Apple edges up premarket as investors weigh estimated tariff costs, iPhone sales
Banco Comercial Português (BCP) reported its financial results for the first quarter of 2025, showcasing a net income increase despite some regional challenges. The bank’s earnings per share (EPS) came in at €0.063, with revenue slightly missing forecasts at €892.97 million compared to the expected €894.8 million. Following the announcement, BCP’s stock rose by 3.05% in after-hours trading, reflecting investor optimism despite the revenue miss. According to InvestingPro data, the bank has demonstrated strong momentum with impressive returns over the last month, three months, and five years.
Key Takeaways
- BCP’s Q1 2025 net income rose 3.9% year-on-year to €243.5 million.
- The bank’s stock increased by 3.05% in after-hours trading.
- Portugal and Poland markets showed strong performance, while Mozambique faced challenges.
- Mobile banking continues to drive customer engagement and sales growth.
- The bank plans to maintain stable net interest income (NII) in 2025.
Company Performance
Banco Comercial Português demonstrated resilience in Q1 2025, with net income rising to €243.5 million, a 3.9% increase from the previous year. The bank saw strong performance in its core markets, particularly in Portugal and Poland, where net incomes increased by 7.6% and nearly 40%, respectively. However, Mozambique experienced a significant decline in net income, attributed to sovereign debt downgrades.
Financial Highlights
- Revenue: €892.97 million, slightly below forecast
- Net income: €243.5 million, up 3.9% year-on-year
- EPS: €0.063
- Return on equity (ROE): 13.9%
- Return on tangible equity (RoTE): 14.5%
- Book value per share plus dividend: 15.8% growth
Earnings vs. Forecast
BCP’s revenue of €892.97 million fell short of the €894.8 million forecast, marking a minor miss. The EPS of €0.063 was not directly compared to forecasts but contributed to the positive market reaction. The stock’s 3.05% rise in after-hours trading suggests that investors focused on the bank’s overall income growth and operational strength.
Market Reaction
Following the earnings announcement, BCP’s stock price increased by 3.05% in after-hours trading, reaching €0.6548. This movement indicates a positive investor sentiment, likely driven by the bank’s strong net income growth and strategic focus on mobile banking innovation. InvestingPro analysis shows the stock is trading near its 52-week high, with the RSI suggesting overbought territory. The bank maintains a conservative beta of 0.41, indicating lower volatility compared to the broader market. Subscribers to InvestingPro can access the comprehensive Pro Research Report, part of the analysis available for 1,400+ top stocks, providing deeper insights into BCP’s valuation and growth prospects.
Outlook & Guidance
Looking ahead, BCP expects its net interest income to remain stable in 2025, with plans for mid-single-digit loan growth. The bank anticipates low to mid-single-digit NII growth in 2026 and aims to distribute up to 75% of cumulative net income. While the bank shows a high shareholder yield according to InvestingPro, investors should note its relatively weak gross profit margins of 1.86%. The bank maintains a strong Altman Z-Score of 12.47, indicating solid financial health despite challenging market conditions. Additionally, BCP plans to significantly reduce provisions for Swiss franc mortgages, which could positively impact future earnings.
Executive Commentary
"We are delivering on shareholder distribution," stated Miguel, Financial Executive, highlighting the bank’s commitment to returning value to shareholders. He also emphasized the alignment of strategy with value creation, saying, "We don’t separate strategy from value creation." These comments underscore BCP’s strategic focus on sustainable growth and shareholder returns.
Risks and Challenges
- Economic instability and declining interest rates could impact profitability.
- Geopolitical uncertainties may affect business confidence and market conditions.
- Sovereign debt issues in Mozambique pose a risk to regional performance.
- Competitive pressures in the banking sector require ongoing innovation and customer engagement.
- Potential acquisition of Novo Banco could introduce integration and financial risks.
Q&A
During the earnings call, analysts inquired about BCP’s capital management strategies and NII sensitivity. The potential acquisition of Novo Banco was also addressed, along with tax rate expectations and the bank’s strategic approach in Poland. These discussions provided insights into BCP’s operational priorities and market strategies.
Full transcript - Banco Comercial Portugues (BCP) Q1 2025:
Miguel Maja, Opening Speaker, BCP: Good morning. Miguel Maja speaking. Welcome to BCP earnings conference call. As usually, I will mention the highlights of our performance, and then Miguel Borgencz and Vernav Clas will follow providing additional detail. The economic activity in the first quarter continued to be significantly marked and conditioned by an unstable and adverse environment to the confidence of economic agents.
Despite that environment, our net income in the first quarter went up 3.9% year on year to EUR 2 and 43,500,000.0, confirming once again the quality of Millennials franchise in our core markets. In Portugal, the net income was million, an increase of 7.6%, demonstrating the robustness of the balance sheet and the profitability of the bank’s business model despite the slowdown in the economic activity and the downward trajectory of interest rates, which conditioned the evolution of the financial margin. This performance in Portugal was largely contributed by the consistent work carried out over several years in improving the quality of the balance sheet, confirmed by year on year decrease of 14 basis points in the cost of risk. A healthy balance sheet combined with intense commercial activity allows us to continue the necessary investments to ensure the future of in strengthening talent and operational capacity, while preserving a solid capital position and without compromising profitability. Therefore, operating cost in Portugal increased above 9%, significantly influenced by the inflationary context over the last years, with BCP remaining a reference in terms of operational efficiency with a cost to income ratio of 34%.
In Poland, Bank Milenio achieved a net income of almost EUR43 million, an increase of nearly 40% year on year, despite still being affected by relevant charge related to FX legal risks, which had a negative impact of EUR 131,000,000, out of which EUR 98,000,000 in provisions and by the payment this quarter of banking tax, which was not applicable on the first quarter last year since the bank was implementing the recovery plan, which was successfully completed in June 2024. The adjusted net profit in Poland, excluding extraordinary items, increased 7%, supported in a positive evolution of the business volumes and growing customer acquisition that once again confirms the capacity of Bank Millennium to grow and generate profitability and capital. In Mozambique, the net profit was strongly affected by the impacts arising from the country’s context in the last quarter twenty twenty four and first quarter this year, namely the downgrades of the sovereign debt rating that resulted from the instability following the elections in October and until the inauguration in January of President Daniel Schap. Net income in Mozambique decreased 84% due to impairments and provisions that have increased almost 22,000,000, mainly due to the impacts of the downgrade of the sovereign debt ratings.
It should be noted that the commercial activity of Millenio BIM before impairments and provisions showed a positive year on year evolution of around 10%. We continue to operate with a very robust capital ratios with the CET1 at 15.9% and Total Capital at 20%, which already considers the estimated impact of CRR three around 50 basis points and only included 25% of the profit generated in the quarter in accordance with the shareholder remuneration policy that we presented to the market. The quality of our retail banking business model, supported by strong relationships with our customers, is driving the growth in business volumes. At the consolidated level, customer funds went up more than 6% and loans to customers increased 2.2%. This quarter, the performing loans to companies in Portugal already showed an inversion from last year downward trajectory, with an increase of 1.1% quarter on quarter.
We kept the trajectory of improvement of the quality of the balance sheet, having managed to cut nonproductive assets by an additional EUR $340,000,000 over the last twelve months. The rigorous management of the balance sheet risks enable us to keep a controlled cost of risk. At group level, the cost of risk also decreased 14 basis points since March 24, reaching 38 basis points. At a group level, our customer base expanded almost 4% in the last twelve months, surpassing the 7,000,000 customer mark, out of which nearly 2,800,000 in Portugal. Most notably, mobile customers continue to grow at around 10% per year, accounting for 72% of the group’s customer base and 64% in Portugal.
