consolidated results

Reuters: BANIF.LS
Bloomberg: BANIF PL
ISIN: PTBAF0AM0002
www.banif.pt/investors
2013
CONSOLIDATED RESULTS
Lisbon, February 3rd 2014
Unaudited Results
CONSOLIDATED RESULTS: January to December 2013
Delivery of the recapitalization strategy:
1. Capital increase in the total amount of Euro 311.5
million, between June and October 2013.
Delivery on the
Recapitalization
Plan
2. Repurchase
the
State’s
contingent
convertible
subordinated bonds (CoCos) in the amount of Euro
150 million, in August.
Activity Highlights:
In line with the objective to redefine Banif’s geographic presence, within the scope of the
Restructuring Plan, the disposal of the control participations in Banif
- Banco
Internacional do Funchal (Brasil), SA, Banif Bank (Malta), PLC and Banco Caboverdiano
de Negócios (BCN) is currently on course, which is expected to be executed during 2014.
In this context, these operations are now classified as discontinued operations, and
continue to be consolidated by the full consolidation method in the financial statements
as of 31 December 2013, with the impact on results presented on a separate line item in
the profit and loss account, defined as income arising from discontinued operations, while
for comparative purposes, the profit and loss account as at 31 December 2012 has been
restated.
Net interest income (NII) improvement: in 2013, NII
stood at Euro 124.7 million, which corresponds to an increase
of 18.7% over 2012. Excluding the interest expenses related
to the CoCos, which reached Euro 30.6 million in 2013, the
Operational
NII would have increased 47.8% on a YoY basis. Throughout
performance
2013, the NII experienced a positive trend as a result of the
recovery
strong focus on funding cost reduction. In 4Q2013, the NII
rose 9.2% QoQ (excluding discontinued operations).
Operating income improvement: in 2013, operating
income stood at Euro 194.1 million having increased 40.5%
YoY driven by the growth of NII and by the increase in gains
from financial operations.
2
Consolidated Results – 2013
Continued
reduction
of
operating
costs:
in
2013
operating costs totalled Euro 236.8 million, representing a
Euro 34.7 million drop versus 2012 (or -12.8% YoY). The
evolution of operating costs reflects the impact of the
rationalization and optimization measures adopted by the
Group in order to adapt to the prevailing context of banking
business activity. In 2012, operating costs had already
decreased 9.3% YoY. In this context, it is worth highlighting
the reduction in headcount of 179 employees, of which 113
in Portugal, and the reduction of 30 branches in 2012 and
36 in 2013.
Total net provisions and impairments: in 2013 stood at
Euro 366.1 million, a 15.5% YoY decrease. The year of 2013
was characterized by the impact of the prudential asset
quality review performed as a result of the indication
provided by the Bank of Portugal, in the amount of Euro
61.1 million (accounted in 2Q13); and the implementation,
in the 4Q13 of a new methodology, in terms of impairment
assessment, applied to the loan book and which explains the
significant
increase
in
impairments
in
Q4.
This
new
methodology reflects a more conservative approach and is
more sensitive to the economic cycle, was applied to the
statistical model for the collective impairment but also for
the assessment of the credit recoverability analysed on an
individual basis. As a result, there was a significant
reinforcement in terms of coverage of overdue loans (> 90
days) which rose from 81.9% in 2012 to 98.6% in 2013.
There was also a reinforcement of the impairment charges
associated with real estate assets. The impact of the
abovementioned prudential criteria exceeded Euro 120
million in the last quarter.
Consolidated net income totalled Euro -470.3 million
which compares with the Euro -584.2 million attained in
2012. The net income of 2013 was strongly penalized by
i) the reinforcement of net provisions and impairments
(Euro
366.1
million);
ii)
income
arising
from
3
Consolidated Results – 2013
discontinued operations, namely Brazil with a negative
contribution of Euro 95.8 million; iii) interest expenses
related to the CoCos (Euro 30.6 million), and iv) costs
related
to
the
recapitalization
process
(Euro
13.2
million).
