Dear Shareholder,
It is with great pleasure that I present Banco BPI’s management report for 2018, a year in which the Bank achieved its highest results ever.
During this year, which was one of great effort, challenge and strong pressure from our competitors, we had the satisfaction of maintaining the lead in values as important for the Group as service quality, reputation, and the confidence of our Clients in Portugal.
The excellent commercial results achieved in 2018, as reflected in an increase in recurring gross income in Portugal of 9%, were supported by strong commercial activity in Portugal and increasingly closer proximity to the Clients: Customer deposits, the Bank’s most stable source of funding, increased by circa €1 800 million (+9.3%); and the total loan portfolio expanded by 5.7%, underpinned by a 16.1% increase in loans to companies in Portugal (+1 136 million). In turn, the Bank increased new production of residential mortgage loans, and personal loans and car financing by 21% and 27%, respectively, surpassing the previous year’s growth.
In the Portuguese market Banco BPI attained market shares of 9.9% in deposits, 15.2% in capitalisation insurance, and 10.1% in credit, consistently gaining market share in loans to companies (+1.1 p.p. to 9.5%) and raising the market share in residential mortgage loans to 11.4% (+0.2 p.p.).
Driven by its commercial dynamics, the Bank pursued its digital transformation path, being leader in homebanking penetration and continuing to equip its commercial teams and networks with all the means required to provide an increasingly high-quality and closer service to the Clients.
In our activity in Portugal, BPI reported a recurring net profit, i.e., excluding the extraordinary gains on the sale of equity holdings, of €218 million (+28.5%). These results correspond to a return on tangible equity (ROTE) of 8.8%.
Following a year when costs were cut by 5.3%, the growth of results in 2018 was mostly determined by the growth of income: recurring gross income increased by 9%, supported by the decisive contribution of net interest income, up by 8.8%, and fee and commission income, which increased by 5.6%. Notwithstanding the activity growth, recurring costs contracted by 0.1%, while the Bank continued to stand out for the excellent quality of its loan portfolio.
2018 was also marked by important developments for BPI Group, which will have implications in the future and in the manner in which it will face new challenges in the coming years.
The holding in BFA, probably the best bank in Angola, deserves a special note. On the one hand, amidst a particularly challenging economic environment, marked by a sharp devaluation of the local currency (-47.5% against the euro) and high average inflation (19.6%), BFA, thanks to the quality of its management team, obtained the highest profit in its history, of which €212 million would be attributed to BPI. On the other hand, BPI changed the accounting classification of this holding from “associated company” to “shares at fair value through other comprehensive income”, leading to a negative impact of €139 million on BFA’s contribution to the Group’s results. BPI believes that this is the more prudent accounting option and that it adequately reflects its current position in BFA (with no significant influence). After this change, the net profit of Banco BPI will reflect only BFA’s dividends distributed to BPI instead of the appropriation of profits.
Concerning the Bank’s strength, its high capitalisation levels deserve a note: the CET 1 and total capital ratios (fully loaded), considering the dividend distribution proposal, both increased by 1.5 p.p, to 13.8% and 15.5%, respectively.
Also worth stressing was the fact that in 2018 the three main international rating agencies raised their rating notations on BPI’s long-term debt, which are currently ‘investment grade’ by Moody’s, S&P and Fitch Ratings.
As to the public recognition earned by the Bank, I would highlight some of the many accolades received in 2018: BPI was elected “Best Bank in Portugal” in Euromoney excellence awards, and also “Trusted Brand in Banking” and “Brand of Excellence in Portugal”, both for the fifth consecutive year, amongst many others received for its positioning in the digital area.
The Portuguese economy has pursued its recovery, however the general backdrop remains challenging on account of the level of interest rates and the competitive pressures.
2018 also saw the completion of the 2019-2021 Strategic Plan: a Plan that combines ambition and values, built around the motto “Creating Value with Values”, and benefiting from the integration in the CaixaBank Group. Some of the Bank’s main objectives are to achieve sustained profitability growth, the transformation of the Customer’s experience, human capital development, improved efficiency and consolidation of the Bank’s reputation. The challenge is to promote businesses with growth potential and profitability, leverage the Group’s innovation capacity to maintain the lead of the digital transformation
process in banking, provide a better experience to the Customer and pursue in the path of growth and conquest of market share gains.
BPI’s mission will be to contribute to the financial well-being of its Clients and assert its role as a benchmark in socially responsible banking, based on the values of trust, service quality and social commitment.
Finally, I would like to express my recognition and gratitude to all those who daily allow ambitions to turn into successes: firstly, our Customers, who inspire us to be the reference bank in Portugal by honouring us with their preference and confidence, and all our Employees, for the dedication and competence with which they perform their functions in such a demanding context.
Pablo Forero