BANIF BANCO INTERNACIONAL DO FUNCHAL SA
Reuters: BANIF.LS Bloomberg: BANIF PL ISIN: PTBAF0AM0002 www.banif.pt/investidores
2015
1Q2015
CONSOLIDATED RESULTS
Lisbon, 11 May 2015
Unaudited information
Highlights:
Turning point for Banif results Significant recovery in banking income Structural streamlining with a positive impact in terms of cost savings Significant improvement in operating profits Lower level of impairment in 1Q2015 Significant improvement in business performance has resulted in a net consolidated profit. This result marks a notable turning point and reflects the considerable efforts that have been put into the extensive restructuring of the bank. These efforts have focused on both realigning the positioning of the business and also making significant cuts in structural costs, aiming for an efficient and viable adaptation to an economic and regulatory environment that has been particularly challenging and difficult. Higher banking income, whichincreased by 21.9% year- on-year, to 89.6 million euros. This was due to a recovery in net interest income (+10.7%), net commissions (+24.8%) and the profits from financial operations (+23,7%). Implementation of the ongoing cost reduction policy. Over the first quarter, costs were cut by 26.7%, in year-on- year terms. This reduction was achieved across the range of structural costs. Staff costs came down by 26.7% and general and administrative costs by 25.8%. Over the period, amortisations also fell by 29.4%. Improved operating profits, which reached 50.1 million euros, compared to the 19.6 million euros earned in the first quarter of 2014. As a result of the upswing in banking income and the significant reduction in operating costs, the efficiency ratio improved substantially, to around 44%, in this first quarter. Reduction in impairments of 42% in year-on-year terms, to 27.5 million euros. This figure was still somewhat penalised by the provisions for the real estate assets classified as 'non- current assets held for sale'. There was a highly favourable2
Consolidated Results - 1Q2015
fall in loan impairments, which, at 14.9 million euros, were
17.2 million euros lower than they had been in 1Q2014, representing just 0.8% of average gross lending.
performance of the discontinued operational units.
Liquidity in comfortable levels Slight rise in the commercial gap, of around 60 million euros, compared to December 2014. The loan-to-deposit ratio stood at 106.7% (105.5% in December 2014 and
121.8% in 1Q2014).
ECB funding rose by some 235.5 million euros between December 2014 and March 2015. The free assets in the ECB pool amounted to 521 million euros at the end of this first
quarter.
As at 31 March 2015, the Common Equity Tier 1 ratio, calculated in accordance with the CRD IV/CRR rules (phasing in) stood at 8.0% and the solvency ratio stood at 9.0%. This is comfortably above the minimum levels required by the regulatory authorities and excludes the positive impact on the capital ratios from the positive net results of the quarter and the Banif Mais sale, expected to occur in May, that should have an impact of more than
100bps.
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Consolidated Results - 1Q2015
Mar-15
Mar-14
D
Restated
Results
Operating income 89.6 73.5 21.9% Operating costs s -39.5 -53.9 -26.7% Operating income 50.1 19.6 155.6% Loans impairment net of reversals and recovery -14.9 -32.1 -53.6% Impairment of other financial assets net of reversals and recovery 0.0 -8.6 - Impairment of other assets net of reversals and recovery -13.6 -6.3 115.9% Income from discontinued operations -3.2 -9.0 64.4% Net income 6.5 -39.7 116.4%
Mar-15 Dec-14 D
Liquidity
Loans-to-deposits ratio 106.7% 105.5% 1.2pp
Capital
Common Equity Tier 1 ratio CRD IV/CRR (phasing in) 8.0% 8.4% -0.4pp
Amounts in millions of euros, except where stated otherwise
4
Consolidated Results - 1Q2015
Results
Balance Sheet
Liquidity
CapitalOperating income: 89.6 million euros, +21.9%, year-on- year (yoy);
Net Interest Income: 24.9 million euros,
+10.7% yoy;
Net Commissions: 17.1 million euros,
+24.8% yoy;
Gains on Financial Operations: 44.9 million euros,
+23,7% yoy;
Other operating income: +2.7 million euros.
Operating costs: 39.5 million euros, -26.7%, yoy.
Net provisions and impairments: 27.5 million euros,
-42.0% yoy.
Net profitof 6.5 million euros, compared to the 39.7 million euro losses of 1Q2014.
Total customer resourceson the balance sheet: 6.6 thousand million euros.
Loan book(gross): 7.7 thousand million euros.
Loan-to-deposit ratio:106.7%, compared to 105.5% in
December 2014.