Liquidity
Commercial gap improvement: reduction by Euro 81
reinforcement
million over 2012 and by Euro 444 million over the 3Q2013
(excluding the effect of discontinued operations), and loans
to deposit ratio at 126.4%.
Reinforcement of capital levels:
Capital ratios at
The core tier 1 stood at 11.16% in December 31,
sound levels and
2013,
significantly above
requirements.
significantly
above
the
regulatory
the regulatory
requirements
4
Consolidated Results – 2013
Main key indicators
(Euro millions, except if stated otherwise)
Dec-13
Dec-12
D
194.1
138.2
40.5%
Operating costs (exluding D&A)
-236.8
-271.5
-12.8%
Provisions & impairments
-366.1
-433.1
-15.5%
-96.9
-81.7
-18.5%
-470.3
-584.2
19.5%
Dec-13
Dec-12
D
98.6%
81.9%
16.6pp
126.4%
126.5%
-0.1pp
11.16%
11.16% (2)
0.0pp
Results
Operating income
Income from discontinued operations
Net income
Asset quality
Impairment for loan losses / overdue loans > 90 days
Liquidity
Loans-to-deposits ratio
(1)
Capital
Core Tier ratio 1 (1)
(1) Calculated in accordance with the definition of the Bank of Portugal
(2) Calculated in accordance with the definition of the Bank of Portugal and considering the effect of the recapitalization
approved by the State in December, 31 2012 and implemented in January, 25 2013.
5
Consolidated Results – 2013
Highlights: 2013
Operating income: Euro 194.1 million, +40.5% YoY;
Results
NII: Euro 124.7 million, +18,7% YoY;
Net fees: Euro 72.4 million, -11.4% YoY;
Gains on financial operations: Euro 30.9 million
compares to Euro -12.2 million in the same period of
2012.
Other operating income: Euro-36.3 millions, +6,6% YoY
Operating costs: Euro 236.8 million, -12.8% YoY.
Net provisions and impairments: Euro 366.1 million,
-15,5% YoY.
Consolidated net results amounted to Euro -470.3 million
and compares with Euro–584.2 million in 2012.
Balance
On-balance customer resources: Euro 7.7 billion.
Loan Book (gross): Euro 9.1 billion.
Loans to deposits ratio: 126.4%.
Liquidity
Core Tier I Ratio as of December 31st, 2013:11.16%.
Capital
6
Consolidated Results – 2013
Balance Sheet
(million Euro)
Dec-13
Dec-12
Cash and balances at central banks
152.3
184.1
Deposits with banks
186.8
210.1
Financial assets held for trading
40.1
214.7
Financial assets at fair value through profit or loss
73.7
79.3
1,782.0
755.6
Available-for-sale financial assets
Loans and advances to banks
Loans and advances to customers
Held-to-maturity investment securities
Financial assets with repurchase agreements
117.5
367.5
7,969.0
9,807.4
12.1
36.3
0.0
26.2
1,607.0
403.1
Investment property
827.6
924.4
Other tangible assets
247.7
307.0
Non-current assets held for sale
Intangible assets
17.1
26.3
129.6
118.6
3.4
17.2
Deferred tax assets
240.4
251.8
Other assets
197.2
257.3
Total Assets
13,603.5
13,986.9
Investments in associates, affiliates and joint ventures
Current tax assets
Deposits from central banks
3,077.6
2,804.1
Financial liabilities helding for trading
28.8
116.2
Financial liabilities at fair value through profit or loss
12.4
14.0
Deposits from banks
348.7
689.1
Customer accounts and other loans
6,303.3
7,750.4
Financial liabilities
1,258.1
1,711.6
Non-current liabilities held for sale
Provisions
Current tax liabilities
Deferred tax liabilities
994.3
0.0
13.4
31.3
5.4
5.9
48.4
63.1
Instruments representing capital
260.1
2.0
Other subordinated liabilities
154.3
228.1
Other liabilities
Total Liabilities
Share capital
Issue premiums
