545 | 6,611 | - | - |
| Closely related people | 543 | 480 | - | - |
| Controlled entities | 316 | 78 | - | - |
| 8,826 | 7,330 | - | 22 |
(Thousands of euros)
The balances with related parties discriminated in the following table, included in liabilities items in the consolidated balance sheet, are analysed as follows:
| Resources from credit institutions | Resources from customers | |||
|---|---|---|---|---|
| 30 September | 31 December | 30 September | 31 December | |
| Board of Directors | 2018 | 2017 | 2018 | 2017 |
| Non-executive directors | - | - | 5,785 | 556 |
| Executive Committee | - | - | 1,008 | 2,664 |
| Closely related people | - | - | 610 | 1,844 |
| Controlled entities | - | 14,838 | 4 | 459 |
| Key management members | ||||
| Key management members | - | - | 6,323 | 7,134 |
| Closely related people | - | - | 2,489 | 1,680 |
| Controlled entities | - | - | 1,944 | 1,728 |
| - | 14,838 | 18,163 | 16,065 |
During the first nine months of 2018 and 2017, the transactions with related parties discriminated in the following table, included in income for items of the consolidated income statement, are as follows:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| Interest and similar income | Commissions' income | ||||
| 30 September 2018 |
30 September 2017 |
30 September 2018 |
30 September 2017 |
||
| Board of Directors | |||||
| Non-executive directors | - | - | 11 | 59 | |
| Executive Committee | - | - | 10 | 21 | |
| Closely related people | - | 1 | 4 | 11 | |
| Controlled entities | - | 1 | - | 102 | |
| Key management members | |||||
| Key management members | 34 | 34 | 46 | 48 | |
| Closely related people | 7 | 6 | 24 | 24 | |
| Controlled entities | 2 | 3 | 9 | 8 | |
| 43 | 45 | 104 | 273 |
During the first nine months of 2018 and 2017, the transactions with related parties discriminated in the following table, included in cost items of the consolidated income statement, are as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Interest and similar expense | ||||
| 30 September 2018 |
30 September 2017 |
30 September 2018 |
30 September 2017 |
|
| Board of Directors | ||||
| Non-executive directors | 41 | 3 | - | 1 |
| Executive Committee | - | 2 | - | - |
| Closely related people | - | 3 | - | - |
| Controlled entities | - | 22 | - | 1 |
| Key management members | ||||
| Key management members | 24 | 29 | 2 | 2 |
| Closely related people | 2 | 4 | 1 | 1 |
| Controlled entities | 1 | 1 | 2 | 2 |
| 68 | 64 | 5 | 7 |
| (Thousands of euros) | |||||||
|---|---|---|---|---|---|---|---|
| Guarantees granted | Revocable credit lines | Irrevocable credit lines | |||||
| 30 September 2018 |
31 December 2017 |
30 September 2018 |
31 December 2017 |
30 September 2018 |
31 December 2017 |
||
| Board of Directors | |||||||
| Non-executive directors | - | 98 | 25 | 83 | - | - | |
| Executive Committee | - | - | 70 | 105 | - | - | |
| Closely related people | - | - | 29 | 104 | - | - | |
| Controlled entities | - | - | - | 25 | - | - | |
| Key management members | |||||||
| Key management members | - | - | 481 | 393 | 100 | 8 | |
| Closely related people | - | - | 161 | 153 | - | - | |
| Controlled entities | - | - | 17 | 16 | - | - | |
| - | 98 | 783 | 879 | 100 | 8 |
The fixed remunerations and social charges paid to members of the Board of Directors and Key management members are analysed as follows:
Considering that the remuneration of members of the Executive Committee intends to compensate the functions that are performed in the Bank and in all other functions on subsidiaries or governing bodies for which they have been designated by indication of the Bank or representing it, in the latter case, the net amount of the remunerations annually received by each member would be deducted from the fixed annual remuneration attributed by the Bank.
During 2018, the amount of remunerations paid to the Executive Committee, includes Euros 70,000 (30 December 2017: Euros 104,000), which were supported by subsidiaries or companies whose governing bodies represent the Group's interests. During 2018 and 2017, no variable remuneration was attributed to the members of the Executive Committee.
During the first nine months of 2018 and 2017, no severance payments were made to key management members.
As approved at the General Shareholders' Meeting of May 2018, the balance Supplementary retirement supplement includes the amount of Euros 4,920,000 related to the payment of a single and extraordinary contribution of BCP to the pension funds of the Executive Directors in functions between 2015/ 2017.
(Thousands of euros)
The balances with associated companies included in the consolidated balance sheet items are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Assets | ||
| Loans and advances to credit institutions repayable on demand | 5 | 1,803 |
| Loans and advances to credit institutions | 309,578 | 316,630 |
| Loans and advances to customers | 68,990 | 63,907 |
| Debt instruments | 1,601 | 1,851 |
| Financial assets held for trading | 95,607 | 91,099 |
| Other assets | 13,316 | 12,868 |
| 489,097 | 488,158 | |
| Liabilities | ||
| Resources from credit institutions | 139,417 | 207,073 |
| Resources from customers | 521,370 | 539,788 |
| Non subordinated debt securities issued | 164,409 | 334,720 |
| Subordinated debt | 478,935 | 480,426 |
| Financial liabilities held for trading | 31,090 | 40,323 |
| Financial liabilities designated at fair value through profit or loss | 31,948 | 138,471 |
| Other liabilities | 2 | 15 |
| 1,367,171 | 1,740,816 |
As at 30 September 2018, the associated company Millenniumbcp Ageas Grupo Segurador, S.G.P.S, S.A. holds 142,601,002 BCP shares (31 December 2017: 142,601,002 shares) in the amount of Euros 36,363,000 (31 December 2017: Euros 38,531,000).
During the first nine months of 2018 and 2017, the transactions with associated companies included in the consolidated income statement items, are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Income | ||
| Interest and similar income | 10,722 | 6,238 |
| Commissions | 43,511 | 28,272 |
| Other operating income | 947 | 620 |
| 55,180 | 35,130 | |
| Costs | ||
| Interest and similar expenses | 7,632 | 27,171 |
| Commissions | 35 | 44 |
| Other administrative costs | 420 | 31 |
| 8,087 | 27,246 |
The guarantees granted and revocable credit lines by the Group to associated companies, are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Guarantees granted | 20,019 | 8,288 |
| Revocable credit lines | 6,562 | 863 |
| Irrevocable credit lines | 672 | - |
| 27,253 | 9,151 |
Under the scope of the Group's insurance mediation activities, the remunerations from services rendering are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Life insurance | ||
| Saving products | 25,295 | 24,481 |
| Mortgage and consumer loans | 12,838 | 14,403 |
| Others | 18 | 25 |
| 38,151 | 38,909 | |
| Non - Life insurance | ||
| Accidents and health | 12,742 | 11,967 |
| Motor | 2,767 | 2,558 |
| Multi-Risk Housing | 4,751 | 4,560 |
| Others | 853 | 829 |
| 21,113 | 19,914 | |
| 59,264 | 58,823 |
The remuneration for insurance intermediation services were received through bank transfers and resulted from insurance intermediation with the subsidiary of Millenniumbcp Ageas Group (Ocidental - Companhia Portuguesa de Seguros de Vida, S.A.) and with Ocidental - Companhia Portuguesa de Seguros, SA. The Group does not collect insurance premiums on behalf of Insurance Companies or performs any movement of funds related to insurance contracts. Thus, there is no other asset, liability, income or expense to be reported on the activity of insurance mediation exercised by the Group, other than those already disclosed.
The receivable balances from insurance intermediation activity, by nature, are analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Funds receivable for payment of life insurance commissions | 12,925 | 12,713 |
| Funds receivable for payment of non-life insurance commissions | 6,976 | 6,658 |
| 19,901 | 19,371 |
The commissions received by the Bank result from the insurance mediation contracts and investment contracts, under the terms established in the contracts. The mediation commissions are calculated given the nature of the contracts subject to mediation, as follows:
insurance contracts – use of fixed rates on gross premiums issued;
investment contracts – use of fixed rates on the responsibilities assumed by the insurance company under the commercialization of these products.
The balances with the Pension Fund included in Liabilities items of the consolidated balance sheet are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Resources from customers | 237,134 | 326,562 |
| Subordinated debt | 9,649 | 41 |
| 246,783 | 326,603 |
During the first nine months of 2018 and in the year 2017, there were no transactions of financial assets between the Group and the Pension Fund.
During the first nine months of 2018 and 2017, the balances with the Pension Fund included in income and expense items of the consolidated income statement, are as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 30 September | |
| 2018 | 2017 | |
| Income | ||
| Commissions | 514 | 621 |
| Expenses | ||
| Interest expense and similar charges | 2 | 1,762 |
| Other administrative costs | 11,457 | 14,915 |
| 11,459 | 16,677 | |
The balance Other administrative costs corresponds to the amount of rents incurred under the scope of Fund's properties which the tenant is the Group.
As at 30 September 2018, the amount of Guarantees granted by the Group to the Pension Fund amounted to Euros 5,000 (31 December 2017: Euros 5,000).
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 management purposes by the Executive Committee. 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.
The Group operates in the Portuguese market, and also in a few affinity markets with 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 the following segments: i) Retail Banking; ii) Companies, Corporate & Investment Banking; iii) Private Banking and iv) Other.
Retail Banking includes the following business areas:
Retail network where the strategic approach is to target "Mass Market" customers, who appreciate a value proposal based on innovation and speed, as well as Prestige and Small Business customers, whose specific characteristics, financial assets or income imply a value proposal 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 and Corporate 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;
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;
Trade Finance Department (from 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 the purposes of geographical segments, comprises the Private Banking network in Portugal, including the asset management activity. For the 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 of obtaining authorization from the Executive Commission for State aid, the Bank entered into an agreement with the European Commission's Directorate-General for Competition (DG Comp) with the goal of gradually divesting from a set of portfolios, which was identified as an autonomous segment called "Non-Core Business Portfolio (PNNC)" for the purposes of preparation of the consolidated balance sheet and income statement by operating segments until 31 December 2017. Once this commitment was formally concluded at the end of 2017, the operations included in PNNC, as well as the respective results, were distributed to the original business segments, determining the reassessment of the allocation criteria. The information with reference to 30 September 2017 has been restated to ensure its comparability with the current position.
All other businesses not previously discriminated are allocated to the Other segment (Portugal) and include centralized management of financial investments, corporate activities and operations not integrated in the remaining business segments and other amounts not allocated to segments.
Foreign Business includes the following 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 Other segment also includes the contribution of the associate in Angola.
For the purposes of business segments reporting, Foreign Business segment 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, in this context, are considered in Private Banking segment.
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.
Considering that the process of capital allocation complies with the regulatory criteria of solvency in force, as at 30 September 2018, 31 December 2017 and 30 September 2017 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 a target capital ratio to the risks managed by each segment, reflecting the application of the Basel III methodology previously referred. Each operation is balanced through internal transfers of funds, with impact on the net interest income and income taxes of each segment, hence with no impact on consolidated accounts.
Commissions and other net income, as well as operating costs calculated for each business area, are based on the amounts accounted for directly in the respective cost centres, on the one hand, and the amounts resulting from internal processes for allocating revenues and costs, for another. As an example, for operational costs, the first set includes costs recorded for telephones, travel, travelling accommodation and representation expenses and to advisory services, and in the second set of costs are included correspondence, water and electricity and rents related to spaces occupied by organic units, among others. The allocation of this last set of costs is based on the application of pre-defined criteria related to the level of activity of each business area.
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), at the reference date and with the Organization of the Group's business areas in force on 30 September 2018. Information relating to prior periods is restated whenever it occurs changes in the internal organization of the entity 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 2018, the net contribution of the major operational segments, for the income statement and balance sheet, is analysed as follows:
| (Thousands of Euros) | |||||||
|---|---|---|---|---|---|---|---|
| Companies, | |||||||
| Corporate and | |||||||
| Commercial banking | Investment | ||||||
| Retail in | Foreign business (1) |
banking | Private | ||||
| INCOME STATEMENT | Portugal | Total | in Portugal | banking | Other | Consolidated | |
| Interest and similar income | 347,370 | 657,355 | 1,004,725 | 259,531 | 24,635 | 118,970 | 1,407,861 |
| Interest expense and similar charges | (30,825) | (209,976) | (240,801) | (52,170) | (9,147) | (52,938) | (355,056) |
| Net interest income | 316,545 | 447,379 | 763,924 | 207,361 | 15,488 | 66,032 | 1,052,805 |
| Commissions and other income | 304,300 | 192,867 | 497,167 | 125,551 | 43,331 | 2,768 | 668,817 |
| Commissions and other costs | (28,896) | (106,897) | (135,793) | (20,456) | (5,518) | (113,981) | (275,748) |
| Net commissions and other income | 275,404 | 85,970 | 361,374 | 105,095 | 37,813 | (111,213) | 393,069 |
| Net gains arising from financial operations (2) | 12,572 | 45,250 | 57,822 | 318 | 3,117 | 28,319 | 89,576 |
| Share of profit of associates under | |||||||
| the equity method | - | 28,733 | 28,733 | - | - | 43,135 | 71,868 |
| Gains / (losses) arising from the sale | |||||||
| of subsidiaries and other assets | (1) | 9,728 | 9,727 | 4 | - | 17,524 | 27,255 |
| Net operating revenue | 604,520 | 617,060 | 1,221,580 | 312,778 | 56,418 | 43,797 | 1,634,573 |
| Operating expenses | 352,687 | 266,793 | 619,480 | 91,120 | 31,639 | 11,986 | 754,225 |
| Impairment for credit and financial assets (3) | (14,8 82) |
(49,104) | (63,986) | (314,268) | 1,837 | 44,392 | (332,025) |
| Other impairments and provisions (4) | (1) | (15,739) | (15,740) | (2) | 1 | (83,585) | (99,326) |
| Net income / (loss) before income tax | 236,950 | 285,424 | 522,374 | (92,612) | 26,617 | (7,382) | 448,997 |
| Income tax | (73,727) | (64,639) | (138,366) | 29,701 | (7,388) | 6,548 | (109,505) |
| Income / (loss) after income tax | |||||||
| from continuing operations | 163,223 | 220,785 | 384,008 | (62,911) | 19,229 | (834) | 339,492 |
| Income / (loss) arising from | |||||||
| discontinued operations | - | - | - | - | - | 1,750 | 1,750 |
| Net income / (loss) for the period | 163,223 | 220,785 | 384,008 | (62,911) | 19,229 | 916 | 341,242 |
| Non-controlling interests | - | (90,107) | (90,107) | - | - | 6,334 | (83,773) |
| Net income / (loss) for the period | |||||||
| attributable to Bank's Shareholders | 163,223 | 130,678 | 293,901 | (62,911) | 19,229 | 7,250 | 257,469 |
As at 30 September 2018, the net contribution of the major operational Segments, for the balance sheet, is analysed as follows:
| Cash and Loans and advances | |||||||
|---|---|---|---|---|---|---|---|
| to credit institutions | 8,292,288 | 1,095,478 | 9,387,766 | 271,863 | 2,443,568 | (8,712,173) | 3,391,024 |
| Loans and advances to customers (5) | 21,063,867 | 12,677,156 | 33,741,023 | 12,980,930 | 624,266 | 597,769 | 47,943,988 |
| Financial assets (6) | 20,312 | 4,997,620 | 5,017,932 | - | 1,650 | 10,358,635 | 15,378,217 |
| Other assets | 173,671 | 565,722 | 739,393 | 46,524 | 14,330 | 6,231,130 | 7,031,377 |
| Total Assets | 29,550,138 | 19,335,976 | 48,886,114 | 13,299,317 | 3,083,814 | 8,475,361 | 73,744,606 |
| Resources from other credit | |||||||
| institutions (7) | 946,395 | 1,579,384 | 2,525,779 | 4,278,789 | 348,111 | 410,845 | 7,563,524 |
| Resources from customers (8) | 26,648,757 | 15,561,796 | 42,210,553 | 7,876,033 | 2,566,800 | 970,984 | 53,624,370 |
| Debt securities issued (9) | 941,398 | 170,871 | 1,112,269 | 737 | 49,203 | 1,513,568 | 2,675,777 |
| Other financial liabilities (10) | - | 119,483 | 119,483 | - | 1,407 | 1,457,873 | 1,578,763 |
| Other liabilities | 45,509 | 424,812 | 470,321 | 61,641 | 7,263 | 818,295 | 1,357,520 |
| Total Liabilities | 28,582,059 | 17,856,346 | 46,438,405 | 12,217,200 | 2,972,784 | 5,171,565 | 66,799,954 |
| Equity and non-controlling interests | 968,079 | 1,479,630 | 2,447,709 | 1,082,117 | 111,030 | 3,303,796 | 6,944,652 |
| Total Liabilities, Equity | |||||||
| and Non-controlling interests | 29,550,138 | 19,335,976 | 48,886,114 | 13,299,317 | 3,083,814 | 8,475,361 | 73,744,606 |
| Number of employees | 4,667 | 8,572 | 13,239 | 732 | 227 | 1,588 | 15,786 |
(1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico;
(2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost, results from derecognition of financial assets measured at fair value through other comprehensive income;
(3) Includes impairment of financial assets at amortised cost, for loans and advances of credit institutions, for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets at fair value through other comprehensive income; (4) Includes impairment for other assets and provisions.
(5) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss;
(6) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income (net of impairment), assets with repurchase agreement and hedging derivatives;
(7) Includes resources and other financing from central banks and resources from other credit institutions;
(8) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss) and debt securities placed with customers;
(9) Includes non subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates);
(10) Includes financial liabilities held for trading, subordinated debt and hedging derivatives.
As at 30 September 2017, the net contribution of the major operational segments, for the income statement, is analysed as follows:
| (Thousands of Euros) | |||||||
|---|---|---|---|---|---|---|---|
| Commercial banking | Companies, Corporate and Investment |
||||||
| Retail in Portugal |
Foreign business (1) |
Total | banking in Portugal |
Private banking |
Other | Consolidated | |
| INCOME STATEMENT | |||||||
| Interest and similar income | 352,684 | 627,192 | 979,876 | 295,793 | 30,214 | 125,929 | 1,431,812 |
| Interest expense and similar charges | (50,080) | (211,335) | (261,415) | (79,707) | (11,419) | (56,069) | (408,610) |
| Net interest income | 302,604 | 415,857 | 718,461 | 216,086 | 18,795 | 69,860 | 1,023,202 |
| Commissions and other income | 277,912 | 190,145 | 468,057 | 126,228 | 38,388 | 7,363 | 640,036 |
| Commissions and other costs | (25,309) | (96,422) | (121,731) | (19,470) | (4,991) | (95,997) | (242,189) |
| Net commissions and other income | 252,603 | 93,723 | 346,326 | 106,758 | 33,397 | (88,634) | 397,847 |
| Net gains arising from trading activity | 13,901 | 64,920 | 78,821 | 1,733 | (18,910) | 53,355 | 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 | 569,108 | 601,674 | 1,170,782 | 324,577 | 33,282 | 65,657 | 1,594,298 |
| Operating expenses | 340,660 | 253,341 | 594,001 | 95,445 | 28,820 | (23,669) | 694,597 |
| Impairment for credit and financial assets | (55,390) | (68,311) | (123,701) | (329,826) | (2,025) | (51,527) | (507,079) |
| Other impairments and provisions | (46) | (1,436) | (1,482) | 143 | - | (120,085) | (121,424) |
| Net income / (loss) before income tax | 173,012 | 278,586 | 451,598 | (100,551) | 2,437 | (82,286) | 271,198 |
| Income tax | (50,285) | (61,100) | (111,385) | 30,567 | (6,159) | 23,866 | (63,111) |
| Income / (loss) after income tax | |||||||
| from continuing operations | 122,727 | 217,486 | 340,213 | (69,984) | (3,722) | (58,420) | 208,087 |
| Income / (loss) arising from | |||||||
| discontinued operations | - | - | - | - | - | 1,250 | 1,250 |
| Net income / (loss) for the period | 122,727 | 217,486 | 340,213 | (69,984) | (3,722) | (57,170) | 209,337 |
| Non-controlling interests | - | (79,511) | (79,511) | - | - | 3,483 | (76,028) |
| Net income / (loss) for the period | |||||||
| attributable to Bank's Shareholders | 122,727 | 137,975 | 260,702 | (69,984) | (3,722) | (53,687) | 133,309 |
As at 31 December 2017, the net contribution of the major operational segments, for the balance sheet, is analysed as follows:
| (Thousands of Euros) | |||||||
|---|---|---|---|---|---|---|---|
| BALANCE SHEET | |||||||
| Cash and Loans and advances | |||||||
| to credit institutions | 7,127,614 | 674,263 | 7,801,877 | 306,599 | 2,419,315 | (6,998,757) | 3,529,034 |
| Loans and advances to customers | 20,776,882 | 12,226,228 | 33,003,110 | 13,527,270 | 580,336 | 522,776 | 47,633,492 |
| Financial assets (2) | 21,172 | 5,391,786 | 5,412,958 | - | 2,183 | 7,742,920 | 13,158,061 |
| Other assets | 112,769 | 596,867 | 709,636 | 33,161 | 9,654 | 6,866,412 | 7,618,863 |
| Total Assets | 28,038,437 | 18,889,144 | 46,927,581 | 13,867,030 | 3,011,488 | 8,133,351 | 71,939,450 |
| Resources from other credit | |||||||
| institutions | 1,143,583 | 1,492,783 | 2,636,366 | 4,641,705 | 339,949 | (130,663) | 7,487,357 |
| Resources from customers | 25,037,376 | 15,130,262 | 40,167,638 | 8,174,722 | 2,515,603 | 329,854 | 51,187,817 |
| Debt securities issued | 873,375 | 276,960 | 1,150,335 | 2,880 | 37,563 | 1,817,013 | 3,007,791 |
| Other financial liabilities | - | 86,081 | 86,081 | - | 2,020 | 1,657,399 | 1,745,500 |
| Other liabilities | 37,370 | 471,569 | 508,939 | 57,731 | 5,972 | 758,607 | 1,331,249 |
| Total Liabilities | 27,091,704 | 17,457,655 | 44,549,359 | 12,877,038 | 2,901,107 | 4,432,210 | 64,759,714 |
| Equity and non-controlling interests | 946,733 | 1,431,489 | 2,378,222 | 989,992 | 110,381 | 3,701,141 | 7,179,736 |
| Total Liabilities, Equity | |||||||
| and Non-controlling interests | 28,038,437 | 18,889,144 | 46,927,581 | 13,867,030 | 3,011,488 | 8,133,351 | 71,939,450 |
| Number of employees | 4,731 | 8,461 | 13,192 | 741 | 217 | 1,577 | 15,727 |
(1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico.
(2) Includes financial assets held for trading, financial assets designated at fair value through profit or loss, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
As at 30 September 2018, the net contribution of the major geographic segments, for the income statement and balance sheet, is analysed as follows:
| (Thousands of Euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Portugal | |||||||||
| Companies, | |||||||||
| Corporate and | |||||||||
| Retail | Investment | Private | |||||||
| banking | banking | banking | Other | Total | Poland | Mozambique | Other (1) | Consolidated | |
| INCOME STATEMENT | |||||||||
| Interest and similar income | 347,370 | 259,531 | 14,870 | 118,970 | 740,741 | 442,781 | 214,574 | 9,765 | 1,407,861 |
| Interest expense and similar charges | (30,825) | (52,170) | (4,801) | (52,938) | (140,734) | (130,394) | (79,282) | (4,646) | (355,056) |
| Net interest income | 316,545 | 207,361 | 10,069 | 66,032 | 600,007 | 312,387 | 135,292 | 5,119 | 1,052,805 |
| Commissions and other income | 304,300 | 125,551 | 21,202 | 2,768 | 453,821 | 151,065 | 41,802 | 22,129 | 668,817 |
| Commissions and other costs | (28,896) | (20,456) | (1,148) | (113,981) | (164,481) | (93,034) | (13,864) | (4,369) | (275,748) |
| Net commissions and other income | 275,404 | 105,095 | 20,054 | (111,213) | 289,340 | 58,031 | 27,938 | 17,760 | 393,069 |
| Net gains arising from financial operations (2) | 12,572 | 318 | 332 | 28,319 | 41,541 | 39,439 | 5,811 | 2,785 | 89,576 |
| Share of profit of associates | |||||||||
| under the equity method | - | - | - | 43,135 | 43,135 | - | - | 28,733 | 71,868 |
| Gains / (losses) arising from the sale | |||||||||
| of subsidiaries and other assets | (1) | 4 | - | 17,524 | 17,527 | 1,831 | 7,897 | - | 27,255 |
| Net operating revenue | 604,520 | 312,778 | 30,455 | 43,797 | 991,550 | 411,688 | 176,938 | 54,397 | 1,634,573 |
| Operating expenses | 352,687 | 91,120 | 13,133 | 11,986 | 468,926 | 200,673 | 66,120 | 18,506 | 754,225 |
| Impairment for credit | |||||||||
| and financial assets (3) | (14,882) | (314,268) | 1,234 | 44,392 | (283,524) | (32,061) | (21,778) | 5,338 | (332,025) |
| Other impairments and provisions (4) | (1) | (2) | - | (83,585) | (83,588) | (4,910) | 789 | (11,617) | (99,326) |
| Net income / (loss) before | |||||||||
| income tax | 236,950 | (92,612) | 18,556 | (7,382) | 155,512 | 174,044 | 89,829 | 29,612 | 448,997 |
| Income tax | (73,727) | 29,701 | (5,845) | 6,548 | (43,323) | (45,891) | (17,328) | (2,963) | (109,505) |
| Income / (loss) after income | |||||||||
| tax from continuing operations | 163,223 | (62,911) | 12,711 | (834) | 112,189 | 128,153 | 72,501 | 26,649 | 339,492 |
| Income / (loss) arising from | |||||||||
| discontinued operations | - | - | - | 1,750 | 1,750 | - | - | - | 1,750 |
| Net income / (loss) for the period | 163,223 | (62,911) | 12,711 | 916 | 113,939 | 128,153 | 72,501 | 26,649 | 341,242 |
| Non-controlling interests | - | - | - | 6,334 | 6,334 | (63,949) | (24,548) | (1,610) | (83,773) |
| Net income / (loss) for the period | |||||||||
| attributable to Bank's Shareholders | 163,223 | (62,911) | 12,711 | 7,250 | 120,273 | 64,204 | 47,953 | 25,039 | 257,469 |
As at 30 September 2018, 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 | 8,292,288 | 271,863 | 1,725,734 | (8,712,173) | 1,577,712 | 646,094 | 449,383 | 717,835 | 3,391,024 |
| Loans and advances to customers (5) | 21,063,867 | 12,980,930 | 302,340 | 597,769 | 34,944,906 | 11,894,171 | 785,120 | 319,791 | 47,943,988 |
| Financial assets (6) | 20,312 | - | - | 10,358,635 | 10,378,947 | 4,340,048 | 657,573 | 1,649 | 15,378,217 |
| Other assets | 173,671 | 46,524 | 11,029 | 6,231,130 | 6,462,354 | 267,190 | 160,976 | 140,857 | 7,031,377 |
| Total Assets | 29,550,138 | 13,299,317 | 2,039,103 | 8,475,361 | 53,363,919 | 17,147,503 | 2,053,052 | 1,180,132 | 73,744,606 |
| Resources from other | |||||||||
| institutions (7) | 946,395 | 4,278,789 | - | 410,845 | 5,636,029 | 1,419,487 | 124,495 | 383,513 | 7,563,524 |
| Resources from customers (8) | 26,648,757 | 7,876,033 | 1,930,984 | 970,984 | 37,426,758 | 14,068,232 | 1,493,563 | 635,817 | 53,624,370 |
| Debt securities issued (9) | 941,398 | 737 | 49,203 | 1,513,568 | 2,504,906 | 170,871 | - | - | 2,675,777 |
| Other financial liabilities (10) | - | - | - | 1,457,873 | 1,457,873 | 119,483 | - | 1,407 | 1,578,763 |
| Other liabilities | 45,509 | 61,641 | 1,237 | 818,295 | 926,682 | 344,697 | 80,115 | 6,026 | 1,357,520 |
| Total Liabilities | 28,582,059 | 12,217,200 | 1,981,424 | 5,171,565 | 47,952,248 | 16,122,770 | 1,698,173 | 1,026,763 | 66,799,954 |
| Equity and non-controlling interests | 968,079 | 1,082,117 | 57,679 | 3,303,796 | 5,411,671 | 1,024,733 | 354,879 | 153,369 | 6,944,652 |
| Total Liabilities, Equity | |||||||||
| and non-controlling interests | 29,550,138 | 13,299,317 | 2,039,103 | 8,475,361 | 53,363,919 | 17,147,503 | 2,053,052 | 1,180,132 | 73,744,606 |
| Number of employees | 4,667 | 732 | 143 | 1,588 | 7,130 | 5,950 | 2,622 | 84 | 15,786 |
(1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico;
(2) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost, results from derecognition of financial assets measured at fair value through other comprehensive income; (3) Includes impairment of financial assets at amortised cost, for loans and advances of credit institutions, for loans to customers (net of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial assets at fair value through other comprehensive income;
(4) Includes impairment for non current assets held for sale, investments in associated companies, goodwill, other assets and provisions.
