Banco Espirito Santo 1H2005 Consolidated Results (Unaudited).LISBON Lisbon (lĭz`bən), Port. Lisboa, ancient Olisipo, city (1991 pop. 677,790), W Portugal, capital of Portugal and of Lisboa dist., on the Tagus River where it broadens to enter the Atlantic Ocean. , Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the -- Banco Espirito Santo Santo, New Hebrides: see Espíritu Santo. (BES; Bloomberg Bloomberg A major global provider of 24-hour financial news and information including real-time and historic price data, financials data, trading news and analyst coverage, as well as general news and sports. BESNN PL; Reuters Reuters British cooperative news agency. Founded in 1851 by Paul Julius Reuter, it was initially concerned with commercial news but began to serve a growing newspaper clientele after the London Morning Advertiser subscribed in 1858. BESN.IN) today announced its 1H2005 results. HIGHLIGHTS --Net income (IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System ) rose to euro 149.0 million in the first half of 2005, up by 13.0% from the first half of 2004 results (PABS - Portuguese accounts for the banking system), which corresponds to ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. of 13.6%. 2004 first half results under IFRS stood at euro 74 million, penalised by pension costs. --Banking income grew by 2.6%, subdued sub·due tr.v. sub·dued, sub·du·ing, sub·dues 1. To conquer and subjugate; vanquish. See Synonyms at defeat. 2. To quiet or bring under control by physical force or persuasion; make tractable. 3. by poor economic activity, low interest rates, capital markets and aggressive competition with direct impact on net interest income and commissioning. --Operating costs dropped by 6.3%, pulled by decrease of pension costs and significant reduction in depreciation. Productivity and efficiency continue to reflect a consistent improvement trend. --Sound business growth: customer loans, including securitisation, increased by 9.8% whereas total customer funds grew 5.0% pushed by off --balance sheet products (+17.5%). --Clearly positive Assurfinance results, namely in the new product called "T-Card": 12 000 new clients acquired; mortgage production represents 15% of total BES new mortgage production; the number of cards issued reached 15 000. --Credit provision reinforcement reinforcement /re·in·force·ment/ (-in-fors´ment) in behavioral science, the presentation of a stimulus following a response that increases the frequency of subsequent responses, whether positive to desirable events, or policy has been maintained, improving the overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. loans coverage ratio (over 90 days) to 181.1% (156.1% in June June: see month. 2004). --Significant gains in the main equity exposures in the available for sale portfolio, which unrealised capital gains reached euro 128.1 million as of 30 June 2005 (euro 48.2 million in March 2005). --Bes Group received several awards in the Investor Relations Investor relations The process by which the corporation communicates with its investors. area, from which we highlight the following: Best Annual Report among the Financial Institutions, Best Corporate Governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. Information, Best Financial Institution in Research.
INDEX
1. Foreword on the new regulatory framework
2. Economic overview
3. Results
3.1 Net interest income
3.2 Fees and commissions
3.3 Capital markets results and other
3.4 Operating costs
4. Activity summary
5. Asset quality, provisioning and solvency
6. Productivity
7. Profitability
8. Bank of Portugal reference indicators
9. Direct banking and other
1. FOREWORD fore·word n. A preface or an introductory note, as for a book, especially by a person other than the author. foreword Noun an introductory statement to a book Noun 1. ON THE NEW REGULATORY FRAMEWORK The Regulation (EC) 1606/2002 of 19 July July: see month. , 2002 of the European Parliament European Parliament, a branch of the governing body of the European Union (EU). It convenes on a monthly basis in Strasbourg, France; most meetings of the separate parliamentary committees are held in Brussels, Belgium, and its Secretariat is located in Luxembourg. and of the Council defines that companies with securities listed on a regulated market A regulated market is the provision of goods or services that is regulated by a government appointed body. The regulation may cover the terms and conditions of supplying the goods and services and in particular the price allowed to be charged. of any Member State should prepare their consolidated accounts for each financial year starting 1 January January: see month. 2005, and thereafter, under the International Financial Reporting Standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). (IFRS), also known as the International Accounting Standards (IAS See iPlanet Application Server. 1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle. ). When this regulation was transposed trans·pose v. trans·posed, trans·pos·ing, trans·pos·es v.tr. 1. To reverse or transfer the order or place of; interchange. 2. into the Portuguese legislation, the Bank of Portugal issued the Notice N. 1/2005 that established the standards and reporting model for the institutions subject to its supervision. Given that BES is subject to these rules, the 2005 full year and interim financial statements were prepared under the IFRS. Furthermore, and due to this change in the accounting regulations, BES Group's 2005 financial statements (prepared under the IFRS/IAS) are not directly comparable with the financial statements disclosed in 2004, which had been prepared under the (Portuguese) Plan of Accounts for the Banking System (PABS), as defined by instruction N. 4/96 and N. 71/96 from the Bank of Portugal. Therefore, in order to make the financial statements comparable, and in line with the recommendations of the Committee of European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Securities Regulators (CESR CESR Committee of European Securities Regulators CESR Center for Economic and Social Rights CESR Centre d'Etude Spatiale des Rayonnements CESR Cornell Electron Storage Ring CESR Corporate Environmental and Social Responsibility ) and the Portuguese Securities Market Commission The Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários), also known by its initials CMVM, was established in April 1991 with the task of supervising and regulating securities and other financial instruments markets (traditionally known (CMVM CMVM Comissão do Mercado de Valores Mobiliários (Portugal) CMVM Comissão de Mercado de Valores Mobiliários ), the BES Group has restated its 2004 financial statements applying IAS/IFRS, except IAS 32 and IAS 39 application, as allowed by IFRS 1. