Interim / Quarterly Report • Aug 29, 2013
Interim / Quarterly Report
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Public Traded Company Headquarters: Avenida da Liberdade, n.º 195, 1250 – 142 Lisboa - Portugal Registered in Lisbon C.R.C. no. 500 852 367 Share Capital: EUR 5.040.124.063,26
(Audited financial information under IFRS as implemented by the European Union) (According to article 9 of CMVM regulation nº 5/2008)
This report is a free translation into English of the original Portuguese version. In case of doubt or misinterpretation the Portuguese version will prevail.
As regards the recovery of credit at risk, 57% of loans to individuals and companies are collateralised by real guarantees, which are the value of real estate assets on the balance sheet to EUR 2.0 billion (the real estate is conservatively valued at the moment of foreclosure). The sales of these assets reached 225.5 million in 1H13 (+94%), with no relevant additional losses (a target real estate sale value of EUR 400 million was established for FY13).
The Core Tier I ratio was 10.4%, remaining above the Bank of Portugal's minimum requirement (10%), and 9.6% under the EBA criteria (minimum required: 9%).
| 30-Jun-13 | 30-Jun-12 | Change | |
|---|---|---|---|
| ACTIVITY (euro million) | |||
| Total Assets (1) | 96 388 | 98 041 | -1,7% |
| Net Assets | 82 646 | 85 292 | -3,1% |
| Gross Loans | 51 111 | 51 176 | -0,1% |
| Customer Deposits | 37 912 | 32 765 | 15,7% |
| Core Capital - BoP | 6 293 | 6 708 | -6,2% |
| Core Capital - EBA | 5 785 | 6 319 | -8,2% |
| SOLVENCY | |||
| Solvency Ratios (2) | |||
| - CORE TIER I - BoP | 10,4% | 10,5% | -0,1 pp |
| - CORE TIER I - EBA | 9,6% | 9,9% | -0,3 pp |
| - TIER I | 10,1% | 10,4% | -0,3 pp |
| - TOTAL | 10,7% | 11,1% | -0,4 pp |
| LIQUIDITY (euro million) | |||
| ECB funds (net) (3) | 8 251 | 13 679 | - 5 428 |
| Repoable Assets | 24 605 | 26 988 | - 2 383 |
| Loan/deposits ratio (4) (%) | 125% | 147% | -22 pp |
| ASSET QUALITY | |||
| Overdue loans + 90 days / Gross loans | 5,1% | 3,3% | 1,8 pp |
| Coverage of Overdue Loans + 90 days | 120,4% | 144,0% | -23,6 pp |
| Credit at Risk | 10,7% | 7,9% | 2,8 pp |
| Provisions for Credit / Gross loans | 6,1% | 4,8% | 1,3 pp |
| Cost of risk (5) | 2,16% | 1,38% | 0,78 pp |
| RESULTS & PROFITABILITY | |||
| Net income (EUR mn) | -237,4 | 25,5 | …. |
| ROE (6) | -6,45% | 0,64% | …. |
| ROA | -0,56% | 0,07% | …. |
| EFFICIENCY | |||
| Cost to Income | 57,3% | 47,0% | 10,3 pp |
| Cost to Income (ex markets) | 69,2% | 52,8% | 16,4 pp |
| BRANCH NETWORK | |||
| Retail Network | 769 | 781 | -12 |
| - Domestic | 652 | 678 | -26 |
| - International | 117 | 103 | 14 |
(1) Net Assets + Asset Management + Other off-balance sheet liabilities + Securitised Credit
(2) Accroding to IRB Foundation; preliminary June 2013 data
(3) ncludes funds from and placements with the ECB System; positive = net borrowing; negative = net lending
(4) Ratio calculated according to BoP definition for the Funding & Capital Plan
(5) P&L provisions / Gross Loans
(6) Annualised Net Income
The second quarter of 2013 was marked by high volatility in the financial markets. This was fuelled by the uncertainty around a possible tapering of quantitative easing (QE) by the North-American Federal Reserve, which drove up the 10-year Treasuries yield from 1.85% to 2.487% in the period.
In the eurozone, the 10-year Bunds yield followed this trend, rising from 1.289% to 1.728%. This context led to the appreciation of the dollar, not only against the euro (+1.43%, to EUR/USD 1.30), but particularly against the emerging markets' currencies (namely the real, against which the dollar climbed by 10.2%, to USD/BRL 2.229). The second quarter also saw signs of a moderate recovery of activity in the US and Japan and symptoms of recession in the entire eurozone, including the peripheral economies. Liquidity circulation in the eurozone, and especially in the periphery, continued to deteriorate. The 3-month Euribor registered a marginal increase in the quarter, from 0.211% to 0.218%. In this context, in May the ECB cut the rate on the main refinancing operations by 25bps, to 0.5%, suggesting that key interest rates would be kept low for a long period of time.
The equity market benefited from this combination of activity rebound and expansionary monetary policies. However, with volatility during the period and fears about QE tapering by the Fed, the main indices showed moderate increases at the end of the quarter. In the US the S&P500 and Dow Jones advanced by 2.36% and 2.27%, respectively, while in the eurozone the DAX and CAC40 gained 2.1% and 0.2%, and the IBEX slid by 1.99%. In China, the Shanghai Composite index fell by 11.5%, reflecting the cooling of activity associated to weaker monetary policy support. In Brazil, the Bovespa index slumped by 15.78%, driven by the hike in interest rates induced by inflationary pressures, the trimming of growth expectations, and the political and social strains flaring up at the end of the quarter.
In Portugal the Treasury made a new issue of long-term public debt in May (EUR 3 billion, maturity in 2024 and 5.669% yield) which met with a favourable reaction by the market. The second quarter was also marked by some signs of an upturn in activity, mainly visible in exports, and to a smaller extent in industrial output and retail sales. GDP is thought to have registered its first positive quarterly change since 2010 (of around 0.5%). However, the rise in market interest rates linked to the expected weakening of monetary stimuli by the Fed, the difficulties arising from the fiscal consolidation process and, already at the beginning of the third quarter, the deterioration in sentiment caused by a political crisis, interrupted the downward trend of public debt yields and spreads. Against this background, the PSI-20 lost 4.56% in the quarter.
The economic and financial adjustment programme in Portugal combined with the recession, which has also been spreading across the European Union, continued to impact the performance of the Portuguese financial sector during the reporting period. The positive change which the Portuguese GDP is expected to have had in the second quarter, the dynamics of the exporting sector, which showed to have originated a surplus in the external accounts, and the slight reversal in consumption trends, are signs that Portugal may be approaching the phase of recovery from current cycle, which we believe could gradually become more solid.
| EUR million | ||||
|---|---|---|---|---|
| Jun,13 | Jun,12 | Change | ||
| absolute | relative | |||
| Net Interest Income | 470,4 | 607,6 | - 137,2 | -22,6% |
| + Fees and Commissions | 343,1 | 452,0 | - 108,9 | -24,1% |
| = Commercial Banking Income | 813,5 | 1 059,6 | - 246,1 | -23,2% |
| + Capital Markets and Other Results | 168,9 | 131,9 | 37,0 | 28,0% |
| = Banking Income | 982,4 | 1 191,5 | - 209,1 | -17,6% |
| - Operating Costs | 563,0 | 559,5 | 3,5 | 0,6% |
| = Net Operating Income | 419,4 | 632,0 | - 212,6 | -33,6% |
| - Provisions | 747,3 | 426,3 | 321,0 | 75,3% |
| Credit | 553,1 | 352,0 | 201,1 | 57,1% |
| Securities | 52,8 | 18,8 | 34,0 | |
| Other | 141,4 | 55,5 | 85,9 | |
| Income before Taxes and Minorities = |
- 327,9 | 205,7 | - 533,6 | |
| - Income Tax | - 103,0 | 101,4 | - 204,4 | … |
| - Special Tax on Banks | 13,0 | 14,0 | - 1,0 | -7,1% |
| = Income Before Minorities | - 237,9 | 90,3 | - 328,2 | |
| - Minority Interests | - 0,5 | 64,8 | - 65,3 | |
| = Net Income | - 237,4 | 25,5 | - 262,9 |
In addition, at the end of Q2, the Group, through BES Vida, reinsured its life risk portfolio. This transaction, which falls within the measures taken by the Group viewing the efficient management of its capital ratios, had a positive impact of ca. 40 bps in the consolidated Core Tier I ratio and of EUR 128 million in the Group's results. Despite this transaction's positive contribution to results, the above factors were responsible for a EUR 237.4 million loss in the period.
As in the previous quarter, domestic activity in the second quarter continued to suffer from the the economic recession, which impacted both banking income (-14.3%) and impairment costs (+76.6%), leading to a loss of EUR 256.3 million in 1H13.
The international area improved its performance in 2Q13, with results more than trebling compared to 1Q13 (EUR 4.4 million), to EUR 14.5 million. This was underpinned by the rebound in net interest income (+11.1% yoy vs. -2.9% in March) and the growth of banking income, which surpassed the previous quarters by 30.2%. The YoY reduction in the international results reflects not only the lower contribution of BES Angola but also the start-up of the new units abroad, namely in Mozambique (where the Group increased its stake in Moza Banco to 49%), Venezuela and Luxembourg.
| DOMESTIC | EUR million INTERNATIONAL |
|||||
|---|---|---|---|---|---|---|
| Jun,13 | Jun,12 | Change | Jun,13 | Jun,12 | Change | |
| Net Interest Income | 261,3 | 419,4 | -37,7% | 209,1 | 188,2 | 11,1% |
| + Fees and Commissions | 237,1 | 276,0 | -14,1% | 106,0 | 176,0 | -39,8% |
| = Commercial Banking Income | 498,4 | 695,4 | -28,3% | 315,1 | 364,2 | -13,5% |
| + Capital Markets and Other Results | 189,1 | 106,3 | 77,8% | - 20,2 | 25,6 | |
| = Banking Income | 687,5 | 801,7 | -14,3% | 294,9 | 389,8 | -24,3% |
| - Operating Costs | 375,3 | 387,8 | -3,2% | 187,7 | 171,7 | 9,3% |
| = Net Operating Income | 312,2 | 413,9 | -24,6% | 107,2 | 218,1 | -50,8% |
| - Provisions | 669,1 | 378,9 | 76,6% | 78,2 | 47,4 | 64,9% |
| Credit | 492,2 | 307,9 | 59,8% | 60,9 | 44,1 | 38,2% |
| Securities | 49,9 | 18,8 | 2,9 | 0,0 | ||
| Other | 127,0 | 52,2 | 14,4 | 3,3 | ||
| Income before Taxes and Minorities = |
- 356,9 | 35,0 | 29,0 | 170,7 | -83,0% | |
| - Income Tax | - 103,2 | 71,4 | 0,2 | 30,0 | ||
| - Special Tax on Banks | 13,0 | 14,0 | -7,1% | - | - | - |
| = Income Before Minorities | - 266,7 | - 50,4 | 28,8 | 140,7 | -79,5% | |
| - Minority Interests | - 10,4 | 2,3 | 9,9 | 62,5 | -84,1% | |
| = Net Income | - 256,3 | - 52,7 | 18,9 | 78,2 | -75,8% |
Main developments in the performance of the geographies where the Group operates and its business units abroad: recovery in the United Kingdom driven by the expansion of wholesale funding; positive evolution in the USA; lower contribution of African operations; and economic recession in Iberia negatively impacting the Group's units in Spain.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| Africa(1) | 7,7 | 43,0 | - 35,3 |
| Brazil | 1,4 | 10,2 | - 8,8 |
| Spain | - 14,3 | 10,5 | …. |
| STRATEGIC TRIANGLE | - 5,2 | 63,7 | - 68,9 |
| United Kingdom | 19,4 | 11,4 | 8,0 |
| USA | 4,7 | 3,9 | 0,8 |
| Other | 0,0 | - 0,8 | 0,8 |
| TOTAL | 18,9 | 78,2 | - 59,3 |
(1) includes Angola, Mozambique, Cape Verde, Libya and Algeria
The 22.6% reduction in Net interest income, to EUR 470.4 million, was domestic driven and translates the constraints weighing on the Portuguese economy, the adjustment of the balance sheet to the existing financial restrictions, and the evolution and volatility of interest rates. In fact, though the volume of the interest earning business remained close to EUR 70 billion, the average interest rate on financial assets (credit, securities and other placements) fell by 69bps, largely surpassing the drop in the average rate of financial liabilities (-29bps YoY) and leading to a 40bps contraction in the margin (from 1.76% to 1.36%).
| EUR million | ||||||
|---|---|---|---|---|---|---|
| Jun,13 | Jun,12 | |||||
| Average Balance |
Avg Rate (%) |
NII | Average Balance |
Avg Rate (%) |
NII | |
| Interest Earnings Assets | 69 763 | 4,66 | 1 614 | 69 435 | 5,37 | 1 848 |
| Customer Loans | 50 199 | 4,64 | 1 155 | 50 473 | 5,27 | 1 319 |
| Other Assets | 19 564 | 4,73 | 459 | 18 962 | 5,62 | 529 |
| Other | - | - | - | 320 | - | - |
| Interest Earning Assets & Other | 69 763 | 4,66 | 1 614 | 69 755 | 5,35 | 1 848 |
| Interest Bearing Liabilities | 66 663 | 3,46 | 1 144 | 69 755 | 3,59 | 1 240 |
| Deposits | 36 289 | 2,84 | 511 | 34 353 | 3,27 | 557 |
| Other Liabilities | 30 374 | 4,20 | 633 | 35 402 | 3,89 | 683 |
| Other | 3 100 | - | - | - - |
- | |
| Interest Bearing Liabilities & Other | 69 763 | 3,30 | 1 144 | 69 755 | 3,59 | 1 240 |
| NIM/NII | 1,36 | 470 | 1,76 | 608 | ||
| Euribor 3 M - average | 0,21% | 0,87% |
As in the previous quarters, NII management continued to be pursued amidst an adverse scenario marked by the following constraints: restricted access to the medium and long term financial markets; the inexistence of an interbank market; the need to reduce funding from the ECB; fierce competition over corporate, institutional and retail customer funds; poor performance of the economy with a negative impact on asset quality; the lack of stimuli to rekindle the economy and consequently weak demand for credit; and benchmark interest rates maintained at historical lows.
In this context revenues and costs had the following performance:
• Interest received totalled EUR 1,614 million, with the YoY declined their average rate (from 5.35% to 4.66%) nearly matching the drop in the 3-month Euribor (-69bps vs. –66bps). The average spreads implicit in the loan book had a small increase, to 4.43% (1H12: 4.40%);
• the cost of funding in 1H13 was EUR 1,144million, with the average rate on deposits dropping by 43bps YoY, to 2.84%, while the average rate on debt securities and other interest bearing liabilities increased by 31bps, to 4.20%, reflecting the reduction in the average amount of funding from the ECB (-EUR 2.4 billion) as well as the issuance of debt in the international market in 4Q12 and January 2013. The fact that the rate on interest bearing liabilities dropped by 29bps only, much less than the 3-month Euribor (-66bps) is a clear symptom of the pressure on the cost of liabilities endured by the financial sector and was the main factor behind the Net interest income reduction.
Fees and commissions decreased by 24.1%, translating the overall activity downturn. If excluding the cost of the guarantees provided by the Portuguese State and the non recurrent fees booked in 1Q12, the reduction is less expressive (-5.6%).
| EUR million | |||||
|---|---|---|---|---|---|
| Jun,13 | Jun,12 | Change | |||
| Absolute | relative | ||||
| Collections | 8,4 | 8,7 | -0,3 | -3,6% | |
| Securities | 38,7 | 37,4 | 1,3 | 3,5% | |
| Guarantees | 74,8 | 68,9 | 5,9 | 8,6% | |
| Account management | 37,7 | 39,2 | -1,5 | -3,9% | |
| Commissions on loans and other (1) | 82,3 | 80,9 | 1,4 | 1,7% | |
| Documentary credit | 35,9 | 42,8 | -6,9 | -16,2% | |
| Asset management (2) | 42,9 | 38,5 | 4,4 | 11,4% | |
| Cards | 17,8 | 20,4 | -2,6 | -12,7% | |
| Bancassurance | 11,3 | 27,5 | -16,2 | -59,1% | |
| Other Services (3) | -6,7 | 87,7 | -94,4 | ||
| TOTAL | 343,1 | 452,0 | -108,9 | -24,1% | |
| State Guarantees | 30,1 | 27,4 | |||
| BESA non-recurrent Commissions | - | 84,0 | |||
| TOTAL (like-for-like) | 373,2 | 395,4 | -22,2 | -5,6% |
(1) Includes commissions on loans, project finance, export financing and factoring
(2) Includes investment funds and discretionary management
(3) Includes costs with State Guarantees
Commissions on guarantees rose by 8.6%; commissions and fees related to capital markets (namely commissions on securities) increased by 3.5%; and asset management fees were up by 11.4% YoY due to the expansion of investment funds and portfolio discretionary management activities.
Fees and commissions more directly linked to corporate business, namely financings (collections, loans, corporate and project finance) and documentary credits, declined, reflecting the economic context as well as the deleveraging process. Commission income from credit cards and account management (commissions on current accounts, transfers, and payment orders) were also harmed by the increase of unemployment and the impact on families of the austerity policies. Finally commissions on bancassurance products (saving and nonlife insurance products) continued to show a negative evolution.
Service quality has long been a strategic priority for and a differentiating factor of BES Group, and its improvement has supported the increase achieved in customer satisfaction levels. The results of the European Consumer Satisfaction Index (ECSI) - an international survey recognised for its credibility conducted in various European countries - confirm the success of this strategy. In 2012 BES scored in 2nd place in the overall Portuguese banking sector ranking and in 1st place in the ranking of the five largest national banks. BES achieved high marks in the various categories analysed by the survey – Quality, Expectations, Image and Price– particularly in key variables for customer satisfaction, such as attention to service, advisory capacity, meeting of deadlines, the quality and availability of branches and direct channels, service levels and the quality/price ratio.
Moreover, BES was named for the seventh consecutive year the best provider of sub-custody services in Portugal by the Global Finance magazine, based on the following selection criteria: customer relations, quality of service, competitive pricing, smooth handling of exception items, technology platforms, post-settlement operations, backup systems and knowledge of local regulations and practices.
Capital markets and other results totalled EUR 168.9 million, which compares with EUR 131.9 million in 1H12.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| Interest rate, Credit and FX | 47,5 | 320,4 | -272,9 |
| Interest rate | 120,9 | 280,0 | -159,1 |
| Credit | -42,8 | 10,1 | -52,9 |
| FX and Other | -30,6 | 30,3 | -60,9 |
| Equity | 39,5 | -91,8 | 131,3 |
| Trading | -13,3 | -192,4 | 179,1 |
| Dividends | 52,8 | 100,6 | -47,8 |
| Other Results | 81,9 | -96,7 | 178,6 |
| TOTAL | 168,9 | 131,9 | 37,0 |
The second quarter of 2013 was marked by fears about the withdrawal of incentives by the FED and by social instability in a number of emerging countries, leading investors to consider that these markets did not offer an adjusted risk premium. Given the prevailing economic climate at the end of the period, these countries' assets and currencies suffered a sharp devaluation.
The positive results achieved by BES Group are mainly explained by the divestment policy pursued, which mainly focused on the interest rate area.
"Other Results" includes EUR 182 million (gross) of the reinsurance of BES Vida's individual life risk portfolio.
Operating costs totalled EUR 563.0 million, in line with 1H12 (EUR 559.5 million), notwithstanding the impact of the international expansion and the new consolidations, without which they would have fallen by 0.5%.
| Change | EUR million | |||
|---|---|---|---|---|
| Jun,13 | Jun,12 | absolute | relative | |
| Staff Costs | 289,5 | 291,5 | -2,0 | -0,7% |
| Administrative Costs | 220,9 | 214,2 | 6,7 | 3,2% |
| Depreciation | 52,6 | 53,8 | -1,2 | -2,2% |
| TOTAL | 563,0 | 559,5 | 3,5 | 0,6% |
| Excluding new consolidations | 554,4 | 557,3 | -2,9 | -0,5% |
| Domestic | 375,3 | 387,8 | -12,5 | -3,2% |
| Excluding new consolidations | 366,7 | 385,6 | -18,9 | -4,9% |
| International | 187,7 | 171,7 | 16,0 | 9,3% |
Domestic costs continued to shrink, dropping by 3.2% (-EUR 12.5 million), or by 4.9% if excluding the impact of the new consolidations. International costs increased by 9.3%, mainly reflecting the costs of expansion in the Angolan market.
| EUR million | ||||
|---|---|---|---|---|
| Change | ||||
| Jun,13 | Jun,12 | absolute | relative | |
| Remunerations | 231,3 | 233,7 | -2,4 | -1,0% |
| Pensions, Long term service benefits & Other | 58,2 | 57,8 | 0,4 | 0,6% |
| TOTAL | 289,5 | 291,5 | -2,0 | -0,7% |
| Excluindo novas consolidações Excluding new Consolidations |
286,9 | 290,6 | -3,7 | -1,2% |
| Domestic | 185,5 | 192,6 | -7,1 | -3,7% |
| Excluding new Consolidations | 182,9 | 191,7 | -8,8 | -4,6% |
| International | 104,0 | 98,9 | 5,1 | 5,1% |
Domestic staff costs continued to drive the reduction in total staff costs, underpinned by the reduction on variable remunerations and number of employees (by 104 employees), decreased by 3.7% (-4.6% without the impact of the new consolidations).
The international staff costs increased by 5.1% as a result of the expansion of activities and consequent increase in the workforce (by 264 employees).
The general administrative costs increased by 3.2%, with international administrative costs rising by 17.2% while domestic decreased by 2.1%. Amortisation and depreciation, amounting to EUR 52.6 million, dropped from EUR 53.8 million YoY, having increased by 6.7% in the international area (which still needed to invest in tangible and intangible assets) and decreased by 5.4% in the domestic area as a result of the streamlining measures implemented and the closure of 26 branches since the end of 1H12.
In light of the challenges currently faced by the financial sector and the country's economic and financial context, BES Group has launched a programme aimed at gradually streamlining and reducing operating costs. The programme will be implemented in 2013-2015 and is expected to generate savings of EUR 100 million in the period, of which 3% in 2013, 5% in 2014 and 6% in 2015.
Efficiency indicators continued to be harmed by the reduction in both commercial banking income and total banking income, notwithstanding the reduction in domestic operating costs:
| Jun,13 | Jun,12 | Change | |
|---|---|---|---|
| Cost to Income | 57,3% | 47,0% | 10,3 p.p. |
| Cost to Income (ex-markets) | 69,2% | 52,8% | 16,4 p.p. |
Considering the adverse economic context, the Group recognised impairment costs of EUR 747.3 million in 1H13, which represents a YoY increase of 75.3%. The credit provision charge in the period totalled EUR 553.1 million (+57.1% YoY), while provisions for securities increased EUR 52.8 million, provisions for foreclosed real estate assets by EUR 79.4 million and provisions for impairments in other assets by EUR 62.0 million.
| EUR million | ||||
|---|---|---|---|---|
| Jun,13 Jun,12 |
Change | |||
| absolute | relative | |||
| Credit Provisions | 553,1 | 352,0 | 201,1 | 57,1% |
| Securities Provisions | 52,8 | 18,8 | 34,0 | |
| Foreclosed Assets | 79,4 | 15,1 | 64,3 | |
| Other Provisions | 62,0 | 40,4 | 21,6 | 53,3% |
| TOTAL | 747,3 | 426,3 | 321,0 | 75,3% |
The balance of provisions for credit increased to EUR 3,134 million on June 30th, 2013 (+ 28.7% YoY), lifting the credit provisions/gross customer loans ratio to 6.1% (Jun.12: 4.8%).
| EUR million | ||||
|---|---|---|---|---|
| Change | ||||
| Jun,13 | Jun,12 | absolute | relative | |
| Gross Loans | 51 111 | 51 176 | - 65 | -0,1% |
| Credit Provisioning Charge (1H13) | 553,1 | 352,0 | 201,1 | 57,1% |
| Provisions for credit | 3 134,2 | 2 434,7 | 699,5 | 28,7% |
| Provision Charge (annualised) | 2,16% | 1,38% | 0,78 pp | |
| Provisions for credit / Gross Loans | 6,1% | 4,8% | 1,3 pp |
The credit provision charge in 1H13 (2.16%) was 78bps higher than in 1H12 (1.38%).
The table below shows the evolution of return on equity (ROE) and return on assets (ROA):
| Jun,13 | Jun,12 | |
|---|---|---|
| Return on Equity | -6,45% | 0,64% |
| Return on Assets | -0,56% | 0,07% |
Profitability Profitability
(1) annualised data
The Group's profitability continues to be harmed by the demanding provisioning effort required in view of the deterioration of credit risk and the devaluation of certain assets as a result of the domestic recession.
During the first half of 2013 the activity of the financial sector and of BES Group continued to be dictated by a process of adjustment entailing the maintenance of capital ratios above the regulatory requirements and the deployment of a deleveraging process. In this context, the loan to deposits ratio registered a clear improvement, dropping to 125%, largely underpinned by a 15.7% YoY increase (+EUR 5.1 billion) in customer deposits. Customer funds acquisition was indeed one of the key aspects of the period, with relevant increases in on-balance sheet customer funds (+11.8%), bancassurance funds (+35.7%) and asset management funds (+12.0%) driving up total customer funds by EUR 6.2billion (+11.8% YoY), to EUR 58.6 billion.
| 30-Jun-13 | Change Jun,13/Jun,12 |
EUR million Change absolute |
||||
|---|---|---|---|---|---|---|
| 31-Dec-2012 | 30-Jun-12 | absolute | relative | Jun,13/Dec,12 | ||
| Total Asstes (1) | 96 388 | 97 765 | 98 041 | -1 653 | -1,7% | -1 377 |
| Net Assets | 82 646 | 83 691 | 85 292 | -2 646 | -3,1% | -1 045 |
| Customer Loans (gross) | 51 111 | 50 399 | 51 176 | - 65 | -0,1% | 712 |
| Loans to Individuals | 13 477 | 13 762 | 13 979 | - 502 | -3,6% | - 285 |
| - Mortgage | 10 974 | 11 134 | 11 412 | - 438 | -3,8% | - 160 |
| - Other Loans to Individuals | 2 503 | 2 628 | 2 567 | - 64 | -2,5% | - 125 |
| Corporate Lending | 37 634 | 36 637 | 37 197 | 437 | 1,2% | 997 |
| (incl. transfer to restrucutring funds) | 38 596 | 37 556 | 37 514 | 1 082 | 2,9% | 1 040 |
| Total Customer Funds | 58 580 | 56 188 | 52 401 | 6 179 | 11,8% | 2 392 |
| On-Balance Sheet Customer Funds | 47 410 | 44 785 | 42 425 | 4 985 | 11,8% | 2 625 |
| Deposits | 37 912 | 34 540 | 32 765 | 5 147 | 15,7% | 3 372 |
| Debt Securities placed with Clients (2) | 4 529 | 5 254 | 5 999 | -1 470 | -24,5% | - 725 |
| Life Insurance | 4 969 | 4 991 | 3 661 | 1 308 | 35,7% | - 22 |
| Off-Balance Sheet Customer Funds | 11 170 | 11 403 | 9 976 | 1 194 | 12,0% | - 233 |
| Loans/Deposits(3) | 125% | 137% | 147% | -22 p.p. | -12 p.p. |
(1) Net Assets + Asset Management + Off-Balance sheet items + Non consolidated Secuiritised credit
(2) Includes funds associated with consolidated securitisations and commercial paper
(4) Ratio calculated based on the definition of BoP
On the other hand the credit portfolio increased by EUR 712 million (+2.8% annualised), supported by the corporate loan book, which grew by EUR 997 million (+5.4% annualised), once again highlighting the support always provided by BES Group to its corporate clients and most especially to the exporting firms. Loans to individuals continued to decrease, falling by EUR 285 million (-4.1% annualised) as a result of the contraction of demand and the amortisation of mortgage loans. On a comparable basis, i.e., adjusted for the effect of loan transfer to restructuring funds, corporate loans increased by 2.9% YoY.
The higher relative increase in deposits versus credit had a positive impact on the Group's liquidity, with the loan to deposits ratio dropping to 125% (Jun.12: 147%; Dec.12%: 137%).
As to other funding components, net funding from the ECB decreased by 40% since the peak attained in June 2012, to EUR 8.3 billion, thus confirming the improvement in the Group's liquidity levels already observed in the last quarters. The increase in net funding versus Dec.12 is explained by the use of deposits held by the Group with the ECB, which dropped from EUR 3.4 billion (Dec.12) to EUR 1.2 billion (Jun.13).
(1) Calculated under the terms of BoP Funding & Capital Plan
In the first half of 2013, the structure of liabilities and equity continued to evolve along the previous lines, i.e., towards an increase in the share of customer deposits and lower reliance on the financial markets, thus making financial management more autonomous and less dependent on cyclical fluctuations in the debt markets.
In June 2013 deposits further consolidated their position as the main asset financing source (46%, or 52%, if including customer funds in the form of life insurance products), while debt securities accounted for 16% only a marked reversal since the end of 2009 (immediately before the escalation of the eurozone crisis at the start of 2010) when debt securities accounted for 43% and deposits for 31% only of the total asset financing sources.
The international units sought to benefit from the dynamics of the economies where they operate, namely the emerging economies: assets grew by 2.4% and the loan portfolio by 10.0%. Total customer funds decreased yoy 6.4%, driven by the debt securities placed with institutional clients, mainly by BES London branch.
| EUR million | ||||||
|---|---|---|---|---|---|---|
| Domestic | International | |||||
| 30-Jun-13 | 30-Jun-12 | Change | 30-Jun-13 | 30-Jun-12 | Change | |
| Total Assets (1) | 67 351 | 69 675 | -3,4% | 29 037 | 28 366 | 2,4% |
| Assets | 54 496 | 59 956 | -5,8% | 26 150 | 25 336 | 3,2% |
| Loans to Customers (gross) | 38 377 | 39 604 | -3,1% | 12 734 | 11 572 | 10,0% |
| Total Customer Funds | 43 902 | 36 719 | 19,6% | 14 679 | 15 682 | -6,4% |
| Loans/Deposits (2) | 125% | 147% | -22 p .p . | 126% | 146% | -20 p .p . |
(1) Net Assets + Asset Management + Off-Balance sheet liabilities+ Non consolidated secuiritised credit
(2) Ratio calculated under the BoP definition
The BES Group develops its activity supported by a set of value propositions aimed at meeting the needs of its diverse client base: companies, institutions and individual clients. Its decision-making centre is located in Portugal, which is also its main market of operation.
The historic links with Africa and South America, notably with Angola and Brazil, the internationalisation of Portuguese companies, the growing interdependence of the Iberian economies and the large communities of Portuguese nationals established across various continents have provided the basis for the international expansion of BES Group.
When monitoring the performance of each business area, the Group considers the following Operating Segments:
Each segment is directly supported by dedicated structures, as well as by those central units whose activity is most closely related to each of these segments. These structures run individual monitoring of each operational unit of the Group (considered from the viewpoint of an investment centre) while the Executive Committee defines strategies and commercial plans for each Operating Segment.
As a complement to this, the Group uses a second segmentation of its activity and results according to geographical criteria, separating the performance of the units located in Portugal (Domestic Area) from that achieved by the units abroad (International Area).
This segment includes activity with individuals and small businesses, most notably deposit taking, sale of saving products, commissions for account management, cards and other means of payment, insurance products, investment funds, brokerage of securities, custody services, mortgage credit, consumption credit and financing of small businesses.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Loans (gross) | 15 149 | 16 293 | -7,0% |
| Customer Funds | 13 304 | 12 611 | 5,5% |
| INCOME STATEMENT | |||
| Commercial Banking Income | 309,4 | 281,0 | 10,1% |
| Capital Mkts & Other Results | 15,6 | 19,6 | -20,6% |
| Banking Income | 325,0 | 300,6 | 8,1% |
| Operating Costs | 192,2 | 208,1 | -7,7% |
| Provisions | 32,0 | 41,6 | -23,1% |
| Income Before Tax | 100,8 | 50,9 | 98,0% |
| Cost to Income | 59,1% | 69,2% | -10,1 pp |
This business area was supported by a network of 652 branches in Portugal at the end of 1H13 (net reduction of 14 branches since the start of the year). This streamlining process permitted to achieve a 7.7% YoY reduction in operating costs. The network includes 43 on-site branches resulting from partnerships with insurance agents under the Assurfinance programme
Total retail customer funds increased by 9.65% YoY. On-balance sheet customer funds increased by 5.5% YoY, underpinned by the strong growth of deposits (+EUR 831 million YoY). The growth of retail customer funds, which is particularly expressive if considering the financial hardships currently faced by the Portuguese
families, is explained by the Group's capacity to devise added value solutions for its clients, even in very adverse market situations, and the trust placed by the clients in the BES brand.
The growth of Retail customer funds in 1H13 was also supported by an influx of new clients: a total of 48.6 thousand new clients were acquired in the period as a result of coordinated action between the branch network and other client acquisition channels, in particular the Cross-segment and Assurfinance programmes, as well as the external promoters, which maintained a decisive contribution to the commercial performance of Retail. Total client acquisition in 1H13, including the international units, reached 86.7 thousand clients, which represents a YoY increase of 13.0%.
The Retail area maintains a constant and dynamic management of the customer funds margin in order to protect banking income growth. In 1H13 the segment's banking income grew by 8.1%, underpinned by the expressive increase in customer funds combined with the streamlining of the net interest margin, which improved by 63 bps, to 2.76%. The increase in banking income, allied to reductions in costs and in impairment losses, allowed the area to increase pre-tax earnings to EUR 100.8 million.
During the period the area maintained its selective loan granting policies, and achieved significant results in cross-selling, where commercial results are supported by a wide range of innovative products, services and tools. Growth was particularly significant in several areas of insurance production, namely health insurance, where the launch of the 'Essential' formula drove a more than two-fold YoY increase in sales of new policies, and life insurance, where sales jumped by 33.8% YoY.
The use of the Direct Channels Direct Channels continued to increase: the internet banking service for individual clients – BESnet – achieved a 7.2% YoY increase (to 365 thous BESnet and) in the number of frequent users, maintaining its leading position in terms of internet banking penetration in Portugal, with a share of 44.9% of the customer base (according to the latest Marktest data), while the number of logins reached 19.6 million (+11.7% YoY). According to Marktest's latest data on user satisfaction with internet banking systems, BESnet achieved the highest level of satisfaction, leading in all eight assessment criteria (security, design, available services, ease of use, availability, page loading speed, transaction execution speed, global satisfaction with the internet banking service) surveyed in all monthly waves during the second quarter. The BESmobile BESmobile service maintained strong growth, with the number of very frequent users reaching 48.3 thousand at the end of 1H13, surpassing the number of clients who use this service through telephone banking. According to Marktest data, BES has reinforced its undisputed leadership in this channel, with more than 8.6% of the clients for whom BES is the first Bank saying they have used BESmobile in the last three months. The Direct Channels continued to play a key role in the relationship with the clients, providing the following: (i) access to the entire range of services, account enquiries and transactions which can be done remotely; (ii) sale of a range of products, namely saving and insurance products, which can be acquired directly through the internet, with the support of a phone operator, or by scheduling a meeting with the branch or account manager; (iii) ) integration of the CRM platforms between the branch, BESnet and BESdirecto, where the customised offers provided at the time the client interacts with the remote channel have proved very successful, confirming their adjustment to the clients' needs.
In the first half of 2013 Banco BEST BEST reached EUR 2.1 billion in customer assets under custody, and posted net earnings of EUR 6.0 million, a YoY increase of 37%. Banco Best was recently awarded three prizes that confirm its success as innovation leader in the offer of financial products and services in Portugal: "Best Site/Mobile App for E-commerce" in the "Navegantes XXI 2013" awards by ACEPI (the Portuguese Electronic Commerce and Interactive Advertising Association), which distinguish the best e-commerce and digital market projects. Considered one of the most comprehensive mobile banking services in the Portuguese market, Banco Best's Mobile Banking service offers not only all current banking operations but also an all-inclusive stock market mobile service, allowing online monitoring of the main global stock exchanges and trading on more than 1,200 securities. (ii) "Best B2B site" (ACEPI), also part of ACEPI's "Navegantes XXI 2013" awards – the 'B2B' and 'White Label' solutions were the winners in the "best B2B eCommerce site" category. Through these services Banco BEST acts as a global provider of wealth management services, being the only exporter in Portugal of banking services and technology. (iii) "Best Technological Projects in Portugal" (CIO Awards 2013) – the 'Best Guru" search engine was considered the best technological project developed in Portugal in the 2013 edition of the CIO awards promoted by IDC, the world leader in market intelligence. 'Best Guru" is an innovating investment search engine providing easy, fast and direct access to Banco Best's vast asset management and trading portfolio which comprises more than 2,000 investment funds from 40 fund managers, ca. 1,800 certificates, more than 1,000 equities traded in the main international markets as well as bonds and ETFs from all over the world.
The activity of Banco Espírito Santo dos Açores Banco dos Açores Açores continued to suffer from the situation of crisis lived in the country as well as in the region, while maintaining its strategy for the acquisition of new clients and the increase of its market share, backed by the signature of new protocols with regional companies and institutions. With loan granting decelerating, the Bank stepped up measures to monitor and recover problem loans, while putting an extra effort into attracting customer funds. Hence customer deposits increased by 3.0% YoY and customer loans decreased by 6.3%. Assets totalled EUR 459 million at the end of 1H13. The Bank posted a net loss for the period of EUR 276 thousand, mainly resulting from a 37% drop in Net interest income and a EUR 1.1 million YoY increase in the credit provision charge. Banco Espírito Santo dos Açores's General Meeting approved a EUR 1,137,500.00 share capital increase, to 18,637,500.00, this operation having taken place at the end of June.
This business area includes the business with large and medium-sized companies, as well as with institutional and municipal clients. BES Group holds a significant position in the Corporate and Institutional Clients segment as a result of its support to the development of the national business community, where it targets companies with a good risk profile, innovative characteristics and a focus on exports.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Loans (gross) | 21 727 | 21 433 | 1,4% |
| Customer Funds | 10 786 | 9 508 | 13,4% |
| INCOME STATEMENT | |||
| Commercial Banking Income | 308,8 | 250,7 | 23,2% |
| Capital Mkts & Other Results | 7,1 | 5,6 | 25,9% |
| Banking Income | 315,9 | 256,3 | 23,2% |
| Operating Costs | 29,7 | 31,4 | -5,7% |
| Provisions | 459,6 | 208,6 | 120,3% |
| Income Before Tax | -173,4 | 16,2 | …. |
| Cost to Income | 9,4% | 12,3% | -2,9 pp |
This business area's results continue to be affected by the impact of overdue loan ratios, leading to the need to reinforce the segment's credit provisions. To counter this effect, the Group has taken action at various levels: (i) intensification of risk prevention practices, namely by increasing the collateralisation of both new loans and the loan portfolio; ii) regular revision of pricing policies for both credit spreads and interest rates on customer funds and elimination of commissioning discounts and exemptions; and (iii) optimisation of the cost basis. The action taken at the pricing policy level allowed for a 23.2% YoY increase in the segment's banking income in 1H13, while the cost restructuring measures resulted in a 5.7% YoY reduction in operating costs.
Despite the strong contraction of demand for credit from the business sector, new loans granted by BES Group remained practically on level with loan reimbursements, keeping the loan portfolio stable during the period – a fact that mirrors the Group's support to the corporate sector and the results of its specialised service for the exporting and innovative companies.
BES Group continues to support the Portuguese companies' internationalisation processes. Working together with the Group's sales force, the International Premium Unit's geographically specialised desks coordinate this effort, providing a dynamic offer that meets the clients' requirements in each phase of their internationalisation processes.
In 2013 the Unit has been focusing its support on introducing its clients to new markets and reinforcing their ties to existing connections. In 1H13 BES successfully organised trade missions to Indonesia, Timor and Algeria and is currently preparing a mission to Poland and a visit of Libyan entrepreneurs to Portugal, to take place in 1H13. Through these trade missions, in full 2013 BES plans to support approximately 100 Portuguese companies establish direct contacts with five different markets.
Coordination between demand (high-potential external markets and segments) and supply (Portuguese companies with production capacity and quality) is essential in the preparation of these missions. 'BES Fine
Trade', a statistical survey on tradable goods conducted by ES Research to track markets with potential, segments offering opportunities and products in demand, offers entrepreneurs a global vision of their potential strategic markets. Close ties with the relevant authorities in each country (city councils, associations, diplomats) and a strong relationship with the local banks are also key to the success of these missions.
In international trade, BES Group is market leader in trade finance with a share of 30.9%, recognised over the last seven years through consecutive awards as 'BEST Trade Finance Bank' from the Global Finance magazine. This positioning is supported on the one hand by the relation of proximity with clients built by the Group's team of international bankers and, where necessary, its trade finance experts, and on the other by the ever close links maintained with a vast network of correspondent banks by the Group's experienced team of bankers specialising in financial institutions. Finally, the capacity to respond to clients across the 25 countries where BES Group operates is further reinforced through coordination with the Group's International Units, translating into rising levels of commissions income.
Given the existing economic interconnection within the Iberian market, client acquisition and business development are supported by close cooperation between domestic and Spanish commercial networks: 90 new Iberian corporate clients were acquired in 1H13, and ca. 50% of all the Iberian companies with good risk profile are BES Group clients.
During 1H13 BES Group's team remained strongly engaged on providing support to Innovation and Entrepreneurship, tracking an increasingly large number of high potential opportunities, both commercial and technological, all over the country. The clear improvement in coordination within Portugal's 'Innovation Ecosystem" is starting to bear fruit, namely in terms of the quantity and quality of business leads which the Group may take up for investment or to support. More specifically, the number of investment deals closed in 1H13 was much higher than in the past, with five new Portuguese companies added to the portfolio of Espírito Santo Ventures. Over the last two years the Group's strategic bet on investment in start-ups has borne expressive results, with the number of investee companies in Portugal already reaching ca. 30.
BES has actively promoted the various PME Investe and PME Crescimento credit lines, two important tools to support the national SMEs' investment and growth, under which it has approved to date EUR 2,885 million of loans. In the case of the PME Crescimento 2013 line, BES is global leader with a share of 23.6% (EUR 279 million), as well as leader in support provided to the exporting companies, with a market share of 43.1%.
In the current market context, supporting companies' cash management continues to deserve particular attention. In this area, BES is the undisputed market leader in Factoring Solutions, with a market share of 25,8% that represents EUR 1,659 million of credit under management.
"BES Express Bill", a solution exclusively developed by BES to manage companies' payments and receipts, has been extremely important as a critical source of liquidity and a booster of confidence in business dealings. So far, more than 13,000 companies have subscribed to "BES Express Bill", with ca. EUR 2,400 million in facilities approved (guaranteeing the advancing of payments of more than EUR 12,000million per year).
The internet banking service for corporate clients - BESnetwork BESnetwork BESnetwork – reached 61 thausand frequent users in 1H13 (a YoY increase of 8.7%), while the number of logins rose by 13.7% YoY, to 8.4 million. In 2013 and for the second consecutive year BESmobile BESmobileBESmobile earned the award for best Mobile Banking services in Europe from the prestigious Global Finance magazine. The results were announced in July and also ranked BES as the Best Corporate/Institutional Internet Bank in Portugal (for the fourth time and the third in a row), confirming the quality and versatility of its BESnetwork service.
This area is dedicated to the business with private high net worth clients, covering all products associated with these clients, notably deposits, discretionary management, custody services, brokerage of securities and insurance products.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Loans (gross) | 935 | 962 | -2,8% |
| Customer Funds | 1 647 | 1 924 | -14,4% |
| INCOME STATEMENT | |||
| Commercial Banking Income | 65,7 | 43,1 | 52,6% |
| Capital Mkts & Other Results | 4,3 | 2,7 | 55,4% |
| Banking Income | 70,0 | 45,8 | 52,8% |
| Operating Costs | 8,4 | 9,0 | -6,4% |
| Provisions | 2,9 | 1,0 | …. |
| Income Before Tax | 58,6 | 35,8 | 63,7% |
| Cost to Income | 12,1% | 19,7% | -7,6 pp |
In this important business area, total customer funds grew by 5.3% YoY, underpinned by a strong increase in off-balance sheet funds (+13.8% YoY) that was driven by the clients' increasing preference for alternative investment products. In 1H13 deposits by private banking clients reversed the downward trend observed last year, growing by 10.5% since the end of 2012.
The segment's pre-tax profit increased to EUR 58.6 million. This improvement translates the measures taken during 2012 and 1H13 to enhance the customer funds margin (which led to a 52.8% increase in banking income) combined with the streamlining of the structure of operating costs (which fell by 6.4% YoY).
This segment includes the retail units operating abroad, which maintained a globally positive performance during 1H13. Customer funds increased by 24.9%, largely driven by bond issues placed with institutional clients through BES London Branch, while customer loans grew by 11.4%, underpinned by the intensification of business in BES's subsidiary in Angola. Translating the reduction of banking income through the devaluation of the Venezuelan currency, and the increase in operating costs (+15.0%) and provisions (+117.8%), the pre-tax profit for the period was EUR 41.1 million, which is lower than in 1H12.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Loans (gross) | 12 144 | 10 900 | 11,4% |
| Customer Funds | 10 942 | 8 762 | 24,9% |
| INCOME STATEMENT | |||
| Commercial Banking Income | 261,7 | 293,6 | -10,9% |
| Capital Mkts & Other Results | -12,6 | 17,6 | -171,2% |
| Banking Income | 249,2 | 311,2 | -19,8% |
| Operating Costs | 125,1 | 108,8 | 15,0% |
| Provisions | 82,9 | 38,0 | 118,1% |
| Income Before Tax | 41,1 | 164,4 | -75,0% |
| Cost to Income | 50,2% | 35,0% | 15,2 pp |
Notwithstanding the persistent climate of economic and financial instability in Spain and the world, BES Spain ES Spain Branch maintained a positive performance during the Branch second quarter of 2013. Main highlights in the period: (i) expansion of the network, with branch openings in Palma de Mallorca and Logroño (where the Bank was not yet present) and two outlets in Madrid; ii) customer deposits increased by 55.5% YoY (+ 46.4% since the end of 2012) while customer loans rose by 1.0% only – this validates the deployment of the branch's policy aimed at reinforcing its self-sufficiency in terms of funding; (iii) the volume of off balance sheet exposures (guarantees) remained flat at around EUR 1,300 million, which is in line with the trend in the previous months; iv) the international corporate activity support volume rose by 1.8%; v) the number of clients, mostly in retail and private banking (+40.7%), increased by 38.7% YoY, which is ca. 8,500 more than in December 2012; and (vi) continued implementation of the prudent credit risk management policy, involving a strong reinforcement of provisions in light of the evolution and direct and indirect effects of the economic situation. This permitted to maintain the rising trend of credit spreads, thus easing the pressure on the cost of liabilities due to intense deposit-taking competition within the Spanish banking system. Operating income grew by 5.3% YoY, to EUR 28.2 million, driven by the increase in banking income (+3.7%) combined with the reduction of costs (-2.5%).
BES London Branch (United Kingdom) concentrates its London Branch activity in wholesale banking in the European market. During the first half of 2013 assets remained above EUR 5.5 billion, underpinned by the EMTN programme, though reflecting some reduction in on-balance sheet customer funds. Customer deposits, however, were 108% higher than in December 2012. On the other hand, customer loans remained practically flat, both YoY (- 3.6%) and compared to the end of 2012 (-2.5%). Despite the adverse context banking income increased by 53% YoY, to EUR 27.2 million. Pursuing the work carried out in 2012, the structure of costs continued to be streamlined, leading to a 7% YoY reduction in costs.
At the end of 1H13 Espírito Santo Bank Espírito Bank (Miami/USA) showed a balance sheet characterised by high quality assets and strong capital and liquidity ratios, and the highest level ever of assets, credit and deposits. Compared with the end of 2012, assets increased by USD 100 million, deposits by USD 88.7 million (+17%) and credit by USD 66.1 million (+15%). This growth was fuelled by the budding recovery of the residential market in south Florida, where the bank promoted the acquisition of second homes by non-resident individuals – an attractive and low risk market segment – while maintaining its conservative and safe assessment standards. In 2013 ES Bank was confirmed its "5 star" ranking, awarded for the first time in 2012 by Bauer Financial, on the grounds of its asset quality and liquidity and solvency levels. Assets under management reached USD 1.4 billion on 30 June 2013.
BES New York Branch (USA) concentrates its activity Branch in wholesale banking, mainly in the US and Brazil. The persistence during 1H13 of restrictions on access to market liquidity required from the Bank extreme prudence in business development, focus on risk monitoring and management, and an effort for further deleveraging (the loan book was reduced by 24% YoY), in line with the Group's international strategy guidelines. The Branch posted net income for the period of EUR 3.8 million.
For Banco Espírito Santo de Angola de Angola, the first half of 2013 was marked by the start of implementation of the new Strategic Plan which aims to redefine the business model along the following lines: (i) evolution towards a banking model focusing on the higher value segments of corporate clients (top corporate) and individual clients (top private), the plan is to broaden the offer so as to allow penetration into new corporate segments (oil companies and SMEs) and retail segments (affluent segment), viewing an increase in the number of active clients; (ii) expansion of the network, opening new branches and corporate centres over a 2-year period; (iii) commercial strategy overhaul: implementation of marketing and communication media focused on the offer and creation of a new model of commercial dynamics; (iv) development of a multi-channel strategy permitting to extend the reach of client acquisition efforts and the provision of innovative services. BESA continued to deserve international recognition, being considered by the Global Finance magazine as the 'Best Bank in Angola' in 2012, the 'Best Trade Finance Bank' and the 'Best Foreign Exchange Provider'. At the end of 1H13 BESA's assets totalled EUR 8,489 million, a YoY rise of 12% that was driven by a 25% increase in the credit portfolio, to EUR 5,699 million. Over the same period customer funds increased by 7%. Banking income dropped
by 32% YoY, to EUR 116.4 million, essentially through the reduction in fees and commissions (the 1H12 banking income included non-recurrent commission income). Net interest income grew by 27%, to EUR 99.3 million, while operating costs increased by 23%. BESA posted net income for the period of EUR 25.9 million, a result that reflects the reduction in fees and commissions and the reinforcement of provisions to provide for the growth of credit.
BES Cape Verde focuses on local corporate banking a Cape Verde ctivity, where it mainly targets public sector companies, subsidiaries of Portuguese companies with interests in Cape Verde, and the local affluent market. In the first half of 2013 the Bank maintained its business volume practically flat (+0.5% vs. Dec.12), closing the period with assets of EUR 137 million.
Banco Espírito Santo do Oriente (Macau) maintained Oriente a positive performance in corporate banking and trade finance, underpinned by the trade flows between the Popular Republic of China and the Portuguese-speaking countries where BES Group has a strategic position. The Bank also reported growth in documentary transactions (e.g. L/C Advising/Forfaiting/Discount), supported by continuous commercial and operational action undertaken in cooperation with BES's International area and by the good relations held with the main Chinese Banks, with which it has entered instrumental agreements viewing the development of this type of business. The growth and stability of customer funds achieved over the last few years remain a key priority in the current context: the initiatives developed by the Bank targeting the various client segments resulted in a 75% YoY increase in deposits in 1H13. Notwithstanding the deceleration of global economic activity, the gross income for the period increased by 31% YoY.
Banque Espírito Santo et de la Vénétie (France) rep Santo la Vénétie orted gross operating income of EUR 8.6 million in 1H13, which represents a YoY increase of 1%. Commercial banking income rose by 1% while total banking income increased by 5% YoY, to EUR 22.5 million. Operating costs were up by 13% YoY, driven by the reorganisation of the teams dedicated to commercial operations and support and information and control systems, as well as by an increase in services provided by external consultants. Provisions, which translate the cost of risk, were reinforced by 158% YoY, reaching EUR 6.8 million. The Bank reported a net profit for the period of EUR 605 million.
In June 2013 BES increased its stake in Moza Banco Banco (Mozambique) to 49%. During 1H13 Moza Banco continued to deploy its commercial expansion plan, opening three new branches that increased the network to 23 units. Activity continued to grow at a strong pace: in local currency, assets increased by 220% YoY, while deposits and customer loans grew by 290% and 241%, respectively.
BES Venezuela Branch, opened in January 2012, has b Branch een focusing its activity on the establishment of closer ties with the Portuguese resident community and the local large companies and institutions. At the end of 1H13 the branch had total assets of EUR 146 million.
BES Luxembourg Branch, also opened in January 2012, Luxembourg Branch has been acting as a platform for business with the Portuguese emigrant community in the country as well as in neighbouring countries in central Europe, while offering the Group's global client base the possibility to do business in a safe and credible market. In June 2013 the branch had total assets of EUR 840 million, reporting a net profit for the period of EUR 1.3 million.
In Libya, now in a phase of political, social, and economic consolidation, Aman Bank Aman Bank is gradually resuming the implementation of its commercial plans and the reinforcement of its operations so as to be able to seize the growth opportunities arising in the country. The branch increased total assets by 6% in 1H13, posting a net profit of EUR 3.1 million.
Investment banking includes advisory services in project finance, mergers and acquisitions, restructuring and consolidation of liabilities, preparation and public or private placement of shares, bonds and other fixedincome and equity instruments, stock broking and other investment banking services. In addition, the bank offers traditional banking services to corporate and institutional clients.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Loans (gross) | 2 146 | 2 316 | -7,3% |
| Customer Funds | 1 067 | 1 052 | 1,4% |
| INCOME STATEMENT | |||
| Commercial Banking Income | 93,1 | 105,4 | -11,6% |
| Capital Mkts & Other Results | 28,2 | 18,0 | 56,5% |
| Banking Income | 121,3 | 123,4 | -1,7% |
| Operating Costs | 86,3 | 85,8 | 0,6% |
| Provisions | 26,6 | 14,1 | 88,1% |
| Income Before Tax | 8,4 | 23,5 | -64,1% |
| Cost to Income | 71,1% | 69,5% | 1,6 pp |
The macroeconomic and political context unfolding during the second quarter exerted some pressure on investment banking business. However the capital markets business area maintained its buoyancy, and BES Investimento (BESI) led the main issues made in Portugal in the period as well as several operations in Poland, the United Kingdom, Mexico and Brazil. Banking income, amounting to EUR 121.3 million, was slightly lower (1.7%) than in 1Q13 while operating costs remained practically flat YoY (+0.6%). The pre-tax results were penalised by the increase in credit impairments, dropping by 64.1% YoY, to EUR 8.4 million.
The international area accounted for 57% of banking income. With the start-up of Lusitânia Capital, SOFOM, E.N.R., a non-banking fully owned subsidiary aiming to provide financial advisory services and support to projects in local currency, and the representation and advisory activities already developed through the local representative office, BESI now has a stronger presence in Mexico, one of the region's markets currently showing good development prospects.
Main operations concluded in 2Q13:
Equity Capital Markets BESI acted: (i): in Poland Equity Markets , as Joint Global Coordinator and Joint Bookrunner on the accelerated bookbuilding sale of a 25% stake in KRUK by PE Fund Entreprise Investors (zloty 251.8 million); (ii) in Brazil, as Joint Bookrunner on the BHG's follow-on offering (BRL 378 million); and (iii) in the United Kingdom, as Joint Bookrunner on the placement of 131.6 million new shares of Vertu Motors Plc (GBP 50 million) and as Sole Bookrunner of the placement of 1.2 million existing shares of Ted Baker (GBP 20 million).
Debt Capital Markets BESI acted (i) in Iberia, as Debt Markets Joint Lead Manager on the Portugal Telecom (EUR 1 billion) and ESFIL (EUR 200 million) bond issues, as Sole Lead Manager on ESF Portugal (EUR 80 million), Sonae Investimentos (EUR 50 million) and Ascendi (EUR 15 million) bond issues and as Joint Global Coordinator on Benfica SAD's bond offering (EUR 45 million); (ii) in Brazil, as Joint Bookrunner on the infrastructure debentures issue of Concessionária Rodovias do Tietê (BRL 1065 million) and on the bond issue of Andrade Gutierrez (USD 500 million); and (iii) in Mexico, as Sole Lead Manager on the bond issue of Crediamigo (USD 30 million).
BESI's activity was internationally recognized and the Bank was considered: (i) 'Best Investment Bank in Portugal', by the World Finance magazine; (ii) 'Best M&A House in Portugal', by the EMEA Finance magazine; and (iii) 'Best Investment Bank in Portugal', by the Euromoney magazine.
This segment includes all the asset management activities of the Group, essentially conducted by Espírito Santo Activos Financeiros (ESAF), within Portugal and abroad (Spain, Luxembourg, Angola, and Brazil). ESAF's product range covers mutual funds, real estate funds and pension funds, besides providing discretionary and portfolio management services.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| ASSETS UNDER MANAGEMENT | 15 723 | 13 125 | 19,8% |
| INCOME STATEMENT | |||
| Banking Income | 30,0 | 34,1 | -11,9% |
| Operating Costs | 8,6 | 8,8 | -1,6% |
| Provisions | 0,1 | 0,8 | -87,0% |
| Income Before Tax | 21,3 | 24,5 | -13,1% |
| Cost to Income | 28,7% | 25,7% | 3,0 pp |
The increase in assets under management was largely driven by growth in the real estate investment funds and portfolio discretionary management activities, and also by the activity developed in Luxembourg, which offset the reduction or stabilisation of volumes in the other business segments. International assets under management dropped by 5%, despite the increase achieved in Luxembourg.