(5) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss;
(6) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive income (net of impairment), assets with repurchase agreement and hedging derivatives;
(7) Includes resources and other financing from central banks and resources from other credit institutions; (8) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer deposits at fair value through profit or loss) and debt securities placed with customers;
(9) Includes non subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt securities and certificates);
(10) Includes financial liabilities held for trading, subordinated debt and hedging derivatives.
| (Thousands of Euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Portugal | |||||||||
| Companies, | |||||||||
| Corporate and | |||||||||
| Retail | Investment | Private | |||||||
| banking | banking | banking | Other | Total | Poland | Mozambique | Other (1) | Consolidated | |
| INCOME STATEMENT | |||||||||
| Interest and similar income | 352,684 | 295,793 | 19,016 | 125,929 | 793,422 | 418,598 | 215,105 | 4,687 | 1,431,812 |
| Interest expense and similar charges | (50,080) | (79,707) | (5,794) | (56,069) | (191,650) | (130,556) | (86,700) | 296 | (408,610) |
| Net interest income | 302,604 | 216,086 | 13,222 | 69,860 | 601,772 | 288,042 | 128,405 | 4,983 | 1,023,202 |
| Commissions and other costs | 277,912 | 126,228 | 16,682 | 7,363 | 428,185 | 148,274 | 41,871 | 21,706 | 640,036 |
| Commissions and other costs | (25,309) | (19,470) | (1,011) | (95,997) | (141,787) | (82,155) | (14,267) | (3,980) | (242,189) |
| Net commissions and other income | 252,603 | 106,758 | 15,671 | (88,634) | 286,398 | 66,119 | 27,604 | 17,726 | 397,847 |
| Net gains arising from trading activity | 13,901 | 1,733 | 322 | 53,355 | 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 | 569,108 | 324,577 | 29,215 | 65,657 | 988,557 | 393,820 | 164,397 | 47,524 | 1,594,298 |
| Operating expenses | 340,660 | 95,445 | 11,384 | (23,669) | 423,820 | 189,655 | 63,686 | 17,436 | 694,597 |
| Impairment for credit | |||||||||
| and financial assets | (55,390) | (329,826) | (1,706) | (51,527) | (438,449) | (45,251) | (23,059) | (320) | (507,079) |
| Other impairments and provisions | (46) | 143 | - | (120,085) | (119,988) | (4,167) | 2,731 | - | (121,424) |
| Net income / (loss) before | |||||||||
| income tax | 173,012 | (100,551) | 16,125 | (82,286) | 6,300 | 154,747 | 80,383 | 29,768 | 271,198 |
| Income tax | (50,285) | 30,567 | (4,757) | 23,866 | (609) | (41,863) | (19,411) | (1,228) | (63,111) |
| Income / (loss) after income | |||||||||
| tax from continuing operations | 122,727 | (69,984) | 11,368 | (58,420) | 5,691 | 112,884 | 60,972 | 28,540 | 208,087 |
| Income / (loss) arising from | |||||||||
| discontinued operations | - | - | - | 1,250 | 1,250 | - | - | - | 1,250 |
| Net income / (loss) for the period | 122,727 | (69,984) | 11,368 | (57,170) | 6,941 | 112,884 | 60,972 | 28,540 | 209,337 |
| Non-controlling interests | - | - | - | 3,483 | 3,483 | (56,329) | (20,703) | (2,479) | (76,028) |
| Net income / (loss) for the period | |||||||||
| attributable to Bank's Shareholders | 122,727 | (69,984) | 11,368 | (53,687) | 10,424 | 56,555 | 40,269 | 26,061 | 133,309 |
As at 31 December 2017, the net contribution of the major geographic segments, for the balance sheet, is analysed as follows:
| (Thousands of Euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| BALANCE SHEET | |||||||||
| Cash and Loans and advances | |||||||||
| to credit institutions | 7,127,614 | 306,599 | 1,526,711 | (6,998,757) | 1,962,167 | 559,047 | 424,966 | 582,854 | 3,529,034 |
| Loans and advances to customers | 20,776,882 | 13,527,270 | 304,302 | 522,776 | 35,131,230 | 11,354,379 | 871,850 | 276,033 | 47,633,492 |
| Financial assets (2) | 21,172 | - | - | 7,742,920 | 7,764,092 | 4,899,703 | 492,082 | 2,184 | 13,158,061 |
| Other assets | 112,769 | 33,161 | 6,741 | 6,866,412 | 7,019,083 | 222,481 | 161,589 | 215,710 | 7,618,863 |
| Total Assets | 28,038,437 | 13,867,030 | 1,837,754 | 8,133,351 | 51,876,572 | 17,035,610 | 1,950,487 | 1,076,781 | 71,939,450 |
| Resources from other | |||||||||
| credit institutions | 1,143,583 | 4,641,705 | - | (130,663) | 5,654,625 | 1,646,767 | 91,879 | 94,086 | 7,487,357 |
| Resources from customers | 25,037,376 | 8,174,722 | 1,748,452 | 329,854 | 35,290,404 | 13,715,985 | 1,414,277 | 767,151 | 51,187,817 |
| Debt securities issued | 873,375 | 2,880 | 37,563 | 1,817,013 | 2,730,831 | 276,960 | - | - | 3,007,791 |
| Other financial liabilities | - | - | - | 1,657,399 | 1,657,399 | 86,081 | - | 2,020 | 1,745,500 |
| Other liabilities | 37,370 | 57,731 | 1,015 | 758,607 | 854,723 | 363,306 | 108,263 | 4,957 | 1,331,249 |
| Total Liabilities | 27,091,704 | 12,877,038 | 1,787,030 | 4,432,210 | 46,187,982 | 16,089,099 | 1,614,419 | 868,214 | 64,759,714 |
| Equity and non-controlling interests | 946,733 | 989,992 | 50,724 | 3,701,141 | 5,688,590 | 946,511 | 336,068 | 208,567 | 7,179,736 |
| Total Liabilities, Equity | |||||||||
| and non-controlling interests | 28,038,437 | 13,867,030 | 1,837,754 | 8,133,351 | 51,876,572 | 17,035,610 | 1,950,487 | 1,076,781 | 71,939,450 |
| Number of employees | 4,731 | 741 | 140 | 1,577 | 7,189 | 5,830 | 2,631 | 77 | 15,727 |
(1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico.
(2) Includes financial assets held for trading, financial assets designated at fair value through profit or loss, financial assets held to maturity, financial assets available for sale, hedging derivatives and assets with repurchase agreement.
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
30 September 2017 |
|
| Net contribution: | ||
| Retail banking in Portugal | 163,223 | 122,727 |
| Companies, Corporate and Investment banking | (62,911) | (69,984) |
| Private Banking | 12,711 | 11,368 |
| Foreign business (continuing operations) | 227,303 | 202,396 |
| Non-controlling interests (1) | (90,107) | (79,511) |
| 250,219 | 186,996 | |
| Amounts not allocated to segments: | ||
| Interests of hybrid instruments | - | (6,343) |
| Net interest income of the bond portfolio | 18,524 | 29,212 |
| Interests on loans to customers written off (Net interest income) | - | 12,909 |
| Own credit risk | - | 46 |
| Foreign exchange activity | 16,135 | 22,257 |
| Gains / (losses) arising from sales of subsidiaries and other assets | 17,524 | (1,323) |
| Equity accounted earnings | 43,135 | 32,399 |
| Impairment and other provisions (2) | (39,191) | (171,611) |
| Operational costs (3) | (11,986) | 23,669 |
| Gains on sale of Portuguese public debt | 16,022 | 6,982 |
| Mandatory contributions | (66,470) | (57,860) |
| Loans sale | (21,581) | (4,622) |
| Taxes (4) | 6,548 | 23,866 |
| Income from discontinued operations | 1,750 | 1,250 |
| Non-controlling interests | 6,334 | 3,483 |
| Others (5) | 20,506 | 31,999 |
| Total not allocated to segments | 7,250 | (53,687) |
| Consolidated net income | 257,469 | 133,309 |
(1) Corresponds mainly to the income attributable to third parties related to the subsidiaries in Poland, and in Mozambique.
(2) 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.
(3) Corresponds to revenues/costs related to the impacts arising from restructuring costs and the revision of the Collective Labour Agreement (the latter, only in 2017).
(4) 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.
(5) It includes other operations not allocated previously namely funding for non-interest bearing assets and strategic financial investments.
The Group is subject to several risks during the course of its business. The risks from different companies of the Group are managed centrally, in coordination with the local departments and considering the specific risks of each business.
The Group's risk-management policy is designed to permanently ensure an adequate relationship between its own funds and the business it develops, as well as the corresponding evaluation of the risk/return profile by business line. Under this scope, the monitoring and control of the main types of financial risks to which the Group's business is subject to – credit, market, liquidity and operational – is particularly relevant.
Credit – Credit risk is associated with the degree of uncertainty of the expected returns as a result of the inability either of the borrower (and the guarantor, if any) or of the issuer of a security or of the counterparty to an agreement to fulfil their obligations.
Market – Market risk reflects the potential loss inherent in a given portfolio as a result of changes in rates (interest and exchange) and/or in the prices of the various financial instruments that make up the portfolio, considering both the correlations that exist between these instruments and the respective volatilities.
Liquidity – Liquidity risk reflects the Group's inability to meet its obligations at maturity without incurring in significant losses resulting from the deterioration of the funding conditions (funding risk) and/or from the sale of its assets below market value (market liquidity risk).
Operational – Operational risk consists in the potential losses resulting from failures or inadequacies in internal procedures, persons or systems, and also in the potential losses resulting from external events.
Banco Comercial Português Board of Directors is responsible for the definition of the risk policy, including the approval of the principles and rules of the highest level to be followed in risk management, as well as the guidelines dictating the allocation of capital to the business lines.
The Board of Directors, through the Audit Committee, ensures the existence of adequate risk control and of risk-management systems at Group level and for each entity. The Board of Directors also approves the risk-tolerance level acceptable to the Group, proposed by its Executive Committee.
The Risk Committee is responsible for monitoring the overall levels of risk incurred, ensuring that these are compatible with the goals and strategies approved for the business.
The Chief Risk Officer is responsible for the control of risks in all Group entities, for the identification of all risks to which the Group activity is exposed and for the proposal of measures to improve risks control. The Chief Risk Officer also ensures that risks are monitored on an overall basis and that there is alignment of concepts, practices and goals in risk management. The activity of every entity included within the Banco Comercial Português consolidation perimeter is governed by the principles and decisions established centrally by the Risk Committee and the main subsidiaries are provided with Risk Office structures which are established in accordance with the risks inherent to their particular business. A Risk Control Commission has been set up at each relevant subsidiary, responsible for the control of risks at local level, in which the Chief Risk Officer takes part.
The Group Head of Compliance is responsible for implementing systems for monitoring the compliance with legal obligations and responsibilities to which the Bank is subject, as well, the prevention, monitoring and reporting of risks in organizational processes, which include, among others, the prevention and repression of money laundering, combating financing of terrorism, prevention of conflicts of interest, issues related to abuse of market and compliance with the disclosure requirements to customers.
Credit granting is based on a prior classification of the customers' risk and on a thorough assessment of the level of protection provided by the underlying collateral. In order to do so, a single risk-notation system has been introduced, the Rating Master Scale, based on the expected probability of default, allowing greater discrimination in the assessment of the customers and better establishment of the hierarchies of the associated risk.
The Rating Master Scale also identifies those customers that show a worsening credit capacity and, in particular, those classified as being in default. All rating and scoring models used by the Group have been duly calibrated for the Rating Master Scale. The protection-level concept has been introduced as a crucial element of evaluation of the effectiveness of the collateral in credit-risk mitigation, leading to a more active collateralization of loans and to a better adequacy of pricing regarding the risk incurred.
The gross Group's exposure to credit risk (original exposure) is presented in the following table:
| (Thousands of euros) | ||
|---|---|---|
| Risk items | 30 September 2018 |
31 December 2017 |
| Central Governments or Central Banks | 13,249,134 | 11,404,056 |
| Regional Governments or Local Authorities | 816,298 | 744,693 |
| Administrative and non-profit Organisations | 188,570 | 349,156 |
| Multilateral Development Banks | 18,791 | 19,432 |
| Other Credit Institutions | 2,568,278 | 2,915,047 |
| Retail and Corporate customers | 60,325,693 | 60,199,404 |
| Other items (*) | 10,435,172 | 11,449,727 |
| 87,601,936 | 87,081,515 |
Note: gross exposures of impairment and amortization, in accordance with the prudential consolidation perimeter. Includes securitization positions.
(*) In addition to positions in equity, collective investment and securitization, the Other items contain other assets subject to credit risk in accordance with article 134 of the CRR.
The evaluation of the risk associated to the loan portfolio and quantification of the respective losses incurred, considers the following methodological notes.
On the risk evaluation of an operation or of a group of operations, the mitigation elements of credit risk associated to those operations are considered in accordance with the rules and internal procedures that fulfil the requirements defined by the regulations in force, also reflecting the experience of the loans recovery areas and the Legal Department opinions with respect to the entailment of the various mitigation instruments.
The collaterals and the relevant guarantees can be aggregated in the following categories:
financial collaterals, real estate collaterals or other collaterals;
receivables;
first demand guarantees, issued by banks or other entities with Risk Grade 7 or better on the Rating Master Scale;
personal guarantees, when the persons are classified with Risk Grade 7 or better;
credit derivatives.
The financial collaterals accepted are those that are traded in a recognized stock exchange, i.e., on an organized secondary market, liquid and transparent, with public bid-ask prices, located in countries of the European Union, United States, Japan, Canada, Hong Kong or Switzerland.
In this context, it is important to refer that the Bank's shares are not accepted as financial collaterals of new credit operations and are only accepted for the reinforcement of guarantees of existing credit operations, or in restructuring process associated to credit recoveries.
Regarding guarantees and credit derivatives, it can be applied the substitution principle by replacing the Risk Grade of the client by the Risk Grade of the guarantor, (if the Risk of Grade Degree of the guarantor is better than the client's), when the protection is formalized through:
State, Financial Institutions or Mutual Guarantee Societies guarantees exist;
personal guarantees (or, in the case of Leasing, there is a recovery agreement of the provider);
Credit derivatives;
Formalization of the clause of the contracting party in leasing contracts in which it is an entity that is in a relationship of dominion or group with the lessee.
An internal level of protection is attributed to all credit operations at the moment of the credit granting decision, considering the credit amount as well as the value and type of the collaterals involved. The protection level corresponds to the loss reduction in case of default that is linked to the various collateral types, considering their market value and the amount of the associated exposure.
In the case of financial collaterals, adjustments are made to the protection value by the use of a set of haircuts, in order to reflect the price volatility of the financial instruments.
In the case of real estate mortgages, the initial appraisal of the real estate value is done during the credit analysis and decision process.
Either the initial evaluations or the subsequent reviews carried out are performed by external expert valuers and the ratification process is centralized in the Appraisals Unit, which is independent of the clients' areas.
In any case, they are the subject to a written report, in a standardized digital format, based on a group of predefined methods that are aligned with the sector practices – income, replacement cost and/or market comparative - mentioning the obtained value, for both the market value and for purposes of the mortgage guarantee, depending on the type of the real estate. The evaluations have a declaration/certification of an expert valuer since 2008, as requested by Regulation (EU) 575/2013 and Law 153/2015 of 14 September and are ratified by the Appraisals Unit.
Regarding residential real estate, after the initial valuation and in accordance with Notice n. 5/2006 of Bank of Portugal and e CRR 575/2013, the Bank monitors the respective values through market indexes. If the index is lower than 0.9, the Bank revaluates choosing one of the following two methods:
i) - depreciation of the property by direct application of the index, if the amount owed does not exceed Euros 300,000; ii) - review of the property value by external valuators, depending on the value of the credit operation, and in accordance with the established standards from ECB and Bank of Portugal.
For all non-residential real estate, the Bank also monitors its values through market indexes and to the regular valuation reviews with the minimum periodicities in accordance with the Regulation (EU) 575/2013, in the case of offices, commercial spaces, warehouses and industrial premises.
For all real estate (residential or non-residential) for which the monitoring result in significant devaluation of the real estate value (more than 10%), a valuation review is subsequently carried out by an expert valuer, preserving the referred i) above.
For the remaining real estate (land or country side buildings for example) there are no market indexes available for the monitoring of appraisal values, after the initial valuations. Therefore, for these cases and in accordance with the minimum periodicity established for the monitoring and reviewing of this type of real estate, valuation reviews are carried out by expert valuers.
The indexes currently used are supplied to the Bank by an external specialized entity that, for more than a decade, has been collecting and processing the data upon which the indexes are built.
In the case of financial collaterals, their market value is daily and automatically updated, through the IT connection between the collaterals management system and the relevant financial markets data.
Credit granting is based on the previous risk assessment of clients and also on a rigorous assessment of the protection level provided by the underlying collaterals. For this purpose, a single risk grading system is used - the Rating Master Scale - based on Probability of Default (PD), allowing for a greater discriminating power in clients' assessment and for a better hierarchy of the associated risk. The Rating Master Scale also allows to identify clients that show signs of degradation in their credit capacity and, in particular, those that are classified in a default situation. All rating systems and models used by the Group were calibrated for the Rating Master Scale.
Aiming at an adequate assessment of credit risk, the Group defined a set of macro segments and segments which are treated through different rating systems and models that relate the internal risk grades and the clients' PD, ensuring a risk assessment that considers the clients' specific features in terms of their respectively risk profiles.
The assessment made by these rating systems and models result in the risk grades of the Master Scale, that has fifteen grades, where the last three correspond to relevant downgrades of the clients' credit quality and are referred to by "procedural risk grades": 13, 14 and 15, that correspond, in this order, to situations of increased severity in terms default, as risk grade 15 is a Default situation.
The non-procedural risk grades are attributed by the rating systems through automatic decision models or by the Rating Division – a unit which is independent from the credit analysis and decision areas and bodies- and are reviewed/updated periodically or whenever this is justified by events.
The models within the various rating systems are regularly subject to validation, made by the Models Validation and Monitoring Office, which is independent from the units that are responsible for the development and maintenance of the rating models.
The conclusions of the validations by the Models Validation and Monitoring Office, as well the respective recommendations and proposal for changes and/or improvements, are analysed and ratified by a specific Validation Committee, composed in accordance to the type of model analysed. The proposals for models' changes originated by the Validation Committee are submitted to the approval of the Risk Committee.
The following table lists the recognised External Credit Assessment Institutions (ECAI) and the external ratings equivalence to the Rating Master Scale of the Group:
| External ratings | ||||||
|---|---|---|---|---|---|---|
| Internal risk grade | Fitch | S&P | Moody's | DBRS | ||
| 1 | AAA | AAA | Aaa | AAA | ||
| 1 | AA+ | AA+ | Aa1 | AA (high) | ||
| 2 | AA | AA | Aa2 | AA | ||
| 2 | AA- | AA- | Aa3 | AA (low) | ||
| 3 | A+ | A+ | A1 | A (high) | ||
| 3 | A | A | A2 | A | ||
| 4 | A- | A- | A3 | A (low) | ||
| 4 | BBB+ | BBB+ | Baa1 | BBB (high) | ||
| 5 | BBB | BBB | Baa2 | BBB | ||
| 6 | BBB- | BBB- | Baa3 | BBB (low) | ||
| 7 | BB+ | BB+ | Ba1 | BB (high) | ||
| 8 | BB | BB | Ba2 | BB | ||
| 9 | BB- | BB- | Ba3 | BB (low) | ||
| 10 | B+ | B+ | B1 | B (high) | ||
| 11 | B | B | B2 | B | ||
| 12 | ≤ B- | ≤ B- | ≤ B3 | ≤ B |
The credit impairment calculation as at 30 September 2018 and 31 December 2017 integrates the general principles defined in International Financial Reporting Standards (IFRS 9 as at 1 January 2018 and IAS 39 as at 31 December 2017) and the guidelines issued by the Bank of Portugal through a Circular Letter "CC / 2018/00000006", in order to align the calculation process used in the Group with the best international practices in this area.
As at 30 September 2018, the financial instruments subject to impairment requirements under IFRS 9, analysed by stage, are detailed in the following tables:
| (Thousands of euros) | |||||||
|---|---|---|---|---|---|---|---|
| 30 September 2018 | |||||||
| Category | Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||
| Financial assets at amortised cost | |||||||
| Loans and advances to credit institutions (note 20) | 862,637 | 5,829 | 666 | - | 869,132 | ||
| Loans and advances to customers (note 21) | 35,660,515 | 6,718,832 | 6,125,309 | 5 | 48,504,661 | ||
| Debt instruments (note 22) | 3,215,145 | 87,540 | 87,195 | - | 3,389,880 | ||
| Debt instruments at fair value | |||||||
| through other comprehensive income (note 23) | 12,010,744 | - | 4,942 | - | 12,015,686 | ||
| Financial guarantees (note 46) | 10,541,042 | 1,325,105 | 633,769 | - | 12,499,916 | ||
| Total | 62,290,083 | 8,137,306 | 6,851,881 | 5 | 77,279,275 |
The gross exposure to guarantees and other commitments includes the balances of guarantees granted, irrevocable credit lines and revocable commitments, as detailed in note 46.
| (Thousands of euros) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||||
| Category | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |||
| Financial assets at amortised cost | ||||||||
| Loans and advances to credit institutions (note 20) | 505 | 441 | - | - | 946 | |||
| Loans and advances to customers (note 21) | 101,267 | 180,996 | 2,867,041 | - | 3,149,304 | |||
| Debt instruments (note 22) | 5,083 | 169 | 36,883 | - | 42,135 | |||
| Debt instruments at fair value | ||||||||
| through other comprehensive income (note 23) | - | - | 4,942 | - | 4,942 | |||
| Financial guarantees (note 39) | 10,698 | 9,717 | 138,716 | - | 159,131 | |||
| Total | 117,553 | 191,323 | 3,047,582 | - | 3,356,458 |
(Thousands of euros)
| 30 September 2018 | |||||||
|---|---|---|---|---|---|---|---|
| Net exposure | |||||||
| Category | Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||
| Financial assets at amortised cost | |||||||
| Loans and advances to credit institutions (note 20) | 862,132 | 5,388 | 666 | - | 868,186 | ||
| Loans and advances to customers (note 21) | 35,559,248 | 6,537,836 | 3,258,268 | 5 | 45,355,357 | ||
| Debt instruments (note 22) | 3,210,062 | 87,371 | 50,312 | - | 3,347,745 | ||
| Debt instruments at fair value | |||||||
| through other comprehensive income (note 23) | 12,010,744 | - | - | - | 12,010,744 | ||
| Financial guarantees (notes 39 and 46) | 10,530,344 | 1,315,388 | 495,053 | - | 12,340,785 | ||
| Total | 62,172,530 | 7,945,983 | 3,804,299 | 5 | 73,922,817 |
As at 1 January 2018, the financial instruments subject to impairment requirements under IFRS 9, analysed by stage, are detailed in the following tables:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 1 January 2018 Gross Exposure |
||||||
| Category | Stage 1 | Stage 2 | Stage 3 | Total | ||
| Financial assets at amortised cost | ||||||
| Loans and advances to credit institutions (note 57) | 1,062,830 | 2,738 | - | 1,065,568 | ||
| Loans and advances to customers (note 57) | 34,511,663 | 7,177,992 | 6,960,474 | 48,650,129 | ||
| Debt instruments (note 57) | 2,521,555 | 382,539 | 84,023 | 2,988,117 | ||
| Debt instruments at fair value | ||||||
| through other comprehensive income | 8,291,706 | 1,508,187 | 5,150 | 9,805,043 | ||
| Financial guarantees | 10,444,690 | 1,467,651 | 723,577 | 12,635,918 | ||
| Total | 56,832,444 | 10,539,107 | 7,773,224 | 75,144,775 |
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 1 January 2018 Impairment losses |
|||||
| 441 | 262 | - | 703 | ||
| 112,344 | 244,708 | 3,165,613 | 3,522,665 | ||
| 7,580 | 2,545 | 37,924 | 48,049 | ||
| - | - | 5,150 | 5,150 | ||
| 9,814 | 10,375 | 125,400 | 145,589 | ||
| 130,179 | 257,890 | 3,334,087 | 3,722,156 | ||
(Thousands of euros) Stage 1 Stage 2 Stage 3 Total Financial assets at amortised cost Loans and advances to credit institutions (note 57) 2,476 1,062,389 - 1,064,865 Loans and advances to customers (note 57) 6,933,284 34,399,319 3,794,861 45,127,464 Debt instruments (note 57) 379,994 2,513,975 46,099 2,940,068 Debt instruments at fair value through other comprehensive income 1,508,187 8,291,706 - 9,799,893 Financial guarantees 1,457,276 10,434,876 598,177 12,490,329 Total 10,281,217 56,702,265 4,439,137 71,422,619 Category Net exposure 1 January 2018
AS at 30 September 2018, the maximum exposure to credit risk of financial assets not subject to impairment requirements is analysed as follows:
| Maximum exposure to credit risk Financial assets held for trading Debt instruments 353,187 Derivatives 871,850 Hedging derivatives (note 25) 15,790 Financial assets designated at fair value through profit or loss Debt instruments (note 23) 50,106 Financial assets designated at fair value through other comprehensive income Debt instruments (note 23) 11,975,658 Total 13,266,591 |
(Thousands of euros) |
|---|---|
Notes:
In the case of financial assets, excluding derivatives, it is considered that its credit risk exposure is equal to its book value plus accrued interest;
In the case of derivatives, the maximum exposure to credit risk is its market value, plus its potential risk ("add-on").
