Banco Comercial Português

Good day and thank you for standing by. Welcome to the Millennium BCP First Quarter 2026 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, today's conference is being recorded. We'd now like to hand the conference over to your speaker today, Mr. Miguel Maia. Please go ahead.

Good morning. Miguel Maia speaking. Welcome to BCP earnings conference call. As usual, I will mention the highlights of our performance, and then Miguel Braganza and Bernard Colasso will follow, providing additional details. The first quarter proved particularly challenging with a global context marked by increasing instability and intensifying geopolitical tensions as conflicts erupted in the Middle East. These events have had a severe impact on international trade and energy costs worldwide, which in turn is affecting global economic growth. Despite operating in a complex environment, the bank's performance remains strong. Net profit grew by more than 25% year on year, reaching 306 million euros and translating into a return on equity of nearly 16%. This profitability underscores the resilience and ability of our business model to generate sustainable value as outlined in our strategic plan for the cycle up to 2028. Our commitment to creating value is matched by our ambition to increase shareholder remuneration. We exceeded our initial target in this matter, having announced last quarter the intention to implement a shareholder's distribution of 90% over results 2025. The competent authorities have meanwhile granted the required permission for our share buyback proposal of up to 40%. Yesterday, the Board of Directors approved the share buyback related to 2025s. that will lead to the acquisition of shares in the amount of 407 million. In Portugal, we achieved a net income of 265 million in the first quarter, an increase of 21% that reinforced the growth and profitability trajectory of previous quarters. This result is grounded in a solid balance sheet, rigorous and effective NII management, and the diligent cost control while executing ongoing investments essential for the bank's future position. Our international operations posted a significant 65% increase, notably driven by Bank Milan in Poland, whose net profit rose by 68% to reach 71 million euros. This performance was supported by a strong commercial momentum and 61% reduction in charges related to FX market funds. The increasing containment of risks and impacts associated with FX loans demonstrates the quality of the franchise and realized the potential for value creation of the operation in Poland. There was growth across several business lines, especially corporate planning, which increased by 26.5%, materializing an important priority of our strategic plan for this market. In Mozambique, although millennial BIM profitability continues to be heavily affected by sovereign rating impacts, the bank delivered a positive performance. There was relevant commercial activity with notable increase in both customer resources and lending, maintaining a robust capital position with a capital ratio above 42% and rigorous risk management, ensuring the bank's balance sheet remains a benchmark in the market. Millennial Beams is therefore well capitalized and positioned to take advantage of the economic growth phase that will be driven by the resumption of major natural gas projects. On a consolidated basis, the quality of our relationship banking model is evident with a rise of over 7% in customer loans and a nearly 8% growth in customer funds. We continue to operate with a very strong capital ratios, with a common equity of 1 at 15.1% and total capital at 19.3%. These figures already account for the maximum value of the share buyback equivalent to 40% of the 2025 net profit and include just 10% of this quarter's profit in line with the new shareholders' distribution policy. At the same time, we are continuing to improve balance sheet quality with a reduction of 238 million in NPEs year on year and a stable cost of risk around 35 basis points for the group and 33 in Portugal. At group level, our customer base expanded almost 5% in the last 12 months, reaching the 7.4 million customers mark, out of which nearly 2.9 million in Portugal. Most notably, mobile customers continue to grow at 8% per year, accounting for 75% of the group's customer base and 67% in Portugal. Individual and corporate clients continue to choose Millennium as their preferred bank, and our services were again awarded this year with several relevant distinctions. Our ongoing investment and continuous customer-centric innovation in the mobile platform, with a constant focus on outstanding user experience, have resulted in a consistent upward trend in both interaction and sales. This quarter, customers carried out 6% more transactions on the app, with a notable rise in transfers. Sales figures increased by 5%, highlighted by an 18% growth in cloud sales. Customers are increasingly choosing the app as their preferred method for conducting their most significant financial operations, as shown by the high penetration rates of each channel, for example, for services such as mortgage-related activities and the acquisition of personal loans or to perform financial investments. With this week's general meeting, if, as expected, the proposals submitted for the shareholders' decision are approved, a new term of office will begin. This will be a term of office in which we will maintain our purpose and commitment to innovation, operational efficiency, prudent risk management, and a strong value creation for shareholders. It is an evolution through continuity, maintaining the performance trajectory that has been consistently recognized by the market, both in the execution of the strategic plans and the increase of SAP value. I would also like to take this opportunity to express my gratitude to the two members of the Executive Committee who are leaving, namely José Miguel Pessang and Rui Teixeira, for their exceptional contributions throughout their executive functions, and in the preparation of the two outstanding professionals who will now join the executive team. Our commitment to creating more value remains unchanged. Miguel, the floor is yours.

