FY 2021 Results

11 Feb 2022

Caixa Geral de Depósitos releases its 2021 full year results

(unaudited accounts)

CGD achieves a return on equity of 7% (ROE) and a net profit of €583 million, with a 44% increase in profit from its overseas activities. Success of the Restructuring Plan recognized on a European level, by both market and regulators.

Caixa Geral de Depósitos group’s consolidated net profit was up 18.7% over 2020 to €583 million in 2021. This was equivalent to a return on equity (ROE) of 7%.

A decisive factor was the confirmation of the successful completion of the 2017-2020 Strategic Plan monitored by DG Comp (European Union Competition Authority). The success achieved and recognized at European level allowed CGD to pay dividends not initially foreseen in the Plan, supported by levels of efficiency, asset quality and solvency in line with the benchmarks for European banking.

The achievement of these objectives was recognised by the rating agencies. Moody’s upgraded its rating on two occasions, signalling a return to investment grade after a ten year period. Fitch changed its outlook to positive, in anticipation of an improvement in 2022, and DBRS affirmed its rating on CGD. Thus, CGD has been recognised as investment grade by two of the international agencies.

Business revenue was up 6.8% by €8.4 billion over 2020, fuelled not only by the growth of credit but also by resources, particularly customer deposits and sales of investment funds.

In a framework of recovery of the economy, consolidated credit was up by a significant 3.8%. The cumulative market share of new mortgage lending in Portugal totalled 23.8% in November 2021, with a 46% increase in loans over 2020. CGD’s growth continued to outpace the sector average with a strengthening of its market share over 2020.

In the case of loans and advances to companies, reference should be made to the contribution to the recovery of the Portuguese economy, with the marked growth of support solutions for SMEs, in such core products as medium and long term financing (up 12% in 2021 and up 34% in the period 2017/2021), trade finance (up 70% in terms of documentary credit and remittances), leasing (up 16% in equipment leasing) and insurance (up 22% in non-financial insurance).

With the end of the moratoriums in Portugal, support measures were created for families and companies, which involved adapting the financial plan of loans to the effective liquidity of customers.

Customer deposits were up 10% by €6.1 billion in 2021 in Portugal. This was essentially fuelled by higher levels of household savings and showing our customers’ trust in and loyalty to Caixa. There has also been a marked growth of 38% in investment in funds in Portugal, as a savings alternative in a context of negative interest rates.by €6.1 billion in 2021 in Portugal. This was essentially fuelled by higher levels of household savings and showing our customers’ trust in and loyalty to Caixa. There has also been a marked growth of 38% in investment in funds in Portugal, as a savings alternative in a context of negative interest rates.

Continued, expressive investment in digital transformation has enabled CGD to achieve a milestone of 2 million active digital customers and to maintain its status as the largest digital franchise operator in Portugal. The transactionality and ability to generate business in these channels continues to contribute to the bank's efficiency, with more than 94% of customer transactions taking place in non-face-to-face environments.

The decrease of 47.9% in the cost-to-income ratio reflected a sustained trend in the evolution of efficiency levels in a context in which the strong investment between 2017 and 2022 reached a value of 335 million euros in these 5 years.

The improvement in asset quality made it possible to achieve an NPL ratio, net of impairment of 0% (zero) when all credit impairment and a non-performing loans ratio of 2.8% are taken into account. The increase in the specific coverage level to 65.3% was substantially higher than the European banking average of 45.1%. Fresh credit impairment of €205.1 million in 2021, indicated a high level of recoveries (down €164 million) translating into a cost of credit risk of 8 bps.

The international activity reinforced its contribution to the Group's net profit, registering a growth of 44% to a value of €133 million (about 23% of the total).

In 2021, CGD was the first Portuguese bank to realise a €500 million sustainable debt issuance, at its lowest ever coupon rate for capital market issuances of 0.375%. The senior preferred debt issuance helped it to achieve the intermediate target set for the MREL ratios in January 2022.

CGD ended 2021 with a robust capital position. Its fully loaded CET1 ratio of 18.2% was well above the average for Portuguese and European banks. The Tier 1 and Total ratios, including net profit, were 18.2% and 19.7% respectively. Caixa was the 10th banking group with the lowest capital reduction among the 50 banks included in the EU stress test on the largest banks in the Single Supervisory Mechanism, in 2021.

Already in 2022, and applicable from that year onwards, the Pillar 2 requirement was set to 2%, which represents a reduction of 0.25%. The reduction of the requirement for Caixa, in a favourable trend to that registered for the sector (up from 2.1% to 2.3%), thus confirms the improvement in the Supervisor's perception of the institution's overall risk.

Also at the beginning of the year, CGD was authorised to exercise a call option on the AT1 issuance, enabling a substantial €54 million per annum reduction of costs. This will permit an annual saving of €54 million in future years, already reflected in 2022 at around €40 million across the last nine months.

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 shareholder position in Banco Comercial do Atlântico (BCA) is no longer classified as “Non-current assets held for sale” as of December 2021. The 2020 accounts have been restated for comparison purposes only.

The financial metrics in this presentation refer to December 31, 2021, unless otherwise stated. These may be estimates subject to revision. Solvency ratios include net income for the period, unless where otherwise noted.

In 2021, economic activity in Portugal and worldwide was significantly affected by the new variants of the Covid 19 pandemic and by the imposed containment efforts, conditioning a series of economic activities. As of the third quarter of 2021, these restrictions were gradually lifted, however the economic outlook remains surrounded by uncertainty, in part due to the emergence of a new variant and the need to reinforce and expand vaccination. The Portuguese economy maintains the recovery process that began in the third quarter of 2020, despite the longer impact on certain sectors and companies. Bank of Portugal and supranational institutions anticipate an acceleration of growth in 2022 as a result of the lifting of restrictive measures, the reduction in the savings rate and the recovery of the main trading partners. However, in the latest Financial Stability Report, Bank of Portugal warns of “uncertainty in the sanitary condition and the accumulation of some vulnerabilities that may materialize into risks in the medium term. The effects of the pandemic are not over, nor fully materialized, with uncertainty remaining about its true extent”. In light of these uncertainties, and based on the information available at this time, CGD estimated and recognized in its financial statements for the period ending on December 31, 2021 its best estimate of 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 monitoring and 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 “Resultados Consolidados 2021”. 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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Caixadirecta

FY 2021 Results

Caixa Geral de Depósitos releases its 2021 full year results

(unaudited accounts)