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Millennium BCP reported its Q2 2025 earnings, revealing a mixed financial performance. The company missed earnings per share (EPS) expectations, posting €0.0128 against a forecast of €0.014, an 8.57% shortfall. However, revenue exceeded projections, reaching €939 million compared to the anticipated €898.41 million, a positive surprise of 4.52%. In response, the stock price rose by 4.43% to €0.7216, indicating investor confidence in the company’s revenue growth and digital transformation efforts. According to InvestingPro data, the bank maintains a strong financial position with a healthy current ratio of 4.81 and an Altman Z-Score of 12.47, suggesting robust financial stability. The stock is currently trading near its 52-week high, with particularly strong returns over the last three months.
Key Takeaways
- Revenue surpassed expectations, achieving a 4.52% surprise.
- EPS fell short of forecasts by 8.57%.
- Stock price increased by 4.43%, reflecting positive market sentiment.
- Continued growth in digital customer base and app transactions.
- Reduction in non-performing assets and improved cost efficiency.
Company Performance
Millennium BCP demonstrated resilience in its Q2 2025 performance with a consolidated net income of €52 million, marking a 3.5% year-on-year increase. The company maintained stable net interest income and achieved a return on equity (ROE) of 14.3%. Digital transformation efforts have been fruitful, with significant growth in mobile customers and app transactions.
Financial Highlights
- Revenue: €939 million, up from forecasted €898.41 million
- Earnings per share: €0.0128, below forecasted €0.014
- Consolidated net income: €52 million, a 3.5% increase year-on-year
- Return on Equity: 14.3%
- Cost-to-income ratio: 37% consolidated, 35% in Portugal
Earnings vs. Forecast
Millennium BCP’s revenue exceeded expectations by 4.52%, while EPS fell short by 8.57%. This mixed result highlights the company’s strong revenue generation capabilities but also points to challenges in profitability management.
Market Reaction
Despite the EPS miss, Millennium BCP’s stock rose by 4.43% to €0.7216, reflecting investor optimism. This movement suggests that the market values the company’s revenue growth and operational efficiency, especially in the context of its digital transformation initiatives.
Outlook & Guidance
Looking ahead, Millennium BCP expects mid-single-digit loan growth and anticipates net interest income stability in 2025. The company also projects potential low to mid-single-digit growth in Portugal’s net interest income in 2026 and maintains guidance for mid-single-digit fee and cost growth. InvestingPro analysis shows the bank’s return on assets stands at 1.68%, while maintaining a gross profit margin of 1.86%. These metrics, combined with the company’s Financial Health Score of 1.78 (rated as ’FAIR’ by InvestingPro), suggest a stable operational foundation for future growth.
Executive Commentary
Miguel Maier, Executive, emphasized the company’s commitment to creating value, stating, "Creating more value is what we have been doing and what we intend to continue doing." CFO Miguel highlighted the company’s robust business model and profitability, noting, "We are fully on track to deliver on our plan, a plan based on a very robust business model that translates into a very robust profitability."
Risks and Challenges
- Geopolitical and interest rate challenges could impact market conditions.
- Maintaining net interest income stability amidst economic pressures.
- Potential risks in sustaining digital growth momentum.
- Managing cost efficiency while expanding digital offerings.
- Competitive pressures in key markets like Portugal and Poland.
Q&A
During the earnings call, analysts inquired about the potential tax rate reduction in Portugal and its impact on the company’s financials. Millennium BCP’s management reiterated its focus on organic growth and resilience in net interest margin management.
Full transcript - Banco Comercial Portugues (BCP) Q2 2025:
Conference Operator: Good day, and thank you for standing by. Welcome to the Millennium BCB First Half twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be the question and answer session. Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Mr. Miguel Maier. Please go ahead.
Miguel Maier, Speaker/Executive, Millennium BCP: Good afternoon. Miguel Maier speaking. Welcome to BCP earnings conference call. I will go through the highlights of our performance, followed by Miguel Borghans and Bernard Klas, who will provide additional detail. In a context marked by eye and predictability shaped by geopolitical challenges in affecting economic agents’ confidence, instability, and arrest caused by the ongoing wars and the Indio also on a significant reduction in interest rates.
BCP achieves positive progress in results and key business and financial indicators in the first half of this year. Once again, we have demonstrated disciplined capital management, constant focus on operational efficiency, commitment to customer orientation and the ability quarter after quarter to consistently deliver on the strategic plans we presented to the market. In the first six months, the consolidated net income stood at $5.00 €2,000,000 an increase of 3.5% year on year, supported by a strong operational performance, having achieved an ROE of 14.3%. All of our core markets, despite having different challenges, contributed positively to the results with the activity in Portugal standing out once again with a net income of EUR $424,000,000, having increased 3.2% year on year. It deserves to be mentioned that the increase in net income in Portugal has been driven by the core capabilities of our business model.
We have achieved higher operational revenues, although within the context of a continued reduction in interest rates over the past year, thanks to appropriate interest rate risk management and strong commercial intensity. These factors led to the expansion of business volumes, combined with a controlled cost of risk. The net income from international operations grew by 11.8% year on year, having achieved almost $147,000,000 in the 2025, with special mention to the bank Millennium in Poland, which recorded a net income of $121,000,000 despite charge above $276,000,000 still associated with the FX mortgage loan portfolio, of which $219,000,000 were provisions. Having already a substantial amount in provisions, again, the risk associated with the FX mortgage loans, which provides confidence to face the future, Bank Millennial continues to develop its core competencies, expanding the franchise to attract and serve a growing number of customers in an economy that is high value creation potential. In Mozambique, the net profit in the first half was $24,000,000 a decrease of 48% driven by impairment and provisions, mostly related with the downgrade of sovereign debt rating that followed the country’s instability between the presidential elections and inauguration in January of President Daniel Schap.
Despite the additional charge off impairments in the 2025, Millennium BIM continued to build up its strong franchise and business model, which has enabled intense commercial activity that reflected in a year on year increase of 3.7% in the profit before impairments and provisions. The consistent organic capital generation capacity of our business model is well reflected in BCP’s strong capital position. We have capital ratios comfortably above regulatory requirements with the CE Tier one at 16.2% and Total Capital at 20.2%, which, in accordance with the shareholders’ remuneration policy that we present to the market, only includes 25% of the non audited profit generated in the first half and already considers the impact of the CRR3. The quality of our retail banking business model across our markets based on a strong commercial skills and lasting relations with our customers led to an increase of 5.5% in customer funds and 3.5% in loan to customers. Customer funds surpassed $106,000,000 and loans to customers stood at $60,000,000,000 at consolidated level, driven by an increase of 40.6% in Portugal, where loans to customers increased 1,800,000.0 year on year.