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the Instruction N. 23/2004 from the Bank of Portugal, the individual accounts and only the individual accounts, are to be prepared under the Adjusted Accounting Standards (AAS) from 2005 onwards on·ward adj. Moving or tending forward. adv. also on·wards In a direction or toward a position that is ahead in space or time; forward. Adv. 1. . The AAS framework is similar to the IAS/IFRS, except on the following issues: --maintains the old method for valuation and provisioning of loans granted; --defers the accounting adjustment arising from recognition of certain liabilities related to retirement pensions and post-retirement health benefits; --does not allow fair value application to tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. . 2. ECONOMIC OVERVIEW World economic forecasts were reviewed downwards during the first half of 2005, generalising the expectation of an activity slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Asia as from the second half of the year.
This was in part due to the persistently high levels of oil prices -
Brent Brent, outer borough (1991 pop. 226,100) of Greater London, SE England. The area is a rail and industrial center. Its manufactures include automobile parts, clocks and watches, and electrical equipment. barrel price jumped by 36.3% in the first six months of the year
to USD USDIn currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 54.85 - as well as to the rise in the US reference rates, and its medium term potential subduing effect on the North-American and global economies. Thus, the main US stock market indices Commonly used stock market indices include: Global Large companies not ordered by any nation or type of business (in alphabetical order).
the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202] See : Finance and S&P 500 indices were down by 4.71% and 1.7% respectively. Despite the fall in the economic agents' confidence levels, the US economy maintained a favourable performance, with positive signs in labour and housing markets. Nevertheless, European stock markets rose, driven by interest rates at historically low levels (BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. refi rate at 2%) and the euro's downward trend against the dollar (-10.78% in 1H05, to EUR/USD 1.2094, with potential benefits for the export sector). Hence the Paris CAC See Consumer Advisory Council. 40 is up by 10.68%, the Frankfurt DAX - by 7.76% and the Madrid IBEX ibex (ī`bĕks), wild goat, genus Capra, found in rugged country on mountain ranges from central Asia to the Himalayas, S Europe, and NE Africa. 35 - by 7.74%. Portugal's PSI20 fell by 1.18%. In the Euro Area, economic activity is thought to have cooled, with GDP GDP (guanosine diphosphate): see guanine. levels going from 0.5% in Q1 to 0.3% in Q2. No signs of inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. pressures, given the current situation marked by corporate restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). efforts and high levels of unemployment translating into a continuous deceleration deceleration /de·cel·er·a·tion/ (de-sel?er-a´shun) decrease in rate or speed. early deceleration of labour costs. In Portugal, the real GDP Real GDP This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP". growth in H1 was close to zero, reflecting the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. trend in economic activity (particularly visible in industrial production and residential housing indices). Consumer confidence levels dropped sharply in June, interrupting the recovery observed earlier in 2005. 3. RESULTS 2005 first half net income totalled euro 149.0 million, compared to euro 131.8 million in the first half of 2004, under the accounting regulations in force at the time (PABS) and euro 74.0 million, under the IFRS(1). Please note that the 2004 year-end results, restated under IFRS, were negatively influenced by disability retirement costs that occurred during that year. The table below shows the income statement for 2005 first half along with the 2004 comparative data:
Income Statement
Euro million
----------------------------------------------------------------------
June D%
------------------------------------
2004 2004 2005
PABS IFRS IFRS IFRS
----------------------------------------------------------------------
Net Interest Income 352.134 9.53 45.7 -1.1
(+)Fees and Commissions 275.927 5.92 55.4 -7.4
(=)Commercial Banking Income 628.0 625.4 601.1 -3.9
(+)Trading and Other Results 93.0 75.2 118.0 56.9
(=)Banking Income 721.0 700.6 719.1 2.6
(-)Operating Costs 363.742 9.64 02.6 -6.3
(=)Gross Results 357.3 271.0 316.5 16.8
(-)Net Provisions 179.515 5.51 46.1 -6.0
Credit 131.813 1.81 20.5 -8.6
Securities 6.0 6.0 17.9 198.3
Other 41.7 17.7 7.7 -56.5
(=)Income before Taxes
and Minorities 177.8 115.5 170.4 47.5
(-)Taxes 24.5 26.2 19.4 -26.0
(=)Income after Taxes 153.3 89.3 151.0 69.1
(-)Minority Interests 21.5 15.3 2.0 -86.9
(=)Net Income 131.8 74.0 149.0 101.4
----------------------------------------------------------------------
(1)IAS 32 and 39 were not applied in 2004, based on IFRS 1.