In 2012 ESAF was named the best Asset Manager in Portugal in the Morningstar / Diário Económico awards, having also received the following accolades: (i) 'Best national bond manager'; (ii) 'Best national euro bond fund' (Espírito Santo Obrigações Europa); (iii) 'Best foreign euro bond fund' (Espírito Santo Euro Bond); and (iv) 'Best national mixed moderate euro fund' (Espírito Santo Estratégia Activa). In 2013 ESAF was distinguished in the Lipper Funds Awards in Spain and in Europe.
This business area comprises the activity developed by BES Vida, Companhia de Seguros, which provides both traditional and unit-linked insurance products as well as pension plans.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| BALANCE SHEET | |||
| Customer Funds | 4 969 | 3 661 | 35,7% |
| INCOME STATEMENT | |||
| Gross Margin of Insurance Business | 300,2 | 40,3 | …. |
| Operating Costs | 5,6 | 2,1 | 161,6% |
| Provisions | 0,2 | 1,8 | -86,9% |
| Net Income | 212,6 | 17,4 | …. |
BES Vida's 1H13 results are influenced by the monetisation transaction of its life risk portfolio under which all the inherent risks were transferred to a reinsurer and BES Vida maintained the management of contracts and the relations with clients. The operation had a positive impact of ca. EUR 150 million on the Company's results. The results were also boosted by an increase in insurance production, which reached EUR 851.6 million, corresponding to a YoY rise of more than 469.3% in premium volume. Moreover, production of unit-linked products and pension plans also experienced strong growth in the period, while claims volume registered a sharp contraction (-35.9%) due to the reduction in financial products' redemption volume and the smaller amount of financial products coming to maturity.
This segment includes the global financial management activity of the Group, namely raising and placement of funds in the financial markets, as well as investment in and risk management of credit, interest rate, FX and equity instruments, whether of a strategic nature or as part of current trading activity. It also includes activity with non-resident institutional investors, as well as any activities arising from strategic decisions impacting the entire Group.
| EUR million | |||
|---|---|---|---|
| Jun,13 | Jun,12 | Change | |
| INCOME STATEMENT | |||
| Banking Income | -429,2 | 79,8 | …. |
| Operating Costs | 30,4 | 24,9 | 21,9% |
| Provisions | 142,9 | 120,4 | 18,7% |
| Income Before Tax | -602,5 | -65,5 | …. |
Reflecting the reduction of funding from the ECB, the issue of bonds, namely in the international market at the end of 2012 and also in January 2013, and the establishment of spreads on strategic products sold to domestic corporate and retail clients that did not take into account the market's volatile conditions, the segment reported negative banking income in 1H13. This, combined with an increase in impairments in securities, real estate assets obtained through credit recoveries, and other assets, that raised the respective cost to EUR 142.9 million, explains the net loss of ca. EUR 602.5 million reported in the period.
The table below summarises the evolution of credit, overdue loans, credit at risk, provisions for impairment losses and overdue loans ratios and provisions ratios.
| 30-Jun-13 | 31-Dec-12 | Change | |||
|---|---|---|---|---|---|
| 30-Jun-12 | absolute | relative | |||
| EUR million | |||||
| Gross loans | 51 111 | 50 399 | 51 176 | 712 | 1,4% |
| Overdue Loans | 2 849 | 2 185 | 1 908 | 664 | 30,4% |
| Overdue Loans +90d | 2 603 | 1 966 | 1 691 | 637 | 32,4% |
| Credit at risk (1) | 5 485 | 4 758 | 4 049 | 727 | 15,3% |
| Provisions for Credit | 3 134 | 2 692 | 2 435 | 442 | 16,5% |
| Indicators (%) | |||||
| Overdue Loans / Gross Loans | 5,6 | 4,3 | 3,7 | 1,3 p.p. | |
| Overdue Loans +90d / Gross Loans | 5,1 | 3,9 | 3,3 | 1,2 p.p. | |
| Credit at risk (1) / Gross Loans | 10,7 | 9,4 | 7,9 | 1,3 p.p. | |
| Coverage of Overdue Loans | 110,0 | 123,2 | 127,6 | -13,2 p.p. | |
| Coverage of Overdue Loans + 90d | 120,4 | 136,9 | 144,0 | -16,5 p.p. | |
| Coverage of Credit at risk (1) | 57,1 | 56,6 | 60,1 | 0,5 p.p. | |
| Provisions for Credit / Gross Loans | 6,1 | 5,3 | 4,8 | 0,8 p.p. | |
| Cost of Risk | 2,16 | 1,62 | 1,38 | 0,54 p.p. |
(1) According to Instruction 23/2011 of Bank of Portugal. Credit at risk includes: a) total value of credit with capital or interest past due by 90 days or more; b) other restructured credit, where the principal or interest payments were past due by more than 90 days and have been capitalized or refinanced without full coverage by collaterals or the interest fallen due have not been fully paid by the debtor and c) credits of an insolvent or bankrupt debtor.
The Overdue loans + 90 days ratio increased to 5.1% (Dec.12: 3.9%), while credit at risk represents 10.7% of gross loans (Dec.12: 9.4%), with a provision coverage (excluding collaterals and guarantees) of 57.1% (Dec.12: 56.6%).
The Provisions for Credit / Gross Loans ratio continued to increase, reaching 6.1% (Dec.12: 5.3%).
The asset quality deterioration was sharpest in corporate credit, rising to 6.8% (Dec.12: 5.2%) and other loans to individuals and consumer credit, where it reached 8.1% (Dec.12: 7.4%), and lowest in mortgage credit, where the ratio was 0.9%, still below the 1.0% threshold.
| 30-Jun-13 | 31-Dec-12 | 30-Jun-12 | Change | |
|---|---|---|---|---|
| Overdue Loans | 5,6% | 4,3% | 3,7% | 1,3 |
| Individuals | 2,3% | 2,2% | 1,8% | 0,1 |
| - Mortgage | 0,9% | 0,9% | 0,9% | 0,0 |
| - Other Purposes | 8,1% | 7,4% | 6,0% | 0,7 |
| Corporate | 6,8% | 5,2% | 4,4% | 1,6 |
According to the statistics published by the Bank of Portugal (May 2013), the Group's overdue loan ratios compare favourably with those of the Portuguese banking sector, where corporate overdue loans stand at 9.8% (BES Group: 6.8%), mortgage overdue loans at 2.0% (BES Group: 0.9%) and other loans to individuals overdue loans at 12.3% (BES Group: 8.1%).
BES Group has been actively executing real guarantees through foreclosures, in light of a proactive recovery process. Foreclosed assets thus totalled EUR 2.0 billion, included in 'Non current assets held for sale'. These assets are initially booked at fair value based on the immediate sale value (ISV) of the property as determined at the time by an independent expert. In subsequent periods these real estate assets are subject to regular revaluations and whenever the new ISV is lower than balance sheet value, provisions for impairment losses are created or reinforced. The table below shows the distribution of these assets by the domestic and international areas.
| EUR million | |||
|---|---|---|---|
| 30-Jun-13 | 31-Mar-13 | 31-Dec-12 | |
| Domestic | 2 185 | 2 122 | 1 965 |
| International | 138 | 137 | 120 |
| Gross Value | 2 323 | 2 259 | 2 085 |
| Provisions | 290 | 267 | 240 |
| Net Value | 2 032 | 1 992 | 1 845 |
The Group actively promotes the sale of these properties, namely through various internal and external sales channels and innovative sale promotion strategies adapted to each channel and target market. With a sales target of EUR 400 million in full 2013, in 1H13 1,774 such properties were sold for a gross balance sheet value of EUR 225.5 million, which represents a YoY increase of 94%. No material gains or losses were determined on these sales.
Faced with the persistent weakness of economic activity and the need to maintain the stimuli to the European economy, in May 2013 the ECB cut the key benchmark rate by 25bps, from 0.75% to 0.5%, with the interest rate on the deposit facility maintained at 0%. The ECB also announced it would continue to conduct 3-month refinancing operations with full allotment at least until July 2014, thus providing liquidity insurance to banks for a longer period of time.
The ECB's stimuli contributed to drive down the peripheral public debt yields, with the 10-year Portuguese sovereign debt yield narrowing to 5.5% in May, from 7% at the start of the year.
In this context, Portugal issued in May a new 10-year benchmark government bond that raised EUR 3 billion, with the order book surpassing EUR 10 billion. The issue was placed with a spread of 400bps over the mid-swap rate (5.67% yield).
In June the statements proffered by the Chairman of the US Federal Reserved provoked adverse reactions in the markets, which interpreted his remarks as meaning that the monetary stimuli would be toned down as from the second half of 2013 and reference interest rates would be raised sooner than previously expected. This caused a reversal in the downward trend of public debt yields, with the 10-year Portuguese debt yield reaching 6.4% at the end of June.
At the end of June the portfolio of repoable securities amounted to EUR 24.6 billion, of which EUR 21.8 billion were eligible for rediscount with the European Central Bank. This amount includes exposure to Portuguese sovereign debt of EUR 4.4 billion (of which EUR 1.4 billion maturing in less than one year). BES Group's other peripheral European sovereign exposures totalled EUR 2.2 billion (of which EUR 1.5 billion maturing in less than one year), including EUR 1.9 billion of Spanish public debt, EUR 218 billion of Italian public debt, EUR 48 million of Greek public debt and no Irish public debt.
Net funding from the ECB totals EUR 8.3 billion, which represents a YoY reduction of EUR 5.4 billion.
BES Group's solvency ratios are calculated under the Basel II regulations. From 1Q09 onwards BES Group has been authorised by the Bank of Portugal to use the Internal Ratings Based (IRB) approach for credit risk and the Standardised Approach – TSA method for operational risk.
Under the Portuguese banking regulations (Bank of Portugal Notice 3/2011) the Portuguese banks should report a Core Tier I ratio of 10% in December 2012. On the other hand, European banks, including Portuguese banks, should post a Core Tier I of 9% by June 30th, 2012, calculated according to the definition established by the European Banking Authority (EBA).
At the end of 3Q10, the Basel Committee on Banking Supervision made several decisions regarding the functioning of the global financial system, that have resulted in a set of recommendations, named Basel III. Banks will have a transitory period (from January 1st, 2013 to January 1st, 2019) to comply with the approved rules, aimed at strengthening financial institutions and preventing new financial crises in the future.
Basel III rules have established the following regulatory framework to be gradually implemented by January 1st, 2019:
BES Group closely follows the development process of the future regulatory framework, as well as all the efforts carried out to define the final rules for new capital ratios in the European Union.
The table below provides the relevant information about risk weighted assets, regulatory capital and solvency ratios under the BISII IRB approach.
| EUR million | ||
|---|---|---|
| 30-Jun-13 | 31-Dec-12 | |
| Risk Weighted Assets (A) | 60 685 | 61 681 |
| Banking Book Trading Book Operational Risk |
55 443 1 548 3 694 |
56 484 1 503 3 694 |
| Regulatory Capital | ||
| Core Tier I (B) | 6 293 | 6 471 |
| Core Tier I EBA (B') | 5 801 | 6 092 |
| Tier I (C) | 6 124 | 6 439 |
| Tier II and Deductions | 397 | 518 |
| TOTAL (D) | 6 521 | 6 957 |
| Core Tier I (B/A) | 10,4% | 10,5% |
| Core Tier I EBA (E/A) | 9,6% | 9,9% |
| Tier I (C/A) | 10,1% | 10,4% |
| Solvency Ratio (D/A) | 10,7% | 11,3% |
Core Tier I capital decreased by EUR 178 million in 1H13, mainly through the incorporation under capital instruments of the period's results (-EUR 237 million) and the change in negative fair value reserves (-EUR 63 million), these being in part offset by the reduction in intangible assets and goodwill (EUR 130 million), which include the impact of BES Vida reinsurance operation.
As a result of the reduction of capitals and risk weighted assets, the Core Tier ratio stands at 10.4%, meeting the Bank of Portugal's requirement (minimum of 10%); under the EBA calculation method, the Core Tier I ratio is 9.6%, which is above the minimum 9% established by the European authority.
The table below lists the reference indicators under Bank of Portugal instruction no. 16/2004, as amended by instructions nos. 16/2008, 23/2011 and 23/2012, for June 2013 and June 2012.
| 30-Jun-13 | % 30-Jun-12 |
|
|---|---|---|
| SOLVENCY | ||
| Regulatory Capital / RWA (a) | 10,7 | 11,1 |
| Tier I / RWA(a) | 10,1 | 10,4 |
| Core Tier I / RWA (a) | 10,4 | 10,5 |
| ASSET QUALITY | ||
| Overdue & Doubtful Loans (b) / Gross Loans (c) | 6,2 | 4,2 |
| Overdue & Doubtful Loans net of Provisions (c)/ Net Loans(c) | 0,0 | -0,5 |
| Credit at Risk(c/f) / Gross Loans(c) | 10,7 | 7,9 |
| Credit at Risk net of Provisions (c/f)/ Net Loans (c) | 4,9 | 3,3 |
| PROFITABILITY | ||
| Income before Tax and Minorities / Average net Assets | -0,8 | 0,5 |
| Banking Income (d)/Average Net Assets | 2,4 | 2,9 |
| Income before Tax and Minorities/ Average Equity(e) | -8,9 | 5,9 |
| EFFICIENCY | ||
| General Admin Costs (d)+ Depreciation / Banking Income (d) | 57,3 | 47,0 |
| Staff Costs / Banking Income (d) | 29,5 | 24,5 |
| TRANSFORMATION | ||
| (Gross Loans(c)- Credit Impairments(c) / Customer Deposits (f) | 125 | 147 |
(a) Under IRB Foundation (b) According to BoP Circular Letter nº 99/2003/DSB ( c) According to BoP Instruction 22/2011 ( d) According to BoP instruction 16/2004
( e) Includes Minority Interests
( f) According to BoP instruction nº23/2004
The indicators show: (i) solvency ratios comply with the Bank of Portugal's recommended minimum levels; (ii) credit quality indicators deteriorated; iii) profitability indicators reflect the net loss reported in the period; (iv) efficiency levels deteriorated due to the reduction in banking income; and (v) the transformation ratio improved.
The positive evolution of Portugal's GDP in the second quarter opened expectations that this performance would be confirmed in the second half of the year.
However, the economic and financial adjustment process which Portugal is going through and the recession that has also been affecting the European Union should continue to take their toll on the performance of the national financial sector over the next six months. Hence these are the main risks and uncertainties that may affect the activity and results of BES Group during the second half of 2013: (i) the Portuguese Government's level of success in achieving the goals and commitments agreed with the EC/ECB/IMF under the Economic and Financial Policy Memorandum; (ii) the general evolution of the financial markets, namely in connection to the pace of the gradual and conditional withdrawal of stimuli by the North-American monetary authority; (iii) the ECB's conduct of the monetary policy, particularly with regard to the future evolution of benchmark interest rates; (iv) the persistence of the Portuguese banking sector's difficulties of access to the monetary and financial markets; and (v) the need to bolster the attraction of customer funds in the current context where the Portuguese banks are struggling with restricted access to the international markets.
Faced with these prospects, BES Group's activity in the second half of the year should continue to be developed according to the following guidelines:
The attached Notes to the Financial Statements contain a description of the management approach to the main activity risks (credit, market, liquidity and operational risks) to which BES Group and BES are exposed through the regular development of their activities.
BES registered a EUR 5.7 billion year-on-year drop in assets, mainly driven by a EUR 4.4 billion reduction in the available for sale portfolio (down by EUR 4.4 billion). On the funding side, customer deposits increased by EUR 4.7 billion, while bank funding (which includes operations with the ECB) decreased by EUR 8.1 billion.
On-balance sheet customer funds were up by 13.9% year-on-year, underpinned by a 16.0% increase in deposits, with total customer funds rising by 12.0%, to EUR 53.7 billion.
| Eur million | ||||
|---|---|---|---|---|
| 30-Jun-13 | 30-Jun-12 | Change | ||
| absolute | relative | |||
| Net Assets | 67 432 | 73 132 | -5 700 | -7,8% |
| Customer Loans | 40 345 | 40 869 | - 524 | -1,3% |
| Loans to individuals | 10 044 | 10 519 | - 475 | -4,5% |
| - Mortgage | 8 012 | 8 350 | - 338 | -4,0% |
| - Other Loans to Individuals | 2 032 | 2 169 | - 137 | -6,3% |
| Corporate Lending | 30 301 | 30 350 | - 49 | -0,2% |
| Total Customer Funds | 53 685 | 47 917 | 5 768 | 12,0% |
| - On-Balance Sheet Customer Funds | 37 402 | 32 828 | 4 574 | 13,9% |
| Deposits | 34 169 | 29 451 | 4 718 | 16,0% |
| Debt Securities placed with Clients | 3 233 | 3 377 | - 144 | -4,3% |
| -Off-Balance Sheet Customer Funds | 16 283 | 15 089 | 1 194 | 7,9% |
In terms of asset quality, the overdue loans ratio (>90 days) increased to 5.98% (Dec.12: 4.58%), with a corresponding provision coverage of 116.6%. The ratio of provisions to total credit (outstanding and overdue) has been consistently increasing, reaching 6.97% (up from 5.35% in Jun.12).
| 30-Jun-13 31-Dec-2012 30-Jun-12 |
||||||
|---|---|---|---|---|---|---|
| absolute | relative | |||||
| EUR million | ||||||
| Customer Loans (gross) | 40 345 | 39 269 | 40 869 | 1 076 | 2,7% | |
| Overdue Loans | 2635,1 | 2003,0 | 1724,0 | 632,1 | 31,6% | |
| Overdue Loans > 90 days | 2412,1 | 1798,4 | 1526,4 | 613,7 | 34,1% | |
| Provisions for Credit | 2811,8 | 2402,1 | 2184,8 | 409,7 | 17,1% | |
| (%) | ||||||
| Overdue Loans/Customer Loans (gross) | 6,53 | 5,10 | 4,22 | 1,43 p.p. | ||
| Overdue Loans> 90 days/ Customer Loans (gross) | 5,98 | 4,58 | 3,73 | 1,40 p.p. | ||
| Coverage of Overdue Loans | 106,7 | 119,9 | 126,7 | -13,2 p.p. | ||
| Coverage of Overdue Loans > 90 days | 116,6 | 133,6 | 143,1 | -17,0 p.p. | ||
| Provisions for Credit (Balance) / Customer Loans | 6,97 | 6,12 | 5,35 | 0,85 p.p. |
Asset Quality Asset
BES's results in the period, a net loss of EUR 465.8 million, translate the reinforcement of provisions for impairments in light of the increase in the number of insolvencies and unemployment, which were also responsible for a significant drop in revenues. The economic recession and a domestic context of strong financial restrictions, namely very limited access to the capital markets, the inexistence of an interbank market, fierce competition over customer funds and benchmark interest rates maintained at historical lows, inevitably impacted the quality of assets and their contribution to banking income.
| EUR million | ||||
|---|---|---|---|---|
| Change | ||||
| Jun,13 | Jun,12 | absolute | relative | |
| Net Interest Income | 166,0 | 367,4 | -201,4 | -54,8% |
| + Fees and Commissions | 268,4 | 224,7 | 43,7 | 19,4% |
| = Commercial Banking Income | 434,4 | 592,1 | -157,7 | -26,6% |
| + Capital Markets and Other Results | -63,1 | 309,5 | -372,6 | …. |
| = Banking Income | 371,3 | 901,6 | -530,3 | -58,8% |
| - Operating Costs | 371,2 | 381,1 | -9,9 | -2,6% |
| = Operating Income | 0,1 | 520,5 | -520,4 | -100,0% |
| - Net Provisions | 585,8 | 308,8 | 277,0 | 89,7% |
| Credit | 492,1 | 277,7 | 214,4 | 77,2% |
| Securities | 60,8 | 29,7 | 31,1 | 104,3% |
| Other | 32,9 | 1,4 | 31,5 | …. |
| = Income before Taxes | -585,7 | 211,7 | -797,4 | …. |
| - Taxes | -132,2 | 42,9 | -175,1 | …. |
| - Special tax on Banks | 12,3 | 13,3 | -1,0 | -7,0% |
| = Net Income | -465,8 | 155,5 | -621,3 | …. |
Banking income fell by 58.8% relative to June 2012, driven by reductions in both net interest income (-54.8%), and in capital markets and other results (to a loss of EUR 63.1 million). On the other hand, fees and commissions increased by 19.4% while operating costs were reduced by 2.6%. Provisions were reinforced by a total of EUR 585.8 million (+ 89.7% YoY), of which 84% were provisions for loan impairments.
In compliance with Article 9 (1-a)) of CMVM regulation no. 5/2008, the table below lists the members of BES Corporate Bodies who on 30 June 2013 held securities or related financial instruments issued by BES.
| Transactions in 1H13 | |||||||
|---|---|---|---|---|---|---|---|
| Shareholder | Shares | Nº of shares as of 31/12/2012 |
Date | Acquisitions | Disposals | Price (EUR) |
Nº of shares as of 30/06/2013 |
| RICARDO ESPÍRITO SANTO SILVA SALGADO | BES Shares | 3 806 915 | - | - | - | - 3 806 915 |
|
| JOSÉ MANUEL PINHEIRO ESPÍRITO SANTO SILVA | BES Shares | 1 009 271 | - | - | - | - 1 009 271 |
|
| ANTÓNIO JOSÉ BAPTISTA DO SOUTO | BES Shares | 106 081 | - | - | - | - 106 081 |
|
| JORGE ALBERTO CARVALHO MARTINS | BES Shares | 144 058 | - | - | - | - 144 058 |
|
| ANÍBAL DA COSTA REIS DE OLIVEIRA | BES Shares | 1 010 000 | 1 010 000 | ||||
| MANUEL FERNANDO MONIZ GALVÃO ESPÍRITO SANTO SILVA |
BES Shares | 6 831 | - | - | - | - 6 831 |
|
| JOSÉ MARIA ESPÍRITO SANTO SILVA RICCIARDI | BES Shares | 30 000 | - | - | - | - 30 000 |
|
| RUI MANUEL DUARTE SOUSA DA SILVEIRA | BES Shares | 6 366 | - | - | - | - 6 366 |
|
| JOAQUIM ANÍBAL BRITO FREIXIAL DE GOES | BES Shares | 151 204 | - | - | - | - 151 204 |
|
| RICARDO ABECASSIS ESPÍRITO SANTO SILVA | BES Shares | 160 000 | - | - | - | - 160 000 |
|
| AMÍLCAR CARLOS FERREIRA DE MORAIS PIRES | BES Shares | 334 725 | - | - | - | - 334 725 |
|
| JOÃO EDUARDO MOURA DA SILVA FREIXA | BES Shares | 131 281 | - | - | - | - 131 281 |
|
| PEDRO MOSQUEIRA DO AMARAL | BES Shares | 192 500 | - | - | - | - 192 500 |
|
| HORÁCIO LUIS AFONSO | BES Shares | 4 125 | - | - | - | - 4 125 |
| Transactions in 1H13 | |||||||
|---|---|---|---|---|---|---|---|
| Bondholder | Securities | Nº of Bonds as of 31/12/2012 |
Date | Acquisitions | Disposals | Price (EUR) |
Nº of Bonds as of 30/06/2013 |
| ALBERTO ALVES DE OLIVEIRA PINTO | Obrigações BES 4 anos 7% (PTBEQGOM0015) |
100 000 | - | - | - | - | 100 000 |
| Obrigações BES LDN 05/12 (SCEBESOOE0608) |
252 000 | 13-02-2013 | - | 252 000 | 92% | 0 | |
| JOSÉ MANUEL PINHEIRO ESPÍRITO SANTO SILVA |
Obrigações BES 5,625% DUE junho 2014 |
200 000 | - | - | - | - | 200 000 |
| ANTÓNIO JOSÉ BAPTISTA DO SOUTO | Obrigações BES 5,625% DUE junho 2014 |
350 000 | - | - | - | - | 350 000 |
| Obrigações BES DUE 02/2013(PTBLMWOM0002) |
350 000 | 30-01-2013 | - 350 000 |
99% | 0 | ||
| Obrigações BES LDN 07/12 (SCBESOOE0678) |
167 000 | - | - | - | - | 167 000 | |
| JORGE ALBERTO CARVALHO MARTINS | Obrigações BES 2009/ 05-06-2014 |
250 000 | - | - | - | - | 250 000 |
| ANÍBAL DA COSTA REIS DE OLIVEIRA | Obrigações BES Finance 0312 (SCBES0OE0567) |
302 000 | 10-01-2013 | - | 116 000 | 86% | |
| 25-03-2013 | - | 186 000 | 87% | 0 | |||
| RUI MANUEL DUARTE SOUSA DA SILVEIRA |
Obrigações BES LDN 05/12 (SCBES0OE0626) |
108 000 | 28-01-2013 | - | 108 000 | 91% | 0 |
| BES LUX 01/13 07P01 (SCBES0OE0779) |
0 | 29-01-2013 | 140 000 | - | 71% | 140 000 | |
| JOAQUIM ANÍBAL BRITO FREIXIAL DE GOES |
Obrigações BES 5,625% DUE junho 2014 |
50 000 | - | - | - | - | 50 000 |
| AMÍLCAR CARLOS FERREIRA DE MORAIS PIRES |
Obrigações BES DUE 3,875% 2015 |
250 000 | - | - | - | - | 250 000 |
| Obrigações BES DUE 5,625% junho 2014 |
250 000 | - | - | - | - | 250 000 | |
| JOÃO EDUARDO MOURA DA SILVA FREIXA |
Obrigações BES Finance 0312 (SCBES0OE0567) |
233 000 | 25-03-2013 | - | 233 000 | 87% | 0 |
| Obrigações BES LDN 10/12 (SCBES0OE0752) |
1 069 000 | - | - | - | - | 1 069 000 | |
| RICARDO ABECASSIS ESPÍRITO SANTO SILVA |
Obrigações BES 5,625% | 50 000 | - | - | - | - | 50 000 |
For compliance with Article 14 (6 and 7) of CMVM Regulation no. 5/2008, the table below lists the transactions of BES shares or related financial instruments carried out during the first half of 2013 by other senior executives of BES or of companies having control over BES, or by persons having a close connection to the former.
| Nº of shares | Transactions in 1H13 | Nº of Shares | |||||
|---|---|---|---|---|---|---|---|
| Shareholder | Shares | as of 31/12/2012 |
Date | Acquisitions Disposals | Price (EUR) |
as of 30/06/2013 |
|
| António Manuel Rodrigues Marques | BES Shares | 133 797 | - | - | - | - | 133 797 |
| António Miguel Natário Rio -Tinto | BES Shares | 13 453 | 08-02-2013 | - | 13 453 | 0,997 | 0 |
| Bernardo Leite Faria Espírito Santo | BES Shares | 7 636 | - | - | - | - | 7 636 |
| Isabel Maria Carvalho de Almeida Bernardino | BES Shares | 176 043 | - | - | - | - | 176 043 |
| João Filipe Carvalho Martins Pereira | BES Shares | 45 226 | - | - | - | - | 45 226 |
| João Maria de Magalhães Barros de Mello Franco | BES Shares | 82 385 | - | - | - | - | 82 385 |
| Jorge Daniel Lopes da Silva | BES Shares | 36 423 | - | - | - | - | 36 423 |
| José Alexandre Maganinho Pinto Ribeiro | BES Shares | 220 000 | - | - | - | - | 220 000 |
| Manuel José Dias de Freitas | BES Shares | 91 767 | 11-03-2013 | - | 80 000 | 0,960 | 11 767 |
| Paulo António Estima da Costa Gonçalves Padrão | BES Shares | 18 023 | - | - | - | - | 18 023 |
| Pedro Roberto Menéres Cudell | BES Shares | 35 000 | - | - | - | - | 35 000 |
| Rui José Costa Raposo | BES Shares | 3 361 | - | - | - | - | 3 361 |
| Rui Manuel Fernandes Pires Guerra | BES Shares | 439 100 | - | - | - | - | 439 100 |
Also for compliance with Article 14 (6 and 7) of CMVM Regulation no. 5/2008, there follows a list of the transactions of Banco Espírito Santo S.A. shares or related financial instruments carried out during the first half of 2013 by members of its corporate bodies and other senior executives.
| Date | Securities | Transaction | Nº of securitues |
Price (EUR) |
||
|---|---|---|---|---|---|---|
| António Miguel Natário Rio -Tinto | 08-02-2013 | BES Shares Disposal |
3 599 | 0,997 | ||
| 9 854 | 0,997 | |||||
| Manuel José Dias de Freitas | 11-03-2013 | BES Shares | Disposal | 7 958 | 0,960 | |
| 72 042 | 0,960 |
The table below lists the qualified holdings in BES share capital as at 30 June 2013, calculated under the terms of Article 20 of the Securities Code, for compliance with the provisions of Article 9 (1-c)) of CMVM Regulation no. 05/2008.
| March 2013 | |||
|---|---|---|---|
| QUALIFIED STAKES | N Shares | % Voting Rig hts |
|
| ESPIRITO SANTO FINANCIAL GROUP, S.A (Luxembourg ) | |||
| - directly | 42.982.596 | 1,07% | |
| - through BESPAR, SGPS, S.A (controlled by Espirito Santo Financial (Portugal), SGPS, S.A., | |||
| fully owned by Espirito Santo Financial Group S.A) | 1.417.916.095 | 35,29% | |
| - through members of its Board of Directors and Supervisory Bodies | 7.421.472 | 0,18% | |
| - through companies controlled directly and indirectly and/or members of its Board of Directors | |||
| and Supervisory Bodies | 22.458.331 | 0,56% | |
| Total attributable Total attributable |
1.4 90.778.4 9494 1.4 90.778.4 94 |
37,10% | |
| CRÉDIT AGRICOLE, S.A (France) | |||
| - directly | 434.252.321 | 10,81% | |
| Total attributable Total attributable |
4 4 34 .252.321 .252.321 |
10,81% | |
| BRADPORT, SGPS, S.A* | |||
| - directly | 194.104.165 | 4,83% | |
| Total attributable Total attributable |
194 .104 .165 .104 .165 .165 |
4 ,83% | |
| SILCHESTER INTERNATIONAL INVESTORS LIMITED (UK) | |||
| - directly | 226.727.742 | 5,64% | |
| Total attributable Total attributable |
226.727.74 2 2 2 |
5,64 % | |
| PORTUGAL TELECOM, SGPS, S.A | |||
| - through PT Prestações - Mandatária de aquisições e gestão de bens, S.A. | 84.109.047 | 2,09% | |
| - through members of its Board of Directors and Supervisory Bodies | 485.929 | 0,01% | |
| Total attributable Total attributable |
84 84 .594 .976 .976 84 .594 .976 |
2.10% | |
| CAPITAL RESEARCH AND MANAGEMENT | |||
| - directly | 102.979.223 | 2,56% | |
| Total attributable Total attributable |
102.979.223 102.979.223 102.979.223 |
2,56% | |
* Portug uese company fully owned by Banco Bradesco (Brasil)
Transactions involving the Bank's own shares in the first half of 2013 related exclusively to those carried out by the BES Vida, Companhia de Seguros, which held shares in BES.
| Number of shares |
Price (Eur) |
Total (euro thousand) |
|
|---|---|---|---|
| Balance as at dec 12 | 10 388 056 | 0,673 | 6 991 |
| Acquisitions in the period (1) | 2 084 826 | 0,896 | 1 868 |
| Disposals in the period (1) | 12 197 591 | 0,661 | 8 058 |
| Balance as at June, 30 2013 June, 30 2013 |
275 291 275 275 291 |
2,909 - |
801 |
(1) Shares acquired/disposed that are now integrated and/or are not in BES Vida protfolio
Detailed information about movements in own shares is provided in Note 44 to the Consolidated Financial Statements.
In its Circular Letter no. 58/2009/DSB of 5 August 2009, the Bank of Portugal reiterated "the need for institutions to maintain adequate compliance with the recommendations of the Financial Stability Forum (FSF), as well as those issued by the Committee of European Banking Supervisors (CEBS), concerning the transparency of information and the valuation of assets, taking into account the proportionality principle", as set out in Circular Letters no. 46/08/DSBDR of 15 July 2008 and no. 97/08/DSB of 3 December 2008.
The Bank of Portugal recommends the inclusion in the reporting documents of a specific chapter or annex exclusively dedicated to the issues dealt with in the CEBS and FSF recommendations.
This chapter aims to ensure compliance with the Bank of Portugal's recommendation, including references to where the information provided may be found within the body of the Management Report or in the Notes to the Financial Statements, or, in the present case of an Interim Report, in other documents previously disclosed by BES Group, namely the 2012 Management Report and Notes to 2012 Financial Statements.
A detailed description of the Group's business model is provided in Item 4 of the 2012 Management Report. The performance of the Group's main business areas (operating segments) may be found in Item 4.2 of the first half of 2013 Management Report and in Note 41.
1 The numbering refers to the Notes to the Interim Consolidated Financial Statements
A detailed description of the Group's strategy and objectives is provided in Item 1 of the 2012 Management Report and Note 51 to the 2012 and first half of 2013 Financial Statements, under Funding and Capitalisation Plans (2011—2015), with no relevant changes in strategic guidelines since the publication of the reports.
The securitisation transactions are detailed in Note 49.
Item 4.2 of the first half of 2013 Management Report and Note no. 4 contain detailed information about the activity developed and its contribution to the business.
Item 6 of the 2012 Management Report describes how the Risk Management function is organised within BES Group; this information is still up to date.
Note 51 contains diverse information that in total allows the market to form a thorough perception about the risks incurred by the Group and the management mechanisms in place to monitor and control such risks.
Activity during 2012 was conducted in a climate of deterioration of Portugal's economic situation, with a negative impact on risk. Consequently the Group reinforced provisions by a total of EUR 1430.0 million (EUR 609.0 million more than in 2011).
For most of the first half of 2013 activity was framed by the continued aggravation of the country's economic situation and resulting strong increase in risk. The provision charge was consequently increased to 2.16% (FY12: 1.62%). In addition, the devaluation of financial instruments' prices during the period reduced the fair value reserve by EUR 233.2 million.
The profit and loss of assets and liabilities held for trading and of assets at fair value and assets available for sale are detailed by financial instrument in Notes 7 and 8. In addition, non realised gains and losses on assets available for sale are detailed in Notes 23 and 45, while the most significant positions are decomposed in Note 23.
Item 1 of the 2012 Management Report and item III.8 of the 2012 Corporate Governance Report present the BES share price performance in 2012. During the first half of 2013 the BES share dropped from EUR 0,895 at the
start of the period to EUR 0.615 at the end of June, which represents a devaluation of 31.3%. We believe this devaluation, which mostly occurred in the latter part of the period, was associated to the uncertainty provoked by a possible tapering of quantitative easing by the North-American Federal Reserve, which affected the performance of equity markets at global level.
Note 51 contains the relevant information about potential losses in market stress situations.
Note 50 describes the impact of debt revaluation and the methods used to calculate this impact on the Results.
As at 30 June 2013 BES Group's total exposure to the peripheral Eurozone countries' public debt was EUR 6.6 billion (Dec.12: 3.9 billion), of which EUR 4.4 billion to Portugal (Dec.12: EUR 3.9 billion), EUR 1.9 billion to Spain (Dec.12: EUR 606 million), EUR 218 million to Italy (Dec.12: EUR 28 million), and EUR 48 million to Greece (Dec.12: EUR 3 million). The Group had no exposure to Irish public debt as of that date.
Note 51 to the 2012 and first half of 2013 Financial Statements contains information comparing the exposures and results. Such information is considered sufficient taking into account the detail and quantification provided.
All the structures related to securitisation operations originated by the Group are presented in Note 49. None of the SPEs was consolidated due to the market turbulence.
The Group does not have exposures to monoline insurers.
These situations are described in Note 2 – Main accounting policies.
Disclosure available in Notes 2 and 49.
See the comments to item 16 of this Annex. Notes 2 and 50 contain the conditions for utilisation of the fair value option as well as the methodology used to value the financial instruments.
The BES Group, within the context of accounting and financial information disclosure, complies with all the regulatory requirements, defined by the accounting standards or by the supervisory and regulatory entities.
At the same time, the Group aims to meet the best market practices in information disclosure, balancing the cost of preparing the relevant information with the benefit that it may provide to the users.
From the information made available to the Group's shareholders, clients, employees, supervisory entities and the public in general, we highlight the Annual, Interim and Quarterly Management Reports, the Financial Statements and the respective Notes, and the Corporate Governance Report.
The management reports and financial statements, released on a quarterly basis, are prepared under IFRS that comply with the highest degree of disclosure and transparency and facilitate comparison to other domestic and international banks.
The Corporate Governance Report provides a detailed view about the governing structure of the Group.
The Social Responsibility Report, which forms an integral part of the Annual Management Report, conveys the Group's perspective about social responsibility in the context of the numerous challenges that the modern world faces, whether of an environmental or social nature, or pertaining to innovation and entrepreneurship.
The website (www.bes.pt) is used as a favoured tool for disclosing all the relevant information about BES Group.
A detailed description of all the means used by the Group to communicate with the financial community is provided in item III.16 of the 2012 Corporate Governance Report.
In accordance with Article 246 (1-c)) of the Securities Code, the Board of Directors of Banco Espírito Santo, S.A., whose members are named hereunder, hereby declares that:
Lisbon, 26 July 2013
The Board of Directors
Ricardo Espírito Santo Silva Salgado, Vice-Chairman of the Board of Directors and Chairman of the Executive Committee
Amílcar Carlos Ferreira de Morais Pires, Carlos Ferreira de Morais Member of the Board of Directors and of the Executive Committee
| Jun,12 | Dec,12 | Jun,13 | |
|---|---|---|---|
| (eur '000) | (eur '000) | (eur '000) | |
| ASSETS | |||
| Cash and deposits at Central Banks | 1 645 779 | 1 377 541 | 1 209 218 |
| Deposits with banks | 723 147 | 681 077 | 565 008 |
| Financial assets held for trading | 3 904 089 | 3 925 399 | 3 218 830 |
| Financial assets at fair value through profit or loss | 3 193 701 | 2 821 553 | 3 893 846 |
| Available-for-sale financial assets | 14 298 311 | 10 755 310 | 12 129 272 |
| Loans and advances to banks | 2 084 440 | 5 426 518 | 2 453 506 |
| (of which of the European system of Central Banks) | - | (3 350 000) | (1 200 000) |
| Loans and advances to customers | 48 740 843 | 47 706 392 | 47 976 727 |
| (Provisions) | (2 434 698) | (2 692 342) | (3 134 195) |
| Held-to-maturity investments | 1 310 181 | 941 549 | 1 025 271 |
| Financial assets with repurchase agreements | - | - | - |
| Hedging derivatives | 484 841 | 516 520 | 391 719 |
| Non-current assets held for sale | 2 164 049 | 3 277 540 | 3 365 181 |
| Investment properties | 385 311 | 441 988 | 393 232 |
| Other tangible assets | 864 595 | 931 622 | 954 282 |
| Intangible assets | 485 202 | 555 326 | 404 514 |
| Investments in associates | 577 263 | 580 982 | 608 300 |
| Current income tax assets | 37 894 | 24 648 | 32 926 |
| Deferred income tax assets | 665 476 | 728 905 | 935 750 |
| Reinsurance Technical Provisions | 3 097 | 3 804 | 12 082 |
| Other assets | 3 723 982 | 2 994 154 | 3 046 075 |
| Direct and Indirect Insurance Creditors | 8 564 | 567 | 352 078 |
| Other | 3 715 418 | 2 993 587 | 2 693 997 |
| TOTAL ASSETS | 85 292 201 | 83 690 828 | 82 615 739 |
| LIABILITIES | |||
| Deposits from central banks | 14 355 628 | 10 893 320 | 10 041 724 |
| (of which of the European System of Central Banks) | (13 697 132) | (10 279 382) | (9 495 599) |
| Financial liabilities held for trading | 2 166 806 | 2 122 025 | 1 568 181 |
| Other financial liabilities at fair value through profit or loss | - | - | - |
| Deposits from banks | 5 767 090 | 5 088 658 | 5 197 142 |
| Due to customers | 32 764 762 | 34 540 323 | 37 911 655 |
| Debt securities | 15 615 163 | 15 424 061 | 12 732 272 |
| Financial liabilities to transferred assets | - 184 334 |
- 125 199 |
- 169 602 |
| Hedging derivatives | |||
| Investment contracts | 1 844 172 | 3 413 563 | 3 474 902 |
| Non current liabilities held for sale | 165 429 | 175 945 | 155 579 |
| Provisions | 186 671 | 236 950 | 192 602 |
| Technical provisions | 1 816 956 | 1 577 408 | 1 494 592 |
| Current income tax liabilities | 44 495 | 221 199 | 123 261 |
| Deferred income tax liabilities | 135 536 | 154 015 | 171 761 |
| Capital instruments | - | - | - |
| Other subordinated loans | 833 727 | 839 816 | 830 932 |
| Other liabilities | 1 886 752 | 1 145 602 | 1 319 792 |
| Direct and Indirect Insurance Creditors | 11 098 | 2 040 | 22 415 |
| Other liabilities | 1 875 654 | 1 143 562 | 1 297 377 |
| TOTAL LIABILITIES | 77 767 521 | 75 958 084 | 75 383 997 |
| EQUITY | |||
| Capital | 5 040 124 | 5 040 124 | 5 040 124 |
| Share Premium | 1 066 932 | 1 069 517 | 1 068 670 |
| Other capital instruments | 29 469 | 29 295 | 29 322 |
| Treasury stock | ( 11 415) | ( 6 991) | ( 801) |
| Preference shares | 193 094 | 193 289 | 167 952 |
| Fair value reserve | ( 821 210) | ( 686 666) | ( 885 760) |
| Other reserves and retained earnings | 1 339 526 | 1 328 630 | 1 399 469 |
| Profit for the period attributable to equity holders of the bank | 25 457 | 96 101 | ( 237 455) |
| Prepaid dividends | - | - | - |
| Minority interests | 662 703 | 669 445 | 650 221 |
| TOTAL EQUITY | 7 524 680 | 7 732 744 | 7 231 742 |
| TOTAL LIABILITIES AND EQUITY | 85 292 201 | 83 690 828 | 82 615 739 |
Chief Account Board of Directors
| Jun,12 | Jun,13 | |
|---|---|---|
| (eur '000) | (eur '000) | |
| Interest and similar income | 2 067 513 | 1 726 023 |
| Interest expense and similar charges | 1 459 870 | 1 255 637 |
| Net Interest Income | 607 643 | 470 386 |
| Dividend income | 100 575 | 52 751 |
| Fee and Commission income | 525 836 | 422 491 |
| Fee and Commission expense | 91 896 | 94 300 |
| Net gains from financial assets at fair value through profit or loss | ( 16 251) | ( 162 404) |
| Net gains from available-for-sale financial assets | 84 994 | 240 880 |
| Net gains from foreign exchange differences | ( 869) | ( 1 755) |
| Net gains/ (losses) from sale of other assets | ( 24 974) | ( 4 126) |
| Insurance earned premiums net of reinsurance | 16 734 | 14 977 |
| Claims incurred net of reinsurance | 76 266 | 122 469 |
| Change on the technical provision net of reinsurance | 60 650 | 274 477 |
| Other operating income and expense | ( 15 819) | ( 122 603) |
| Operating income | 1 170 357 | 968 305 |
| Staff costs | 291 512 | 289 532 |
| General and administrative expenses | 214 189 | 220 939 |
| Depreciation and amortisation | 53 756 | 52 499 |
| Provisions impairment net of reversals | 678 | ( 29 777) |
| Loans impairment net of reversals | 352 001 | 553 096 |
| Impairment on other financial assets net of reversals | 18 865 | 52 685 |
| Impairment on other assets net of reversals | 54 843 | 171 238 |
| Negative consolidation differences | - | - |
| Equity accounted earnings | 7 282 | 1 089 |
| Net income before income tax and minorities | 191 795 | ( 340 818) |
| Income tax | ||
| Current tax | 44 899 | 108 849 |
| Deferred Tax | 56 624 | ( 211 753) |
| Net income | 90 272 | ( 237 914) |
| ow: profit after taxes of discontinued operations | ( 2 582) | ( 3 133) |
| Minority interests | 64 815 | ( 459) |
| Consolidated net income for the period | 25 457 | ( 237 455) |
Chief Account Board of Directors
| euro thousand | ||||
|---|---|---|---|---|
| Jun,13 | ||||
| amount before provisions, impairment and depreciations |
provisions, impairment and depreciations |
Net amount | Jun,12 | |
| ASSETS | ||||
| Cash and deposits at Central Banks | 451 915 | - | 451 915 | 905 445 |
| Deposits with banks | 176 147 | - | 176 147 | 208 357 |
| Financial assets held for trading | 1 386 109 | - | 1 386 109 | 1 968 947 |
| Financial assets at fair value through profit or loss | 3 092 980 | - | 3 092 980 | 2 057 090 |
| Available-for-sale financial assets | 9 596 514 | 286 708 | 9 309 806 | 13 702 088 |
| Loans and advances to banks | 6 501 392 | 55 | 6 501 337 | 6 434 969 |
| Customer loans | 40 344 697 | 2 423 904 | 37 920 793 | 39 105 280 |
| Held-to-maturity investments | 661 155 | 25 565 | 635 590 | 763 287 |
| Repurchase agreements | - | - | - | - |
| Derivatives for risk management purposes | 340 280 | - | 340 280 | 447 482 |
| Non-current assets held for sale | 1 555 691 | 213 581 | 1 342 110 | 1 067 709 |
| Invesment properties | - | - | - | - |
| Proprety and equipment | 1 074 199 | 744 782 | 329 417 | 357 388 |
| Intangible assets | 667 456 | 561 911 | 105 545 | 111 919 |
| Investments in associates | 2 494 468 | 398 887 | 2 095 581 | 1 950 504 |
| Current income tax assets | 1 552 | - | 1 552 | 571 |
| Deferred income tax assets | 971 608 | - | 971 608 | 757 740 |
| Other assets | 2 884 387 | 113 442 | 2 770 945 | 3 293 291 |
| TOTAL ASSETS | 4 768 835 | 67 431 715 | 73 132 067 | |
| LIABILITIES | ||||
| Deposits from Central Banks Financial liabilities held for trading |
9 254 714 1 248 467 |
- - |
9 254 714 1 248 467 |
13 483 066 1 671 848 |
| Other financial liabilities at fair value through profit or loss | - | - | - | - |
| Deposits from banks | 5 106 462 | - | 5 106 462 | 8 975 915 |
| Due to customers | 34 169 149 | - | 34 169 149 | 29 451 165 |
| Debt securities issued | 8 887 163 | - | 8 887 163 | 9 251 204 |
| Financial liabilities to transferred assets | 775 072 | - | 775 072 | 1 071 907 |
| Derivatives for risk management purposes | 108 218 | - | 108 218 | 93 206 |
| Non core liabilities held for sale | - | - | - | - |
| Provisions | 515 598 | - | 515 598 | 545 455 |
| Current income tax liabilities | 33 330 | - | 33 330 | 10 938 |
| Defered income tax liabilities | 123 987 | - | 123 987 | 138 943 |
| Equity instruments | - | - | - | - |
| Subordinated debt | 796 665 | - | 796 665 | 799 330 |
| Other liabilities | 683 067 | - | 683 067 | 1 305 855 |
| TOTAL DE PASSIVO TOTAL LIABILITIES |
- | 61 701 892 | 66 798 832 | |
| EQUITY | ||||
| Share capital | 5 040 124 | - | 5 040 124 | 5 040 124 |
| Share premium | 1 060 774 | - | 1 060 774 | 1 059 036 |
| Other equity instruments | 220 756 | - | 220 756 | 225 958 |
| Treasury stock | ( 801) | - | ( 801) | ( 801) |
| Fair value reserve | ( 916 508) | - | ( 916 508) | ( 764 371) |
| Other reserves and retained earnings | 791 282 | - | 791 282 | 617 771 |
| Profit for the year | ( 465 804) | - | ( 465 804) | 155 518 |
| Dividends paid | - | - | - | - |
| TOTAL EQUITY | 5 729 823 | - | 5 729 823 | 6 333 235 |
| TOTAL LIABILITIES AND EQUITY | 5 729 823 | - | 67 431 715 | 73 132 067 |
Chief Account
The Board of Directors
| EUR thousand | ||
|---|---|---|
| Jun,13 | Jun,12 | |
| Interest and similar income | 1 154 519 | 1 587 623 |
| Interest expense and similar charges | 988 482 | 1 220 238 |
| Net Interest Income | 166 037 | 367 385 |
| Dividend income | 61 167 | 86 169 |
| Fee and comission income | 406 105 | 322 644 |
| Fee and comission expense | 143 242 | 105 022 |
| Net gains from financial assets at fair value through profit or loss | ( 207 568) | ( 48 218) |
| Net gains from available-for-sale financial assets | 98 363 | 215 261 |
| Net gains from foreign exchange differences | ( 5 422) | ( 7 390) |
| Net gains from sale of other assets | 536 | ( 12 469) |
| Other operating income and expense | ( 17 056) | 69 945 |
| Operating Income | 358 920 | 888 305 |
| Staff costs | 175 643 | 178 728 |
| General and administrative expenses | 155 175 | 159 869 |
| Depreciation and amortisation | 40 378 | 42 527 |
| Provisions impairment net of reversals | ( 31 050) | ( 23 877) |
| Loans impairment net of reversals | 500 729 | 290 952 |
| Impairment on other financial assets net of reversals | 60 759 | 29 740 |
| Impairment on other assets net of reversals | 55 319 | 11 970 |
| Net Income Before Tax | ( 598 033) | 198 396 |
| Income tax | ( 132 229) | 42 878 |
| Current tax | 3 140 | 22 422 |
| Deferred tax | ( 135 369) | 20 456 |
| Net Income | ( 465 804) | 155 518 |
| ow: net income after discontinued operations | ( 925) | ( 2 655) |
Chief Account Board of Directors
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| Period of 3 months ended as at | Period of 6 months ended as at | |||||
| Notes | 30.06.2013 | 30.06.2012 | 30.06.2013 | 30.06.2012 | ||
| Interest and similar income | 5 | 865 670 | 995 264 | 1726023 | 2 067 513 | |
| Interest expense and similar charges | 5 | 617 136 | 682 167 | 1 255 637 | 1459870 | |
| Net interest income | 248 534 | 313 097 | 470 386 | 607 643 | ||
| Dividend income | 50 884 | 63 835 | 52751 | 100 575 | ||
| Fee and commission income | 6 | 212 968 | 284 066 | 422 491 | 525 836 | |
| Fee and commission expenses | 6 | (47777) | (46485) | (94300) | (91896) | |
| Net gains / (losses) from financial assets at fair value through profit or loss | 7 | (91915) | (13315) | (162404) | (16251) | |
| Net gains / (losses) from available-for-sale financial assets | 8 | 79878 | 144 834 | 240 880 | 84 994 | |
| Net gains / (losses) from foreign exchange differences | 9 | (16928) | (33781) | (1755) | (869) | |
| Net gains/ (losses) from the sale of other assets | 10 | 2 2 1 5 | (14336) | (4126) | (24722) | |
| Insurance earned premiums net of reinsurance | 11 | (5075) | 16 734 | 14 977 | 16734 | |
| Claims incurred net of reinsurance | 12 | (50392) | (76266) | (122469) | (76266) | |
| Change on the technical reserves net of reinsurance | 13 | 224 160 | 60 650 | 274 477 | 60 650 | |
| Other operating income and expense | 14 | (83545) | 43 5 7 5 | (122603) | 73767 | |
| Operating income | 523 007 | 742 608 | 968 305 | 1 260 195 | ||
| Staff costs | 15 | 143 888 | 148 421 | 289 532 | 291 512 | |
| General and administrative expenses | 17 | 112 025 | 112 006 | 220 939 | 214 189 | |
| Depreciation and amortisation | 30 and 31 | 26 555 | 27 102 | 52 499 | 53 756 | |
| Provisions net of reversals | 40 | (24015) | 6901 | (29/11) | 6/8 | |
| Loans impairment net of reversals and recoveries | 25 | 365 953 | 203 045 | 553 096 | 352 001 | |
| Impairment on other financial assets net of reversals and recoveries | 23, 24 and 26 | 34 382 | 16 591 | 52 685 | 18 865 | |
| Impairment on other assets net of reversals and recoveries | 28, 31 and 34 | 130 861 | 9 1 9 2 | 171 238 | 54 843 | |
| Operating expenses | 789 649 | 523 258 | 1 310 212 | 985 844 | ||
| Gains on disposal of investments in subsidiaries and associates | 1 | (252) | (252) | |||
| Losses arising on business combinations achieved in stages | 1 and 55 | (89586) | (89586) | |||
| Diferenças de consolidação negativas | ||||||
| Share of profit of associates | 32 | (744) | 3836 | 1 0 8 9 | 7 2 8 2 | |
| Profit before income tax | (267386) | 133 348 | (340818) | 191 795 | ||
| Income tax | ||||||
| Current tax | 41 | 65 175 | 3880 | 108 849 | 44 899 | |
| Deferred tax | 41 | (161812) | 80 133 | (211753) | 56 624 | |
| (96637) | 84 013 | (102904) | 101 523 | |||
| Profit for the year | (170749) | 49 335 | (237914) | 90 272 | ||
| Attributable to equity holders of the Bank | (175419) | 13 901 | (237455) | 25 457 | ||
| Attributable to non-controlling interest | 45 | 4670 | 35 434 | (459) | 64815 | |
| (170749) | 49 335 | (237914) | 90 27 2 | |||
| Earnings per share of profit attributable to the equity holders of the Bank | ||||||
| Basic (in Euro) | 18 | $-0.04$ | 0.00 | $-0.06$ | 0.01 | |
| Diluted (in Euro) | 18 | $-0.04$ | 0.00 | $-0.06$ | 0.01 |
| Period of 3 months ended as at | Period of 6 months ended as at | un uruusanus or curo | ||
|---|---|---|---|---|
| 30.06.2013 | 30.06.2012 | 30.06.2013 | 30.06.2012 | |
| Profit for the period | ||||
| Attributable to equity holders of the Bank Attributable to non-controlling interest |
(175419) 4670 |
13 901 35 4 34 |
237 455) 459) |
25 457 64 815 |
| (170749) | 49 335 | (237914) | 90 272 | |
| Other comprehensive income for the period | ||||
| Items that wont be reclassified into the Income Statement | ||||
| Long-term benefit | (12297) | (48370) | (12297) | (48462) |
| Income taxes on actuarial gains and losses from defined benefit obligations | 1708) | 48 370) | (1708) | |
| (14005) | 14005 | 48 462) | ||
| Items that may be reclassified into the Income Statement | ||||
| Exchange differences | 40 949) | 52731 | 5855 | 20 404 |
| Income taxes on exchange differences on translating foreign operations | 2056 | (7278) | 14959 | 3485 |
| 43 005) | 45 4 53 | 9104 | 16919 | |
| Available-for-sale financial assets Gains/ (losses) arising during the period |
(144830) | 252 174 | (43904) | 423 090 |
| Reclassification adjustments for gains/ (losses) included in the profit or loss | (45147) | (127240) | (186896) | (64398) |
| Deferred taxes | 33 611 | 3690 | 57 869 | 45 574) |
| (156366) | 128 624 | (172931) | 313 118 | |
| Total comprehensive income/(loss) for the period | 384 125) | 175 042 | 433 954) | 371 847 |
| Attributable to equity holders of the Bank | (373997) | 113 886 | (434164) | 297 620 |
| Attributable to non-controlling interest | (10128) | 61 156 | 210 | 74 227 |
| (384125) | 175 042 | (433954) | 371 847 |
| (in thousands of euro) | |||
|---|---|---|---|
| Notes | 30.06.2013 | 31.12.2012 | |
| Assets | |||
| Cash and deposits at central banks | 19 | 1 209 218 | 1 377 541 |
| Deposits with banks | 20 | 565 008 | 681 077 |
| Financial assets held for trading | 21 | 3 218 830 | 3925399 |
| Other financial assets at fair value through profit or loss | 22 | 3893846 | 2821553 |
| Available-for-sale financial assets | 23 | 12 129 272 | 10 755 310 |
| Loans and advances to banks | 24 | 2 453 506 | 5426518 |
| Loans and advances to customers | 25 | 47 976 727 | 47 706 392 |
| Held-to-maturity investments | 26 | 1 025 271 | 941 549 |
| Derivatives for risk management purposes | 27 | 391 719 | 516 520 |
| Non-current assets held for sale | 28 | 3 3 6 5 1 8 1 | 3 277 540 |
| Investment properties | 29 | 393 232 | 441 988 |
| Property and equipment | 30 | 954 282 | 931 622 |
| Intangible assets | 31 | 434 889 | 555 326 |
| Investments in associates | 32 | 608 300 | 580 982 |
| Current income tax assets | 32 926 | 24 648 | |
| Deferred income tax assets | 41 | 935 750 | 728 905 |
| Technical reserves of reinsurance ceded | 33 | 12 082 | 3804 |
| Other assets | 34 | 3 046 075 | 2994154 |
| Debtors from the insurance business | 352 078 | 567 | |
| Other assets | 2693997 | 2993587 | |
| Total Assets | 82 646 114 | 83 690 828 | |
| Liabilities | |||
| Deposits from central banks | 35 | 10 041 724 | 10 893 320 |
| Financial liabilities held for trading | 21 | 1 568 181 | 2 122 025 |
| Deposits from banks | 36 | 5 197 142 | 5 088 658 |
| Due to customers | 37 | 37 911 655 | 34 540 323 |
| Debt securities issued | 38 | 12 732 272 | 15 424 061 |
| Derivatives for risk management purposes | 27 | 169 602 | 125 199 |
| Investment contracts | 39 | 3 474 902 | 3 413 563 |
| Non-current liabilities held for sale | 28 | 155 579 | 175 945 |
| Provisions | 40 | 192 602 | 236 950 |
| Technical reserves of direct insurance | 33 | 1 494 592 | 1 577 408 |
| Current income tax liabilities | 123 261 | 221 199 | |
| Deferred income tax liabilities | 41 | 171 761 | 154 015 |
| Subordinated debt | 42 | ||
| 830 932 | 839 816 | ||
| Other liabilities | 43 | 1 350 167 | 1 145 602 |
| Creditors from insurance operations Other liabilities |
22 415 | 2 0 4 0 | |
| 1 327 752 | 1 143 562 | ||
| Total Liabilities | 75 414 372 | 75 958 084 | |
| Equity | |||
| Share capital | 44 | 5 040 124 | 5 040 124 |
| Share premium | 44 | 1 068 670 | 1 069 517 |
| Other equity instruments | 44 | 29 322 | 29 29 5 |
| Treasury stock | 44 | (801) | (6991) |
| Preference shares | 44 | 167 952 | 193 289 |
| Other reserves, retained earnings and other comprehensive income Profit for the period attributable to equity holders of the Bank |
45 | 513709 (237 455) |
641 964 96 101 |
| Total Equity attributable to equity holders of the Bank | 6 581 521 | 7 063 299 | |
| Non-controlling interest | 45 | 650 221 | 669 445 |
| Total Equity | 7 231 742 | 7 732 744 | |
| Total Equity and Liabilities | 82 646 114 | 83 690 828 |
| Other reserves, retained earnings and other comprehensive income |
Profit for the | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | Share premium |
Other equity instruments |
Treasury stock |
Preference shares |
Fair value reserve |
Other reserves. retained earnings and other comprehensive income |
Total | period attributable to equity holders of the Bank |
Total equity attributable to equity holders of the Bank |
Non- controlling interest |
Total equity |
|
| Balance as at 31 december 2011 | 4 030 232 | 1 081 663 | 29 50 5 | (997) | 211 913 | (445175) | 805 645 | 360 470 | (108758) | 5 604 028 | 588 447 | 6 192 475 |
| Other comprehensive income Changes in fair value, net of taxes Other comprehensive income appropriate from associates Exchange differences, net of taxes Profit for the period |
313 742 | (48277) 6 3 3 8 |
313 742 (48277) 6 3 3 8 |
25 457 | 313 742 (48277) 6 3 3 8 25 45 7 |
624) 185) 10 221 64 815 |
313 118 (48462) 16 559 90 272 |
|||||
| Total comprehensive income in the period | . . | ÷. | ÷. | 313 742 | (41939) | 271 803 | 25 457 | 297 260 | 74 227 | 371 487 | ||
| Capital increase - issue of 2 556 688 387 nnew shares - Costs with capital increase Purchase of preference shares (see Note 44) Transfer to reserves Dividends on preference shares, net of taxes (b) Variations of treasury stock (see Note 44) Interest of other equity instruments, net of taxes (b) Other movements Other changes in minority interest (see Note 45) |
1 009 892 1 009 892 |
(14616) (14616) (115) |
(36) | (10418) | (18819) | 7 206 108 758) (10996) (1409) |
7 206 (108758) (10996) (1409) |
108 758 | 995 276 1 009 892 (14616) (11613) (10996) (10418) (1409) (151) |
29 | 995 276 1 009 892 (14616) (11613) (10996) (10418) (1409) (151) 29 |
|
| Balance as at 30 june 2012 | 5 040 124 | 1 066 932 | 29 469 | (11415) | 193 094 | (131433) | 649 749 | 518 316 | 25 457 | 6 861 977 | 662 703 | 7 524 680 |
| Other comprehensive income Changes in fair value, net of taxes Actuarial deviations, net of taxes Other comprehensive income appropriate from associates Exchange differences, net of taxes Profit for the period Total comprehensive income in the period Capital increase - costs with capital increase Purchase of preference shares (see Note 44) Purchase of other capital instruments Transactions with non-controlling interests Dividends on preference shares, net of taxes (a) Variations of treasury stock (see Note 44) Interest of other equity instruments, net of taxes (b) Changes on Consolidated Perimeter (See note 45) Other movements |
2470 2 470 115 |
٠. (210) 36 |
4 4 2 4 | 195 | 302 283 302 283 |
(124894) (9800) (43277) (177971) (2728) 497 4 8 5 9 (455) (2837) |
302 283 (124894) (9800) (43277) 124 312 (2728) 497 4 8 5 9 (455) (2837) |
70 644 70 644 |
302 283 (124894) (9800) (43277) 70 644 194 956 2470 2 470 (2533) (210) 497 4 8 5 9 4 4 2 4 (455) (2686) |
646 306 (27251) (41080) (67379) 74 293 |
302 929 (124588) (9800) (70528) 29 5 64 127 577 2470 2 470 (2533) (210) 497 4 8 5 9 4 4 2 4 (455) 74 293 (2686) |
|
| Other changes in minority interest (see Note 45) | (172) | (172) | ||||||||||
| Balance as at 31 december 2012 | 5 040 124 | 1 069 517 | 29 29 5 | (6991) | 193 289 | 170 850 | 471 114 | 641 964 | 96 101 | 7 063 299 | 669 445 | 7 732 744 |
| Other comprehensive income Changes in fair value, net of taxes Actuarial deviations, net of taxes Exchange differences, net of taxes Profit for the period Total comprehensive income in the period |
(175386) (175386) |
(14025) (7298) (21323) |
(175386) (14025) (7298) (196709) |
(237455) (237455) |
(175386) (14025) (7298) (237455) (434164) |
2 4 5 5 20 1806 459 210 |
(172931) (14005) (9104) (237914) (433954) |
|||||
| Purchase of preference shares (see Note 44) Transactions with non-controlling interests Transfer to reserves Dividends on preference shares, net of taxes (a) Variations of treasury stock (see Note 44) Interest of other equity instruments, net of taxes (b) Changes on Consolidated Perimeter (See note 45) Other movements Other changes in minority interest (see Note 45) Balance as at 30 june 2013 |
5 040 124 | 847) 1 068 670 |
27 29 3 22 |
6 190 (801) |
(25337) 167 952 |
(4536) | 5 7 7 7 (17500) 96 101 (8035) (6529) (954) (406) 518 245 |
5 7 7 7 (17500) 96 101 (8035) (6529) (954) (406) 513 709 |
(96101) (237455) |
(19560) (17500) (8035) (339) (954) (1226) 6 581 521 |
(24216) 4 7 8 2 650 221 |
(19560) (17500) (8035) (339) [954] (24216) (1226) 4 7 8 2 7 231 742 |
| (in thousands of euro) | |||
|---|---|---|---|
| Notes | 30.06.2013 | 30.06.2012 | |
| Cash flows from operating activities | |||
| Interest and similar income received | 1 566 170 | 1915739 | |
| Interest expense and similar charges paid | (1189994) | (1589770) | |
| Fees and commission received | 424 662 | 531 584 | |
| Fees and commission paid | (97959) | (95055) | |
| Insurance premiums | (113090) | (61900) | |
| Recoveries on loans previously written off | 3508 | 12 068 | |
| Contributions to pensions' fund | |||
| Cash payments to employees and suppliers | (503928) | (202567) | |
| 89 369 | 510 099 | ||
| Changes in operating assets and liabilities: | |||
| Deposits with central banks | 1 261 686 | 4 396 608 | |
| Financial assets at fair value through profit or loss | (1585798) | 187 671 | |
| Loans and advances to banks | 800 124 | 1 183 620 | |
| Deposits from banks | 113 503 | (475960) | |
| Loans and advances to customers | |||
| Due to customers | (1015840) | (518818) | |
| 3 3 6 4 3 5 2 | (1465095) | ||
| Derivatives for risk management purposes | 66 155 | 197 681 | |
| Other operating assets and liabilities | 333 199 | (554611) | |
| Net cash from operating activities before income tax |
3 426 750 | 3 461 195 | |
| Income taxes paid | (77795) | (26589) | |
| Net cash from operating activities | 3 348 955 | 3 434 606 | |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries and associates | 1 | (32969) | (30161) |
| Sale of subsidiaries and associates | 1 | 3 1 2 9 | 54 122 |
| Dividends received | 55 393 | 102 426 | |
| Acquisition of available-for-sale financial assets | (29534914) | (43 229 475) | |
| Sale of available-for-sale financial assets | 28 712 890 | 40 915 487 | |
| Held to maturity investments | (68195) | 215 262 | |
| Issued insurance investment contracts | (18945) | 1839316 | |
| Purchase of tangible and intangible assets and investment properties Sale of tangible and intangible assets and investment properties |
(93880) 1 1 8 3 |
(428361) 1 3 3 3 |
|
| Net cash from investing activities | (976 308) | 560 051) | |
| Cash flows from financing activities | |||
| Capital increase | 995 276 | ||
| Acquisition of preference shares | (19560) | (11613) | |
| Bonds issued | 3 133 460 | 8651605 | |
| Bonds paid | (5792763) | (11 533 178) | |
| Subordinated debt issued | |||
| Subordinated debt paid | (8229) | (214151) | |
| Treasury stock | (339) | (10418) | |
| Interest from other equity instruments | (954) | (1409) | |
| Dividends paid on ordinary shares | |||
| Dividends paid on preference shares | (8035) | (1096) | |
| Net cash from financing activities | (2696420) | (2 134 884) | |
| Net changes in cash and cash equivalents | (323 773) | 739 671 | |
| Cash and cash equivalents at the beginning of the period | 2 0 2 4 5 3 3 | 1 542 251 | |
| BES Vida full consolidation impact | 54 | ||
| Effect of exchange rate changes on cash and cash equivalents | (1063) | 42 631 | |
| Net changes in cash and cash equivalents | (323773) | 739 671 | |
| Cash and cash equivalents at the end of the period | 1699697 | 2 3 2 4 5 5 3 | |
| Cash and cash equivalents includes: | |||
| Cash | 15 | 237 557 | 257819 |
| Deposits at Central Banks | 15 | 971 661 | 1 387 960 |
| of which, restricted balances | (74529) | (44373) | |
| Deposits with banks | 16 | 565 008 | 723 147 |
| Total | 1699697 | 2 3 2 4 5 5 3 |
(Amounts expressed in thousands of euro, except when indicated)
Banco Espírito Santo, S.A. (Bank or BES) is a commercial bank headquartered in Portugal, Avenida da Liberdade, no. 195, Lisbon. The Bank is authorised by the Portuguese authorities, central banks and other regulatory authorities, to operate in Portugal and in the countries where its international branches are located.