Common Equity Tier 1 ratio.As at 31 March 2015 the Common Equity Tier 1 ratio, calculated in accordance with the CRD IV/CRR rules (phasing in) stood at 8.0% and the
solvency ratio stood at 9.0%.
5
Consolidated Results - 1Q2015
Mar-15 Dec-14
Cash and balances at central banks 83.3 113.8
Deposits w ith banks 97.9 102.9
Financial assets held for trading 86.4 65.1
Financial assets at fair value through profit or loss 49.7 48.8
Available-for-sale financial assets 1,994.3 1,960.8
Loans and advances to banks 271.6 250.8
Loans and advances to customers 6,670.9 6,855.0
Held-to-maturity investment securities 5.5 5.5
Financial assets w ith repurchase agreements 27.1 26.9
Non-current assets held for sale 2,083.4 2,154.7
Investment property 736.4 736.5
Other tangible assets 198.5 207.3
Intangible assets 12.7 13.4
Investments in associates, affiliates and joint ventures 151.4 146.3
Current tax assets 1.6 1.6
Deferred tax assets 251.7 266.2
Other assets 220.2 169.9
Total Assets 12,942.6 13,125.5
Deposits from central banks 1,729.2 1,493.7
Financial liabilities helding for trading 33.8 30.4
Financial liabilities at fair value through profit or loss 12.9 12.8
Deposits from banks 444.7 882.5
Customer accounts and other loans 6,253.1 6,499.3
Financial liabilities 1,832.3 1,645.6
Non-current liabilities held for sale 1,073.7 1,130.0
Provisions 11.0 10.9
Current tax liabilities 4.2 3.9
Deferred tax liabilities 56.8 66.2
Instruments representing capital 127.2 130.2
Other subordinated liabilities 266.3 181.6
Other liabilities 314.2 234.9
Total Liabilities 12,159.4 12,322.0
Share capital 1,720.7 1,720.7
Issue premiums 199.8 199.8
Revaluation reserves 39.4 61.4
Other reserves and retained earnings -1,246.9 -952.2
Profit for the period 6.5 -295.4
Minority interests 63.7 69.2
Total Equity 783.2 803.5
Total Equity + Liabilities 12,942.6 13,125.5
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Consolidated Results - 1Q2015
Mar-15 Mar-14 D15/14
Restated (*)
Interest and similar income 74.5 102.1 -27.0%Interest and similar expense -49.6 -79.6 -37.7%Net interest income 24.9 22.5 10.7%
Dividend income 0.0 0.6 -100.0%
Net fees and commissions 17.1 13.7 24.8%
Fees and commission income 19.2 18.4 4.3% Fees and commission expense -2.1 -4.7 -55.3% Gains and losses in financial operations 44.9 36.323.7%
Income from assets and liabilities valued at fair value through profit or loss 1.2 -4.0 - Income from available-for-sale financial assets 42.0 40.5 3.7%
Foreign exchange income 1.7 -0.2 -
Other operating income 2.7 0.4 -
Operating revenue 89.6 73.5 21.9%
Personnel costs -24.4 -33.3 -26.7%Selling and General Administrative costs -11.5 -15.5 -25.8%Depreciation and amortisation -3.6 -5.1 -29.4%
Operating Income 50.1 19.6 155.6%
Provisions net of reinstatement and w rite-offs 1.0 -0.4 -Loans impairment net of reversals and recovery -14.9 -32.1 -53.6%Impairment of other financial assets net of reversals and recovery 0.0 -8.6 -Impairment on other assets net of reversals -13.6 -6.3 115.9%Equity accounted earnings -1.8 0.0 -
Profits before tax 20.8 -27.8 174.8%
Taxes -11.2 -2.6 -
Profits after tax 9.6 -30.4 131.6%
Income from discontinued operations (*)-3.2 -9.0 64.4%
Minority interests 0.1 -0.3 -
Net income for the period 6.5 -39.7 116.4%
The holdings in Banif - Banco Internacional do Funchal (Brasil), SA, Banif Bank (Malta), PLC, Banco Caboverdiano de Negócios
(BCN) and Banif Mais SGPS are classified as discontinued operational units in the consolidated profit and loss accounts as at 31
March 2015 and 2014.
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Consolidated Results - 1Q2015
In the first quarter of 2015, Banif made a net profit of 6.5 million euros. This reflects the measures being implemented under the bank's restructuring plan, which is designed to completely reshape the business model and ensure the bank's viability in a highly challenging economic and regulatory environment.
