Nine Months Results - Net Income Up 90.6%
BANCO COMERCIAL PORTUGUES SA
27 October 1999
BANCO COMERCIAL PORTUGUES ('BCP')
NET INCOME UP 90.6% TO EUR 393 MILLION (PTE 78.7 BILLION)
FOR THE FIRST NINE MONTHS OF 1999
(Lisbon, October 26, 1999) Banco Comercial Portugues (BCP, NYSE BPC,
BCPPRA), Portugal's leading private bank, today reported consolidated net
income of EUR 392.6 million (PTE 78.7 billion) for the first nine months of
1999, 90.6% up on the same period of 1998. Earnings per share increased to
EUR 1.97 (PTE 394.6) from EUR 1.15, while return on equity improved to 31.5%
and return on assets to 1.5%.
30 Sept. 99 30 Sept. 99 30 Sept. 98 Change
Accumulated Accumulated Accumulated 99/98
PROFITABILITY INDICATORS PTE EUR EUR
-----------------------------------------------------------------------------
Net Income (PTE billion
and EUR million) 78.71 392.59 206.014 90.6%
Earnings per share 394.6 1.97 1.15 71.5%
ROE 31.5% 23.6% -
ROA 1.5% 0.9% -
-----------------------------------------------------------------------------
'The first nine months of 1999 have seen the BCPAtlantico Group consolidate
its position as the market leader in the Portuguese financial sector.
We are pleased to report that we have met our targets for revenue and
earnings growth and remain confident about the outlook for the remainder
of the year', commented Mr. Jardim Goncalves, Chairman and CEO of BCP,
adding: 'We continue to experience strong growth in client activity
across several franchises, in particular loan granting and insurance and
card businesses. The level of profitability attained reflects the adoption
of rigorous risk and pricing policies without compromising overall business
growth. At the same time, we are reaping the benefits of continuous
improvements in productivity and efficiency which stem from significant and
well-timed investments in innovative distribution channels and in
exploiting synergies at ServiBanca'.
BCPAtlantico has strengthened its prominent position in Portugal, within a
framework characterised by continuing intense competition and by increasingly
difficult differentiation of financial groups' offers. At the end of
September 1999, BCPAtlantico Group accounted for 15% of total assets, 20% of
total loans to customers and 14% of total balance sheet customers' funds
within the Portuguese banking sector. The Group is also the domestic
leader in insurance, asset management and specialised finance (leasing and
factoring).
Net income for the first nine months of 1999 includes the impact of the
break-up of the strategic alliance with BSCH in the second quarter of the
year, while during the first nine months of 1998 it was influenced by
the flotation of a 32.2% shareholding in Atlantico. Excluding these
factors, net income rose 33.4%, amounting to EUR 193 million (PTE 38.6
billion). Commercial activity performed well - the growth of loans granted
being worth-noting - while the growing diversification of income,
reflected in the growth of commissions, more than offset the narrowing
of the net interest margin. The increase in operating costs was slower
than the expansion of business, so maintaining the improving trend in
efficiency.
Net interest income increased by 10.4% up to EUR 648 million (PTE 130.0
billion) for the first nine months of 1999 from EUR 587 million during the
same period of 1998. This was due to the result of the increase in the
amount of loans granted which more than compensated for the impact of the
slight decrease in the net interest margin to 3.0%.
30 Sept. 99 30 Sept. 98
Accumulated Accumulated
OPERATING INDICATORS
-------------------------------------------------------------
Net Interest Margin 3.0% 3.1%
Other Income/Total Income (1) 60.1% 59.7%
Operating Costs/Total Income (1) 45.2% 47.1%
-------------------------------------------------------------
(1) Excluding the impact of the break-up of the strategic agreement between
BCP and BSCH.
Reflecting the Group's strategy to diversify the income structure, the weight
of other income as a percentage of total income continued to increase,
rising to 60.1% for the first nine months of 1999 from 59.7% for the same
period of 1998. This was mainly due to the contribution from net commissions
(particularly regarding cards and guarantees which more than compensated
for the decrease in commissions from securities' operations as a result of
the poor performance of the Portuguese stock exchange) arising from the
Group's cross-selling activities and reflected in growing involvement with
customers.
Operating costs showed controlled growth, amounting to EUR 735 million (PTE
147.3 billion) for the first nine months of 1999, up 7.2% from the same
period of 1998. The increase in the cost structure was proportionally
less than business growth, so causing the improving trend in efficiency to
be continued. This reflects the positive effect of centralising operating and
strategic units under a common platform, despite investment in the expansion
of the distribution networks and in new businesses. Operating costs
represented 45.2% of total income, compared to 47.1% for the first nine
months of 1998. As a percentage of average total assets, operating costs
decreased to 2.8% in the first nine months of 1999 from 3.0% in the same
period of 1998.