We also kept the trajectory of improvement in the quality of the balance sheet. In the last twelve months, we have managed to cut nonproductive assets by an additional $425,000,000 including $336,000,000 in NPEs and $70,000,000 in restructuring funds. Operating in a challenging environment, our rigorous management of the balance sheet risks enable us to also improve the cost of risk to around 30 basis points, a level well anchored below the threshold presented in the strategic plan. Overall, this was a positive first half, which we further strengthened the franchise, the asset quality, the capital ratios and the efficiency of the bank. In this same biases between excellent teams and distinctive digital competencies lays the backbone of our competitive edge, which is also reflected in the expansion of customer base.
At group level, our customer base expanded 4% in the last twelve months, reaching 7,100,000, of which more than 2,800,000 in Portugal. Most notably, mobile customers grew 9% during the same period, accounting for 73% of the group’s customer base and 65% in Portugal being a very good indicator of the preparation and success of BCP to tackle the opportunities in an increasingly digital market. Individual and corporate clients continue to choose Millennium as their preferred bank, and our services were again awarded with prestigious distinctions recognized by the market. Customer recognition of our digital capabilities continues to be reflected in the use they make of the app. In the first half, customers carried out 11% more transactions to the app than in the same period last year, with a significant growth in the number of transfers.
This platform reinforces relevance in the effort to expand the customer base with an increase of 47% in the number of accounts opened directly in the app. The number of sales through the app increased 13% in the same period with emphasis on the sale of personal loans, which increased 42%. The convenient and end to end seamless experience provided by the app is driving us its use by customers in their acquisition journey of solutions fit for the financial needs, being an relevant tool to have more processes fully digital. For instance, in the sale of mortgage loans, we saw an increase of 76% in the number of customers who received their approval letters through the app, and 38% more mortgage deeds appointments were also scheduled through the app. The investment and priority we give to mobile solutions with a clear focus on customer centric version means that our app continues to lead the rankings and deserve top reviews on the most relevant platforms.
Before ending over the presentation, let me give you a word on the sale of Novo Bank. As we have always emphasized, our strategic plan is based on organic growth. So the outcome of this matter, which we consider positive for the Portuguese financial system, does not affect our strategic our strategy and our strategic plan in any way. Our commitment has been to the bank’s development, focus on commercial intensity, operational efficiency, and rigorous capital management, enabling BCP to position itself as a bank that generates and delivers more value. That focus has shaped our approach.
Creating more value is what we have been doing and what we intend to continue doing. Miguel, the floor is yours.
Miguel, CFO/Financial Executive, Millennium BCP: Good afternoon, ladies and gentlemen. As always, starting here with an overview of our income statement, we can see that in spite of the reduction in interest rates, we have been able to present a very resilient, NII, both in Portugal and in in Poland as we had anticipated. A growth in commissions in the mid single digit area, also as we had a dissipation as we had anticipated with a higher weight in in Portugal than in in Poland. The operating costs growing around 8.7% on a pro form a basis, and 10.5% on a status basis, basically, because last year, we had finished the agreement with the unions in the second half of the year. So it only affected the accounts in half two of the year.
So adjusting for this factor, 8.7%. So this means that we have been able to show, in spite of the more challenging environment in terms of interest rates, a very, very resilient profitability before impairment and and provisions growing by 3% from a level that I think we all agree is quite high level. The impairments, have been reduced in our geographies, both in Portugal and in, in Poland for different reasons. In Poland, there was a sale of NPLs that generated a gain in impairments because in Poland, we typically only sell the loans after they are fully impaired. And, we are seeing here a reduction of the cost of legal risks in Poland when compared with last year.
And if we, consider not only the cost that is booked in the provision line, but also the cost that is, booked on the other income line and on the results of modification line, this reduction is around one quarter, around 25%. The profit before income tax growing 16%. And after income taxes and noncontrolling interests, we see here a growth rate of of three and a half percent mainly because of the high growth rate in Poland where we have a a larger stack of noncontrolling interests. Just to highlight the main points, the ROE above 14%, the RoTE approaching 15%, the growth in terms of book value per share plus dividend per share, reflecting the number of shares bought until June 13 for 15.5% and the dividend yield based on the price, of last year. So in the last twelve months of 8.9%.
In terms of group profitability, net interest margin growing 3.3% as we had commented with some contraction in terms of NIM from three zero eight to 2.97. And I would here like to highlight the very posi I would say the the very positive growth of, the net interest, income in international operations. This is mainly because, but not only, but because of the, interest, the the NII the lower NII generated by the credit holidays last year in Poland. So Poland but in spite of this, even without the effect of the credit holidays, it Poland would have grown 5%. And in Portugal, in spite of the reduction of interest rates, the a very stable NII.
As you may see, our NII has been stable in the last four quarters. Of course, last quarter, there was an issue in terms of, of the account because, as we know, February has less months than a typical month of the year. But still, we are showing a very consistent pattern in terms of NII both in Portugal and in Poland. The seasoned commissions in Portugal growing almost 7%, which is, I think it’s an important print showing clearly the growth of our customer base and our effort to to generate profitability also in this, in this line. In in Poland, there is a higher challenge because, as you may recall, we have sold our bank assurance broker operations.
This is having, its impact, of course, in terms of fees when you do not correct, when you do not do a pro form a basis. In any case, we expect as the bank develops, as time goes by, this gradually to increase. As a net operating income, We see a a very positive evolution in this line. As you in this line, you can see in terms of Portugal, the mandatory contributions being reduced by around 6,000,000 because of a ruling a ruling of the constitutional court that declared one of those contributions basically, unconstitutional. So this is positive news.
And also going forward, this 6 5 to 6,000,000 a year that we used to have is something that we expect to continue. In, in Poland, of course, as the bank becomes normalized, we see a growth in mandatory contributions, basically adjusting the level of mandatory contributions in the bank to the normal level that it was not paying before. In terms of, net trading income, there was here, in in Poland, the mark to market of the the participation in a in a payment company that the bank owned that largely explains this well. Operating costs. I would like you to highlight the cost to income of 37%.
So, in consolidated level, as I commented, there is this growth of, 10.5. But adjusting adjusting for the, for the seasonality, I would say, of the negotiation with the unions, it be 8.7%. And in Portugal, 8.5, adjusting for the seasonality around 5%, perfectly aligned with the guidance of mid single digit that we had anticipated. Cost to income in Portugal, 35%, which, clearly shows the resilience of our business model. Cost of risk.
Cost of risk, around 30 basis points. And as we see as we see, in Portugal, a level of 33 basis points. So around hovering around 35 basis points, which I would say is close to the to the to the new normal of the bank, at least for this macro environment in which we are living right now. Cost of risk in Poland benefiting from a credit sale that I have, anticipated. I would say, before credit sales, the cost of risk in, in Poland should hover around the the the the 40 basis points.
