Banco Comercial Português

Good day and thank you for standing by. Welcome to Millennium BCP full year 2025 earnings conference call and webcast. 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, please press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Miguel Maia, CEO. Please go ahead.

Good afternoon. Miguel Maia speaking. Welcome to BCP earnings conference call. As usual, I will go through the highlights of our performance, followed by Miguel Braganza, who will provide further details. From a macroeconomic perspective, 2025 proved to be a complex year. Ongoing conflicts and economic climate shaped by the impact of geopolitical tensions continue to have a relevant repercussions on global . On Europe, the economy's performance exceeded initial expectations with the Eurozone showing signs of transition from a stagnation to a slow recovery within a framework of controlled prices and a less restrictive monetary policy. Of particular note is the performance of the Portuguese economy, which stood out as one of the most promising. A solid growth, high resilience and unemployment at record lows. The Polish economy recorded robust growth, supported by private consumption and investment, with inflation dropping into target range. In Mozambique, too, inflation is an economy showing signs of recovery from the impact of instability experience, which worsened the country's public finance and led to reductions in the sovereign debt rating. Demonstrating a level of adaptability to deal with different contexts, the group's consolidated results exceeded the 1 billion euro mark, corresponding to a year-on-year increase of 12.4%. and resulting in an ROE of 14.1%, an increase of more than 14% in earnings per share, reflecting the bank's ability to generate value for stakeholders through an active engagement with the business community and the households. Strict management of the financial margin and intensive commercial activity, supported by a robust balance sheet, contributed to an increase of 10.6% of net income in Portugal, surpassing 869 million. The total earnings from international operations reached 292 million, marking a substantial year-on-year increase of 33%, mainly driven by banks' million in Poland, which saw its profits rose by 67% to 284 million, further reinforcing the upward trend in this subsidiary's contribution to the group's net income. It should be noted that the charge associated with FX mortgage loan portfolio, although still relevant, registered a significant decrease of 34%, strengthening our confidence that this risk is on a downward trajectory and does not compromise the growth potential we envisioned for the Polish market. In Mozambique, BIM net income was below 4 million euros in 2025 due to being heavily affected by provision on exposure to sovereign debt, which this year amounted to 82 million. I would like to emphasize that we have a solid operation with a very robust capital position and the balance sheet quality that is a benchmark in the market. The proven quality of BIM franchise, combined with signs of economic recovery already visible, together with the restart of large natural gas projects, which will have a significant contribution to economic growth and improvement of public finances, gives confidence that this subsidiary will eventually converge to the targets that we have set for Moçambique in the strategic plan. Our capacity for organic capital generation is reflected in BCP's robust capital position and the relevant earnings distribution to shareholders. We have ratios comfortably above regulatory requirements, with the CE201 at 15.9% and total capital at 19.9%. The quality of our retail banking business models, the driving force behind the growth in business volumes, with loans increasing by 7.3% and customer funds growing by 8.6%. Customer funds stood above $111 billion and loans to customers surpassed $62 billion. At the same time, we maintain the trajectory of improving balance sheet quality by reducing non-performing assets with MPE reduced by $322 million throughout 2025. Despite the challenging context in which we operate, we maintain a strict and rigorous risk management of the balance sheet quality which led us to achieve a cost of risk of 32 basis points and indicator anchored below the target we set in the strategic plan. The growth of the customer base demonstrates our ability to meet clients' expectations. We exceeded 7.3 million customers at the group level, of which 2.9 in Portugal. The growth rate is even more noticeable at the level of mobile customers, which increased by 9% and stood at 5.4 million at group level, of which 1.9 in Portugal. Mobile customers does represent 74% of our customer base, 66% in Portugal, an important indicator of our digital capabilities. We are, year after year, recognized as the top choice for families and the leading bank for business. Customer-centric innovation results in substantial growth in mobile usage. In 2025, the number of transactions completed through the app increased by 15%, with a notable 54% rise in the number of account openings. We also achieved 13% more sales compared to the previous year, particularly driven by a 49% increase in personal loan sales and a 47% increase in savings solutions sales. These improvements stem from our strategy of targeting investments in technology to address customer requirements and in-house development of specialized skills, enabling us to launch very competitive digital solutions, even when we compare with neobanks offers. A prime example of this strategy is the digital offering we provide for mortgage products, which stand out as an innovative solution in the market and give us a significant competitive edge. As we have always communicated to the market, in addition to our ongoing commitment to improving the quality of our products, processes and customer services, both in person and digitally, we have remained extremely rigorous in managing operational efficiency. This is evident in our cost-to-income ratio, which is firmly anchored below 40%. We have a strong focus on value creation, clearly reflecting the level of results achieved, coupled with a very strict approach to capital management. This has led us to announce to the market a proposal to increase our shareholder distribution policy, which will be presented at the next general meeting. Provided that the defined conditions are met and the necessary approvals from the supervisors are obtained, this policy would allow us for the distribution of up to 90% of the annual net income, 50% through dividends and the share buyback program of up to 40%. After the first year of the strategic plan, the results confirm our execution capabilities and allow us to be very confident about the BTP futures. Miguel, the floor is yours.

