Quarterly Report • Aug 29, 2013
Quarterly Report
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This is a mere translation of the original Portuguese documents prepared by Banco Popular Portugal, S.A., which was made with the single purpose of simplifying their consultation to English speaking stakeholders. In case of any doubt or contradiction between these and the original documents, the Portuguese version prevails.
| GENERAL INFORMATION 4 |
|
|---|---|
| BOARD AND MANAGEMENT5 | |
| INTERIM MANAGEMENT REPORT6 | |
| Main indicators7 | |
| Macroeconomic scenario8 | |
| Commercial strategy8 | |
| Income and profitability9 | |
| Net interest income 9 | |
| Banking income12 | |
| Operating income13 | |
| Net income and profitability14 | |
| Funds and lending 14 | |
| Total assets 14 | |
| Customer funds15 | |
| Lending operations17 | |
| Principal risks and uncertainties 19 | |
| Qualifying holdings29 | |
| DECLARATION OF COMPLIANCE OF THE FINANCIAL INFORMATION30 | |
| HALF-YEAR ACCOUNTS 31 |
|
| Balance Sheet31 | |
| Income Statement 32 | |
| Statement of Comprehensive Income33 | |
| Statement of Changes in Equity33 | |
| Cash Flow Statements 34 | |
| Notes to the Financial Statements 35 |
Banco Popular Portugal, S.A., was founded on 2 July 1991. The head office is located at 51 Ramalho Ortigão in Lisbon. It is registered at the Lisbon Commercial Registry under the taxpayer No. 502.607.084. The Bank adopted its current corporate name in September 2005 to the detriment of its former name — BNC-Banco Nacional de Crédito, S.A.. Banco Popular Portugal is a member of the Deposit Guarantee Fund and it has a share capital of 476 million euros.
The financial and statistical data provided in the interim management report and half-year accounts were prepared according to analytical criteria based on the utmost objectivity, detail, reporting transparency and consistency over time, from the financial information periodically sent to the Bank of Portugal. The financial statements are presented in accordance with the legislation in force in 2013, particularly those issued by the Bank of Portugal regarding the presentation of accounting information.
Pursuant to article 8(3) of the Portuguese Securities Market Code, the half-year information contained herein was not submitted to any auditing or limited reviewing.
The interim management report, the half-year accounts and its accompanying documents are available at Banco Popular Portugal's Internet website: www.bancopopular.pt
Augusto Fernando Correia Aguiar-Branco - Chairman João Carlos de Albuquerque de Moura Navega - Secretary
Rui Manuel Morganho Semedo - Chairman Carlos Manuel Sobral Cid da Costa Álvares - Member Tomás Pereira Pena - Member José Ramón Alonso Lobo - Member
Rui Manuel Ferreira de Oliveira - Chairman Telmo Francisco Salvador Vieira António José Marques Centúrio Monzelo Ana Cristina Freitas Rebelo Gouveia – Alternate
PricewaterhouseCoopers & Associados, Sociedade de Revisores Oficiais de Contas, Lda., represented by Aurélio Adriano Rangel Amado or José Manuel Henriques Bernardo
Jorge Manuel Santos Costa, Statutory auditor.
At the end of the first half of 2013, Banco Popular Portugal operated with a network of 177 branches and a team of 1,305 staff. At 2012 year-end, the Bank had around 388 thousand customers and managed around 10.3 billion euros of total assets, including customer funds in the amount of 4.9 billion euros (total assets). Net assets amounted to around 9.6 billion euros and equity stood at 680 million euros. As at 30 June 2013, Banco Popular Portugal posted net profit of 2 million euros, which generated a return on equity of 0.31%.
The Bank's activity has been supported by the following financial companies that belong to Banco Popular Group and which have allowed the Bank to provide its customers with a full range of banking products and services:
Popular Gestão de Activos, S.A., wholly owned by Banco Popular Español, is a fund management company that manages, among others, the securities and real estate investment funds commercialized by Banco Popular Portugal;
Popular Factoring, S.A., 99.8% held by Banco Popular Español, is a credit institution that provides the full range of factoring products;
Eurovida - Companhia de Seguros de Vida, S.A., which is 15.9 % held by Banco Popular Portugal, while Banco Popular Español owns the remaining share capital, is a life insurance company that provides life, retirement and investment insurance, namely those commercialized by the Bank's branches;
Popular Seguros - Companhia de Seguros, S.A., indirectly owned by Banco Popular Portugal and Banco Popular Español through Eurovida, which fully owns its share capital, is an insurance company that trades non-life insurance products and that has Banco Popular Portugal as a distribution channel.
(million euros, unless otherwise stated)
| Change | |||
|---|---|---|---|
| Jun-13 | (% and p.p.) | Jun-12 | |
| Total turnover | |||
| Total assets managed | 10 311 | 2.8% | 10 026 |
| On-balance sheet total assets | 9 581 | 2.7% | 9 332 |
| Own funds (a) | 680 | 24.5% | 546 |
| Customer funds: | 4 919 | 4.6% | 4 703 |
| on balance sheet | 4 190 | 4.5% | 4 009 |
| other intermediated customer funds | 730 | 5.2% | 694 |
| Lending to customers | 5 905 | -6.1% | 6 291 |
| Contingent risks | 605 | 0.6% | 602 |
| Solvency | |||
| Solvency ratio-BP | 11.1% | 1.7 | 9.3% |
| Tier 1 | 11.1% | 1.7 | 9.3% |
| Core Tier 1 | 11.4% | 1.8 | 9.6% |
| Risk management | |||
| Total risks | 6 510 | -5.6% | 6 893 |
| Non-performing loans | 251 | 20.9% | 207 |
| Non-performing loans for more than 90 days | 227 | 28.4% | 177 |
| Non-performing loan ratio (%) | 4.27% | 0.96 | 3.31% |
| Non-performing loan coverage ratio | 104.2% | -9.1 | 113.3% |
| Earnings | |||
| Net interest income | 64.2 | -21.7% | 81.9 |
| Banking income | 90.9 | -15.0% | 106.9 |
| Operating income | 35.4 | -28.4% | 49.4 |
| Income before tax | 3.3 | -53.7% | 7.2 |
| Net income | 2.0 | -54.9% | 4.5 |
| Profitability and efficiency | |||
| Average net assets | 9 186 | -6.4% | 9 815 |
| Average own assets | 670 | 33.2% | 503 |
| ROA (%) | 0.02% | -0.02 | 0.05% |
| ROE (%) | 0.31% | -0.60 | 0.90% |
| Operating efficiency (Cost to income) (%) | 61.1% | 10.87 | 50.2% |
| (without depreciation) (%) | 58.3% | 4.55 | 53.8% |
| Per share data | |||
| Final number of shares (millions) | 476 | 5.5% | 451 |
| Average number of shares (millions) | 476 | 5.5% | 451 |
| Share book value (€) | 1.428 | 18.0% | 1.211 |
| Earnings per share (€) | 0.004 | -57.3% | 0.010 |
| Other data | |||
| Number of employees Number of branches |
1 305 177 |
-0.5% -5.9% |
1 312 188 |
| Employees per branch | 7.4 | 5.6% | 7.0 |
(a) After appropriation of results for each year
The first six months of the year were lived in an uncertain economic climate both in Europe and in Portugal. Confidence indicators have increased slightly in Europe when compared with the exceedingly low levels previously found. Euro money market interest rates remained stable when compared with the last few months and the Harmonised Index of Consumer Prices (HICP) increased slightly thus reflecting a surge in the price of unprocessed food and services. In the first quarter of 2013, and according to Eurostat, Gross Domestic Product (GDP) dropped in the Euro zone. According to OECD, we should witness steady improvement in the performance of the economic activity in the second half of 2013 and in 2014.
In Portugal, GDP fell by 4.0 per cent in the first quarter of 2013 when compared with the same period last year. Data provided by the National Institute of Statistics for May 2013 show a positive evolution of exports vis-à-vis the same month in 2012 (5.6% increase) mostly due to intra-EU and extra-EU trade, while imports decreased by 3.2% when compared with May 2012. There has been a constant increase in the household savings rate due to the drop in private consumption.
In the first half of 2013, Banco Popular followed its growth policy with an increase of its customer portfolio by 10,686 customers (net increase), or 2.8% when compared with 2012 year-end and by 15,930, or 4.3% when compared with the first half of 2012.
Regarding the volume of transactions, flat fees (integrated solutions) grew by 8% when compared with 2012 year-end and 16% when compared with the first half of 2012. Credit card business also grew by over 5% when compared with the same period last year. Point-ofsale terminals (POS) performed negatively in the first half of 2013 when compared with the same period last year.
Credit portfolio and assets' performance will be shown on the following sections.
The statement of income is summarised in table 1. The Interim Accounts show the income statements for the past two years pursuant to regulations issued by the Bank of Portugal.
| Table 1 . Individual Income Statement | |||||
|---|---|---|---|---|---|
| (€ thousand) | |||||
| Jun-13 | Jun-12 | Change Amount |
% | ||
| 1 | Interest and similar income | 161 149 | 194 144 | - 32 995 | -17.0 |
| 2 | Interest expense and similar charges | 96 986 | 112 218 | - 15 231 | -13.6 |
| 3 | Net interest income (1-2) | 64 163 | 81 927 | - 17 764 | -21.7 |
| 4 | Return on equity instruments | 47 | 55 | - 8 | -13.9 |
| 5 | Net fees and commissions | 24 698 | 27 699 | - 3 001 | -10.8 |
| 6 | Income from financial transactions (net) | 2 506 | 779 | 1 727 | -221.8 |
| 7 | Income from the sale of other assets | 2 614 | - 599 | 3 214 | 536.2 |
| 8 | Other operating profits/losses | - 3 138 | - 2 973 | - 165 | -5.5 |
| 9 | Banking income (3+4+5+6+7+8) | 90 890 | 106 887 | - 15 997 | -15.0 |
| 1 0 |
Personnel expenses | 27 913 | 27 990 | - 77 | -0.3 |
| 1 1 |
Other general administrative expenses | 25 112 | 25 671 | - 559 | -2.2 |
| 1 2 |
Depreciation | 2 483 | 3 832 | - 1 349 | -35.2 |
| 1 3 |
Operating income (9-10-11-12) | 35 382 | 49 393 | - 14 012 | -28.4 |
| 1 4 |
Provisions net of recoveries and write-offs | - 2 129 | - 2 083 | - 46 | 2.2 |
| 1 5 |
Value adjustments net of loans and advances to customers | 32 185 | 36 266 | - 4 081 | -11.3 |
| 1 6 |
Impairment and other net provisions | 1 992 | 8 006 | - 6 014 | -75.1 |
| 1 7 |
Profit before tax (13-14-15-16) | 3 334 | 7 204 | - 3 870 | -53.7 |
| 1 8 |
Income tax | 1 285 | 2 657 | - 1 373 | -51.7 |
| 1 9 |
Net income for the period (17-18) | 2 049 | 4 547 | - 2 498 | -54.9 |
At the end of the first half of 2013, net interest income exceeded 64.1 million euros, which corresponds to a 17.8 million euro decrease when compared with the same period last year. As seen on table 2, this loss was mostly due to the combined adverse effect of the fluctuation of the average trading volumes, the effect of changes in interest rates and the effect of maturity dates.
| Due to changes in business volume |
interest rates | maturity | Total change |
|---|---|---|---|
| - 11 384 | - 20 603 | - 787 | - 32 774 |
| - 117 | 349 | - 6 | 225 |
| 202 | - 394 | - 227 | - 418 |
| - 13 | - 15 | - 1 | - 28 |
| - 11 311 | - 20 664 | - 1 020 | - 32 995 |
| - 8 826 | |||
| - 4 898 | - 4 382 | - 101 | - 9 381 |
| 0 | 0 | 0 | 0 |
| 1 436 | 1 581 | - 42 | 2 975 |
| 2 952 | - 17 561 | - 622 | - 15 231 |
| - 14 263 | - 3 103 | - 398 | - 17 765 |
| 6 413 | - 14 760 | Due to changes in Due to changes in - 479 |
As shown on table 3, the average assets of the Bank at the end of the first half of 2013 were backed by customer funds (54.7%) and deposits from banks (35.1%) mostly deposits from Banco Popular Group. Loans and advances to customers is still their main component, representing 64.1% of total assets.
This evolution reflects the successful effort of increasing customer funds in the context of improving the commercial gap, since in the same period of 2012 deposits from customers financed only 47.3% of average assets and the dependence on deposits from banks represented around 44.8%.
Considering the evolution of the average annual interest rates from loans and deposits, we would like to stress that the average assets, which amounted to 9,185 million euros, posted an overall profitability of 3.54%. On the other hand, the average cost of total funds allocated to the financing of assets decreased by 16 basis points when compared with the first half of 2012, standing at 2.13%.
The aim of increasing the financing of customer lending with customer funds and thus improving on the commercial gap has led to an increase by around 379.3 million euros in the average balance when compared with the same period last year, to which contributed the diversification of the available products, taking into consideration maturity dates and average cost against other alternative sources of financing. This evolution was accompanied by a significant reduction by 61 basis points in the average rate of deposits from customers, which stood at 2.97% the first half of 2013 and compares with 3.58% in the same period last year (table 3a).
The decrease in the average balance of loans and advances to customers is justified mostly by the reduction in demand. The combined effect represented a decrease in customer margin by 8 bp when compared with the same period last year.
| Table 3a . Evolution of annual average rates. Margins | ||||
|---|---|---|---|---|
| Average annual rate Jun-13 (%) |
Average annual rate Jun-12 (%) |
Change Jun-13 / Jun-12 (p.p.) |
||
| Loans and advances to customers (a) | 4.07 | 4.75 | -0.68 | |
| Deposits with banks | 0.65 | 0.47 | 0.18 | |
| Financial assets | 3.48 | 3.52 | -0.03 | |
| Other assets | 0.04 | 0.04 | -0.01 | |
| Total Assets ( b ) | 3.54 | 3.97 | -0.43 | |
| Deposits from customers ( c ) | 2.97 | 3.58 | -0.61 | |
| Deposits from banks | 0.73 | 0.96 | -0.23 | |
| Equity accounts | 0.00 | 0.00 | 0.00 | |
| Other liabilities | 8.61 | 6.17 | 2.45 | |
| Total Liabilities and Equity (d) | 2.13 | 2.29 | -0.16 | |
| Customer spread (a - c) | 1.10 | 1.18 | -0.08 | |
| Net Interest Income (b - d) | 1.41 | 1.67 | -0.27 |
As at 30 June 2013, net fees and commissions charged to customers for the sale of products and services totalled 24.7 million euros, decreasing by around 10.8% when compared with the same period last year.
Table 4 shows the evolution of fees and commissions that occurred in the first half of 2013 when compared with the first half of 2012.
The drop by 3 million euros was mostly due to a decrease in lending operations and related fees and commissions (-1 million euros, or -10.9%) and in asset management commissions (-0.6 million euros, or -55.0%), the latter resulting mostly from third party receivables at the end of the first half of 2012 which did not occur in the first half of 2013 by option of the issuers. We note as positive the 17.3% upsurge in commissions from insurance sales and the 8.1% increase in account management commissions.
| Table 4 . Net Fees and Commissions | ||||
|---|---|---|---|---|
| (€ thousand) | ||||
| Change | ||||
| Jun-13 | Jun-12 | Amount | % | |
| Commissions from lending | 8 310 | 9 329 | - 1 019 | -10,9 |
| Commissions from guarantees | 3 671 | 3 971 | - 300 | -7,6 |
| Commissions from collection and payment handling (net) | 5 899 | 6 733 | - 834 | -12,4 |
| Commissions from asset management (net) | 518 | 1 152 | - 634 | -55,0 |
| Commissions from insurance sales | 918 | 783 | 135 | 17,3 |
| Commissions from account management | 2 538 | 2 349 | 189 | 8,1 |
| Commissions from processing services | 821 | 1 019 | - 198 | -19,4 |
| Other commissions (net) | 2 182 | 2 513 | - 331 | -13,2 |
| Fees paid to promoters and agents | - 159 | - 148 | - 11 | -7,3 |
| Total | 24 698 | 27 699 | - 3 001 | -10,8 |
Regarding the remaining items of banking income, there has been a significant increase in the items Income from financial operations and sale of other assets, respectively 1.7 and 3.2 million euros. Conversely, the item other operating income performed badly, with a 165 thousand change when compared with the same period last year.
The joint effect of all the aforementioned items made Banco Popular Portugal generate banking income of almost 91 million euros in the first half of 2013, which represents a decrease by 16 million euros or 15% when compared with the same period last year.
Banco Popular remains committed to implementing its cost reduction policy. In the first half of 2013, operating expenses totalled over 55.5 million euros, which represents a decrease by 2 million euros or 3.5% when compared with the same period last year.
In this first semester, and as can be seen in the following table, personnel expenses amounted to 27.9 million euros, dropping by 0.3%. On the other hand, total general expenses reached 25.1 million euros, which implied a decrease by over half a million euros (-2.2%) when compared with the same period of last year.
Allocations for depreciation of fixed assets amounted to 2.5 million euros, a decrease of 35.2% when compared with the first half of 2012.
| Table 5 . Operating Expenses | |||
|---|---|---|---|
(€ thousand)
| Change | ||||
|---|---|---|---|---|
| Jun-13 | Jun-12 | Amount | % | |
| Personnel expenses (a) | 27 913 | 27 990 | - 77 | -0,3 |
| Wages and salaries | 20 844 | 21 142 | - 298 | -1,4 |
| Social security charges | 5 950 | 6 056 | - 106 | -1,7 |
| Pension fund | 549 | 226 | 323 | 143,2 |
| Other personnel expenses | 570 | 566 | 4 | 0,7 |
| General expenses (b) | 25 112 | 25 671 | - 559 | -2,2 |
| External supplies | 1 337 | 1 371 | - 35 | -2,5 |
| Rents and leasing | 2 249 | 2 518 | - 269 | -10,7 |
| Communications | 2 033 | 2 117 | - 84 | -4,0 |
| Travel, hotel and representation | 516 | 484 | 32 | 6,7 |
| Advertising and publications | 1 160 | 1 317 | - 157 | -11,9 |
| Maintenance of premises and equipment | 2 024 | 2 859 | - 835 | -29,2 |
| Transports | 522 | 668 | - 145 | -21,8 |
| Advisory services | 3 202 | 1 555 | 1 647 | 105,9 |
| Legal expenses | 1 296 | 1 341 | - 46 | -3,4 |
| IT services | 3 881 | 3 090 | 790 | 25,6 |
| Security, surveillance and cleaning | 590 | 768 | - 178 | -23,2 |
| Temporary work | 2 214 | 2 373 | - 159 | -6,7 |
| External consultants and auditors | 347 | 973 | - 627 | -64,4 |
| External real estate appraisers | 147 | 495 | - 348 | -70,3 |
| Services rendered by Grupo Banco Popular | 1 676 | 1 866 | - 190 | -10,2 |
| Other general expenses | 1 918 | 1 875 | 43 | 2,3 |
| Operating expenses (c=a+b) | 53 025 | 53 661 | - 636 | -1,2 |
| Depreciation (d) | 2 483 | 3 832 | - 1 349 | -35,2 |
| Total (c+d) | 55 508 | 57 493 | - 1 986 | -3,5 |
The cost-to-income ratio, which corresponds to the part of banking income consumed by operating expenses, increased slightly in the first half of 2013 when compared with the same period last year, standing at 58.3% and up from 50.2%, mostly due to the reduction in banking income.
The weight of personnel expenses in banking income stood at 30.7%, a little over the amount for June 2012 (26.2%).
Operating income thus amounted to approximately 35.4 million euros, around 28% lower than in the same period last year.
In the first half of 2013, Banco Popular Portugal posted a Net Income slightly above 2 million euros, 55% lower than in the same period last year. This income reduction is mostly due to the decrease in net interest income.
By analysing the income statement and the balance sheet together we can assess the profitability of the Bank's financial activity, comparing profits and costs and their respective margins with the investment and assets that originated them.
At the end of this semester, operating profitability stood at 0.39%, 12 basis points lower than in the same period last year, while return on assets (ROA - the ratio of annual net income to average total assets) stood at 0.02%.
The balance sheets as at 30 June 2013 and 2012 are summarised in table 7. In the section Interim Accounts, those same balance sheets are presented in accordance with the model defined by the Bank of Portugal.
As at 30 June 2013, Banco Popular's net assets amounted to 9,581 million euros, 248 million euros more than in the same period last year, which corresponds to an increase by 2.7%.
The Bank, through the companies of the group, also manages other customer funds applied in investment, saving and retirement instruments, and others, which amounted to 729 million euros in the first half of 2013, representing a 5.2% increase when compared with the same period last year.
Therefore, total assets managed by the Bank amounted to 10,311 million euros in the first half of 2013, which represents a 3% increase when compared with the same period last year.
In the first half of 2013, the total amount of on- and off-balance sheet customer resources amounted to 4,919 million euros, 4.6% more when compared with the same period last year.
On-balance sheet funds, comprised mostly of customer deposits, reached 4,190 million euros, which corresponds to an increase by 4.5% when compared with the first half of 2012.
Demand accounts posted significant increase, reaching 715.5 million euros up from 594.6 million euros, which corresponds to a 20.3% increase when compared with the same period last year.
In the middle of 2012, the Bank started to sell bonds under its EMTN programme.
| Table 6 . Customer Funds | ||||||
|---|---|---|---|---|---|---|
| (€ thousand) | ||||||
| Jun-13 | Jun-12 | Change | ||||
| Amount | % | |||||
| CUSTOMER FUNDS : | ||||||
| Deposits | 4 135 002 | 3 945 745 | 189 257 | 4.8 | ||
| Demand accounts | 715 528 | 594 621 | 120 907 | 20.3 | ||
| Time deposits | 3 413 995 | 3 343 799 | 70 196 | 2.1 | ||
| Savings accounts | 5 478 | 7 325 | - 1 847 | -25.2 | ||
| Cheques, payment orders and other funds | 12 056 | 23 590 | - 11 534 | -48.9 | ||
| Interest payable | 42 548 | 40 039 | 2 509 | 6.3 | ||
| ON-BALANCE SHEET FUNDS ( a ) | 4 189 605 | 4 009 374 | 180 231 | 4.5 | ||
| Disintermediation funds | ||||||
| Investment funds | 198 813 | 151 450 | 47 363 | 31.3 | ||
| Investment and capitalisation insurance | 378 615 | 364 605 | 14 010 | 3.8 | ||
| Retirement insurance plans | 91 367 | 97 170 | - 5 803 | -6.0 | ||
| Customer portfolio under management | 60 897 | 80 631 | - 19 734 | -24.5 | ||
| OFF-BALANCE SHEET FUNDS ( b ) | 729 692 | 693 856 | 35 836 | 5.2 | ||
| TOTAL CUSTOMER FUNDS ( a + b ) | 4 919 297 | 4 703 230 | 216 067 | 4.6 |
Off-balance sheet funds – which include investment fund applications, retirement plans, funds raised through investment insurance products, and assets managed through private banking – increased by 5.2%. The positive performance of this item is mostly due to the growth of investment funds. The evolution of these funds is showed at the bottom of the previous table.
