1st Quarter Results

Banco Comercial Portugues S.A. 22 April 2002 FOR IMMEDIATE RELEASE 22 APRIL 2002 BANCO COMERCIAL PORTUGUES ('BCP') NET INCOME UP 4.6% TO EUR 167.6 MILLION IN THE FIRST QUARTER OF 2002 (Lisbon, April 22, 2002): Banco Comercial Portugues (BCP, NYSE: BPC, BCPPRA) today reported consolidated net income of Euro 167.6 million in the first quarter of 2002, up 4.6% from Eur 160.2 million in the same period of 2001. Return on equity stood at 31.2%, with return on assets being 1.1%. PROFITABILITY INDICATORS 1st Quarter 1st Quarter Change 2002 2001 2002/2001 Net income 167.58 160.22 4.6% (Millions of euros) ROE 31.2% 34.6% - ROA 1.1% 1.1% - 1.3% 1.2% - ROA before minority interests 'These results clearly reflect the success of BCP's domestic programme of operating rationalisation which we concluded in 2001, with revenue synergies now beginning to be visible amongst the Group's retail brands through the increase of the main business variables. Domestic activity, although affected by the evolution of credit risks and by significant changes to interest rates, was marked by revenue growth and decreasing costs, resulting in improved efficiency and so confirming the profitability potential of the Portuguese market, in which we are leaders', commented Mr. Jardim Goncalves, Chairman and CEO of BCP, adding: 'Our international activity also saw rapid expansion during the first quarter of 2002. The consolidation of BBG's profitability and the growth of NovaBank's business volumes and efficiency, in line with our plans for the Polish and the Greek markets, are worth noting. Profits from Eureko, which has a sound business base, recovered from last quarter and the company has demonstrated consistent activity growth'. Given the current economic framework, marked by the slowdown of production and by the poor performance of financial markets, BCP charged additional provisions for credit risks. However, this impact was compensated for by capital gains arising from the sale of premises, under the process of rationalisation of real-estate assigned to operations and of non-strategic assets. In this context, BCP also sold its shareholding in Mexico's Grupo Financiero Bital in March 2002, with a capital gain of Eur 312,000. The Bank's increased shareholding in NovaBank, on the one hand, and the fact that BCP became the majority shareholder of Banco Internacional de Mocambique after having merged it with Banco Comercial de Mocambique, on the other, led to the full consolidation of both these institutions from the end of 2001. As these interests were previously consolidated using the proportional method, we have produced pro forma financial statements for the first quarter of 2001, allowing a comparable basis with the figures now presented for the first three months of 2002. Consolidated net interest income amounted to Eur 333 million in the first quarter of 2002, roughly at the level of the same period of 2001, on a comparable basis. This has benefited from increased customers' funds and loans, and also from the Group's efforts to maintain interest margins in spite of decreasing market interest rates from September 2001. Other income increased, mainly as a consequence of increased cross-selling, particularly at the SottoMayor network, and reflecting also the benefits arising from a renewed commercial approach. Net commissions totalled Eur 125 million, up 4.9% from Eur 120 million for the first quarter of 2001, mainly influenced by the strong performance of income related to the Group's activities abroad and of investment banking fees. Trading gains, which amounted to Eur 44 million in the first quarter of 2002, compared to a pro forma of Eur 36 million in the same period of 2001, were 4.5% up from the quarterly average of 2001. Other net operating income was up 17.4% to Eur 80 million in the first quarter of 2002, excluding non-recurring items. This performance chiefly reflected increased revenue from investment banking services and recoveries of written-off loans. The non-recurring items amounted to Eur 42 million arising from the sale of premises assigned to operations to the pension fund, under the rationalisation of areas occupied by the Group's central services and the optimisation of capital allocation, that also led to an