In the period, banking income rose by 21.9%, year-on-year, to 89.6 million euros. A
number of factors contributed to this, including:
The 10.7% rise in net interest income, to 24.9 million euros. Despite the positive effect of the policy of reducing deposit cost, which has improved significantly over recent quarters due to changes made to the fundraising policy, this income was negatively affected by the following: (i) the effect of the fall in loan volumes, a consequence of the deleveraging of the non-financial sectors of the economy and the lowering of spreads on loans; (ii) reference interest rates that have remained historically low; and (iii) the cost of the interest on the CoCos, which totalled 3.1
million euros in the first quarter of 2014.
An increase of 24.8% in commissions (net), to 17.1 million euros. This positive performance reflects a business approach that is focused on core segments, the ongoing implementation of the operational efficiency drive and the lower commission
costs for state-backed securities, due to the cancellations of these same issues.
The 44.9 million euro gains on financial operations, mostly attributable to the capital gains on the disposal of fixed-income Portuguese public debt securities (42
million euros in the first quarter of 2015).
Other operating profits,which came to 2.7 million euros.
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Consolidated Results - 1Q2015
1% 3%
49% 50%
19%
1%
19%
31% 28%
Mar-14 (*) Mar-15
Net interest income Dividend income
Net fees and comissions Gains and losses in financial operations
Other operating income
(millions of euros) (*) Restated
Structural costs totalled 39.5 million euros for the first quarter of 2015. This is 26.7% lower than in the same period of the previous year and can be attributed to the benefits accruing from the restructuring process, particularly as regards the accelerated schedule for branch closures and the staff reorganisation programme. This reduction was achieved across the full range of structural costs. Staff costs came down by 26.7% and general and administrative costs by 25.8%. Over the period, amortisations also fell by 29.4%. Staff costs stood at 24.4 million euros for 1Q2015 (that is,26.7% lower than in1Q2014). Excluding the impact of non-recurrent costs related with redundancy agreements, staff costs decreased 19.3% YoY.
General administrative costs totalled 11.5 million euros for the period, a yoyfall of 25.8%. Excluding the impact of costs related to the recapitalisation process, general administrative costs decreased 20.3% YoY. This decrease can be attributed to the gains in efficiency resulting from the rationalisation and optimisation strategy being applied to operating procedures and also to the renegotiation of contracts, the resizing of the distribution network and the reduction in staffing levels. Amortisations for the period totalled 3.6 million euros at the end of the first quarter of the year,29.4% less than in the previous year. This partly reflects the downsizing of the bank's structure and the rationalisation of the investment policy to provide a better
fit to the reshaped business model.
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Consolidated Results - 1Q2015
than at the end of 1Q2014.
Gross lending came to 7,746 million euros as at 31 March 2015, down around 2% compared to 31 December 2014. This fall reflects not only the lower demand for loans in a Portuguese economy that is deleveraging, but also the bank's lower exposure to non- strategic sectors. It is also the result of an increasingly closer scrutiny of client credit
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Consolidated Results - 1Q2015
risk, with priority being given to loans to lower risk operations, as a way of improving the quality of the balance sheet assets.
Nevertheless, it is important to note, in the context of Banif's support for Portuguese businesses, that the bank is developing a repositioning strategy that will allow it to focus more tightly on the corporate sector (Micro and SME). One of the main drivers of this commitment is the new commercial Leads programme, which has resulted in 500 million euros of loans to SMEs in the industrial and agri-food sectors.
Mar-15 Dec-14 D
Corporate 3,099 3,292 -5.9% Individuals 3,516 3,635 -3.3%
Mortgage Loans 2,690 2,740 -1.8%Consumer Loans 265 338 -21.6%Other Loans 561 557 0.7%
Others 1,131 979 15.5%
Total 7,746 7,906 -2.0%
Discontinued units
(*) The Othersitem includes loans more than 30 days overdue
In 1Q2015, deposits totalled 6,253 million euros, a fall of 3.8% compared to December
2014, as a result of the acceleration of the branch closure program and the steep reduction in interest rates on deposits.
Banif has continued to follow a funding cost reduction strategy that has focused the offer on standardised savings products, rather than on term deposits with negotiated rates. During this period, and in line with the current strategic plan, the bank is implementing a differentiated support strategy for high value private clients in the private and affluent segments and of the continued commercial support for mass market customers, particularly in the autonomous regions. This includes a tight focus on customers in the emigration segment.
'Off-balance sheet' resources totalled 1,819 million euros at 31 March 2015.
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Consolidated Results - 1Q2015
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