The expansion of the Group's branch networks as planned (including 45 new
Atlantico Stores, 17 new NovaRede branches and 15 new Expresso Atlantico
stores between the end of September 1998 and September 30, 1999) and the
strengthening of commercial areas have led to an increase in costs more
directly linked to the Group's business growth. In particular, staff and
communication costs - the latter influenced by intensified telemarketing
campaigns and by the development of remote distribution channels - as
well as costs related to customers' increased usage of payment cards should be
mentioned. The increase in operating costs was also affected by the
preparation of the Group's information systems for Y2K which involved
extensive testing of both external and internal entities and the design of
business continuity plans.
30 Sept. 99 30 Sept. 99 30 Sept. 98 Change
Accumulated Accumulated Accumulated 99/98
ACTIVITY INDICATORS PTE EUR EUR
-----------------------------------------------------------------------------
Total Assets under
Management (1) 10,078 50,269 43,079 16.7%
Total Assets 7,388 36,852 30,512 20.8%
Total Customers' Funds (2) 6,265 31,249 29,294 6.7%
Loans to Customers 4,517 22,532 16,659 35.3%
Own Funds (3) 698 3,480 2,730 27.5%
-----------------------------------------------------------------------------
(1) Total assets, Investment funds and Assets under personalised management.
(2) Customers' deposits, certificates of deposit, assets under management
and capitalisation insurance.
(3) Shareholders' equity, preference shares and subordinated debt.
(PTE billion and EUR million)
Loans to customers amounted to EUR 22,532 million (PTE 4,517 billion) at the
end of the third quarter of 1999, 35.3% up on September 30, 1998. This
performance was mainly due to the growth of loans granted to individuals
(mortgage loans and consumer credit) as well as to the increase of loans
granted to services and commerce companies.
Total customers funds - customers' deposits, certificates of deposit, assets
under management and capitalisation insurance - were EUR 31,249 million (PTE
6,265 billion) at September 30, 1999, up 6.7% on September 30, 1998.
This growth was despite the fall of the domestic stock market which
restricted the share price growth of assets under management and which
discouraged potential investors.
Despite the maintenance of a highly favourable environment to credit -
characterised by historically low interest rates, intense competition and by
a strong consumption incentive due to the low profitability of savings
instruments - the Group kept a prudent credit underwriting policy. Loans
overdue by more than 90 days accounted for 1.1% of total loans at September
30, 1999, compared to 1.6% at September 30, 1998. The provisioning of loans,
based on an appraisal of potential risks, was maintained at a comfortable
degree, with coverage by provisions for loans overdue by more than 90
days increasing to 179.9% at September 30, 1999 (145.2% on the same date
in 1998).
30 Sept. 99 30 Sept. 98
LOAN QUALITY INDICATORS
-------------------------------------------------------------
Loans more than 90 days overdue/
Total loans 1.1% 1.6%
Total overdue loans/Total loans 1.3% 1.8%
Provisions/Loans more than 90
days overdue 179.9% 145.2%
Provisions/Total overdue loans 151.5% 132.0%
-------------------------------------------------------------
Reflecting continued high solvency levels, own funds - comprised of
shareholders' equity, preference shares and subordinated debt - amounted
to EUR 3,480 million, up 27.5% on September 30, 1998. The solvency ratio,
estimated in accordance with the rules of the Bank of Portugal, stood at
11.1%, compared to 11.0% at the end of the third quarter of 1998, while this
same indicator stood at 12.0% according to BIS.
'Having announced our intention to bid for the Mundial-Confianca Group,
we are keen to achieve our objectives by taking all the steps required for
a transparent and market-driven solution. We shall proceed with the
definitive filing of our Public Offers for Mundial-Confianca and its
banking subsidiaries', said Mr. Jardim Goncalves, who concluded: 'Our
proposals, the rationale of which have been recognised by the main
analysts covering the Portuguese market, are directed at all the
shareholders of the target entities. We are confident that the success of
these Offers will contribute to the creation of a strong group, both in a
financial and in a strategic sense, as well as enhancing and re-positioning
the Portuguese market and its participants within Europe'.
