Espirito Santo Financial Group Announces Consolidated 2001 Results.Business Editors LUXEMBOURG Luxembourg, province, Belgium Luxembourg, Du. Luxemburg, province (1991 pop. 232,813), 1,706 sq mi (4,419 sq km), SE Belgium, in the Ardennes, bordering on the Grand Duchy of Luxembourg in the east and on France in the south. & PORTUGAL--(BUSINESS WIRE)--April 23, 2002 Espirito Santo Santo, New Hebrides: see Espíritu Santo. Financial Group SA (NYSE NYSE See: New York Stock Exchange and Lisbon Stock Exchange Lisbon Stock Exchange (LSE) Stock exchange trading stocks, bonds, and unit trusts. The BVL general index is the exchange's official index. : ESF (1) (Extended SuperFrame) An enhanced T1 format that allows a line to be monitored during normal operation. It uses 24 frames grouped together (instead of the 12-frame D4 superframe) and provides room for CRC bits and other diagnostic commands. ) -- Consolidated Net Interest Income up 20.7 per cent -- Average market share in Portugal increases to nearly 17.0 per cent -- Trading, Commissions and Insurance results severely affected by very negative performance of Portuguese capital markets -- Consolidated Net Income down by 89.7 per cent -- Restructuring of life assurance and other business lines in course -- Restructuring of non-life company in course -- Streamlining of commercial banking operations in course -- Capital increases at major subsidiaries Espirito Santo Financial Group SA ("ESFG") (NYSE and Lisbon Stock Exchange: ESF) announced today the un-audited consolidated results for 2001. ESFG'S 2001 un-audited consolidated results were severely affected by the 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 Portuguese economy, which is estimated to have grown around 1.5 per cent in 2001, against 3.4 per cent in the previous year. In addition to this, it reflected also the effects of the decline in stock market activities and prices at the Lisbon stock exchange, where the PSI-20 index fell almost 25.0 per cent in the course of the year, whilst transaction volumes declined over 48.0 per cent and equity market capitalization Equity Market Capitalization A measure of the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole. reduced by 16.2 per cent. Finally, bad weather conditions in early 2001 had a negative impact on casualty insurance results. However, in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite this negative environment, ESFG's financial subsidiaries saw their global average market share improve by around 1.0 per cent to approximately 17.0 per cent, 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 group's strategic objectives (target market share for 2005: 20.0 per cent). A further 140,000 clients were added by ESFG's retail and commercial banking subsidiaries and the number of products per client increased to 3.85, ahead of the target for the year (target number of products per client for 2002: 4.3). Significant progress was achieved in the area of multi-channel See multichannel. distribution of products in 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 , where the subscribers to the direct banking services of ESFG's commercial banking subsidiaries increased by 143.0 per cent, leading to more that 10.0 per cent of all low value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. transactions being undertaken via the 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 services. Meanwhile, the 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. mechanism continues to perform well, with over 90.0 per cent of life products sold through the branch networks of ESFG's commercial banks and about 10.0 per cent of new mortgages being marketed by the insurance company's agents. Main item analysis In spite of the negative background, ESFG's consolidated net interest income increased 20.7 per cent in 2000 to reach 616.0 million Euros reflecting a combination of an increase in loan volume and a slight improvement in margin, at the level of ESFG's main commercial banking subsidiaries in Portugal. However, this was not sufficient to compensate for the effects of the very poor Portuguese capital markets performance on trading and new issue activities, as well as on the insurance portfolios. These are the fundamental reasons why ESFG's un-audited consolidated net income suffered a decline of 89.7 per cent in 2001 to 11.0 million Euros. Indeed, trading results(1) declined 46.6 per cent over last year's figures, which had already shown an important slowdown in the last quarter of 2000. However, if we exclude the gains originating from foreign exchange transactions, the full impact of the Portuguese capital markets situation is even more noticeable. As can be expected, fees and commissions suffered as well from the above mentioned factors, with a decline of 6.3 per cent in 2001, against the previous year. Whilst "classic" fees and commissions performed reasonably at the level of pure commercial banking activity, the absence of significant new issue activity and the reduction in volumes traded in the stock exchange led to substantial reductions in fees, both at the level of investment banking, as well as stockbrokerage activities. The investment bank's main activities in the equity capital markets in Portugal were reduced to the PT Multimedia exchange offer and the Benfica issue. Outside Portugal, it was active 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. (Inditex Inditex, Industrias de Diseño Textil, S.A., (IBEX-35:ITX), or ("Textil Design Industries, Inc.") is a large Spanish corporation and one of