Banco Espirito Santo 3Q2005 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. BES.LS) today announced its 3Q2005 results. HIGHLIGHTS --Net income for the first nine months of 2005 (IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System ) reached euro 208.0 million, up by 19.9% year-on-year (PABS - Portuguese plan of accounts for the banking sector), corresponding to a 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 13.2%. Banking income increased 6.6%, despite an adverse economic background and strong competitive pressure. --Net interest income, fuelled by business growth, reached euro 534.8 million, up by 4.1%. --Commissioning posted a significant recovery in the quarter, reaching euro 394.2 million in the nine months. Excluding the deferral deferral - Waiting for quiet on the Ethernet. effect resulting from the introduction of IFRS, accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. fees and commissions grew by 1.8%. --Operating costs dropped by 7.2%, influenced by a reduction of pension costs and depreciation. Productivity and efficiency (cost to income) continue to reflect a consistent improvement trend. --The unrealised capital gains increased from euro 143.2 million in June June: see month. to euro 359.2 million in September September: see month. , backed by an appreciation on the main equity exposures in the available for sale portfolio. --Sharp increase in the customer base: the Group acquired 50,000 net new clients in the first nine months of the year. Customer loans, including securitised credit, rose by 12.7% and total customer funds were up by 6.0%, underpinned by off-balance sheet business (+15.3%). --Coverage of 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 over 90 days rose to 189.9% (Sep 04: 165.9%), the outcome of a prudent stance vis-a-vis the provisioning policy. The ratio of overdue loans over 90 days fell to 1.45% (Sep 04: 1.67%). --Approval, during the third quarter, of a project of merger by integration of Banco Internacional de Credito (BIC BIC See: Bank Investment Contract ) into Banco Espirito Santo (BES), which will contribute to improve the Group's efficiency and profitability.
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 and efficiency
7. Profitability
8. Bank of Portugal reference indicators
9. Direct banking and other
10. Merger by incorporation of BIC into BES
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 Regulation no. 1606/2002 of 19.Jul Jul abbr (= July) → jul Jul abbr (= July) → juil Jul written abbr Jul July. .02 of the European Council European Council, a consultative branch of the governing body of the European Union (EU). It is composed of the heads of government of the EU nations and their foreign ministers, in conjunction with the president and two additional members from the European and Parliament determines that companies having securities admitted to trading 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 on or after 1 January January: see month. 2005 in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with 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 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. ). After 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 Portuguese national legislation, the Bank of Portugal, through Notice no. 1/2005, established the standards and reporting model for the entities subject to its supervision. Bearing in mind that BES is subject to these provisions, its consolidated financial information relative to financial 2005, including interim financial information, was prepared based on the application of the IFRS. On the other hand, and also deriving from the change in accounting regulations, the financial statements of BES Group for financial 2005 (prepared in accordance with the IFRS/IAS) are not directly comparable with the financial statements disclosed in the course of 2004, which had been prepared based on the regulations of the Portuguese Plan of Accounts for the Banking System (PABS), as set out in the Bank of Portugal's instructions no. 4/96 and 71/96. Hence, for purposes of comparability of the financial statements, 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 ), BES Group has restated its financial statements for financial year 2004 based on application of the IAS/IFRS with the exceptions, as permitted by IFRS 1, of comparable information that would arise from application of IAS 32 and IAS 39. 2. Economic overview In the third quarter of 2005, the world economy was marked by a new hike in the price of oil, with the 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 leaping by 14% over the previous quarter. In the year to September 2005, the price per barrel surged by 55.5%, to USD USD In 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. 62.6. Despite the negative impact of hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. , economic activity
in the US is thought to have maintained a growth rate of around 3.5%,
the year-on-year inflation rate rising to 4.7% in September. This
prompted the Federal Reserve to raise the fed funds fed fundsSee federal funds. target rate by 50 basis points, to 3.75%. Between January and September, the performance of 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).