The continued decrease in in NPEs, so in spite of the low level of NPEs in the several geographies in which we are and I would here, like to highlight the the level of nonperforming loans, really nonperforming loans with more than ninety days past due that is already around 1%, which is a very low level. And with if we include the unlikely to file, it’s already below 3%, around 2.7%, only focused on loans. If we if we include securities and off balance sheet items, also, this total ratio that includes the unlikely to sell is also already below 2%. The unlikely to pay already below 2%. And in Portugal, a further reduction of 26% year on year with the, NPE loans ratio, including the unlikely to pay only at around 2% as we see in page 16.
In our international operations, the the NPE ratio is is higher but below 5%, and this is, to a large extent, linked to the business model in these in these geographies. In Mozambique, we have a very small credit portfolio and very low, I would say, exposure to to to to credit of of companies. Also, a lot of it is to individuals. And in Poland, we have a high concentration also in unsecured loans. As you know, part of our strategic targets is to diversify our business model also to SMEs and, and corporates.
But in the meantime, we tend to show a higher NPE loan ratio, but still very consistent with a very healthy model because the spread of the unsecured loans, is a is a multiple of the cost of risk. Activity. Solid activity. Customer funds growing five and a half percent year on year at group level and 4.6 in Portugal in several lines. In our international business, growing 7.5%.
This really shows the strength of our franchise and our business model and our ability to reinforce our position both as a savings and investment house in the daily banking house. The loan portfolio, growing at group level 3.4%. Here, I would like to highlight the important growth, in Portugal, of of the loan portfolio overall of more than, 2,000,000,000, as you see here in graph in Slide 19. In in the international operations, quite stable. This is, to some extent, to the effort that we are doing in Poland of recalibrating, so to say, our balance sheet in Poland so as to, have a business model more that is more diversified and has a a higher share of, SMEs and micro business and and small corporates, I would say, vis a vis, the market share in, mortgages.
As you may recall, when two years ago, we one and a half years ago, we had the issue of the great holidays, and we had the issue of long term finance ratio. We were particularly affected vis a vis our competitors in Poland. We want to converge, I would say, to a ratio of mortgage to total credit that is more aligned with the system exactly to be a more diversified bank. In terms of capital and liquidity, stability in the capital ratio, I would say this is a particularly good news. And when considering the context of the growth of the credit portfolio, this is not something that we should expect forever.
As you as as you know, on on average, we would expect our RWAs to grow aligned with the growth of our credit portfolio, maybe even a little bit higher because we are focusing more on the corporate and SME business, which is typically more RWA intensive. However, in this specific quarter, we because of the composition of, our growth and lower risk asset density of our growth, we were able to to grow almost without without any increase in terms of of RWAs, which means that we were able to appropriate the very small, 25% accrual of the P and L. And considering the 25% accrual, when we consider the last quarter together with an almost irrelevant growth of RWAs, this has made it possible for us to actually increase our capital ratio when we compare with the 15.9% of the last quarter. But going forward, as we had commented in the context of our, long term plan, our objective is to continue to grow at, these type of levels around 5%, the but with a higher risk asset density, and we should expect that a growth of credit of 5% also to contribute to a higher growth of RWAs and this ratio to slowly, I would say, normalize.
A very strong capital position, as we see here in page 22 with a leverage ratio, that compares very well with the leverage ratios in the main, or most of the main European economies. You see 6.4% comparing with 4% in, in France, 5.6 in Germany, and five point and five and a half in Spain, which also translates in a high risk weight density, which gives us some comfort in terms of modeling risk going forward. MREL requirements, clearly, above minimum MREL requirements. So very comfortable position as our bond investors are seeing also a very good performance of our credit spreads that and the ability to access the market, I would say, in a normalized way. Pension fund coverage.
The fund profitability, the fund profitability has been 1.6% as of June 25, so somewhat below, I would say, the reference, actuarial rate. However, because of the the growth of the long term interest rates, a quite positive impact in terms of the in terms of the liabilities of the of the liabilities, which means that we still maintain, an important buffer above the minimum, above the minimum. You see that that the pension fund is has 3,300,000,000.0 of assets for liabilities of three three point o five, which means that the difference around 250,000,000 is a buffer to observe potential actual differences before having any type of impact in terms of capital. The liquidity position, very robust. I will not enter into it.
And now I’ll pass the floor here to Bernardo.
Bernard Klas, Executive, Millennium BCP: Okay. Thank you, Miguel, and good afternoon, ladies and gentlemen. I will start on page 27. That’s that’s related with Portugal, where net income reached 424,000,000 in the ’25. That corresponds to an increase of 3.2% compared with the same period of last year.
I think that for this favorable contribution or evolution of the Portuguese net income, it should be highlighted the increase of net operating revenues of almost EUR 19,000,000 and the reduction of almost EUR 11,000,000 on impairments and other provisions. Regarding operating costs, and as it was already explained by Miguel, on a pro form a basis, costs increased 5.1%. On Page 28, net interest income stood at $659,000,000 in the first half of this year. That means 2.2% below what was recorded in the 2024. But once again, I think it’s important to highlight if we do a quarter on quarter comparison that NII increased 2.2%, it’s broadly stable, as Miguel also mentioned, over the last four quarters.
And the previous one, there was a small decrease that was related with the calendar effect. Regarding year on year evolution, as you can show from the graph, NII decrease reflects the lower income generated by the loan portfolio that was partially offset by the increase of the performing loan book by the reduction of interest paid on deposits, lower wholesale costs and the positive contribution from the securities portfolio. NIM stood at 2.12 at the June ’25, which is the same level reported in March 25 when interest rates were almost 40 basis points higher than they are right now. Moving to Page 29. Commissions amounted to EUR $3.00 7,000,000 in the first half, increasing 6.7% compared with first half twenty twenty four.
Banking fees and commissions went up 7.70.7%, supported by higher bank insurance fees and by the increase of clients that have BCP as a first bank. Regarding market related fees, there was an increase of 2.2%, mainly reflecting the higher contributions the higher contribution from asset management. Trading results evolved from minus EUR 4,700,000.0 in the first half twenty twenty four to a positive contribution of EUR 7,000,000 in the first half of this year. And equity accounted earnings were broadly stable year on year at a level of around EUR 30,000,000. Other net operating income registered also an improvement, evolving from minus EUR 25,000,000 in the first half of last year to minus EUR 21,000,000 in the first half of this year, and this is mainly due to lower mandatory contributions.
Going to Page 30, operating costs totaled $342,000,000, which is EUR 8,500,000.0 higher than the $315,000,000 of last year. Although, as also already mentioned twice, if you analyze the cost evolution on a pro form a basis, meaning that I mean, considering the accrual of the salary increases and the variable remuneration that was booked in the second half of last year, operating costs went up 5.1%. In terms of branches, there was a small reduction. And regarding the number of employees, there was a reduction of 50 employees. Moving to Page 31, which refers to asset quality.
