Banco Comercail Unsp/Adr

Good day and thank you for standing by. Welcome to the Millennium BCP 9-month 2026 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 have the conference over to your speaker, Mr. Miguel Maya, Chairman and CEO. Please go ahead.

Good afternoon, Miguel Maya speaking. Welcome and thank you very much for attending this conference call. I will begin with the highlights of our performance, which will be followed by Miguel Braganca, who will provide additional details. We have been witnessing a challenging global environment shaped by geopolitical tensions. whose effects are visible across several domains. The Portuguese and Polish economies have continued to show good fundamentals, with economic growth being supported by domestic demand. Mozambique continues to recover from the downturn in late 2024, with growing prospects of a support program with the IMF. Resilient economic activity and higher inflation have led to changing expectations regarding the path of interest rates. Despite this volatile environment, in the first nine months of 2026, the group delivered a strong set of results. Net income reached 873.7 million euros, a 12.6% year-on-year increase, showing the bank's ability to generate value supported by a robust franchise. In Portugal, we achieved a net income of R$ 727.9 million, up 11.2%, further reinforcing the positive profitability trend observed in previous quarters. Core income grew 5.7%, driven by robust net interest income and commissions. Disciplined cost management continues to deliver results, while enabling sustained investment in digital transformation and technology. This solid financial performance is underpinned by prudent balance sheet management and resilient asset quality in a rising interest rates environment. Net income from international operations increased by 21.8%, reaching R$ 281 million in the first nine months, compared with R$ 230.7 million in the same period of 2025. We highlight that Banco Millennium recorded a net income of R$ 259.7 million 29.6% increase. This performance largely reflects the material reduction in charges associated with FX denominated mortgage portfolio, as Swiss francs related litigation is in a clear downward path. The strategic importance of Banco Millennium for BCP is evident, with loans growing by 10.2% and customer funds by 11.9%. Capital ratios remain above regulatory requirements, with a CE Tier 1 ratio of 13.7%. In Moçambique, Millenium BIM results were influenced by the context. Adjusted for non-recurring items, net income rose by 16.8% to 73.6 million euros, with customer funds up 13% and lending increasing by 12.2%. Overall, Millennium BIM is well-positioned to capture the opportunities arising from the major energy-related projects, supported by a strong capital position with a capital ratio of 40.7%. The resilience of BCP business models is also reflected in robust capital ratios, comfortably above regulatory requirements, with a common equity ratio of 15.2% and a total capital ratio of 20%. On a pro forma basis, that is, if no distribution was considered, the common equity ratio would be 16.9%. The group continues to run a strong liquidity position. Liquidity indicator remains significantly above regulatory requirements, with the liquidity coverage ratio at 330, net stable funding ratio at 180, and the loan to deposit ratios at 70%. Assets eligible for ECB funding amounted to 30.4 billion. The strength of our franchise is also visible across key indicators at group level. Customer loans grew by 7.8% year-on-year to 66.2 billion, while total customer funds increased by 7.1% to 116.3 billion. In Portugal, customer loans rose by 7.8% and total customer funds by 5.8%. At Banco Milenio, corporate lending grew by 24.5%. Asset quality continues to improve, with groups NPEs declining by 157 million and leading to an NP ratio of 2.2%. The cost of risk reflects this positive trend, standing at 34 basis points from the group and 32 basis points in Portugal. Active customers increased by 4% year-on-year to 7.5 million, while mobile customers grew by 8% and represent 76% of the active customers base. This performance underscores the strength of the group's business model across all its operations. Milenio BCP remains a preferred bank and important distinctions continue to be awarded, including the Consumer Choice Award from the sixth consecutive year in Portugal and the recognition of a new corporate website as a product of the year. The expansion of our customer base also reflects the confidence placed in our teams and in our digital capabilities. A growing number of our customers acknowledge the ease of use and read of our digital proposition, with digital customers increasing by 7% and now accounting for 82% of active customers. Our innovative mobile platforms continue to deliver an outstanding digital journey, translating into sustained growth in customer interactions and sales. The Millenio app recorded 1.7 million logins every day, a 7% increase, with customers accessing the app on average 33 times per month. The value generation from our digital capabilities has been remarkable, with sales through the app growing by 6%, credit card sales increasing by 45%, and a 28% rise in personal loans origination. Transactions increased by 10%, with international transfers expanding by 52%. Digital penetration rates also demonstrate strong usage of the app across multiple areas. In Portugal, measured by number of operations, 98% of stock market transactions, 89% of savings product subscriptions and 76% of both investment fund subscriptions and personal loans are now carried out through the digital channels. In Margaret's Landing, we continue to simplify and digitize the entire journey, turning it even more seamless. Digital adoption is progressing steadily, with 89% of approval letters being digitally signed and 37% of need appointments booked online. Overall, BCP continues to deliver strong results, adding confidence to the performance trajectory envisaged under our strategic plan. Subject to the usual disclaimers, namely the uncertain macroeconomic and financial environment we may face, we are updating the estimate for our strategic targets for 2028 which Miguel Braganca will detail later in the presentation. But I would like to highlight a part of the revision of the cumulative net income to a range of 475 to 525 billion euros and under the shareholder remuneration policy and subject to the defined conditions we estimate the cumulative distribution in the range of 4 to 4.5 billion euros which has an underlying ROE equal to or above 70.5%. We remain confident BCP is well placed to deliver value to all its stakeholders. Miguel, floor is yours.