As at 30 June 2013 Banco Popular Portugal is the depositary of 19 investment funds managed by Popular Gestão de Activos, whose total portfolio amounted to 198.8 million euros, 31.3% higher than in the first half of 2012. The following table shows the evolution of each investment fund managed by Popular Gestão de Activos.
| Table 7 . Investment Fund Portfolio ( asset value ) | |||||
|---|---|---|---|---|---|
| (€ thousand) | |||||
| Jun/13 | Jun/12 | Variação | |||
| Funds | Valor | % | |||
| Popular Valor | 2 546 | 2 840 | - 294 | -10.4 | |
| Popular Acções | 2 502 | 1 948 | 554 | 28.4 | |
| Popular Euro Obrigações | 12 162 | 4 929 | 7 233 | 146.7 | |
| Popular Global 25 | 8 171 | 5 811 | 2 360 | 40.6 | |
| Popular Global 50 | 4 330 | 2 685 | 1 644 | 61.2 | |
| Popular Global 75 | 2 551 | 1 483 | 1 068 | 72.0 | |
| Popular Tesouraria | 3 955 | 2 393 | 1 562 | 65.3 | |
| Popular Economias Emergentes I | 8 250 | 8 170 | 80 | 1.0 | |
| Popular Economias Emergentes II | 9 923 | 9 800 | 123 | 1.3 | |
| Popular Multiactivos (*) | 4 047 | 1 449 | 2 598 | ||
| Popular Multiactivos I (*) | 0 | 1 008 | - 1 008 | ||
| Popular Multiactivos III (*) | 0 | 1 230 | - 1 230 | ||
| Popular obrig. Ind.Emp. Alemanha e EUA | 5 627 | 5 292 | 336 | 6.3 | |
| Popular obrig.Ind.Ouro (Londres) | 3 927 | 3 847 | 79 | 2.1 | |
| Fundurbe | 10 359 | 11 553 | - 1 194 | -10.3 | |
| Imourbe | 10 441 | 12 369 | - 1 927 | -15.6 | |
| ImoPopular | 25 468 | 26 205 | - 737 | -2.8 | |
| ImoPortugal | 24 210 | 24 308 | - 98 | -0.4 | |
| Popular Predifundo | 13 173 | 15 591 | - 2 419 | -15.5 | |
| Popular Objectivo Rendimento 2015 | 2 454 | 0 | 2 454 | ||
| Popular Arrendamento | 44 718 | 0 | 44 718 | ||
| Popular Imobiliário FEI | 0 | 8 540 | - 8 540 | -100.0 | |
| Total | 198 813 | 151 450 | 47 363 | 31.3 |
(*) Popular Multiactivos, results from the merger with incorporation of Popular Multiactivos II, Popular Multiactivos I and Popular Multiactivos III.
Banco Popular Portugal sells Eurovida's retirement plans and investment insurance, a company that belongs to BPE group. Customer funds raised via these products increased by 3.8% in terms of investment insurance and decreased by 6% in terms of retirement plans, as can be seen at the end of table 6.
Loans and advances to customers totalled around 5.9 billion euros at the end of the first half of 2013, representing 59% of total net assets. This amount corresponds to a decrease by 6.1% when compared with the same period last year.
The following table shows the distribution of loans and advances to customers in the past two years.
| Table 8 . Loan Transactions | ||||
|---|---|---|---|---|
| (€ thousand) | ||||
| Jun-13 | Jun-12 | Change | ||
| Amount | % | |||
| Loans and advances to customers ( a ) | ||||
| Companies and public sector | 3 483 422 | 3 726 827 | - 243 405 | -6,5 |
| Private customers | 1 874 027 | 1 928 943 | - 54 916 | -2,8 |
| Residencial mortgage loans | 1 462 556 | 1 456 203 | 6 353 | 0,4 |
| Personal and consumer loans | 50 051 | 61 605 | - 11 553 | -18,8 |
| Other personal lending | 361 420 | 411 136 | - 49 716 | -12,1 |
| Total | 5 357 449 | 5 655 770 | - 298 321 | -5,3 |
| Other loans (represented by securities) ( b ) | 272 300 | 403 400 | - 131 100 | -32,5 |
| Interes and commissions receivable ( c ) | 24 168 | 24 327 | - 160 | -0,7 |
| Past-due loans and interest ( d ) | ||||
| Due within 90 days | 23 963 | 30 710 | - 6 748 | -22,0 |
| Over 90 days | 226 886 | 176 719 | 50 167 | 28,4 |
| Total | 250 849 | 207 430 | 43 419 | 20,9 |
| Total Gross Lending ( a + b + c + d ) | 5 904 765 | 6 290 927 | - 386 162 | -6,1 |
| Specific Loan Provisions | 211 713 | 181 282 | 30 431 | 16,8 |
| Total Net Lending | 5 693 052 | 6 109 645 | - 416 593 | -6,8 |
The decrease in the amount of loans and advances to customers was due to a drop by around 32.5% in securitised lending operations and a decline by 5.3% in lending operations in general. In terms of retail, loans to businesses and the public sector dropped by 243 million euros, 6.5% less when compared with the previous year, while loans to private individuals decreased slightly by 2.8%. This fall had the contribution of a two-figure drop in the items of loans and advances to private individuals (except residential mortgage loans, which increased by 0.4% when compared with the first quarter of 2012). Part of the growth in residential mortgage loans was destined to the acquisition of real estate of the Bank's portfolio.
The amount of past-due loans and interest totalled almost 251 million euros in the first half of 2013, which represents an increase by 20.9% when compared with the same period last year. As seen on the following table, this item represented 4.27% of total lending operations. Taking into consideration only loans that have been non-performing for more than 90 days this indicator stands at 3.84%.
Total non-performing loans amounted to 368 million euros as at 30 June 2013, which represents 6.24% of total lending operations.
| Table 9. Past-due Loans and Non-performing Loans | ||||||
|---|---|---|---|---|---|---|
| (€ thousand) | ||||||
| Jun/13 | Jun/12 | Change | ||||
| Amount | % / p.p. | |||||
| Past-due loans and interest | 250 849 | 207 430 | 43 419 | 20.93 | ||
| Past-due loans by more than 90 days (a) | 226 886 | 176 719 | 50 167 | 28.39 | ||
| Doubtful loans reclassified as past-due loans (b) | 141 496 | 107 853 | 33 643 | 31.19 | ||
| Non-performing loans (a+b) | 368 382 | 284 572 | 83 810 | 29.45 | ||
| Past-due loans / total loans (%) | 4.27 | 3.31 | 0.96 | |||
| Past-due loans over 90 days / total lending (%) | 3.86 | 2.82 | 1.04 | |||
| Non-performing loans / total lending (%) | 6.26 | 4.54 | 1.72 | |||
| Net non-performing loans, net / total net lending (%) | 2.85 | 1.96 | 0.89 | |||
| Provisions for Credit risks | 261 274 | 234 947 | 26 326 | 11.21 | ||
| Hedging Ratio (%) | 104.2 | 113.3 | -9.11 | |||
| memorandum item: | ||||||
| Total lending | 5 904 765 | 6 290 927 | - 386 162 | -6.14 |
In the first half of 2013, provisions for credit risks amounted to 261.3 million euros, ensuring a coverage ratio of 104.2%.
The annual evolution of customer deposits and profitable lending has enabled substantial improvement in the transformation ratio when compared with the previous year. Consequently, this ratio was 17 percentage points lower than in the first half of 2012, which corresponds to a 610 million euro improvement. As at 30 June 2013, this ratio stood at 135%, which corresponds to an absolute gap of 1.5 billion euros.
Credit risk arises from the possible loss triggered by the breach of contractual obligations of the Bank's counterparties. In the case of refundable financing it arises as a consequence of the non-recovery of principal, interest and commissions, regarding amount, period and other conditions stipulated in the contracts. Concerning off-balance sheet risks, it derives from the non-compliance of the counterparties regarding their obligations with third parties, which implies that the Bank has to assume as its own certain obligations depending on the contracts.
The credit risk the Bank is exposed to results mainly from its commercial banking activity, which is its core business. Total lending operations amounted to around 5,693 million euros at the end of June 2013, with a year-on-year drop of around 6.9%. We would like to highlight that this decrease resulted mostly from the repricing policy applied to the credit portfolio and the sale of loans to Banco Popular Group. corporate
Loans and advances to customers is the Bank's main asset, representing around 59% of net assets. As at 30 June 2013, around 70% of the portfolio was tied with advances and loans to businesses (mostly SMEs). The decline in loans and advances to companies over the past few years results from an increase in residential mortgage loans and the effect of credit assignments to companies belonging to the group, particularly regarding companies operating in the construction business.
Portfolio broken down by type of counterparty
The evolution of the default ratio, as seen below, is mostly attributable to the current macroeconomic scenario. In spite of the joint effect of the focus given by management to credit recovering and credit assignments, this evolution was negative.
The Bank's securities portfolio (including available-for-sale financial assets, held-to-maturity investments, trading portfolio and other financial assets at fair value through profit or loss) amounted to around 2.3 billion euros at the end of June 2013, which represents 24% of Banco Popular's total net assets. In the chart below we have summed up these assets broken down by type.
The sustained macroeconomic downturn that continued throughout 2013 remained at the basis of the upsurge in the number of insolvent businesses, which in the case of Banco Popular's customers totalled 1,494 companies which compares with 1,549 companies in the whole of 2012.
In Portugal, until June 2013, 11,764 companies filed for bankruptcy, which represents an increase by 4,001 companies when compared with the whole of 2012 (+51.5%) and shows a clear acceleration when compared with the year-on-year increase 2012/2011 (+27.7%).
It is also important to stress that until June 2013, the Bank continued to make credit assignments which allowed for a decrease in terms of delinquent debts. After the credit assignments, the past-due loan ratio (4.27%) posted a slight growth when compared with the same period last year (3.31%).
The loan portfolio broken down by economic sector as at 30 June 2013 was as follows:
As seen above, around 29.2% of loans to companies comprise the sector of property construction and development. When compared with December 2012, it shows a slight decrease in terms of the weight that this sector of activity has in the portfolio, which is more relevant when we consider the decrease in the Bank's total lending. The aim of Banco Popular is to continue to the process that has lead to the diminished exposure in the sectors of property construction and development until it reaches 25%.
Although this sector still bears significant weight on total loans and advances to customers, we would like to stress that these exposures have real collaterals that are periodically monitored, since capital is released after an inspection (carried out by specialized external companies and verified internally by specialized engineers) and the assessment of the progress of their respective projects.
Market Risk is the probability of negative impact on the Bank's earnings or capital due to adverse changes in the market prices of the instruments in the trading book, caused by the volatility of equity prices, interest rates and foreign exchange rates.
Considering that the measurement and management of the impact of interest rate fluctuations on the Bank's Balance Sheet is done separately via the Structural Interest Rate Risk, and given the Bank's activity and the structure of its Balance Sheet, market risk is limited to the fluctuation in the prices of the securities that comprise its portfolio.
As at 30 June 2013, the Bank's portfolio amounted to around 2,6 billion euros, of which only around 56 million were classified as financial assets held for trading and other financial assets at fair value through profit or loss (around 2.1% of the securities portfolio, i.e., with direct impact on the Bank's income account).
Due to the small size of this portfolio, this risk and its respective impact is not considered material for the Bank's management.
Foreign exchange risk is the probability of negative impact on the Bank's earnings or capital due to adverse changes in foreign exchange rates, caused by the volatility of the price of instruments that correspond to foreign exchange positions or by any change in the competitive position of the institution due to significant fluctuations in foreign exchange rates.
The activity in foreign currency consists in making transactions with the parent company deriving from customer operations. In this context, the global currency position is almost null and therefore any impact on the Bank's earnings as a result in fluctuations in exchange rates (mostly the American dollar) is immaterial. We would also like to highlight that the foreign exchange risk management is carried out jointly with GBP.
Banco Popular Group (GBP) has adopted the definition of operational risk contained in the New Basel Accord (Basel II) as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
GBP adopted the Standardised Approach envisaged in BIS II to calculate capital requirements for operational risk, while Banco Popular Portugal is still using the Basic Indicator Approach.
However, Banco Popular Portugal considers it has been abiding by the requirements needed to use the Standardised Approach and therefore filed an application with Banco de Portugal to be allowed to use that approach.
This application derives from the following motivations:
• Obtaining in Portugal the necessary authorization to use the same method as the parent company in view of the efforts that Banco Popular has been conducting for some years to implement methodologies and tools that are very similar to the ones used by the Group;
• Formalizing, in terms of day-to-day management, the efficacy that the active monitoring of Operational Risk has been demonstrating in the mitigation of Risk factors, as practices are implemented and intervention actions are carried out in terms of training and raising awareness of the whole organization to this reality;
• Anticipating that capital requirements may reflect the effect of the predominant role of the retail segment where the Bank operates which does not happen with the current Basic Indicator Approach.
Moreover, since 2004, Banco Popular has been recording events associated with operational risk as they occur so that they can be subsequently integrated into a sole Group database.
In sum, the operational risk management process – similar to the one that exists in the parent company but takes into consideration the specific characteristics of Portugal – derived from
the implementation of an overall process of operational risk identification and its respective controls.
This process consists in the maintenance of a network of people in charge of operational risk management. These people, appointed by the Bank's top management, have essentially the following roles:
• Participating in meetings and supporting qualitative analysis (process, risk, control, evaluation and indicator analysis);
• Following-up on the structure of processes, risks and controls, so that any changes that may become necessary derived from new risks and controls that may arise can be communicated;
• Carrying out self-evaluations;
• Ensuring that every operational risk event occurred or attributable to their organic unit is recorded.
In 2010, the Operational Risk Committee was formally constituted, integrating the regular meetings of the now called Internal Control and Operational Risk Committee, which, accompanied by key management personnel, meets periodically to discuss the main events that have occurred and evaluate the need to establish credit risk mitigating measures or changes to the already existing ones.
Every month, the Risk Management Department presents to the top management personnel and discloses to the permanent members of the Committee a report on the main activities in the scope of Operational Risk management and a quantitative analysis of occurred events.
Additionally, regular workshops are promoted and carried out on suitable topics related to frequency or the relevant impacts, which justify a debate with those in charge of operational risk in functional areas with the aim of promoting the identification of possible mitigating measures that may be implemented.
In 2012, some initiatives were carried out in the scope of this type of risk, from which we would like to highlight:
by type of exposure and, from that indicator, a Risk Appetite Level within the bank's Risk Capacity considering the maximum amount allocated to Operational Risk (provisions for covering Operational Risk) each year;
On the first stage, indicators were implemented in the following functional areas: Risk Analysis Department (DAR) Customer Ombudsman (PCL) Operations Department – Securities (DOP – Securities) Property Department (DIM)
It is also worth mentioning that those responsible for operational risk management in Portugal are part of Banco Popular Group's Operational Risk Committee (which meets quarterly) where all the relevant aspects to the whole Group are discussed. Similarly to what is already also happening in Spain, the topic of Operational Risk will continue to be object of training actions for all the employees of the Bank.
This risk is defined as the risk originated by the fluctuations in interest rates and is estimated through the analysis made to maturities and repricing of on-balance sheet transactions involving assets and liabilities.
Banco Popular Portugal measures its structural interest rate risk by using the following methodology:
The repricing gap model used to measure the interest rate risk consists in measuring exposures by different maturity and repricing dates in asset and liability cash flows. Briefly, this model groups assets and liabilities in fixed time intervals (maturity date or date of the next interest rate revision when indexed) based on which the potential impact in net interest income is calculated.
In this framework, this model considers a scenario in which there is an immediate impact on interest rates, so at the date the interest rates are revised (both asset and liability transactions) the new rates start to incorporate that effect.
The model allows the calculation of the impact of parallel gap curve shifts in Net Interest Income:
| Interest rate trend | GAP > 0 | GAP < 0 | GAP = 0 |
|---|---|---|---|
| Increase | Gain | Loss | Balance sheet |
| Decrease | Loss | Gain | immunisation |
Liquidity risk is defined as the probability of negative impact on results or equity deriving from the incapacity of the Bank to meet its payment obligations as these mature or to ensure them in reasonable market conditions.
The Bank is exposed to liquidity risk deriving from the usage of current accounts, execution of guarantees, withdrawal of deposits, adverse conditions in money or debt markets, etc.
Liquidity risk is managed in Banco Popular Group through its Assets and Liabilities Committee (ALCO) in a centralized manner for all credit entities and consolidated financial societies, and is monitored simultaneously by Banco Popular. The liquidity risk management system employed by Banco Popular Group includes formal procedures for monitoring liquidity, warning systems associated with specific and systemic crisis situations, liquidity contingency plans, etc.
As at 30 June 2013, Banco Popular's funding needs were ensured mainly by deposits from customers (4,189 million euros, around 44% of total assets (Jun/2012: 43%)), by ECB funding (around 1,595 million euros, representing around 16.6% of total assets), by deposits from banks, mostly BPE (1,541 million euros, around 17% (Jun/2012: 37%)), and by the issuance of bonds (1,067 million euros, around 11.1% (Jun/2012: 6.4%)).
Reputational risk is defined as the probability of negative impact on earnings or capital due to an adverse perception of the public image of the financial institution, grounded or otherwise, held by its different stakeholders, i.e., clients, suppliers, financial analysts, employees, investors or the public opinion in general.
Potential adverse impact on the Group's reputation may arise from failures in terms of management and control of the aforementioned risks. In this scope, the Group considers that the internal government system, the policies and procedures in force, are adequate and enable the prevention and mitigation of reputational risk in its various forms.
The main, and more easily identifiable, source for this type of risk is legal risk. In this scope, at Banco Popular Portugal, the areas of Compliance and Control worry about abiding by the legal regulations in force, assessing and trying to prevent possible relevant default risks from an economic or reputational standpoint, which may arise in connection with:
• Laws and regulations;
• Codes of conduct and standards of good practice, namely regarding its business activities, prevention of money laundering and financing of terrorism;
In addition, the Bank promotes regular staff training actions on these topics.
Property risk is defined as the probability of negative impact on results or equity arising from a general drop in the property portfolio and the inherent volatility of the real estate market.
The Bank is exposed to property risk that arises from its property portfolio whose net amount as at 30 June 2013 was around 317 million euros, representing around 3.3% of the Bank's net assets. These were assets whose ownership was transferred to the Bank following legal actions or in lieu of payment to settle loan debts (mostly loans for construction/property development). These assets include urban and rural lands, land plots, buildings or parts of buildings, finished or under construction.
The Property Department is in charge of managing these assets and has employees who are trained in engineering.
At the time of transfer in lieu of payment, acquisition or legal award to settle the debt, for the materially relevant transactions independent external appraisals are always required. After that, every three years or whenever there is any indication of any property loss of value, new appraisals are carried out. Periodically, sensitivity analyses are carried out to assess the amount of the assets, taking into consideration the market evolution as felt by the Group.
Thus, the Group considers that these assets are adequately appraised and registered in its income statements.
The aim of the Group is to ensure the assets are sold at the best price possible, and may promote joint projects with construction companies to support those projects and therefore ensure better selling conditions.
Pursuant to Article 20 of the Securities Code ('Código dos Valores Mobiliários')
| Shareholders | No. of Shares | Shareholding Position % |
Voting Rights % |
|---|---|---|---|
| Banco Popular Español, SA | 476 000 000 | 100% | 100% |
Lisbon, 31 July 2013
The Board of Directors
Paragraph (c) of article 246(1) of the Portuguese Securities Code states that each of the responsible persons of the entity shall issue a statement as explained therein.