BANCO COMERCIAL PORTUGUES
Consolidated Balance Sheet as at 30 September, 1999 and 1998 (i)
1999 1999 1998
----------- -------------- --------------
Assets (Thousands (Thousands
of Euros) of Escudos)
Cash and deposits at
central banks 494,832 99,204,977 72,094,159
Loans and advances to
credit institutions
Repayable on demand 557,134 111,695,266 88,154,315
Other loans and advances 2,873,962 576,177,768 762,744,142
Loans and advances to
customers 22,531,781 4,517,216,556 3,339,795,817
Securities 5,959,833 1,194,839,249 1,094,631,742
Treasury stock 482,977 96,828,195 5,349,505
Investments 656,400 131,596,415 100,131,203
Intangible assets 563,416 112,954,683 139,667,876
Tangible assets 979,527 196,377,587 184,406,049
Other debtors 779,679 156,311,627 145,982,153
Prepayments and accrued
income 972,020 194,872,625 184,081,179
----------- -------------- --------------
36,851,562 7,388,074,948 6,117,038,140
=========== ============== ==============
Liabilities
Amounts owed to credit institutions
Repayable on demand 174,180 34,919,937 71,266,846
With agreed maturity date 9,590,012 1,922,624,724 1,382,542,009
Amounts owed to customers
Repayable on demand 6,618,569 1,326,903,941 1,178,915,074
With agreed maturity date 8,583,759 1,720,889,089 1,777,176,581
Debt securities 2,847,364 570,845,291 222,798,013
Other liabilities 633,045 126,914,185 119,485,675
Accruals and deferred income 1,068,243 214,163,449 217,097,370
Provision for liabilities
and charges 3,216,360 644,822,319 497,481,918
Subordinated debt 743,712 149,100,948 152,881,254
----------- -------------- --------------
Total Liabilities 33,475,244 6,711,183,883 5,619,644,740
----------- -------------- --------------
Shareholders' Equity
Share capital 1,000,000 200,482,000 196,969,000
Share premium 587,687 117,820,736 115,300,795
Reserves and retained
earnings 261,230 52,371,963 (13,939,561)
----------- -------------- --------------
Total Shareholders'
Equity 1,848,917 370,674,699 298,330,234
----------- -------------- --------------
Minority interests 639,891 128,286,579 102,905,825
Minority interests in
preference shares 887,510 177,929,787 96,157,341
----------- -------------- --------------
Total Minority Interests 1,527,401 306,216,366 199,063,166
----------- -------------- --------------
36,851,562 7,388,074,948 6,117,038,140
=========== ============== ==============
(i) Financial Statements incorporating the insurance subsidiary companies by
the full consolidation method.
BANCO COMERCIAL PORTUGUES
Consolidated Statement of Income
for the nine months ended 30 September, 1999 and 1998 (i)
1999 1999 1998
----------- -------------- --------------
(Thousands (Thousands
of Euros) of Escudos)
Interest income 1,233,465 247,287,598 264,343,155
Interest expense 585,109 117,303,915 146,615,203
----------- -------------- --------------
Net interest income 648,356 129,983,683 117,727,952
Provision for loan losses 112,220 22,498,163 20,485,211
----------- -------------- --------------
Net interest income after
provision for loan losses 536,136 107,485,520 97,242,741
----------- -------------- --------------
Other operating income
Income from securities 51,281 10,280,871 9,121,412
Commissions 289,287 57,996,866 51,728,336
Profit arising from
trading activity 261,823 52,490,862 65,551,619
Insurance premiums 811,622 162,715,660 130,886,171
Other income 121,216 24,301,668 19,873,095
Gains on sale of shares
of subsidiaries and
associated companies 373,569 74,893,803 35,850,337
----------- -------------- --------------
1,908,798 382,679,730 313,010,970
----------- -------------- --------------
Other operating expenses
Commissions 45,849 9,191,856 7,917,769
Losses arising from
trading activity 173,196 34,722,616 38,045,159
Staff costs 372,602 74,700,014 69,087,475
Other administrative costs 250,464 50,213,527 46,029,436
Depreciation 111,704 22,394,733 22,339,530
Other provisions 611,354 122,565,496 102,008,378
Claims incurred in the
insurance activity 307,383 61,624,710 48,790,136
Other expenses 32,966 6,609,212 8,029,863
----------- -------------- --------------
1,905,518 382,022,164 342,247,746
----------- -------------- --------------
Income before income
taxes 539,416 108,143,086 68,005,965
Income taxes 50,487 10,121,701 10,125,000
----------- -------------- --------------
Net income 488,929 98,021,385 57,880,965
Minority interests 96,341 19,314,584 16,579,081
----------- -------------- --------------
Net income for the
year attributable to
the Bank 392,588 78,706,801 41,301,884
=========== ============== ==============
(i) Financial Statements incorporating the insurance subsidiary companies by
the full consolidation method.
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