As I highlighted before, there was a sizable reduction of NPEs. NPE reduction since June was above 26%, meaning almost €290,000,000 And it should be noticed that from the total figure of eight twenty million of NPEs, more than 50% are other NPEs and not really ninety days past due exposures. Cost of risk stood at 33 basis points in June, which is a similar level than Q1 of this year. That compares with the stated cost of risk of 28 basis points in June 24. But as it was also mentioned, that was affected by an impairment reversal in 2024, which excluding these effects these effect cost of risk would have stood at 52 basis points in the first half of last year.
Now moving to Page 32, which looks at the NPE coverage breakdown. As you can see, total coverage of NP stood above 140%, NPE coverage by loan loss reserves at 94%, and here I should also highlight that the total coverage for companies stood at 134%. On Page 33, that shows the evolution of foreclosed assets and corporate restructuring funds. Net value of foreclosed assets stood at EUR46 million that compares with EUR66 million one year ago, meaning a reduction of more than 29% or a decrease of almost EUR 20,000,000. Regarding corporate restructuring funds, exposure at the June stood at EUR $323,000,000, that compares with EUR $393,000,000 in June 24.
Now on Page 34, in terms of total customer funds, we reached in Portugal, 72,300,000,000.0, an increase of 4.6% compared with June. On balance sheet funds stood at EUR56.5 billion, reflecting an increase of 4% year on year. And off balance sheet funds went up almost 10%, meaning an increase of EUR1.4 billion compared with June 24. In terms of the gross loan book, it stood at EUR 41,500,000,000.0 in June 25, an increase of 4.6% from previous year. And this increase reflects the strong performance on loans to individuals where mortgages registered an increase of 8%.
And in terms of corporate lending, it should be highlighted the positive trend that becomes even more visible in the quarter on quarter comparison, where loans to companies registered an increase of 5%. Going to page 35, it is possible to see the new loans origination by segment and the recognition of BCP as a main bank for Portuguese companies. Performing loans in Portugal went up 5.5%, meaning an increase of more than €2,100,000,000 Loans to individuals grew 8% year on year with a relevant contribution for mortgages that increased 8.2%. And here, once again, it must be highlighted the performing loans to companies that increased 2.5% year on year. But as I said before, on a quarter on quarter comparison, exposure to companies went up 5%.
Now in terms of international operations and on page 37, results from international activity went up 11.8% to EUR 146,600,000.0. Dynamics were different in Poland and Mozambique. Bank Millennio in Poland net profit stood at $121,000,000 in the 2025, up 43% from previous year, while Millennio Bibi Mozambique recorded a net profit of almost 24,000,000 that is lower than the amount recorded the year before. And as I mentioned and as it was mentioned in Q1 twenty twenty five, the decrease was related with a downgrade of the sovereign debt, leading to an increase on financial assets impairments. Moving to Page 38, which refers to Bank Millennium.
Net income went up more than 43%, but profitability continued to be impacted by costs related with CHF mortgage loans. If we exclude this specific effect, net income grew 6.9% compared with the same period of last year and would have stood above EUR $380,000,000. Net operating revenues up 13.6% and operating costs, including mandatory contributions, up 15%. If we exclude mandatory contributions from costs, increase of the cost base was 11%. CET1 and total capital at 13.815%, respectively, are clearly above the minimum requirements despite the quarter on quarter reduction related with the application of CRR three in the second quarter of this year and the fact that Bank Millennium is not considering in their first half capital figures the earnings of the first half results.
Considering the first half twenty five net income, CET1 and total capital ratios stood at fifteen and sixteen point eight, respectively. On Page 39, some detailed information about Bank Millennium. NII increased EUR 32,000,000 compared with the first half of last year. NIM stood at EUR 4 0.18, which compares to EUR 4.32 in the 2024. And it is important to highlight that National Bank of Poland cut interest rates by 50 basis points in May and already in July, another additional cut of 25 basis points.
Fees and commissions were down 5%, and the reduction was mostly related, as Miguel said, with bank assurance commissions that are expected to be recovered over the year and somehow align with the expectations in terms of volume growth. Trading contribution for P and L from Bank Mileni was influenced by the revaluation of the stake that Bank Mileni has in the local company, and mandatory contributions went up 51,000,000 compared with the 2024. As you know, the Bank Millennium started to pay the banking tax in June 2024 after exiting the recovery plan. Moving to Page 40 related with asset quality, cost of risk stood at 21 basis points. That compares with 50 basis points in June 2024.
And as it was already mentioned and on the presentation of Bank Millennio, in the second quarter, cost of risk of the Polish subsidiary was impacted by the sale of NPLs. Nonperforming loans more than ninety days past due stood at 2.1% and coverage by loan loss reserves of nonperforming loans stood at 153. On page 41, customer funds in Bank Milan grew 6.7% year on year, off balance sheet funds grew more than 34% and total deposits 4.5%. In terms of loans, gross book stood at EUR 18,000,000,000, which is slightly lower than in June 2024. Mortgage loans decreased 4%, and personal loans went up almost 4%.
And regarding companies where Bank Millennium has a strong focus, exposure to companies increased more than 6.5% compared with June. On page 42, regarding FX mortgage, it’s worth mentioning the continued reduction of the CHF portfolio, which showed a reduction of 31% since June 24 and by 10% since March 25. CHF loan book at the June ’25 represented only 1.1% of the loan portfolio, which compares with two point four percent one year ago. Cumulative provisions for legal risk stood at 1,740,000,000.00, representing 142% of the CHF mortgage portfolio. It is also possible to see, once again in this slide, the downward trend of the new court claims and the capacity and focus of Bank Millennium in reaching amicable settlements.
This is another quarter where agreements with CHF agreements regarding CHF mortgage loans with clients were above new individual lawsuits. Turning to Page 43, which regards to now to Mozambique, to Millennium BIM. Performance in Mozambique was impacted by the downgrade of sovereign debt ratings, leading to additional impairments on financial assets at the end of last year and the first quarter of this year. And as a consequence, the net income decreased from EUR 46,000,000 in June 24 to almost EUR 24,000,000 in June 25. Net operating revenues went up almost 7% and costs registered an increase of around 10% compared with previous year, and this could be also partially explained by the increase in terms of the number of employees.
Capital ratio stood at very high levels, and it stood at the June at 37.2. Moving to Page 44, NII went up more than 9%. And for this evolution, miladybine, there was a contribution, let’s say, from the reduction in the local currency requirements for non remunerated cash reserves that has been applied since January 25. NIM was broadly stable, above 8%. Commissions registered a negligible decrease of 2.5% and other income that includes mostly the contribution from the trading line on the Mozambique operation went up more than 4%.
On Page 45, regarding asset quality, nonperforming loans ninety days past due stood at 3.6%. That compares with three point eight percent one year ago, and coverage is above last year at the level of 125%. Regarding volumes on page 46, you can see in Mozambique that customer funds increased 6%, driven mostly by the increase on demand deposits, and loans to customers registered an increase of almost 4%, supported by the growth on personal loans. As as you can see, this was also registered a decrease in terms of loans to companies. And thank you for your attention.