BES's foundation dates back to the last quarter of the 19th century. The Bank began its operations as a commercial bank in 1937, following the merger of Banco Espírito Santo and Banco Comercial de Lisboa, from which resulted Banco Espírito Santo e Comercial de Lisboa. On 6 July 1999, the Bank changed its name to Banco Espírito Santo, S.A.. BES is the core of a financial group – BES Group – which includes the Bank and a number of financial entities located in Portugal and abroad.
BES is listed on the NYSE Euronext Lisbon. As at 30 June 2013, the Bank's subsidiary BES Finance, Ltd had also 193 thousands preference shares listed on the Luxembourg Stock Exchange.
Since 1992, BES is part of the Espírito Santo Group, therefore its financial statements are consolidated by BESPAR SGPS, S.A., headquartered in Rua de São Bernardo, no. 62, Lisbon, and as well by Espírito Santo Financial Group, S.A. (ESFG), with headquarters in Luxembourg.
BES Group has a network of 769 branches throughout Portugal (31 December 2012: 775), international branches in London, Spain, New York, Nassau, Cayman Islands, Cape Verde, Venezuela and Luxembourg, a branch in the Madeira Free Trade Zone and ten representative offices overseas.
Group companies where the Bank has a direct or indirect holding greater or equal to 20%, over which the Bank exercises control or has significant influence, and that were included in the consolidated financial statements, are as follows:
| Established Established |
Acquired Acquired |
Headquartered | ActivityActivity Activity | % economic interes tinteres t |
Cons olidation method |
|
|---|---|---|---|---|---|---|
| B ANCO ESPÍRITO SANTO, SA (B E S) | 1 937 | - | Portugal | Commercial banking | ||
| Banco E spírito S anto de Investimento, SA (BE S I) | 1 993 | 1 997 | Portugal | Investment bank | 1 00.00% | Full consolidation |
| BE S-Vida, Companhia de Seguros, S A (BE S VIDA) | 1 993 | 2006 | Portugal | Insurance | 1 00.00% | Full consolidation |
| Aman Bank for Commerce and Investment Stock Company | 2003 | 201 0 | Libya | Commercial banking | 40.00% a) |
Full consolidation |
| Avistar, SGP S, SA | 2009 | 2009 | Portugal | Holding company | 1 00.00% | Full consolidation |
| E spírito Santo Servicios, SA | 1 996 | 1 997 | Spain | Insurance | 1 00.00% | Full consolidation |
| E spírito Santo Activos Financieros, SA | 1 988 | 2000 | Spain | Asset management | 95.00% | Full consolidation |
| E spírito Santo Vanguarda, S L | 201 1 | 201 1 | Spain | Services provider | 1 00.00% | Full consolidation |
| Banco E spírito S anto dos Açores, S A (BAC) | 2002 | 2002 | Portugal | Commercial banking | 57,53% | Full consolidation |
| BE ST - Banco E lectrónico de Serviço Total, SA (BE ST) | 2001 | 2001 | Portugal | Internet banking | 66.00% | Full consolidation |
| BE S África, SGPS, SA | 2009 | 2009 | Portugal | Holding company | 1 00.00% | Full consolidation |
| Banco E spírito S anto Angola, SA (BE SA) | 2001 | 2001 | Angola | Commercial banking | 51 .94% | Full consolidation |
| BE SAACTIF - Sociedade Gestora de Fundos de Investimento, SA | 2008 | 2008 | Angola | Asset management - Investment funds | 63.70% | Full consolidation |
| BE SAACTIF Pensões - Sociedade Gestora de Fundos de Pensões, SA | 2009 | 2009 | Angola | Asset management - P ension funds | 63.70% | Full consolidation |
| Banco E spírito S anto do Oriente, SA (BE S OR) | 1 996 | 1 996 | Macau | Commercial banking | 99,75% | Full consolidation |
| E spírito Santo Bank (E S BANK) | 1 963 | 2000 | USA | Commercial banking | 99.99% | Full consolidation |
| BE S Beteiligungs, GmbH (BE S GMBH) | 2006 | 2006 | Germany | Holding company | 1 00.00% | Full consolidation |
| BIC International Bank Ltd. (BIBL) | 2000 | 2000 | Cayman Islands | Commercial banking | 1 00.00% | Full consolidation |
| Parsuni - Sociedade Unipessoal, S GPS | 2004 | 2005 | Portugal | Holding company | 1 00.00% | Full consolidation |
| Praça do Marquês - S erviços Auxiliares, SA (PÇMARQUÊ S) | 1 990 | 2007 | Portugal | Real estate | 1 00.00% | Full consolidation |
| E spírito Santo, plc. (E SPLC) | 1 999 | 1 999 | Ireland | Non-bank finance company | 99,99% | Full consolidation |
| E SAF - E spírito Santo Activos Financeiros, S .G.P.S., SA (E S AF) | 1 992 | 1 992 | Portugal | Holding company | 89.99% | Full consolidation |
| E S Tech Ventures, S.G.P .S., SA (E STV) | 2000 | 2000 | Portugal | Holding company | 1 00.00% | Full consolidation |
| Banco E spirito S anto North American Capital Limited Liability Co. (BE SNAC) | 1 990 | 1 990 | USA | Financing vehicle | 1 00.00% | Full consolidation |
| BE S Finance, Ltd. (BE S FINANCE ) | 1 997 | 1 997 | Cayman Islands | Issue of preference shares and other securities | 1 00.00% | Full consolidation |
| E S, Recuperação de Crédito, ACE (E SRE C) | 1 998 | 1 998 | Portugal | Financing vehicle | 99.1 5% | Full consolidation |
| E S Concessões, SGPS, SA (E S CONCE SSÕE S) | 2002 | 2003 | Portugal | Holding company | 71 .66% | Full consolidation |
| E spírito Santo - Informática, ACE (E S INF) | 2006 | 2006 | Portugal | Services provider | 82.28% | Full consolidation |
| E spírito Santo Prestação de Serviços, ACE 2 (E S ACE 2) | 2006 | 2006 | Portugal | Services provider | 88.26% | Full consolidation |
| E SGE S T - E sp. S anto Gestão Instalações, Aprov. e Com., SA (E SGE ST) | 1 995 | 1 995 | Portugal | Services provider | 1 00.00% | Full consolidation |
| E spírito Santo Representações, Ltda. (E SRE P ) | 1 996 | 1 996 | Brazil | Representation office | 99,99% | Full consolidation |
| Quinta dos Cónegos - Sociedade Imobiliária, S A (CÓNE GOS) | 1 991 | 2000 | Portugal | Real estate | 81 .00% | Full consolidation |
| Fundo de Capital de Risco - E S Ventures II | 2006 | 2006 | Portugal | Venture capital fund | 60.68% | Full consolidation |
| Fundo de Capital de Risco - E S Ventures III | 2009 | 2009 | Portugal | Venture capital fund | 61 .1 4% | Full consolidation |
| Fundo de Capital de Risco - BE S PME Capital Growth | 2009 | 2009 | Portugal | Venture capital fund | 1 00.00% | Full consolidation |
| Fundo FCR PME / BE S | 1 997 | 1 997 | Portugal | Venture capital fund | 55.07% | Full consolidation |
| Fundo Gestão Património Imobiliário - FUNGE PI - BE S | 1 997 | 201 2 | Portugal | Real estate fund | 82.1 7% | Full consolidation |
| Fundo de Gestão de Património Imobiliário - FUNGE PI - BE S II | 201 1 | 201 2 | Portugal | Real estate fund | 94.54% | Full consolidation |
| FUNGE RE - Fundo de Gestão de P atrimónio Imobiliário | 1 997 | 201 2 | Portugal | Real estate fund | 97.24% | Full consolidation |
| ImoInvestimento – Fundo E special de Investimento Imobiliário Fechado | 201 2 | 201 2 | Portugal | Real estate fund | 1 00.00% | Full consolidation |
| Prediloc Capital – Fundo E special de Investimento Imobiliáro Fechado | 2006 | 201 2 | Portugal | Real estate fund | 1 00.00% | Full consolidation |
| BE S A Valorização – Fundo de Investimento Imobiliário Fechado | 201 2 | 201 2 | Angola | Real estate fund | 51 .94% | Full consolidation |
| FLITPTRE L VIII, S A | 201 1 | 201 1 | Portugal | Real estate | 1 0.00% a) |
Full consolidation |
| OBLOG Consulting, S A | 1 993 | 1 993 | Portugal | Software development | 66.63% | Full consolidation |
| BE S, Companhia de Seguros, S A (BE S SE GUROS ) | 1 996 | 1 996 | Portugal | Insurance | 25.00% | E quity method |
| Société Civile Immobilière du 45 Avenue Georges Mandel (SCI GM) | 1 995 | 1 995 | France | Real estate | 22.50% | E quity method |
| E SE GUR - E spírito Santo Segurança, S A (E SE GUR) | 1 994 | 2004 | Portugal | S ecurity | 44.00% | E quity method |
| Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA (LOCARE NT) | 1 991 | 2003 | Portugal | Renting | 50.00% | E quity method |
| Banco Delle Tre Venezie, Spa | 2006 | 2007 | Italy | Commercial banking | 20.00% | E quity method |
| Nanium, S A | 1 996 | 201 0 | Portugal | Industry | 41 .06% | E quity method |
| Ascendi Douro - E stradas do Douro Interior, SA | 2008 | 201 0 | Portugal | Motorway concession | 1 8.57% b) |
E quity method |
| Ascendi P inhal Interior - E stradas do P inhal Interior, SA | 201 0 | 201 0 | Portugal | Motorway concession | 1 8.57% b) |
E quity method |
| UNICRE - Instituição Financeira de Crédito, SA | 1 974 | 201 0 | Portugal | Non-bank finance company | 1 7.50% b) |
E quity method |
| Ijar Leasing Argélie | 201 1 | 201 1 | Algeria | Leasing | 35.00% | E quity method |
| Tranquilidade Corporação Angolana de Seguros, S.A. | 2007 | 201 2 | Angola | Insurance | 1 0.91 % b) |
E quity method |
| E denred P ortugal, SA | 1 984 | 201 3 | Portugal | Services provider | 50.00% | E quity method |
a) Thes e companies were fully cons olidated, as the Group exercis es control over their activities .
b) The percentage in the table above repres ents the Group's economic interest. Thes e companies were accounted for following the equity method, as the Group exercis es a s ignificant influence over them.
| Established Established |
AcquiredAcquired Acquired Acquired |
Headquartered Headquartered | ActivityActivity Activity | % economic interestinterest interest |
Consolidation method | |
|---|---|---|---|---|---|---|
| Banco Espírito Santo de Investimento, SA (BES I) | 1 993 1 993 |
1 997 1 997 |
Portugal PortugalPortugal Portugal | Investment bank Investment bank Investment bank | 1 00.00% 1 00.00%1 00.00% 1 00.00% | Full consolidation Full consolidation |
| E spírito Santo Capital - S ociedade de Capital de Risco, SA (E SCAPITAL) 1 988 | 1 996 | Portugal | Venture capital | 1 00.00% | Full consolidation | |
| S E S Iberia | 2004 | 2004 | S pain | Asset management | 50.00% | Full consolidation |
| HLC - Centrais de Cogeração, SA | 1 999 | 1 999 | Portugal | Services provider | 24.50% | E quity method |
| Coporgest, SA | 2002 | 2005 | Portugal | Services provider | 25.00% | E quity method |
| Synergy Industry and Technology, SA | 2006 | 2006 | S pain | Holding company | 26.00% | E quity method |
| Salgar Investments | 2007 | 2007 | S pain | Services provider | 45.05% | E quity method |
| 2BCapital Luxembourg S.C.A SICAR | 2011 | 201 1 | Luxembourg | Investment fund | 42.12% | E quity method |
| E S SI Comunicações SGPS , SA | 1 998 | 1 998 | Portugal | Holding company | 1 00.00% | Full consolidation |
| E SS I SGP S, SA | 1 997 | 1 997 | Portugal | Holding company | 1 00.00% | Full consolidation |
| E spírito Santo Investment Sp, Z.o.o. | 2005 | 2005 | Poland | Services provider | 1 00.00% | Full consolidation |
| E spírito Santo Securities India | 2011 | 201 1 | India | Brokerage house | 75.00% | Full consolidation |
| Lusitania Capital S.A.P.I. de C.V., SOFOM, E .N.R. | 2013 | 201 3 | Mexico | Non-bank finance company | 1 00.00% | Full consolidation |
| E spírito S anto Investment Holding, Limited | 2010 | 201 0 | United Kindom | Holding company | 1 00.00% | Full consolidation |
| E xecution Holding, Limited | 2010 | 201 0 | United Kindom | Holding company | 1 00.00% | Full consolidation |
| MCO2 – Sociedade Gestora de Fundos de Investimento Mobiliário, SA 2008 | 2008 | Portugal | Asset management - investment funds | 25.00% | E quity method | |
| E spírito Santo Investments PLC | 1 996 | 1 996 | Ireland | Non-bank finance company | 1 00.00% | Full consolidation |
| E S SI Investimentos SGPS, S A | 1 998 | 1 998 | Portugal | Holding company | 1 00.00% | Full consolidation |
| Polish Hotel Capital SP | 2008 | 2008 | Poland | Services provider | 33.00% | E quity method |
| E spirito Santo Investimentos, SA | 1 996 | 1 999 | Brazil | Holding company | 1 00.00% | Full consolidation |
| BE S Investimento do Brasil, S A | 2000 | 2000 | Brazil | Investment Bank | 80.00% | Full consolidation |
| 2BCapital, S A | 2005 | 2005 | Brazil | Holding company | 45.00% | E quity method |
| 2B Capital Luxembourg General Partners S arl | 2011 | 201 1 | Luxembourg | Asset management | 45.00% | E quity method |
| BE S Securities do Brasil, S A | 2000 | 2000 | Brazil | Brokerage house | 80.00% | Full consolidation |
| Gespar Participações, Ltda. | 2001 | 2001 | Brazil | Holding company | 80.00% | Full consolidation |
| BE S Activos Financeiros, Ltda | 2004 | 2004 | Brazil | Asset management | 85.00% | Full consolidation |
| FI Multimercado Treasury | 2005 | 2005 | Brazil | Investment fund | 80.00% | Full consolidation |
| E spírito Santo Serviços Financeiros DTVM, S A | 2009 | 201 0 | Brazil | Asset management | 80.00% | Full consolidation |
| R Invest, Ltda | 2001 | 2009 | Brazil | Services provider | 80.00% | Full consolidation |
| R Consult Participações, Ltda | 1 998 | 2009 | Brazil | Services provider | 80.00% | Full consolidation |
| BRB Internacional, S A | 2001 | 2001 | S pain | E ntertainment | 24.93% | E quity method |
| Prosport - Com. Desportivas, S A | 2001 | 2001 | S pain | Sporting goods trading | 25.00% | E quity method |
| Apolo Films, SL | 2001 | 2001 | S pain | E ntertainment | 25,15% | E quity method |
| Cominvest- S GII, S A | 1 993 | 1 993 | Portugal | Real E state | 98.59% | Full consolidation |
| Fundo E spírito Santo IBE RIA I | 2004 | 2004 | Portugal | Venture capital fund | 38.67% | E quity method |
| Fundo FIM BE S Moderado | 2004 | 2009 | Brazil | Investment fund | 84.16% | Full consolidation |
| Fundo BE S Absolute Return | 2002 | 2009 | Brazil | Investment fund | a) 43.61% |
Full consolidation |
| BES Beteiligungs, GmbH (BES GMBH) | 2006 | 2006 | Germany Germany Germany | Holding company Holding company | 1 00.00% 1 00.00%1 00.00% | Full consolidation consolidation |
| Bank E spírito Santo International, Ltd. (BE SIL) | 1 983 | 2002 | Cayman Islands | Commercial banking | 1 00.00% | Full consolidation |
| BES África, SGPS, S A (BES ÁFRICA) | 2006 | 2006 | Portugal PortugalPortugal Portugal | Holding company Holding company Holding company | 1 00.00% 1 00.00%1 00.00% 1 00.00% | Full consolidation Full consolidation |
| Banco E spírito Santo Cabo Verde, S A | 2010 | 201 0 | CapeVerde | Commercial banking | 99.99% | Full consolidation |
| Moza Banco, SA | 2008 | 201 0 | Mozambique | Commercial banking | 49.00% | E quity method |
| ESAF - Espírito S anto Activos Financeiros, S.G.P.S., SA (ESAF) P.S., (ESAF) |
1 992 1 992 |
1 992 | Portugal PortugalPortugal Portugal | Holding company Holding company Holding company | 89.99% | Full consolidation Full consolidation |
| E spírito Santo Fundos de Investimento Mobiliário, SA | 1 987 | 1 987 | Portugal | Asset management - investment funds | 89.99% | Full consolidation |
| E spírito Santo International Management, SA | 1 995 | 1 995 | Luxembourg | Asset management - investment funds | 89.81% | Full consolidation |
| E spírito Santo Fundos de Investimento Imobiliário, S A | 1 992 | 1 992 | Portugal | Asset management - investment funds | 89.99% | Full consolidation |
| 89.99% | ||||||
| E spírito Santo Fundo de Pensões, SA | 1 989 | 1 989 | Portugal | Asset management - investment funds | Full consolidation | |
| Capital Mais - Assessoria Financeira, SA | 1 998 | 1 998 | Portugal | Asset management - investment funds | 89.99% | Full consolidation |
| E spirito Santo International Asset Management, Ltd. | 1 998 | 1 998 | British Virgin Islands | Asset management - investment funds | 44.10% | E quity method |
| E spírito Santo Gestão de Patrimónios, SA | 1 987 | 1 987 | Portugal | Asset management - investment funds | 89.99% | Full consolidation |
| E S AF - E spírito Santo Participações Internacionais, SGPS , SA | 1 996 | 1 996 | Portugal | Asset management - investment funds | 89.99% | Full consolidation |
| E S AF - International Distributors Associates, Ltd | 2001 | 2001 | British Virgin Islands | Asset management - investment funds | 89.99% | Full consolidation |
| ES Tech Ventures, S .G.P.S., S A (ESTV) | 2000 | 2000 | Portugal PortugalPortugalPortugal | Holding company Holding company Holding company | 1 00.00% 1 00.00%1 00.00%1 00.00% | Full consolidation Full consolidation |
| E S Ventures - Sociedade de Capital de Risco, S A | 2005 | 2005 | Portugal | Venture capital fund | 1 00.00% | Full consolidation |
| Yunit S erviços, S A | 2000 | 2000 | Portugal | Management of internet portals | 33,33% | E quity method |
| FCR E spírito S anto Ventures Inovação e Internacionalização | 2011 | 201 1 | Portugal | Venture capital fund | 50.00% | E quity method |
| Fundo Bem Comum, FCR | 2011 | 201 1 | Portugal | Venture capital fund | 20.00% | E quity method |
| E spírito Santo Contact Center, Gestão de Call Centers, SA (E SCC) | 2000 | 2000 | Portugal | Call centers management company | 41 .67% | E quity method |
| Banque E spirito Santo et de la Vénétie, SA (E S Vénétie) | 1 927 | 1 993 | France | Commercial banking | 42.69% | E quity method |
| Established Established |
AcquiredAcquiredAcquired Acquired |
Headquartered Headquartered | ActivityActivity Activity | % economic interestinterest interest |
Consolidation method | |
|---|---|---|---|---|---|---|
| Fundo de Capital de Risco - ES Ventures II Fundo de de Risco - Ventures II |
2006 2006 |
2006 | Portugal PortugalPortugalPortugal | Venture capital fundcapital fund Venture capital fund |
60.68% | Full consolidation Full consolidation |
| Atlantic Ventures Corporation | 2006 | 2006 | USA | Holding company | 60.68% | Full consolidation |
| Sousacamp, SGPS, SA | 2007 | 2007 | Portugal | Holding company | 23.73% | E quity method |
| Global Active - SGPS, SA | 2006 | 2006 | Portugal | Holding company | 27.1 0% | E quity method |
| Outsystems, SA | 2007 | 2007 | Portugal | IT Services | b) 1 7.77% |
E quity method |
| Corework s - Proj. Circuito Sist. E lect., SA | 2006 | 2006 | Portugal | IT Services | b) 1 9.64% |
E quity method |
| Multiwave Photonics, SA | 2003 | 2008 | Portugal | IT Services | b) 1 2.60% |
E quity method |
| Bio-Genesis | 2007 | 2007 | Brazil | Holding company | b) 1 8.1 6% |
E quity method |
| Y Dreams - Informática, SA | 2000 | 2009 | Portugal | IT Services | 29.1 2% | E quity method |
| Fundo de Capital de Risco - ES Ventures III Fundo de de Risco - Ventures III |
2009 2009 |
2009 | Portugal PortugalPortugalPortugal | Venture capital fund capital fund | 61 .1 4% 4%61 4% | Full consolidation consolidation |
| Nutrigreen, SA | 2007 | 2009 | Portugal | Services provider | 1 2.23% b) |
E quity method |
| Advance Ciclone Systems, SA | 2008 | 2009 | Portugal | Treatment and elimination of residues | b) 1 9.56% |
E quity method |
| Watson Brown, HSM, Ltd | 1 997 | 2009 | United Kingdom | Recycling rubber | 21 .95% | E quity method |
| Domática, E lectrónica e Informática, SA | 2002 | 201 1 | Portugal | IT Services | b) 1 4.42% |
E quity method |
| Sociedade Agrícola Turística e Imobiliária da Várzea da Lagoa, SA | 201 2 | 201 2 | Portugal | Promoção imobiliária | 100.00% | Integral |
| Fundo FCR PME / BES | 1 997 | 1 997 | Portugal PortugalPortugalPortugal | Venture capital fund capital fund | 55.07% | Full consolidation consolidation |
| Mobile World - Comunicações. SA | 2009 | 2009 | Portugal | Telecommunications | 26.98% | E quity method |
| MMCI - Multimédia, SA | 2008 | 2008 | Portugal | Holding company | 26.98% | E quity method |
| TLCI 2 - Soluções Integradas de Telecomunicações, SA | 2006 | 2006 | Portugal | Telecommunications | 26.98% | E quity method |
| E nk rott SA | 2006 | 2006 | Portugal | Management and water treatment | 1 6.52% b) |
E quity method |
| Palexpo - Imagem E mpresarial, SA | 2009 | 2009 | Portugal | Furniture manufacturing | 27.26% | E quity method |
| Rodi - Sink s & Ideas, SA | 2006 | 2006 | Portugal | Metal industry | 24.81 % | E quity method |
| Espírito Santo Activos Financieros, SA | 1 988 1 988 |
2000 2000 |
Spain | Asset managementmanagement Asset management |
95.00% | Full consolidation consolidation |
| E spírito Santo Gestión, SA, SGIIC | 2001 | 2001 | Spain | Asset management | 95.00% | Full consolidation |
| E spírito Santo Pensiones, S.G.F.P., SA | 2001 | 2001 | Spain | Asset management - pension funds | 95.00% | Full consolidation |
| Espírito Santo Bank (ESBANK) | 1 963 1 963 |
2000 2000 |
USA | Commercial banking banking banking | 99.99% | Full consolidation consolidation |
| E S Financial Services, Inc. | 2000 | 2000 | USA | Brok erage house | 99.99% | Full consolidation |
| Tagide Properties, Inc. | 1 991 | 1 991 | USA | Real estate | 99.99% | Full consolidation |
| E S Investment Advisors, Inc. | 201 1 | 201 1 | USA | Investment consulting | 99.99% | Full consolidation |
| BES-Vida, Companhia de Seguros, SA (BES VIDA) BES-Vida, Seguros, (BES VIDA) |
1 993 1 9 |
2006 93 2006 | Portugal PortugalPortugalPortugal | Insurance Insurance | 1 00.00% 00.00%1 00.00% | Full consolidation consolidation |
| Caravela Defensive Fund | 2006 | 201 2 | Luxembourg | Investment fund | 1 00.00% | Full consolidation |
| Caravela Balanced Fund | 2006 | 201 2 | Luxembourg | Investment fund | 54.95% | Full consolidation |
| E S Plano Dinâmico | 2008 | 201 2 | Portugal | Investment fund | 97.79% | Full consolidation |
| E S Arrendamento | 2009 | 201 2 | Portugal | Investment fund | 1 00.00% | Full consolidation |
| E spirito Santo Investments SICAV-SIF Liquidity Fund | 201 2 | 201 3 | Luxembourg | Investment fund | 51 .1 3% | Full consolidation |
| Orey Reabilitação Urbana | 2006 | 201 2 | Portugal | Investment fund | 77.32% | Full consolidation |
| Fimes Oriente | 2004 | 201 2 | Portugal | Investment fund | 1 00.00% | Full consolidation |
| ES Concessões, SGPS, SA (ES CONCESSÕES) (ES CONCESSÕES) |
2002 2002 |
2003 | Portugal PortugalPortugalPortugal | Holding company company | 71 .66% .66% .66% | Full consolidation consolidation |
| E S Concessions International Holding, BV | 2010 | 201 0 | Netherlands | Holding company | 71 .66% | Full consolidation |
| E mpark - Aparcamientos y Servicios, SA | 1 968 | 2009 | Spain | Management of park ing lots | b) 1 5.92% |
E quity method |
| E S Concessions Latam, BV | 201 1 | 201 1 | Netherlands | Holding company | 71 .66% | Full consolidation |
| Concesionaria Autopista Perote-Xalapa, CV | 2008 | 2008 | Mexico | Motorway concession | b) 1 4.33% |
E quity method |
| Ascendi Group SGPS, SA | 201 0 | 201 0 | Portugal | Holding company | 28.66% | E quity method |
| Auvisa - Autovia de los Viñedos, SA | 2003 | 201 0 | Spain | Motorway concession | 35.83% | E quity method |
a) These companies were fully consolidated, as the Group controls its activities.
b) The percentage in the table above represents the Group's economic interest. These companies were accounted for under the equity method, as the Group exercises a significant influence over them, in accordance with the accounting policy described in Note 2.2.
Additionally, in accordance with SIC 12, the Group consolidates the following special purpose entities:
| Established Established |
AcquiredAcquired Acquired |
Headquartered Headquartered Headquartered |
% economic interest % economic interest |
Consolidation method | |
|---|---|---|---|---|---|
| Lusitano SME No.1 plc (*) | 2006 | 2006 | Ireland | 100% | Full Consolidation |
| Lusitano Mortgages No.6 plc (*) | 2007 | 2007 | Ireland | 100% | Full Consolidation |
| Lusitano Project Finance No.1, FTC (*) | 2007 | 201 1 | Portugal | 100% | Full Consolidation |
| Lusitano Mortgages No.7 plc (*) | 2008 | 2008 | Ireland | 100% | Full Consolidation |
| Lusitano Leverage Finance No. 1 BV (*) | 201 0 | 201 0 | Netherlands | 100% | Full Consolidation |
| Lusitano Finance No. 3 (*) | 201 1 | 201 1 | Portugal | 100% | Full Consolidation |
| IM BE S E mpresas 1 (*) | 201 1 | 201 1 | Spain | 100% | Full Consolidation |
| CLN Magnolia Finance 2038 | 2008 | 2008 | Ireland | 100% | Full Consolidation |
(*) Entities set-up in the s cope of securitis ation trans actions (See Note 43).
The consolidation of these entities had the following impact on the Group's accounts:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 | |
| Deposits with banks | 1 93 478 | 1 95 586 |
| Due to costumers (net of impairment) | 3 499 558 | 3 803 343 |
| Debt securities issued | 71 1 528 | 703 797 |
The main changes in the Group structure that occurred in 2013 are highlighted as follows:
Subsidiaries
During the first half of 2013, BESI acquired the remaining share capital of Espírito Santo Investment Holding, Limited becoming to hold 100% of the share capital of the Company;
The main changes in the Group structure that occurred during the six month period ended 30 June 2012 are highlighted as follows:
• In May 2012, BES acquired an additional 50% of the capital of BES Vida, by an amount of euro 225 million, becoming to hold the total share capital of the company and started to consolidate this entity under the full consolidation method;
Associates (see Note 32)
In In April 2012, ES Capital acquired 42.99% of 2BCapital Luxembourg S.C.A SICAR, for the amount of euro 854 thousands. In May 2012, following the capital increase of the company, ES Capital invested an additional euro 15.6 million;
During the six months period ended as at 30 June 2013 and 2012, the movements regarding acquisitions and disposals of investments in subsidiaries and associates are presented as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.2013 | |||||||
| Aquisitions | Disposals | ||||||
| Aquisition price |
Other investments (a) |
Total | Sale Price | Other Total reimbursements |
Gain/(Loss) on disposals |
||
| Subsidiaries | |||||||
| BE S África | - | 28 000 | 28 000 | - | - | - | - |
| E spírito Santo Investment Holding | 20 281 | 1 1 71 4 | 31 995 | - | - | - | - |
| E S Tech Ventures | - | 6 500 | 6 500 | - | - | - | - |
| 20 281 | 46 214 | 66 495 | - | - | - | - | |
| Associates | |||||||
| Moza Banco | - | 24 856 | 24 856 | - | - | - | - |
| E denred | 8 1 1 3 | - | 8 1 1 3 | ( 3 1 29) | - | ( 3 1 29) | - |
| 8 113 | 24 856 | 32 969 | ( 3 129) | - | ( 3 129) | - | |
| 28 394 | 71 070 | 99 464 | ( 3 129) | - | ( 3 129) | - |
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.2012 | |||||||
| Aquisitions | Disposals | ||||||
| Aquisition price |
Other investments (a) |
Total | Sale Price | Other Total reimbursements |
Gain/(Loss) on disposals |
||
| Subsidiaries BE S Vida (b) |
225 000 | - | 225 000 | - | - | - | ( 89 586) |
| 225 000 | - | 225 000 | - | - | - | ( 89 586) | |
| Associates | |||||||
| Moza Banco | - | 2 033 | 2 033 | - | - | - | - |
| E mpark | - | - | - | - | ( 2 584) | ( 2 584) | - |
| Portvias | - | - | - | ( 1 067) | - | ( 1 067) | 590 |
| Scutvias | - | - | - | ( 49 783) | - | ( 49 783) | ( 886) |
| Ascendi Group | - | 1 1 462 | 1 1 462 | - | - | - | - |
| Coreworks | - | - | - | - | ( 286) | ( 286) | - |
| Sousacamp | - | - | - | - | ( 3 700) | ( 3 700) | - |
| Fin Solutia | - | - | - | ( 1 21 9) | - | ( 1 21 9) | ( 6) |
| 2B Capital Luxembourg | 854 | 1 5 61 9 | 1 6 473 | - | - | - | - |
| Nova Figfort | - | - | - | ( 71 9) | - | ( 71 9) | - |
| Sopratutto Cafés | - | - | - | ( 1 334) | - | ( 1 334) | 50 |
| Y dreams | - | 204 | 204 | - | ( 71 1 ) | ( 71 1 ) | - |
| MRN - Manutenção de Rodovias Nacionais, SA (c) | - | - | - | - | ( 1 1 ) | ( 1 1 ) | - |
| 854 | 29 318 | 30 172 | ( 54 122) | ( 7 292) | ( 61 414) | ( 252) | |
| 225 854 | 29 318 | 255 172 | ( 54 122) | ( 7 292) | ( 61 414) | ( 89 838) |
(a) Capital increases and loan to companies in w hich the Group has interest
(b) These companies w ere fully consolidated, as the Group exercises control over their activities.
(c) Company that ceased to integrate the Group consolidation perimeter, and that is currently booked on the assets held for sale portfolio.
In accordance with Regulation (EC) no. 1606/2002, of 19 July from the European Council and Parliament, and its adoption into Portuguese Law through Decree-Law no. 35/2005, of 17 February and Regulation no. 1/2005 from the Bank of Portugal, Banco Espírito Santo, S.A. ("BES" or "the Bank") is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").
IFRS comprise accounting standards issued by the International Accounting Standards Board ("IASB") and its predecessor body as well as interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and its predecessor body.
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") IAS 34 – Interim Financial Reporting and do not include all the information required in the preparation of a complete set of consolidated financial statements which will be prepared for the year ending 31 December 2013.
The accounting policies applied by the Group in the preparation of its consolidated financial statements for the period ended 30 June 2013 are consistent with the ones used in the preparation of the annual consolidated financial statements for the year ended 31 December 2012, except for the adoption of IFRS 13 'Fair Value Measurement', IAS 19 (Revised) 'Employee Benefits' (2011) and of the changes to IAS 1 'Presentation of Financial Statements' as described below:
• IFRS 13 Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date.
In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively.
Notwithstanding the above, the change had no significant impact on the measurement of the Group's assets and liabilities.
• IAS 19 (Revised) Employee Benefits (2011)
As a result of IAS 19 (2011), the Group has changed its accounting policy with respect to the basis for determining the income or expense related to defined benefit. Under IAS 19 (2011), the Group determines the net interest expense (income) for the period on the net defined benefit liability (asset) by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at the beginning of the annual period. Consequently, the net interest expense (income) includes interest cost on the defined benefit obligation net of a theoretical return on the plan assets, both calculated using the discount rate applied in the determination of the defined benefit obligation.
Previously, the Group determined interest income on plan assets based on their long-term rate of expected return.
The adoption of IAS 19 (Revised) had no significant impact on the measurement of the Group's assets and liabilities.
• IAS 1 Presentation of Financial Statements - Presentation of items of other comprehensive income
As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its consolidated statement of other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly.
The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.
The Group acquired, in May 2012, the remaining 50% of BES Vida share capital and the control over its activities. Therefore, from that date, BES Vida, which previously qualified as an associate and was included for in the consolidated financial statements up to May 2012 under the equity method, is now being fully consolidated by the Group. Further details are provided in Note 54.
These consolidated financial statements are expressed in thousands of euro, rounded to the nearest thousands, and have been prepared under the historical cost convention, except for the assets and liabilities accounted at fair value, namely, derivative contracts, financial assets and financial liabilities at fair value through profit or loss, available-for-sale financial assets, recognised assets and liabilities that are hedged, in a fair value hedge, in respect of the risk that is being hedged.
The preparation of financial statements in conformity with IFRS requires the application of judgement and the use of estimates and assumptions by management that affects the process of applying the Group's accounting policies and the reported amounts of income, expenses, assets and liabilities. Actual results in the future may differ from those reported. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.
These consolidated financial statements were approved in the Board of Directors meeting held on 26 July 2013.
These consolidated financial statements comprise the financial statements of BES and its subsidiaries ("the Group" or "BES Group"), and the results attributable to the Group from its associates.
These accounting policies have been consistently applied by the Group companies, during all the periods covered by the consolidated financial statements.
Subsidiaries are entities over which the Group exercises control. Control is presumed to exist when the Group owns more than one half of the voting rights. Additionally, control also exists when the Group has the power to, directly or indirectly, govern the financial and operating policies of the entity, so as to obtain benefits from its activities, even if its shareholding is equal or less than 50%. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases.
Accumulated losses of a subsidiary are attributed proportionally to the owners of the parent and to the non-controlling interest even if this results in non-controlling interest having a deficit balance.
In a business combination achieved in stages (step acquisition) where control is obtained, the Group remeasures its previously held non-controlling interest in the acquiree at its acquisition date fair value and recognises the resulting gain or loss in the income statement when determining the respective goodwill. At the time of a partial sale, from which arises a loss of control of a subsidiary, any remaining non-controlling interest retained is remeasured to fair value at the date the control is lost and the resulting gain or loss is recognised against the income statement.
Associates are entities over which the Group has significant influence over the company's financial and operating policies but not its control. Generally when the Group owns more than 20% of the voting rights it is presumed that it has significant influence. However, even if the Group owns less than 20% of the voting rights, it can have significant influence through the participation in the policy-making processes of the associated entity or the representation in its executive board of directors.
Investments in associates are accounted for under the equity method from the date on which significant influence is transferred to the Group until the date that significant influence ceases. The book value of the investments in associates includes the value of the respective goodwill determined on acquisition and is presented net of impairment losses.
In a step acquisition that results in the Group obtaining significant influence over an entity, any previously held stake in that entity is remeasured to fair value through the income statement when the equity method is first applied.
If the Group's share of losses of an associate equals or exceeds its interest in the associate, including any long-term interest, the Group discontinues the application of the equity method, except when it has a legal or constructive obligation of covering those losses or has made payments on behalf of the associate.
Gains or losses on sales of shares in associate companies are recognised in the income statement even if that sale does not result in the loss of significant influence.
The Group consolidates certain special purpose entities ("SPE"), specifically created to accomplish a narrow and well defined objective, when the substance of the relationship with those entities indicates that they are controlled by the Group, regardless the percentage of equity held.
The evaluation of the existence of control is made based on the criteria established by SIC 12 – Consolidation Special Purpose Entities, which can be summarised as follows:
• In substance, the Group retains the majority of residual or ownership risks related to the SPE so as to obtain the benefits from its activities.
As part of the asset management activity, the Group manages investment funds on behalf of the unitholders. The financial statements of these funds are not consolidated by the Group except in the cases where control is exercised over its activity based on the criteria established by SIC 12. It is assumed that there is control over a fund when the Group holds more than 50% of the units.
Goodwill resulting from business combinations that occurred until 1 January 2004 was offset against reserves, according to the option granted by IFRS 1, adopted by the Group on the date of transition to the IFRS.
Goodwill resulting from business combinations that occurred from 1 January 2004 until 31 December 2009 was accounted under the purchase method. The acquisition cost was measured as the fair value, at the acquisition date, of the assets and equity instruments given and liabilities incurred or assumed plus any costs directly attributable to the acquisition.
Goodwill represents the difference between the cost of acquisition and the fair value of the Group's share of identifiable net assets, liabilities and contingent liabilities acquired.
For acquisitions on or after 1 January 2010, in accordance with IFRS 3 – Business Combinations, the Group measures goodwill as the fair value of the consideration transferred including the fair value of any previously held non-controlling interests in the acquire, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Transaction costs are expensed as incurred.
At the acquisition date, the non-controlling interests are measured at their proportionate interest in the fair value of the net identifiable assets acquired and of the liabilities assumed, without the correspondent portion of goodwill. As a result, the goodwill recognised in these consolidated financial statements corresponds only to the portion attributable to the equity holders of the Bank.
In accordance with IFRS 3 – Business Combinations, goodwill is recognised as an asset at its cost and is not amortised. Goodwill relating to the acquisition of associates is included in the book value of the investment in those associates determined using the equity method. Negative goodwill is recognised directly in the income statement in the period the business combination occurs.
The recoverable amount of the goodwill recognised as an asset is reviewed annually, regardless of whether there is any indication of impairment. Impairment losses are recognised directly in the income statement. The recoverable amount corresponds to the higher of its fair value less costs to sell and its value in use. In determining value in use, estimated futures cash flows are discounted using a rate that reflects market conditions, time value and business risks.
Acquisitions of non-controlling interest are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such a transaction. Any difference between the consideration paid and the amount of non-controlling interest acquired is accounted for as a movement in equity. Similarly, sales of non-controlling interest and dilutions from which does not result a loss of control, are accounted for as transactions with equity holders in their capacity as equity holders and therefore no gain or loss is recognised in the income statement. Any difference between the sale proceeds and the recognised amount of non-controlling interest in the consolidated financial statements is accounted for as a movement in equity.
Gains or losses on a dilution or on sale of a portion of an interest, from which results a loss of control, are accounted for by the Group in the income statement.
The financial statements of each of the Group entities are prepared using their functional currency which is defined as the currency of the primary economic environment in which that entity operates. The consolidated financial statements are prepared in euro, which is BES's functional and presentation currency.
The financial statements of each of the Group entities that have a functional currency different from the euro are translated into euro as follows:
Inter-company balances and transactions, including any unrealised gains and losses on transactions between Group companies, are eliminated in preparing the consolidated financial statements, unless unrealised losses provide evidence of an impairment loss that should be recognised in the consolidated financial statements.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment loss.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to euro at the foreign exchange rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement.
Non-monetary assets and liabilities in a foreign currency that are measured at historical cost are translated using the 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 to euro at the foreign exchange rates ruling at the dates the fair value was determined. The resulting exchange differences are accounted for in the income statement, except if related to equity instruments classified as availablefor-sale, which are accounted for in equity, within the fair value reserve.
Derivatives for risk management purposes includes (i) hedging derivatives and (ii) derivatives used to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss that were not classified as being hedging derivatives.
All other derivatives are classified as trading derivatives.
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into (trade date). Subsequent to initial recognition, the fair value of derivative financial instruments is remeasured on a regular basis and the resulting gains or losses on re-measurement are recognised directly in the income statement, except for derivatives designated as hedging instruments. The recognition of the resulting gains or losses of the derivatives designated as hedging instruments depends on the nature of the risk being hedged and of the hedge model used.
Fair values are obtained from quoted market prices, in active markets, if available or are determined using valuation techniques, including discounted cash flow models and options pricing models, as appropriate.
Derivatives traded in organised markets, namely futures and some options, are recognised as trading derivatives, being marked to market on a daily basis and the resulting gains or losses are recognised directly in the income statement. Once the fair value changes on these derivatives are settled daily through the margin accounts held by the Group, these derivatives do not present any fair value on the balance sheet. The margin accounts are included under the caption Other assets (see Note 34) and comprise the minimum collateral mandatory for open positions.
• Classification criteria
Hedge accounting is used for derivative financial instruments designated as hedging instruments, provided the following criteria are met:
In a fair value hedge, the book value of the hedged asset or liability, determined in accordance with the respective accounting policy, is adjusted to reflect the changes in its fair value that are attributable to the risks being hedged. Changes in the fair value of the derivatives that are designated as hedging instruments are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the risk being hedged.
If the hedge no longer meets the criteria for hedge accounting, the derivative financial instrument is transferred to the trading portfolio and the hedge accounting is discontinued prospectively. The cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income statement over the period to maturity.
When a derivative financial instrument is designated as a hedge of the variability in highly probable future cash flows, the effective portion of changes in the fair value of the hedging derivatives is recognised in equity. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect the income statement. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognised in equity at that time is recognised in the income statement when the hedged transaction also affects the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss reported in equity is recognised immediately in the income statement and the hedging instrument is reclassified for the trading portfolio.
Derivatives that are embedded in other financial instruments are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement.
Loans and advances to customers include loans and advances originated by the Group, which are not intended to be sold in the short term. Loans and advances to customers are recognised when cash is advanced to borrowers.
Loans and advances to customers are derecognised from the balance sheet when (i) the contractual rights to receive their cash flows have expired, (ii) the Group has transferred substantially all risks and rewards of ownership or (iii) although retaining some but not substantially all of the risks and rewards of ownership, the Group has transferred the control over the assets.
Loans and advances to customers are initially recorded at fair value plus transaction costs and are subsequently measured at amortised cost, using the effective interest rate method, less impairment losses.
In accordance with the documented strategy for risk management, the Group contracts derivative financial instruments to manage certain risks of a portion of the loan portfolio, without applying, however, the provisions of hedge accounting as mentioned in Note 2.4. These loans are measured at fair value through profit or loss, in order to eliminate a measurement inconsistency resulting from measuring loans and derivatives for risk management purposes on different basis (accounting mismatch). This procedure is in accordance with the accounting policy for classification, recognition and measurement of financial assets at fair value through profit or loss, as described in Note 2.6.
The Group assesses, at each balance sheet date, whether there is objective evidence of impairment within its loan portfolio. Impairment losses identified are recognised in the income statement, and are subsequently reversed through the income statement if, in a subsequent period, the amount of the impairment losses decreases.
A loan or a loan portfolio, defined as a group of loans with similar credit risk characteristics, is impaired when: (i) there is objective evidence of impairment as a result of one or more events that occurred after its initial recognition and (ii) that event (or events) has an impact on the estimated future cash flows of the loan or of the loan portfolio, that can be reliably estimated.
The Group first assesses whether objective evidence of impairment exists individually for each loan. In this assessment the Group uses the information that feeds the credit risk models implemented and takes into consideration the following factors:
When loans have been individually assessed and no evidence of loss has been identified, these loans are grouped together on the basis of similar credit risk characteristics for the purpose of evaluating the impairment on a portfolio basis (collective assessment). Loans that are assessed individually and found to be impaired are not included in a collective assessment for impairment.
If an impairment loss is identified on an individual basis, the amount of the impairment loss to be recognised is calculated as the difference between the book value of the loan and the present value of the expected future cash flows (considering the recovery period), discounted at the original effective interest rate. The carrying amount of impaired loans is reduced through the use of an allowance account. If a loan has a variable interest rate, the discount rate for measuring the impairment loss is the current effective interest rate determined under the contract rules.
The changes in the recognised impairment losses attributable to the unwinding of discount are recognised as interest and similar income.
The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral.
For the purposes of a collective evaluation of impairment, loans are grouped on the basis of similar credit risk characteristics, taking in consideration the Group's credit risk management process. Future cash flows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the loans in the Group and historical loss experience. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group with the purpose of reducing any differences between loss estimates and actual loss experience.
When a loan is considered by the Group as uncollectible and an impairment loss of 100% was recognised, it is written off against the related allowance for loan impairment.
The Group classifies other financial assets at initial recognition in the following categories:
• Financial assets at fair value through profit or loss
This category includes: (i) financial assets held for trading, which are those acquired principally for the purpose of selling in the short term or that are owned as 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 and (ii) financial assets that are designated at fair value through profit or loss at inception.
The Group classifies, at inception, certain financial assets at fair value through profit or loss when:
The structured products acquired by the Group corresponding to financial instruments containing one or more embedded derivatives meet the above mentioned conditions, and, in accordance, are classified under the fair value through profit or loss category.
• Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold until its maturity and that are not classified, at inception, as at fair value through profit or loss or as available-forsale.
• Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets (i) intended to be held for an indefinite period of time, (ii) designated as available-for-sale at initial recognition or (iii) that are not classified in the other categories referred to above.