Thank you. Thank you very much, Miguel.

presenting now the income statement as you see a very resilient P&L with the net interest income in spite of the general reduction of interest rates growing 2.4% in contrast to what's happening in the majority of the banks in Europe commissions growing also very healthy 8% mainly linked to asset management insurance and payments and cash which means that the core income so the grew almost 4%. Operating costs at 4.5% is our guidance, with a strong contribution here from IT investment, that is part of our general adaptation as an institution to this new environment. The core operating profit is growing in spite of the reduction of interest rates. On top of this, we have the income and in the sale of some legacy assets. That was a positive evolution this quarter, so that the profit before impermented provisions grew around 10%. In terms of impairments and other provisions, the very healthy evolution of the impairments that stayed constant in spite of the growth in the credit portfolio and the strong reduction of as anticipated of the legal risk charges in Poland. I would like to highlight these four indicators in page 9 that clearly are our benchmark and what we want to be, with an ROT of almost 17%, 16.6%, a growth in the book value per share plus dividends per share above 18%, and an EPS growth above 29%. So it is a really positive development. Going forwards, we continue to expect an ROTE and a book value per share plus dividend per share growth in these high teams, as you are seeing here. In terms of the EPS, Looking at the future, we also expect it to continue to grow materially above 15% for the years to come within the period of our strategic plan. Going now to our accounts in more detail. The NIM showed a strong resilience, reducing only 14 basis points in spite of the reduction in interest rates in Poland, and this explains why it was possible to grow the NII

containing the performance trajectory that has been consistently recognized by the market, both in the execution of the strategic plans and the increase of VCP value. I would also like to take this opportunity to express my gratitude to the two members of the executive committee who are leaving, namely José Miguel Psang and Rui Teixeira, for their exceptional contributions throughout their executive functions, and in the preparation of the two outstanding professionals who will now join the executive team. Our commitment to creating more value remains unchanged. Miguel, the floor is yours.

Thank you. Thank you very much, Miguel.

Presenting now the income statement as you see a very resilient P&L with the net interest income in spite of the general reduction of interest rates growing 2.4% in contrast to what's happening in the majority of the banks in Europe. Commissions growing also very healthy 8% mainly linked to asset management, insurance and payments and cards which means that the core income, so the They grew almost 4%. Operating costs at 4.5% is our guidance with a strong contribution here from IT investment that is part of our general adaptation as an institution to this new environment. The core operating profit growing in spite of the reduction of interest rates. On top of this, we have other income, mainly in the sale of some legacy assets. That was a positive evolution this quarter, so that the profit before impermented provisions grew around 10%. In terms of impairments and other provisions, a very healthy evolution of the impairments that stayed constant in spite of the growth in the credit portfolio and the strong reduction as anticipated of the legal risk charges in Poland. I would like to highlight these four indicators in page 9 that clearly are our benchmarks and what we want to be, with an ROT of almost 17%, 16.6%, a growth in the book value per share plus dividends per share above 18%, and an EPS growth above 29%. So it is a really positive development. Going forward, we continue to expect an ROTE and the book value per share plus dividend per share growth in these high teams as you are seeing here. In terms of the EPS, Looking at the future, we also expect it to continue to grow materially above 15% for the years to come within the period of our strategic plan. Going now to our accounts in more detail, the NIM showed a strong resilience reducing only 14 basis points in spite of the reduction in interest rates in Poland. This explains why it was possible to grow the NII the NII 2.4%, this together of course with the volumes. The NIM in Portugal even increasing from 2.12 to 2.2, which is a good NIM to have in a mature market such as the Portuguese market, which together with the volume growth that we will see allowed us to grow around 10% in terms of In the international operations, and I would remind that when you compare quarter on quarter, Poland, which is the main operation, reduced the benchmark interest rates in the market almost 200 basis points. We only reduced the NIM around 60 basis points in spite of this 200 basis points reduction, and the NII reduced 3.7%. As we have pointed out in our previous conference calls, our expectation for this year is, as the quarters slow, as time goes by, is to have a quite stable NII when you compare it with last year, with the volume growth compensating the reduction in interest rates. Fees and commissions also growing healthy both in Portugal and international operations, 8.5% in Portugal, 7.4% in international operations, both in banking fees and commissions and market related includes asset management. Here a strong contribution from clients, transactionality, cards and asset management products. Other operating income, as you see here in page 13, the net trading income in Portugal showing here a very positive evolution in the quarter, mainly linked to the sales of some legacy assets that is obviously not recurrent on a quarter by quarter basis. So this around, this difference, this growth from 13.3 million to 37 million, I would classify this difference as a one-off. In the international operations, what we see is that there was some increase in monetary contributions, mainly in Poland. However, this has more to do with the mix of the monetary contributions. If we take a look at the full year, we expect the monetary contributions to be broadly constant in Poland. Operating costs evolving in a very contained and disciplined way in spite of all the investments that we are doing as you see here mainly in the other administrative costs in Portugal. The cost to income at 36%. in Portugal the cost to income only at 31%. So this clearly shows the competitive advantage that we have and the possibility that we have to remain and to be quite competitive in the market. Cost of risk. also very contained, so we are not seeing in our market any warning signals in spite of what's happening in the Gulf of course of the war in Ukraine. very much in line with our plan with a cost of risk in Portugal in the low 30s as we also have anticipated and in our international operations also reducing from 47 basis points to 41 basis points. This was achieved together with the continued reduction of our NPEs so that today, as you see, our hard NPE ratio, so the really day past due ratio is only at 1.2% and the more traditional NPE loan ratio at 2.3%. In terms of business activity, that explains this evolution of the P&L. We see that strong growth in customer funds which shows the resilience of our business model and the ability that we have to originate new customer relationships and to deserve the trust of our customers in terms of our advisory businesses, asset management businesses that here grew more than 10%, as you see, but also in terms of term deposits and of the transactionality that shows up in the demand deposits. And this is in the several geographies. You see Portugal, a more mature market, we have been growing and gaining market share growing 6.3% and in the international operations where we are a challenger mainly in Poland growing 11.1% with a very strong contribution as you see here from asset management. The loan portfolio. also growing well in Portugal at 9.6%. As I had anticipated in the last call, our objective for this year is to see here some deceleration mainly in the mortgage market. So the mortgage market grew very, very healthy in Portugal. We are expecting some deceleration in Portugal. However, to continue to grow looking forward at the mid-single digit level, no more bias towards the SME and the corporate sector. In the international operations, a slower growth but a very good composition. So what we had said is that we wanted to rebalance our business mix in Poland towards the corporate segment. As Miguel Maia commented, we grew more than 20% year on year on the corporate segment. this strong growth is continuing, showing that we really have a business model that works in Poland also for the SMEs and corporate segments. This last year we have reduced somewhat our mortgage portfolio, as we had commented. However, in the first quarter of this year it has already stabilized, so the mortgage portfolio during last year, mainly the last two quarters, was a drag in terms of volume growth, will start also to contribute in Poland to the growth of the credit platform. In terms of capital, as you see, a very strong capital position that compares well with the minimum capital ratios, both in terms of CET1 and in terms of total capital ratio. Here, this next page, I think it's very important to understand the evolution of the capital. In the data that we had presented in December 25, the share buyback that we are now going to implement was not deducted yet because we did not have the authorization. It was disclosed that we had this objective and that this would represent 35 basis points. So on a pro forma basis, we'd have to adjust for the share buyback. Then the other elements of the capital waterfall, I would say, are more recurrent elements and others not so recurrent elements. So the P&L and of course the distribution of the P&L, as we are distributing almost everything and as we are deducting from capital, 90% of the P&L is not contributing to increase the capital ratio. On the other hand, we are continuing to grow on a healthy way, mainly in the corporate sector, both in Portugal and in Poland. This growth in the corporate sector, of course, consumes more RWAs than the growth in the mortgage segment. So these 20 basis points that we see here in the first four columns of the waterfall what I would classify more as a more recurrent and more recurrent evolution of our capital ratio on a quarter by quarter basis as I commented in the last call as you may have recalled in our last call, I had commented that we should expect a P&L before distributions between 55 and 65 basis points on a quarter by quarter basis. We had here 70 basis points because of this extraordinary gain that I just commented. And in terms of RWA growth or RWA linked exactly to this strong focus on the corporate business, we would have, so to say, a consumption of other ways between 20 and 25 basis points. This is exactly what I said in the last conference call, and this is what I am reaffirming here. Then there are other elements in our capital waterfall that are not so recurrent, so to say, namely the evolution of the IFS reserves. We do not have a very... material exposure to interest rates in IFS reserves in terms of our fair value through OCI portfolio. But still, with the volatility that we had in the market, this has an impact. Part of it has already been reversed, but there are some small changes here. And as time goes by, some of the securitizations that we have, namely here there was one important securitization in Poland, lose a part of its contribution to the capital ratio. This is something that when we take the view of the full year is not necessarily to be considered because what happens is that securitizations lose their eligibility, they reduce, so to say, the secured amount, so to say. But what happens is that we, in the meantime, we prepare new securitizations. So right now, as we did in the last years, we are preparing in new secretizations to be to be executed in q3 and q4 that will represent between one and two billion of risk-weighted assets so this will be more than compensated as time goes by by new secretizations and these other are some small effects that may work one way or another all of them are below five basis points typically linked to to market risk or to operational risk or to minority minority deduction, so it's a small effect. So all in all, so the guidance that here I would like here to comment is that it is a constructive view of the capital position. The capital is growing, is evolving exactly aligned with what we want and It is, so to say, a virtuous capital consumption because the reason why we are consuming most of the capital is because we are being successful in terms of the implementation of our SME and corporate strategy in Poland, but also in Portugal. The MREL, very comfortable about the MREL requirements and we are executing our funding plan exactly as commented. The liquidity position, very robust, as you say, with the net loans to deposit ratio at 68%, which is important because this is exactly what allows us to be very confident in terms of the management of our spread on deposits. So if we were not in such a comfortable position, probably we would not be able to grow so heavily in terms of the deposit margin as we have right now. And I'll pass it now to Bruno.