Before we move to q and a, I will return to Mr. Miguel de Gracias for some final remarks.
Miguel, CFO/Financial Executive, Millennium BCP: As usual, here, we present the key metrics of our plan. As you may see, we are clearly on track to deliver on our plan. The business volumes, behaving very positively, clearly on track to achieving business volumes above 190,000,000,000 by 02/1928 in terms of number of customers also and, and number of customers also with a high share of mobile that will enable us to serve them with a high quality and in a cost efficient way. The cost to the Community Tier one ratio behaving also very favorably and consistently with a high ROE clearly above the targets that we have set. I will open now the floor to to q and a.
Thank you very much.
Conference Operator: Thank you so much, dear participants. And now we’re going to take our first question, And it comes from the line of Ignacio Largui from BNP Paribas. Your line is open. Please ask your question.
Ignacio Largui, Analyst, BNP Paribas: Thanks. Good afternoon, and thanks very much for the presentation and for taking my questions. I have two questions, if I may, and one follow-up on a clarification. So the first one is on NII. How should we think about Portuguese NII after the performance of 2Q?
Do you see it we have seen already the bottom, And, do you think Miguel, the mid single digit growth expectation for ’26, should that just like last quarter is, still valid? Second question is on capital. You have had a very good performance on capital. You have still a very big buffer with above 13.5 target that you have. I mean, should we think about the use of that capital?
I know that you have said that the plan has been that you had a plan based on organic growth. Is it reasonable? When should we have a reasonable view when this capital could be distributed or used in any way? And finally, one clarification on the tax rate evolution. I mean, looking to the tax rate, it’s very low in Portugal.
How should we think about it going forward? And also wanted to get a bit of your sense of the implications from the recent plans of Portuguese government to reduce the tax rate in Portugal from 20% to 17%? Thank you.
Miguel, CFO/Financial Executive, Millennium BCP: Okay. Thank you. Thank you very much. Starting starting with the last question, about the tax rate. The the type of tax rate that we are seeing in Portugal, we think they are consistent, and we can expect this type of tax rates on the on the mid-20s, going forward ex this evolution that we are seeing, of the potential changes to the to the tax rate in Portugal.
So first, there is a proposal on our parliament, as some of you may know, of reduction of the tax rate from 20% to 17% in three years, but already legislated, so to say. So there is a reduction of 1% a year, so so as to reach 17%. Once we get there and as we went there, we would expect, a proportional reduction on our tax rate of of one percentage point a year because this is almost I’m speaking about the Portuguese operations. This is almost automatic. And this is good news.
So I was here first, of course, having a 3% reduction on taxes for, our profitability is good news because it translates immediately into a higher profitability and a higher profit and, and consequently, in principle, into a higher valuation. Nevertheless, there is a a short term impact in terms of of DTIs and in terms of of capital. So we don’t expect this to have an impact necessarily in terms of profitability. But, if this law is approved, and in spite of this being a good news from a value standpoint, in terms of capital, we would expect, because of the reduction of DTAs, something around, give or take, around 15 basis points of reduction in terms of of capital. So I think, but, nevertheless, it’s much less in terms of impact than what you would expect in terms of the impact or in terms of valuation of the bank.
In terms of capital, as we have presented the plan, it is a it was a it is a four year plan, up until ’28. And the base of our plan is growth, growth both in terms of customer funds and in terms of credit, a growth in terms of credit that we expect to have a CAGR more or less around 5%, some in in Portugal here, in Poland, maybe a little bit more than that. But changing, so to say, somewhat the mix into a portfolio with a somewhat higher risk weighted asset density because we want to focus more and more in our two main geographies in the in the SMEs and corporate business, so with a higher risk asset density. So this means a higher RWA consumption. So as we move forward, our plan is to allocate this capital or this generated capital to growth, to organic capital growth.
This quarter, but we cannot see it every quarter, we were able to grow exactly this 5% of the deals and of the origination that we have this quarter and of the amount of, government guarantees created we had this quarter and of the risk profile that we have originated this quarter, we were able to grow credit without, I would say, the proportional impact in terms of, RWAs, which is very positive. But going forward, looking until ’28, what I would expect is that our growth in RWAs will be somewhat larger than our growth in capital. And this means that by distributing 75% of our profit every year through, dividends and through share buybacks. This means that, we will converge, I would say, to CET one ratio comfortably above 13.5%, and this is our plan. If for whatever reason the environment changes and we are not able to grow, of course, we have to come back to you and present another plan.
But as of today, this is the plan, and we are delivering on the plan. In terms of NII, the message here for this year, both for Portugal and Poland, is a message of stability of NII, of resilience of the NII, which is in a scenario of decrease of interest rates. Looking to ’26, I would say, in Poland, in spite of a further reduction, in interest rates, we would, we would expect the, the the margin in in Poland to continue relatively resilient. In Portugal, what we would expect, even if the, the ECB rates goes to as low as one seventy five, But based on the forward rates that then starting next year, our NII will start growing, I would say, low to mid single digits in in Portugal, consistent with the growth of the business volumes of 5% and a marginal margin contraction. So to make a long story short, NII resilience in Portugal, resilience this year and some growth next year.
Ignacio Largui, Analyst, BNP Paribas: Thank you very much.
Conference Operator: Thank you. Now we’re going to take our next question. And it comes from the line of Alvaro Fernandez from UBS. Your line is open. Please ask your question.
Alvaro Fernandez, Analyst, UBS: Yeah. Hi. Good afternoon, and thanks for taking my questions. I have two. First, we have seen a strong acceleration in corporate lending in Portugal.
So what had driven this performance? What are your expectations for coming quarters? And is the eighteen billion euros book you have right now sustainable towards year end? Or should we see a reversal? And second, CHF provisions in H1 have declined 8% year on year and just 2% compared to the ’24, so no not significantly.
So my question is, how do you see the second half of this year relative to the first? And also if you could give a bit more color on 2026. Thanks.
Miguel, CFO/Financial Executive, Millennium BCP: So we think that a corporate a corporate lending a corporate lending growth around the mid single digits is sustainable. So I cannot commit that every quarter, this will be gradual because mainly when we speak about corporate loans and, about the larger SMEs, there is always some some bulkiness there, but we do think it’s sustainable. We have pipeline for this. We are seeing also some interest right now finally, also in line with the second order effects of the of the PRR, of the of the funds that come from Europe and the and the investment in in several in several projects. There are second order effects.
So we feel comfortable in Portugal that this type of growth rates year on year of mid single digits are sustainable. In terms of the P and L for the rest of the year, the guidance that we have given is maintained. So I would say a resilient NII. So our NII has been quite stable. We think that in spite of a further reduction in interest rates, we will continue to have a resilient NII, a mid single digit fees and commissions line evolution, which we think is is also still possible, a mid single digit cost evolution, and, a cost of risk hovering around 35 basis points.
