9M2023 Results

10 Nov 2023

Caixa Geral de Depósitos releases its 9M2023 consolidated results

(unaudited accounts)

Organic capital generation exceeds public investment of the Recapitalisation Plan. Private component paid in full. Best result in the stress test among banks supervised by the ECB.Around €2 million a day in dividends delivered in 2023.

Highlights

Caixa Geral de Depósitos group’s consolidated net profit of €987 million in the first 9 months of 2023 reflects the economic environment and the development of its transformation cycle. The evolution of net interest income and international activity contributed to a higher level of income, superseding the increase in operating costs in an inflationary environment. This contribution enabled CGD to achieve €9.4 billion in equity capital and to generate, since 2017, organic capital of €4.1 billion, exceeding the Recapitalisation Plan’s €3.9 billion. It should be remembered that this Plan involved a capital increase with three components: 2.5 billion euros in cash, 945 million euros through the delivery of bonds subscribed by the Portuguese State in 2012 and 499 million euros through the delivery of shares representing 49% of Parcaixa, S.A..

In September, following authorisation from the supervisor, CGD made a dividend pay-out of €713 million and paid €1,675 million of the €2,500 million in public investment, representing 2/3 of the total.

The fact that CGD came in top position in the banking groups supervised by the ECB and achieved 3rd position with the lowest capital reduction among the 70 banks included in the EBA 2023 EU-Wide Stress Test bears witness to the high quality of its assets.

The recurring cost-to-income ratio, sustained by high levels of efficiency and improved earnings, was down to 25.8%.

Consolidated customer deposits totalled €79 billion and €69 billion in the case of domestic activity, with CGD retaining its leading market share of 23.1%, in addition to its leading position in the personal customers segment with 31.4%.

Customer deposits in the domestic market were down 4.9% over December 2022, followed by a trend reversal in the third quarter with an increase of around €200 million.

CGD’s consolidated total of €53 billion in loans and advances to customers of which €45 billion in Portugal, remained stable in comparison to the same period last year. In domestic terms, this volume represents a market share of 17.8%, enabling CGD to maintain its leading position, especially in terms of mortgage loans (23.3%), in which its continues to be the market leader in a environment with a significant level of early repayments.

CGD actively promoted support to households with greater difficulties, restructuring more than 40 thousand loans by October 2023, including the proactive renegotiation of 20 thousand loans with spread reduction and 12 thousand contractual changes from variable rate to fixed rate. About 4,600 loans were also renegotiated under legislative measures. Of these, about 1,200 loans were restructured under Decree-Law No. 80/2022, and about 3,400 operations benefited from the State subsidy in accordance with Decree-Law No. 20/2023). CGD, as a one-off market development, also implemented an extraordinary support to lower-income households, characterized in Decree-Law No. 20-B, reducing the spread of mortgage loans by 0.5 p.p. in the instalments of around 2,600 operations until the end of 2023. It should also be noted that there were about 50 requests per day to freeze the mortgage loan instalments for a period of 2 years, under the recent Decree-Law 91/2023.

Consumer credit of €262 million, retained its growth trend over 2022.

The growth of loans to SMEs was 2.1%, higher than the 1.3% growth in loans to corporates and to the public sector, compared to December 2022 CGD also consolidated its leadership of the equipment leasing market with a market share of 24.4% in March 2023 according to the latest available data.

In terms of corporate business special reference should also be made to the 64% growth of sales on the Flexcash digital payment management platform and expressive 79% increase in "green" vehicle lease operations, over the same period 2022.

In Portugal, CGD reduced its fees, as a result of not increasing the fees prices, which implied a fees reduction in relation to the level of inflation recorded. At the same
time, CGD exempted commissions on several operations, which resulted in a 4% decrease in income from services and commissions, a trend that should increase in the last quarter.

The total number of 2.31 million active digital banking customers (personal and corporate) was up 5.5% by 120 thousand over the same period last year. The mobile channel recorded a 10.3% growth of 156 thousand customers to 1.68 million users. There were more than 190 million remote financial transactions (+5%). Sales on digital channels accounted for 81% in terms of individual customers in Portugal. Online operations involving consumer credit, accounted for 17% of the applications approved, up 55% over December 2022.

Marked by a strong component of innovation and focusing on customer needs, the Caixadirecta app has been completely redesigned with new layouts, simpler application processes and a strong financial and digital literacy component.

CGD recorded an NPL ratio (EBA Risk Dashboard) of 2.09% in the first 9 months of 2023, with a total NPL ratio, net of impairment, remaining at 0% (zero). The cost of credit risk of 0.36% reflected a conservative and predominantly preventative approach.

The capital ratios fulfil the regulatory requirements by a wide margin, even after the early repayment of the Tier 2 issue in June and dividend payment in September. The CET 1 ratio stands at 20.1%, more than double the regulatory requirement, and the Total Capital ratio at 20.3%, more than 50% of the requirement.

The MREL ratio equalled the amount of own funds and eligible liabilities, equivalent to 27.86% of total riskweighted assets as opposed to the 26.44% requirement applicable from the beginning of 2024.

Fitch Ratings upgraded its rating on CGD to BBB in September, with outlook remaining stable. At the same time, the long term senior non-preferred debt rating was also upgraded from BB+ to BBB- to investment grade status and tier 2 debt upgraded from BB to BB+. This was the 3rd upgrade by a rating agency in 2023, reflecting CGD’s good performance.

CGD continues to make an active contribution to sustainable development and was the only Portuguese financial institution in The Banker’s sustainable banking revenues ranking. It also announced its Carbon Neutrality Transition Plan that sets decarbonisation goals and objectives for 2030, both for its own operations and the most carbon-intensive sectors.

On a brand level, CGD was distinguished, in the third quarter, as the "Company with the Best Corporate Reputation in the Banking Sector", in Portugal, and came 15th in Merco’s TOP 100 global ranking. It also won the Gazet International Global Magazine prizes for the "Best Banking App Portugal 2023" with its Caixadirecta app; "Best Banking Digital Assistant Portugal 2023" for the Caixadirecta app’s digital assistant; and "Digital Culture Portugal Initiative 2023” with Digital Talks.

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 the shareholding in 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 September 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 September 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 economy is expected to continue to grow at a moderate pace, influenced by tightening financial conditions and weak growth in global trade. In the Euro Area, after weak growth in the first half of 2023, annual GDP growth is projected to be 0.7% and 1.0% in 2023 and 2024, respectively, and a return to a pace close to its potential in 2025.

International prices continue to support the reduction in inflation, despite the upward revision in energy prices. In the Euro Area, inflation is projected to fall to 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025. Excluding energy and food prices, inflation is expected to stand at 5.1 % in 2023, 2.9% in 2024 and 2.2% in 2025.

Increases in ECB interest rates have been reflected in a worsening of private sector funding costs and weaker dynamics of bank loans. However, it is still to be expected that part of the increases in official interest rates that have already occurred have not yet been fully reflected in the funding conditions of the economy.

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 9M 2023”. 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.