The members of the Board of Directors of Banco Popular Portugal, S.A., identified below by name, have individually signed the following statement:
«Pursuant to paragraph (c) of article 246(1) of the Portuguese Securities Code, I declare that, to the best of my knowledge, the condensed financial statements of Banco Popular Portugal, S. A. referred to the first half of 2013, were drawn up in accordance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and the results of that entity and that the interim management report faithfully states the information required in accordance with article 246(2) of the Portuguese Securities Code»
Lisbon, 31 July 2013
The Board of Directors
Rui Manuel Morganho Semedo - Chairman Carlos Manuel Sobral Cid da Costa Álvares - Member Tomás Pereira Pena - Member José Ramón Alonso Lobo - Member
Balance Sheet
Individual Balance Sheet as at 30 June 2013
| (€ thousand) |
|---|
| -------------- |
| (€ thousand) | |||||
|---|---|---|---|---|---|
| 30/ 06/ 2013 |
|||||
| N o te/ T able A nnex |
A mo unt befo re pro visio ns impairment & depreciatio n |
P ro visio ns, impairment & depreciatio n |
N et result |
30/ 06/ 2012 |
|
| 1 | 2 | 3 = 1 - 2 | |||
| Assets | |||||
| Cash and balances w ith central banks |
17 | 52 219 | 52 219 | 88 220 | |
| Deposits w ith banks |
18 | 68 853 | 68 853 | 93 999 | |
| Financial assets held for trading | 19 | 55 107 | 55 107 | 45 106 | |
| Other financial assets at fair value through profit or loss | 20 | 32 320 | 32 320 | 31 506 | |
| Available-for-sale financial assets | 21 | 2 256 880 | 2 256 880 | 1 517 516 | |
| Loans and advances to banks | 22 | 677 770 | 677 770 | 123 023 | |
| Loans and advances to customers | 23 | 5 904 765 | 211 713 | 5 693 052 | 6 109 645 |
| Held-to-maturity investments | 24 | 0 | 0 | 600 272 | |
| Non-current assets held for sale | 25 | 22 579 | 22 579 | 0 | |
| Other tangible assets | 26 | 179 667 | 94 343 | 85 324 | 90 662 |
| Intangible assets | 27 | 20 794 | 20 592 | 202 | 861 |
| Investment in subsidiaries and associates | 25 | 0 | 0 | 22 579 | |
| Current income tax assets | 3 053 | 3 053 | 0 | ||
| Deferred income tax assets | 28 | 72 160 | 72 160 | 111 518 | |
| Other assets | 29 | 616 050 | 54 532 | 561 518 | 497 299 |
| Total Assets | 9 962 217 | 381 180 | 9 581 037 | 9 332 206 | |
| Liabilities | |||||
| Deposits from central banks | 30 | 1 609 046 | 1 609 046 | 1 200 012 | |
| Financial liabilities held for trading | 19 | 32 296 | 32 296 | 35 464 | |
| Deposits from banks | 31 | 1 807 930 | 1 807 930 | 2 728 987 | |
| Due to customers | 32 | 4 189 605 | 4 189 605 | 4 009 374 | |
| Debt securities issued | 33 | 1 066 572 | 1 066 572 | 596 413 | |
| Hedging derivatives | 34 | 89 064 | 89 064 | 93 490 | |
| Provisions | 35 | 52 459 | 52 459 | 59 051 | |
| Current income tax liabilities | 1 860 | 1 860 | 3 996 | ||
| Deferred income tax liabilities | 28 | 15 218 | 15 218 | 11 682 | |
| Other liabilities | 36 | 37 281 | 37 281 | 47 756 | |
| Total Liabilities | 8 901 331 | 0 | 8 901 331 | 8 786 225 | |
| Equity | |||||
| Share capital | 39 | 476 000 | 476 000 | 451 000 | |
| Share premium | 39 | 10 109 | 10 109 | 10 109 | |
| Fair value reserves | 40 | - 82 585 | - 82 585 | - 193 305 | |
| Other reserves and retained earnings | 41 | 274 133 | 274 133 | 273 630 | |
| Profit for the year | 2 049 | 2 049 | 4 547 | ||
| Total Equity | 679 706 | 0 | 679 706 | 545 981 | |
| Total Liabilities + Equity | 9 581 037 | 0 | 9 581 037 | 9 332 206 |
| (€ thousand) | |||
|---|---|---|---|
| N o te/ T able/ A nnex |
30/ 06/ 2013 |
30/ 06/ 2012 |
|
| Interest and similar income Interest expense and similar charges Net interest income |
6 6 |
161 149 96 986 64 163 |
194 144 112 217 81 927 |
| Return on equity instruments Fees and commissions received Fees and commission paid Net gains from financial assets at fair value through profit or loss |
7 8 8 9 |
47 29 081 4 383 769 |
55 37 855 10 156 1 613 |
| Net gains from available-for-sale financial assets Net gains from foreign exchange differences Net gains from the sale of other assets Other operating income Operating income |
9 10 11 12 |
1 064 673 2 614 - 3 138 90 890 |
- 1 503 668 - 599 - 2 973 106 887 |
| Personnel expenses General administrative expenses Depreciation and amortization Provisions net of reversals Adjustments to loans and advances to customers (net of reversals) Impairment of other financial assets net of reversals |
13 14 26/27 35 23 |
27 913 25 112 2 483 - 2 129 32 185 0 |
27 990 25 671 3 832 - 2 083 36 266 611 |
| Impairment of other assets net of reversals Net income before tax |
29 | 1 992 3 334 |
7 396 7 204 |
| Income tax Current tax Deferred tax |
15 15 |
1 285 218 1 067 |
2 657 4 723 - 2 066 |
| Net income after taxes | 2 049 | 4 547 | |
| Of w hich: Net income from discontinued operations Net income for the period |
0 2 049 |
0 4 547 |
|
| Earnings per share (euro) | 0.00 | 0.01 |
| (€ thousand) | ||
|---|---|---|
| 30/06/2013 | 30/06/2012 | |
| Net income | 2 049 | 4 547 |
| Retirement Pensions | ||
| Recognition of actuarial gains/losses | 1 004 | 1 849 |
| Income not recognized in the income statement | 1 004 | 1 849 |
| Available-for-sale financial assets | ||
| Revaluation of available-for-sale financial assets | 38 474 | 54 867 |
| Tax burden | - 10 195 | - 14 540 |
| Income not recognized in the income statement | 28 279 | 40 327 |
| Individual comprehensive income | 31 332 | 46 723 |
CHIEF ACCOUNTANT THE BOARD OF DIRECTORS
| (€ thousand) | ||||||
|---|---|---|---|---|---|---|
| Share Capital |
Share premium |
Fair value reserves |
Other reserves and retained |
Net income |
Total do Capital Próprio |
|
| Balance as at 1 January 2012 | 451 000 | 10 109 | - 233 632 | earnings 255 418 |
13 432 | 496 327 |
| Transferred to reserves Share capital increase |
25 000 | 13 432 | - 13 432 | 0 25 000 |
||
| Actuarial gains/losses | 735 | 735 | ||||
| Other changes | -795 | 795 | 0 | |||
| Comprehensive income for the period | 123 620 | 2 692 | 126 312 | |||
| Balance as at 31 December 2012 | 476 000 | 10 109 | - 110 807 | 270 380 | 2 692 | 648 374 |
| Transferred to reserves | 2 692 | - 2 692 | 0 | |||
| Actuarial gains/losses | 1 004 | 1 004 | ||||
| Other changes | -57 | 57 | 0 | |||
| Comprehensive income for the period | 28 279 | 2 049 | 30 328 | |||
| Balance as at 30 June 2013 | 476 000 | 10 109 | - 82 585 | 274 133 | 2 049 | 679 706 |
(€ thousand)
| Notes | 30/06/2013 | 30/06/2012 | |
|---|---|---|---|
| Cash flow from operating activities | |||
| Interest and income received | 119 629 | 142 564 | |
| Interest and expenses paid | - 63 126 | - 96 588 | |
| Fees and commissions received | 28 703 | 37 087 | |
| Fees and commissions paid | - 4 383 | - 10 156 | |
| Loan recoveries | 576 | 956 | |
| Contributions to the pension fund | 37 | 81 | - 20 |
| Cash paid to suppliers and employees | - 50 768 | - 57 065 | |
| Sub-total | 30 712 | 16 778 | |
| Changes in operating assets and liabilities | |||
| Minimum cash requirements and deposits w ith central banks |
111 814 | 45 729 | |
| Financial assets and liabilities at fair value through profit or loss | - 4 187 | - 4 072 | |
| Loans and advances to banks | - 254 688 | - | |
| Deposits from banks | 384 072 | - 218 366 | |
| Loans and advances to customers | 341 606 | 47 777 | |
| Hedging derivatives | - 25 656 | 2 733 | |
| Other operating assets and liabilities | - 24 990 | - 4 226 | |
| Net cash flow from operating activities before | |||
| income taxes | 558 683 | - 113 647 | |
| Income taxes | - 51 | - 2 790 | |
| Net cash flow from operating activities | 558 632 | - 116 437 | |
| Cash flow from investment activities | |||
| Dividends received | 47 | 54 | |
| Purchase and sale of available for sale financial assets | - 910 139 | 69 072 | |
| Held-to-maturity investments | 542 167 | - 44 469 | |
| Purchase and sale of assets | 50 483 | 29 716 | |
| Net cash flow from investment activities | - 317 442 | 54 373 | |
| Cash flow from financing activities | |||
| Issue of ow n equity instruments |
33 | 56 208 | |
| Redemption of ow n equity instruments |
- 16 917 | - 16 179 | |
| Net cash flow from financing activities | 39 291 | - 16 179 | |
| Net changes in cash and cash equivalents | |||
| Cash and cash equivalents at the beginning of the period | 46 | 227 772 | 329 394 |
| Effect of exchange rate fluctuations on cash and cash equivalents | 382 | 1 833 | |
| Net changes in cash and cash equivalents | 280 480 | - 78 243 | |
| Cash and cash equivalents at the end of the period | 46 | 508 634 | 252 984 |
(€ thousand)
The Bank – then named BNC-Banco Nacional de Crédito Imobiliário – was founded on 2 July 1991, following the authorization given by Decree order No. 155/91, of 26 April, issued by the Ministry for Finances. On 12 September 2005, the name of the Bank was changed to Banco Popular Portugal, S.A.
The Bank is authorized to operate pursuant to the rules and regulations currently applicable to banks in Portugal and its corporate purpose is raising funds from third parties in the form of deposits or other, which it applies, together with its own funds, in granting loans or in other assets, also providing additional banking services in the country and abroad.
The accounts of the Bank are consolidated at the parent company, Banco Popular Español, S.A., ('BPE') whose Head Office is located in Madrid, Spain, at 34 Calle Velázquez.
BPE accounts are available at its respective Head Office as well on its webpage (www.bancopopular.es).
The Bank is not a listed company.
As a result of the restructuring process initiated in previous years, during 2011, the Bank ceased to hold any equity stake in any subsidiary and ceased to reclassify Class D Notes issued by Navigator Mortgage Finance Nº 1 Plc ('Navigator') into the available-for-sale asset portfolio.
Based on the assumption that the investment in Navigator and its potential impact on the financial statements were considered immaterial, and pursuant to IAS 1 revised, the Bank decided not to prepare consolidated financial statements from 2011 onwards, since that information is not materially relevant for effects of the presentation of the Bank's financial information nor does it influence the decision of the readers of those statements.
Thus, as at 30 June 2013, the Bank detains only one equity stake in the associated company – Companhia de Seguros de Vida, S.A. (see note 25).
The main accounting principles and valuation criteria adopted in the preparation of these financial statements are stated below. These principles were consistently applied to every year presented, except when otherwise stated.
Individual financial statements for Banco Popular Portugal were prepared in accordance with the Adjusted Accounting Standards ('Normas de Contabilidade Ajustadas' - NCA) as defined by Notice No. 1/2005, of 21 February, and defined in Instructions Nos. 9/2005 and 23/2004 issued by the Bank of Portugal.
The Adjusted Accounting Standards fundamentally correspond to the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) pursuant to Regulation (EC) No. 1606/2002, of the European Parliament and of the Council, of 19 July, except for the following matters:
IFRS are the standards and interpretations adopted by the International Accounting Standards Board (IASB) that comprise the International Financial Reporting Standards (IFRS), the International Accounting Standards (IAS) and the Interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC) or by the previous Standard Interpretation Committee (SIC).
As of 1 January 2009, the Bank adopted IFRS 8 – Operating Segments for effects of disclosing financial information analysed by operating segments (see note 5).
An operating segment in a business is a group of assets and operations used to provide products or services, subject to risks and benefits that are different from those seen in other segments.
The Bank determines and presents operating segments based on in-house produced management information.
Associated companies are those in which the Bank has, directly or indirectly, a significant influence over its management and financial policy but does not hold control over the company. It is assumed that the Bank has a significant influence when it holds the power to control over 20% of the voting rights of the associate. Even when voting rights are lower than 20%, the Bank may have significant
influence through the participation in managing bodies or the composition of the Executive Boards of Directors.
In the Bank's individual financial statements, associated companies are valued at historical cost. The dividends from associated companies are booked in the Bank's individual results on the date they are attributed or received.
In case of objective evidence of impairment, the loss by impairment is recognised in the income statement.
The financial statements are presented in euros, which is both the functional and presentation currency of the Bank.
Foreign currency transactions are translated into the functional currency using indicative exchange rates prevailing on the dates of transactions. Gains and losses resulting from the conversion of foreign currency transactions, deriving from their extinction and conversion into monetary assets and liabilities in foreign currencies at the exchange rate at the end of each period, are recognised in the income statement, except when they are part of cash flow hedges or net investment in foreign currency, which are deferred in equity.
Conversion differences in non-monetary items, such as equity instruments measured at fair value with changes recognised in net income, are booked as gains and losses at fair value. For non-monetary items, such as equity instruments, classified as available for sale, conversion differences are booked in equity, in the fair value reserve.
Derivative financial instruments are initially recognised at fair value on trade date and subsequently remeasured at fair value. Fair values are based on quoted market prices, including recent market transactions and evaluation models, namely: discounted cash flow models and option valuation models. Derivatives are considered assets when their fair value is positive and liabilities when their fair value is negative.
Certain derivatives embedded in other financial instruments – such as debt instruments whose profitability is indexed to share or share index price – 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.
The Bank holds: (i) trading derivatives, measured at fair value – gains and losses arising from changes in their fair value are immediately included in the income statement, and (ii) fair value derivatives accounted for in conformity with note 3.1 a).
Interest income and charges are recognised in the income statement for all instruments measured at amortized cost in accordance with the pro rata temporis accrual method.
Once a financial asset or group of financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
Fees and commissions are generally recognised using the accrual method when the service has been provided. Revenue from credit line fees, which are expected to originate a loan, is differed (together with any cost directly related) and recognised as an adjustment at the effective interest rate. Fees and commissions on trades, or participation in third party trades – such as purchasing stock or purchasing or selling a business – are recognised as earned when the service has been provided. Portfolio and other management advisory fees are recognised based on the applicable service contracts – usually recognised proportionally to the time elapsed. Asset management fees related to investment funds are recognised rateably over the period the service is provided.
Financial assets are recognised in the Balance Sheet on trade date – the date on which the Bank commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus direct transaction costs, except for financial assets carried at fair value through profit or loss for which transaction cost are directly recognised in the income statement. Financial assets are derecognised when (i) the rights to receive cash flows from these assets have expired, (ii) the Bank has substantially transferred all risks and rewards of ownership, or (iii) notwithstanding the fact that the Bank may have retained part, but not substantially all, of the risks and benefits associated with holding them, control over the assets was transferred.
Financial assets and liabilities are offset and the net amount booked in the income statement when, and only when, the Bank has a currently enforceable legal right to offset the recognised amounts and intends to settle them on a net basis.
The Bank classifies its financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. Management determines the classification of the financial instruments at initial recognition.
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivative financial assets are also categorised as held for trading unless they qualify for hedge accounting.
The fair value option is only used for financial assets and liabilities in one of the following circumstances:
These assets are assessed daily or at each reporting date based on fair value. In the case of bonds and other fixed-income securities the balance sheet contains the amount of unpaid accrued interest.
Gains and losses arising from changes in fair value are included directly in the income statement, which also includes interest revenue and dividends on traded assets and liabilities at fair value. Revenue from interest on financial assets at fair value through profit or loss is carried in net interest income.
Gains and losses arising from changes in the fair value of the derivatives that are managed together with designated financial assets and liabilities are included in item 'Income from assets and liabilities assessed at fair value through profit and loss'.
Loans and receivables includes loans to customers and banks, leasing operations, factoring operations, participation in syndicated loans and securitised loans (commercial paper and corporate bonds) that are not traded in an active market and for which there is no selling intention.
Loans and securitised loans traded in an active market are classified as available-for-sale financial assets.
Loans and receivables are initially recognised at fair value. In general, fair value at inception corresponds to transaction value and includes fees, commissions or other credit-related costs and revenues.
Subsequently, loans and receivables are valued at amortized cost based on the effective interest rate method and subjected to impairment tests.
Interest, fees, commissions and other credit-related costs and revenues are recognised on an accrual basis over the period of the transactions regardless of the moment when they are charged or actually paid. Fees on loan commitments are recognised on a deferred and linear basis during the lifetime of the commitment.
The Bank classifies as non-performing loans instalments of principal or interest after, at most, thirty days of their due date. In case of litigation, all principal instalments are considered non-performing (current and past due).
Credit to customers includes advances within factoring operations with recourse and the amount of the invoices granted without recourse, whose intention is not a short run sale, and is recorded on the date the accounts receivable are assigned by the seller of the product or service who issues the invoice.
Accounts receivables assigned by the issuer of the invoices or other commercial credits for recourse or non-recourse factoring are registered on assets under the item Loans and advances to customers. As a counterpart it changes the item Other liabilities.
When invoices are taken with recourse but cash advances on those respective contracts have not been made yet, they are registered in off-balance sheet accounts on the amount of the invoices that have been received. The off-balance sheet account is rectified as the cash advances are made.
Commitments arising from credit lines to factoring customers that have not been utilized yet are registered in off-balance sheet accounts.
Liabilities for guarantees granted and irrevocable commitments are registered in off-balance sheet accounts by the value at risk and interest flows, commissions or other revenues recorded in the income statement during the lifetime of the operations. These operations are subjected to impairment tests.
This item includes non-derivative financial assets with fixed or determinable payments and defined maturities that the Bank has the intention and ability to hold to maturity.
These assets are initially recognised at fair value, minus possible commissions included in the effective rate, plus all direct incremental costs. They are subsequently valued at amortised cost, using the effective interest rate method and subjected to impairment tests. If during a subsequent period the amount of the loss of impairment decreases, and that decrease may be objectively tied to an event that happened after the impairment was recognised, this is reversed through the income statement.
Available-for-sale financial assets are non-derivative financial assets that: (i) the Bank intends to keep for an undetermined period of time, (ii) are recognised as available for sale at inception, or (ii) are not categorized into any of the other categories described above.
This item includes:
Available-for-sale assets are recognised at fair value, except for equity instruments that are not listed on any active market and whose fair value may not be reliably measured or estimated, in which case they are recognised at cost value.
Gains and losses arising from changes in the fair value of available-for-sale financial assets are directly recognised in equity in item Fair value revaluation reserves, except for impairment losses and foreign exchange gains and losses of monetary assets, until the asset is sold, when the gain or loss previously recognised in equity is carried in the income statement.
Interest from bonds and other fixed-income securities and the differences between acquisition cost and the nominal value (premium or discount) are registered in the income statement using the effective rate method.
Revenue from variable-income securities (dividends in the case of shares) are booked in the income statement on the date they are attributed or received. According to this criterion, interim dividends are recorded as profit in the exercise their distribution is decided.
In case of objective impairment evidence – resulting from a significant and prolonged decline in the fair value of the security or from financial problems on the part of the issuer – the cumulative loss on the fair-value revaluation reserve is removed from equity and recognised in the income statement.
Impairment losses on fixed-income securities may be reversed on the income statement if there is a positive change in the security's fair value as a result of an event that occurred after the initial impairment recognition. Impairment losses on variable-income securities may not be reversed. In the case of impaired securities, subsequent negative fair-value changes are always recognised in the income statement.
Exchange rate fluctuations of non-monetary assets (equity instruments) classified in the available-forsale portfolio are registered in fair-value reserves. Exchange rate fluctuations in the other securities are recorded in the income statement.
The Bank assess on each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. A financial asset, or group of financial assets, is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and 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. Objective evidence that an asset, or group of assets, is impaired, includes observable data, that the Bank is aware of, regarding the following loss events:
– national or local economic conditions that correlate with defaults on the assets in the portfolio.
The Bank assesses initially whether objective evidence of impairment exists for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes that asset in a group of financial assets with similar credit risk and collectively assesses them for impairment.
If there is objective evidence of an impairment loss on loans and receivables, or held-to-maturity investments, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future impairment losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the provisions account. The Bank may also determine impairment losses through the instrument's fair value at observable market prices.
When analysing impairment in a portfolio, the Bank estimates the probability of an operation or a customer in regular situation to default during the estimated period between occurrence and the loss being identified. Usually, the timeframe used by the Bank is of around 6 months.
For the purpose of evaluation of impairment in groups, financial assets are grouped on the basis of similar risk characteristics (i.e., based on the Bank's classification process that takes into account asset type, geographical location, collateral type, past due status and other relevant factors). These characteristics are relevant to estimate future cash flows for groups of financial assets by being indicative of the counterparty's ability to pay all amounts due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.
If, in a subsequent period, the amount of the impairment loss decreases and that decrease can be related objectively to an event occurring after the impairment was recognised (e.g., improvement in a debtor's credit rating), the previously recognised impairment loss is reversed through the provisions account. The amount of the reversal is recognised directly in the income statement.
Loans to customers whose terms have been renegotiated are no longer considered past due and are treated as new loan contracts. Restructuring procedures include: extended payment conditions, approved management plans, payment change and deferral. Restructuring practices and policies are based on criteria that, from the point of view of the Bank's management, indicate that payment has a high probability of occurring.
The Bank assess at each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. In the case of equity securities classified as availablefor-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss —measured as the difference between the acquisition cost and the current fair value, minus any impairment loss on that financial asset previously recognised in the income statement — is removed from equity and recognised in the income statement.
Impairment losses on equity instruments that have been recognised in the income statement are not reversible. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and growth can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement.
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives.
Costs associated with software development and maintenance are recognised as expenses when incurred. Costs directly associated with developing unique and identifiable software, controlled by the Bank and where it is probable that they will generate future economic benefits, are recognised as intangible assets.
Costs associated with software development recognised as assets are amortized during its useful life using the straight-line method.
The Bank's property is comprised essentially of offices and branches. All tangible assets are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Land is not depreciated. Depreciation of other tangible assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
| Estimated useful life (years) | |
|---|---|
| Freehold buildings | 50 |
| Adaptation works in leasehold property |
10, or during the lease period if lower than 10 years |
| Furniture, fixtures and fittings | 5 to 8 |
| Computers and similar equipment | 3 and 4 |
| Transport equipment | 4 |
| Other tangible assets | 4 to 10 |
Tangible assets subject to depreciation are submitted to impairment tests whenever events or changes in certain circumstances indicate their carrying amount may no longer be recovered. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher between the value in use and the asset's fair value, minus sale costs.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These gains and losses are included in the income statement.
Assets acquired in exchange for loans (real estate property, equipment and other assets) are recorded in the item Tangible assets held for sale by the value stated in the agreement that regulates the asset's delivery, which corresponds to the lower of the outstanding amount of the debt or the asset's evaluation at the time of its delivery.
The Bank's policy for this type of assets is to sell them as soon as possible.
These assets are periodically assessed and impairment losses are recognised whenever the result of that appraisal is lower than the asset's book value (see note 29).
Potential realized gains on these assets are not recorded in the Balance Sheet.
Leases entered by the Bank are essentially related to transport equipment, where there are contracts classified as financial leases and others as operating leases.
Payments made on operating leases are recognised in the income statement.
When an operating lease is terminated before the end of the lease period, any payment required by the lessor, by way of compensation, is recognised as an expense in the period the operation is terminated.
Financial leases are capitalised at the inception of the lease in the respective item of tangible or intangible assets, as a counterpart to the item Other liabilities, at the lower of (i) the fair value of the leased asset and (ii) the present value of the minimum lease payments. Incremental costs paid for leases are added to the recognised asset. Tangible assets are depreciated pursuant to Note 2.11. Rents are comprised of (i) financial cost charged to expenses and (ii) financial depreciation of premium which is deducted from the item Other liabilities. Financial charges are recognised as expenses over the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. However, when there is no reasonable certainty that the Bank will obtain possession of the asset at the end of the lease, the asset must be totally depreciated during the smaller of the lease period or its useful life.
Assets held under a financial lease are recognised as an expense in the period to which they relate by the current amount of the payments to be made. The difference between the gross amount receivable and the current balance receivable is recognised as receivable financial income.
Interest included in the rents charged to customers is registered as income, while principal depreciation, also included in the rents, is deducted from the overall amount initially lent. Recognition of the financial result reflects a constant periodical return rate over the remaining net investment of the lessor.
Provisions for restructuring costs and legal expenses are recognised whenever: the Bank has a legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle that obligation; the amount can be reliably estimated.