Purchases and sales of: (i) financial assets at fair value through profit or loss, (ii) held-to-maturity investments and (iii) available-for-sale financial assets, are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, in which case these transaction costs are directly recognised in the income statement.
Financial assets are derecognised when (i) the contractual rights to receive their cash flows have expired, (ii) the Group has transferred substantially all risks and rewards of ownership or (iii) although retaining some but not substantially all of the risks and rewards of ownership, the Group has transferred the control over the assets.
Financial assets at fair value through profit or loss are subsequently carried at fair value and gains and losses arising from changes in their fair value are included in the income statement in the period in which they arise.
Available-for-sale financial assets are also subsequently carried at fair value. However, gains and losses arising from changes in their fair value are recognised directly in equity, until the financial assets are derecognised or impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in the income statement. Foreign exchange differences arising from equity investments classified as available-for-sale are also recognised in equity, while foreign exchange differences arising from debt investments are recognised in the income statement. Interest, calculated using the effective interest rate method and dividends are recognised in the income statement.
Held-to-maturity investments are carried at amortised cost using the effective interest rate method, net of any impairment losses recognised.
The fair values of quoted investments in active markets are based on current bid prices. For unlisted securities the Group establishes fair value by using (i) valuation techniques, including the use of recent arm's length transactions, discounted cash flow analysis and option pricing models and (ii) valuation assumptions based on market information.
The Group only reclassifies non-derivative financial assets with fixed or determinable payments and fixed maturities, from the available-for-sale financial assets category to the held-to-maturity investments category, if it has the intention and ability to hold those financial assets until maturity.
Reclassifications between these categories are made at the fair value of the assets reclassified on the date of the reclassification. The difference between this fair value and the respective nominal value is recognised in the income statement until maturity, based on the effective interest rate method. The fair value reserve at the date of the reclassification is also recognised in the income statement, based on the effective interest rate method.
The Group assesses periodically whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is impaired if there is objective evidence of impairment as a result of one or more events that occurred after their initial recognition, such as: (i) for equity securities, a significant or prolonged decline in the fair value of the security below its cost, and (ii) for debt 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 reliably estimated.
For held-to-maturity investments, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (considering the recovery period) discounted at the financial asset's original effective interest rate and are recognised in the income statement. The carrying amount of the impaired assets is reduced through the use of an allowance account. If a held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. For held-to-maturity investments if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the income statement.
If there is objective evidence that an impairment loss on available-for-sale financial assets has been incurred, the cumulative loss recognised in equity – 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 income statement – is taken to the income statement. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the income statement up to the acquisition cost if the increase is objectively related to an event occurring after the impairment loss was recognised, except in relation to equity instruments, in which case the reversal is recognised in equity.
Securities sold subject to repurchase agreements (repos) at a fixed price or at the sales price plus a lender's return are not derecognised. The corresponding liability is included in amounts due to banks or to customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest rate method.
Securities purchased under agreements to resell (reverse repos) at a fixed price or at the purchase price plus a lender's return are not recognised, being the purchase price paid recorded as loans and advances to banks or customers, as appropriate. The difference between purchase and resale price is treated as interest and accrued over the life of the agreements using the effective interest rate method.
Securities lent under lending agreements are not derecognised being classified and measured in accordance with the accounting policy described in Note 2.6. Securities borrowed under borrowing agreements are not recognised in the balance sheet.
An instrument is classified as a financial liability when it contains a contractual obligation to transfer cash or another financial asset, independently from its legal form.
Non-derivatives financial liabilities include deposits from banks and due to customers, loans, debt securities, subordinated debt and short sales. Preference shares issued are considered to be financial liabilities when the Group assumes the obligation of reimbursement and/or to pay dividends.
The financial liabilities are recognised (i) initially at fair value less transaction costs and (ii) subsequently at amortised cost, using the effective interest rate method, except for short sales and financial liabilities designated at fair value through profit or loss, which are measured at fair value.
The Group designates, at inception, certain financial liabilities as at fair value through profit or loss when:
The structured products issued by the Group meet the above mentioned conditions and, in accordance, are classified under the fair value through profit or loss category.
The fair value of quoted financial liabilities is based on the current price. In the absence of a quoted price, the Group establishes the fair value by using valuation techniques based on market information, including the own credit risk of the issuer.
If the Group repurchases debt issued, it is derecognised from the balance sheet and the difference between the carrying amount of the liability and its acquisition cost is recognised in the income statement.
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument, namely the payment of principal and/or interests.
Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee is issued. Subsequently financial guarantees are measured at the higher of (i) the fair value recognised on initial recognition or (ii) any financial obligation arising as a result of the guarantees at the balance sheet date. Any increase in the liability relating to guarantees is taken to the income statement.
The financial guarantee contracts issued by the Group normally have a stated maturity date and a periodic fee, usually paid in advance on a quarterly basis. This fee varies depending on the counterparty risk, the amount and the time period of the contract. Therefore, the fair value of the financial guarantee contracts issued by the Group, at the inception date, equal the initial fee received, which is recognised in the income statement over the period to which it relates. The subsequent periodic fees are recognised in the income statement in period to which they relate.
An instrument is classified as an equity instrument when it does not contain a contractual obligation to deliver cash or another financial asset, independently from its legal form, being a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Transaction costs directly attributable to the issue of equity instruments are recognised under equity as a deduction from the proceeds. Amounts paid or received related to acquisitions or sales of equity instruments are recognised in equity, net of transaction costs.
Distributions to holders of an equity instrument are debited directly to equity as dividends, when declared.
Preference shares issued are considered as equity instruments if the Group has no contractual obligation to redeem and if dividends, non cumulative, are paid only if and when declared by the Group.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Non-current assets or disposal groups (groups of assets to be disposed of together and related liabilities that include at least a non-current asset) are classified as held for sale when their carrying amounts will be recovered principally through sale (including those acquired exclusively with a view to its subsequent disposal), the assets or disposal groups are available for immediate sale and 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 brought up to date in accordance with the applicable IFRS. Subsquently, these assets or disposal group are measured at the lower of their carrying amount or fair value less costs to sell.
In the scope of its activity, the Group incurs in the risk from failure of the borrower to repay all the amounts due. In case of loans and advances with mortgage collateral, the Group acquires the asset held as collateral in exchange from loans. In accordance with the requirements of Regime Geral das Instituições de Crédito e Sociedades Financeiras (RGICSF), banks are prevented, unless authorised by the Bank of Portugal, from acquiring property that is not essential to their daily operations (no. 1 of article 112 of RGICSF) being able to acquire, however, property in exchange for loans granted by the Group. This property must be sold within 2 years, period that may be extended by written authorization from the Bank of Portugal and in conditions to be determined by this authority (no. 114 of art of RGICSF).
It is Group's objective to immediately dispose all property acquired in exchange for loans. This property is classified as non-current assets held-for-sale and initially recognised at the lower of its fair value less costs to sell and the carrying amount of the loans. Subsequently, this property is measured at the lower of its carrying amount and the corresponding fair value less costs to sell and is not depreciated. Any subsequent write-down of the acquired property to fair value is recorded in the income statement.
Property valuations are performed in accordance with one of the following methodologies, which are applied in accordance with the specific situation of the asset:
a) Market Method
The Market Comparison Criteria takes as reference transaction values of similar and comparable property to the property under valuation, obtained through market searching carried out in the zone. b) Income Method
Under this method, the property is valued based on the capitalization of its net income, discounted for the present moment, through the discounted cash-flows method.
c) Cost Method
This method separates the value of property on its basic components: Urbane Ground Value and Urbanity Value; Construction value; and Indirect Costs Value.
The valuations are performed by independent specialized entities. The valuation reports are analysed internally with the gauging of processes adequacy, by comparing the sales values with the reevaluated values.
Property and equipment are measured at cost less accumulated depreciation and impairment losses. The value includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group. All other repairs and maintenance are charged to the income statement during the period in which they are incurred.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method over their estimated useful lives, as follows:
| Number of years | |
|---|---|
| Buildings | 35 to 50 |
| Improvements in leasehold property | 1 0 |
| Computer equipment | 4 to 5 |
| Furniture | 4 to 1 0 |
| Fixtures | 5 to 1 0 |
| Security equipment | 4 to 1 0 |
| Office equipment | 4 to 1 0 |
| Motor vehicles | 4 |
| Other equipment | 5 |
When there is an indication that an asset may be impaired, IAS 36 requires that its recoverable amount is estimated and an impairment loss recognised when the net book value of the asset exceeds its recoverable amount. Impairment losses are recognised in the income statement.
The recoverable amount is determined as the greater of its net selling price and value in use which is based on the net present value of future cash flows arising from the continuing use and ultimate disposal of the asset.
The costs incurred with the acquisition, production and development of software are capitalised, as well as the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis during their expected useful lives, which is usually between three to six years.
Costs that are directly associated with the development of identifiable specific software applications and that will probably generate economic benefits beyond one year, are recognised as intangible assets. These costs include employee costs from the Group companies specialised in IT directly associated with the development of the referred software.
All remaining costs associated with IT services are recognised as an expense as incurred.
The Group classifies its lease agreements as finance leases or operating leases taking into consideration the substance of the transaction rather than its legal form, in accordance with IAS 17 – Leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases.
Payments made under operating leases are charged to the income statement in the period to which they relate.
Finance lease contracts are recorded at inception date, both under assets and liabilities, at the cost of the asset leased, which is equal to the present value of outstanding lease instalments. Instalments comprise (i) an interest charge, which is recognised in the income statement and (ii) the repayment of principal, which is deducted from liabilities. Financial charges are recognised as costs over the lease period, in order to produce a constant periodic rate of interest on the remaining balance of liability for each period.
Assets leased out are recorded in the balance sheet as loans granted, for the amount equal to the net investment made in the leased assets.
Interest included in instalments charged to customers is recorded as interest income, while repayments of principal also included in the instalments, is deducted from the amount of the loans granted. The recognition of the interest reflects a constant periodic rate of return on the lessor's net outstanding investment.
Arising from the signing of the "Acordo Colectivo de Trabalho" (ACT) and subsequent amendments resulting from the 3 tripartite agreements as described in Note 13, the Bank and other Group entities set up pension funds and other mechanisms to cover the liabilities with pensions on retirement and disability, widows' pension and health-care benefits.
The pension liabilities and health care benefits are covered by funds that are managed by ESAF – Espírito Santo Fundos de Pensões, S.A., a Group's subsidiary.
The pension plans of the Group are classified as defined benefit plans, since the criteria to determine the pension benefit to be received by employees on retirement are predefined and usually depend on factors such as age, years of service and level of salary.
The liability with pensions is calculated semi-annually by the Group, as at 31 December and 30 June for each plan individually, using the projected unit credit method, and is reviewed annually by qualified independent actuaries. The discount rate used in this calculation is determined based on market rates of emissions associated with high quality corporate bonds, denominated in the currency in which benefits will be paid and with a similar maturity to the date of termination of the plan.
The Group determines the net interest expense (income) for the period on the net defined benefit liability (asset) by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at the beginning of the annual period, taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest expense (income) includes interest cost on the defined benefit obligation net of a theoretical return on the plan assets, both calculated using the discount rate applied in the determination of the defined benefit obligation.
Actuarial gains and losses determined semi-annually and resulting from (i) the differences between financial and actuarial assumptions used and real values obtained and (ii) the changes in actuarial assumptions, are recognised under share capital in the balance other comprehensive income.
At each period, the Group recognises as a cost in the income statement a net total amount that comprises (i) the service cost, (ii) the interest cost, (iii) the expected return on plan assets, (iv) effect early retirement, and (v) effect of settlement or curtailment occurred during the period. Early retirement costs corresponds to an increase on the liabilities due to the fact the employee retires before reaching 65 years of age.
The Group makes payments to the funds in order to maintain its solvency and to comply with the following minimum levels: (i) the liability with pensioners shall be totally funded at the end of each year, and (ii) the liability related to past services cost with employees in service shall be funded at a minimum level of 95%.
Semiannually, the Group assesses for each plan separately, the recoverability of any recognised asset in relation to the defined benefit pension plans, based on the expectation of reductions in future contributions to the funds.
The Group provides to its banking employees health care benefits through a specific Social-Medical Assistance Service. This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union.
SAMS provides to its beneficiaries services and/or contributions on medical assistance expenses, diagnostics, medicines, hospital confinement and surgical operations, in accordance with its financing availability and internal regulations.
The annual contribution of the Group to SAMS amounts to 6.5% of the total annual remuneration of employees, including, among others, the holiday and Christmas subsidy.
The measurement and recognition of the Group's liability with post-retirement healthcare benefits is similar to the measurement and recognition of the pension liability described above. These benefits are covered by the Pension Fund which at present covers all responsibilities with pensions and health care benefits.
In accordance with the ACT "Acordo Colectivo de Trabalho" for the banking sector, the Group has assumed the commitment to pay to current employees that achieve 15, 25 and 30 years of service within the Group, long-term service premiums corresponding, respectively, to 1, 2 and 3 months of their effective monthly remuneration earned at the date the premiums are paid.
At the date of early retirement or disability, employees have the right to a premium proportional to what they would earn if they remained in service until the next payment date.
These long-term service benefits are accounted for by the Group in accordance with IAS 19 as other longterm employee benefits.
The liability with long-term service benefits is calculated semi-annually, at the balance sheet date, by the Group using the projected unit credit method. The actuarial assumptions used are based on the expectations about future salary increases and mortality tables. The discount rate used in this calculation was determined based on the same methodology described for pensions.
In each period the increase in the liability for long-term service premiums, including actuarial gains and losses and past service costs is charged to the income statement.
Following the recommendations of the Supervising and Regulatory authorities, on the shareholders General Meeting, held in 6 April 2010 it was approved a new remuneration policy for the Executive Committee members. This policy consists in giving to the Executive Committee members a fixed remuneration, which should represent approximately 45% of the total remuneration, and a variable component representing around 55% of the total remuneration. The variable remuneration shall have two components: one associated with short-term performance and another with medium-term performance. Half of the short-term component must be paid in cash and the remaining 50% should be paid over a three years period, with half of these payments to be made in cash and the remaining through the attribution of shares. The medium-term component has associated a share options program with the exercise of the options set at 3 years from the date of its attribution.
The execution of PRVIF regarding the total remunerations in cash, number of shares and options attributable to each Executive Committee member will be determined by the Remuneration Committee.
Regarding the first scheme, the attribution of PRVIF shares to the beneficiaries is performed on a deferred basis over a period of three years ( 1st year: 33%; 2nd year: 33% and 3rd year: 34%) and is subject to the achievement of a Return on Equity (ROE) greater than or equal to 5%.
Regarding the attribution of options to the beneficiaries is also performed by the Remuneration Committee, and the exercise price is equal to the single average of the closing prices of BES shares on NYSE Euronext Lisbon during the 20 days preceding the day of attribution of the options, plus 10%. The option can only be exercised at maturity and the beneficiary may choose between the physical settlement or the financial settlement of the options.
PRVIF provides for the granting of options on BES shares to the Bank Top Management. The options are granted by the Board of Directors to the beneficiaries in identical terms to those explained above for the attribution of options to the members of the Executive Committee.
PRVIF is accounted for under IFRS rules (IFRS 2 and IAS 19).
In accordance with IAS 19 Employee benefits, the bonus payment to employees and to the Board of Directors is recognised in the income statement in the period to which they relate.
Income tax for the period comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Income tax recognised directly in equity relating to fair value re-measurement of available-for-sale financial assets and cash flow hedges is subsequently recognised in the income statement when gains or losses giving rise to the income tax are also recognised in the income statement.
Current tax is the tax expected to be paid on the taxable profit for the period, calculated using tax rates enacted or substantively enacted at the balance sheet date at each jurisdiction.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis, and is calculated using the tax rates enacted or substantively enacted at the balance sheet date in any jurisdiction and that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
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 tax assets are recognised to the extent it is probable that future taxable profits will be available against which deductible temporary differences can be deducted.
The Group offsets deferred taxes assets and liabilities for each subsidiary, whenever (i) the subsidiary has a legally enforceable right to set off current tax assets against current tax liabilities, and (ii) they relate to income taxes levied by the same taxation authority. This offset is therefore performed at each subsidiary level, being the deferred tax asset presented in the consolidated balance sheet the sum of the subsidiaries' amounts which present deferred tax assets and the deferred tax liability presented in the consolidated balance sheet the sum of the subsidiaries' amounts which present deferred tax liabilities.
Provisions are recognised when: (i) the Group has present legal or constructive obligation, (ii) it is probable that settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.
When the effect of the passage of time (discount) is material, the provision corresponds to the net present value of the expected future payments, discounted at an appropriate rate considering the risk associated to the obligation.
Restructuring provisions are recognised when the Group has approved a detailed and formal restructuring plan and such restructuring either has commenced or has been announced publicly.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligation under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net costs of continuing with the contract.
Interest income and expense are recognised in the income statement under interest and similar income and interest expense and similar charges for all non-derivative financial instruments measured at amortised cost and for the available-for-sale financial assets, using the effective interest rate method. Interest income arising from non-derivative financial assets and liabilities at fair value through profit or loss is also included under interest and similar income or interest expense and similar charges, respectively.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. The effective interest rate is calculated at inception and it is not subsequently revised, except in what concerns financial assets and liabilities with a variable interest rate. In this case the effective interest rate is periodically revised, having in consideration the impact of the change in the reference interest rate in the estimated future cash-flows.
When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and commissions paid or received that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. In the case of financial assets or groups of similar financial assets for which an impairment loss was recognised, interest income is calculated using the interest rate used to measure the impairment loss.
For derivative financial instruments, except for derivatives for risk management purposes (see Note 2.4), the interest component of the changes in their fair value is not separated out and is classified under net gains/(losses) from financial assets and financial liabilities at fair value through profit or loss. The interest component of the changes in the fair value of derivatives for risk management purposes is recognised under interest and similar income or interest expense and similar charges.
Fees and commissions are recognised as follows:
Dividend income is recognised when the right to receive payment is established.
The Group adopted IFRS 8 – Segmental reporting, for the disclosure of the financial information by operating segments (see Note 4).
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.
The results of the operating segments are periodically reviewed by the Management for decisions taking purposes. The Group prepares on a regular basis, financial information regarding the operating segments, which is reported to the Management.
A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments.
Basic earnings per share is calculated by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding the average number of ordinary shares purchased by the Group and held as treasury stock.
For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to assume conversion of all dilutive potential ordinary shares, such as convertible debt and share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share.
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months' maturity from the inception date, including cash, deposits with banks and deposits at Central Banks.
Cash and cash equivalents exclude restricted balances with central banks.
The Group classifies as investment property the property held to earn rentals or for capital appreciation or both. Investment property is recognised initially at cost, including transaction costs that are directly attributable expenditures, and subsequently at their fair value. Changes in the fair value determined at each balance sheet date are recognised in the income statement. Investment property is not amortised.
Subsequent expenditure is capitalised only when it is probable that it will give rise to future economic benefits in excess of the originally assessed standard of performance of the asset.
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 investment contract recognised and measured in accordance with the accounting policies applicable to insurance contracts (IFRS 4). A contract issued by the Group that transfers only financial risk, without discretionary participating features, is classified as an investment contract and accounted for as a financial instrument (IAS 39).
The financial assets held by the Group to cover the liabilities arising under insurance and investment contracts are classified and accounted for in the same way as other Group financial assets.
Insurance contracts and investment contracts with discretionary participating features are recognised and measured as follows:
Gross written premiums are recognised for as income in the period to which they respect, 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 written premiums.
Acquisition costs that are directly or indirectly related to the selling of insurance and investment contracts with discretionary participating features are capitalized and deferred through the life of the contracts. Deferred acquisition costs are subject to recoverability testing at the time of the insurance policy or investment contract is issued and subject to impairment test (liability adequacy test) at each reporting date.
Claims outstanding reflects the estimated total outstanding liability for reported claims and for incurred but not reported claims (IBNR). Reserves for both reported and not reported claims are estimated by management based on experience and available data using statistical methods. Claims reserves are not discounted.
The life assurance reserve reflects the present value of the Group's future obligations arising from life policies (insurance contracts and investment contracts with discretionary participating features) written and is calculated in accordance with recognised actuarial methods within the scope of applicable legislation.
The reserve for bonus and rebates corresponds to the amounts attributed to policyholders or beneficiaries of insurance or investment contracts, in the form of profit participation, which have not yet been specifically allocated and included in the life assurance reserve.
In accordance with IFRS 4, the unrealised gains and losses on the assets covering liabilities arising out from insurance and investment contracts with discretionary participating features are attributable to policyholders, to the extent that it is expected that policyholders will participate on those unrealised gains and losses when they became realised in accordance with the terms of the contracts and applicable legislation, by recording those amounts under liabilities.
At each reporting date, the Group performs a liability adequacy test to the insurance and investment contracts with discretionary participating features liabilities. The assessment of the liabilities is performed using the best estimate of future cash flows under each contract, discounted at a risk free rate. The liability adequacy test is performed product by product or aggregate basis when contracts are subject to broadly similar risks and managed as a single portfolio. Any deficiency determined, if exists, is recognised directly through income.
The reserve for unearned gross written premiums and reinsurance ceded premiums reflects the part of the written premiums before the end of the period for which the risk period continues after the end of the period.
IFRS set forth a range of accounting treatments and require management to apply judgement and make estimates in deciding which treatment is most appropriate. The most significant of these accounting policies, are discussed in this section in order to improve understanding of how their application affects the Group's reported results and related disclosure. A broader description of the accounting policies applied by the Group is shown in Note 2 to the Consolidated Financial Statements.
Because in many cases there are other alternatives to the accounting treatment chosen by management, the Group's reported results would differ if a different treatment were chosen. Management believes that the choices made are appropriate and that the financial statements present the Group's financial position and results fairly in all material aspects.
The Group determines that available-for-sale financial assets are impaired when there has been a significant or prolonged decline in the fair value below its cost or when it has identified an event with impact on the estimated future cash flows of the assets. This determination requires judgement based on all available relevant information, including the normal volatility of the financial instruments prices. Considering the high volatility of the markets, the Group has considered the following parameters when assessing the existence of impairment losses:
In addition, valuations are generally obtained through market quotation or valuation models that may require assumptions or judgement in making estimates of fair value.
Alternative methodologies and the use of different assumptions and estimates could result in a higher level of impairment losses recognised with a consequent impact in the income statement of the Group.
Fair values are based on listed market prices if available; otherwise fair value is determined either by dealer price quotations (both for that transaction or for similar instruments traded) or by pricing models, based on net present value of estimated future cash flows which take into account market conditions for the underlying instruments, time value, yield curve and volatility factors. These pricing models may require assumptions or judgements in estimating fair values.
Consequently, the use of a different model or different assumptions or judgements in applying a particular model may have produced different financial results from the ones reported.
The Group reviews its loan portfolios to assess impairment on a regular basis, as described in Note 2.5.
The evaluation process in determining whether an impairment loss should be recorded in the income statement is subject to numerous estimates and judgements. The frequency of default, risk ratings, loss recovery rates and the estimation of both the amount and timing of future cash flows, among other factors, are considered in making this evaluation.
Alternative methodologies and the use of different assumptions and estimates could result in a different level of impairment losses with a consequent impact in the consolidated income statement of the Group.
Goodwill recoverable amount recognised as an asset of the Group is revised annually regardless the existence of impairment losses.
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/ dividends predictions, applying a discount rate that includes a risk premium appropriated to the business unit being tested.
Changes in the expected cash flows and in the discount rate may lead to different conclusions from those that led to the preparation of these financial statements.
The Group sponsors the formation of special purpose entities (SPEs) primarily for asset securitisation transactions.
The Group does not consolidate SPEs that it does not control. As it can sometimes be difficult to determine whether the Group does control an SPE, it makes judgements about its exposure to the risks and rewards, as well as about its ability to make operational decisions for the SPE in question (see Note 2.2).
The determination of the SPEs that needs to be consolidated by the Group requires the use of estimates and assumptions in determining the respective expected residual gains and losses and which party retains the majority of such residual gains and losses. Different estimates and assumptions could lead the Group to a different scope of consolidation with a direct impact in net income.
The Group follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement.
In making this judgement, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value instead of amortised cost.
Held-to-maturity investments are subject to impairment tests made by the Group. The use of different assumptions and estimates could have an impact on the income statement of the Group.
The Group is subject to income taxes in numerous jurisdictions. Significant interpretations and estimates are required in determining the worldwide 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 period.
The Tax Authorities are entitled to review the Bank and its subsidiaries located in Portugal's determination of annual taxable earnings, for a period of four years or six years in case there are tax losses brought forward. Hence, it is possible that some additional taxes may be assessed, mainly as a result of differences in interpretation of the tax law. However, the Board of Directors of the Bank, and those of its subsidiaries, are confident that there will be no material tax assessments within the context of the financial statements.
Determining pension liabilities requires the use of assumptions and estimates, including the use of actuarial projections, estimated returns on investment, and other factors that could impact the cost and liability of the pension plan.
Changes in these assumptions could materially affect these values.
Insurance and investment contracts liabilities represent liabilities for future insurance policy benefits. Insurance reserves for traditional life insurance, annuities, and workmen's compensation policies have been calculated based upon mortality, morbidity, persistency and interest rate assumptions applicable to those coverages. The assumptions used reflect the Groups' and market experience and may be revised if it is determined that future experience will differ substantially from that previously assumed. Insurance and investment contracts liabilities include: (i) life mathematical reserve, (ii) reserve for bonus and rebates, (iii) claims reserves, (iv) unexpired risk reserve and (v) unearned premiums reserve. Claims reserves include estimated provisions for both reported and unreported claims incurred and related expenses.
When claims are made by or against policyholders, any amounts that the Group pays or expects to pay are recorded as losses. The Group establishes reserves for payment of losses for claims that arise from its insurance and investment contracts.
In determining their insurance reserves and investment contracts liabilities, the Group's insurance companies perform a continuing review of their overall positions, their reserving techniques and their reinsurance coverage. The reserves are also reviewed periodically by qualified actuaries.
The Group maintains property and casualty loss reserves to cover the estimated ultimate unpaid liability for losses with respect to both reported and not reported claims incurred as of the end of each accounting year.
BES Group activities are focused on the financial sector and are directed to companies, institutionals and private customers. The Group's decision centre is in Portugal, which makes it its privileged market. The historical link with Brazil and Africa, the globalization of the Portuguese companies and the Portuguese emigration to several countries, led to an internationalisation of the Group, which already has an international structure contributing significantly to the Group's activities and results.
The Group's products and services includes deposits, loans to retail and corporate customers, fund management, broker and custodian services, investment banking services and the commercialization of life and non-life insurance products. Additionally, the Group makes short, medium and long term investments in the financial and currency exchange markets with the objective of taking advantages from the prices changes or to have a return from its available resources.
The Group has BES as its main operating unit - with 623 branches in Portugal and with branches in London, New York, Spain (28 branches), Nassau, Cayman Islands, Cape Verde, Venezuela, Luxembourg and Madeira Free Zone and 10 representation offices – with BES Investmento (investment banking); BES Angola (46 branches); BES Açores (18 branches); Banco BEST (10 branches); Espírito Santo Bank; BES Oriente; Aman Bank; BES Vénétie; Espírito Santo Activos Financeiros (ESAF); BES Seguros (non life insurance) and BES Vida, among other companies.
When evaluating the performance by business area, the Group considers the following Operating Segments: (1) Domestic Commercial Banking, including Retail, Corporate, Institutional and Private Banking; (2) International Commercial Banking; (3) Investment Banking; (4) Asset Management; (5) Life insurance; (6) Capital Markets and Strategic Investments; and (7) Corporative Centre. Each segment includes the BES structures that directly or indirectly relate to it, and also the other units of the Group whose activities are most related to one of these segments. In addition to the individual evaluation of each operating unit of the Group (considered as an investment centre), the Executive Committee defines strategies, commercial programs and performance evaluation for each operating segment.
Complementary, the Group uses a second segmentation of its activities and results according to geographic criteria, segregating the activity and the results generated from the units located in Portugal (domestic activities) from the units located abroad (international activities).
Each of the operating segments includes the following activities, products, customers and Group structures:
This operating segment includes all the banking activity with corporate and institutional customers developed in Portugal, based in the branch offices network, corporate centres and other channels and includes the following:
This operating segment includes the units located abroad, which banking activities are focused on corporate and retail customers, excluding investment banking and asset management, which are integrated in the corresponding segments.
Among the units comprising this segment are BES Angola and Spain, London, New York, Cape Verde, Luxembourg and Venezuela branches. The main products included in this segment are deposits, credit, leveraged finance, structured trade finance and project finance operations. This segment, in the context of the funding strategy, has been assuming a relevant role, mainly within institutional customers.
Includes assets, liabilities, profits and losses of the operating units that consolidate in BES Investimento, which comprises all the investment banking activities of the Group originated in Portugal and abroad. In addition to the lending activity, deposits and other forms of funding, it includes Project Finance advisory services, mergers and acquisitions, restructuring and debt consolidation, initial public offerings (shares and bonds), brokerage and other investment banking services.
This segment includes the asset management activities developed by ESAF in Portugal and abroad (Spain, Brazil, Angola e Luxembourg). ESAF's products includes all types of funds - investment funds, real estate funds and pension funds, and also includes discretionary management services and portfolio management.
This segment includes the activities of BES-Vida, through the sale of traditional and investment insurances and retirement plans to BES customers.
This segment includes the financial management of the Group, namely the investments in capital markets instruments (equity and debt), whether they are integrated in trading, fair value, available for sale or held to maturity financial assets portfolios. Also included in this segment is the Group's investment in non-controlling strategic positions, as well as all the activity inherent to interest rate and exchange rate risk management, long and short positions on financial instruments management, which allow the Group to take advantage of the price changes in those markets where these instruments are exchanged.
This area does not correspond to an operating segment. It refers to an aggregation of corporative structures acting throughout the entire Group, such as, areas related to the Board of Directors, Compliance, Planning, Financial and Accounting, Risk management, Investor Relations, Internal Audit, Organization and Quality, among others.
The financial information presented for each segment was prepared in accordance with the criteria followed for the preparation of internal information analysed by the decision makers of the Group, as required by IFRS.
The accounting policies applied in the preparation of the financial information related with the operating segments are consistent with the ones used in the preparation of these consolidated financial statements, which are described in Note 2, being also adopted the following principles:
The Group uses net income before taxes as the measure of profit or loss for evaluating the performance of each operating segment.
As mentioned above, each operating unit (branches abroad, affiliated and associated entities) is evaluated separately, as these units are considered investment centres. Additionally, considering the characteristics of the business developed by these units, they are fully included in one of the operating segments, assets, liabilities, equity, income and expenses.
BES activity comprises most of its operating segments and therefore its activity is disaggregated.
For the purpose of allocating the financial information, the following principles are used: (i) the origin of the operation, i.e., the operation is allocated to the same segment as the commercial structure that originated it, even though, in a subsequent phase, the group makes a strategic decision in order to securitize some of these originated assets; (ii) the allocation of a commercial margin to mass-products, established in a high level when the products are launched; (iii) the allocation of a margin directly negotiated by the commercial structures with the clients for non-mass-products; (iv) the allocation of direct costs from commercial and central structures dedicated to the segment; (v) the allocation of indirect cost (central support and IT services) determined in accordance with specific drivers and with the Cost Based Approach (CBA) model; (vi) the allocation of credit risk determined in accordance with the impairment model; (vii) the allocation of the Bank total equity to the capital markets and strategic investments segment.
The transactions between the independent and autonomous units of the Group are made at market prices; the price of the services between the structures of each unit, namely the price established for funding between units, is determined by the margins process referred above (which vary in accordance with the strategic relevance of the product and the balance between funding and lending); the remaining internal transactions are allocated to the segments in accordance with CBA without any margin from the supplier; the strategic decisions and/ or of exceptional nature are analysed on a case by case basis, being the income and/ or costs generally allocated to the Capital Markets and Strategic Investments segment.
The interest rate risk, exchange risk, liquidity risk and others, except for credit risk, are included in the Financial Department, whose mission is to make the Bank's financial management. The related activity and results are included in Capital Markets and Strategic Investments segment.
Since the Group's activities are exclusively related to the financial sector, the major income results from the difference between interest received on assets and interest paid from liabilities. This situation and the fact that the segments evaluation is based on negotiated margins or determined previously to each product, leads to the results on the intermediation activity being presented, as permitted by IFRS 8 paragraph 23, as the net value of interest under the designation of Financial Income.
Investments in associated companies consolidated under the equity method are included in Capital Markets and Strategic Investments segment, in case of BES associates. For other companies of the Group, the same entities are included in the segment they relate to.
Non current assets, according to IFRS 8, include Other Tangible Assets and Intangible Assets. BES includes these assets on the Capital Markets and Strategic Investments segment; the non current assets held by the subsidiaries are allocated to the segment in which these subsidiaries develop their business.
Income tax is a part of the Group net income but does not affect the evaluation of most of the Operating Segments. Deferred tax assets and liabilities are included in the Capital Markets and Strategic Investments segment.
Assets under post employment benefits are managed in a similar way to deferred income taxes assets, and are included in the Capital Markets and Strategic Investments segment. The factors that influence the amount of responsibilities and the amount of the funds assets correspond, mainly, to external elements; it is Group's policy not to include these factors on the performance evaluation of the operating segments, which activities relate to customers.
In the disclosure of financial information by geographical areas, the operating units that integrate the International Area are: BES Angola and its branches, BES África, Aman Bank, BES Oriente, Espírito Santo Bank, BES Cape Verde; Espírito Santo Vénétie, Banco Delle Tre Venezie, Moza Bank, Ijar Leasing Argélie and the branches in London, Spain, New York, Cape Verde, Venezuela and Luxembourg and the operating units located abroad from BES Investimento and ESAF.
The financial elements related to the international area are presented in the financial statements of those units with the respective consolidation and elimination adjustments.
| (in thousands of euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Period of 6 months ended as at | ||||||||||
| 30.06.2013 | ||||||||||
| Retail | Corporate and Institutional |
Private banking | International commercial banking |
Investment banking |
Asset management |
Insurance | Capital markets and strategic investments |
Corporative centre |
Total | |
| Net interest income | 217 786 | 175 706 | 57 433 | 194 777 | 38 779 | 979 | 78 641 | ( 293 71 5) | - | 470 386 |
| Other operating income | 1 07 099 | 140 204 | 1 2 568 | 54 265 | 81 548 | 29 047 | 221 521 | ( 1 48 333) | - | 497 91 9 |
| Total operating income | 324 885 | 31 5 910 | 70 001 | 249 042 | 1 20 327 | 30 026 | 300 1 62 | ( 442 048) | - | 968 305 |
| Operating expenses | 224 137 | 489 270 | 1 1 359 | 208 01 6 | 1 1 2 866 | 8 730 | 5 850 | 1 73 281 | 76 703 | 1 310 21 2 |
| Includes: | ||||||||||
| Provisions/Impairment | 31 968 | 459 616 | 2 921 | 82 904 | 26 583 | 1 07 | 237 | 142 903 | - | 747 239 |
| Gains on disposal of investments in subsidiaries and associates | - | - | - | - | - | - | - | - | - | - |
| Share of profit of associates | - | - | - | 1 20 | 420 | - | - | 549 | - | 1 089 |
| Profit before income tax and non-controlling interests | 1 00 748 1 748 | ( 173 360) 360) ( 173 360) |
58 642 | 41 1 46 41 46 | 7 881 7 881 | 21 296 | 294 312 | ( 614 780) 614 780) | ( 76 703) ( 76 703)( 703) | ( 340 81 8) |
| Intersegment operating income | 424 | 1 6 186 | - | 98 896 | ( 5 073) | ( 6 829) | ( 11 7) | ( 89 992) | - | 1 3 495 |
| Total Net Assets | 1 5 421 842 421 842 |
24 141 712 24 141 712 24 141 712 |
1 707 739 1 707 739 1 | 23 920 990 23 920 990 920 | 6 602 285 6 602 285 6 602 285 | 208 1 95 208 1 95 | 7 384 768 7 384 768 | 3 258 583 3 258 583 258 583 | - | 82 646 11 4 82 646 11 4 |
| Total Liabilities | 1 5 232 21 0 232 21 |
24 5 071 24 31 5 071 |
1 649 142 1 | 22 240 934 240 | 5 91 8 273 5 8 273 | 29 994 | 6 949 966 | ( 921 21 8) 921 8) | - | 75 414 372 75 |
| Investments in associates | - | - | - | 8 860 | 57 71 3 | - | - | 541 727 | - | 608 300 |
The primary segments reporting are presented as follows:
| (in thousands of euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Period of 6 months ended as at | ||||||||||
| 30.06.2012 | ||||||||||
| Retail | Corporate and Institutional |
Private banking | International commercial banking |
Investment banking |
Asset management |
Insurance | Capital markets and strategic investments |
Corporative centre |
Total | |
| Net interest income | 1 82 781 | 1 1 5 1 37 | 35 320 | 156 461 | 45 883 | 1 709 | 30 1 01 | 40 251 | - | 607 643 |
| Other operating income | 1 1 7 701 | 1 41 1 86 | 1 0 493 | 154 470 | 76 240 | 32 388 | 10 238 | 1 09 836 | - | 652 552 |
| Total operating income | 300 482 | 256 323 | 45 81 3 | 31 0 931 | 1 22 123 | 34 097 | 40 339 | 1 50 087 | - | 1 260 1 95 |
| Operating expenses | 249 656 | 240 073 | 1 0 040 | 146 843 | 99 931 | 9 584 | 3 952 | 1 45 310 | 80 455 | 985 844 |
| Includes: | ||||||||||
| Provisions/Impairment | 41 565 | 208 625 | 1 027 | 38 01 7 | 1 4 1 34 | 823 | 1 806 | 120 390 | - | 426 387 |
| Gains on disposal of investments in subsidiaries and associates | - | - | - | - | ( 6) | - | - | ( 246) | - | ( 252) |
| Diferenças de consolidação negativas | - | - | - | - | - | - | - | ( 89 586) | - | ( 89 586) |
| Share of profit of associates | - | - | - | 300 | 687 | - | - | 6 295 | - | 7 282 |
| Profit before income tax and non-controlling interests | 50 826 50 826 | 1 6 250 1 | 35 773 35 773 | 164 388 | 22 873 22 873 | 24 51 3 24 | 36 387 36 387 | ( 78 760) 78 760)( 760) | ( 80 455) ( 455)( 455) | 1 91 795 1 |
| Intersegment operating income | 4 611 | 1 5 566 | 6 | 249 032 | ( 7 046) | ( 7 1 25) | ( 420) | ( 241 199) | - | 13 425 |
| Total Net Assets | 1 5 633 394 5 633 394 |
23 032 898 | 1 491 1 00 1 491 00 | 22 096 488 22 | 6 484 489 6 484 489 | 1 89 948 1 89 | 6 657 573 657 573 | 8 1 04 938 1 04 | - | 83 690 828 |
| Total Liabilities | 1 5 542 1 45 5 542 45 |
23 032 898 | 1 491 1 49 1 491 49 | 20 607 324 20 | 5 745 347 5 745 347 | 23 622 23 | 6 385 553 385 553 | 3 1 30 046 1 30 | - | 75 958 084 |
| Investments in associates | - | - | - | 8 539 | 57 456 | - | - | 51 4 987 | - | 580 982 |
The secondary segment information is prepared in accordance with the geographical distribution of the Group's business units, as follows:
| (in thousands of euro) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||||||
| Portugal | Spain | France / Luxembourg |
United Kingdom |
United S tates of America |
Brazil | Angola | Cape Verde | Macao | Other | Total | |
| Net profit for the period | ( 256 358) | ( 1 4 284) | ( 3 631 ) | 1 9 361 | 4 685 | 1 425 | 6 028 | 930 | 2 605 | 1 784 | ( 237 455) |
| Net assets | 56 495 830 | 5 597 889 | 91 9 453 | 5 453 703 | 1 224 409 | 2 676 51 5 | 8 547 1 1 8 | 201 486 | 339 443 | 1 1 90 268 | 82 646 1 1 4 |
| Capital expenditure (Property and equipment) | 3 058 | 1 360 | - | 31 6 | 94 | 3 490 | 74 349 | 3 | - | 257 | 82 927 |
| Capital expenditure (Intangible assets) | 9 261 | 1 403 | - | 269 | 69 | 628 | 1 43 | 1 76 | - | 2 663 | 1 4 61 2 |
| (in thousands of euro) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30.06.201 2 | |||||||||||
| Portugal | Spain | France / Luxembourg |
United Kingdom |
United S tates of America |
Brazil | Angola | Cape Verde | Macao | Other | Total | |
| Net profit for the period | ( 52 736) | 1 0 545 | 2 1 57 | 1 1 406 | 3 862 | 1 0 246 | 40 21 7 | 1 485 | 2 007 | ( 3 732) | 25 457 |
| Net assets * | 59 1 75 822 | 4 652 643 | 464 238 | 5 944 423 | 1 393 230 | 2 439 976 | 7 970 699 | 208 048 | 446 385 | 995 364 | 83 690 828 |
| Capital expenditure (Property and equipment) * | 9 929 | 2 939 | 976 | 388 | 44 | 305 | 1 26 709 | 1 81 | - | 7 329 | 1 48 800 |
| Capital expenditure (Intangible assets) * | 375 338 | 4 31 8 | 51 | 887 | 1 49 | 901 | 382 | 444 | - | 6 038 | 388 508 |
* - Amounts refer to the year ended as at 31 December 201 2
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.201 3 3 |
30.06.201 2 | ||||
| Interest and similar income | |||||
| Interest from loans and advances | 1 1 55 1 27 | 1 31 7 963 | |||
| Interest from financial assets at fair value through profit or loss | 1 26 1 29 | 1 21 069 | |||
| Interest from deposits with banks | 21 477 | 38 841 | |||
| Interest from available-for-sale financial assets | 1 85 209 | 283 698 | |||
| Interest from held-to-maturity financial assets | 206 893 | 259 720 | |||
| Interest from derivatives for risk management purposes | 20 352 | 31 522 | |||
| Other interest and similar income | 1 0 836 | 1 4 700 | |||
| 1 726 023 | 2 067 51 3 51 3 | ||||
| Interest ex pense and similar charges | |||||
| Interest from debt securities | 424 054 | 41 3 690 | |||
| Interest from amounts due to customers | 51 1 351 | 557 249 | |||
| Interest from deposits from central banks and other banks | 1 72 978 | 233 488 | |||
| Interest from subordinated debt | 1 07 844 | 21 3 949 | |||
| Interest from derivatives for risk management purposes | 34 998 | 34 782 | |||
| Other interest expense and similar charges | 4 41 2 | 6 71 2 | |||
| 1 255 637 | 1 459 870 | ||||
| 470 386 | 607 643 |
Interest from loans and advances includes an amount of euro 48 501 thousands (30 June 2012: euro 37 898 thousands) related to the unwind of discount regarding the impairment losses of loans and advances to customers that are overdue (see Note 25).
Interest from derivatives for risk management purposes includes, in accordance with the accounting policy described in Notes 2.4 and 2.19, interests from hedging derivatives and from derivatives used to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss in accordance with the accounting policies described in Notes 2.5, 2.6 and 2.8.
This balance is analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.201 3 3 |
30.06.201 2 2 |
||||
| Fee and commission income | |||||
| From banking services | 231 048 | 31 2 500 | |||
| From guarantees granted | 1 1 1 573 | 11 2 449 | |||
| From transactions with securities | 34 936 | 32 350 | |||
| From commitments assumed to third parties | 1 2 930 | 1 7 688 | |||
| Other fee and commission income | 32 004 | 50 849 | |||
| 422 491 422 |
525 836 525 |
||||
| Fee and commission ex penses | |||||
| From banking services rendered by third parties | 41 650 | 39 947 | |||
| From transactions with securities | 1 0 671 | 1 5 058 | |||
| From guarantees received | 30 941 | 28 1 61 | |||
| Other fee and commission expenses | 1 1 038 | 8 730 | |||
| 94 300 94 |
91 896 91 |
||||
| 328 191 328 |
433 433 940 |
Fee and commission expenses from guarantees received includes as at 30 June 2013, the amount of euro 30.1 million (30 June 2012: euro 27.4 million) related with the guarantees received from the Portuguese government in relation with the debt issued by the Group.
This balance is analysed as follows:
| (in thousands of euro) Period of six months ended as at |
||||||||
|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 30.06.201 2 | |||||||
| Gains Gains |
Losses Losses |
Total | Gains | Losses | Total | |||
| Assets and liabilities held for trading | ||||||||
| Bonds and other fixed income securities | ||||||||
| Issued by government and public entities | 65 000 | 1 23 536 | ( 58 536) | 230 01 6 | 72 830 | 1 57 1 86 | ||
| Issued by other entities | 8 029 | 7 51 5 | 51 4 | 6 087 | 24 058 | ( 1 7 971 ) | ||
| Shares | 26 579 | 41 572 | ( 1 4 993) | 25 749 | 38 41 4 | ( 1 2 665) | ||
| Other variable income securities | 233 | 1 72 | 61 | 88 | 269 | ( 1 81 ) | ||
| 99 841 841 |
1 72 795 795 |
( 72 954) 954) 954) | 261 940 | 1 35 571 35 | 1 26 369 369 | |||
| Derivative financial instruments | ||||||||
| E xchange rate contracts | 961 060 | 964 840 | ( 3 780) | 687 930 | 71 4 683 | ( 26 753) | ||
| Interest rate contracts | 3 1 82 208 | 3 278 223 | ( 96 01 5) | 3 204 541 | 3 1 51 572 | 52 969 | ||
| E quity/Index contracts | 1 61 3 947 | 1 61 4 654 | ( 707) | 542 051 | 543 689 | ( 1 638) | ||
| Credit default contracts | 296 609 | 329 263 | ( 32 654) | 378 071 | 407 822 | ( 29 751 ) | ||
| Other | 1 6 71 9 | 1 2 878 | 3 841 | 25 693 | 9 449 | 1 6 244 | ||
| 6 070 543 543 |
6 1 99 858 858 6 1 99 858 |
( 1 29 31 5) ( 1 29 31 5) ( 1 5) | 4 838 286 4 838 286 4 | 4 827 21 5 4 827 21 5 4 5 | 1 1 071 1 1 071 | |||
| 6 1 70 384 384 |
6 372 653 653 6 372 653 |
( 202 269) ( 202 269) ( 202 269) | 5 1 00 226 5 1 00 226 5 00 | 4 962 786 4 962 786 4 | 1 37 440 1 37 440 | |||
| Financial assets at fair value through profit or loss | ||||||||
| Securities | ||||||||
| Bonds and other fixed income securities | ||||||||
| Issued by government and public entities | 1 8 042 | 3 443 | 1 4 599 | 30 762 | 1 87 | 30 575 | ||
| Issued by other entities | 25 242 | 25 483 | ( 241 ) | 1 6 21 0 | 1 8 51 4 | ( 2 304) | ||
| Shares | 1 2 840 | 4 769 | 8 071 | ( 1 1 20) | 4 01 7 | ( 5 1 37) | ||
| Other variable income securities | 38 392 | 61 1 77 | ( 22 785) | 1 8 272 | 1 1 6 549 | ( 98 277) | ||
| 94 51 6 6 |
94 872 872 |
( 356) 356) 356) | 64 1 24 64 | 1 39 267 39 | ( 75 1 43) ( 1 | |||
| Other financial assets(1 ) | 36 31 9 | 9 204 | 27 1 1 5 | 1 4 950 | 1 5 598 | ( 648) | ||
| Financial liabilities(1 ) | 1 86 838 | 1 73 732 | 1 3 1 06 | 1 1 1 1 1 3 | 1 89 01 3 | ( 77 900) | ||
| 31 7 673 31 673 |
277 808 808 |
39 865 865 | 1 90 1 87 90 | 343 878 | ( 1 53 691 ) ( 691 | |||
| 6 488 057 057 |
6 650 461 461 |
( 1 62 404) ( 1 404) 404) | 5 290 41 3 5 41 | 5 306 664 5 | ( 1 6 251 ) ( 1 251 |
(1 ) Includes the fair value change of hedged assets and liabilities or at fair value option.
As at 30 June 2013, this balance includes a negative effect of euro 35.7 million related to the change in fair value of financial liabilities designated at fair value through profit or loss attributable to the Group's credit risk component (30 June 2012: positive effect of euro 12.1 million).
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| Period of six months ended as at | |||||||
| 30.06.201 3 3 |
30.06.2012 30.06.2012 |
||||||
| Gains Gains |
Losses Losses |
Total | Gains | Losses | Total | ||
| Bonds and other fixed income securities | |||||||
| Issued by government and public entities | 229 924 | 1 2 165 | 21 7 759 | 255 763 | 22 333 | 233 430 | |
| Issued by other entities | 6 101 | 6 082 | 1 9 | 53 624 | 34 896 | 1 8 728 | |
| Shares | 21 346 | 3 421 | 1 7 925 | 37 001 | 200 308 | ( 163 307) | |
| Other variable income securities | 9 790 | 4 61 3 | 5 177 | 7 964 | 1 1 821 | ( 3 857) | |
| 267 161 267 |
26 281 26 281 |
240 880 240 | 354 352 | 269 358 | 84 994 |
This balance is analysed as follows:
During 2012, the Group sold at market prices through the overall stock exchange 82.9 million ordinary shares of EDP and 113.0 million ordinary shares of Portugal Telecom. These transactions generated a realised net loss of euro 181.2 million. During the six month period ended 30 June 2013, the Group did not make any major transactions on the shares of either Portugal Telecom or EDP.
Related party transactions are described in Note 48.
This balance is analysed as follows:
| Period of six months ended as at | (in thousands of euro) | |||||
|---|---|---|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
30.06.201 2 2 |
|||||
| Gains Gains |
Losses Losses |
Total | Gains | Losses | Total | |
| Foreign exchange translation | 509 939 | 51 1 694 | ( 1 755) | 525 256 | 526 1 25 | ( 869) |
| 509 939 939 |
51 1 694 1 |
( 1 755) 755) 755) | 525 256 | 526 1 25 25 | ( 869) |
This balance includes the exchange differences arising on translating monetary assets and liabilities at the exchange rates ruling at the balance sheet date in accordance with the accounting policy described in Note 2.3.
This balance is analysed as follows:
| (in thousand of euro) | ||||||
|---|---|---|---|---|---|---|
| Period of six months ended as at | ||||||
| 30.06.201 3 30.06.201 3 |
30.06.201 2 30.06.201 2 |
|||||
| Loans and advances to customers | ( 489) | ( 1 7 41 2) | ||||
| Non current assets held for trade | ( 4 41 2) | ( 3 636) | ||||
| Other | 775 | ( 3 674) | ||||
| ( 4 1 26) 26) |
( 24 722) 24 |
As at 30 June 2012, Loans and advances to customers include a loss of euro 16.2 million related to the sale of euro 108.1 million of credits realized within the deleverage program of the Group. During the six month period ended 30 June 2013 the Group did not register any material gains or losses.
The insurance earned premiums, net of reinsurance, can be analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.201 3 3 |
30.06.201 2 30.06.201 2 |
||||
| Gross written premiums | 42 363 | 1 7 324 | |||
| Reinsurance premiums ceded | ( 27 344) | ( 588) | |||
| Net premiums written | 1 5 01 9 | 1 6 736 | |||
| Change in the provision for unearned premiums, net of reinsurance | ( 42) | ( 2) | |||
| E arned premiums, net of reinsurance | 1 4 977 | 1 6 734 | |||
Gross written premiums from life insurance business are analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.201 3 3 |
30.06.201 2 30.06.201 2 |
||||
| Annuities | - | 372 | |||
| Risk contracts | 30 044 | 9 898 | |||
| Saving contracts with profit sharing | 1 2 31 9 | 7 054 | |||
| 42 363 | 1 7 324 |
The reinsurance premiums ceded respect to cover the risk of death and longevity of contracts made in the traditional segments.
In accordance with IFRS 4, the contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary participating features, are classified as investment contracts and accounted for as financial liabilities.
Contracts for which the investment risk is borne by insurance contracts and fixed rate without profit are not accounted for as premiums.
Claims incurred, net of reinsurance are analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| Period of six months ended as at | ||
| 30.06.201 3 3 |
30.06.201 2 30.06.201 2 |
|
| Claims paid | ||
| Gross amount | ( 134 876) | ( 81 854) |
| Reinsurance share | 5 422 | 5 009 |
| ( 129 454) | ( 76 845) | |
| Change in claims outstanding reserve | ||
| Gross amount | 7 802 | 321 |
| Reinsurance share | ( 817) | 258 |
| 6 985 | 579 | |
| ( 122 469) | ( 76 266) |
The change in the technical reserves, net of reinsurance is analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.2013 30.06.2013 |
30.06.2012 30.06.2012 |
||||
| Mathematical reserves | 85 063 | 58 1 51 | |||
| Reserve for participating features | ( 883) | ( 720) | |||
| Other tecnical reserves | ( 42) | 2 846 | |||
| Reserve for reinsurance | 10 045 | 373 | |||
| Commissions and participating features from reinsurance | 1 80 294 | - | |||
| 274 477 | 60 650 |
Commissions and reinsurance profit sharing includes the net upfront fee, resulting from the signing of a reinsurance treaty in which BES Vida reinsures the life insurance risk portfolio at 100%, including all insurance policies in force as at 30 June 2013.
From this date, BES Vida will cede to the reinsurer all premiums and claims associated with the policies included in this treaty. The Company will perform the servicing of these contracts, as well as the distribution of the respective products.
Under this treaty, BES Vida received an upfront fee, having transferred all the risks and benefits associated with these contracts. On that basis, the risk of (i) life, (ii) disability, and (iii) cancellation of contracts were transferred. As such the upfront fee is recognized on the present date, net of the respective in Value in force of the portfolio recognized as an asset, at the date of acquisition of BES Vida (see notes 31 and 54)
This balance is analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Period of six months ended as at | |||||
| 30.06.201 3 30.06.201 3 |
30.06.201 2 | ||||
| Other operating income / (ex penses) | |||||
| IT related business | 2 171 | 3 220 | |||
| Gains on repurchase of Group debt securities (see Notes 38 and 42) | ( 1 4 808) | 99 737 | |||
| Non recurring gains on credit operations | 3 508 | 12 068 | |||
| Non recurring gains on advisory services | 864 | 2 528 | |||
| Direct and indirect taxes | ( 20 462) | ( 21 061) | |||
| Contributions to the deposits guarantee fund | ( 6 31 2) | ( 4 71 7) | |||
| Other operating expenses resulting from the activity of held for sale companies | ( 42 054) | ( 7 397) | |||
| Membership and donations | ( 3 970) | ( 4 390) | |||
| Other | ( 41 540) | ( 6 221) | |||
| ( 1 22 603) 1 22 |
73 767 |
Direct and indirect taxes include an amount of euro 13.0 million (30 June 2012: euro 14.0 million) relating to the cost related with the introduction of a Banking levy, created by Law No. 55-A/2010, of 31 December prorogued by Law No. 64-B/2011 of 30 December and Law No. 66-B/2012 of 31 December (see Note 41).
This balance is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| Period of six months ended as at | |||
| 30.06.201 3 3 |
30.06.201 30.06.201 2 |
||
| Wages and salaries | 220 702 | 222 924 | |
| Remuneration | 21 9 494 | 220 736 | |
| Long-term service benefits (see Note 1 6) | 1 208 | 2 1 88 | |
| Mandatory social charges | 48 870 | 51 31 7 | |
| Pension costs (see Note 1 6) | 8 1 88 | 4 307 | |
| Other costs | 1 1 772 | 1 2 964 | |
| 289 532 289 |
291 291 51 2 |
As at 30 June 2013, other costs include the amount of euro 463 thousands (30 June 2012: euro 752 thousands) related with the variable remuneration plan on financial instruments (PRVIF) of BES in accordance with the accounting policy described in Note 2.16. The details of this plan implemented by the Group are presented in Note 16.
As at 30 June 2013 and 2012, the number of employees of the Group is analysed as follows:
| 30.06.201 3 30.06.201 3 |
30.06.201 2 | |
|---|---|---|
| BE S employees | 6 656 | 6 694 |
| Financial sector subsidiaries employees | 3 408 | 3 21 0 |
| Financial sector group entities employees Financial sector entities employees |
1 0 064 1 0 064 |
9 904 |
In compliance with the collective labor agreement (ACT) for the banking sector established with the unions, the Bank undertook the commitment to grant its employees, or their families, pension on retirement and disability, and widows' pension. Pension payments consist of a rising percentage based on years of service, applicable to each year's negotiated salary table for the active work force.
As at 30 December 1987, the Bank estabilished a pension fund to cover the above mentioned liabilities with pension payments. Later, after obtaining the authorisation from the Portuguese Insurance Institute, the Bank has changed the pension fund contract in order to allow the coverage of all pension liabilities, health care benefits and, in 2009, the death allowance. The pensions funds in Portugal are managed by ESAF – Espírito Santo Fundo de Pensões, S.A.
However, it should be noted that in what concerns the banking subsidiaries, the employees hired after 31 March 2008 are covered by the Portuguese Social Security scheme.