Okay. Thank you, Miguel. And good morning, ladies and gentlemen. This time, in order not to take too much of your time, I will briefly go through some of the slides, and I will not follow the full set of slides that you have, as you already have the opportunity to look at it. So starting on page 26, net income in Portugal grew 21%, reaching 265 million. And as Miguel said, this performance was driven by the increase on NII of 9.1%, and also by the strong improvement on fees and commissions that grew 8.5%. It's also important to highlight, as Miguel also stated, the disciplined management costs and costs in Portugal just rose 4.5%. On page 27, net interest income stood at 357 million in the first quarter of 2026, that is 9.8 above what was recorded in the first quarter of 2025. And this is equivalent to an improvement of almost 32 million. Let me also highlight here that on a quarter-on-quarter basis, NII went up 4.1%, And in the last, this is something that we have shown. It's the consistency in terms of NII growth over the last six quarters. Regarding year-on-year evolution, as you can see also in the graph, I mean, it's important to highlight the increase of the credit portfolio and also the strict management of deposits more than compensate the effect from lower interest rates. This means that the commercial activity was responsible for more than 25 million of the positive evolution of NAI year on year. And this also, it's important to remember that it's important also to consider the decrease of almost 30 basis points of the average three-month arrival that was registered in the first quarter of 26 compared with the first quarter of 25. Moving to page 28, commissions amount to slightly more than 160 million at the end of the first quarter 26, increasing 8.5% compared with the same period of last year. Banking fees and commissions went up 7.1%, supported by higher contribution from cards and transfers. And also, let me highlight the strong contribution and improvement from bank insurance fees. Regarding market-related fees, there was a significant increase that is coming from security transactions, but also from asset management and third-party distribution of investment products. Here also on this slide, as Miguel said, there was some change and improvement in terms of the trading line that, as it was stated, it was mostly driven by gains from the disposal of some legacy assets steaming from the recovery of non-performing loans. On page 29, operating costs stood at 176 million in the first quarter of 26, 4.5% above last year, and the increase in operating costs in the Portuguese operation was driven by the increase on admin costs and amortizations and depreciations, as Miguel said, related with some investments. And as you can see, staff costs were broadly stable compared with the first quarter of 25. Cost to income stood at 31%. That compares with 34% in Q1 last year. And as I said, I will jump some slides, and if I may, I will ask you to move directly to page 33 to deep dive on volumes. On volumes and starting with customer funds, as you can see, there was a continuation of the growth trajectory, reaching at the end of the first quarter of 26 more than $75 billion, compared with $71 billion in March 25. This represents an increase of 6.3%. I think it's also important to highlight the growth on balance sheet funds, which grew 5.2%, driven by the stabilization of term deposits and the increase in demand deposits. Off-balance sheet funds posted also positive growth, increasing more than 10%, and this reflects what I already said, the growth in terms of the distribution of third-party funds, alongside with the positive performance recorded in sales of financial insurance products and by the improvement of asset center management. Gross loans stood at $44 billion at the end of March, 9.6% above the 40 billion reported at the end of the first quarter, 25. And this growth reflects in one end an increase in mortgage lending, which rose by more than 11%. Some while also driven with some support by the state initiatives for young people. And on the other end, by the positive performance in corporate lending, which was materialized in a growth of 7.6% or more than 1.3 billion that in this portfolio related with companies. Once again, I will ask you to jump some slides and move to page 36. And here, I mean, leaving the Portuguese operation, let's have a quick look on the international operations that, as you can see, there was a strong improvement and the contribution grew after deducting minorities almost 65%, reflecting mostly the strong improvement from the Polish operation. Bank Millenium, as I'm sure you have followed the results disclosure on the 28th of April, this improvement in the Polish operation was somehow, I mean, apart from the positive evolution on volumes, but it was basically, I mean, it has improved mainly with the decrease related with CHF costs. But it's also important to highlight regarding Poland that, I mean, it has been applied since the beginning of the year, a higher tax on banks. There was also an increase in terms of mandatory contributions. the interest rates in Poland have decreased significantly. I will not detail the following slides about Bank Millenium, but I would like just to reinforce, as I said, the resilience of NAI, taking into consideration that there was a reduction of almost 200 basis points on the three months Viber registered in the first three months of 26 compared with the three months Viber registered in the first three months of last year. So let's move to page 40. Once again, about volumes and starting with customer funds, as you can see, are still growing at a fast pace, reaching more than 35 billion. that compares with 30.6 billion euros, and this is in euros, from March 25. And regarding the loan book, it's important also to highlight the positive trends on mortgage lending on Zloty's and the strong increase on loans to companies that grew more than 26% compared with March 2025. Loan book growth was not more pronounced due to the continued sharp reduction in CHF on the CHF mortgage portfolio. And to show that, I will ask you to move to the following page that provides some detailed information that I'm sure all of you are aware of it, but regarding the FX mortgage portfolio. So here, once again, it's important to mention the strong drop of the CHF outstanding portfolio that registered a decrease of 44% on a year-on-year basis and 15% on a quarterly basis. The percentage of the CHF loan portfolio at the end of March was just 0.7 of the gross loan book that compares with 1.4% at the end of the first quarter 2025. Cumulative provisions for legal risk at the end of March 26 represented 169% of the outstanding CHF mortgage portfolio. And here, it's also important to highlight the significant drop in the number of individual lawsuits that is explained by the effort of the banks to achieve extrajudicial agreements, and even more relevant, as it was already mentioned, the significant drop of 61% of pre-tax costs related with CHF portfolio. Turning to page 32, regards Millennium in Mozambique, reported net income amount slightly above break-even, and the results continue to be somehow constrained by the provisions associated with the exposure to the sovereign debt in local currency. But it's also important to highlight that from an operational standpoint, net operating revenues are growing almost 4%, and costs are under control. And I will conclude here, but before we move to Q&A, I will hand the floor to Miguel Freganza for some final remarks. about the execution of the strategic plan on page 47.