Thank you very much, ladies and gentlemen. As always, we'll be presenting here a short snapshot of our income statement. As you've seen, in spite of the sharp reduction of interest rates in both the Eurozone and Poland, we were able to increase the net interest income in consolidated terms. Commissions also growing at the level of 4.3%, which means that core income has grown around 3%. The operating costs have grown at a faster pace mainly in Poland due to wage inflation in the country, as you know, but we were still able to increase the profit before impairment and provisions by around 6% in spite of the very good years in terms of core income that we had and in terms of interest rates that we had in the last years. the reduction of the legal risk charge for CHF in Poland and the other provisions have made it possible for us to increase the profit before income tax around 17% and the net income after minorities and taxes around 12.4%. In terms of the profitability of the group, we would highlight here in page 10 the growth of 2.4% in the NII. This 2.9% was achieved with a very healthy NIM of 2.9%. As you know, in Europe, the NIM of the Eurozone banks fluctuates between 2.5% and 2% mostly. We were able to present a very resilient NIM of around 2.1% due to our very prudent hedging policy. This is what made it also possible, together with the volume growth, which was very material in both Portugal and Poland, to grow 0.2% in terms of NII. In Poland, also, we were able to, in spite of the sharp reduction of interest rates, to present a NIM above 4%, which enabled us to achieve a growth of NII of 4.3%. In terms of fees and commissions, also very healthy growth in Portugal, growing around 5.6%, both explained by banking fees and commissions and market-related fees. Other operating income, influence. by the reduction in mandatory contributions because this year we have recovered, due to the finalization of some legal processes, the additional contribution that we made in previous years. So the mandatory contributions in Portugal reduced from 40 million to around 9 million. which explains this positive performance of around 30 million in this line. In Poland, because of the end of the, this was the first full year where we were totally normalized in terms of payment of bank taxes in Poland, and so that we had higher mandatory contributions because exactly of being fully normalized vis-a-vis the year before where we only were around half year. Operating costs, a strong focus in terms of cost to income. So I would highlight here the ability to maintain a cost to income of 37%. In Portugal, this cost to income around 35%, so broadly constant, 34% to 35%. And this was achieved together with a focus in the reduction of headcount so that we had some additional restructuring costs of around 23 million. In Poland, due to the wage inflation that persists in the country, the costs have increased around 10%. But this is, I would say, the normal in an economy such as Poland. In terms of cost of risk, aligned with the guidance that we have given, around 31% to 32%, in Portugal, broadly constant at 31 basis points. In terms of Poland, what we see is a slight growth from 33 to 34 basis points. I would like to highlight that in terms of composition in Poland, we have a higher share of cash loans and still a lower share of corporate loans. We were able to continue to decrease the non-performing exposures, as you see here in page 15, by almost 18%, 23% in Portugal, and the EVA ratio that includes all exposures, so to say, is already at 1.3%. In terms of business activity, very, very healthy in terms of customer funds growing 8.6%, so almost 9%, with already a healthy evolution of the off-balance sheet funds due to the performance of the market. These off-balance sheet funds are mainly distribution fees from investment trusts. And the demand deposits and term deposits also growing healthy in the several geographies. In the international operations, growing 13.5%. Loan portfolios. This is also very interesting, growing 7%, of which 9.3% in Portugal, even considering the reduction in MPEs. In Poland, in the beginning of the year, we were more prudent in terms of the Zloty mortgage loan, so we were not growing material in Zloty mortgages. This effect has been more than compensated by a growth of almost 20% in our corporate portfolio, which highlights a change in the business model and mix of the bank as we had envisaged. Liquidity, very healthy liquidity that enables us to keep and to manage the margin of deposits in an adequate way. Morel, in page 21, clearly above the requirement. As you see, both the TRIA and the LRE, we have a morel of 33.3% in terms of TRIA, which compares with a ratio of 28.9%. And in terms of MRE, almost double, so 12% that compares with a requirement of 6.9%. Our funding plan is being executed exactly according to what has been commented to the market. We