3.1 Net Interest Income Net interest income, at euro 345.7 million, reflecting a YoY drop of 1.1%. The first half of the year continued to feature the same external constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. that have been negatively influencing the progress of net interest income, namely pressure on credit products spreads, particularly in lower risk segments, and the continuing very low level of euro interest rates, hampering the profitability of funds. These adverse factors were to some extent offset by the positive impact of business growth, namely in loans that grew 9.8% (including securitised loans) YoY. IFRS has brought yet another constraint Constraint A restriction on the natural degrees of freedom of a system. If n and m are the numbers of the natural and actual degrees of freedom, the difference n - m is the number of constraints. , introducing more restrictive criteria for hedging policies definition. This obliged o·blige v. o·bliged, o·blig·ing, o·blig·es v.tr. 1. To constrain by physical, legal, social, or moral means. 2. , as from 1 January 2005, to reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you part of the derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. transactions from the hedging portfolio to the trading portfolio, which means that the corresponding results were recognised as results from financial operations instead of net interest income. 3.2 Fees and Commissions The performance of fees and commissions in the first half of the year has been conditioned by the volatile nature of investment banking activities and the adverse effects of fierce competition backed by aggressive promotion of sharp price reductions and even free services (O.Eng. Law) such feudal services as were not unbecoming the character of a soldier or a freemen to perform; as, to serve under his lord in war, to pay a sum of money, etc. See also: Free . Furthermore, the introduction of IFRS has lead to accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of fees of commissions.
Fees and Commissions
Euro million
----------------------------------------------------------------------
June
--------------
2004 2005
IFRS IFRS D%
----------------------------------------------------------------------
Fees and Commissions based on applicable rules 275.9 255.4 -7.4
Investment Banking Effect (37.4) (24.1) -
Deferred Commissions effect (10.6) - -
----------------------------------------------------------------------
Comparable Fees and Commissions 227.9 231.3 1.5
----------------------------------------------------------------------
BES Group Fees and Commissions went up by 1.5% on a comparable basis (i.e. with accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and investment banking activity effects). 3.3 Capital markets results and other IFRS adoption has introduced significant changes to trading results analysis: --New classification of securities portfolios, that are now subject to the fair value revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. principle (market price or fair value), with potential impact on the income statement or equity; and --More restrictive criteria in hedging policies definition, specifically when more volatile instruments such as derivatives are used. Capital markets and other results reached euro 118.0 million in 2005 first half. As in the past, these results were based diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of market risk. In the second quarter of 2005 we have increased emphasis on emerging markets trading, with a special focus on Latin American countries List of American countries Nations:
The flattening, ellipticity, or oblateness of an oblate spheroid is the "squashing" of the spheroid's pole, down towards its equator. yield curves of European and US markets as well as the negative performance of the domestic market. 3.4 Operating costs operating costs npl → gastos mpl operacionales Operating costs reached euro 402.6 million in the first half of 2005, corresponding to a YoY drop of 6.3%. The cost reduction has been underpinned by lower investment, translating into a 20.4% drop in amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. and depreciation, as well as by lower pension costs, which in 2004 were influenced by disability retirement costs.
Operating Costs
Euro million
----------------------------------------------------------------------
June
------------------------- D%
2004 2004 2005 IFRS
PABS IFRS IFRS
----------------------------------------------------------------------
Staff Costs 161.7 236.5 202.6 -14.2
Salaries 148.6 171.1 175.8 2.7
Pensions 13.1 65.4 26.8 -58.9
Other Admin Expenses 136.3 142.6 159.8 12.1
Depreciation and Amortisation 65.7 50.5 40.2 -20.4
----------------------------------------------------------------------
Operating Costs 363.7 429.6 402.6 -6.3
----------------------------------------------------------------------
Staff costs, driven by the annual salary increases and promotions, went up by 2.7%. These costs already include the accrual of employee bonuses, which will naturally be subject to adjustments during the year. General administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , though slowing down when compared to Q1, rose by 12.1% (14% in Q1). The cost of information and operative OPERATIVE. A workman; one employed to perform labor for another. 2. This word is used in the bankrupt law of 19th August, 1841, s. 5, which directs that any person who shall have performed any labor as an operative in the service of any bankrupt shall be systems changes due to Basel II Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations compliance projects as well as adaptation to the introduction of the IFRS totalled euro 12 million. A further euro 2.1 million was spent on promotion of "T-Card" project, an Assurfinance project focused on acquiring Clients from Tranquilidade that are not yet BES Clients. Excluding the above mentioned projects costs and pension costs, the administrative costs would have fallen by 0.7%. 4. ACTIVITY SUMMARY BES Group's activity during the first quarter of the year continued to focus on the following key commercial factors: --Differentiation through quality; --Commitment to the higher value Clients and products; --Specific value proposition for the Clients of Tranquilidade. The Group maintained a strong commercial activity, with total assets rising by 14.8% and customer loans by 9.8%. Total customer funds grew by 5.0%, despite the increasing competition and the increase of migration of savings to alternative products, namely off- balance sheet products.