Additionally, with the publication of Decree-Law n.1-A / 2011 of January 3, all banking sector employees beneficiaries of "CAFEB – Caixa de Abono de Família dos Empregados Bancários" were integrated into the General Social Security Scheme from 1 January 2011, which assumed the protection of banking sector employees in the contingencies of maternity, paternity and adoption and even old age, remaining under the responsibility of the banks the protection in sickness, disability, survivor and death.
Retirement pensions of banking employees integrated into the General Social Security Regime continue to be calculated according to the provisions of ACT and other conventions. Banking employees, however, are entitled to receive a pension under the general regime, which amount takes into account the number of years of discounts for that scheme. Banks are responsible for the difference between the pension determined in accordance with the provisions of ACT and that the one that the banking employees are entitled to receive from the General Social Security Regime.
The contribution rate to the Social Security Regime is 26.6%, 23.6% paid by the employer and 3% paid by the employees, instead of Caixa de Abono de Família dos Empregados Bancários (CAFEB), abolished by the same law. In consequence of this change, the pension rights of active employers is to be covered under the terms defined by the General Social Security Regime, taking into account the length of service from 1 January 2011 until retirement. The differential required to support the guaranteed pension in terms of the ACT is paid by the Banks.
At the end of 2011 following the third tripartite agreement established between the Portuguese Government, the Portuguese Banking Association and the banking sector employees unions, it was decided to transfer to the Social Security Regime the banks liabilities with pension in payment as at 31 December, 2011.
The tripartite agreement established, provides for the transfer to the Social Security sphere of the liabilities with pensions in payment as of 31 December 2011 at constant values (0% discount rate). The responsibilities relating to updates of pensions value, other pension benefits in addition to those to be borne by the Social Security, health-care benefits, death allowance and deferred survivor pensions, will remain in the sphere of responsibility of the banks with the correspondent funding being provided through the respective pension funds.
The banks pension funds assets, specifically allocated to the cover of the transferred liabilities were also be transferred to the Social Security.
Being thus a definitive and irreversible transfer of the liabilities with pensions in payment (even if only on a portion of the benefit), the conditions set out in IAS 19 'Employee benefits' underlying the concept of settlement were met, as the obligation with pension in payment as at 31 December, 2011 extinguished at the date of transfer.
| Assumptions | ||||
|---|---|---|---|---|
| 30-06-201 3 | 3 | 31 -1 2-201 2 | ||
| 1 st through 4th year |
5th and subsequent years |
1 st through 4th year |
5th and subsequent years |
|
| Actuarial Assumptions | ||||
| E xpected return of plan assets | 4.50% | 5.50% | ||
| Discount rate | 4.50% | 4.50% | ||
| Pensions increase rate | 0.00% | 0.75% | 0.00% | 0.75% |
| S alaries increase rate | 1 .00% | 1 .75% | 1 .00% | 1 .75% |
| Mortality table men | TV 73/77 - 1 year | |||
| Mortality table woman | TV 88/90 |
The key actuarial assumptions used to calculate pension liabilities are as follows:
| 30.06.201 3 30.06.201 3 |
31 31 .1 2.201 2 2 |
|
|---|---|---|
| E mployees | 6 023 | 5 31 1 |
| Pensioners | 5 744 | 5 734 |
| TOTAL | 1 1 767 767 |
1 1 045 1 1 045 |
The application of IAS 19 on responsibilities and coverage levels reportable to 30 June 2013 and 31 December 2012 is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 30.06.2013 |
31.12.2012 31.12.2012 |
|
| Assets / (liabilities) recog nised in the balance sheet | ||
| Total oblig ations | (1 207 708) 207 708) |
(1 206 283) (1 206 283) |
| Pensioners | ( 438 832) | ( 448 265) |
| Employees | ( 768 876) | ( 758 018) |
| Coverag e | ||
| Fair value of plan assets | 1 202 329 329 |
1 220 885 220 |
| Net assets/(liabilities) in balance sheet (see Note 34 and 4 3) | ( 5 379) 379) |
14 602 14 |
| Acumulated actuarial deviations recog nised in other comprehensive income income |
1 091 029 029 1 091 029 |
1 078 732 1 078 732 |
In accordance with the accounting policy described in Note 2.16 – Employees Benefits, the Group liability with pensions is calculated semi-annually.
In accordance with the accounting policy described in Note 2.16 and following the requirements of IAS 19 – Employees benefits, the Group assesses at each balance sheet date and for each plan separately, the recoverability of the recognised assets in relation to the defined benefit pension plans based on the expectation of reductions in future contributions to the funds.
The changes in the defined benefit obligation can be analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 | 31.12.2012 | |
| Defined benefit oblig ation at the beg inning of the period period |
1 206 283 283 |
1 1 077 864 |
| Service cost | 8 188 | 12 012 |
| Interest cost | 27 103 | 58 994 |
| Plan participants' contribution | 1 591 | 3 259 |
| Actuarial (gains) / losses: | ||
| - changes in actuarial assumptions | - | 65 366 |
| - experience adjustments | ( 16 393) | 40 300 |
| Pensions paid by the fund | ( 14 808) | ( 27 481) |
| Transfer to the Social Security regime of the liabilities with pensions in payment | - | ( 21 813) |
| Exchange differences and other | ( 4 256) | ( 2 218) |
| Defined benefit oblig ation at the end of the period | 1 207 708 708 |
1 206 283 |
The change in the fair value of the plan assets for the six months period ended as at 30 June 2013 and for the year ended 31 December 2012 is analysed as follows:
| (in thousand of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 .1 2 |
||
| Fair value of plan assets at the beginning of the period eriod |
1 220 885 1 220 885 |
1 1 84 878 1 1 84 878 | |
| Actual return on plan assets | ( 1 063) | ( 24 299) | |
| Group contributions | - | 86 41 0 | |
| Plan participants' contributions | 1 591 | 3 259 | |
| Pensions paid by the fund | ( 1 4 808) | ( 27 481 ) | |
| E xchange differences and other | ( 4 276) | ( 1 882) | |
| Fair value of plan assets at the end of the period of assets the period |
1 202 329 1 202 329 1 |
1 220 885 1 220 885 |
The fair value of plan assets can be analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.2012 | |||
| Shares | 209 965 | 178 654 | ||
| Bonds | 364 501 | 335 192 | ||
| Real estate | 431 289 | 370 769 | ||
| Other | 1 96 574 | 336 270 | ||
| Total | 1 202 329 1 202 |
1 220 885 1 220 885 |
||
The real estate assets rented to BES Group and securities issued by Group companies which are part of the plan assets are analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 1 31 .1 2.201 1 |
||
| Shares | 2 925 | 1 200 | |
| Bonds | 2 595 | 6 382 | |
| Real estate | 227 751 | 298 022 | |
| Total | 233 271 | 305 604 |
During the year ended 31 December 2012 the Group acquired 49 779 and 37 115 thounsands units of Fungere Fund and Fungepi Fund to the Group pensions funds, by a global amount of euro 158.1 million and euro 87.2 million, respectively.
The changes in the accumulated actuarial gains and losses are analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 30.06.2013 |
31.12.2012 31.12.2012 |
|
| Accumulated actuarial (g ains) and losses recog nised in other comprehensive income at the beg inning of the period |
1 078 732 | 886 964 |
| Actuarial (gains) / losses | ||
| - changes in actuarial assumptions | - | 65 366 |
| - experience adjustments | 11 309 | 127 103 |
| Other | 988 | ( 701) |
| Accumulated actuarial (g ains) and losses recog nised in other | ||
| comprehensive income at the end of the period income the period |
1 091 029 091 029 1 091 029 |
1 078 732 1 078 732 |
The period costs can be analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| Period of six months ended as at | ||||
| 30.06.201 3 30.06.201 3 |
30.06.201 2 30.06.201 2 |
|||
| Service cost | 8 1 88 | 6 431 | ||
| Interest cost | 464 | ( 2 1 24) | ||
| Net benefit cost | 8 652 | 4 307 |
In compliance with the previously mentioned on the Note 2.16, from 1st of January 2013 and following the revision of IAS 19 – Employees Benefits, the income/expenses from interest became to be recognised by their net value under the interest (income/expense) and similar caption.
The changes in the net assets/ (liabilities) recognised in the balance sheet is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 |
||
| At the beginning of the period | 1 4 602 1 4 |
1 07 01 4 1 07 01 4 |
|
| Net periodic benefit cost | ( 8 652) | ( 8 544) | |
| Actuarial (gains)/ losses recognised on other comprehensive income | ( 1 1 309) | ( 1 91 768) | |
| Contributions of the period and pensions paid by the Group | - | 86 41 0 | |
| Other (a) | ( 20) | 21 490 | |
| At the end of the period | ( 5 379) 5 379) |
1 4 602 4 |
(a) In 201 2, this amount includes a profit of euro 21 .8 million related to the liability decrease w ith death subsidy.
The evolution of the defined benefit obligations, fair value of plan assets and of the experience adjustments gains/ (losses) in the past 5 years, is presented as follows:
| ( in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.2013 | 31.12.2012 | 31.12.2011 | 31.12.2010 | 31.12.2009 | |
| Defined benefit obligation | (1 207 708) | (1 206 283) | (1 077 864) | (2 205 366) | (2 125 202) |
| Fair value of plan asssets | 1 202 329 | 1 220 885 | 1 184 878 | 2 206 313 | 2 198 280 |
| (Un)/over funded liabilities | ( 5 379) | 14 602 | 107 014 | 947 | 73 078 |
| (Gains)/losses from experience adjustments arising on defined benefit obligation ( 16 393) | 40 300 | ( 110 266) | 25 201 | 51 583 | |
| (Gains)/losses from experience adjustments arising on plan assets | 27 702 | 86 803 | 268 043 | 66 895 | ( 90 994) |
Following the recommendations of the Supervising and Regulatory authorities, on the shareholders General Meeting, held in 6 April 2010 it was approved a new remuneration policy for the Executive Committee members. This policy consists in giving to the Executive Committee members a fixed remuneration, which should represent approximately 45% of the total remuneration, and a variable component representing around 55% of the total remuneration. The variable remuneration shall have two components: one associated with short-term performance and another with medium-term performance. Half of the short-term component must be paid in cash and the remaining 50% should be paid over a three years period, with half of these payments to be made in cash and the remaining through the attribution of shares. The medium-term component has associated a share options program with the exercise of the options set at 3 years from the date of its attribution.
Regarding the first scheme, the attribution of PRVIF shares to the beneficiaries is performed on a deferred basis over a period of three years ( 1st year: 33%; 2nd year: 33% and 3rd year: 34%) and is subject to the achievement of a Return on Equity (ROE) greater than or equal to 5%.
Regarding the attribution of options to the beneficiaries is also performed by the Remuneration Committee, and the exercise price is equal to the single average of the closing prices of BES shares on NYSE Euronext Lisbon during the 20 days preceding the day of attribution of the options, plus 10%.
The option can only be exercised at maturity and the beneficiary may choose between the physical settlement or the financial settlement of the options.
The plans' initial fair value was calculated using an option valuation model with the following assumptions:
| Option valuation assumption | |||
|---|---|---|---|
| st attribution 1 |
2nd attribution | ||
| Inicial reference date | 1 2.04.201 1 | 1 2.1 0.201 2 | |
| Final reference date | 31 .03.201 4 | 1 5.01 .201 6 | |
| Rights granted to employees | 2 250 000 | 6 280 045 | |
| Reference price (in euro) | 3.47 | 0.67 | |
| Interest rate | 2.31 % | 0.67% | |
| Volatility | 40.0% | 65.00% | |
| Inicial fair value of the plan (in thousands of euro) | 1 1 30 | 1 940 |
PRVIF is accounted for in accordance with the applicable IFRS rules (IFRS 2 and IAS 19). During 2013, the Group registered, against liabilities, a cost of euro 463 thousands (30 June 2012: euro 752 thousands) related to the amortization of the initial options premium granted.
As referred in Note 2.16, for employees that achieve certain years of service, the Bank pays long term service premiums, calculated based on the effective monthly remuneration earned at the date the premiums are due. At the date of early retirement or disability, employees have the right to a premium proportional to that they would earn if they remained in service until the next payment date.
As at 30 June 2013 and 31 December 2012, the Group's liabilities regarding this benefits amount to euro 28 226 thousands and euro 28 691 thousands, respectively (see Note 43). The costs incurred in the first semester of 2013 with long-term service benefits amounted to euro 1 208 thousands (30 June 2012: euro 2 188 thousands).
The actuarial assumptions used in the calculation of the liabilities are those presented for the calculation of pensions (when applicable).
This balance is analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| Period of six months ended as at | ||||
| 30.06.201 3 30.06.201 3 |
30.06.201 2 30.06.201 2 |
|||
| Rental costs | 37 844 | 35 833 | ||
| Advertising costs | 1 3 654 | 1 7 395 | ||
| Communication costs | 22 069 | 23 090 | ||
| Maintenance and related services | 1 1 21 2 | 1 0 903 | ||
| Travelling and representation costs | 1 6 427 | 1 4 767 | ||
| Transportation | 3 593 | 4 1 62 | ||
| Insurance costs | 4 295 | 4 352 | ||
| IT services | 31 846 | 31 971 | ||
| Independent work | 3 920 | 4 007 | ||
| Temporary work | 2 331 | 2 467 | ||
| E lectronic payment systems | 5 406 | 6 271 | ||
| Legal costs | 9 822 | 8 698 | ||
| Consultants and external auditors | 1 4 723 | 1 0 21 4 | ||
| Water, energy and fuel | 5 868 | 5 548 | ||
| Consumables | 2 589 | 2 91 4 | ||
| Other costs | 35 340 | 31 597 | ||
| 220 939 220 |
21 4 1 89 21 4 1 89 |
The balance other costs includes, among others, specialised services with security, information, databases, costs with training and external suppliers.
Basic earnings per share are calculated by dividing the net profit attributable to equity holders of the Bank by the weighted average number of ordinary shares outstanding during the year.
| (in thousands of euro) | |||
|---|---|---|---|
| Period of six months ended as at |
Year ended as at |
Period of six months ended as at |
|
| 30.06.201 3 3 |
31 .1 2.201 2 .1 2.201 2 |
30.06.201 2 | |
| Profit attributable to the equity holders of the Bank (1 ) | ( 237 303) 237 |
92 578 92 578 |
26 078 26 078 |
| Weighted average number of ordinary shares (thousands) | 4 01 7 928 | 3 096 971 | 2 1 76 01 3 |
| Weighted average number of treasury stock (thousands) | ( 1 31 8) | ( 1 1 91 0) | ( 1 6 201 ) |
| Weighted average number of ordinary shares outstanding (thousands) ing (thousands) |
4 01 6 61 0 01 0 |
3 085 061 085 | 2 1 59 81 2 1 81 |
| Basic earnings per share attributable to equity holders of the Bank (in euro) | (0.06) (0.06) |
0.03 0.03 |
0.01 |
(1) Net profit for the period adjus ted by the dividend from preference s hares and from perpetual bonds interes t, and res ults form the repurchas e of preference s hares .
The diluted earnings per share is calculated considering the profit attributable to the equity holders of the Bank and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
The diluted earnings per share are not different from the basic earning per share as the outstanding plans of PRVIF do not have a dilutive effect.
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
||
| Cash | 237 557 | 303 538 | |
| Deposits at central banks | 1 2 21 5 959 446 |
26 1 36 1 047 867 |
|
| Bank of Portugal | |||
| Other central banks | |||
| 971 661 | 1 074 003 | ||
| 1 209 21 8 1 21 8 |
1 377 541 1 377 541 |
The deposits at Central Banks include mandatory deposits with the Bank of Portugal intended to satisfy legal minimum cash requirements, for an amount of euro 12 215 thousands (31 December 2012: euro 26 136 thousands). According to the European Central Bank Regulation (CE) no. 1745/2003, of 12 September 2003, minimum cash requirements kept as deposits with the Bank of Portugal earn interest, and correspond to 1% of deposits and debt certificates maturing in less than 2 years, excluding deposits and debt certificates of institutions subject to the European System of Central Banks' minimum reserves requirements. As at 30 June 2013 these deposits have earned interest at an average rate of 0.50% (31 December 2012: 0.89%).
The fulfilment of the minimum cash requirements for a given period of observation is monitored taking into account the value of bank deposits with the Bank of Portugal during the referred period. The balance of the bank account with the Bank of Portugal as at 30 June 2013, was included in the observation period from 12 June 2013 to 9 July 2013, which corresponded to an average minimum cash requirements of euro 264.3 million.
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31.1 2.201 2 | |
| Deposits with banks in Portugal | ||
| Repayable on demand | 81 659 | 1 38 854 |
| Uncollected cheques | 75 1 45 | 1 07 354 |
| 1 56 804 1 804 |
246 208 246 208 |
|
| Deposits with banks abroad | ||
| Repayable on demand | 375 940 | 392 183 |
| Uncollected cheques | 2 999 | 8 962 |
| Other | 29 265 | 33 724 |
| 408 204 408 204 |
434 869 434 869 |
|
| 565 008 565 008 |
681 077 681 077 |
Uncollected cheques in Portugal and abroad were sent for collection during the first working days following the reference dates.
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.2012 2.2012 |
|
| Financial assets held for trading | ||
| Securities | ||
| Bonds and other fixed income securities | ||
| Issued by government and public entities | 1 207 959 | 1 347 806 |
| Issued by other entities | 344 760 | 259 203 |
| Shares | 41 1 77 | 51 91 1 |
| Other variable income securities | 1 275 | 2 01 4 |
| 1 595 1 71 595 1 71 |
1 660 934 660 934 |
|
| Derivatives | ||
| Derivative financial instruments with positive fair value | 1 623 659 | 2 264 465 |
| 3 21 8 830 21 830 |
3 925 399 3 925 399 |
|
| Financial liabilities held for trading | ||
| Derivative financial instruments with negative fair value | 1 552 775 | 2 1 21 229 |
| Short sales | 1 5 406 | 796 |
| 1 568 1 81 568 1 81 |
2 1 22 025 1 22 025 |
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
As at 30 June 2013 and 31 December 2012 the analysis of the securities held for trading by the period to maturity, is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Up to 3 months | 1 06 474 | 1 38 71 0 |
| 3 to 1 2 months | 76 507 | 1 30 677 |
| 1 to 5 years | 1 208 395 | 757 798 |
| More than 5 years | 1 61 343 | 576 1 27 |
| Undetermined | 42 452 | 57 622 |
| 1 595 1 71 595 |
1 660 934 1 660 934 |
In accordance with the accounting policy described in Note 2.6, securities held for trading are those which are bought to be traded in the short-term, regardless of their maturity.
As at 30 June 2013 and 31 December 2012, the exposure to peripheral Euro zone countries public debt is analysed in Note 51.
As at 30 June 2013 and 31 December 2012, derivative financial instruments can be analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | ||||
| Notional | Notional | Liabilities | |||
| 1 2 443 | |||||
| 2 002 | |||||
| 3 695 266 | 3 344 1 04 | ||||
| 1 27 443 | - | - | 278 31 7 | - | - |
| 87 425 | 1 1 8 945 | 1 8 343 | |||
| 89 233 | 1 1 5 406 | ||||
| 4 41 4 940 | 57 241 | 57 909 | 2 41 4 534 | 41 41 5 | 46 846 |
| 16 330 473 330 |
1 1 12 1 39 39 |
93 363 363 | 1 2 073 273 073 | 75 826 826 | 79 634 634 |
| 1 6 | |||||
| 1 81 2 560 | |||||
| 1 556 | |||||
| 38 562 | |||||
| - | |||||
| 597 218 | 365 | 367 | 1 903 388 | 1 341 | 1 341 |
| 39 805 055 805 |
1 413 1 00 1 00 |
1 292 985 985 | 41 81 9 049 81 9 | 1 996 798 1 798 | 1 854 035 035 |
| 24 936 | |||||
| 1 31 1 46 | |||||
| - | |||||
| - | |||||
| 2 413 568 413 |
55 427 55 427 |
1 38 020 1 38 020 020 | 3 555 81 2 3 555 81 2 555 2 | 1 46 928 1 46 928 1 928 | 1 56 082 1 56 082 |
| 2 213 1 28 | 42 993 | 28 407 | 2 774 780 | 44 91 3 | 31 478 |
| 2 1 21 229 229 | |||||
| 2 1 08 301 2 1 07 370 3 700 495 900 000 27 293 576 87 000 3 976 442 6 950 819 904 409 946 037 53 223 509 899 60 762 224 762 |
Assets Assets 23 082 3 689 28 1 27 486 1 378 235 96 33 918 - 26 341 29 086 - - 1 1 623 659 |
Fair Value Liabilities Liabilities 8 025 2 370 25 059 - 1 260 037 96 32 485 - 69 71 8 68 302 - - 1 552 775 775 |
1 21 7 845 1 226 399 3 357 723 200 000 30 649 333 363 000 4 918 557 3 784 771 664 51 6 2 71 2 479 96 583 82 234 60 222 91 4 222 4 |
Fair Value Assets 6 968 1 753 25 690 - 1 953 058 1 556 40 843 - 86 202 60 726 - - 2 264 465 2 465 |
a) Derivatives traded in organised markets, whose fair value is settled daily through the margin accounts.
As at 30 June 2013 and 31 December 2012, the analysis of trading derivatives by the period to maturity is presented as follows:
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 31 .1 2.201 2 |
(in thousands of euro) | ||||
|---|---|---|---|---|---|---|
| Notional Notional |
Fair Fair value (net) (net) Fair value (net) |
Notional NotionalNotional | Fair value (net) Fair value (net) |
|||
| Up to 3 months | 1 5 057 041 | ( 1 4 61 9) | 1 3 956 784 | 71 1 33 | ||
| 3 to 1 2 months | 9 561 562 | ( 25 856) | 9 998 962 | ( 46 401 ) | ||
| 1 to 5 years | 1 9 586 268 | 27 070 | 1 8 71 9 605 | 21 460 | ||
| More than 5 years | 1 6 557 353 | 84 289 | 1 7 547 563 | 97 044 | ||
| 60 762 224 762 224 |
70 884 | 60 222 91 4 60 222 91 | 1 43 236 236 |
This balance is analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 31 .1 2.201 2 |
|
| Bonds and other fixed income securities | ||
| Issued by government and public entities Issued by other entities |
1 323 905 1 368 533 |
51 5 994 1 1 1 8 425 |
| S hares and other variable income securities | 1 201 408 | 1 1 87 1 34 |
| 3 893 846 893 846 |
2 821 553 2 821 553 |
In light of IAS 39 and in accordance with the accounting policy described in Note 2.6, the Group designated these financial assets at fair value through profit or loss, in accordance with the documented risk management and investment strategy, considering that these financial assets (i) are managed and evaluated on a fair value basis and/or (ii) have embedded derivatives.
As at 30 June 2013 and 31 December 2012, the analysis of the financial assets at fair value through profit or loss by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 30.06.2013 |
31 .1 2.2012 .1 2.2012 |
|
| Up to 3 months | 518 090 | 486 789 |
| 3 to 1 2 months | 1 505 905 | 239 972 |
| 1 to 5 years | 243 659 | 224 257 |
| More than 5 years | 386 1 56 | 733 700 |
| Undetermined | 1 240 036 | 1 1 36 835 |
| 3 893 846 | 2 821 553 2 821 553 |
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Fair value reserve | Impairment | Book | |||
| Cost (1 ) | Positive Positive |
Negative Negative |
losses | value | |
| Bonds and other fixed income securities | |||||
| Issued by government and public entities | 6 335 806 | 58 870 | ( 53 489) | - | 6 341 1 87 |
| Issued by other entities | 3 260 850 | 63 594 | ( 61 946) | ( 27 71 2) | 3 234 786 |
| Shares | 1 526 31 4 | 96 665 | ( 94 830) | ( 21 3 980) | 1 31 4 1 69 |
| Other variable income securities | 1 293 61 5 | 11 459 | ( 22 777) | ( 43 167) | 1 239 1 30 |
| Balance as at 31 december 201 2 at 31 december 2 |
1 2 41 6 585 1 2 41 6 585 |
230 588 230 588 588 | ( 233 042) ( 233 042)042) | ( 284 859) ( 284 859)859) | 1 2 1 29 272 1 2 1 29 272 |
| Bonds and other fixed income securities | |||||
| Issued by government and public entities | 4 405 389 | - | - | - | 4 405 389 |
| Issued by other entities | 3 887 038 | 266 574 | ( 79 726) | ( 1 7 171 ) | 4 056 71 5 |
| Shares | 1 557 346 | 82 153 | ( 45 387) | ( 185 190) | 1 408 922 |
| Other variable income securities | 908 326 | 16 472 | ( 4 908) | ( 35 606) | 884 284 |
| Balance as at 31 December 201 1 at 31 December 1 |
1 0 758 099 | 365 199 199 | ( 1 30 021 ) ) | ( 237 967) 967) | 1 0 755 31 0 1 0 755 0 |
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
(1 ) Acquisition cost relating to shares and other variable income securities and amortised cost relating to debt securities.
As at 30 June 2013, the exposure to debt of peripheral countries in the euro area is analysed in Note 51 – Risk Management.
In accordance with the accounting policy described in Note 2.6, the Group assesses periodically whether there is objective evidence of impairment on the available-for-sale financial assets, following the judgment criteria's described in Note 3.1.
The changes occurred in impairment losses of available-for-sale financial assets are presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 2 .1 |
30.06.201 2 30.06.201 | |
| Balance at the beginning of the period | 237 967 | 1 88 236 | 1 68 282 |
| Charge for the period | 64 1 33 | 81 774 | 21 459 |
| Charge off | ( 7 422) | ( 24 382) | ( 4 044) |
| Write back for the period | ( 1 0 1 49) | ( 3 062) | ( 863) |
| E xchange differences and other | 330 | ( 4 599) | 3 402 |
| Balance at the end of the period | 284 859 859 |
237 967 237 967 237 967 |
1 88 236 1 88 236 |
As at 30 June 2013 and 31 December 2012, the analysis of available-for-sale assets by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Up to 3 months | 2 298 1 77 | 2 859 487 |
| 3 to 1 2 months | 2 276 466 | 1 263 81 4 |
| 1 to 5 years | 1 899 480 | 1 227 774 |
| More than 5 years | 3 31 5 664 | 3 1 1 4 31 6 |
| Undetermined | 2 339 485 | 2 289 91 9 |
| 1 2 1 29 272 1 1 29 272 |
1 0 755 31 0 1 0 755 31 0 |
|
The main equity exposures that contribute to the fair value reserve, as at 30 June 2013 and 31 December 2012, can be analysed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| 30.06.201 3 | ||||||
| Acquisition | Fair value reserve | Book | ||||
| Description | cost | Positive Positive |
Negative Negative |
Impairment | value | |
| Portugal Telecom | 346 678 | - | ( 77 61 8) | - | 269 060 | |
| E DP- E nergias de Portugal | 1 73 826 | 41 01 0 | - | - | 21 4 836 | |
| Banque Marocaine du Commerce E xtérieur | 81 004 | 1 440 | - | - | 82 444 | |
| 601 508 601 508 |
42 450 450 42 450 |
( 77 61 8) ( 77 61 8) 8) | - | 566 340 566 340 |
(in thousands of euro) 31 .1 2.201 2 Positive Negative Positive Negative Portugal Telecom 346 637 - ( 1 0 757) - 335 880 E DP- E nergias de Portugal 1 73 826 24 447 - - 198 273 Banque Marocaine du Commerce E xtérieur 81 004 - ( 1 5 81 3) - 65 1 91 601 467 24 447 601 467 24 447 447 ( 26 570) ( 26 570) 570) - 599 344 599 344 Book value Description Acquisition cost Fair value reserve Impairment
During the first semester of 2012, the Group sold at market prices 82.9 million ordinary shares of EDP, and 113.0 million ordinary shares of Portugal Telecom. These transactions generated a realised net loss of euro 181.2 million.
During the six month period ended 30 June 2013, the Group did not make any major transactions on the shares of either Portugal Telecom or EDP.
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 | ||
| Loans and advances to banks in Portugal | |||
| Deposits at central banks | 1 200 000 | 3 350 000 | |
| Deposits at other banks | 266 706 | 39 372 | |
| Loans | 1 1 4 006 | 1 27 581 | |
| Very short term deposits | 20 001 | 34 085 | |
| Other loans and advances | 1 220 | 84 474 | |
| 1 601 933 601 |
3 635 51 2 635 |
||
| Loans and advances to banks abroad | |||
| Deposits | 42 940 | 833 223 | |
| Very short term deposits | 1 93 759 | 1 48 696 | |
| Loans | 442 1 33 | 703 798 | |
| Other loans and advances | 1 73 042 | 1 05 653 | |
| 851 874 851 |
1 791 370 791 |
||
| Impairment losses | ( 301 ) | ( 364) | |
| 2 453 506 453 |
5 426 51 8 5 426 51 8 |
The main loans and advances to banks in Portugal, as at 30 June 2013, bear interest at an average annual interest rate of 1.46% (31 December 2012: 1.73%). The main loans and advances to banks abroad bear interest at an average annual interest rate of 0.24%.
As at 30 June 2013 and 31 December 2012, the analysis of loans and advances to banks by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 .1 2 |
|
| Up to 3 months | 1 946 441 | 5 063 1 07 |
| 3 to 1 2 months | 200 081 | 96 652 |
| 1 to 5 years | 25 871 | 79 623 |
| More than 5 years | 281 41 4 | 1 87 427 |
| Undetermined | - | 73 |
| 2 453 807 807 |
5 426 882 426 882 |
The changes occurred during the year in impairment losses of loans and advances to banks are presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .12.201231 .12.2012 31 .12.2012 |
30.06.201 2 30.06.201 2 | |
| Balance at the beginning of the period | 364 | 297 | 21 9 |
| Charge for the period | 93 | 257 | 1 1 09 |
| Write back for the period | ( 160) | ( 1 69) | ( 1 038) |
| E xchange differences and other | 4 | ( 21 ) | 7 |
| Balance at the end of the period | 301 | 364 364 | 297 |
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 31 .1 2.201 2 |
|
| Domestic loans | ||
| Corporate | ||
| Loans | 1 3 41 1 426 | 1 2 605 085 |
| Commercial lines of credits | 4 926 242 | 5 247 361 |
| Finance leases | 2 382 396 | 2 560 544 |
| Discounted bills | 407 005 | 454 624 |
| Factoring | 1 404 661 | 1 41 2 476 |
| Overdrafts | 43 379 | 76 303 |
| Other loans | 1 1 5 976 | 31 0 1 68 |
| Retail | ||
| Mortgage loans | 9 885 760 | 1 0 067 1 67 |
| Consumer and other loans | 1 595 498 | 1 726 91 0 |
| 34 1 72 343 34 |
34 460 638 34 460 638 |
|
| Foreign loans | ||
| Corporate | ||
| Loans | 9 065 937 | 8 593 536 |
| Commercial lines of credits | 2 1 35 306 | 2 1 81 087 |
| Finance leases | 72 41 8 | 69 732 |
| Discounted bills | 1 63 566 | 1 45 877 |
| Factoring | 56 692 | 52 494 |
| Overdrafts | 633 952 | 581 680 |
| Other loans | 272 290 | 458 646 |
| Retail | ||
| Mortgage loans | 984 659 | 964 525 |
| Consumer and other loans | 704 555 | 705 091 |
| 1 4 089 375 1 4 |
1 3 752 668 1 3 752 668 |
|
| Overdue loans and interest | ||
| Up to 3 months | 246 426 | 21 9 41 6 |
| From 3 months to 1 year | 783 349 | 608 075 |
| From 1 to 3 years | 1 1 40 553 | 791 568 |
| More than 3 years | 678 876 | 566 369 |
| 2 849 204 2 |
2 1 85 428 1 85 428 |
|
| 51 1 1 0 922 51 |
50 398 734 50 398 734 |
|
| Impairment losses | (3 1 34 1 95) | (2 692 342) |
| 47 976 727 47 |
47 706 392 47 706 392 |
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
As at 30 June 2013, the balance loans and advances to customers (net of impairment) includes an amount of euro 3 499.6 million (31 December 2012: euro 3 803.3 million) related to securitised loans following the consolidation of the securitisation vehicles (see Notes 1 and 49), according to the accounting policy described in Note 2.2. The liabilities related to these securitisations are booked under debt securities issued (see Notes 38 and 49).
As at 30 June 2013, loans and advances include euro 5 567.5 million of mortgage loans that collateralise the issue of covered bonds (31 December 2012: euro 5 605.1 million) (see Note 38).
As at 30 June 2013 and 31 December 2012, the analysis of loans and advances to customers by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 30.06.2013 |
31.12.2012 31.12.2012 |
|
| Up to 3 months | 7 602 095 | 7 932 875 |
| 3 to 12 months | 5 999 546 | 6 143 518 |
| 1 to 5 years | 10 688 777 | 10 058 945 |
| More than 5 years | 23 971 300 | 24 077 968 |
| Undetermined | 2 849 204 | 2 185 428 |
| 51 110 922 51 |
50 398 734 50 398 |
The changes occurred in impairment losses of loans and advances to customers are presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 22 31 .1 2.201 2 |
30.06.201 2 30.06.201 2 | |
| Balance at the beginning of the period | 2 692 342 | 2 434 698 | 2 1 67 444 |
| Charge for the period | 790 463 | 571 1 09 | 445 044 |
| Charge off | ( 63 546) | ( 1 62 291 ) | ( 46 203) |
| Write back of the period | ( 237 367) | ( 1 08 278) | ( 93 043) |
| Unwind of discount | ( 48 501 ) | ( 40 392) | ( 37 898) |
| E xchange differences and other | 804 | ( 2 504) | ( 646) |
| Balance at the end of the period | 3 1 34 1 95 3 |
2 692 342 | 2 434 698 |
The unwind of discount represents the interest on overdue loans, recognised as interest and similar income, as impairment losses are calculated using the discounted cash flows method.
As at 30 June 2013 and 31 December 2012, the detail of loans and advances to customers and impairment losses can be analysed as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||
| individual basis | Loans with impairment losses calculated on an |
Loans with impairment losses calculated on a portfolio basis |
Total | ||||
| Gross amount |
Impairment | Gross amount |
Impairment | Gross amount |
Impairment | Net Loans Impairment |
|
| Corporate loans | 1 2 950 41 3 | 2 61 1 949 | 24 683 833 | 1 50 754 | 37 634 246 | 2 762 703 | 34 871 543 |
| Mortgage loans | 2 322 003 | 1 64 045 | 8 652 389 | 8 665 | 10 974 392 | 1 72 71 0 | 1 0 801 682 |
| Consumers loans - other | 540 996 | 1 71 1 78 | 1 961 288 | 27 604 | 2 502 284 | 1 98 782 | 2 303 502 |
| Total | 1 5 81 3 41 2 | 2 947 1 72 | 35 297 51 0 | 1 87 023 | 51 1 1 0 922 | 3 1 34 1 95 | 47 976 727 |
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | |||||||
| individual basis | Loans with impairment losses calculated on an |
Loans with impairment losses calculated on a portfolio basis |
Total | ||||
| Gross amount |
Impairment | Gross amount |
Impairment | Gross amount |
Impairment | Net Loans Impairment |
|
| Corporate loans | 12 51 0 484 | 2 1 95 708 | 24 126 648 | 1 49 576 | 36 637 132 | 2 345 284 | 34 291 848 |
| Mortgage loans | 2 362 525 | 1 60 135 | 8 771 297 | 6 884 | 1 1 1 33 822 | 1 67 019 | 1 0 966 803 |
| Consumers loans - other | 585 945 | 1 68 948 | 2 041 835 | 11 091 | 2 627 780 | 1 80 039 | 2 447 741 |
| Total | 15 458 954 | 2 524 791 | 34 939 780 | 1 67 551 | 50 398 734 | 2 692 342 | 47 706 392 |
The impairment calculated on an individual basis corresponds to the impairment related to loans with objective evidence of impairment and to loans classified as "Higher Credit Risk." The objective evidence of impairment occurs when there is a default event, i.e., from the moment that a significant change occurs in the lender-borrower relationship and the lender is subject to a loss. The "Higher Credit Risk" corresponds to loans without objective evidence of impairment but that present higher risk signs (e.g. customers with overdue loans; litigations; higher risk rating / scoring; allocated to the Companies Monitoring Department).
The interest recognised as interest and similar income during the first semester of 2013 in relation to these loans amounted to euro 346.1 million (31 December 2012: euro 825.4 million), which includes the effect of the unwind of discount in connection with overdue loans.
The Group requires that some credit operations be collateralised, in order to mitigate credit risk. The most common types of collaterals held are mortgages and securities. The fair value of these collaterals is determined at the date the loan is advanced to customers, being periodically reassessed.
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.2013 30.06.2013 |
31.12.2012 31.12.2012 |
||||
| Credit Value | Fair Value collateral |
Credit Value | Fair Value collateral |
||
| Mortg ag e loans | |||||
| Mortgages | 10 786 857 | 10 764 599 | 10 951 831 | 10 930 789 | |
| Pawns | 5 087 | 4 014 | 4 739 | 4 570 | |
| Not collateralised | 182 448 | - | 177 252 | - | |
| 10 974 392 | 10 768 613 | 11 133 822 | 10 935 359 | ||
| Individuals loans | |||||
| Mortgages | 304 898 | 286 243 | 310 561 | 291 897 | |
| Pawns | 399 001 | 296 160 | 585 020 | 388 748 | |
| Not collateralised | 1 798 385 | - | 1 732 199 | - | |
| 2 502 284 | 582 403 | 2 627 780 | 680 645 | ||
| Companies loans | |||||
| Mortgages | 9 425 461 | 8 390 019 | 10 034 387 | 9 122 921 | |
| Pawns | 4 569 963 | 2 847 834 | 6 884 077 | 3 562 838 | |
| Not collateralised | 23 638 822 | - | 19 718 668 | - | |
| 37 634 246 | 11 237 853 | 36 637 132 | 12 685 759 | ||
| Total | 51 110 922 110 |
22 588 869 22 588 22 588 869 |
50 398 734 50 398 50 398 734 |
24 301 763 24 301 763 |
The collateral received regarding credit operations can be analysed as follows:
The held-to-maturity investments can be analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 31 .1 2.201 2 |
||
| Bonds and other fixed income securities | |||
| Issued by government and public entities | 403 583 | 295 271 | |
| Issued by other entities | 647 253 | 685 389 | |
| 1 050 836 050 |
980 980 660 |
||
| Impairment losses | ( 25 565) | ( 39 1 1 1 ) | |
| 1 025 271 025 |
941 549 941 549 |
As at 30 June 2013 and 31 December 2012, the analysis of held-to-maturity investments by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31.12.2012 31.12.2012 |
|
| Up to 3 months | 1 02 245 | 1 4 715 |
| 3 to 12 months | 36 520 | 175 566 |
| 1 to 5 years | 387 1 47 | 230 854 |
| More than 5 years | 524 924 | 559 525 |
| 1 050 836 1 |
980 660 |
The changes occurred in impairment losses of held-to-maturity investments are presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 2.201 2 2 |
30.06.201 2 30.06.201 | |
| Balance at the beginning of the period | 39 1 1 1 | 30 048 | 32 31 6 |
| Charge for the period | ( 1 232) | 9 062 | ( 1 802) |
| Charge off | ( 1 2 31 5) | - | ( 467) |
| E xchange differences and other | 1 | 1 | 1 |
| Balance at the end of the period | 25 565 25 |
39 1 1 39 1 1 1 |
30 048 30 048 |
The securities pledged as collateral by the Group are analysed in Note 46.
As at 30 June 2013 and 31 December 2012, the fair value of the derivatives for risk management purposes can be analysed as follows:
| 30.06.201 3 | 31 .1 2.201 2 | |||||
|---|---|---|---|---|---|---|
| Hedging | Risk management |
Total Total |
Hedging Hedging |
Risk management |
Total | |
| Derivatives for risk management purposes | ||||||
| Derivatives for risk management purposes - assets | 1 38 535 | 253 1 84 | 391 71 9 | 1 53 897 | 362 623 | 51 6 520 |
| Derivatives for risk management purposes - liabilities | ( 83 934) | ( 85 668) | ( 1 69 602) | ( 43 581 ) | ( 81 61 8) | ( 1 25 1 99) |
| 54 601 601 |
1 67 51 6 1 6 1 67 51 6 |
222 1 1 7 222 1 1 7 1 7 | 1 1 0 31 6 1 1 0 31 6 1 1 6 | 281 005 281 005 281 | 391 321 391 321 | |
| Fair value component of assets and liabilities being hedged |
||||||
| Financial assets | ||||||
| Loans and advances to customers | 49 438 | - | 49 438 | 22 391 | - | 22 391 |
| 49 438 438 |
- - |
49 438 438 | 22 391 391 | - | 22 391 | |
| Financial liabilities | ||||||
| Deposits from banks | ( 57 054) | - | ( 57 054) | ( 67 996) | - | ( 67 996) |
| Due to customers | ( 646) | ( 54 732) | ( 55 378) | ( 787) | ( 90 099) | ( 90 886) |
| Debt securities issued | ( 24 340) | 40 003 | 1 5 663 | ( 38 472) | 47 631 | 9 1 59 |
| ( 82 040) ( 040) |
( 1 4 729) 729) |
( 96 769) 769) | ( 1 07 255) 1 255) 255) | ( 42 468) 42 468) | ( 1 49 723) 1 | |
| ( 32 602) ( 602) |
( 1 4 729) 729) |
( 47 331 ) 331 ) | ( 84 864) ( 864) 864) | ( 42 468) 42 468) | ( 1 27 332) 1 |
As mentioned in the accounting policy described in Note 2.4, derivatives for risk management purposes include hedging derivatives and derivatives contracted to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss (and that were not classified as hedging derivatives).
Changes in the fair value of the hedged items mentioned above and of the respective hedging derivatives are recognised in the income statement under net gains/ (losses) from financial assets and financial liabilities at fair value through profit or loss (See Note 7).
As at 30 June 2013, the ineffectiveness of the fair value hedge operations amounted to euro 2.6 million (30 June 2012: euro 0.2 million) and was recognised in the income statement. BES Group evaluates on an ongoing basis the effectiveness of the hedges.
As at 30 June 2013, the fair value of the financial liabilities at fair value through profits and losses, includes a positive cumulative effect of euro 131.4 million (31 December 2012: positive cumulative effect of euro 167.1 million) attributable to the Group's own credit risk.
As at 30 June 2013 and 31 December 2012, the analysis of derivatives for risk management purposes by the period to maturity is presented as follows:
| 30.06.201 3 | 31 .1 2.201 2 | ||||
|---|---|---|---|---|---|
| Notional Notional |
Fair Value ValueValue |
Notional Notional Notional | Fair Value | ||
| Up to 3 months | 1 344 522 | 6 51 4 | 1 674 024 | 1 3 571 | |
| 3 to 1 2 months | 6 582 335 | 1 1 929 | 2 361 702 | 25 889 | |
| 1 to 5 years | 7 308 343 | 1 1 4 91 1 | 7 205 288 | 205 686 | |
| More than 5 years | 1 358 377 | 88 763 | 984 230 | 1 46 1 75 | |
| 1 6 593 577 1 6 593 |
222 1 1 7 222 1 1 |
1 2 225 244 1 2 | 391 321 391 321 |
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
| 30.06.201 3 3 31 .12.2012 |
||||
|---|---|---|---|---|
| Ativo Ativo |
Passivo Passivo |
Ativo | Passivo Passivo | |
| Assets and liabilities of subsidiaries acquired exclusively | ||||
| for resale purposes | 657 925 | 1 55 579 1 579 | 731 767 767 | 175 945 |
| Property held for sale | 3 071 747 | - | 2 843 378 | - |
| E quipment | 3 708 | - | 2 524 | - |
| Other | 3 501 | - | 3 501 | - |
| 3 078 956 | - | 2 849 403 | - | |
| Impairment losses | ( 371 700) | ( 303 630) | ||
| 2 707 256 2 |
- - |
2 545 773 2 773 | - | |
| 3 365 1 81 3 |
1 55 579 1 579 1 55 579 |
3 277 540 3 277 540 3 540 | 175 945 175 945 |
he amounts presented refer to (i) investments in entities controlled by the Group, which have been acquired exclusively with the purpose of being sold in the short term, and (ii) assets acquired in exchange for loans and discontinued branches available for immediate sale.
As at 30 June 2013, the amount of property held for sale includes euro 20 629 thousands (31 December 2012: euro 21 598 thousands) related to discontinued branches, in relation to which the Group recognised an impairment loss amounting to euro 10 585 thousands (31 December 2012: euro 11 193 thousands).
The changes occurred in impairment losses are presented as follows:
| (thousands of euro) | |||
|---|---|---|---|
| 30.06.2013 30.06.2013 |
31 .1 2.201 2 2 |
30.06.201 2 30.06.201 2 | |
| Balance at the beginning of the period Balance at the beginning of the period |
303 630 | 1 75 865 |
1 81 449 |
| Changes in the consolidation scope | - | 1 1 6 654 | - |
| Charge/ Write back of the period | 147 028 | 1 9 969 | 20 209 |
| Charge off | ( 81 066) | ( 4 31 9) | ( 25 345) |
| E xchange differences and others | 2 1 08 | ( 4 539) | ( 448) |
| Balance at the end of the period | 371 700 700 |
303 630 | 1 75 865 75 |
The changes occurred during the period ended as at 30 June 2013 and 31 December 2012 in non-current assets held for sale (excluding the assets of subsidiaries acquired exclusively with the purpose of being sold in the short term), are presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 31 .1 2.201 2 2 |
|
| Balance at the beginning of the period the the period |
2 849 403 | 1 5 36 884 |
| Changes in the consolidation scope | 1 8 024 | 530 343 |
| Additions | 393 047 | 996 260 |
| Sales | ( 221 279) | ( 21 8 735) |
| Other | 39 761 | 4 651 |
| Balance at the end of the period | 3 078 956 3 |
2 849 403 849 |
The Group has implemented a plan for the immediate sale of non-current assets held for sale. However, given the current market conditions it was not possible, in some situations, to sell them within the expected time frame. However, the Group continues to work towards the achievement of the sales plan established.
Following the sales occurred in first six months of 2013, the Group realised a loss amounting to euro 4 412 thousands (31 December 2012: euro 5 914 thousands).
The movement in investment properties for the period ended 30 June 2013 can be analysed as follows:
| (thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 2.201 |
|
| Balance at the beginning of the period | 441 988 | - |
| Change in the scope of consolidation a) | - | 446 1 35 |
| Improvements | 21 6 | 748 |
| Other | ( 48 972) | ( 4 895) |
| 393 232 | 441 988 |
a) Related w ith the inclusion of BES Vida, Fungere and Fungepi into the Group consolidation perimeter.
The carrying amount of investment property is the fair value of the properties as determined by a registered and independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same locations as the Group's investment property when available.
Investment property includes a number of commercial properties that are leased to third parties. Most lease contracts do not have a specified term being possible for the lessee to cancel at any time. However, for a small portion of commercial properties leased to third parties on average the leases contain an initial non-cancellable period of 10 years. Subsequent renewals are negotiated with the lessee.
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 31 .1 2.201 2 2 |
31 .1 2.201 1 31 .1 2.201 1 |
|
| Property | ||
| For own use | 473 824 | 472 650 |
| Improvements in leasehold property | 230 555 | 228 098 |
| Other | 1 088 | 1 1 39 |
| 705 467 705 |
701 887 887 |
|
| Equipment | ||
| Computer equipment | 293 027 | 308 497 |
| Fixtures | 1 40 563 | 1 42 759 |
| Furniture | 1 33 456 | 1 31 075 |
| S ecurity equipment | 44 240 | 42 469 |
| Office equipment | 35 557 | 34 961 |
| Motor vehicles | 1 4 704 | 1 2 627 |
| Other | 1 543 | 6 1 35 |
| 663 090 663 |
678 523 678 523 |
|
| Other | 624 | 624 |
| 1 369 1 81 1 369 |
1 381 034 034 |
|
| Work in progress | ||
| Improvements in leasehold property | 31 4 | 344 |
| Property for own use | 429 01 7 | 396 237 |
| E quipment | 2 445 | 2 092 |
| Other | 75 | 54 |
| 431 851 431 |
398 727 727 |
|
| 1 801 032 1 801 |
1 779 761 1 779 761 |
|
| Accumulated depreciation | ( 846 750) | ( 848 1 39) |
| 954 282 954 |
931 622 622 |
The movement in this balance was as follows:
| (milhares de euros) | |||||
|---|---|---|---|---|---|
| Property Property |
Equipment Equipment Equipment |
Other | Work in progress |
Total | |
| Custo de aquisição | |||||
| Balance as at 31 December 201 1 as December 1 |
686 681 | 651 863 863 | 643 | 326 485 485 | 1 665 672 665 |
| Acquisitions | 2 745 | 1 6 064 | - | 1 0 933 | 29 742 |
| Disposals | ( 1 8 304) | ( 9 464) | ( 1 7) | - | ( 27 785) |
| Transfers (a) | 21 638 | 1 595 | - | ( 28 712) | ( 5 479) |
| E xchange differences and other (b) | 1 0 41 4 | 9 338 | 2 | 7 606 | 27 360 |
| Balance as at 30 J une 201 2 as J 201 2 |
703 174 703 174 |
669 396 669 396 396 | 628 | 31 6 31 2 31 6 31 2 6 31 | 1 689 51 0 1 689 51 0 |
| Acquisitions | 2 665 | 1 1 551 | - | 104 842 | 1 1 9 058 |
| Disposals | ( 1 987) | ( 3 1 01) | 1 | ( 850) | ( 5 937) |
| Transfers (a) | 1 221 | 3 41 4 | - | ( 5 880) | ( 1 245) |
| E xchange differences and other | ( 3 186) | ( 2 737) | ( 5) | ( 1 5 697) | ( 21 625) |
| Balance as at 31 December 201 2 as December 2 |
701 887 | 678 523 523 | 624 | 398 727 727 | 1 779 761 779 |
| Acquisitions | 780 | 9 357 | - | 72 790 | 82 927 |
| Disposals | ( 3 521 ) | ( 22 098) | - | - | ( 25 61 9) |
| Transfers (a) | 3 922 | 676 | - | ( 6 11 0) | ( 1 51 2) |
| E xchange differences and other | 2 399 | ( 3 368) | - | ( 33 556) | ( 34 525) |
| Balance as at 30 J une 201 3 as J 201 3 |
705 467 | 663 090 090 | 624 | 431 851 851 | 1 801 032 801 |
| Depreciation | |||||
| Balance as at 31 December 201 1 as December 1 |
288 649 288 649 |
525 076 525 076 076 | 269 | - | 81 3 994 81 3 994 |
| Acquisitions | 1 0 943 | 20 034 | 6 | - | 30 983 |
| Disposals | ( 1 7 673) | ( 8 984) | - | - | ( 26 657) |
| Transfers (a) | ( 846) | ( 362) | - | - | ( 1 208) |
| E xchange differences and other (b) | 262 | 7 585 | ( 44) | - | 7 803 |
| Balance as at 30 J une 201 2 as J 201 2 |
281 335 281 335 |
543 349 543 349 349 | 231 | - | 824 91 5 824 91 5 |
| Acquisitions | 1 1 063 | 1 9 872 | 4 | - | 30 939 |
| Disposals | ( 994) | 1 21 9 | - | - | 225 |
| Transfers (a) | ( 264) | ( 51) | - | - | ( 31 5) |
| E xchange differences and other | ( 787) | ( 6 900) | 62 | - | ( 7 625) |
| Balance as at 31 December 201 2 as December 2 |
290 353 | 557 489 489 | 297 | - | 848 1 39 848 1 |
| Acquisitions | 1 0 534 | 1 8 884 | - | - | 29 41 8 |
| Disposals | ( 3 521 ) | ( 20 91 5) | - | - | ( 24 436) |
| Transfers (a) | ( 368) | ( 1 04) | - | - | ( 472) |
| E xchange differences and other | ( 152) | ( 5 657) | ( 90) | - | ( 5 899) |
| Balance as at 30 J une 201 3 as J 201 3 |
296 846 296 846 |
549 697 549 697 697 | 207 | - | 846 750 846 750 |
| Net amount as at 30 J une 201 3 amount 30 J une 3 |
408 621 | 1 1 3 393 1 3 393 | 41 7 7 | 431 851 851 | 954 282 954 |
| Net amount as at 31 December 201 2 amount 31 201 2 |
41 1 534 41 |
1 21 034 21 034 | 327 | 398 727 727 | 931 622 931 |
| Net amount as at 30 J une 201 2 amount 30 J une 2 |
421 839 421 839 |
1 26 047 1 26 047 26 047 | 397 | 31 6 31 2 31 6 31 2 6 31 | 864 595 864 595 |
(a) Property and equipment transferred to the balance other assets, referring to discontinued branches transferred to the balance non-current assets held for sale.
(b) Includes euro 8 743 thousand from property, euro 7 91 9 thousand from equipment and euro 6 647 thousand of accumulated depreciation related to the inclusion of BE S Vida in the consolidation scope.
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Goodwill | 31 1 1 05 | 31 3 665 31 3 665 |
| (a) Value In Force |
- | 1 09 937 1 |
| Internally developed Software |
65 260 | 58 1 86 |
| Acquired to third parties Software Other |
654 21 9 952 |
645 01 0 951 |
| 655 1 71 | 645 961 | |
| Work in progress | 31 586 31 |
33 701 33 701 |
| 1 063 1 22 | 1 1 61 450 1 | |
| Accumulated amortisation Impairment losses |
(61 8 561 ) (9 672) |
(596 345) (9 779) |
| 434 889 | 555 326 |
As at 30 June 2013 and 31 December 2012, this balance is analysed as follows:
(a) related to BES Vida; under the reinsurance operation of the life insurance portfolio, the remaining amount w as booked under Other liabilities (see note 43)
Goodwill is registered in accordance with the accounting policy described in Note 2.2. and is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 31 .12.201 2 .12.201 2 |
31 .1 2.2011 .1 |
|
| S ubsidiaries | ||
| BE S Vida | 234 574 | 234 574 |
| E S Investment Holding (a) | 46 237 | 48 567 |
| E S Gestion | 2 459 | 2 459 |
| Aman Bank | 16 046 | 1 6 046 |
| Concordia | 1 649 | 1 756 |
| Other | 2 247 | 2 370 |
| Other cash-generating units | ||
| Leasing and Factoring | 7 893 | 7 893 |
| 311 1 05 1 05 |
31 3 665 31 3 665 |
|
| Impairment losses | (9 672) | (9 779) |
| 301 433 433 |
303 886 886 |
(a) Company that holds Execution Noble
In 2012, the Group acquired control of BES Vida and determined at acquisition date the fair value of the acquired assets and liabilities. The fair value of assets and liabilities included the amount of 107 768 thousands euros (76 515 thousands euros, net of tax) related to the value in force of life insurance individual risk portfolio, which was recognized as an intangible asset (see Note 54). This asset will be amortized over the remaining life of the acquired contracts.
However, considering the reinsurance treaty signed in 2013 and described in Note 13, which reinsures the entire portfolio of life insurance individual risk portfolio at 100%, including all policies in force in the Group as at 30 June 2013, transferring to the reinsurer all the risks and benefits associated with these contracts, the respective value in force in the net amount of 137 476 thousands euros was derecognised. The value in force of the remaining force acquired contracts, in the net amount of 30 375 thousands euros, possesses the nature of liability and, as such, was transferred to other liabilities (see Note 43).
The costs incurred by the Group unit specialized on the implementation of IT solutions, which will bring future economic benefits, are included in the intangible assets internally developed (see Note 2.14).
