Banco BPI 2010

Transcription

Banco BPI 2010

Banco BPI 2010
This page was intentionally left blank.
Index
REPORT
Leading business indicators
Introduction
The identity of BPI
Financial structure and business
Distribution channels
The BPI Brand
Social responsibility
Human resources
Technology
Background to operations
Domestic Commercial Banking
Bancassurance
Asset management
Investment banking
Private Equity
International activity
Financial review
Risk management
Rating
Proposed appropriation of net profit
Final acknowledgements
4
5
11
12
14
15
18
25
28
27
40
56
57
61
64
65
69
101
124
125
126
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Consolidated financial statements
Notes to the consolidated financial statements
Statement of the Board of Directors
Statutory audit certification and audit report
Report and opinion of the Supervisory Board
127
136
237
239
240
THE BPI GROUP’S CORPORATE GOVERNANCE REPORT
Statement of compliance
Introduction
Guiding principles of the BPI Group’s governance policy
BPI Group’s Governing Bodies – structure, division of duties and functioning
The Group’s functional organisation chart
Risk management
Portuguese statutory auditor and external auditors
Remuneration
Shareholder structure, control and transferability of shares
Ethics and professional conduct
Communication with the market
Banco BPI shares
Dividend policy
Experience, professional qualification and other management and
supervisory positions exercised at companies by Banco BPI, S.A.’s governing bodies
246
255
256
257
300
302
303
306
324
325
331
332
334
335
Leading business indicators
(Consolidated figures in millions of euro, except where indicated otherwise)
2009
2010 ∆% 09 / 10
2006
2007
2008
Net total assets
35 565
Assets under management1
16 756
56 227
Business turnover2
28 263
Loans to Customers (gross) and guarantees3
Total Customer resources
27 964
6 784
Business turnover2 per Employee4 (thousands of euro)
Net operating revenue
1 018.1
129
Net operating revenue per Employee4 (thousands of euro)
Operating costs / net operating revenue5
56.6%
Net profit
308.8
Cash flow after taxation
410.3
Return on average total assets (ROA)
1.0%
Return on Shareholders’ equity (ROE)6
25.9%
Loans in arrears for more than 90 days (in the balance sheet) / Customer loans 1.1%
Loan impairments (in the balance sheet) / Customer loans
1.4%
0.16%
Net credit loss7
Adjusted net credit loss8
0.19%
Cover of pension obligations
110.7%
Shareholders’ equity
1 450.6
9.4%
Ratio of own funds requirements10
7.4%
Tier I10
Core Tier I10
5.9%
Adjusted data per share (euro)11
Cash flow after taxation11
0.53
0.40
Net profit11
0.154
Dividend11, 12
1.86
Book value11
Weighted average no. of shares (in millions)11
776.4
5.680
Closing price (euro)13
Total Shareholder return
56.3%
Stock market capitalisation at year end
4 491.6
Dividend yield
4.1%
692
Retail branches14 (number)
55
Corporate and institutionals centres network15 (number)
BPI Group staff complement16 (number)
8 288
40 546
17 628
64 521
32 483
32 037
6 904
1 215.5
138
53.7%
355.1
531.1
0.9%
24.7%
1.0%
1.4%
0.25%
0.23%
114.4%
1 635.1
9.9%
6.2%
5.4%
43 003
13 558
68 245
34 069
34 176
7 185
1 181.8
125
55.8%
150.3
493.0
0.4%
8.8%
1.2%
1.6%
0.32%
0.32%
98.7%9
1 498.1
11.3%
8.8%
8.0%
47 449
16 879
68 837
34 465
34 372
7 294
1 164.8
124
57.9%
175.0
437.7
0.6%
8.8%
1.8%
1.8%
0.50%
0.38%
108.3%
1 847.0
11.0%
8.6%
7.8%
45 660
18 043
69 667
34 449
35 218
7 338
1 098.8
115
61.2%
184.8
380.2
0.6%
8.8%
1.9%
1.9%
0.35%
0.46%
104.5%
1 446.6
11.1%
9.1%
8.7%
0.68
0.45
0.180
2.09
782.1
5.151
(7.0%)
4 073.6
3.2%
806
59
9 345
0.59
0.18
0.071
1.68
842.3
1.750
(64.4%)
1 575.0
1.4%
871
63
9 498
0.49
0.20
0.078
2.07
893.3
2.120
25.5%
1 908.0
4.5%
882
64
9 437
0.43
0.21
1.62
892.8
1.385
(31.5%)
1 246.5
892
67
9 494
(3.8%)
6.9%
1.2%
(0.0%)
2.5%
0.6%
(5.7%)
(7.0%)
5.6%
(13.1%)
(21.7%)
(13.1%)
5.6%
(100.0%)
(21.7%)
(0.1%)
(34.7%)
(34.7%)
1.1%
4.7%
0.6%
1) Amounts not corrected for double counting (investments of financial products in other financial products). Includes unit trust (mutual) funds,
Table 1
Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary
management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff pension funds).
2) Loans, guarantees and total Customer resources.
3) To ensure comparability, 1 266 M.€, 989 M.€, 903 M.€ and 828 M.€ of securitised mortgage loans (gross balance) written off from the balance sheet in 2007, 2008, 2009 and 2010,
respectively, were added back.
4) Number of Employees of the companies which are consolidated in full.
5) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue.
6) For the purpose of the calculation of the ROE, the revaluation reserves were excluded from the allocated capital.
7) Loan impairments in the year, deducted of recoveries of loans in arrears written-off (in the income statement) as percentage of Customer loans portfolio.
8) In the calculation of the above indicator, the following adjustments were taken into consideration:
in 2006, included 6.2 M.€ of impairments made at the beginning of 2007 and relating to the revaluation of fixed properties at 31 December 2006 (that amount was in 2007 excluded
from impairments);
in 2009, impairments for the year exclude the extraordinary charge made in December of that year (of 33.2 M.€);
in 2010, the utilisation of that extraordinary charge was added to impairments for the year.
9) Including contributions of 119.3 M.€ to the pension fund made at the beginning of 2009.
10) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements.
11) Corresponds to cash flow, net profit, dividends to be distributed and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-year
number in the case of the indicator “book value per share”), with the number of shares adjusted by the capital increase which took place in June 2008.
12) The net profit for 2010 was incorporated in full in reserves, resulting in the non-distribution of dividends.
13) Historical share prices adjusted by the share capital increase realised in June 2008.
14) Includes traditional branches, housing shops, investment centres and automatic shops in Portugal, branches in Angola, investment centres in Angola and branches in Paris.
15) Distribution network specialising in serving large and medium-sized companies, 1 Project Finance centre, Institutional centres, the branch in Madrid and corporate centres in Angola.
16) Group staff complement in the domestic activity and in the international activity. Includes term Employees and temporary workers, and excludes bursaries.
4
Banco BPI | Annual Report 2010
Introduction
A demanding mandate
The Board of Directors’ three-year term of office which terminated in 2010
coincided with the affirmation and unfolding of the worst financial and
economic crisis of the last 75 years, of truly world-wide proportions,
notwithstanding the varying scale of its regional repercussions.
Commencing in the spring of 2007 with the profound imbalance in the
United States housing market, the crisis began to spread to Europe in the
summer of that year and rapidly triggered major turmoil on the
international markets as a consequence of the loss of credibility in
financial institutions and systems, threatened by unsustainable leverage
levels. From the last quarter of 2008 onwards following the collapse of
Lehman Brothers and the contribution of an unavoidable contraction in
lending, the crisis became widespread and filtered through to economic
activity, generating in 2009 the biggest global recession since the 1930’s.
Notwithstanding the unequivocal hesitations and missteps, it is possible
today to acknowledge that the coordinated action of the principal
international monetary authorities and an unprecedented injection of
public funds permitted averting a repeat of the Great Depression of the
inter-war period. These initiatives created the conditions for the
progressive re-establishment of a “new normality” which seemed
possible at the start of the second half of 2009, even within the context
of the serious macroeconomic imbalances that will persist for a long
period in the United States, United Kingdom and in several of the most
important European economies.
Chairman of the Board of Directors
Artur Santos Silva
The illusion did not last for very long however: in May 2010, in the wake of the
difficulties announced in the last quarter of the preceding year, almost simultaneously
with the already-forgotten bankruptcy of Dubai, a tripartite team involving the European
Commission, the ECB and the IMF intervened in Greece, and in November of that year
(but for different reasons) in Ireland, thus giving expression to the so-called
sovereign-debt crisis, the third phase of the grave disruption initiated in 2007.
As for Portugal and the Portuguese financial system, this new phase is still extremely
demanding: in the first place, because it is no longer possible to talk about a global
crisis, globally managed, but rather a series of specific cases, with their own course and
their own management instruments, that weaken the more dependent and smaller
economies; secondly, because it is part of a group of critical countries and integrated
within a Monetary Union, it has to recoup credibility by means of a more stringent
adjustment programme, marked by a minimum margin of autonomy, inevitably recessive
and counter-cyclical, as borne out by a few simple statistics: the world economy, which
retreated 0.6% in 2009, should grow 5% in 2010 and by an estimated 4.4% in 2011;
the euro zone declined 4.9% in 2009, grew by 1.9% in the following year and it is
forecast to expand by 1.5% and 1.7% in the next two years. Conversely, the Portuguese
economy retreated 2.7% in 2009, probably grew 1.4% in 2010 and should once again
shrink by more than 1% in 2011, after having posted annual average growth of just
0.7% in the first decade of this century.
Report | Leading business indicators and Introduction
5
Security and strength
The economic landscape of the past three years, and of each one of them in particular,
had a very violent impact on the management of financial institutions, with special
incidence in Portugal because, for the reasons already cited – dependency, exposure to
debt, weak growth, relative size – it has accumulated all the effects of the crisis without
a single meaningful comparative advantage other than participation in the euro zone.
After having registered in 2007 its best-ever economic performance, BPI – just like many
other banks – suffered already in 2008 falls of 18% in domestic net operating revenue
and 58% in consolidated earnings, fruit of the vertical plunge in commissions associated
with the capital markets and in income generated from the asset management business,
the increase in loan impairments and from the pressure on net interest income stemming
from an unavoidable asymmetry in the repricing movement of resources and loans. Added
to all this are the persistent difficulties in funding, for no fault of its own, which
manifested themselves in the literal impossibility of accessing the medium and long-term
financial markets since the first quarter of 2010 and during extended periods in 2008
and 2009.
The Bank’s management, supported by the loyalty of its Customers, the permanent
backing of the Shareholders and the professionalism of its Employees, assumed this
challenging environment as an inescapable and lasting reality right from the third quarter
of 2007, striving to find in each new phase a balance between three major pillars:
security and solidity, defence of the market base and the institution’s profitability.
In any of these domains and in any of the period’s three years, BPI is ranked in first
place amongst the four largest Portuguese banks: it presents the highest capital ratios
and the lowest amount of capital increases since 2007, the best credit-risk indicators,
the lowest volume of central-bank funding, the most favourable leverage indicator, the
highest ROE, one of the best credit ratings, the best result in the stress tests disclosed in
2010 and one of the highest levels of new Customers captured.
As regards financial strength and security, which encompasses liquidity and capital
adequacy (capital and risks), the following points merit highlighting:
Liquidity
j The transformation ratio, represented by net lending over on-balance sheet Customer
resources, dropped from 130% to 113% between 2007 and 2010; taking into account
only deposits, it fell from 148% to 135%, the only decline amongst the banks
analysed;
j
6
The recourse to central-bank funding, mainly from the ECB, was zero in 2007, totalled
2.5 billion euro in 2009 and decreased to one billion euro in 2010, a third of the
amount presented by the second-placed institution;
Solvency
The non-performing loan ratio, which includes loans in arrears for more than 90 days
and doubtful loans, rose from 1% to 1.9% between 2007 and 2010, year in which the
second best bank posted a figure of 2.7%; in the same period, loan losses net of
recoveries climbed from 0.25 to 0.35%, while the second best bank posted 0.51%;
j
j
j
BPI’s core capital ratio climbed from 5.4% to 8.7%, the highest ever since 1996, even
without taking into consideration the introduction of the IRB standard; the tier 1 ratio
rose from 6.2% to 9.1%, the sample’s highest level, while it is a fact that between
2006 and 2011, BPI realised only one capital increase of 350 million euro, the lowest
figure of any of the other banks considered;
The indicators relating to capital already reflect the proposal which the Board of
Directors, in line with the Bank of Portugal’s general recommendation for the
Portuguese banking system, is going to present at the General Meeting – that there
should be no dividend distribution in 2010, with net profit being incorporated into
reserves;
Profitability
The return on BPI’s Shareholders’ equity dropped from 24.7% to 8.8% between 2007
and 2010, but was in those two years the highest amongst the biggest Portuguese
banks;
j
j
j
Net interest income after impairment charges, measured relative to average total assets,
attained the highest figure of the group in 2010 (1.2%) and equalled the sample’s best
levels in the 2005-2010 average (1.4%);
The Bank is adopting structural measures in order to reduce its operating costs and
bolster efficiency through the reorganisation of processes, the optimisation of the
central services and commercial networks and the cutback in headcount, by means of
early retirements, without replacement and without the recourse to capital increases. In
2009 and 2010, the accounts reflected the cost incurred with the early retirement of
535 people; and in 2008, the variable component of remuneration, which covered in
that year 80% of Employees, decreased by 58% and since then has not suffered any
alteration.
Portugal and Angola
Consolidated net profit for 2010 confirmed the fundamental trends previously identified in
the overall review of the past three years. As regards the security and financial strength
indicators – management’s primary concern in this exceptional climate – special mention can
be made from the outset of the improvement in the capital ratios (Basel II), with tier 1
climbing from 8.6%to 9.1%, the core tier 1 ratio from 7.8% to 8.7% and the total ratio from
11% to 11.1%. The loan portfolio, as well as the cost of credit risk, practically stabilised
while Customer resources rose 2.5%, permitting once again reducing the transformation ratio
of deposits into lending. Meanwhile pension liabilities are now 105% covered.
Report | Introduction
7
Consolidated net profit was 185 million euro and, as with earnings per share, advanced
5.6% when compared with the preceding year. Turning to costs and income, there was a
positive trend in net interest income and commissions, which increased by 7.7 and 0.8%
respectively, accompanied by a 0.3% decrease in administrative overheads, excluding the
impact of the early retirements programme. These performances were not sufficient to
prevent a 5.7% drop in consolidated net operating revenue, as a consequence of the
steep decline in profits from financial operations (-45%) and a negative change of 24.3
million euro in the caption operating income and expenses, due to circumstantial and
non-recurring reasons.
Profit from domestic operations improved 1.2%, with a contribution of 47% to
consolidated net profit, but continued to reflect inevitably the strong negative pressure on
net interest income exerted by the combined effect of the increase in the average cost of
resources, the increase – albeit moderate – in impairments, and the deceleration in the
growth in lending and commissions. Net profit from international activity for its part rose
9.7% to 98.3 million euro, of which roughly 94% (92.7 million euro) corresponds to the
appropriation of 50.1% of the individual profit of Banco de Fomento Angola (BFA). The
contribution from the 30% interest in BCI, in Mozambique, stood at 5.6 million euro,
corresponding to growth of close to 11%.
In a difficult economic environment, still marked by the important macroeconomic
adjustment carried out in the last two years, above all due to the drop in the oil price,
Angola’s economy grew by 4.5%, primarily thanks to the contribution from the non-oil
sector, and appears to have created the conditions for resuming a robust path in the next
few years after having averted a recession last year when it posted the lowest GDP
increase of the last ten years (+2.4%).
BFA has pursued unequivocally in 2010 the strategy of boosting its presence in every
area of financial activity; the workforce increased 11% to a total of 2 038 people, the
commercial network expanded by 14 units to total 143 selling points which added
105 thousand new Customers to a total which today exceeds 800 thousand. According to
a survey by Marktest Angola, BFA’s market share in attracting new Customers was 33%
and 35% as the main bank, the Angolan market’s best indicators. The Bank also
consolidated its leading position in virtual channels and electronic means of payment
with market shares varying between 20% and 35% of the stock of POS and ATM
terminals and active credit and debit cards, which already number more than 400
thousand. For its part, BFA Net now boasts a total of 135 thousand users. Customer
resources rose by 9.4%, which permitted achieving a 19% market share in deposits, the
second best, just as in 2009. On the other hand, the loan portfolio shrank 9.7% in dollar
terms and by 2.2% in euro, with the Bank maintaining fourth place in the ranking with a
share of 13%, thus translating the policy of very demanding and stringent risk evaluation.
The Bank presents globally very sound indicators, with a transformation ratio of 28% and
a loan provisioning index of 186%.
8
Recognition and trust
The resilience and flexibility that have been a hallmark of BPI’s response to the
circumstances of the crisis, in relative and absolute terms, is consistently reflected in the
external evaluation, commencing with the aforementioned rating and stress test
indicators, but also in a market appraisal supported on Customer surveys, of which the
following are the most salient results:
j
j
j
j
j
j
j
BPI obtained the best result in the stress tests carried out in July 2010, with a tier 1
ratio of 10.2% in 2011, in the worst-case scenario, which compares with the second
placed bank’s 8.4% and constitutes the 18th best performance from amongst the 90
most important European banking institutions;
for the fifth consecutive year, first place amongst the five biggest banks operating in
Portugal, in the ECSI Satisfaction indicator, a European survey monitored in Portugal by
the Universidade Nova de Lisboa and the Instituto da Qualidade;
first position amongst the five biggest banks operating in Portugal in the categories
Attendance, Products and Overall Satisfaction, included in the BASEF 2010, the
financial system’s barometer published over the last 20 years or so by Marktest, based
on four annual series of 15 thousand interviews;
for the third time in four years, first rated amongst the four largest private banks and
second place in the bank-sector ranking of Trusted Brands published by the Selecções
do Reader’s Digest;
best “Private Banking” in Portugal for the fourth consecutive year in the Euromoney
classification;
the Iberian Peninsula’s second best research team, as rated by the Institutional
Investors – All Europe and the best small & mid caps brokerage house, according to
Thomson Reuters, in the Extel Surveys;
in Angola, BFA was voted the most innovative bank and received for the eighth
consecutive year the Deutsche Bank Trust Company award for the best processing of
foreign operations, and was distinguished as the 2009-2010 Brand of Excellence by
Superbrands Angola.
On a different but related plain, it is important to underline that the Bank maintained
over the past three-year period its principal commitments in the patronage domain, in the
Culture, Education, Science and Social Solidarity fields, having even launched in the
last-mentioned area a new initiative – the Prémio BPI Capacitar, in the amount of 500
thousand euro, earmarked to support institutions and projects directed at improving the
living conditions of people suffering from permanent disabilities or handicaps.
The persistence of this set of results is consistent with an annual average intake of 150
thousand Customers in the last three years – systematically situated amongst the highest
amongst the banking community operating in Portugal – and with surveys which regularly
place the Bank within the top three slots in the Small Businesses segment, with market
shares which are virtually twice its natural share.
Report | Introduction
9
The trust and loyalty of Customers thus demonstrated will be crucial for confronting with
independence and determination, the latest developments of the so-called sovereign-debt
crisis, still suspended in a European debate to be concluded, but already unambiguously
reflected in the Portuguese reality through the rigorous 2011 State Budget which in turn
gave birth to the period of austerity indispensable for carrying out the far-reaching and
lengthy adjustment that the Portuguese economy needs.