Main business variables
Euro million
----------------------------------------------------------------------
June
-------------------------
2004 2004 2005 D%
PABS IFRS IFRS IFRS
----------------------------------------------------------------------
Total Assets(1) 60 945 58 042 66 603 14.7
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Assets 44 082 41 568 46 999 13.1
Gross Loans (including
securitised) 29 819 29 943 32 885 9.8
Mortgage 10 737 10 737 11 694 8.9
Other Loans to Individuals 1 505 1 505 1 728 14.8
Corporate 17 577 17 700 19 463 10.0
Loans to Individuals / Gross
Loans (%) (2) 37.2 37.0 35.4 -1.6 p.p.
Customer Funds
+ Deposits and equivalents(3) 21 190 21 250 20 509 -3.5
+ Debt Securities placed with
Customers 5 110 3 207 3 581 11.7
= On-Balance Sheet Customer
Funds 26 300 24 457 24 090 -1.5
+ Off- Balance Sheet Customer
Funds 12 637 12 637 14 843 17.5
= Total Customer Funds 38 937 37 094 38 933 5.0
------------------------------------- ------- ------- -------------
Transformation Ratio (%) (2) 102 112 122 10 p.p.
------------------------------------- ------- ------- -------------
(1) Net Assets + Asset Management + Other Off-Balance Sheet Funds
+ Securitised Credit
(2) Considering On-Balance Sheet Credit
(3) Includes: Deposits and Deposit Certificates
Credit displayed balanced growth, with mortgage loans rising by 8.9% and corporate loans advancing by 10%. Other loans to individuals were up by 14.8%, driven by Plano BES 95, that reached euro 149 million in total amount placed until 30 June 2005.
LOANS TO CUSTOMERS
Euro million
-------------------------------------------------------------
Jun,04 Jun,04
PABS IFRS
------------------------------------------------
Excluding Including Excluding Including
securitised securitised securitised securitised
credit credit credit credit
-------------------------------------------------------------
Gross Loans 27 587 29 819 28 100 29 943
Mortgage 8 923 10 737 8 923 10 737
Other Loans to
Individuals 1 346 1 505 1 476 1 505
Corporate 17 318 17 577 17 700 17 700
LOANS TO CUSTOMERS
Euro million
-------------------------------------------------------------
Jun,05 D IFRS (%)
IFRS
------------------------------------------------
Excluding Including Excluding Including
securitised securitised securitised securitised
credit credit credit credit
-------------------------------------------------------------
-------------------------------------------------------------
Gross Loans 30 115 32 885 7.2 9.8
Mortgage 8 924 11 694 0.0 8.9
Other Loans
to
Individuals 1 728 1 728 17.1 14.8
Corporate 19 463 19 463 10.0 10.0
Regarding the BES Investimento (BESI) activity we highlight the following operations in the M&A area: (i) advisory WhatEverNet that sold 99.69% of its capital to Pararede; (ii) advisory Salvador Caetano Group Salvador Caetano Group is a group that operates on several business areas, including Cars Retail in Portugal, Spain and Africa, and multi-brand services. Salvador Caetano Group that bought 100% of Setucar Group capital; (iii) advisory to AII AII Auto ID Infrastructure AII Agence de l'Innovation Industrielle (French Agency for Industrial Innovation) AII Active Input Interface (used in UNI PMD specs for Copper/Fiber) AII ASEAN Information Infrastructure 2IT that merged with Tecnidata. In the Project finance area: (i) Lead financer of Concessao Rodoviaria Litoral Centro (highway concessionary) that amounted euro 553 million; (ii) lead-arranger of financing of different wind energy parks, amounting euro 28 million; (iii) financial advisory to several bidders for 5 new no-toll highways in Spain. In Brokerage, we highlight growth of 90% in the portfolio management activity; In Capital markets - Fixed income, the highlight goes to: lead-arranger in financing of senior debt to Permira to acquire Supermercados Ahold a·hold n. Hold; grip: "I knew I could make it all right if I got . . . back to the hotel and got ahold of that bottle of brandy" Jimmy Breslin. in Spain. Regarding Variable income, the advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal to EDA (1) (Electronic Design Automation) Using the computer to design, lay out, verify and simulate the performance of electronic circuits on a chip or printed circuit board. - Electricidade dos Acores in the privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned process of 33.92% of share capital deserves a comment. BES Group has a stake in this venture, that belongs to Bensaude Group (leader) and Fundacao Oriente. BAC BAC abbr. blood alcohol concentration - BES dos Acores (BES in the Azores islands) holds 6.5% and BES has a 9.5% in the joint holding. BAC has maintained a significant growth in mortgages and Clients funds that increased 20% and 13.4% respectively. Banco Internacional de Credito (BIC BIC See: Bank Investment Contract ) has achieved significant results in the cross-selling activity. The cross-selling of Bancassurance Bancassurance A French term referring to the selling of insurance through a bank's established distribution channels. Notes: The result is a bank that can offer banking, insurance, lending, and investment products to a customer. (life and non-life) deserves a special note since generated 20% more fees YoY. BIC net profit stood at euro 22.1 