CGD Group Consolidated Operations

10 Mar 2017

Caixa Geral de Depósitos S.A. (CGD): Improved financial strength.

Significant reduction in credit at risk, with increased impairment coverage. Recapitalisation plan to be concluded.

Highlights

While advancing in its recapitalisation plan, CGD has completed a management assessment of its assets following the valuation principles of a new relevant private investor, as agreed with DGComp.
This exercise produced €3,016.9 million of new impairment and provisions for 2016.
Following the significant increase of impairment and provisions, together with credit write-offs, CGD reduced its credit at risk to 10.5% of its credit portfolio.
Coverage by impairments reached 79% including 100% coverage achieved in the corporate loans segment.
Credit more than 90 days overdue coverage reached 123.9% increasing 21.7 p.p. when compared to 2015.
The referred amount of €3,016.9 million recorded as impairment and provisions was decisive for net income of €-1,859.5 million achieved in 2016.
Core operating income, in 2016, comprising the sum of net interest income and commissions, net of operating costs in 2016, was up 68.7% over the preceding year to €368.1 million, having benefited from the performance of net interest income and operating costs.
Net interest income was up 5.5% by €60.2 million over the preceding year to €1,144.9 million.
Total operating income was down €451.7 million to €1,547.2 million, in 2016, in comparison to the preceding year. This decrease resulted essencially from the €266.4 million reduction in income from financial operations, which amounted to €79.5 million, and from other operating losses of €189.0 million (also a consequence of the asset assessment exercise).
Operating costs, in 2016, were down 9.1% over the preceding year, having benefited from containment across all of its component parts. Excluding the recognition of the nonrecurring cost of the pre or early retirement programme in progress (Horizonte plan) in 2015 and in 2016, the reduction would have been 5.7%.
CGD Group’s consolidated net assets were down 7.3% over the end of 2015 to €93,547 million at the end of 2016.
Customer resources were down 5.1% over the preceding year to €69,680 million.
The reduction in deposits was mainly due to the institutional clients segment, while the individuals segment experienced a slight decrease as a consequence of a strong placement effort of OTRVs (Portuguese Public Debt) throughout the year.
Loans and advances to customers (gross), including loans with repurchase agreements, were down 3.7% over the preceding year to €68,735 million, strongly influenced by write-offs.
The loans-to-deposits ratio, in December 2016, was 90.6% against 90.1% in December 2015, reflecting the strong liquidity position of the Group.
CGD Group had total financing of €3,527 million from the ECB at the end of 2016 (up €761 million over December 2015), 3.8% of total assets, clearly showing its comfortable liquidity position.
The LCR (liquidity coverage ratio) of 181.1% was higher than regulatory requirements.
The phased-in common equity tier 1 (CET 1) and total ratios calculated under CRD IV/CRR rules were 7.0% and 8.1%, respectively, in December 2016.
Considering the component parts of the recapitalisation plan already implemented in January 2017 (capital increase in kind – Parcaixa shares and CoCo bonds – and the elimination of available negative items), in addition to the components planned for 2017 (capital increase of €2,500 million by the state, as well as the market issuance of €500 million in AT1 (additional tier 1) subordinated debt), the pro forma values of the phased-in and fully implemented Common Equity Tier 1 (CET 1) ratios at 31 December 2016, would amount to 12.0% and 11.8%, respectively.
CGD’s Tier 1 and Total phased-in ratios will, in turn, be 13.0% and 14.1%, after the conclusion of the Recapitalization Plan.
These ratios decisively increase CGD’s financial strength, building the foundation to preserve CGD’s leadership position of the Portuguese financial system, and its role supporting families and corporates.

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CGD Group Consolidated Operations

Caixa Geral de Depósitos S.A. (CGD): Improved financial strength.

Significant reduction in credit at risk, with increased impairment coverage. Recapitalisation plan to be concluded.