Individual and corporate clients continued to choose Millenio as their preferred bank and our services were again awarded this year with several relevant distinctions. Customer recognition of our digital capabilities continues to be reflected in the use they make of the app, which leads the NPS among the largest banks in Pokrvo. This quarter, customers carried out 15% more transactions through the app than in the same period last year, with a significant growth in the number of transfers and payments. The number of sales through the mobile app has increased 13% in the same period, with emphasis to the sale of personal loans, which increased 34% and to the sale of investments funds, which increased 75. The investment and priorities we give to mobile solutions with a clear focus on customer centric innovation means that our app continues to lead the rankings and deserve top reviews on the most relevant platforms.
The results achieved and the progress of the bank in the first quarter, despite the challenging context for economic activity, allow us to remain very confident in our ability to implement the strategic plan presented to the market as we have always done. Miguel, the floor is yours.
Miguel, Financial Executive, BCP: Good morning, ladies and gentlemen. Going now to Page eight. As you see in our income statement, in spite of the reduction of interest rates, a very resilient core income, growing 36% in terms of NII and 2.1% in terms of commissions. Costs also growing to a large extent influenced by the salary inflation in Poland and to the normalization of variable remuneration across the group as we hit our profitability targets and other income also with the positive evolution vis a vis last year. In terms of loan impairment, we are seeing a positive evolution in several markets in which we are present, with a reduction of 24 in terms of loan impairment, which shows some convergence in terms of cost of risk with one of our competitors.
And in terms of legal risk in Poland, a further reduction. I would like here to highlight that the guidance that we gave already many quarters ago was that ’23 would be our our the the year with the highest value of legal risk provisions with a strong reduction for ’24, which happened around 30% reduction in ’24. And what we are expecting is another very strong reduction now in ’25, and then, I would say, a very more a much more normalized path from the ’25 onwards. And in terms of profit before tax, minorities here, a growth of 13%. We have, in the first quarter of last year, some extraordinary tax elements in our income statement related to the Swiss franc mortgages, which we we don’t have as much this year.
So the net income grows 3.9% in spite of the more challenging interest rate environment. Here, I would like here to highlight the focus that we have in terms of remuneration, in terms of shareholder value creation, clearly above our cost of equity, with an ROE of 13.9%, a RoTE of 14.5%, but very importantly, with growth in terms of book value per share plus dividend per share, which at the end of the day is a very important benchmark for the value creation for shareholders of 15.8%. The dividend yields year on year, I. E, making the calculation with the price of twelve years ago and only considering the dividend that was distributed until March of this year, I. E, the dividend the year before, not considering the dividend that will be approved, of course, in the AGM, was 5.4%.
In terms of group profitability, very, very resilient margin, as we see here, with in Portugal, the margin decreasing 3.9%. But I would like to highlight that in Portugal, there was a decrease in the margin of less than 2%, which is less than the impact of the day count. So that adjusted for the day count, what you have is a constant margin already in the last three quarters. So the which clearly confirms our guidance that due to our hedging of the NII, we will be able to deliver a very resilient and stable margin in Portugal. In the international operations, both in Mozambique due to lower deposit require reserve deposit requirements, but also in Poland due to the high level of interest due to still high level of interest rates and to the volume growth SMEs, we will we are here also showing a NIM above 4.5%, and that also translated in a growth of two digits in terms of NII.
Fees and commissions, very resilient. I would here like to highlight that in Portugal, there is some sometimes some seasonality and some ad hoc fees, sometimes that in one year may come more in one in one quarter in the year more in another quarter. But still, we are quite confident in terms of the growth of this line, mainly as the market or if when and if the market stabilize and customers show more interest in more investments and in asset management products. Up until now, as you know, we have had we are having a strong contribution from bank assurance products, which is an area that is also strategic for us. Other net operating income, positive evolution in Portugal, which explained to some extent by the some rotations, some of the adjustment of our hedges.
And in terms of the mandatory contributions, what we see here is the normalization of our bank in Poland, of course, made us have to pay when we compare with the first quarter of last year, the bank tax, which we did not in the last year in first quarter. In terms of operating costs, normalization of the level, I would like here to highlight the cost to income. Of course, as time goes by and with such high profitability and the good cost to income, then we have to balance this also with the cost growth of of several stakeholders. Variable remuneration is here an important element. In terms of IT and systems, some of the investment that we that committed to in terms of development of the bank, more and more flow into the income statement, through the OpEx line and not through the CapEx line.
The business model of several of the large international IT companies more and more is directed towards having yearly yearly licensing fees and ad hoc purchases of of licenses. So this is a crucial part of the bank transformation. Still, I would like you to highlight a cost to income clearly below 40% in in Portugal and and slightly above 40% in the international operations in which we are investing. Cost of risk. Cost of risk already below 40 basis points.
We are seeing very strong resilience of our cost of risk at low levels in Portugal. This is the other side of the coin of the prudence that we have shown in terms of the growth of our credit portfolio. As you’ve seen in the last quarters, we have been quite selective in terms of growth of the credit. The other side of the coin is, of course, a much more normalized and low cost of risk when you compare with competitors. Still loan loss reserves in Portugal that almost achieved EUR 800,000,000, so we are quite comfortable in this area.
In the international operation, contrary to what was usual in the past, a higher cost of risk than in Portugal, but this is, to a large extent, explained by the different business mix. So mainly in Poland because Mozambique has much lower, I mean, much lower credit portfolio that does not influence this too much. But, in terms of Poland, as you know, our bank, in terms of credit, has a much higher percentage in terms of cash loans, which is a much, very, I would say, very interesting business in Poland, but, of course, has a higher cost of risk, of course, with with a much higher spread. Continued decrease of NPEs. I think this is very, very important.
So we are already, in Portugal, which used to be, I would say, the bank with the most challenges in this area, already with an NPE loans ratio of 2.2%, so and decreasing, so very much aligned with the banks in Europe. So this is not, I would say, an issue today anymore. So at 2.2%, we generally believe this is not an issue. And if we include off balance sheet and securities, we are already below 2% at 1.5%. In the international operations, the value is higher, but also, to some extent, also linked to the business of cash loans in Poland, which I would like here to also to stress is a very interesting business because the margin much more than compensates for the additional cost of respective business implies.
We we have been able to do this maintaining coverage both with with collaterals and without considering collaterals that is very comfortable with the level of above 80% without considering collaterals and significantly above 100% considering collaterals. In terms of main volumes of the group, very resilient business, as you see here. In terms of customer funds, we have been able to grow, and this is very important, profitably, very profitably in terms of customer funds at 6% at group level, which is balanced by a 4% growth in Portugal and a 10% growth in our international operations in our international operations. The loan the loan portfolio the loan portfolio, showing here an inflection. I think this is very important.
In Portugal, growing 1.3% year on year, which to a large extent is also explained by the growth that we already had in this first quarter, which clearly is a leading indicator in terms of the what we have to deliver according to our business plan. So around 1% growth quarter on quarter, as you see. As you as we have shown to you, our business plan, and I would like here to highlight, is a business plan over four year periods. Of course, are in the beginning, but a business plan based on growth. So it is so and this growth is a growth in terms of customers, a growth in terms of customer funds, but also a growth in terms of loan portfolio as time goes by.
In the international operations, of course, also growth of 4.2%. As we all know, Poland is a market still with a loan to GDP ratio that is significantly below the loan to GDP ratio in Europe. So strategically, we view this as an important opportunity. In terms of capital, as we have commented to you in our last presentation, we would have here an impact in terms of fully loaded of around 50 basis points linked to CRRT, basically explained by operational risk. And this is an impact that will fade away as the provisions over the next years.