As you see here in page 8, a very healthy evolution of the income statement with the core income growing 5.7% in consolidated terms and the operating costs 5.3% so positive jaws which generate a core operating profit of 5.9% in terms of growth. The profit before impermanent provisions grows 6.3% and the profit before tax more than 20% to a larger extent with the contribution of the decrease in the legal risk provisions in Poland as anticipated. In terms of the numbers which we are proud to present, we are here presenting a book value per share plus dividend per share growth of 15.4%, an ROE around 14.9%. Of course, the ROT is around 50 basis points higher, as you see here in the graph. In terms of the NII, an acceleration of the NII in Portugal, to some extent due to the lagging effects of the interest rate increase. So as you know, the average interest rate in terms of our stock last year was still suffering, so to say, from a much lower interest rate. There has also been some discipline in terms of the pricing of the deposits in Portugal. So we are here presenting a growth in terms of NII of 13.9. What we are expecting is for this year to have here a growth in the mid-teens area as we are now, but also for next year, absent a major disruption, we are also expecting a mid-teens growth in terms of the NAI in Portugal. In terms of the international operations, as you see, the evolution of the interest rate in Poland is helping us, so after some decrease there is a stability and as you know even the foreign rates are up for sloping. This quarter already with a substantial increase vis-à-vis the past quarter and what we do expect, as referred in previous presentations, is to end the year with a positive evolution in terms of the NII in Poland. Fees and commission stability. 5% growth with the contribution of both the market related fees and banking fees in the several geographies growing somewhat higher rate in Poland where we still are punching below our weight in terms of fees and commissions so there is still some Some upside there when we compare ourselves with our competitors, but also a very healthy evolution in Portugal, mainly when you compare with our competitors of around 4%. And I would here highlight the contribution both of transactional fees and of fees of investment and bank assurance. Other operating income. An important evolution in year on year. It's important also to state that we have here some extraordinary gains. Last year we had here a recovery of an additional tax that was judged unconstitutional. This year we also have been benefiting from some capital gains On some legacy assets that we had recovered and and once because they were well provided once we sold them we we made here more than 30 million euros of of of capital gains in the in the in the full year so we are having here a positive a positive evolution in in spite of of the extraordinaries of of last year because of the extraordinaries of the of this year in terms of operating costs A cost to income of 36%, a very, I would say, disciplined cost growth on the mid-single digits, as we had anticipated, with a 5.8% cost growth in Portugal, which leads to a cost to income of 33%, which is an important benchmark cost to income when you compare ourselves with other European competitors, and in international operations, a 4.8% growth, and a cost of income around 40% or 41% in the international operations. Cost of risk very contained, a slight increase in consolidated terms, in Portugal a decrease of one basis point, in consolidated terms a slight increase, both linked to The sovereign debt in Mozambique and also in the quarter, more in the quarter, We have not had any loan sales and typically in Poland when we have loan sales the cost of risk benefits from it because our proven provisioning policy leads to capital gains once we sell the portfolio. So this quarter we have not had it so there is some variability in terms of cost of risk but I would say very contained all in all. The NPE is continuing to decrease. It's important to state here that we are reaching a level where we will have some volatility in terms of these NPEs according to the cycle. So we are already with a low NPE ratio. So considering the EVA ratio, for instance, in Portugal, we already have an NPE ratio of 1.2%. So it's already so low that if there is a A credit that defaults or if there is a credit that gets recovered. Of course, when the value of the NP ratio is low, one has to anticipate that it will be more volatile than in the past where there was only a downward trend. So we are not expecting here any trend increase, but we are expecting, as time goes by, just because of the sheer size of the number, some volatility around those numbers. In terms of the international operations, I would like to highlight the decrease in terms of the NPE loans ratio and the EVA ratio has gone down from 1.9 to 1.6%. In terms of the business activity, importantly, so very healthy. Both in terms of clients and in terms of customer funds. So, year-on-year, a 7.1% increase. In Portugal, a growth of 5.8%. I would like to highlight that this growth is a healthy growth, but it's affected by two factors. So, the off-balance sheet products and off-balance