million at half year end. Espirito Santo Activos Financeiros (ESAF ESAF Enhanced Structural Adjustment Facility ESAF Escola de Administração Fazendária (Brazil) ESAF Electric Safe Arm and Fire ) has reached a 17% market share in the first half of the year in assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . Mutual Fund grew 30.8%, a growth rate that is significantly higher than the market average of 10.8%. In Portfolio Management ESAF reached 22% of market share where as in Real Estate funds maintained the leadership position with a 18.9% market share in Portugal. As for the High Value Clients, the 360 and Small Businesses segments have maintained the positive performance, as a result of specialised Adj. 1. specialised - developed or designed for a special activity or function; "a specialized tool" specialized specific - (sometimes followed by `to') applying to or characterized by or distinguishing something particular or special or unique; "rules with approach for each segment. In the 360 segment the financial involvement and the number of Loyal Clients grew YoY by 11% and 8.5%, respectively. In the Small Businesses segment the financial involvement and the number of Loyal Clients grew YoY by 13% and 8.5%, respectively. The Assurfinance Program was launched this year aimed at acquiring Tranquilidade Clients that are not yet BES Clients. Therefore a specific value proposition has been developed with T-Card being the star product. So far this venture has reached very positive results, regarding both the number of new Clients acquired (12 000), new mortgage production (weighting 15% of total BES production, vs. 12% as at June 2004) and T-Cards placed (15 000). The Middle Market has also registered a positive performance, with an increase of financial involvement (14.9% YoY) and of the Client base (5% YoY). In the international arena we highlight the activity undertaken by BESSA in Spain, whose assets under management grew by 17% (annualised) and loans and guarantees by 35%, as a result of a significant increase of Client acquisition and transactions. BESSA is now present in S. Sebastian and Marbella, thus increasing its coverage area to 26 main Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. cities after the merger with Banco Inversion inversion /in·ver·sion/ (in-ver´zhun) 1. a turning inward, inside out, or other reversal of the normal relation of a part. 2. a term used by Freud for homosexuality. 3. . BES Angola reached a net profit of euro 10.3 million (the same as total of 2004). The bank increased its geographic coverage, opening new agencies in several provinces, including Zaire, which is the area of largest production of petroleum and natural gas, Cunene and Huila. 5. ASSET QUALITY, PROVISIONING AND SOLVENCY The ability of an individual to pay his or her debts as they mature in the normal and ordinary course of business, or the financial condition of owning property of sufficient value to discharge all of one's debts. solvency n. The introduction of the IFRS led to significant changes in the provisioning rules: --IFRS impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. methodology now applies to loans granted, which differs from the former by extending the method for discounting cash flows to all segments of credit; --in the portfolio of securities available for sale, unrealised capital losses in securities are no longer provisioned at all times, but only when there is evidence of impairment; --with regard to the remaining assets and contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , there are no significant changes versus the former policy adopted by the Group. As referred in the first quarter results presentation, and notwithstanding the new regulatory framework, an adjustment of euro 20 million was made in provisions for credit, mainly through application of the discounted cash flow method to certain credits for which provisions had not been calculated under this method. In the first half of the year the Group maintained its traditionally prudent stance in credit provisioning, the provision charge totalling euro 120.5 million. Hence the provision coverage of overdue loans over 90 days rose to 181.1% (156.1% in June 2004), while the ratio of overdue loans over 90 days to total loans dropped to 1.50% (1.80% in June 2004). Overdue loans dropped by euro 71.4 million YoY, mainly due to a euro 71 million sale of mortgage overdue loans.
ASSET QUALITY
----------------------------------------------------------------------
Change IFRS
---------------------
Jun,04 Jun,04 Jun,05 absolute relative(%)
PABS IFRS IFRS
----------------------------------------------------------------------
----------------------------------------------------------------------
Gross Loans eur mn 27 587 28 100 30 115 2 015 7.2
Overdue Loans eur mn 582.9 588.0 516.6 -71.4 -12.1
Overdue Loans
greater than
90 days eur mn 505.3 505.3 451.3 -54.0 -10.7
Overdue and
Doubtful Loans
(BoP) (a) eur mn 586.4 586.4 562.0 -24.4 -4.2
Provisions for
Credit eur mn 788.7 788.7 817.3 28.6 3.6
----------------------------------------------------------------------
----------------------------------------------------------------------
Overdue Loans /
Gross Loans % 2.11 2.09 1.72 -0.37 p.p.
