01Q 2022 Results

12 May 2022

Caixa Geral de Depósitos releases its 2022 1st quarter consolidated results

(unaudited accounts)

CGD is, after 11 years, recognized as investment grade by the three international rating agencies that atribute its rating. Net income of €146 million achieves an ROE (return on equity) of 7.2%. 2021-2024 Strategic Plan in progresso.

Highlights

Caixa Geral de Depósitos group’s consolidated net income for first quarter 2022 was up 80.5% over 1Q2021 to €146 million, equivalent to ROE (return on equity) of 7.2%. In March 2022, Fitch upgraded its rating on CGD to investment grade for the first time since the loss of this status 11 years ago. CGD has now been awarded investment grade status by the three international agencies that oversee its rating.

Execution of the 2021-2024 Strategic Plan continued, fulfilling CGD's ambition to continue to be a leading bank in customer and society service, supporting performance levels in 2024 in line with European banking practices in terms of profitability and capital strength.

Business volume was up €1.6 billion compared to 2021, recording growth in credit and resources, with international activity following the growth in Portugal, with an increase of over €650 million.

Corporate lending in the first quarter was up 8.6%, in contrast to a market downturn and the SME (Small and Medium Enterprises) credit portfolio was up by 9%. Reference should also be made to the growth in the sale of core products to corporates, including non-financial insurance (up 33%), bank guarantees (up 18%) and factoring and confirming (up 29%) and particularly as regards the contracting arm of the Flexcash platform, with growth of 35% over first quarter 2021.

Mortgage loans to personal customers in Portugal were up 20.3% in the quarter to €871 million. Consumer credit was, in turn, up 65%, owing to investments made in improving the quality of service and reducing funds approval and disbursement times.

Customer deposits were up 1.3% by €900 million across the quarter in Portugal, particularly in the corporate segment (up 3.3%).

There has been another increase in the number of active digital banking customers to 2.1 million at the end of March 2022. The number of financial transactions across the quarter was, in turn, up 9% year-on-year.

The steady decline in recurrent cost-to-income to 49% was indicative of high levels of efficiency gains and improved returns.

Asset quality remained stable with an NPL ratio net of impairment of 0%. Held-for-sale property was down 8.2% to €368 million, its lowest since 2008. New impaired credit totalled €22.9 million in first quarter 2022, which, with recoveries of €21.6 million, translated into a cost of credit risk of 1 bp, in a return to pre-pandemic levels.

International activity contribution to the Group's net income was up 29% to €37.9 million, over the first quarter of 2021, representing around 26% of the consolidated net income. The regulatory costs for the year 2022, totaling €73.5 million, were fully accounted for in the first quarter, as has been CGD's practice.

CGD continues to enjoy a robust capital status, with a fully loaded CET1 ratio of 18.2% − higher than the average for Portuguese and European banks. The tier 1 and total ratios stood at 18.3% and 19.7% respectively. The regulatory capital requirements applicable in 2022 display a reduction of the Pillar 2 requirement from 2.25% to 2.00%, as opposed to an increase in the average of European banks.

This high level of solvency and improvement in the supervisor’s perception of CGD’s overall risk allowed the early redemption of the additional €500 million tier 1 issuance on 30 March 2022 as the first contractually scheduled call date. This perpetual issue, with a yield of 10.75%, had been launched in March 2017 under the recapitalisation plan agreed between the Portuguese state and the European Commission. Its redemption will allow significant annual interest savings and increase the capacity for organic capital generation.

At the beginning of 2022, the MREL (Minimum Requirement for Own Funds and Eligible Liabilities) requirements applicable to CGD as of January 1, 2024 were updated to within the expected values. CGD estimates that the direct impacts of the Russian invasion of Ukraine have no direct materiality in its activity, given the residual exposure of CGD and Portuguese companies, in general, to these two countries.

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.

In December 2021, the shareholding in Banco Comercial do Atlântico (BCA) was no longer classified as “Non-current assets held for sale”. For this reason and in accordance with the provisions of IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operating Units” the consolidated income statement as of 31 March 2021 has been restated.

The financial metrics in this presentation refer to March 31, 2022, unless otherwise stated. These may be estimates subject to revision. Solvency ratios include net income for the period, unless where otherwise noted.

Global economic activity decelerated in the early months of 2022, due to the impact of the new wave of the pandemic and the invasion of Ukraine by Russia at the end of February, which implied a deterioration in the growth prospects of the global economy in the short term and greater inflationary pressures. The prospects of growth of the Portuguese economy in the period 2022-24 have been revised downwards by the Bank of Portugal and inflation will be substantially higher. Geopolitical instability implies that the magnitude of the economic impact of the conflict is uncertain, involving the risk of materialization of more adverse scenarios.

In light of this framework, with reference to the information available at the time, CGD estimated and reflected in its financial statements, for the period that ended in 31 March 2022, its best estimate of the financial effects arising from these events, including with regard to the valuation of its assets and the measurement of expected losses in the loan portfolio, which will be subject to continuous monitoring and review.

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 1T2022”. In the event of any inconsistency, the original version prevails.

Caixadirecta

Caixadirecta

01Q 2022 Results

Caixa Geral de Depósitos releases its 2022 1st quarter consolidated results

(unaudited accounts)