sheet funds, of course, are affected by the mark-to-market. And we have some demand deposits, that are, so to say, hedged and once they are hedged there is also a mark to market in terms of the demand deposit hedges. These are on one hand. On the other hand, Q3 is typically a not so good quarter in terms of customer funding increase. So Q2 and Q4 are typically, there is some seasonality In terms of customer funds, because of the holiday season and so on, so once you compare it quarter on quarter one has to adjust also for seasonality. In terms of the international operations, also a healthy growth. I would here also like to highlight that in Poland, and this also explains the margin improvement in Poland, we are making here an effort to increase somewhat the savings and the projects and in Q3 the volumes in Poland in terms of customer funds were less I would say the volume growth was less exciting than in previous quarters because we are rebalancing so to say our objectives in terms of margin and customer funds goals but all in all in the international operations almost growing 10% which is very positive year on year the quarter as I was commenting affected by these factors. Loan portfolio Healthy Loan Portfolio with almost 8% growth, 7.5% in mortgages, 8.4% in terms of companies. These 7.8% more or less reflecting the same rate in Portugal in international operations, in one case 7.8%, in another case 7.9%, with more growth in Portugal in terms of companies than we had in previous quarters, which is good, so a quarter-on-quarter growth of companies in Portugal that is That is much higher than in previous quarters. And in Poland, still a year-on-year growth that is above 20%. But all in all, there were some large deals that matured in Q3. So the growth in the quarters, so the quarter-on-quarter growth in Poland, was not so large than in previous quarters, but still, I mean, we feel comfortable with this growth slightly above 30% that we are presenting now also in Poland. In terms of capital, 15.2% Comercail Q1 ratio with an evolution that is very much aligned with the factors that I have here present in the past. I will elaborate a little bit on it. and then the leverage ratio also at around 6.1% so comfortable above the minimum. In page 22 here the waterfall of the of capital it's important to see exactly what's what's going on so you see that in terms of the capital generation before distribution of 68 basis points broadly aligned with the guidance that we have been giving between 55 and 65, 70 basis points per quarter, so to say in terms of P&L. Of course then a part of it gets distributed to shareholders and here we have also included in these 64 basis points the 81 coupons as dividends, so basically because of our very ambitious Distribution Policy, of course, the P&L as it gets distributed does not contribute to an increase in the capital ratio. On the contrary, because the whole logic of the plan that we have presented and that was approved to you was a smooth landing of the capital ratio to a ratio that is closer to what we deem as our comparables. Some small impact of the of the considering mainly the magnitude of the changes in the market of the AFS reserves. As you know, we have a sovereign debt portfolio. Most of our sovereign debt is in our hold to collect portfolio. This is a small part. or a smaller part that is in the farewell through OCI. Of course, this has an impact in terms of capital, but please consider the small impact that ETS has considering the magnitudes of the price changes in the market. So this clearly shows the prudence of our policy. As I had told before, we were not sure whether we would be able to approve To implement and approve the securitization that we were doing in Portugal of around 30 basis points, we were able to do it inclusive. We were able to enlarge somewhat the size of the portfolio, so this has contributed with a 31 basis points increase. There is another transaction. that has already been announced to the market in Poland that has already been implemented but is in the process of approval that will contribute, if approved as it surely will be, with 15 basis points more and of course there is then the RWA evolution, the healthy credit growth That typically has an impact of around 20 to 25 in this quarter, 18. So this is the normal evolution. So what we have to expect going forward is exactly this evolution in terms of P&L and distribution of this between, I would say, 55 and 65 capital generation. And in terms of RWA, I would say between 18 and 20 basis points of RWA increased due to the business evolution. The EFS reserves are particularly hard to predict, but they can vary in this order of magnitude depending on the evolution of the market. Our MREL position as you see in page 23 very very comfortable with a 33.4% ratio comparing with MREL requirement plus CBR of 29.5, so nothing to write home about. Our funding plan being executed with everything according to plan, so also no worries here. As you may see, we have had access to the market in very reasonable conditions, as we also continue to have. The liquidity ratios at very high levels, with eligible assets above 30 billion euros and with net loans to deposit of around 70%, so a