As the provisions for CHF phase in Poland, as you know, for operational risk, what is relevant is the last three years. So as the it’s like a moving average over the last three years. So as we provide less and less, this impact also will gradually, fight. But still a ratio of 15 or 15.9, which shows very clearly that that we have generated, capital, in spite of these 50 basis points, impact of the CRR three, very comfortably above above the minimum. But as you know, we have here a a plan of a four year plan, whereby we expect, as time goes by, to grow RWAs and credit somewhat faster due to credit growth and due to the change in the business mix with more investment in corporate loans, both in Poland and in Portugal.
Leverage ratio, very, very high leverage ratio, which shows also the resilience of our of our models. And the other side of it is also or the contribution of it is also to our quite conservative RW identity that also shows in the fact that the impact of the of CRR three was quite limited in the in the credit area. So the main impact was, on the on the operational risk as we always said. MREL requirements, clearly also above the MREL requirements. We are executing our funding plan.
As you know, in March of this year, we launched a Tier two notes, which and we also issued in March with the maturity of twenty years. I’m sorry. We have recalled the tier two notes, and we have also issued in March of this year a 500 million silver plain plain vanilla tier two notes with a maturity of twelve years in the call after year seven. A very robust liquidity position, as you know, as you see, with a part of it also committed to investing in the LM portfolio that really assures, so to say, the hedge of our NII. And then a net loan to deposit ratio that is also, I would say, almost too comfortable and that we expect gradually to normalize over the year.
I will pass now the floor here to Bernard.
Bernard, Operational Executive, BCP: Okay. Thank you, Miguel, and good afternoon good morning, ladies and gentlemen. I will start on Page 26. That’s the Portuguese operation, which it should be highlighted, the net income that reached EUR $219,000,000 in the first quarter of twenty twenty five. That corresponds to an increase of 7.6% compared with the same period of last year and has been the best quarter over last year’s.
For this favorable evolution, the reduction of 39.7% of credit impairments and other provisions provided a significant contribution for net income. Operating revenues compared with the same period of last year went up 1%, but it should be noticed that on a quarter on quarter basis, revenues went up 4%. Regarding operating costs, there was an increase of 9% compared with the previous year, but it should also be highlighted that cost decreased 11% if we compare on a quarter on quarter basis. On Page 27, net interest income stood at 3 and 25,800,000.0 in the first quarter of twenty twenty five. That means 3.9% below what was recorded in the first quarter.
But let me also highlight, as Miguel clearly stated before, on a quarter on quarter analysis, NII decrease was just was lower than 2%, and it’s mainly explained by the calendar effect. This quarterly evolution allow us to reinforce what we have in common about the resilience of NII in the Portuguese operation. But regarding the year on year evolution, as presented in the graph, NII decrease reflects the lower income generated by the loan portfolio that was partially offset by the reduction in funding costs, which includes the reduction of interest paid on deposits and costs associated with the wholesale funding. NIM stood at 2.12% at the March 2025, that compares with 2.34% at the March 2024, but it’s just three basis points below the NIM that it was registered in the fourth quarter of last year. Moving to Page 28.
Commissions amounted to €148,000,000 at the end of the first quarter twenty twenty five, increasing almost 4% compared with the amount recorded in the first quarter of last year. Banking fees and commissions went up 5.5%, supported by higher bank insurance fees, and market related fees went down 4.2%, mainly reflecting the lower contribution from securities. Trading results evolved from minus EUR4.3 million to plus EUR 13,300,000.0 and equity accounted earnings from EUR 9,100,000.0 to EUR 13,300,000.0. Other operating income registered also an improvement year on year, evolving from EUR 5,800,000.0 to $12,000,000 in the first quarter of twenty twenty five. Going to Page 29, operating costs totaled $168,000,000 in the first quarter of twenty twenty five, which is 9,300,000.0 higher than the €154,000,000 recorded in the first quarter of twenty twenty four.
Evolution of operating costs in the Portuguese activity reflect mainly the increase in staff costs and admin costs. And as Miguel Crillo explained, I mean, there’s already a decrease on a quarterly basis of around 11%, where staff costs went down 15% and admin costs almost 9%. Number of branches were broadly stable year on year, and there was a small reduction of around 40 employees over last year. Moving to Page 30, which refers to asset quality, and as highlighted before by Miguel, there was a sizable reduction of NPEs. NPEs reduced 22.6, meaning more than EUR $246,000,000, and it should be referred that on the first quarter twenty five there was a reduction of €131,000,000 and this clearly shows that the bank is still committed with the NPE reduction.
NPEs in the first quarter twenty five stood at EUR $841,000,000. That compares with more than EUR 1,000,000,000 a year ago. Cost of risk below 40 basis points. The first quarter of twenty five stood at 34 basis points. That compares with 48 basis points in March 2024.
Now let’s move to Page 31, which looks at the NPE coverage breakdown. And as you can see, total coverage of NPs stood at 137%. NPE coverage by loan loss reserves at 92%. And total coverage for individuals, which with a high level of real estate collateral, stood at 100% and for companies at a higher level. On Page 32, which shows the evolution of foreclosed assets and corporate restructuring funds, net value of foreclosed assets stood at €50,000,000 that compares with €93,000,000 1 year ago, meaning a reduction of more than 46% or, if you want, a decrease of €43,000,000 Regarding property sales, there was an increase in the number of transactions compared with Q1 of twenty twenty four.
And regarding Corporate Restructuring Funds exposure at the March ’25 stood at €334,000,000 that compares with €373,000,000 at the March ’24. Now moving to Page 33, regarding total customer funds and loans to customers. Total customer funds reached almost €71,000,000,000 an increase of 4.3% compared with the same period of last year. On balance sheet funds stood at EUR55.6 billion, reflecting the increase of savings from households and companies. Off balance sheet funds went up 7% year on year, meaning an increase of EUR1 billion compared with the same period of last year.
Gross loan book stood at EUR38.9 billion as of March 2025, a slight increase of 1.3% from previous year, and this increase reflects the strong performance on loans to individuals, where mortgages registered an increase of 6.4% and personal loans of 2.4%. On a quarter on quarter basis, it is possible to see that the positive trend on loans to individuals, where mortgages increased by 2.6% and personal loans by 4% compared with December 24. And regarding companies, there was a decrease of 5% year on year, however, it is important to highlight that we are facing an inversion and the corporate loan book increased compared with the last quarter of twenty twenty four. Now moving to Page 34, regarding the performing book in Portugal. It’s possible to see that new loans origination by segment and the recognition of BCP as the main bank for Portuguese companies.
Performing loans in Portugal went up 2% compared with March 24, and it was also registered an increase of 2% on a quarter on quarter basis. Loans to individuals grew 6.2% year on year, or 6.3%, with a relevant contribution from mortgages loans that increased 6.5%. Loans to companies, as I mentioned before, a slight decrease of 3.6% year on year, but as I said before, we are facing an inversion point, and loans to companies registered already an increase of 1.3% compared with the end of the year. Now moving to International Operations on Page 36. Net profit in the first three months of twenty twenty five amounted to EUR24.5 million, that means 20% less than the first three months of last year.
This evolution reflects the reduction of the contribution from Millennium BIM in Mozambique that offset the improvements on results from Bank Millennium in Poland. Bank Millennium net profit stood at almost EUR43 million in the first quarter. That means a growth of 40% from previous year, while Millenium BIM in Mozambique recorded a net profit of almost EUR4 million at the March ’25, and this is significantly lower than what was recorded the year before. And the main reason, as it was already mentioned, was related with the downgrade of the sovereign debt, leading to an increase on financial asset impairments. Moving to page 37, which refers to Bank Millennial.