As at 30 September 2018, the modified financial assets that did not result in derecognition are analysed as follows:
| (Thousands of euros) | |
|---|---|
| Financial assets modified during the period (with impairment losses based on expected lifetime losses) |
30 September 2018 |
| Amortised cost before changes | 442,339 |
| Impairment losses before changes | (196,531) |
| Net amortised cost before changes | 245,808 |
| Net gain / loss | (31,808) |
| Net amortised cost after changes | 214,000 |
| (Thousands of euros) | |
|---|---|
| Financial assets changed since the initial recognition at a time when the impairment loss was measured based on the expected credit losses lifetime |
30 September 2018 |
| Amortised cost of financial assets for which credit losses | |
| expected to go from "lifetime" to 12 months | 22,800 |
As at 30 September 2018, financial assets at amortised cost, guarantees and other commitments, analysed by segment and stage, are as follows:
| (Thousands of euros) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||||||
| Stage 2 Days past |
Days past | Days past | Stage 3 Days past |
|||||||
| Segment | Stage 1 | No delays | due <= 30 days |
due > 30 days |
Total | due <= 90 days |
due > 90 days |
Total | POCI | Total |
| Gross Exposure | ||||||||||
| Individuals-Mortgage | 19,528,916 | 2,468,614 | 237,131 | 48,761 | 2,754,506 | 395,110 | 648,796 | 1,043,906 | - | 23,327,328 |
| Individuals-Other | 5,493,660 | 684,183 | 127,005 | 29,792 | 840,980 | 253,593 | 424,923 | 678,516 | 5 | 7,013,161 |
| Financial Companies | 1,213,817 | 239,321 | 35 | 2 | 239,358 | 388,759 | 294,237 | 682,996 | - | 2,136,171 |
| Non-financial comp. - Corporate | 8,073,459 | 1,070,642 | 44,525 | 1,908 | 1,117,075 | 527,462 | 989,692 | 1,517,154 | - | 10,707,688 |
| Non-financial comp.- SME-Corporate | 8,733,091 | 1,540,360 | 35,953 | 2,392 | 1,578,705 | 1,119,630 | 701,593 | 1,821,223 | - | 12,133,019 |
| Non-financial comp. -SME-Retail | 3,433,977 | 1,040,225 | 37,641 | 5,615 | 1,083,481 | 554,769 | 487,195 | 1,041,964 | - | 5,559,422 |
| Non-financial comp.-Other | 401,611 | 161,429 | 8,521 | - | 169,950 | 9,146 | 50,140 | 59,286 | - | 630,847 |
| Other loans | 3,400,808 | 353,081 | 170 | - | 353,251 | 18 | 1,876 | 1,894 | - | 3,755,953 |
| Total | 50,279,339 | 7,557,855 | 490,981 | 88,470 | 8,137,306 | 3,248,487 | 3,598,452 | 6,846,939 | 5 | 65,263,589 |
| Impairment | ||||||||||
| Individuals-Mortgage | 6,298 | 13,082 | 6,241 | 2,251 | 21,574 | 34,141 | 127,792 | 161,933 | - | 189,805 |
| Individuals-Other | 27,841 | 16,196 | 9,548 | 5,807 | 31,551 | 113,665 | 255,215 | 368,880 | - | 428,272 |
| Financial Companies | 2,995 | 9,306 | 1 | - | 9,307 | 270,452 | 206,769 | 477,221 | - | 489,523 |
| Non-financial comp. - Corporate | 32,842 | 36,233 | 2,432 | 1,768 | 40,433 | 223,661 | 564,902 | 788,563 | - | 861,838 |
| Non-financial comp.- SME-Corporate | 35,512 | 41,486 | 3,017 | 359 | 44,862 | 392,385 | 364,366 | 756,751 | - | 837,125 |
| Non-financial comp. -SME-Retail | 10,335 | 30,344 | 2,786 | 597 | 33,727 | 216,396 | 259,875 | 476,271 | - | 520,333 |
| Non-financial comp.-Other | 187 | 2,259 | 170 | - | 2,429 | 2,348 | 10,057 | 12,405 | - | 15,021 |
| Other loans | 1,543 | 7,434 | 6 | - | 7,440 | 9 | 607 | 616 | - | 9,599 |
| Total | 117,553 | 156,340 | 24,201 | 10,782 | 191,323 | 1,253,057 | 1,789,583 | 3,042,640 | - | 3,351,516 |
| Net exposure | ||||||||||
| Individuals-Mortgage | 19,522,618 | 2,455,532 | 230,890 | 46,510 | 2,732,932 | 360,969 | 521,004 | 881,973 | - | 23,137,523 |
| Individuals-Other | 5,465,819 | 667,987 | 117,457 | 23,985 | 809,429 | 139,928 | 169,708 | 309,636 | 5 | 6,584,889 |
| Financial Companies | 1,210,822 | 230,015 | 34 | 2 | 230,051 | 118,307 | 87,468 | 205,775 | - | 1,646,648 |
| Non-financial comp. - Corporate | 8,040,617 | 1,034,409 | 42,093 | 140 | 1,076,642 | 303,801 | 424,790 | 728,591 | - | 9,845,850 |
| Non-financial comp.- SME-Corporate | 8,697,579 | 1,498,874 | 32,936 | 2,033 | 1,533,843 | 727,245 | 337,227 | 1,064,472 | - | 11,295,894 |
| Non-financial comp. -SME-Retail | 3,423,642 | 1,009,881 | 34,855 | 5,018 | 1,049,754 | 338,373 | 227,320 | 565,693 | - | 5,039,089 |
| Non-financial comp.-Other | 401,424 | 159,170 | 8,351 | - | 167,521 | 6,798 | 40,083 | 46,881 | - | 615,826 |
| Other loans | 3,399,265 | 345,647 | 164 | - | 345,811 | 9 | 1,269 | 1,278 | - | 3,746,354 |
| Total | 50,161,786 | 7,401,515 | 466,780 | 77,688 | 7,945,983 | 1,995,430 | 1,808,869 | 3,804,299 | 5 | 61,912,073 |
| % of impairment coverage | ||||||||||
| Individuals-Mortgage | 0.03% | 0.53% | 2.63% | 4.62% | 0.78% | 8.64% | 19.70% | 15.51% | 0.00% | 0.81% |
| Individuals-Other | 0.51% | 2.37% | 7.52% | 19.49% | 3.75% | 44.82% | 60.06% | 54.37% | 0.00% | 6.11% |
| Financial Companies | 0.25% | 3.89% | 2.95% | 0.30% | 3.89% | 69.57% | 70.27% | 69.87% | 0.00% | 22.92% |
| Non-financial comp. - Corporate | 0.41% | 3.38% | 5.46% | 92.63% | 3.62% | 42.40% | 57.08% | 51.98% | 0.00% | 8.05% |
| Non-financial comp.- SME-Corporate | 0.41% | 2.69% | 8.39% | 15.00% | 2.84% | 35.05% | 51.93% | 41.55% | 0.00% | 6.90% |
| Non-financial comp. -SME-Retail | 0.30% | 2.92% | 7.40% | 10.64% | 3.11% | 39.01% | 53.34% | 45.71% | 0.00% | 9.36% |
| Non-financial comp.-Other | 0.05% | 1.40% | 1.99% | 0.17% | 1.43% | 25.67% | 20.06% | 20.92% | 0.00% | 2.38% |
| Other loans | 0.05% | 2.11% | 3.39% | 37.39% | 2.11% | 50.00% | 32.24% | 32.41% | 0.00% | 0.26% |
| Total | 0.23% | 2.07% | 4.93% | 12.19% | 2.35% | 38.57% | 49.73% | 44.44% | 0.00% | 5.14% |
As at 30 September 2018, financial assets at amortised cost, guarantees and other commitments, analysed by sector of activity and stage, are as follows:
| (Thousands of euros) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||||||
| Stage 2 Days past |
Days past | Days past | Stage 3 Days past |
|||||||
| Sector of activity | Stage 1 | No delays | due <= 30 days |
due > 30 days |
Total | due <= 90 days |
due > 90 days |
Total | POCI | Total |
| Gross Exposure | ||||||||||
| Loans to individuals | 25,022,576 | 3,152,797 | 364,136 | 78,553 | 3,595,486 | 648,703 | 1,073,719 | 1,722,422 | 5 | 30,340,489 |
| Non-financial comp.- Trade | 4,309,635 | 573,639 | 25,937 | 2,552 | 602,128 | 184,345 | 195,863 | 380,208 | - | 5,291,971 |
| Non-financial comp.- Construction | 1,701,641 | 610,306 | 20,334 | 2,913 | 633,553 | 758,463 | 566,926 | 1,325,389 | - | 3,660,583 |
| Non finan. comp.- Manufacturing indust. | 4,580,585 | 551,942 | 30,432 | 1,305 | 583,679 | 180,471 | 210,496 | 390,967 | - | 5,555,231 |
| Non-financial comp.-Other activities | 1,421,563 | 218,035 | 2,814 | 338 | 221,187 | 217,654 | 21,183 | 238,837 | - | 1,881,587 |
| Non-financial comp.- Other services | 8,628,714 | 1,858,734 | 47,123 | 2,807 | 1,908,664 | 870,074 | 1,234,152 | 2,104,226 | - | 12,641,604 |
| Other Services /Other activities | 4,614,625 | 592,402 | 205 | 2 | 592,609 | 388,777 | 296,113 | 684,890 | - | 5,892,124 |
| Total | 50,279,339 | 7,557,855 | 490,981 | 88,470 | 8,137,306 | 3,248,487 | 3,598,452 | 6,846,939 | 5 | 65,263,589 |
| Impairment | ||||||||||
| Loans to individuals | 34,139 | 29,278 | 15,789 | 8,058 | 53,125 | 147,806 | 383,007 | 530,813 | - | 618,077 |
| Non-financial comp.- Trade | 17,259 | 11,342 | 1,329 | 271 | 12,942 | 58,031 | 117,406 | 175,437 | - | 205,638 |
| Non-financial comp.- Construction | 6,618 | 13,343 | 3,326 | 1,834 | 18,503 | 271,110 | 296,015 | 567,125 | - | 592,246 |
| Non-financial comp.- Manufacturing industries | 20,008 | 16,794 | 1,668 | 246 | 18,708 | 68,177 | 100,275 | 168,452 | - | 207,168 |
| Non-financial comp.-Other activities | 2,517 | 9,849 | 209 | 28 | 10,086 | 98,454 | 10,451 | 108,905 | - | 121,508 |
| Non-financial comp.- Other services | 32,474 | 58,994 | 1,873 | 345 | 61,212 | 339,018 | 675,053 | 1,014,071 | - | 1,107,757 |
| Other Services /Other activities | 4,538 | 16,740 | 7 | - | 16,747 | 270,461 | 207,376 | 477,837 | - | 499,122 |
| Total | 117,553 | 156,340 | 24,201 | 10,782 | 191,323 | 1,253,057 | 1,789,583 | 3,042,640 | - | 3,351,516 |
| Net exposure | ||||||||||
| Loans to individuals | 24,988,437 | 3,123,519 | 348,347 | 70,495 | 3,542,361 | 500,897 | 690,712 | 1,191,609 | 5 | 29,722,412 |
| Non-financial comp.- Trade | 4,292,376 | 562,297 | 24,608 | 2,281 | 589,186 | 126,314 | 78,457 | 204,771 | - | 5,086,333 |
| Non-financial comp.- Construction | 1,695,023 | 596,963 | 17,008 | 1,079 | 615,050 | 487,353 | 270,911 | 758,264 | - | 3,068,337 |
| Non finan. comp.- Manufacturing indust. | 4,560,577 | 535,148 | 28,764 | 1,059 | 564,971 | 112,294 | 110,221 | 222,515 | - | 5,348,063 |
| Non-financial comp.-Other activities | 1,419,046 | 208,186 | 2,605 | 310 | 211,101 | 119,200 | 10,732 | 129,932 | - | 1,760,079 |
| Non-financial comp.- Other services | 8,596,240 | 1,799,740 | 45,250 | 2,462 | 1,847,452 | 531,056 | 559,099 | 1,090,155 | - | 11,533,847 |
| Other Services /Other activities | 4,610,087 | 575,662 | 198 | 2 | 575,862 | 118,316 | 88,737 | 207,053 | - | 5,393,002 |
| Total | 50,161,786 | 7,401,515 | 466,780 | 77,688 | 7,945,983 | 1,995,430 | 1,808,869 | 3,804,299 | 5 | 61,912,073 |
| % of impairment coverage | ||||||||||
| Loans to individuals | 0.15% | 0.84% | 3.48% | 11.17% | 1.28% | 21.88% | 37.33% | 31.42% | 0.00% | 2.24% |
| Non-financial comp.- Trade | 0.42% | 1.92% | 3.96% | 11.10% | 2.31% | 25.48% | 53.81% | 37.74% | 0.00% | 3.54% |
| Non-financial comp.- Construction | 0.46% | 2.21% | 12.08% | 32.43% | 2.46% | 33.37% | 54.17% | 42.20% | 0.00% | 17.06% |
| Non finan. comp.- Manufacturing indust. | 0.46% | 2.90% | 4.35% | 12.59% | 3.17% | 37.91% | 51.49% | 44.86% | 0.00% | 3.81% |
| Non-financial comp.-Other activities | 0.21% | 4.54% | 3.26% | 3.08% | 4.50% | 44.69% | 47.64% | 44.96% | 0.00% | 7.10% |
| Non-financial comp.- Other services | 0.41% | 2.61% | 4.61% | 27.62% | 2.99% | 35.52% | 53.44% | 46.42% | 0.00% | 8.91% |
| Other Services /Other activities | 0.10% | 2.23% | 0.42% | 13.81% | 2.23% | 67.40% | 72.88% | 69.68% | 0.00% | 8.61% |
| Total | 0.25% | 1.83% | 4.13% | 14.88% | 2.16% | 36.05% | 50.04% | 43.41% | 0.00% | 5.36% |
As at 30 September 2018, financial assets at amortised cost, guarantees and other commitments, analysed by geography and stage, are as follows:
| 30 September 2018 Stage 2 Stage 3 Days past Days past Days past Days past due <= 30 due due due Geography Stage 1 No delays days > 30 days Total <= 90 days > 90 days Total POCI Total Gross Exposure Portugal 35,457,852 6,413,785 291,157 43,515 6,748,457 2,971,945 3,135,479 6,107,424 5 48,313,738 Poland 13,149,828 671,654 116,399 35,460 823,513 261,357 321,910 583,267 - 14,556,608 Mozambique 1,205,726 472,416 83,425 9,495 565,336 11,604 141,063 152,667 - 1,923,729 Switzerland 465,933 - - - - 3,581 - 3,581 - 469,514 Total 50,279,339 7,557,855 490,981 88,470 8,137,306 3,248,487 3,598,452 6,846,939 5 65,263,589 Impairment Portugal 40,086 111,045 8,183 1,130 120,358 1,133,311 1,537,632 2,670,943 - 2,831,387 Poland 67,930 28,900 10,973 6,180 46,053 111,206 204,689 315,895 - 429,878 Mozambique 9,220 16,395 5,045 3,472 24,912 6,215 47,262 53,477 - 87,609 Switzerland 317 - - - - 2,325 - 2,325 - 2,642 Total 117,553 156,340 24,201 10,782 191,323 1,253,057 1,789,583 3,042,640 - 3,351,516 Net exposure Portugal 35,417,766 6,302,740 282,974 42,385 6,628,099 1,838,634 1,597,847 3,436,481 5 45,482,351 Poland 13,081,898 642,754 105,426 29,280 777,460 150,151 117,221 267,372 - 14,126,730 Mozambique 1,196,506 456,021 78,380 6,023 540,424 5,389 93,801 99,190 - 1,836,120 Switzerland 465,616 - - - - 1,256 - 1,256 - 466,872 Total 50,161,786 7,401,515 466,780 77,688 7,945,983 1,995,430 1,808,869 3,804,299 5 61,912,073 % of impairment coverage Portugal 0.11% 1.73% 2.81% 2.60% 1.78% 38.13% 49.04% 43.73% 0.00% Poland 0.52% 4.30% 9.43% 17.43% 5.59% 42.55% 63.59% 54.16% 0.00% |
(Thousands of euros) | |||||
|---|---|---|---|---|---|---|
| 5.86% | ||||||
| 2.95% | ||||||
| 0.76% 3.47% 6.05% 36.57% 4.41% 53.56% 33.50% 35.03% 0.00% |
Mozambique | 4.55% | ||||
| Switzerland 0.07% 0.00% 0.00% 0.00% 0.00% 64.93% 0.00% 64.93% 0.00% |
0.56% | |||||
| Total 0.23% 2.07% 4.93% 12.19% 2.35% 38.57% 49.73% 44.44% 0.00% |
5.14% |
As at 30 September 2018, the exposure by type of financial instrument, internal rating (attributed in Portugal and Poland) and by stage, is analysed as follows:
| (Thousands of euros) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||||
| Gross Exposure | ||||||||
| Higher quality (GR 1-6) |
Average quality (GR 7-9) |
Lower quality (GR 10-12) |
Procedural (GR 13/14/15) |
Not classified (without risk grade) |
Total | Impairment losses |
Net exposure |
|
| Financial assets at amortised cost | ||||||||
| - stage 1 | 25,258,904 | 8,937,273 | 3,021,541 | 2,364 | 1,109,523 | 38,329,605 | 98,574 | 38,231,031 |
| - stage 2 | 915,049 | 1,202,288 | 3,083,669 | 450,562 | 658,733 | 6,310,301 | 156,975 | 6,153,326 |
| - stage 3 | 109 | 528 | 37,253 | 5,978,695 | 42,227 | 6,058,812 | 2,848,499 | 3,210,313 |
| - POCI | - | - | - | - | 5 | 5 | - | 5 |
| 26,174,062 | 10,140,089 | 6,142,463 | 6,431,621 | 1,810,488 | 50,698,723 | 3,104,048 | 47,594,675 | |
| Debt instruments at fair value through other comprehensive income | ||||||||
| - stage 1 | 11,921,284 | 82,801 | - | - | 6,659 | 12,010,744 | - | 12,010,744 |
| - stage 2 | - | - | - | - | - | - | - | - |
| - stage 3 | - | - | - | - | 4,942 | 4,942 | 4,942 | - |
| 11,921,284 | 82,801 | - | - | 11,601 | 12,015,686 | 4,942 | 12,010,744 | |
| Guarantees and other commitments | ||||||||
| - stage 1 | 5,938,187 | 2,411,466 | 800,149 | 530 | 1,127,742 | 10,278,074 | 9,442 | 10,268,632 |
| - stage 2 | 90,768 | 235,226 | 562,116 | 35,387 | 338,170 | 1,261,667 | 9,436 | 1,252,231 |
| - stage 3 | 1 | 11 | 9,004 | 620,663 | 2,200 | 631,879 | 138,337 | 493,542 |
| 6,028,956 | 2,646,703 | 1,371,269 | 656,580 | 1,468,112 | 12,171,620 | 157,215 | 12,014,405 | |
| Total | 44,124,302 | 12,869,593 | 7,513,732 | 7,088,201 | 3,290,201 | 74,886,029 | 3,266,205 | 71,619,824 |
As at 1 January 2018, financial assets at amortised cost, guarantees and other commitments, analysed by segment and stage, are as follows:
| 1 January 2018 | (Thousands of euros) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Stage 2 | Stage 3 | ||||||||
| Days past | Days past | Days past | Days past | ||||||
| Segment | Stage 1 | No delays | due <= 30 days |
due > 30 days |
Total | due <= 90 days |
due > 90 days |
Total | Total |
| Gross Exposure | |||||||||
| Individuals-Mortgage | 18,940,165 | 2,544,822 | 225,522 | 67,963 | 2,838,307 | 417,142 | 932,928 | 1,350,070 | 23,128,542 |
| Individuals-Other | 5,242,695 | 709,880 | 118,694 | 51,042 | 879,616 | 271,078 | 515,368 | 786,446 | 6,908,757 |
| Financial Companies | 1,819,540 | 286,848 | 349 | 51 | 287,248 | 601,270 | 287,533 | 888,803 | 2,995,591 |
| Non-financial comp. - Corporate | 6,808,612 | 1,279,814 | 6,929 | 9,310 | 1,296,053 | 455,905 | 809,351 | 1,265,256 | 9,369,921 |
| Non-financial comp.- SME-Corporate | 8,825,340 | 2,116,165 | 17,775 | 103,904 | 2,237,844 | 1,349,797 | 1,099,257 | 2,449,054 | 13,512,238 |
| Non-financial comp. -SME-Retail | 3,197,172 | 1,004,850 | 26,485 | 28,895 | 1,060,230 | 505,550 | 522,673 | 1,028,223 | 5,285,625 |
| Non-financial comp.-Other | 209,327 | 162,273 | 400 | 56,878 | 219,551 | 100 | 58 | 158 | 429,036 |
| Other loans | 3,497,887 | 210,559 | - | 1,512 | 212,071 | - | 64 | 64 | 3,710,022 |
| Total | 48,540,738 | 8,315,211 | 396,154 | 319,555 | 9,030,920 | 3,600,842 | 4,167,232 | 7,768,074 | 65,339,732 |
| Impairment | |||||||||
| Individuals-Mortgage | 6,346 | 13,694 | 8,390 | 4,477 | 26,561 | 33,187 | 173,371 | 206,558 | 239,465 |
| Individuals-Other | 30,392 | 19,538 | 10,471 | 10,022 | 40,031 | 116,274 | 296,198 | 412,472 | 482,895 |
| Financial Companies | 4,303 | 7,880 | 17 | 1 | 7,898 | 388,428 | 207,317 | 595,745 | 607,946 |
| Non-financial comp. - Corporate | 26,054 | 30,790 | 443 | 2,850 | 34,083 | 134,765 | 449,866 | 584,631 | 644,768 |
| Non-financial comp.- SME-Corporate | 33,629 | 58,728 | 1,591 | 41,274 | 101,593 | 430,177 | 664,906 | 1,095,083 | 1,230,305 |
| Non-financial comp. -SME-Retail | 11,769 | 28,878 | 1,211 | 6,260 | 36,349 | 205,307 | 229,025 | 434,332 | 482,450 |
| Non-financial comp.-Other | 6,847 | 2,585 | 9 | 5,316 | 7,910 | 3 | 49 | 52 | 14,809 |
| Other loans | 10,839 | 3,216 | - | 249 | 3,465 | - | 64 | 64 | 14,368 |
| Total | 130,179 | 165,309 | 22,132 | 70,449 | 257,890 | 1,308,141 | 2,020,796 | 3,328,937 | 3,717,006 |
| Net exposure | |||||||||
| Individuals-Mortgage | 18,933,819 | 2,531,128 | 217,132 | 63,486 | 2,811,746 | 383,955 | 759,557 | 1,143,512 | 22,889,077 |
| Individuals-Other | 5,212,303 | 690,342 | 108,223 | 41,020 | 839,585 | 154,804 | 219,170 | 373,974 | 6,425,862 |
| Financial Companies | 1,815,237 | 278,968 | 332 | 50 | 279,350 | 212,842 | 80,216 | 293,058 | 2,387,645 |
| Non-financial comp. - Corporate | 6,782,558 | 1,249,024 | 6,486 | 6,460 | 1,261,970 | 321,140 | 359,485 | 680,625 | 8,725,153 |
| Non-financial comp.- SME-Corporate | 8,791,711 | 2,057,437 | 16,184 | 62,630 | 2,136,251 | 919,620 | 434,351 | 1,353,971 | 12,281,933 |
| Non-financial comp. -SME-Retail | 3,185,403 | 975,972 | 25,274 | 22,635 | 1,023,881 | 300,243 | 293,648 | 593,891 | 4,803,175 |
| Non-financial comp.-Other | 202,480 | 159,688 | 391 | 51,562 | 211,641 | 97 | 9 | 106 | 414,227 |
| Other loans | 3,487,048 | 207,343 | - | 1,263 | 208,606 | - | - | - | 3,695,654 |
| Total | 48,410,559 | 8,149,902 | 374,022 | 249,106 | 8,773,030 | 2,292,701 | 2,146,436 | 4,439,137 | 61,622,726 |
| % of impairment coverage | |||||||||
| Individuals-Mortgage | 0.03% | 0.54% | 3.72% | 6.59% | 0.94% | 7.96% | 18.58% | 15.30% | 1.04% |
| Individuals-Other | 0.58% | 2.75% | 8.82% | 19.64% | 4.55% | 42.89% | 57.47% | 52.45% | 6.99% |
| Financial Companies | 0.24% | 2.75% | 5.02% | 2.14% | 2.75% | 64.60% | 72.10% | 67.03% | 20.29% |
| Non-financial comp. - Corporate | 0.38% | 2.41% | 6.39% | 30.62% | 2.63% | 29.56% | 55.58% | 46.21% | 6.88% |
| Non-financial comp.- SME-Corporate | 0.38% | 2.78% | 8.95% | 39.72% | 4.54% | 31.87% | 60.49% | 44.71% | 9.11% |
| Non-financial comp. -SME-Retail | 0.37% | 2.87% | 4.57% | 21.67% | 3.43% | 40.61% | 43.82% | 42.24% | 9.13% |
| Non-financial comp.-Other | 3.27% | 1.59% | 2.33% | 9.35% | 3.60% | 2.70% | 85.29% | 32.89% | 3.45% |
| Other loans | 0.31% | 1.53% | 6.29% | 16.46% | 1.63% | 0.00% | 100.00% | 100.00% | 0.39% |
| Total | 0.27% | 1.99% | 5.59% | 22.05% | 2.86% | 36.33% | 48.49% | 42.85% | 5.69% |
As at 1 January 2018, financial assets at amortised cost, guarantees and other commitments, analysed by sector of activity and stage, are as follows:
| 1 January 2018 | (Thousands of euros) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Stage 2 | Stage 3 | ||||||||
| Days past | Days past | Days past | Days past | ||||||
| Sector of activity | Stage 1 | No delays | due <= 30 days |
due > 30 days |
Total | due <= 90 days |
due > 90 days |
Total | Total |
| Gross Exposure | |||||||||
| Loans to individuals | 24,150,612 | 3,254,702 | 344,216 | 119,005 | 3,717,923 | 688,219 | 1,448,295 | 2,136,514 | 30,005,049 |
| Non-financial comp.- Trade | 4,291,610 | 654,571 | 8,591 | 19,903 | 683,065 | 122,954 | 202,485 | 325,439 | 5,300,114 |
| Non-financial comp.- Construction | 1,280,528 | 954,626 | 1,944 | 19,854 | 976,424 | 763,616 | 665,353 | 1,428,969 | 3,685,921 |
| Non finan. comp.- Manufacturing indust. | 4,626,518 | 606,459 | 15,376 | 38,105 | 659,940 | 162,183 | 170,097 | 332,280 | 5,618,738 |
| Non-financial comp.-Other activities | 1,384,664 | 243,255 | 877 | 22,015 | 266,147 | 218,487 | 38,108 | 256,595 | 1,907,406 |
| Non-financial comp.- Other services | 7,457,132 | 2,104,194 | 24,801 | 99,109 | 2,228,104 | 1,044,114 | 1,355,295 | 2,399,409 | 12,084,645 |
| Other Services /Other activities | 5,349,674 | 497,404 | 349 | 1,564 | 499,317 | 601,269 | 287,599 | 888,868 | 6,737,859 |
| Total | 48,540,738 | 8,315,211 | 396,154 | 319,555 | 9,030,920 | 3,600,842 | 4,167,232 | 7,768,074 | 65,339,732 |
| Impairment | |||||||||
| Loans to individuals | 36,739 | 33,231 | 18,861 | 14,499 | 66,591 | 149,461 | 469,568 | 619,029 | 722,359 |
| Non-financial comp.- Trade | 17,300 | 13,459 | 966 | 4,291 | 18,716 | 41,412 | 117,030 | 158,442 | 194,458 |