In the financial statements, the credit and guarantee portfolio is subject to provisioning pursuant to the terms of Notice No. 3/95 issued by the Bank of Portugal, namely for:
These provisions include:
(i) a specific provision for past due credit and interest presented in assets as a deduction to the item Loans and advances to customers, calculated using rates that vary between 0.5% and 100% on past due loan and interest balances, according to risk classification and whether secured or unsecured with collaterals (see note 23);
(ii) a specific provision for doubtful loans, recognised in assets as a deduction from the item Loans and advances to customers, which corresponds to the application of the rates foreseen for nonperformance classes, to instalments reclassified as past due in a single credit operation, as well as its application to the outstanding loan instalments of any single customer, where it was ascertained that the past due instalments of principal and interest exceeded 25% of principal outstanding plus past due interest, of half the provisioning rates applicable to credit past due (see note 23);
(iii) a general provision for credit risks, presented as a liability in item Provisions for risks and charges, corresponding to a minimum of 1% of total outstanding credit, including guarantees and other instruments, except for consumer loans, where the provisioning rate was at least 1.5% of such loans, and for mortgage loans whenever the real estate asset (collateral) was for the borrower's own use, in which case the minimum rate of 0.5% is applied (see note 34); and
(iv) a provision for country risk, constituted to face the risk attached to financial assets and off-balance sheet elements on residents from high risk countries according to Instruction No. 94/96 issued by the Bank of Portugal (see notes 23 and 34).
In compliance with the Collective Bargaining Agreement (ACT) for the banking sector, the Bank has established a Pension Fund designed to cover retirement benefits on account of age, including disability, and survivor's benefits, set up for the entire work force, calculated based on projected salaries of staff in active employment. The pension fund is supported by the contributions made based on the amounts determined by periodic actuarial calculations. A defined benefit plan is a pension plan that generally defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensations.
With the publication of Decree-law No. 1-A/2011, of 3 January, employees covered by the CBA of working age on 4 January 2011 were made subject to the Social Security General Scheme (SSGS) as far as retirement benefits are concerned. Therefore, from that date, the benefits plan defined for the employees covered by the CBA, as far as retirement benefits are concerned, will be financed by the Pension Fund and the Social Security. However, after 4 January 2011, the Pension Fund is still liable for death, disability and survivor's benefits, as well as old-age complementary benefits in order to match the retirement pension of the participants in the Pension Fund to the amounts of the current pension plan.
Pursuant to the guidelines stated on the note issued on 26 January 2011 by the National Council of Financial Supervisors, the Bank has maintained the measurement methodology and the liabilities for past services of active employees with reference to 31 December 2010 regarding the eventualities transferred to the SSGS used in previous years.
Pursuant to Decree-law No. 127/2011, of 31 December, Banco Popular Portugal transferred to Social Security the liabilities for the pensions to be paid as at 31 December 2011, as well as part of the assets of the pension fund that covered those liabilities.
This transfer impacted the Bank's results due to the allocation of the proportional part of the accumulated actuarial deviations and the actuarial deviations originated by the difference of actuarial assumptions used to calculate the transferred liabilities. According to Decree-law No. 127/2011, of 31 December, this amount will be deductible for purposes of determining the taxable profit, in equal parts, from the year starting on 1 January 2012, according to the average number of year of life expectancy of the pensioners whose liabilities were transferred, having been recorded the respected differed tax on the settlement amount recognised in that year's operating income.
Every year the Bank determines the amount of liabilities for past services using actuarial calculations based on the Project Unit Credit method for liabilities for past services in the case of old age and the Unique Successive Premium to calculate disability and survivor's benefits. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible. The amount of liabilities includes, besides retirement pensions, post-employment medical care (SAMS) and post-retirement death benefits.
Analyses and possible revisions to actuarial and financial assumptions are made by the Bank of Portugal with reference to 31 December every year. The updating of these assumptions is prospectively reflected on pension expenses and in arriving at actuarial gains and losses.
Until December 2012, the Bank recognized the net accumulated amount (after 1 January 2004) of actuarial gains and losses resulting from changes in the financial and actuarial assumptions and differences between the financial and actuarial assumptions used and the actual amounts in the item Other Assets or Other Liabilities – Actuarial deviations. Accumulated actuarial gains and losses were deferred in an account on the assets or liabilities side ('corridor'), up to a limit of 10% of the highest of
the current value of liabilities for past services or the value of the pension funds. Accrued actuarial gains and losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.
On 1 January 2013, and as stated in 2.19 Changes in the Accounting Policy for Recognizing Actuarial Deviations, Banco Popular changed its accounting policy for the recognition of actuarial and financial deviations of the pension plans and other post-employment benefits with defined benefit pursuant to IAS 19 Revised. Actuarial and financial gains and losses are now booked in the period they occur directly on equity in the Statement of Comprehensive Income.
Increases in past service liabilities resulting from early retirement are fully recognised as expenses in the income statement for the year in which they occur.
Increases in past service liabilities resulting from changes in the conditions of Pension Plans are fully recognised as expenses in the case of acquired benefits or depreciated during the period that remains until those benefits are acquired. The balance of the increases in liabilities not yet recognised as expenses are registered in the item Other Assets.
Past service liabilities (post-employment benefits) are covered by a pension fund. The amount of the pension funds corresponds to the fair value of its assets at the balance sheet date.
The financing regime by the pension fund is established in Notice No. 4/2005 issued by the Bank of Portugal, which determines the compulsory fully financing pension liabilities and a minimum level of 95% financing of past service liabilities for staff in active employment.
In the Bank's financial statements, the amount of past service liabilities for retirement pensions minus the amount of the pension fund is stated in item Other Liabilities or in item Other Assets.
Banco Popular Portugal appraises on each reporting date the recoverability of any possible excess of the fair value of the assets that comprise the pension fund in view of the retirement pension liabilities based on the expectation of the reduction of future necessary contributions.
The Bank's income statement includes the following expenses related to retirement and survivor pensions:
On the transition date, the Bank adopted the possibility permitted by IFRS 1 of not recalculating deferred actuarial gains and losses from the beginning of the plans (normally known as the reset option). Thus, deferred actuarial gains and losses recognised in the Bank's accounts as at 31 December 2003 were fully reversed in retained earnings on the transition date – 1 January 2004.
In compliance with the Collective Bargaining Agreement (ACT) for the banking sector in Portugal, the Bank has committed to attribute to active staff that complete fifteen, twenty-five and thirty years of good and effective service, a seniority bonus equal, respectively, to one, two or three months of their effective monthly salary on the year of the attribution.
Every year the Bank determines the amount of liabilities for seniority bonuses using actuarial calculations based on the Project Unit Credit method for liabilities for past services. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible.
Liabilities for seniority bonuses are recognised in the item Other Liabilities.
The Bank's income statement includes the following expenses regarding seniority bonus liabilities:
Deferred taxes are recognised using the balance sheet debt method, based on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using the effective tax rate on profits at the balance sheet date which is expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax is recognised when it is probable that in the future there is enough tax on profits so that it can be used.
Taxes on profits based on the application of legal rates for each jurisdiction are recognised as expenses in the period when the profit is originated. The tax effect of reportable tax losses are recognised as an asset when it is likely that the future profitable profit is enough for the reportable tax loss to be utilized.
Deferred tax related to fair value revaluation of an available-for-sale asset, which is charged or credited directly in equity, is also credited or charged in equity and subsequently recognised in the income statement together with deferred gains or losses.
The Bank classifies its financial liabilities in the following categories: held-for-trade financial liabilities, other financial liabilities at fair value through profit and loss, deposits from central bank, deposits from other banks, customer deposits, securitised liabilities and other subordinated liabilities. Management determines the classification of investments at their initial recognition.
This item essentially includes deposits whose yield is indexed to stock portfolios or indexes and the negative fair value of derivative contracts. The evaluation of these liabilities is made based on fair value. The balance sheet value of deposits includes the amount in accrued interest not paid.
After the initial recognition, deposits and other financial assets from customers, central banks and other banks are revalued at amortized cost based on the effective interest rate method.
These liabilities are initially recognised at fair value, which is the amount for which they were issued net of transaction costs incurred. These liabilities are subsequently measured at amortized cost and any difference between the net amount received on transaction and their redemption value is recognised in the income statement over the liability period using the effective interest rate method.
If the Bank acquires its own debt, this amount is removed from the balance sheet and the difference between the balance sheet amount of the liability and the amount spent to acquire it is recognised in the income statement.
Non-current assets, or disposal groups, are classified as held for sale whenever their book value is recoverable through sale. This condition can only be met when the sale is highly probable and the asset is available for immediate sale in its current condition. The sale must be performed within one year from the date on which they are included in this item. An extension of the period during which the asset must be sold does not exclude that asset, or a disposal group, from being classified as held for sale if the delay is caused by an event or circumstances that the Bank cannot control and if the selling purpose is maintained. Immediately before the initial classification of the asset, or disposal group, as held for sale, the book value of non-current assets (or of every asset and liability in the group) is carried pursuant to the applicable IFRS. Subsequently these assets, or disposal group, will be remeasured at the lower between the initial carrying amount and the fair value minus selling costs.
On 1 January 2013, Banco Popular changed its accounting policy for the recognition of actuarial and financial deviations of the pension plans and other post-employment benefits with defined benefit (see note 2.15) pursuant to IAS 19 Revised. Actuarial and financial gains and losses are now booked in the period they occur directly on equity in the Statement of Comprehensive Income.
Banco Popular previously used the 'corridor' method, recognizing actuarial gains and losses on the Balance Sheet and establishing a 'corridor' to absorb accumulated actuarial and financial gains and losses up to a limit of the highest of 10% of the amount of liabilities for past services or 10% of the amount of the assets in the Pension Fund. The amounts in excess of the corridor were then depreciated by the average number of years until the expected retirement age of the employees covered by the plan.
The retrospective application of the accounting policy to recognize actuarial deviations pursuant to IAS 8 had the following impact on equity:
| Equity as at 01- 01-2012 |
Income for 2012 | Equity as at 01- 01-2012 |
|
|---|---|---|---|
| Balance pursuant to IAS 19 pre-revised | 496 327 | 2 692 | 647 639 |
| Accumulated actuarial gains/losses as at 01-01-2012 | 2 931 | - | 2 931 |
| Actuarial gains/losses for 2012 | - | - | - 2 196 |
| Balance pursuant to IAS 19 revised | 499 258 | 2 692 | 648 374 |
In face of its activity, the Bank raises funds essentially through customer deposits and monetary market operations indexed to Euribor.
Besides the activities of credit granting, the Bank also applies its funds in financial investments, particularly in the group of investments that currently comprise the Bank's portfolio.
The Bank's portfolio – including financial assets held for sale, held-to-maturity investments, trading portfolio and other financial assets at fair value through profit or loss – amounted to around 2.6 billion euros at the end of the first half of 2013, representing around 27% of total net assets. The typology of these assets was broken down as follows: public Portuguese debt (22.1%), public Spanish debt (38.8%), banks (24.7%) and others (14.4%).
To hedge its investment against interest rate risk, the Bank carried out interest rate swap operations and monetary market operations, thus trying to control the variability of interest rate risk and the flows generated by these assets.
Gains and losses resulting from the revaluation of hedge derivatives are recognised in the income statement. Gains and losses deriving from differences in terms of the fair value of hedged financial assets and liabilities, corresponding to the hedged risk, are also recognised in the income statement as a counterpart for the carrying value of the hedged assets and liabilities, in the case of operations at amortized cost, or by counterpart of the reserve for fair value revaluation in the case of available-forsale assets.
Efficacy tests for hedges are accordingly documented on a regular basis, ensuring the existence of proof during the lifetime of the hedged operations. If the hedge no longer meets the criteria demanded by hedge accounting, it shall be prospectively discontinued.
In a cash flow hedge, the effective part of the changes in fair value for the hedged derivative is recognised in reserves, and transferred to the income statement in the periods when the respective hedged item affects results. If it is foreseeable that the hedged operation will not take place, the amounts still stated in equity are immediately recognised in the income statement and the hedged instrument is transferred to the trading book.
The Bank is exposed to a certain cash flow risk as regards open positions in foreign currency. However, in view of the little materiality of the normally existing overall position, no hedge operations are carried out in this case.
The Board of Directors considered that as at 30 June 2013, the fair value of assets and liabilities at amortised cost did not differ significantly from its book value.
In order to determine the fair value of a financial asset or liability, its market price is applied whenever there is an active market for it. In case there is no active market, which happens with some financial assets and liabilities, generally accepted valuation techniques based on market assumptions are employed.
The net income of financial assets and liabilities at fair value that have not been classified as coverage includes an amount of 1 125 thousand euros (2011: -2 254 thousand euros).
Consequently, the fair value change recognized in the income statement for the period is analysed as follows:
| 30/06/2013 | 30/06/2012 | |||
|---|---|---|---|---|
| Fair value | Change | Fair value | Change | |
| Financial assets at fair value through profit or loss | ||||
| Trading derivatives | ||||
| Interest rate sw aps |
31 598 | 26 579 | 31 806 | 27 836 |
| Futures | 34 | - | - | - |
| Options | 82 | 825 | 59 | 115 |
| Available-for-sale financial assets | ||||
| Debt instruments issued by residents | 622 831 | - | 434 093 | - |
| Equity instruments issued by residents | 612 | - | 1 298 | - |
| Debt instruments issued by non-residents | 1 633 371 | 1 064 | 1 082 065 | 1 503 |
| Equity instruments issued by non-residents | 65 | - | 70 | - |
| Financial liabilities at fair value through profit or loss | ||||
| Trading derivatives | ||||
| Interest rate sw aps |
32 190 | - 26 372 | 32 883 | - 27 729 |
| Futures | 23 | - | - | - |
| Options | 83 | - 91 | 1 262 | - 45 |
| 2 005 | 1 680 |
The table below classifies fair value assessment of the Bank's financial assets and liabilities based on a fair value hierarchy that reflects the significance of the inputs that were used in the assessment, according to the following levels:
| 30/06/2013 | 30/06/2012 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets and Liabilities at fair value |
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Held-for-trading financial assets Variable income securities Derivatives |
23 393 - |
- 31 714 |
- - |
23 393 31 714 |
13 184 - |
- 31 922 |
- - |
13 184 31 922 |
|
| Other financial assets at fair value through profit or loss Fixed income securities |
32 319 | - | - | 32 319 | 31 506 | - | - | 31 506 | |
| Available-for-sale financial assets Debt securities Equity securities |
2 250 980 - |
5 223 | - 677 |
2 256 203 677 |
1 361 095 - |
155 053 1 298 |
- 70 |
1 516 148 1 368 |
|
| Total Assets at fair value | 2 306 692 | 36 937 | 677 | 2 344 306 | 1 405 785 | 188 273 | 70 | 1 594 128 | |
| Held-for-trading financial liabilities (Derivatives) Hedging derivatives |
- - |
32 296 89 064 |
- - |
32 296 89 064 |
- - |
35 464 93 490 |
- - |
35 464 93 490 |
|
| Total Liabilities at fair value | 0 | 121 360 | 0 | 121 360 | 0 | 128 954 | 0 | 128 954 |
The Bank is exposed to credit risk, which is the possible loss that arises when the Bank's counterparties fail to fulfil their obligations. In the case of lending, it implies the loss of principal, interest and commissions, in the terms regarding amount, period and other conditions set forth in the contracts. Regarding off-balance sheet risks, it is triggered when the Bank's counterparties fail to fulfil their obligations with third parties, which implies that the Bank has to assume as their own in view of the contract.
The Bank structures the levels of credit risk it is exposed to by establishing pre-defined acceptable risk amounts regarding the borrower or group of borrowers and geographical or business activity segments.
Exposure to credit risk is managed through a regular analysis of the capacity of borrowers and potential borrowers of meeting payment obligations for principal and interest, and by changing these loan limits when appropriate. Exposure to credit risk is also managed in part by obtaining collaterals and personal or corporate guarantees.
The Bank employs a series of policies and practices in order to mitigate credit risk. The most traditional one is securing collaterals at the moment funds are advanced. The Bank implements guidelines regarding the acceptability of specific classes of collaterals or mitigation of credit risk. The main types of collaterals for loans and receivables are:
Property mortgages;
Pledges of operations made within the Bank;
Long term loans to businesses and private individuals usually require collateral; lower amounts and recurring personal loans generally require no collateral. Additionally, with the intention of minimising loss, at the time an impairment indicator for loans and receivables is identified the Bank tries to obtain additional collaterals from the relevant counterparties.
Collaterals held for financial assets, except for loans and advances, are determined by the nature of the instrument. Debt instruments, treasury bonds and other securities usually are not collateralized.
The main objective of these instruments is to ensure that funds are made available to customers as they require them. Loan extension commitments represent non-utilized parts of credit extension authorizations in the form of loans, guarantees or letters of credit. Regarding the credit risk associated with loan extension commitments, the Bank is potentially exposed to a loss in the amount of the total of non-utilized commitments. However, the probable loss amount is much lower than the sum of the nonutilized commitments since loan extension commitments are revocable and depend on a specific customer's credit worthiness. The Bank monitors the maturity of lending commitments since long term commitments usually present a greater credit risk than short term commitments.
As at 30 June 2013 and 2012, maximum exposure to credit risk was as follows:
| 30/06/2013 | 30/06/2012 | |
|---|---|---|
| On-balance sheet | ||
| Deposits w ith banks |
68 853 | 93 999 |
| Financial assets held for trading | 31 714 | 31 922 |
| Other financial assets at fair value through profit or loss | 32 320 | 31 506 |
| Available-for-sale financial assets | 2 256 202 | 1 516 148 |
| Loans and advances to banks | 677 770 | 123 023 |
| Loans and advances to customers | 5 693 052 | 6 109 645 |
| Held-to-maturity investments | 0 | 600 272 |
| Other assets | 222 622 | 85 338 |
| 8 982 533 | 8 591 853 | |
| Off-balance sheet | ||
| Financial guarantees | 445 858 | 474 895 |
| Other guarantees | 113 979 | 92 772 |
| Lending commitments | 662 387 | 695 240 |
| Documentary credits | 45 400 | 34 252 |
| 1 267 624 | 1 297 159 | |
| Total | 10 250 157 | 9 889 012 |
| The table above shows the worst case scenario in terms of the level of exposure to credit risk the Bank faced as at 30 June 2013 and 2012, without considering any collateral held or other credit enhancements. For on-balance sheet assets, the above stated exposure is based on their carrying amount on the balance sheet. |
||
| As can be seen on the table above, 62% of total maximum exposure results from loans and advances to customers (2012: 68.8%). |
The table above shows the worst case scenario in terms of the level of exposure to credit risk the Bank faced as at 30 June 2013 and 2012, without considering any collateral held or other credit enhancements. For on-balance sheet assets, the above stated exposure is based on their carrying amount on the balance sheet.
As can be seen on the table above, 62% of total maximum exposure results from loans and advances
The Bank's management trusts its capacity to control and maintain a minimal exposure to credit risk, which results mainly from its customer portfolio, based on the following assumptions:
The tables below show the exposure of the Bank according to the assets' carrying amount (excluding accrued interest) broken down by activity segment.
| Financial | Public | Property constr. | Other | Private individuals | |||
|---|---|---|---|---|---|---|---|
| 30/06/2013 | Institutions | Sector | & development | industries | Services | Home loans Other loans | |
| Deposits with banks | 68 853 | ||||||
| Financial assets held for trading | 25 343 | 14 910 | 28 | 14 710 | 116 | ||
| Other financial assets at fair value through profit or loss 24 695 | 7 624 | ||||||
| Available-for-sale financial assets | 647 297 | 1 580 023 | 29 560 | ||||
| Loans and advances to banks | 677 770 | ||||||
| Loans and advances to customers | 32 185 | 1 160 451 | 847 452 | 2 114 893 | 1 479 534 | 246 083 | |
| Held-to-maturity investments | |||||||
| Other assets | 120 806 | 90 875 | |||||
| 1 564 764 | 1 710 707 | 1 175 361 | 847 480 | 2 159 163 | 1 479 534 | 246 199 | |
| Financial | Public | Property constr. | Other | Private individuals | |||
| 30/06/2012 | Institutions | Sector | & development | industries | Services | Home loans Other loans | |
| Deposits with banks | 93 999 | ||||||
| Financial assets held for trading | 13 715 | 8 022 | 4 853 | 18 516 | |||
| Other financial assets at fair value through profit or loss 24 300 | 7 206 | ||||||
| Available-for-sale financial assets | 784 430 | 707 451 | 25 634 | ||||
| Loans and advances to banks | 122 904 | ||||||
| Loans and advances to customers | 52 626 | 1 425 546 | 842 249 | 2 330 562 | 1 471 457 | 144 161 | |
| Held-to-maturity investments | 221 124 | 318 351 | 57 026 | ||||
| Other assets | 747 | 72 555 | |||||
| 1 261 219 | 1 158 189 | 1 433 568 | 847 102 | 2 431 738 | 1 471 457 | 144 161 |
The Bank operates fully on the national market. Therefore, it is not relevant to perform an analysis by geographical sector, since there is no identifiable item within a specific economic environment that is subject to differentiated risks or benefits.
Market Risk is the probability of negative impact on the Bank's earnings or capital due to adverse changes in the market prices of the instruments in the trading book, caused by the volatility of equity prices, interest rates and foreign exchange rates.
As at 30 June 2013, the Bank's portfolio amounted to around 2.6 billion euros, of which only around 56 million were classified as financial assets held for trading and other financial assets at fair value through profit or loss (around 2.1% of the securities portfolio), i.e., with direct impact on the Bank's income account.
Due to the small size of this portfolio, this risk and its respective impact is not considered material for the Bank's management. Therefore we have not performed specific analyses to the trading portfolio.
We would like to add that on that date, market risk (debt instruments) represented around 0.2% of capital requirements, calculated pursuant to Instruction No. 23/2007 issued by the Bank of Portugal.