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. (although a recovery trend became more noticeable in the third quarter): the Nasdaq and Dow Jones Dow Jones the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202] See : Finance dropped by 1.1% and 2%, respectively, and the S&P 500 rose by 1.4%. In the Euro area, economic activity is thought to have picked up somewhat in the third quarter, with GDP GDP (guanosine diphosphate): see guanine. growth rising from 0.3% to between 0.4% and 0.5% on the positive performance of external demand, an improvement in the financial health of companies, and the persistence (1) In a CRT, the time a phosphor dot remains illuminated after being energized. Long-persistence phosphors reduce flicker, but generate ghost-like images that linger on screen for a fraction of a second. of historically favourable financing conditions - the European Central Bank European Central Bank (ECB) Bank created to monitor the monetary policy of the countries that have converted to the Euro from their local currencies. The original 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, kept the main refi rate at 2%, the yield on 10-year public debt securities remained at extremely low levels (3.15%) and the euro fell by 0.53% against the dollar (-11.26% since January), to EUR/USD 1.203. In this context, the main European stock market indices recorded appreciable ap·pre·cia·ble adj. Possible to estimate, measure, or perceive: appreciable changes in temperature. See Synonyms at perceptible. gains since the beginning of the year: CAC See Consumer Advisory Council. 40 +20.38%, DAX +18.52% and 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 +19.09%. In Portugal, the available third quarter indicators confirm the sluggish trend of economic activity, consistent with a year-on-year increase in GDP of 0.4% in the first nine months of the year. The hike in energy prices pushed up inflation, the year-on-year inflation rate rising above the average rate in the Euro area, to 2.8%. The PSI-20 followed the European upward trend, going up by 6.43% since the beginning of the year. 3. Results The activity developed by BES Group in the first nine months of the year resulted into a net income of euro 208.0 million, which compares with euro 173.5 million in the same period last year, under the accounting regulations in force at the time (PABS), and euro 77.3 million under IFRS(1). As referred in the previous quarters, the 2004 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. results, restated under IFRS, were negatively influenced by disability retirement costs that occurred during that year (euro 60 million). The table below shows the income statement for the year to September 2005 along with the 2004 comparative data:
Income Statement
euro million
---------------------------------------------------------------------
September
-------------------------
2004 2004 2005 D%
PABS IFRS IFRS IFRS
---------------------------------------------------------------------
Net Interest Income 517.5 513.7 534.8 4.1
+ Fees and Commissions 400.7 400.7 394.2 -1.6
= Banking Income ex-Markets 918.2 914.4 929.0 1.6
+ Capital Markets and Other 137.1 109.8 162.8 48.2
= Banking Income 1 055.3 1 024.2 1 091.8 6.6
- Operating Costs 558.5 656.1 608.9 -7.2
= Gross Results 496.8 368.1 482.9 31.2
- Net Provisions 258.9 234.9 232.8 -0.9
Credit 204.0 204.0 187.3 -8.2
Securities 5.8 5.8 27.1 ---
Other 49.1 25.1 18.4 -26.7
= Income before Taxes and
Minorities 237.9 133.2 250.1 87.7
- Income Tax 33.3 36.0 37.0 2.8
= Income before Minorities 204.6 97.2 213.1 119.2
- Minority Interests 31.1 19.9 5.1 -74.4
= Net Income 173.5 77.3 208.0 169.1
---------------------------------------------------------------------
(1)Under IFRS 1, IAS 32 and 39 do not apply retroactively.
3.1 Net Interest Income Accumulated net interest income for the first nine months of 2005 reached euro 534.8 million, which corresponds to a year-on-year increase of 4.1%. Such increase represents a reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its in the previous quarters' trend, deriving essentially from business growth, particularly on the side of credit, which was up by 12.7% (including securitised loans). Notwithstanding the good progress made in the third quarter, net interest income continues to suffer from several 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)]. , namely competition's pressure and the low level of euro interest rates. Nevertheless, a slight recovery in Euribor 3M had a positive impact on the funds' contribution to net interest income. 3.2 Fees and Commissions The performance of fees and commissions in the course of 2005 has been conditioned by the volatile nature of investment banking activities, which are very sensitive to the economic environment and corporate expectations, and the adverse effects of fierce competition. Results from traditional banking services were the worst affected. Cross selling results continued to make good progress, fuelled by the commercial dynamics of the various sales networks and on intra-company synergies, bearing out the Group's long standing strategic focus. 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. deserves a special note, in particular the good performance of retirement/education savings plans (+34%) and other life insurance products (+17%).