| Non-financial comp.- Construction | 7,829 | 21,557 | 112 | 5,821 | 27,490 | 229,547 | 391,695 | 621,242 | 656,561 |
| Non-financial comp.- Manufacturing industries | 20,439 | 18,091 | 924 | 5,036 | 24,051 | 55,731 | 102,726 | 158,457 | 202,947 |
| Non-financial comp.-Other activities | 8,986 | 10,396 | 38 | 16,942 | 27,376 | 102,572 | 15,816 | 118,388 | 154,750 |
| Non-financial comp.- Other services | 23,745 | 57,478 | 1,214 | 23,610 | 82,302 | 340,990 | 716,579 | 1,057,569 | 1,163,616 |
| Other Services /Other activities | 15,141 | 11,097 | 17 | 250 | 11,364 | 388,428 | 207,382 | 595,810 | 622,315 |
| Total | 130,179 | 165,309 | 22,132 | 70,449 | 257,890 | 1,308,141 | 2,020,796 | 3,328,937 | 3,717,006 |
| Net exposure | |||||||||
| Loans to individuals | 24,113,873 | 3,221,471 | 325,355 | 104,506 | 3,651,332 | 538,758 | 978,727 | 1,517,485 | 29,282,690 |
| Non-financial comp.- Trade | 4,274,310 | 641,112 | 7,625 | 15,612 | 664,349 | 81,542 | 85,455 | 166,997 | 5,105,656 |
| Non-financial comp.- Construction | 1,272,699 | 933,069 | 1,832 | 14,033 | 948,934 | 534,069 | 273,658 | 807,727 | 3,029,360 |
| Non finan. comp.- Manufacturing indust. | 4,606,079 | 588,368 | 14,452 | 33,069 | 635,889 | 106,452 | 67,371 | 173,823 | 5,415,791 |
| Non-financial comp.-Other activities | 1,375,678 | 232,859 | 839 | 5,073 | 238,771 | 115,915 | 22,292 | 138,207 | 1,752,656 |
| Non-financial comp.- Other services | 7,433,387 | 2,046,716 | 23,587 | 75,499 | 2,145,802 | 703,124 | 638,716 | 1,341,840 | 10,921,029 |
| Other Services /Other activities | 5,334,533 | 486,307 | 332 | 1,314 | 487,953 | 212,841 | 80,217 | 293,058 | 6,115,544 |
| Total | 48,410,559 | 8,149,902 | 374,022 | 249,106 | 8,773,030 | 2,292,701 | 2,146,436 | 4,439,137 | 61,622,726 |
| % of impairment coverage | |||||||||
| Loans to individuals | 0.15% | 1.02% | 5.48% | 12.18% | 1.79% | 21.72% | 32.42% | 28.97% | 2.41% |
| Non-financial comp.- Trade | 0.40% | 2.06% | 11.24% | 21.56% | 2.74% | 33.68% | 57.80% | 48.69% | 3.67% |
| Non-financial comp.- Construction | 0.61% | 2.26% | 5.78% | 29.32% | 2.82% | 30.06% | 58.87% | 43.47% | 17.81% |
| Non finan. comp.- Manufacturing indust. | 0.44% | 2.98% | 6.01% | 13.22% | 3.64% | 34.36% | 60.39% | 47.69% | 3.61% |
| Non-financial comp.-Other activities | 0.65% | 4.27% | 4.33% | 76.96% | 10.29% | 46.95% | 41.50% | 46.14% | 8.11% |
| Non-financial comp.- Other services | 0.32% | 2.73% | 4.90% | 23.82% | 3.69% | 32.66% | 52.87% | 44.08% | 9.63% |
| Other Services /Other activities | 0.28% | 2.23% | 5.02% | 15.99% | 2.28% | 64.60% | 72.11% | 67.03% | 9.24% |
| Total | 2.86% | 17.55% | 42.76% | 193.06% | 27.25% | 264.03% | 375.97% | 326.07% | 54.48% |
As at 1 January 2018, financial assets at amortised cost, guarantees and other commitments, analysed by geography and stage, are as follows:
| (Thousands of euros) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1 January 2018 | |||||||||
| Stage 2 | Stage 3 | ||||||||
| Days past due <= 30 |
Days past due |
Days past due |
Days past due |
||||||
| Geography | Stage 1 | No delays | days | > 30 days | Total | <= 90 days | > 90 days | Total | Total |
| Gross Exposure | |||||||||
| Portugal | 34,806,803 | 7,117,280 | 203,736 | 75,462 | 7,396,478 | 3,298,058 | 3,745,047 | 7,043,105 | 49,246,386 |
| Poland | 12,003,400 | 787,665 | 152,833 | 50,198 | 990,696 | 300,180 | 403,355 | 703,535 | 13,697,631 |
| Mozambique | 1,312,061 | 410,168 | 39,585 | 193,895 | 643,648 | 2,604 | 18,830 | 21,434 | 1,977,143 |
| Switzerland | 418,474 | 98 | - | - | 98 | - | - | - | 418,572 |
| Total | 48,540,738 | 8,315,211 | 396,154 | 319,555 | 9,030,920 | 3,600,842 | 4,167,232 | 7,768,074 | 65,339,732 |
| Impairment | |||||||||
| Portugal | 40,101 | 119,083 | 2,851 | 2,401 | 124,335 | 1,211,345 | 1,783,969 | 2,995,314 | 3,159,750 |
| Poland | 70,985 | 32,928 | 15,759 | 9,103 | 57,790 | 95,746 | 223,370 | 319,116 | 447,891 |
| Mozambique | 16,556 | 13,298 | 3,522 | 58,945 | 75,765 | 1,050 | 13,457 | 14,507 | 106,828 |
| Switzerland | 2,537 | - | - | - | - | - | - | - | 2,537 |
| Total | 130,179 | 165,309 | 22,132 | 70,449 | 257,890 | 1,308,141 | 2,020,796 | 3,328,937 | 3,717,006 |
| Net exposure | |||||||||
| Portugal | 34,766,702 | 6,998,197 | 200,885 | 73,061 | 7,272,143 | 2,086,713 | 1,961,078 | 4,047,791 | 46,086,636 |
| Poland | 11,932,415 | 754,737 | 137,074 | 41,095 | 932,906 | 204,434 | 179,985 | 384,419 | 13,249,740 |
| Mozambique | 1,295,505 | 396,870 | 36,063 | 134,950 | 567,883 | 1,554 | 5,373 | 6,927 | 1,870,315 |
| Switzerland | 415,937 | 98 | - | - | 98 | - | - | - | 416,035 |
| Total | 48,410,559 | 8,149,902 | 374,022 | 249,106 | 8,773,030 | 2,292,701 | 2,146,436 | 4,439,137 | 61,622,726 |
| % of impairment coverage | |||||||||
| Portugal | 0.12% | 1.67% | 1.40% | 3.18% | 1.68% | 36.73% | 47.64% | 42.53% | 6.42% |
| Poland | 0.59% | 4.18% | 10.31% | 18.13% | 5.83% | 31.90% | 55.38% | 45.36% | 3.27% |
| Mozambique | 1.26% | 3.24% | 8.90% | 30.40% | 11.77% | 40.33% | 71.46% | 67.68% | 5.40% |
| Switzerland | 0.61% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.61% |
| Total | 2.57% | 9.10% | 20.61% | 51.72% | 19.29% | 108.96% | 174.48% | 155.57% | 15.70% |
As at 1 January 2018, the exposure by type of financial instrument, internal rating (attributed in Portugal and Poland) and by stage, is analysed as follows:
| (Thousands of euros) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 1 January 2018 | ||||||||
| Gross Exposure | ||||||||
| Higher quality (GR 1-6) |
Average quality (GR 7-9) |
Lower quality (GR 10-12) |
Procedural (GR 13/14/15) |
Not classified (without risk grade) |
Total | Impairment losses |
Net exposure |
|
| Financial assets at amortised cost | ||||||||
| - stage 1 | 24,234,962 | 8,542,294 | 2,991,570 | 20,482 | 1,009,402 | 36,798,710 | 103,295 | 36,695,415 |
| - stage 2 | 990,971 | 1,229,959 | 3,577,893 | 412,385 | 756,870 | 6,968,078 | 172,889 | 6,795,189 |
| - stage 3 | 701 | 229 | 40,517 | 6,909,473 | 72,798 | 7,023,718 | 3,189,037 | 3,834,681 |
| 25,226,634 | 9,772,482 | 6,609,980 | 7,342,340 | 1,839,070 | 50,790,506 | 3,465,221 | 47,325,285 | |
| Debt instruments at fair value through other comprehensive income | ||||||||
| - stage 1 | 6,506,338 | 309,947 | - | - | 1,475,421 | 8,291,706 | - | 8,291,706 |
| - stage 2 | 1,490,425 | 17,712 | - | - | 50 | 1,508,187 | - | 1,508,187 |
| - stage 3 | - | - | - | - | 5,150 | 5,150 | 5,150 | - |
| 7,996,763 | 327,659 | - | - | 1,480,621 | 9,805,043 | 5,150 | 9,799,893 | |
| Guarantees and other commitments | ||||||||
| - stage 1 | 6,214,881 | 2,203,989 | 751,382 | 89 | 841,152 | 10,011,493 | 7,791 | 10,003,702 |
| - stage 2 | 75,952 | 265,699 | 680,268 | 22,966 | 374,211 | 1,419,096 | 9,236 | 1,409,860 |
| - stage 3 | 6 | - | 12,383 | 707,867 | 2,666 | 722,922 | 125,393 | 597,529 |
| 6,290,839 | 2,469,688 | 1,444,033 | 730,922 | 1,218,029 | 12,153,511 | 142,420 | 12,011,091 | |
| Total | 39,514,236 | 12,569,829 | 8,054,013 | 8,073,262 | 4,537,720 | 72,749,060 | 3,612,791 | 69,136,269 |
As at 30 September 2018, financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by segment, by sector of activity and by geography, are presented in the following tables:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| Gross Exposure | |||||
| Individual | Collective | Total | Individual | Collective | Total |
| 34,583 | 23,292,745 | 23,327,328 | 13,734 | 176,071 | 189,805 |
| 178,513 | 6,834,648 | 7,013,161 | 75,511 | 352,761 | 428,272 |
| 668,622 | 1,467,549 | 2,136,171 | 475,354 | 14,169 | 489,523 |
| 1,838,182 | 8,869,506 | 10,707,688 | 790,090 | 71,748 | 861,838 |
| 1,458,091 | 10,674,928 | 12,133,019 | 627,835 | 209,290 | 837,125 |
| 782,079 | 4,777,343 | 5,559,422 | 372,577 | 147,756 | 520,333 |
| 215,001 | 415,846 | 630,847 | 14,626 | 395 | 15,021 |
| 240,093 | 3,515,860 | 3,755,953 | 5,362 | 4,237 | 9,599 |
| 5,415,164 | 59,848,425 | 65,263,589 | 2,375,089 | 976,427 | 3,351,516 |
| 30 September 2018 | Impairment losses |
(Thousands of euros)
| 30 September 2018 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Impairment losses | |||||||||
| Individual | Collective | Total | Individual | Collective | Total | ||||
| 213,096 | 30,127,393 | 30,340,489 | 89,245 | 528,832 | 618,077 | ||||
| 405,049 | 4,886,922 | 5,291,971 | 118,184 | 87,454 | 205,638 | ||||
| 1,222,859 | 2,437,724 | 3,660,583 | 506,281 | 85,965 | 592,246 | ||||
| 282,482 | 5,272,749 | 5,555,231 | 117,141 | 90,027 | 207,168 | ||||
| 257,944 | 1,623,643 | 1,881,587 | 98,527 | 22,981 | 121,508 | ||||
| 2,125,019 | 10,516,585 | 12,641,604 | 964,995 | 142,762 | 1,107,757 | ||||
| 908,715 | 4,983,409 | 5,892,124 | 480,716 | 18,406 | 499,122 | ||||
| 5,415,164 | 59,848,425 | 65,263,589 | 2,375,089 | 976,427 | 3,351,516 | ||||
| Gross Exposure |
| 30 September 2018 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Exposure | Impairment losses | ||||||||||
| Geography | Individual | Collective | Total | Individual | Collective | Total | |||||
| Portugal | 4,287,235 | 44,026,503 | 48,313,738 | 2,221,114 | 610,273 | 2,831,387 | |||||
| Poland | 173,146 | 14,383,462 | 14,556,608 | 88,398 | 341,480 | 429,878 | |||||
| Mozambique | 951,200 | 972,529 | 1,923,729 | 63,251 | 24,358 | 87,609 | |||||
| Switzerland | 3,581 | 465,933 | 469,514 | 2,325 | 317 | 2,642 | |||||
| Total | 5,415,162 | 59,848,427 | 65,263,589 | 2,375,088 | 976,428 | 3,351,516 |
The balances Gross Exposure and Collective Impairment include the loans subject to individual analysis for which the Group has concluded that there is no objective evidence of impairment.
As at 1 January 2018, financial assets at amortised cost, guarantees and other commitments subject to individual and collective impairment, by segment, by sector of activity and by geography, are presented in the following tables:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 1 January 2018 | ||||||
| Gross Exposure | Impairment losses | |||||
| Segment | Individual | Collective | Total | Individual | Collective | Total |
| Individuals-Mortgage | 39,580 | 23,088,962 | 23,128,542 | 15,844 | 223,621 | 239,465 |
| Individuals-Other | 190,037 | 6,718,720 | 6,908,757 | 73,833 | 409,062 | 482,895 |
| Financial Companies | 881,447 | 2,114,144 | 2,995,591 | 594,127 | 13,819 | 607,946 |
| Non-financial comp. - Corporate | 1,336,252 | 8,033,669 | 9,369,921 | 584,341 | 60,427 | 644,768 |
| Non-financial comp.- SME-Corporate | 2,500,908 | 11,011,330 | 13,512,238 | 989,669 | 240,636 | 1,230,305 |
| Non-financial comp. -SME-Retail | 836,994 | 4,448,631 | 5,285,625 | 320,173 | 162,277 | 482,450 |
| Non-financial comp.-Other | 219,763 | 209,273 | 429,036 | 8,044 | 6,765 | 14,809 |
| Other loans | 73,783 | 3,636,239 | 3,710,022 | 1,978 | 12,390 | 14,368 |
| Total | 6,078,764 | 59,260,968 | 65,339,732 | 2,588,009 | 1,128,997 | 3,717,006 |
(Thousands of euros)
| 1 January 2018 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gross Exposure | Impairment losses | ||||||||
| Sector of activity | Individual | Collective | Total | Individual | Collective | Total | |||
| Individuals-Mortgage | 229,617 | 29,775,432 | 30,005,049 | 89,677 | 632,682 | 722,359 | |||
| Individuals-Other | 372,837 | 4,927,277 | 5,300,114 | 90,782 | 103,676 | 194,458 | |||
| Financial Companies | 1,414,493 | 2,271,428 | 3,685,921 | 551,922 | 104,639 | 656,561 | |||
| Non-financial comp. - Corporate | 329,353 | 5,289,385 | 5,618,738 | 117,949 | 84,998 | 202,947 | |||
| Non-financial comp.- SME-Corporate | 267,529 | 1,639,877 | 1,907,406 | 123,920 | 30,830 | 154,750 | |||
| Non-financial comp. -SME-Retail | 2,509,704 | 9,574,941 | 12,084,645 | 1,017,654 | 145,962 | 1,163,616 | |||
| Non-financial comp.-Other | 955,231 | 5,782,628 | 6,737,859 | 596,104 | 26,211 | 622,315 | |||
| Other loans | 6,078,764 | 59,260,968 | 65,339,732 | 2,588,008 | 1,128,998 | 3,717,006 |
| 1 January 2018 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross Exposure | Impairment losses | |||||||||
| Geography | Individual | Collective | Total | Individual | Collective | Total | ||||
| Portugal | 4,862,921 | 44,383,465 | 49,246,386 | 2,417,300 | 742,450 | 3,159,750 | ||||
| Poland | 204,812 | 13,492,819 | 13,697,631 | 93,759 | 354,132 | 447,891 | ||||
| Mozambique | 1,011,031 | 966,112 | 1,977,143 | 76,950 | 29,878 | 106,828 | ||||
| Switzerland | - | 418,572 | 418,572 | - | 2,537 | 2,537 | ||||
| Total | 6,078,764 | 59,260,968 | 65,339,732 | 2,588,009 | 1,128,997 | 3,717,006 |
The balances Gross Exposure and Collective Impairment include the loans subject to individual analysis for which the Group has concluded that there is no objective evidence of impairment.
As at 30 September 2018, the following table includes the loans portfolio by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans):
| 30 September 2018 | ||||||
|---|---|---|---|---|---|---|
| Construction | Companies - | Individuals - | ||||
| Year of production | and CRE | Other Activities Mortgage loans | Other | Other loans | Total | |
| 2008 and previous | ||||||
| Number of operations | 15,066 | 27,927 | 328,289 | 604,817 | 452 | 976,551 |
| Value (Euros '000) | 1,229,782 | 3,596,619 | 13,797,499 | 1,073,280 | 30,193 | 19,727,373 |
| Impairment constituted (Euros '000) | 179,569 | 180,422 | 151,953 | 35,498 | 672 | 548,114 |
| 2009 | ||||||
| Number of operations | 2,157 | 3,423 | 19,142 | 73,647 | 70 | 98,439 |
| Value (Euros '000) | 271,191 | 710,991 | 933,082 | 117,880 | 11,085 | 2,044,229 |
| Impairment constituted (Euros '000) | 24,867 | 15,825 | 10,402 | 5,208 | 805 | 57,107 |
| 2010 | ||||||
| Number of operations | 2,126 | 4,284 | 21,011 | 107,988 | 73 | 135,482 |
| Value (Euros '000) | 194,461 | 498,087 | 1,046,430 | 197,123 | 16,975 | 1,953,076 |
| Impairment constituted (Euros '000) | 20,969 | 18,295 | 7,333 | 4,419 | 2,898 | 53,914 |
| 2011 | ||||||
| Number of operations | 2,055 | 5,704 | 13,832 | 125,194 | 44 | 146,829 |
| Value (Euros '000) | 105,797 | 492,354 | 636,724 | 201,777 | 12,655 | 1,449,307 |
| Impairment constituted (Euros '000) | 16,011 | 18,016 | 4,393 | 8,387 | 632 | 47,439 |
| 2012 | ||||||
| Number of operations | 1,977 | 6,205 | 11,291 | 136,152 | 280 | 155,905 |
| Value (Euros '000) | 124,417 | 559,745 | 471,455 | 187,028 | 23,743 | 1,366,388 |
| Impairment constituted (Euros '000) | 11,787 | 96,935 | 6,374 | 8,330 | 810 | 124,236 |
| 2013 | ||||||
| Number of operations | 3,095 | 9,566 | 11,700 | 181,019 | 164 | 205,544 |
| Value (Euros '000) | 153,998 | 1,033,498 | 530,965 | 248,989 | 142,455 | 2,109,905 |
| Impairment constituted (Euros '000) | 21,382 | 58,230 | 7,975 | 17,315 | 16,994 | 121,896 |
| 2014 | ||||||
| Number of operations | 3,547 | 14,752 | 8,726 | 234,819 | 277 | 262,121 |
| Value (Euros '000) | 184,103 | 1,112,148 | 451,888 | 385,906 | 246,456 | 2,380,501 |
| Impairment constituted (Euros '000) | 7,596 | 50,353 | 6,489 | 28,585 | 2,925 | 95,948 |
| 2015 | ||||||
| Number of operations | 5,074 | 22,184 | 10,071 | 303,015 | 491 | 340,835 |
| Value (Euros '000) | 304,063 | 1,836,382 | 603,914 | 611,132 | 177,294 | 3,532,785 |
| Impairment constituted (Euros '000) | 30,121 | 167,891 | 4,302 | 45,547 | 3,850 | 251,711 |
| 2016 | ||||||
| Number of operations | 5,485 | 27,961 | 13,924 | 296,451 | 414 | 344,235 |
| Value (Euros '000) | 437,405 | 2,563,476 | 885,249 | 757,379 | 234,090 | 4,877,599 |
| Impairment constituted (Euros '000) | 24,167 | 119,588 | 4,478 | 38,635 | 2,884 | 189,752 |
| 2017 | ||||||
| Number of operations | 6,224 | 31,709 | 25,514 | 310,491 | 569 | 374,507 |
| Value (Euros '000) | 764,762 | 3,151,094 | 1,876,784 | 970,153 | 314,304 | 7,077,097 |
| Impairment constituted (Euros '000) | 22,893 | 62,749 | 4,758 | 30,387 | 7,265 | 128,052 |
| 2018 | ||||||
| Number of operations | 12,145 | 119,462 | 24,114 | 544,367 | 3,592 | 703,680 |
| Value (Euros '000) | 1,707,742 | 6,836,809 | 1,996,163 | 1,490,435 | 532,325 | 12,563,474 |
| Impairment constituted (Euros '000) | 22,138 | 63,653 | 4,598 | 19,486 | 11,361 | 121,236 |
| Total | ||||||
| Number of operations | 58,951 | 273,177 | 487,614 | 2,917,960 | 6,426 | 3,744,128 |
| Value (Euros '000) | 5,477,721 | 22,391,203 | 23,230,153 | 6,241,082 | 1,741,575 | 59,081,734 |
| Impairment constituted (Euros '000) | 381,500 | 851,957 | 213,055 | 241,797 | 51,096 | 1,739,405 |
In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations.
As at 31 December 2017, the following table includes the loans portfolio by segment and by year of production (date of the beginning of the operations, in the portfolio at the date of balance sheet - it does not include restructured loans):
| 31 December 2017 | ||||||
|---|---|---|---|---|---|---|
| Construction | Companies - | Individuals - | ||||
| Year of production | and CRE | Other Activities Mortgage loans | Other | Other loans | Total | |
| 2007 and previous | ||||||
| Number of operations | 13,525 | 25,709 | 293,527 | 518,544 | 469 | 851,774 |
| Value (Euros '000) | 1,102,287 | 3,293,047 | 11,950,816 | 566,768 | 282,030 | 17,194,948 |
| Impairment constituted (Euros '000) | 172,898 | 127,150 | 118,985 | 39,144 | 86,688 | 544,866 |
| 2008 | ||||||
| Number of operations | 2,334 | 4,438 | 51,483 | 84,530 | 101 | 142,886 |
| Value (Euros '000) | 430,283 | 690,601 | 2,859,321 | 118,454 | 71,494 | 4,170,153 |
| Impairment constituted (Euros '000) | 53,814 | 36,708 | 37,916 | 9,427 | 9,846 | 147,711 |
| 2009 | ||||||
| Number of operations | 2,342 | 3,835 | 20,171 | 73,416 | 82 | 99,846 |
| Value (Euros '000) | 297,134 | 705,530 | 1,016,080 | 91,262 | 57,557 | 2,167,563 |
| Impairment constituted (Euros '000) | 25,956 | 15,910 | 12,920 | 7,818 | 668 | 63,272 |
| 2010 | ||||||
| Number of operations | 2,139 | 4,670 | 22,205 | 92,057 | 107 | 121,178 |
| Value (Euros '000) | 318,513 | 442,468 | 1,139,539 | 108,272 | 69,002 | 2,077,794 |
| Impairment constituted (Euros '000) | 24,176 | 21,367 | 7,321 | 6,647 | 13,483 | 72,994 |
| 2011 | ||||||
| Number of operations | 2,084 | 6,168 | 14,505 | 105,969 | 102 | 128,828 |
| Value (Euros '000) | 251,558 | 548,450 | 690,366 | 135,493 | 99,878 | 1,725,745 |
| Impairment constituted (Euros '000) | 24,473 | 18,361 | 3,948 | 8,904 | 9,144 | 64,830 |
| 2012 | ||||||
| Number of operations | 1,985 | 7,595 | 11,886 | 110,811 | 127 | 132,404 |
| Value (Euros '000) | 130,199 | 653,268 | 512,374 | 126,610 | 18,557 | 1,441,008 |
| Impairment constituted (Euros '000) | 11,940 | 69,121 | 4,523 | 10,514 | 2,298 | 98,396 |
| 2013 | ||||||
| Number of operations | 2,828 | 11,243 | 12,391 | 157,954 | 261 | 184,677 |
| Value (Euros '000) | 248,907 | 1,021,859 | 582,308 | 207,984 | 505,504 | 2,566,562 |
| Impairment constituted (Euros '000) | 22,000 | 33,870 | 5,886 | 22,112 | 39,142 | 123,010 |
| 2014 | ||||||
| Number of operations | 3,429 | 17,518 | 9,152 | 186,626 | 346 | 217,071 |
| Value (Euros '000) | 306,153 | 1,525,860 | 491,689 | 322,617 | 271,324 | 2,917,643 |
| Impairment constituted (Euros '000) | 9,149 | 54,225 | 4,526 | 33,075 | 19,289 | 120,264 |
| 2015 | ||||||
| Number of operations | 4,696 | 24,652 | 10,533 | 252,867 | 590 | 293,338 |
| Value (Euros '000) | 354,769 | 2,457,408 | 651,805 | 597,156 | 377,141 | 4,438,279 |
| Impairment constituted (Euros '000) | 30,477 | 105,387 | 2,525 | 42,437 | 103,223 | 284,049 |
| 2016 | ||||||
| Number of operations | 5,107 | 31,664 | 14,425 | 275,819 | 592 | 327,607 |
| Value (Euros '000) | 577,491 | 2,737,819 | 957,102 | 829,740 | 309,842 | 5,411,994 |
| Impairment constituted (Euros '000) | 20,440 | 64,001 | 3,090 | 28,886 | 7,371 | 123,788 |
| 2017 | ||||||
| Number of operations | 8,562 | 102,309 | 25,986 | 389,045 | 4,039 | 529,941 |
| Value (Euros '000) | 1,150,717 | 5,203,244 | 1,973,777 | 1,312,089 | 551,122 | 10,190,949 |
| Impairment constituted (Euros '000) | 17,714 | 51,943 | 4,414 | 20,182 | 21,593 | 115,846 |
| Total | ||||||
| Number of operations | 49,031 | 239,801 | 486,264 | 2,247,638 | 6,816 | 3,029,550 |
| Value (Euros '000) | 5,168,011 | 19,279,554 | 22,825,177 | 4,416,445 | 2,613,451 | 54,302,638 |
| Impairment constituted (Euros '000) | 413,037 | 598,043 | 206,054 | 229,146 | 312,745 | 1,759,026 |
In the year of the current production, are included operations that, by their nature, are contractually subject to renewals. In these cases, the date of the last renewal is considered, namely for overdraft operations, secured current account and factoring operations.
