Banco Comercial Português

Good day and thank you for standing by. Welcome to the Millennium BCP 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Miguel Maia, Vice Chairman and CEO. Please go ahead.

Good afternoon. Miguel Maia speaking. Welcome to BCP Earnings Conference Call. As usually, I will mention the highlights of our performance, and then Miguel Braganza and Bernardo Colasso will follow, providing additional detail. Despite being a complex year with significant macroeconomic and geopolitical uncertainties, 2023 also carried relevant positive factors, namely those coming from the normalization of the monetary policy. Against this backdrop, our intense commercial activity, coupled with a robust business model, resulted in a time of 56 million of profit, compared with 197 million last year. Although it should be noted that profit in 2022 was negatively influenced by some specific Swiss francs-related effects in Poland, namely Craig's holidays, contribution for the institutional protection scheme, and the impairment of the Banque Milenius Goodwill, which altogether had a gross impact above 270 million. The earnings in 2023 were mainly driven by a strong increase of 32% of the core profits, having reached 2.4 billion, supported by an increase of 23% of core income, coupled with a rigorous cost management that allows us to contain the cost increase of 8.3% in a still markedly inflationary context. The group's net income was still notably affected in 2023 by legal risks in Poland related to FX markets, which had an unfavorable impact of 780 million, more than 250 million above last year's impact, driven by the significant increase in provisions, which stood at 623 million, following the application of more conservative assumptions after the decision of the European Court of Justice. On the positive side, still in Poland, it should be mentioned the on-off effect of 139 million from the sale of 80% of Millennium Financial Services. Nevertheless, with five consecutive quarters of profit, Bank Millennium have been consistently confirming the ability to simultaneously manage the significant costs related to Swiss francs while successfully implement measures to strengthen the capital position and steer the business model to generate additional value from the activity in Poland. Net income in Poland stood at 127 million, compared with a loss of 224 million last year. Despite the high provision for risks related with the Swiss francs mortgage, the capital ratios in Poland have been reset above regulatory requirements, following a rigorous and successful implementation of the recovery plan and positive evolution of core income. In Mozambique, having a very good commercial franchise, high operational efficiency and prudent risk management, our operation continues to show relevant profitable levels. The net income in Mozambique amounted to 105 million, showing a sustained and adequate profitability proven to be resilient in several contexts. In Portugal, the ATVT showed remarkable growth, having achieved a profit of 725 million, more than doubling last year's net income, and confirming the leadership of BCP in multiple business fronts in the Portuguese market. These results confirm the strong ability of our business models to steadily generate organic capital, which has allowed for the substantial strengthening of our capital position, standing at very robust levels. We have capital ratios comfortably above regulatory requirements, with the common equity year one at 15.4% and total capital at 19.9%. Especially in the current interest rate context, in which several clients use part of their savings to prepare loans, and in an environment of intense competition for balanced funds, its evolution is a very good indicator of the client's preference. Unbalanced customer funds reached $79.2 billion, showing year-on-year growth of 2.5% and confirming the quality of our franchise. We developed specific competencies and have a solid tech record in managing and enhancing the quality of the balance sheet, consistently reducing the volume of non-productive assets. In 2023, we have managed to reduce almost 400 million in non-performing assets, of which 266 million in NPEs and 83 million in foreclosed assets. These capabilities, combined with sustained business growth, have led to a continuous trajectory of reduction of NPS ratio, which stood at 3.4%, having decreased 40 basis points in 2023. The 90 days past due NPL ratio stood at 1.3%, and the NPS cash coverage reached 81.8%. Considering real estate collaterals, the coverage is above 120%. Despite the challenges and uncertainties in the operating environment, including the significant provisions related to legal risks in Poland, we have maintained a very rigorous balance sheet management, keeping cost of risk roughly around 50 basis points. Last year's sound earnings marked the end of a transition period for BCP. With the normalization of the bank going forward, in 2023, we have achieved adequate profitability levels supported on an outstanding core income performance, having consolidated a strong capital position, complied morale requirements, both in Portugal and Poland, and obtained investment-grade notation for major rating agencies. The vitality and growth potential of the bank is also shown by our ability to attract new clients and steadily expand the customer base. We have more than 6.7 million clients at the group level, of which nearly 2.7 million in Port Colt. Last year, mobile customers grew 10% at the group level and 12% in Portugal, with mobile customers already accounting for 68% of the group's customer base, which is a good indicator of the success of our digital transformation journey. The quality of our franchise is widely recognized by clients who continue to select us and award us. Individual clients distinguish BCP in Portugal as the preferred bank of households for the fourth consecutive years, confirming the bank's ability to meet customer expectations. BCP is also the main bank of companies in Portugal, particularly in the SME segment. Our permanent focus on customer-centric innovation is driving the increased relevance that the mobile app gains as the preferred channel of the clients for their daily transactions. Besides continuing to lead the rankings on the most relevant platforms, Millennium App is being intensively used by the clients. Last year, customers carried out 26% more transactions through the app, significantly increasing the number of transfers, savings, personal loans, and payments. The priority we gave to the investment in the transformation and modernization of the bank is also reflected in the importance that digital channels play in sales figures. Last year, 82% of the sales were performed through our digital channels, and the number of sales through the app has increased 37%, with the emphasis to saving solutions, which increased 39%, and sale of cards, which increased 29%. The year of 2023 marked the end of the transition period of the bank. Currently, BCP is a reference brand in terms of service quality, both in the physical and digital channels, a reference in terms of operating efficiency, has a healthy balance, developed excellent competencies in managing risks, and has a robust capital ratio. Our profitability already exceeds the cost of equity, and the effect of the eventual reduction in interest rates will be mitigated by the expected reduction in impairment charges, which in 2023 were still at a very high level. We exceeded the main targets defined in the strategic plan more than a year ahead of time. We intend to present a new strategic plan together with this year's third quarter earnings, as I have already said. The executive committee already decided to present the dividend proposal to the board, considering a 30% payout over 2023 results, to be submitted to the shareholder general meetings. As a working assumption, we will consider 50% payout ratio from 2024 results on our interim reports going forward. I stress that this is just a working assumption and that any decision has been taken first at the board level and then by the general meeting, at the general meeting. I conclude by highlighting that shareholders represented on the board have expressed high appreciation and full support for the path we have taken. The success achieved in transforming the bank allow us to face with confidence the fact that we now have a higher level of refloat closer to what is normal in the main banks in the Eurozone.

Miguel, the floor is yours. Thank you.