The national currency equivalent, in thousands of euros, of assets and liabilities at sight expressed in foreign currency is as follows:
| 30-Jun-13 | USD | GBP | CHF | JPY | CAD | Other |
|---|---|---|---|---|---|---|
| Assets | ||||||
| Cash and cash equivalents | 549 | 63 | 54 | 39 | 31 | 68 |
| Deposits w ith banks |
14 631 | 11 860 | 286 | 4 | 1 778 | 901 |
| Available-for-sale financial assets | 49 | - | - | - | - | - |
| Loans and advances to banks | 11 684 | 9 854 | - | - | 9 553 | 10 501 |
| Loans and advances to customers | 2 253 | 10 | 1 | - | 22 | 39 |
| Other assets | 1 157 | 4 | 1 | - | 92 | - |
| 30 323 | 21 791 | 342 | 43 | 11 476 | 11 509 | |
| Liabilities | ||||||
| Deposits from banks | 32 473 | 13 489 | - | 31 | 10 | 5 |
| Deposits from customers | 105 410 | 8 459 | 207 | - | 11 391 | 11 549 |
| Other liabilities | 1 489 | 28 | 10 | - | - | 40 |
| 139 372 | 21 976 | 217 | 31 | 11 401 | 11 594 | |
| Foreign exchange forw ards |
106 807 | - | - | - | - | - |
| Net balance sheet position | - 2 242 | - 185 | 125 | 12 | 75 | - 85 |
| 30-Jun-12 | ||||||
| Total assets | 149 919 | 1 602 | 587 | 45 | 1 015 | 9 329 |
| Total liabilities | 146 363 | 6 637 | 507 | 59 | 1 087 | 9 549 |
| Net balance sheet position | 3 556 | - 5 035 | 80 | - 14 | - 72 | - 220 |
The activity of Banco Popular Portugal regarding foreign currency consists in making transactions based on customer operations. In this framework, the overall foreign exchange position of the Bank is virtually non-existent.
Thus, as can be seen, whatever the impact of foreign currency prices on foreign exchange terms, it is financially immaterial for the Bank's income.
The interest rate risk associated with cash flows reflects the risk of changes in the future cash flows of the financial instruments due to changes in the fair value of a financial instrument arising from fluctuations in market interest rates. The Bank is exposed to the risk of fluctuation of the market interest rates for the risks of cash flows and fair value.
The interest rate risk of the balance sheet is measured using a repricing gap model applied to assets and liabilities that are susceptible to interest rate fluctuations. Briefly, this model groups assets and liabilities that are sensitive to fluctuations at fixed time brackets (maturity dates or the first interest rate
revision in case of indexation), from which one calculates the potential impact on the intermediation margin.
| Up to 1 month | 1 to 3 months |
3 to 12 months |
1 to 5 years |
Not sensitive | Total | |
|---|---|---|---|---|---|---|
| Cash and balances w ith central & other banks 68 853 |
- | - | - | 52 219 | 121 072 | |
| Monetary market | 605 515 | 14 272 | - | - | 57 983 | 677 770 |
| Loans and advances to customers | 1 437 322 | 2 424 454 | 1 448 765 | 273 883 | 108 628 | 5 693 052 |
| Securities market | 67 248 | 682 711 | 1 271 456 | 307 107 | 15 783 | 2 344 305 |
| Other assets | - | - | - | - | 744 838 | 744 838 |
| Total Assets | 2 178 938 | 3 121 437 | 2 720 221 | 580 990 | 979 451 | 9 581 037 |
| Monetary market | 1 262 414 | 739 425 | 46 797 | 1 350 000 | 18 340 | 3 416 976 |
| Deposit market | 850 464 | 655 730 | 1 714 097 | 920 703 | 48 611 | 4 189 605 |
| Securities market | 515 000 | - | 165 668 | 384 447 | 1 457 | 1 066 572 |
| Other liabilities | - | - | - | - | 228 178 | 228 178 |
| Total Liabilities | 2 627 878 | 1 395 155 | 1 926 562 | 2 655 150 | 296 586 | 8 901 331 |
| Gap | - 448 940 | 1 726 282 | 793 659 | -2 074 160 | 682 865 | |
| Accumulated gap | - 448 940 | 1 277 342 | 2 071 001 | - 3 159 | 679 706 | |
| M aturity and repricing gap for the Bank's activity as at 30 June 2012 |
||||||
| Gap | -1 807 883 | 2 418 279 | 463 677 | -1135 224 | 602 352 |
The Bank measures the interest rate risk of the balance sheet with a model that analyses assets and liabilities that are vulnerable to interest rate fluctuations. Briefly, this model groups assets and liabilities at fixed time brackets (maturity dates or the first interest rate revision in case of indexation), from which one calculates the potential impact on net interest income.
Accumulated gap -1 807 883 610 396 1 074 073 - 61 151 541 201
In the table below, this model considers a potential 1% immediate impact on interest rates. Consequently, on the date interest rates are revised (both for assets and liabilities), the new interest rates will start to show this effect.
| Up to 1 month | 1 to 3 months |
3 to 12 months |
Over 12 months |
Not sensitive | Total | |
|---|---|---|---|---|---|---|
| Cash and balances w ith central and other banks |
68 853 | - | - | - | 52 219 | 121 072 |
| Monetary market | 605 515 | 14 272 | - | - | 57 983 | 677 770 |
| Loans and advances to customers | 1 437 322 | 2 424 454 | 1 448 765 | 273 883 | 108 628 | 5 693 052 |
| Securities market | 67 248 | 682 711 | 1 271 456 | 307 107 | 15 783 | 2 344 305 |
| Other assets | - | - | - | - | 744 838 | 744 838 |
| Total Assets | 2 178 938 | 3 121 437 | 2 720 221 | 580 990 | 979 451 | 9 581 037 |
| Monetary market | 1 262 414 | 739 425 | 46 797 | 1 350 000 | 18 340 | 3 416 976 |
| Deposit market | 850 464 | 655 730 | 1 714 097 | 920 703 | 48 611 | 4 189 605 |
| Securities market | 515 000 | - | 165 668 | 384 447 | 1 457 | 1 066 572 |
| Other liabilities | - | - | - | - | 228 178 | 228 178 |
| Total Liabilities | 2 627 878 | 1 395 155 | 1 926 562 | 2 655 150 | 296 586 | 8 901 331 |
| Gap | - 448 940 | 1 726 282 | 793 659 | -2 074 160 | 682 865 | |
| Accumulated gap | - 448 940 | 1 277 342 | 2 071 001 | - 3 159 | 679 706 | |
| Impact of a 1% increase | - 94 | 79 | 6 198 | |||
| Accumulated impact | - 94 | - 15 | 6 183 | |||
| Accumulated effect | 6 183 | |||||
| Net interest income | 64 163 | |||||
| Accumulated gap | 9,64% |
This concept assumes that a credit institution will have liquid funds to meet its payment obligations at all times. The Bank is exposed to daily requests of cash available in current accounts, loans and guarantees, margin account needs and other needs related to cash equivalents. The Group does not have cash to meet all these needs, since its experience reveals that the proportion of funds that will be reinvested on the maturity date may be forecasted with a high degree of certainty. Management policy defines limits for the minimum proportion of available funds to meet requests and for the minimum level of interbank facilities and other loans that have to be available to cover withdrawals and unexpected demand levels.
The liquidity management process, as performed by the Bank, includes:
Monitoring and reporting assume the form of cash flow measurement and projection reports for the following day, week and month, since these are important time brackets in terms of liquidity management. The starting point for these projections is an analysis of the contractual maturity of financial liabilities and the expected date for asset cash flows. The cash flow also monitors the degree of non-utilized loan commitments, the use of overdraft facilities and the impact of contingent liabilities such as letters of credit and guarantees.
Regarding the analysis of liquidity risk, besides the obligations established by the Bank of Portugal under the terms of Instruction No. 13/2005, the Bank also resorts to the concept of liquidity gap, i.e., from the balance sheet of the Bank as at 30 June 2013, based on the maturities of assets and liabilities it is possible to ascertain the ratio between the referred to maturities (positive or negative) according to residual maturity dates called liquidity gaps.
The table below presents the Bank's balance sheet (without accrued interest) at the end of June 2013 with the main classes grouped by maturity date:
| Liquidity gap of the balance sheet as at 30 June 2013 | |||||
|---|---|---|---|---|---|
| Up to 1 month | 1 to 3 months |
3 to 12 months |
1 to 5 years |
Over 5 years |
|
| Cash and balances w ith central banks |
52 219 | - | - | - | - |
| Deposits w ith banks |
68 853 | - | - | - | - |
| Financial assets held for trading | 1 103 | 32 | 28 447 | 16 293 | 13 881 |
| Other financial assets at fair value | - | - | 7 624 | 24 695 | - |
| Available-for-sale financial assets | 677 | 19 673 | 56 897 | 1 653 059 | 526 573 |
| Loans and advances to banks | 666 481 | 10 000 | - | - | 1 100 |
| Loans and advances to customers | 753 886 | 448 584 | 972 739 | 1 511 424 | 1 943 117 |
| Held-to-maturity investments | - | - | - | - | - |
| Other assets | 126 | 23 739 | 176 286 | 262 | |
| Total Assets | 1 543 345 | 478 289 | 1 089 446 | 3 381 757 | 2 484 933 |
| Deposits from central banks | - | 400 000 | - | 1 195 000 | - |
| Financial liabilities held for trading | 1 086 | 24 | 6 156 | 16 031 | 13 642 |
| Deposits from banks | 1 394 121 | 212 817 | 44 407 | 155 000 | - |
| Deposits from customers | 1 554 316 | 637 465 | 1 687 942 | 267 335 | - |
| Debt securities issued | - | - | 491 001 | 569 610 | - |
| Hedging derivatives | - | - | 1 860 | ||
| Current tax liabilities | - | - | - | - | |
| Other liabilities | 5 812 | 835 | 13 360 | 65 | 6 449 |
| Total Liabilities | 2 955 335 | 1 251 141 | 2 244 726 | 2 203 041 | 20 091 |
| Gap | -1 411 990 | - 772 852 | -1 155 280 | 1 178 716 | 2 464 842 |
| Accumulated gap | -1 411 990 | -2 184 842 | -3 340 122 | -2 161 406 | 303 436 |
| Liquidity gap as at 30 June 2012 | |||||
| Gap | -1 471 792 | -1 087 268 | - 457 500 | - 410 342 | 3 374 854 |
| Accumulated gap | -1 471 792 | -2 559 060 | -3 016 560 | -3 426 902 | - 52 048 |
As at 30 June 2013, maturities for the contracted amounts of off-balance sheet financial instruments that may commit the Bank to lending and other facilities to customers were as follows:
| 30/06/2013 | Up to 1 month | 1 to 3 months |
3 to 12 months |
1 to 5 years |
Over 5 years |
Undated |
|---|---|---|---|---|---|---|
| Contingent liabilities: | ||||||
| Documentary credit | - | - | - | - | - | 45 400 |
| Guarantees and Sureties | 4 106 | 9 265 | 7 921 | 164 427 | 44 975 | 329 143 |
| Commitments: | ||||||
| Irrevocable loans | - | - | - | - | - | |
| Revocable loans | 30 296 | 44 938 | 201 248 | 20 388 | 102 128 | 263 389 |
| Total | 34 402 | 54 203 | 209 169 | 184 815 | 147 103 | 637 932 |
| 30/06/2012 | Up to 1 month | 1 to 3 | 3 to 12 | 1 to 5 | Over 5 | Undated |
| months | months | years | years | |||
| Contingent liabilities: | ||||||
| Documentary credit | - | - | - | - | - | 34 252 |
| Guarantees and Sureties | 3 455 | 7 012 | 21 608 | 157 956 | 45 781 | 331 859 |
| Commitments: Irrevocable loans |
- | - | - | - | - | 28 |
| Revocable loans | 26 888 | 62 632 | 214 545 | 26 584 | 134 057 | 230 533 |
Banco Popular Group (GBP) has adopted the definition of operational risk contained in the New Basel Accord (Basel II) as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
GBP adopted the Standardised Approach envisaged in BIS II to calculate capital requirements for operational risk, while Banco Popular Portugal is still using the Basic Indicator Approach.
However, Banco Popular Portugal considers it has been abiding by the requirements needed to use the Standardised Approach and therefore filed an application with Banco de Portugal to be allowed to use that approach.
We would like to stress that operational risk consumed around 5.7% of Tier I capital requirements as at 30 June 2013.
In 2012, some initiatives were carried out in the scope of this type of risk, from which we would like to highlight:
Resorting to the statistical analysis of the data that has been recorded for several years and that thus reflects the historical experience of the Bank in this scope, the Bank's top management approved an Operational Risk Tolerance by type of exposure and, from that indicator, a Risk Appetite Level within Banco Popular's Risk Capacity considering the maximum amount allocated to Operational Risk (provisions for covering Operational Risk) each year;
The Bank has identified key risk indicators (KRI) in sensitive areas and manages them aided by a specific module of the qualitative management tool (GIRO).
The Bank provides custody services, guarantees, corporate management services, investment management and third party advisory services. These activities demand the allocation of assets and
purchasing and sale transactions regarding a wide range of financial instruments. These assets, which are kept in fiduciary capacity are not included in these financial statements. As at 30 June 2013, the Bank held investment accounts in the amount of 4 583 404 thousand euros (2012: 6 054 846 thousand euros) and managed estimated financial assets in the amount of 118 488 thousand euros (2012: 144 621 thousand euros).
The main objective of capital management at the Bank is meeting the minimum requirements defined by supervisory entities in terms of capital adequacy and ensuring that the strategic objectives of the Bank in terms of capital adequacy are met.
The definition of the strategy to adopt in terms of capital management is in the scope of the Bank's Executive Board of Directors.
In prudential terms, the Bank is subject to the supervision of the Bank of Portugal, which issues the rules and regulations regarding this matter that guide the several institutions under their supervision. These rules and regulations determine a minimum ratio of total own funds in relation to the requirements demanded due to committed risks, that the institutions must abide by.
The following table presents the composition of the Bank's regulatory capital and the ratios for the periods as at 30 June. During these two periods, the Bank was able to meet all the capital requirements to comply with the law.
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Tier 1 Capital | ||
| Share capital | 476,000 | 451,000 |
| Share premium | 10,109 | 10,109 |
| Statutory reserve | 35,221 | 34,951 |
| General banking reserves | 238,912 | 233,899 |
| Minus: Intangible assets | -2,176 | -2,462 |
| Eligible revaluation differences | -3,463 | -32,775 |
| Deductions pursuant to Instruction 28/2011 | -21,699 | -11,082 |
| Deferred taxes and non-accepted assets | -6,546 | -6,507 |
| Deductions from insurance shareholdings | -2,000 | -2,000 |
| Deductions pursuant to Instruction 120/96 | -21,552 | -20,448 |
| Tier 1 Capital total | 702,806 | 654,685 |
| Tier 2 Capital | ||
| Unrealized gains in | ||
| available-for-sale investments | - | 3 |
| Reserves from revaluation of tangible assets | 2,291 | 3,143 |
| Deductions from insurance shareholdings | -2,000 | -2,000 |
| Tier 2 Capital total | 291 | 1,146 |
| Eligible own funds | 703,097 | 655,831 |
| Risk w eighted assets |
6,360,692 | 7,033,190 |
| Ow n funds requirement ratio |
11.1% | 9.3% |
| Core tier I | 11.4% | 9.6% |
| Tier I | 11.0% | 9.3% |
The Bank makes estimates and assumptions with impact in the reported amount of assets and liabilities in the following year. These estimates and assumptions are continuously assessed and conceived based on historical data and other factors, such as expectations regarding future events.
Every month, the Bank assesses its securities portfolio to evaluate potential impairment losses. In determining whether an impairment loss should be recorded in the income statement, the Bank analyses observable data that may be indicative of a measurable decrease in estimated cash flows both of the trading book and of specific individual cases within a trading book. This analysis may indicate, for example, an adverse event in the capacity of a customer to pay a loan or the worsening of macroeconomic conditions and related indicators. The management uses estimates based on historical data available for assets with similar credit risk and possible impairment losses. The methodology and assumptions used to calculate these estimates are revised regularly aiming at reducing any differences between estimated and actual losses.
The fair value of derivatives and unlisted financial assets was determined based on evaluation methods and financial theories whose results depend on the assumptions that have been used.
The Bank determines that there is impairment of equity investments of available-for-sale assets when there has been a significant or prolonged decline in the fair value below its cost. The needed quantification for the expressions 'significant' and 'prolonged' require professional judgement. When making this judgement, the Bank assesses among other factors the normal volatility of share prices. As a complement, impairment should be recognised when there are events that show the deterioration of the viability of the investment, the performance of the industry and the sector, technological changes and operational and financial cash flows.
Liabilities for retirement and survivor's pensions are estimated based on actuarial tables and assumptions on the growth of pensions and salaries. These assumptions are based on the Bank's expectations for the period when the liabilities are to be settled.
The recognition of a deferred tax asset assumes the existence of profit and a future tax base. Deferred tax assets and liabilities have been determined based on tax legislation currently in effect or on legislation already published for future application. Changes in the interpretation of tax legislation may influence the amount of deferred tax that has been recognised.
The Bank operates essentially in the financial sector and its activity is targeted at businesses, institutional and private individuals customers.
The products and services offered by the Bank include deposits, loans to companies and private individuals, brokerage and custody services, investment banking services, and selling investment
funds and life and non-life insurance. Additionally, the Bank makes short, medium, or long term investments in financial and foreign exchange markets in order to take advantage of price variations or as a means to make the most of available financial assets.
Banco Popular operates in the following segments:
Geographically, Banco Popular operates exclusively in Portugal.
Segmental reporting is as follows:
| 30/06/2013 | Retail Banking |
Commercial Banking |
Other Segments |
Total |
|---|---|---|---|---|
| Interest and similar revenue Interest and similar charges |
62 750 42 650 |
57 172 21 499 |
41 226 32 837 |
161 148 96 986 |
| Revenue from equity instruments | - | - | 47 | 47 |
| Fees and commissions revenue Fees and commissions charges |
12 270 - 382 |
5 137 74 |
11 674 4 691 |
29 081 4 383 |
| Income from Financial Operations (net) | 88 | - 20 | 2 439 | 2 507 |
| Gains from the sale of other assets | - | - | 2 614 | 2 614 |
| Other Operating Income (net) | - | - | - 3 138 | - 3 138 |
| Net assets | 3 364 096 | 2 437 002 | 3 779 939 | 9 581 037 |
| Liabilities | 2 630 853 | 1 647 400 | 4 623 078 | 8 901 331 |
| 30/06/2012 | Retail Banking |
Commercial Banking |
Other Segments |
Total |
|---|---|---|---|---|
| Interest and similar revenue Interest and similar charges |
34 419 - |
105 896 23 |
53 829 112 195 |
194 144 112 218 |
| Revenue from equity instruments | - | - | 55 | 55 |
| Fees and commissions revenue Fees and commissions charges |
24 462 8 834 |
10 843 219 |
2 550 1 103 |
37 855 10 156 |
| Income from Financial Operations (net) | - | 669 | 110 | 779 |
| Gains from the sale of other assets | - | - | - 2 973 | - 2 973 |
| Other Operating Income (net) | - | - | - 599 | - 599 |
| Net assets | 1 970 926 | 3 928 478 | 3 428 022 | 9 327 426 |
| Liabilities | - | - | 8 786 225 | 8 786 225 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Interest and similar income from : | ||
| Cash and cash equivalents | 172 | 380 |
| Deposits w ith banks |
1 270 | 837 |
| Loans and advances to customers | 118 838 | 151 613 |
| Other financial assets at fair value | 669 | 672 |
| Other available-for-sale financial assets | 25 190 | 30 396 |
| Held-to-maturity investments | 14 921 | 10 129 |
| Others | 89 | 117 |
| 161 149 | 194 144 | |
| Interest and similar charges from: | ||
| Deposits from Central Banks | 5 361 | 21 117 |
| Deposits from banks | 6 375 | |
| Deposits from customers | 58 015 | 76 099 |
| Debt securities issued | 16 034 | 6 776 |
| Hedging derivatives | 11 201 | 8 202 |
| Others | - | 23 |
| 96 986 | 112 217 | |
| Net Financial Income | 64 163 | 81 927 |
Balance for this item is as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Available-for-sale financial assets | 47 | 55 |
| 47 | 55 |
These items are broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Revenue from Fees and Commissions from: | ||
| Loans | 8 310 | 9 329 |
| Guarantees and sureties | 3 671 | 3 971 |
| Means of collection and payment | 8 745 | 15 605 |
| Asset management | 1 752 | 2 173 |
| Fees from insurance brokerage | 918 | 783 |
| Account maintenance | 2 538 | 2 349 |
| Processing fees | 821 | 1 018 |
| Structured operations | 913 | 1 207 |
| Others | 1 413 | 1 420 |
| 29 081 | 37 855 | |
| Expenses w ith Fees and Commissions from: |
||
| Means of collection and payment | 2 846 | 8 872 |
| Asset management | 1 234 | 1 021 |
| Promoters and agents | 159 | 148 |
| Others | 144 | 115 |
| 4 383 | 10 156 |
63
This item is broken down as follows:
| 30/06/2013 | 30/06/2012 | |||
|---|---|---|---|---|
| Gains | Losses | Gains | Losses | |
| Financial assets and liabilities held for trading | ||||
| Fixed-income securities | - | - | - | 153 |
| Variable-income securities | 214 | 430 | 254 | 350 |
| Derivative financial instruments | 27 404 | 26 463 | 27 951 | 27 775 |
| 27 618 | 26 893 | 28 205 | 28 278 | |
| Assets and liabilities at fair value through profit or loss | ||||
| Fixed-income securities | 428 | 383 | 2 453 | 767 |
| Variable-income securities | - | - | - | - |
| 428 | 383 | 2 453 | 767 | |
| Hedging derivatives at fair value | 97 557 | 97 557 | 106 194 | 106 194 |
| Available-for-sale assets and liabilities | ||||
| Fixed-income securities | 1 064 | - | 198 | 198 |
| 1 064 | 0 | 198 | 198 | |
| Income from held-for-trading financial assets and liabilities | ||||
| and at fair value through profit or loss | 126 667 | 124 833 | 137 050 | 135 437 |
In the first half of 2013, the Bank received 22.5 thousand euros in dividends from financial assets held for trading (2012: 21.2 thousand euros). In 2012 and 2011 the Bank did not earn any income from financial assets at fair value through profit or loss.
The effect seen in item Hedging derivatives at fair value results from fluctuations in the fair value of hedge instruments (interest rate swaps) and variations in the fair value of hedged assets, resulting from the hedged risk (interest rate). Since the hedging instrument is accounted for in the Available-forsale financial assets portfolio, that variation in fair value is carried from Fair value revaluation reserve to the income statement.
