CGD Group Consolidated Operations

31 Jul 2020

Consolidated results
1st Half 2020

(Unaudited financial information)

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Consolidated net income totalled €249 million (€198 million on a recurring basis). Results impacted by preventative impairment increases.
CGD remains fully operational and has significantly enhanced its support to households and corporates. First half 2020 results impacted by the response to the Covid-19 pandemic.

Highlights

Consolidated net income for first half 2020 was down 41% over the same period 2019 to €249 million, equivalent to a ROE of 6.2% (down by a year-on-year 4.5 pp).

This amount includes an extraordinary gain of €51 million (after tax) arising from actuarial gains in liabilities with post-employment benefits (pension fund and medical plan). Current net income of €198 million was therefore down 30% over the current income in first half 2019. ROE stood at 5%;

The cost of credit risk totalled 0.31% owing to a €156 million increase of impairment and provisions in anticipation of the effects of the Covid-19 pandemic. Without this increase the ratio would have remained negative;

Recurring operating costs, down 7% over June 2019, reflected improved efficiency levels as shown by the recurring cost-to-income ratio of 44%⁽¹⁾ in terms of domestic activity;

Customer deposits were up €4.9 billion in the half year. This was essentially on account of the resources taken by CGD Portugal, fuelled by higher levels of household savings and showing our customers’ trust in Caixa;

The corporate credit stock in Portugal (excluding the construction and real estate sectors) grew 8.5% across the 1st half year, which was the largest semi-annual growth in the last eight years, strengthening the support for corporates.

In the production of mortgage loans, CGD maintained in the semester the trend of increasing its production share, which reached 20%, despite the 2% reduction compared to the same period in 2019, reflecting the slowdown resulting from the effects of the pandemic.

Improvement of asset quality with the non-performing loan ratio down to 4.4% which, together with impairment increases resulted in an NPL ratio net of impairment of 0.6% (considering all credit impairments);

Capital ratios of 16.6% for core capital (CET 1) and 19.1% for total capital were above the expectable average for euro zone banks;

CGD entered into a new €1 billion TLTRO (“targeted longer-term refinancing operation”) with the ECB.

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 February17. The financial information reported is unaudited.

– The financial metrics in this presentation refer to June 30, 2020, unless otherwise stated. These may be estimates subject to revision. Solvency ratios include net income for the period.

– The first months of 2020 have been marked by the COVID-19 pandemic. As a consequence of the spread of the disease, with confirmed cases in more than 200 countries and territories, drastic measures have been taken to contain it, including the restrictions on mobility of the population, the closure of national borders and conditioning in a wide range of economic activities. Several countries lifted their lockdown restrictions in the second part of the half year, enabling a resumption of economic activity albeit subject to the application of limitations on different sectors. Consequently diverse economic indicators referring to the
first quarter have confirmed a sharp deceleration of worldwide economic activity, suggesting a global recessionary scenario with high levels of uncertainty over its depth and duration.
Impacts, albeit uncertain, are naturally expected on the group’s activity and its capacity to achieve its economic-financial goals. Their extent will be contingent upon a multiplicity of factors such as the depth of the economic crisis, its length, the economic sectors most affected and the type and impact of the monetary and fiscal policy measures adopted and to be adopted by the diverse European Union central banks in the future.
In light of these uncertainties, and based on the information available at this time, CGD estimated and recognized in the semester the financial effects of this pandemic, including the valuation of financial assets and the measurement of expected losses in the loan portfolio, which will be subject to continuous reassessment.

– This document is intended for general information only and does not constitute investment recommendation or professional guidance and may not be construed as such.

– This document is an English translation of the Portuguese language document “Press Release - Resultados Consolidados 1º Semestre de 2020”. 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.

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¹⁾Excluding non-recurring costs.

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