Banco Comercial Português

Welcome again. Welcome to Bank Millennium 4Q24 slash 2024 results presentation. Today's event will be hosted by Mr. Joao Brajors, our Chairman of the Board and CEO, and Mr. Fernando Bicho, Deputy Chairman of the Board and CFO. In the interest of time, we know there's a competitive event right after ours. We'll try to briefly present the results, and then we will obviously be ready to answer all your questions. Over to you, Fernando.

Thank you. Good afternoon. Thank you very much for attending this meeting. As usual, around this time of the year, we present the preliminary results of the previous year. And until the end of February, we will publish the audited financial results. So let me start with the main financial achievements in the fourth quarter and in the year 2024, starting with page number five. We had in the year 2024 a net profit of 790 million zlotys, which represents a 25% growth over the profit of the previous year. If we exclude extraordinary items, both negative and positive, in the last two years, we would have shown a net profit of 3.2 billion zlotys, which would represent a growth of 7% versus 2023. The result was supported by a strong net interest income which grew 7% year on year and in the fourth quarter grew 1% versus the previous quarter with a full year 2024 and also fourth quarter 24 net interest margin at the level of 4.35% excluding the impact of the credit holidays. Core income grew 6% year-on-year, also excluding impact of credit holidays. The reported cost to income was at 37.6%, adjusted by extraordinary items at 30.8%. The cost of credit risk was still low and better than expectations at 40 basis points over total loans, and the NPL ratio stood at 4.5%. We closed the year with solid levels of capital ratios. The core tier 1 at the end of December was at 15.1% and the total capital ratio was at 17.6%, which gives a surplus over the minimum requirements over 5 percentage points. In fact, the surplus would be even higher if we would take already into consideration the cancellation of the solo P2R buffer, which was previously at 1.47, and that was eliminated already after regulatory decision that was received already in January 2025. Also worth mentioning is the annulment of the P2G buffer that we also communicated to the market in December 2024. In this context, and reminding that in the third quarter we had already included in non-funds the result of the first half of the year, in the shareholders meeting of 2025, where we will propose the retention of the full year net profit of 2024, Assuming approval of this proposal and incorporation of the second half net profit into own funds, this will represent an additional positive impact of 90 basis points in the tier 1 ratio. Regarding Morel, we are fulfilling the requirements with a significant surplus and regarding the new long-term funding ratio, at the end of 2024 it was at 28% and still clearly on track to achieve the targeted level in December 2026. I will skip pages 6 and 7 that present in a snapshot the key profit and loss items and other key indicators of our activity as they will be shown throughout the presentation. And so I would go directly to page number eight, where we have just a final summary of the implementation of the previous strategy, 2022-2024, that was called Inspired by People. where, as we show, we have outperformed on the majority of the ambitions and most of them even delivered ahead of the plan. And this happened both on the commercial activity side, where especially we highlight The higher than planned growth of the active customer base in retail, and we closed the year already with more than 3.1 million active customers in retail against the target of 3 million. Also, the share of digital customers in the active retail customer base, which already crossed 90% and stood at 92%. the significant growth of the share of digital channels in terms of sales, which was already at 76% in the end of the year. On the financial indicator side, the net profit excluding extraordinary is much above also the target at 3.2 billion. Slot is the cost to income at 30.6 on an adjusted basis. And the return on equity corrected calculated over a conservative base, including all the FX losses that we booked in the past, still very high at 18.5%. And finally, the NPR ratio also below the original target and stood at 4.5%, and the share of FX mortgage loans, which dropped below 10% before deduction of the legal risk provisions, and which was the factor that triggered also this expiration of the P2R buffer that had been imposed in the past on the bank. Moving to page 9. Here we show the evolution of the reported net profit on a quarterly and yearly basis. In the fourth quarter, we had a net profit of 173 million zlotys. And without extraordinary items, it reached a record level of 904 million, which represents a growth of 20% versus one year before. On a reported basis, as I mentioned before, a growth of 25% of net profit in 2024. On an adjusted basis, a growth of 7%. On page 10, we can see more details about the evolution of the net interest income, which without credit holidays was still in an uptrend and grew 7% year on year in 2024. And in the fourth quarter, when