The recessive nature of this adjustment is, at least in this first instance, undeniable and
unavoidable, with new consequences for the economics of financial institutions,
pressured by the deterioration in the risk profiles of companies and individuals, by the
anomalous functioning of the markets and by the regulatory pressure in favour of the
reinforcement of capital, even when this appears counterproductive.
As in the last three years, BPI will advance with its de-leveraging process, striving to
preserve through liquidity, credit and capital management, the levels of freedom
which enable a sustainable adaptation in tandem with maximum flexibility and
independence.
Board of Directors’ Executive Committee
Manuel Ferreira da Silva | Fernando Ulrich
(Chairman)
| Maria Celeste Hagatong | José Pena do Amaral |
António Farinha Morais (behind)
Pedro Barreto | António Domingues
10
(Deputy-Chairman)
(in front)
The identity of BPI
A company is just like a person: it has its own identity and personality, it stands out for its character, its
principles, its way of doing, its objectives.
Banco BPI’s identity is marked by the financial and business culture of Banco Português de Investimento.
The essential traits of this culture are management independence, organisational flexibility, team work,
recognition of merit, the ability to anticipate, strict management of risks and the secure creation of value.
Earning a just return from the Bank’s business operations through the adoption of superior management
and service practices constitutes a fundamental goal of our activity. The safeguarding of Customer
interests, with dedication, loyalty and confidentiality, is one the core principles of the business ethics and
code of conduct assumed by the Bank’s Employees.
An institution’s identity asserts itself through its own attributes, which gain consistency and credibility in
its daily interaction with Customers and the community. In particular, BPI values two of these attributes:
Experience and Harmony.
Experience is the reflection of the training undergone by our teams and the important professional capital
accumulated during the history of each one of the institutions which gave rise to the Bank. It translates
itself into the dimension of our commercial presence, the soundness of our financial indicators, the
security of our growth and in our proven ability to achieve and lead.
We wish to combine Experience with Harmony, which expresses the permanent ambition of serving our
Customers and the community with the highest standards of ethics and quality. It is a projected aspiration
for the future, always open-ended, imposed by the constant desire to refine so that we do better. It is our
most challenging mission that, in the final analysis, justifies all others.
Report | The identity of BPI
11
Financial structure and business
At the end of 2010, 82% of the Group’s Shareholders’
equity was allocated to domestic operations1, and the
remaining 18% to international activity.
The BPI Group – headed by Banco BPI – is a financial
and multi-specialist group, focusing on the banking
business, with a comprehensive spectrum of financial
services and products for corporates, institutional and
individual Customers.
Leading indicators by business segment
At 31 December 2010
The Group’s operations are mainly conducted in Portugal,
a developed and competitive market where BPI has a
strong competitive position – the third by turnover
amongst the privately held banks –, and in Angola, an
emerging economy which has recorded robust and
sustained growth in recent years, where BPI, through its
equity interest in BFA, is market leader.
Amounts in M.€
Domestic International
activity
activity
Net total assets2
Shareholders' equity
Loans to Customers3
and guarantees
Total Customers resources
Business volume4
No. of Customers (thousand)
No. of Employees
Distribution network (no.)
Consolidated
40 779
1 189
4 881
257
45 660
1 447
32
31
64
1
7
1 461
4 176
5 637
781
2 038
143
34
35
69
2
9
988
042
030
592
456
816
449
218
667
373
494
959
Table 2
Banco BPI
1.9%
2.5%
77.8%
17.8%
Capital allocated
Capital allocated
Capital allocated
Capital allocated
Investment Banking
Financial investments
and Private Equity
Domestic Commercial
Banking
Banco Português
de Investimento
100%
j
Equities
j
Corporate Finance
j
BPI Private
Equity
j
Private Equity
Private Banking
BPI Suisse (100%)
j
100%
j
Individuals and
Small Businesses
Banking
Corporate Banking,
Institutional Banking
and Project Finance
Participating
interests
Insurance
International
Commercial Banking
Allianz Portugal
Banco de Fomento
Angola
50.1%
Asset Management
BPI Gestão
de Activos
j
35%5,6
100%
Unit trust funds
management
j
BPI Pensões
Non-life and life-risk
insurance
Cosec
50%5,7
100%
j
Pension funds
management
j
j
Individuals Banking
j
Corporate Banking
j
Investment Banking
Banco Comercial e de
Investimentos
Mozambique 30%5,8
Export credit insurance
BPI Vida
100%
j
Portugal
Portugal
Spain
Portugal
Portuguese emigrant
communities9
Capitalisation insurance
Portugal
Portugal
Angola
Mozambique
Madrid branch
Figure 1
Note:
1)
2)
3)
4)
5)
6)
7)
8)
9)
12
The percentages indicated refer to the participations (direct and indirect) of Banco BPI in each company.
BPI Group adopted the geographical segmentation as the main basis for the segmentation of its activities, having defined two segments: domestic activity and international activity.
The total assets figure presented for each geographic segment is corrected for the balances resulting from operations between these segments.
Gross loans. Includes securitised mortgage loans derecognised from assets (gross balance of 828 M.€ at 31 December 2010).
Loans, guarantees and total Customer resources.
Equity-accounted subsidiaries.
In association with Allianz, which holds 65% of the capital.
In association with Euler Hermes, a company of Allianz Group.
In partnership with Caixa Geral de Depósitos and a group of Mozambican investors, which together, hold 70% of the share capital.
The BPI Group has overseas branches, representative offices and distribution agreements in overseas cities with large communities of Portuguese emigrants.
Domestic operations
Domestic operations correspond to commercial banking
business in Portugal, the provision overseas of banking
services to non residents – notably to communities of
Portuguese emigrants and the services provided at the
Madrid branch–, and to investment banking services,
private equity, asset management and insurance.
Domestic commercial banking operations is carried on by
Banco BPI, the fourth biggest financial institution
operating in Portugal (3rd among private banks), in terms
of business volume, serving more than 1.6 million
Customers holding market shares of close to 11% in
loans and resources.
Individuals and Small Businesses Banking serves
individual Customers and small businesses with turnovers
of up 5 M.€.
Corporate, Project Finance and Institutional Banking
serves companies with a turnover of more than 2 M.€,
operating in competition with Individuals and Small
Businesses Banking in the segment up to 5 M.€. Also
includes the provision of project finance services and the
relationship with Public Sector, State-owned Companies,
Municipalities and the State Business Sector,
Foundations and Associations.
BPI also makes available a broad range of life and nonlife insurance by means of a insurance distribution
agreement with Allianz Portugal, which is 35% held by
the BPI Group within the scope of the strategic
partnership with the Allianz Group.
Investment banking business is conducted by Banco
Português de Investimento and is structured into four
main areas: Equities, Corporate Finance – these within
the geographic confines of the Iberian Peninsula –,
Private Equity and Private Banking. BPI also has a team
dedicated to Angola and Mozambique.
BPI’s asset management – unit trust funds,
life-capitalisation insurance and pension funds – is
carried on by dedicated subsidiaries controlled 100%,
with the products being placed with Customers through
Banco BPI’s distribution network and Banco Português de
Investimento.
At the end of 2010, BPI Gestão de Activos was the
second biggest fund manager in Portugal, with a market
share of 17.2%, BPI Pensões was the second largest
pension fund manager with a 17% market share, and BPI
Vida had an 8.9% market share in the segment of
capitalisation and PPR products in the form of insurance.
Private equity invests directly, as well through the venture
capital funds, of which we highlight the venture capital
funds promoted by the BPI Group and currently managed
by a 49%-held associated company – Inter-Risco.
International operations
International operations encompass the business
conducted by Banco de Fomento in Angola (BFA) –
50.1% held by BPI in partnership with Unitel, owner of
the remaining 49.9% of the capital –, as well as the
appropriation of the results attributable to the 30%
interest held in Banco Comercial e de Investimentos
(BCI), in Mozambique.
BFA is a retail bank and has an ample base of deposits
and reduced transformation of deposits in loans. BFA
holds leadership positions in Angola, with market shares
of close to 19% and 13% in terms of loans and deposits,
respectively, and 30% in cards and payment terminals.
BFA has a structured and differentiated spectrum of
products and services for individuals and companies,
complemented in this case by the availability of project
finance, corporate finance and private equity services.
At the end of 2010, BFA served 781 thousand
Customers, through a distribution network with a strong
presence in Luanda and wide coverage throughout of the
whole territory, comprising 124 branches, 6 investment
centres and 13 corporate centres. The physical network is
complemented by homebanking services – BFA Net
Particulares and BFA Net Empresas.
BCI is a retail bank predominantly focused in collecting
resources and granting loans, in which activities the bank
has market shares of 27% and 33%, respectively. BCI
serves 262 thousand Clients via a branch network of
95 units, 218 ATM and 1 365 POS.
Report | Financial structure and business
13
Distribution channels
PORTUGAL
Viana
Braga Vila Real
Bragança
Porto
Viseu
Aveiro
Guarda
Coimbra
Castelo Branco
Leiria
Santarém
Banco BPI
Portalegre
Lisboa
Hamburg
Banco Português
de Investimento
Toronto
Évora
Açores
London
Paris
Setúbal
Rhode Island
Beja
Newark
Belgium
Luxembourg
BPI Suisse
Geneva
S.ta Maria – Azores (SFE)
Madrid
Madeira
Faro
Funchal – Madeira (SFE)
Macau (SFE)
Banco BPI (Cayman)
Cayman Islands (SFE)
Caracas
ANGOLA
Cabinda
Banco de Fomento
(Angola)
Zaire
Uíge
Luanda
Commercial Banking
Banks
Lunda-Norte
KwanzaNorte
Branches
Overseas branches
Malange
Bengo
BCI
(Mozambique)
Lunda-Sul
Kwanza-Sul
Johannesburg
Representative offices
Bengela Huambo
Bié
Moxico
Money remitter
Huíla
Investment Banking
Bank
Namibe
Cunene
Cuando-Cubango
4
Macau (SFE
)
Overseas branches
SFE – Sucursal Financeira do Exterior (off-shore financial branch).
Figure 2
Distribution network selected indicators
Banco BPI
Traditional branches
Paris branch (branches)
Investment centres
Corporate centres1
Housing shops
Automatic bank (ATM)
Active points of sale (POS)
Commercial partners
Internet Banking (active users)
Telephone banking (active users)
BPI Imobiliário (properties available)
696
12
39
54
15
1 670
51 353
29 179
BPI Net: 552 803
BPI Net Empresas: 64 002
BPI Directo: 359 874
715 785
Banco de
Fomento Angola
124
–
6
13
–
262
2 018
–
BFA Net Particulares: 130 167
BFA Net Empresas: 5 031
–
–
BCI – Banco Comercial
e de Investimentos2
89
–
–
6
–
218
1 365
–
E-banking Particulares: 14 217
E-banking Empresas: 2 852
–
–
Table 3
1) The corporate banking distribution network in Portugal includes 1 Project Finance centre, 6 institutional centres and a Madrid branch.
2) 30% shareholding.
14
The BPI Brand
categories “Relationship
Management” and
“Privacy and Security”.
This award stems from a
survey conducted
annually by the magazine
Euromoney, one of the
world’s most respected
financial sector
publications, with the
winners being selected
based on an assessment
made by their peers.
BPI’s Private Banking was
the most voted in no less than eleven categories.
In 2010, BPI renewed its leadership in the principal
accolades received consecutively over the last four years,
in domains such as Customer Satisfaction, Asset
Management, Private Banking, Brokerage and Research.
The Bank continued to focus its investment and
communication policy on Customer proximity and on the
quality of the service offered, while reinforcing its action
in social responsibility programmes, at the expense of
advertising spending on the more visible channels.
Reputation and recognition
BPI’s performance in various key areas of financial
activity continued to merit public recognition on the part
of different national and international independent
entities. Amongst other distinctions attributed to the
Bank, the following deserve special mention:
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BPI Asset Management
was voted for the third
year the Best National
Fund Manager of the
Year, and for the fourth
consecutive year, the Best
National Equities
Manager in the seventh
edition of the
Morningstar-Diário
Económico awards for the
best unit-trust funds.
Within the scope of this
classification, three BPI funds were also honoured in
different categories: Fundo de Investimento Mobiliário
BPI Reestruturações (restructurings), rated the Best
Global Equities National Fund; BPI Euro Taxa Fixa
(fixed-income), the Best Euro Bonds National Fund; and
BPI Universal, the Best Moderate Euro Mixed National
Fund.
For the fourth year in a row, BPI’s Private Banking was
acclaimed the “Best Local Private Banking” in Portugal
by the Euromoney Private Banking Survey. In the last
four years, it has also been ranked first in the
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BPI was rated the Iberian Peninsula’s Best Brokerage
House for Small & Mid Cap Equities in the last two
years in the Extel Surveys realised by the leading
international fund managers.
BPI’s Research team was
ranked the Iberian
Peninsula’s second best
within the context of the
Institutional Investors
All-Europe Research
Team, one of the sector’s
most prestigious awards.
This award emanates from
a survey conducted
amongst more than
1 900 investors, who
manage some 5.6 trillion
dollars in European
Equities.
For the fifth time in eight editions, BPI was rated the Best
Research House in Portugal, within the ambit of the
Investor Relations & Governance Awards 2010, organised
by Deloitte and the Diário Económico newspaper; a
special mention also of the acclaim for the best
recommendations produced by analysts from AQ Research
and Starmine.
Report | Distribution channels and The BPI Brand
15
Satisfaction and trust
In the 2010 edition of the Trusted Brands poll published
annually by the Reader’s Digest Selections, BPI attained
for the second year running second place amongst the
most trusted banking brands and first amongst private
institutions.
According to ECSI Portugal – National Index of Customer
Satisfaction, BPI occupies first place amongst the five
largest Portuguese banks and third place in the overall
ranking of Service Quality. This index, based on a
common European methodology, assesses the quality of
the products and services on offer on the local market
taking into account seven aspects: image, Customer
expectations, perceived quality, perceived value (price /
quality relationship), satisfaction, loyalty and complaints.
This position is confirmed by the Estudo de Base do
Sistema Financeiro (BASEF), published by Marktest, in
which BPI has the highest ever satisfaction index,
occupying top position amongst the Portuguese financial
system’s five biggest banks.
According to this study, BPI leads the ranking in all the
satisfaction indicators, namely, total satisfaction,
satisfaction with attendance and satisfaction with
products, as well as share of abandonment.
In analysing these results, it is important to underline
that the BASEF survey is compiled from market
perceptions, influenced by direct experience and the
16
volume of advertising expenditure. In the respect, the
results presented become even more meaningful when
one considers that BPI’s adspend in 2010 represented a
mere 2% of the amount spent by the five largest
Portuguese banks and that for the fourth consecutive
year, BPI has abstained from advertising through the two
most visible channels: television and outdoor.
Investment and communication
Last year the financial sector posted a 4% growth in
advertising spending, retaining seventh place out of all
the sectors of activity.
In total financial sector adspend, BPI climbed from 14th
to 12th slot with a market share of 1% of advertising
investment.
For the fourth consecutive year, BPI obtained the
financial sector’s best efficiency ratio, needing to invest
less than half of the second-placed peer for each unit of
top-of-mind advertising.
In the field of communication policy, the Bank
maintained its strategy of focusing primarily on the
quality of service offered, the Customer proximity
relationship and on boosting its involvement in the social
responsibility arena.
In this domain, the most salient aspects were:
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stepping up campaigns devoted to savings solutions,
with a significant educational component that
endeavours to make investors aware of the growing
importance of saving and diversifying their investments.
Examples of this are the campaigns dealing with
savings plans, the excellent results of the Fundo BPI
Brasil, diversification, guaranteed returns and tax
incentives;
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the creation of an in-house film on the BPI Brand,
directed at the entire commercial network, as part of
the training Project Account Manager to Customer
Manager. This film had as its prime goal alerting the
commercial network to its crucial role in building up the
BPI Brand;
the launch of the Brand Manager for each of BPI’s
commercial premises, whose main mission is to
guarantee that the brand is well projected and
disseminated at each location;
the fact that BPI was the 1st bank in Portugal to make
available at its entire branch network the facility of
opening an account with the Citizen’s Card, thereby
making the process swifter, simpler and with minimal
paperwork;
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the support to Small and Medium-sized Companies,
which enabled BPI to position itself once again as the
no. 1 bank in supporting the PME Excelência status
and for the 3rd consecutive year as the PME Líder
leading bank;
the launching of the first edition of the BPI Capacitar
and BPI Inovação projects and the renewed support for
some of the most important Portuguese cultural
institutions – Serralves, Casa da Música and Fundação
Gulbenkian, details of which appear in a separate
chapter of this report;
the dynamic promotion of sponsorships through the
creation of direct initiatives with Customers and
advertising campaigns for the promotion of bank
products. Examples are the linking up with singer Tony
Carreira in the campaign to attract emigrants whereby
more than 1 000 Customers were invited to events in
Portugal and abroad, namely, London and Rhode Island;
and the creation for the 1st time of a Mobile Bank at the
National Agriculture Fair at which some 100 accounts
were opened;
the continued commitment to the development of
cross-selling operations by way of campaigns offering
10% of a monthly salary to set up a Retirement Savings
Plan on the opening of a BPI Salary Account;
the active cultivation of partnerships with renowned
brand names in various business areas, namely with the
creation of jewellery collections designed exclusively for
BPI;
the reinforced investment in the Internet, with special
reference to the continued presence in the Google
search engine.
Report | The BPI Brand
17
Social responsibility
BPI interprets its corporate responsibility as being the set
of duties and obligations the Institution is bound by in
relation to the Community in which it is integrated and to
the specific interest groups that depend on its activity:
Customers, Shareholders, Employees and Investors,
represented in the capital market where the share is
subject to permanent scrutiny.
From this perspective, the exercise of corporate social
responsibility assumes multiple dimensions of quite
contrasting natures which from the outset entail
compliance with the Law and applicable regulations, the
observance of specific conduct rules, the corporate
governance policy and its execution, the relationship with
Investors, the promotion of quality service and the policy
of human resources advancement, as well as the support
for initiatives within society in fields such as health,
solidarity, education, research, the environment and
culture. As has become customary, BPI’s Annual Report
deals with each one of these topics under specific
chapters, duly highlighted in the text, while presenting in
this chapter an overview of the Bank’s involvement in
each one of the major themes in which the exercise of
BPI’s social responsibility is referred to.
GOVERNANCE
Since its inception BPI has pursued a set of practices
and guiding principles, the application of which ensures
a diligent, effective and balanced management of the
interests of all its Shareholders and other stakeholders.
Some of the structural pillars of BPI’s governance policy
are the creation of value as management’s overriding
objective, the adoption of best market practices in terms
of communication and the dissemination of information,
the independence of executive management vis-à-vis any
Shareholder or specific interest groups, and the
commitment to stringent standards of ethical and
professional conduct.
Banco BPI is permanently concerned with streamlining
the governance structure, practices and report. In this
way, it also responds to the initiatives of the Securities
Market Commission (Comissão do Mercado de Valores
Mobiliários), and keeps abreast of the pronouncements
and publications of various national and European
bodies.
18
INVESTOR RELATIONS
BPI attributes great importance to keeping a frank and
transparent relationship with Shareholders, investors,
financial analysts, the authorities and other capital
market players.