As at 30 September 2018, the following table includes the fair value of the collaterals (not limited by the value of the collateral) associated to the loans portfolio by segments Construction and CRE, Companies - Other Activities and Mortgage loans:
| 30 September 2018 | ||||||
|---|---|---|---|---|---|---|
| Construction and CRE | Companies - Other Activities | Mortgage loans | ||||
| Fair Value | Real Estate | Other Collateral (*) |
Real Estate | Other Collateral (*) |
Real Estate | Other Collateral (*) |
| < 0.5 M€ | ||||||
| Number | 7,948 | 7,996 | 10,788 | 64,827 | 410,037 | 474 |
| Value (Euros '000) | 993,279 | 206,568 | 1,513,482 | 1,528,058 | 44,865,323 | 24,332 |
| >= 0.5 M€ and < 1 M€ | ||||||
| Number | 625 | 51 | 1,296 | 281 | 2,367 | 6 |
| Value (Euros '000) | 424,533 | 32,296 | 905,956 | 196,799 | 1,530,501 | 3,788 |
| >= 1 M€ and < 5 M€ | ||||||
| Number | 457 | 49 | 1,036 | 253 | 356 | 2 |
| Value (Euros '000) | 929,818 | 85,308 | 2,048,009 | 481,193 | 539,470 | 4,203 |
| >= 5 M€ and < 10 M€ | ||||||
| Number | 61 | 4 | 115 | 32 | 4 | - |
| Value (Euros '000) | 420,061 | 29,574 | 779,247 | 216,364 | 24,124 | - |
| >= 10 M€ and < 20 M€ | ||||||
| Number | 35 | 4 | 62 | 16 | - | - |
| Value (Euros '000) | 471,756 | 56,023 | 838,523 | 240,815 | - | - |
| >= 20 M€ and < 50 M€ | ||||||
| Number | 22 | 1 | 25 | 6 | - | - |
| Value (Euros '000) | 622,145 | 22,536 | 745,411 | 154,498 | - | - |
| >= 50 M€ | ||||||
| Number | 3 | - | 9 | 2 | - | - |
| Value (Euros '000) | 189,577 | - | 736,816 | 688,193 | - | - |
| Total | ||||||
| Number | 9,151 | 8,105 | 13,331 | 65,417 | 412,764 | 482 |
| Value (Euros '000) | 4,051,169 | 432,305 | 7,567,444 | 3,505,920 | 46,959,418 | 32,323 |
(*) Includes, namely, securities, deposits and fixed assets pledges.
As at 31 December 2017, the following table includes the fair value of the collaterals (not limited by the value of the collateral) associated to the loans portfolio by segments Construction and CRE, Companies - Other Activities and Mortgage loans:
| 31 December 2017 | ||||||
|---|---|---|---|---|---|---|
| Construction and CRE | Companies - Other Activities | Mortgage loans | ||||
| Fair Value | Real Estate | Other Collateral (*) |
Real Estate | Other Collateral (*) |
Real Estate | Other Collateral (*) |
| < 0.5 M€ | ||||||
| Number | 8,234 | 7,265 | 11,659 | 59,792 | 405,122 | 466 |
| Value (Euros '000) | 973,882 | 192,714 | 1,548,932 | 1,456,339 | 44,297,149 | 24,169 |
| >= 0.5 M€ and < 1 M€ | ||||||
| Number | 539 | 56 | 1,179 | 267 | 2,182 | 6 |
| Value (Euros '000) | 367,191 | 35,677 | 818,215 | 186,548 | 1,405,443 | 3,948 |
| >= 1 M€ and < 5 M€ | ||||||
| Number | 409 | 58 | 938 | 246 | 297 | 2 |
| Value (Euros '000) | 821,414 | 111,562 | 1,842,171 | 501,882 | 440,762 | 4,039 |
| >= 5 M€ and < 10 M€ | ||||||
| Number | 47 | 6 | 108 | 23 | 3 | - |
| Value (Euros '000) | 319,356 | 46,363 | 737,290 | 170,979 | 18,391 | - |
| >= 10 M€ and < 20 M€ | ||||||
| Number | 38 | 4 | 62 | 19 | - | - |
| Value (Euros '000) | 555,655 | 57,738 | 833,482 | 272,379 | - | - |
| >= 20 M€ and < 50 M€ | ||||||
| Number | 11 | 1 | 30 | 4 | - | - |
| Value (Euros '000) | 315,506 | 22,230 | 944,616 | 108,978 | - | - |
| >= 50 M€ | ||||||
| Number | 4 | - | 9 | 4 | - | - |
| Value (Euros '000) | 250,839 | - | 834,614 | 842,987 | - | - |
| Total | ||||||
| Number | 9,282 | 7,390 | 13,985 | 60,355 | 407,604 | 474 |
| Value (Euros '000) | 3,603,843 | 466,284 | 7,559,320 | 3,540,092 | 46,161,745 | 32,156 |
(*) Includes, namely, securities, deposits and fixed assets pledges.
As at 30 September 2018, the following table includes the LTV ratio by segments Construction and Commercial Real Estate (CRE), Companies - Other Activities and Mortgage loans:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Number | |||||
| Segment/Ratio | of properties | Stage 1 | Stage 2 | Stage 3 | Impairment |
| Construction and CRE | |||||
| Without associated collateral | n.a. | 2,103,594 | 570,115 | 670,852 | 343,459 |
| <60% | 9,273 | 416,432 | 181,412 | 88,463 | 29,709 |
| >=60% and <80% | 4,194 | 388,468 | 105,034 | 147,803 | 29,346 |
| >=80% and <100% | 2,391 | 152,890 | 31,883 | 143,032 | 40,428 |
| >=100% | 16,032 | 242,831 | 301,109 | 854,229 | 377,158 |
| Companies - Other Activities | |||||
| Without associated collateral | n.a. | 14,685,092 | 1,571,022 | 1,608,168 | 1,020,516 |
| <60% | 46,651 | 1,314,822 | 442,570 | 234,908 | 85,643 |
| >=60% and <80% | 17,152 | 973,413 | 214,723 | 176,192 | 61,218 |
| >=80% and <100% | 13,287 | 691,037 | 129,664 | 139,795 | 66,901 |
| >=100% | 8,733 | 1,095,741 | 327,920 | 963,331 | 641,105 |
| Mortgage loans | |||||
| Without associated collateral | n.a. | 263,248 | 27,484 | 11,342 | 10,331 |
| <60% | 272,085 | 8,028,432 | 924,390 | 197,641 | 30,153 |
| >=60% and <80% | 144,605 | 7,150,538 | 1,013,414 | 240,014 | 29,761 |
| >=80% and <100% | 66,887 | 3,210,451 | 605,283 | 266,283 | 31,510 |
| >=100% | 28,973 | 1,309,328 | 224,752 | 421,923 | 136,735 |
As at 1 January 2018, the following table includes the LTV ratio by segments Construction and Commercial Real Estate (CRE), Companies - Other Activities and Mortgage loans:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 1 January 2018 | |||||
| Number | |||||
| Segment/Ratio | of properties | Stage 1 | Stage 2 | Stage 3 | Impairment |
| Construction and CRE | |||||
| Without associated collateral | n.a. | 2,083,997 | 749,908 | 903,739 | 419,283 |
| <60% | 8,703 | 326,283 | 246,476 | 85,772 | 24,494 |
| >=60% and <80% | 3,359 | 193,619 | 143,375 | 163,915 | 31,995 |
| >=80% and <100% | 2,069 | 89,822 | 182,921 | 160,284 | 53,834 |
| >=100% | 11,901 | 168,907 | 247,013 | 1,042,934 | 443,955 |
| Companies - Other Activities | |||||
| Without associated collateral | n.a. | 15,472,983 | 1,586,081 | 1,790,752 | 1,018,913 |
| <60% | 42,479 | 1,138,439 | 368,552 | 250,503 | 87,389 |
| >=60% and <80% | 15,397 | 800,458 | 267,183 | 171,720 | 60,707 |
| >=80% and <100% | 12,087 | 585,056 | 161,075 | 156,480 | 72,560 |
| >=100% | 6,891 | 779,776 | 343,049 | 1,115,139 | 731,383 |
| Mortgage loans | |||||
| Without associated collateral | n.a. | 266,679 | 49,697 | 14,176 | 13,204 |
| <60% | 266,761 | 7,764,782 | 905,337 | 223,142 | 30,201 |
| >=60% and <80% | 139,571 | 6,649,171 | 1,019,794 | 262,125 | 26,212 |
| >=80% and <100% | 73,125 | 3,327,519 | 654,942 | 351,238 | 36,957 |
| >=100% | 32,652 | 1,277,085 | 250,529 | 582,800 | 181,153 |
As at 31 December 2017, the following table includes the LTV ratio by segments Construction and Commercial Real Estate (CRE), Companies - Other Activities and Mortgage loans:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 31 December 2017 | ||||
| Number | Performing | Non-performing | ||
| Segment/Ratio | of properties | loans | loans | Impairment |
| Construction and CRE | ||||
| Without associated collateral | n.a. | 2,392,620 | 698,185 | 369,525 |
| <60% | 9,331 | 538,924 | 95,724 | 26,589 |
| >=60% and <80% | 4,113 | 359,663 | 148,150 | 26,228 |
| >=80% and <100% | 2,234 | 305,654 | 122,626 | 48,536 |
| >=100% | 38,406 | 477,589 | 1,183,727 | 450,285 |
| Companies - Other Activities | ||||
| Without associated collateral | n.a. | 13,407,838 | 1,282,197 | 695,075 |
| <60% | 44,040 | 1,611,046 | 173,476 | 77,424 |
| >=60% and <80% | 15,305 | 1,043,046 | 128,443 | 43,284 |
| >=80% and <100% | 11,758 | 778,326 | 142,199 | 65,057 |
| >=100% | 7,011 | 1,624,093 | 624,692 | 402,082 |
| Mortgage loans | ||||
| Without associated collateral | n.a. | 409,090 | 13,260 | 11,301 |
| <60% | 266,317 | 8,684,265 | 186,719 | 20,513 |
| >=60% and <80% | 139,291 | 7,692,693 | 223,109 | 18,064 |
| >=80% and <100% | 72,474 | 3,980,818 | 309,375 | 28,094 |
| >=100% | 32,449 | 1,550,105 | 547,008 | 162,694 |
As at 30 September 2018, the following table includes the fair value and the accounting net value of the properties arising from recovered loans, by asset and aging:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 30 September 2018 | ||||||
| Assets belong to | ||||||
| Assets arising from | investments funds and | |||||
| recovered loans results (note 27) | real estate companies (note 27) | Total | ||||
| Asset | Book | Asset | Book | Asset | Book | |
| Asset | value | value | value | value | value | value |
| Land | ||||||
| Urban | 510,244 | 456,825 | 330,387 | 330,387 | 840,631 | 787,212 |
| Rural | 28,521 | 25,535 | 32,760 | 32,760 | 61,281 | 58,295 |
| Buildings in development | ||||||
| Commercials | 23,799 | 22,926 | 34,750 | 34,750 | 58,549 | 57,676 |
| Mortgage loans | 57,213 | 53,296 | 9,094 | 9,094 | 66,307 | 62,390 |
| Other | 60 | 60 | - | - | 60 | 60 |
| Constructed buildings | ||||||
| Commercials | 363,273 | 319,669 | 31,975 | 31,975 | 395,248 | 351,644 |
| Mortgage loans | 502,897 | 441,441 | 52,874 | 52,874 | 555,771 | 494,315 |
| Other | 6,134 | 6,078 | 3,893 | 3,893 | 10,027 | 9,971 |
| Other | 4,016 | 4,016 | - | - | 4,016 | 4,016 |
| 1,496,157 | 1,329,846 | 495,733 | 495,733 | 1,991,890 | 1,825,579 |
As at 31 December 2017, the following table includes the fair value and the accounting net value of the properties arising from recovered loans, by asset and aging:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| 31 December 2017 | ||||||
| Assets belong to | ||||||
| Assets arising from | investments funds and | |||||
| recovered loans results (note 27) | real estate companies (note 27) | Total | ||||
| Asset | Book | Asset | Book | Asset | Book | |
| Asset | value | value | value | value | value | value |
| Land | ||||||
| Urban | 610,976 | 560,413 | 378,754 | 378,754 | 989,730 | 939,167 |
| Rural | 10,065 | 7,679 | 3,476 | 3,476 | 13,541 | 11,155 |
| Buildings in development | ||||||
| Commercials | 6,289 | 5,683 | 37,651 | 37,651 | 43,940 | 43,334 |
| Mortgage loans | 60,147 | 55,980 | 9,095 | 9,095 | 69,242 | 65,075 |
| Other | 721 | 721 | - | - | 721 | 721 |
| Constructed buildings | ||||||
| Commercials | 366,978 | 325,130 | 35,581 | 35,581 | 402,559 | 360,711 |
| Mortgage loans | 673,157 | 604,417 | 10,564 | 10,564 | 683,721 | 614,981 |
| Other | 4,562 | 4,365 | 5,238 | 5,238 | 9,800 | 9,603 |
| Other | - | - | - | - | - | - |
| 1,732,895 | 1,564,388 | 480,359 | 480,359 | 2,213,254 | 2,044,747 |
The Group's policy relating to the identification, measurement and evaluation of the concentration risk in credit risk is defined and described in the document Credit Principles and Guidelines, approved by the Bank's management body. This policy applies to all Group entities by the transposition of the respective definitions and requirements into the internal rulings of each entity. Through the document mentioned above, the Group defined the following guidelines relating to the control and management of credit concentration risk:
The monitoring of the concentration risk and the follow-up of major risks is made, at Group level, based on the concept of "Economic Groups" and "Customer Groups" - sets of connected Customers (individual persons or companies), which represent a single entity from a credit risk perspective, such that if one of them is affected by financial problems, one or all of the others, will probably face difficulties to fulfil their debtor obligations. The Customer connections that originate a Customer group include the formal participation on the same economic group, the evidence that a direct or indirect control relationship exists, including the control by an individual Customer (criteria of capacity of control) of a company or the existence of a strong commercial interdependency or common sources of funding that cannot be replaced on a short term (criteria of economic dependency).The identification of connected clients is an integral part of the credit granting and monitoring processes of each entity.
For the control of credit concentration risk and limit the exposure to this risk, there are limits defined for:
These limits apply to the 'Net exposures' at stake(*), relating either to a counterparty or a group of counterparties – cases for 1), 2) and 3) – or to the set of exposures to an activity sector or to a country (the counterparty country of residence) – cases for 4) and 5). The measurement of geographic concentration excludes the countries in which the Group operates (Portugal, Poland and Mozambique).
Except for case 4), the concentration limits are established by taking into consideration the credit worthiness of the debtors at stake in what concerns their rating grades/probability of Default (PD) (internal or external ratings; country rating in the case of geographic concentration).
The concentration limits for Corporate single-name exposures apply only to non-NPE positions, since the NPE(**) positions are covered by the NPE reduction Plan.
The in force limits, as at 30 September 2018, for single-name concentration are presented in the following table, which indicates the single-name limit for any given Customer/Group of Customers, as the Net Exposure weight over the consolidated Own Funds:
| Risk quality | Risk grade | Max Net exposure as a % of COF |
|---|---|---|
| High quality | 1 – 5 | 8.0% |
| Average/good quality | 6 – 7 | 6.0% |
| Average low/quality | 8 - 9 | 4.0% |
| Low quality | 10 – 11 | 1.0% |
| Restricted credit | 12 or worse | 0.5% |
As at 30 September 2018 there were 4 Economic Groups with net exposure above the limits approved for the respective risk grade, the same number of clients in that situation by the end of 2017 and on 30 June 2018. For each client with exposure excess a specific plan is prepared, aiming at reducing the exposure and bringing it within the established limits.
It should also be referred that the measurement of this concentration type is also done within the Group RAS (Risk Appetite Statement)(***) scope.
Risk grades: 1 – 3 - Very low risk ; 4 – 6 - Low risk; 7 - 12 - Average (or lower quality) risk.
(*) Net exposure = EAD x LGD, assuming that PD=1 and considering LGD=45% whenever own estimates for LGD are not available. (**) NPE = Non-performing exposures
(***) "Risk Appetite" indicators.
The following tables present the concentration limits to Sovereigns, Institutions, countries and activity sectors, as well as the measurements of these concentrations as at 30 September 2018:
| Counterparties | Limit (% of COF) | Net exposure % weight |
|---|---|---|
| Sovereigns | Very low risk 25%; low risk 10%; average (or lower quality) risk 7.5% |
Sovereign 1: 2,7% (very low risk); Sovereign 2: 0,8% (low risk); Sovereign 3: 0,4% (low risk); Sovereign 4: 0,1% (very low risk) |
| Institutions | Very low risk 10%; low risk 5%; average (or lower quality) risk 2.5% |
Institution 1: 2,4% (very low risk); Institution 2 (average or lower quality risk): 2,1%; Institution 3: (very low risk) 1,0%; Institution 4: 0,5%; Institution 5: 0,5%; Institution 6: 0,5% ; Institution 7: 0,4%; Institution 8: 0,4%; Institution 9: 0,4%; Institution 10: 0,3%; Institution 11: 0,3%; Institution 12: 0,3%; Institution 13: 0,3%; Institution 14: 0,2%; Institution 15: 0,2%; Institution 16: 0,2%; Institution 17: 0,2%; Institution 18: 0,2%; Institution 19: 0,2%; Institution 20: 0,1% |
| Portfolios | Limit (% of COF) | Net exposure % weight | |
|---|---|---|---|
| Country risk | Very low risk 40%; low risk 20%; average (or lower quality) risk |
Country 1 (very low risk): 3,8%; Country 2 (very low risk): 2,9%; Country 3 (average or lower quality risk): 2,9%; Country 4 (very low risk): 2,4%; Country 5 (low risk): 2,1%; Country 6 (very low risk): 1,8%; Country 7 (very low risk): 1,7%; |
|
| 10% | Country 8: 1,5%; Country 9: 1,3%; Country 10: 0,6%; Country 11: 0,5%; Country 12: 0,5%; Country 13: 0,5%; Country 14: 0,4%; Country 15: 0,3% |
||
| Sectors of activity | 40% of the Group entity's Own Funds |
Portugal: Other corporate services 28,1%; Construction 18,5%; Other activities 17,5%; Wholesale and retail trade and repairs 17,4%; Financial and insurance activities 15,2% Poland: Wholesale and retail trade and repairs 25,1%; Transporting and storage 11,4%; Other corporate services 7,7%; Financial and insurance activities 6,8% |
COF = Consolidated Own Funds
The Bank's management body and the Risk Assessment Committee are regularly informed on the evolution of the credit concentration risk metrics (against the mentioned limits) and on major risks, which are assessed by measuring the weights of the net exposure values in question in terms of the consolidated Own Funds level. For such measurements, the Risk Office uses a database on credit exposures (the Risk Office Datamart), monthly updated by the Group's systems, which also feeds a simulation tool for supporting the analysis of the impact on changes on the Customers exposures in the consumption of the respective concentration limits, used by the Credit Division within the scope of credit analysis for large clients.
Market risks consist in losses that may occur as a result of changes in rates (interest or exchange rates) and / or in the prices of different financial instruments, considering not only the correlations between them but also their volatilities.
For the purposes of profitability analysis and market risk quantification and control, the following management areas are defined for each entity of the Group:
Trading - Management of positions whose objective is the achievement of short term gains, through sale or revaluation. These positions are actively managed, tradable without restriction and may be valued frequently and accurately. The positions in question include securities and derivatives of sales activities;
Funding - Management of institutional funding (wholesale funding) and money market positions;
Investment - Management of all the positions in securities to be held to maturity (or for a longer period of time) or positions which are not tradable on liquid markets;
Commercial - Management of positions arising from commercial activity with Customers;
Structural - Management of balance sheet items or operations which, due to their nature, are not directly related to any of the management areas referred to above; and
ALM - Assets and Liabilities management.
The definition of these areas allows for an effective separation of the trading and banking portfolios management, as well as for a proper allocation of each operation to the most appropriate management area, according to its context and strategy.
In order to ensure that the risk levels incurred in the different portfolios of the Group comply with the predefined levels of tolerance to risk, various market risks limits are established, at least yearly, being applicable to all portfolios of the risk management areas over which the risks are incident. These limits are monitored on a daily basis (or intra-daily, in the case of financial markets) by the Risk Office.
Stop Loss limits are also defined for the financial markets areas, based on multiples of the risk limits defined for those areas, aimed at limiting the maximum losses that might occur. When these limits are reached, a review of the strategy and of the assumptions relative to the management of the positions in question is mandatory.
The Group uses an integrated market risk measurement that allows for the monitoring all of the risk subtypes that are considered relevant. This measurement includes the assessment of the following types of risk: general risk, specific risk, non-linear risk and commodity risk. Each risk subtype is measured individually using an appropriate risk model and the integrated measurement is built from the measurements of each subtype without considering any kind of diversification between the four subtypes (worst-case scenario approach).
For the daily measurement of general market risk (relative to interest rate risk, exchange rate risk, equity risk and price risk of credit default swaps) a VaR (value-at-risk) model is used, considering a time horizon of 10 business days and a significance level of 99%.
For non-linear risk, an internally-developed methodology is applied, replicating the effect that the main non-linear elements of options might have in P&L results of the different portfolios in which these are included, similarly to what is considered by the VaR methodology, using the same time horizon and significance level.
Specific and commodity risks are measured through standard methodologies defined in the applicable regulations, with an appropriate change of the time horizon considered.
The following table presents the values at risk for the trading book between 31 December 2017 and 30 September 2018, as measured by the above methodologies:
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September | 31 December | ||||
| 2018 | Average | Maximum | Minimum | 2017 | |
| Generic Risk ( VaR ) | |||||
| Interest Rate Risk | 2,141 | 5,160 | 2,692 | 1,637 | 2,450 |
| FX Risk | 260 | 495 | 847 | 598 | 790 |
| Equity Risk | 56 | 89 | 53 | 39 | 36 |
| Diversification effects | 342 | 336 | 609 | 459 | 730 |
| 2,115 | 5,408 | 2,983 | 1,815 | 2,546 | |
| Specific Risk | 138 | 1,124 | 136 | 19 | 100 |
| Non Linear Risk | 15 | 17 | 8 | 2 | 7 |
| Commodities Risk | 2 | 7 | 3 | 1 | 6 |
| Global Risk | 2,270 | 5,579 | 3,130 | 1,947 | 2,659 |
In order to check the appropriateness of the internal VaR model to the assessment of the risks involved in the positions held, several validations are conducted over time, of different scopes and frequency, which include back testing, the estimation of the effects of diversification and the analysis of the comprehensiveness of the risk factors.
As a complement to the VaR assessment, the Group continuously tests a broad range of stress scenarios analysing the respective results with a view to identify risk concentrations that have not been captured by the VaR model and, also, to test for other possible dimensions of loss.
The interest rate risk derived from Banking Book operations is assessed through a process of risk sensitivity analysis, undertaken every month, covering all the operations included in the Group's consolidated Balance Sheet and discriminated by exposure currency.
Variations of market interest rates influence the Group's net interest income, both in the short term and medium/long term, affecting its economic value in a long term perspective. The main risk factors arise from the repricing mismatch of portfolio positions (repricing risk) and from the risk of variation in market interest rates (yield curve risk). Besides this, but with less impact, there is the risk of unequal variations in different reference rates with the same repricing period (basis risk).
In order to identify the exposure of the Group's banking book to these risks, the monitoring of the interest rate risk takes into consideration the financial characteristics of each of the relevant contracts, with the respective expected cash-flows (principal and interest, without the spread component but including costs for liquidity, capital, operational and other) being projected according to the repricing dates, thus calculating the impact on economic value resulting from alternative scenarios of change of market interest rate curves.
The interest rate sensitivity of the balance sheet, by currency, is calculated as the difference between the present value of the interest rate mismatch discounted at market interest rates and the discounted value of the same cash flows simulating parallel shifts of the market interest rates.
The following tables show the expected impact on the banking book economic value of parallel shifts of the yield curve by +/- 100 and +/- 200 basis points, for each of the main currencies in which the Group holds material positions:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 30 September 2018 | ||||
| Currency | - 200 bp (*) | - 100 bp (*) | + 100 bp | + 200 bp |
| CHF | 1,821 | 1,821 | 2,970 | 5,876 |
| EUR | (13,348) | (23,256) | 103,010 | 202,356 |
| PLN | 7,211 | 3,683 | (3,220) | (6,023) |
| USD | (31,512) | (15,453) | 14,867 | 29,189 |
| (35,828) | (33,205) | 117,627 | 231,398 |
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 31 December 2017 | ||||
| Currency | - 200 bp (*) | - 100 bp (*) | + 100 bp | + 200 bp |
| CHF | 2,604 | 2,604 | 3,815 | 7,555 |
| EUR | (62,356) | (64,565) | 210,712 | 409,920 |
| PLN | (27,614) | (14,137) | 13,840 | 27,386 |
| USD | (26,289) | (12,915) | 12,423 | 24,405 |
| (113,655) | (89,013) | 240,790 | 469,266 |
(*) Decrease in rates scenario, limited to non-negative rates (which implies effective variations of lesser amplitude than 100 bp, especially in shorter periods).
As described in accounting policy 1 B), the financial statements of the Group's subsidiaries and associates residing abroad are prepared in their functional currency and translated into Euros at the end of each financial period. The exchange rates used for the conversion of balance sheet foreign currency amounts are the ECB reference rates at the end of each period. In foreign currency conversion of results, are calculated average exchange rates according to the closing exchange rates of each month of the year. The rates used by the Group are as follows:
| Closing exchange rates | Average exchange rates | |||
|---|---|---|---|---|
| (Balance sheet) | (Income statement) | |||
| Currency | 30 September 2018 |
31 December 2017 |
30 September 2018 |
30 September 2017 |
| AOA | 341.9660 | 199.0190 | 281.2516 | 181.7892 |
| BRL | 4.6379 | 3.9775 | 4.2821 | 3.4674 |
| CHF | 1.1345 | 1.1704 | 1.1579 | 1.0754 |
| MOP | 9.3612 | 9.6669 | 9.3612 | 9.1685 |
| MZN | 71.1200 | 70.4400 | 72.2233 | 71.8837 |
| PLN | 4.2807 | 4.1756 | 4.2491 | 4.2604 |
| USD | 1.1613 | 1.2006 | 1.1973 | 1.0893 |
The exchange rate risk of the banking book is transferred internally to the Trading area (Treasury), in accordance with the risk specialisation model followed by the Group for the management of the exchange rate risk of the Balance Sheet. The exposures to exchange rate risk that are not included in this transfer – the financial holdings in subsidiaries, in foreign currency - are covered by market operations, considering the policy defined and the availability and conditions of the instruments.