As you know, around two years ago, we have presented a plan to a market with a roadmap until 2028 that implied further evolution and I would even say transformation of the bank a plan of growth in terms of number of customers, in terms of making sure that these customers use the mobile channel, making sure that our cost to serve these customers and our service quality both in terms of quality of the advisory and quality of the transactionality improves so as to achieve a low cost to income, a very controlled cost of risk within the limits of a prudent CT1 ratio and an ROE ratio that was above above benchmark and all of these together with more distribution so to say of these values of the generated value to to the shareholders and at the time what we had presented was uh 75 what i i would even here like to say is that in qualitative terms we are clearly ahead ahead of schedule so in terms of the customers that we are acquisition in terms of business volumes in terms of the the conversion of our of our customers in in a more mobile usage or digital enabled customers, we are clearly ahead of schedule. And the fact that we are ahead of schedule in qualitative terms shows that our strategy is the correct strategy and we want to maintain the strategy that we have defined and we have presented to the market. Having said that, it is clear that we are overachieving this strategy in financial terms. So what we see is that we said that we would we intend to have an ROE above 13.5 for instance, that is the synthetical measure as you see and we have an ROE today close to 16% and if we use the ROTE even clearly above these values. We have also in the meantime proposed to the AGM and communicated to the market a new shareholder distribution policy that is basically a table that depending on the need of capital we could go up to 90% of value. So very clearly we are overachieving this plan as I have commented in the first page that we have commented here. we are we feel very comfortable that we will continue as i commented in the first slide and i presented we will continue to grow book value per share plus dividend per share on the on the high teams level we will continue to grow of course eps in the next years also on the on the on the high teams levels and we are also having an rot on the on the needs to high teams so course we have been giving this guidance to the market in the in the several in the several conference calls but with the results of q3 without changing the strategy so we will maintain the strategy but with the results of the q3 we will give a more formal guidance of what is our objective for 2028. And we hope that with all this transparency and with all this commitment from our teams and the confidence from our customers, we will continue to generate and create more value for the different stakeholders. Thank you very much.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Thank you. First question today comes from the line of Max Mission from JB Capital. Please go ahead.