These items are broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Exchange gains | ||
| Spot | 40 | 832 |
| Forw ard |
1 611 | 2 |
| 1 651 | 834 | |
| Exchange losses | ||
| Forw ard |
978 | 166 |
| 978 | 166 | |
| Income from exchange differences (net) | 673 | 668 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Gains from the sale of held-for-trading tangible assets | 401 | 790 |
| Gains from other tangible assets | - | 100 |
| Gains from held-to-maturity investments | 5 065 | - |
| Other operating revenue | - | 348 |
| 5 466 | 1 238 | |
| Losses from the sale of held-for-trading tangible assets | 2 852 | 1 837 |
| 2 852 | 1 837 | |
| 2 614 | - 599 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Contributions to the DGF | - 583 | - 518 |
| Contributions to the Resolution Fund | - 83 | - |
| Other operating expenses | - 1 352 | - 730 |
| Other taxes | - 1 235 | - 1 254 |
| Contribution on the banking sector | - 1 679 | - 1 777 |
| Income from staff transfer | 832 | 824 |
| Income from property | 174 | 277 |
| Other income and operating revenue | 788 | 205 |
| - 3 138 | - 2 973 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Wages and salaries | 20 844 | 21 142 |
| Obligatory social security charges from: | ||
| - Wages and salaries | 5 863 | 5 870 |
| - Pension Fund | 549 | 226 |
| - Other obligatory social security charges | 87 | 186 |
| Other expenses | 570 | 566 |
| 27 913 | 27 990 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| With supplies | ||
| Water, energy and fuel | 866 | 896 |
| Items of regular consumption | 207 | 263 |
| Softw are licences |
115 | 80 |
| Other third party supplies | 149 | 134 |
| With services | ||
| Rents and leasing | 2 249 | 2 518 |
| Communications | 2 033 | 2 117 |
| Travel, hotel and representation | 516 | 484 |
| Advertising and publicity | 1 160 | 1 317 |
| Maintenance of premises and equipment | 2 024 | 2 859 |
| Transports | 522 | 667 |
| Fees and regular payment agreements | 3 202 | 1 555 |
| Legal expenses | 1 296 | 1 341 |
| IT Services | 3 881 | 3 090 |
| Security, surveillance and cleaning | 590 | 768 |
| Temporary w ork |
2 214 | 2 373 |
| External consultants and auditors | 347 | 973 |
| SIBS | 612 | 648 |
| External real estate appraisers | 147 | 495 |
| Services rendered by the parent company | 1 676 | 1 866 |
| Other third party services | 1 306 | 1 227 |
| 25 112 | 25 671 |
Income tax calculation for 2013 was made based on a nominal tax rate of 25% calculated over the tax base, to which a municipal surcharge of 1.5% was applied – levied on taxable income – and a state surcharge of 3% also levied on taxable income from 1.5 to 10 million euros, and of 5% on the remaining amount. In 2011, the state surcharge was 2.5% and levied on taxable income in excess of 2 million euros.
As at 30 June 2013 and 2012, tax expenses on net profit, as well as the tax burden, measured by the relation between income taxes and the profit of the year before those taxes may be summed up as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Current tax on profits | ||
| For the year | 1 911 | 4 049 |
| Adjustments in respect of prior years | - 1 693 | 674 |
| 218 | 4 723 | |
| Deferred tax | ||
| Origination and reversal of temporary differences | 1 067 | - 2 066 |
| Total tax in the income statement | 1 285 | 2 657 |
| Profit before tax | 3 334 | 7 204 |
| Tax burden | 38.5% | 36.9% |
The reconciliation between the nominal tax rate and the tax burden for the years 2013 and 2012, as well as the reconciliation between tax expense/income and the product of accounting profit multiplied by the nominal tax rate, after deferred tax, is analysed as follows:
| 30/06/13 | 30/06/12 | |||
|---|---|---|---|---|
| Taxa de imposto | Valor | Taxa de imposto | Valor | |
| Profit before tax | 3 334 | 7 204 | ||
| Tax at nominal rate | 25.0% | 834 | 25.0% | 1 801 |
| Municipal surcharge after deferred tax | 6.5% | 218 | 13.6% | 980 |
| Autonomous taxation | 5.9% | 197 | 2.3% | 166 |
| Tax benefits | -4.0% | - 132 | -2.0% | - 144 |
| Effect of provisions not acceptable as costs | 3.1% | 102 | -21.7% | - 1 565 |
| Other net value adjustments | 40.2% | 1 339 | 2.5% | 179 |
| Contribution on the banking sector | 12.6% | 420 | 6.2% | 444 |
| Tax from previous years | -50.8% | - 1 693 | 11.0% | 796 |
| 38.5% | 1 285 | 36.9% | 2 657 |
For additional information on deferred tax assets and liabilities see note 28.
Classification of financial assets and liabilities in accordance with IAS 39 categories has the following structure:
| 30/06/2013 | Booked at fair value | AccountsAvailable-for-sale Held-to-maturity Non-fin. | ||||
|---|---|---|---|---|---|---|
| Traded | Fair value | receivableFinancial AssetsInvestments | Assets | Total | ||
| Assets | ||||||
| Cash and balances w ith central banks |
52 219 | 52 219 | ||||
| Deposits w ith other banks |
68 853 | 68 853 | ||||
| Financial assets held for trading | 55 107 | 55 107 | ||||
| Other fin. assets at fair value thr. prof./loss | 32 320 | 32 320 | ||||
| Available-for-sale financial assets | 2 256 879 | 2 256 879 | ||||
| Loans and advances to banks | 677 770 | 677 770 | ||||
| Loans and advances to customers | 5 693 052 | 5 693 052 | ||||
| Held-to-maturity investments | 0 | |||||
| Other assets | 197 635 | 363,883 | 561 518 | |||
| 55 107 | 32 320 | 6 689 529 | 2 256 879 0 |
363 883 | 9 397 718 |
| 30/06/2013 | Booked at fair value | Other Financial | Hedging | Non-financial | |
|---|---|---|---|---|---|
| Traded | Liabilities | Derivatives | Liabilities | Total | |
| Liabilities | |||||
| Deposits from central banks | 1 609 046 | 1 609 046 | |||
| Deposits from banks | 1 807 930 | 1 807 930 | |||
| Financial liabilities held for trading | 32 296 | 32 296 | |||
| Deposits from customers | 4 189 605 | 4 189 605 | |||
| Debt securities issued | 1 066 572 | 1 066 572 | |||
| Hedging derivatives | 89 064 | 89 064 | |||
| Other liabilities | 26 525 | 10 756 | 37 281 | ||
| 32 296 | 8 699 678 | 89 064 | 10 756 | 8 831 794 |
| 30/06/2012 | Booked at fair value | AccountsAvailable-for-sale Held-to-maturity Non-fin. | |||||
|---|---|---|---|---|---|---|---|
| Traded | Fair value | receivableFinancial AssetsInvestments | Assets | Total | |||
| Assets | |||||||
| Cash and balances w ith central banks |
88 220 | 88 220 | |||||
| Deposits w ith other banks |
93 999 | 93 999 | |||||
| Financial assets held for trading | 45 106 | 45 106 | |||||
| Other fin. assets at fair value thr. prof./loss | 31 506 | 31 506 | |||||
| Available-for-sale financial assets | 1 517 516 | 1 517 516 | |||||
| Loans and advances to banks | 123 023 | 123 023 | |||||
| Loans and advances to customers | 6 109 645 | 6 109 645 | |||||
| Held-to-maturity investments | 600,272 | 600 272 | |||||
| Other assets | 80 053 | 483,078 | 563 131 | ||||
| 45 106 | 31 506 | 6 494 940 | 1 517 516 | 600 272 | 483 078 | 9 172 418 |
| 30/06/2012 | Booked at fair value | Other Financial | Hedging | Non-financial | |
|---|---|---|---|---|---|
| Traded | Liabilities | Derivatives | Liabilities | Total | |
| Liabilities | |||||
| Deposits from central banks | 1 200 012 | 1 200 012 | |||
| Deposits from banks | 2 728 987 | 2 728 987 | |||
| Financial liabilities held for trading | 35 464 | 35 464 | |||
| Deposits from customers | 4 009 374 | 4 009 374 | |||
| Debt securities issued | 596 413 | 596 413 | |||
| Hedging derivatives | 93 490 | 93 490 | |||
| Other liabilities | 24 487 | 23 269 | 47 756 | ||
| 35 464 | 8 559 273 | 93 490 | 23 269 | 8 711 496 |
The balance of this item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Cash | 41 348 | 47 240 |
| Demand accounts w ith the Bank of Portugal |
10 871 | 40 980 |
| 52 219 | 88 220 |
Deposits with Central Banks include mandatory deposits with the Bank of Portugal intended to meet legal minimum cash requirements.
The balance of this item is as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Deposits w ith banks in Portugal |
||
| Demand accounts | 368 | 352 |
| Cheques payable | 6 893 | 34 401 |
| Other deposits | 687 | 481 |
| 7 948 | 35 234 | |
| Deposits w ith banks abroad |
||
| Demand accounts | 58 696 | 56 618 |
| Cheques payable | 2 209 | 2 147 |
| 60 905 | 58 765 | |
| 68 853 | 93 999 |
Cheques payable from Portuguese and foreign banks were sent for settlement on the first working day after the reference dates.
The Bank uses the following derivatives:
Currency forward represents a contract between two parties for the exchange of currencies at a determined exchange rate established at the moment of the accomplishment of the contract (forward) for a determined future date. These operations have the purpose of hedging and managing currency risk, through the elimination of the uncertainty of the future value of certain exchange rate, which is immediately fixed by the forward operation.
Interest rate swap, which in conceptual terms can be percept as an agreement between two parties who compromise to exchange (swap) between them, for a specified amount and period of time, periodic payments of fixed rate for floating rate payments. Involving only one currency, this kind of instrument is mainly directed at the hedging and management of the interest rate risk related with the income of a financial asset or a loan or advance's costs that one part is intended to take in a determined future moment.
The fair value of derivative instruments held for trading is set out in the following table:
| 30/Jun/2013 | |||
|---|---|---|---|
| Contract value | Fair value | ||
| (Notional amount) | Assets | Liabilities | |
| Held-for-trading derivatives | |||
| a) Foreign currency derivatives | |||
| Currency forw ards |
5 989 | 34 | 23 |
| b) Interest rate derivatives | |||
| Interest rate sw aps |
425 671 | 31 598 | 32 190 |
| Options | 59 782 | 82 | 83 |
| Total held-for-trading derivatives (assets/liabilities) | 31 714 | 32 296 |
| 30/Jun/2012 | |||
|---|---|---|---|
| Contract value | Fair value | ||
| (Notional amount) | Assets | Liabilities | |
| Held-for-trading derivatives a) Foreign currency derivatives |
|||
| Currency forw ards |
119 841 | 56 | 1 319 |
| b) Interest rate derivatives Interest rate sw aps |
527 389 | 31 806 | 32 883 |
| c) Derivatives - others Options |
27 123 | 60 | 1 262 |
| Total held-for-trading derivatives (assets/liabilities) | 31 922 | 35 464 |
As at 30 June 2013, the fair value of other financial assets and liabilities held for trading was as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Other financial assets | ||
| Variable-yield securities | ||
| Equity stakes | 23 393 | 13 184 |
| 23 393 | 13 184 | |
| Total | 23 393 | 13 184 |
| Total financial assets held for trading | 55 107 | 45 106 |
| Total financial liabilities held for trading | 32 296 | 35 464 |
Set out below is a breakdown of these items:
| Assets | 30/06/13 | 30/06/12 |
|---|---|---|
| Fixed-income securities | ||
| Portuguese government bonds | 7 625 | 7 206 |
| Other foreign debt securities | 24 695 | 24 300 |
| 32 320 | 31 506 |
The item Other foreign debt securities refers to mortgage bonds issued by the Grupo Popular Español.
Public debt securities, as well as mortgage bonds, are managed, and their performance is assessed, taking into consideration their fair value and in accordance with risk strategies and policies, and the information on those items is reported to the Board on that basis.
The Bank does not hold financial liabilities at fair value through profit or loss.
As at 30 June 2013 and 2012, the Bank had no unlisted equity instruments classified as available-forsale financial assets, which, since their fair value cannot be reliably measured, were recognised as costs.
A breakdown of this item is as follows
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Securities issued by residents | ||
| Government bonds - at fair value | 569 588 | 344 317 |
| Other debt securities - at fair value | 53 243 | 89 776 |
| Equity securities - at fair value | 612 | 1 298 |
| 623 443 | 435 391 | |
| Securities issued by non-residents | ||
| Government bonds - at fair value | 1 010 435 | 363 135 |
| Other debt securities - at fair value | 622 936 | 718 920 |
| Equity securities - at fair value | 66 | 70 |
| 1 633 437 | 1 082 125 | |
| Total | 2 256 880 | 1 517 516 |
As a result of the sale of several financial assets classified as held to maturity made in June, the Bank, pursuant to IAS 39, reclassified the remaining assets, in the amount of 935 364 thousand euros, as available for sale.
The difference between the book value and the fair value was directly booked on equity.
The Bank has in its available-for-sale financial assets portfolio an investment of 2 590 thousand euros regarding subordinate bonds (Class D Notes) purchase in June 2002 associated with the securitization of housing loans, in the amount of 250 million euros named Navigator Mortgage Finance No. 1.
In the scope of that securitization operation, assets were acquired by a loan securitization fund named Navigator Mortgage Finance No. 1, which simultaneously issued securitization units fully subscribed by Navigator Mortgage Finance No. 1 Plc, which also issued bonds with the following characteristics:
| Nominal amount | Rating | Interest rate | ||
|---|---|---|---|---|
| thousand euros | Standard & Poors |
Moody's | (until May 2035) | |
| Class A Notes (Senior) | 230 000 | AAA | Aaa | 3-month Euribor + 0.21% |
| Class B Notes (Senior) | 10 000 | A A |
Aa2 | 3-month Euribor + 0.38% |
| Class C Notes (Senior) | 10 000 | A | A 2 |
3-month Euribor + 0.55% |
| Class D Notes (Subordinate) | 4 630 | n.a. | n.a. | n.a. |
Under the terms of the agreement that was signed the Bank did not assume any commitment regarding cash availabilities of the issuer, as well as liquidity lines, credits, guarantees, rights and residual profits, or any other risks, besides the Class D Notes.
Intervening entities:
The nature of loans and advances to banks is as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Loans and advances to banks in Portugal | ||
| Time deposits | 3 173 | 3 167 |
| Loans | 10 000 | 10 000 |
| Other | 93 399 | 101 278 |
| Interest receivable | 98 | 91 |
| 106 670 | 114 536 | |
| Loans and advances to banks abroad | ||
| Time deposits | 292 455 | 7 170 |
| Call options w ith repurchase agreement |
277 996 | - |
| Other | 557 | 1 289 |
| Interest receivable | 92 | 28 |
| 571 100 | 8 487 | |
| 677 770 | 123 023 |
Set out below is a breakdown of loans and advances to banks by period to maturity:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Up to 3 months | 676 429 | 121 745 |
| From 3 months to 1 year | - | - |
| Over 5 years | 1 151 | 1 159 |
| Interest receivable | 190 | 119 |
| 677 770 | 123 023 |
Loans are granted via loan agreements, including overdraft facilities in demand accounts, and by the discount of effects. Total amounts of loans and advances to customers in the balance sheet, by nature, is as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Internal lending operations | ||
| Public sector | 3 430 120 | 3 594 035 |
| Private customers | 1 855 077 | 1 908 312 |
| Residential mortgage loans | 1 446 928 | 1 439 361 |
| Personal and consumer loans | 50 002 | 61 502 |
| Other personal lending | 358 147 | 407 449 |
| 5 285 197 | 5 502 347 | |
| External lending operations | ||
| Public sector | 53 302 | 132 792 |
| Private customers | 18 949 | 20 631 |
| Residential mortgage loans | 15 628 | 16 842 |
| Personal and consumer loans | 49 | 103 |
| Other personal lending | 3 272 | 3 686 |
| 72 251 | 153 423 | |
| Other loans (represented by securities) | 272 300 | 403 400 |
| Interest and commissions receivable | 24 168 | 24 328 |
| Past-due loans and interest | ||
| Due w ithin 90 days |
23 963 | 30 710 |
| Over 90 days | 226 886 | 176 719 |
| 250 849 | 207 429 | |
| Gross Total | 5 904 765 | 6 290 927 |
| Minus: | ||
| Provision for doubtful loans | 63 970 | 68 522 |
| Provision for past-due loans and interest | 147 728 | 112 749 |
| Provision for country risk | 15 | 11 |
| 211 713 | 181 282 | |
| Net total | 5 693 052 | 6 109 645 |
As at 30 June 2013, lending operations included 867 064 thousand euros in mortgage loans assigned to the issuance of mortgage bonds (2012: 780 981 thousand de euros) (note 33).
Set out below is a breakdown of loans and advances to customers by period to maturity:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Up to 3 months | 1 202 470 | 1 446 100 |
| From 3 months to 1 year | 972 739 | 1 011 855 |
| From 1 to 5 years | 1 511 423 | 631 837 |
| Over 5 years | 1 943 116 | 2 969 378 |
| Undetermined maturity (past due) | 250 849 | 207 429 |
| Interest and commissions receivable | 24 168 | 24 328 |
| 5 904 765 | 6 290 927 |
During the first half of 2012, the Bank carried out three credit assignments to the company Consulteam (a subsidiary of BPE in which the Bank has no stake), in the total gross amount of 81.4 million euros for the total amount of 60.9 million euros. This operation had a positive income in the amount of 15.5 million euros due to the cancelling of already constituted provisions.
On 30 January 2013, the Bank assigned loans to Banco Popular Español in the total gross amount of 86.3 million euros for the amount of 86.3 million euros. This operation aimed at concentrating in a sole entity all the credit held on Chamartin Group.
On 28 March 2013, the Bank assigned loans to Consulteam (a subsidiary of BPE in which the Bank has no stake), in the total gross amount of 19.9 million euros for the amount of 19.3 million euros. This operation had a positive income in the amount of 3.3 million euros due to the cancelling of already constituted provisions.
On 31 May 2013, the Bank assigned loans to to Consulteam (a subsidiary of BPE in which the Bank has no stake), in the total gross amount of 63.1 million euros for the amount of 58.3 million euros. This operation had a positive income in the amount of 0.4 million euros due to the cancelling of already constituted provisions.
On 28 December 2012, the Bank assigned loans to Consulteam (a subsidiary of BPE in which the Bank has no stake), in the total gross amount of 50.4 million euros for the amount of 38.3 million euros. This operation had a positive income of 8.6 million euros due the cancelling of already constituted provisions.
The balance of the provision account for specific credit risks is detailed in the following table:
| 30/06/2013 | 30/06/2012 | |
|---|---|---|
| Balance as at 1 January | 185 144 | 162 610 |
| Appropriations | 114 230 | 119 629 |
| Used | 7 205 | 18 551 |
| Cancelled | 80 456 | 82 406 |
| Balance as at 30 June | 211 713 | 181 282 |
| Appropriations for provisions | 114 230 | 119 629 |
| Write-offs | - 80 456 | - 82 406 |
| Recoveries of bad debts | - 1 589 | - 957 |
| Provisions net of w rite-offs and recoveries of bad debts |
32 185 | 36 266 |
The table below was prepared based on the following assumptions:
| 30/06/13 | 30/06/12 | 30/06/13 | 30/06/12 | |
|---|---|---|---|---|
| Private customers | ||||
| Residential mortgage loans | 1 475 434 | 1 481 724 | 121 881 | 121 747 |
| Personal and consumer loans | 52 051 | 62 790 | 21 991 | 20 014 |
| Other personal lending | 120 487 | 128 214 | 46 879 | 36 842 |
| 1 647 972 | 1 672 728 | 190 751 | 178 603 | |
| Corporate customers | ||||
| Loans | 1 754 681 | 2 098 378 | 647 305 | 454 727 |
| Current account | 688 426 | 785 027 | 69 182 | 9 631 |
| Others | 740 285 | 949 814 | 106 380 | 66 979 |
| 3 183 392 | 3 833 219 | 822 867 | 531 337 | |
| 4 831 364 | 5 505 947 | 1 013 618 | 709 940 |
For the following table we have considered past due and outstanding balance of default operations on the maturity dates stated.
| 30/06/12 | |||||
|---|---|---|---|---|---|
| Up to 30 days | 31 to 60 days | 61 to 90 days | Total | Total | |
| Private customers | |||||
| Residential mortgage loans 50 160 | 15 061 | 10 268 | 75 489 | 81 148 | |
| Personal and consumer loans 2 413 | 1 240 | 552 | 4 205 | 5 427 | |
| Other personal lending | 9 354 | 3 890 | 1 459 | 14 703 | 10 158 |
| 61 927 | 20 191 | 12 279 | 94 397 | 96 733 | |
| Corporate customers | |||||
| Loans | 108 334 | 17 118 | 18 017 | 143 469 | 79 725 |
| Current account | 240 | 193 | 105 | 538 | 15 |
| Others | 3 805 | 2 181 | 2 051 | 8 037 | 9 657 |
| 112 379 | 19 492 | 20 173 | 152 044 | 89 397 | |
| Total | 174 306 | 39 683 | 32 452 | 246 441 | 186 130 |
The breakdown of the total gross amount of loans to customers individually considered impaired is as follows:
| 30/06/12 | 30/06/12 | |
|---|---|---|
| Private customers | ||
| Residential mortgage loans 4 724 | 9 746 | |
| Personal and consumer loans 3 | 45 | |
| Other personal lending | 2 463 | 2 010 |
| 7 190 | 11 801 | |
| Corporate customers | ||
| Loans | 436 612 | 404 105 |
| Current account | 37 594 | 72 171 |
| Others | 59 868 | 58 865 |
| 534 074 | 535 141 | |
| Total | 541 264 | 546 942 |
As a result of changes made to the credit impairment model, the Bank considers signs of nonperformance the fact that a customer has an outstanding loan for over 90 days, if they have filed for bankruptcy, or if they have chosen a Special Revitalization Plan (PER). Impaired operations are now subject to individual analysis when the customer has an exposure of over 750 thousand euros.
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Debt instruments - Residents | ||
| Listed securities | ||
| Portuguese government bonds | - | 122 452 |
| Interest receivable | - | 2 265 |
| 0 | 124 717 | |
| Debt instruments - Non-residents Listed securities |
||
| Foreign government bonds | - | 195 899 |
| Other non-resident bonds | - | 278 150 |
| Interest receivable | - | 1 506 |
| 0 | 475 555 | |
| TOTAL | 0 | 600 272 |
In June, the Bank sold several financial assets classified as held to maturity made. As a result of these sales, the Bank, pursuant to IAS 39, reclassified the remaining assets as available for sale. Also as a consequence of these operations the Bank will not be able to classify any financial asset as held to maturity during the current financial year or during the subsequent two financial years.
As at 30 June 2013, the Bank only held an equity stake in the associate company Eurovida – Companhia de Seguros de Vida, S.A., booked for 22 579 thousand euros.
As at 31 December 2011, that equity stake was accounted for in investments in associates. However, based on a public decision announced by BPE Group to sell it, the Bank reclassified that equity stake as non-current assets held for sale.