As at 30 September 2018, the Group's financial holdings in CHF and PLN were hedged. On a consolidated basis, these hedges are identified, in accounting terms, as 'Net investment hedges', in accordance with the IFRS nomenclature. On an individual basis, hedge accounting is also carried out, in this case through a 'Fair Value Hedge' methodology, in this case also for positions in USD.
Regarding equity risk, the Group maintains a series of equity positions of a small size and low risk in the investment portfolio, which are not held for trading purposes. The management of these positions is carried out by a specific area of the Group, with the respective risk being controlled on a daily basis, through the indicators and limits defined for market risks.
As at 30 September 2018, the information of net investments, considered by the Group in total or partial hedging strategies on subsidiaries and on hedging instruments used, is as follows:
| 30 September 2018 | |||||
|---|---|---|---|---|---|
| Net | Hedging | Net | Hedging | ||
| Investment | instruments | Investment | instruments | ||
| Company | Currency | Currency '000 | Currency '000 | Euros '000 | Euros '000 |
| Banque Privée BCP (Suisse) S.A. | CHF | 81,170 | 81,170 | 71,545 | 71,545 |
| Bank Millennium, S.A. | PLN | 2,570,017 | 2,570,017 | 600,373 | 600,373 |
The information on the gains and losses in exchange rates on the loans to cover the investments in foreign institutions, accounted for as exchange differences, is presented in the statement of changes in equity. The ineffectiveness generated in the hedging operations is recognised in the statement of income, as referred in the accounting policy 1 C4).
The transfer to Portugal of funds, including dividends, which are owed by BCP's subsidiaries or associates in third countries, particularly outside the European Union, are, by their nature, subject to the exchange restrictions and controls that are in force at any time in the country of subsidiaries or associates. In particular, as regards Angola and Mozambique, countries in which the Group holds a minority investment in Banco Millennium Angola and a majority investment in BIM - Banco Internacional de Moçambique, being the case of, export of foreign currency requires prior authorization of the competent authorities, which depends, namely, on the availability of foreign exchange by the central bank of each country. At the date of preparation of this report, there are no outstanding amounts due to the aforementioned requirements.
Evaluation of the Group's liquidity risk is carried out using indicators defined by the supervisory authorities on a regular basis and other internal metrics for which exposure limits are also defined.
The evolution of the Group's liquidity situation for short-term time horizons (up to 3 months) is reviewed daily on the basis of two indicators defined in-house, immediate liquidity and quarterly liquidity. These measure the maximum fund-taking requirements that could arise on a single day, considering the cash-flow projections for periods of 3 days and of 3 months, respectively.
Calculation of these indicators involves adding to the liquidity position of the day under analysis the estimated future cash flows for each day of the respective time horizon (3 days or 3 months) for the transactions as a whole brokered by the markets areas, including the transactions with customers of the Corporate and Private networks that, for their dimension, have to be quoted by the Trading Room. The amount of assets in the Bank's securities portfolio considered highly liquid is added to the calculated value, leading to determination of the liquidity gap accumulated for each day of the period under review.
In parallel, the evolution of the Group's liquidity position is calculated on a regular basis identifying all the factors that justify the variations that occur. This analysis is submitted to the Capital and Assets and Liabilities Committee (CALCO) for appraisal, in order to enable the decision making that leads to the maintenance of financing conditions adequate to the continuation of the business.
In addition, the Risks Commission is responsible for controlling the liquidity risk. This control is reinforced with the quarterly execution of stress tests, to characterize the Bank's risk profile and to ensure that the Group and each of its subsidiaries, fulfil its obligations in the event of a liquidity crisis. These tests are also used to support the liquidity contingency plan and management decisions.
The Liquidity Coverage Ratio (LCR) stood at 182% at the end of September 2018 on a consolidated basis, comfortably above the minimum requirement of 100%, supported by highly liquid asset portfolios of value compatible with prudent management of the Group's short-term liquidity, having improved favorably against December 2017 (158%).
At the same time, the Group has a strong stable financing base, characterized by the large share of customer deposits in the funding structure, collateralized financing and medium and long-term instruments, which enabled the stable financing ratio (NSFR - Net Stable Funding Ratio) to reach 128% in September 2018 (31 December 2017: 124%).
Consolidated wholesale financing increased between December 2017 and September 2018, mainly due to the increase in the liquidity needs arising from the increase in the sovereign debt portfolio, partially offset by the decrease in the commercial gap in Portugal and the cash flow from operations. The increase in liquidity needs was made by resort to the interbank market in Portugal.
Net borrowing with the ECB amounted to Euros 3,199,299,000 as at 30 September 2018, a level similar to that reached at the end of December 2017 (Euros 3,048,618,000) and materially lower than the average balance observed in 2017. The liquidity buffer with the ECB, in the amount of Euros 12,492,711,000, remained in line with that of the previous quarter and evidenced a reinforcement of Euro 2,765,070,000 compared to December 2017. Considering other assets highly liquid or eligible for conversion into eligible collateral with the ECB in the short term, the buffer would amount to Euros 13,515,711,000 (Euros 11,051,308,000 in December 2017).
The eligible pool of assets for funding operations in the European Central Bank and other Central Banks in Europe, net of haircuts, is detailed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| European Central Bank | 7,196,807 | 7,431,756 |
| Other Central Banks | 4,669,135 | 3,216,224 |
| 11,865,942 | 10,647,980 |
As at 30 September 2018, the amount discounted in the European Central Bank amounted to Euros 4,000,000,000 (31 December 2017: Euros 4,000,000,000). As at 30 September 2018 and 31 December 2017 no amounts were discounted in Other Central Banks. The amount of eligible assets for funding operations in the European Central Banks includes securities issued by SPEs concerning securitization operations in which the assets were not derecognised at a consolidated level. Therefore, the respective securities are not recognised in the securities portfolio.
The evolution of the ECB's Monetary Policy Pool, the net borrows at the ECB and liquidity buffer is analysed as follows:
| (Thousands of euros) | ||
|---|---|---|
| 30 September 2018 |
31 December 2017 |
|
| Collateral eligible for ECB, after haircuts: | ||
| The pool of ECB monetary policy (i) | 7,196,807 | 7,431,756 |
| Outside the pool of ECB monetary policy | 8,415,203 | 5,344,503 |
| 15,612,010 | 12,776,259 | |
| Net borrowing at the ECB (ii) | 3,119,299 | 3,048,618 |
| Liquidity buffer (iii) | 12,492,711 | 9,727,641 |
i) Corresponds to the amount reported in COLMS (Bank of Portugal application).
ii) Includes, as at 30 September 2018, the value of funding with ECB net of interest associated with negative financing rate applied to TLTRO (Euros 36,117,000), of deposits with the Bank of Portugal and other liquidity of the Eurosystem (Euros 1,207,285,000), plus the minimum cash reserves (Euros 362,701,000).
iii) Collateral eligible for ECB, after haircuts, less net financing at the ECB.
The BCP Group structurally improved its liquidity profile by recording a credit transformation ratio on deposits calculated in accordance with Bank of Portugal Instruction No. 16/2004 on 30 September 2018 of 89% and on 31 December 2017 this ratio was set at 94%.
The Basel Committee published the definition of the Liquidity Coverage Ratio (LCR) in 2014, and the Delegated Act by the European Commission was adopted in early October 2015, which introduced, in relation to CRD IV / CRR, new metrics and calculation criteria implemented in the European Union. The adoption of the new framework defines a minimum requirement of 100% as at 1 January 2018. The LCR ratio of the BCP Group comfortably stood above the regulamentar limit indicating 182% at the end of September 2018 (31 December 2017: 158%), supported by highly liquid asset portfolios of value compatible with prudent management of the Group's short-term liquidity.
The definition of the Net stable funding ratio (NSFR) was approved by the Basel Committee in October 2014. As regards this ratio, the Group presents a stable financing base obtained by the high weight of customer deposits into the funding structure, by collateralized financing and medium and long-term instruments, which allowed that the levels of stable financing ratio established in September 2018 set the NSFR at 128% (31 December 2017: 124%).
According to the Notice n.º28/2014 of the Bank of Portugal, which focuses on the guidance of the European Banking Authority on disclosure of encumbered assets and unencumbered assets (EBA/GL/2014/3), and considering the recommendation made by the European Systemic Risk Board, the following information regarding the assets and collaterals, is presented as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| 30 September 2018 | ||||
| Assets | Carrying amount of encumbered assets |
Fair value of encumbered assets |
Carrying amount of unencumbered assets |
Fair value of unencumbered assets |
| Assets of the reporting institution, of which: | 11,224,340 | n/a | 61,746,630 | n/a |
| Equity instruments | - | - | 400,499 | 400,499 |
| Debt securities | 2,023,414 | 2,023,447 | 14,329,688 | 14,330,232 |
| Other assets | - | - | 7,952,402 | n/a |
(Thousands of euros)
| 31 December 2017 | |||||
|---|---|---|---|---|---|
| Assets | Carrying amount of Fair value of encumbered encumbered assets assets |
Carrying amount of unencumbered assets |
Fair value of unencumbered assets |
||
| Assets of the reporting institution, of which: | 12,542,681 | n/a | 60,204,359 | n/a | |
| Equity instruments | - | - | 1,946,587 | 1,946,587 | |
| Debt securities | 2,222,056 | 2,222,056 | 11,029,696 | 11,019,693 | |
| Other assets | - | - | 8,744,647 | n/a |
| Fair value of encumbered collateral received or own debt securities issued |
Fair value of collateral received or own debt securities issued available for encumbrance |
|||
|---|---|---|---|---|
| Collateral received | 30 September 2018 |
31 December 2017 |
30 September 2018 |
31 December 2017 |
| Collateral received by the reporting institution | - | - | - | - |
| Equity instruments | - | - | - | - |
| Debt securities | - | - | 336,264 | 50,471 |
| Other assets | - | - | - | - |
| Own debt securities issued other than own covered bonds or ABSs encumbered | - | - | - | - |
| (Thousands of euros) | ||
|---|---|---|
| Carrying amount of selected financial liabilities |
||
| Encumbered assets, encumbered collateral received and matching liabilities | 30 September 2018 |
31 December 2017 |
| Matching liabilities, contingent liabilities and securities lent | 6,973,081 | 8,957,873 |
| Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered | 10,066,955 | 11,885,777 |
The encumbered assets are mostly related to collateralized financing, in particular the ECB's, repo transactions, issuance of covered bonds and securitization programs. The types of assets used as collateral of these financing transactions are divided into portfolios of loans to clients, supporting securitization programs and covered bonds issues, whether placed outside the Group, whether to improve the pool of collateral with the ECB, and Portuguese sovereign debt, which collateralize repo transactions in the money market. The funding raised from the IEB is collateralized by Portuguese public debt and bonds issues of the public sector entities.
The balance other assets in the amount of Euros 7,952,402,000 (31 December 2017: Euros 8,744,647,000) although unencumbered, are mostly related to the Group's activity, namely: investments in associates and subsidiaries, tangible fixed assets and investment property, intangible assets, assets associated with derivatives and deferred tax assets and current taxes.
The amounts presented in these tables correspond to the position as at 30 September 2018 and 31 December 2017 reflecting the high level of collateralisation of the wholesale funding of the Group. The buffer of eligible assets for the ECB, after haircuts, less net borrowing at the ECB, as at 30 September 2018 amounts to Euros 12,492,711,000 (31 December 2017: Euros 9,727,641,000).
The approach to operational risk management is based on the business process structure and an end-to-end processes structure, both for business and business support processes. Process management is the responsibility of the Process Owners, who are the first parties responsible for the risks assessment and for strengthening the performance within the scope of their processes. Process Owners are responsible for the updating of all of the relevant documentation concerning the processes, for ensuring the effective adequacy of all of the existing controls through direct supervision or by delegation on the departments responsible for the controls in question, for coordinating and taking part in the risks self-assessment exercises and for detecting improvement opportunities and implementing improvements, including mitigating measures for the most significant exposures.
Within the operational risk model implemented in the Group, there is a systematic process of capturing data on operational losses that systematically characterizes the loss events in terms of their causes and effects. From the analysis of the historical information and its relationships, processes involving greater risk are identified and mitigation measures are launched to reduce the critical exposures.
The contractual terms of instruments of wholesale funding encompass obligations assumed by entities belonging to the Group as debtors or issuers, concerning general duties of societary conduct, maintenance of banking activity and the inexistence of special guarantees constituted for the benefit of other creditors ("negative pledge"). These terms reflect essentially the standards internationally adopted for each type of instrument.
The terms of the Group's participation in securitization operations involving its own assets are subject to mandatory changes in case the Group stops respecting certain rating criteria. The criteria established in each transaction results mainly from the existing risk analysis at the moment that the transaction was set, being these methodologies usually applied by each rating agency in a standardised way to all the securitization transactions involving the same type of assets.
Regarding the Covered Bond Programs of Banco Comercial Português and Banco de Investimento Imobiliário that are currently underway, there are no relevant covenants related to a possible downgrade of BCP.
The Group's own funds are determined according to the established regulation, in particular, according to Directive 2013/36/EU and Regulation (EU) 575/2013, approved by the European Parliament and the Council (CRD IV / CRR).
Total capital includes tier 1 and tier 2. Tier 1 comprises common equity tier 1 (CET1) and additional tier 1.
Common equity tier 1 includes: (i) paid-up capital, share premium, hybrid instruments subscribed by the Portuguese State within the scope of the Bank's recapitalization process and not reimbursed, reserves and retained earnings and non-controlling interests; ii) and deductions related to own shares and loans to finance the acquisition of shares of the Bank, the shortfall of value adjustments and provisions to expected losses concerning risk‐weighted exposure amounts calculated according to the IRB approach and goodwill and other intangible assets. Reserves and retained earnings are adjusted by the reversal of unrealised gains and losses on cash-flow hedge transactions and on financial liabilities valued at fair value through profits and losses, to the extent related to own credit risk. The minority interests are only eligible up to the amount of the Group's capital requirements attributable to the minorities. In addition, the deferred tax assets arising from unused tax losses carried forward are deducted, as well as the deferred tax assets arising from temporary differences relying on the future profitability and the interests held in financial institutions and insurers of at least 10%, in this case only in the amount that exceeds the thresholds of 10% and 15% of the common equity tier 1, when analysed on an individual and aggregated basis, respectively. The additional value adjustments necessary for the prudent valuation requirements applied to all assets at fair value as well as the irrevocable payment commitments for the Deposits Guarantee Fund and the Single Resolution Fund , are also deducted.
Additional tier 1 comprises preference shares and hybrid instruments that are compliant with the issue conditions established in the Regulation and minority interests related to minimum additional capital requirements of institutions that are not totally owned by the Group.
Tier 2 includes the subordinated debt that is compliant with the Regulation and the minority interests related to minimum total capital requirements of institutions that are not totally owned by the Group. Additionally, Tier 2 instruments held in financial institutions and insurers of at least 10% are deducted.
The legislation in force stipulates a transitional period between the own funds calculated under national law until 31 December 2013, and own funds estimated according to EU law, in order to exclude some elements previously considered (phase-out) and include new elements (phase-in). This transitional period is applied to the deferred tax already recorded on the balance sheet of 1 January 2014 and the subordinated debt and all the hybrid instruments not eligible to own funds, according to the new regulation, ending in 2023 and 2021, respectively.
With the IFRS9 introduction the Bank has decided to gradually recognise the impacts, according to artº 473º-A of CRR.
CRD IV/CRR establishes Pilar 1 capital requirements of 4.5%, 6% and 8% for CET1, Tier 1 and Total Capital, respectively. However, under the scope of SREP , European Central Bank notified BCP about the need to comply with phased-in capital ratios, during 2018, of 8.81% (CET1), 10.31% (Tier 1) and 12.31% (Total), including 2.25% of additional Pilar 2 requirements, 0,188% of O-SII and 1.875% of capital conservation buffer. The Bank meets all the requirements and other recommendations issued by the supervisor on this matter.
The Group has adopted the methodologies based on internal rating models (IRB) for the calculation of capital requirements for credit and counterparty risk, covering a substantial part of both its retail portfolio in Portugal and Poland and its corporate portfolio in Portugal. The Group has adopted the advanced approach (internal model) for the coverage of trading portfolio's general market risk and for exchange rate risks generated in exposures in the perimeter centrally managed from Portugal, and the standard method was used for the purposes of operational risk coverage. The capital requirements of the other portfolios/geographies were calculated using the standardised approach.
The own funds and the capital requirements determined according to the CRD IV/CRR (phased-in) methodologies previously referred, are the following:
| (Thousands of euros) | ||
|---|---|---|
| 30 September | 31 December | |
| 2018 | 2017 | |
| Common equity tier 1 (CET1) | ||
| Share capital | 5,600,738 | 5,600,738 |
| Share Premium | 16,471 | 16,471 |
| Ordinary own shares | (83) | (88) |
| Reserves and retained earnings | 22,040 | 401,067 |
| Minority interests eligible to CET1 | 522,618 | 564,042 |
| Regulatory adjustments to CET1 | (1,272,452) | (1,262,956) |
| 4,889,332 | 5,319,274 | |
| Tier 1 | ||
| Capital Instruments | 1,169 | 4,130 |
| Minority interests eligible to AT1 | 73,415 | 47,084 |
| Regulatory adjustments | - | (51,214) |
| 4,963,916 | 5,319,274 | |
| Tier 2 | ||
| Subordinated debt | 503,170 | 596,693 |
| Minority interests eligible to CET1 | 152,449 | 146,229 |
| Other | (58,800) | (130,345) |
| 596,819 | 612,577 | |
| Total own funds | 5,560,735 | 5,931,851 |
| RWA - Risk weighted assets | ||
| Credit risk | 36,718,770 | 35,366,357 |
| Market risk | 1,675,978 | 991,992 |
| Operational risk | 3,574,097 | 3,574,097 |
| CVA | 173,048 | 238,668 |
| 42,141,893 | 40,171,114 | |
| Capital ratios | ||
| CET1 | 11.6% | 13.2% |
| Tier 1 | 11.8% | 13.2% |
| Tier 2 | 1.4% | 1.5% |
| 13.2% | 14.8% |
In accordance with accounting policy 1 V3), the main contingent liabilities and other commitments under IAS 37 are as follows:
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 Portuguese Competition Authority refused the Bank´s application for confidential treatment of some of the information in the Bank´s defence against the notice of illegal act. In June 2018 the Bank filed an appeal with the Portuguese Competition, Regulation and Supervision Court (which is pending) and filed its defence against the notice of illegal act in a non-confidential version
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 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 31 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 20 November 2017, the District Court in Warsaw ordered the publication in the newspaper "Rzeczpospolita" that group proceedings had been initiated. The announcement was published on 23 January 2018; the deadline for further borrowers to join the proceedings was 23 April 2018.
In the last extension of claim (dated 24 April 2018), 382 new borrowers declared their accession to the group. Including all previous extensions of claim, the total number of declared members of the group is currently approx. 5,400 persons, while the total value of the subject matter of the dispute was indicated as approx. PLN 146 million (Euros 34.1 million) The next stage of the proceedings will be establishing the composition of the group. As yet, the Regional Court in Warsaw has not set a deadline for the Bank to challenge the membership of particular individuals in the group.
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 0.8 million) 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 13 September 2017 the Court of Appeal in Warsaw dismissed the complaint against the decision of the Regional Court in Warsaw of 30 March 2017 on dismissal of the motion to provide security. The decision is final. On 28 December 2017, pursuant to the decision from 10 October 2017, the Regional Court in Warsaw announced the initiation of group proceedings in the newspaper "Rzeczpospolita", thus setting a period of three months for submitting by interested parties the statements on joining the group. Pursuant to the court´s order, the representative of the group filed with the Regional Court in Warsaw an update list of all the members of the group amounting to 709 persons and lodged a further claim for slightly above PLN 5 million (Euros 1.17 million) altogether.
The plaintiff filed the suit dated 23 October 2015 to the Regional Court in Warsaw; the suit was served to the Bank on 4 April 2016. According to the plaintiff, the basis for the claim is damage to their assets, due to the actions taken by the Bank and consisting in the wrong interpretation of the Agreement for working capital loan concluded between the Bank and PCZ S.A., which resulted in placing the loan on demand.
In the case brought by EFWP-B, the plaintiff moved for securing the claim in the amount of PLN 250 million (Euros 58.4 million). The petition was dismissed on 5 September 2016 with legal validity by the Appellate Court. The Bank is requesting complete dismissal of the suit, stating disagreement with the charges raised in the claim. After prior exchange of pleadings, the Court on the first hearing on 10 October 2017 has started the evidentiary hearings. On the hearing on 24 April 2018 the Bank's witnesses were heard. The parties submitted further requests for evidence. Next hearing was set at 29 October 2018.
Supporting the position of the Bank, the Bank's attorney submitted a binding copy of final verdict of Appeal Court in Wrocław favourable to the Bank, issued in the same legal state in the action brought by PCZ SA against the Bank. Favourable forecasts for the Bank, as regards dismissal of the suit in both proceedings, is confirmed by a renowned law firm representing the Bank in the proceeding.
1) send information on the UOKiK decision to the said 78 clients;
2) place the information on decision and the decision itself on the website and on twitter;
3) to pay a fine PLN 20.7 million (Euros 5 million). The decision on the fine is not immediately enforceable.
The decision of the President of UOKIK is not final. The Bank does not agree with this Decision and lodged an appeal within the statutory time limit.
On 19 January 2018 the Bank has received the lawsuit petition of First Data Polska SA requesting the payment of PLN 186.8 million (Euros 43,6 million). First Data claims a share in an amount which the Bank has received in connection with the Visa Europe takeover transaction by Visa Inc. The plaintiff based its request on an agreement with the Bank on cooperation in scope of acceptance and settlement of operations conducted with the usage of Visa cards. The Bank does not accept the claim and filed the response to the lawsuit petition within the deadline set forth in the law.
In Poland, on 2 August 2016 the President's Bill on support for FX mortgage borrowers was submitted to the Parliament. The proposed law is to apply to FX (all currencies) loan agreements signed from 1 July 2000 to 26 August 2011 (when the "Anti-spread Act" came into force). This Bill concerns the return of part of FX spreads applied by banks.
On 2 August 2017 a new Presidential Bill appeared in Parliament regarding changes in the Act on Support for Distressed Borrowers who Took Residential Loans. The Bill assumes a modification of the existing Borrowers' Support Fund by separating-out two Funds: Supporting Fund and Restructuring Fund. As regards the Supporting Fund, the Bill aims to increase availability of money from the fund by means of: relaxing criteria, which must be satisfied by a borrower applying for support; increasing the maximum amount of support; extending the period, for which the support is granted; forgiving part of the support granted conditional on punctual repayment to the fund. The Restructuring Fund is to be used for currency conversion of FX mortgages to PLN. The Bill contains very general regulations and does not specify criteria of eligibility for such currency conversion and its rules.
Quarterly payments to the Restructuring Fund made by lenders are not to exceed the equivalent of the FX mortgage portfolio and the rate of 0.5%. The maximum costs for the entire sector, estimated by KNF, are up to PLN 2.8 billion (Euros 654 million) in the first year of operation of the Restructuring Fund. According to the Bill, KNF may issue a recommendation to lenders specifying the principles of voluntary conversion of receivables for restructuring with consideration of stability of the financial system and effective use of money in the Restructuring Fund.
Including the two above Bills, so far four draft Acts have been submitted to Parliament and in consequence it is not possible to estimate the impact of the proposed legislation on the banking sector and the Bank. However, if any of the Bills is adopted and begins to bind banks, this may lead to significant reduction of the Bank's profitability and its capital position.
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 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 borrowed Euros 4,600 million, of which Euros 3,900 million 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 that may result in liabilities or contingencies".
On 7 July 2016, the Resolution Fund declared that it would analyse and evaluate the diligences to take, 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 BES liquidation process is over, if it is verified that the creditors, whose credits were not transferred to Novo Banco, would take on a higher loss 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 31 March 2017, the Bank of Portugal communicated about the sale of Novo Banco, where it states the following: " Banco of Portugal today selected Lone Star to complete the sale of Novo Banco. The Resolution Fund has consequently signed the contractual documents of the transaction. Under the terms of the agreement, Lone Star will inject a total of Euros 1,000 million in Novo Banco, of which Euros 750 million at completion and Euros 250 million within a period of up to 3 years. Through the capital injection, Lone Star will hold 75% of the share capital of Novo Banco and the Resolution Fund will maintain 25% of the share capital.
The terms agreed also include a contingent capital mechanism, under which the Resolution Fund, as a shareholder, undertakes to make capital injections in case certain cumulative conditions are to be met related to: i) the performance of a specific portfolio of assets and ii) the capital levels of the bank going forward.
Any capital injections to be carried out pursuant to this contingent mechanism benefit from a capital buffer resulting from the injection to be made under the terms of the agreement and are subject to an absolute cap. The terms agreed also provide for mechanisms to safeguard the interests of the Resolution Fund and to align incentives as well as monitoring mechanisms, notwithstanding the limitations arising from State Aid rules."
On 18 October 2017, following the resolution of the Council of Ministers No. 151-A/2017 of 2 October 2017, the Bank of Portugal communicated the conclusion of the sale of Novo Banco to Lone Star, with an injection by the new shareholder of Euros 750 million, followed by a further capital increase of Euros 250 million by the end of 2017. Upon completion of the transaction, the status of Novo Banco as a bridge institution will cease, fully complying with the purposes of the resolution of Banco Espírito Santo.
On 26 February 2018, the European Commission published the non-confidential version of its decision regarding the approval of State aid underling Novo Banco's sale process. This statement identifies the three support measures by the Resolution Fund and the state that are part of the sale agreement associated with a total gross book value of around Euros [10-20] billion (*) that revealed significant uncertainties as regards adequacy in provisioning (**):
(i) Contingent Capital Agreement which allows Lone Star to reclaim, from the Resolution Fund, funding costs, realised losses and provisions related to an ex-ante agreed portfolio of existing loan stock, up to a maximum of Euros 3.89 billion, subject to a capital ratio trigger (CET1 below 8%-13%) as well as to some additional conditions (*)(**).
(ii) Underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount necessary (but no more than Euros 400 million). The amount that can be reclaimed by the Resolution Fund under the Contingent Capital Agreement is subject to the cap of Euros 3.89 billion (**).
(iii) In case the Supervisory Review and Evaluation Process ("SREP") total capital ratio of Novo Banco falls below the SREP total capital requirement, the State will provide additional capital in certain conditions and through different instruments (iii).