Hi, good morning. Thank you for the presentation and taking our questions. Two questions for me, please. The first one is on Portugal. Given the strong quarter-on-quarter pickup in the NIM and the still high long book growth, how do you see your NII guidance for 2026? And also, if you could give us a hint on how the current rate curve impacts your 2027 outlook would be super useful. And the second one is on your cost base. Some Iberian peers are executing headcount optimization. Is this something BCP could consider as part of the digitalization and implementation of AI? Thank you.

Thank you very much for your questions. In terms of NII, the last guidance I gave was the NII growth in Portugal growing between the mid single digits and the high single digits. This was the last guidance I gave here. With the evolution that we've seen in the market interest rates, right now we are much, in spite of the fact that the bank is quite edged, but we are much closer to the high single digits. And this would run both for 26 and 27. So the NII guidance that I would like here, assuming, I mean, the market is very volatile. But the NII guidance based on the current structure of interest rates, both for 26 and 27, is on the high single digit area. In terms of costs, of course, we are in a transformation phase. We are in a transformation phase. The world is in a transformation phase. We are exploring most of the opportunities that AI gives us. We were clearly innovators in terms of service model, in terms of mobile, in terms of everything that has to do with technology. It's part of our DNA to be a technology-driven innovator, so to say, since the inception of BCP. Actually, there are several case studies on how BCP has been an innovator in technology since its inception. But there is here, so to say, a J curve. So there is a phase of investment and then the phase of saving of the cost typically takes some time. What we are trying to do is to make sure that we profit from these opportunities and that we reinvent ourselves. In the period of this plan, I would say that the potential cost savings that we will be having, and we will be having some cost savings, will be invested exactly in the transformation to assure that the bank continues to be a reference bank, that the bank continues to be a main player in this. So I would not review our guidance in terms of total costs in the mid single digit area, what I would say is that the composition of these costs will become more and more different. So we will try, we will probably have more and more as time goes by, more costs related to change the bank, more to IT, more to technology, more to training, and somewhat less the pure traditional headcount costs. So, the guidance, we would keep the guidance in this meeting of Digitaria for the time being.

Thank you very much.

Thank you. Next question today comes from Ignacio Olardegui-Lopez from BNP Paribas. Please go ahead.

Thanks very much for the presentation and for taking my questions. I have to, if I may, The first one, Miguel, looking to the capital performance, how should we think about it? You have just given some sense that part of the impact that we have seen in the quarter might be recovered throughout the year. But how should we think about capital and distribution into 2026? Is 90% still kind of the current target payout ratio? And a link to that, actually, if we see an acceleration of lending growth, Could we expect a relevant acceleration as well in NII? There is a conversion effect on that profitability improvement that may be not captured at this stage in your guidance. Thank you.

I mean, the answer to the second question is yes, it's mathematical. So if the growth of the credit accelerates even further, of course, we will go even more than what I said. It's mathematical. But I would say that at this point in time, with so much uncertainty in the world, probably what I would keep, so to say, the guidance that I gave in terms of volumes is except, I would say, if suddenly all this uncertainty that we are seeing in the Gulf, in Ukraine and so on, in a very, I would say, Goldilocks scenario, where suddenly the investment picks up and potentially in this scenario we could have a much higher growth in terms of growth. But this is not our base case. In terms of our capital distribution strategy, First, I would like to highlight that we have been quite innovative here. So instead of doing what most banks do, that is presenting a target payout ratio, what we have said is we wanted to come up with a situation in which we ensured a couple of objectives. first we wanted to make sure that the market sees through and almost anticipates what may happen based on the evolution of the bank and that's why we have so to say a capital a maximum reference value for capital distribution that is a function of the ratio this assures this transparency But it also shows strategic flexibility. So if suddenly there is a much better, so to say, opportunity to create value in, let's say, growing SMEs in Poland or in Portugal, we think that exactly the fact that we are giving quarter after quarter, very close to the market, how we will reason and how we will go about it, allows us also to do what, at the end of the day, is our main mission, that is to create value. I mean, the capital distribution is a means, it's not an end, so what we want is to create value. And thirdly, transparency, strategic flexibility, and thirdly, our strategy assures is exactly this balance between discipline, so that we do not accumulate unneeded capital, and value creation. So the objective of the pay-out ratio is to assure this discipline because the market puts a premium to this discipline. So the objective is not 90% per se. The 90% is a means to assure discipline and is a means to be transparent and is a means to assure the strategic flexibility with value. Having said that, Based on the projections that we have right now and based on the guidance that we've just given you, together, of course, with the fact that some of these securitizations that are coming to an end will be replaced by new securitizations, what I can comment is that it is still a likely scenario that we can reach the 90%. It's not the only possibility. But it is still likely. Of course, if we do not do it, it is for good reasons. It's because we are creating even more value, namely in terms of SME creator growth. But it is still likely. I mean, this is equity. It's not fixed income. So I cannot assure exactly what will be the growth. the growth of what our clients will do, how our competitors will move, and what will be the growth of our trade portfolio in Portugal and Poland. What we have is, I mean, a view. The reality will then be the confrontation between this view and what will happen in the market in the next quarter. I remind you that it's still the first quarter. So what we can commit to you is to give you and to keep you posted in every one of these quarter meetings. And you'll see, I mean, much more in a much more transparent way and in a much closer way what you'll be doing and how you are reasoning and thinking about it.