We think all these guidance maintains its validity. Okay.
Conference Operator: Thank you. Now we’re going to take our next question. And the question comes from the line of Max Mission from JB Capital. Your line is open. Please ask your question.
Max Mission, Analyst, JB Capital: Hello. Good afternoon. Thanks for the presentation and taking our questions. I have three. The first one is a follow-up on loan book growth.
Given your comments on mid single digit growth for corporate loan book, you’re growing 8% in mortgages and consumer. What should we expect for overall loan book growth in 2025? Maybe you can grow on top of the mid single digit guidance. The second one is on fees. They delivered a notable surprise in Portugal, and I was wondering if you expect momentum to continue in the coming quarters.
And what was the driver of the performance? And then the final question is on other provisions. They were almost absent in Portugal, just wanted to update the expectations for the rest of the year. Thank you.
Miguel, CFO/Financial Executive, Millennium BCP: Okay. Starting with the other provisions. The other provisions as the trading line, by the way, are, by its own nature, more hard to predict because these other provisions are linked to risks that are more difficult to model and and harder to predict. So we this was effectively, as you commented, a good month in terms of other provisions. But the type of guidance that we have been giving of around 10,000,000 to $15,000,000 per quarter, I will not change it because it is difficult to anticipate what can go wrong.
And just based on the magnitude of our balance sheet and our magnitude of balance of our, of of the risks, the the the operational risks, not only that that are linked to our model, we think it is prudent to assume that, I would say, across the cycle, I would say, this type of other provisions are are the the reasonable ones. In terms of loan book and the fees and commissions, Up until now, there’s always some some bulkiness in this area. Let me tell, for instance, in the in the fees and commission line, which is that there were some fees that being recurrent, they are not recurrent, every quarter. So there were there were some fees, for instance, that had to do with incentive fees from Visa that are paid once a year. So, this means that we cannot assume that the full, value of the of the increase in terms of fees and commissions is totally current for for the year.
So for the time being, we are maintaining the the a mid single digit guidance of it maybe with a slight positive a slight positive bias in the sense that if the markets perform well, there will be more asset management fees and investment fees, basically. That is, I would say, a slight positive value, but it’s still early days to say whether the markets will perform well or not and whether there will be, an accrued interest for, investments and asset management products. And I would say the same goes also for the for the loan book. The 5% increase year on year, we think it makes, it makes sense. There’s always some bulkiness there, mainly when we speak about corporates.
There is also, of course, a trade off between growth and and price, which I would say on the short term, there is probably an excessive growth, has even a negative impact in terms of NII. So we are very prudent in terms of of pricing. We do think that this type of growth is sustainable and accrues value to to our shareholders at this point in time, we would maintain this type of guidance in the mid single digit area.
Max Mission, Analyst, JB Capital: Thank you very much.
Conference Operator: Thank you. Now we’re going to take our next question. And it comes from the line of Francisco Riquel from Alantra. Your line is open. Please ask your question.
Francisco Riquel, Analyst, Alantra: Yes. Thank you for taking my questions. Two follow ups in fact. First one is on the margin dynamics NIM, resilient NIM in Portugal that you mentioned. If you can elaborate a little bit more, please, on the evolution between the customer spread and the NIM, and in particular, the cost of deposits front book versus back book dynamics.
And also now that you are accelerating growth in loans also front book versus back book dynamics there would be useful. And second is also a follow-up in the corporate loan growth, this mid single digit growth that you think is sustainable. So this I mean, we know demand in mortgages is strong, but corporate loan book has been lagging in your case. So the question is what has changed? So you previously mentioned that you were impacted by the repayment of COVID lines.
Is that fading now? So where do you see corporate loan demand coming coming from mainly? Thank you.
Miguel, CFO/Financial Executive, Millennium BCP: Okay. Starting starting with the the corporate loan book. Yes, you’re right. I mean, in the last years, we were very, very successful in terms of the the COVID lines, the COVID guaranteed lines. But the other point of this success is that some of these loans were contracted for safety reasons, for prudential reasons, by the customers.
And they effectively as the COVID, issues did not materialize to the degree that people, were, were concerned about, basically, they they have repaid the loans because it was to some of them, it was almost an insurance an insurance loan. So the success that we have was then counterbalanced, I would say, by a a negative dynamics when these loans were repaid. But in the meantime, this was good business. We made, I would say, an interesting profitability for our bank and for our shareholders, and our customers were adequately served. As you said, I mean, now that this is fading away, this is, also helping the situation.
So this is one situation. The other the other issue is, as these European lines and as these European investments become or are materialized, so to say, we see customers trying to access these type of lines. We see the customers of these customers also trying to prepare themselves for this type of lines. And, this explains to some extent this renewed interest in terms of of loans. So all in all, for the time being, except if there is, I would say, a major a major macro macro crisis in the, I would say, in Europe, which is not clearly not our our best case scenario, we feel confident that this is a trend that is that will continue.
In terms of the deposits, we do have a deposit. Let me just check here. Typically typically, our, we have been showing, I would say, EBITDA, slightly slightly below 50%. So as the interest rate goes down, I would say, in terms of deposits, our, our deposit cost, in terms of term deposits, goes down, but only by around 50% of this value. So I think this is the the the best way to approach it because in this scenario of decreasing interest rates is it is it is the best way to approach because, of course, as interest rate goes down, mainly when we speak about deposits, the loan, I’m sorry, the deposit pricing, of course, in the scenario of decreasing interest rates, the front book is lower than the back book, but not by as low as the the amount of the, decrease in the arrival rates.
On the other hand, in terms of of the the spreads, we are seeing resilience in terms of asset spreads. And we are, so to say, hedging, the fact that most of our current accounts are nonrenewrated and the fact that we have EBITDA of 50% with a portfolio of government debt and with a portfolio of interest rate swaps that allows us, even in spite of this reduction in interest rates, to maintain a very resilient margin. So I would say that our the hedging of our balance sheet is what allows us to, maintain the NII in spite of the fact that our current accounts are fixed rate at zero and in spite of the fact that our term deposits have, EBITDA of around slightly below 50%. So I think this is the best way to to explain it. And this is what will allow us to have or is allowing us already for four quarters in a row to have a very resilient margin.
And going forward, once the interest rate hits its bottom, we expect by the by the end of this year to start growing in terms of, of NII aligned with the business volume growth.
Ignacio Largui, Analyst, BNP Paribas: Thank you.
Conference Operator: Thank you. Now we’re going to take our next question. And the question comes from the line of Carlos Peixoto from Caixabank. Your line is open. Please ask your question.
Carlos Peixoto, Analyst, Caixabank: Yes. Hi. Good afternoon. A couple of questions from my side as well. The first one or the one that actually be on capital.