Overdue Loans
greater than 90
Days / Gross
Loans % 1.83 1.80 1.50 -0.30 p.p.
Overdue and
Doubtful Loans
/ Gross Loans % 2.13 2.09 1.87 -0.22 p.p.
Coverage of
Overdue Loans % 135.3 134.1 158.2 24.1 p.p.
Coverage of
Overdue Loans
greater than 90
Days % 156.1 156.1 181.1 25.0 p.p.
Coverage of
Overdue and
Doubtful Loans % 134.5 134.5 145.4 10.9 p.p.
----------------------------------------------------------------------
(a) According to BoP Circular- Letter no. 99/03/2003
Provisions for securities were reinforced by euro 17.9 million in the period, mainly due to the losses in PT Multimedia equity holding. Other provisions reinforcement led to a surplus of around euro 9 million that is intended to meet possible adjustments in impairment models. As for the highest equity exposures in the available for sale portfolio, there were significant improvements, except for Portugal Telecom Portugal Telecom (Euronext: PTC, NYSE: PT) is the biggest telecommunications operator in Portugal. It operates mainly in Portugal and Brazil. It also has a significant presence in Morocco, Guinea-Bissau, Cape Verde, Mozambique, Timor-Leste, Angola, Kenya, the People's Republic Group.
Available for sale portfolio
Euro million
----------------------------------------------------------------------
Fair Value Reserves
----------------------------------
31-Mar-05 30-Jun-05
----------------------------------------------------------------------
Portugal Telecom -23.1 -63.5
PT Multimedia 10.0 0.7
Bradesco 58.1 185.5
BMCE Bank 1.4 3.6
Jeronimo Martins 1.8 1.8
----------------------------------------------------------------------
48.2 128.1
----------------------------------------------------------------------
Value fluctuations in these investments are reflected into fair value reserves of shareholder equity. For capital ratio purposes, only 45% of potential gains are eligible for Tier II. The Group's solvency ratio Solvency Ratio One of many ratios used to gauge a company's ability to meet long-term obligations. Notes: Derived by taking a company's net worth and dividing by total assets. See also: Asset, Asset Valuation, Balance Sheet, Fundamental Analysis, Income Statement remains at comfortable levels compared with the minimum requirements of the Supervision Authority.
SOLVENCY
(Bank of Portugal)
Euro million
---------------------------------------------------------
Jun, 05(*)
---------------------------------------------------------
Risk Weighted Assets 35 514
Regulatory Capital 4 192
Tier I 2 288
Tier II 1 967
Deductions ( 63)
Preference Shares 600
---------------------------------------------------------
Core Tier I 4.75%
Tier I 6.44%
Total 11.80%
---------------------------------------------------------
(*) estimate
We remind that the impact of IFRS adoption on regulatory capital and risk assets is deferred for a period of 3 to 7 years. At the end of the first half of the year, Standard & Poor's reaffirmed its rating at "A-" for the medium term and long term debt and "A-2" for the short term, with stable outlook. The rating agency's decision was based on the Group's strong competitive position in retail, its adequate profitability based on operating efficiency as well as a more balanced funding Balanced Fund A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income. Also known as an asset allocation fund. structure and asset quality. 6. PRODUCTIVITY Productivity and efficiency ratios continued to make good progress: --operating costs per unit of average net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. under management dropped from 2.12% to 1.82%; --total assets per employee reached nearly euro 9.2 million, corresponding to an increase of 15.7%; --the cost to income once again shows sustained improvement.
Productivity Indicators
-----------------------------------------------------------------
Jun,04 Jun,04 Jun,05 D
PABS IFRS IFRS IFRS
-----------------------------------------------------------------
Cost to Income (incl.
Capital Markets) 50.2% 61.3% 56.0% -5.3 p.p.
Cost to Income (excl.
Capital Markets) 57.9% 68.7% 67.0% -1.7 p.p.
Operating Costs / Average
Net Assets 1.69% 2.12% 1.82% -0.30 p.p.
Total Assets (*) per
Employee (eur '000) 8 317 7 921 9 163 15.7 %
-----------------------------------------------------------------
(*) Net Assets + Asset Management + Other Off-Balance Sheet Funds
+ Securitised Credit
7. PROFITABILITY Based on the annualised results of the first half 2005, Return on equity (ROE) stood at 13.6% and Return on Assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). (ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). ) at 0.67%.