Net income, as I said before, increased almost 40%, and profitability continued to be impacted by costs related with CHF mortgage loans. If we exclude most of these specific impacts, net income grew 7.5% compared with the same period of last year, and it stood above EUR170 million. Regarding costs, if we exclude mandatory contributions, which, as Miguel said, includes the contribution for the Resolution Fund, and this year also the Deposit Guarantee Fund went up just 7.1%. CET1 and total capital at fifteen point two percent and seventeen point three respectively, and comfortable above the minimum requirements of 8.112.2%. On page 38, some additional detailed information about Magmillennial.
NII increased 5.1% to €340,000,000 that compares with €323,000,000 1 year ago. NIM stood at 4.23% that compares with 4.36% in the first quarter twenty twenty four. Fees and commissions were down 8.4%, and the reduction is mostly related with bank assurance commissions that are expected to recover over the year. Trading contribution for the P and L was different than what happened in the first quarter of twenty twenty four and was influenced by the reduction the reduce on the impact related with amicable settlements in CHF mortgage loans due to the use of part of the provisions established to cover this type of agreements. Mandatory contributions went up €31,000,000 compared with the first quarter of twenty twenty four, as Bank Milenis started to pay the banking tax since June 2024 and after exits the recovery plan.
Moving to Page 39 related with asset quality, cost of risk stood at 45 basis points. That compares with 64 basis points in March 2024. Non performing loans more than ninety days past due stood at 2.2%, and coverage by loan loss reserves stood at 150%. On Page 40, customer funds in Bank Milenio grew 7.6% year on year, off balance
: in December
Bernard, Operational Executive, BCP: grew more than 33% and total deposits by 5.5%. The evolution since December’s auto portfolio customer funds grew more than €1,300,000,000 and in terms of loans to customers, the gross book stood at slightly above €18,000,000,000 Loans to individuals were broadly stable compared to last year, and loans to companies grew more than 4%. On page 41, still on the FX topic, it’s worth mentioning that the continued reduction of the CHF mortgage portfolio, which reduced 29% since March 24 and by 9% since the end of last year. CHF loan book at the March represented only 1.4% of the loan portfolio, which compares to two point nine percent one year ago. Cumulative provisions for legal risk amounted to €1,750,000,000 representing 132% of the total loan of the total loan portfolio in Poland.
Reduction over last year was driven by natural redemptions and amicable settlements with clients, and on the first quarter of twenty twenty five, again, the number of amicable settlements were above the new court claims. And it’s also important to mention that, I mean, we still continue to see a downward trend in terms of new claims flowing into courts. Turning to page 42, which regards now to Mozambique operation. Performance in Millennium BIM was, this quarter, impacted again by the downgrade of the sovereign debt rating, leading to additional impairments on financial assets in the first quarter of twenty twenty five. And as a consequence, net income decreased from more than EUR 23,000,000 to almost EUR 4,000,000 in March 2025.
Net operating revenues went up 8.6 and costs registered an increase of almost 11% compared with previous year. Capital, I mean, at very high levels and stood at 39.2%. Moving to Page 43, NII in Mozambique went up almost 10%. And for this evolution, Bank Millennium, as Miguel said, there’s a contribution from the reduction in the local requirement Millennium BIM, sorry. There was a reduction in the local requirements in terms of cash reserves that was applied since January 25.
NIM increased from 8.1% to 8.4%. Commissions went up 11% to more than EUR 10,000,000, and the operating income was broadly aligned with last year. On Page 44, regarding asset quality, non performing loans ninety days past due stood at 3.7%, and coverage clearly above 100%. It stood at 120. Regarding volumes on page 45, as you can see, customer funds registered an increase of almost 7%, and loans to customers an increase of 2%, supported by the growth on personal loans.
And before we move to Q and A, I would like to thank you, and I will pass to Mr. Miguel de Arguazzo for some final remarks.
Miguel, Financial Executive, BCP: Thank you very much. As we always do, we like to really present to you how we are performing vis a vis the plan that we have presented to you. We are clearly on track in terms of plan. So as you see in terms of business volume, we have grown materially, and we are already at 110,000,000,000 of business volumes in Portugal and 163 at group level. So clearly on track for achieving the more than 190,000,000,000 by 02/1928.
We are already above 7,000,000 customers, so clearly on track to achieving a value above 8,000,000 by 02/1928. And we are serving these clients more and more in a customer friendly, simultaneously customer friendly and efficient way, namely through mobile, where we already have more than 75% of our customer base, regular mobile users. The cost to income in spite of the reduction of interest rate has been, quite resilient. And the cost of risk, I would say, is performing better than what we even have presented in the in the business plan. In terms of ESG commitment, we are clearly top quartile in terms of the independent S and P Global CSI.
CET one ratio, we are better, but I would like here to to recall the issue that we have a growth business plan. And as I commented at the time, the the growth would be somewhat backward loaded. So the first year, we would grow less than the years after. But we are you are already seeing that we are growing in terms of if you annualize the growth of Q1, we are growing it already at mid single digits if you analyze the growth rate of Q1. So we are on track for it also and presenting, I would say, an ROE almost of 14% and much more important than this, book value per share the sum of book value per share and dividend per share that really is clearly above our cost of capital.
We are delivering on the shareholder distribution, and we expect that by delivering on these targets to continue with our plan of distributing up to 75% of the cumulative net income, which will be equivalent to a value between EUR 4,000,000,000 and EUR €4,500,000,000 to our shareholders. Thank you very much. I’ll open now the floor to to q and a.
Conference Moderator: Thank you, sir. To withdraw your question, please press 11 again. Once again, please press 11 and wait for your name to be announced. To withdraw your question, please press 11 again. Thank you.
We are now going to proceed with our first question. And the questions come from the line of Max Bishan from JB Capital. Please ask your question.
: Hello. Good morning. Thank you very much for the presentation and taking our questions. I have three, if I may. The first one is on the NII.
Do you think that you have already reached the bottom in the first quarter? And shall we expect recovery in the coming quarters with the numbers you’re seeing so far in Portugal? The second one is on loan book growth in Portugal. It has accelerated. As you highlighted, we even see slight growth in the nonfinancial corporation loans.
Do you think you can grow faster than your low single digit guidance for Portugal in 2025? And what kind of trends are you observing in April and May? And then finally, on the cost of risk in Portugal, asset quality did really well. And I was just wondering, is there any reason to not improve guidance for the 40 basis points in Portugal for 02/2025? Thank you.
Miguel, Financial Executive, BCP: Thank you very much for your questions. I mean, when we compute the NII, we have to adjust it, of course, for the day count. And and as you know, February, we all know this, February has less days than than other than other quarters than other months. And if you adjust for the day count, this quarter was already better than the last quarter because, the the reduction was a very slight reduction. And, of course, we have to, to adjust for it.
The the the message that I would like you to give is of a resilient NII. I will not discuss because it’s always hard to predict 1,000,000 more or 1,000,000 less. And NII broadly aligned with last year, which was a year with a much higher level of Euribor. If I comment that the NII of this year will be broadly aligned with last year, this means that over the full year, we will have to have, I would say, an average quarterly NII above the one of this quarter. Exactly midway through Q2 or Q3 or Q4, I will not enter into this because this is much more difficult to be totally accurate, but I feel very comfortable that we will be that we will close the year with an NII broadly aligned with the NII of last year.
In terms of the loan in Portugal and of course, Poland, in spite of the reduction of the interest rates, we are seeing still positive evolution of the NII. In terms of the loan book growth, we are seeing some green shoots. Yes, we are seeing some green shoots in terms of the corporate loan book growth. As you’ve seen, the total loan book growth, around 1%. If you analyze it, we are already on the mid single digits.
