1H2023 Results

21 Jul 2023

Caixa Geral de Depósitos releases its 1H2023 consolidated results

(unaudited accounts)

Net income for the half year offsets past losses. Caixa pays, in 2023, €1.2 billion of the recapitalisation amount, with a dividend payment of €713⁽¹⁾ million and the redemption of its €500 million Tier 2 issue.

Highlights

Caixa Geral de Depósitos group’s consolidated net profit of €608 million in first half 2023 is a sign of its recovery of recent years and the current scenario of interest rate increases. This contribution enabled the profit made since its recapitalisation of 2017, to offset its accumulated losses across the years 2011 to 2016. The average return on equity (ROE) in the last decade was 0.9%, evolving in the post-recapitalization period (2017-1H2023), to 7.7%.

A dividend distribution of €352 million for 2022 was approved in General Meeting. This dividend was the highest ever and was accompanied by a distribution in kind for the amount of €361 million, subject to the authorization of the European Central Bank, comprising the surrender of the ownership of its headquarters building to its sole shareholder, for the amount of €713 million, paid in 2023.

Early payment of the Tier 2 issuance for the amount of €500 million was made in June, in full settlement of private sector financing in the 2017 recapitalisation.

These operations as a whole represented Caixa’s payment of €1.2 billion of the amount of its 2017 recapitalisation in 2023, in its payment of €1,675 million of the €2.5 billion in public investment and representing 2/3 of the total.

The current cost-to-income ratio was down to 27.3%, on the back of high levels of efficiency and a higher level of income.

Customer deposits totalled €79 billion on a consolidated basis and €69 billion in terms of domestic activity in which Caixa retained its market lead of 23%, as was the case in the individual customers segment with a market share of 31%.

Caixa achieved a consolidated total of €53 billion in its loans and advances to customers, of which €45 billion in Portugal, stabilising in year-on-year terms. In domestic terms this volume represents a market share of 18% and preserves Caixa’s leading position, particularly in mortgage lending (23%).

The amount charged in commissions decreased by 5%, compared to the same period last year, with a continuation of the decline expected until the end of the year.

Caixa also consolidated its lead of the equipment leasing segment with a market share of 24%.

Consumer credit (new loans) was up 18.4% over the same period to €180 million. Providing customers with technologically advanced solutions developed under the 2021-2024 strategic plan, with remote contracting representing 53% of total operations, contributed to such a positive level of evolution.

In corporate terms reference should be made to the 52% growth of business on the Flexcash digital payment management platform and expressive increases in trade finance products.

The number of active digital banking customers was up 7% over the same period last year to 2.3 million (individual and corporate). The mobile channel recorded 16% growth to 1.6 million users and the proportion of sales on digital channels to individual customers in Portugal totalled 82%.

Caixa recorded an NPL ratio of 2.48% in first half 2023, with the NPL ratio net of impairment remaining at 0% (zero). The cost of credit risk, reflecting a conservative and predominantly preventative approach, stood at 0.40% Capital ratios comfortably exceeded regulatory requirements to CET 1 and total capital ratios of 19.3% and 19.6%, respectively, even after early repayment of the tier 2 issue.

The MREL ratio equalled the amount of own funds and eligible liabilities equivalent to 27.09% of total risk-weighted assets and exceeded the requirement of 26.44% applicable from the beginning of 2024.

Caixa’s performance merited the recognition of the rating agencies. DBRS upgraded its rating on Caixa to BBB (high) in May and Moody’s upgraded its BCA (baseline credit assessment) rating to baa2 - the same level as for the Portuguese Republic - and attributed a positive outlook on Caixa’s debt rating. Subordinated debt, rated at Baa3 also improved to investment grade.

DISCLAIMER

The financial statements have been prepared on the basis of the International Financial Reporting Standards (IFRS) as adopted in the European Union in accordance with Regulation (EC) No. 1606/2002 of the European Council and of the Parliament of July 19 and provisions of Decree-Law No. 35/2005 of February 17. The financial information reported is unaudited.

The shareholding in Banco Comercial do Atlântico (BCA) was classified under "Non-current assets held for sale" in December 2022, and in June 2023 Flitptrel IV SA and Flitptrel Porto Santo SA were also classified under this heading. Therefore, and for comparative purposes only, the amounts related to the consolidated balance sheet as of June 30, 2022 and December 31, 2022 disclosed in this document were restated, as IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations” only requires the restatement of the income statement.

The financial metrics in this presentation refer to June 30, 2023, unless otherwise stated. These may be estimates subject to revision. Solvency ratios include net income for the period, excluding the maximum distributable amount according to dividend policy, unless where otherwise noted.

World economic activity continues to be conditioned by high inflation and the tightening of monetary and financial conditions. In the Eurosystem projection of June 2023, world growth drops from 3.3% in 2022 to 2.9% in 2023 ― due to the evolution of the more developed economies ―, remaining around 3% in 2024-25. Growth in external demand for the Portuguese economy is expected to slow down from 7.8% in 2022 to 1.4% in 2023, in line with the evolution of imports from trading partners. This evolution takes place in a context of recomposition of global demand, with an increase in the weight of services, including non-tradables, to the detriment of consumption of goods and investment. In the short term, the decrease in inflation results from the adjustment in the prices of energy goods. In the case of the less volatile components, inflationary pressures associated with the dynamism of the labor market and, consequently, wage increases, particularly in advanced economies, point to a more gradual slowdown. Thus, inflation in the Euro area is expected to decrease from 8.4% in 2022 to 5.4%, 3% and 2.2% in 2023, 2024 and 2025, respectively. As for monetary and financial conditions, they became less favourable, reflecting higher interest rates and an appreciation of the Euro.

This document is only intended to provide general information and does not constitute investment advice or professional advice, nor can it be interpreted as such.

This document is an English translation of the Portuguese language document “Resultados Consolidados 1S2023”. In the event of any inconsistency, the original version prevails.

Press Release - Read or Download here the full version.
Presentation - Read or Download CGD Consolidated Results presentation.

Caixadirecta

Caixadirecta

1H2023 Results

Caixa Geral de Depósitos releases its 1H2023 consolidated results

(unaudited accounts)