increase in the fund's assets, compensating for some of the impact of recent low returns on financial assets, that were considerably lower than historical rates. OTHER INCOME 1st Quarter 1st Quarter 2001 1st Quarter Change (Millions of euros) 2002 Pro forma 2001 2002/2001 Pro forma Net Commissions 125.5 119.6 118.4 4.9% Of which: - Domestic activity 114.8 109.2 109.2 5.2% Trading Gains 43.7 36.3 32.5 20.2% Of which: - Domestic activity 35.3 29.2 29.2 20.8% Other Net Operating Income (1) 79.7 67.9 67.9 17.4% Of which: - Domestic activity 76.4 64.6 64.6 18.3% Other Income /Total Income (1) - Total 46.6% 44.8% 44.5% - - Domestic activity 47.3% 45.2% 45.2% - (1) Excludes non-recurring transactions. Operating costs (staff costs, other administrative expenses and depreciation) amounted to Eur 355 million, increasing 2.9% on a comparable basis from Eur 345 million in the first three months of 2001, in spite of the impact of the growth of the Group's operations abroad. The Group's domestic efficiency indicators improved, as operating costs accounted for 52.7% of total income in the first quarter of 2001, down from 54.4% in the same period of 2001. The rationalisation measures the Group has implemented in the wake of its acquisitions in the domestic market had a particular impact on staff costs, which decreased by 3.5% to Eur 156 million in the first three months of 2002 from Eur 162 million in the first quarter of 2001. This performance fully reflects the impact of the staff resizing programme implemented following the acquisitions of Banco Mello and Banco Pinto & Sotto Mayor in 2000. Other administrative expenses and depreciation were influenced by the costs related to launching and developing businesses abroad, with NovaBank being worth noting. The impact of the network rationalisation and branch closure programme in 2000 and 2001 was fundamental to the evolution of domestic costs: other administrative expenses increased 4.5%, slower than business, while depreciation decreased by 1.4%. OPERATING COSTS 1st Quarter 1st Quarter 2001 1st Quarter Change (Millions of euros) 2002 Pro forma 2001 2002/2001 Pro forma Staff Costs 182.8 184.6 181.6 -1.0% Of which: - Domestic activity 156.2 161.8 161.8 -3.5% Other Administrative Expenses 131.4 120.8 117.9 8.8% Of which: - Domestic activity 110.4 105.6 105.6 4.5% Depreciation 41.0 39.9 37.6 2.9% Of which: - Domestic activity 31.5 32.0 32.0 -1.4% Operating Costs/ Total Income (1) - Total 57.1% 57.4% 56.8% - - Domestic activity 52.7% 54.4% 54.4% - (1) Excludes non-recurring transactions. Loans to customers totalled Eur 43,433 million at the end of March 2002, up 9.3% from Eur 39,731 million at March 31, 2001, on a comparable basis. The 13.8% increase in loans to individuals (in which mortgage loans, rising by 14.9%, stand out) was key to this growth, as loans to companies increased by 7.7%, reflecting the Group's strategy to decrease large exposures to some customers resulting from its acquisitions in 2000 and to focus on low risk customers. The performance of total customers' funds, up 7.4% to Eur 49,744 million at March 31, 2002 from Eur 46,302 million a year earlier, was influenced by the strong growth of capitalisation insurance and securities, reflecting the Group's effectiveness in bancassurance, particularly in placing unit-linked insurance products through the banking networks, and its success in creating and distributing structured products for the retail market. The success of the Group's new commercial model, based on units specialised by products for the banking networks, also contributed to this performance. ACTIVITY INDICATORS 31 Mar. 2002 31 Mar. 2001 31 Mar. 2001 Change 2002/2001 (Millions of euros) Pro forma Pro forma Total Assets (1) 62,053 60,755 62,532 2.1% Total Customers' Funds - Balance Sheet 28,773 27,591 27,138 4.3% - Assets under Management 10,570 10,193 10,193 3.7% - Capitalisation Insurance 5,835 5,060 5,060 15.3% - Securities 4,566 3,458 3,458 32.0% - Total 49,744 46,302 45,849 7.4% Loans to Customers (1) 43,433 39,731 39,629 9.3% Own Funds (2) 6,022 5,632 5,632 6.9% (1)Does not include securitised assets. (2)Shareholders' Equity, Preference Shares and Subordinated Debt. Loan quality at the end of March 2002 was similar to that at the end of 2001, although indicators