slight increase aligned with what we want to be. As we have done when we presented the strategic plan and in order to allow more time for questions, I will not go into the detail of Portugal and the international operations. You have here the data and most of the information has been handed to you and, of course, We are always available to discuss and to provide further information if you so ask. But I will go directly here to the update of our estimations here in page 46. I'm sorry, in page 46. As you know, in the end of 24, October of 24, we have presented a plan called Deliver More Value that was a plan A four year plan from 25 until 28. We are in the middle of the plan. In terms of the plan that I'm presenting here in page 47, the main levers of the plan are absolutely valid. The main priorities of the plan are absolutely valid. So we are in implementation mode. We are not changing the plan. And what we want to be, just to remind you, is what we already are and want to maintain. To be the best relationship bank with the best experience with human and digital enables for families and companies in Portugal. It's easy to say more difficult to execute, but our difference is in exactly these capabilities of executing. We have a digital bank that leads in terms of customer acquisition of affluent and affluent-to-be customers in Portugal. So this bank has already more than a fourth of our clients in Portugal, which is very, very important. In Poland we are a challenger bank and we want to be the reference bank for primary relationships, not only individuals but also in the SME market. So this is the clear change that we are implementing and that is a product of the plan. In Mozambique we also want to be perceived by families, companies and international companies as the bank with the strongest controls, as the most reliable bank, the most controlled bank. And that's the way we want to differentiate ourselves in Mozambique. In page 48, you see here the targets which we have committed in the market, four year targets, 4 billion in terms of gate to companies, 2 billion in terms of company stock, these are the targets for Portugal. And even before, I mean, there was so much emphasis in AI and data, we were already focusing in terms of data, AI, even before all these sensitivity To the cyber risk, we were clearly strengthening all the resilience and the cyber resilience of the bank. Of course, this is only possible to do with talent management and with a clear focus in having and developing the best people. We have also presented a lot of initiatives keeping the leadership in customer acquisition very important. We are clearly one of the leading banks in terms of customer acquisition but also being a benchmark bank in terms of privacy and with the development not only for companies but also for the first bank entrepreneurs and micro business and all of these with a very differentiated customer experience. We do believe that mainly in this AI age, what will make us different in all the geographies in which we are, including of course Portugal and Poland, is customer experience. This seems a little bit abstract, but it's not. We clearly want to be, and we are already the best bank in terms of daily banking, in terms of all the needs that the customers have on their Daily operations or daily banking, be it digital in the app or in the branch, that's where we want to distinguish ourselves and we expect that the customer will reward us for this transparency and for this no nuisance experience going forward. In Mozambique we also have an ambition of preparing our bank for the future. In page 51, on the left hand side, we recall what were the values that we have presented to you at the end of 24 and what are our estimations right now. So what we said at the time between 25 and 28 we were expecting a cumulative net income generation of 4 to 4.5 billion and now what we are saying is that already with of course two years past that in this period what we are expecting is a cumulative net income between 475 and 575 so around 750 million more cumulative net income in the period At the time we had presented to you and I want to remind that we were coming from periods of almost no distribution to shareholders of up to 75 percent of of payout to shareholders in the meantime and we have done this last year as you may recall we have changed our dividend and distribution policy so as to have here a smooth landing a convergence to to optimal capital ratios and we have we have been quite innovative in terms of giving you the transparency of saying that depending On the CT1 ratio before distributions so we will have a maximum distribution to shareholders and depending exactly on where we stand at year end we will distribute 90%, 80%, 75% and you know clearly in principle what are the maxima that we are targeting. If we multiply these values with the cumulative net income, what we are saying is that this will mean a 4 to 4.5 billion distribution, which means, if you use the numbers, that we are increasing the distribution by 1 billion. So what we are saying here is that in principle, I mean of course there are still two years missing, but in principle what we are saying here is that we will distribute one billion