Fees and Commissions
euro million
----------------------------------------------------------------------
September
------------------
2004 2005
IFRS IFRS D %
----------------------------------------------------------------------
Fees and Commissions based on applicable
rules 400.7 394.2 -1.6
Deferral effect (13.5) - -
----------------------------------------------------------------------
Comparable Fees and Commissions 387.2 394.2 1.8
----------------------------------------------------------------------
Excluding the effect of deferral of fees and commissions related to credit origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real , resulting from the difference between the IFRS and the former rules (PABS), accumulated commissions as of September 2005 rose 1.8%. 3.3 Capital markets results and other Capital markets and other results reached euro 162.8 million. These results were based on 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, while lately trading on emerging markets securities was reinforced, with a special focus on Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. 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 equity domestic market. During the third quarter, the Group realised capital losses in 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 , whose impact on the income statement (a loss of euro 70.9 million) was offset by the sale of 1.3% of the ordinary shares of Banco Bradesco Banco Bradesco, short for Banco Brasileiro de Descontos, that is 'Brazilian Discount Bank', is one of the Big Four banks in Brazil, the others being Banco do Brasil, Banco Itaú and Unibanco. Bradesco is the largest private bank in Brazil. to the pension fund and by the sale of preference shares of Bradespar Bradespar S.A. is a Brazilian investment company headquartered in São Paulo. The company was formed in 2000 by Banco Bradesco in order to allow the bank to spin out some of its industrial investments. in the international market. None of the transactions related to PT and Bradesco affects either the partnerships or the strategic nature of these investments for BES Group. 3.4 Operating costs operating costs npl → gastos mpl operacionales Operating costs reached euro 608.9 million, corresponding to a year-on-year decline of 7.2%. The cost reduction has been underpinned by lower investments, translating into a 21.2% 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.
Operating Costs
euro million
---------------------------------------------------------------------
September
---------------------
2004 2004 2005 D %
PABS IFRS IFRS IFRS
---------------------------------------------------------------------
Staff Costs, o.w. 245.0 356.8 310.1 -13.1
Salaries 225.0 258.7 265.7 2.7
Pensions 20.0 98.1 44.4 -54.7
Admin Costs 215.2 223.3 238.9 7.0
Depreciation and Amortisation 98.3 76.0 59.9 -21.2
---------------------------------------------------------------------
Operating costs 558.5 656.1 608.9 -7.2
Staff costs went up by 2.7%, driven by the annual salary increases and promotions. These costs already include the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of employee bonuses, which will be subject to adjustments in the last quarter of 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. pursued the slowing down trend achieved in the previous periods, registering a 7.0% increase that compares with the 14.0% and 12.1% rises reported respectively in the first quarter and in the first half of the year. Excluding the cost of promoting the "T-Card", an initiative intended to promote the Assurfinance project, this increase would have been even lower. The drop in depreciation and amortisation reflects the streamlining of investments in premises premises n. 1) in real estate, land and the improvements on it, a building, store, shop, apartment, or other designated structure. The exact premises may be important in determining if an outbuilding (shed, cabana, detached garage) is insured or whether a person and IT developments. 4. Activity BES Group's activity continued to focus on the following key commercial factors: --differentiation through quality; --focus on higher value Clients and products; --stepping up the effort to attract new Clients; --specific value proposition for the Clients of Tranquilidade Tranquilidade (tranquility in english) is a Portuguese insurance company, founded in Oporto in 1871. It is part of the Portuguese economic group "Grupo Espirito Santo". . The Group maintained a strong commercial activity, with total assets rising by 14.5% and customer loans by 12.7%. Customer funds show a more modest performance (+6.0%) due to a particularly fierce competitive environment. However, off-balance sheet funds grew 15.3% year-on-year. This performance is strongly influenced by the acquisition of 50,000 net new Clients this year, significantly higher than in 2004.
Main business variables
euro million
---------------------------------------------------------------------
September
---------------------
2004 2004 2005 D %
PABS IFRS IFRS IFRS
---------------------------------------------------------------------
Total Assets (1) 62 499 60 204 68 958 14.5
---------------------------------------------------------------------
Assets 45 160 43 198 49 033 13.5
Gross Loans (including
securitised) 30 345 30 477 34 335 12.7
- Mortgage 10 930 10 930 12 062 10.4
- Other Loans to Individuals 1 549 1 549 1 713 10.6
- Corporate 17 866 17 998 20 560 14.2
Loans to Individuals / Gross
Loans (%) (2) 37.5 37.3 35.0 -2.3p.p.