Very clear. I mean, so in a sense, it will be that if the payout is 80% for for the reason of growth, that would probably mean a better profile in the P&L. Yes. It is at the end of the day the conclusion of the message.

Thank you. Yes.

Thanks very much.

And of course, I mean, it's better to have a smaller payout in a larger P&L than a larger payout in a smaller P&L, I would say.

Totally.

Thank you.

Okay.

Thank you. Next question today is from Francis Goriquel from Alantra. Please go ahead.

Yes, thank you for the presentation. Two for me, please, on margins and volumes. On margins, I wonder if you can update on the NAI tailwind that we should expect from the hedging portfolio. You include in the appendix of the presentation with a yield of just 2.3% in 26-27. And if you can share with us how you are managing those rollovers, if you are already locking forwards agreements, or if you will just replace those hedges at the prevailing rate at the time. And in this context, just provided guidance for NII. I wanted to ask you about guidance for NIM in Portugal, which came at 2.2 in Q1. If you can please comment. And my second question on volumes, the sector in Portugal is growing loans 8% and deposits 6%, so a 2% gap. The gap for BCP is 5% points, so plus 10 and plus 5. And I wonder if you want to close this gap or not. In loans, you've mentioned that you're going to slow down the growth in mortgages. I don't know if this is housing demand, or you want to be more conservative here. And then in deposits, you're growing a bit less than the sector. If you can please explain what is driving this underperformance, if it is growth in retail or corporate deposits. Thank you.

Okay. So starting with your last question more around deposits, gap, and so on. So first, we are in individuals, we are clearly gaining some market share in terms of deposits. In the corporate sector, we are more opportunistic in terms of term deposits. So we only quote when the price makes sense for us. And given that we are in a situation... there is not so much franchise linked to it. So mainly in the large corporate deposits, we are not overpaying or we consider all the costs. And here and there, we may lose one or other large deposit to a competitor that needs more, so to say, the deposit that we do. But all in all, it is large corporate deposits. But all in all, as you see, we are evolving very much aligned with In terms of the hedge of the balance sheet, as you see here in the annex, we have here a hedge book and this hedging book that uses swaps and unhedged bonds, so to say, is used to hedge the balance sheet as a whole. so to say. And because it is used to have the balance sheet at the whole, what we typically do is that we have our own metrics, typically the standard metrics of basis point value and the EDE, so economic value sensitivity to interest rates. And typically what we do as most of the banks according to guidance of the EDA is that most of our demand deposits are modeled to a large part as a five years, not everything, but to a large part as a five years, as a five years zero coupon liability, if you want, most of it. So what we tend to do is that we use the interest rate swaps and the unhedged bonds to hedge, so to say, the balance sheet as a whole, and we hedge both our demand deposits and, so to say, the beta part of our term deposits. So typically, mainly when we look at NII, typically our term deposits have a beta of 50%. So we typically, in terms of NII hedging, we typically hedge, so to say, 50% of it to emulate, so to say, the sensitivity of our margin to interest rates. So this means that our margin is, not very sensitive to interstate movements as you see when you compare with our competitors we are in a very immunized margin so the way to look at this slide in page 55 is that on average as these hedging positions mature and not all of them mature in one day we typically will be maintaining so to say this level of 32 33 billion plus the increase in the in-demand deposits and we will be typically be investing at the then prevailing five-year rates so i think this is a today the five year rates are at 2.8 so more than a headwind I would say this is a tailwind so you should look at this page as the opportunity that we have as time goes by to reinvest for instance in 27 the difference between 27 billion and 32 billion that are now invested on average at 2.3 they will be invested at 2.8 if the five year rates continue So this will be a positive contribution to the margin going forward and not a negative contribution. Okay. Okay. Let's move. I'm sorry. In terms of volumes, I'm here. I mean, we don't, to make it clear, we don't, we're not worried about having a commercial gap, so to say. What we want to make sure is that the credit that we originate, I mean, pays well our cost of equity and that the deposits that we, of course, originate are well priced, so to say. That we make money on the deposits. We want to grow in SME credit and we want to grow in corporate credit as we have presented in our strategy. However, What we don't want to do is to destroy value in this growth. So I would say we will not grow credit just because we want to close the gap. What we want to do is to make sure that every credit that's decided really pays well. the cost of funding and the cost of equity. And we are not limited by the equity, but we are very disciplined in terms of our cost of equity because we prefer to distribute if we have excess capital than to do value-destroying business. So we are not worried about having a gap. Thank you.

Thank you. And the next question comes from Carlos Peixoto from CaixaBank. Please go ahead.