have issues, an H1 in Poland and a senior preferred in Portugal. Well, this time exceptionally, we will not comment in detail what we have sent to you in terms of the performance of the several geographies to make our presentation shorter and allow more time for questions. And I will go immediately to the part to slide 44 in terms of capital and value generation. as you see in page 45 our community one ratio with the present distribution policy of 75 being deducted from the pnl stood at 15.9 and our total capital ratio almost at 20 at 29.9 incorporating all the effects of CRR3. These capital ratios compare very favorably with the requirements as of December of last year, but also with the requirements that are already in place since 1st of January. So we see here that we have a very comfortable buffer above the minimum requirements. Comparing with September, our CET1 ratio is constant. In terms of the moving parts of the capital, the P&L since September, The P&L explains an increase of 57 basis points in our Communicative 1. As we are distributing 75% of the P&L, this translates into a reduction of this capital generation of 45 basis points. And our credit RWA's, mainly because of the strong growth that we had in the last quarter, decreased by around 34 basis points. I would like to highlight that this type of P&L capital generation is 57 basis points. It's more or less between 50 and 60. It's more or less aligned with the capital generation that we have in the full year. And in terms of other ways of credits, because of the mix that we had, mainly in terms of corporate growth in Poland and of the strong growth in these segments, we had a capital consumption that was slightly above what was the capital consumption for the full year. So for the full year, it was around 74 basis points. In the last quarter, it was 34 basis points, so it was somewhat above the, I would say, the normal rate of RWA consumption. We have here other effects mainly linked to minorities, and the very important effect here that is a little bit counterintuitive is when the capital requirements of Poland go up, we reduce the minority deductions. The capital requirements in Poland went up by 100 basis points, And the amount of minority deductions in general that we had in Poland also were reduced, and this explains a large part of this effect. this is just the metrics that we have presented until 2028 just to show that we are very clearly above the business plan that we had presented for 2028 to the market so we are clearly over performing and I would like here to focus more on these metrics I think it's very important to keep in mind these metrics So that we clearly see an ROT on the new teams and our strong conviction is that this ROT of the new teams is sustainable and we see an EPS growth of also in the new teams and we also think that this EPS growth of the new teams across the business plan is also sustainable. So on top of this what we clearly see is that the the growth of book value per share plus dividend per share reaching almost 20%. So looking forward, what we see is that we do not see this year, so to say, as a one-off. We see this year based on a very strong franchise fundamentals to the point that we can envisage that we will most probably overachieve the plan that we presented in to you regarding the 28 values. As Mr. Miguel Maia commented, this led us to the conclusion that we are in a situation of being able to propose to our shareholders an increase in the payout limit of the limit, instead of the limit being 75%, having a limit of around 90%. And to give it more transparency and predictability to the market, we have here presented the schedule so that this limit will be a function of a certain schedule. So we will disclose to the market every quarter what is our capital ratio before before the deductions related to dividends and to share buybacks. By the way, this value today is 17.7%, and we will disclose it to the market. And our limit, instead of being fixed at 75%, we will have a reference limit of 90%. If we are above 17.5, as we are right now, if we are between 16 and 17.5, we will have a limit of around 80%. And if we are a limit below 16%, our limit will be 25% as it was before. So in practice, this will allow you to project with a little bit more of foresight what our policy will be. Of course, this is subject to regulatory approval and we have sent these requests to the supervisors for approval, which we expect to obtain in the next month, aligned with the period of the approval of the AGM, of the results of the AGM, maybe a little bit later, a little bit sooner. but our AGM is also for May, beginning of May, so we think we are on track for this. But, of course, it is in the hands of the supervisor right now. I will now stop for questions. We have here, as you've seen, some news, so I'm expecting some questions from your side. And that's it, Patrick.