Customer Funds
+ Deposits (3) 21 256 21 309 20 830 -2.2
Debt Securities placed with
+ Clients 5 733 4 055 4 815 18.7
= On-Balance Sheet Customer Funds 26 989 25 364 25 645 1.1
+ Off-Balance Sheet Funds 13 215 13 215 15 241 15.3
= Total Customer Funds 40 204 38 579 40 886 6.0
---------------------------------------------------------------------
Transformation Ratio(%)(2) 102 110 120 10p.p.
---------------------------------------------------------------------
(1) Net Assets + Asset Management + Other off-balance sheet
liabilities + Securitised credit
(2) Assuming on-balance sheet credit
(3) Includes: Customer deposits and Certificates of Deposits
Credit displayed balanced growth, with mortgage loans rising by 10.4%, corporate loans by 14.2% and other loans to individuals up by 10.6%. As for corporate lending, BES has been reinforcing its position as bank of reference and a protagonist in Programmes for Investment Incentives. Within the scope of agreements between banks and the Portuguese Institute of Tourism, BES is financing 58% of the projects, which represents 82% of total amount. BES also participates in PROREST III (Portuguese public co-investment programme for restaurant qualification, modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, and equipment), where BES supports 20% of the projects both in terms of number of projects and in terms of total amount. BES also takes part in PRIME-SIME (Portuguese Public Incentive Systems for Economic Development), where 21% of approved projects and 31% of incentives allocated were implemented through BES Group.
Loans to Customers euro million
---------------------------------------------------------------------
Sep 04 Sep 04
PABS IFRS
--------------------------------------------------------
excluding including excluding including
securitisation securitisation securitisation securitisation
---------------------------------------------------------------------
---------------------------------------------------------------------
Loans to
Customers 28 220 30 345 28 685 30 477
Mortgage 9 160 10 930 9 160 10 930
Other Loans to
Individuals 1 415 1 549 1 527 1 549
Corporate 17 645 17 866 17 998 17 998
euro million
----------------------------------------------------------------------
Sep 05
IFRS D% IFRS
--------------------------------------------------------
excluding including excluding including
securitisation securitisation securitisation securitisation
---------------------------------------------------------------------
Loans to
Customers 31 642 34 335 10.3 12.7
Mortgage 9 369 12 062 2.3 10.4
Other Loans to
Individuals 1 713 1 713 12.2 10.6
Corporate 20 560 20 560 14.2 14.2
In September, the Group performed a securitisation transaction on mortgage loans, amounting to euro 1,200 million. This transaction had no impact on the credit portfolio because the Group consolidated the securitisation SPV SPV sheeppox virus. , since the equity piece was kept. The Assurfinance Program continues to deliver positive results, in line with the objectives: more than 18,000 new Clients were acquired and over 22,000 T-Cards were placed. The program already contributes to over 17% of the Group's mortgage credit production (12% in September 2004). In September 2005, the banking income of BES Investimento reached euro 81.3 million and net income totalled euro 30.8 million, representing an increase of 5.9% year-on-year. BES Investimento established a partnership with Concordia Concordia (kōng-kôr`thyä), city (1991 pop. 116,491), Entre Ríos prov., NE Argentina, a port on the Uruguay River. Group, which will result into the incorporation of a company named Concordia Espirito Santo Investment (CESI CESI Centro Elettrotecnico Sperimentale Italiano (Italy) CESI Chauffe-Eau Solaire Individuel CESI Centre d'Etudes Superieures Industrielles (French) CESI Canadian Educational Standards Institute ) to provide 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 in Project Finance, M&A and other areas of Corporate Finance in the Polish market. This company will be held 51% by Concordia and 49% by BES Investimento. BES Investimento applied for the authorisations of incorporation of Espirito Santo Investment, a brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. company that operates in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. . 