compared with the previous quarter, the growth was 1%. We also had the final assessment of the cost of the credit holidays which triggered another release of provision of around 45 million in the in the fourth quarter so at the end of the year the final gross cost of the credit holidays stood at 113 million zlotys. For the improvement of the NII continues to contribute resilient Income coming from the loan portfolio, a gradual drop in the average cost of the deposits, and as a consequence, the net interest margin has been quite resilient and in the fourth quarter stood at 4.37%. On the net fee and commission income, there was, in the year, just a small drop of 1%. In the fourth quarter, the drop was a little bit bigger, of 5%, in which some items, such as cars, investment products, have largely offset some drop in the bank assurance commissions. Moving now to the cost side, the trends are the same as in previous quarters, so overall in the year 2024 we had a growth of total costs by 13%, year-on-year mainly fueled by the growth of staff costs by 16% and a slower growth of admin costs by 11%. On an adjusted basis the cost to income ratio was at a very similar level of the previous year at 30.8%. Throughout the year the number of employees was relatively stable, minor changes and there was a small drop in the number of total branches. And regarding the asset quality, we had a very good fourth quarter supported by sales of NPLs that generated pre-tax positive result of 74 million zlotys. And this has contributed to the fact that in the fourth quarter the cost of risk was close to zero. In fact, negative in retail and positive in corporate, but overall close to zero, and brought the overall cost of risk in 2024 to 40 basis points over total loans, which is almost at the same level of the previous year, which was 39 basis points. In terms of the quality of the portfolios, the sale of NPLs helped to decrease the NPL on the consumer lending side, but overall the NPL ratio was slightly better at 4.5%. Regarding capital, on page 13, We already mentioned very solid capital ratios, especially a quarter one of 15.1%. In the quarter, we completed another synthetic securitization transaction, which largely contributed to offset higher risk-weighted assets. I already mentioned the regulatory decisions regarding P2G and P2R, and the still incorporation of the second half net profit will add 90 basis points to the Tier 1 ratio. CRR3 will have an initial negative impact on the capital ratios and of course in the course of time we will provide those impacts and also to mention that of course we are already And considering the future introduction of the counter-cyclical capital buffer in the second half of 2025, which will increase capital requirements by one percentage point. the important is that this recent decrease of the p2r buffer we also expect that will have positive influence in the morale requirements later in the year so as you can see on page 14 we have now a substantial surplus of morale trea over the minimum requirement almost eight percentage points surplus And in terms of the other indicator that also we are now presenting on a regular basis, the long-term funding ratio, we continue to take the steps to achieve the regulatory required level by the end of 2026, mainly through the issuance of covered bonds, and we should mention that in 2024 our mortgage bank subsidiary already issued 800 million zlotys of covered bonds. Last but not the least, the liquidity position of the bank is very strong and apart from having an LCR at 370%, we have a very low loan to deposit ratio at 64%. Regarding FX mortgage, on page 15, We continue to have an accelerated pace of downsizing of the FX mortgage portfolio. So in Swiss francs, excluding FX impacts, the portfolio decreased by 26% year on year. And when we look at the portfolio deducting the FX mortgage legal risk provisions, it already represents less than 2% of total gross loans. Regarding the provisions, as we had previously announced already two or three weeks ago, in the fourth quarter, they were very similar to the previous quarter at 483 million zlotys. We finished the year with an outstanding amount of provisions for legal risk of 7.7 billion zlotys, and these represented 122% of the outstanding loan amount. Regarding the recent trends, in the fourth quarter 24, we had the lowest quarterly inflow of new court cases of the last three years. And at the same time, it stood below the number of settlements with clients, which reached 1,261 against the 1,191 inflow of court cases. the we continued the significant effort to reach amicable settlements with with clients overall since the beginning of this effort we reached almost 25.9 thousand settlements which is equivalent to 42% of the number of active agreements that we had at the beginning of this saga in the end of 2019. Moving now to the second part of the presentation regarding business results and starting with page 18. Looking at the full year numbers, we would highlight the solid growth of deposits by 9% year-on-year. Consumer loans grew 7%. PLN mortgages, 3%. Investment funds, significant growth of 35%. We achieved even higher liquidity surplus at over 42 billion zlotys from the