The first one would be in terms of DTAs, How much deductions from DTAs do you still have in in how much DTAs are are being deducted to CET1 right now, and what’s the pace at which you believe that that the deduction can come can come down as you use the stock of TTAs. And then still and still related with with that, looking into off balance sheet TTAs, which I believe you still have a somewhat somewhat of a significant amount, Are there are there any changes in in your view regarding the the recoverability of those DTAs? What I’m meaning here is that whether you can you can start bringing back the balance sheet some some of those. And then just to follow-up on the on the capital and capital distribution that you you were discussing before. I was just running here quick maths, but I was I was running a numbers with a 6% growth per annum in in RWAs and a 25% retention on on net profit, and let let let’s say net profit around $11,000,000,000.
The fact is that I I would still be getting to something closer to, 15% CET one ratio at at the end of of the business plan rather than the the then closer to the 13 and a half that you mentioned there. Are there any any missing pieces here in terms of CET one evolution, any relevant ones that you should bear in mind, or or or are you just being conservative on the on the on your expectations on capital? Thank you very much.
Miguel, CFO/Financial Executive, Millennium BCP: Starting with our last question. As you see in our page 48 where we have presented our targets, there is a reason why we said that we want to have a CET1 ratio above 30 and a half. It’s not at 30 and a half. It’s above 30 and a half. Okay?
So the the ratio is more than 30 and a half. It’s not 13 half. So, of course, there is a buffer above 13 half that you want to get. So this is part of the answer. The other part of the answer is the RWA density.
So, as we grow in businesses, including in Poland, where we almost have, we have very little in terms of SME credit and corporate credit, but also to some extent in Portugal with a higher RWA density and with less reliance on mortgages, the growth of RWA will tend to be higher than the, than the growth in terms of credit. So this is the, a part of the answer. In terms of in terms of the the you you will see, by the way, in very much detail, we will publish our our and our semiannual report end or, I’m sorry, end of first week of August. And you will see a lot of information and a very intensive note in terms of technical carry forwards, about TTIs. I I’m seeing here the the note now in front of me.
One two three four five six seven eight. Nine pages of a note that we are very transparent as we explained this in very much detail. And if you want to read over your holidays, I think it will make a very interesting reading. But in any case, what I would like to highlight is, yes, we do continue to have off balance sheet BTIs. These off balance sheet BTIs are slightly below, 800,000,000, and they have, to be more exact, 772,000,000, and they have not changed since, December.
So this is an important point. It is, secondly, it is possible that as time goes by, we we recognize a part of these DTIs, mainly in the context if the law is approved of a lower, tax rate in Portugal. So if the tax rate, if the risk of the tax rate can or or or the risk of the event of the tax rate coming down materializes. This, of course, has a negative impact on DTAs, a positive impact in terms of valuation. We may, so to say, recognize a part of these DTAs to to immunize this impact because it makes, it makes sense.
In terms of the guaranteed DTAs, What we have in June in June, of this year is 1,240,000,000.00, which have been reduced by around 100,000,000 since, since December. So what we are seeing here, we are seeing more or less, I would say, a rhythm of reduction of guaranteed DTIs of around 100,000,000 per, each half year. Or if you want, 200,000,000 per year, this has been more or less been the reason at which we have been, amortizing, so to say, these guaranteed DTIs. But we have a lot of information in in the annual report. So
Carlos Peixoto, Analyst, Caixabank: sorry, Paul. Just one thing. I was actually referring to the amount of DTAs that is actually being deducted from CET1 and
Miguel, CFO/Financial Executive, Millennium BCP: the No. No. No. No. No.
The the I’m I’m effect I’m I’m commenting the amount of ETIs that are guarantees and count as capital. The amount of ETIs that are deducted from, from capital as of today are the tax loss carryforwards, which, I would have to check, is around 100,000,000. I’m sorry. So the the amount that is deducted are the are the tax loss carry forwards. The amount that is guaranteed as capital are the guaranteed DTIs.
Conference Operator: Thank you, Carlos. Now we’re going to take our next question. And the next question comes from the line of Noemi Parukh from Mediobanca. Your line is open. Please ask your question.
Noemi Parukh, Analyst, Mediobanca: Good good afternoon. I have a clarification on the tax rate. So shall we understand that 15 bps, you mentioned, so basically 60,000,000
Miguel, CFO/Financial Executive, Millennium BCP: Naomi. Naomi, I I’m sorry. The connection is very poor. I’m sorry. I don’t know if you can either speak closer to the mic or Yes.
Speak louder.
Noemi Parukh, Analyst, Mediobanca: Is that better? Yes.
Miguel, CFO/Financial Executive, Millennium BCP: Much better. Much better. Thank you.
Noemi Parukh, Analyst, Mediobanca: So I just would like to ask a clarification on the tax rate. You mentioned 15 bps, basically, 60,000,000. Shall we increase temporarily the 25% tax rate by this seven sixty million in the next three years? And I’ve understood correctly that you may offset such an impact with the tax loss carry forward write up, perhaps. And then my second question is on capital.
Again, I I understand that organic growth is the priority, but the buffer, like, above 13.5 is is really meaningful. So I was wondering if there is a chance that you might be in a position to reconsider your distribution policy with the full year results or maybe if that’s too early. And then in here, in terms of strategy, would you would you see m and a options in your current markets, or would you consider entering a new market, perhaps? Thank you very much.
Miguel, CFO/Financial Executive, Millennium BCP: So we try not to be victims of what some consultants call the paralysis by analysis. So we have moments to plan and moments to execute. K? So we we were planning during We developed a plan.
We had all the governance around the plan. We created the consensus around the plan. Now we are in execution mode, so to say. We’re not in planning mode. Of course, life may change, So something may become dramatically different.
But if you ask me whether I think it is reasonable for the environment to change so much until year end that we will have to reconsider our plan. I would say it’s highly unlikely. Of course, nobody can foresee the future. But I would say that until year end, unless there is something very extraordinary that I don’t think it’s in the base case of anybody, I think it’s highly unlikely. Of course, nobody can totally forecast the future, but it’s highly unlikely.
Let’s see next year whether we are growing at the pace that we expect. And in this context, let’s see. Let’s see. We will reconsider. Of course, this is not a decision of any single person.
This has to to come through all the governance structure of an institution. We have to to to engage with the different stakeholders, shareholders. We will listen to you as we always do. But, to the moment, what we are focusing on is on delivering in, in the plan. In terms of the of the tax rates for Portugal, the tax rate in Poland is a little bit more more complicated because of the fact that the Swiss franc mortgage costs are not tax deductible.
The the the the cost of contributions is not tax deductible, and this weighed a lot in the in the in the Polish assets. So I will not enter too much into it, but there is an interesting explanation on it on the the q and a of our Polish bank c o CFO. So I will refer to it, but we can also take take it by side. But but commenting to Portugal, what we are seeing is the following. We are presenting a tax rate of around 25%.