Profitability
(%)
----------------------------------------------------------------------
2004
----------------- Jun,05
PABS IFRS IFRS
----------------------------------------------------------------------
Return on Equity (ROE) 13.9 6.1 13.6
Return on Assets (ROA) 0.82 0.35 0.67
----------------------------------------------------------------------
8. BANK OF PORTUGAL REFERENCE INDICATORS According to the instruction N. 16/2004 from Bank of Portugal, financial institutions should disclose reference indicators (calculated under the methodology set forth in this regulation), when releasing information concerning Solvency, Credit Quality, Profitability and Efficiency. The table below lists these indicators for both June 2005 and 2004.
Bank of Portugal Indicators
(%)
----------------------------------------------------------------------
Jun,04 Jun,04 Jun,05
PABS IFRS IFRS
----------------------------------------------------------------------
SOLVENCY
----------------------------------------------------------------------
Regulatory Capital / Risk Weighted Assets 10.95 10.95 11.80
Tier I Capital / Risk Weighted Assets 6.90 6.90 6.44
ASSET QUALITY
----------------------------------------------------------------------
Overdue & Doubtful Loans (a)/ Gross Loans 2.13 2.09 1.87
Overdue & Doubtful Loans Net of Provisions (b)
/ Net Loans (b) 0.53 0.52 -0.87
PROFITABILITY
----------------------------------------------------------------------
Income before Taxes and Minorities / Average
Equity (c) 13.30 8.82 12.24
Banking Income (d) / Average Net Assets 3.34 3.45 3.25
Income before Taxes and Minorities / Average
Net Assets 0.82 0.57 0.72
EFFICIENCY
----------------------------------------------------------------------
General Admin Costs (d)+ Depreciation / Banking
Income (d) 50.4 61.3 56.0
Staff Costs / Banking Income (d) 22.4 33.8 28.2
======================================================================
(a) Calculated according to BoP Circular Letter no. 99/03/2003
(b) Credit net of provisions for overdue loans and for doubtful loans
(c) Includes Average Minorities
(d) Calculated according to BoP Instruction no 16/2004
9. DIRECT BANKING AND OTHER Direct Channels The number of users of Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Banking for individual customers - BESnet - reached 728 000 in June, corresponding to a YoY increase of 6.1%. The number of logins and transactions continued to grow at a sustained pace, rising YoY by respectively 14.8% and 13.5%. Low value transactions processing reached 39.8%, above 36.0% registered in 1H 2004. The website increased its role as a source of information on the Bank's product offer, with a 2.3 million average monthly visits between January and June (+25.3% YoY). The number of companies using the Internet banking service for corporate customers - BESnet Negocios - reached 40 000, a YoY increase of 14.8%. Logins were up by 25.5% and transactions by 44.3%, proving the importance of this channel as a transactional support to the companies' activity. Electronic Banking Pmelink.pt, the largest domestic online business centre for companies promoted under a joint venture between BES, CGD CGD Chronic granulomatous disease, see there and PT, already has more than 19 995 companies as customers (14 460 in June 2004), a YoY increase of 38%. Turnover of the portal reached euro 6.3 million, a 36% YoY increase. In the first half of 2005, Banco BEST reinforced its asset management product offer by selling mutual funds from highly recognised investment management firms. The Client base reached 38 000, up 37% YoY. Assets under management totalled euro 450 million, corresponding to an increase of 34% versus June 2004. Other aspects In the 2005 edition of the Investor Relations Awards (promoted by Deloitte Consulting with the support of Diario Economico and Semanario Economico), an initiative intended to stimulate improvements and transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. in the financial information of listed companies listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → , BES Group was distinguished with the following prizes: Grand Prize for the Best Global Investor Relations Programme among the PSI20 companies -- BES Best annual report among financial institutions -- BES Best information about Corporate Governance -- BES Best use of technology for Investor Relations -- BES Best CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. in Investor Relations -- Ricardo Salgado Best Investor Relations Officer -- Elsa Jardim Best Research House -- ES Investment Best Research Analyst -- Miguel Viana (ES Investment)
THE BOARD OF DIRECTORS
BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2005
---------------------------------------------------------------------
Jun,04 Jun,04 Jun,05
PABS IFRS IFRS
(eur '000) (eur '000) (eur '000)
---------------------------------------------------------------------
NET ASSETS
Cash and deposits at Central
Banks 692 504 693 357 691 435
Loans and advances to credit
institutions 443 858 443 858 538 370
Financial Assets held for
trading 1 868 300 1 868 300 3 459 707
Other financial assets at fair
value through the P&L 2 133 902
Financial Assets available for
sale 5 061 680 3 630 770 3 004 860
Other loans and advances to
credit institutions 5 277 866 5 318 100 4 731 296
Loans and advances to
customers 27 146 129 27 311 173 29 297 721
(Provisions) (788 700) (788 700) (817 331)
Financial Assets held to
maturity 560 587 560 587 556 234
Financial Assets with
repurchase agreements - - -
Fair value of Hedging
derivatives 165 608 165 608 53 532
Non current assets held for
sale 81 727 81 727 123 438
Property and equipment - - -
Other tangible assets 338 697 338 697 348 737
Intangible assets 155 310 101 920 75 310