Hi there, good morning. Thank you for taking my question. So I would actually have a couple of follow-ups, which would be one of them on NII. Basically, you upgraded or you put the guidance on the top end of the previous guidance on NII for Portugal. But basically, if we annualize first you, NII, and adjust for the day count, we will already be on a performer basis on an 8%. year-on-year increase. So my question here is shouldn't we see actually something above that considering that you'll be having some loan growth throughout the year and also some tailwinds from from interest rates, even though part of that is hedged. Then the second question would be on capital, the second follow-up would be on capital. Just a couple of issues here. So you mentioned the securitizations of one to two billion. I'm just wondering here to clarify the one to two billion, Are they impacts in RWA's or are the size of the securitizations that you could be doing? And then still within capital, the 100 basis points, sorry, the 100 basis points increase in capital requirements in Poland in September, that should mean a lower deduction from minorities. Do you have an estimate on exactly how much could that mean? I'm calculating around 15 basis points, but I wanted to cross check that. And then just, sorry, finally, on cost of risk outlook, maybe if you could comment on what you're seeing now, what your expectations and whether you're seeing any signs of deterioration in the corporate segment driven by the higher rises in oil prices. Thank you very much.

Okay. Okay, thank you. Thank you very much. I mean, first in terms of NII, it is true that when we annualize what we have, we are already at 8%. But it is also true that mainly when we consider what we had achieved in the end of last year, it was also a positive evolution. So looking forward, we want to maintain this high single digit, high single digit, maybe nine, maybe seven, it's also eight. So let's see, based on the uncertainty that we are seeing right now, is what you see. The credit growth, as you know, the main impact of the credit growth, mainly if it starts now or if it starts later in the year, I mean, in the year where the credit grows, it is not so material for the NII. It becomes more material the year after because it does not contribute so much for the average balance, so to say. So, a credit growth, even if we grow a lot of credit this year, this may mean more 10 million of NII, so to say. So, it is not so sensitive, but it will be more sensitive for the year after. And we will be here at the end of the year to see whether we can be more optimistic for 2027. But at least for 2026, I think that it's now prudent to focus on the high single digit. In terms of RWA, the 1 to 2 billion are traditional RWA. SRTs and equivalent deals through insurance protections and so on. And the values that I mentioned, and they are not guaranteed, but we typically do them, we do them all the years, but the values that I mentioned are RWA's in Portugal and in Poland, so to say. the cost of risk as i commented in the presentation we are not seeing any worrying early warning signals that was uh that would point to an increase in the cost of risk so neither in portugal nor in poland of course it's early days and of course i mean every day we hear something new about ormuz and we do not know whether the end will end today whether it has ended or whether it will restart in one week and whether the full prices will stay high for a very long time. So it is a very complex situation, the situation that we have right now. But I would say in a baseline scenario and assuming that the situation normalizes, the level of cost of risk that we are seeing right now, we do think it's recurrent. I'm sorry. Thank you very much.

I mean, the additional requirements from Poland from September 26th, that will be around 100 basis points. This will have an impact at C2-1 at group level of around 30 basis points. But it's also important to highlight that, I mean, then this will have a positive impact on capital. Exactly.

Okay. Okay. Okay, let's then move forward.

Thank you. We'll now take the next question. This is from Alvaro Fernandez from UBS. Please go ahead.

Good morning. Thanks for taking my questions. I have two. First, on operating jobs, you were expecting kind of flat operating jobs at a group level, so revenues growing more or less in line with net costs. Is this still the case or do you now expect like kind of positive jobs in 26 and 27 given, you know, volume growth and a better yield curve? And second, there has been recent news on Fosun looking to divest their stake. So do you see any risks of a sale to a bigger player in Europe and then therefore BCP becoming an M&A target? and what actions could you take to protect yourself from that happening? Thanks.

Okay. First, in terms of operating JAWS, we have to separate Portugal from Poland. In Portugal, effectively, what we are pointing to is a growth in costs in the mid-single digit area. And right now, what I commented is that we were targeting NII in the mid to high single digit. If the NII goes to high single digit, there could be a slight positive operating jaws in terms of the recurrent NII and the recurrent costs, so to say. Of course, there are always some non-recurrent items, as it happened this quarter, that was positive, that may change this on a quarter-by-quarter basis. But this is the situation in which we are. In Poland, as you know, we come from a situation in which the interest rates were very high, where they went down very sharply. And what we are trying is, in spite of this strong reduction of interest rates, to have a stable NII. And the costs, the guidance in terms of costs, are more on the high single digit area. So in Poland, we will continue to have negative operating jaws, but from a very, I would say, from a very high value in terms of the NIMB. So all in all, this is the situation that we have, but I would say slightly more positive ethnicity in Portugal and Poland than what we had before. In terms of our equity investors and so on, I mean, we are totally committed and totally focused in creating shareholder value. and we we do we do not condition any of our investors neither institutional investors nor more strategic investors nor i mean on what they want to to do with their participation we what we want to are totally and relentless focus on is on generating value and i don't think it is i mean even advisable for me to comment on what investors in BCP, it's always an honor to have good investors in BCP, I mean, want to do with their participation. So we are totally focused on generating value and making sure that our share price reflects this value. And I think this is the best thing to do for our shareholders.

Thanks. Thank you. Next question today comes from Maruna Cherea from Jefferies. Please go ahead.

Good morning. Thank you very much for taking my questions. First, I have a clarification, please. Your high single-digit NIA growth guidance in Portugal for 26 and 27, does it assume any hikes from the ECB? And if you could please remind us, what is your NIA sensitivity to 100 basis points higher rates in the Eurozone, and if there is a meaningful difference between your year one and year two sensitivity? And then also on fees, I guess your fees are also performing better than your previous guidance, both at the group level and in Portugal, you are going above 8% year-on-year. And I think previously we were discussing about mid-single-digit growth in 2026. So just wondering if there is any upside there. Thank you very much.