The movement in this balance was as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| Goodwill and Value In Force |
Software Software |
Other | Work in progress |
Total | |
| Acquisition cost | |||||
| Balance as at 31 December 2011 2011 Acquisitions: |
97 739 97 739 |
658 1 13 658 1 13 658 1 13 | 917 | 26 413 | 783 1 82 783 1 82 |
| Internally developed | - | - | - | 3 633 | 3 633 |
| Acquired from third parties (a) | 278 032 | 5 287 | - | 8 021 | 291 340 |
| Disposals | - | (1 411 ) | - | ( 1 04) | (1 51 5) |
| Transfers E xchange differences and other (b) (c) (b) (c) (c) |
- (18 069) |
6 333 1 0 1 17 |
- 37 |
(6 333) 30 |
- (7 885) |
| Balance as at 30 J une 2012 2012 |
357 702 702 |
678 439 678 439 | 954 | 31 660 | 1 068 755 068 |
| Acquisitions: | |||||
| Internally developed | - | 54 | - | 4 624 | 4 678 |
| Acquired from third parties (a) | 66 479 | 6 246 | - | 1 6 1 31 | 88 856 |
| Disposals | - | ( 3) | - | 1 | ( 2) |
| Transfers E xchange differences and other |
- ( 579) |
1 9 922 (1 462) |
- ( 3) |
(1 9 922) 1 207 |
- ( 837) |
| Balance as at 31 December 2012 2012 |
423 602 602 |
703 1 96 703 1 96 1 | 951 | 33 701 33 701 | 1 161 450 1 161 |
| Acquisitions: | |||||
| Internally developed | - | - | - | 3 659 | 3 659 |
| Acquired from third parties | - | 4 445 | 2 | 6 506 | 1 0 953 |
| Disposals (e) | (1 37 476) | ( 443) | - | - | (137 919) |
| Transfers (e) | 30 375 | 1 1 476 | - | (1 1 476) | 30 375 |
| E xchange differences and other | (5 396) | 805 | ( 1 ) | ( 804) | (5 396) |
| Balance as at 30 J une 2013 2013 |
311 105 311 105 |
71 9 479 71 479 71 | 952 | 31 586 | 1 063 1 22 1 063 1 22 |
| Amortisations | |||||
| Balance as at 31 December 2011 2011 |
- | 542 344 542 344 | 878 | - | 543 222 543 |
| Amortizações do período | - | 22 746 | 27 | - | 22 773 |
| Abates / vendas Variação cambial e outros movimentos (d) |
- - |
(1 310) 9 1 61 |
- - |
- - |
(1 31 0) 9 161 |
| Balance as at 30 J une 2012 | - | 572 941 572 941 572 941 | 905 | - | 573 846 573 846 |
| Amortisations of the period | - | 23 370 | 9 | - | 23 379 |
| Disposals | - | ( 8) | - | - | ( 8) |
| E xchange differences and other | - | ( 873) | 1 | - | ( 872) |
| Balance as at 31 December 2012 2012 |
- - |
595 430 595 430 595 430 | 915 | - | 596 345 596 345 |
| Amortisations of the period | - | 23 080 | 1 | - | 23 081 |
| Disposals | - | ( 443) | - | - | ( 443) |
| E xchange differences and other | - | ( 422) | - | - | ( 422) |
| Balance as at 30 J une 2013 | - | 61 7 645 61 7 645 645 | 916 | - | 61 8 561 8 |
| Impairment | |||||
| Balance as at 31 December 2011 2011 |
9 628 9 628 |
- | - | - | 9 628 |
| Variação cambial e outros movimentos | 79 | - | - | - | 79 |
| Balance as at 30 J une 2012 2012 |
9 707 707 |
- | - | - | 9 707 |
| E xchange differences and other | 72 | - | - | - | 72 |
| Balance as at 31 December 2012 2012 |
9 779 9 779 |
- | - | - | 9 779 |
| E xchange differences and other | ( 107) | - | - | - | ( 1 07) |
| Balance as at 30 J une 2013 2013 |
9 672 672 |
- | - | - | 9 672 |
| Net amount as at 30 J une 201 3 at une 3 |
301 433 301 433 |
101 834 101 834 | 36 | 31 586 | 434 889 434 |
| Net amount as at 31 December 2012 at December 2012 |
413 823 823 |
107 766 107 766 | 36 | 33 701 33 | 555 326 555 |
| Net amount as at 30 J une 201 2 at une 2 |
347 995 995 |
105 498 105 498 | 49 | 31 660 | 485 202 485 |
(a) Goodwill and VIF relates to BE S Vida control ac (a) quisition.
(b) Includes euro 19 682 thousands regarding Gespas (b) tor goodwill derecognition.
(c) Includes euro 8 91 7 thousands from BE S Vida con (c) trol acquisition (see Note 54).
(d) Includes euro 8 791 thousands from BE S Vida con (d) trol acquisition (see Note 54).
(e) Parcial sale of the VIF in relation to the control acquisi (e) tion over BE S Vida, under the reinsurance operation of the life insurance portfolio, the remaining amount was booked under Other liabilities (see Note 43)
| The financial information concerning associates is presented in the following table: | |||
|---|---|---|---|
| (in thousands of euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| As s etsAs ets ets | Liabilities Liabilities Equity |
Incom e e e | Profit/(Los s ) for the period |
|||||||
| 30.0 6.2013 | 31.12.2012 | 30.06.2013 | 31.12.2012 | 30.06.2013 | 31.12.2012 | 30 .06.2013 | 30.06.2012 | 30.06.2013 | 30 .06.2012 | |
| BES VIDA | - | - | - | - | - | - | - | - | - | - |
| ES VÉNÉTIE | 1 401 049 | 1 61 6 961 | 1 228 1 1 7 | 1 444 71 5 | 1 72 932 | 1 72 246 | 34 433 | 41 379 | 605 | 3 930 |
| LOCARENT | 261 821 | 285 740 | 251 445 | 277 404 | 1 0 376 | 8 336 | 42 499 | 37 531 | 61 7 | 1 422 |
| BES SEGUROS | 1 1 0 550 | 1 20 243 | 83 738 | 89 039 | 26 81 2 | 31 204 | 33 332 | 33 1 99 | 3 003 | 3 250 |
| ESEGUR | 38 479 | 39 1 21 | 27 677 | 28 526 | 1 0 802 | 1 0 595 | 26 1 54 | 23 671 | 340 | 550 |
| FUNDO ES IBERIA | 1 4 906 | 1 3 894 | 28 | 1 69 | 1 4 878 | 1 3 725 | 295 | 21 | ( 3) | ( 1 25) |
| SCI GEORGES MANDEL | 1 1 006 | 1 1 271 | 35 | 9 | 1 0 971 | 1 1 262 | 486 | 483 | 300 | 301 |
| BRB INTERNACIONAL | 1 2 663 | 1 2 883 | 1 1 759 | 1 2 407 | 904 | 476 | 481 | 3 537 | ( 1 71 ) | 84 |
| AUTOPISTA PEROTE-XALAPA | 650 1 79 | 650 1 79 | 521 1 67 | 521 1 67 | 1 29 01 2 | 1 29 01 2 | - | - | - | ( 57) |
| ASCENDI GROUP | 4 056 000 | 4 056 000 | 3 656 000 | 3 656 000 | 400 000 | 400 000 | - | 63 000 | - | 7 400 |
| EMPARK | 776 050 | 782 872 | 661 227 | 651 074 | 1 1 4 823 | 1 31 798 | 73 21 9 | 44 849 | ( 1 752) | ( 2 1 1 8) |
| AUV ISA - AUTOV IA DE LOS V IÑEDOS | 21 6 000 | 21 6 000 | 222 000 | 222 000 | ( 6 000) | ( 6 000) | - | 3 706 | - | 1 9 |
| UNICRE | 397 644 | 305 005 | 271 874 | 1 79 941 | 1 25 770 | 1 25 064 | 94 839 | 21 6 355 | 5 681 | 3 631 |
| MOZA BANCO | 270 501 | 1 86 71 9 | 237 339 | 1 54 683 | 33 1 62 | 32 036 | 1 5 964 | 5 624 | ( 1 354) | ( 2 388) |
| RODI SINKS & IDEAS | 44 035 | 43 446 | 20 930 | 20 537 | 23 1 05 | 22 909 | 6 1 38 | 6 939 | 462 | 825 |
| Participation Cos t | Economic Interes t | t | Book V alue Book alue Book V alue |
Share of profits of as s ociates Share of profits of as s ociates |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30.06.2013 | 31.12.2012 | 30.06.2012 | 30.06.2013 | 31.12.2012 | 30.06.2012 | 30.06.2013 | 31.12.2012 | 30.06.2012 | 30.06.2013 | 31.12.2012 | 30.06.2012 | ||
| BES V IDA a) | - | - | - | - | - | 0.00% | - | - | - | - | 2 761 | 2 761 | |
| ES V ÉNÉTIE | 42 293 | 42 293 | 42 293 | 42.69% | 42.69% | 42.69% | 73 965 | 73 672 | 72 338 | 258 | 4 403 | 1 678 | |
| LOCARENT | 2 967 | 2 967 | 2 967 | 50.00% | 50.00% | 50.00% | 5 498 | 4 478 | 3 892 | 309 | 1 298 | 71 1 | |
| BES SEGUROS | 3 749 | 3 749 | 3 749 | 25.00% | 25.00% | 25.00% | 6 700 | 7 798 | 5 925 | 750 | 1 743 | 81 3 | |
| ESEGUR | 9 634 | 9 634 | 9 634 | 44.00% | 44.00% | 44.00% | 1 1 597 | 11 506 | 11 486 | 150 | 262 | 242 | |
| FUNDO ES IBERIA | 7 087 | 7 087 | 8 708 | 38.67% | 38.67% | 38.67% | 6 097 | 5 649 | 5 780 | 51 8 | 261 | 393 | |
| SCI GEORGES MANDEL | 2 401 | 2 401 | 2 401 | 22.50% | 22.50% | 22.50% | 2 468 | 2 534 | 2 469 | 68 | 1 33 | 68 | |
| BRB INTERNACIONAL | 1 0 659 | 1 0 659 | 1 0 659 | 24.93% | 25.00% | 25.00% | 226 | 1 19 | 291 | 107 | ( 216) | ( 44) | |
| AUTOPISTA PEROTE-XALAPA b) | 36 678 | 36 678 | 36 678 | 1 4.33% | 1 4.33% | 1 4.33% | 30 802 | 30 802 | 27 088 | - | 3 647 | ( 1 01 ) | |
| ASCENDI GROUP | 179 772 | 179 772 | 179 772 | 28.66% | 28.66% | 28.66% | 1 86 955 | 1 86 955 | 1 83 476 | - | 6 566 | 3 881 | |
| EMPARK b) | 52 429 | 52 429 | 52 429 | 1 5.92% | 1 5.92% | 1 5.92% | 48 371 | 50 090 | 52 078 | ( 926) | ( 2 1 93) | ( 99) | |
| AUVISA - AUTOV IA DE LOS VIÑEDOS | 41 056 | 41 056 | 41 056 | 35.83% | 35.83% | 35.83% | 34 792 | 34 792 | 37 358 | - | ( 2 531 ) | 34 | |
| UNICRE b) | 1 1 497 | 1 1 497 | 1 1 497 | 1 7.50% | 1 7.50% | 1 7.50% | 22 01 0 | 21 886 | 20 1 98 | 994 | 1 970 | 635 | |
| MOZA BANCO | 37 707 | 1 2 791 | 1 1 833 | 49.00% | 25.10% | 25.1 0% | 37 31 4 | 12 234 | 12 652 | ( 447) | ( 826) | ( 599) | |
| RODI SINKS & IDEAS | 1 240 | 1 240 | 1 240 | 24.81 % | 24.81 % | 24.81 % | 8 1 98 | 8 1 29 | 7 725 | 70 | 1 94 | 1 98 | |
| Others | 148 430 | 140 507 | 139 996 | 1 33 307 | 1 30 338 | 1 34 507 | ( 762) | ( 9 1 60) | ( 3 289) | ||||
| 587 599 | 554 760 599 554 760 | 554 91 2 554 91 | 608 300 608 |
580 982 580 |
577 263 | 1 089 1 089 | 8 31 2 2 | 7 282 7 |
b) Although the Group's economic interest is less t b) han 20% , this entities w ere consolidated under the equity method, as the Group exercises a significant influence over their activities.
The movement occurred in this balance is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Balance at the beginning of the period | 580 982 | 806 999 |
| Disposals | ( 3 1 29) | ( 58 905) |
| Acquisitions (see Note 1 ) | 32 969 | 32 41 8 |
| S hare of profit of associates | 1 089 | 8 31 2 |
| Fair value reserve from investments in associates | - | 43 084 |
| Dividends received | ( 2 642) | ( 3 423) |
| Changes in the consolidation scope | - | ( 243 790) |
| E xchange differences and other | ( 969) | ( 3 71 3) |
| Balance at the end of the period | 608 300 | 580 982 580 982 |
The changes in consolidation scope in 2012 arise from the full consolidation of BES Vida from 1 May 2012, which up to that date was included in the consolidated financial statements following the equity method (see Note 54).
The direct insurance and reinsurance ceded technical reserves are analysed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | |||||
| Direct insurance | Reinsurance ceded |
Total Total |
Direct insurance Direct insurance |
Reinsurance ceded |
Total | |
| Unearned premiums reserve | 2 660 | - | 2 660 | 2 61 8 | - | 2 61 8 |
| Life mathematical reserve | 1 460 015 | ( 10 1 74) | 1 449 841 | 1 545 079 | ( 129) | 1 544 950 |
| Claims outstanding reserve | 21 916 | ( 803) | 21 1 13 | 27 447 | ( 1 621) | 25 826 |
| Reserve for participating features | 1 0 001 | ( 1 1 05) | 8 896 | 2 264 | ( 2 054) | 21 0 |
| 1 494 592 | ( 12 082) | 1 482 510 | 1 577 408 | ( 3 804) | 1 573 604 |
In accordance with IFRS 4, the contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary profit sharing, are classified as investment contracts and accounted for as financial liabilities (see Note 39).
The life mathematical reserve is analysed as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | ||||||
| Reinsurance Direct insurance ceded |
Total Total |
Direct insurance Direct insurance |
Reinsurance ceded |
Total | |||
| Traditional | 29 855 | ( 1 0 1 74) | 1 9 681 | 31 979 | ( 1 29) | 31 850 | |
| S aving contracts with profit sharing | 1 430 1 60 | - | 1 430 1 60 | 1 51 3 1 00 | - | 1 51 3 1 00 | |
| 1 460 01 5 | ( 1 0 1 74) | 1 449 841 | 1 545 079 | ( 1 29) | 1 544 950 |
The claims outstanding reserve is analysed as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | ||||||
| Reinsurance Direct insurance ceded |
Total Total |
Direct insurance Direct insurance |
Reinsurance ceded |
Total | |||
| Traditional | 1 3 291 | ( 803) | 1 2 488 | 1 4 31 6 | ( 1 621 ) | 1 2 695 | |
| Saving contracts with profit sharing | 8 625 | - | 8 625 | 1 3 1 31 | - | 1 3 1 31 | |
| 21 91 6 | ( 803) | 21 1 1 3 | 27 447 | ( 1 621 ) | 25 826 |
The claims outstanding reserve represents unsettled claims occurred before the balance sheet date and include an estimated provision in the amount of euro 437 thousands for claims incurred before 30 June 2013 (31 December 2012: euro 429 thousands), but not reported (IBNR).
The movements on the claims outstanding reserve of direct insurance business are analyzed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | |||||
| Direct insurance |
Reinsurance ceded |
Total | Direct insurance |
Reinsurance ceded |
Total | |
| Balance at the beginning of the period | 27 447 27 |
( 1 621 ) ) ) |
25 826 25 826 | - | - | - |
| Change in the scope of consolidation | - | - | - | 30 1 94 | ( 1 257) | 28 937 |
| Plus incurred claims | - | - | ||||
| Current year | 1 41 352 | ( 6 581 ) | 1 34 771 | 362 235 | ( 1 1 01 ) | 361 1 34 |
| Prior years | ( 1 2 007) | ( 403) | ( 1 2 41 0) | 1 830 | ( 1 1 7) | 1 71 3 |
| Less paid claims related to | ||||||
| Current year | ( 1 20 892) | 7 646 | ( 1 1 3 246) | ( 361 834) | 640 | ( 361 1 94) |
| Prior years | ( 1 3 984) | 1 56 | ( 1 3 828) | ( 4 978) | 21 4 | ( 4 764) |
| Balance at the end of the period Balance end period |
21 91 6 21 91 |
( 803) ( 803)803) | 21 1 1 3 21 1 3 | 27 447 | ( 1 621 ) ( 1 621 ) | 25 826 |
The reserve for bonuses and rebates corresponds to the amounts attributed to policyholders or beneficiaries of insurance and investment contracts with profit sharing, in the form of profit participation, which have not yet been specifically allocated and included in the life mathematical reserve.
The movement in the reserve for bonuses and rebates for the period ended as at 30 June 2013 is as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | ||||||
| Direct insurance |
Reinsurance ceded |
Total | Direct insurance |
Reinsurance ceded |
Total | ||
| Balance at the begginning of the period | 2 264 | ( 2 054) | 21 0 | - | - | - | |
| Changes in the scope of consolidation | - | - | - | 1 326 | ( 804) | 522 | |
| Amounts paid | ( 537) | 2 227 | 1 690 | ( 1 70) | 1 87 | 1 7 | |
| E stimated attributable amounts | 8 274 | ( 1 278) | 6 996 | 1 1 08 | ( 1 437) | ( 329) | |
| Balance at the end of the period | 1 0 001 | ( 1 1 05) | 8 896 | 2 264 | ( 2 054) | 21 0 |
As at 30 June 2013, the provision for rate commitments, which refers to the result obtained in the liability adequacy test, is null. This test was performed by taking in considerations the most accurate estimates at the date of the balance sheet, in compliance with the accounting policy mentioned in Note 3.
As at 30 June 2013 and 31 December 2012, the balance other asset is analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31.1 2.201 2 31.1 2.201 2 |
|
| Debtors | ||
| Deposits placed with futures contracts | 1 398 71 8 | 1 664 467 |
| Recoverable government subsidies on mortgages loans | 36 732 | 38 658 |
| Debtors for unrealised capital of subsidiaries | 7 000 | 7 000 |
| Public sector | 1 43 367 | 1 44 697 |
| Debtors from the insurance business | 352 078 | 567 |
| Sundry debtors | 598 41 5 | 628 668 |
| 2 536 31 0 | 2 484 057 | |
| Impairment losses on debtors | ( 1 63 322) | ( 234 987) |
| 2 372 988 | 2 249 070 2 249 070 | |
| Other assets | ||
| Gold, other precious metals, numismatics, | ||
| and other liquid assets | 1 0 037 | 10 834 |
| Other assets | 202 355 | 1 85 994 |
| 21 2 392 | 1 96 828 96 828 | |
| Accrued income | 60 823 60 |
48 48 41 5 5 |
| Deferred acquisition costs | 1 36 251 1 36 |
1 14 766 1 14 766 |
| Other sundry assets | ||
| Foreign exchange transactions pending settlement | 6 563 | 16 1 79 |
| Stock exchange transactions pending settlement | 1 88 1 86 | 1 54 257 |
| Other transactions pending settlement | 68 872 | 200 037 |
| 263 621 | 370 473 370 473 | |
| Assets recognised on pensions | - | 14 602 |
| 3 046 075 | 2 994 1 54 2 994 54 |
Receivables from insurance operations, includes the receivable amount of 343 417 thousands euros, related to the upfront fee resulting of the signing of a reinsurance treaty, that reinsures the entire portfolio of life insurance individual risk at 100%, including all policies in force at BES Vida, with reference to 30 June 2013 (see Note 13). This amount was received in July 2013.
Sundry debtors include loans to companies in which the Group has a non-controlling interest, as follows: - euro 100 million related with loans to Locarent – Companhia Portuguesa de Aluguer de Viaturas, S.A. (31 December 2012: euro 100 million)
As at 30 June 2013, the balance prepayments and deferred costs includes the amount of euro 75 248 thousands (31 December 2012: euro 64 901 thousands) related to the difference between the nominal amount of loans granted to Group's employees under the collective labour agreement for the banking sector (ACT) and their respective fair value at grant date, calculated in accordance with IAS 39. This amount is charged to the income statement over the lower period between the remaining maturity of the loan granted, and the estimated remaining service life of the employee.
The stock exchange transactions pending settlement refer to transactions with securities on behalf of third parties, recorded on trade date and pending settlement, in accordance with the accounting policy described in Note 2.6.
The movements occurred in impairment losses are presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31.1 2.201 22 31.1 2.201 2 |
30.06.201 2 30.06.201 2 | |
| Balance at the beginning of the period | 234 987 | 83 986 | 47 861 |
| Charge for the period | 25 991 | 1 55 731 | 38 41 1 |
| Charge off | ( 98 568) | ( 239) | ( 1 1 6) |
| Write back of the period | ( 1 781) | ( 9 650) | ( 3 777) |
| Other | 2 693 | 5 1 59 | 1 607 |
| Balance at the end of the period | 1 63 322 | 234 987 | 83 986 986 |
The balance deposits from central banks is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.2013 30.06.2013 |
31 .1 2.201 2 31 .1 2.201 2 |
||
| From the European System of Central Banks | |||
| Deposits | 1 45 599 | 1 29 382 | |
| Other funds | 9 350 000 | 1 0 1 50 000 | |
| 9 495 599 495 |
1 0 279 382 1 279 |
||
| From other Central Banks | |||
| Deposits | 546 125 | 61 3 938 | |
| 546 125 546 |
61 3 61 3 938 |
||
| 1 0 041 724 1 041 |
1 0 893 320 1 0 893 320 |
As at 30 June 2013, Other funds from the European System of Central Banks includes euro 9 358 million (31 December 2012: euro 10 156 million), covered by securities pledged as collaterals (see Note 46).
As at 30 June 2013, the balance Deposits from other Central Banks includes the amount of euro 362 million related to deposits with Angola National Bank (31 December 2012: euro 431 million).
As at 30 June 2013 and 31 December 2012 the analysis of deposits from banks by the period to maturity is presented as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|||
| Up to 3 months | 930 052 | 1 50 206 | ||
| 1 to 5 years | 9 1 1 1 672 | 1 0 743 1 1 4 | ||
| 1 0 041 724 724 |
1 0 893 320 320 |
The balance deposits from banks is analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 .1 31 .1 2.201 2 2 |
|||
| Domestic | ||||
| Deposits | 348 024 | 383 720 | ||
| Very short term funds | 63 369 | 40 1 72 | ||
| Repurchase agreements | 1 4 | 66 579 | ||
| Other funds | 2 295 | 4 487 | ||
| 41 3 702 3 |
494 958 958 |
|||
| International | ||||
| Deposits | 530 988 | 504 679 | ||
| Loans | 2 725 984 | 2 315 433 | ||
| Very short term funds | 1 44 51 8 | 1 94 475 | ||
| Repurchase agreements | 1 1 52 274 | 1 311 1 62 | ||
| Other funds | 229 676 | 267 951 | ||
| 4 783 440 783 |
4 4 593 700 700 |
|||
| 5 1 97 142 97 |
5 088 658 5 088 658 |
As at 30 June 2013 and 31 December 2012 the analysis of deposits from banks by the period to maturity is presented as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| 2 596 851 | 2 363 81 3 | |
| 1 1 09 461 | 1 327 967 | |
| 855 627 | 669 591 | |
| 635 203 | 727 287 | |
| 5 1 97 1 42 5 97 42 |
5 088 658 5 088 658 |
|
The balance due to customers is analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.2013 30.06.2013 |
31 .1 2.201 2 31 .1 2.201 2 |
||||
| Repayable on demand | |||||
| Demand deposits | 10 506 273 | 1 0 458 336 | |||
| Time deposits | |||||
| Time deposits | 24 772 036 | 21 71 9 358 | |||
| Other | 64 81 3 | 56 391 | |||
| 24 836 849 | 21 775 749 21 775 749 |
||||
| Savings accounts | |||||
| Pensioners | 1 52 350 | 28 022 | |||
| Other | 1 826 676 | 1 645 970 | |||
| 1 979 026 | 1 673 992 1 673 992 | ||||
| Other funds | |||||
| Repurchase agreements | 229 1 09 | 242 150 | |||
| Other | 360 398 | 390 096 | |||
| 589 507 | 632 246 246 | ||||
| 37 91 1 655 | 34 34 540 323 323 |
The analysis of the amounts due to customers by the period to maturity is as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Repayable on demand | 1 0 506 273 | 10 458 336 |
| Term liabilities | ||
| Up to 3 months | 1 2 220 628 | 11 024 506 |
| From 3 months to 1 year | 8 561 631 | 6 51 7 1 98 |
| From1 to 5 years | 6 428 232 | 6 1 69 1 47 |
| More than 5 years | 1 94 891 | 371 1 36 |
| 27 405 382 405 |
24 081 987 24 081 987 |
|
| 37 91 1 655 | 34 34 540 323 |
The balance debt securities issued is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 2 |
||
| E uro Medium Term Notes (E MTN) | 8 605 088 | 1 0 033 382 | |
| Certificates of deposit | 378 720 | 61 2 033 | |
| Bonds | 1 439 362 | 2 366 1 1 9 | |
| Covered bonds | 894 750 | 864 1 00 | |
| Other | 1 41 4 352 | 1 548 427 | |
| 1 2 732 272 732 272 |
1 5 424 061 1 5 424 061 |
||
As at 30 June 2013, bonds issued by the Group includes the amount of euro 4 750 million of debt securities issued with a guarantee from the Portuguese Republic (31 December 2012: euro 4 750 million).
Under the covered bonds programme, which has a maximum amount of 10 000 million, the Group issued covered bonds for a total amount of euro 4 040 million. The main characteristics of these issues are as follows:
| Description | Nominal value |
Book value (in thousands Issue date Issue date Maturity date date Maturity date |
Interest payment Interest payment |
Interest rate | Rating | |||
|---|---|---|---|---|---|---|---|---|
| (in thousands of euro) |
of euro) | Moody's Moody's |
DBRS DBRS |
|||||
| BE S Covered bond 3,375% | 1 000 000 | 853 71 5 | 1 7-1 1 -2009 | 1 7-02-201 5 | Annually | 3.375% | Baa3 | AL |
| BE S Covered bond DUE J UL 1 7 | 1 000 000 | - | 07-07-201 0 | 09-07-201 7 | Annually | 6 month E uribor + 0.60% | Baa3 | AL |
| BE S Covered bond 21 /07/201 7 | 1 000 000 | 33 | 21 -07-201 0 | 21 -07-201 7 | Annually | 6 month E uribor + 0.60% | Baa3 | AL |
| BE S Covered bond DUE 4,6% | 40 000 | 41 002 | 1 5-1 2-201 0 | 26-01 -201 7 | Annually | Fixed rate 4,6% | Baa3 | AL |
| BE S Covered bond HIPOT. 201 8 | 1 000 000 | - | 25-01 -201 1 | 25-01 -201 8 | Annually | 6 month E uribor + 0.60% | Baa3 | AL |
| 4 040 000 000 |
894 750 |
These covered bonds are guaranteed by a cover assets pool, comprised of mortgage credit assets and limited classes of other assets, that the issuer of mortgage covered bonds shall maintain segregated and over which the holders of the relevant covered bonds have a statutory special creditor privilege. These conditions are set up in Decree-Law no. 59/2006, Regulations 5/2006, 6/2006, 7/2006 and 8/2006 of the Bank of Portugal and Instruction 13/2006 of the Bank of Portugal.
As at 30 June 2013, the mortgage loans that collateralise these covered bonds amount to euro 5 567.5 million (31 December 2012: euro 5 605.1 million) (see Note 25).
The changes occurred in debt securities issued during the first six months of 2013 are analysed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| Balance as at 31 .1 2.201 2 |
Issues Issues |
Repayments | Net repurchase |
Other movements a) |
Balance as at 30.06.201 3 |
|
| E uro Medium Term Notes (E MTN) | 10 033 382 | 973 807 | ( 2 1 91 757) | ( 1 34 51 4) | ( 75 830) | 8 605 088 |
| Certificates of deposit | 61 2 033 | - | ( 231 780) | - b) |
( 1 533) | 378 720 |
| Bonds | 2 366 1 1 9 | - | ( 874 808) | ( 69 000) | 17 051 | 1 439 362 |
| Covered bonds | 864 1 00 | - | - | 49 929 | ( 19 279) | 894 750 |
| Other | 1 548 427 | 2 1 59 653 | (2 325 650) | 1 221 | 30 701 | 1 41 4 352 |
| 15 424 061 424 061 |
3 1 33 460 3 1 33 460 |
(5 623 995) (5 623 995)623 995) | ( 1 52 364) ( 1 52 364)( 1 364) | ( 48 890) ( 48 890) 890) | 1 2 732 272 1 2 732 272 |
a) Other movements include accrued interest, corrections by hedging operations, fair value adjustments and foreign exchanges differences.
b) Certificates of deposit are presented at the net value, considering their short term maturity.
The analysis of debt securities issued by the period to maturity is presented as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 2 |
||
| Up to 3 months | 1 430 452 | 2 466 1 03 | |
| 3 to 1 2 months | 2 651 481 | 1 345 865 | |
| 1 to 5 years | 5 11 8 776 | 7 367 491 | |
| More than 5 years | 3 531 563 | 4 244 602 | |
| 1 2 732 272 1 732 272 |
1 5 424 061 1 5 424 061 |
The main characteristics of debt securities issued during the first semester of 2013, are presented as follows:
| 30.06.2013 | (in thousands of euro) | |||||
|---|---|---|---|---|---|---|
| Issuer Issuer |
Desig nation | Currency Currency |
Book value | Maturity Maturity | Interest rate | |
| BES | BES 4.75% 2018 | EUR | 486 682 | 2018 | Fixed rate: 4.75% | |
| BES (Luxembourg branch) | BES Luxembourg 3.5% 02/01/43 | EUR | 71 897 | 2043 | Fixed rate - 3.5% | |
| BES (Luxembourg branch) | BES Luxembourg 3.5% 23/01/43 | EUR | 71 358 | 2043 | Fixed rate - 3.5% | |
| BES (Luxembourg branch) | BES Luxembourg 3.5% 19/02/2043 | EUR | 84 758 | 2043 | Fixed rate - 3.5% | |
| BES (Luxembourg branch) | BES Luxembourg 3.5% 18/03/2043 | EUR | 55 799 | 2043 | Fixed rate - 3.5% | |
| ES Investment Plc | ESIP DEC2015 FTD CRD LKD | a) | EUR | 4 547 | 2015 | b) |
| ES Investment Plc | ESIP AUTOCALL JAN20 EQL | a) | EUR | 302 | 2020 | c) |
| ES Investment Plc | ESIP SX5E BOOSTER JAN2016 | a) | EUR | 2 296 | 2016 | SX5E Linked |
| ES Investment Plc | ESIP SX5E BULLISH JAN2016 | a) | EUR | 2 505 | 2016 | SX5E Linked |
| ES Investment Plc | ESIP AUTOCALL EDP EQL JAN2015 | a) | EUR | 1 779 | 2015 | EDP Linked |
| ES Investment Plc | ESIP 2Y AUTOCALL EDP EQL FEB2015 | a) | EUR | 1 933 | 2015 | EDP Linked |
| ES Investment Plc | ESIP 2Y AUTOCAL EQL3 EDP FEB2015 | a) | EUR | 1 808 | 2015 | EDP Linked |
| ES Investment Plc | ESIP 4Y AUTOCALL FEB2017 EQL | a) | EUR | 9 042 | 2017 | d) |
| ES Investment Plc | ESIP 2Y AUTOCALL BES EQL FEB2015 | a) | EUR | 644 | 2015 | BES Linked |
| ES Investment Plc | ESIP 2Y AUTOCALL EQL REP FEB2015 | a) | EUR | 1 320 | 2015 | REPSOL Linked |
| ES Investment Plc | ESIP BULLISH IBERIA MAR2016 | a) | EUR | 4 230 | 2016 | e) |
| ES Investment Plc | ESIP TURKISH LIRA EQL MAR2018 | a) | EUR | 4 035 | 2018 | EUR/TRY Linked |
| ES Investment Plc | ESIP 3Y WIN MAR2016 | a) | EUR | 1 683 | 2016 | f) |
| ES Investment Plc | ESIP REPSOL 2Y EQTY LINKED MAR15 | a) | EUR | 905 | 2015 | REPSOL Linked |
| ES Investment Plc | ESIP BARCLAYS 2Y EQL MAR2015 | a) | EUR | 458 | 2015 | BARCLAYS Linkked |
| ES Investment Plc | ESIP CLN GALP MAR2018 | a) | EUR | 5 845 | 2018 | EUR GALP CLN Linked |
| ES Investment Plc | ESIP 3Y AUTOCAL IBERIA EQL MAR16 | a) | EUR | 926 | 2016 | e) |
| ES Investment Plc | ESIP BASKET+NOTES APR2016 | a) | EUR | 1 396 | 2016 | i) |
| ES Investment Plc | ESIP BULLISH PAISES PERIF APR16 | a) | EUR | 894 | 2016 | Baskets of Index PSI20, MIB and IBEX30 |
| ES Investment Plc | ESIP AC INDICES GLOBAIS APR16 | a) | EUR | 897 | 2016 | Baskets of Index Eurostoxx, SP500 and Nikkei |
| ES Investment Plc | ESIP USD CLN GALP MAR2018 | a) | USD | 7 768 | 2018 | USD GALP CLN Linked |
| ES Investment Plc | ESIP 3Y AC SAN TELE REP APR2016 | a) | EUR | 875 | 2016 | g) |
| ES Investment Plc | ESIP AMAZON EQL APR2014 | a) | EUR | 722 | 2014 | Amazon Linked |
| ES Investment Plc | ESIP APPLE EQL APR2015 | a) | EUR | 831 | 2015 | Apple Linked |
| ES Investment Plc | ESIP BULLISH EUROSTOXX APR2016 | a) | EUR | 1 169 | 2016 | Eurostoxx Linked |
| ES Investment Plc | ESIP BULLISH EWZ APR2016 | a) | EUR | 854 | 2016 | EWZ Linked |
| ES Investment Plc | ESIP BULLISH HSCEI APR2016 | a) | EUR | 874 | 2016 | HSCEI Linked |
| ES Investment Plc | ESIP 3Y AC ENER. EOLICA MAY16 | a) | EUR | 2 410 | 2016 | EDP & Iberdrola Linked |
| ES Investment Plc | ESIP 3Y WIN MAY16 | a) | EUR | 1 551 | 2016 | Baskets of Index Eurostoxx, SP500 and Nikkei |
| ES Investment Plc | ESIP AC REPSOL 9.6% MAY2014 | a) | EUR | 996 | 2014 | Repsol Linked |
| ES Investment Plc | ESIP AC REPSOL JUN2014 | a) | EUR | 1 828 | 2014 | Repsol Linked |
| ES Investment Plc | ESIP CLN PT INT FIN 3.5Y DEC16 | a) | EUR | 11 072 | 2016 | Credit Linked Note Portugal Telecom |
| ES Investment Plc | ESIP FEB16 BULLISH ES AFRICA LKD | a) | EUR | 1 295 | 2018 | Espirito Santo Africa Linked |
| ES Investment Plc | ESIP WRC BBVA SAN MAY2014 | a) | EUR | 941 | 2014 | BBVA & Santander Linked |
| ES Investment Plc | ESIP CLN TELECOM ITALIA JUNE16 | a) | EUR | 5 938 | 2016 | Credit Linked Note Telecom Italia |
| ES Investment Plc | ESIP 3Y AC BBVA JUN16 | a) | EUR | 585 | 2016 | BBVA Linked |
| ES Investment Plc | ESIP 3Y AC GALP&REPSOL JUN16 | a) | EUR | 637 | 2016 | GALP and REPSOL Linked |
| ES Investment Plc | ESIP USD CLN ESFPORTUGA 3Y MAY16 | a) | USD | 5 477 | 2016 | ESFP CLN |
| ES Investment Plc | ESIP CLN ESFPORTUGAL 3Y MAY16 | a) | EUR | 6 398 | 2016 | ESFP CLN |
| ES Investment Plc | ESIP 3Y BULLISH REINO UNID JUN16 | a) | EUR | 398 | 2016 | UKX Linked |
| ES Investment Plc | ESIP CLN ESFPORTUGAL 3Y N MAY16 | a) | EUR | 7 317 | 2016 | ESFP CLN |
| ES Investment Plc | ESIP 3Y BULLISH BRAZ REAL JUN16 | a) | EUR | 1 627 | 2016 | EUR/BRL Linked |
| ES Investment Plc | ESIP PT INT. FINANCE DEC16 | a) | EUR | 2 432 | 2016 | PT CLN |
| ES Investment Plc | ESIP 3Y AC ENERGIA IBERICA JUN16 | a) | EUR | 2 362 | 2016 | GALP and REPSOL Linked |
| ES Investment Plc | ESIP FTD TI, ENEL, PT CLN SEP16 | a) | EUR | 1 377 | 2016 | TELECOM ITALIA, ENEL, PT CLN |
| ES Investment Plc | ESIP FTD BRISA, EDP, PT CL SEP16 | a) | EUR | 1 965 | 2016 | BRISA, EDP, PT CLN |
| BESI | BESI MAR2018 FTD CRD LKD | a) | EUR | 3 096 | 2018 | h) |
| BESI | BESI MAR2016 FTD CRD LKD USD | a) | EUR | 2 107 | 2016 | h) |
| BESI | BES INVESTIMENTO DO 4.00000 29/05/2014 | USD | 7 955 | 2014 | 2,90% | |
| BESI | LCI - until 1 year | BRL | 3 639 | 2014 | CDI 89% to 98% | |
| ESPLC | BES0713_09E BESESPLC04/07/2013 | EUR | 150 252 | 2013 | 0,72% | |
| ESPLC | BES0713_10E BESESPLC08/07/2013 | EUR | 130 216 | 2013 | 0,73% | |
| ESPLC | BES0813_11E BESESPLC13/08/2013 | EUR | 123 110 | 2013 | 0,70% | |
| ESPLC | BES0813_12E BESESPLC14/08/2013 | EUR | 127 102 | 2013 | 0,69% | |
| ESPLC | BES0813_13E BESESPLC28/08/2013 | EUR | 120 075 | 2013 | 0,70% | |
| ESPLC | BES0913_14E BESESPLC17/09/2013 | EUR | 160 034 | 2013 | 0,70% | |
| ESPLC | BES0913_15E BESESPLC18/09/2013 | EUR | 140 027 | 2013 | 0,69% |
a) emissions with embedded derivatives or at fair value options
b) Indexed to basket of Loan FTD: Telecom Italia, EDP, Portugal Telecom.
c) Indexed to basket of Equities Repsol, BSCH, Nestle.
d) Indexed to basket of Equities EDP, Portugal Telecom and GALP. e) Indexed to basket of Index PSI20 and IBEX.
f) Indexed to basket of Indexes Ishares MSCI Brazil Index Fund, Russian Depositary Index USD, S&P ASX 200.
g) Indexed to basket of Equities BBVA, BSCH and Repsol.
h) Indexed to basket of Loan FTD: Arcelor Mittal, Telefonica and Intesa SPA.
i) basket of Equities: Coca-Cola, France Telecom, Vivendi and YUM Brands Inc
The liabilities arising from investment contracts are analysed as follows:
| (in thousands of euros) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
||
| Fixed rate investment contracts | 1 955 1 28 | 1 298 933 | |
| Investment contracts in which the financial risk is borne by the policyholder |
1 51 9 774 | 2 1 1 4 630 | |
| 3 474 902 | 3 41 3 563 |
In accordance with IFRS 4, the insurance contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary participating features, are classified as investment contracts.
The movement in the liabilities arising out from the investment contracts with fixed rate is analysed as follows:
| (in thousands of euros) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 .1 2.201 |
||
| Balance at the begginning of the period | 1 298 933 | - | |
| Change in the consolidation scope | - | 376 975 | |
| Net deposits received | 726 048 | 1 057 880 | |
| Benefits paid | ( 1 04 899) | ( 1 43 288) | |
| Change on the deferred acquisition costs | ( 1 800) | ( 1 0 601 ) | |
| Technical interest charged | 36 846 | 1 7 967 | |
| Balance at the end of the period | 1 955 1 28 | 1 298 933 |
The movement in the liabilities arising out from the investment contracts in which the financial risk is borne by the policyholder is analysed as follows:
| (in thousands of euros) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 .1 2.201 |
|||
| Balance at the begginning of the period | 2 1 14 630 | - | ||
| Change in the consolidation scope | - | 1 91 6 883 | ||
| Net deposits received | 1 32 01 3 | 260 993 | ||
| Benefits paid | ( 763 977) | ( 220 506) | ||
| Changes in financial liabilities at fair value through profit or loss | - | ( 2 1 76) | ||
| Technical result | 37 1 08 | 1 59 436 | ||
| Balance at the end of the period | 1 519 774 | 2 1 1 4 630 |
As at 30 June 2013 and 31 December 2012, the balance of provisions presents the following movements:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 .1 2 2 |
30.06.201 2 2 | |
| Balance at the beginning of the period period |
236 950 236 950 |
1 86 671 1 86 671 1 86 | 1 90 450 1 90 450 |
| Change in the scope of consolidation | - | - | 1 6 945 |
| Charge for the period | ( 29 777) | 56 300 | 678 |
| Charge off | ( 956) | ( 2 230) | ( 1 5 724) |
| E xchange differences and other | ( 1 3 61 5) | ( 3 791 ) | ( 5 678) |
| Balance at the end of the period | 1 92 602 1 92 |
236 950 | 1 86 671 1 86 |
Provisions for an amount of euro 192 602 thousands (31 December 2012: euro 236 950 thousands) are intended to cover certain contingencies related to the Group's activities, the more relevant being as follows:
The Bank and its subsidiaries domiciled in Portugal are subject to taxation in accordance with the corporate income tax code (IRC) and to local taxes.
Income taxes (current or deferred) are recognised in the income statement except in cases where the underlying transactions have been reflected in equity items. In these situations, the corresponding tax is also charged to equity, not affecting the net profit for the year.
As at 30 June 2013, the current tax calculation for the Group's entities covered by the Portuguese tax legislation, used an IRC and City surcharge ("Derrama Municipal") rate of 26.5%, according to Law no. 107- B/2003, of 31 December and Law no. 2/2007, of 15 January (which approved the Local Finance Law, "Lei das Finanças Locais"), plus an additional fee up to 5% on the State surcharge ("Derrama Estadual") over taxable income above 10 million, according to Law No. 64-B/2011, of 30 December (2012 State Budget Law, "Lei do Orçamento do Estado para 2012").
Deferred taxes are calculated based on tax rates anticipated to be in force at the temporary differences reversal date, which corresponds to the rates enacted or substantively enacted at the balance sheet date.
To the extent that the change in rates provided by Law 64-B/2011 of 30 December 2011 (State Budget Law for 2012), applies only to the years ended 2012 and 2013 and it is estimated that in these years no reversal of temporary differences with significant net effect will occur, it was not taken into account in the calculation of the deferred taxes as at 31 December 2011 and 2012. Thus, for the years in question, deferred tax was calculated based on the aggregate rate of 29%, resulting from the sum of IRC (25%), City surcharge (1.5%) and State surcharge (2.5% ) rates above referred. Deferred tax assets relating to tax losses is determined based on the income tax rate of 25%.
The Portuguese Tax Authorities are entitled to review the annual tax return of the Group subsidiaries domiciled in Portugal for a period of four years. Hence, it is possible that some additional taxes may be assessed, mainly as a result of differences in interpretation of the tax law. However, the Board of Directors of the Group subsidiaries domiciled in Portugal are confident that there will be no material differences arising from tax assessments within the context of the financial statements.
Income taxes of the Group's entities located abroad are subject to the tax laws prevailing in the respective countries where they operate.
The deferred tax assets and liabilities recognised in the balance sheet as at 30 June 2013 and 31 December 2012 can be analysed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| Assets Assets |
LiabilitiesLiabilities Liabilities |
Net | ||||
| 30.06.201 3 3 |
31 .1 2.201 2 2 |
30.06.201 3 3 3 | 31 .1 2.201 2 31 2.201 2 | 30.06.201 3 30.06.201 3 | 31 .1 2.201 2 2 | |
| Financial instruments | 87 548 | 74 257 | ( 70 041 ) | ( 1 06 71 7) | 1 7 507 | ( 32 460) |
| Loans and advances to customers impairment | 462 261 | 402 750 | - | - | 462 261 | 402 750 |
| Property and equipment | 263 | 271 | ( 8 820) | ( 8 901) | ( 8 557) | ( 8 630) |
| Intangible assets | 1 02 | 1 02 | - | - | 1 02 | 1 02 |
| Investments in subsidiaries and associates | - | - | ( 1 35 866) | ( 1 63 986) | ( 1 35 866) | ( 1 63 986) |
| Provisions | 52 562 | 54 356 | - | - | 52 562 | 54 356 |
| Pensions | 243 1 1 9 | 257 901 | ( 35 507) | ( 35 507) | 207 61 2 | 222 394 |
| Long-term service benefits | 7 720 | 7 726 | - | - | 7 720 | 7 726 |
| Debt securities issued | 557 | - | - | ( 1 01 0) | 557 | ( 1 01 0) |
| Other | 8 621 | 1 6 81 5 | - | ( 4 1 1 7) | 8 621 | 1 2 698 |
| Tax losses brought forward | 1 51 470 | 80 654 | - | 296 | 1 51 470 | 80 950 |
| Deferred tax asset / (liability) Deferred tax (liability) |
1 01 4 223 | 894 832 | ( 250 234) ( 250 234) | ( 31 9 942) ( 31 9 942) | 763 989 989 | 574 890 890 |
| Assets / liabilities compensation for deferred taxes | ( 78 473) | ( 1 65 927) | 78 473 | 1 65 927 | - | - |
| Deferred tax asset / (liability), net Deferred tax (liability), |
935 750 | 728 905 | ( 1 71 761 ) ( 1 71 ) | ( 1 54 01 5) ( 1 54 01 5) | 763 989 989 | 574 890 890 |
The changes in deferred taxes were recognised as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 31 .1 2.201 2 |
|||
| Balance at the beginning of the period | 574 890 | 601 624 | ||
| Recognised in the income statement | 21 1 753 | 52 434 | ||
| Recognised in fair value reserve | ( 8 1 75) | ( 56 61 7) | ||
| Recognised in equity - other comprehensive income | ( 1 6 667) | 9 882 | ||
| Recognised in other reserves | 2 685 | ( 30 280) | ||
| Changes in the scope of consolidation | - | ( 291 ) | ||
| E xchange differences and other | ( 497) | ( 1 862) | ||
| Balance at the end of the period (Assets/ (Liabilities)) ies)) |
763 763 989 |
574 890 574 |
(in thousands of euro) Recognised in (profit) /loss Recognised in reserves Recognised in (profit) /loss Recognised in reserves Financial Instruments ( 58 1 42) 8 1 75 ( 1 6 371 ) 60 205 Loans and advances to customers impairment ( 59 51 1 ) - ( 69 029) - Property and equipment ( 73) - ( 1 53) - Investments in subsidiaries and associates ( 36 734) 1 0 500 81 689 ( 3 528) Provisions 1 794 - ( 20 343) - Pensions 2 346 1 2 388 4 005 ( 6 354) Long-term service benefits 6 - 459 - Debt securities issued ( 1 567) - 1 21 4 - Other 792 950 ( 1 633) - Tax losses brought forward ( 60 664) ( 9 856) ( 32 272) 26 692 Deferred taxes ( 21 1 753) 22 1 57 ( 52 434) 77 01 5 Current taxes 1 08 849 ( 65 941 ) 1 35 350 43 390 Total tax recognised (profit) /loss ( 1 02 904) tax (profit) /loss 904)904) ( 43 784) 784) 784) 82 91 6 91 6 120 405 30.06.201 3 31 .1 2.201 2 30.06.201 3 31 .1 2.201 2
The deferred tax recognised in the income statement and reserves, during the six months period ended 30 June 2013 and the year 2012 is analysed as follows:
The current tax accounted for in reserves as at 30 June 2013 in the amount of euro 65 941 thousands, relates with unrealised losses recognised in the fair value reserve associated with the insurance activity (31 December 2012: euro 59 247 thousands related with unrealised gains). As at 31 December 2012, the current tax accounted for in reserves, also included a tax credit of euro 7 773 thousands from negative equity changes (primarily related to pension funds benefits).
The reconciliation of the income tax rate can be analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | |||
| % % |
Amount Amount |
% | Amount | |
| Profit before taxes | ( 340 81 8) ( |
202 752 | ||
| Banking levy | 1 2 971 | 27 91 0 | ||
| Profit before tax for the tax rate reconciliation | ( 327 847) ( |
230 662 475 092 |
||
| S tatutory tax rate | 25.0 | 31 .5 | ||
| Income tax calculated based on the statutory tax rate | ( 81 962) | 72 659 | ||
| Tax-exempt dividends | 3.3 | ( 1 0 947) | 3.7 | ( 1 2 1 47) |
| Tax-exempt profits (off shore) | (0.9) | 2 982 | 9.9 | ( 32 449) |
| Tax-exempt gains | (1 .1 ) | 3 445 | (1 9.5) | 63 887 |
| Non-taxable share of profit in associates | 0.1 | ( 234) | 0.7 | ( 2 41 0) |
| Non deductible costs | (2.7) | 8 797 | (6.2) | 20 375 |
| Changes in estimates | 5.8 | ( 1 8 979) | 1 8.3 | ( 59 968) |
| Non deductible losses arising from subsidiaries acquisition | 0.0 | - | (1 0.1 ) | 33 230 |
| Other | 1 .8 | ( 6 006) | 0.1 | ( 261 ) |
| … … |
( 1 02 904) ( 02 904) ( 1 02 904) |
… | 82 91 6 82 91 6 |
Following the Law No. 55-A/2010 of 31 December, was established a Banking levy, which is not elegible as a tax cost, and whose regime was extende by Law no. 64-B/2011, of 30 December. As at 30 June 2013, the Group recongnised a cost of euro 13.0 million (31 December 2012: euro 14.0 million, which was included in Other operating income and expenses – Direct and indirect taxes (see Note 14).
The balance subordinated debt is analysed as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|||
| Bonds | 767 092 | 774 473 | ||
| Perpetual Bonds | 63 840 | 65 343 | ||
| 830 932 932 |
839 81 6 839 81 6 |
The main features of the subordinated debt are presented as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||
| Issuer Issuer |
Designation | Currency Currency |
Issue Date Date |
Amount Issued |
Carrying amount |
Interest Rate | Maturity |
| BE S Finance | Subordinated perpetual bonds | E UR | 2002 | 30 843 | 23 642 | E uribor 3M + 2.83% | 201 3 a) |
| BE S Finance | Subordinated perpetual bonds | E UR | 2004 | 95 767 | 1 9 802 | 4.50% | 201 5 a) |
| BE S Finance | Bonds | E UR | 2008 | 20 000 | 20 1 69 | E uribor 3M + 1 % | 201 8 |
| BE SI | Bonds | BRL | 2007 | 21 1 34 | 1 9 036 | 1 .30% | 201 4 |
| BE SI | Bonds | BRL | 2008 | 1 0 099 | 1 0 881 | 1 .30% | 201 5 |
| BE SI | Bonds | E UR | 2005 | 60 000 | 1 1 063 | 5.33% | 201 5 |
| BE SI | Bonds | E UR | 2003 | 1 0 000 | 265 | 5.50% | 2033 |
| BE S | Bonds | E UR | 2004 | 25 000 | 22 588 | E uribor 6M + 1 .25% | 201 4 |
| BE S | Bonds | E UR | 2008 | 41 550 | 3 868 | E uribor 3M + 1 % | 201 8 |
| BE S | Bonds | E UR | 2008 | 638 450 | 596 464 | E uribor 3M + 8.5% | 201 9 |
| BE S | Bonds | E UR | 2008 | 50 000 | 50 077 | E uribor 3M + 1 .05% | 201 8 |
| BE S | Bonds | E UR | 2011 | 8 1 74 | 8 585 | Fixed rate 1 0% | 2021 |
| BE S Vida | Bonds | E UR | 2002 | 45 000 | 24 096 | E uribor 3M + 2.20% | 2022 |
| BE S Vida | Subordinated perpetual bonds | E UR | 2002 | 45 000 | 20 396 | E uribor 3M + 2.50% | 201 3 a) |
| 1 1 01 01 7 1 |
830 932 830 932 |
a) Call option date
The changes occurred in subordinated debt during the first six months of 2013 are analysed as follows:
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| Balance as at 31 .1 2.201 2 |
Issues Issues |
Repayments Repayments |
Net Repurchases |
Other movements (a) |
Balance as at 30.06.201 3 |
||
| Bonds | 774 473 | - | ( 1 945) | ( 5 287) | ( 1 49) | 767 092 | |
| Perpetual Bonds (b) | 65 343 | - | - | ( 1 023) | ( 480) | 63 840 | |
| 839 81 6 | - | ( 1 945) ( 945)945) | ( 6 31 0) 31 0)0) | ( 629) 629)629) | 830 932 830 932 |
In accordance with the accounting policy described in Note 2.8, debt issued repurchased by the Group is derecognised from the balance sheet and the difference between the carrying amount of the liability and its acquisition cost is recognised in the income statement. Following the repurchases performed until 30 June 2013, the Group has recognised a gain in the amount of euro 26 million (30 June 2012: gain of euro 39.7 million) (see Notes 14 and 38).
| As at 30 June 2013 and 31 December 2012, the balance other liabilities is analysed as follows: | ||
|---|---|---|
| ------------------------------------------------------------------------------------------------ | -- | -- |
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 2.201 2 |
|
| Creditors | ||
| Public sector | 1 42 492 | 1 35 693 |
| Deposit accounts | 1 78 046 | 1 73 955 |
| Sundry creditors | ||
| Creditors from transactions with securities | 1 07 761 | 89 357 |
| S uppliers | 31 746 | 49 61 9 |
| Creditors from factoring operations | 5 865 | 3 509 |
| Creditors from insurance operations | 22 41 5 | 2 040 |
| Other sundry creditors | 21 9 993 | 228 052 |
| 708 31 8 | 682 225 | |
| Accrued ex penses | ||
| Long-term service benefits (see Note 1 6) | 28 226 | 28 691 |
| Other accrued expenses | 201 576 | 1 27 430 |
| 229 802 | 1 56 1 21 | |
| Deferred income | 53 1 86 | 22 267 |
| Other sundry liabilities | ||
| Stock exchange transactions pending settlement | 257 329 | 92 363 |
| Foreign exchange transactions pending settlement | 7 51 5 | 1 9 999 |
| Other transactions pending settlement | 88 638 | 1 72 627 |
| 353 482 | 284 989 | |
| Net liabilities with retirement pensions (see Note 1 6) | 5 379 | - |
| 1 350 1 67 1 67 |
1 1 45 602 1 |
As at 30 June 2013, the Deferred income includes the amount of 30,375 thousands euros relating to the value in force of the remaining contracts acquired of BES Vida, after the reinsurance transaction of life insurance risk portfolio held in the first half of 2013 (see Notes 13 and 31). This amount will be amortised against income over the remaining life of the respective contracts.
The stock exchange transactions pending settlement refer to transactions with securities on behalf of third parties, recorded on trade date and pending settlement, in accordance with the accounting policy described in Note 2.6.
As at 30 June 2013, the Bank's share capital in the amount of euro 5 040.1 million, was represented by 4 017 928 471 ordinary shares, which were subscribed and fully paid by the following entities:
| % Capital | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 31 .1 2.201 2 |
||
| BE S PAR - S ociedade Gestora de Participações Sociais, S .A. | 35.29% | 35.29% | |
| Credit Agricole, S .A. (França) | 1 0.81 % | 1 0.81 % | |
| Silchester International Investors Limited (Reino Unido) | 5.64% | 5.76% | |
| Bradport, SGPS, S.A. (1 ) | 4.83% | 4.83% | |
| Capital Research and Management Company (E UA) | 2.56% | - | |
| PT Prestações - Mandatária de Aquisições e Gestão de Bens, S .A.(2) | 2.09% | 2.09% | |
| E spírito S anto Financial Group, S .A. (Luxemburgo) | 1 .07% | 0.74% | |
| Outros | 37.71 % | 40.48% | |
| 1 00.00% 00.00% |
1 00.00% |
(1 ) Portuguese Law company w holly ow ned by Banco Bradesco (Brazil), to w hich are attributable the voting rights.
(2) Company fully and indirectly dominated by Portugal Telecom, SGPS, SA.
The BES Finance issued 450 thousands non-voting preference shares, which were listed in the Luxembourg stock Exchange in July 2003. In March 2004, 150 thousands preference shares were additionally issued forming a single series with the existing preference shares, in a total amount of euro 600 million. The face value of these shares is euro 1 000 and is wholly (but not partially) redeemable by option of the issuer at its face value, as at 2 July 2014, subject to prior approvals of BES and Bank of Portugal. During the year ended 31 December 2011, the Group acquired 388 thousands preference shares, issued by BES Finance, of which 197 thousands were acquired in scope of the exchange offer over securities referred to above.
In the year ended 31 December 2012, the Group acquired 19 000 preference shares, having recorded a net gain in the amount of euro 4.5 million recognised in Other reserves.
During the first semester of 2013, the Group acquired 25 337 thousands of preference shares, leading to the recognition of a gain (net of tax) of euro 5 777 thousands. As at 30 June 2013 there were 168 thousands preference shares in circulation with a book value of euro 168,0 millions.
These preference shares pay an annual non cumulative preferred dividend, if and when declared by the Board of Directors of the issuer, of 5.58% per annum on nominal value. The dividend is paid on 2 July of each year, beginning 2 July 2004 and ending 2 July 2014.
If the issuer does not redeem these preference shares on 2 July 2014, the dividend applicable rate will be the 3 months Euribor plus 2.65%, with payments on 2 January, 2 April, 2 July and 2 October of each year, if declared by the Board of Directors of the issuer.
BES unconditionally guarantees dividends and principal repayment related to the above mentioned issue, until the limit of the dividends previously declared by the Board of Directors of the issuer.
These shares rank lower than any BES liability, and pari passu relative to any preference shares that may come to be issued by the Bank.
In the period ended as at 30 June 2013, share premiums are represented by euro 1 068 670 thousands related to the premium paid by the shareholders following the share capital increases.
The Group issued during 2010, perpetual subordinated bonds with interest conditioned in the total amount of euro 320 million, of which euro 270 million were issued by BES and the remaining euro 50 million by BESI. These bonds have an interest conditioned non-cumulative, payable only if and when declared by the Board of Directors.