On 28 March 2018, the Resolution Fund announced that, following the disclosure of Novo Banco 2017 results, the contingent capitalization mechanism provided in Novo Banco's sale agreement reached Euros 792 million, falling within the obligations of the Resolution Fund.
On 24 May 2018, arising from the referred mechanism, the Resolution Fund paid Euros 791,695 thousands to the Novo Banco using its available financial resources from banking contributions (direct or indirect) and complemented by a State loan of Euros 430,000 thousands under the terms agreed between the Portuguese State and the Resolution Fund.
Novo Banco is held by Lone Star and the Resolution Fund, corresponding to 75% and 25% of the share capital respectively.
In the Novo Banco Report of 30 June 2018, it was stated that on that date the amount of 726,369 thousand of euros to be received from the Resolution Fund in 2019 under the aforementioned contingent capitalization mechanism. It is also stated that this amount depends, at the date of each balance sheet, on the losses incurred and on the regulatory ratios in force at the time of their determination and may vary according to these factors throughout the year. Accordingly, this amount is provisional, and its definitive determination is made with reference to 31 December 2018.
On 19 December 2015, the Board of Directors of the Bank of Portugal announced that Banif was "at risk of insolvency or insolvent" and started an urgent resolution process 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 to an asset management vehicle denominated Oitante, S.A. (Oitante) specifically created for that purpose, having the Resolution Fund as the sole shareholder. For that matter, Oitante issued bonds representing debt in the amount of Euros 746 million. The Resolution Fund provided a guarantee and the Portuguese State a counter-guarantee. In 2017 Resolution Fund Report, it is disclosed that: (i) as a result of the partial early repayments made by Oitante, the amount outstanding of these obligations had been reduced to Euros 565.6 million at the end of 2017; (ii) in 2018 Oitante made a new partial early reimbursement of Euros 10 million, and (iii) considering the early repayments, as well as the information provided by the Oitante's Board of Directors regarding the activity performed in 2017, the Fund expects that there will be no relevant situations triggering the guarantee provided by the Resolution Fund.
(*) Exact value not disclosed by the European Commission for confidentiality reasons. (**) As referred to in the respective European Commission Decision.
The operation also involved state aid, of which Euros 489 million 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 28 March 2018, the Resolution Fund confirms the outstanding principal amount of Euros 353 million related to this loan, due to the early reimbursement of Euros 136 million already made. 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 and after the agreement of sale of Novo Banco to Lone Star, the Resolution hold, as at 30 September 2018, all the share capital of Oitante, and 25% of the capital of Novo Banco but without the corresponding voting rights.
Under the scope of these measures, the Resolution Fund borrowed loans and assumed other responsibilities and contingent liabilities resulting from:
Effects of the application of the principle that no creditor of the credit institution under resolution may assume a loss greater than the one it would take if that institution did not go into liquidation;
Negative effects resulting from the resolution process that result in additional liabilities or contingencies for Novo Banco, S.A., which must be neutralized by the Resolution Fund;
Legal proceedings filed against the Resolution Fund;
Guarantee granted to the bonds issued by Oitante S.A. This guarantee is counter-guaranteed by the Portuguese State;
Contingent Capital Agreement which allows Lone Star to reclaim, from the Resolution Fund, funding costs, realised losses and provisions related to an ex-ante agreed portfolio of existing loan stock, up to a maximum of Euros 3.89 billion, subject to a capital ratio trigger (CET1 below 8%-13%) as well as to some additional conditions (*)(**).
Underwriting by the Resolution Fund of a Tier 2 instrument to be issued by Novo Banco up to the amount necessary (but no more than Euros 400 million). The amount that can be reclaimed by the Resolution Fund under the Contingent Capital Agreement is subject to the cap of Euros 3.89 billion. That amount is reduced by the amount which the Resolution Fund has to provide in the course of the underwriting of the Tier 2 instruments (**). This underwriting did not take place as the emission was taken by third party entities as disclosed by Novo Banco on 29 July 2018.
In case the Supervisory Review and Evaluation Process ("SREP") total capital ratio of Novo Banco falls below the SREP total capital requirement, the State will provide additional capital in certain conditions and through different instruments (iii).
-State loan in the amount of Euros 430,000 thousand under the agreement between the Portuguese State and the Resolution Fund to cover possible funding needs arising from the activation of the aforementioned contingent capital mechanism.
By a public statement on 28 September 2016, the Resolution Fund and the Ministry of Finance communicated the agreement on the basis of a review of the terms of the Euros 3,900 million loan originally granted by the State to the Resolution Fund 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 from 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 were granted by the Portuguese State and Euro 700 million were 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 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".
(*) Exact value not disclosed by the European Commission for confidentiality reasons. (**) As referred to in the respective European Commission Decision.
On 2 October 2017, by Council of Ministers (Resolution No. 151-A/2017), the Portuguese State, as the ultimate guarantor of financial stability, was authorised to enter into a framework agreement with the Resolution Fund, to make available the necessary financial resources to the Resolution Fund, if and when it deemed necessary, to satisfy any contractual obligations that may arise from the sale of the 75% stake in Novo Banco. It is also mentioned that the reimbursement will consider the stability of the banking sector, i.e. without the Resolution Funds' participants being charged special contributions or any other extraordinary contributions.
The Resolution Fund's own resources had a negative balance of Euros 5,104 million, according to the latest 2017 annual report of the Resolution Fund
To reimburse the loans obtained and to meet other liabilities that it may take on, the Resolution Fund receives proceeds from the initial and regular contributions from the participating institutions (including the Bank) and from the contribution over the banking sector (Law 55-A/2010). It is also provided for the possibility of the member of the Government responsible for the area of finance to determine, by ordinance, that the participating institutions make special contributions, in the situations provided for in the applicable legislation, particularly in the event that the Resolution Fund does not have resources to fulfil with their 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 Resolution Fund 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 Resolution Fund 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 of the Bank of Portugal No. 20/2017, published on 19 December 2017, set the base rate to be effective in 2018 for the determination of periodic contributions to the FR by 0.0459% against the rate of 0.0291% effective in 2017.
Thus, during 2018, the Group made regular contributions to the Resolution Fund in the amount of Euros 12,122 thousands. The amount related to the contribution on the banking sector, registered in the first semester of 2018, was Euros 33,066 thousands. These contributions were recognized as cost in the months of April and June 2018, 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 thousands. 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 2018, attributable to the Group was Euros 24,922 thousands, of which the Group delivered Euros 21,185 thousands 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.
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 condensed consolidated financial statements as at 30 September 2018 reflect the Bank's expectation that no special contributions or other type of extraordinary contributions will be required of the institutions 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.
Until 31 December 2016, Euros 2,300 million of the CoCos were reimbursed and, on 9 February 2017, Banco Comercial Português, S.A., reimbursed the remaining Euros 700 million to the Portuguese State. This reimbursement, 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.
The commitments of the Restructuring Plan ceased on 31 December 2017 with the end of the transition period, following the full reimbursement of the CoCos in anticipation of the defined schedule, and the European Commission confirmed in March 2018 that the Restructuring Plan had been successfully completed and that the monitoring of the commitments contained therein had been closed.
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.
On 25 May 2018 the Court issued a sentence and: (i) rejected the request made by the Bank consisting in the reduction of the pensions paid and to be paid to Mr. Jorge Jardim Gonçalves, (ii) rejected the request for the nullity of the eventual future survival pension of the second defendant; (iii) partially accepted the counter-claim made by the defendant Mr. Jorge Jardim Gonçalves, sentencing the Bank to pay him the amount of Euros 2,124,923.97, as reimbursement of the expenses regarding the use of a car with driver and private security until 16 June 2016, and also those that, on this regard, he paid since that date or pays in the future, in the amount that comes to be settled, expenses which would be part of his retirement regime, plus default interests accounted at the legal rate of 4% per year since the date of the reimbursement request up to their effective and full payment.
On 12 July 2018, BCP appealed the sentence to the Tribunal da Relação de Lisboa (Appellate Court) requesting that the same be revoked and replaced by a decision accepting all the requests presented by the Bank. The Bank considers that the Court decided incorrectly in what regards evidence, namely regarding the relevant legal issues, and that the appeal has good chances of success, namely because, concerning the amounts received by the former director, the sentence upholds an original interpretation of the limit of nr. 2 of article 402 of the Companies Code (CC), going against all court decisions issued by superior courts and most of all the prior doctrine on these issues.
Regarding the expenses presented by the former director, the same are not part of the single pension established in the Retirement Regulations and that they are not allowed by article 402 of the CC. In any case, all the instalments exceeding the maximum pension limit established pursuant to nr. 2 of article 402 must also be considered forbidden by that rule.
On the other hand, accepted the counter claim presented by the Defendants regarding the reimbursement of the total amount of Euros 2,124,923.97, as reimbursement of the expenses relating to the use of a car with driver and private security incurred until June 2016; and also those that, on this regard, the defendants paid since that date or will pay in the amount to be settled when the sentence is executed. The Bank is waiting for the issue of the pertinent decision by the 2nd instance court (regarding which we are unable to make a prognosis regarding the respective date).
Following a period of deceleration in economic activity and increase of inflation, reduction of Republic of Mozambique rating, depreciation of metical and 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 a strict liquidity management, emphasis 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 the statements dated of 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 November 2018, the Ministry of Economy and Finance of the Republic of Mozambique announced that it has reached an agreement in principle on the key commercial terms of a proposed restructuring transaction related to this debt securities with four members of the Global Group of Mozambique Bondholders. The Bondholders currently own or control approximately 60% of the outstanding Bonds. The agreement in principle reached by the parties, and the support of the Bondholders for the proposed restructuring, is conditional on the parties reaching an agreement. The Ministry and the Bondholders expect that the restructuring will likely be implemented through a consent solicitation and exchange offer relating to the Bonds, which will be launched by the Ministry, likely in early 2019. It is expected that the Bond holders will be invited to exchange their existing holdings for two new instruments representing senior unsecured obligations of the Republic of Mozambique.
In June 2017, the Attorney General's Office of the Republic of Mozambique published an Executive Summary regarding the abovementioned 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.
On 14 December 2017, in a statement from the IMF staff, after the end of the mission held between 30 November and 13 December 2017, it was reiterated the need for the Mozambican State to provide missing information. In the statement of the Mozambican Attorney General's Office dated 29 January 2018, it is mentioned, among other things, that the Public Prosecutor submitted to the Administrative Court, on 26 January 2018, a complaint regarding the financial responsibility of public managers and companies participated by the State, participants in the execution and management of contracts for financing, supplying and providing services related to debts not disclosed to the IMF.
As at 30 September 2018, considering the 66.7% indirect investment in BIM, the Group's interest in BIM's equity amounted to Euros 300,133,000, with the exchange translation reserve associated with this participation, accounted in Group's consolidated equity, a negative amount of Euros 154,734,000. BIM's contribution to consolidated net income for the first nine months of 2018, attributable to the shareholders of the Bank, amounts to Euros 48,182,000.
On that date, the subsidiary BIM's exposure to the State of Mozambique includes public debt securities denominated in metical classified as Financial assets measured at amortised cost - Debt instruments in the gross amount of Euros 656,328,000. These public debt securities mostly have a maturity of less than 1 year.
As at 30 September 2018, the Group has also registered in the balance Loans and advances to customers, a direct gross exposure to the Mozambican State in the amount of Euros 424,598,000 (of which Euros 342,760,000 are denominated in metical, Euros 4,806,000 denominated in USD and Euros 77,032,000 denominated in Rands) and an indirect exposure resulting from sovereign guarantees received in the amount of Euros 151,974,000 denominated in USD and in the balance Guarantees granted and irrevocable commitments, an amount of Euros 79,074,000 (of which Euros 664,000 are denominated in metical, Euros 78,408,000 denominated in USD and Euros 2,000 denominated in Rands).
According to public information provided by IMF, there are credits granted in default to Mozambican companies, non-state, guaranteed by the Mozambican State. The ongoing dialogue between the Government of Mozambique, IMF and creditors with the objective of finding a solution to the debt guaranteed by the State of Mozambique that had not previously been disclosed to the IMF referred to above. Nevertheless, in March 2018 the Mozambican Government presented proposals regarding this matter, a solution has not yet been approved to change the Group's current expectations reflected in the financial statements as at 30 September 2018, regarding the capacity of the Government of Mozambique and public companies to repay their debts and the development of the activity of its subsidiary Banco Internacional de Moçambique (BIM).
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.
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. As at 30 September 2018, these securities are booked in Other financial assets not held for trading mandatorily at fair value through profit or loss portfolio (financial assets available for sale portfolio as at 31 December 2017, in accordance with the classification of IAS 39) 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 IFRS 9 3.2 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 IFRS 9 3.2 , the derecognition of the assets transferred and the recognition of the assets received.
The results are calculated on the date of transfer of the assets. During the first nine months of 2018 and 2017, no credits were sold to Specialized Credit Funds. The amounts accumulated as at 30 September 2018, related to these operations are analysed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| Assets transferred |
Net assets transferred |
Received value |
Net gains / (losses) |
|
| 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.
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 30 September 2018 | |||||
| Senior securities | Junior securities | ||||
| Participation units * (note 23) |
Participation units * (note 23) |
Capital supplies (note 31) |
Capital supplementary contributions (note 31) |
Total | |
| Fundo Recuperação Turismo FCR | |||||
| Gross value | 287,930 | - | 32,089 | - | 320,019 |
| Impairment and other fair value adjustments | (48,036) | - | (32,089) | - | (80,125) |
| 239,894 | - | - | - | 239,894 | |
| Fundo Reestruturação Empresarial FCR | |||||
| Gross value | 86,061 | - | - | 33,280 | 119,341 |
| Impairment and other fair value adjustments | (6,673) | - | - | (33,280) | (39,953) |
| 79,388 | - | - | - | 79,388 | |
| FLIT-PTREL | |||||
| Gross value | 262,208 | - | 38,154 | - | 300,362 |
| Impairment and other fair value adjustments | (1,590) | - | (38,154) | - | (39,744) |
| 260,618 | - | - | - | 260,618 | |
| Vallis Construction Sector Fund | |||||
| Gross value | 203,172 | 36,292 | - | - | 239,464 |
| Impairment and other fair value adjustments | (203,172 ) |
(36,292) | - | - | (239,464) |
| - | - | - | - | - | |
| Fundo Recuperação FCR | |||||
| Gross value | 199,819 | - | 80,443 | - | 280,262 |
| Impairment and other fair value adjustments | (80,580) | - | (80,443) | - | (161,023) |
| 119,239 | - | - | - | 119,239 | |
| Fundo Aquarius FCR | |||||
| Gross value | 139,146 | - | - | - | 139,146 |
| Impairment and other fair value adjustments | (6,017) | - | - | - | (6,017) |
| 133,129 | - | - | - | 133,129 | |
| Discovery Real Estate Fund | |||||
| Gross value | 152,938 | - | - | - | 152,938 |
| Impairment and other fair value adjustments | (5,900) | - | - | - | (5,900) |
| 147,038 | - | - | - | 147,038 | |
| Fundo Vega FCR | |||||
| Gross value | 47,393 | - | 73,743 | - | 121,136 |
| Impairment and other fair value adjustments | (3,772) | - | (73,743) | - | (77,515) |
| 43,621 | - | - | - | 43,621 | |
| Total Gross value | 1,378,667 | 36,292 | 224,429 | 33,280 | 1,672,668 |
| Total impairment and other fair value adjustments | (3 55,740) |
(36,292) | (224,429) | (33,280) | (649,741) |
| 1,022,927 | - | - | - | 1,022,927 |
(*) As from 1 January 2018, with the entry into force of IFRS 9, the Participation Units are now recorded at fair value through profit and loss (note 23).
The book value of these assets resulted from the last communication by the respective management company of the NAV of the Fund which, as at 30 September 2018, corresponds to the NAV at that date, with the exception of the Discovery Real Estate Fund, Vallis and Vega , which reports on 31 December 2017 and FLIT-PTREL reporting to 31 March 2018. In addition, the valuation of these funds includes, among others, the following aspects: (i) these are funds whose latest Audit Reports available with reference to 31 December 2017 (except for Vallis Fund which is 30 September 2017) do not present any reservations; (ii) the funds are subject to supervision by the competent authorities.
Within the scope of the transfer of assets, the junior securities subscribed which carry a subordinated nature and are directly linked to the transferred assets, are fully provided for. Although the junior securities are fully provisioned, the Group still holds an indirect exposure to financial assets transferred, under the minority investment that holds in the pool of all assets transferred by financial institutions involved, through the holding of participation units of the funds (denominated in the table as senior securities).
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| 31 December 2017 | |||||
| Senior securities Participation units (note 23) |
Participation units (note 23) |
Junior securities Capital supplies (note 32) |
Capital supplementary contributions (note 32) |
Total | |
| Fundo Recuperação Turismo FCR | |||||
| Gross value | 287,930 | - | 31,737 | - | 319,667 |
| Impairment | (46,791) | - | (31,737) | - | (78,528) |
| 241,139 | - | - | - | 241,139 | |
| Fundo Reestruturação Empresarial FCR | |||||
| Gross value | 85,209 | - | - | 33,280 | 118,489 |
| Impairment and other fair value adjustments | (6,118) | - | - | (33,280) | (39,398) |
| 79,091 | - | - | - | 79,091 | |
| FLIT-PTREL | |||||
| Gross value | 261,502 | - | 38,155 | 2,939 | 302,596 |
| Impairment | (3,697) | - | (38,155) | (2,939) | (44,791) |
| 257,805 | - | - | - | 257,805 | |
| Vallis Construction Sector Fund | |||||
| Gross value | 203,172 | 36,292 | - | - | 239,464 |
| Impairment | (203,172) | (36,292) | - | - | (239,464) |
| - | - | - | - | - | |
| Fundo Recuperação FCR | |||||
| Gross value | 199,324 | - | 78,995 | - | 278,319 |
| Impairment | (79,247) | - | (78,995) | - | (158,242) |
| 120,077 | - | - | - | 120,077 | |
| Fundo Aquarius FCR | |||||
| Gross value | 138,045 | - | - | - | 138,045 |
| Impairment | (6,993) | - | - | - | (6,993) |
| 131,052 | - | - | - | 131,052 | |
| Discovery Real Estate Fund | |||||
| Gross value | 150,409 | - | - | - | 150,409 |
| Impairment | (2,690) | - | - | - | (2,690) |
| 147,719 | - | - | - | 147,719 | |
| Fundo Vega FCR | |||||
| Gross value | 47,087 | - | 70,770 | - | 117,857 |
| Impairment | (1,902) | - | (70,770) | - | (72,672) |
| 45,185 | - | - | - | 45,185 | |
| Total Gross value | 1,372,678 | 36,292 | 219,657 | 36,219 | 1,664,846 |
| Total Impairment | (350,610) | (36,292) | (219,657) | (36,219) | (642,778) |
| 1,022,068 | - | - | - | 1,022,068 |
This standard is included in the draft revision of IAS 39 and establishes the new requirements regarding the classification and measurement of financial assets and liabilities, the methodology for calculating impairment and for the application of hedge accounting rules.
IFRS 9 - Financial Instruments was endorsed by EU in November 2016 and come into force for periods beginning on or after 1 January 2018. IFRS 9 has replaced IAS 39 - Financial Instruments: Recognition and Measurement and provides new requirements in accounting for financial instruments with significant changes specifically regarding impairment requirements. For this reason, it is a standard that has been subject to a detailed and complex implementation process that has involved all the key stakeholders in order to understand the impacts and the changes in processes, governance and business strategy that may involve.
The requirements provided by IFRS 9 are, in general, applied retrospectively by adjusting the opening balance at the date of initial application (1 January 2018).
In July 2014, the IASB issued the final version of IFRS 9 - Financial Instruments. In October 2017, the IASB issued the document "Prepayment features with negative compensation (amendments to IFRS 9). The changes are effective for annual periods beginning on 1 January 2019, with early adoption allowed.
The Group applied IFRS 9 and adopted in advance the modifications made to IFRS 9 in the period beginning as at 1 January 2018. The impact of the adoption of IFRS 9 on the Group's equity attributable to shareholders of the Bank, with reference to 1 January 2018 was negative of Euros 373,451,000 (negative impact of Euros 403,562,000 Group's total equity, including non-controlling interests).
The accounting policies in force in the Group at the level of financial instruments after adoption of IFRS 9 as at 1 January 2018 are described in note 1C.
IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model used in asset management, as well as the characteristics of the respective contractual cash flows.
The standard will have an impact at the level of the classification of the financial assets held as at 1 January 2018, as follows:
Held for Trading and Derivatives held for risk management, which were classified as "Held-for-Trading" and measured at FVTPL under IAS 39, are measured at FVTPL under IFRS 9;
Loans and advances to customers and to Financial Institutions measured at amortised cost under IAS 39 are generally measured at amortised cost under IFRS 9;
Investments in held-to-maturity securities, measured at amortized cost under IAS 39, are measured, generally, at amortised cost under IFRS 9;
Investments in debt securities that were classified as available for sale under IAS 39 may, under IFRS 9, be measured at amortised cost, FVOCI or FVTPL, depending on certain circumstances;
Loans to customers and investment securities that were measured at fair value option under IAS 39 are measured at FVTPL under IFRS 9;
Most of the equity instruments that were classified as available for sale under IAS 39 are measured at FVTPL under IFRS 9. However, some of these equity instruments are held under a long-term strategic investment and are designated at FVOCI, under IFRS 9.
Based on this analysis and in the strategy defined, no material changes occurred at the level of the measurement associated with financial assets of the Group (financial assets measured at amortised cost versus financial assets measured at fair value) with the impact on the transition to IFRS 9.
IFRS 9 replaces the "loss incurred" model in IAS 39 by a forward-looking model of "expected credit losses (ECL)", which considers expected losses over the life of financial instruments. Thus, in the determination of ECL, macroeconomic factors are considered as well as other forward looking information, whose changes impact expected losses.
The impact of the adoption of IFRS 9 in the Group's equity related to impairment losses on financial assets, guarantees and other commitments was negative of Euros 255,691,000.
IFRS 9 generally maintains the requirements in IAS 39 regarding the classification of Financial Liabilities. However, under IAS 39 all fair value changes of financial liabilities designated to FVTPL (Fair Value Option) are recognised in the income statement, while under IFRS 9 these fair value changes will be presented as follows: the amount related to the variation in the fair value attributable to changes in the credit risk of the liability will be presented in OCI and the remaining value of the change in fair value will be presented in profit or loss.
The Group has adopted the Fair Value Option for some of its own issues which contain embedded derivatives or associated hedging derivatives, or when this designation eliminates or significantly reduces the accounting mismatch of operations. The fair value variations attributable to changes in the credit risk of these liabilities were recognised in profit or loss in 2017 under IAS 39. In adopting IFRS 9, these changes in fair value will be recognised in OCI and the amount recognised in OCI in each year will be variable. The accumulated amount recognised in OCI will be null if these liabilities are repaid at maturity.
IFRS 9 incorporates the requirements of IAS 39 for the derecognition of financial assets and liabilities without significant changes.
As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements under IAS 39.
Changes in accounting policies resulting from the application of IFRS 9 will generally be applied retrospectively, with the exception of the following:
The Group applies the exception that allows the non-restatement of prior period comparative information regarding classification and measurement changes (including impairment). Differences in the balance sheet values of financial assets and liabilities resulting from the adoption of IFRS 9 are recognised in Reserves and retained earnings, as at 1 January 2018.
The following assessment was made based on the facts and circumstances that existed at the time of the initial application:
a) the determination of the business model in which the financial asset is held;
b) the designation and revocation of prior designations of certain financial assets and liabilities designated at FVTPL;
c) the designation of certain equity instruments that are not held for trading as FVOCI; and
d) for financial liabilities designated at FVTPL (Fair Value Option), to assess whether the presentation of the effects in the credit risk variations of the financial liabilities in OCI would create or increase an accounting mismatch in profit or loss.
The impact of the adoption of IFRS 9 in the Group's financial statements is described below.
The impacts on the Group's equity arising from the implementation of IFRS 9 with reference to 1 January 2018 are as detailed below:
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Other equity items |
Fair value changes |
Reserves and retained earnings |
Total equity attributable to bank's shareholders |
Non-controlling interests |
Total equity | |
| Equity as at 31 December 2017 - Before IFRS 9 |
5,932,554 | 82,090 | 66,171 | 6,080,815 | 1,098,921 | 7,179,736 |
| Impairment | ||||||
| Loans and advances to credit institutions | - | - | (703) | (703) | - | (703) |
| Loans and advances to customers | - | - | (193,948) | (193,948) | (41,163) | (235,111) |
| Debt instruments | - | - | (5,163) | (5,163) | - | (5,163) |
| - | - | (199,814) | (199,814) | (41,163) | (240,977) | |
| Provisions | - | - | (14,714) | (14,714) | - | (14,714) |
| Changes in securities classification | - | (91,234) | 90,522 | (712) | 4,164 | 3,452 |
| Own credit risk | - | 1,958 | (1,958) | - | - | - |
| Investments in associates | - | (1,071) | (1,668) | (2,739) | - | (2,739) |
| - | (90,347) | (127,632) | (217,979) | (36,999) | (254,978) | |
| Current and deferred tax assets | - | 26,150 | (181,622) | (155,472) | 6,888 | (148,584) |
| Total impact | - | (64,197) | (309,254) | (373,451) | (30,111) | (403,562) |
| Equity as at 1 January 2018 - After IFRS 9 |
5,932,554 | 17,893 | (243,083) | 5,707,364 | 1,068,810 | 6,776,174 |
In 2018, the Bank adopted IFRS 9 - Financial Instruments. Since there is no transitional regime that establishes the tax treatment to be applied to the transition adjustments to IFRS 9, the treatment given resulted from the interpretation of the general rules application of the IRC Code.
