CGD Group Consolidated Operations

30 Oct 2018

Consolidated results
3rd Quarter 2018*

(Unaudited financial information)

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Third quarter results confirm an increase in core profitability and improved asset quality following the successful implementation of the Strategic Plan acknowledged by a rating upgrade.

Highlights

CGD’s consolidated activity continued to be positively impacted by the implementation of its strategic plan which generated net income of €369.3 million, in the first nine months of 2018, equivalent to a ROE(1) (return on equity) of 6.7%;
This level of profitability, above the forecast set out in CGD’s strategic plan for 2018 (5%), reflects the evolution of the following accounts:
- CGD Portugal’s net interest income was up 4.0% over the first nine months of 2017 to €546.4 million. Consolidated net interest income, impacted by adverse foreign exchange effects in Angola and Macau was down 2.4% to €886.5 million;
- An improvement of 8.8% in net fees and commissions in the first nine months of 2018, in comparison to the same period 2017;
- A visible 12.4% reduction in operating costs(2);
The maintenance of a low cost of credit risk of 0.26%, confirming the quality of CGD’s assets as well as their coverage ratio;
Net core operating income before impairments was up 23% over the end of the first nine months of 2017 to €554 million;

CGD’s total operating income of €1,330.1 million, in the first nine months of 2018, was down €195.7 million year-on-year 2017, having been sharply impacted by the expected reduction of net trading income, owing to its highly expressive proportion in 2017;

(EUR Million)

Core Activity Evolution
Core Activity Evolution	2017-09	2018-09	Var. (Abs)	Var. (%)
Net interest income	909	887	-22	-2.4%
of wich CGD Portugal	526	546	21	4.0%
Net fees and commissions	333	362	29	8.8%
Recurrent operating costs	792	695	-98	-12.4%
Net core operating income before impairments.⁽²⁾	449	554	105	23.4%
Provisions and impairments for credit risk (net)	41	49	8	19.1%
Non-control. interests and results ass. companies	-12	12	24	-
Recurrent net operating income before impairments	396	517	121	30.5%
Net income	-47	369	416	-

CGD’s efficiency level continued to progress favourably with a cost-to-income ratio of 51%;
Net income of €369.3 million in the first nine months of 2018 was sharply up over the negative €46.8 million of September 2017;
CGD’s asset quality continued to show remarkable improvement with the CGD Group NPL (non-performing loans) ratio reaching 9.6%, when considering the sale of a credit portfolio concluded in early October;
Without considering the effect of this disposal, the NPL ratio at the end of the third quarter was 10.5%, with impairment and collateral coverage ratios on the said date of 61.5% and 42.1% respectively (total coverage ratio of 103.5%);
Total resources continue to benefit from the preference of CGD’s customers with domestic activity comprising a total amount of €70,968 million;
Increase of 26% in new mortgage lending operations, an increase of 230 million euros compared to the first nine months of 2017;
New factoring and confirming operations increased by 18%, equipment and property leasing by 38% and 26%, respectively, over the first nine months of 2017;
Credit evolution marked by the reduction of NPL’s. Nonetheless, the performing credit stock is up 3% over the same period last year;
CGD continued to enjoy a highly favourable liquidity status with €11.9 billion in eligible assets included in the Eurosystem pool and an LCR (liquidity coverage ratio) of 253%;
The phased-in and fully implemented CET 1 ratios both stood at 14.6%. The phased-in tier 1 and total ratios of 15.6% and 17.0%, were indicative of the robustness of CGD’s capital position, even without any phasing in period for the implementation of IFRS 9 in first quarter 2018;
CGD’s performance in implementing its strategic plan and the completion of its recapitalisation plan in 2018, together with the favourable economic environment in Portugal, were reflected in Moody’s two notch upgrade of CGD’s rating from Ba3 to Ba1, in October.

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

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⁽¹⁾ Net ROE from current activity = (Net Income + nonrecurring costs + Non-controlling interests) / Average Shareholders' equity (13 observations).
⁽²⁾ Excluding non-recurring costs of M€ 44.3 in 2018 and M€ 272.5 in 2017 for staff reduction programs as well as administrative expenses.
^(*)The 2017 September values have been restated, considering BCG Espanha, BCG Brasil and CGD Investimentos CVC as a non-current asset held for sale. Mercantile Bank Holdings was already reclassified as such since December 2016. The whole analysis in this document was done comparably to the September 2017 restated accounts.
This document is an English translation of the Portuguese language document “Press Release - Resultados Consolidados – 3º Trimestre de 2018”. In the event of any inconsistency, the original version prevails.

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CGD Group Consolidated Operations

Consolidated results
3rd Quarter 2018*

(Unaudited financial information)

CGD Group Consolidated Operations

Consolidated results3rd Quarter 2018*

(Unaudited financial information)

Consolidated results
3rd Quarter 2018*