Consequently and long before it was already common
practice amongst companies listed on the stock
exchange, BPI created in 1993 a structure dedicated
exclusively to this end – the Investor Relations Division
which reports directly to the Executive Committee of the
Board of Directors and to the Chairman of the Board of
Directors.
The dissemination of accurate, timely, regular, clear and
unbiased information that is relevant for assessing its
shares listed on the stock market constitutes one of BPI’s
primary concerns.
Comprehensive information about investor relations
activity during 2010 is provided in the BPI Group’s
Corporate Governance Report.
SERVICE QUALITY
BPI’s action in the service quality arena centres on three
main aspects: Market (through the assessment of the
competition), Customers (by analysing their opinions) and
the Bank itself (by means of commercial network
Employees’ opinions regarding central services).
As regards the Market’s assessment, the following
fundamental indicators are utilised: the National
Customer Satisfaction Index (ECSI), an independent
survey promoted annually by entities specialising in
Quality, the BASEF Banca, a regular market poll
conducted by Marktest which gathers information about
consumer behavioural patterns, attitudes and opinions
relating to financial services directed at Individuals, the
Mystery Customer survey, also independent, which
analyses banks operating in the domestic market, and the
Bank of Portugal’s Annual Report on Behavioural
Supervision, with special focus on Customer complaint
indicators.
The Customer aspect is studied through three main
indicators: the Bank’s Service Quality Index (IQS Banco),
annual, the Branch Service Quality (IQS Balcão),
quarterly, and the scrutiny of complaints.
The in-house evaluation of the Bank’s own central
services is undertaken by means of another Quality index
– the Central Units IQS – which half-yearly evaluates the
satisfaction of commercial network Employees with the
Bank’s chief service areas.
The following were the most salient results for 2010:
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BPI has maintained in recent years in a sustained
manner a solid position in the National Customer
Satisfaction Index in the banking sector;
the results obtained in the Customer satisfaction sphere
are confirmed by Marktest’s Banking BASEF, in which
BPI secured in 2010 first place amongst the
Portuguese banking system’s five biggest banks in the
indicator of Overall Customer Satisfaction with the
principal bank. The same survey also reveals that in
2010 it occupies the top position amongst the five
largest banks as regards Attendance Satisfaction and
Product Satisfaction indicators;
in the “Mystery Customer” survey, the good results
achieved confirm the soundness of the attendance
methodologies employed at BPI branches, noting a
positive trend in all the themes assessed (physical
aspects, teller attendance and commercial attendance);
the Bank’s Service Quality Index (IQS Banco), which
measures Customer satisfaction with the Bank as an
organisation, advanced from 797 points in 2009 to 798
points in 2010, on a scale with a maximum of 1 000;
the high level of Customer satisfaction with attendance
at BPI branches translated into good results during the
course of 2010 of the Branch IQS;
complaints recorded by the Bank evidenced a decrease
of around 50% relative to 2009 (6 974 vs. 13 994 in
2009), to which contributed the improved level of
service rendered to Customers stemming from the
refinement of operations and systems;
ADVANCEMENT OF HUMAN RESOURCES
In order to boost commercial strategy, an ambitious
training project was created and implemented, embracing
all Employees of the branch commercial network.
This programme began in June of this year and had as its
objective the development and consolidation of best
practices in Personalised Assistance to Individual
Customers and sole proprietors and small businesses.
This training integrated various methodologies: Elearning,
on-the-job and classroom-type training and entailed a
major commitment to quality and experience of a team of
Employees from the commercial area which took on this
challenge as instructors.
In order to facilitate these Employees’ performance,
training sessions were held for the Instructors, seeking to
merge commercial skills with the necessary expertise to
undertake training.
SPONSORSHIP
Within the scope of its social responsibility policy, BPI
continued to support in 2010 a number of important
projects and initiatives spearheaded by renowned
institutions in domains as varied as social solidarity,
culture, education, science, research, innovation and
entrepreneurship and the environment. These initiatives
took place and made a difference in the countries in
which the Bank has a strong presence, namely Portugal,
Angola and Mozambique.
BFA – Banco de Fomento Angola continued to support
major causes through its social fund set up in 2005, to
which 5% of annual net profit is allocated to social
responsibility initiatives over a period of 5 years. 2010
marks the end of this period during which the
accumulated funds allocated totalled 19.6 million
dollars.
As part of its social responsibility policy, BFA renewed as
its priority beneficiary in 2010 large-scale projects having
a significant impact amongst the local communities.
Luanda continued to be the principal focus of action, but
Benguela, Huíla, Bengo and Kuanza-Norte also benefited
from the Social Fund’s support.
the overall results of the central units’ IQS have
confirmed during the past a positive trend in the
functioning of the central services from the viewpoint of
their main internal users.
Report | Social responsibility
19
In Mozambique, Banco Comercial e de Investimentos,
BCI, in which BPI has a 30% shareholding, supported
various initiatives in the fields of social solidarity,
education and culture.
Social solidarity
In the social solidarity
arena, we highlight the
first edition of the BPI
Capacitar Award. The
initiative was launched at
the beginning of 2010 and
prizes worth 524 770 euro
in total were awarded to
non-profit private
institutions. This project’s
mission is to promote a
better quality of life and
social integration of people
suffering from handicaps
or permanent disabilities.
The winner of the BPI Capacitar 2010 Prize was ARCIL
(Associação para a Recuperação de Cidadãos Inadaptados
da Lousã), which received a donation of 200 thousand
euro. The prize reverts in favour of Projecto Sustento,
which endeavours to construct sustainable development
solutions for people and businesses.
With donations of up to 50 thousand euro for application
in their development projects, the following institutions
were also honoured: ACAPO (Associação dos Cegos e
Amblíopes de Portugal) (blind and poor sighted persons),
APCL (Associação de Paralisia Cerebral de Lisboa)
(cerebral palsy sufferers), APPACDM de Coimbra
(Associação Portuguesa de Pais e Amigos do Cidadão
Deficiente Mental) (support group for the mentally
handicapped); APPACDM de Mirandela (Associação
Portuguesa de Pais e Amigos do Cidadão Deficiente
20
Mental) (support group for the mentally handicapped),
Centro de Educação Especial Rainha D. Leonor,
Cercizimbra (Cooperativa de Educação e Reabilitação de
Cidadãos Inadaptados Sesimbra, CRL) (support group for
handicapped persons), Elo Social (Associação para a
Integração e o Apoio ao Deficiente Jovem e Adulto)
(support group for handicapped youth and adults) e
Federação Portuguesa de Surdos Mudos (support group
for deaf and dumb people).
In the wake of the floods and mudslides which struck at
dawn on 20 February in the Funchal and Ribeira Brava
zones of the Madeira Archipelago, BPI put into action a
series of support initiatives directed at the local
population. In this context, a solidarity account was
opened for the collection of funds, with an initial amount
donated by BPI of 200 thousand euro for the
reconstruction of housing in Ribeira Brava. BPI also
decided to apply a moratorium of one year for capital and
interest to its Customers who had suffered personal and
property damages resulting from the bad weather, while
also making available complementary support measures
to be fixed on a case-by-case basis.
In the drive to contribute to the normalisation of life in
the region, the affected Branches were immediately
repaired, with BPI being the first bank to resume
business following the catastrophe. The annual incentives
trip for the Bank’s commercial teams, which normally
takes place outside of Portugal, had Funchal as its venue
in 2010. This initiative was intended to give a signal of
confidence and backing for the Region’s industry.
In 2010, BPI gave continuity to its policy of supporting
social-involvement institutions, amongst which the
involvement in the Casa dos Marcos da Associação
Raríssimas project. This project’s mission is the
construction of a shelter home for adults or young adults
suffering from rare diseases and lacking support, as well
as sporting and intellectual activities. The clinical and
rehabilitation areas will be open to the community in
general.
Raríssimas – Associação Nacional de Deficiências
Mentais e Raras – has been receiving since 2007, the
collaboration of the Project Finance Division, which offers
a regular financial consultancy and management service,
as well as support for the conception and development of
this institution’s various initiatives and projects.
Ajuda de Berço, Casa das
Cores, Raríssimas, Instituto
de Surdos-Mudos da
Imaculada Conceição and
Centro de Acolhimento
para Crianças Refugiadas
were some of the
institutions contemplated
with a total donation of
199 thousand euro under
the campaign which BPI
has realised since 2004 at
Christmas time.
In the social welfare field, support was given to
institutions associated with child protection and youth at
risk. For the continued support received from BPI, a
reference is warranted for the Associação Terra dos
Sonhos; CADIn – Centro de Apoio ao Desenvolvimento
Infantil; Novo Futuro – Associação de Lares para crianças
(child shelters) and Associação Portuguesa para o Direito
dos Menores e da Família (minors’ and family rights).
Also noteworthy was the renewed BPI support for the
Fundação Pauleta. This entity’s mission, which has counted
with the Bank’s support since 2007, is to foster and
disseminate the practice of sport in the Azores. Other
important initiatives in this domain are the support
extended to Pro Dignitate – Fundação de Direitos Humanos;
to REAPN – Rede Europeia Anti-Pobresa; to BUS – Bens de
Utilidade Social; to Associação EPIS – Empresários pela
Inclusão Social; to Leigos para o Desenvolvimento and to
the São Nicolau e São Julião Parish Church.
Also meriting mention was the direct involvement of some
300 BPI Employees in the remodelling of an old-age
home – the Lar da Nossa Senhora da Visitação – in
Albufeira-Guia. Still in this domain, it is worth noting
BPI’s involvement in the National Agriculture Fair, of
which it was the official sponsor this year, where it
donated mini tractors to social-solidarity institutions
supporting children in the Eastern region.
In the health area, of note is the continuity of the support
given to Cruz Vermelha Portuguesa (Red Cross); AMI –
Assistência Médica em Portugal (medical assistance);
Abraço – Associação de Apoio a Pessoas com VIH / Sida
(Aids support group); AAHSM – Associação de Amigos do
Hospital de Santa Maria; SPAVC – Sociedade Portuguesa
do Acidente Vascular Cerebral (cerebral vascular
accident); Associação para o Tratamento das
Toxicodependências (drug addiction treatment);
A.N.D.A.R – Associação Nacional Doentes Artrite
Reumatóide (arthritis and rheumatism sufferers’ group);
CEDEMA – Associação de Pais e Amigos dos Deficientes
Mentais Adultos (support group for the mentally
handicapped) e Fundação Portuguesa de Cardiologia
(cardiology foundation).
In Angola, BFA focused a large part of its social
contribution to institutions dedicated to the underprivileged, amongst which support given to Casa do
Gaiato de Benguela and to Kimbo Liombembwa. Also
noteworthy was the support for Kandimbas de Santa
Cecília da Arquidiocese do Lubango (Huíla), in the
celebration of Christmas for the children at the Hospital
Pediátrico do Lubango.
Still in the Health Area, mention is also made of the
support given to the Fundação Calouste Gulbenkian for
the creation of a Health Research Centre in the Bengo
province. This initiative also contemplates the temporary
secondment of Portuguese researchers to this location.
In Mozambique, BCI gave continuity to its support for
Casa do Gaiato, the Rotary Club de Maputo (in the
purchase of 100 wheelchairs), the Associação dos Surdos
de Moçambique (association for the deaf) and the
Direcção Nacional dos Serviços Sociais da PRM,
contributing to the Red Cross of Mozambique and for the
Ordem dos Médicos (medical institute).
BCI also participated in several events of a sporting
nature, including the FUT 21 project, which aims to
revitalise Mozambique’s sporting activities, in particular
football. Also worth highlighting was the support given to
Clube Ferroviário de Maputo; Clube de Desportos da
Costa do Sol and to the Liga Desportiva Muçulmana de
Maputo; to Futebol Clube de Lichinga.
At the end of the year, BCI once again channelled the
funds normally reserved for offering Customers Christmas
gifts to a country-wide solidarity initiative. With the active
participation of the Bank’s Employees, Christmas
hampers and toys were given to more than two thousand
children interned at paediatric wards of Mozambique’s
principal general and provincial hospitals.
21
Culture
Within the ambit of cultural patronage, BPI continued to
support in 2010 a number of leading national institutions
dedicated to art and music. This included the renewed
support to the Serralves Museum, Casa da Música and the
Fundação Calouste Gulbenkian.
In the arts arena, BPI
continues to be the patron
of the Serralves Museum,
having sponsored for the
sixth consecutive year the
project Serralves em Festa:
40h of uninterrupted
culture with more than
90 events, ranging from
contemporary dance to
acrobatics, theatre,
contemporary circus,
cinema, video,
photography, workshops,
guided tours and exhibitions.
BPI is also patron of the following institutions: Caramulo
Museum, Centro Nacional de Cultura, Teatro Viriato in
Viseu, Museum of Contemporary Art of Elvas, and gave
support to the Foundations Museu do Douro, Luís Miguel
Nava and Casa de Mateus.
In the music domain, BPI continues to be the patron of
the Casa da Música, supporting the promotion of culture
and disclosure of the most diversified musical projects,
national and international. For the fifth year running, BPI
sponsored the Verão na Casa (Summer at the Casa), a
show where various styles of music intermingle, from jazz
22
to fado, encompassing traditional Portuguese music and
symphonic music.
BPI continued to sponsor the cycle of the Great World
Orchestras concerts organised in conjunction with the
Fundação Calouste Gulbenkian. This event has now been
held for two decades and has always been marked by the
high quality of its world-wide programming.
In Mozambique, BCI sponsored the realisation of a number
of music festivals, amongst which the Festival
Internacional de Música de Maputo. Still in the musical
arena, BCI supported the staging of the “Top de música
ligeira moçambicana” (top of Mozambique’s light music)
and the singer Neyma, considered the best artiste of 2010.
Education, efficiency and research
In the education field, BPI was party at the end of 2010
to protocols with a total of 29 institutions of higher
learning. These include the long-term protocols with the
Instituto Superior Técnico, the Science and Technology
Faculty and the Law Faculty of the Universidade de
Coimbra, the Fines Arts Faculty of the Universidade de
Lisboa, the Universidade da Beira Interior and the Escola
de Fuzileiros and Escola de Tecnologias Navais (ETNA) of
the Portuguese Navy. The last-mentioned protocol
contemplates the funding of innovative projects of the
Sergeants Course run by the Propulsion and Energy
Department and the pedagogic and didactic equipping of
the ETNA classrooms used by some 3 thousand students.
In this area, of particular
note was the creation in
2010 of iTGROW –
Software e Sistemas, ACE
(Agrupamento
Complementar de
Empresas) (i.e. a complementary corporate grouping),
controlled by BPI and Critical Software, with the object of
nurturing talent and the provision of services in the realm
of information systems projects. iTGROW proposes to
collaborate actively in the preparation of young graduates,
by way of on-the-job training– complementary to their
academic courses –, which will make them better
equipped to enter an even more demanding and global
marketplace. At the end of 2010, and in compliance with
the proposed goal, iTGROW had already recruited 14 new
graduates.
For the third consecutive year, support was renewed for
the Lisbon MBA in BPI’s capacity of founding member of
the Fundação Ulisses. The programme’s mission is to
create a world-class MBA – Master in Business
Administration – in Portugal. The Lisbon MBA is the
result of a partnership between three top-flight
institutions dedicated to the teaching of economic and
business sciences: Universidade Nova de Lisboa,
Universidade Católica Portuguesa and MIT Sloan School
of Management, in Boston. The Lisbon MBA curriculum
is tailored to the development of managerial and
interpersonal competencies, and affords its students the
chance to attend lectures at MIT during the summer
period, as well as practical training secondments at
prestigious companies.
Prizes continued to be awarded to the best students from
the Escola Superior de Belas Artes de Lisboa, the
Universidade do Algarve, the Universidade de Aveiro, the
Universidade da Beira Interior, he masters degree in
Economic and Business Sciences of Universidade
Católica Portuguesa, the Science, Technology and Law
Faculties of Universidade de Coimbra, the Instituto de
Ciências Biomédicas Abel Salazar, and from the Instituto
Politécnico de Leiria.
Prizes were also awarded to the best secondary school
pupils in the subjects Mathematics, Portuguese and
History. The prizes, instituted by the Academia de
Ciências de Lisboa (ACL) though its Instituto de Altos
Estudos, seek to enhance the performance and
dedication of Portuguese youth.
Some of the Student Associations, such as those of the
Instituto Superior Técnico and the Instituto de Ciências
Biomédicas Abel Salazar, in Oporto, the Law Faculty of
the Universidade do Porto, the Lisbon Faculty of
Architecture, Instituto Superior de Contabilidade e
Administração de Aveiro and the Federação Académica
de Leiria, similarly established long-term partnerships
with the Bank.
In 2010, BPI extended the protocol signed with the
Portuguese Navy to the Escola de Fuzileiros, embracing
some 800 military personnel who annually are admitted
for the first time to the Portuguese Navy.
In the research field, BPI continued to lend support to
the IPATIMUP – Instituto de Patologia e Imunologia
Molecular of the Universidade do Porto. This institution,
systematically sponsored by BPI, carries out work of
enormous merit in the field of scientific research in the
oncology and genetic areas.
In this domain, mention is also made of the support for
UNICRI – Instituto de Investigação Inter-regional de
Crime e Justiça das Nações Unidas. UNICRI is a United
Nations Entity set up in 1967 for the purpose of
supporting intergovernmental, governmental and
non-governmental organisations, in the formulation and
implementation of improved policies in the areas of crime
prevention and criminal justice.
BPI also renewed the cooperation protocol with the Ius
Gentium Conimbrigae (IGC), the Coimbra Law Faculty’s
research and learning institute. This support enables the
IGC’s Human Rights Centre to hold its annual conference
– ‘Autumn Conference’ –, which has proven to be an
enormous contribution to the debate concerning
fundamental rights.
In Angola, noteworthy was the support given to the
Studies and Scientific Research Centre of the
Universidade Católica de Angola, in the research project
covering Angola’s economic history from the XIX century
up till 1975. It represents a historical treasure of
unquestionable value and relevance, the contents of
which are not known, in addition to not being duly
documented.
Also worth mentioning is the collaboration with the
Instituto de Cooperação Jurídica of the Law Faculty of
Universidade de Lisboa, which for more than 5 years has
been promoting post-graduate courses in coordination
with the Law Faculty of the Universidade Agostinho Neto;
the support for the Fundação Cidade de Lisboa, in the
granting of 5 bursaries to young African students from
the Colégio Universitário “Nuno Krus Abecasis”; and the
theatre project at the Schools of the Grupo de Teatro
Oprimido, whose plays convey messages about HIV / Aids,
violence and juvenile delinquency.
In Mozambique, in the Education field, BCI granted
20 study bursaries to needy young people to attend the
country’s main universities, offering monetary prizes and
paid practical internships to 40 of the best students from
the country’s top universities and renewed its support to
the Universidade Politécnica.
23
Innovation and entrepreneurship
In the innovation area, one
of the highlights was the
first edition of the BPI
Innovation Award. This
award is an annual event
and is given for ideas
proposed by Employees
who promote innovation as
relates to the Bank’s
products, services or processes.