more to our shareholders than what we were saying in 24. In page 52 we have here exactly where we stand in the nine months of 26. What were the targets for 28? And where do we expect to land? I want to say very clearly that mainly when we speak here about the CT1 ratio, about other values or about the cost of risk, these are not targets. These are best estimations on where we expect to land. So we are not changing our, just for the sake of example, our target capital ratio. We think that the banks such as us may operate above 13.5% in terms of CQ1 ratio. What we are saying is that considering our dividend policy, considering our dividend policy and considering the way that we think the bank will evolve by 2028, our best estimation In terms here of business volumes, clearly larger business volumes, so we are speaking here about more 10 billion of business volumes than what we were expecting in 2028. In terms of customers, and mobile customers. We already had a very, very ambitious plan. We are targeting probably more value-added customers. We are not reviewing upwards our expectations because they were already very, very ambitious at the time. In terms of cost to income, we were, based on our projections, expecting to get to cost to income slightly below 40% and slightly below 37%. In Portugal, what we are now targeting is our Cost to Income at or below 37% in international terms and broadly maintenance of the Cost to Income at or below 34% where we are at 33%, so very, very aligned. In terms of cost of risk, in spite of the challenges in the world and in spite of the fact that there are some seeds of, I would say, of risk or additional seeds of risk in the world, because when we were doing the plan, I want to remind you, I mean, all of us were concerned with also the possible tariff war, Disruption in value chains and so on. And we are seeing that the economies in which we are in have been proving much more resilient than we were expecting when we did the plan. So this better resilience allows us to review the estimations in terms of cost of risk so that in Portugal we are expecting a cost of risk at or below 35 basis points. Of course, this is an expectation, it's not a commitment. We all know that we are in a very uncertain world, but as of today, our best expectation for Portugal is around 35 basis points, slightly below 35 basis points in terms of cost of risk. CT1 ratio. I mean, there are different policies in terms of CT1 ratios. There are some banks that basically distribute everything that they have above a certain threshold, that they distribute all what they expect to be the excess capital at once and then to have a very stable, I would say, payout ratio. It is not the policy that we have presented to you. The policy that we have presented to you is a policy of a smooth landing, of a prudence in terms of distributing, converging to a ratio that will be above 13.5, but it will not be immediate, so to say. And as of today, by the end of 2028, i.e. within two years, what we expect is to be at or slightly above the 14.25. So clearly above our target, but we are not changing our target because we think that our business model is totally consistent with this target. In terms of ROE, we are also reviewing upwards our target. A part of this, of course, is a consequence of the cost of income, of the cost of risk, of management. A part of it is also based on the interest rate environment. And of course, what we typically do is that we use in our estimations The forward rates in terms of interest rate environment and interest rate projections. So when we say that these are updated 28 estimates, it's based on the forward rates. So based on the current forward rates, we expect our ROE to be at or above 70.5 and our ROTE around 50 basis points higher than that. So of course, if tomorrow there is a A large recession that, for whatever reason, makes the interest rates go down dramatically, of course, the values will change. This is not, I would say, this is not the target, this is a projection, this is an estimation, as we have told you. And in terms of shareholder distribution, we are maintaining exactly what we had told you before, that based on the CET1 ratio before distributions, we will be able to distribute up to 90%, but we will be very transparently making this in terms of a formula. As you know, Miguel Maya just told you that our CET1 before distributions right now is around 16.9, You can model yourself what is the evolution in terms of RWAs and in terms of P&L until the year end and what you can see is that if the risk environment stays more or less as it is right now and if you reach a ratio that is above 17.5, the maximum that you will distribute is 90%. If it's below 17.5, it will be, I mean, But close to it will be 80%. But all in all, a very, I would say, generous distribution policy so as to converge to the best practices in the market. And I hope this gives you the view that you were expecting. And of course, as a bank, we are committed to developing people and to the society and recognition. And in the appendixes also, you have much more, very rich information that we can then elaborate on. Thank you very much for your time. We are now available for the Q&A session.