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. of Espirito Santo Activos Financeiros (ESAF ESAF Enhanced Structural Adjustment Facility ESAF Escola de Administração Fazendária (Brazil) ESAF Electric Safe Arm and Fire ) reached euro 15.2 billion, representing a 15.3% year-on-year growth, backed by a strong performance of domestic mutual funds, discretionary management and the launch of the second closed-end closed-end adj. Issuing a fixed number of shares that can be traded publicly but are not redeemable by the issuer: a closed-end investment company. real estate fund in August 2005 (Espirito Santo Reconversao Urbana Urbana (ûrbăn`ə). 1 City (1990 pop. 36,344), seat of Champaign co., E central Ill., adjoining Champaign; inc. 1833. With Champaign, its twin city, Urbana is a trade, medical, and educational center in a fertile farm area. ) with an initial capital of euro 30 million. ESAF posted a net income of euro 14.1 million in the first nine months of 2005 (+22%). Besleasing e Factoring posted an increase in leasing production of 27.4% and in factoring production of 24.9%, which allowed to maintain the second position in the Portuguese market in both products, with a market share of 18% and 21%, respectively. The company posted a net income close to euro 9 million, corresponding to a year-on-year increase of 31.5%. In the international arena, the performance of BES Angola Angola (ăng-gō`lə), officially Republic of Angola (2005 est. pop. 11,191,000), including the exclave of Cabinda, 481,351 sq mi (1,246,700 sq km), SW Africa. should be highlighted, which has striven to build ever stronger relations with corporate, institutional and affluent clients. Having followed a pre-established strategy, the bank has shown consistent growth, continuously improving its efficiency ratios, while also raising its market share. Customer funds increased 100% year-on-year up to September 2005, the cost to income ratio stood at 26.9% and net income climbed by 174%, to euro 19.7 million 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 provision charge totalled euro 187.3 million, despite a drop of euro 48.7 million in overdue loans, showing a traditionally prudent stance in credit provisioning. Hence the provision coverage of overdue loans over 90 days rose to 189.9% (Sep 04: 165.9%), while the corresponding overdue loans ratio significantly dropped from 1.67% in September 2004 to 1.45% in September 2005.
Asset Quality
---------------------------------------------------------------------
Change IFRS
Sep 04 Sep 04 Sep 05 -------------------
PABS IFRS IFRS absolute relative(%)
---------------------------------------------------------------------
Loans to Customers(gross)
(eur mn) 28 220 28 685 31 642 2 957 10.3
Overdue Loans (eur mn) 569.9 575.3 526.6 -48.7 -8.5
Overdue Loans greater
than 90 days (eur mn) 477.7 477.7 457.3 -20.4 -4.3
Overdue and Doubtful
Loans
(B.Portugal)(a)(eur mn) 560.0 560.0 607.5 47.5 8.5
Provisions for
Credit (eur mn) 792.4 792.4 868.5 76.1 9.6
---------------------------------------------------------------------
Overdue Loans / Loans to
Customers (gross) % 2.02 2.01 1.66 -0.35 p.p.
Overdue Loans greater
than 90 days / Loans to
Customers (gross) % 1.69 1.67 1.45 -0.22 p.p.
Overdue and doubtful
loans / Loans to
Customers (gross)(a) % 1.98 1.95 1.92 -0.03 p.p.
Coverage of Overdue
Loans % 139.0 137.7 164.9 27.2 p.p.
Coverage of Overdue Loans
greater than 90 days % 165.9 165.9 189.9 24.0 p.p.
Coverage of Overdue and
doubtful loans % 141.5 141.5 143.0 1.5 p.p.
----------------------------------------------------------------------
(a) According to Circular Letter no. 99/03/2003 of Bank of Portugal
The highest equity exposures in the available for sale portfolio continued to post an appreciation, with overall potential gains amounting to euro 359.2 million at the end of the period.
Available for sale portfolio
euro million
---------------------------------------------------------
Fair Value Reserve
----------------------------------
31 Mar 05 30 Jun 05 30 Sep 05
---------------------------------------------------------
Portugal Telecom -23.1 -63.5 1.5
PT Multimedia 10.0 0.7 14.5
Banco Bradesco 58.1 185.5 294.2
Bradespar 32.9 16.9 40.9
B. Marocaine Com. Ext. 1.4 3.6 8.1
Jeronimo Martins 1.8 1.8 -
---------------------------------------------------------
81.1 145.0 359.2
---------------------------------------------------------
Value fluctuations in these investments are reflected into fair value reserves of equity. For 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 purposes, only 45% of potential gains are eligible for Tier II. The Group's solvency ratio remains at comfortable levels compared with the minimum requirements of the Bank of Portugal.