BPI, through the partnership with COTEC Portugal –
Associação Empresarial para a Inovação, seeks to
contribute to reinforcing the competitiveness of SME’s by
means of the development and nurturing of a culture of
innovation and know how. Fruit of this association are the
‘SME Innovation’ gatherings, the company training
workshops, the COTEC BPI innovation awards and
CoHiTEC. The 2010 SME Innovation Award went to
Polisport Plásticos. S.A., a company with 100%
Portuguese capital dedicated to the conception,
development, production and sales of plastic products.
In this domain, BPI also renewed its support for the third
edition of the Creative Industries National Prize,
organised by Unicer and the Fundação de Serralves.
This prize is intended to promote, support, accompany
and assist in the implementation of projects which are
innovative, have economic and financial feasibility, have
the potential for skilled job creation and for boosting
Portuguese intellectual output within the context of the
global market.
The SEPG Europe 2010 congress, Europe’s prime
Software event was also another major sponsorship in this
domain. The congress was co-organised by the Software
Engineering Institute, the Engineering Faculty of the
Universidade do Porto and by the Instituto das
Tecnologias de Informação da Justiça, and offered
numerous business and promotion opportunities to
Portuguese companies.
In Mozambique, BCI supported various events in this
area, amongst which the Private Sector’s Annual
Conference, the Conference of Energy Ministers of Africa,
the International Conference on Regional Integration and
the Conference on African Independence.
24
Turning to entrepreneurship, BCI sponsored the Empresa
Júnior do ISCTEM – Mês da Mulher Empreendedora
(female entrepreneur month), the Portuguese Community
Day and the Associação Nacional de Jovens
Empreendedores (national association of young
entrepreneurs).
Environment
In 2010, continuity was given to a number of internal
and external initiatives within the scope of environmental
responsibility, which contributed to the decline in paper
consumption and protection of the environment.
BPI was the first bank in Portugal to offer at all its
branches the possibility of opening a bank account using
the Citizen’s Card, thereby making this process quicker,
simpler and with less paperwork. This facility strengthens
the drive targeting the dematerialisation and elimination of
the number of forms that has been in progress since 2009.
The availability of card
statements in digital
format terminates the
cycle of BPI’s
dematerialisation of
statements as part of the
paperless project,
following on from the
integrated statement, the
account statement and the
investment statement.
Still on this topic, a
mention of the launching
of a platform for the selling of insurance, Allianz.net,
which allows the online issue of isolated-sale insurance,
thereby also contributing to the lower recourse to paper.
It is also worth noting BPI’s association with the national
project “Clean Portugal”, realised in Braga, Guimarães
and Ponte de Lima. This initiative was carried out by
Employees and their families with the object of making
local populations aware of environmental issues.
Human resources
Staff headcount
At 31 December 2010, the BPI Group’s workforce
numbered 9 494.
In international operations, in Angola, the workforce grew
by 200, which represents a 10.9% increase. At the end
of 2010, Banco de Fomento Angola’s headcount stood at
2 038 Employees, of which 21 is BPI staff seconded to
Angola.
In domestic operations, the staff headcount fell by 1.9%
(-143), in part as a consequence of the programme of
200 early retirements.
BPI Group Employees
Year-end figures
Domestic activity
Activity in Portugal1
Banco BPI
Banco Português de Investimento
Other subsidiary companies
1
2
3
[= Σ 1 to 3]
4
[= 4 + 5]
6
Overseas branches and
representative offices
Domestic activity
Banco de Fomento Angola
Total 1
5
7
[= 7]
8
[= 6 + 8]
9
Year-average figures
2009
2010
∆%
2009
2010
∆%
7 140
161
84
7 385
7 000
165
79
7 244
(2.0%)
(2.5%)
(6.0%)
(1.9%)
7 229
167
100
7 496
7 190
163
83
7 436
(0.5%)
(2.4%)
(17.0%)
(0.8%)
214
7 599
212
7 456
(0.9%)
(1.9%)
215
7 711
213
7 649
(0.9%)
(0.8%)
1 838
1 838
9 437
2 038
2 038
9 494
10.9%
10.9%
0.6%
1 719
1 719
9 430
1 910
1 910
9 559
11.1%
11.1%
1.4%
Table 4
BPI Group staff complement
As % of Group’s total
Number
Banco BPI
165
Other
79
BFA
Age and experience at BPI
Distribution by gender
%
years
%
7 000
BPI-BI
Overseas
branches2
With higher education
212
50
2%
1%
2%
75
74%
70
33
21%
59
25
9.1
38
6.3
38
50
75
100
0
3.6
46
20
30
40
38
52
48
60
30
10
54
62
40
10.5
2 038
0
40
13.4
50
40
54
0
Average age
Average period of service in BPI
25
46
50
75
100
Chart 1
2
1) Includes fixed-term contracts and temporary employment of persons with no binding work contracts with BPI.
At 31 December 2009 and 2010, the number of Employees with fixed-term contracts stood at 485 and 358 respectively, while for the same years, the numbers relating to overseas
operations were 18 and 22 respectively. In turn, the number of Employees working on a temporary basis in Portugal was 171 in December 2009 and 158 in December 2010, while
overseas there was only one Employee working under this regime.
In average terms, in the period 2009 and 2010, the number of Employees with fixed-term contracts in Portugal was situated at 622 and 442 respectively, while the corresponding figures
for overseas operations were 17 and 20 respectively. In turn, the number of Employees working on a temporary basis in Portugal was 166 in December 2009 and 181 in December
2010, while overseas there was only one Employee working under this regime.
Temporary employment costs are recorded in the books under the caption General and administrative overheads.
2) Overseas branches and representative offices.
Report | Human resources
25
Technology
INFORMATION SYSTEMS
BPI pursued in 2010 the strategy of modernising and
optimising its Information Systems with the launch of
projects involving the upgrading of existing platforms and
systems, with particular emphasis on responding to
business requirements, rationalisation and enhancing the
associated control and quality processes.
Improvement in software development processes
2010 saw the start of work on a programme for improving
applications development processes based on the model
“Capability Maturity Model Integration”, with the object
of obtaining an internationally-recognised certification in
the field of Software Engineering and Quality.
The initiatives of a more technological nature were
complemented by others addressing methodological and
organisational aspects, namely with the implementation
of a major projects management process with the active
participation of the business and technological areas.
This project, which involved a broad and
multi-disciplinary team, is being developed in partnership
with a company originating in an academic environment
and linked to the Engineering Faculty of the Universidade
do Porto (FEUP) and with the Software Engineering
Institute (SEI).
As has been the case in recent years, the availability and
performance indices registered high values in all the
areas and platforms in 2010.
Outsourcing of infrastructure
Banco BPI signed in 2010 an outsourcing contract with
the firm IBM in the area of technological infrastructure.
Efficiency, availability and performance of the systems in activity
in Portugal
Principal indicators
This contract, with a duration of 10 years, encompasses
all the platforms which Banco BPI utilises as support for
the Information Systems, including the management and
supply of capacity for the Mainframe, Mid-Range,
Distributed, Storage, and Networking systems, as well as
the relevant contingency solutions. Also forming part of
the scope of the new contract is the IT support to end
users throughout the entire commercial network and the
Bank’s central services.
Processing capacity in central systems
(million instructions / second)
Processing capacity in middle range systems
(thousand transactions / minute)
Storage capacity in the central and middle
range systems (in terabytes)
Employees with access to Intranet and e-mail
Intranet pages visited daily (x thousand)
Employees with access to Internet
Availability of transactional sites
Internet pages visited daily (all BPI sites)
(x thousand)
Systems’ availability at the branches,
before 8.30 am
Branch transactions in less than two seconds
Daily transactions on multi-channel platforms
(x thousand)
Responses to enquiries through the technological
help desk in less than 15 minutes
2009
2010
1 647
1 612
1 549
1 549
46.7
100%
1 500
40%
98.2%
58.2
100%
1 560
50%
98.8%
1 768
2 041
100%
98.6%
100%
98.42%
1 680
1 680
92%
99%
Table 5
26
Management of the contract is founded on strict and
demanding principles, the efficacy of which has already
been successfully proven under the previous contract
whose scope was restricted to the central, Mainframe and
Mid-Range systems.
In the first two years of this contract, a series of
technological transformation and renovation projects will
be realised that will translate into the modernisation of
the technological infrastructure to substantially higher
levels of functionality and performance.
Monitoring of operations
One of the focal points of attention within the ambit of
operational control refers to the monitoring of the
operations realised, meriting special attention the
prevention of and combat against money laundering and
financing terrorism operations in accordance with
directives laid down by Regulatory and Supervisory
Entities.
The Anti-Money Laundering Project entailed the
implementation of a solution for supporting prevention,
detection, investigation and compliance functions
referring to money laundering and the prevention of
terrorism funding, embracing BPI and Banco BPI and
respective branches and subsidiaries.
It relates to an intelligent observation system composed
of various applications:
j
j
SDN Check – permits validating the Customer data
bases and checking against public and private lists.
SIOPEIA AML – application based on a powerful rules
and training engine which, based on operations realised
over a time span, is capable of detecting alterations or
variances from behavioural patterns capable of
signalling anomalous activities.
BPI and Critical Software created iTGROW – SOFTWARE E
SISTEMAS, ACE in September, held in equal shares by the
two companies whose mission is the development of talent
in IT systems engineering.
This young organisation aspires to become a key player in
the training of superior competencies in technological
areas, contributing to the qualification of the information
technologies market. With this initiative, an important step
is also taken in fostering closer relations with the academic
world.
iTGrow positions itself in a differentiated manner so as to
attract the best, offering selected candidates a practical
training programme at the workplace that will enable them
to develop their skills and consolidate their knowledge, at
the same time as participating in real-life projects.
j
Workflow – Workflow system for supporting the analysis
and decision process of selected situations.
The project which was embarked on in 2009, was
successfully concluded in 2010, allowing BPI to respond
within the stipulated deadlines to the defined objectives.
New investment platform – Web and Mobile channels
A new technological platform was unveiled in March
2010 for Banco BPI online investment solutions,
available to all the Group’s Customers who wish to deal
on the equity markets via the Internet.
This platform, backed by the most advanced models of
systems architecture and resorting primarily to Microsoft
and Oracle technologies, place BPI amongst the world’s
leading banks in terms of security, scalability and
flexibility.
December 2010 saw the launching of BPI Online Mobile,
a specific online investment site for mobile terminals:
http://m.bpionline.pt.
ITGROW’s operational focus is centred on monitoring
newly-qualified graduates in all phases of their
advancement, from the strict recruitment process, to
personalised induction, tutorial sessions, performance
evaluation and career orientation. As part of its
dissemination strategy, iTGROW participates actively in
presentation and collaboration sessions with the principal
engineering schools.
Having commenced activity in November, iTGROW had at
the end of 2010 two dozen trainees involved in projects of
the two associated companies, and expects to close 2011
with twice this number.
Report | Technology
27
Background to operations
WORD ECONOMY AND PORTUGUESE ECONOMY
WORLD ECONOMY
Global economic activity registered a 5% expansion in
2010 according to the estimate of the International
Monetary Fund (IMF), but nevertheless with disparate
growth rates in the world’s various economic zones.
On the positive side, the group of emerging economies
stole the limelight, in particular the Asian region (China
and India) and Latin America (Brazil and Mexico), which
benefited from the robust growth in domestic demand
and exports, the latter spurred by the revival in
international trade flows after the steep fall noted in
2009. Amongst the developed countries, on the one hand
there were those where support-oriented economic
policies remained the most active, namely in the USA
and Japan; and also those with interconnection with the
more dynamic emerging economies, such as the case of
Germany and once again Japan.
Estimated growth in economic activity in 2010 stands at
2.9% in the US, 4.3% in Japan and 3.6% in Germany.
For the EMU, the IMF estimates GDP growth at 1.8% in
2010, in real terms, with the greater dynamism of the
central European economies being counterbalanced by
the weak performance of the so-called European
periphery countries – Greece, Ireland, Spain and
Portugal, with the first three expected to have contracted
economically.
consolidation, in tandem with (in the case of Ireland and
Spain) structural adjustments in the real-estate and
financial sectors.
PORTUGUESE ECONOMY
GDP and employment
According to the estimate published by the INE (national
statistics institute), the Portuguese economy posted
growth of 1.4% in 2010, with an upswing in both
domestic demand and exports, with only investment
continuing to retreat, albeit at a slower pace than that
observed in the previous year.
Business climate indicator
GDP growth
%
6
120
4
110
2
100
0
90
-2
80
-4
70
-6
%
01 02 03 04 05 06 07 08 09 10
60
01 02 03 04 05 06 07 08 09 10
Chart 2
The German economy, propelled by the growing
relationship with the more buoyant emerging economies,
and the central European economies – without structural
imbalances and with high levels of competitiveness
(Finland, Holland, Austria) – were the star performers on
the European stage.
The European periphery countries were particularly
affected by the worsening sovereign debt crisis, with the
deterioration in these countries’ conditions for tapping
external financing hampering the States themselves and
the respective banking systems. This situation in turn
impacted the ability to finance their economies and
imposed the implementation of fiscal consolidation
measures dictated by a more rapid process of fiscal
28
Portugal
Spain
Euro zone
Source: European Commission,
Bank of Portugal, BPI.
Chart 3
Portugal
Spain
Euro zone
Source: Eurostat.
Notwithstanding the favourable base effect, the
investment component contracted by more than 5% in
real terms, reflecting the decline in investment in
construction and in machinery and equipment. This
behaviour can be attributed to the lacklustre outlook for
demand, the restructuring movements still taking place in
certain sectors and the more adverse financing
conditions.
It is worth noting the 15.7% annual growth in exported
goods (in nominal terms) as a result of the favourable
trend in exports to the traditional EU community markets,
namely Spain and Germany, to the US and to the more
dynamic emerging economies, notably Brazil, Mexico and
China.
The announcement of a higher tax burden (indirect taxes)
with effect from July was responsible for the bringing
forward of consumption and investment decisions to the
first half of the year, a situation which repeated itself at
the end of the year, although to a lesser extent.
From the end of June onwards, economic activity began
to show signs of a cooling down triggered by the
deceleration in domestic demand. This state of affairs
reflected the impact of the restrictive measures adopted
by the government (already in 2010) aimed at trimming
the public deficit and the restrictions on banking credit
to the economy in the light of the escalating difficulties
encountered by banks in accessing the international debt
markets. These impacts were to a certain degree
attenuated by the slowdown in imports, which was
reflected in an increase in the contribution from net
external demand.
The average quarterly unemployment rate climbed from
9.5% in the previous year to 10.7% in September 2010.
The number of unemployed increased by 13%, more than
68.5 thousand individuals; while the volume of
employment registered a decrease of some 104 thousand
job posts. The unemployment rate rose above previous
historical highs, and given the weakness in demand
continues to deteriorate, albeit at a slower tempo.
The budget deficit in 20102 should be situated below the
official goal set of 7.3% of GDP. A fiscal execution in line
with that budgeted, namely as regards indirect tax receipts,
the deceleration in the rate of increase in spending and
also the recourse to extraordinary measures – integration of
the Portugal Telecom pension fund into the CGA – justified
the good performance by the State accounts. As for 2011,
the Government proposes to reduce the deficit by more
than 2.7 percentage points to a figure of 4.6% of GDP at
the end of the year.
Inflation
The average inflation rate was situated at 1.4%2 in 2010.
The gradual rise in fuel and food prices since the middle
of the year, as well as the higher burden of indirect taxes
in July, triggered an acceleration in inflation, with the
year-on-year inflation rate hovering at 2.5% at the end of
the year.
Deposits
Non-financial private sector deposits (individuals and
companies) grew 5.4% in 2010, which compares with
2.1% in the previous year. After having witnessed a
slowdown in the expansion of deposits, which was
partially influenced by the stock markets’ recovery –
which in turn stimulated the demand for higher risk
instruments –, the second half of the year saw deposits
expanding at a faster pace, a reflection of the banks’
greater focus on attracting this type of resource.
The households’ savings rate1 maintained the gradual
upward movement: in the nine months to September it
stood at 11% of disposable income in average terms,
which compares with 9.6% in 2010. The gradual
reposition of individuals’ savings indices which, despite
the rise, remain low when compared with historical
levels, constitutes a desirable medium-term trend,
permitting at a later stage the reinforcement of
investment in productive levels in order to underpin
sustained economic growth.
1) Source: National Institute of Statistics.
2) Source: State Budget for 2011 and BPI forecasts.
Report | Background to operations
29
Loans
Loans to residents increased 2.1% in 2010 in year-onyear terms, which reflects a deceleration relative to the
2.9% growth registered in the previous year. In view of
the adverse external environment and the difficulty felt by
credit institutions in fundraising on the external
wholesale markets, the conditions for granting loans to
domestic agents inevitably became more restrictive.
The worsening trend in spreads on new lending
operations remained in evidence, reflecting a more
conservative evaluation of credit risk and the higher
funding costs borne by banks. Similarly, the demand for
credit fell appreciably, above all in the business sector,
given the retraction in investment. In the case of
individuals, there was a stabilisation in home loans, while
the volume of credit for consumption suffered a
retraction.
Annual average inflation
Credit risk
In 2010 the tendency for the loan default rate to
deteriorate continued, climbing from 3.2% to 4%. This
movement was noticeable in the individuals’ loans
portfolio, with special incidence in the case of loans for
consumption and other purposes (default rate of 8.3% in
December 2010), and in the corporate loans portfolio
(5.2%), with greater incidence in the construction (8.4%)
and real-estate business sectors (5.3%).
The default rate in the home loans portfolio – which
accounts for around 43% of loans to the non-financial
private sector – remained stable at 1.7%. Contributing to
this trend were the fact that there has been no excessive
real-state appreciation in Portugal, interest rates have
been situated at their historical lows and the fact that a
large proportion of properties are destined for one’s own
dwelling, as a result of which there is a strong incentive
for complying with debt servicing.
Evolution of loans
Trends in deposits
Evolution of loans on arrears
%
6
30
%
30
%
%
4
20
20
6
2
10
10
4
0
0
0
2
-2
01 02 03 04 05 06 07 08 09 10
-10
01 02 03 04 05 06 07 08 09 10
Chart 4
Portugal
Euro zone
Source: European Commission, BPI.
1) Total loans to the non-financial private sector.
30
-10
8
01 02 03 04 05 06 07 08 09 10
Chart 5
Sight deposits
Time deposits
Note: Year-on-year growth rate.
Source: Bank of Portugal.
0
01 02 03 04 05 06 07 08 09 10
Chart 6
Individuals
Companies
Total lending1
Note: Year-on-year growth rate.
Chart 7
Individuals
Companies
Total lending1
Note: As a percentage of total loan
portfolio.
Outlook for 2011
The effort required to attain the budgetary consolidation
goals and the increased difficulty experienced by banks,
companies and the State to access external funding, with
significantly higher costs when compared to the past
decade, will translate into a downswing in economic
activity, induced by the transversal contraction in
domestic demand. It is foreseeable that the behaviour of
exports will compensate in part for this trend, given that
we can observe an expansion in the target markets and
an increased technological content incorporated into
exported products. Gross domestic product is expected to
fall by 1.5%, while the unemployment rate will remain
high.
deterioration in the risk perception relating to Spain,
could precipitate a more pronounced drop in economic
activity.
The inflation rate may approach 3% in 2011, thanks to
the cumulative impact of the upward price spiral in
commodity and food products on the international
market, as well as reflecting the deterioration in the
burden of indirect taxes. This should be a transitory
movement, and should not have an impact on external
competitiveness given the improbability of contagion to
wage policy. Indeed, the weakness in domestic demand
should translate at a later stage into the abatement of
pressures on prices.