the world largest fashion groups. and Iberia Iberia (ībĭr`ēə), ancient country of Transcaucasia, roughly the eastern part of present-day Georgia. It was inhabited in earliest times by various tribes, collectively called Iberians by ancient historians, although Herodotus called issues) and in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. through its own unit in that country (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. IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ). Transactions in the syndicated loan Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. , bond and commercial paper markets centered mostly in the Iberian Iberian Any member of a prehistoric people of southern and eastern Spain. They were largely untouched by the migrations of Celtic peoples to northern and central Spain beginning in the 8th century BC. Culturally they were influenced by Greek and Phoenician trading colonies. market (BES Finance, Sol Sol, in Roman religion Sol (sŏl), in Roman religion, sun god. An ancient god of Mesopotamian origin, he was introduced (c.220) into Roman religion as Sol Invictus by emperor Heliogabalus. Melia Melia genus in the family Meliaceae. Melia azederach, Melia dubia much used as a shade tree. The seed causes severe diarrhea with dysentery. There may also be excitement and dyspnea. and Avanzit) and the 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 market (Federative fed·er·a·tive adj. Forming, belonging to, or of the nature of a federation. fed  er·a Republic of Brazil, Globalpar, CESP CESP - Common ESP , TelespCelular,
Globocabo and others).In contrast, merger and acquisition activities acquired a more salient profile during the course of 2001, highlighted in the specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. press, which ascribed to the investment bank pre-eminent pre·em·i·nent or pre-em·i·nent adj. Superior to or notable above all others; outstanding. See Synonyms at dominant, noted. [Middle English, from Latin prae positions in relevant league tables in the Iberian and Brazilian markets. Another activity which is acquiring significantly higher international profile for the investment bank, is project financing Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. , where the Portuguese based team was complemented in 2001 with a new team based in London, which started activities in May. As a consequence of reduced activity, at ESFG's stockbrokerage subsidiary, brokerage fees declined approximately 50.0 per cent in the course of 2001 and the company's own investment portfolio suffered from the Portuguese capital markets decline. Nevertheless, the stockbrokerage subsidiary managed to end the year in second place amidst a·midst prep. Variant of amid. [Middle English amiddes : amidde; see amid + -es, adverbial suffix; see -s3.] Portuguese operators. The insurance operation's performance was affected by three sorts of factors; on the one hand, severe weather conditions felt in early 2001 in Portugal, which caused an increase in claims, on the other, the strategic shift in life products production, and finally, the effect of declining share prices in the insurance company's investment portfolio. The first factor, combined with increased provisions and pension fund contributions led to a significant loss at the level of the non-life operation. The life assurance operation introduced a strategic shift away from guaranteed return savings products in favor of upon the side of; favorable to; for the advantage of. See also: favor classical life risk products and private pension plans, which have a higher profitability, utilize less capital and present less risk in uncertain market conditions. This has an effect or reducing the life assurance operation's immediate market share from 25.8 per cent to 18.0 per cent. This is reflected in the 11.6 per cent decline in insurance revenues to 1,348.9 million Euros. In addition, the decline in stock exchange prices triggered the need for additional provisions at the level of the life assurance company; of the total 105.0 million Euros of unrealized investment portfolio losses incurred at end 2001, 10.5 million Euros were provisioned in 2001 and the remaining will be provisioned until end 2003. This has been accounted for in the items insurance revenues and insurance underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and related expenses. The 14.4 per cent increase in salaries and benefits reflects to a sizeable extent, the effects of a full period of consolidation of the new 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. stockbrokerage and asset management subsidiaries and similarly of Via Banque in France. 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). Initiatives, New Developments and Capital Increases Although some of the factors which negatively affected the consolidated results of ESFG in 2001 are outside of their control, the management teams of ESFG's subsidiaries have introduced restructuring initiatives and new developments have been started with a view to enhancing the performance of the individual units as well as to create benefits at the consolidated ESFG level. Some subsidiaries have had their capital increased to support further business development and ESFG has contributed directly or indirectly to such increases. A capital increase from 1,000 million Euros to 1,500 million Euros at the level of Banco Espirito Santo ("BES") was approved at the end of the year. This increase, achieved both by incorporation of reserves and by a rights issue, was completed