Solvency
(Bank of Portugal)
euro million
---------------------------------------------------------
Sep 05*
---------------------------------------------------------
Risk Weighted Assets 37 458
Regulatory Capital 4 448
Tier I 2 372
Tier II 2 136
Deductions ( 60)
Preference Shares 600
---------------------------------------------------------
Core Tier I 4.73%
Tier I 6.33%
Total 11.87%
---------------------------------------------------------
* estimate
Standard & Poor's, in its annual ratings review, has maintained "A-" for the medium 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. FitchRatings maintained the A+ notch notch (noch) incisure; an indentation on the edge of a bone or other organ. aortic notch dicrotic n. cardiac notch 1. for long term debt and F1 for short term debt, with stable outlook. Moody's Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. ratings for BES are A1 for long term debt and P1 for short term, with a stable outlook. 6. PRODUCTIVITY AND EFFICIENCY 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 1.79% while total assets per employee grew by 14.9%. The cost to income also improved, reaching 55.8% (56.0% in 1H05) in the period, or 65.5% excluding capital markets results (67.0% in 1H05).
Productivity and Efficiency Indicators
--------------------------------------------------------------------
Sep 04 Sep 04 Sep 05 Chg
PABS IFRS IFRS IFRS
--------------------------------------------------------------------
Cost to Income 52.5% 64.1% 55.8% -8.3 p.p.
Cost to Income ex-Markets 60.8% 71.8% 65.5% -6.3 p.p.
Operating Costs / Average Net
Assets 1.71% 2.12% 1.79% -0.33 p.p.
Total Assets* per
Employee (eur '000) 8 501 8 189 9 408 14.9%
--------------------------------------------------------------------
* Net Assets + Asset Management + Other Off-Balance Sheet items +
Securitised Credit
7. PROFITABILITY Based on the annualised results, Return on equity (ROE) stood at 13.2% 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 0.61%.
Profitability
(%)
--------------------------------------------------------------------
2004 up to
---------- Sep 05
PCSB IFRS IFRS
--------------------------------------------------------------------
Return on Equity 13.9 6.4 13.2
Return on Assets 0.63 0.37 0.61
8. BANK OF PORTUGAL REFERENCE INDICATORS 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. Bank of Portugal instruction no. 16/2004, 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 September 2005 and 2004.
Bank of Portugal Indicators (%)
---------------------------------------------------------------------
Sep 04 Sep 04 Sep 05
PABS IFRS IFRS
---------------------------------------------------------------------
Solvency
---------------------------------------------------------------------
Regulatory Capital /
Risk Weighted Assets 10.29 10.29 11.87
Tier I Capital /
Risk Weighted Assets 6.37 6.37 6.33
Asset Quality
----------------------------------------------------------------------
Overdue & Doubtful Loans (a)/
Gross Loans 1.98 1.95 1.92
Overdue & Doubtful Loans
Net of Provisions(b)/Net Loans(b) -0.85 -0.83 -0.85
Profitability
---------------------------------------------------------------------
Income before Taxes and Minorities/
Average Equity (c) 11.79 6.78 12.58
Banking Income (d)/
Average Net Assets 3.23 3.32 3.22
Income before Taxes and Minorities/
Average Net Assets 0.73 0.43 0.74
Efficiency
---------------------------------------------------------------------
General Admin Costs (d)+ Depreciation/
Banking Income (d) 52.5 64.1 55.8
Staff Costs / Banking Income (d) 23.2 34.8 28.4
=====================================================================
(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 Banking 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 742,000 in September, corresponding to a year-on-year increase of 6.4%. The number of logins continued to grow at a sustained pace, rising by 15% on September 2004. The number of transactions performed through BESnet has increased by 23.3% versus September 2004, and by 42.5% in the third quarter. This sharp increase in transactions pushed up the ratio of low value transactions performed off-branch, which reached 41.1% (35.7% in the same period in 2004). During this period the "electronic statement" facility was made available on line. This allows BESnet users to view their last 12 account statements in PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. format, cancelling the receipt of account statements in paper format. So far, 13,000 clients have subscribed to this new facility. At the beginning of October October: see month. another facility was made available through BESnet that allows clients to view, print and record a copy of the cheques drawn or deposited in their account. Close to 10,000 clients have already used this new service, viewing a total of 33,000 cheques in the first three weeks after it was made available. The monthly average number of visitors to BES website reached 2.4 million between January and September, corresponding to a 22.6% increase compared to the same period last year. The number of companies using the