The Portuguese economy’s dependence on external
funding for refinancing debt imposes added risks to the
above scenario. The possibility of a sudden deterioration
in international investors’ perception of risk vis-à-vis
Portuguese assets, the change in the ECB’s posture as
regards unconventional monetary policy measures or the
The adverse macroeconomic scenario, namely, high
unemployment and the prospect of losses in family
incomes, as well as the possibility of a slow climb in
short-term interest rates, point to the trend in deteriorating
default rates remaining, albeit at a slower pace.
Detailed forecasts for Portugal and for the euro zone
% growth rates
2011
2010
Portugal
Private consumption
Public consumption
Fixed investment
Exports goods and services
Imports goods and services
GDP
Inflation3
Current and capital balance4
Euro zone
Portugal
Euro zone
BoP1
EC2
EC2
BoP1
EC2
EC2
1.8
3.2
(5.0)
9.0
5.0
1.3
1.4
(8.8)
1.6
3.0
(4.1)
9.1
5.8
1.3
1.4
(9.5)
0.6
1.0
(0.8)
10.7
8.7
1.7
1.5
(0.4)
(2.7)
(4.6)
(6.8)
5.9
(1.9)
(1.3)
2.7
(7.1)
(2.8)
(6.8)
(3.2)
5.6
(3.2)
(1.0)
2.3
(6.7)
0.9
(0.1)
2.2
6.1
5.1
1.5
1.8
0.2
Table 6
1)
2)
3)
4)
Bank of Portugal forecasts, Economic Bulletin, Winter 2010.
European Commission, November 2010.
Harmonised Index of Consumer Prices.
As percentage of GDP.
31
Currency market
In 2010 the currency market displayed some volatility.
The two main questions that influenced the euro’s
behaviour against the dollar were primarily the unfolding
of the sovereign debt crisis in the EU and the market
sentiment surrounding the prospects for the direction of
the North American economy. In the first six months of
the year, the dollar posted sharp gains, with the exchange
rate falling from 1.43 in January to 1.19 dollars per euro
in the middle of June. Between June and November, the
calming of the situation in Europe after the
implementation of the financial aid package for Greece,
and the greater pessimism surrounding the US economy –
which culminated later with the implementation of
quantitative easing measures by the Federal Reserve –,
justified a reversal in the trend, with the euro recovering
to a level of around 1.40. However, in the closing months
of the year, the crisis in Ireland once again weighed on
the single currency, which ended 2010 in the vicinity of
1.33.
Money market
In 2010 the Federal Reserve’s monetary policy
maintained an exceptionally accommodative stance –
besides the undertaking that the fed funds rates would
remain at very low levels for an extended period of time,
the central bank announced in November a new
programme of public-debt securities purchases totalling
600 billion dollars, to be executed by the end of the first
half of 2011.
The rekindling of the crisis on the sovereign debt market
led the ECB to hold back on taking the first steps to
withdraw the non-conventional measures adopted up till
May. The principal aspect of this about-turn was the
extension of the period in which long-term funding
operations remained at fixed rate and with unlimited
placing. The principal instrument of monetary policy –
the refinancing rate – remained at 1% throughout the
whole year.
During the course of 2010, there was a progressive
normalisation of the interbank money market for the
central European countries. On the other hand, with the
32
eruption of the Irish crisis, the dependency on ECB
funding became more evident for the periphery countries’
banks, namely Ireland, Greece, Spain and Portugal.
Simultaneously throughout the year the normalisation of
the money market’s functioning was also evident in the
pattern of short-term interest rates, rising steadily
virtually the entire period. The 3-month rate began 2010
at 0.69% and closed the year at around 1%, on a par
with the principal refinancing rate. In the North American
market, short-term interest rates recorded greater
volatility. Indeed, the first half year’s optimism – 3-month
interest rates climbed from 0.25% in January to 0.53%
in June – dissipated, with dollar short-term interest rates
retracing to 0.3%, at which level they stabilised at the
end of the year. The reinforcement of measures of a
quantitative nature by the Federal Reserve, fears about
deflation and the absence of any clear improvements in
the labour and real-estate markets, were behind this state
of affairs.
EUR / USD exchange rate
in 2010
US$ per €
Evolution of reference rates
1.6
%
1.5
5
1.4
4
1.3
3
1.2
2
1.1
1
1.0
1Q10
6
2Q10
3Q10
4Q10
0
06
07
08
Chart 8
10
Chart 9
ECB
BoE
Fed
Source: Reuters, BPI.
09
Source: Central banks.
Bond market
During the first nine months of the year, the public debt
market was once again influenced by the demand for
refuge vis-à-vis the resurgence of tensions in the
peripheral markets. Faced with the uncertainty
surrounding the targeted countries and even as regards
the Monetary Union’s own future, movements towards the
recomposition of portfolios predominated, giving priority
to lower risk assets. In this period, US Treasuries and
German public debt – Bunds – benefited with the
respective yields on the 10-year benchmarks falling from
3.8% in January to 2.4% in October and in the case of
German debt, from 3.4% to 2.1% in September.
However, in the closing months of the year, there was a
distinct change in dominant market sentiment. On the
one hand, financial aid to Ireland was forthcoming, where
the situation appeared to be controlled, while the
European authorities displayed determination in finding a
sustained medium-term solution for resolving the
sovereign debt crisis, thus conferring credibility to the
European project.
On the other, in the US, the announcement of the
reinforcement of quantitative measures by the Federal
Reserve, seeking to influence inflationary expectations,
and the announcement of a new package of fiscal
measures by the Obama Administration – which, in
addition to extending the tax cuts on the highest earners,
Yield curve
At 31 December 2010
10-year sovereign debt
Interest rates in 2010
a measure introduced by the Bush Administration,
introduced new stimulus measures for families and
companies – weighed heavily on market sentiment. The
dominant macroeconomic scenario for 2011 improved
and simultaneously fears about the signs of fiscal
consolidation in the US returned, exerting pressure on
long-term interest rates. In this environment, the yield
curves’ slope trended downwards during the greater part
of the year, subsequently inverting the trend by
incorporation of the expectation of the more rapid
normalisation of monetary policies.
The market’s evaluation regarding the public-debt risk of
the European periphery countries registered marked
swings during the course of the year. In the first half of
the year, Greece’s risk premium evolved unfavourably,
reflecting the lack of investors’ confidence on the fiscal
consolidation front and fears relating to the inevitability
of a debt restructuring. This situation culminated at the
end April with the formalisation of the Greek
government’s request to activate the financial support
mechanism, which materialised at the beginning of May.
The total amount of the loan was fixed at 110 th.M.€, of
which 80 th.M.€ through bilateral loans from the EMU
members states and 30 th.M.€ via the International
Monetary Fund.
10-year sovereign debt
Spread vs. Bund
8
%
8
12
6
6
9
4
4
0
2
4
6
8
10
years
0
Source: BPI, Reuters.
300
200
100
3
1Q10
2Q10
Chart 10
Portugal
Germany
United Kingdom
USA
400
6
2
0
basis
points
%
%
2
Corporates and financials
Credit risk premiums
3Q10
4Q10
0
0
1Q10
2Q10
Source: Reuters.
4Q10
-100
06
07
Chart 12
Chart 11
Portugal
Germany
Spain
USA
3Q10
Greece
Ireland
Portugal
Spain
Italy
Source: Bloomberg.
08
09
10
Chart 13
Financials
BBB
A
AA
AAA
Source: Credit Suisse, Bloomberg.
33
Subsequently, some degree of calm prevailed until the
end of summer, moment in which the Irish authorities
made public the estimated recapitalisation requirements
of the country’s banking system. Faced with a State
guarantee for all the assets of the banking system – a
decision which dates back to end of 2008 – the sector’s
difficulties are now confused with those of the sovereign
state, giving rise to various upward revisions of the
deficit, public debt and the respective financing needs.
This situation culminated with the formalisation of the
request for help by the Irish government at the end of
November, with the final agreed amount being situated at
85 th.M.€, roughly 54% of GDP, of which 50 th.M.€ was
earmarked for the banking sector’s recapitalisation and
restructuring plan.
In the opening months of 2011, besides the progress
made in the fiscal consolidation process by the member
states which are now under greater scrutiny – Portugal
and Spain – it will also be important to gauge the
progress made by the European authorities in conceiving
34
mechanisms that avert in the future a repetition of
similar crises.
In the corporate debt market, the primary market saw
strong activity throughout 2010, together with the
normalisation of loan spreads. The upswing in economic
activity, fuelled by fiscal stimuli and the highly liquid
environment engendered by the expansionist policies
pursued by the principal central banks, were the key
factors behind this favourable trend. The advance made
in the financial sector’s de-leveraging process, which
translates into a lesser predisposition to granting loans,
also explains the recourse to the capital market as a
source of funding by the corporate sector. The current
trends are expected to continue in 2011, although it is
worth underlining certain risk factors, namely, more
subdued economic growth than that projected and / or a
worsening of the sovereign debt crisis in Europe, which
could lead to losses in the financial sector and an
increase in defaults.
Equity market
Global overview
2010 registered a revival in economic activity around the
globe, underpinned not only by the emerging countries
such as China, India or Brazil, but also by the anchor
economies such as the United States and Germany,
which continued to benefit in particular from
expansionist monetary policies. The vast majority of stock
market indices presented a positive performance in
2010, with the Eurostoxx 600 – which aggregates the
leading European companies – closing the year with a
9% gain, and the S&P500 – the American market’s
primary index – appreciating more than 13%.
However, 2010 was also marked by the mounting
budgetary difficulties and the increased sovereign risk of
the euro-zone periphery countries. This situation ended
up leading to a joint intervention by the EU and the IMF
in Greece and Ireland, with rife speculation regarding
similar measures for Portugal and Spain, at the same
time that the stock market indices of these countries
recorded a significant underperformance.
Iberia – secondary market
In Portugal and Spain, the benchmark PSI-20 and
IBEX 35 indices ended the year down by 10% and 17%,
respectively. Nevertheless, trading volumes in 2010 rose
by 30% in Portugal to 40 th.M.€ and by 33% in Spain
to 972 th.M.€, which represents a better performance
than that of the key global indices (13%). It is worth
highlighting in 2010 that Iberian shares continued to
attract smaller coverage by the global brokers.
Iberia – primary market
The Iberian market for public offers for subscription was
negatively affected by the instability on the sovereign
debt markets. There were no initial public offerings and
only two on the Spanish continuous market – Amadeus
and Enel Green Power, with the latter only being partially
placed in Spain (2.5% of the total capital compared with
the 32.5% placed in the public offer for subscription).
Meanwhile, the Spanish alternative market (MAB) turned
in a better performance with the admission of a further
10 companies, compared with the 2 offerings which took
place in 2009.
As concerns capital increases by quoted companies,
2010 was a year with a narrow liquidity window which
only a very limited number of companies took advantage
of in order to bolster their capital. Accordingly, there were
no issues which exceeded 500 million euro, with the
exception of the operation realised by the Spanish bank
BBVA in the amount of 5.1 th.M.€ following the
acquisition of Banco Garanti in Turkey.
Equity indexes evolution
Iberian primary market
Capital increases
%
th.M.€
60
30
8.9
0
10.3
10.1
9.1
11.7
-30
-60
06
07
08
09
10
1.8
06
0.2
07
Chart 14
PSI-20
DJ Stoxx 600
IBEX 35
S&P 500
Source: Bloomberg.
2.4
08
1.2
09
0.1
10
Chart 15
Spain
Portugal
Source: Bloomberg, Madrid Stock
Exchange, BPI.
35
ANGOLA
Economic activity
The Angolan economy grew 4.5% in 2010 following the
marked slowdown registered in the preceding year when
growth shrank to 2.4%, well below the expansion
observed in the recent past. The recovery of the oil price
on the international markets with the global economy’s
revival was the factor spurring economic activity in
Angola.
strengthening of the non-oil sectors and the dynamism of
private investment.
Real GDP growth in Angola
%
Others
32
Mercantile
services
23.3
24
The oil sector GDP grew 2.7% after having contracted a
year earlier, but it was above all the non-oil sectors with
5.7% expansion which were behind the increase in
Angola’s GDP. In sectorial terms, of special note was the
expansion of the agricultural and manufacturing sectors
that more than compensated for the retraction in the
construction and retail sectors.
18.6
20%
13.8
16
Real GDP growth (yoy, %)
Oil sector
Non-oil sector
Inflation (yoy, %)
Price of Angolan oil
(USD / barrel)
Average exchange rate
(AKZ / US$)
2008 2009E 2010E
8
2.4
0
2011F
23.3
20.4
25.7
11.8
13.8
12.3
20.5
13.2
2.4
(5.1)
8.3
14.0
4.5
2.7
5.7
15.3
7.6
2.3
11.2
12.0
72.4
97.1
60.9
74.4
68.0
75
75
79.2
91.9
-
Source: Ministry of Finance; State General Budget 2011.
E – estimate.
F – forecast.
4.5
Turning to 2011, the outlook points to an acceleration in
economic activity, benefiting from the rising oil price, the
recovery in levels of oil exploration and the payment of
debts by the State. This last-mentioned factor favours the
06
07
08
09
10
Chart 16
6%
7%
Construction
0.1%
47%
11% 1%
Manufacturing
industry Electricity
Diamonds
Animal
production,
fishing
Chart 17
Oil sector
Non-oil sector
Total
Sources: Angolan Central Bank, International Monetary Fund (IMF), Angolan
Government, BPI.
Table 7
In spite of the growing contribution by the non-oil sectors
to gross domestic product, the importance of oil
exploitation is still paramount, both directly and
indirectly. To the extent that the fulfilment of the public
investment programme and the behaviour of national
income are influenced by the flow of receipts from the
export of oil, the consolidation drive aimed at economic
diversification will remain dependent on the evolution of
the international price of oil given that installed
manufacturing capacity is relatively stabilised.
36
-8
Crude oil
and gas
7%
Economic forecasts for Angola
2007
GDP breakdown by business
sector
At 31 December 2010
External sector
Oil production in 2010 was slightly below the authorities’
initial projections, at under 1.9 million barrels / day. The
smaller output was largely offset by the rise in
international prices, which permitted reducing the current
deficit and the accumulation of foreign reserves.
According to official estimates, the current account
balance improved significantly, moving from -7.5 billion
dollars in 2009 to -0.6 billion dollars in 2010. In the
meantime, foreign exchange reserves during the past year
climbed from 12 th.M.US$ in January to 17.5 th.M.US$
in December. This advance benefited not only from the
correction of the trade deficit, but also from the entry of
funds associated with the agreement entered into the
International Monetary Fund (IMF). Out of a total of
1 400 million dollars, some 890 million dollars were
made available during 2010.
The behaviour of reserves influenced exchange rate policy
to the extent that the authorities continued to resort to
devaluation as a means of correcting domestic demand,
thus avoiding the intensification of external imbalances.
Hence, in 2010 the Kwanza depreciated against the
North American dollar between January and April, period
in which foreign reserves grew only marginally and
subsequently after September. In October the reserves
fell, recovering only in December. As concerns 2011, no
alteration is expected in the orientation of exchange rate
policy. However, the rise in the international oil price
should facilitate the recomposition of foreign exchange
reserves, in line with projections of a current surplus of
1.9% of GDP (source: IMF).
Kwanza / Dollar exchange rate
AKZ per US$
Average inflation rate in Angola
%
100
90
12.2
11.8
13.2
14.0
15.3
Although the authorities have fixed an inflation target for
2011 of 12%, the anticipated cooling down in the
rhythm of price rises should not be enough for the official
goal to be met, compounded by the fact that there has
been no notable progress regarding the removal the
structural obstacles to inflation.
Lending
Loans to the private sector probably expanded at an
estimated rate of 21%1 in 2010. The slowdown in credit
to the public sector explains why the behaviour of the
overall credit aggregate (to the private sector and to the
public sector) was more moderate, with the respective
balance estimated to have grown by 10.5%1. In sectorial
terms, loans to individuals, above all for the acquisition
of a home, as well as for real-estate, retail and
construction activities, continue to predominate.
As for 2011, the higher oil price, the settlement of debts
by the State to suppliers, and the resumption of public
projects should reanimate economic activity in the private
sector, which in turn is conducive to the acceleration in
lending operations.
80
70
60
the Angolan authorities initiated a process of eliminating
fuel subsidisation, which at one stage corresponded to
50% of the price paid by the consumer.
06
07
08
09
10
06
07
08
Chart 18
09
10
Chart 19
Source: Bloomberg.
Inflation
Inflation hovered at 15.3% in December, outpacing the
official target set at 13%. Prices continued to reveal
strong resistance to any drop owing to the existence of
important structural constraints on satisfying demand,
above all as regards the logistics and mobility of goods.
The change in the policy of fuel subsidies was
responsible for the acceleration of inflation in the second
half of the year. In effect, and on the IMF’s suggestion,
Deposits
Deposits in Angola expanded 3.8%1 in 2010. The trend
in deposits is closely related to the payment of the
State’s debts. Thus, in the first half of the year, deposits
fell: however, the commencement of payments by the
Angolan authorities explains this aggregate’s recovery in
the second half of the year. In the coming months, as
and when the authorities announce the intention to pay
the debts by the end of the first quarter of 2011, we
should continue to witness an increase in deposits;
however, this will be modest because the majority of
payments is made to non residents who then repatriate
the funds.
1) Growth rate of loans and deposit balances when expressed in US dollars.
37
The Angolan system continues to boast a large liquidity
surplus. The transformation rate of deposits into loans,
including the public sector, was situated at 91.7%.
Considering just loans to the private sector, the ratio
stood at 59.8%.
Loans evolution
Deposits evolution
th.M.AKZ
3 000
3 000
2 250
2 250
1 500
1 500
750
750
0
06
th.M.AKZ
07
08
09
101
0
Placements of Central Bank Securities (TBC) and
Treasury Bills (BT) in the last 2 years
Placement interest rates
Amounts placed
06
07
08
Chart 20
Total domestic credit
Credit to the private sector
the majority of maturity bands, with issues favouring
maturities of up to 3 months (including). From July
onwards, interest rates began to decline considerably,
reaching about 19% in October for TBC. In November and
December, the placing of TBC was interrupted and fully
replaced by BT, which had not been utilised during the
greater part of the year. This change in instrument
corresponded to a steep fall in interest rates, which
descended to around 12.4% in November and 11.4% in
December. It will be recalled that these assets have a
more favourable tax regime than the TBC, which helps to
explain part of the decline in placing rates. The Angolan
government should continue to favour the placing of
instruments with longer maturities. Interest rates present a
tendency to edge downwards; however the official goal for
inflation in 2011 of 12% will tend to act as a yardstick.
09
101
28
%
100
th.M.AKZ
21
75
14
50
7
25
Chart 21
In domestic currency
In foreign currency
Source: Banco Nacional de Angola (Central Bank).
State funding policy
In 2010, the Angolan authorities issued debt totalling
485.4 billion kwanzas (464.4 in 2009), split between
Central Bank Securities (Títulos do Banco Central – TBC)
and Treasury Bills (Bilhetes do Tesouro – BT). Of the
outstanding balance at the end of 2010, 243.6 billion
kwanzas (which compares with 328.4 billion kwanzas at
the end of the previous year) about 76% are TBC
concentrated in the 364 days maturity band (77% of the
total). This structure is replicated in the BT, where 72%
are also in the one-year maturity grouping. Between
January and May, interest rates hovered around 25% in
1) Values until September 2010.