in February 2002. At BES, 372 further employees have taken early retirement in 2001, (231 net reduction) with clear reflections in future expected cost performance, albeit at a significant immediate pension fund cost (planed total early retirements for 2001/2002: 790). Moreover, the project of integration of the IT platforms of BES and Banco Internacional de Credito was completed, which is expected to bring considerable gains for both institutions. Finally, the newly created mortgage credit unit will be added to the already existing platforms of shared services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. , which cover banking operations and domestic and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . In the insurance area, the Tranquilidade group of insurance companies undertook a restructuring both in terms of their positioning within the ESFG ownership structure and in terms of business strategy. From an initial position where most insurance operations were held by ESFG through its sub-holding company Partran, the shareholding structure changed to one where most of the non-life and life bancassurance activities are now held through Bespar, the sub-holding company which also holds most of ESFG's participation in BES. This brings the shareholdings of BES and of the insurance operations which utilize BES's distribution capabilities closer together. The straight non-life activity which distributes mostly through agents is still held through Partran. As a consequence of this shareholding restructuring, in 2001, the results of Companhia de Seguros Tranquilidade Vida (life) Companhia de Seguros Tranquilidade (non-life), and ES Seguros (non life bancassurance) were presented separately for the first time. Tranquilidade Vida's capital was increased from 100.0 to 250.0 million Euros. This increase will be paid up over a five-year period, at the end of which it is expected that ESFG will control 90.5 per cent of the capital of Tranquilidade Vida, with the remaining being held by a group of outside investors. A first tranche Tranche One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics. tranche A class of bonds. of this capital increase, in the amount of 50.0 million Euros, was paid up in the course of 2001. A new business plan is being implemented at the level of the life operation, whilst the negotiations for a new business partner at the level of the non-life company, abandoned in the second half of 2001 due to adverse market conditions prevailing in the insurance market at that time, may well resume if conditions in the market so justify. In France, following the full acquisition of Via Banque ("VB") in July 2001, the fundamental objectives of VB and Banque Espirito Santo et de la Venetie ("BESV") in the course of the year related to the preparations for the forthcoming merger of their activities. For this purpose they co-ordinated their operational procedures The detailed methods by which headquarters and units carry out their operational tasks. , undertook the necessary work towards the merger of their working teams and of their information systems, as well as their accounting, payment and back office work. All such targets were met at the end of the year. BESV's capital was increased in December 2001 by 22.2 million Euros to reach 62.5 million Euros. This will help BESV to pursue its business development plan in 2002, as well as to acquire VB from ESFIL (a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of ESFG which had purchased VB from BNP Paribas BNP Paribas (Euronext: BNP, TYO: 8665 ) is one of the main banks in Europe and France. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. in several stages from October 2000 to June 2001), a transaction which effectively took place at the end of January 2002. The principal conditions were therefore set for the full merger with VB, which has effectively taken place in mid April 2002. The new merged entity will retain the name of Banque Espirito Santo et de la Venetie and a new business development plan will be implemented once the full merger has taken place. In Spain, the two asset management companies acquired in 2001, merged to form a single new company, Espirito Santo Gestion. ESFG's Portuguese stockbrokerage operation is also investing in an integration with its recently acquired Spanish counterpart counterpart n. in the law of contracts, a written paper which is one of several documents which constitute a contract, such as a written offer and a written acceptance. . In early October 2001, ESFG's ordinary shares started trading in the Lisbon stock exchange ("BVLP BVLP Bolsa de Valores de Lisboa e Porto (Portuguese Stock Exchange) "). In February 2002, BVLP merged with Euronext to become Euronext Lisbon Euronext Lisbon is a Portuguese stock exchange headquartered in Lisbon. It belongs to the NYSE Euronext group, the first global stock exchange. Euronext Lisbon trades equities, public and private bonds, participation bonds, warrants, corporate warrants, investment trust , so ESFG's ordinary shares are now traded in the Luxembourg and London stock exchanges London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. and Euronext Lisbon, whilst ESFG's ADSs are traded in the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. . In early November, ESFG undertook an issue of convertible bonds in the amount of 200 million Euros in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. market. This was complemented by another European issue in the amount of 110 million Euros, undertaken in February 2002.