Other equity instruments issued by BES reduced by an amount of euro 240 448 thousands and Noncontrolling interests issued by BESI reduced by an amount of euro 46 269 thousands.
These bonds are subordinated in respect of any liability of BES and BESI and pari passu in respect of any subordinated bonds with identical characteristics that may be issued by the Bank. Given their characteristics, these obligations are considered as equity instruments in accordance with the accounting policy described in Note 2.10.
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| Issuer Issuer |
Issue date date Issue |
Currency Currency Currency | Book Value Value Value | Interest rate rate rate | Coupon date | Reimbursement possibility (2) |
| BE S BE S |
Dec/1 0 Dec/1 0 |
E UR USD |
26 21 7 3 1 05 |
8.50% 8.00% |
15/Mar and 1 4/Sep 15/Mar and 1 4/Sep |
From Sep/15 From Sep/15 |
| 29 322 | ||||||
| BE SI (1 ) | Oct/1 0 | E UR | 3 681 | 8.50% | 20/Apr and 20/Oct | From Oct/15 |
| 33 003 |
The main characteristics of these equity instruments are presented as follows:
(1) BE SI iss ue is included in the balance non-controlling interes t (s ee Note 45)
(2) The reimburs ement of these s ecurities may be performed in full, but not partially, at the option of the is s uer, s ubject to prior approval of the Bank of Portugal.
During the period ended 30 June 2013, the Group made an interest payment in the amount of euro 1 425 thousands, which was recorded as a deduction to equity.
During 2011, BES acquired own shares under PRVIF (see Note 16). As at 27 January 2012, BES sold 67 184 shares, following the retirement of two directors to whom had been assigned 33 592 shares on the distribution of results in 2010, according to PRVIF approved by the General Meeting held on 6 April 2010 and in accordance with the proposal of the Board on the acquisition and disposal of own shares approved at the General Meeting on 31 March 2011.
The movement in treasury stocks is analysed as follows:
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
||||
|---|---|---|---|---|---|
| Number of s hares |
Amount (thous ands of euro) |
Number of s hares |
Amount (thous ands of euro) |
||
| Transactions under PRVIF | |||||
| Opening balance (1 ) | 275 291 | 801 | 342 475 | 997 | |
| Shares sold (2) | - | - | 67 1 84 | ( 1 96) | |
| 275 291 | 801 | 275 291 | 801 | ||
| Other transactions | |||||
| Opening balance | 1 0 1 1 2 765 | 6 1 90 | - | - | |
| Changes in the scope of consolidation (3) | - | - | 68 333 226 | 43 51 5 | |
| Shares acquired (4) | 2 084 826 | 1 868 | 1 1 268 1 61 | 5 409 | |
| Shares sold (4) | 1 2 1 97 591 | ( 8 058) | 69 488 622 | ( 42 734) | |
| - | - | 1 0 1 1 2 765 | 6 1 90 | ||
| Balanced as at 30 J une 201 3 as J 3 |
275 291 | 801 | 1 0 388 05 6 |
6 991 |
(1 ) Shares acquired under PRVIF, at a price of 2.909 euro per share.
(2) Shares sold under PRVIF, at a price of 1 .31 5 euro per share in J anuary 201 2.
(3) Respects to BES shares in BES Vida portfolio, follow ing the control acquisition in May 201 2.
(4) Shares acquired/sold that became part/left to be part of BES Vida portfolio.
The legal reserve can only be used to absorb accumulated losses or to increase the amount of the share capital. Portuguese legislation applicable to the banking sector (Article 97 of Decree-Law no. 298/92, 31 December) requires that 10% of the profit for the year be transferred to the legal reserve until it is equal to the share capital.
The fair value reserve represents the amount of the unrealized gains and losses arising from securities classified as available-for-sale, net of impairment losses recognised in the income statement in the year/previous years. The amount of this reserve is shown net of deferred taxes and non-controlling interests.
The changes in these balances were as follows:
| (in thousands of euro) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Other comprehensive income, other reserves and retained earnings | ||||||||
| Available for sale financial assets |
Deferred tax reserves |
Total fair value reserve reserve |
Actuarial deviations (net of tax es) |
Exchange differences (net of tax es) |
Legal reserve | Other reserves and retained earnings |
Total Other reserves and retained earnings |
Total |
| ( 51 5 827) 51 827) ( 51 5 827) |
70 652 70 652 70 70 | ( 445 1 75) ( 445 1 75) ( 1 75) | ( 641 31 5) ( 641 31 5) ( 5) | 92 | 85 000 85 000 85 85 | 1 361 868 1 361 868 361 868 | 805 645 805 645 | 360 470 360 470 |
| - - - - 371 81 2 - |
- - - - ( 58 070) - |
- - - - 31 3 742 - |
- ( 48 277) - - - - |
- - - - - 6 338 |
- - - - - - |
7 206 - ( 1 409) ( 1 0 996) - - |
7 206 ( 48 277) ( 1 409) ( 1 0 996) - 6 338 |
7 206 ( 48 277) ( 1 409) ( 1 0 996) 31 3 742 6 338 |
| ( 1 08 758) 51 8 31 6 51 8 31 6 |
||||||||
| ( 2 728) | ||||||||
| - | - | - | ( 1 24 894) | - | - | - | ( 1 24 894) | ( 1 24 894) |
| - | - | - | - | - | - | ( 455) | ( 455) | ( 455) |
| - | - | - | - | - | - | 4 859 | 4 859 | 4 859 |
| 375 651 | ( 73 368) | 302 283 | - | - | - | - | - | 302 283 |
| - | - | - | - | ( 43 277) | - | - | ( 43 277) | ( 43 277) |
| - | - | - | - | - | - | 497 | 497 | 497 |
| - | - | - | - | - | - | ( 9 800) | ( 9 800) | ( 9 800) |
| - | - | - | - | - | - | ( 2 837) | ( 2 837) | ( 2 837) |
| 231 636 231 636 231 636 |
( 60 786) ( 60 786)( 60 786) 60 786) | 1 70 850 1 70 850 1 850 | ( 81 4 486) ( 81 4 486) ( 486) | ( 36 847) ( 36 847)( 847) ( 847) | 85 000 85 000 85 85 | 1 237 447 1 237 447 237 447 | 471 1 1 4 471 1 1 4 1 4 | 641 964 641 964 |
| 5 777 | ||||||||
| ( 1 4 025) | ||||||||
| ( 954) | ||||||||
| ( 8 035) | ||||||||
| ( 1 75 386) | ||||||||
| ( 7 298) | ||||||||
| 96 1 01 | ||||||||
| ( 6 529) | ||||||||
| ( 1 7 500) | ||||||||
| - | - | - | - | - | - | ( 406) | ( 406) | ( 406) |
| ( 1 61 9)( 9) 9) ( |
( 2 91 7) 2 7)( 7) |
( 4 536) 536)( 536) | ( 828 51 1 ) ( ) ) | ( 44 1 45) ( 1 45)( 45) | 97 1 97 97 | 1 293 704 293 704 | 51 8 245 | 51 3 709 51 709 |
| - ( 1 44 01 5) 1 5) - - - - - ( 233 255) - - - - |
- 1 2 582 1 2 1 2 1 2 582 - - - - - 57 869 - - - - |
Fair value reserve - ( 1 31 433) ( 1 31 433) ( 1 433) - - - - - ( 1 75 386) - - - - |
- ( 689 592) ( 689 592) ( 592) - - ( 1 4 025) - - - - - - - |
- 6 430 - - - - - - ( 7 298) - - - |
- 85 000 85 000 85 85 - - - - - - - 1 2 1 97 - - |
( 1 08 758) 1 247 91 1 1 247 91 1 247 1 ( 2 728) 5 777 - ( 954) ( 8 035) - - 83 904 ( 6 529) ( 1 7 500) |
( 1 08 758) 649 749 649 749 ( 2 728) 5 777 ( 1 4 025) ( 954) ( 8 035) - ( 7 298) 96 1 01 ( 6 529) ( 1 7 500) |
(a) - value net tax (a)
The fair value reserve is analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 | 31.1 2.2012 2.2012 | |
| Balance at the beginning of the period | 1 70 850 1 850 |
( 445 1 75) ( 1 75) |
| Changes in fair value | ( 41 767) | 1 177 565 |
| Disposals during the period | ( 240 705) | ( 600 206) |
| Impairment recognised during the period | 49 217 | 99 308 |
| Increase in share capital of subsidiaries (a) | - | 70 796 |
| Deferred taxes recognised in reserves during the period | 57 869 | ( 131 438) |
| Balance at the end of the period | ( 4 536) ( 4 536) |
170 850 850 |
(a) BE S Vida
Non-controlling interests by subsidiary are analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.2013 30.06.2013 |
31 .1 2.2012 31 .1 2.2012 |
||||
| Balance sheet |
Income statement |
Balance sheet |
Income | ||
| statement | |||||
| BE S ANGOLA | 407 872 | 8 679 | 396 369 | 25 554 | |
| BE S I a) | 3 681 | - | 3 681 | - | |
| AMAN BANK | 36 802 | 1 843 | 34 974 | 1 745 | |
| E S CONCE SS ÕE S | 23 001 | ( 2 569) | 25 868 | ( 5 673) | |
| FCR VE NTURE S II | 1 8 251 | ( 652) |
1 7 676 | 499 | |
| BE S Securities | 4 967 | ( 11 2) |
5 480 | ( 1 47) |
|
| BE S Investimento do Brasil | 32 785 | 41 3 | 32 886 | 2 292 | |
| E SAF | 1 3 564 | 1 1 32 | 1 2 887 | 1 991 | |
| BE S AÇORE S | 1 7 1 26 | ( 939) |
1 8 018 | 530 | |
| E spirito Santo Investment Holding | - | ( 1 521 ) | 3 967 | ( 4 607) | |
| BE S T | 20 320 | 2 1 46 | 1 8 1 61 | 2 989 | |
| FCR VE NTURE S III | 1 6 565 | ( 2 265) | 1 7 043 | ( 1 855) | |
| FUNGE PI | 49 738 | ( 6 795) | 56 537 | ( 570) |
|
| Other | 5 549 | 181 | 25 898 | 987 | |
| 650 221 | ( 459) 459) 459) ( |
669 445 669 | 23 735 |
a) Corresponds to the emission of other equity instruments (see Note 42).
The movements in non-controlling interests as at 30 June 2013 and 31 December 2012 are analysed as follows:
| (in thousands of euro) | |||||
|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | ||||
| Non-controlling interests at the beginning of the period eriod |
669 445 | 588 447 588 | |||
| Changes in the scope of consolidation | ( 7 022) | 74 293 | |||
| Increase/ (decrease) in share capital of subsidiaries | ( 2 823) | 1 3 527 | |||
| Dividends paid | ( 906) | ( 2 924) | |||
| Changes in fair value reserve | 2 455 | 22 | |||
| E xchange differences and other | ( 1 0 469) | ( 27 655) | |||
| Profit for the year/period | ( 459) | 23 735 | |||
| Non-controlling interests at the end of the period | 650 221 | 669 445 669 445 |
As at 30 June 2013 and 31 December 2012, this balance can be analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|
| Contingent liabilities | ||
| Guarantees and stand by letters of credit | 7 831 396 | 8 023 520 |
| Assets pledged as collateral | 21 401 985 | 21 632 555 |
| Open documentary credits | 3 872 877 | 3 776 399 |
| Other | 420 41 7 | 531 757 |
| 33 526 675 33 675 |
33 964 231 33 964 231 |
|
| Commitments | ||
| Revocable commitments | 5 766 662 | 5 462 823 |
| Irrevocable commitments | 3 1 41 487 | 3 280 971 |
| 8 908 1 49 49 |
8 743 794 8 794 |
|
Guarantees and standby letters of credits are banking operations that do not imply any out-flow by the Group.
As at 30 June 2013, the balance assets pledged as collateral include:
The above mentioned securities pledged as collateral are booked in the available-for-sale portfolio and they can be executed in case the Group does not fulfil its obligations under the terms of the contracts.
Documentary credits are irrevocable commitments by the Group, in the name of its clients, to pay or order to pay a certain amount to a supplier of goods or services, within a determined term, against the exhibition of the expedition documentation of the goods or service provided. The condition of irrevocable consists of the fact that the terms initially agreed can only be changed or cancelled with the agreement of all parties.
Revocable and irrevocable commitments represent contractual agreements to extend credit to the Group's customers (eg. unused credit lines). These agreements are, generally, contracted for fixed periods of time or with other expiration requisites and usually require the payment of a commission. Substantially, all credit commitments require that clients maintain certain conditions verified at the time when the credit was granted.
Despite the characteristics of these contingent liabilities and commitments, these operations require a previous rigorous risk assessment of the client and its business, like any other commercial operation. When necessary, the Group require that these operations are collateralised. As it is expected that the majority of these operations will mature without any use of funds, these amounts do not represent necessarily future out-flows.
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 | ||
| Securities and other items held for safekeeping on behalf of customers | 52 243 962 | 54 335 220 | |
| Assets for collection on behalf of clients | 257 271 | 294 295 | |
| Securitised loans under management (servicing) | 2 571 968 | 2 671 390 | |
| Other responsibilities related with banking services | 8 892 1 1 9 | 8 784 286 | |
| 63 965 320 63 |
66 085 1 91 66 085 1 91 |
Additionally, the off-balance sheet items related to banking services provided are as follows:
In accordance with the legislation in force, the fund management companies and the depositary bank are jointly liable before the participants of the funds for the non fulfilment of the obligations assumed under the terms of the Law and the management regulations of the funds.
As at 30 June 2013 and 31 December 2012, the amount of the investment funds managed by the Group is analysed as follows:
| (in thousands of euro) | |||
|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 31 2 |
||
| Securities investment funds | 5 500 735 | 5 1 1 5 043 | |
| Real estate investment funds | 1 080 881 | 1 075 678 | |
| Pension funds | 1 874 1 00 | 1 783 359 | |
| Bancassurance | 99 487 | 89 662 | |
| Portfolio management | 1 1 51 563 | 1 960 206 | |
| Others | 1 463 332 | 1 378 639 | |
| 1 1 1 70 098 1 1 |
1 1 402 587 1 1 587 |
The amounts recognised in these accounts are measured at fair value determined at the balance sheet date.
The entities considered to be BES Group related parties together with the subsidiaries referred in Note 1, as defined by IAS 24, are as follows:
| Grupo BES Associates companies | ESFG's subsidiaries, associates and related entities |
|---|---|
| Tranquilidade Corporação Angolana de Seguros, S.A. | Group Credit Agricole |
| Fin Solutia - Consultoria e Gestão de Créditos, SA | Saxo Bank |
| Polish Hotel Capital SP | The Atlantic Company ( Portugal ) - Turismo e Urbanização, SA |
| MCO2 – Sociedade Gestora de Fundos de Investimento Mobiliário Hlc - Centrais de Cogeração, SA |
Agribahia, S/A Atr - Actividades Turisticas e Representações, Lda |
| Coporgest | Aveiro Incorporated |
| Synergy Industry and Technology, S.A. | Beach Heath Investments, Ltd |
| Salgar Investments | Companhia Agricola Botucatu, SA |
| 2BCapital, SA | Casas da Cidade - Residências Sénior, SA |
| 2B Capital Luxembourg S.C.A SICAR | Cerca da Aldeia - Sociedade Imobiliária, SA |
| 2B Capital Luxembourg General Partners SARL Espírito Santo IBERIA I |
Cimenta - Empreendimentos Imobiliários, SA Cidadeplatina - Construção SA |
| Apolo Films SL | Clarendon Properties, Inc. |
| Brb Internacional, S.A. | Clube de Campo da Comporta - Actividades Desportivas e Lazer, Lda |
| Prosport, SA | Club de Campo Villar Ollala, SA |
| Banque Espirito Santo et de la Vénétie, SA | Clup Vip - Marketing de Acontecimentos, SA |
| YUNIT - Serviços, SA | Clube Residencial da Boavista, SA |
| E.S. Contact Center - Gestão de Call Centers, SA Fundo de Capital de Risco Espírito Santo Ventures Inovação e Internacionalização |
Companhia Brasileira de Agropecuária Cobrape Coimbra Jardim Hotel - Sociedade de Gestão Hoteleira, S.A. |
| Fundo Bem Comum FCR | Construcciones Sarrión, SL |
| Esiam - Espirito Santo International Asset Management, Ltd | Ganadera Corina Campos y Haciendas, S/A |
| Société 45 Avenue Georges Mandel, SA | E.S.B. Finance Ltd |
| BES, Companhia de Seguros , SA | Eastelco - Consultoria e Comunicação, SA |
| Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA | E.S. Asset Administration, Ltd. |
| Esegur - Empresa de Segurança, SA Ascendi Group, SGPS, SA |
Espírito Santo Cachoeira Desenvolvimento Imobiliário Ltda ES Comercial Agrícola, Ltda |
| Empark Aparcamientos y Servicios SA | Espírito Santo Guarujá Desenvolvimento Imobiliário Ltda |
| Concesionaria Autopista Perote-Xalapa, CV | ES Holding Administração e Participações, S/A |
| Autovia De Los Vinedos, SA | Espírito Santo Hotéis, SGPS, SA |
| SOUSACAMP, SGPS, SA | Espirito Santo Industrial ( BVI ), SA |
| GLOBAL ACTIVE - GESTÃO P.S.SGPS, SA | Espírito Santo Indaiatuba Desenvolvimento Imobiliário Ltda |
| OUTSYSTEMS, SA Coreworks - Proj. Circuito Sist. Elect., SA |
Espirito Santo Industrial, SA Espírito Santo Industrial ( Portugal ) - SGPS, SA |
| Multiwave Photonics, SA | Espirito Santo Irmãos - Sociedade Gestora de Participações Sociais, SA |
| BIO-GENESIS | Espírito Santo Itatiba Desenvolvimento Imobiliário Ltda |
| YDreams - Informática, SA | Espírito Santo Primavera Desenvolvimento Imobiliário Ltda |
| Nutrigreen, S.A. | ES Private Equity, Ltd |
| Advance Ciclone Systems, SA | Espirito Santo Property (Brasil) S/A |
| WATSON BROWN HSM, Ltd Domática, Electrónica e Informática, SA |
Espírito Santo Services, SA Espirito Santo Tourism, Ltd |
| MMCI - Multimédia, SA | Espirito Santo Tourism ( Europe ), SA |
| Mobile World - Comunicações, SA | Espírito Santo Venture Ltd |
| Enkrott SA | Espírito Santo Viagens - Sociedade Gestora de Participações Sociais, SA |
| Rodi Sinks & Ideas, SA | ES Viagens e Turismo, Lda |
| Palexpo - Imagem Empresarial, SA TLCI 2 - Soluções Integradas de Telecomunicações, SA |
Espírito Santo Viagens - Consultoria e Serviços, SA Escae Consultoria, Administração e Empreendimento, Ltda |
| BANCO DELLE TRE VENEZIE SPA | Escopar - Sociedade Gestora de Participações Sociais, SA |
| NANIUM , SA | ESDI Administração e Participações Ltda |
| IJAR LEASING ALGÉRIE | Esger - Empresa de Serviços e Consultoria, SA |
| Ascendi Pinhal Interior Estradas do Pinhal Interior, SA | Espirito Santo International (BVI), SA |
| Ascendi Douro Estradas do Douro Interior, SA Unicre - Cartão Internacional de Crédito, SA |
E.S. International Overseas, Ltd. Esim - Espirito Santo Imobiliário, SA |
| Edenred Portugal, S.A. | E.S. - Espírito Santo, Mediação Imobiliária, S.A. |
| MOZA BANCO | Espirito Santo Property SA |
| ESFG's subsidiaries, associates and related entities | Espirito Santo Property Holding, SA |
| Espírito Santo Property España, S.L. | |
| Bespar - Sociedade Gestora de Participações Sociais, SA | Espart - Espirito Santo Participações Financeiras, SGPS, SA |
| Banque Privée Espírito Santo Banque Privée Espírito Santo Sucursal Portugal |
Espirito Santo Resources, Ltd Espirito Santo Resources ( Portugal ), SA |
| ES Bank (Panama), SA | E.S. Resources Overseas, Ltd |
| ES Bankers (Dubai) Limited | Espírito Santo Resources SA |
| Espirito Santo Financial ( Portugal ), SGPS, SA | Estoril Inc |
| Espirito Santo Financial Group, SA | Euroamerican Finance Corporation, Inc. |
| ESFG International, Ltd Esfil - Espírito Santo Financiére, S.A. ( Luxemburgo ) |
Euroamerican Finance SA Euroatlantic, Inc. |
| Espírito Santo International SA | Fafer - Empreendimentos Turisticos e de Construção, SA |
| Espírito Santo Saúde SGPS, S.A. | Fimoges - Sociedade Gestora de Fundos de Investimento Imobiliário, SA |
| Clínica Parque dos Poetas, SA | GES Finance Limited |
| Cliria - Hospital Privado de Aveiro, SA | Gesfimo - Espirito Santo, Irmãos, Soc. Gestora de Fundos de Investimento Imobiliários,SA |
| ES Saúde - Residência com Serviços Senior, S.A. | Gestres - Gestão Estratégica Espirito Santo, SA |
| Espírito Santo - Unidades de Saúde e de Apoio à Terceira Idade, S.A. Genomed, Diagnóstico de Medicina Molecular, SA |
Goggles Marine, Ltd Sociedade Agricola Golondrina, S/A |
| HCI - Health Care International, Inc | HDC - Serviços de Turismo e Imobiliário, SA |
| HME Gestão Hospitalar | Herdade da Comporta - Actividades Agro Silvícolas e Turísticas, SA |
| Hospital da Arrábida - Gaia, SA | |
| Hoteis Tivoli, SA | |
| Hospital da Luz - Centro Clínico da Amadora, SA | Hotelagos, SA |
| Hospital da Luz, SA | Hospital Residêncial do Mar, SA |
| Hospor - Hospitais Portugueses, SA | I.A.C. UK, Limited |
| Instituto de Radiologia Dr. Idálio de Oliveira - Centro de Radiologia Médica, S.A. RML - Residência Medicalizada de Loures, SGPS, SA |
Inter-Atlântico, S/A Iber Foods - Produtos Alimentares e Biológicos, SA |
| Surgicare - Unidades de Saúde, SA | Imopca, SA |
| Vila Lusitano - Unidades de Saúde, SA | Lote Dois - Empreendimentos Turisticos SA |
| Key Space Investments LLC | Luzboa, SA |
| Marignan Gestion, SA | Luzboa Um, SA |
| Omnium Lyonnais de Participations Industrielles, SA Partran - Sociedade Gestora de Participações Sociais, SA |
Luzboa Dois, SA Luzboa Três, SA |
| Société Antillaise de Gestion Financiére, S.A. - SAGEFI | Luzboa Quatro, SA |
| Société Lyonnaise de Marchands de Biens | BEMS, SGPS, SA |
| Companhia de Seguros Tranquilidade, SA | Margrimar - Mármores e Granitos, SA |
| T - Vida, Companhia de Seguros, SA | Marinoteis - Sociedade de Promoção e Construção de Hoteis, SA |
| Seguros Logo, SA Advancecare - Gestão e Serviços de Saúde, SA |
Marmetal - Mármores e Materiais de Construção, SA Metal - Lobos Serralharia e Carpintaria, Lda |
| Pastor Vida, S.A de Seguros y Reaseguros | Multiger - Sociedade de Gestão e Investimento Imobiliário, SA |
| Esumédica - Prestação de Cuidados Médicos, SA | Mundo Vip - Operadores Turísticos, SA |
| Europe Assistance - Companhia Portuguesa de Seguros de Assistência, SA | Net Viagens - Agência de Viagens e Turismo, SA |
| BESV Courtage SA | Novagest Assets Management, Ltd |
| AOC Patrimoine, SA ES Consultancy Singapore |
Opca Angola, SA Opca Moçambique, Lda |
| Opcatelecom - Infraestuturas de Comunicação, SA |
| ESFG's subsidiaries, associates and related entities | ESFG's subsidiaries, associates and related entities |
|---|---|
| OPWAY - Engenharia, SA | Solférias - Operadores Turísticos, Lda |
| OPWAY Imobiliária, SA | Sopol - Concessões, SGPS, SA |
| OPWAY - SGPS, SA | Sotal - Sociedade de Gestão Hoteleira, S.A. |
| Pavi do Brasil - Pré-Fabricação, Tecnologia e Serviços, Lda. | Space - Sociedad Peninsular de Aviación, Comércio e Excursiones, SA |
| Pavicentro - Pré-Fabricação, SA | Suliglor - Imobiliária do Sul, SA |
| Pavilis - Pré-Fabricação, SA | TA DMC Brasil - Viagens e Turismo, SA |
| Paviseu - Materiais Pré-Fabricados, SA | Agência de Viagens Tagus, S.A. |
| Pavitel, SARL | Construtora do Tamega Madeira SA |
| Personda - Sociedade de Perfurações e Sondagens, SA | Construtora do Tamega Madeira SGPS SA |
| Placon - Estudos e Projectos de Construção, Lda | Terras de Bragança Participações, Ltda |
| Pojuca, SA | Timeantube Comércio e Serviços de Confecções, Ltda |
| Pontave - Construções, SA | Tivoli Gare do Oriente - Sociedade de Gestão Hoteleira, S.A. |
| Agência Receptivo Praia do Forte, Ltda | TOP A DMC Viajes, SA |
| Praia do Forte Operadora de Turismo, Ltda | Top Atlântico - Viagens e Turismo, SA |
| Grupo Proyectos y Servicios Sarrion, SA | Top Atlântico DMC, SA |
| Quinray Technologies Corp. | Transcontinental - Empreendimentos Hoteleiros, SA |
| Quinta da Areia - Sociedade Agrícola Quinta da Areia, SA | Turifonte, Empreendimentos Hoteleiros, SA |
| Sociedade Agricola Quinta D. Manuel I, SA | Turistrader - Sociedade de Desenvolvimento Turístico, SA |
| Recigreen - Reciclagem e Gestão Ambiental, SA | Ushuaia - Gestão e Trading Internacional Limited |
| Recigroup - Industrias de Reciclagem, SGPS, SA | Sociedade Agricola Turistica e Imobiliária Várzea Lagoa, SA |
| Recipav - Engenharia e Pavimentos, Unipessoal, Lda | Viveiros da Herdade da Comporta - Produção de Plantas Ornamentais, Lda |
| Recipneu - Empresa Nacional de Reciclagem de Pneus, Lda | Ribeira do Marchante, Administração de Bens Móveis e Imóveis, S.A. |
| Santa Mónica - Empreendimentos Turísticos, SA | Casa da Saudade, Administração de Bens Móveis e Imóveis, S.A. |
| Saramagos S/A Empreendimentos e Participações | Angra Moura-Sociedade de Administração de Bens,S.A. |
| Société Congolaise de Construction et Travaux Publiques, SARL | Sociedade de Administração de Bens - Casa de Bons Ares, S.A. |
| Series - Serviços Imobiliários Espirito Santo, SA | ACRO, Sociedade Gestora de Participações Sociais, S.A. |
| Sociedade Gestora do Hospital de Loures, SA | Diliva, Sociedade de Investimentos Imobiliários, S.A. |
| Sintra Empreendimentos Imobiliários, Ltda |
As at 30 June 2013 and 31 December 2012, the balances and transactions with related parties are presented as follows:
| (in thousands of euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | |||||||||
| Assets Assets |
Liabilities Liabilities |
Guarantees Guarantees Guarantees | Income | Ex penses Ex penses | Assets | Liabilities Liabilities | Guarantees Guarantees Guarantees | Income | Expenses | |
| Associates companies | ||||||||||
| BE S VÉ NÉ TIE | 1 41 747 | 735 | 5 636 | 6 | - | 726 91 0 | 623 | 5 627 | 2 705 | - |
| ASCE NDI GROUP S GPS | 327 01 3 | 30 447 | 26 900 | 1 0 274 | 1 45 | 299 462 | 3 781 | 28 364 | 1 1 278 | 2 |
| LOCARE NT | 1 22 31 6 | 875 | - | 1 479 | 4 776 | 1 29 81 8 | 3 723 | - | 2 692 | 1 1 006 |
| AE NOR DOURO | 271 894 | 2 783 | 1 3 470 | 4 425 | - | 271 887 | 3 461 | 1 1 000 | 8 985 | - |
| NANIUM | 34 283 | 8 61 6 | 1 8 331 | 1 29 | 50 | 35 327 | 4 272 | 1 8 349 | 306 | 4 |
| E MPARK | 49 088 | - | 4 685 | 1 1 79 | - | 49 1 79 | - | 4 684 | 3 872 | 246 |
| ASCE NDI PINHAL INTE RIOR | 1 1 4 775 | 5 929 | 1 6 374 | 1 877 | - | 98 356 | 2 051 | 1 5 374 | 3 073 | - |
| PALE XPO | 7 238 | 1 78 | 26 | 227 | - | 7 266 | 1 24 | 26 | 537 | - |
| BE S S E GUROS | 1 09 | 1 7 268 | - | 85 | 9 | 630 | 1 8 456 | - | 41 5 | 1 6 |
| E SE GUR | 7 235 | 2 | 2 388 | 548 | 1 59 | 7 680 | 3 | 2 105 | 1 055 | 430 |
| E S CONTACT CE NTE R | 1 662 | - | 40 | 40 | 31 0 | 1 858 | - | 43 | 90 | 874 |
| UNICRE | - | 28 | - | - | - | 26 | 2 | - | 1 | - |
| OTHE RS | 65 238 | 69 1 38 | 1 0 602 | 1 604 | 204 | 58 358 | 24 459 | 1 1 508 | 1 2 278 | 1 250 |
| 1 1 42 598 1 1 598 |
1 35 999 1 999 1 35 999 |
98 452 98 452 452 | 21 873 21 873 21 | 5 653 | 1 686 757 1 686 757 1 686 | 60 955 60 955 60 | 97 080 97 080 | 47 287 47 287 287 | 1 3 828 1 3 828 |
Balances and transactions with the above referred entities relate mainly to loans and advances and deposits in the scope of the banking activity of the Group. The liabilities relate mainly to bank deposits taken.
As at 30 June 2013 and 31 December 2012, the total amount of assets and liabilities of BES Group with ESFG (Bank holding) and related companies, is as follows:
| (in thousands of euro) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||||||
| Assets | |||||||||||
| Loans and advances to banks |
Loans Loans |
Securities Securities |
Other | Total | Guarantees | Liabilities | Income Income |
Ex penses | |||
| Shareholders | |||||||||||
| E S FINANCIAL GROUP | - | - | 4 244 | 28 | 4 272 | - | 1 00 065 | 32 | 271 | ||
| E S F PORTUGAL | - | - | 99 984 | 75 | 1 00 059 | - | 4 582 | 868 | 1 | ||
| BE SPAR | - | - | - | - | - | - | 1 89 | - | - | ||
| GRUPO CRÉ DIT AGRICOLE | 1 080 | 91 | 6 966 | 1 1 0 | 8 247 | 1 080 | 362 | 5 | - | ||
| Subsidiaries, associates from shareholders | |||||||||||
| PARTRAN | - | - | - | - | - | - | 21 | - | - | ||
| E S PÍRITO SANTO FINANCIÉ RE , SA | - | 7 645 | 8 771 | - | 1 6 41 6 | - | 262 475 | 334 | 66 | ||
| COMPANHIA S E GUROS TRANQUILIDADE | - | 87 969 | - | 385 | 88 354 | 21 492 | 77 338 | 1 298 | 722 | ||
| BANQUE PRIVÉ E E S PÍRITO SANTO | 1 6 297 | - | - | 6 | 1 6 303 | 8 235 | 26 635 | 1 74 | 1 82 | ||
| E S BANK PANAMA | 22 936 | - | - | - | 22 936 | - | 9 985 | 1 596 | - | ||
| E S S AUDE | - | 1 7 854 | 48 227 | 1 3 | 66 094 | 4 006 | 1 4 202 | 336 | 1 | ||
| T - VIDA | - | 42 447 | 1 61 790 | 1 1 46 | 205 383 | - | 1 62 296 | 452 | 69 | ||
| E S UMÉ DICA | - | 1 000 | - | 6 | 1 006 | 4 | 78 | 29 | 49 | ||
| E UROP AS SIS TANCE | - | - | - | - | - | 25 | 1 773 | 25 | 7 | ||
| Other | |||||||||||
| E S IRMÃOS | - | - | - | - | - | - | 649 | - | - | ||
| OPWAY | - | 7 080 | - | 2 206 | 9 286 | 45 878 | 909 | 89 | - | ||
| CONSTRUCCIONE S SARRION | - | 1 5 960 | - | - | 1 5 960 | 8 747 | - | 54 | - | ||
| E S PÍRITO SANTO RE SOURCE S | - | - | - | 9 | 9 | - | 275 | 22 | 92 | ||
| Other | 29 265 | 58 393 | 20 988 | 321 | 1 08 967 | 9 885 | 26 223 | 4 752 | 1 1 06 | ||
| TOTAL | 69 578 69 |
238 439 238 238 439 |
350 970 350 970 350 970 | 4 305 | 663 292 663 292 663 292 | 99 352 99 352 99 352 | 688 057 688 057 688 | 1 0 066 1 0 066 066 | 2 566 |
| (in thousands of euro) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | |||||||||
| Assets | |||||||||
| Loans and advances to banks |
Loans Loans |
S ecuritiesecurities S ecurities |
Other | Total | Guarantees Guarantees |
Liabilities Liabilities |
Income Income |
Ex penses Ex penses |
|
| Shareholders | |||||||||
| E S FINANCIAL GROUP | 548 | - | 40 632 | 2 | 41 1 82 | - | 28 | 1 1 86 | - |
| E SF PORTUGAL | - | - | 72 666 | - | 72 666 | - | 1 09 | 2 349 | - |
| BE S PAR | - | - | - | - | - | - | 386 | - | - |
| GRUPO CRÉ DIT AGRICOLE | 973 | 1 08 | 1 01 6 | 1 1 0 | 2 207 | 1 080 | 271 | 1 0 | - |
| Subsidiaries, associates from shareholders | |||||||||
| PARTRAN | - | - | - | - | - | - | 22 | - | - |
| E SPÍRITO SANTO FINANCIÉ RE , S A | - | 7 579 | - | - | 7 579 | - | 1 53 | - | - |
| COMPANHIA S E GUROS TRANQUILIDADE | - | 1 50 1 50 | - | 520 | 1 50 670 | 21 979 | 1 1 6 657 | 1 582 | 1 200 |
| BANQUE PRIVÉ E E S PÍRITO S ANTO | 1 5 794 | - | - | 1 1 | 1 5 805 | 8 01 8 | 32 904 | 503 | 351 |
| E S BANK PANAMA | 1 35 000 | - | - | - | 1 35 000 | - | 35 51 2 | 1 0 1 39 | - |
| E S SAUDE | - | 1 8 484 | 45 1 1 2 | 64 | 63 660 | 24 269 | 1 3 1 40 | 464 | 2 |
| T - VIDA | - | 55 560 | 9 291 | 1 63 | 65 01 4 | - | 98 61 1 | 492 | 364 |
| E SUMÉ DICA | - | 1 000 | - | - | 1 000 | 4 | 24 | 80 | 81 |
| E UROP AS SISTANCE | - | 24 | - | 34 | 58 | 25 | 2 749 | 57 | - |
| Other | |||||||||
| E S IRMÃOS | - | 1 04 570 | - | - | 1 04 570 | - | 1 | 4 708 | - |
| OPWAY | - | 3 645 | - | 2 686 | 6 331 | 48 029 | 35 089 | 362 | 225 |
| CONS TRUCCIONE S SARRION | - | 1 6 527 | - | - | 1 6 527 | 8 745 | - | 233 | - |
| E SPÍRITO SANTO RE SOURCE S | - | 1 1 | - | 1 9 | 30 | - | 2 359 | 51 | 221 |
| OUTRAS | - | 62 048 | 20 971 | 1 075 | 84 094 | 1 7 294 | 32 368 | 5 1 62 | 2 438 |
| TOTAL | 1 52 31 5 | 41 9 706 41 9 706 | 1 89 688 1 89 688 1 89 688 | 4 684 | 766 393 766 393 393 | 1 29 443 1 29 443 1 29 | 370 383 370 383 | 27 378 27 378 | 4 882 |
As at 30 June 2013, loans granted by BES Group to the members of the Board of Directors of ESFG that are not simultaneously members of the Board of Directors of BES, amounted to euro 2 833 thousands (31 December 2012: euro 4 047 thousands).
All transactions with related parties are made on an arms length basis, under the fair value principle.
Credits granted to members of the Board of Directors correspond to operations under the BES core business, being excluded from the nr. 1, 2, 3 and 4 of article 397 of the Código das Sociedades Comerciais.
However, credit granted by the Group to members of the Board of Directors of credit institutions are under the scope of article 85 of the Regime Geral das Instituições de Crédito e Sociedades Financeiras (RGICSF) being these operations subject to reporting to the Bank of Portugal, under the terms of Instruction nr. 17/2011, of August 2011.
It cannot be granted credit to executive members of the Board of Directors and to the Fiscal Board (including first degree relatives), with the exception of operations (i) with a social purpose, (ii) under the company policies, or (iii) resulting from the use of credit cards in conditions similar to the ones applied to the general clients with similar risk profile. All these exception are included in nr. 4 of article 85 of RGICSF; - Credit operations with non-executive members of the Board of Directors are subject to approval by a majority of at least two thirds of the remaining Board Members and can only be granted with the approval of the Fiscal Board, in accordance with nr. 8 of article 85 of RGICSF;
The credit is granted and approved at market prices and the Board Member involved in the operation cannot intervene in the decision making process.
All credits granted to Board Members fulfill the above mentioned requirements.
All credits granted to related parties are included in the impairment model, being subject to provisions in the same manner that the commercial credits granted by the Group. As at 30 June 2013 and 31 December 2012, none of the credits granted to related parties were subject to individual impairment. However, these credits are subject to an impairment evaluation on a portfolio basis, as referred in Note 2.5 – Loans and advances to customers.
(in thousands of euro)
As at 30 June 2013, the outstanding securitisation transactions performed by the Group were as follows:
| Designation Designation |
Initial datedate Initial date Original amountamount Original amount |
Current amount Current amount Current amount |
Asset securitised Asset securitised |
||
|---|---|---|---|---|---|
| Lusitano Mortgages No.1 plc | December 2002 | 1 000 000 | 346 548 | Mortgage loans (subsidised regime) | |
| Lusitano Mortgages No.2 plc | November 2003 | 1 000 000 | 345 939 | Mortgage loans (subsidised and general regime) | |
| Lusitano Mortgages No.3 plc | November 2004 | 1 200 000 | 501 483 | Mortgage loans (general regime) | |
| Lusitano Mortgages No.4 plc | September 2005 | 1 200 000 | 575 529 | Mortgage loans (general regime) | |
| Lusitano Mortgages No.5 plc | September 2006 | 1 400 000 | 802 469 | Mortgage loans (general regime) | |
| Lusitano SME No.1 plc | 01 October 2006 | 862 607 | 208 298 | Loans to small and medium entities | |
| Lusitano Mortgages No.6 plc | J uly 2007 | 1 1 00 000 | 739 384 | Mortgage loans (general regime) | |
| Lusitano Project Finance No.1 , FTC | December 2007 | 1 079 1 00 | 1 25 1 74 (1 ) Project Finance Loans | ||
| Lusitano Mortgages No.7 plc | September 2008 | 1 900 000 | 1 759 329 | Mortgage loans (general regime) | |
| Lusitano Leverage finance No. 1 BV | February 201 0 | 51 6 534 (2) | 84 575 | Leverage Finance Loans | |
| Lusitano Finance N.º 3 | November 201 1 | 657 981 | 354 951 | Retail loans | |
| IM BE S E mpresas 1 | November 201 1 | 485 000 | 31 4 696 | Loans to small and medium entities |
(2) This securitis ation includes the amount of euro 382 062 thousand of mortgage loans from BE S and an amountof euro 1 34 472 thousand of mortgage loans from BE SI and BE S Vénétie, (1) In March 201 1 , the credit portfolio associated to this securitisation was partially sold, with the remaining (domes tic credit) been to "Lusitano Project Finance Nº. 1 FTC".
As permitted by IFRS 1, the Group has applied the derecognition requirements of IAS 39 for the transactions entered into after 1 January 2004. Therefore, the assets derecognised until that date, in accordance with the previous accounting policies, were not restated in the balance sheet.
The assets sold in the securitisation transactions Lusitano Mortgages No.3, Lusitano Mortgages No.4 and Lusitano Mortgages No.5, performed after 1 January 2004, were derecognised considering that the Group has transferred substantially all the risks and rewards of ownership.
In accordance with SIC 12, the Group fully consolidates Lusitano SME No. 1, plc, Lusitano Mortgages No.6 plc, Lusitano Project Finance No. 1 FTC and Lusitano Mortgages No.7 plc as it retains the majority of the risks and rewards associated with the activity of these SPE's. Therefore, the respective assets and liabilities are included in the consolidated balance sheet of the Group. The other securitisation vehicles are not included in the consolidated financial statements of the Group as it has not retained the majority of the risks and rewards of ownership.
In 2011 there were two securitization transactions: loans to households (Lusitano Finance Nº3) with loan originated by BES and other of corporate loans (IM BES Empresas 1) with loans originated by BES Spanish branch. During 2010 it was set-up two securitization operations of corporate loans (Lusitano Leverage Finance Nº1) which includes loans from BES London Branch, BESI and ES Vénétie and other of corporate loans and commercial paper (Lusitano SME Nº2), and the latter been repaid in March 2012. These loans were not derecognised considering that the group has not transferred substantially all the risks and rewards of ownership.
The fair value of financial assets and liabilities, for the Group, is analysed as follows:
| (in thousands of euro) | ||||||
|---|---|---|---|---|---|---|
| Fair Value | ||||||
| Amortised Cost | Quoted Market Prices |
Valuation models based on observable market information |
Valuation models based on non observable market information |
Book Value | Fair Value | |
| Balance as at 30 J une 2013 | ||||||
| Cash and deposits at central banks Deposits with banks Other financial assets held for trading Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and advances to banks Loans and advances to customers |
1 209 218 565 008 - - a) 7 447 2 453 506 47 554 229 |
- - 1 323 369 2 217 735 6 931 1 21 - - |
- - 1 891 859 1 444 764 4 1 88 966 - 422 498 |
- - 3 602 231 347 1 001 738 - - |
1 209 21 8 565 008 3 218 830 3 893 846 1 2 1 29 272 2 453 506 47 976 727 |
1 209 21 8 565 008 3 21 8 830 3 893 846 12 129 272 2 453 506 45 148 641 |
| Held-to-maturity investments Derivatives for risk management purposes |
1 025 271 - |
- - |
- 391 71 9 |
- - |
1 025 271 391 71 9 |
939 1 1 1 391 71 9 |
| Financial assets | 52 81 4 679 4 |
1 0 472 225 1 0 225 1 0 472 225 |
8 339 806 8 339 806 8 806 | 1 236 687 1 236 687 1 | 72 863 397 72 863 397 863 | 69 949 1 51 69 949 1 51 |
| Deposits from central banks Financial liabilities held for trading Deposits from banks Due to customers Debt securities issued Derivatives for risk management purposes Investment contracts S ubordinated debt |
10 041 724 - 4 542 225 28 495 993 9 71 4 1 08 - 1 955 1 28 830 667 |
- - - - - - - |
- 1 568 181 654 91 7 9 415 662 3 018 164 1 69 602 1 519 774 265 |
- - - - - - - |
1 0 041 724 1 568 181 5 1 97 142 37 911 655 1 2 732 272 1 69 602 3 474 902 830 932 |
10 041 724 1 568 181 5 041 068 37 91 1 655 12 481 395 169 602 3 081 527 779 744 |
| Financial liabilities | 55 579 845 | - - | 1 6 346 565 1 6 565 | - | 71 926 41 0 926 | 71 074 896 074 |
| Balance as at 31 December 2012 | ||||||
| Cash and deposits at central banks Deposits with banks Other financial assets held for trading Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and advances to banks Loans and advances to customers Held-to-maturity investments Derivatives for risk management purposes |
1 377 541 681 077 - - a) 8 605 5 426 518 47 194 030 941 549 - |
- - 1 484 1 12 1 387 979 5 008 676 - - - - |
- - 2 441 287 1 1 53 990 4 778 336 - 512 362 - 516 520 |
- - - 279 584 959 693 - - - - |
1 377 541 681 077 3 925 399 2 821 553 1 0 755 31 0 5 426 51 8 47 706 392 941 549 516 520 |
1 377 541 681 077 3 925 399 2 821 553 10 755 310 5 426 51 8 44 684 1 22 879 265 51 6 520 |
| Financial assets | 55 629 320 | 7 880 767 7 880 767 7 767 | 9 402 495 9 402 495 9 495 | 1 239 277 1 239 277 1 | 74 1 51 859 74 1 51 859 51 | 71 067 305 71 067 305 |
| Deposits from central banks Financial liabilities held for trading Deposits from banks Due to customers Debt securities issued Derivatives for risk management purposes Investment contracts S ubordinated debt |
10 893 320 - 4 476 381 25 743 341 12 764 479 - 1 298 933 839 553 |
- - - - - - - - |
- 2 1 22 025 612 277 8 796 982 2 659 582 1 25 199 2 1 14 630 263 |
- - - - - - - - |
1 0 893 320 2 1 22 025 5 088 658 34 540 323 1 5 424 061 1 25 199 3 413 563 839 81 6 |
10 893 320 2 122 025 4 898 506 34 540 323 15 990 921 125 1 99 3 61 5 405 81 1 686 |
| Financial liabilities | 56 01 6 007 6 |
- - |
1 6 430 958 1 6 430 958 1 6 958 | - | 72 446 965 72 446 965 446 | 72 997 385 72 997 385 |
a) Assets at acquisition cost net of impairment losses. These assets refer to equity instruments issued by non-quoted entities in relation to w hich no recent transactions w ere identified or is not possible to estimate reliably its fair value.
BES Group determines the fair value of its financial assets and liabilities in accordance with the following hierarchy:
Quoted market prices – this category includes finan Quoted prices cial assets with available quoted market prices in official markets and with dealer prices quotations provided by entities that usually provide transaction prices for these assets/liabilities traded in active markets.
Valuation models based on observable market Valuation models on observable market information information – consists on the use of internal valuation techniques, namely discounted cash flow models and option pricing models which imply the use of estimates and require judgments that vary in accordance with the complexity of the financial instrument. Notwithstanding, the Group uses observable market data such as interest rate curves, credit spreads, volatility and market indexes. Includes also instruments with dealer price quotations but which are not traded in active markets.
Valuation models based Valuation models basedon non-observable market information observable market information –consists on the use of internal valuation models or quotations provided by third parties but which imply the use of non-observable market information. Changes in the parameters used in 2012 and 2011, have no significant impact to the Group consolidated financial statements.
The movements of the financial assets valued based on non-observable market information, during the first six months of 2013, can be analysed as follows:
| (in thousands of euro) | ||
|---|---|---|
| 30.06.2013 30.06.2013 |
31 .12.2012 | |
| Balance at the beggining of the year | 1 239 277 | 263 194 |
| Acquisitions | 11 7 984 | 989 342 |
| Disposals | ( 130 730) | ( 1 7 604) |
| Transfers | 36 190 | 6 593 |
| Changes in value | ( 26 034) | ( 2 248) |
| Balance at the end of the year/period | 1 236 687 | 1 239 277 |
The main assumptions and inputs used during the years ended 2011 and 2010 in the valuation models are presented as follows:
Cash and deposits at central banks, Deposits with banks and Loans and advances to banks Considering the short term nature of these financial instruments, carrying value is a reasonable estimate of its fair value.
The fair value of loans and advances to customers is estimated based on the discount of the expected future cash flows of capital and interest, assuming that the installments are paid on the dates that have been contractually defined. The expected future cash flows of loans with similar credit risk characteristics are estimated collectively. The discount rates used by the Group are current interest rates used in loans with similar characteristics.
The fair values of these financial instruments are based on quoted market prices, when available. For unlisted securities the fair value is estimated by discounting the expected future cash-flows.
Considering the short term nature of these financial instruments, carrying value is a reasonable estimate of its fair value
The fair value of these financial instruments is estimated based on the discount of the expected future cash flows of capital and interest, assuming that the installments are paid on the dates that have been contractually defined. The discount rates used by the Group are the current interest rates used in instruments with similar characteristics. Considering that the applicable interest rates to these instruments are floating interest rates and that the period to maturity is substantially less than one year, the difference between fair value and book value is not significant.
The fair value of these instruments is based on market prices, when available. When not available, the Group estimates its fair value by discounting the expected future cash-flows.
A qualitative outlook of the risk management at the Group is presented below:
Credit risk represents the potential financial loss arising from the failure of a borrower or counterparty to honour its contractual obligation. Credit risk is essentially present in traditional banking products – loans, guarantees granted and contingent liabilities – and in trading products – swaps, forwards and options (counterparty risk). Regarding credit default swaps, the net exposure between selling and buying positions in relation to each reference entity, is also considered as credit risk to the Group. The credit default swaps are accounted for at fair value in accordance with the accounting policy described in Note 2.4.
Credit portfolio management is an ongoing process that requires the interaction between the various teams responsible for the risk management during the consecutive stages of the credit process. This approach is complemented by the continuous introduction of improvements in the methodologies, in the risk assessment and control tools, as well as in procedures and decision processes.
The risk profile of BES Group is analysed on a regular basis by the risk committees, especially in what concerns the evolution of credit exposures and monitoring of credit losses.
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 2.201 |
|
| Deposits with banks | 2 790 1 75 | 3 799 1 29 |
| Financial assets held for trading | 3 1 76 378 | 3 871 474 |
| Other financial assets at fair value through profit or loss | 2 692 438 | 1 634 41 9 |
| Available-for-sale financial assets | 9 575 973 | 8 462 1 04 |
| Loans and advances to customers | 47 976 727 | 47 706 392 |
| Held-to-maturity investments | 1 025 271 | 941 549 |
| Derivatives for risk management purposes | 391 71 9 | 51 6 520 |
| Other assets | 532 648 | 480 754 |
| Guarantees granted | 7 831 396 | 8 023 520 |
| S tand by letters of credit | 3 872 877 | 3 776 399 |
| Irrevocable commitments | 3 1 41 487 | 3 280 971 |
| Credit risk associated to the credit derivatives reference entities | 472 443 | 489 884 |
| 83 479 532 83 479 532 |
82 983 1 1 5 82 983 |
BES Group credit risk exposure is analysed as follows:
The analysis of the risk exposure by sector of activity, as at 30 June 2013 and 31 December 2012, can be analysed as follows:
| 30.06.2013 | (in thousands of euro) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Loans and advances to customers |
Financial assets held for trading |
Other financial assets at fair value through |
Derivatives for risk management |
Available-for-sale financial assets |
Held-to-maturity investments |
Guarantees granted |
||||
| Gross amount Impairment | profit and loss | purposes | Gross amount Impairment Gross amount Impairment | |||||||
| Agriculture | 426 110 | ( 27 476) | 3 372 | - | - | 7 485 | - | - | - | 31 750 |
| Mining | 299 078 | ( 11 532) | 6 670 | 6 430 | - | 11 407 | ( 724) | - | - | 47 422 |
| Food, beverage and tobacco | 979 274 | ( 44 297) | 34 052 | 102 772 | - | 124 966 | ( 52) | 4 995 | - | 80 238 |
| Textiles | 356 521 | ( 34 732) | 1 093 | - | - | 9 491 | ( 3 958) | - | - | 13 241 |
| Shoes | 62 566 | ( 7 392) | 73 | - | - | 489 | ( 499) | - | - | 2 572 |
| Wood and cork | 146 608 | ( 29 227) | 374 | 25 282 | - | 86 326 | ( 1 330) | - | - | 6 877 |
| Printing and publishing | 399 566 | ( 21 553) | 6 100 | - | - | 16 971 | ( 11 985) | - | - | 74 003 |
| Refining and oil | 3 201 | ( 105) | 195 | 17 630 | - | 38 824 | - | - | - | 4 979 |
| Chemicals and rubber | 656 817 | ( 17 158) | 22 858 | 29 233 | - | 15 199 | ( 12 979) | - | - | 111 818 |
| Non-metallic minerals | 371 544 | ( 30 120) | 1 938 | - | - | 12 730 | ( 7 586) | - | - | 18 439 |
| Metallic products | 871 681 | ( 48 873) | 8 355 | 5 566 | - | 2 049 | - | - | - | 148 266 |
| Production of machinery, equipment and electric devices | 272 892 | ( 9 805) | 3 085 | 44 422 | - | 31 957 | ( 3 583) | - | - | 126 947 |
| Production of transport material | 120 437 | ( 3 749) | 676 | 29 902 | - | 44 717 | ( 108) | - | - | 24 514 |
| Other transforming industries | 408 077 | ( 26 365) | 628 | 51 249 | - | 61 000 | ( 16 425) | 9 494 | - | 42 916 |
| Electricity, gas and water | 1 563 238 | ( 14 273) | 150 673 | 20 083 | - | 414 558 | ( 507) | - | - | 472 811 |
| Construction | 3 651 972 | ( 457 026) | 326 302 | 182 635 | - | 175 527 | ( 1 688) | 4 233 | - | 2 324 577 |
| Wholesale and retail | 3 263 125 | ( 369 963) | 14 542 | 87 589 | - | 70 265 | ( 22 437) | 3 902 | - | 550 945 |
| Tourism | 1 444 438 | ( 124 236) | 4 058 | 27 399 | - | 35 954 | ( 391) | - | - | 96 883 |
| Transports and communications | 2 903 304 | ( 58 560) | 240 724 | 50 739 | - | 205 604 | ( 25 595) | 10 797 | - | 984 970 |
| Financial activities | 3 991 871 | ( 178 315) | 755 530 | 1 636 327 | 391 719 | 3 400 125 | ( 87 655) | 486 822 | ( 14 354) | 251 403 |
| Real estate activities | 5 749 051 | ( 457 670) | 30 208 | 71 953 | - | 79 333 | ( 4 511) | 1 301 | - | 368 374 |
| Services provided to companies | 4 653 276 | ( 468 937) | 360 395 | 97 348 | - | 774 692 | ( 36 004) | 39 223 | - | 1 377 786 |
| Public services | 1 618 529 | ( 24 070) | 1 214 296 | 1 323 905 | - | 6 341 187 | - | 403 583 | - | 201 215 |
| Non-profit organisations | 3 271 447 | ( 292 995) | 31 605 | 81 444 | - | 400 533 | ( 46 838) | 86 486 | ( 11 211) | 410 064 |
| Mortgage loans | 10 974 392 | ( 172 710) | - | - | - | - | - | - | - | 7 |
| Consumers loans | 2 502 284 | ( 198 782) | - | - | - | - | - | - | - | 55 223 |
| Other | 149 623 | ( 4 274) | 1 028 | 1 938 | - | 52 742 | ( 4) | - | - | 3 156 |
| TOTAL | 51 922 (3 |
51 110 922 (3 134 195) 195) |
3 218 830 3 | 3 893 84 6 3 84 | 391 719 719 | 12 4 14 131 12 | ( 284 859) 859) | 1 050 836 1 | ( 25 565) 25 565) | 7 831 396 831 396 |
| (in thousands of euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | ||||||||||
| Loans and advances to customers |
Financial assets held for trading |
Other financial assets at fair value through |
Derivatives for risk management |
Available-for-sale financial assets |
Held-to-maturity investments | Guarantees granted |
||||
| Gross amount |
Impairment | profit and loss |
purposes | Gross amount |
Impairment | Gross amount |
Impairment | |||
| Agriculture | 434 485 | ( 27 1 52) | 1 4 202 | - | - | 1 0 725 | ( 6) | - | - | 36 677 |
| Mining | 309 229 | ( 1 1 966) | 3 742 | 1 1 708 | - | 1 2 969 | ( 675) | - | - | 53 656 |
| Food, beverage and tobacco | 974 407 | ( 50 542) | 25 727 | 2 685 | - | 1 0 395 | ( 52) | - | - | 1 02 293 |
| Textiles | 31 6 309 | ( 31 090) | 862 | - | - | 1 0 425 | ( 3 958) | - | - | 1 2 779 |
| Shoes | 63 359 | ( 6 843) | 38 | - | - | 499 | ( 499) | - | - | 2 063 |
| Wood and cork | 1 47 345 | ( 23 1 21 ) | 480 | 2 236 | - | 4 366 | ( 1 330) | - | - | 7 466 |
| Printing and publishing | 331 889 | ( 1 5 601 ) | 6 683 | - | - | 1 1 968 | ( 1 1 968) | - | - | 84 260 |
| Refining and oil | 6 976 | ( 45) | 4 81 7 | 3 385 | - | 1 1 61 8 | - | - | - | 5 425 |
| Chemicals and rubber | 61 6 899 | ( 1 4 1 49) | 20 744 | 1 471 | - | 24 009 | ( 1 3 276) | - | - | 1 02 280 |
| Non-metallic minerals | 363 449 | ( 28 435) | 431 | - | - | 1 3 1 03 | ( 7 958) | - | - | 20 1 52 |
| Metallic products | 877 1 38 | ( 48 939) | 1 4 592 | 1 94 | - | 2 407 | - | - | - | 1 55 603 |
| Production of machinery, equipment and electric devices | 280 584 | ( 1 1 883) | 3 079 | 584 | - | 31 249 | ( 5 632) | - | - | 1 20 022 |
| Production of transport material | 1 1 3 698 | ( 9 677) | 630 | 1 0 741 | 1 4 | 33 298 | ( 3 438) | - | - | 34 662 |
| Other transforming industries | 389 355 | ( 27 340) | 1 61 1 | 2 642 | - | 31 758 | ( 1 1 280) | - | - | 38 449 |
| E lectricity, gas and water | 1 458 334 | ( 1 1 032) | 1 55 360 | 23 846 | - | 687 307 | - | - | - | 487 693 |
| Construction | 4 429 927 | ( 368 41 7) | 41 6 606 | 57 643 | - | 27 858 | ( 1 688) | - | - | 2 292 61 9 |
| Wholesale and retail | 3 1 88 671 | ( 289 276) | 1 0 81 0 | 1 366 | - | 33 764 | ( 1 5 430) | 1 537 | - | 546 904 |
| Tourism | 1 453 1 73 | ( 91 21 5) | 1 4 625 | 65 301 | - | 39 439 | ( 379) | - | - | 1 01 949 |
| Transports and communications | 2 1 52 1 59 | ( 46 964) | 291 1 75 | 1 8 483 | - | 271 487 | ( 8 91 6) | 9 894 | - | 1 01 0 767 |
| Financial activities | 3 952 1 38 | ( 1 23 257) | 1 045 792 | 1 901 531 | 51 6 506 | 3 650 620 | ( 70 301 ) | 526 584 | ( 20 794) | 1 61 474 |
| Real estate activities | 6 249 967 | ( 431 61 1 ) | 52 371 | 70 000 | - | 201 741 | ( 1 891 ) | 1 299 | - | 456 531 |
| Services provided to companies | 4 749 1 80 | ( 369 927) | 344 883 | 91 424 | - | 1 1 56 930 | ( 33 1 97) | 39 1 39 | - | 1 484 41 4 |
| Public services | 954 941 | ( 22 959) | 1 361 1 85 | 51 5 994 | - | 4 405 389 | - | 295 271 | - | 227 1 98 |
| Non-profit organisations | 2 682 267 | ( 268 571 ) | 1 33 1 28 | 38 356 | - | 303 008 | ( 46 089) | 1 06 936 | ( 1 8 31 7) | 402 493 |
| Mortgage loans | 1 1 1 33 822 | ( 1 67 01 9) | - | - | - | - | - | - | - | 9 |
| Consumers loans | 2 627 780 | ( 1 80 039) | - | - | - | - | - | - | - | 70 704 |
| Other | 1 41 253 | ( 1 5 272) | 1 826 | 1 963 | - | 6 945 | ( 4) | - | - | 4 978 |
| TOTAL | 50 398 734 398 |
(2 (2 692 342) 342) 342) |
3 925 399 925 | 2 821 553 2 553 | 51 6 520 6 | 1 0 993 277 1 993 | ( 237 967) 967) 967) | 980 660 980 | ( 39 1 1 1 ) 1 ) ) | 8 023 520 023 |
| Rating/S coring models Rating/S coring models Internal scale [aaa;a-] [bbb+;-bbb-] Large companies [bb+;bb-] [b+;b-] ccc+ 8-9 1 0-1 1 1 2-1 3 1 4-1 5 Medium enterprises 1 6-1 7 1 8-1 9 20-21 22-23 24-25 |
30.06.201 3 | (in million of euro) 31 .1 2.201 2 |
|||
|---|---|---|---|---|---|
| Credit amount |
(%) | Credit amount |
(%) | ||
| 7 | 0.01 % | 8 | 0.02% | ||
| 2 944 | 5.76% | 2 31 3 | 4.59% | ||
| 4 556 | 8.91 % | 4 997 | 9.91 % | ||
| 6 331 | 1 2.39% | 8 080 | 1 6.02% | ||
| 1 61 6 | 3.1 6% | 1 277 | 2.53% | ||
| 533 | 1 .04% | 535 | 1 .06% | ||
| 533 | 1 .04% | 532 | 1 .06% | ||
| 588 | 1 .1 5% | 632 | 1 .25% | ||
| 458 | 0.90% | 438 | 0.87% | ||
| 474 | 0.93% | 567 | 1 .1 3% | ||
| 284 | 0.56% | 342 | 0.68% | ||
| 336 | 0.66% | 347 | 0.69% | ||
| 225 | 0.44% | 294 | 0.58% | ||
| 1 51 0 | 2.95% | 1 659 | 3.29% | ||
| A | 61 | 0.1 2% | 71 | 0.1 4% | |
| B | 352 | 0.69% | 305 | 0.61 % | |
| C | 563 | 1 .1 0% | 620 | 1 .23% | |
| S mall enterprises D |
269 | 0.53% | 31 1 | 0.62% | |
| E | 222 | 0.43% | 251 | 0.50% | |
| F | 471 | 0.92% | 557 | 1 .1 1 % | |
| 01 | 1 1 78 | 2.30% | 1 1 96 | 2.37% | |
| 02 | 4 299 | 8.41 % | 4 341 | 8.61 % | |
| 03 | 1 502 | 2.94% | 1 492 | 2.96% | |
| 04 | 720 | 1 .41 % | 71 0 | 1 .41 % | |
| Mortgage loans 05 |
51 7 | 1 .01 % | 503 | 1 .00% | |
| 06 | 505 | 0.99% | 488 | 0.97% | |
| 07 | 654 | 1 .28% | 679 | 1 .35% | |
| 08 | 842 | 1 .65% | 953 | 1 .88% | |
| 01 | 93 | 0.1 8% | 86 | 0.1 7% | |
| 02 | 60 | 0.1 2% | 66 | 0.1 3% | |
| 03 | 1 33 | 0.26% | 1 30 | 0.26% | |
| 04 | 252 | 0.49% | 31 2 | 0.62% | |
| 05 | 1 23 | 0.24% | 1 36 | 0.27% | |
| Private individuals 06 |
1 70 | 0.33% | 1 98 | 0.39% | |
| 07 | 1 50 | 0.29% | 1 44 | 0.29% | |
| 08 | 1 1 6 | 0.23% | 1 09 | 0.22% | |
| 09 | 21 9 | 0.43% | 260 | 0.52% | |
| 1 0 | 4 | 0.01 % | 4 | 0.01 % | |
| No internal rating/scoring loans | 1 7 241 | 33.74% | 1 4 456 | 28.68% | |
| TOTAL | 51 1 1 1 51 1 1 |
1 00.00% 1 00.00% |
50 399 50 399 50 399 | 1 00.00% 1 00.00% |
As at 30 June 2013 and 31 December 2012, the analysis of the loan portfolio by rating is as follows:
Market risk is the possible loss resulting from an adverse change in the value of a financial instrument due to fluctuations in interest rates, foreign exchange rates, share prices, commodities prices, volatility and credit spread.