38
0
2009
2010
0
2009
Chart 22
Until 91 days
182 days
364 days
2010
Chart 23
Until 91 days
182 days
364 days
Source: Banco Nacional de Angola (Central Bank).
MOZAMBIQUE
GROWTH
The Mozambique economy continued to evidence a very
favourable performance, both in the regional context and
from a global perspective, maintaining a brisk growth rate
in line with the most robust emerging economies. The
major investment projects, above all in the mineral
extraction and energy areas, continue to be a key factor
fuelling the tempo of activity. Meanwhile, there is
evidence of the drive directed at bolstering the
diversification of economic activity to more labourintensive sectors in the quest to boost employment,
reduce poverty indices and to foster shared economic
development.
The annual rate of Gross Domestic Demand (GDP)
change, at constant prices, was situated at 6.6% in
2010, which compares with 6.4% in the previous year.
Besides surpassing the forecasts of the vast majority of
observers, Mozambique also appears well positioned
when compared to its peers: the IMF estimates GDP
growth in the sub-Saharan African region in the order of
4.9%, while countries in the coastal region with
economies less dependent on natural resources probably
expanded by 3.5%.
The dynamism of economic activity was transversal to all
sectors, with special reference, however, to the
agricultural sector’s contribution. Favourable climatic
conditions, as well as the emphasis that has been placed
on investment and the sector’s reorganisation, justify this
behaviour. The world economy’s recovery, the greater
demand for commodities on the international markets
and the higher aluminium prices also mirrored
themselves in the upswing in exports and in the greater
contribution of the output of the so-called mega projects,
notably aluminium, electric energy and also natural gas.
The rate of economic expansion is expected to continue
to surprise favourably, outstripping that of its peers in the
region. This positive scenario is underpinned by the
progressive entry into operation of several investment
projects primarily in the energy and mining exploration
sectors – in the next two years 5 coal mines are
scheduled to commence operations. It is worth
mentioning that the IMF forecasts an average real GDP
growth rate in Mozambique between 2012 and 2015 in
the vicinity of 8%, whereas all the countries of the
sub-Saharan region should post average growth of around
5.5%.
Sustained advances in economic development are,
however, dependent on the strengthening of the private
sector. The maintenance of this dynamic will dictate that
the authorities maintain as primordial objectives: the
upgrading of infrastructures and public services; boosting
the financial system, and the maintenance of a business
climate open to private initiative. It should be noted in
this respect that Mozambique once again improved its
classification in the World Bank’s “Doing Business”
ranking. In 2011, it is situated in 126th position out of
183 economies, which represents a rise of 4 positions
relative to the previous year. The progression in this
ranking is important as a factor for capturing foreign
direct investment, bearing in mind that it is one of the
information sources consulted by potential investors. In
this context, it is important that the authorities continue
to strive towards lowering bureaucratic and legislative
barriers, amongst others, which hamper foreign or
national private initiative.
The annual average inflation rate stood at 12.5% in
2010, close to official estimates but above last year’s
levels (2009: 3.3%). This trend can be attributed to the
metical’s depreciation against the North American dollar,
the South African rand and the euro, thus making
imported products more expensive, to the higher prices of
energy and food products on the international markets
and to the withdrawal of subsidies for the prices of
certain primary goods and services (bread and fuel,
amongst others).
Real GDP growth
in Mozambique
Average inflation rate
in Mozambique
%
%
8.7
7.0
6.7
6.3
6.5
13.2
8.2
12.4
10.3
3.3
06
07
08
09
10
06
07
08
Chart 24
09
10
Chart 25
Source: IMF and National Institute of Statistics of Mozambique.
39
Domestic Commercial Banking
INDIVIDUALS AND SMALL BUSINESSES BANKING
OVERVIEW
Individuals and Small Businesses Banking was
responsible at the end of 2010 for a Customer resources
portfolio worth 22 441.5 M.€, and for a loan and
guarantees portfolio valued at 16 225.5 M.€. These
figures represent respectively 72% and 50% of total
Customer resources and Customer loans relating to
domestic operations.
Balance sheet resources increased by 250 M.€ (+1.2%)
in 2010 as a result of the expansion of the portfolios of
capitalisation insurance and bonds placed with
Customers, while off-balance sheet resources decreased
by 347 M.€ (-13.6%).
Individuals and Small Businesses
Selected indicators
In 2010, 145.9 thousand accounts were opened,
representing 10% growth relative to the preceding year.
The sale of products and services from the basic range to
new Customers signed up in 2010 was 2.3 products per
account. At the end of 2010, Individuals and Small
Businesses Banking boasted 1.5 million accounts.
2010
∆%
539.1 22 441.5
982.9 20 232.5
556.2
2 209.0
826.5 16 225.5
132.6
145.9
(0.4%)
1.2%
(13.6%)
2.5%
10.0%
2009
Total Customer resources1
On-balance sheet
Off-balance sheet
Loan and guarantees portfolio2
Accounts opened (thousands)
Total business per
account opened (th.€)
22
19
2
15
12.7
11.3
Individuals and Small Businesses Banking
Customer resources
th.M.€
13.1
06
th.M.€
14.6
07
15.5
15.8
16.2
08
09
10
18.7
06
21.3
07
22.5
22.5
22.4
08
09
10
Chart 26
Other loans and guarantees
Mortgage loans
1) Does not include securities.
2) In 2009 and 2010 includes performing loan balances of 897 M.€ and 821 M.€, respectively, relating to derecognised securitisation operations.
40
(10.7%)
Table 8
Loans and guarantees
The loan and guarantees portfolio expanded by around
400 M.€ (+2.5%), which chiefly reflects the growth of
the mortgage loan portfolio (+4.2%).
Amounts in M.€
Chart 27
Off-balance sheet
On-balance sheet
CUSTOMER RESOURCES
At 31 December 2010, Individuals and Small Businesses
Banking’s Customer resources totalled 22 441.5 M.€
(-0.4% than in 2009).
Customer resources1
Amounts in M.€
2009
On-balance sheet resources
Sight deposits
Time deposits
Bonds and structured products2
Insurance capitalisation3
PPR (insurance capitalisation)
Preference shares4
[= Σ 1 to 6]
Off-balance sheet resources
Unit trust funds
PPR
1
2
3
4
5
6
7
∆%
3
10
3
1
645.2
3 652.5
0.2%
333.6
9 715.5
(6.0%)
471.8
3 591.7
3.5%
588.3
2 066.3
30.1%
917.3
1 206.5
31.5%
26.6
0 (100.0%)
19 982.9 20 232.5
1.2%
1 330.2
878.8
2 209.0
(19.5%)
(2.7%)
(13.6%)
[= 7 + 10] 11 22 539.1 22 441.5
(0.4%)
8
9
[= 8 + 9] 10
Total Customer
resources
2010
1 653.0
903.3
2 556.2
Table 9
Customer resources carried on the balance sheet
increased 1.2% in 2010, thanks to the contribution of
the expansion of the portfolios of capitalisation insurance
(+478 M.€), PPR (+289 M.€) and bonds and structured
products placed with Customers (+119.9 M.€), which
compensated for the 6% decline in term deposits
(-618 M.€).
Off-balance sheet resources fell by 13.6% in 2010 as a
result of the 19.5% decrease in the portfolio of unit trust
funds (excluding retirement savings plans – PPR). This
behaviour is explained by the drop in the amount of
money market and variable-rate funds (-445 M.€), while
equities and flexible funds grew by 16% (+101 M.€).
The range of unit trust funds was broadened in 2010
with the special investment funds BPI Monetário,
directed at investment in short-term financial assets with
minimal volatility, and BPI Brasil Valor, which
complements BPI Brasil, by having greater exposure to
the stock market.
The retirement savings plans in the form of capitalisation
insurance and unit trust funds, increased by 264.7 M.€
(+14.5 %). The number of Customers with a retirement
savings plan increased by 46 thousand to 345 thousand
Customers at the end of 2010. BPI continued to promote
the placing of regular contribution plans, registering in
2010 the adherence of 29 thousand Customers to these
plans. At the end of the year, 57% of Customers who
subscribed to PPR had associated regular contribution
plans.
The portfolio of bonds and structured products placed
with Customers increased by 3.5%. Of special note was
the enlarged product range with the launching of
fixed-rate bonds in foreign currency, namely Swiss francs,
Canadian and American dollars and the offer of
structured product issues associated with certain sectors
of activity – gold mines, pharmaceuticals,
telecommunications, financials, agriculture and raw
materials.
1)
2)
3)
4)
Does not include securities portfolio.
Guaranteed-capital and limited-risk bonds.
Excludes PPR.
Preference shares placed with Customers.
Report | Domestic Commercial Banking
41
CUSTOMER LOANS
In December 2010, the loan and guarantees portfolio of
individuals and small businesses amounted to
16 225.5 M.€ (+2.5% than in 2009).
The loan portfolio growth resulted primarily from the
expansion in mortgage loans of 4.2% (+498 M.€), while
the small business loan portfolio contracted by 4.9%
(-121.1 M.€).
Customer loans and guarantees
2010
4.2%
4.7%
0.2%
(3.0%)
4.0%
1 817.0
1 761.5
148.2
117.1
463.3
441.8
30.0
16.8
2 458.4 2 337.3
15 626.0 16 027.7
200.4
197.8
15 826.5 16 225.5
(3.1%)
(21.0%)
(4.6%)
(43.8%)
(4.9%)
2.6%
(1.3%)
2.5%
2
[= Σ 1 to 4]
Portfolio balance
Loans contracted in the year
th.M.€
M.€
∆%
11 896.5 12 394.4
740.1
774.6
3
187.3
187.8
4
343.7
333.6
5 13 167.6 13 690.4
1
Loans to small businesses
Commercial loans6
Equipment leasing5
Property leasing5
Factoring with recourse
Mortgage loans
Amounts in M.€
2009
Loans to individuals
Mortgage loans1, 2
Personal loans3
Credit cards4
Car finance5
BPI strengthened its stringent risk-assessment criteria
and pursued a policy of gradual price adjustment during
the course of the year in order to adjust to the trend in
banks’ funding conditions.
6
7
8
9
[= Σ 6 to 9] 10
Total loan portfolio
[= 5 + 10] 11
Guarantees and sureties
12
Total
[= 11 + 12] 13
9.7
06
10.8
07
11.6
12.4
11.9
New mortgage lending in the year totalled 1 374.4 M.€,
which represented a 12.6% increase relative to the
previous year. BPI’s market share in new loans contracted
was situated at 12.6% in 2010 (+1.9 p.p. than in
2009). The background of low interest rates and the
non-existence of an over-valued real-estate market
underpinned demand for home loans.
1)
2)
3)
4)
5)
6)
7)
1 820
1 672
08
09
10
06
07
08
09
Chart 28
Market shares
Loan-to-value ratio
%
8.9
06
10.3
12.3
9.6
9.9
07
08
12.6
10.7
10
Chart 29
%
9.4
1 374
1 221
Table 10
Mortgage loans
At the end of 2010, the mortgage-loan portfolio
amounted to 12 394.4 M.€, (up 4.2%). BPI’s market
share in terms of the balance on the mortgage-loan
portfolio was situated at 10.3%7 (10.1% a year earlier).
2 151
63.2
65.1
64.8
63.1
07
08
09
66.4
10.3
10.1
09
10
Chart 30
Portfolio balance
06
10
Chart 31
Loans secured by fixed property. Corresponds primarily to home loans and loans for home alterations.
Figures for 2009 and 2010 include 897 M.€ and 821 M.€, from securitisation operations derecognized from the balance-sheet.
Includes consumer loans and credit lines made available for privatisations.
Includes outstanding credit of non-Bank Customers.
Includes car financing and leasing originated by Individuals and Small Businesses Banking.
Includes overdrafts, current account loans, discounted bills receivable and other loans which form part of the loans products tailored mainly for sole traders and small businesses.
Based on the latest data available for the market relating to October.
42
The average term of the new loans advanced and the
average amount per contract were situated at 34.9 years
and 84.1 M.€, respectively. The average loan / value
ratio for new mortgage loans in 2010 stood at 66.4%.
Personal loans and motor car finance
The personal loans portfolio reached 774.6 M.€ at the
end of the year, 4.7% higher than that observed at the
close of 2009. New loans contracted in 2010, increased
by 5.3% relative to 2009 to stand at 309.8 M.€.
In 2010, the Bank realised several joint campaigns for
the sale of non-financial products involving first-class
brands, such as Atlantis, Breitling, Canon, Cutipol, Gucci,
Montblanc, Phillips and Vista Alegre.
Personal loans
Selected indicators
Amounts in M.€
Loan portfolio
Consumer loans
Loans for acquisition
of securities
[= 1 + 2]
Consumer loans
Loans for acquisition of securities
[= 4 + 5]
Average term weighted
by amount (years)
2009
2010
∆%
1
724.4
763.4
5.4%
2
15.7
740.1
11.2
774.6
(28.3%)
4.7%
6
293.3
0.9
294.2
306.8
3.1
309.8
4.6%
261.0%
5.3%
7
7.0
6.7
3
4
5
(4.4%)
Table 11
The Individuals and Small Businesses Banking’s portfolio
of Customer loans advanced for motor car finance
decreased 3.0% to 333.6 M.€ at the end of 2010. This
portfolio corresponds to 75% of the BPI Group’s total
motor car finance portfolio.
Car finance
Selected indicators
Loan portfolio
Long-term rental
Loans
Leasing
Amounts in M.€
1
2
[= Σ 1 to 3]
Loans contracted in the year1
3
4
5
2009
2010
∆%
77.5
112.1
154.1
343.7
120.9
68.6
118.4
146.6
333.6
137.6
(11.5%)
5.6%
(4.9%)
(3.0%)
13.8%
Table 12
The most noteworthy initiatives undertaken in 2010
included:
j
j
the launching of an incentives campaign aimed at
dealers with a view to boosting the business generated
through these joint initiatives;
the launching of three important campaigns in
partnership with three prestige makes. Two were
launched in the 2nd quarter, with Volvo and Porsche, the
latter targeted at high net worth Customers and the
third in the 4th quarter with Peugeot.
Commercial loans, leasing and factoring
The portfolio of commercial loans, leasing and factoring
recorded a 4.9% decrease in 2010 to 2 337.3 M.€.
BPI held on to its leading position in 2010 in the
programmes launched by the Government aimed at
lending support to small and medium-sized enterprises
(PME Investe credit lines, credit line to aid the
Agricultural, Forestry and Agri-Produce sectors, MODCOM
– 5th phase and the IEFP credit lines)2, as well as in the
Programa Fincresce, by means of which companies are
granted the PME Líder3 status.
New business contracted totalled 137.6 M.€, up 13.8%
on the 2009 figure.
1) Amount of the contract after deducting the 1st instalment / initial payment.
2) Credit lines with subsidised interest rates which were created with the object of supporting SME’s in reinforcing their permanent capital and in the development of their investment projects.
3) The PME Líder status is awarded by IAPMEI to companies which pursue strategies directed at growth and strengthening their competitive base and whose profile is positioned at the best
risk levels.
43
As regards the Individuals and Small Businesses Banking
network’s involvement in 2010, we highlight:
j
j
the contracting of 3 745 operations in the amount of
171.3 M.€ within the scope of the PME Investe credit
lines, support line to the Agricultural, Forestry and
Agri-Produce sectors, the Madeira and the Azores lines;
granting of the PME Líder status to 1 803 companies
and the granting of the PME Excelência status to
397 companies.
Credit and debit cards and automatic payment terminals
Banco BPI closed 2010 with 548 thousand credit cards
in circulation, 1.8% more than in 2009. Billing
increased by 2.6% relative to 2009 to 1 057 M.€, while
the amount outstanding registered a marginal increase of
0.2% to 187.8 M.€.
The number of debit cards placed with BPI Customers
rose by 4.1% to 1 046 thousand cards, while billing in
the year climbed 7.4% when compared to the previous
year to 5 690 M.€.
Credit cards, debit cards and automatic payment terminals (APT)
Selected indicators
Credit cards
Number of credit cards at
the end of the year (x th.)
Billing (M.€)
Loan portfolio (M.€)1
Debit cards
Number of debit cards at
Billing (M.€)
APT
Number of APT at
Billing (M.€)
2009
2010
∆%
538.4
1 030.1
187.3
548.2
1 057.2
187.8
1.8%
2.6%
0.2%
1 004.7
5 300
1 045.7
5 690
4.1%
7.4%
40.3
2 389
51.4
2 711
27.4%
13.5%
Table 13
The Bank has pursued an aggressive strategy aimed at
the placing of POS automatic payment terminals (APT)
launched in 2007 and which was based on the revision
of conditions, as well as on product-placement
campaigns.
The stock of Banco BPI’s APTs grew 27.4% to 51.4
thousand at the end of 2010, making BPI the market
leader with a 18.8% share (up 2 p.p. on 2009). Billing
via the terminals in which BPI is the support bank grew
by 13.5% to 2 711 M.€.
Salary accounts
In 2010, the number of Customers with automatic salary
domiciliation increased by 28 thousand (in 2009 rose by
20 thousand).
During the year under review, two campaigns were
launched aimed at attracting new salary accounts with
automatic salary domiciliation. These campaigns entailed
the offer of a PPR, corresponding to 10% of a Customer’s
monthly salary, simultaneously promoting the placing of
PPR with regular contribution plans.
Isolated sale insurance
Within the ambit of the strategic partnership with Allianz
Portugal, Banco BPI offers a comprehensive array of
autonomous-sale insurance policies, not only for
individual Customers but also for small company
Customers, sole proprietors and self-employed
professional people. In 2010 the number of insurance
products subscribed for rose by 43% relative to 2009, in
particular insurance destined for the small companies,
sole proprietors and the professional class segments.
In 2010 the whole isolated-sale insurance product range
was revamped, which permitted offering a greater choice
in line with predefined cover packages. Also noteworthy
was the availability of a new application which permits
the issue of online insurance in conjunction with Allianz.
1) Outstanding owed by Individuals and Small Businesses Banking Customers and non Customers.
44
NON RESIDENTS
The non-residents’ segment is charged with serving
communities abroad which maintain important ties with
Portugal, namely communities of emigrants and
Portuguese descendants, as well as non emigrant
Portuguese living abroad.
This segment is served by a branch network in Portugal,
for which there is a specific product range, and by
structures overseas – seven representative offices1, two
Money-remitter offices and by the branch in France
which has 12 agencies – geared to prospecting for
business and providing support to Customers.
The non-residents’ segment2 registered in 2010 growth
of 2.8% in the Customer resources portfolio to
4 518.8 M.€, and 5.3% in the loan portfolio to
523.6 M.€. At the end of the year, this segment
represented 20% of resources and 3% of total loans of
Individuals and Small Businesses Banking.
Some 11 thousand new accounts were opened in 2010,
21.6% more than that registered in 2009. At the end of
the year, the non-resident segment had about 124
thousand accounts.