Internet banking service for corporate customers - BESnet Negocios - reached 41,000, a year-on-year increase of 14.9%. Logins were up by 23.5% and transactions by 40.2% proving the growing importance of this channel as a transactional support to the companies' activity. Electronic Banking Pmelink.pt, the largest domestic B2B (Business to Business) Refers to one business communicating with or selling to another. See B2B e-commerce, B2C and B2G. B2B - business to business portal, promoted under a joint venture between BES, CGD CGD Chronic granulomatous disease, see there and PT, registered more than 57,000 on-line purchasers up to September 2005, corresponding to an increase of 40% over September 2004. Turnover of the portal reached euro 10.1 million, a year-on-year increase of 45%. Banco BEST continued to reinforce its asset management product offer by selling mutual funds from highly recognised investment management firms. New investor support facilities were introduced in equities trading, contributing to raise the Bank's market share of internet transactions from 6.3% in the 3rd quarter of 2004 to 8.6% in the reporting quarter. The Client base reached 40,000 in September 2005, up by 23% year-on-year. Assets under management totalled euro 503 million, corresponding to an increase of 42% versus September 2004. Other aspects BES Group was the first Portuguese financial institution to adopt the Equator Principles The Equator Principles is a set of environmental and social benchmarks for managing environmental and social issues in development project finance in the emerging markets. Once adopted by banks and other financial institutions, the Equator Principles commit the adoptees not to . The Equator Principles are a set of guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. voluntarily followed by financial institutions to manage social and environmental issues arising from project finance operations The execution of the joint finance mission to provide financial advice and guidance, support of the procurement process, providing pay support, and providing disbursing support.See also financial management. with a capital cost of US$50 million or more (roughly euro 40 million). By adopting the Equator Principles, BES Group undertakes to subject the approval of credit operations to compliance with these principles and to make public the number of projects financed, and their categorisation by social and environmental risk criteria. 10. MERGER BY INCORPORATION OF BIC INTO BES On September 19th, BES's Board of Directors approved a proposal for the merger by incorporation of Banco Internacional de Credito, SA into Banco Espirito Santo, SA, which should be concluded by the end of 2005. This operation is part of the Group's strategy for creating shareholder value, which assumes that a single commercial and branch network will induce in·duce v. 1. To bring about or stimulate the occurrence of something, such as labor. 2. To initiate or increase the production of an enzyme or other protein at the level of genetic transcription. 3. business growth - by broadening the scope of the offer of products and services and the capacity to attract clients, raising quality standards and building up brand value - and strengthen the Group's competitiveness, through increased efficiency and profitability. Besides positioning the Group as the holder of the third largest branch network at national level, promoting the Espirito Santo brand value, and broadening the bonded client base, this operation, will also afford integration synergies of euro 24 to 28 million per year, which roughly corresponds to 8% of the Group's operating results. The costs attributed to the integration process will be charged to a 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). provision (IAS 37) to be charged in the last quarter of 2005. At the time of its integration into BES, it is important to recognise the crucial contribution given by BIC over the years to the Group's positioning and development, particularly after the market's liberalisation n. 1. Same as liberalization. Noun 1. liberalisation - the act of making less strict liberalization, relaxation alleviation, easement, easing, relief - the act of reducing something unpleasant (as pain or annoyance); "he asked the nurse . The creation of BIC in 1986 actually represents an historical landmark as it coincided with the return of the Espirito Banco Group to financial activities in Portugal. THE BOARD OF DIRECTORS
BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2005
---------------------------------------------------------------------
Sep 04 Sep 04 Sep 05
PCSB IFRS IFRS
(eur '000) (eur '000) (eur '000)
---------------------------------------------------------------------
---------------------------------------------------------------------
NET ASSETS
Cash and deposits at Central
Banks 613 586 614 055 672 949
Loans and advances to credit
institutions 770 396 770 456 471 903
Financial Assets held for trading 2 161 046 2 161 046 3 606 152
Other financial assets at fair
value through the P&L - - 2 047 969