Starting with the fees, what I would like to comment is the difference in fees is to a large extent also related to markets to market related fees to asset management fees and these depend a lot in the situation of of the market so uh what we had commented before was a mid single digit in the in a in in portugal probably right now given the performance that we had in the first quarter with more go to between me and and high single digit contingent on the on the market evolution The market has been volatile, as you know, and the retail investors flows, as you know, because you're active in the asset management area, have also been volatile. But if the market performs well, if the retail investors come back, so to say, mainly to invest in products, there is room to go closer to the high single digit. If we have here a more challenging market environment, probably the retail investors would focus more on deposits and on balance sheet products. Our projections and other guidance that we gave were very much aligned have implicit, so to say, the forward rates. When we give a guidance, we typically give it based on the forward rate. So the numbers that I gave were basically, if you go to the present forward rate, the forward rate is off today. In terms of that reflects of course the ECB rate increases. In terms of our sensitivity, our sensitivity is very low to the market. So our sensitivity in year one is both in Portugal and in Poland around 2% to 3% of the NII for each 100 basis points increase in the interest rate. So our NII sensitivity is very low. Our year two sensitivity is not an information that we have been giving publicly. Probably it's something that we have to improve, but let me, let me just check on, and then when we start giving it, let me, we'll give it in a more formal way. Okay.

Thank you. We'll move to the next question. And this is from Dimitri Kergan from Mediobanca. Please go ahead.

Thank you. Yeah, just two questions on volume growth in Portugal.

Firstly, how much of the mortgage demand is driven by the current scheme for young borrowers? And second, how would you the resilience of corporate borrowers to the energy prices right now and maybe if there's any guidance for the corporate loan growth in Portugal for this year? Thank you.

I'm sorry, the connection is very, very poor. I only understood your first question. Can you hear me better now? Yes, yes, yes, yes.

So the first question would be on the mortgages in Portugal, how much of the mortgage demand comes from the government scheme for the young borrowers? And the second question is on corporate loan growth. Is there any guidance for this year and how are the corporate borrowers resilient to the energy prices right now?

okay okay so um in terms of the percentage of the of the of the production that was done according to the guarantee was around 40%. In terms of the corporate loan growth, there is some expectancy right now in terms of how the situation will evolve. We do expect the loan growth to be around the mid single digit, but this is probably one of the most volatile parts of our P&L because, or the most uncertain part of our P&L, because it depends a lot on investor confidence, on corporate confidence, and due to current volatility, I mean, some of the investments are being at least postponed. So I would say around mid single digit, but it could be, I would say low single digit or high single digit with an equal distribution. In terms of the impact of the crisis yet, as I've commented, we are not seeing yet any material impact of the crisis in terms of the business profitability of our customers. Up until now, it is not happening. But we all know that if this takes too long, the impact may be exponential. We take some comfort from the fact that Portugal has a large part of its energy from renewables, and Portugal almost does not import any oil and gas from or move from the Persian Gulf. So our providers come from other parts. So we will be more impacted by the price than by the quantity. So let's see. I would say if there is an issue, I would say probably that our economy will suffer much less than other economies. But of course, if the situation remains for very long, I mean, all the world will suffer. So we have to be realistic about this.

Got it. Thank you.

Thank you. As a reminder, if you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, you can press star 1 and 1 again. We will now take our next question. This is from Cecilia Romero Reyes from Barclays. Please go ahead.

Thank you very much for taking my questions. The first one is on NII again. In a higher rate scenario, do you expect the positive data to remain stable with current levels, at current levels? Or is there a risk of further pass through that what we have seen in the past, given that you are now growing more on corporate and SME, which are usually more rate sensitive? And then I would like to clarify, what are the rate assumptions that are embedded in your Poland NII guidance, which is currently flattish? And then the last one is on provision. I know you just said that there is no reason to change cost of grace outlook, and you're not seeing any declaration, and you're for now quite comfortable, but obviously the situation is very fluid. Do you have overlay provisions available that could be used in the macro scenario to soften the impact of changing macro scenario? Thank you.

Okay. So in terms of provisions, we have our normal provisions, so to say, that come from the models. And then we have additional provisions exactly to... So we have what we call the overlays to cope with additional scenarios. these overlays are properly disclosed in our accounts and they are there exactly to cope with potential scenarios and they are allocated to industries that are most sensitive to the current risks, so to say. Right now the overlays are around 100, slightly above 100 million in Portugal and around 40 in Poland. That's the situation that we have right now for these overlays. But all in all, we think this is aligned. In terms of the stable NIA in Poland, as you've seen, I mean, in Poland, the reference interest rate decreased very materially to around 200 basis points. Right now, the forward interest rates in Poland are reasonably stable. And as I commented in the previous question, we typically give our guidance based on the forward interest rates. So the guidance that we gave was based on forward interest rates that are stable. This means that if this stability continues then to 2027, in 2027 we will start growing with volumes, in 2026 basically what we are expecting is that the volume growth will compensate this massive reduction in interest rates that happened in Poland.

Thank you. We'll now take the next question. This is from Luis Pratas from Autonomous Research. Please go ahead.

Good morning, everyone. Thank you for taking my questions. My first one is on the NIM in Portugal this quarter. I think there was a small pickup in NIM for quarter Q&Q. I wanted to ask you what was the driver for this, whether there was any change in the mix, edging, or something else?