Non-residents’ segment
Selected indicators
Amounts in M.€
Customer resources3
Loan portfolio
No. of accounts opened
2009
2010
∆%
4 397.3
497.3
8 884
4 518.8
523.6
10 802
2.8%
5.3%
21.6%
Table 14
At the French branch, the portfolios of Customer
resources and Customer loans totalled circa 200 M.€ and
100 M.€, respectively at the end of 2010.
1) The business originated by the representative offices and by the remittance offices is domiciled at the Individuals and Small Businesses network.
2) Business generated by the distribution network in Portugal and by the external support structures, with the exception of the branch in France.
3) Does not include securities portfolio.
45
HOMEBANKING SERVICE
BPI places at its Customers’ disposal the following
homebanking services – BPI Directo, BPI Net, BPI Net
Empresas, Mobile Banking and SMS Banking, as well as
the brokerage services BPI Online and BPI Net Bolsa.
The growing adherence by Customers to the homebanking
services has permitted the progressive transfer of the
branches’ transactional activity to these channels,
liberating the commercial network to concentrate on more
value-added services, namely, fostering the commercial
relationship with Customers, at the same time affording
Customers greater convenience in the realisation of
transactions and consultations.
Homebanking services
Selected indicators
2009
Selected indicators
Subscribers (in thousands)
7441
Active users (in thousands)
7071
% of the Banks’ total
consultations (account-balances
68%
and activity)2
% of the Banks’ total
transactions2
85%
BPI Net
4921
Consultations made
(in thousands)
91 884
Transactions carried out
(in thousands)
11 156
BPI Directo
3611
Consultations made (in thousands) 863
% of calls received by BPI Directo
dealt with by automatic
attendance
48%
% of calls received attended
in less than 20 seconds
74%
BPI Net Empresas
70
Subscribers (in thousands)3
57
Active users (in thousands)3
Volume transacted (M.€)
43.4
Online brokerage
Market share
20.3%
2010
∆%
BPI Net and BPI Directo
Subscribers
Transactions and consultations
Thousands
Millions
650
751
838
7441
801
54
06
07
08
09
10
8%
1%
06
07
08
10
Chart 33
Transactions
Consultations
67%
(1 p.p.)
87%
+2 p.p.
553
12%
98 326
7%
11 678
5%
360
700
(0.3%)
(19%)
44%
(4 p.p.)
70%
(4 p.p.)
76
64
46.7
9%
12%
8%
20.8%
+0.5 p.p.
Active subscribers3
Volume transacted
Thousands
M.€
77
06
89
104
70
07
08
09
44.7
43.4
08
09
46.7
32.8
76
22.5
10
06
07
Chart 34
Table 15
1) The internet banking data base was updated in Portugal, with the adherence of 247 thousand Customers having been cancelled for non utilisation of the service.
2) All BPI Net and BPI Directo consultations and transactions as a percentage of the Bank’s total.
3) Does not include business Customers who use the BPI Net service.
09
BPI Net Empresas
Concepts: Active subscribers – Customers with active contract.
Active users – Customers with active contract, who changed
the password and carried out at least one operation.
46
111
72
Chart 32
801
717
94
104
10
Chart 35
SERVICE QUALITY
In 2010 BPI centred its action on the following
fundamental axes:
j
j
j
j
j
monitoring the market’s perceived quality through the
analysis of internal and external service quality and
Customer satisfaction indices;
ongoing improvement in the quality of Customer
attendance and the involvement of the commercial teams
in the quest for solutions to maintain and enhance
service quality;
strengthening the Quality theme in training programmes
for commercial network Employees;
monitoring the in-house quality of the service provided by
the central units to the commercial network;
following up Customers’ complaints from the standpoint
of the continual improvement of service and processes.
2010 Results – Customer satisfaction
IQS Banco: annual survey involving Banco BPI Customers
The Bank’s Service Quality Index (in Portuguese IQS
Banco), evaluates the level of BPI’s service as an
organisation, based on an annual survey conducted
amongst a significant sample of Customers. This index was
situated at 798 points in 2010 (797 points in 2009), on a
scale whose maximum is 1 000.
IQS Unidades Centrais: half-yearly survey of commercial
network Employees
This internal indicator is capable of translating the level of
satisfaction of Employees working at the commercial
network with the service provided by the central units. This
indicator’s overall results have confirmed over time a
positive trend in the central units’ functioning from the
viewpoint of their main in-house users.
Complaints management
In 2010, the number of complaints recorded a decline of
some 50% relative to 2009 (6 974 vs. 13 994 in 2009),
an improvement that can be ascribed to the better level of
Customer service stemming from the streamlining of
operations and systems.
The average response time increased by 2.2 days (9.9 days
vs. 7.7 in 2009), justified by the significant decrease in
the weight of more direct response complaints (price and
commissions).
In the decrease in the number of complaints, we highlight
the following headings: means of operating accounts,
homebanking services and home loans.
IQS Balcão: quarterly survey realised by Banco BPI
Customers
In monitoring the quality of BPI’s attendance, the Branch
Service Quality Index is used (in Portuguese IQS Balcão),
which evaluates the satisfaction of Customers with the
service received at each branch.
Service quality in branches
IQS Branch in the 4th quarter 2010
IQS
(global satisfaction)
883
895
Personnel
attendance
Service
Effectiveness
in operations
Telephone
attendance
865
882
871
Chart 36
47
CORPORATE BANKING, INSTITUTIONAL BANKING AND PROJECT FINANCE
2010 saw the maintenance of an extremely adverse
macroeconomic and financial environment with negative
consequences for the demand for credit: on the one
hand, there was a steep contraction in public and private
investment, and on the other, the restrictions on
Portuguese institutions’ ability to tap international
funding in the wake of the sovereign debt crisis, which
was mirrored in an inevitable increase in the cost of
borrowing.
Spreads widened significantly in almost all segments,
although less so in the case of companies than in the
public sector; SME’s bore a smaller increase in spreads
in average terms.
Banco BPI continued to focus its lending and service
priorities on Portuguese SME’s and more particularly on
export companies as a whole which, in fact, distinguished
themselves for being the economy’s most dynamic
segment.
Corporate Banking, Institutional Banking and Project Finance
Selected indicators
Amounts in M.€
Loans to Customers
Large corporations
Companies (SME)
Project Finance
Institutional Banking and
State Business
2009
2010
∆%
4 802.0
3 895.4
2 225.3
4 371.3
3 568.1
2 328.1
(9.0%)
(8.4%)
4.6%
2 105.1
2 284.4
13 027.7 12 552.0
6
2 478.2
2 482.1
7 15 736.7 15 152.3
8
1 898.8 2 105.3
8.5%
(3.7%)
0.2%
(3.7%)
10.9%
1
2
3
[= Σ 1 to 4]
Guarantees
Loans and guarantees1
Resources2
4
5
Table 16
Corporate Banking, Institutional Banking and Project Finance
Customer resources
th.M.€
13.7
th.M.€
15.6
15.8
15.7
15.2
2.4
2.0
1.7
In this unfavourable background, the Bank continued to
pursue a stringent evaluation practice, closing monitoring
corporate credit risk.
At the end of 2010, Corporate Banking, Institutional
Banking and Project Finance’s Customer loans portfolio
totalled 12 552 M.€, down 3.7% on the figure at
31 December 2009. The amount relating to bank
guarantees was 2 482 M.€ at the end of 2010, which is
almost identical to the figure at the end of the previous
year (2 478 M.€). Resources grew by around 10.9% to
stand at 2 105 M.€ by the end of the year.
06
07
Guarantees
Loans
08
09
10
Chart 37
06
07
08
1.9
09
2.1
10
Chart 38
1) Includes loans to Customers (certificated and non certificated), bank guarantees, loans to credit institutions and other debt securities falling under the jurisdiction of Corporate Banking,
Institutional Banking and Project Finance.
2) Sight and term deposits.
48
LARGE CORPORATIONS
The Customer loans portfolio of the large corporations
segment stood at 4 371 M.€ in December 2010, which
corresponds to a decrease of 9% over the year. This trend is
due, on the one hand, to the decrease in the portfolio as a
result of programmed repayments and some early
repayments and, on the other, to the Bank’s decision to
focus its priorities in supporting SME’s.
companies whose main business is dependent on the
domestic market and a more efficient financial
management observed at several companies.
BPI continued to actively distribute PME Investe lines
negotiated with the government and guaranteed by the
mutual guarantee companies to these loans to the extent
of between 50% and 75%.
COMPANIES
At the end of 2010 the corporate loans portfolio totalled
3 568 M.€, that is, 8.4% less than at the end of the
previous year.
BPI retained its clear leadership in the canvassing for
companies’ applications for obtaining PME Líder and
PME Excelência status.
This decrease in the portfolio was primarily due to the
marked drop in investment, the decline in the activity of
In 2010, BPI was able to attract 700 new corporate
Customers.
Agricultura 2010, Linha de Crédito Açores Empresas II and
Linha de Apoio à Recuperação Empresarial da Madeira, –
the latter set up to minimise the losses stemming from the
devastating floods and mudslides which occurred in that
Autonomous Region on 20 February 2010.
These lines, which are the object of protocols signed with
the Portuguese State, permit beneficiary companies to
obtain medium-term bank loans under very attractive terms
and have become a fundamental instrument for companies
to access credit in the current financial environment. Since
the launching of these credit lines, BPI has occupied a
leading position, as borne out by the following data:
In 2010 BPI maintained a very prominent position in
lending support to small and medium-sized enterprises
(SME, the corresponding Portuguese term is PME), having
been involved in the reinforcement of support instruments
for companies in this segment, in the form of subsidised
credit lines through the opening of the following lines –
PME Investe V and VI, Linha QREN Investe, Linha
Credit
line
PME Investe1
Azores2
Madeira3
Operations
contracted by
BPI (no.)
Global
BPI
Market
share
(%)
6 900
33
82
1 400
6
15
20%
19%
19%
Outstanding (M.€)
> 13 000
140
150
Table 17
1) PME Investe I, II, III, IV, V and VI.
2) SAFIAGRI, Açores Empresas, Açores Investe and Açores Reestruturação de Crédito lines.
3) Credit line PRO-INVEST, Micro e Pequenas Empresas da Madeira, Linha de Apoio à Recuperação Empresarial da Madeira and PME Madeira.
49
PME LÍDER
BPI was the main bank in supporting some 6 800 SME’s
attaining the PME Líder status. This status is granted by
IAPMEI and by Turismo de Portugal to companies which
pursue growth strategies and strengthen their respective
competitive base while having a sound risk profile. BPI is
the bank having signed up the most companies adhering to
PME Líder: 69% of PME Líder firms are BPI Customers
and 42% adhered to the PME Líder programme via BPI.
The PME Excelência distinguishes the PME Líder firms
which present the best performance and risk profile; here
also BPI is the undisputed leader with 52% of the PME
Excelência firms having adhered via the Bank.
PME LÍDER AND PME EXCELÊNCIA DIPLOMAS
BPI created a diploma for PME Líder and PME Excelência
companies, who adhered to the status via BPI, as a form of
honouring the status achieved and rewarding the success
of the strategies followed by these companies.
AGRICULTURE LINE
BPI has the leading position in the value of guarantees
issued by Agrogarante, with a market share of 25%. This
performance is a reflection above all of the protocol signed
by BPI and Sociedade de Garantia Mútua within the ambit
of the Agriculture Line, which materialised in 240
outstanding operations amounting to 42 M.€.
MUTUAL GUARANTEE
Banco BPI continued to play a prominent role in the
dynamic promotion of mutual guarantee business in close
liaison with the mutual guarantee companies (Norgarante,
Lisgarante, Garval and Agrogarante), stemming from the
eminent position reached within the ambit of the PME
Investe lines.
In 2010, BPI maintained its leading position with a share
of approximately 21% in terms of the amounted contracted
in the mutual guarantee system.
EIB CREDIT LINE
In January 2010, BPI signed a contract with the European
Investment Bank (EIB) with a view to making available a
new financing line– the 17th global line negotiated between
BPI and the EIB – geared above all to supporting Small
and Medium-sized Companies.
Of the overall amount of 200 M.€, about 80% of the line
has already been drawn, with the funds having been used
to finance 324 companies’ projects so far with an average
value of 348 thousand euro, and 28 projects submitted by
institutions with an average value of 1.6 M.€.
BPI PME + LINE
The BPI PME + credit line remained available in 2010.
It was created for the purpose of financing PME’s
medium-term investment projects under very competitive
conditions by recourse to property and equipment leasing
solutions, mortgage loans and additional working capital
needs. This product complements the PME Investe
subsidised lines.
50
INTERNATIONAL BACKING
Spain and Angola are two key markets for national
companies and where Banco BPI has a unique position; in
Spain through the special relationship with La Caixa, and
in Angola through BFA.
In this regard, BPI developed in partnership with La Caixa
and with BFA specific products designed to assist
companies wishing to invest or export to those markets –
“Soluções Ibéricas para Empresas” (Iberian Solutions for
Companies) ands “Soluções Angola-Empresas”
(Angola-Companies Solutions) – and created in Portugal
support structures for the aforementioned offers, namely:
Spanish companies office
j Support for companies operating in the Iberian market.
j Keeping track of the large Spanish groups and companies
present in the local market.
j Supporting BPI’s Corporate Centres in issues which
involve those Customers.
j Facilitating access to information about the Spanish
market.
Office for Africa
j Assisting Customers – jointly with the BPI Corporate
Centres in Portugal, and with BFA in Angola – in the
detection of business opportunities in Africa, especially
in Angola.
j Provision of information about the behaviour of the
Angolan economy and market.
j Creation of privileged link channels with BFA, channelling
Portuguese Customers who travel to Angola to local BFA
teams.
Business Development Unit
j Structure and team in Portugal and in Angola.
j Proactively assisting and encouraging companies to
expand their businesses to Angola, by way of direct
investment, offering a wide range of services.
j Provision of first-class consultancy services to Angolan
entities – governmental or business, public or private –
with a view to Angola’s economic and financial market
development.
j Support to BFA in the mounting of major and / or more
complex operations.
Trade finance
In the light of the growth in exports, in particular the
contribution of SME’s, BPI created a trade finance unit
with the objective of:
j
j
j
boosting the sale of products which give support to
companies in international trade;
assisting companies in the choice of financial products
designed to minimise the risks stemming from their
activity in international trade;
promoting training at companies, especially those taking
their first steps towards export business.
51
SUPPORT FOR INNOVATION, ENTREPRENEURSHIP AND INTERNATIONALISATION
BPI has participated and actively fostered, in collaboration
with leading public and private entities, several projects
which promote innovation and the internationalisation of
Portuguese companies, communicating these initiatives
and other matters of interest to the sector through the
most diverse channels.
Partnership with COTEC Portugal
One of the key initiatives aimed at bolstering business
innovation is the permanent partnership with COTEC
Portugal.
The following were the most noteworthy initiatives in 2010
were:
BPI “Rede PME Inovação COTEC”: organised six events at
different locations for the purpose of disseminating the
network Rede PME Inovação COTEC.
Workshops BPI-COTEC “Innovation Scoring”: five
workshops held by BPI and sponsored by COTEC, aimed at
explaining to the business community the “innovation
scoring” system and making them aware of the importance
of making innovation at their companies a systematic
process.
Prémio PME Inovação COTEC-BPI: BPI has been the chief
sponsor of the event since it was first held in 2005. The
PME Inovação COTEC-BPI Award is intended to reward a
group of SME’s with innovative attitudes and activities and
which represent striking examples of value creation for the
country. The award winner in 2010 was Polisport Plásticos,
while the company Nautilus received an honourable
mention.
52
Promoting export firms and internationalisation
“ABC Mercado Angola – Províncias” seminars – staging of
two seminars, in conjunction with AICEP Portugal Global,
which were attended by more than 370 Customers, where
the present state of the Angolan market was debated, and
the importance of BPI and BFA in assisting companies with
operations in Angola.
2010 Internationalisation Action – with the mutual goal of
assisting Portuguese companies in their internationalisation
strategies, BPI supported WIND in the “2010
Internationalisation Campaign”.
This initiative took place in October and November 2010
and included a Training Cycle and Workshops with the
theme “Internationalisation – a growth strategy” with a
duration of 100 hours and which in this first edition was
attended by 14 businessmen and senior staff from
Portuguese small and medium-sized firms.
On 25 November, in Oporto, the event “Innovate to
internationalise” was staged which closed the cycle of
training sessions and workshops, which counted with the
participation of some 150 businessmen.
Entrepreneurship
In 2010, Banco BPI maintained its active involvement in
supporting entrepreneurship by way of offering financial
instruments for this purpose, namely, the Linha FINICIA II
(micro credit line), Linha FINICIA III (FIINICIA FAME) and
the IEFP lines (Investe + e Microinveste).
As a result of these lines, Banco BPI contracted during
2010 150 operations worth a total 4.2 M.€.
COMMUNICATION WITH CUSTOMERS
BPI Empresas
BPI makes available to the corporate segment a monthly
electronic newsletter containing up-to-date information
about products and services, as well as analyses and other
crucial business information. Currently, the newsletter is
distributed via email to 19 thousand Corporate Banking
Customers, or 17% more than in 2009.
BPI Empresas site
BPI has a public website – www.bancobpi.pt – with useful
information about BPI products and services specially
tailored for the needs of business Customers. In 2010,
some 566 thousand accesses to the BPI Empresas site
were registered.
Regional BPI gatherings
In 2010, BPI organised 2 Regional Gatherings which were
attended by the Executive Committee of the Board of
Directors and involved all the commercial units and
principal Customers. In the 7 cities visited (Aveiro, Castelo
Branco, Évora, Faro, Guimarães, Ponta Delgada and
Setúbal) each region’s potential economic development
was debated with local businessmen and representatives.
Cross selling with COSEC
In 2010, Banco BPI, through its Corporate Banking
network, was very actively involved in the launching of the
Soluções COSEC campaign, directed at PME Excelência
and PME Líder firms, and which entailed the offer of
special and flexible conditions in the access to credit
insurance. This campaign resulted in the signing up of an
important number of new Customers in this segment, with
the bank contributing with 47% of the new business won.
The campaign’s dynamic promotion also contributed to
sustaining the increase in new business activity originated
at Banco BPI, which amounted to 1.1 M.€ in annual
premiums and registered a 20% increase in the number of
new Customers relative to 2009. Banco BPI reinforced its
relative share of COSEC’s Customer portfolio to 14%.
BPI’s partnership with COSEC also extended to the
promotion of support lines for commercial loans with State
guarantee to Portuguese companies. In line with the
previous year, Banco BPI contributed in 2010 decisively to
publicising these lines to companies specifically with the
contracting of 24% of the following policies: Linha
Cobertura Adicional OCDE I, 48% of the Linha Cobertura
Adicional OCDE II and 65% of the Linha para países fora
da OCDE, México e Turquia (line for countries outside the
OECD, Mexico and Turkey).
53
INSTITUTIONAL BANKING AND STATE BUSINESS
SECTOR
In 2010 the loan portfolio of Institutional Banking and
State Business Sector Clients grew by roughly 8.5% to
2 284 M.€. This increase reflects in part the execution
of commitments assumed in previous years.
Banco BPI has been at the forefront of settling Local
Authorities’ debts to the relevant suppliers, permitting
through the debt-settlement accords, not only reinforcing
the suppliers’ treasury management, but also an
adjustment to Municipalities’ budget planning. In 2010,
Institutional Banking drew up some 600 debt-settlement
accords with 66 Municipal Councils totalling 140 M.€.