Other equity instruments
Own shares
Revaluation reserves
219.3
205.5
12,723.9
13,621.3
1,582.2
570.0
199.8
104.6
0.0
95.9
0.0
-0.1
-18.8
-2.1
Other reserves and retained earnings
-483.0
97.4
Profit for the period
-470.3
-584.2
Minority interests
Total Equity
Total Equity + Liabilities
69.7
84.2
879.6
365.6
13,603.5
13,986.9
7
Consolidated Results – 2013
Income Statement
(million Euro)
Dec-13
Dec-12
D 13/12
491.2
647.9
-24.2%
-366.5
-542.9
-32.5%
124.7
105.1
18.7%
2.4
2.4
2.1%
72.4
81.7
-11.4%
Fees and commission income
94.7
111.3
-14.9%
Fees and commission expense
-22.3
-29.5
-24.6%
30.9
-12.2
-
Interest and similar income
Interest and similar expense
Net interest income
Dividend income
Net fees and commissions
Gains and losses in financial operations
Other operating income
-36.3
-38.9
6.6%
194.1
138.2
40.5%
-128.3
-147.7
-13.1%
Selling and General Administrative costs
-82.3
-92.8
-11.3%
Depreciation and amortisation
-26.1
-30.9
-15.5%
-0.2
-6.9
-97.4%
-298.3
-317.8
-6.1%
-7.4
-37.1
-80.0%
-60.2
-71.3
-15.6%
0.8
1.1
-23.5%
-407.9
-565.3
27.8%
34.8
61.6
-43.6%
-373.2
-503.7
25.9%
-96.9
-81.7
-18.5%
-0.2
1.3
-
-470.3
-584.2
19.5%
Operating revenue
Personnel costs
Provisions net of reinstatement and write-offs
Loans impairment net of reversals
Impairment of other financial assets net of reversals and recovery
Impairment on other assets net of reversals
Equity accounted earnings
Profits before tax
Taxes
Profits after tax
Income from discountinued operations
Minority interests
Net income for the period
8
Consolidated Results – 2013
Activity in 2013
Results
In 2013 operating income rose 40.5% on a YoY basis to Euro 194.1 million influenced by:
The NII improvement that reached Euro 124.7 million in 2013 (+18.7% YoY).
Excluding the effect of the interest expenses related to CoCos, which in 2013
amounted to Euro 30.6 million, NII would have increased 47.8% YoY. Moreover, NII
experienced a positive trend throughout 2013 as a result of the focus on funding cost
reduction. In 4Q2013, the NII rose 9.2% QoQ (excluding discontinued operations).
The decrease in net commissions of 11.4% YoY to Euro 72.4 million, which is
explained by i) the negative impact of legislative changes related to commissioning of
overdrafts with effects from the 2nd semester and ii) the decrease of the banking
activity both in the retail and investment banking activities.
Gains on financial operations that totalled Euro 30.9 million mostly explained by
capital gains on the sale of fixed income securities (Euro 32.4 million).
Favourable evolution of other operating income which stood at Euro -36.3 million
impacted by the devaluation and sale of real estate assets that reached Euro -59.7
million in 2013 versus Euro -68.6 million in 2012.
Operating Income: Structure
(Euro million)
100%
138.2
40.5%
194.1
80%
37.3%
60%
59.2%
17.2%
40%
20%
0%
64.2%
76.1%
-7.1%
-18.7%
-1,8%
-20%
Dez/12
Net Interest income
Net Trading income
Dez/13
Fees & Commisions
Other operating income
9
Consolidated Results – 2013
Operating Costs totalled Euro 236.8 million in 2013. The Euro 34.7 million reduction (12.8% YoY) reflects the impact of the optimization and rationalization measures adopted
by the Group in the context of lower banking activity. In this context, it is important to
highlight the headcount reduction of 179 employees in 2013, of which 113 in Portugal
and the closing of branches that in Portugal reached 36 branches in 2013.