ESPIRITO SANTO FINANCIAL GROUP SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(millions of Euros, except in earnings per share)
Audited Unaudited
Dec-31-00 Dec-31-01
ASSETS
Cash and due from banks 1,699.5 1,991.6
Interest-earning deposits with banks 2,183.6 3,497.2
Trading account securities 623.3 625.6
Investment securities 7,676.2 8,963.5
Loans and advances to customers 23,626.9 26,037.8
Allowance for loan losses (625.6) (637.4)
Accrued interest income 271.5 262.9
Property and equipment 540.7 529.8
Other assets 1,386.0 1,376.3
TOTAL ASSETS 37,382.1 42,647.3
LIABILITIES
Deposits from banks 1,885.0 3,698.4
Demand deposits 6,095.1 6,619.9
Time deposits 11,722.8 12,020.7
Securities sold under
repurchase agreements 699.5 761.9
Other short-term borrowings 2,229.7 1,929.3
Insurance policy reserves 4,011.4 4,487.3
Accrued interest and other liabilities 896.2 1,152.1
Corporate borrowings and long-term debt 7,945.3 10,167.9
TOTAL LIABILITIES 35,485.0 40,837.5
MINORITY INTERESTS 1,727.8 1,716.8
SHAREHOLDERS' EQUITY
Common stock, $10 per value 479.1 479.1
Treasury stock, at cost (72.8) (73.1)
Share premium - -
Retained earnings (233.3) (326.8)
Revaluation reserve 3.0 -
Accumulated other comprehensive
income, net of taxes (6.7) 13.8
TOTAL SHAREHOLDERS' EQUITY 169.3 93.0
TOTAL LIABILITIES and SHAREHOLDERS' EQUITY 37,382.1 42,647.3
ESPIRITO SANTO FINANCIAL GROUP SA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(millions of Euros, except in earnings per share)
Audited Unaudited
Dec-31-00 Dec-31-01
INTEREST INCOME
Interest on loans 1,267.0 1,631.3
Interest and dividends on securities
Trading securities 11.7 28.0
Investment securities 266.4 242.0
Other interest income 200.3 244.6
Total interest income 1,745.4 2,145.9
INTEREST EXPENSE
Interest on deposits 705.6 859.9
Interest on securities sold
under repurchase agreements 22.7 28.2
Interest on short-term borrowings 116.3 95.0
Interest on corporate borrowings
and long-term debt 255.1 402.4
Interest on convertible bonds 1.3
Total interest expense 1,099.7 1,386.8
Net interest income 645.7 759.1
Provisions for loan losses (135.2) (143.1)
Net interest income after
provision for loan losses 510.5 616.0
OTHER INCOME
Fee and commission income 315.3 295.4
Net trading account profit 31.0 (2.3)
Net investment securities gains 31.7 (50.9)
Net gains on foreign currency transactions 113.1 147.1
Insurance revenues 1,525.2 1,348.9
Other operating income 119.4 139.0
Total other income 2,135.7 1,877.2
OTHER EXPENSES
Salaries and benefits 361.3 413.5
Occupancy costs 48.1 53.9
Insurance benefits and claims 1,302.5 1,167.6
Insurance underwriting and related expenses 77.6 113.4
Depreciation 59.0 62.9
Amortization 70.9 82.7
Other expenses 369.5 429.8
Total other expenses 2,288.9 2,323.8
Income before income taxes and
minority interests 357.1 169.4
Income taxes (74.6) (49.4)
Minority interests in income
of consolidated subsidiaries (177.9) (109.2)
Earnings in associated undertakings 1.7 0.2
NET INCOME 106.3 11.0
NET INCOME PER SHARE 2.42 0.25
Weighted average number of
shares outstanding: 43,943,526 44,253,510
ESPIRITO SANTO FINANCIAL GROUP SA, LUXEMBOURG
Societe anonyme Holding
BALANCE SHEET
Audited Unaudited
Dec-31-00 Dec-31-01
Euros Euros
ASSETS
Intangible fixed assets
Unamortized costs in respect
of debt securities and capital increase 3,416,371 5,978,332
Financial fixed assets
Investments in subsidiaries 866,424,194 919,799,147
Loans and advances to subsidiaries 163,107,100 194,471,977
Other financial assets 14,767,464 13,274,446
Current assets
Debtors 26,921,070 45,354,368
Cash and short term deposits with banks 5,326,704 124,863,004
Treasury shares 56,608,667 79,448,538
Prepayments and accrued income 822,082 563,586
------------- -------------
1,137,393,652 1,383,753,398
============= =============
LIABILITIES
Capital and reserves
Subscribed capital 479,085,550 479,085,550
Share premium 170,526,368 170,526,368
Legal reserve 15,100,000 24,000,000
Free reserve (27,987,556) 83,041,582
Other reserve 56,608,667 79,448,538
Income carried forward 466,277 2,385,847
Income for the period 177,466,655 6,961,299
Liabilities
Long term liabilities
Floating rate notes 136,000,000 136,000,000
Convertible bonds - 200,000,000
Short term liabilities
Other debts 130,127,691 202,304,214
------------- -------------
1,137,393,652 1,383,753,398
============= =============
ESPIRITO SANTO FINANCIAL GROUP SA, LUXEMBOURG
Societe anonyme Holding
STATEMENT OF INCOME
Audited Unaudited
Dec-31-00 Dec-31-01
----------- -----------
Euros Euros
EXPENSES
Interest and similar charges 6,831,904 7,728,448
Amortization of costs in respect of
debt securities and capital increase 1,852,737 2,004,968
Other expenses 4,608,373 5,570,031
----------- -----------
13,293,014 15,303,447
----------- -----------
Income for the period 177,466,655 6,961,299
----------- -----------
190,759,669 22,264,746
=========== ===========
INCOME
Income from financial fixed assets 187,986,237 21,492,099
Income from current assets 2,768,776 768,271
Other income 4,656 4,376
----------- -----------
190,759,669 22,264,746
=========== ===========
--------
(1) Includes Net Trading Account Profit, Net Investment Securities
Gains and Net Gains on Foreign Currency Transactions
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