On the corporate, we are seeing some but a large part of it is linked to investments and with so much uncertainty in the world, we we we don’t know yet whether the the, the corporates are, so to say, really with fixed and committed investment projects or whether they are preparing to invest, if there is more predictability in the in the in the the world. So to say, everybody’s a little bit in the wait and see mode in terms of what will be the new post post tariff, world before investing where, before deciding where to invest. So but all in all, as you recall, we had we presented the plan with an accumulative average growth rate of, of credit around mid single digit, around 55%, give or take. We feel committed with this over the over the plan. Of course, again, on a quarter by quarter, we will have some quarters that are better, some quarters that are worse, but clearly some green shoots in this area.
By the same token, in terms of cost of risk, we feel comfortable with the cost of risk. We don’t like to review the guidance every quarter. We typically don’t don’t do it, but we feel quite comfortable that, absent a major crisis in, in the in the world, these values between thirty and forty basis points in Portugal are, I would say, a new normal absent, I would say, a major recession in, in Europe. So we feel very comfortable with the resilience of our book. Yes.
: Thank you very much. Thank you.
Conference Moderator: We are now going to proceed with our next question. And the questions come from the line of Alvaro Fernandez Garizabel from UBS. Please ask your question.
Alvaro Fernandez Garizabel, Analyst, UBS: Yes. Hi, good morning and thanks for taking my questions. I have one and a follow-up on the guidance for Portugal. So the first one on capital, you absorbed the 50 basis points of Basel IV headwinds in the quarter, but you’re still sitting on a 15.9% CET1. So what’s the plan to use that excess capital and your thoughts around the timing on this?
And related to that, on Nobobanco, what’s your stance here? Could you be interested? Is it a feasible deal for BCP given the size? So basically, thoughts on this. And the second one is a follow-up on the guidance for Portugal.
If you could give a bit more color on the different moving parts behind the flat NII guidance, so average interest rates, the evolution of deposit costs and mix, volume growth and so on? And also, you suggested in the past that also your earnings in Portugal could remain flat in 2025. I just wanted to see if you confirm that guidance or if it needs to be revised after Q1. With
Miguel, Financial Executive, BCP: I’m sorry, starting with the last two questions. Yes. So up until now, we think that in spite of this movement of decreased interest rates, we still feel comfortable with giving the guidance that our income statement will be resilient in Portugal and will be flattish both at the NII level and at the earnings after tax level. So we think very, very comfortable with this. As we we are seeing in q one even some increase, but a part of it is in trading gains with by its own nature are not are not so recurrent, so we’re not we cannot count on them for all the year, for all the quarters.
So we feel very comfortable with this guidance, both at the NII level and at an investor tax level. So in terms of the capital plan, it’s Novo Bank. So there are moments to plan and to develop strategy. There are moments to act. So we we cannot be always in a planning mode, so to say, because the plans have its own governance, have to involve people, have to involve our different stakeholders, and so on.
So we have presented a plan that starts in ’24 in ’5 and goes until ’28. This plan was a consensual plan of the different stakeholders and approved by the board of the plan. And we are I mean, in the first three months of the plan, we are presenting here the first three months of a four year plan. So it’s really too soon to review the plan. Our plan, as I commented, was a plan that was based on growth of the growth of credit and of growth of RWAs and on a distribution of 75% of our earnings so as to achieve at the end of the plan because of the higher risk weighted asset density of the of the new business of the of the corporate loan book and the growth of the of of the corporate loan book.
Always CET1 ratio materially above 13.5 with with the normal buffers that you would expect there. So this is the plan that we have now right now, and it’s a plan of also of organic growth. So distribution of 75 and growth of RWAs. If further down the the of course, is within two years, For whatever reason, we think that this flood is not adding value to the to the bank. We’ll have to go back to the drawing board and see what alternative plan we’ll have to develop.
But up until now, we are three months down for your plan. So it’s it’s too soon really to to replan and to re I mean, to come up with different different guidelines. Regarding Novo Bank, we have several times commented. So our base plan is an, a of organic capital generation and of, organic growth. That’s what we are totally focused on.
Okay? We don’t need NovoVengo. We see the IPO of NovoVengo as a positive development in the market, if not because it allows more attention, more focus of international investors and of analysts in the Portuguese market. So and we that’s what we see. We are not seeing right now, I would say, a deal that would be clearly accretive for our shareholders in terms of value and in terms of EPS because of the growth that we expect in the bank.
So right now, it’s not on our to do list to do everything as with any opportunity. If there comes a moment where we think that this clearly accrues value to our shareholders, we have to analyze and to take the appropriate measures. But right now, we are not in this this objective, and we are clearly focused on this on the plan that we have presented to the market. I mean, the moving parts of the NII in a decreasing interest rates, of course, there will be some margin compression on the term deposits because we typically have EBITDA of around 50%. So as the interest rate goes down, we will we will find some, some negative impact on the term deposit spread.
So I think it’s important. We will have, on the other hand, volume growth both in terms of deposit and in terms of credit, aligned with what we have been commenting until now. And we are projecting, I would say, relatively stable spreads. We will have a positive impact in terms of the mix because we will have, as time goes by and towards the end of the year, more corporate loans and, of course, a positive contribution from our hedges. So these are the different moving parts.
Thanks.
Conference Moderator: We are now going to move to our next question. The next questions come from the line of Francisco Riquel from Alantra. Please ask your question.
Francisco Riquel, Analyst, Alantra: Yes, hello. Thank you for the presentation and for taking my questions. I have two on NII. The first one is on the customer spread. When I look at the NII bridge in the Slide 27 for the NII in Portugal, I see that the fall in deposit costs, it translate that into basic points, barely one third of the fall in the loan yield.
So this seems to me a worse customer spread evolution compared to some local peers, which have reported to date. The cost of deposits, in particular, seems to be falling by just 20 basis points year on year when your LIBOR rates have fallen 120 basis points. So if you can explain what type of EBITDA shall we expect on the assets and on the liabilities and what is the repricing velocity that we should expect in the coming quarters? And then my second question is on the NIM. I see that the deposits in Portugal are more or less stable quarter on quarter, but the bond portfolio is up nearly EUR 2,000,000,000.
So if you can update on the ALCO strategy in terms of size and duration? And also, if you can explain the NII sensitivity to the steepening of the GILCAF compared to the parallel shift that you have been commenting to date? Thank you.
Miguel, Financial Executive, BCP: So the NII sensitivity, starting with the last with the last one to the steepening, the twelve month NII is is not very material is is not very material because over the year, over the next twelve months, the steepening does not influence too much. The EV sensitivity the EV sensitivity, I I mean, the value, the impact in terms of the NPV, so to say, of our interest rate risk, that is a standard metric, quite positive towards the steepening of the yield curve because most of our demand deposits are assumed to have a five year or more repricing. And a large part of our hedges have two point five to three years so that when the curve steepens, we tend to benefit in terms of NII in terms of EV sensitivity. In terms of I mean, the beat of the deposits, as I commented, is a beta of around 50%. In our case, of the term deposits, 50%.
Of the total deposits because the term deposits and the demand deposits are broadly the same magnitude and the demand deposits, so we are not remunerating them, is around 25%. So as interest rate goes down, so typically, we are able to reflect over, I would say, three point five to four months, so to say, a part of this decrease, broadly half of this decrease in terms of the term deposit rate. So the that’s where we are. In terms of the beta of the credit in terms of the beta of the credit, we we, we have very high beta because most of our credit is, floating rate. But on but on the other hand, what we see is that we have, we have hedges.
So that at the end of the day, what we have been commenting to you is that we have a very, very low NII sensitivity. On that’s what I can tell you. So we are not sensitive to to this to this NII, to NII movements both in Portugal and in and in Poland. Right now, our NII sensitivity in in Poland is almost zero, and our NII and our I’m sorry, in Portugal is around 2.5%. So it’s for 100 basis points movement.