Total net provisions and impairments: in 2013 stood at Euro 366.1 million, a 15.5%
YoY decrease. The year of 2013 was characterized by the impact of the prudential asset
quality review performed as a result of the indication provided by the Bank of Portugal, in
the amount of Euro 61.1 million (accounted in 2Q13); and the implementation, in the
4Q13, of a new methodology, in terms of impairment assessment, applied to the loan
book which explains the significant increase in impairments in Q4. This new methodology
reflects a more conservative approach and is more sensitive to the economic cycle, was
applied to the statistical model for the collective impairment but also for the assessment
of the credit recoverability analysed on an individual basis. As a result, there was a
significant reinforcement in terms of coverage of overdue loans (> 90 days) which rose
from 81.9% in 2012 to 98.6% in 2013. There was also a reinforcement of the
impairment charges associated with real estate assets. The impact, in the last quarter, of
the abovementioned prudential criteria exceeded Euro 120 million.
Consolidated net income totalled Euro -470.3 million which compares with the Euro 584.2 million attained in 2012.
The net income of 2013 was strongly penalized by i) the reinforcement of net provisions
and impairments (Euro 366.1 million); ii) income arising from discontinued operations,
namely Brazil with a negative contribution of Euro 95.8 million; iii) interest expenses
related to the CoCos (Euro 30.6 million), and iv) costs related to the recapitalization
process (Euro 13.2 million).
10
Consolidated Results – 2013
Balance Sheet
Net Assets amounted to Euro 13,603.5 million, on December, 31st 2013, decreasing
2.7% versus December 2012. Notice that in this period, the acquisition of sovereign
Portuguese debt amounted to approximately Euro 1.1 billion, through the use of
resources related to the capital increase and hybrid financial instruments subscribed by
the Portuguese State in the context of the recapitalisation plan.
Total gross loan book reached Euro 9,129.2 million as of December, 31st 2013
decreasing by 16.3% YoY. The effect in the loan portfolio related to discontinued
operations totalled Euro 788.3 million. Excluding this effect, total gross loan book would
have decreased 9.1%. This evolution reflects the deleveraging effort mainly in non core
sectors undertaken by the Bank and a global context of lower demand for credit by
households and firms, associated with the current recessionary environment, in particular
the sharp contraction in demand in the domestic market.
With the aim of supporting the financial needs of the Portuguese companies, Banif
launched a program of commercial Leads that offers Euro 500 million of financing to
SMEs in the industrial and agro-business sectors. The Bank’s strategic commercial
repositioning based on a strong support to the companies (micro and SME) lead to a
stabilization of the credit stock in the 4Q13.
Loans to customers - gross
(Euro millions)
Dec-13
Dec-12
D
3,620
4,149
-12.8%
2,885
3,073
-6.1%
Consumer Loans
522
589
-11.4%
Other Loans
657
725
-9.4%
1,445
1,428
1.2%
788
940
-16.2%
9,918
10,905
-9.1%
Corporate
Individuals
Mortgage Loans
Others
Discontinued units
Total
Others includes overdue loans > 30 days.
On December, 31st 2013 the overdue loans (>90 days) in percentage of the total loans
stood at 12.9%, strongly affected by the reduction of credit stock since overdue loans,
excluding the effect of discontinued operations, in absolute terms, remained broadly
stable.
11
Consolidated Results – 2013
On December 31st, 2013, customer deposits reached Euro 6,303.3 million, decreasing
18.7% versus December, 2012. The effect in deposits related to discontinued operations
totalled Euro 663 million. Excluding this effect, deposits would have decreased 10.1%.
This performance is largely explained by a reduction in deposits from State authorities
and central administration (as a consequence of the recapitalization process) and a
downward revision of the pricing of deposits, on the back of the focus on funding costs
reduction. Notice that the stock of saving products increased significantly since the
beginning of the year in the Bank’s deposit portfolio (from around 40% in the beginning
of 2013 to 80% by the end of the year) while the amount of non-standard deposits,
associated to a high level of volatility in terms of its remuneration, decreased significantly
(from around 60% in the beginning of 2013 to 20% by the end of the year), reinforcing
the stability of this source of funding.
In 4Q2013 there was an inversion in the downward trend of deposits that rose 2.2% QoQ
(excluding the impact of discontinuing operations). This positive evolution is a result of a
closer and more proactive focus on the higher value segments of private, affluent and
upper mass market customers, as well as on the emigrant community with close ties to
Madeira and the Azores, a strategy that is expected to be further consolidated in 2014.