worsened slightly from March 31, 2001. This evolution was mainly attributable to adverse economic conditions, as the Bank maintained very prudent criteria regarding analysis, granting, monitoring and recovery of credit. At the end of the first quarter of 2002, past due loans accounted for 1.7% of total loans, the same level as at the end of 2001, while its coverage by provisions amounted to 138.2% (146.3% at December 31, 2001). LOAN QUALITY INDICATORS (1) 31 Mar. 2002 31 Mar. 2001 31 Mar. 2001 Pro forma Total overdue loans/Total loans 1.7% 1.6% 1.5% Provisions/Total overdue loans 138.2% 152.5% 155.6% (1) Does not include securitised loans. Solvency indicators maintained adequate levels, roughly in line with the end of 2001. The Bank's capacity to generate profits, together with the careful management of risks, have led to a solvency ratio of 9.5% at the end of March 2002, according to BIS principles (9.4% at December 31, 2001), with tier one standing at 6.4%. In accordance with the ruling of the Bank of Portugal, the consolidated solvency ratio was 8.5% at the end of the first quarter of 2001. 'The sale of assets which we have undertaken during the first quarter was aimed at optimising BCP's assets and at further improving the management of our shareholdings and real-estate, in order to ensure an adequate stability of capital and to allow us to pursue domestic growth and develop our international operations, so accomplishing our goal of creating shareholder value', Mr. Jardim Goncalves concluded. For further information: Miguel Duarte Banco Comercial Portugues Tel: +35 121 321 1081 Toby Moore/Emma Pickford Citigate Dewe Rogerson Tel: +44 20 7638 9571 BANCO COMERCIAL PORTUGUES Consolidated Balance Sheet as at 31 March, 2002 and 2001 2002 2001 (Thousands of Euros) Assets Cash and deposits at central banks 1,180,476 910,809 Loans and advances to credit institutions Repayable on demand 854,864 1,198,821 Other loans and advances 4,571,228 6,769,340 Loans and advances to customers 43,432,703 41,293,882 Securities 4,378,962 5,735,588 Treasury stock 24,217 - Investments 2,686,713 2,467,898 Intangible assets 137,650 97,960 Tangible assets 1,184,873 1,244,887 Other debtors 1,079,834 887,763 Prepayments and accrued income 2,521,135 1,924,994 62,052,655 62,531,942 Liabilities Amounts owed to credit institutions Repayable on demand 470,078 490,592 With agreed maturity date 11,892,625 17,265,428 Amounts owed to customers Repayable on demand 11,624,789 10,601,817 With agreed maturity date 17,138,905 16,526,124 Debt securities 11,566,872 9,045,978 Other liabilities 1,068,631 383,482 Accruals and deferred income 1,237,110 1,624,541 Provision for liabilities and charges 890,649 913,774 Subordinated debt 2,827,802 1,964,526 Total Liabilities 58,717,461 58,816,262 Shareholders' Equity Share capital 2,326,715 2,269,688 Share premium 715,117 716,083 Reserves and retained earnings (1,073,800) (542,669) Total Shareholders' Equity 1,968,032 2,443,102 Minority interests 141,035 48,482 Minority interests in preference shares 1,226,127 1,224,096 Total Minority Interests 1,367,162 1,272,578 62,052,655 62,531,942 BANCO COMERCIAL PORTUGUES Consolidated Statement of Income for the three months ended 31 March, 2002 and 2001 2002 2001 (Thousands of Euros) Interest income 753,787 851,985 Interest expense 421,076 522,912 Net interest income 332,711 329,073 Provision for loan losses 92,150 50,455 Net interest income after provision for loan 240,561 278,618 losses Other operating income Income from securities 41,102 45,547 Commissions 146,802 138,588 Profit arising from trading activity 88,063 124,679 Other income 137,882 83,677 413,840 392,491 Other operating expenses Commissions 21,320 20,230 Losses arising from trading activity 44,378 92,135 Staff costs 182,810 181,572 Other administrative costs 131,446 117,915 Depreciation 41,015 37,603 Other provisions 851 222 Other expenses 16,100 15,799 437,920 465,476 Income before income taxes 216,490 205,633 Income taxes (22,521) (21,355) Net income 193,969 184,278 Minority interests (26,392) (24,058) Net income for the period attributable to the Bank 167,577 160,220 This information is provided by RNS The company news service from the London Stock Exchange
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