Last year, we had a tax rate, an effective rate, tax rate of around 26%. And we think that going forward, this is something that we can assume as, I would say, a new normal, absent, tax rate change. K? This is where we stand right now. K?
If there is a tax rate change, you have to see it in detail. And if the tax rate goes down by one, two, 3%, this would probably have a proportional effect in terms of this tax rate. Let’s see exactly what are the the details of it. But I would expect if the tax rate change, the effective income tax rate also to change. So this is the what I would like you to highlight.
The other question, I don’t know exactly what what was the other the other question that you asked, but but maybe we can then take it off offline to clarify something.
Noemi Parukh, Analyst, Mediobanca: I was wondering the 15 bps of common equity impact in
Miguel, CFO/Financial Executive, Millennium BCP: terms of loan. Okay. Okay. Let me just okay. So if we if there is, but I I would say this is the the law is in the parliament, but the law has not been approved yet.
And by the way, last year, the government tried to come up also with a similar solution, and I will remind you that the the government does not have the majority in the parliament. And the sec and the second largest party at the time, did not agree with this measure, and it was finally not approved. But the law that the the main the government party is presented to the parliament that we don’t know whether it will be approved or not foresees a reduction in the tax rate in three years of 3%. K? If this is if this happens, this will have two impacts.
The first and the largest one in terms of valuation is the one that I had commented. That is a reduction of the effective tax rate over the period. In principle, it’s it goes without saying that it’s better for the shareholders and for the companies to have a lower tax rate and to have a higher tax rate. So you should not forget this. So it’s the the net impact is is positive.
So it reflects immediately in terms of the p and l and in terms of distribution and so on. So 3% more profits is, in principle, around 3% more value, I would say. So this is the one that we have commented. Then there is another impact. There’s a, I would say, a short term impact that is the reduction of the value of the DTAs.
K? The reduction of the value of the DTAs, of course, if if the tax rate is lower, the DTAs are worth less. This reduction of the value of the DTAs, to the extent that the DTAs count as capital to the extent that the DTAs count as capital has some impact in the capital ratio. This impact is not very large mainly when consider it in the context of the value that may be generated by the reduction of the tax rate, but it’s around 15 basis points. Okay?
Noemi Parukh, Analyst, Mediobanca: And, sorry. I just I have a few clarification to ask. These 15 dates to be taken every year for one percentage point of a lower It
Miguel, CFO/Financial Executive, Millennium BCP: It it depends on how the final law is, is worthless, I would say. But it is possible that if if the law clearly states that the the tax rate goes to 17%, It depends on how the law is working. If the law clearly states the new tax rate is 17%, but there is a transitional period, it has to be taken upfront. If the law states the new tax rate is one percentage point below the current tax rate, but we intend to re reduce it over time one percentage point per year, it it would be, over a three year period.
Noemi Parukh, Analyst, Mediobanca: Thank you.
Conference Operator: Thank you. And now I’m going going to take our final questions for today, and it comes from the line of Borja Ramirez from Citi. Your line is open. Please ask your question.
Miguel Maier, Speaker/Executive, Millennium BCP0: Hello. Good afternoon. Thank you very much for taking my questions. Have a couple of quick follow-up questions, please. Firstly is on the hedging portfolio in Portugal, which I understand was €40,000,000,000, notional in q one.
I would like to ask if there’s any changes in the size and the the average maturity and the and the yield, and also if you see any opportunity to further reprice? And then my second question would be, on Poland, if you could give a bit more detailed guidance on the NII developments in 2025 and 2026 based on the current curve? And lastly, on the other leg growth, it understood well, it will be higher than the loan growth. But could you give a bit more precise indications on the ROA growth in 2025 and 2026, please?
Miguel, CFO/Financial Executive, Millennium BCP: Starting with your last question. I mean, we have our own objectives, but one thing is the objective. The other thing is what exactly what will be possible and what is the reality, so to say. What I can tell you is that on average, we will try to focus more on the SME and on the corporate set on on the corporate market that has a higher RWA growth almost twice than the RWA, I’m sorry, RWA weight, than the RWA of mortgages. When we go the the more granular we get, the more difficult it is to be absolutely precise on what we get will occur in exactly one quarter, and we don’t think it’s very useful because the the reality is so, I mean, it’s by its own nature quite uncertain.
So what we should expect is, another way growth that is higher than the RWA than the the credit growth, and I would not go much to go above it. In terms of our interest rate, hedging risk and so on, in terms of our our hedging of our interest rate risk, we do we do have a portfolio that is composed of three parts, I would say, of government debt, of, unhedged, I would say, fixed rate loans, typically, consumer loans or, mortgages that have at least an initial period that is, that is fixed rate and interest rate swaps. So we have these three elements. So a part of our hedging of interest rate has to do also with our commercial activity. These have not changed very materially since since last since we published our annual report.
You will see also some more detailed information in our in our semiannual report that we will publish at the end of the first week of August, but these have not these have not changed very much. But what what I can tell you is, is the following. The 80,000,000,000 that you comment is is not the correct way to look at it because this is only the swap part. That includes the swaps and then the the swaps that we do to cancel the impact of of the swaps. So, as of ’25, I would say, the value of these three legs, I would say, and they are more or less one third each, is around 40,000,000,000, therefore taking by heart.
And we have the nonremunerated, demand deposits around 28,000,000,000. So we have a value of fixed rate that is in excess of the demand deposits. And so this excess is to compensate the fact that the term deposits, so to say, which are around 25,000,000,000, have a b EBITDA of 25 of of around 50%. So so the way to look at it, the simplest way to look at it is we have a portfolio of fixed rate instruments, so to say, that hedges us for the fact that our current account are fixed rate at zero, and our term deposits are not totally floating rate instruments but has a fixed rate component. And this is exactly what is making it possible for us to have a very resilient interest NII so that in spite of the reduction of the Euribor, we have been able to present in Portugal already for for four quarters in a row a very stable NII, and we expect it to to continue so, for the foreseeable, quarters in ’25.
And then, assuming that the ECB rate goes to 1.75 at its lower level, then to start to increase because then the the part of the absorption of the decrease in interest rates will already have flowed through, or passed through our NII. In Poland, it is similar. In Poland, we also have fixed rate instruments. We also have a portfolio of government debt. And our interest our NII, as you see, has been very, very resilient, continue and continues to be very resilient, and we expect until the end of this year is to continue, this this trend.
Next question, please.
Conference Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to Mr. Miguel Meyer for any closing remarks.
Miguel, CFO/Financial Executive, Millennium BCP: Okay. It’s it’s me, Organizer. We are very pleased to show you, these results. Clearly, the market has received them very well. We, really would like here to commit to you that we are fully on track to deliver on our plan, a plan based on a very robust business model that translates into a very robust profitability.
Thank you very much.
Conference Operator: This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.
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