This strategy together with the expected recovery of the economic activity in Portugal,
should continue to have a positive impact on the bank resources in 2014. Furthermore,
the constant renewal in terms of resources portfolio based on saving products in
detriment of non-standard deposits should result in the continued reduction of the cost of
funding, essential to allow a NII reinforcement.
The “off balance assets” amounted to Euro 1,993.1 million as of December 31st, 2013.
Total Customer Resources
(Euro million)
Dec-13
Total customer resources
Deposits
Other liabilities
Total off-balance sheet resources
Discontinued units
Total
Dec-12
D
8,841
9,834
-10.1%
6,303
7,233
-12.9%
544
581
-6.3%
1,993
2,021
-1.4%
962
1,020
-5.7%
9,802
10,854
-9.7%
12
Consolidated Results – 2013
Transformation ratio: evolution
126.5%
4Q12
131.2%
128.4%
131.8%
1Q13
2Q13
3Q13
126.4%
4Q13
As of December 31s, 2013 the loans-to-deposits ratio reached 126.4%, compared to
126.5% at December 31, 2012.
The net exposure to the European Central Bank (ECB) increased Euro 273.5 million,
compared to December 2012, totalizing Euro 3,077.6 million at the end of December
2013, which represents a significantly decrease versus the 3Q2013. In 2013 the assets
available for discount at the ECB rose to Euro 501 million.
The lower exposure to the ECB accomplished in the 4Q13 reflects an inversion of the
trend of the first 9 months of the year when, as a counterpart of the recapitalisation
process, it took place the amortization of a Government guaranteed bond issue (in the
amount of Euro 300 million) and the reduction in deposits from government and central
administration (in the amount of Euro 115 million). In 4Q13 the increase of customer
resources and the use of other funding sources lead to a considerable decrease in the
exposure to the ECB. In December Banif placed with investors Euro 180 million of ABS
notes - Atlantes Finance No 6 – backed by auto loans, auto leases and consumer
loans originated by Banif and Banif Mais.
Total resources: Breakdown as of 31/12/2013
7.3%
25.6%
55.3%
11.7%
Deposits & equivalents
Own debt funds
Central Banks
Equity
13
Consolidated Results – 2013
Equity before non-controlling interests, increased 187.8% compared to December
2012, and amounted to Euro 809.9 million at the end of December 2013, mainly
explained by: i) the share capital increase of Euro 700 million subscribed by the
Portuguese State and Euro 311.5 million subscribed by private shareholders; ii)
accumulated net results between January and December 2013 (Euro -470.3 million) and
iii) the decrease of revaluation reserves (Euro -16.6 million).
It should be highlighted that in 2013 several share capital increase operations occurred:
a) a private placement (June 2013) subscribed by reference shareholders in the amount
of Euro 100 million; b) a public offering (July 2013) in the amount of Euro 100 million; c)
a private placement addressed to a group of private investors (August 2013) in the
amount of Euro 40.7 million and d) a public exchange offer in the amount of Euro 70.8
million (October 2013)
The Core Tier 1 ratio (according to the Bank of Portugal) as of December 2013 stood at
11.16%, unchanged
versus December, 31 2012 (considering the effect of the
recapitalization approved by the State at December 31 and implemented in January 25,
2013). In 2013, on top of several important adjustments made to the balance sheet, the
Group proceeded to the repurchase of Euro 150 million of CoCos, which explains that the
ratio was kept above the 11% threshold.
14
Consolidated Results – 2013
Commercial Network & Employees
The network distribution
(*)
decreased from 430 to 387, between December 2012 and
December 2013. The number of banking branches in Portugal decreased from 331 to 295
in the same period while 30 banking branches were closed in Portugal in 2012.
The total number of employees(*) in December, 2013 reached 3.196, which compares to
3.375 in December, 2012 totalling a headcount reduction of 611 employess in 2012 and
2013.