The most important financial data extracted from the consolidated financial statements of Eurovida, prepared according to the IFRS, as well as the impact of the equity method of accounting, were as follows, as at 30 June 2013.
| Financial consolidated results for | Impact of the application | |||||
|---|---|---|---|---|---|---|
| Eurovida as at 30-06-2013 | of the equity method | |||||
| Effective | Net | Ow ner's |
Net | In consolidation | In net | |
| stake (%) | Assets | equity | profit | reserves | income | |
| 15.9348% | 782 680 | 66 316 | 5 155 | -12 833 | 821 |
This item is broken down as follows:
| 30/06/2013 | ||||||
|---|---|---|---|---|---|---|
| Art and | Tang. Assets | |||||
| Real estate | Equipment | antiques | in progress | Total | Total | |
| Balance as at 1 January | ||||||
| Acquisition costs | 130 001 | 51 244 | 149 | 0 | 181 394 | 184,577 |
| Accumulated depreciation | - 40 099 | - 46 695 | 0 | - 86 794 | -84,644 | |
| Accumulated impairment | - 6 595 | 0 | - 6 595 | -6,595 | ||
| Acquisitions | 68 | 68 | 5,859 | |||
| Transfers | - 752 | |||||
| Acquisition costs | - 752 | - 752 | - 8 627 | |||
| Accumulated depreciation | 752 | 752 | 3 496 | |||
| Disposals / Write-offs | ||||||
| Acquisition costs | - 1 043 | - 1 043 | ||||
| Accumulated depreciation | 722 | 722 | ||||
| Depreciation for the year | - 1 363 | - 1 065 | - 2 428 | -3,404 | ||
| Balance as at 30 June | ||||||
| Acquisition costs | 129 249 | 50 269 | 149 | 0 | 179 667 | 181,809 |
| Accumulated depreciation | - 40 710 | - 47 038 | 0 | - 87 748 | -84,552 | |
| Accumulated impairment | - 6 595 | - 6 595 | -6,595 | |||
| Net amount | 81 944 | 3 231 | 149 | 0 | 85 324 | 90,662 |
This item is broken down as follows:
| 30/06/2012 | ||||
|---|---|---|---|---|
| Softw are |
Diverse | Total | Total | |
| Balance as at 1 January | ||||
| Acquisition costs | 18 610 | 2 097 | 20 707 | 20 767 |
| Accumulated depreciation | - 18 465 | - 2 071 | - 20 536 | - 19 950 |
| Acquisitions Transfers |
87 | 87 | 472 | |
| Acquisition costs | 0 | 0 | ||
| Depreciation for the year | - 50 | - 6 | - 56 | - 428 |
| Balance as at 30 June | ||||
| Acquisition costs | 18 697 | 2 097 | 20 794 | 21 239 |
| Accumulated depreciation | - 18 515 | - 2 077 | - 20 592 | - 20 378 |
| Net amount | 182 | 20 | 202 | 861 |
Deferred taxes are calculated in respect of all the temporary differences using an effective tax rate of 26.5% (2012: 26.5%).
Balances for these items are as follows:
| Balance as at | Equity | Reserves | Balance as at | |||
|---|---|---|---|---|---|---|
| 31/12/12 | Costs | Revenues | Increase | Decrease | 30/06/13 | |
| Deferred Tax Assets | ||||||
| Available-for-sale securities | 45 875 | 7 896 | 16 711 | 37 060 | ||
| Tangible assets | 5 434 | 1 331 | 100 | 4 203 | ||
| Taxable provisions | 15 915 | 4 068 | 3 894 | 15 741 | ||
| Fees and commissions | 184 | 184 | ||||
| Seniority bonus | 1 032 | 40 | 38 | 1 030 | ||
| RGC provisions | 6 546 | 6 546 | ||||
| Other assets/liabilities | 7 410 | 14 | 7 396 | |||
| Tax loss | 0 | 3 444 | 3 444 | 0 | ||
| 82 396 | 8 897 | 7 476 | 7 896 | 16 711 | 72 160 | |
| Deferred Tax Liabilities | ||||||
| Available-for-sale securities | 5 077 | 2 740 | 4 121 | 6 458 | ||
| Retirement pensions | 3 516 | 352 | 3 164 | |||
| Property revaluation | 185 | 2 | 183 | |||
| Shareholdings | 5 413 | 5 413 | ||||
| 14 191 | 0 | 354 | 2 740 | 4 121 | 15 218 |
This item is detailed as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Recoverable government subsidies | 395 | 1 739 |
| Taxes recoverable | 15 267 | 15 193 |
| Escrow accounts |
121 333 | 484 |
| Other debtors | 60 311 | 62 089 |
| Other income receivable | 1 077 | 1 024 |
| Expenses w ith deferred charges |
9 607 | 11 108 |
| Asset operations pending settlement - Diverse | 12 868 | 5 150 |
| Properties from recovered loans | 362 175 | 443 807 |
| Other tangible assets held for sale | 8 779 | 10 133 |
| Pension liabilities | 13 210 | 17 770 |
| Other transactions pending settlement | 11 028 | 500 |
| 616 050 | 568 997 | |
| Impairment of properties from recovered loans | - 49 619 | - 67 155 |
| Provisions for other assets | - 4 913 | - 4 543 |
| 561 518 | 497 299 |
Balances and movements in the accounts of Provisions for other assets are as follows:
| Provisions for other assets | 30/06/13 | 30/06/12 |
|---|---|---|
| Balance as at 1 January | 4 662 | 654 |
| Appropriations | 1 123 | 3 889 |
| Used | 859 | - |
| Cancelled | 13 | - |
| Balance as at 30 June | 4 913 | 4 543 |
Movements in the Properties recovered from loans in the first half of 2013 and 2012 were as follows:
| 30/06/2012 | |||||
|---|---|---|---|---|---|
| Properties | Equipment | Other | Total | Total | |
| Balance as at 1 January | |||||
| Gross amount | 363 930 | 1 305 | 3 865 | 369 100 | 444 020 |
| Accumulated impairment | - 53 390 | - 208 | - | - 53 598 | - 74 143 |
| Net amount | 310 540 | 1 097 | 3 865 | 315 502 | 369 877 |
| Additions | |||||
| Acquisitions | 46 352 | 582 | 1 583 | 48 517 | 38 388 |
| Others | 1 173 | - | - | 1 173 | 3 967 |
| Disposals | |||||
| Gross amount | - 55 936 | - 679 | - | - 56 615 | - 47 491 |
| Decommitment of ow n property |
- | - | 0 | 4 923 | |
| Impairment losses | - 2 436 | - 342 | - | - 2 778 | - 5 917 |
| Used | 4 676 | 186 | - | 4 862 | 10 495 |
| Reversed | 1 841 | 54 | - | 1 895 | 2 410 |
| Balance as at 30 June | |||||
| Gross amount | 355 519 | 1 208 | 5 448 | 362 175 | 443 807 |
| Accumulated impairment | - 49 309 | - 310 | 0 | - 49 619 | - 67 155 |
| Net amount | 306 210 | 898 | 5 448 | 312 556 | 376 652 |
This item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Central banks | ||
| Deposits | 1 595 000 | 1 195 000 |
| Interest payable | 14 046 | 5 012 |
| 1 609 046 | 1 200 012 |
In terms of residual maturity, these funds are broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Forw ard |
||
| Up to 3 months | 400 000 | - |
| 1 to 5 years | 1 195 000 | 1 195 000 |
| Interest payable | 14 046 | 5 012 |
| 1 609 046 | 1 200 012 |
The balance of this item, spot and forward, is composed in terms of nature as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Domestic credit institutions | ||
| Deposits | 152 072 | 153 925 |
| Interest payable | 1 334 | 901 |
| 153 406 | 154 826 | |
| International credit institutions | ||
| Loans | 125 000 | 131 250 |
| Deposits | 509 123 | 2 090 360 |
| Repurchase agreement | 1 019 646 | 351 173 |
| Other funds | 503 | 365 |
| Interest payable | 252 | 1 013 |
| 1 654 524 | 2 574 161 | |
| 1 807 930 | 2 728 987 |
The item International banks – Deposits includes essentially deposits made by the shareholder BPE.
In terms of residual maturity, these funds are broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Spot | 8 007 | 47 323 |
| Forw ard |
||
| Up to 3 months | 1 598 930 | 2 156 457 |
| 3 months to 1 year | 74 407 | 362 043 |
| 1 to 5 years | 125 000 | 30 000 |
| Over 5 years | - | 131 250 |
| Interest payable | 1 586 | 1 914 |
| 1 799 923 | 2 681 664 | |
| 1 807 930 | 2 728 987 |
The balance of this item is composed as follows in terms of nature:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Resident funds | ||
| Demand accounts | 690 478 | 577 115 |
| Time accounts | 3 328 047 | 3 194 354 |
| Savings accounts | 5 478 | 7 325 |
| Cheques payable | 12 023 | 23 503 |
| Other funds | 31 | 44 |
| 4 036 057 | 3 802 341 | |
| Non-resident funds | ||
| Demand accounts | 25 051 | 17 506 |
| Time accounts | 85 949 | 149 445 |
| Cheques payable | 1 | 43 |
| 111 001 | 166 994 | |
| Interest payable | 42 547 | 40 039 |
| 4 189 605 | 4 009 374 |
| In terms of residual maturity, these funds are broken down as follows: | |||||
|---|---|---|---|---|---|
| Spot | 715 529 | 594 621 |
|---|---|---|
| Forw ard |
||
| Up to 3 months | 1 476 253 | 1 633 377 |
| From 3 months to 1 year | 1 687 942 | 1 715 687 |
| From 1 to 5 years | 267 334 | 25 650 |
| Interest payable | 42 547 | 40 039 |
| 3 474 076 | 3 414 753 | |
| 4 189 605 | 4 009 374 |
The balance of this item is broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Cash bonds | - | 18 797 |
| Mortgage bonds | 515 000 | 515 000 |
| Euro Medium Term Note | 545 611 | 60 000 |
| Interest payable | 5 961 | 2 616 |
| 1 066 572 | 596 413 |
During 2010, Banco Popular Portugal constituted a Mortgage Bond Issuance Programme whose maximum amount is 1,500 million euros. In the scope of this programme, the Bank made the first issuance of mortgage bonds in the amount of 130 million euros on 20 December 2010, the second issuance of mortgage bonds in the amount of 225 million euros on 30 June 2011, and the third issuance of mortgage bonds in the amount of 160 million euros on 30 December 2011. This last issuance was fully repurchased by the Bank. securities: 30/06/13 30/06/12
These bonds are covered by a group of residencial and commercial mortgage loans, as well as other assets, that have been segregated as autonomous equity in the Bank's accounts, therefore grating special credit privileges to the holders of these securities over any other creditors. The conditions of the aforementioned issuances are in accordance with Decree-law No. 59/2006, and Notices Nos. 5/2006, 6/2006, 7/2006 and 8/2006 and Instruction No. 13/2006 issued by the Bank of Portugal.
On 30 June 2013, the characteristics of these issuances were the following:
| N ame |
N ominal value |
C arrying value |
Issue dat e |
R eimburse ment dat e |
Int erest f reqeuncy |
Int eres rat e |
R at ing |
|---|---|---|---|---|---|---|---|
| BAPOP Obrgs hipotecárias 20/12/2013 130 000 | 130 057 | 20-12-2010 | 20-12-2013 | M ensal |
Euribor 1M +1,20% |
BBB | |
| BAPOP Obrgs hipotecárias 30/06/2014 225 000 | 225 327 | 30-06-2011 | 30-06-2014 | M ensal |
Euribor 1M +1,20% |
BBB | |
| BAPOP Obrgs hipotecárias 30/12/2014 160 000 | 160 233 | 30-12-2011 | 30-12-2014 | M ensal |
Euribor 1M +1,20% |
BBB |
On 30 June 2013, autonomous equity assigned to these issuances amounted to 872 059 thousand euros (2012: 784 089 thousand euros) (see note 23).
In 2011, Banco Popular Portugal issued the Euro Medium Term Notes Programme in the maximum amount of 2.5 billion euros. In the scope of this programme, the Bank has already issued the following
| Issue date | Serial | Amount | Number | Nominal | Reimbursement |
|---|---|---|---|---|---|
| number | unit value | date | |||
| 29/12/2011 | 1ª | 50 000 | 500 | 100 000 | 29/12/2014 |
| 20/04/2012 | 2ª | 10 000 | 100 | 100 000 | 20/04/2015 |
| 17/09/2012 | 3ª | 91 980 | 9 198 | 10 000 | 17/09/2015 |
| 17/09/2012 | 4ª | 4 148 | 4 148 | 1 000 | 17/09/2014 |
| 02/10/2012 | 6ª | 27 630 | 2 763 | 10 000 | 02/10/2014 |
| 02/10/2012 | 7ª | 20 000 | 20 000 | 1 000 | 02/10/2015 |
| 15/10/2012 | 5ª | 70 781 | 70 781 | 1 000 | 15/10/2015 |
| 25/10/2012 | 9ª | 80 000 | 800 | 100 000 | 25/10/2015 |
| 26/10/2012 | 10ª | 20 000 | 200 | 100 000 | 26/10/2015 |
| 13/11/2012 | 8ª | 37 031 | 37 031 | 1 000 | 13/05/2014 |
| 26/11/2012 | 12ª | 9 319 | 9 319 | 1 000 | 26/02/2014 |
| 11/12/2012 | 11ª | 29 548 | 29 548 | 1 000 | 11/06/2014 |
| 20/12/2012 | 15ª | 15 000 | 15 000 | 1 000 | 20/01/2014 |
| 21/12/2012 | 13ª | 11 715 | 11 715 | 1 000 | 21/03/2014 |
| 21/12/2012 | 14ª | 11 037 | 11 037 | 1 000 | 21/06/2014 |
| 21/12/2012 | 16ª | 1 214 | 1 214 | 1 000 | 21/01/2014 |
| 12/02/2013 | 17ª | 4 585 | 4 585 | 1 000 | 12/02/2014 |
| 26/02/2013 | 18ª | 6 728 | 6 728 | 1 000 | 26/02/2016 |
| 18/02/2013 | 19ª | 12 492 | 12 492 | 1 000 | 18/05/2014 |
| 12/02/2013 | 20ª | 4 060 | 4 060 | 1 000 | 12/02/2014 |
| 26/03/2013 | 21ª | 6 628 | 6 628 | 1 000 | 26/03/2016 |
| 12/04/2013 | 22ª | 5 093 | 5 093 | 1 000 | 12/07/2014 |
| 30/04/2013 | 23ª | 5 142 | 5 142 | 1 000 | 30/06/2016 |
| 28/05/2013 | 24ª | 5 695 | 5 695 | 1 000 | 28/05/2016 |
| 25/06/2013 | 25ª | 5 785 | 5 785 | 1 000 | 25/06/2016 |
| 545 611 |
The item derivatives is composed as follows:
| 30/06/2013 | 30/06/2012 | |||
|---|---|---|---|---|
| Notional amount Liabilities |
Notional amount |
Liabilities | ||
| Interest rate contracts | ||||
| Sw aps |
696 250 | 89 064 | 706 250 | 93 490 |
| 89 064 | 93 490 |
As referred to previously, the Bank covers part of its interest rate risk, resulting from any possible decrease in the fair value of fixed interest rate assets, using interest rate swaps. On 30 June 2013, the net fair value of hedging (see above) and trading interest rate swaps (see note 19) was negative in the amount of -89 656 thousand euros (2012: -94 567 thousand euros).
The fluctuations in the fair value associated with hedged assets and their respective hedging derivatives are registered in the income statement under item Net income from financial operations (see note 9).
Balances and movements for the Provisions account were as follows:
| Other Provisions (Liabilities) - Movements | 30/06/13 | 30/06/12 |
|---|---|---|
| Balance as at 1 January | 54 588 | 61 134 |
| Appropriations | 1 285 | 651 |
| Cancelled | 3 414 | 2 734 |
| Balance as at 30 June | 52 459 | 59 051 |
| Other Provisions (Liabilities) - Balances | 30/06/13 | 30/06/12 |
| Other provisions | 257 | 43 |
| Provisions for general credit risks | 49 575 | 56 998 |
| Other provisions | 2 627 | 2 010 |
| 52 459 | 59 051 | |
This item can be broken down as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Suppliers of goods | 4 113 | 2 856 |
| Tax w ithheld at source |
3 569 | 3 733 |
| Personnel expenses | 11 144 | 11 352 |
| Other expenses | 6 477 | 6 026 |
| Other revenues w ith deferred income |
1 855 | 2 306 |
| Debit instructions charged | 627 | 5 441 |
| Funding operations pending payment | 8 274 | 7 706 |
| Other accruals and deferred income | 1 222 | 8 336 |
| 37 281 | 47 756 |
The Pension Plan of Banco Popular Portugal is a scheme of benefits that comprehends all the benefits foreseen in the Collective Bargaining Agreement that regulates the banking sector in Portugal
The fund assumes the liabilities with past services of former employees in the proportion of their time of service. As a counterpart it from the amount of liabilities we deduct the amount of liabilities with past services of current employees as regards the time of service rendered in other institutions in the banking sector. These liabilities for past services are calculated pursuant to IAS 19 Revised.
The Pension Plan of the executive members of the Board of Directors intends to ensure payment for old age pensions, disability pensions and survivor's pensions for the executive members of the Bank's Board of Directors.
With the publication of Decree-law No. 1-A/2011, of 3 January, the employees comprehended by the Collective Bargaining Agreement and in active life on 4 January 2011 started to be comprehended within the General Social Security Scheme ('Regime Geral da Segurança Social' - RGSS) as regards the benefits of old age pensions. Therefore, from that date on the benefits plan defined for employees comprehended in the Collective Bargaining Agreement as regards retirement pensions started to be funded by the Pension Fund and Social Security. However, the Pension Fund still has the responsibility, after 4 January 2011, to cover liabilities on death, disability and survivor's pensions, as well as the old age complement in order to match the retirement of the participants in the Pension Fund to the amounts of the current pension plan.
According to guidelines derived from the Note issued on 26 January 2011 by the National Council of Financial Supervisors, the Bank has kept with reference to 31 December 2010 the recognition and measurement method for past services of active employees regarding the events transferred to the RGSS used in previous years.
In accordance with Decree-law No. 127/2011 of 31 December, Banco Popular Portugal transferred to Social Security the liabilities for pensions in payment on 31 December 2011, as well as part of the assets that comprise the pension fund that covered said liabilities. The liabilities transferred amounted to 6.3 million euros and have already been fully paid (55% in December 2011 and 45% in March 2012).
This transference was recorded in the income statement in the amount of 795 thousand euros due to the allocation of the proportional part of accumulated actuarial deviations and the actuarial deviations originated by the difference in actuarial assumptions used for the calculation of the transferred liabilities. Pursuant to Decree-law No. 127/2011, of 31 December, this amount shall be deductable for effects of determining taxable profit, in equal parts, from the fiscal year started on 1 January 2012, regarding the average of the number of years of life expectancy of the pensioners whose responsibilities have been transferred having been booked the respective deferred taxes on the settlement account recognized in the operating result for the year.
Until December 2012, the Bank recognized the net accumulated amount (after 1 January 2004) of actuarial gains and losses resulting from changes in the financial and actuarial assumptions and differences between the financial and actuarial assumptions used and the actual amounts in the item Other Assets or Other Liabilities – Actuarial deviations. Accumulated actuarial gains and losses were deferred in an account on the assets or liabilities side ('corridor'), up to a limit of 10% of the highest of the current value of liabilities for past services or the value of the pension funds. Accrued actuarial gains and losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.
On 1 January 2013, and as stated in 2.19 Changes in the Accounting Policy for Recognizing Actuarial Deviations, Banco Popular changed its accounting policy for the recognition of actuarial and financial deviations of the pension plans and other post-employment benefits with defined benefit pursuant to IAS 19 Revised. Actuarial and financial gains and losses are now booked in the period they occur directly on equity in the Statement of Comprehensive Income.
On 30 June 2013, the number of participants in the fund was 1 147 (2012: 1 167). On this date there were 36 retired people and 11 pensioners, while the remaining are employees in service.
| Past Services | 30/06/13 | 30/06/12 |
|---|---|---|
| Defined benefit obligation at the beginning of the year 108 961 | 94 708 | |
| Service expenses: | ||
| Bank | 618 | 328 |
| Employees | 378 | 369 |
| Interest expense | 2 488 | 2 275 |
| Pensions paid | - 431 | - 307 |
| Actuarial deviations | - 1 564 | 403 |
| Defined benefit obligation as at 30 June | 110 450 | 97 776 |
The liabilities assumed for retirement and survivor's pensions are as follows:
Every year, the Bank determines the amount of obligations for past services through actuarial calculations using the Projected Unit Credit method for obligations with past services due to old age and the Successive Single Premiums method for the calculation of disability and survivor's benefits. The discount rate is determined based on market rates for bonds issued by low risk companies with a similar maturity to that of the settlement of the liabilities.
Obligations for survival and disability, foreseen in the Collective Bargaining Agreement and insurable are covered by the subscription of a multi-protection life insurance policy for the population at stake, except for those whose urgency of disability or survival is considered unfit to insure.
This is an annual renewable temporary contract in which the Insurance company guarantees the Pension Fund of Banco Popular Portugal, S.A., in case of death or disability assessed at 66% or more according to the National Table for Disability, for any of the people comprehended within the insured group, the payment of the hired premiums.
This insurance contract was signed with Eurovida – Companhia de Seguros de Vida S.A., an insurance company that is an associate of Banco Popular Portugal, SA.
The movements occurred in the equity of the pension fund were as follows:
| Equity amount of the Fund | 30/06/13 | 30/06/12 |
|---|---|---|
| Amount at the beginning of the year | 121 796 | 113 703 |
| Contributions paid | ||
| Employer | - | - |
| Employees | 378 | 369 |
| Return on Fund assets | 2 217 | 4 979 |
| Pensions paid | - 431 | - 3 175 |
| Other net differences | - 300 | - 329 |
| Amount of the Fund as at 30 June | 123 660 | 115 547 |
| Current obligations for past services | 110 450 | 97 776 |
| Hedging level | 112.0% | 118.2% |
The evolution of the pension fund's asset value in the past five years was the following:
| 31/12/12 | 31/12/11 | 31/12/10 | 31/12/09 | 31/12/08 | |
|---|---|---|---|---|---|
| Current obligations amount | 108 961 | 94 708 | 102 746 | 105 838 | 93 532 |
| Pension Fund Assets | 121 796 | 113 703 | 118 246 | 110 346 | 93 234 |
| Net Assets/(Obligations) | 12 835 | 18 995 | 15 500 | 4 508 | - 298 |
| Hedging amount | 111.8% | 120.1% | 115.1% | 104.3% | 99.7% |
On each reporting date, Banco Popular Portugal assesses the recoverability of the possible excess in the fair value of the assets included in the pension fund in face of the liabilities for retirement pensions, based on expectation of reduction in the necessary future contributions.