commercial activity. And the loan-to-deposit ratio at 64%, as I already mentioned. On the other points that are worth mentioning is the number of active retail customers, which reached 3,148,000, of which 92% digitally active. In terms of sales, also both cash loans, mortgage and leasing had significant growth rates versus the previous year. More details can now be seen starting from page 19. Looking at the dynamics of the loan portfolio on a net basis, we had an overall growth of 2% or 4% if we exclude FX mortgage loans which have been decreasing at a very fast pace. And looking at the breakdown, we see that PLN mortgage portfolio grew by 3%, loans to companies grew 5%, and consumer loans by 7%. So all these three main categories we have already single digit, but still already growth. On the customer deposits, The 9% growth was driven by the 14% growth of retail deposits. while we had a small drop of corporate deposits, as we will see later on. And in investment projects, a very strong year with a growth of 35% overall, of which the growth of our Millennium TFI subsidiary grew by 45%, the assets under management that already crossed 11 billion zlotys. On page 20, looking some additional data on the retail side. The retail customer funds grew by 16%, mainly driven by the growth of investment funds, followed by a balanced growth both of current service accounts and time deposits. The mortgage sales grew by 22% year on year, although dropping in the fourth quarter. And in the cash loans sales the growth was 11% year on year with a market share above close to 11% in the full year with some drop of origination in the fourth quarter which is also partially due to seasonality. On page 21, we see a steady and solid growth of new customers and accounts of around 30 to 40,000 a quarter. So in the full year, we added 146,000 active retail clients on a net basis to our customer base. Also with solid growth on the micro business segment and of course then the number of current accounts is following this acquisition of customers with a growth of 180,000 current accounts and a growth of 64,000 accounts. On page 22, highlights of the several important figures from digital usage. We have now 2.9 million active digital users, which is a growth of 8% year on year, and they represent 92% of the active customer base. Of these, 2.65 million are active mobile app users, which represents a growth of 7% year-on-year. And last but not least, also a 38% increase in the number of BLEAK users, which stood at 2.16 million in the second half of 2024. Page 23 summarizes some of the top initiatives in digital in 2024 regarding retail, including the implementation of a currency exchange platform in June, the redesign of the app and the introduction of the BLEAK Paylater solution. And on page 26, the numbers about BLEAK with continuation of the significant increase of active users by 35%, number of transactions made through Gudi Cashback Service by 50%. Moving now to the corporate side, the year 24 marks a rebound in corporate activity as we made a growth of 5% in loans to companies on a gross basis, which contrasts with a contraction of 8% that we had faced in 2023 when we were still taking significant steps to improve the capital ratios and to reduce the risk-weighted assets. This growth was relatively evenly distributed between loans to companies, which grew 5%, leasing, that also grew 5%, and factoring, which grew 7%. On the company's deposits, they slightly dropped year on year by 3%, but actually the composition is better, as we had a growth of 7% in current accounts, while time deposits fell due to tighter price management. In terms of transactions with corporate customers, they continue to increase. We would highlight mainly the growth of 11% in FX transactions, as can be seen on page 28. And in terms of sales, the significant growth of new leasing sales by 24% year-on-year. Then pages 29 and 30 summarize a number of initiatives and developments that we have implemented for our corporate banking customers, which is also part of the effort to significantly boost our presence in the corporate segment, and this includes loans with different types of customers. guarantees and also different digital developments that are allowing us, for example, to have much more transactions and services provided through digital channels. The same effort is being done for micro business, where also different initiatives are being done in order to implement new services in terms of digital banking, including new value added services, cash loans and new processes. So we finish here the highlights of the results of the fourth quarter and full year 24. And now we will go through the questions. Thank you.

Thank you very much. Now it's more of a fun part for the audience and a bit of a heavy lifting for us. And as usual, I suggest you do the heavy lifting and I can take the light questions if there is any. Okay. I suggest we do FX because they are FX mortgage related because there are just a few and then we go over to the results. So in terms of FX mortgage questions. Let's do the technical one. How much of the 42.3 thousand remaining repaid loans were amortized before the end of the CHF EUROPEG? January 15, effectively.