(*)
Excludes the distribution network of Companhia de Seguros Açoreana and Banca Pueyo, as both companies are consolidated
through the equity method.
15
Consolidated Results – 2013
Major Events in 2013
January 16, 2013: General Meeting of Shareholders approved the recapitalization
Plan and the resort to public investment through the subscription by the Portuguese
State of 70.000.000.000 new shares (special shares), with a unit value of €0.01 and
the issuance of contingent convertible bonds eligible as Core Tier I, in the amount of
Euro 400 million. This General Meeting also approved the share capital increase of
Euro 450 million to be held until June 30, 2013 and to be subscribed by private
investors, with the suppression of preference rights of shareholders to be held until
June 30, 2013.
March 4, 2013: Publication of the Despacho nº 3454-A/2013 approving the
appointment, with effect from February 22, of Dr. António Carlos Custódio de Morais
Varela as a non-executive member of the Board of Directors and Dr. Rogério Pereira
Rodrigues as a member of the Audit Board of the Bank.
May, 2013: Launch of the campaign “500 milhões para quem não baixa os braços” to
provide financing to the industrial and agro-business sectors.
June 2013: Prize award "Best Asset Management Company in Portugal", to Banif
Asset Management by magazine "World Finance”.
June 25, 2013: General Meeting of Shareholders to amend the bylaws of the Bank in
order to enable the realization of the capital increase of Euro 450 million in several
phases, with the suppression of preference rights of shareholders.
June 26, 2013: Registration on CRC of the capital increase of Euro 100 million,
through a private placement of 10.000.000.000 shares subscribed at a unit value of
€0.01, subscribed by reference shareholders, in compliance with the commitment
established under the Recapitalization Plan.
July 05, 2013: Publication of the Prospectus of the Euro 100 million increase in share
capital and up to Euro225 million bond issue reserved to the shareholders, with the
subscription period occurring between 08-19 July and 24 to 26 July, respectively.
July 30, 2013: registration on CRC of the capital increase of Euro 100 million, though
a public offer of 10.000.000.000 shares subscribed at a unit value of €0.01.
16
Consolidated Results – 2013
August 05, 2013: Registration on CRC of the capital increase of Euro 40.7 million,
through private subscription of 4.700.000.000 shares subscribed at a unit value of
€0.01.
August 29, 2013: repurchase of the 1st tranche of CoCo’s to the Portuguese State, in
the amount of Euro 150 million.
August 30, 2013: Changes in the composition of the Board of Directors with a
reduction of its executive members from 8 to 5.
October 09, 2013: Registration on CRC of the capital increase of Euro 700 thousand
by conversion of VMOCs.
October 16, 2013: Registration on CRC of the capital increase of Euro 70.8 million,
through Public Exchange Offer of securities through the issuing of 7,079,522,043
shares.
November
25,
2013:
Issue
of
senior
unsecured
notes
in
the
amount
of
US$50,000,000, fixed rate US$ 2013/2016 and a 3 year maturity.
December 7, 2013: Banif announced the creation of the fund Banif Portugal
Crescimento with an initial capital contribution of Euro 50 million, fully subscribed
by Banif. Banif Portugal Crescimento is expected to carry out investments in a
regular and on-going manner in the coming years, prioritizing the primary and
secondary sectors and thus contributing to the revitalization of the Portuguese
economy.
December 18, 2013: Banif placed with investors Euro 180 million of ABS notes Atlantes Finance No 6 – backed by auto loans, auto leases and consumer loans
originated by Banif and Banif Mais. Citibank and Banif - Banco de Investimento,
SA were Joint lead managers and arrangers of the transaction that was rated
“Single A” by Standard & Poor’s.
December 20, 2013: Publication of the results of the public offering: 80,000
bonds amounting to Euro 80 million. The listing of the bonds occurred on
December 24, 2013.
17
Consolidated Results – 2013
The Board of Directors
Banif SA
Listed Company
Registered Office: Rua de João Tavira, 30 – 9004-509 Funchal
Share Capital: Euro 1.582.195.220,43
Corporate Tax Number 511 202 008
18
Consolidated Results – 2013