Financial Assets available for
sale 5 524 139 4 445 507 3 167 460
Other loans and advances to
credit institutions 4 764 999 4 797 260 5 389 479
Loans and advances to customers 27 781 430 27 892 675 30 773 298
(Provisions) (438 356) (792 318) (868 541)
Financial Assets held to maturity 502 584 502 584 597 810
Financial Assets with repurchase
agreements - - -
Fair value of Hedging
derivatives 176 704 176 704 59 268
Non current assets held for sale - - -
Property and equipment - - -
Other tangible assets 339 177 329 802 350 774
Intangible assets 141 832 86 270 73 893
Investments in associated
companies 46 617 54 783 58 123
Current tax assets 5 224 5 224 20 601
Deferred tax assets - 94 158 209 793
Other assets 2 332 297 1 267 445 1 533 317
---------------------------------------------------------------------
TOTAL ASSETS 45 160 031 43 197 969 49 032 789
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES
Amounts owed to central banks 126 748 126 748 387 231
Financial liabilities held for
trading 587 918 587 918 1 622 362
Other financial liabilities at
fair value through the P&L - - -
Amounts owed to other credit
institutions 6 368 783 6 386 453 7 884 803
Amounts owned to customers 19 435 871 19 489 334 18 157 059
Debt securities 13 118 338 11 440 116 14 590 537
Financial liabilities associated
to transfered assets - - -
Fair value of hedging derivatives 151 664 151 664 88 928
Non current liabilities held for
sale - - -
Provisions 558 111 75 149 112 111
Current tax liabilities 8 624 8 624 23 032
Deferred tax liabilities - 24 526 169 784
Capital instruments - - -
Other subordinated liabilities 1 533 504 1 572 690 2 080 827
Other liabilities 452 539 797 765 972 725
---------------------------------------------------------------------
TOTAL LIABILITIES 42 342 100 40 660 987 46 089 399
---------------------------------------------------------------------
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 - - 313 992
Other reserves and retained
earnings 197 230 104 642 63 304
(Treasury stock) - ( 100 174) ( 89 039)
Net income for the year 173 530 77 269 208 018
(Anticipated dividends) - - ( 33 480)
Minority interests 647 171 655 245 80 595
---------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2 817 931 2 536 982 2 943 390
---------------------------------------------------------------------
---------------------------------------------------------------------
TOTAL LIABILITIES + SHAREHOLDERS'
EQUITY 45 160 031 43 197 969 49 032 789
---------------------------------------------------------------------
BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED INCOME STATEMENT AS AT 30 SEPTEMBER 2005
--------------------------------------------------------------------
Sep 04 Sep 04 Sep 05
PCSB IFRS IFRS
(eur '000) (eur '000) (eur '000)
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest Income 1 615 150 1 608 769 1 470 789
Interest expense 1 097 669 1 095 103 935 989
--------------------------------------------------------------------
Net interest income 517 481 513 666 534 800
--------------------------------------------------------------------
Dividends on securities 16 215 16 215 31 350
Commissions and other similar income 327 015 327 015 353 319
Commissions and other similar
expenses 33 091 33 091 48 365
Gains and losses in financial assets
at fair value 9 683 9 683 ( 70 778)
Gains and losses in financial assets
available for sale 111 915 46 398 113 839
Gains and losses in foreign exchange
revaluation 6 989 6 989 80 100
Gains and losses in the sale of
other assets 56 906 56 906 33 773
Other net income from banking
activity 38 648 76 822 58 898
--------------------------------------------------------------------
Banking Income 1 051 761 1 020 603 1 086 936
--------------------------------------------------------------------
Staff expenses 244 988 356 779 310 093
Other administrative expenses 215 209 223 304 238 871
Depreciation 98 303 75 980 59 929
Provisions net of reversals 33 184 9 184 22 149
Loan impairment net of reversals and
recoveries 203 946 203 946 187 275
Other financial assets' impairment
net of reversals and recoveries 18 121 18 121 24 622
Other assets' impairment net of
reversals and recoveries 3 622 3 622 ( 1 234)
Equity in earnings of associated
companies 3 571 3 571 4 860
--------------------------------------------------------------------
Income before taxes 237 959 133 238 250 091
--------------------------------------------------------------------
Taxes
Current 33 286 33 286 57 570
Deferred - 2 751 ( 20 595)
--------------------------------------------------------------------
Income after taxes 204 673 97 201 213 116
--------------------------------------------------------------------
Minority interests 31 143 19 932 5 098
--------------------------------------------------------------------
Net income 173 530 77 269 208 018
--------------------------------------------------------------------
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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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" . |
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