So if you take a 25 basis points movement, you would have a minor impact in terms of NII. Okay?
Francisco Riquel, Analyst, Alantra: Yes. Sorry, just about the ALCO strategy, the bond portfolio increase versus the deposits.
Miguel, Financial Executive, BCP: ALCO strategy well, let me comment here a little bit. We have here the ALCO strategy is a strategy that is a strategy to, with a means, or with two means, I would say. One is to invest the liquidity of the bank, and the other is to hedge the interest rate risk. Whether we do it with more swaps or with more government debt is sometimes that we is something that we evaluate at each moment what makes more sense at each moment. So it is not an independent strategy.
It’s not as if we want to position suddenly in terms of interest rate risk is the objective, so to say, is to hedge the interest rate risk. And right now, what we want to have is to the a quite close balance sheet with, of course, with some positive, with some positive exposure to increasing interest rates because this is what the market expects from a commercial bank, but with a value that is at minimum, as I commented as I commented right now in terms of of NII, we are almost at at zero in terms of EV sensitivity also. So our our strategy is exactly to contribute, to this, to give you to give you just some numbers. I mean, the total outstanding amount in terms of everything that we have fixed rate that we have fixed rate by the end of the year just because it’s almost EUR 40,000,000,000 with demand deposits of slightly below EUR 30,000,000,000. So we have a fixed rate well in excess, so to say, of our demand deposits.
Of course, also to help the hedging of the 50% of the EBITDA of the term deposits. So just to give you an order of magnitude, so this is the type of portfolio that we have that is allowing us, in spite of the reduction of interest rates, this EUR 40,000,000,000. In EUR 40,000,000,000, I’m adding the the government debt portfolio, the interest rate swaps, and the fixed rate loans that we have in our balance sheet. So this is net of fixed rate liabilities. So this is clearly shows, I mean, where we are and that’s what we’re going to be.
So very close to zero in terms of exposure right now.
Francisco Riquel, Analyst, Alantra: Okay. Thank you.
Conference Moderator: We are now going to proceed with our next question. And the questions come from the line of Naomi Peruk from Mediobanca. Please ask your question.
Naomi Peruk, Analyst, Mediobanca: Good morning. Thank you for taking my question. My first question is on DCAs. You have more than $800,000,000 tax loss carry forward of balance sheet and your profitability in Portugal is set to remain high even with lower interest rates. So I would like to ask about your approach to write up DTAs and also about the tax rate you expect in the coming years, which we have seen already then you’re around 25% Portugal already in Q1.
Then my second question is on other provisions. We saw very low number in Q1 and I was just wondering what you expect for the rest of the year if you see user seasonality in Q4 or not this time around? And my last question is on Mozambique. And here I would like to ask about an update on your strategy, in particular how you manage liquidity there after two downgrades and after the increase in the bond portfolio we have seen in Q4. And also if you can comment on the level of NII we have seen in Q1, which was quite strong.
Thank you. Okay.
Miguel, Financial Executive, BCP: Just taking your point. So in terms of VTI, you’re absolutely right. We have an important amount of DTIs that are off balance sheet. We also have, as you well know, also on balance sheet DTIs. And according to the Portuguese law, the on balance sheet TTAs have to be used before the the the on the on balance sheet guaranteed TTAs have to be used because they are they are they are pending TTAs before we use, so to say, the off balance sheet TDAs.
So, this means that before we clearly can use them from a cash standpoint from a cash standpoint, we, it will still take some years. Of course, we can write we can write them up gradually. And, but I also would like here to highlight that as we write them up gradually, this does not necessarily have a positive impact in our capital ratios because, as you well know, the tax loss carry forwards are not are from a CET1 standpoint. So all in all, so we have clearly an economic value there. No doubt about it.
It is an economic value that will take some time to flow into a cash into into cash flow and you exactly to this time that it will take our approach to this is a gradual approach. So our as you know, the the tax rate in Portugal, when you send them, I mean, the ERC, what you called, with the that are two technical words in Portugal. But at the end of the day, both are corporate income tax. It’s around 30%. We have had 25%.
I would say, of course, it depends in any quarter on the specific composition of the P and L. But I would say that going forward, we will be closer to this 25% than to the, 30%. In terms of other provisions, other provisions are a little bit like trading gains. They are hard to predict. So it’s the contrary of depreciation.
So the other provisions are typically provisions for contingencies that may come up for for legal issues as we’ve seen with the Swiss franc and so on. I would say right now in Portugal, we don’t have any reason to to expect an increase in other provisions from this quarter. But, of course, I mean, we are always subject to litigation. We are always subject to to the unknown. It is of it always difficult to forecast the unknown.
But based on the information that we have right now, we think that we can live with a level of of other impairments and provisions of around 10,000,000 to 20,000,000 per quarter on an average basis, so to say, as a normal operational litigation and so on risks going forward. And then Mozambique. Mozambique, I mean, as you know, we have a a business there. I think it’s very important that our risk is limited to the invested capital. So from a liquidity standpoint, there are no lines from the, from the mother company to the local company.
So everything is local. I think this is the first the first point that I would like you to highlight. The second point that I would like you also to highlight is that there are absolutely no exposure to foreign currency Mozambican debt. So all the exposure that exists in Mozambique is in local currency, and the business model in Mozambique has a very low credit corporate credit exposure, and most and, basically, everything is either deposited to Central Bank or government debt in local currency. And and I recall that, I mean, Mozambique is totally autonomous from a currency issue standpoint.
It’s not like the the the country is not part of a monetary union. It’s not part of, over the country. So it’s part of the of the business. I would say, I always I always have some difficulty in understanding when, why a country why a country was, I would say, restructured necessarily, its debt in local currency when, it has, so to say, the ability to issue the local currency. But, of course, it’s always something that, rating agencies appraise.
If, the Mozambican rating degrades, it is always I mean, we have our model, so we have to flow this into our models. But that’s it. So what if there are additional downgrades of Mozambican debt, we may have to have additional impairments, but we are not expecting this to be material at consolidated levels. So it is part of the business of being in Africa, a very profitable business. Over the years, we have been having I mean, on a sustained basis, ROEs above 20% year after year on a capital ratio of, more than 35%.
So, a part of being in Africa is you will have some volatility, but with not very material impact in terms of consolidated level. Yes. The loan to deposit is so low, so low that we would not expect any type of liquidity issue there
Luis Manuel Grilo Pratas, Analyst, Autonomous: also. Okay.
Conference Moderator: Thank you. We are now going to proceed with our next question. And the questions come from the line of Luis Manuel Grilo Pratas from Autonomous. Please ask your question.
Luis Manuel Grilo Pratas, Analyst, Autonomous: Good morning. Thank you for taking my questions. I have two, please. The first one is on cost in Portugal. So costs are up 9% compared to last year.
How do you see costs evolving for the rest of the year, especially for staff? I think your 2025 guidance in Q4 was low to mid single digit cost growth. Does this still make sense? And are there any management actions that you can initiate to better control these costs? And then moving to capital.
Could you please comment on the main moving parts of the capital this quarter? So essentially, you beat on group earnings Basel IV impact of 50 basis points was in line with the guidance. And the 75% payout accrual, I think was also expected, but there was still a small missing CET1 against consensus. So I was trying to understand if there were like any other factors impacting capital PR, maybe like the DTIs as you just mentioned? And how do you expect capital build going forward?
And if there are any additional regulatory headwinds? Thank you.
Miguel, Financial Executive, BCP: Okay. So, in terms of costs in Portugal, we have given the guidance of mid single digits. We are maintaining the guidance of mid single digits. I would not classify it as an issue of control, how to control the cost. Because if we are clearly within the plan, it’s not an issue of control.