Investments in associated
companies 45 748 53 477 60 746
Current tax assets 4 847 4 847 23 174
Deferred tax assets - 102 646 195 868
Other assets 2 238 819 892 691 1 704 924
---------------------------------------------------------------------
TOTAL NET ASSETS 44 081 680 41 567 758 46 999 254
---------------------------------------------------------------------
LIABILITIES
Amounts owed to central banks 106 942 106 942 464 148
Financial liabilities held for
trading 613 663 613 663 1 653 026
Other financial liabilities at
fair value through the P&L - - -
Amounts owed others credit
institutions 6 552 101 6 571 503 7 769 746
Amounts owned to customers 19 580 592 19 640 775 17 993 592
Debt securities 11 701 640 9 798 649 12 924 300
Passivos financeiros
associados a activos
transferidos - - -
Fair value of hedging
derivatives 123 237 123 237 64 659
Non current liabilities held
for sale - - -
Provisions 560 217 83 859 109 559
Current tax liabilities 10 905 10 905 27 957
Deferred tax liabilities - 31 942 102 892
Capital instruments - - -
Other subordinated liabilities 1 534 346 1 551 656 2 023 437
Other liabilities 395 041 361 225 1 117 754
---------------------------------------------------------------------
TOTAL LIABILITIES 41 178 684 38 894 356 44 251 070
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 1 500 000 1 500 000 2 100 000
Share premium 300 000 300 000 300 000
Other capital instruments - - -
Revaluation reserves - - 158 750
Other reserves and retained
earnings 199 495 113 027 50 171
(Treasury stock) - 100 174 90 120
Net income for the year 131 765 73 995 148 960
(Anticipated dividends) - - -
Minority interests 771 736 786 554 80 423
---------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2 902 996 2 673 402 2 748 184
---------------------------------------------------------------------
TOTAL LIABILITIES +
SHAREHOLDERS' EQUITY 44 081 680 41 567 758 46 999 254
---------------------------------------------------------------------
BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED INCOME STATEMENT AS AT 30 JUNE 2005
--------------------------------------------------------------------
Jun,04 Jun,04 Jun,05
PABS IFRS IFRS
(eur '000) (eur '000) (eur '000)
--------------------------------------------------------------------
Interest Income 1 060 697 1 056 425 937 269
Interest expense 708 554 706 868 591 584
--------------------------------------------------------------------
Net interest income 352 143 349 557 345 685
--------------------------------------------------------------------
Dividends on securities 13 325 13 325 30 659
Commissions and other similar
income 224 578 224 578 227 418
Commissions and other similar
expenses 22 814 22 814 33 514
Gains and losses in financial
assets at fair value 7 896 7 896 (44 597)
Gains and losses in financial
assets available for sale 70 738 27 077 72 752
Gains and losses in foreign
exchange revaluation 4 893 4 893 51 590
Gains and losses in the sale of
others assets 35 490 35 490 31 271
Other net income from banking
activity 32 886 58 708 34 592
--------------------------------------------------------------------
Banking Income 719 135 698 710 715 856
--------------------------------------------------------------------
Staff expenses 161 722 236 513 202 632
Other administrative expenses 136 305 142 596 159 782
Depreciation 65 711 50 498 40 243
Provisions net of reversals 30 858 6 858 12 520
Loan impairment net of reversals
and recoveries 131 814 131 814 120 534
Other financial assets' impairment
net of reversals and recoveries 15 769 15 769 14 777
Other assets' impairment net of
reversals and recoveries 1 115 1 115 (1 698)
Equity in earnings of associated
companies 1 934 1 934 3 335
--------------------------------------------------------------------
Income before taxes 177 775 115 481 170 401
--------------------------------------------------------------------
Taxes
Current 24 545 24 545 31 905
Deferred - 1 679 (12 508)
--------------------------------------------------------------------
Income after taxes 153 230 89 257 151 004
--------------------------------------------------------------------
Minority interests 21 465 15 262 2 044
--------------------------------------------------------------------
Net income for half year 131 765 73 995 148 960
--------------------------------------------------------------------
This news release may include certain statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Banco Espirito Santo Group that are neither reported financial results nor other historical information. These statements may include targets, forecasts, projections, descriptions of anticipated cost savings, statements regarding the possible development or possible assumed future results of operations and any statement preceded by, followed by or including words like "believes", "expects", "aims", "intends", "may" or similar expressions. By their nature, forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, changes in economic conditions in individual countries in which the BES Group conducts its business and internationally, fiscal or other policies adopted by various governments and regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities of Portugal and other jurisdictions, levels of competition from other banks and financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. companies as well as future exchange and interest rates. Banco Espirito Santo does not undertake to release publicly any revision to the forward-looking information included in this news release to reflect events, circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or unanticipated events occurring after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . |
|
||||||||||||
Bahamas 
Printer friendly
Cite/link
Email
Feedback
Reader Opinion