As at 30 June the structure of the Pension Fund by asset class was the following:
| Type of assets | 30/06/2013 | 30/06/2012 |
|---|---|---|
| Fixed income securities | 61.10% | 61.41% |
| Variable income securities | 24.20% | 15.06% |
| Real estate | 7.25% | 8.72% |
| Liquidity | 7.45% | 14.81% |
| 100.00% | 100.00% |
Regarding the credit risk of the assets with debt characteristics that comprise the fund's assets the exposure by rating was structured as follows:
| Ratings | 30/06/2013 | 30/06/2012 |
|---|---|---|
| AAA | 0.60% | 0.65% |
| A A |
2.52% | 4.25% |
| A | 14.00% | 14.14% |
| BBB | 76.37% | 76.24% |
| Other (NR) | 6.51% | 4.72% |
| 100.00% | 100.00% | |
As at 30 June 2013, the Fund had 50 Euro Medium Term Notes issued on 29 December 2011 by Banco Popular Portugal in the amount of 5 203 thousand euros. During the first half of 2013, these bonds showed a positive change in the fair value by 193 thousand euros.
The amounts recognized as costs for the year are broken down as follows:
| Cost for the year | 30/06/13 | 30/06/12 |
|---|---|---|
| Service Cost | 996 | 697 |
| Interest cost | 2 488 | 2 275 |
| Expected return on Fund assets | - 2 776 | - 2 726 |
| Others | - 182 | - 41 |
| Total | 526 | 205 |
The amount of actuarial gains and losses during 2012 and 2011 are broken down as follows:
| Actuarial gains and losses | 31/12/12 | 31/12/11 |
|---|---|---|
| Gains/losses as at 1 January | 2 931 | - 3 070 |
| Actuarial losses for the year - obligations | - 9 016 | 3 718 |
| Actuarial gains / losses for the year - Fund | 6 820 | - 5 713 |
| Actuarial losses for the year | - | 795 |
| Transfer of obligations to SS | - | 7 201 |
| Off-balance actuarial gains/losses as at 31 December | 735 | 2 931 |
The main actuarial and financial assumptions used were as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Assumptions | Assumptions | |
| Discount rate | 4.50% | 4.75% |
| Expected return of Fund assets | 4.50% | 4.75% |
| Salaries and other benefits increase rate | 2.0% | 2.0% |
| Pensions increase rate | 1.0% | 1.0% |
| Mortality table | TV 88/90 | TV 88/90 |
| Disability table | ERC Francona | ERC Francona |
| Turnover | n.a | n.a. |
The following table shows the contractual amount of off-balance financial instruments, which imply lending to customers.
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Contingent liabilities | ||
| Guarantees and Sureties | 559 837 | 567 667 |
| Documentary loans | 45 400 | 34 252 |
| Commitments | ||
| Irrevocable loans | 763 543 | 651 455 |
| Revocable loans | 662 387 | 695 240 |
| 2 031 167 | 1 948 614 |
On 30 June 2013, the item Irrevocable loans included the amount of 5 314 thousand euros (2012: 5 314 thousand euros) regarding forward liabilities for the Deposit Guarantee Fund regarding the part of annual contributions which, pursuant to the deliberations of the Fund, were not paid in cash.
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Assets pledged as collateral | 3 179 265 | 1 658 391 |
The amount of the item Assets pledged as collateral includes 1 656.5 thousand euros in loans pledged as collateral to the European Central Bank and 1 522.7 thousand euros from the Bank's own portfolio aimed, almost entirely, at collateralizing an irrevocable credit line with the Bank of Portugal pursuant to the large-amount payment system ('Sistema de Pagamentos de Grandes Transacções – SPGT') and the Intervention Operations Market ('Mercado de Operações de Intervenção' - MOI)
Additionally, as at 30 June 2013 and 2012, the balances regarding off-balance sheet accounts were as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Deposit and custody of securities Amounts received for collection |
4 583 404 95 738 |
6 054 846 101 919 |
| 4 679 142 | 6 156 765 |
Pursuant to the decision made by the General Meeting on 20 December 2012, the Bank did a capital increase from 451 million euros to 476 million euros.
This increase, in the amount of 25 million euros, corresponded to the issuance of 25 000 thousand new shares with the nominal value of 1 euro each and was entirely subscribed by Banco Popular Español.
Consequently, as at 30 June 2013, the Bank's share capital was represented by 476 000 thousand shares with the nominal value of 1 euro each, which was subscribed and fully paid by Banco Popular Español, SA.
The amount recognised in item Share premiums originated in the premiums paid by shareholders in the share capital increases made in 2000, 2003 and 2005.
The movements in this account are detailed on the following table:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Revaluation reserves and Fair Value | ||
| Available-for-sale investments | ||
| Net balance as at 1 January | - 113 155 | - 236 775 |
| Revaluation at fair value | 38 474 | 54 866 |
| Deferred taxes | - 10 195 | - 14 539 |
| Balance as at 30 June | - 84 876 | - 196 448 |
| Revaluation reserves ( Legal provisions ) | 2 291 | 3 143 |
| Balance as at 30 June | - 82 585 | - 193 305 |
Revaluation reserves regarding available-for-sale assets result from the adequacy to the fair value of the securities in the Bank's portfolio. These balances shall be reversed through the income statement at the time the securities that originated them are disposed of or in case there is any impairment.
The revaluation reserve regarding the adequacy to fair value of tangible assets for own use is related to the property on Rua Ramalho Ortigão (note 26).
The revaluation reserve for tangible assets calculated in accordance with Decree-law No. 31/98 shall only be moved when it is considered realized, total or partially, and pursuant to the following priorities:
The balances of the accounts for other reserves and retained earnings are analysed as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Legal reserve | 35 221 | 34 951 |
| Other reserves | 289 027 | 285 753 |
| Retained earnings | - 50 115 | - 47 074 |
| 274 133 | 273 630 |
The movements in the items reserves and retained earnings were as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Legal reserve | ||
| Balance as at 1 January | 34 951 | 33 607 |
| Transf. Retained Earnings | 270 | 1 344 |
| Balance as at 30 June | 35 221 | 34 951 |
| Other reserves | ||
| Balance as at 1 January | 286 548 | 273 665 |
| Transf. Retained Earnings | 2 422 | 12 088 |
| Transf. Revaluation Reserves | 57 | - |
| Balance as at 30 June | 289 027 | 285 753 |
| Retained earnings | ||
| Balance as at 1 January | - 51 119 | - 51 854 |
| Net income for the previous year | 2 692 | 13 432 |
| Diff. from changed accounting critera (IFRS) | 1 004 | 4 780 |
| Transf. Legal Reserve | - 270 | - 1 344 |
| Transf. Other Reserves | - 2 422 | - 12 088 |
| - 50 115 | - 47 074 | |
| 274 133 | 273 630 |
The legal reserve can only be used to absorb accumulated losses or to increase 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 number of employees of the Bank according to professional category was as follows:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Directors | 94 | 95 |
| Management | 457 | 455 |
| Technical personnel | 517 | 493 |
| Clerical staff | 237 | 269 |
| 1 305 | 1 312 |
The annual amounts earned by the members of the Board of Directors and the Supervisory Board are detailed, individually and in group, on the following table:
| Fixed Remun. |
Variable Remun. - Cash |
Total Remun. |
|
|---|---|---|---|
| Board of Directors | |||
| Rui Manuel Morganho Semedo - Chairman | 196 787 | 100 000 | 296 787 |
| Carlos Manuel Sobral Cid da Costa Álvares | 38 407 | 0 | 38 407 |
| 196 787 | 100 000 | 296 787 | |
| Supervisory Board | |||
| Rui Manuel Ferreira de Oliveira - Chairman | 4 800 | 0 | 4 800 |
| António José Marques Centúrio Monzelo - Member | 3 000 | 0 | 3 000 |
| Telmo Francisco Salvador Vieira - Member | 3 000 | 0 | 3 000 |
| 10 800 | 0 | 10 800 |
The remunerations earned and the number of number of employees who have responsibilities in terms of risk taking regarding the Bank or its customers as well as those who assume control functions pursuant to Notice 5/2008 issued by the Bank of Portugal are detailed below:
| No. of Benef. |
Fixed Remun. |
Variable Cash Remun. |
Total Remun. |
|
|---|---|---|---|---|
| Executive Committee | 7 | 538 301 | 196 000 | 734 301 |
| Risk Management | 1 | 31 146 | 6 000 | 37 146 |
| Compliance | 1 | 32 958 | 4 000 | 36 958 |
| Asset Management | 1 | 47 652 | 7 000 | 54 652 |
| Auditing | 1 | 29 808 | 10 000 | 39 808 |
| 11 | 679 864 | 223 000 | 902 864 |
The amounts paid to the Audit Firm PricewaterhouseCoopers in the first half of 2012 and 2013 were:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Statutory audit | 76 | 87 |
| Other guarantee and reliability services | 108 | 173 |
| 184 | 260 |
As at 30 June 2013 and 2012, the amounts payable and receivable regarding related companies were as follows:
| Credit | Debit | Income | Expense | |||||
|---|---|---|---|---|---|---|---|---|
| 30/06/13 | 30/06/12 | 30/06/13 | 30/06/12 | 30/06/13 | 30/06/12 | 30/06/13 | 30/06/12 | |
| Eurovida, SA | 4 025 | 4 063 | 113 883 | 111 935 | 1 206 | 937 | 3 231 | 2 039 |
| Popular Gestão de Activos, SA | - | - | 1 890 | 2 072 | 677 | 463 | 1 | 7 |
| Popular Factoring, SA | 97 862 | 104 422 | - | - | 1 504 | 2 266 | 187 | 187 |
| Imopopular Fundo Especial I.I. | 12 703 | 1 104 | 208 | 475 | 162 | 20 | - | - |
| Popular Arrendamento | 3 | - | - | - | 13 | - | 3 | - |
| Popular Seguros, SA | - | - | 679 | 1 729 | 281 | 268 | 15 | 28 |
| SPE-Special Pourpuse Entities | 2 699 | 3 156 | - | - | 948 | 303 | - | - |
| 117 292 | 112 745 | 116 660 | 116 211 | 4 791 | 4 257 | 3 437 | 2 261 | |
| Banco Popular Español, SA | 499 272 | 389 956 | 2 197 193 | 3 084 238 | 17 894 | 124 758 | 132 441 | 155 221 |
As at 30 June 2013, the guarantees pledged by the Bank to related companies amounted to 8 431 thousand euros (2012: 26 052 thousand euros).
As at 30 June 2013, the Bank received deposits from BPE to guarantee the risk associated with loans granted by the Bank in the amount of 172 491 thousand euros (2012: 76 289 thousand euros).
Transactions with related companies are based on common market conditions.
As at 30 June 2013, the members of the Bank's Board of Directors only held deposits in the amount of 9 thousand euros.
For effects of the cash flow statement, Cash and cash equivalents include the following balances with maturity inferior to 90 days:
| 30/06/13 | 30/06/12 | |
|---|---|---|
| Cash (note 17) | 41 348 | 47 240 |
| Cash and balances w ith banks (note 18) |
68 853 | 93 999 |
| Deposits w ith banks w ith maturities of less than 3 months |
398 433 | 111 745 |
| 508 634 | 252 984 |
Had the Bank's individual financial statements been prepared according to the International Financial Reporting Standards (IAS/IFRS), they would show the following changes:
After applying the IFRS, the accounting policies would reflect the following changes:
a) Loans and advances to customers
According to the IFRS the accounting policies applicable to loans and advances to customers correspond to what is stated on item 2.1 of the Notes to the Financial Statements, except for credit provisioning as foreseen in Notice No. 3/95 issued by the Bank of Portugal, which is replaced by impairment determined according to the below described model.
In compliance with the conceptual model on which impairment calculations are based, every month an analysis is carried out to the overall credit portfolio divided into three main groups: default portfolio, non-performing portfolio and performing loans.
The segmentation of the portfolio for subsequent analysis is based on grouping credit operations into six different groups according to the counterparty's classification: significant default exposures (of customers with total liabilities of above 750 thousand euros); homogenous default exposures (regarding the remaining default customers); significant non-performing exposures (of entities with total liabilities of above 750 thousand euros); homogenous non-performing exposures (regarding the remaining customers that show default signals); significant performing exposures (regarding customers with total liabilities above 2,500 thousand euros); and homogeneous performing exposures.
The analysis of each of these groups is carried out as follows:
i) 'Homogenous' groups
In the case of the homogenous exposures group, we carry out a historical analysis of the relative default frequencies or an estimate of PD (probability of default), of PI (probability of non-performing signals), PID (probability of future default of operations that show non-performing signals) and, in the universe of default operations, of LGD (loss given default). We build a random sample for each subsegment to perform a case-by-case analysis and to validate their respective historical LGD.
The probability of default and of non-performing loans to default, calculated based on monthly portfolios for 5 years between the first historical month and the reference date (exclusive), result from the ratio of performing operations in a given moment to those that show default or default signals in the subsequent period, taking into consideration the observations in between periods. Subsequent periods vary according to the specific characteristics of the homogenous segment where they are included.
The LGDs that will be applied to each homogenous segment are obtained after analysing a random sample, based on the weight of the portfolio on the date of the analysis with a 95% confidence interval. Afterwards, every historical cash flow for those operations is obtained. In the case of operations that haven't been settle we also consider estimates of loan recovery based essentially on collaterals that guarantee them and apply haircuts according to the date these were assessed.
For losses associated with off-balance sheet exposures (revocable commitments, guarantees granted and documentary credit) a conversion factor (CCF) is applied in order to assess the percentage of these exposures that may have been converted into balance sheet exposures in the subsequent year.
This conversion factor is reviewed every year and results from the analysis of the execution of guarantees granted and the usage of available credit lines.
These exposures are subjected to an individual analysis regarding the estimate of recovery for each of the operations with Banco Popular taking into consideration the actual situation of each customer and the characteristics of those operations, namely their collaterals.
The analysis that is performed on these customers is mostly based on the current situation of credit operations (non-default/default) and the current state of the collaterals associated with those same operations. For the entire universe of customers that do not show any default signs and have been granted credit above 2 500 thousand euros an individual analysis is carried out.
Whenever no impairment losses were identified during the individual analysis, these operations have been included in the respective non-default homogenous segments with the application of its respective PD, PI, PID, and LGD.
With respect to property for own use at the date of transition to IFRS (1 January 2006) we have elected to use the option provided by IFRS 1 using fair value as deemed cost obtained through an assessment made by independent experts, considering the difference between that amount and the property's carrying value in retained earnings minus deferred tax. That amount becomes the cost amount on that date subject to future depreciation.
Estimates for material adjustments that would derive from changes in accounting policies alluded to in the previous number, and the reconciliation between the balance sheet, the income statement and the statement of changes in equity in conformity with AAS for the ones resulting from the application of IFRS are presented in the following tables:
| 30/06/2013 30/06/2012 AAS IFRS AAS Net amount Net amount Adjust. Net amount Adjust. Assets Cash and balances w ith central banks 52 219 52 219 88 220 Deposits w ith banks 68 853 68 853 93 999 Financial assets held for trading 55 107 55 107 45 106 Other financial assets at fair v alue through profit or loss 32 320 32 320 31 506 Av ailable-for-sale financial assets 2 256 880 2 256 880 1 517 516 Loans and adv ances to banks 677 770 677 770 123 023 Loans and adv ances to customers 5 693 052 - 47 356 5 645 696 6 109 645 - 55 026 Held-to-maturity inv estments 0 0 600 272 Non-current assets held for sale 22 579 22 579 0 Other tangible assets 85 324 9 791 95 115 90 662 9 791 Intangible assets 202 202 861 |
(€ thousand) |
|---|---|
| IFRS | |
| Net amount | |
| 88 220 | |
| 93 999 | |
| 45 106 | |
| 31 506 | |
| 1 517 516 | |
| 123 023 | |
| 6 054 619 | |
| 600 272 | |
| 0 | |
| 100 453 | |
| 861 | |
| Inv estment in subsidiaries and associates 0 0 22 579 |
22 579 |
| Current income tax assets 3 053 3 053 0 |
0 |
| Deferred income tax assets 72 160 - 333 71 827 111 518 - 19 |
111 499 |
| Other assets 561 518 561 518 497 299 |
497 299 |
| Total Assets 9 581 037 - 37 898 9 543 139 9 332 206 - 45 254 |
9 286 952 |
| Liabilities | |
| Deposits from central banks 1 609 046 1 609 046 1 200 012 |
1 200 012 |
| Financial liabilities held for trading 32 296 32 296 35 464 |
35 464 |
| Deposits from banks 1 807 930 1 807 930 2 728 987 |
2 728 987 |
| Due to customers 4 189 605 4 189 605 4 009 374 |
4 009 374 |
| Debt securities issued 1 066 572 1 066 572 596 413 |
596 413 |
| Hedging deriv ativ es 89 064 89 064 93 490 |
93 490 |
| Prov isions 52 459 - 48 612 3 847 59 051 - 55 097 |
3 954 |
| Current income tax liabilities 1 860 1 860 3 996 |
3 996 |
| Deferred income tax liabilities 15 218 2 594 17 812 11 682 2 595 |
14 277 |
| Other liabilities 37 281 37 281 47 756 |
47 756 |
| Total Liabilities 8 901 331 - 46 018 8 855 313 8 786 225 - 52 502 |
8 733 723 |
| Equity | |
| Share capital 476 000 476 000 451 000 |
451 000 |
| Share premium 10 109 10 109 10 109 |
10 109 |
| Fair v alue reserv es - 82 585 4 905 - 77 680 - 193 305 4 054 |
- 189 251 |
| Other reserv es and retained earnings 274 133 5 250 279 383 273 630 4 707 |
278 337 |
| Profit for the y ear 2 049 - 2 035 14 4 547 - 1 513 |
3 034 |
| Total Equity 679 706 8 120 687 826 545 981 7 248 |
553 229 |
| Total Liabilities + Equity 9 581 037 - 37 898 9 543 139 9 332 206 - 45 254 |
9 286 952 |
| (€ thousand) | ||||||
|---|---|---|---|---|---|---|
| 30/06/2013 | 30/06/2012 | |||||
| AAS | Adjust. | IFRS | AAS | Adjust. | IFRS | |
| Interest and similar income | 161 149 | 161 149 | 194 144 | 194 144 | ||
| Interest ex pense and similar charges |
96 986 | 96 986 | 112 217 | 112 217 | ||
| Net interest income | 64 163 | 0 | 64 163 | 81 927 | 0 | 81 927 |
| Return on equity instruments |
47 | 47 | 55 | 55 | ||
| Fees and commissions receiv ed |
29 081 | 29 081 | 37 855 | 37 855 | ||
| Fees and commission paid | 4 383 | 4 383 | 10 156 | 10 156 | ||
| Net gains from financial assets at fair v alue |
0 | |||||
| through profit or loss | 769 | 769 | 1 613 | 1 613 | ||
| Net gains from av ailable-for-sale financial assets |
1 064 | 1 064 | - 1 503 | - 1 503 | ||
| Net gains from foreign ex change differences |
673 | 673 | 668 | 668 | ||
| Net gains from the sale of other assets | 2 614 | 2 614 | - 599 | - 599 | ||
| Other operating income | - 3 138 | - 3 138 | - 2 973 | - 2 973 | ||
| Operating income | 90 890 | 0 | 90 890 | 106 887 | 0 | 106 887 |
| Personnel ex penses |
27 913 | 27 913 | 27 990 | 27 990 | ||
| General administrativ e ex penses |
25 112 | 25 112 | 25 671 | 25 671 | ||
| Depreciation and amortization | 2 483 | 2 483 | 3 832 | 3 832 | ||
| Prov isions net of rev ersals |
- 2 129 | - 2 129 | - 2 083 | - 2 083 | ||
| Adjustments to loans and adv ances to customers |
||||||
| (net of rev ersals) |
32 185 | 2 769 | 34 954 | 36 266 | 2 058 | 38 324 |
| Impairment of other financial assets net of rev ersals |
0 | 0 | 611 | 611 | ||
| Impairment of other assets net of rev ersals |
1 992 | 1 992 | 7 396 | 7 396 | ||
| Net income before tax | 3 334 | - 2 769 | 565 | 7 204 | - 2 058 | 5 146 |
| Income tax | 1 285 | - 734 | 551 | 2 657 | - 545 | 2 112 |
| Current tax | 218 | 218 | 4 723 | 4 723 | ||
| Deferred tax | 1 067 | - 734 | 333 | - 2 066 | - 545 | - 2 611 |
| Net income for the period | 2 049 | - 2 035 | 14 | 4 547 | - 1 513 | 3 034 |
Reconciliation of changes in equity as at 30 June 2013 and 2012
| (€ thousand) | ||||||
|---|---|---|---|---|---|---|
| Share Capital |
Share premium |
Fair value reserves |
Other reserves and retained |
Net income |
Total | |
| Balances as at 30-06-2013 - AAS | 476 000 | 10 109 | - 82 585 | earnings 274 133 |
2 049 | 679 706 |
| Credit impairment - Adjustments - regulatory prov isions - Deferred tax |
4 025 | - 2 769 734 |
- 2 769 4 759 |
|||
| Valuation of ow n property |
||||||
| - Fair v alue - Deferred tax |
7 500 - 2 595 |
2 291 - 1 066 |
9 791 - 3 661 |
|||
| Balances as at 30-06-2013 - IFRS | 476 000 | 10 109 | - 77 680 | 279 383 | 14 | 687 826 |
| Share Capital |
Share premium |
Fair value reserves |
Other reserves and retained |
Net income |
Total | |
|---|---|---|---|---|---|---|
| Balances as at 30-06-2012 - AAS | 451 000 | 10 109 | - 193 305 | earnings 273 630 |
4 547 | 545 981 |
| Credit impairment - Adjustments - regulatory prov isions - Deferred tax |
2 128 - 564 |
- 2 058 545 |
70 - 19 |
|||
| Valuation of ow n property - Fair v alue - Deferred tax |
6 649 - 2 595 |
3 143 | 9 792 - 2 595 |
|||
| Balances as at 30-06-2012 - IFRS | 451 000 | 10 109 | - 189 251 | 278 337 | 3 034 | 553 229 |
By letter dated 26 July 2013, the Bank of Portugal communicated to Banco Popular that under the scope of its recent transversal auditing action, involving the eight largest banking groups operating in Portugal, minimum impairment levels have been defined for a set of customers that show relevant default signals in their respective credit quality.
As a result of this resolution, Banco Popular increased its provisions for general credit risks in the amount of 22 082 thousand euros in July.
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