It’s maybe an issue of level, but but not an issue of control. I would also here like to highlight I would also here like to highlight that with the cost to income that we have, I mean, cutting more income costs may imply losing some key people, and not not generating the return that we want to generate. So with the cost to income that we are presenting, I mean, it is if if I can make sure that this cost to income is sustainable, I mean, we should not be very I mean, concerned in terms of the costs in Portugal. I mean, tell me other banks in Europe that have, honest that that have cost to incomes of, of 34%. So with the 34%, I would say, the cost to income, I would say we are well served, as we also have to make sure that we retain key people, that we also have the very remuneration that makes sense.
And, of course, mainly when we are clearly generating value for our shareholders, it’s important to keep the key people committed mainly after many years in which this was very much constrained. I think this is important. We had commented that in terms of Basel III, we would have an impact of around 50 basis points of Basel III. When if you do the P and L impact, including impairments and so on, you would get here a 20 basis points here of positive impact. The remaining part are minor adjustments mainly to the minority interest in Poland, minority and the cap of minority interest, but this is this is a minor a minor impact.
So I would not give it too much weight. I mean, I’ve read I’ve read most of your pieces of of research in the meantime. Effectively, some of the analysts said that there was a miss in terms of capital, but the majority of analysts said that the the capital was clearly in line with the projections. So I I would not classify this in terms of a difference vis a vis what at least most of the analysts were were were projecting. What some of the analysts, yes, I I confirm that some were projecting this.
Okay?
Luis Manuel Grilo Pratas, Analyst, Autonomous: K. Thank you. Can I just do a a very quick follow-up? In terms of the pension fund coverage in Portugal, could you please, give us a number? I think last quarter, it was 105%.
Thank you.
Miguel, Financial Executive, BCP: I mean, we we do not give this number on a quarter by quarter basis and make sure. But what I can comment to you is that it has evolved positively. So we don’t have here I mean, we continue to have a large buffer on this area. But this is a number that we only disclose on half year basis. Actually, because, formally, we only update the discount rate also only on a half year basis.
But if we were to update it right now, it would have a positive evolution.
Luis Manuel Grilo Pratas, Analyst, Autonomous: Thank you very much. Okay.
Conference Moderator: We are now going to proceed with our next question. And the next questions come from the line of Sophie Petersen from JPMorgan. Please ask your question.
Sophie Petersen, Analyst, JPMorgan: Yes. Thank you for taking my question. And thanks for being so helpful on the net interest income in 2025. But just a question on 2026 net interest income. Given that margins are kind of close to troughing and volume growth should be kind of mid single digits.
Is it fair to assume that we should start to see net interest income growth in Portugal in 2026? That would be my first question. And then the second question would be on Poland. Santander sold their Polish operations for a quite attractive price. What’s your view on Poland?
And would you consider exiting Poland? That would be my second question. And then just finally, at the beginning of the call, very helpfully kind of gave details around the Polish Swiss franc provisions that they should continue to to come down. But how at what in which year should we expect the British, provision to be immaterial? Is it already in ’26 or ’27 or further out?
Thank you.
Miguel, Financial Executive, BCP: Okay. So, Sophie, just one were were you were you, I mean, concerned that the NII in ’26 would go down or or that it should increase more? I did not understand exactly
Sophie Petersen, Analyst, JPMorgan: Sorry. I I was I was wondering if net interest income in Portugal in 2026 should be growing in line with the volume. So if volume growth is kind of mid single digits, is it good to assume that we could already see that kind of NII growth in 2026?
Miguel, Financial Executive, BCP: Yes. I mean, as you know, we don’t have a monopoly, so we live in a competitive market, so to say. And, of course, net interest income is very much influenced by the competitiveness and the by rivalry in terms of the pricing mainly of the deposits because this is what I mean, influences more directly and more immediately the P and L. But what I can tell you is that our base case is exactly what you are saying. So our base case is that the NII will grow in 26, low to mid single digit growing I.
Growing in line with volumes. In terms of the Polish operations, starting the Swiss franc mortgage provisions. We have been very consistent in terms of what we are saying. We will say that 23% would be the highest number. We will show a large drop from ’23 to ’24.
And we were also seeing expecting to see a material drop from ’24 to ’25. So and, I mean, in ’26, it will be much, much lower than what we have in ’25. Whether it will be material or not, I think it’s too it’s too early to say. But what we expect is at a much, much lower value. It depends a lot on the on the methodology, but and in what happens next.
Mean, right now, what our model our model just why why is it a little bit more complex to say? Because our model, is basically a three year forward looking model. Okay? And our expectation this started in 02/2019. So this means that the the flow of cases that we have right now on ’25 in our model will be the the flow of cases that we will expect until ’28.
The four of cases that we have in ’26 will be the four of cases until ’29, the beginning of twenty six or at the end of twenty six, until the end of twenty nine. We we would expect, so to say, that most of the cases, will already have, I mean, are already projected there because it started ten years ago. But, of course, if there is a sudden new totally unexpected, I would say, source of new flow off cases, this may change a little bit. But in any case, this is the message that I would like to give right now, a large drop this year and next year, I would say. I will not call it immaterial, but much, much lower, I would say, the normal course of business, I would say, an impairment in the very normal course of business without major impact on the P and L.
Terms of the Polish operation, I mean, we, as I comment very often, we don’t separate strategy from value creation. So this is a very important point. We we we think we are managing well our Polish operation. We are generating value in our Polish operation. We are, so to say, we’re calling the natural owners, but at least we are value accretive owners of our Polish operation.
This is important to say. And when we see what is the possibility or or or the capacity, the earnings generating capacity of our Polish operation ex Swiss franc, we are seeing our values in excess of 700,000,000. So you can do the numbers of our what is our P and L ex Swiss franc. So it is a very high P and L. So when we see when we look at the at the multiples in the market, we don’t think that the valuations reflect already, I mean, these earnings generation capacity of the bank that we have in Poland.
So this means that we think we can do better than what is implicit in the market. So while we are generating value and, if we really feel more comfortable that we can generate more value, as we have been doing, our bank has been a key benchmark bank bank in terms of quality of service, in terms of acquisition of new clients, in terms of acquisition of of salary accounts. So we clearly are one of the two players that have been growing in terms of current accounts, in terms of clients and so on. We think we are the natural owners. I mean, and that the market still, I mean, has a lot of upside.
So, if somebody wants to convince us that it is an owner that is generates much more value than we do, it has to prove it to us. But, the asset is not for sale, so we are not we are not we are not proactively, I mean, putting the asset for sale because we think we can generate still a lot of value.
Sophie Petersen, Analyst, JPMorgan: That’s very clear. Thank you.
Conference Moderator: We are now going to proceed with our next question. And the questions come from the line of Hugo Cruz from KBW. Please ask your question.
Miguel, Financial Executive, BCP0: Hi. Thank you for the time. First, I had two clarifications. You’ve talked about on the loan growth in Portugal. If you could just clarify what you are expecting for this year because I understood from the previous results call that you are targeting more low single digit this year given the uncertainty.
But it sounds like you’re little bit more positive now. So do you think we could actually see 3%, four % loan growth this year in Portugal? So that’s the first clarification. The second is on taxes. You’ve talked today about tax rate being between, I think, five percent and thirty Is that a guide just for 2025 or also for the later years?
And then finally, if you could talk about RWA optimization. A lot of banks have been doing synthetic securitizations, for example, but also other measures. So is there anything you could you you are planning that could improve your CT one ratio there? Thank you.
Miguel, Financial Executive, BCP: Starting with last question. I mean, we are always we are always, I mean, looking at opportunities of synthetic securitization. Actually, we have several of them done. We look at this on a very, practical and value driven approach. So there is an implicit cost of equity in these, in these deals.