The impacts on the Group's balance sheet arising from the implementation of IFRS 9 with reference to 1 January 2018 are detailed as follows:
| (Thousands of euros) | ||||
|---|---|---|---|---|
| IAS 39 | IFRS 9 | |||
| 31 Dec 2017 | Reclassifications Remeasurement | 1 Jan 2018 | ||
| ASSETS | ||||
| Cash and deposits at Central Banks | 2,167,934 | - | - | 2,167,934 |
| Loans and advances to credit institutions repayable on demand | 295,532 | - | - | 295,532 |
| Financial assets at amortised cost | - | |||
| Loans and advances to credit institutions | 1,065,568 | - | (703) | 1,064,865 |
| Loans and advances to customers | 45,625,972 | (263,397) | (235,111) | 45,127,464 |
| Debt instruments | 2,007,520 | 939,889 | (7,341) | 2,940,068 |
| Financial assets at fair value through profit or loss | - | |||
| Financial assets held for trading | 897,734 | (6,623) | - | 891,111 |
| Financial assets not held for trading | - | |||
| mandatorily at fair value through profit or loss | n.a. | 1,382,151 | - | 1,382,151 |
| Financial assets designated at fair value through profit or loss | 142,336 | - | - | 142,336 |
| Financial assets at fair value through other comprehensive income | n.a. | 9,831,626 | 5,630 | 9,837,256 |
| Financial assets available for sale | 11,471,847 | (11,471,847) | - | - |
| Financial assets held to maturity | 411,799 | (411,799) | - | - |
| Hedging derivatives | 234,345 | - | - | 234,345 |
| Investments in associated companies | 571,362 | - | (2,739) | 568,623 |
| Non-current assets held for sale | 2,164,567 | - | - | 2,164,567 |
| Investment property | 12,400 | - | - | 12,400 |
| Other tangible assets | 490,423 | - | - | 490,423 |
| Goodwill and intangible assets | 164,406 | - | - | 164,406 |
| Current tax assets | 25,914 | - | 1,047 | 26,961 |
| Deferred tax assets | 3,137,767 | - | (149,631) | 2,988,136 |
| Other assets | 1,052,024 | - | - | 1,052,024 |
| TOTAL ASSETS | 71,939,450 | - | (388,848) | 71,550,602 |
| LIABILITIES | ||||
| Financial liabilities at amortised cost | ||||
| Resources from credit institutions | 7,487,357 | - | - | 7,487,357 |
| Resources from customers | 48,285,425 | - | - | 48,285,425 |
| Non subordinated debt securities issued | 2,066,538 | - | - | 2,066,538 |
| Subordinated debt | 1,169,062 | - | - | 1,169,062 |
| Financial liabilities at fair value through profit or loss | ||||
| Financial liabilities held for trading | 399,101 | - | - | 399,101 |
| Financial liabilities designated at fair value through profit or loss | 3,843,645 | - | - | 3,843,645 |
| Hedging derivatives | 177,337 | - | - | 177,337 |
| Provisions | 324,158 | - | 14,714 | 338,872 |
| Current tax liabilities | 12,568 | - | - | 12,568 |
| Deferred tax liabilities | 6,030 | - | - | 6,030 |
| Other liabilities | 988,493 | - | - | 988,493 |
| TOTAL LIABILITIES | 64,759,714 | - | 14,714 | 64,774,428 |
| EQUITY | ||||
| Share capital | 5,600,738 | - | - | 5,600,738 |
| Share premium | 16,471 | - | - | 16,471 |
| Preference shares | 59,910 | - | - | 59,910 |
| Other equity instruments | 2,922 | - | - | 2,922 |
| Legal and statutory reserves | 252,806 | - | - | 252,806 |
| Treasury shares | (293) | - | - | (293) |
| Reserves and retained earnings | (38,130) | 186,391 | (373,451) | (225,190) |
| Net income for the period attributable to Bank's Shareholders | 186,391 | (186,391) | - | - |
| TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS | 6,080,815 | - | (373,451) | 5,707,364 |
| Non-controlling interests | 1,098,921 | - | (30,111) | 1,068,810 |
| TOTAL EQUITY | 7,179,736 | - | (403,562) | 6,776,174 |
| 71,939,450 | - | (388,848) | 71,550,602 |
The impacts of the implementation of IFRS 9 on the classification and measurement of financial instruments and the determination of impairment losses on financial assets are explained in more detail in the following notes.
The table below shows the measurement category and the book value of financial assets, in accordance with IAS 39 and IFRS 9, as at 1 January 2018.
| IAS 39 | IFRS 9 | (Thousands of euros) | |||
|---|---|---|---|---|---|
| Category | Measurement | Book value | Category | Measurement | Book value |
| Cash and deposits at Central Banks | Amortised cost | 2,167,934 Cash and deposits at Central Banks | Amortised cost | 2,167,934 | |
| Loans and advances to credit institutions repayable on demand |
Amortised cost | 295,532 | Loans and advances to credit institutions repayable on demand |
Amortised cost | 295,532 |
| Loans and advances to credit institutions |
Amortised cost | 1,065,568 | Loans and advances to credit institutions |
Amortised cost | 1,064,865 |
| Financial assets at amortised cost - Loans and advances to customers |
Amortised cost | 45,625,972 | Financial assets at amortised cost - Loans and advances to customers Financial assets not held for trading mandatorily at fair value through profit or loss |
Amortised cost FVTPL (mandatorily) |
45,127,464 263,397 |
| Financial assets at amortised cost - Debt instruments |
Amortised cost | 2,007,520 | Financial assets at amortised cost - Debt instruments |
Amortised cost | 2,004,574 |
| Financial assets held to maturity | Amortised cost | 411,799 | Financial assets at amortised cost - Debt instruments |
Amortised cost | 415,695 |
| Financial assets at fair value through other comprehensive income |
FVOCI | 9,830,633 | |||
| Financial assets available for sale | FVOCI (available for sale) |
11,471,847 | Financial assets not held for trading mandatorily at fair value through profit or loss |
FVTPL (mandatorily) |
1,118,754 |
| Financial assets at amortised cost - Debt instruments |
Amortised cost | 519,799 | |||
| Financial assets held for trading | FVTPL | 897,734 | Financial assets at fair value through other comprehensive income |
FVOCI | 6,623 |
| Financial assets held for trading | FVTPL | 891,111 | |||
| Financial assets designated at fair value through profit or loss |
FVTPL (designated) |
142,336 | Financial assets designated at fair value through profit or loss |
FVTPL (designated) |
142,336 |
| Hedging derivatives | FVTPL | 234,345 Hedging derivatives | FVTPL | 234,345 |
Notes:
FVOCI - Measured at fair value through other comprehensive income
FVTPL - Measured at fair value through profit or loss
There were no material changes regarding the measurement criteria associated with the Group's financial liabilities with impact on the transition to IFRS 9, except for changes in the fair value of financial liabilities at fair value through profit or loss that are attributable to changes in the credit risk of the instrument, which will be included in other comprehensive income as from 1 January 2018.
The following table shows the reconciliation between the book values of financial assets according to the measurement categories of IAS 39 and IFRS 9, as at 1 January 2018 (transition date).
| (Thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| Financial assets at amortised cost (Amortised Cost) | ||||||
| IAS 39 | IFRS 9 | |||||
| Notes | 31 December 2017 | Reclassifications | Remeasurement | 1 January 2018 | ||
| Cash and deposits at Central Banks | ||||||
| Opening balance in IAS 39 and final balance in IFRS 9 | 2,167,934 | - | - | 2,167,934 | ||
| Loans and advances to credit institutions repayable on demand |
||||||
| Opening balance in IAS 39 and final balance in IFRS 9 | 295,532 | - | - | 295,532 | ||
| Loans and advances to credit institutions | ||||||
| Opening balance in IAS 39 | 1,065,568 | - | - | 1,065,568 | ||
| Remeasurement: impairment losses | (A) | - | - | (703) | (703) | |
| Final balance in IFRS 9 | 1,065,568 | - | (703) | 1,064,865 | ||
| Loans and advances to customers Opening balance in IAS 39 |
45,625,972 | - | - | 45,625,972 | ||
| Transfer: | ||||||
| to fair value through profit or loss (IFRS 9) - Gross Value to fair value through profit or loss (IFRS 9) - Impairment |
(G) | - | (283,463 | ) - |
(283,463) | |
| (G) | - | 20,066 | - | 20,066 | ||
| Remeasurement: impairment losses | (A) | - | - | (235,111) | (235,111) | |
| Final balance in IFRS 9 | 45,625,972 | (263,397) | (235,111) | 45,127,464 | ||
| Debt instruments | ||||||
| Opening balance in IAS 39 | 2,007,520 | - | - | 2,007,520 | ||
| Transfer: of available financial assets for sale (IAS 39) |
(E) | - | 528,090 | - | 528,090 | |
| Transfer: from held-to-maturity financial assets to maturity date (IAS 39) |
(F) | - | 411,799 | - | 411,799 | |
| Remeasurement: impairment losses | (A) | - | - | (5,163) | (5,163) | |
| Remeasurement: fair value to amortised cost | (E) | - | - | (2,178) | (2,178) | |
| Final balance in IFRS 9 | 2,007,520 | 939,889 | (7,341) | 2,940,068 | ||
| Financial assets held to maturity | ||||||
| Opening balance in IAS 39 | 411,799 | - | - | 411,799 | ||
| Transfer: for financial assets at amortised cost - debt securities (IFRS 9) |
(F) | - | (411,799 | ) - |
(411,799) | |
| Final balance in IFRS 9 | 411,799 | (411,799) | - | - | ||
| Total of financial assets at amortised cost | 51,574,325 | 264,693 | (243,155) | 51,595,863 |
(Thousands of euros)
| Financial assets at fair value through other comprehensive income (FVOCI) | |||||
|---|---|---|---|---|---|
| IAS 39 | IFRS 9 | ||||
| Notes | 31 December 2017 | Reclassifications | Remeasurement | 1 January 2018 | |
| Financial assets at fair value through other comprehensive income - debt instruments |
|||||
| Opening balance in IAS 39 | |||||
| Transfer: of available financial assets for sale (IAS 39) |
(F) | - | 9,793,65 0 |
- | 9,793,650 |
| Transfer: of financial assets held for trading |
(D) | - | 6,623 | - | 6,623 |
| Final balance in IFRS 9 | - | 9,800,27 3 |
- | 9,800,273 | |
| Financial assets at fair value through other comprehensive income - equity instruments |
|||||
| Opening balance in IAS 39 | |||||
| Transfer: of available financial assets for sale (IAS 39) |
(B) | 31,353 | 5,630 | 36,983 | |
| Final balance in IFRS 9 | - | 31,353 | 5,630 | 36,983 | |
| - | 9,831,62 6 |
5,630 | 9,837,256 | ||
| Financial assets available for sale | |||||
| Opening balance in IAS 39 | 11,471,847 | - | - | 11,471,847 | |
| Transfer: Financial assets not held for trading mandatorily at fair value through profit or loss (IFRS 9) |
(C) | - | (1,118,7 54) |
- | (1,118,754) |
| Transfer: for financial assets at amortised cost (IFRS 9) | (E) | - | (528,090 | ) - |
(528,090) |
| Transfer: to financial assets at fair value through other comprehensive income - debt instruments (IFRS 9) |
(F) | - | (9,793,6 50) |
- | (9,793,650) |
| Transfer: to financial assets at fair value through other comprehensive income - equity instruments (IFRS 9) |
(B) | - | (31,353) | - | (31,353) |
| Final balance in IFRS 9 | 11,471,847 | (11,471,847) | - | - | |
| Total financial assets at fair value through other comprehensive income |
11,471,847 | (1,640,221) | 5,630 | 9,837,256 |
| (Thousands of euros) | |||||
|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss (FVTPL) | |||||
| IAS 39 | IFRS 9 | ||||
| Notes | 31 December 2017 | Reclassifications | Remeasurement | 1 January 2018 | |
| Financial assets held for trading | |||||
| Opening balance in IAS 39 | 897,734 | - | - | 897,734 | |
| Transfer: to financial assets at fair value | |||||
| through other comprehensive income | (D) | - | (6,623) | - | (6,623) |
| Final balance in IFRS 9 | 897,734 | (6,623) | - | 891,111 | |
| Financial assets not held for trading mandatorily at fair value through profit or loss |
|||||
| Opening balance in IAS 39 | |||||
| Transfer: of available financial assets | |||||
| for sale (IAS 39) | (C) | - | 1,118,75 4 |
- | 1,118,754 |
| Transfer: from financial assets at amortised cost | |||||
| - Loans to customers (IAS 39) - Gross value | (G) | - | 283,463 | - | 283,463 |
| Transfer: from financial assets at amortised cost | |||||
| - Loans to customers (IAS 39) - Impairment | (G) | - | (20,066) | - | (20,066) |
| Final balance in IFRS 9 | - | 1,382,15 1 |
- | 1,382,151 | |
| Financial assets designated at fair value through profit or loss |
|||||
| Opening balance in IAS 39 and final balance in IFRS 9 | 142,336 | - | - | 142,336 | |
| Hedging derivatives | |||||
| Opening balance in IAS 39 and final balance in IFRS 9 | 234,345 | - | - | 234,345 | |
| Total financial assets at fair value through profit or loss | 1,274,415 | 1,375,528 | - | 2,649,943 |
Notes:
(A) Under the IFRS 9 criteria, additional impairments were calculated and registered in Other reserves and retained earnings, for:
financial assets at amortised cost (Loans and advances to credit institutions);
financial assets at amortised cost (Loans and advances to customers);
and debt instruments at fair value through other comprehensive income.
(B) Designation of equity instruments at fair value through other comprehensive income: The Group opted for the irrevocable designation of equity instruments that are neither held for trading nor contingent retribution recognised by a buyer in a business combination to which it applies IFRS 3 as at fair value through other comprehensive income, as allowed by IFRS 9. These instruments were previously classified as "Financial assets available for sale". Changes in the fair value of these instruments will not be reclassified to profit or loss when derecognised.
(C) Classification of debt securities previously classified as "Financial assets available for sale ", which do not fall within the definition of SPPI: The portfolio of debt instruments that do not fall within the scope of SPPI definition was classified under " Financial assets not held for trading mandatorily at fair value through profit or loss " on the date of the initial application.
(D) Classification of debt securities previously classified under "Financial assets held for trading", whose business model is "held to collect and sell" and whose characteristics of contractual cash flows fall within the scope of SPPI definition.
(E) Classification of debt securities previously under "Financial assets available for sale ", whose business model is "held-to-collect" and whose characteristics of contractual cash flows fall within the scope of SPPI definition.
(F) Changes occurred in the categories provided for in IAS 39, without changing the measurement basis: In addition to the aforementioned, the following debt instruments were reclassified to new categories in accordance with IFRS 9, following the elimination of previous categories of IAS 39 , without changes in its measurement basis: (i) Instruments previously classified as available for sale, currently classified as financial assets at fair value through other comprehensive income; (ii) Instruments previously classified as held to maturity, currently classified as financial assets at amortised cost.
(G) The new classification and measurement model is mainly based on principles and requires the Bank to consider not only its business model for the management of financial assets but also the characteristics of the contractual cash flows of these assets (particularly if they represent solely payments of principal and interest ('SPPI')). Thus, a set of loans from customers previously classified as financial assets at amortised cost were transferred to financial assets not held for trading mandatorily at fair value through profit or loss.
The table below presents the reconciliation between the book values of impairment / provisions in balance sheet according with the measurement categories of IAS 39 and IFRS 9 as at 1 January 2018 (initial application date):
| Measurement category | Impairment for credit IAS 39 / Provision IAS 37 |
Reclassifications (A) |
Revaluation | (Thousands of euros) Impairment loss / Provision in accordance with IFRS 9 |
|---|---|---|---|---|
| Loans and accounts receivable (IAS 39) / Financial assets at amortised cost (IFRS 9) |
||||
| Cash and deposits at Central Banks | - | - | - | - |
| Loans and advances to credit institutions repayable on demand |
- | - | - | - |
| Loans and advances to credit institutions | - | - | 703 | 703 |
| Loans and advances to customers | 3,279,046 | 8,508 | 235,111 | 3,522,665 |
| Debt instruments | 42,886 | - | 5,163 | 48,049 |
| Total | 3,321,932 | 8,508 | 240,977 | 3,571,417 |
| Held to maturity (IAS 39) / Financial assets at amortised cost (IFRS 9) Debt instruments |
- | - | - | - |
| Available-for-sale financial instruments (IAS 39)/ Financial assets at fair value through other comprehensive income (IFRS 9) |
||||
| Debt instruments | 88,796 | (83,646) | - | 5,150 |
| Commitments and financial guarantees issued | 324,158 | - | 14,714 | 338,872 |
| Total | 3,734,886 | (75,138) | 255,691 | 3,915,439 |
(A) The reclassification recorded in impairment for financial assets at fair value through other comprehensive income (Debt instruments) in the negative amount of Euros 83,646,000, refers to the write-off impairment for securities that were transferred to FVTPL (fall within the scope of SPPI).
As at 30 September 2018, the Group's subsidiary companies included in the consolidated accounts using the full consolidation method were as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Subsidiary companies | office | capital | Currency | Activity | interests | held | 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 | 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 | 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 | 5,000 | 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 | – |
| 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 | São Paulo | 52,270,768 | BRL | Financial Services | 100.0 | 100.0 | 100.0 |
| Representações e Serviços, Ltda. | |||||||
| Millennium bcp Participações, S.G.P.S., | Funchal | 25,000 | EUR | Holding company | 100.0 | 100.0 | 100.0 |
| Sociedade Unipessoal, Lda. | |||||||
| 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 | Oeiras | 1,500,000 | EUR | Investment fund | 100.0 | 100.0 | 100.0 |
| Investimento Imobiliários, S.A. | management | ||||||
| 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 | Oeiras | 30,300,000 | EUR | Real-estate management | 100.0 | 100.0 | – |
| Imobiliários, S.A. | |||||||
| Millennium bcp - Prestação de Serviços, A.C.E. | Lisbon | 331,000 | EUR | Services | 96.2 | 95.8 | 85.7 |
| Millennium bcp Teleserviços - Serviços | Lisbon | 50,004 | EUR | Videotext services | 100.0 | 100.0 | 100.0 |
| de Comércio Electrónico, S.A. | |||||||
| 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 Telecommunication, Sp.z o.o. | Warsaw | 100,000 | PLN | Brokerage services | 100.0 | 50.1 | – |
| Millennium TFI - Towarzystwo Funduszy | Warsaw | 10,300,000 | PLN | Investment fund | 100.0 | 50.1 | – |
| Inwestycyjnych, S.A. | management | ||||||
| Millennium bcp Imobiliária, S.A. | Oeiras | 50,000 | EUR | Real-estate management | 99.9 | 99.9 | 99.9 |
| MULTI 24 - Sociedade Imobiliária, S.A. | Lisbon | 44,919,000 | EUR | Real-estate company | 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 | 400,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Subsidiary companies | office | capital | Currency | Activity | interests | held | held |
| Irgossai - Urbanização e Construção, S.A. | Oeiras | 50,000 | EUR | Construction and real estate |
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 | Oeiras | 2,150,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| e Imobiliários S.A. | |||||||
| Finalgarve – Sociedade de Promoção Imobiliária | Oeiras | 250,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Turística, S.A. | |||||||
| Fiparso – Sociedade Imobiliária S.A | Oeiras | 50,000 | EUR | Real-estate company | 100.0 | 100.0 | – |
| Planfipsa S.G.P.S., S.A. | Belas | 10,252,000 | EUR | Holding company | 51.0 | 51.0 | 51.0 |
| Cold River's Homestead, S.A. | Lisbon | 36,838,000 | EUR | Agricultural and livestock products, services, animation and rural tourism |
50.0 | 50.0 | 50.0 |
| Planbelas - Sociedade Imobiliária, S.A. | Belas | 2,500,000 | EUR | Real-estate company | 100.0 | 51.0 | – |
| Colonade - Sociedade Imobiliária, S.A. | Belas | 50,000 | EUR | Real-estate company | 100.0 | 51.0 | – |
| Colon Belas Hotel - Sociedade Imobiliária, S.A. | Belas | 50,000 | EUR | Real-estate company | 100.0 | 51.0 | – |
(*) - Company classified as non-current assets held for sale.
As at 30 September 2018, the investment and venture capital 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 | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Nominal Value | economic effective | direct | ||||
| Subsidiary companies | office | Units | Currency | Activity | interests | held | held |
| Fundo de Investimento Imobiliário Imosotto | Oeiras | 153,883,066 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Acumulação | fund | ||||||
| Fundo de Investimento Imobiliário Gestão | Oeiras | 11,718,513 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Imobiliária | fund | ||||||
| Fundo de Investimento Imobiliário Imorenda | Oeiras | 137,657,450 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| fund | |||||||
| Fundo Especial de Investimento Imobiliário | Oeiras | 304,320,700 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Oceânico II | fund | ||||||
| Fundo Especial de Investimento Imobiliário | Oeiras | 3,336,555,200 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Fechado Stone Capital | fund | ||||||
| Fundo Especial de Investimento Imobiliário | Oeiras | 16,149,800,900 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Fechado Sand Capital | fund | ||||||
| Fundo de Investimento Imobiliário Fechado | Oeiras | 6,653,257 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Gestimo | fund | ||||||
| Fundo Especial de Investimento Imobiliário | Oeiras | 7,791,600 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Fechado Intercapital | fund | ||||||
| Millennium Fundo de Capitalização - Fundo de | Oeiras | 18,307,000 | EUR | Venture capital fund | 100.0 | 100.0 | 100.0 |
| Capital de Risco | |||||||
| Funsita - Fundo Especial de Investimento | Oeiras | 8,834,000 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Imobiliário Fechado | fund |
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Nominal Value | economic effective | direct | ||||
| Subsidiary companies | office | Units | Currency | Activity | interests | held | held |
| Multiusos Oriente - Fundo Especial de | Oeiras | 491,610 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Investimento Imobiliário Fechado | fund | ||||||
| Grand Urban Investment Fund - Fundo Especial | Oeiras | 134,023,100 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| de Investimento Imobiliário Fechado | fund | ||||||
| Fundial – Fundo Especial de Investimento | Oeiras | 21,850,850 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Imobiliário Fechado | fund | ||||||
| DP Invest – Fundo Especial de Investimento | Oeiras | 8,860,000 | EUR | Real estate investment | 54.0 | 54.0 | 54.0 |
| Imobiliário Fechado | fund | ||||||
| Fundipar – Fundo Especial de Investimento | Oeiras | 11,945,000 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Imobiliário Fechado | fund | ||||||
| MR – Fundo Especial de Investimento | Oeiras | 31,056,099 | EUR | Real estate investment | 100.0 | 100.0 | 100.0 |
| Imobiliário Fechado | fund | ||||||
| Domus Capital– Fundo Especial de Investimento | Oeiras | 5,200,000 | EUR | Real estate investment | 50.0 | 50.0 | 50.0 |
| Imobiliário Fechado | fund | ||||||
| Predicapital – Fundo Especial de Investimento | Oeiras | 83,615,061 | EUR | Real estate investment | 60.0 | 60.0 | 60.0 |
| Imobiliário Fechado (*) | fund |
(*) - Company classified as non-current assets held for sale.
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 2018, the SPEs included in the consolidated accounts under the full consolidation method are as follows:
| Group | Bank | |||||||
|---|---|---|---|---|---|---|---|---|
| % | % | % | ||||||
| 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 2018, the 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 |
| SIM - Seguradora Internacional de | Maputo | 147,500,000 | MZN | Insurance | 92.0 | 61.4 | – |
| Moçambique, S.A.R.L. |
As at 30 September 2018, the Group's associated companies included in the consolidated accounts under the equity method are as follows:
| Group | Bank | ||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Associated companies | office | capital | Currency | Activity | interests | held | held |
| Banco Millennium Atlântico, S.A. | Luanda | 53,821,603,000 | AOA | Banking | 22.7 | 22.5 | – |
| Banque BCP, S.A.S. | Paris | 141,710,595 | EUR | Banking | 19.9 | 19.9 | 19.9 |
| Beiranave Estaleiros Navais Beira SARL | Beira | 2,850,000 | MZN | Naval shipyards | 22.8 | 14.0 | – |
| Constellation, S.A. | Maputo | 1,053,500,000 | MZN | Property management | 20.0 | 12.3 | – |
| Exporsado - Comércio e Indústria de | Setúbal | 744,231 | EUR | Trade and industry of | 35.0 | 35.0 | – |
| Produtos do Mar, S.A. | sea products | ||||||
| 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 | 24.8 | 24.7 | – |
| PNCB - Plataforma de Negociação Integrada | Lisbon | 1,000,000 | EUR | Services | 33.3 | 33.3 | 33.3 |
| de Créditos Bancários, A.C.E | |||||||
| Projepolska, S.A. | Cascais | 9.424.643 | EUR | Real-estate company | 23.9 | 23.9 | 23.9 |
| SIBS, S.G.P.S., S.A. | Lisbon | 24,642,300 | EUR | Banking services | 23.3 | 21.9 | – |
| Sicit - Sociedade de Investimentos e Consultoria | Oeiras | 50,000 | EUR | Advisory services | 25.0 | 25.0 | 25.0 |
| em Infra-Estruturas de Transportes, S.A | |||||||
| UNICRE - Instituição Financeira de Crédito, S.A. | Lisbon | 10,000,000 | EUR | Credit cards | 32.0 | 32.0 | 0.5 |
| Webspectator Corporation | Delaware | 950 | USD | Digital advertising services | 25.1 | 25.1 | 25.1 |
As at 30 September 2018 the Group's associated insurance companies included in the consolidated accounts under the equity method were as follows:
| Group | |||||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Head | Share | economic effective | direct | ||||
| Associated companies | office | capital | Currency | Activity | interests | held | held |
| Millenniumbcp Ageas Grupo Segurador, | Oeiras | 775,002,375 | EUR | Holding company | 49.0 | 49.0 | 49.0 |
| S.G.P.S., S.A. | |||||||
| Ocidental - Companhia Portuguesa de | Oeiras | 22,375,000 | EUR | Life insurance | 49.0 | 49.0 | – |
| Seguros de Vida, S.A. | |||||||
| Ocidental - Sociedade Gestora de Fundos | Oeiras | 1,200,000 | EUR Pension fund |
49.0 | 49.0 | – | |
| de Pensões, S.A. | management |
On November 5, BCP concluded on that day, with 62.1% of the share capital represented, the Annual General Meeting of Shareholders, with the following resolutions:
i) Approval of the alteration of the articles of association through the modification of number 2 of article 54 of the Bank's Articles of Association;
ii) Approval of reformulation of the items of own capital with the special purpose of unequivocally reinforcing the future conditions for the existence of funds able of being classified by the regulators as distributable by means of the reduction of the amount of the share capital in 875,738,053.72 euros, without changing the existing number of shares (without nominal value) and without altering the net equity, with the consequent alteration of number 1 of article 4 of the articles of association. This resolution is dependent on the authorization of the regulatory authority.
On November 5, BCP informed that its subsidiary Bank Millennium announced that day that it reached an agreement for the acquisition of a 99.79% stake in Euro Bank S.A. from Societe Generale Financial Services Holding, a subsidiary of Société Générale S.A., for an estimated total consideration of 1,833 million zlotys (EUR 428 million), implying a 1.20x P/BV (final purchase price subject to customary NAV adjustment at closing), to be paid in cash and fully financed from internal sources of Bank Millennium. The transaction is expected to close in the second quarter of 2019, subject to regulatory approvals, and is estimated to be earnings accretive for Millennium bcp on a consolidated basis from 2020, already including integration costs, with an approximate impact of -40 basis points on its CET1 ratio and of -30 basis points on its total capital ratio expected on the date of transaction.
On the basis of decision of the Polish Financial Supervision Authority on 17 October 2018 Bank Millennium will take over management of the assets of Spółdzielcza Kasa Oszczędnościowo-Kredytowa Piast (SKOK Piast) (Cooperative Credit Union SKOK Piast). The acquisition will take place on 1 November 2018.
Bank Millennium is a consecutive bank to join the SKOK turnaround process supported by the Polish Financial Supervision Authority and the Bank Guarantee Fund. Acquisition of SKOK Piast fits well within efforts to ensure stability of the national financial system and to ensure safety for all clients of financial institutions in Poland.
Report and Accounts for the nine months period ended 30 September 2018
© 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 LEI BCP: JU1U6S0DG9YLT7N8ZV32
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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