The market risk management is integrated with the balance sheet management through the Asset and Liability Committee (ALCO). This committee is responsible for defining policies for the structuring and composition of the balance sheet, and for the control of exposures to interest rate, foreign exchange and liquidity risk.
The main measure of market risk is the assessment of potential losses under adverse market conditions, for which the Value at Risk (VaR) valuation criteria is used. BES's VaR model uses the Monte Carlo simulation, based on a confidence level of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on an observation period of one year. As a complement to VaR stress testing has been developed, allowing to evaluate the impact of potential losses higher than the ones considered by VaR.
| (in thousands of euro) | ||
|---|---|---|
| 30.06.201 3 3 |
31 .1 2.201 2 .1 2 |
|
| E xchange Risk | 1 0 537 | 3 399 |
| Interest rate risk | 8 566 | 8 793 |
| Shares and commodities | 1 3 995 | 1 5 026 |
| Volatility | 6 61 9 | 7 1 1 2 |
| Credit S pread | 1 5 484 | 1 3 887 |
| Diversification effect | ( 1 1 471 ) | ( 1 0 1 05) |
| Total | 43 730 | 38 1 1 2 |
Group has a VaR of euro 43 730 thousands (31 December 2012: euro 38 112 thousands), for its trading positions.
Following the recommendations of Basel II (Pilar 2) and Instructions nº19/2005, of the Bank of Portugal BES Group calculates its exposure to interest rate risk based on the methodology of the Bank of International Settlement (BIS), classifying all balance and off-balance balances which are not part of the trading portfolio, by repricing intervals.
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||
| E ligible | Non sentitive | Up to 3 months | 3 to 6 months | 6 to 1 2 months | 1 to 5 years | More than 5 | |
| amounts | years | ||||||
| Cash and deposits | 4 241 1 33 | 31 5 701 | 3 761 1 20 | 1 49 505 | 61 0 | 540 | 1 3 656 |
| Loans and advances to customers | 50 1 75 876 | - | 29 723 540 | 8 21 7 542 | 3 1 70 1 72 | 6 344 448 | 2 720 1 74 |
| S ecurities | 1 8 940 562 | 7 027 91 7 | 3 928 330 | 1 1 34 41 0 | 2 538 967 | 1 657 657 | 2 653 282 |
| Debt securities issued | 344 980 | 344 980 | - | - | - | - | - |
| Total | 37 41 2 990 990 |
9 9 501 457 457 |
5 709 749 749 | 8 002 645 002 645 | 5 387 1 1 3 5 3 | ||
| Deposits from Banks | 1 5 1 00 226 | - | 1 3 689 645 | 720 753 | 1 1 5 450 | 321 1 39 | 253 239 |
| Due to customers | 37 365 854 | - | 23 281 1 21 | 2 882 043 | 5 236 882 | 5 930 070 | 35 737 |
| S ecurities issue | 1 3 343 390 | - | 3 386 909 | 343 261 | 2 235 073 | 4 797 328 | 2 580 81 9 |
| Investiments contracts | 3 474 902 | 1 026 962 | - | - | - | 1 581 1 1 5 | 866 824 |
| Debt securities issued | 1 494 592 | 29 737 | 1 4 421 | 350 636 | - | 71 0 356 | 389 443 |
| Total | 40 372 097 097 |
4 296 6934 693 4 296 693 |
7 587 404 7 587 404404 | 1 3 340 008 1 3 340 0081 340 008 | 4 1 26 063 4 1 26 063 | ||
| GAP (assets - liabilities) | (3 708 31 1 ) | (2 959 1 07) | 5 204 764 | (1 877 656) | (5 337 364) | 1 261 050 | |
| Off Balance sheet | ( 3 01 5) | (1 1 41 0 1 81 ) | (1 1 03 1 50) | 6 526 482 | 6 207 720 | ( 223 886) | |
| S tructural GAP | (3 71 1 326) (3 1 326) |
(1 4 369 288) 369 288) |
4 1 01 61 4 4 1 4 4 | 4 648 827 827 827 | 870 357 870 357 | 1 037 1 64 1 | |
| Accumulated GAP | (1 4 369 288) 369 288) |
(1 (1 0 267 673) 673) |
(5 61 8 847) 61 847) 847) | (4 748 490) (4 748 490) | (3 71 1 326) (3 |
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | |||||||
| E ligible | Non sentitive | Up to 3 months | 3 to 6 months | 6 to 1 2 months | 1 to 5 years | More than 5 | |
| amounts | years | ||||||
| Loans and advances to customers | 7 492 060 | 438 71 3 | 6 664 597 | 269 579 | 1 03 370 | 1 5 754 | 46 |
| S ecurities | 49 673 250 | - | 29 71 2 842 | 8 957 736 | 2 736 21 0 | 5 965 359 | 2 301 1 03 |
| Debt securities issued | 1 6 725 064 | 7 367 973 | 4 002 972 | 1 359 061 | 1 058 477 | 1 742 554 | 1 1 94 026 |
| Total | 40 380 41 1 1 |
1 0 586 3760 376 1 0 586 376 |
3 898 057 3 898 057 057 | 7 723 668 7 723 668723 668 | 3 495 1 75 3 495 1 75 | ||
| Deposits from banks | 1 5 867 594 | - | 1 4 1 82 895 | 525 694 | 648 472 | 270 027 | 240 506 |
| Due to customers | 34 031 479 | - | 22 337 278 | 2 929 281 | 3 066 320 | 5 685 1 75 | 1 3 424 |
| S ecurities issue | 1 5 858 652 | - | 5 1 39 450 | 752 979 | 279 880 | 6 547 539 | 3 1 38 805 |
| Investment contracts | 3 31 9 944 | 545 779 | 25 622 | 371 293 | - | 1 671 301 | 705 950 |
| Tecnical provision | 1 547 697 | 1 531 1 05 | - | - | - | 5 904 | 1 0 689 |
| Total | 41 685 244 244 |
4 579 247 247 4 |
3 994 673 673 673 | 1 4 1 79 946 1 1 946 | 4 1 09 373 4 1 373 | ||
| GAP (assets - liabilities) | (2 464 796) | (1 304 833) | 6 007 1 29 | ( 96 61 6) | (6 456 278) | ( 61 4 1 98) | |
| Off Balance S heet | (6 1 1 4 471 ) | ( 751 350) | 509 366 | 6 289 980 | 66 475 | ||
| S tructural GAP | (2 464 796) (2 796) |
(7 41 9 305) 305) 9 |
5 255 779 5 779 | 41 2 750 2 750 | ( 1 66 298) ( 66 298) | ( 547 723) ( | |
| Accumulated GAP | (7 41 9 305) 9 305) |
(2 1 63 525)1 525) (2 1 63 525) |
(1 750 775) (1 750 775)750 775) | (1 91 7 073) (1 91 7 073)(1 91 7 073) | (2 464 796) (2 464 796) |
The following table presents the average balances, interests and interest rates in relation to the Group's major assets and liabilities categories, for the six months period ended 30 June 2013 and for the year ended as at 31 December 2012:
| (in thousands of euro) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31 .1 2.201 2 | |||||||
| Average balance for the year |
Interest for the year |
Av erage interest rate |
Average balance for the year |
Interest for the year |
Av erage interest rate |
|||
| Monetary assets | 5 1 22 937 | 1 20 578 | 4.75% | 4 885 099 | 1 92 458 | 3.94% | ||
| Loans and advances to customers | 50 1 98 737 | 1 1 55 127 | 4.64% | 50 31 5 71 5 | 2 527 274 | 5.02% | ||
| Securities | 1 4 440 873 | 338 062 | 4.72% | 1 4 242 252 | 850 845 | 5.97% | ||
| Differencial applications | - | - | - | - | - | - | ||
| Financial Assets | 69 762 549 | 1 61 3 767 1 3 | 4.66% | 69 443 065 69 443 065 | 3 570 577 | 5.1 4% 5.1 4% | ||
| Monetary Liabilities | 1 5 407 503 | 1 72 978 | 2.26% | 1 7 566 965 | 41 9 1 67 | 2.39% | ||
| Due to consumers | 36 289 404 | 51 1 351 | 2.84% | 34 029 787 | 1 037 769 | 3.05% | ||
| Other | 1 4 965 735 | 459 052 | 6.1 9% | 1 6 564 422 | 933 1 33 | 5.63% | ||
| Differencial liabilities | 3 099 906 | - | - | 1 281 892 | - | - | ||
| Financial Liabilities | 69 762 549 | 1 1 43 381 1 | 3.31 % % | 69 443 066 69 443 066 | 2 390 069 | 3.44% | ||
| Net interest income | 470 386 | 1 .36% .36% | 1 1 80 508 | 1 .70% .70% 1 .70% |
In relation to foreign exchange risk, the breakdown of assets and liabilities by currency as at 30 June 2013 and 31 of December of 2012, is analysed as follows:
| (in thousands of euro) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | 31.12.2012 | |||||||
| Spot Spot |
Forward Forward |
Other elements |
Net ex posure posure |
Spot Spot |
Forward Forward | Other elements |
Net ex posure | |
| USD United Stades Dollars | ( 1 51 922) | 194 219 | 195 487 | 237 784 | ( 802 201) | 842 328 | 32 097 | 72 224 |
| GBP Great Britain P ounds | 425 974 | ( 395 456) | ( 8 687) | 21 831 | 466 168 | ( 467 042) | ( 1 057) | ( 1 931) |
| BRL Brazillian real | 1 72 519 | ( 120 060) | ( 53 471) | ( 1 012) | 1 87 801 | ( 1 83 686) | ( 4 738) | ( 623) |
| DKK Danish Krone | 12 339 | ( 1 1 926) | - | 413 | 21 947 | ( 21 579) | - | 368 |
| J PY J apanese yene |
( 6 504) | 5 411 | ( 1 349) | ( 2 442) | 27 297 | 5 1 71 | ( 40 1 66) | ( 7 698) |
| CHF S wiss franc | 47 840 | 2 586 | ( 60 773) | ( 10 347) | 9 944 | ( 6 962) | ( 1 286) | 1 696 |
| S E K S wedish krone | 3 227 | ( 1 351 ) | ( 1 981) | ( 1 05) | 7 403 | ( 7 778) | ( 53) | ( 428) |
| NOK Norwegian krone | ( 88 1 60) | 87 896 | 1 981 | 1 717 | ( 49 539) | 49 807 | 69 | 337 |
| CAD Canadian Dollar | 3 569 | ( 1 203) | ( 2 969) | ( 603) | 22 866 | ( 23 290) | ( 7 227) | ( 7 651) |
| ZAR Rand |
( 6 425) | 6 733 | - | 308 | ( 5 569) | 4 475 | 497 | ( 597) |
| AUD Australian Dollar | ( 22 679) | 36 776 | ( 1 1 567) | 2 530 | ( 8 51 0) | 10 1 24 | 1 7 | 1 631 |
| AOA Kwanza | ( 54 912) | ( 76 967) | - | ( 1 31 879) | ( 53 208) | - | - | ( 53 208) |
| CZK Czach koruna |
( 486) | 489 | - | 3 | 5 | - | - | 5 |
| MXN Mexican P eso | 64 472 | ( 64 1 12) | - | 360 | 63 789 | ( 75 772) | 9 338 | ( 2 645) |
| Others | ( 40 017) | 50 324 | 21 91 6 | 32 222 | 1 6 727 | 45 008 | 34 626 | 96 361 |
| 358 835 835 |
( ( 286 641 ) 641 ) ) |
78 587 587 | 1 50 780 780 | ( 95 080) 080) 080) | 1 70 804 804 | 22 1 1 7 1 1 7 | 97 841 97 841 |
As at 30 June 2013 and 31 December 2012 the exposure to public debt from peripheral Eurozone countries which are monitored by the Group is analysed as follows:
| (in thousands of euro) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||||
| Loans and Advances to Customers |
Financial Assets held for trading at fair value |
Derivatives instruments (1 ) |
Available-for-sale financial assets |
Held-to-maturity investments |
Total | ||||
| Portugal | 927 591 | 862 488 | 23 301 | 3 419 987 | 1 33 831 | 5 367 1 98 | |||
| Spain | 1 02 613 | 675 478 | ( 63) | 1 243 848 | - | 2 021 876 | |||
| Greece | - | 3 376 | - | 45 002 | - | 48 378 | |||
| Irland | - | - | - | - | - | - | |||
| Italy | - | 403 | - | 217 1 85 | - | 21 7 588 | |||
| Hungary | - | - | - | - | - | - | |||
| 1 030 204 1 204 |
1 541 745 541 |
23 238 23 | 4 926 022 4 | 1 33 831 1 33 831 | 7 655 040 655 040 |
(1) Net values: receivable/(payable)
| (in thousands of euro) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | |||||||||
| Loans and Advances to Customers |
Financial Assets held for trading at fair value |
Derivatives instruments (1 ) |
Available-for-sale financial assets |
Held-to-maturity investments |
Total | ||||
| Portugal | 935 771 | 592 985 | 31 1 43 | 2 468 941 | 1 28 1 47 | 4 1 56 987 | |||
| S pain | 1 1 1 1 21 | 568 | ( 76) | 605 499 | - | 71 7 1 1 2 | |||
| Greece | - | 3 439 | - | - | - | 3 439 | |||
| Irland | - | - | - | - | 24 894 | 24 894 | |||
| Italy | - | 6 225 | - | 21 290 | - | 27 51 5 | |||
| Hungary | - | - | - | - | - | - | |||
| 1 046 892 1 |
603 21 7 603 603 21 7 |
31 067 31 067 | 3 095 730 3 095 730 095 730 | 1 53 041 1 53 041 53 | 4 929 947 4 929 947 |
(1) Net values: receivable/(payable)
All the exposures presented above, except loans and advances to customers, are recorded in the Group's balance sheet at fair value, which is based on market quotations or, in relation to derivatives, based on valuation techniques with observable market data. Loans and advances to customers are recorded at amortized cost net of impairment losses.
A detailed exposure regarding securities recorded in financial assets available-for-sale, financial assets held for trading, financial assets at fair value through profit or loss and held to maturity investments can be analysed as follows:
| (in millions of euro) | ||||||
|---|---|---|---|---|---|---|
| 30.06.201 3 | ||||||
| Nominal Amount |
Market value | Accrued interest |
Book value value |
Impairment | Fair value reserves |
|
| Available-for-sale financial assets | ||||||
| Portugal | 3 652 398 652 |
3 3 397 690 |
22 297 297 | 3 41 9 987 9 | - | 1 6 647 647 |
| Maturity up to 1 year | 909 903 | 901 590 | 57 | 901 647 | - | ( 725) |
| Maturity exceeding 1 year | 2 742 495 | 2 496 1 00 | 22 240 | 2 51 8 340 | - | 1 7 372 |
| Spain | 1 243 821 243 |
1 1 235 427 |
8 421 8 421 | 1 243 848 243 | - | ( 4 258) 258) |
| Maturity up to 1 year | 806 200 | 796 753 | 1 66 | 796 91 9 | ( 1 211 ) | |
| Maturity exceeding 1 year | 437 621 | 438 674 | 8 255 | 446 929 | - | ( 3 047) |
| Grécia | 105 003 105 |
44 279 | 723 | 45 002 45 | - | ( 9 1 53) 1 |
| Maturidade até 1 ano | - | - | - | - | - | - |
| Maturidade superior 1 ano | 105 003 | 44 279 | 723 | 45 002 | - | ( 9 1 53) |
| Italy | 220 000 220 |
21 6 771 21 21 6 771 |
414 | 21 7 185 21 7 185 7 | - | 73 |
| Maturity up to 1 year | 100 000 | 98 645 | - | 98 645 | - | - |
| Maturity exceeding 1 year | 120 000 | 11 8 126 | 414 | 11 8 540 | - | 73 |
| 5 221 222 221 |
4 894 1 67 4 67 4 894 1 67 |
31 855 31 855 855 | 4 926 022 4 926 022 926 | - | 3 309 | |
| Financial assets held for trading | ||||||
| Portugal | 178 779 | 164 71 5 | 5 830 | 170 545 | - | - |
| Spain | 34 926 | 42 828 | 7 435 | 50 263 | - | - |
| 21 3 705 21 3 |
207 543 | 1 3 265 3 265 | 220 808 220 | - | - | |
| Financial assets at fair value | ||||||
| Portugal | 662 108 | 684 090 | 7 853 | 691 943 | - | - |
| Spain | 630 434 | 625 206 | 9 | 625 21 5 | - | - |
| Greece | 7 568 | 3 324 | 52 | 3 376 | - | - |
| Italy | 400 | 402 | 1 | 403 | - | - |
| 1 300 510 300 |
1 31 1 31 3 022 |
7 91 5 7 91 | 1 320 937 320 | - | - | |
| Financial assets held to maturity | ||||||
| Portugal | 137 000 | 135 523 | 4 585 | 133 831 | - | - |
| 137 000 137 |
135 523 | 4 585 | 133 831 133 | - | - | |
| (in millions of euro) | ||||||
|---|---|---|---|---|---|---|
| 31 .1 2.2012 | ||||||
| Nominal Amount |
Market value | Accrued interest |
Book value Book value |
Impairment | Fair value reserves |
|
| Available-for-sale financial assets | ||||||
| Portugal | 2 669 666 2 666 |
2 421 241 | 47 700 47 | 2 468 941 2 | - | 1 91 1 42 1 |
| Maturity up to 1 year | 1 87 331 | 186 1 35 | 1 1 3 | 1 86 248 | - | 498 |
| Maturity exceeding 1 year | 2 482 335 | 2 235 1 06 | 47 587 | 2 282 693 | - | 1 90 644 |
| Spain | 61 6 092 6 092 |
597 401 | 8 098 8 | 605 499 | - | 2 1 90 2 1 |
| Maturity up to 1 year | 389 350 | 383 681 | 325 | 384 006 | - | 796 |
| Maturity exceeding 1 year | 226 742 | 21 3 720 | 7 773 | 221 493 | - | 1 394 |
| Italy | 20 000 000 |
20 867 | 423 | 21 290 | - | 478 |
| Maturity up to 1 year | - | - | - | - | - | - |
| Maturity exceeding 1 year | 20 000 | 20 867 | 423 | 21 290 | - | 478 |
| 3 305 758 3 758 |
3 039 509 | 56 221 56 | 3 095 730 3 | - | 1 93 81 0 81 | |
| Financial assets held for trading | ||||||
| Portugal | 1 58 946 | 141 676 | 3 807 | 1 45 483 | - | - |
| Spain | 304 | 302 | - | 302 | - | - |
| 1 59 250 250 |
141 978 | 3 807 | 1 45 785 | - | - | |
| Financial assets at fair value | ||||||
| Portugal | 523 775 | 439 544 | 7 958 | 447 502 | - | - |
| Spain | 260 | 259 | 7 | 266 | - | - |
| Greece | 1 29 655 | 3 439 | - | 3 439 | - | - |
| Italy | 5 969 | 6 224 | 1 | 6 225 | - | - |
| 659 659 659 |
449 466 | 7 966 | 457 432 | - | - | |
| Financial assets held to maturity Portugal |
1 37 000 | 126 431 | 1 71 6 | 1 28 147 | - | - |
| Irland | 24 000 | 24 051 | 844 | 24 894 | - | - |
| 1 61 000 000 |
150 482 150 482 |
2 560 | 1 53 041 1 53 041 | - | - |
Liquidity risk derives from the potential inability to fund assets while satisfying commitments on due dates and from potential difficulties in liquidating positions in portfolio without incurring in excessive losses.
The liquidity risk can be divided into two types:
The first half of 2013 was characterized by the maintenance of the trend that market was recovering, lead by the reduction of risk aversion and the decrease of the peripheral countries sovereign debts yields sustained by the central banks strong expansionist policies. Within this context, on February a significant number of banks reimbursed the LTRO (Long Term Refinancing Operation) granted on December 2011, in the amount of 137 billions of euros. Bes Group reimbursed in advance euro 1 billion in relation with the referred credit operation.
Taking advantage of the favorable conditions, the Group went to the international capital markets with one senior debt emission, not guaranteed, with 5 years maturity, in the amount of euro 500 million, anticipating some reimbursements that were due during 2013 (euro 1.9 billions).
However, the impasse resulting from the Italian elections, as well as the measures announced in relation to the Cyprus request for financial aid, brought uncertainty to the market agents, leading again to an uncertainty climate and risk aversion, and as a consequence the increase of the spreads on the peripheral European countries loans. This movement was partly reversed on April.
At the end of the first half of 2013, the value of the portfolio of assets eligible for rediscount operations was euro 24.6 billions, of which euro 21.8 billions with the European Central Bank.
The overall exposure to liquidity risk is assessed through reports that provide not only identify the negative mismatch, but also how to make coverage an a dynamic basis.
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 30.06.201 3 | |||||||
| E ligible amounts |
Up to 7 days | From 7 days to 1 month |
From 1 to 3 months |
From 3 to 6 months |
From 6 months to 1 year |
More than 1 year |
|
| ASS ETS | |||||||
| Cash and deposits with banks | 316 | 31 6 | - | - | - | - | - |
| Loans and advances to banks and central banks | 3 925 | 3 585 | 1 30 | 31 | 1 44 | 2 | 34 |
| Loans and advances to customers | 42 797 | 599 | 794 | 1 461 | 1 860 | 1 61 7 | 36 466 |
| S ecurities | 29 282 | 2 580 | 1 454 | 1 658 | 1 573 | 2 949 | 1 9 068 |
| Debt securities issues | 345 | - | 345 | - | - | - | - |
| Other Assets, net | 2 1 30 | 738 | 428 | - | 3 | 1 25 | 836 |
| Off Balance sheet (Commitments and Derivatives) | 7 750 | 820 | 87 | 476 | 457 | 573 | 5 336 |
| Total | 8 8 638 |
3 238 238 |
3 626 | 4 037 | 5 266 | 61 740 61 740 740 | |
| LIABILITIES | |||||||
| Deposits from banks, central banks and other loans | 1 5 329 | 2 81 2 | 587 | 499 | 677 | 1 93 | 1 0 562 |
| Due to customers | 37 1 37 | 1 1 24 | 2 099 | 926 | 300 | 652 | 32 035 |
| S ecurities | 1 3 264 | 1 65 | 271 | 1 055 | 1 59 | 2 390 | 9 223 |
| Investments contracts | 3 475 | 33 | 1 7 | 44 | 1 02 | 251 | 3 027 |
| Debt securities issues | 1 495 | 3 | 5 | 1 2 | 23 | 74 | 1 378 |
| Other short-term liabilities | 1 929 | 1 325 | 528 | - | - | 1 | 75 |
| Off Balance sheet (Commitments and Derivatives) | 1 1 1 30 | 879 | 228 | 660 | 570 | 565 | 8 229 |
| Total | 6 341 6 |
3 735 735 |
3 1 96 | 1 831 | 4 1 26 | 64 529 | |
| GAP (Assets - Liabilities) | 2 297 2 297 |
( 497) 497) ( 497) |
428 | 2 206 | 1 1 41 1 41 | ||
| Accumulated GAP | 2 297 2 |
1 800 800 800 |
2 228 | 4 434 | 5 575 | ||
| Buffer > 1 2 months | 2 805 | ||||||
| (in thousands of euro) | |||||||
|---|---|---|---|---|---|---|---|
| 31 .1 2.201 2 | |||||||
| E ligible amounts |
Up to 7 days | From 7 days to 1 month |
From 1 to 3 months |
From 3 to 6 months |
From 6 months to 1 year |
More than 1 year |
|
| ASSETS | |||||||
| Cash and deposits with banks | 420 | 420 | - | - | - | - | - |
| Loans and advances to banks and central banks | 7 072 | 5 61 4 | 504 | 607 | 223 | 95 | 30 |
| Loans and advances to customers | 43 500 | 561 | 1 1 70 | 1 41 1 | 1 501 | 2 291 | 36 566 |
| Securities | 25 684 | 2 601 | 1 1 40 | 2 226 | 889 | 1 500 | 1 7 328 |
| Debt securities issues | 4 | 4 | - | - | - | - | - |
| Other Assets, net | 1 81 6 | 1 81 6 | - | - | - | - | - |
| Off Balance sheet (Commitments and Derivatives) | 6 570 | 31 3 | 1 39 | 268 | 454 | 51 3 | 4 883 |
| Total | 1 1 329 329 1 1 329 | 2 953 2 953 |
4 51 2 4 51 | 3 067 | 4 399 | 58 807 | |
| LIABILITIES | |||||||
| Deposits from banks, central banks and other loans | 1 6 1 1 0 | 2 092 | 51 5 | 680 | 479 | 770 | 1 1 573 |
| Due to customers | 33 789 | 594 | 957 | 1 974 | 731 | 1 38 | 29 396 |
| Securities | 1 5 862 | 1 76 | 441 | 1 936 | 927 | 278 | 1 2 1 03 |
| Investments contracts | 3 320 | 21 | 1 | 83 | 63 | 1 62 | 2 989 |
| Debt securities issues | 1 548 | 1 0 | 5 | 1 4 | 28 | 71 | 1 41 8 |
| Other short-term liabilities | 1 589 | 1 589 | - | - | - | - | - |
| Off Balance sheet (Commitments and Derivatives) | 1 0 1 88 | 330 | 201 | 41 7 | 624 | 520 | 8 096 |
| Total | 4 81 2 2 | 2 1 20 1 20 20 |
5 1 04 | 2 852 | 1 939 | 65 575 | |
| GAP (Assets - Liabilities) | 6 51 5 5 5 |
833 833 |
( 593) 593) | 21 4 | 2 459 | ||
| Accumulated GAP | 6 51 5 6 51 5 5 |
7 348 7 348 |
6 755 | 6 970 | 9 429 | ||
| Buffer > 1 2 months | 581 |
The one year cumulative gap went from euro 9 429 million in December 2012 to euro 5 575 million in June 2013. These amounts include BES Vida.
Additionally, and in accordance with Instruction no. 13/2009 of Bank of Portugal, the liquidity gap is defined by the indicator [(Net Assets - Volatile Liabilities) / (Assets - Net assets) * 100] on each residual cumulative maturity scale. Net assets include cash and net securities and volatile liabilities include
issuances, commitments, derivatives and other liabilities. This indicator allows a characterization of the wholesale risk of the institutions.
As at 30 June 2013, BES Group one year liquidity gap was -2.3, which compares with -1.7 as at 31 December 2012. This negative evolution does not reflect, by the ratio definition, the increase of liquidity securities with maturities over one year in portfolio. It should be noted that the above figures, calculated in accordance with Instruction no. 13/2009 of Bank of Portugal, do not include BES Vida, whose activity is regulated by the Portuguese Insurance Institute ("Instituto de Seguros de Portugal"), that establishes exposure limits for diversification and prudential spread.
In order to try to anticipate possible constraints, BES Group considers extreme scenarios in terms of liquidity (moderate and severe), different timeframes and different impact areas (systemic, specific to the Bank and combined). For example, in the systemic scenario is simulated the closure of the wholesale market, while in the specific scenario to the Bank is simulated the run-off of customer deposits from retail and non-retail, with different severity levels.
In January 2013, under the Basel III framework, the Bank of International Settlements published new legislation regarding the Liquidity Coverage Ratio (LCR). As at 31 December 2012, the Group has met on this ratio the limit set for 2015.
Operational risk represents the risk of losses resulting from failures in internal procedures, people behaviors, information systems and external events. It is understood, therefore, operational risk as the sum of the following risks: operational, information systems, compliance and reputation.
To manage operational risk, it was developed and implemented a system that standardizes, systematizes and regulates the frequency of actions with the objective of identification, monitoring, controlling and mitigation of risk. The system is supported at organizational level by a unit within the Global Risk Department, exclusively dedicated to this task, and by representatives designated by each of the relevant departments and subsidiaries.
There are written rules that establish the guidelines to consider in the risk acceptance, and which were based on the analysis performed over several portfolio indicators to enable matching the best possible price to the risk. The information provided by the Company's reinsurers is also taken into account and the underwriting policies are defined by business segment.
The Company aims to set prices sufficient and adequate to cover all commitments (outstanding claims, expenses and cost of capital).
Upstream, the price suitability is tested through techniques of realistic cash flow projections and downstream, the profitability of each product or group of products is monitored annually when calculating the Market Consistent Embedded Value.
There are metrics and guidelines defined by the Company setting out the minimum requirements for profitability of any new product, as well as to perform sensitivity analysis. The calculation of the Market Consistent Embedded Value is conducted once a year by the Company and reviewed by external consultants.
In general, the Company's policy is prudential and uses recognized actuarial methods fulfilling the legislation in force. The main policy objective is to record appropriate and adequate reserves so that the Company meets all its future liabilities. For each line of business, the Company records reserves within their liabilities for future claims and segregate assets to represent these reserves. This requires the preparation of estimates and the use of assumptions that may affect the assets and liabilities amounts in future years.
Such estimates and assumptions are periodically evaluated, including through statistical analysis of historical internal and / or external data. The adequacy of estimated liabilities for the insurance activity is reviewed annually. If the technical reserves are not sufficient to cover the present value of expected future cash flows (claims, costs and commissions), the insuffciencty is immediately recognized through additional reserves.
The risk associated to the claim management procedures has it origin on the possibility that an increase responsibility may occur, by insufficient or deficient quality of the data used in the provision calculation process, or increase in the expenses related to the litigations management, as an consequence of a insufficient management of the referred procedures.
In relation to this type of risk, there are clear and formalized rules in that define the procedures and controls in the claims management procedures.
BES Vida celebrates reinsurance contracts in order to limit its exposure to risk. Reinsurance may be performed for each single insurance contract (optional reinsurance), namely when the coverage level required by the insurer exceeds subscription internal limits, or based in the portfolio (reinsurance to be treated), in which the individual exposures from the insured are within the internal limits, but there is a unacceptable risk due to the accumulation of claims.
Biometric risks include the risks of longevity, mortality and disability. The longevity risk covers the uncertainty in the ultimate loss due to policyholders living longer than expected and can arise for example, in annuities. The longevity risk is managed through pricing, underwriting policy and by regularly reviewing the mortality tables used to set prices and create reserves in compliance. The mortality risk is linked to an increase of the mortality rate which may have an impact on insurances that guarantee capital in the event of death. This risk is mitigated through underwriting policies, regular review of the mortality tables used and reinsurance. The disability risk covers the uncertainty of actual losses due to disability rates higher than expected.
The sensitivity of the portfolio to biometric risks is analyzed through realistic cash flow projections - Market Consistent Embedded Value Model.
The non-collection risk relates to the risk of nonpayment of premiums and cancellation of policies. The redemption and cancellation rates are monitored regularly in order to monitor its impact on the Company's portfolio. The portfolio's sensitivity to this risk is analyzed through realistic cash flow projections - Market Consistent Embedded Value Model.
The main assumptions used by type of contract are as follows:
| Mortality Table Table |
Technical rate Technical rate |
|
|---|---|---|
| Retirements savings plans and capitalization products | ||
| Up to December 1 997 | GKM 80 | 4% |
| From J anuary 1 998 to February 1 999 | GKM 80 | 3.25% |
| From J uly 1 999 to February 2003 | GKM 80 | 2.25% and 3% |
| From Mars 2003 to December 2003 | GKM 80 | 2.75% |
| After J anuary 2004 | GKM 80 | Set per calendar year (*) |
| Insurance in case of life | ||
| Rents | ||
| Up to J une 2002 | TV 73/77 | 4% |
| From J uly 2002 to December 2003 | TV 73/77 | 3% |
| From J anuary 2004 to August 2006 | GKF 95 | 3% |
| After September 2006 | GKM - 3 years | 2% |
| Other insurance | ||
| Insurance in case of death | ||
| Up to December 2004 | GKM 80 | 4% |
| After J anuary 2005 | GKM 80 | 0% to 2% |
| Insurance mixed | ||
| Up to September 1 998 | GKM 80 | 4% |
| After October 1 998 | GKM 80 | 3% |
(*) In the years of 201 2 and 201 1 the technical rate w as 2%
For liability adequacy test purposes, the mortality assumptions are based on best estimates derived from portfolio experience investigations. Future cash flows are evaluated and discounted at government bonds rate.
The mortality assumptions used are as follows:
| Mortality Table | |
|---|---|
| Rents | GRM 95 |
| S avings and Other contracts | 30% GKM 80 |
The main objective of the Group capital management is to ensure compliance with the Group's strategic objectives in terms of capital adequacy, respecting and enforcing the minimum capital requirements set by supervisors.
The definition of the strategy in terms of capital adequacy is made by the Executive Committee and is integrated in the global goals of the Group.
The Group is subject to Bank of Portugal supervision that, under the capital adequacy Directive from the CE, establishes the prudential rules to be attended by the institutions under its supervision. These rules determine a minimum solvability ratio in relation to the requirements of the assumed risks that institutions have to fulfill.
In the scope of the implementation of the new capital accord Basel II, and using the permission granted by the new prudential regime established by Decree-Law 103/2007 and Decree-Law 104/2007, the Group was authorized to use, starting 31 March 2009, the approach based in the use of internal models for credit risks (Foundation Internal Rating Based Approach – IRBF) for credit risk and the Standardized Approach – TSA) for operational risk.
The capital elements of BES Group are divided into: Basic Own Funds, Complementary Own Funds and Deductions, as follows:
Additionally there are several rules that limit the composition of the capital basis. The prudential rules determine that the COF cannot exceed the BOF. Also, some components of the COF (Lower Tier II) cannot exceed 50% of the BOF.
In May 2011 and in the context of the negotiation of the Financial Assistance Programme to Portugal – with the European Commission, the European Central Bank and the International Monetary Fund – the Bank of Portugal issued the Notice 3/2011, establishing new minimum levels of solvency to be followed by the financial groups subject to its supervision. Therefore, Portuguese credit institutions must reach a Core Tier I ratio of no less than 9% by 31 December 2011 and 10% by 31 December 2012. At the same time, european banks must reach a Core Tier I ratio of 9% as defined by the European Banking Authority (EBA).
As at 30 June 2013 and 31 December 2012, the main movements occurred in BOF are as follows:
| (in thousands of euro) | |
|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 |
| 6 439 6 |
6 1 71 71 |
| - | 995 |
| ( 24) | ( 1 9) |
| ( 236) | 42 |
| ( 1 0) | 2 |
| 1 22 | ( 1 66) |
| ( 24) | ( 526) |
| ( 3) | ( 1 2) |
| ( 1 1 3) | ( 1 64) |
| ( 63) | 1 42 |
| 36 | ( 26) |
| 6 1 24 6 |
6 439 6 439 |
The capital adequacy of BES Group as at 30 June 2013 and 31 December 2012 is presented as follows:
| (in thousands of euro) | ||||
|---|---|---|---|---|
| 30.06.201 3 30.06.201 3 |
31 .1 2.201 2 31 .1 2.201 2 |
|||
| A - Capital Requirements | ||||
| Share Capital, Issue Premium and Treasury stock | 6 1 02 | 6 074 | ||
| E legible reserves and retained earnings (excluding fair value reserves) | 1 001 | 1 237 | ||
| Minority Interest | 577 | 587 | ||
| Intangible assets | ( 1 33) | ( 1 41 ) | ||
| Changes on actuarial Losses | ( 765) | ( 741 ) | ||
| Goodwill | ( 384) | ( 506) | ||
| Fair value reserves with an impact on BOF | ( 1 1 5) | ( 52) | ||
| Recognition of the impact of adopting IFRS | 1 0 | 1 3 | ||
| Basic own funds ex cluding preference shares (Core Tier I) ier I) |
( A1 ) ) ( A1 ) |
6 293 6 293 | 6 471 6 471 | |
| Hybrid instuments, elegible for Tier I | 202 | 226 | ||
| Deductions in connection with investments held in banking and insurance entities | ( 371 ) | ( 258) | ||
| Own Funds for the determination of the EBA Core Tier I ratio r I ratio |
( C ) ( C ) |
5 803 5 803 | 6 092 6 092 | |
| Basic own funds (Tier I) | ( A2 ) | 6 1 24 1 | 6 439 6 439 | |
| Positive fair value reserves (45% ) | 53 | 47 | ||
| E ligible subordinated debt | 792 | 801 | ||
| Deductions in connection with investments held in banking and insurance entities | ( 371 ) | ( 258) | ||
| Complementary own funds (Tier II) | 474 | 590 590 | ||
| Deductions | ( 77) ( 77) ( 77) |
( 72)( ( 72) |
||
| Eligible own funds | ( A3 ) ( A3 ) |
6 521 6 521 |
6 957 6 957 | |
| B- Risk Weighted Assets | ||||
| Calculated according Notice 5/2007 (Credit Risk) | 55 443 | 56 484 | ||
| Calculated according Notice 8/2007 (Market Risk) | 1 548 | 1 503 | ||
| Calculated according Notice 9/2007 (Operational Risk) | 3 694 | 3 694 | ||
| Risk Weighted Assets Total | ( B ) ( ) |
60 685 | 61 681 681 | |
| C- Prudential Ratios | ||||
| Core Tier 1 | ( A1 / B ) | 1 0.4% | 1 0.5% | |
| Core Tier 1 E BA | (C / B ) | 9.6% | 9.9% | |
| Tier 1 | ( A2 / B ) | 1 0.1 % | 1 0.4% | |
| S olvency Ratio | ( A3 / B ) ( B ) |
1 0.7% 0.7% 1 0.7% |
1 1 .3% 1 1 .3% 1 |
According to the Memorandum of Economic and Financial Policies signed between the Portuguese Government and the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF), Portuguese banks, and financial holding companies that consolidate Portuguese banking subsidiaries, have to quarterly develop financing and capitalization plans for the period from 2011 to 2015, in order to achieve the following objectives:
Additionally, the financing plans should consider that the dependence of domestic funds from its branches and subsidiaries abroad should be minimized; must reduce its funding dependence from the ECB; consider a progressive access to the short-term market and a progressive opening of the medium and long term market from the fourth quarter of 2013; and should be supported by commercial policies to support the Portuguese economy sectors, namely the small and medium enterprises.
In order to prepare the initial plan and the quarterly reviews, projections on the relevant domestic macroeconomic variables, of GDP growth in the geographic areas of greatest relevance to the activities of the banks and further projections of interest rates and other reference parameters necessary for drawing up the plans are provided by the Bank of Portugal in conjunction with the EC/ECB/IMF. In the context of the plan for the period in reference, it is also noted the fact that the same is being object of a stress test exercise where the banks should, in a extreme scenario, present a Core Tier I ratio higher than 6% during the period (2011-2015).
During the year 2011 and 2012, the securitization transactions originated by BES suffered successive rating downgrades, following the downgrades attributed by various rating agencies to the Portuguese Republic and Portuguese banks. Traditionally, these operations include in their structures different risk protection mechanisms, namely the substitution of counterparties when credit ratings fall below minimum levels required by rating agencies or by triggering corrective actions enabling the mitigation of the exposure risk to those counterparties.
In addition, BES acted as swap counterparty in two of its operations (Lusitano Mortgage No.6 and Lusitano Mortgage No.7). The performance of these functions in securitization transactions is restricted to entities that meet the minimum rating levels established by the rating agencies. Therefore, following the downgrades, BES position in the operation Lusitano Mortgage No.6 was transferred to a financial institution that meets the eligibility criteria of the agencies and in the operation Lusitano Motgage No.7, the Group preceded to the restructuring of the operation.
Additionally, following the Portuguese Republic downgrade by Moody's in February 2012, this agency set the maximum rating attributable to bonds issued in securitized operations as Baa1. Thus, the operation of securitization of small and medium enterprises settled by BES in December 2010 – Lusitano SME No.2 – lost the eligibility for rediscount at ECB and BES chose to exercise the call option in 23rd March 2012.
The issues of covered bonds also suffered a strong impact caused by the downgrade of the Portuguese Republic and the Portuguese banks. As a result, BES could no longer be the counterparty in interest rate swaps transactions and proceeded to its transfer and, in some cases, to its cancelation.
BES has a set of contracts negotiated with counterparties with who trades derivative in the OTC market. CSA takes the form of collateral agreement established between two parties dealing with each other derivatives Over-the-Counter, with the main objective to provide protection against credit risk, establishing for the purpose a set of rules regarding the collateral. Derivatives transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have a minimum margin of risk that may change according to the parties rating.
As part of the restructuring process of the Portuguese real estate sector, several initiatives have been launched in order to create financial, operational and management conditions to revitalize the sector. Accordingly, the Government, in close liaison with the business and the financial sector, including BES Group, encouraged the creation of companies and specialized funds that, through merger, consolidation and integrated management, would obtain the required synergies to recover the sector. Pursuing the goals established, were created companies (parent companies), where BES Group has minority interests (in partnership with other banks that also have a minority interest), and which in turn now hold almost all of the capital of certain subsidiaries (subsidiaries of those parent companies) in order to acquire certain real estate bank loans.
During 2012 and in the first semester of 2013, BES transferred financial assets (mainly corporate loans) to the subsidiaries of the parent companies. These entities are responsible for managing the assets received as collateral, which after the transfer of loans the great majority of the financial assets transferred under these operations, was derecognized from the Group balance sheet, considering that the group has transferred substantially all the risks and rewards of ownership, have the goal to implement a plan to increase its value.
These acquiring entities (the subsidiaries of the parent companies) have a specific management structure, fully autonomous from the banks, selected on the date of their incorporation and have the following main responsibilities:
The acquiring entities are predominantly financed through the issuance of senior equity instruments fully underwritten by the parent company. The amount of capital represented by senior securities equals the fair value of the underlying asset, determined through a negotiation process based on evaluations made by both parties. These securities are remunerated at an interest rate that reflects the risk of the company holding the assets. Additionally, the funding can be supplemented through banks underwriting of junior capital instruments equal to the difference between the book value of the loans transferred and the fair value based on the senior securities valuation. These junior instruments, when underwrited by BES Group shall entitle to a contingent positive amount if the assets transferred value, when sold, exceeds the amount of senior securities plus its remuneration. Normally, the amount of the junior security is limited to a maximum of 25% of the total amount resulting from the senior and junior securities issued.
Given that these junior securities reflect a differential assessment of the assets transferred, based on valuation performed by independent bodies and a negotiation process between the parties, they are fully provided for in the Group's balance sheet.
Therefore, following the transfer of assets, the Group subscribed:
The instruments subscribed by BES Group clearly resulted in a minority position in the capital of the parent companies and of its subsidiaries.
In this context, having no control but being exposed to some risk and rewards of ownership in relation to the transferred assets through the securities as referred above, the Group, in accordance with IAS 39.21, conducted an analysis in order to compare the exposure to the variability of risks and rewards of the transferred assets before and after the operation and concluded that it has not retained substantially all the risks and rewards of ownership. Additionally, and considering that also no control has been retained, it proceeded in accordance with IAS 93.20c (i) to the derecognition of the assets transferred and the recognition of the assets received in return, as shown in the following table:
| (in thousands of euro) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Amounts at transfer date | ||||||||
| Amount of the assets transferred | Securities subscribed | |||||||
| Net assets transferred |
Transfer amount |
Result of the transfer |
Shares (senior securities) |
J unior securities |
Total | Impairment | Net amount | |
| As at 31 December 201 2 | ||||||||
| Tourism Recovery Fund, FCR | 282 1 21 | 282 1 21 | - | 256 891 | 34 906 | 291 797 | (34 906) | 256 891 |
| FLIT SICAV | 252 866 | 254 547 | 1 682 | 235 303 | 23 247 | 258 550 | (23 247) | 235 304 |
| Discovery Portugal Real E state Fund | 96 1 96 | 93 208 | (2 988) | 96 81 2 | - | 96 81 2 | - | 96 81 2 |
| Vallis Construction Sector Fund | 66 272 | 66 272 | - | 81 002 | 21 992 | 1 02 994 | (21 992) | 81 002 |
| 1 st Semester 201 3 | - | |||||||
| Fundo Vallis Construction Sector | 1 6 980 | 1 6 980 | - | 1 607 | 2 874 | 4 481 | (2 874) | 1 607 |
| FLIT SICAV | 75 835 | 74 1 35 | (1 700) | 1 1 332 | (7 1 1 5) | 4 21 6 | 7 1 1 5 | 1 1 332 |
| Discovery Portugal Real E state Fund | 1 331 | 900 | ( 431 ) | 4 365 | - | 4 365 | - | 4 365 |
| Tourism Recovery Fund, FCR | - | - | - | 1 249 | - | 1 249 | - | 1 249 |
| 791 601 791 601 |
788 1 63 788 1 63 |
(3 437) 437) | 688 561 561 | 75 904 | 764 464 764 | (75 904) 904)(75 904) | 688 562 |
As showed in the table above, the junior securities underwritten specifically as part of the transfer of assets are fully provided for. The provision amount recorded for these transactions amounts to approximately euro 75.9 million.
Although the junior securities are fully provided for, the Group also maintains an indirect exposure to the assets transferred through its minority interest in the pool of assets transferred by other banks, through the subscribed shares of the parent companies.
There was however an operation with the company FLITPTREL VIII in relation to which, by the fact that the acquiring company substantial holds assets transferred by BES Group and considering the holding of junior securities, the variability test resulted in a substantial exposure to all risks and benefits. In this circumstance, the operation, amounting to euro 60 million, remained recognized in the Group's balance sheet under Other assets.
Until 30 April 2012, BES held a 50% interest in BES-Vida, Companhia de Seguros, S.A. (BES Vida), a life insurance company, which distributes its products in Portugal and Spain, through BES branch network. Crédit Agricole owned the remaining 50 % and controlled its activities.
As referred in Note 1, in May 2012, BES acquired, from Credit Agricole, the remaining 50% of the share capital of BES Vida with the objective of leveraging the marketing of BES Vida's insurance products.
Following this acquisition, BES became to hold the entire share capital of BES Vida and has the management control over its activities. Therefore, BES Vida, which qualified as an associated and was included in the consolidated financial statements of BES following the equity method, has become a subsidiary and is being fully consolidated since May 2012.
The total investment amounted to euro 225 million euro, paid in cash and BES Vida reimbursed, in October 2012, the additional paid-in capital amounting to euro 125 million.
This transaction was accounted for in accordance with the provisions of paragraph 42 of IFRS 3 related with business combination achieved in stages, which requires any previously held equity interest in the acquire, to be remeasured to fair value at the acquisition date and the resulting gain or loss to be recognised in the income statement. The amounts recognised in the fair value reserve up to the date in which control in acquired, are required to be recycled to the income statement.
As at 1 May 2012, the balance sheet of BES-Vida included in the BES Group consolidated financial statements can be analysed as follows:
| BES VIDA Balance sheet 01.05.2012 |
|
|---|---|
| (in thousands of euro) | |
| Assets | |
| Cash and deposits with banks | 1 98 648 |
| Other financial assets at fair value through profit or loss | 2 759 1 00 |
| Available-for-sale financial assets | 1 91 7 328 |
| Held-to-maturity investments | 1 59 551 |
| Property and equipment | 93 864 |
| Intangible assets | 1 07 768 |
| Technical reserves of reinsurance ceded | 2 51 2 |
| Income tax assets | 1 1 2 |
| Other assets | 1 78 71 2 |
| 5 41 7 595 | |
| Liabilities | |
| Technical reserves | 1 880 631 |
| Investment contracts | 3 053 344 |
| Other financial liabilities | 1 94 434 |
| Income tax liabilities | 33 469 |
| Other liabilities | 40 291 |
| 5 202 1 69 | |
| Equity | |
| Share Capital | 50 000 |
| Other reserves and retained earnings | 1 65 426 |
| 21 5 426 | |
| 5 41 7 595 |
The fair value of recognised identifiable assets acquired and liabilities assumed include, under Intangible assets, the amount of euro 107 768 thousands (euro 76 515 thousands net of assets) related to the present value of the business in force acquired related to life insurance contracts (Value in Force). This asset will be amortised over the remaining lifetime of the acquired contracts.
The goodwill recognized as a result of this acquisition amounts to approximately euro 234 574 thousands and is detailed as follows:
| % | in thousands of euro |
|
|---|---|---|
| Goodwill as the excess of: Consideration paid |
225 000 | |
| Fair value, determined at the aquisition date, of the 50% interest previously held in BE S Vida |
225 000 | |
| 450 000 | ||
| Over: | ||
| Fair value of identifiable assets and liabilities acquired | 1 00 | 21 5 426 |
| Goodwill | 234 574 |
The goodwill is attributable mainly to the potential growth of the market where BES-Vida operates.
The impact in the income statement of measuring at fair value the previously held equity interest in BES Vida, representing 50% of its share capital, following the requirements of paragraph 42 of IFRS 3, can be analysed as follows:
| in thousands of euro |
|
|---|---|
| 50% interest previously held in BE S Vida | |
| Fair value | 225 000 |
| Book value | 243 790 |
| Loss on remeasurement of the previously held equity interest in BE S Vida | ( 1 8 790) |
| Recognition in the income statement of the fair value reserve | |
| of BE S Vida appropriated by BE S on the consolidation up to the acquisition date | ( 70 796) |
| Loss arising from the acquisition of control in BE S Vida | ( 89 586) |
The impact of fully consolidating BES Vida resulted in a gain of euro 68.7 million included in the Group's profit for the first half of 2012 which can be determined, detailed as follows:
measurement of the 50% share capital already held by the Group in the amount of euro -89.6 million; effect of eliminating intra-group transactions amounting to euro 35.5 million, bringing the total impact in the first full consolidation to euro -54.1 million, net of taxes;
Appropriation trough the equity method of the net profit generated by BES Vida from 1 January to 30 April 2012, amounting to euro 2.8 million; and
Appropriation through the consolidation method of the net profit generated by BES Vida from 1 May until 31 December 2012, net of consolidation adjustments, amounting to euro 120.0 million.
If BES Vida had been fully consolidated since 1 January 2012, the net profit for the period would be higher by approximately euro 2 761 thousands.
8. Based on our review, which was performed with the objective of obtaining moderate assurance, nothing has come to our attention that causes us to believe that the interim consolidated financial information for the six-months period ended 30 June 2013, is not free of material misstatements that affects its compliance with the IAS 34 - Interim Financial Reporting and that is not complete, true, current, clear, objective and lawful.
Lisbon, 14 August 2013
KPMG & Associados Sociedade de Revisores Oficiais de Contas, S.A. (nº 189) Represented by Sílvia Cristina de Sá Velho Corrêa da Silva Gomes(ROC N.º 1131)
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