If we if we reach the conclusion that the implicit cost of equity is clearly below, the cost of equity so that it accrues well to our shareholders, we typically may do it. If we think that, not that, what the consultants or the want to charge us or the investors want to charge us is more than the cost of equity, probably we will not do it. We are continuously analyzing this until now. Got one. I can tell you that we do not have anyone in the pipeline because the proposal that we have, we did not think they were necessarily in the shareholders’ interest to do them.
But we are it’s part of it’s part of our job to continually analyze it. And we have, I mean, already closed, considering Portugal and Poland, more than four of these deals. So just to give you an idea, so we are clearly on on this. In terms of taxes, I mean, I would say that for the the the values that I gave, of course, this is very dependent on exactly the profile because there are some expenses that are not that are not deductible. There are so we have I mean, it’s not a a totally fixed number.
It’s not like a a depreciation schedule. But when I say broadly in this interval between 25 and 30, It is, I would say, for the foreseeable future. I mean,
Bernard, Operational Executive, BCP: for for for the foreseeable future,
Miguel, Financial Executive, BCP: I would say, for many years to come. In terms of loan growth, there are some green shoots. I mean, it’s very difficult for me to, I mean, to whether to say whether it’s low single digit or mid single digit. I mean, what I we are it’s only one quarter. There are green shoots, and we are in a in a period of a a very high a very high uncertainty.
What I can tell is the following. The relevant impact on the margin is business confidence, so to say. So if business confidence grows and these uncertainties, these geopolitical uncertainties and tariff uncertainties decline, we will clearly be or decline significantly, we will clearly be on the mid single digit. If probably these uncertainties do not decline, probably there will be less investment, we will be closer to the low single digit. But of course, we are speaking of, I mean, small values, 1% more, 1% less, that do not necessarily have a material impact on the short term on the NII.
Okay.
Miguel, Financial Executive, BCP0: Thank you very much.
Miguel, Financial Executive, BCP: You tell me what mister Trump will will decide in in the next eighty days. So and I will tell you how the business confidence will will evolve.
Conference Moderator: We are now going to proceed with our next question. The next questions come from the line of Carlos Peixoto from CaixaBank BPI. Please ask your question.
Miguel, Financial Executive, BCP1: Hi. Good morning. So a few questions from from my side as well. First of all, sorry if I repeat anything because I had some problems during during the connection.
Miguel, Financial Executive, BCP: Carlos, Carlos, the connection is quite poor. If you can speak up or closer to the mic. I’m sorry.
Miguel, Financial Executive, BCP1: Sorry. Is it better now?
Miguel, Financial Executive, BCP: Much better. Much better. Thank you.
Miguel, Financial Executive, BCP1: Okay. Sorry about that. So as I was saying, I I I was interrupted during during the call. I had some problems with the connection. So sorry if I repeat any question that was already previously made before.
First, would it just be very quickly on fees outlook, how you see that evolving throughout the rest of the year? Then second bit of a follow-up on the loan growth that you were talking before or mentioning before. One of the things that we’ve noticed is that on the company’s side, loans are still declining roughly 5% year on year. This is a bit below what we are seeing from other competitors in Portugal. I was wondering whether you have any views on what could be driving this?
Is that competitors are being much more aggressive than BCP in pricing? Or are there any trends that are worth having in mind? And then just a couple of follow ups. Sorry about that. But on costs, just to have an idea.
Last year, were you accruing any variable remuneration throughout the year? And are you doing so this year? So should we expect the staff costs to be more stable throughout the year? Then the second follow-up on other provisions. I believe you mentioned that you weren’t seeing any signs or any reasons for other provisions in Portugal to increase over coming quarters.
But then I think you mentioned there were between EUR 10,000,000 to EUR 15,000,000 per quarter over the coming quarters. So should we take the 10/15 or the first Q as a reference there? And then finally, it’s just a bit of a tease. Well, you mentioned that Bank Millennium current market valuations don’t really reflect the value that you see for the unit and the potential in earnings that it has. So my question here is, could you do the opposite rather than sell, consider buying out minorities and reinforcing your position there?
Thank you very much.
Miguel, Financial Executive, BCP: Thank you very much. So starting with your last question. We have more than 20% of our market cap, so to say, invested, so to say, in terms of value in Poland. The Polish market is a very interesting market, but still has some uncertainty. So from a risk appetite standpoint, we are more or less where we want to be, so to say.
So unless there is a strong reduction in terms of these other risks that can emerge in Poland, we are where we want to be. So we are not considering any purchase of minorities for the moment in terms of Poland. So I think this is an important point. In terms of cost, of course, we accrue variable remuneration, but we accrue based on budget. If, if the employees have been delivered much better than the budgets, of course, we then have to be some some adjustment, so to say, for the overperformance.
But at the end of the day, I mean, say for the shareholders, this is good news because, of course, we what we distribute as a remuneration is only a small percentage of the overachievement in terms of the budget. In terms of other provisions, I have commented a little bit this already. I mean, the other provisions is a line that is for other risks typically. And almost by definition, most of I mean, these other risks are always difficult to anticipate. It’s a little bit more for the almost for the unforeseen.
So this, around 15, give or take, that we may have, on a quarter by quarter basis, I think it’s something that is across the year or across the cycle. If there is, I would say, suddenly large litigation that we are not expecting, it may be high. If there is a large recovery of a previous litigation, we may reverse. But I think, I mean, at least over the year, this is a good guidance, except if something strange happens. I mean, in terms of loan growth, I mean, we can speak for ourselves, so to say.
We are very disciplined in terms of spread in any, material loan that we originate. We we typically compare it with our cost of capital, with the expected loss, with our funding. So we have a model that assures that when we originate a loan, that these loans pays for the cost of equity and pays for the expected loss. Effectively, as you comment, some of our competitors, because they may have a different short term priorities, at least during some time, I mean, may may have a different perspective. I mean, we have seen even some some loans here and there sometimes with a negative spread or something like that, which for us are difficult to understand.
Having said this, I mean, typically, this does not last a lot of time. I mean, sometimes there there is a campaign. There is a a moment in which a competitor that’s not always the same, I mean, wants to make a point in the market. But what we see is that this typically does not last a lot of time because, I mean, people cannot destroy destroy value forever. People may have a moment of, of affirmation in terms of market share, but people didn’t.
And that’s why we feel confident that at least over the period of the plan, because we our the competition on average in Portugal is very rational. We will be able to deliver on this on this middle mid single digit growth of mid single digit of loan growth. Of course, this has the assumption of that the competitors that have been typically rational over time will continue to be rational. But I think this is also, I’m sorry, a rational assumption to assume that the competitors sooner or later will be will be rational. Of course, if if there is no rationality, I mean, this may be different.
So this is this is different. I mean, the fee outlook On the we have been quite successful in terms of bank issuance fees. In
Miguel, Financial Executive, BCP1: terms
Miguel, Financial Executive, BCP: of investment fees, this will depend in terms of on our asset management performance and placement. And this also depends a lot on the markets. But all in all, we feel that this mid single digit guidance that we are giving in terms of fees is appropriate. Of course, if some what what is the critical factor here? If the markets start to underperform significantly and if the retail investors divest from, equity funds and riskier investments, where, as you well know, we make most of the fees.
Of course, this might this might then have a a different a different evolution. And for the same token, in the if there’s an optimism in terms of the markets, we will overachieve. I think that’s it.
Miguel, Financial Executive, BCP1: Thank you.
Miguel, Financial Executive, BCP: Okay. So, thank you very much for your interest in following us. We are very proud that you were able to deliver on what we have been saying. We are very satisfied with the value that, our share has accrued over the last over the last quarters. Do we really, are totally committed in continuing this path of shareholder value creation?
Thank you very much.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.