Banco BPI once again supported a number of entities –
the Autonomous Regions of Madeira and the Azores and
the municipalities of Lisbon, Oporto, Sintra and Cascais –
the process relating to their international credit ratings.
PROJECT FINANCE
As a result of the prevailing budgetary restrictions,
limitations on public debt and adverse conditions on the
financial markets, the project finance market in Portugal
registered a significant slowdown in 2010, namely as
regards the financing of large-scale public investment
projects in the public-private partnership regime, which
substantially limited the materialisation of tenders
launched in previous years.
54
During this period, BPI’s involvement in this market was
marked by a deliberate selectiveness in project financing,
which became more pronounced in the 2nd half of the
year. In addition, greater emphasis was placed on
monitoring the loans and guarantees portfolio under
management and financial consultancy mandates on the
national and international markets.
In this context, the loan portfolio relating to the project
finance segment grew 4.6% when compared with the
previous year, and stood at 2 328 M.€ in December
2010. This increase is chiefly explained by the advancing
of funds on operations already on hand and, to a lesser
extent, by the contracting of new financing, essentially
concentrated on the domestic market.
As concerns financial consultancy work locally, the Bank
remained very active, giving continuity to its role of
permanent financial consultant in various projects, in
particular in the infrastructure and transport sectors,
involving both private and central and local
administration entities.
On the international front, BPI continued to evolve its
financial consultancy business in the Portuguese-speaking
African countries, notably Angola, Mozambique and Cape
Verde, having established teams dedicated to the
structuring and mounting of financing operations in these
markets.
Amongst the operations in which BPI was involved in 2010, the following were the most noteworthy:
Structuring, mounting and financing operations under the
project finance regime
j Ascendi Pinhal Interior – Estradas do Pinhal Interior –
Mandated Lead Arranger in the organisation, mounting
and underwriting of financing for the Pinhal Interior
motorway sub-concession with a total length of 520 km.
Total financing and bank guarantees: 892.5 M.€.
j
ENEOP – Energias de Portugal – Mandated Lead Arranger
in the financing for the construction, operation and
maintenance of a portfolio of 23 wind farms with
installed capacity of 480 MW. Total financing and bank
guarantees: 467.5 M.€.
j
Águas de Cascais – Mandated Lead Arranger in the
refinancing of the public service concession for the water
supply and sanitation systems for the borough of Cascais.
Total financing and bank guarantees: 62.8 M.€.
j
j
Fuente Álamo Fotoparques (Fundo Novenergia) – Sole
Lead Arranger in the organisation, mounting and
underwriting of the Fuente Álamo photovoltaic park in
Múrcia, Spain, with a potential installed capacity of
5.25 MW: 30.6 M.€.
Mersol – Projectos Solares de Mértola – Sole Lead
Arranger in the structuring, mounting and financing of
the Castanhos photovoltaic power plant with capacity of
1.3 MW, situated in Mértola: 4.0 M.€.
Public administration public-private partnerships
j Ministry of Health – economic-financial advisory service
to the Ministry of Health within the ambit of the 1st wave
hospital projects (hospitals of Loures and Vila Franca de
Xira) and of the 2nd wave (hospitals of Todos os Santos,
Central do Algarve, Vila Nova de Gaia / Espinho and
Póvoa de Varzim / Vila do Conde).
j
North Regional Health Administration –
Economic-financial and production consulting to the
management of the Braga Hospital contract under the
public-private regime.
j
Vila Nova de Gaia / Espinho Hospital Centre – analysis of
options for the development of the imageology service.
j
Douro and Leixões Port Administrations – financial
advisory services within the ambit of the public tender for
concession of the construction, management and
commercial operation rights under the public service
regime of the Leixões’ logistics platform.
j
Municipality of Guimarães – preparation of the economic
and financial feasibility study of the municipal company
Vitrus-Ambiente, responsible for the collection of solid
urban waste in the municipality.
Organisation and mounting of financial restructurings and
financing solutions in the state business sector
j National schools – provision of support services in the
preparation and mounting of the financing solution within
the ambit of the pluri-annual programme for modernising
educational infrastructures.
j
IGA – Investimento e Gestão da Água – Financial advisory
service within the scope of the application of a new
organisational model for the water, sanitation and waste
sectors of the Madeira Autonomous Region.
Other consultancy assignments
Auto-Estradas do Atlântico – Permanent financial
consultant to the West motorway concession.
j
j
Vialitoral – Permanent financial consultant to the Madeira
SCUT motorway concession.
j
Norscut – Financial consultant in the restoration of the
financial equilibrium of the Northern Interior SCUT
concession contract.
j
Consórcio ALTAVIA – financial consultant to the
consortium comprising the groups MotaEngil, Vinci,
Somague, Teixeira Duarte, MSF, Opway, Alves Ribeiro,
BPI and BES, bidder in the high-speed railway projects
launched in Portugal.
International area
On the international front, BPI pursued its project finance
business in Angola, Mozambique and Cape Verde, with
structuring mandates being promoted and in progress
involving projects in the energy, transportation, cement and
water and sanitation sectors, amongst others.
55
Bancassurance
In the insurance area, BPI has a strategic partnership
with the sector’s world leader – the German Allianz group.
This association has been cemented through BPI’s 35%
stake in the capital of Allianz Portugal, and in a
distribution agreement in terms of which insurance
policies are marketed via the Bank’s commercial network.
BPI Customers thus have at their disposal an extensive
range of insurance products which cover both life
assurance – death and disability insurance – and the
other branches – motor insurance and all-risks insurance:
household, fire, alterations and installations, public
liability, theft, personal accident, unemployment and
sickness.
The 2010 performance of the insurance area is reflected
in the following revenues indicators:
Commissions
Insurance
Intermediation of insurance
products
Life-risk and non-life
M.€
Thousand
31.8
32.5
36.3
36.8
23.3
06
j
j
commissions rose to 36.8 M.€;
735
340
325
395
400
410
06
07
08
280
07
08
09
10
Chart 39
j
740
675
Non-life insurance
Life-risk insurance
life and non-life insurance premiums totalled
respectively 69.5 M.€ and 59.3 M.€, which correspond
to growths of 4.7% in life risk and 9.4% in non-life risk
(the market posted growth of 1.3% in life risk and 0.9%
in non-life risk);
the number of insurance policies at the end of 2010
exceeded 480 thousand active life-risk policies and
360 thousand active non-life insurance policies.
Seguros
1
56
820
840
350
360
470
480
09
10
Chart 40
Asset management
BPI GESTÃO DE ACTIVOS, BPI PENSÕES AND BPI VIDA
OVERVIEW
At the end of 2010, BPI Gestão de Activos managed
financial assets totalling 10 479 M.€, which is up 6.2%
on the previous year’s figure.
Assets under management
Selected indicators
Unit trust (mutual) funds
Real estate unit trust funds
Pension funds
Institutional Customers
[= Σ 1 to 5]
Elimination of double recording
Total adjusted1
[= 6 + 7]
share of 17% (17% in 2009), and fifth position in terms
of the capitalisation insurance portfolio with a 9% market
share (8% in 2009).
Amounts in M.€
1
2
3
4
5
6
7
8
2009
2010
∆%
2 919
248
3 179
3 188
573
10 107
(244)
9 863
2 584
274
3 183
4 035
639
10 715
(236)
10 479
(11.5%)
10.5%
0.1%
26.3%
11.5%
6.0%
6.2%
Breakdown at 31 Dec. 10
2006-2010
th.M.€
12.7
Institutional
Clients
12.7
8.6
9.9
10.5
6%
Unit trust
funds
24%
Real
estate
funds
3%
30%
37%
Table 18
At the end of 2010, BPI’s Asset Management occupied
second place in the ranking of unit trust fund managers
in Portugal, with a 17% market share (16% in 2009),
second place in pension fund management with a market
06
07
08
09
10
Pension
funds
Insurance
Chart 41
Chart 42
The BPI Group has an ample array of investment and
savings products in the form of investment (mutual) funds,
unit trusts and real-estate funds, capitalisation life
insurance, pension funds and the management of Clients’
asset portfolios.
The unit trust (mutual) funds are also commercialised via
the telephone banking service (BPI Directo) and the
internet platforms (www.bpinet.pt and www.bpionline.pt),
as well as www.activobank7.pt, www.banco-best.com and
www.bigonline.pt.
BPI Gestão de Activos is responsible for the management
of asset portfolios of Institutional and Individual
Customers, as well as all the BPI Group’s range of
asset-management financial products. BPI Vida,
Companhia de Seguros, undertakes the design and control
of the capitalisation insurance product range, as well as
developing the related institutional functions, while BPI
Pensões’s mission is to offer directly to its Clients an
all-embracing pension fund service, as well as performing
institutional functions.
The commercial and promotional function is carried out by
Banco BPI, in close collaboration with BPI Gestão de
Activos and BPI Vida, which ensures proper integration in
the overall strategy of the Group’s investment and savings
products. The objective is to ensure adequate liaison
between, on the one side, the product units and the
structuring of the product range and, on the other, between
the distribution network
and the
Gestão
defunction
Activosaimed at
dynamic sales promotion.
The unit trust and capitalisation insurance funds are
placed with Customers by Banco BPI’s distribution network
– branches and investment centres – and by Banco
Português de Investimento’s Private Banking area.
1e2
Turning to the pension funds, BPI Pensões is directly
involved in selling to the market its plan-management and
corporate pension-fund services.
1) Adjusted to eliminate double counting.
Report | Bancassurance and Asset management
57
BPI GESTÃO DE ACTIVOS
Unit trust funds
The national market at 31 December 2010 totalled
14 237.1 M.€, down 17.4% on the year. The figure of
2 584.4 M.€ under BPI’s management corresponds to a
lower decrease (-11.5%) than the market and enabled
the Bank to climb from 4th to 2nd in the ranking of fund
management companies with a share of 17.2% (16% in
2009).
Unit trust funds under management
Bonds and money market
Capital growth (equities)
Tax efficiency (PPR/E and PPA)
Diversification
Total1
[= Σ 1 to 4]
1
2
3
4
5
Unit trust funds under management
Breakdown at 31 Dec. 10
2006-2010
th.M.€
Diversification
4.6
4.4
Amounts in M.€
2009
2010
∆%
1 080
447
967
425
2 919
559
575
935
516
2 584
(48.2%)
28.6%
(3.3%)
21.4%
(11.5%)
Table 19
2.2
06
Tax efficiency
(PPR/E and PPA)
07
08
2.9
09
20%
2.6
10
22%
Capital growth
(equities)
36%
22%
Bonds and
money market
Chart 43
New funds
BPI Gestão de Activos launched 4 new funds:
j
j
j
j
BPI Brasil Valor – Fundo Especial de Investimento (FEI)
(special investment fund), which invests in Brazilian
equities and is managed by Itaú Unibanco, one of
Brazil’s most renowned institutions;
BPI Ibéria, an Iberian equities fund;
BPI Perpétuas II (closed-end special investment fund –
FEI), constituted for a period of 8 years, it invests in a
portfolio of financial sector perpetual debt and is geared
to high net worth Customers;
BPI Monetário Curto Prazo FEI (short-term money fund),
the first national fund structured in accordance with the
recent European rules for money-market funds.
Real-estate unit trust funds
The portfolio of real-estate unit trust funds under
management grew 10.5% to 274 M.€ at the end of
2010.
BPI Gestão de Activos, an award-winning fund manager
In 2010 BPI Gestão de Activos and its funds were once
again on the prize lists for the best unit trust fund ratings
promoted by Morningstar and Diário Económico: BPI
Gestão de Activos was voted the “Best National Fund
Manager of the Year” and “Best National Equities Fund
Manager”, while the funds BPI Reestruturações, BPI Euro
Taxa Fixa and BPI Universal won awards for the “Best
National Funds”.
Gestão de Activos
3e4
1) Corresponds to funds domiciled in Portugal (2 754 M.€ in 2010) and BPI funds domiciled in Luxembourg (137 M.€ at the end of 2010).
58
Chart 44
BPI PENSÕES
Pension funds
At the end of 2010, BPI Pensões managed 123 business
pension plans and 36 pension funds. The net assets
under management totalled 3.183 M.€.
Income from contributions and transfers to the pension
funds amounted to 137 M.€ while disbursements for
pensions, benefits paid and transfers totalled 207 M.€.
In 2010 BPI Pensões won seven more management
mandates for new pension plans.
In 2010 BPI Pensões retained its second place in the
rankings of pension fund managers in terms of the
volume of managed assets. Its market share is estimated
at 17.4%1.
Pension funds’ returns
The pension funds’ median return was situated at
2.82%, while the weighted average return obtained by
the pension funds’ respective net assets was 3.0%
The Pension Funds’ portfolios benefited from the good
performance of the majority of stock markets – with gains
of 12.8% in the USA and 7.5% in Europe –, which
compensated for the negative behaviour of the bonds of
periphery countries’ financial institutions, namely
Portugal and Spain, severely affected by the deterioration
of the risk premiums on the respective sovereign debt.
Pension funds under management
2006-2010
3.6 3.5
th.M.€
In November, the IV BPI
Pensions Conference was
held at the Centro Cultural
de Belém (in Lisbon) with
the presence of Marie
Collins, president of the
Irish Association of Pension
Funds, Gabriel Bernardino,
president of the European
Insurance and Occupational
Pensions Authority (EIOPA),
and Jacques de Laroisière,
former Director-General of
the International Monetary
Fund and author of the European System of Financial
Supervision’s retirement programme, adopted by the
European Union. The conference was closed with an
address given by Carlos Costa, Governor of the Bank of
Portugal.
Long term return
3.5
No.
2.9
3.2
3.2
2.7
105
1.8
70
0.9
35
0
06 07 08 09
10
%
140
5.1
4.0
0
3.0 3.0
3.0
1.8
1.7
1.4
Last
year
3.1 3.2
1.3
Last
5 years
Chart 45
No. of plans
3.3
Last
10 years
Chart 46
Mercer Investment Consulting
BPI Pensões median
Market median
Towers Watson
BPI Pensões weighted average
Market median
Attracting new Clients
In 2010, BPI Pensões won seven new mandates for the
management of pension plans, reinforcing its leading
position in the business pension funds market.
Fonte: Watson Wyatt International
Ltd. – Sucursal em Portugal.
Gestão de Activos
5e6
1) Not taking into consideration the amounts allocated to PPR's and PPA's and the amounts under the management of the Sociedade Gestora do Fundo de Pensões do Banco de Portugal
and Previsão, whose sole objective entails the management of the respective shareholders’ pension funds.
Report | Asset management
59
BPI VIDA
The capitalisation insurance portfolio was 3 802 M.€ at
the close of 2010, or 26% higher than a year earlier,
outpacing the life assurance market’s positive expansion
of 17.2% in Portugal.
Throughout 2010 Customer preference continued to be
directed at guaranteed capital products, as these were
the portfolios with the biggest growth.
Life capitalisation insurance
New business per year
Capitalisation insurance portfolio
under management1
Amounts in M.€
2009
Under commercialisation
With guaranteed capital
or income
PPR2
Other savings plans /
capitalisation
[= 1 + 2]
Without guaranteed capital
or income
2010
∆%
1 175
M.€
th.M.€
4.3
938
1
930
1 229
32.2%
2
1 443
2 373
1 948
3 178
35.0%
33.9%
558
2 931
96
3 027
560
3 738
64
3 802
0.4%
27.5%
(33.3%)
25.6%
3
4
[= 3 + 4]
5
Excluded from commercialisation3
Total
[= 5 + 6]
7
6
796
4.5
690
4.0
3.2
3.2
08
09
465
Table 20
06
07
08
09
10
06
07
10
Chart 48
Chart 47
The growth in BPI Vida’s insurance portfolio is explained
by the strong increase in new business written; 70.3%
more than new business contracted in 2009. The volume
of premiums issued was 1 175 M.€, 485 M.€ more than
in the previous year (690 M.€).
In 2010 BPI Vida launched a new product destined for
commercialisation at the Investment Centre and Private
Banking networks – BPI Capitalização Obrigações – which
at the end of 2010 already reached a volume of managed
assets worth 27.6 M.€.
Gestão de Activos
8
1) Amount of the mathematical provisions of the capitalisation insurance products. Does not include BPI Vida’s own portfolio and BPI Vida PPR pension fund. The amount of assets under
BPI Vida’s management stood at 4 035 M.€ at the end of 2010.
2) Commercialised in the form of capitalisation insurance.
3) Products closed to new and / or additional subscriptions.
60
Investment banking
CORPORATE FINANCE
Notwithstanding some signs of recovery displayed in the
mergers & acquisitions market in Europe, the market in
Portugal remained lacklustre.
The crisis in the international financial markets which
still persists, associated in Portugal’s case (amongst other
European States) with a sovereign debt crisis that obliged
the pursuance of budgetary consolidation policies in a
context of weak economic growth of its main trading
partners, constituted a backdrop that is not conducive to
the execution of mergers & acquisitions involving national
economic agents.
In fact, based on data obtained from Bloomberg, it is
estimated that in 2010 the volume of deals involving
Portuguese entities on the buyer’s or vendor’s side which
counted with the participation of financial advisers, has
remained at clearly lower levels than those observed
before the outbreak of the financial crisis (the volume of
reported deals in 2010 amounted to less than 1/3 of the
values attained in 2007).
Amongst the processes in which BPI was involved,
consultancy assignments were undertaken on behalf of
Portuguese companies (i) with a view to greater
internationalisation: advising Auto Sueco (Coimbra) on
the acquisition of the Volvo construction equipment
business in Turkey, as well as advising Ibersol in the
taking of a strategic investment decision in Spain); or (ii)
in the strengthening of its competitive position in the
value chain by vertical consolidation: advising Porto
Editora in the acquisition of Bertelsmann’s assets in
Portugal (Direct Group).
Also noteworthy were the technically very demanding
assignments such as the one it undertook for NAER as
part of the preparations for the privatisation of ANA –
Aeroportos de Portugal. Also worth mentioning are the
advisory services rendered by BPI to Parpública in the
valuation of Galp within the ambit of the next
privatisation phase.
The following are some of the chief advisory services of a
public nature rendered by BPI during 2010.
Nonetheless, BPI maintained a prominent position in the
corporate finance market in Portugal and advised a broad
spectrum of entities in the taking of investment,
restructuring and financing decisions.
j
j
j
j
j
j
Porto Editora – Advising in the acquisition of
Bertelsmann’s assets in Portugal (Direct Group).
Auto Sueco (Coimbra) – Advising in the acquisition of the
Volvo construction equipment business in Turkey.
Ibersol – Advising in the study involving the taking of a
strategic investment decision in Spain.
NAER – Advising in the process relating to the
preparation of ANA’s privatisation and the contracting of
the conception, construction, financing and operation of
the New Lisbon Airport.
Partex – Advising in the calculation of the fair value of
crude-oil interests.
Cerealis – Advising in the analysis of investment projects
and compilation of the business plan.
j
j
j
j
j
j
Sonae Investimentos – Advising in the valuation of the
subsidiary companies as part of the Group’s
reorganisation.
Cofina – Advising in the valuation of a subsidiary.
Martifer Renewables – Advising in the analysis of
strategic options for wind farms.
Desfo – Advising in the execution of strategic
development options.
Unicer – Advising in the assessment and strategic
development options in the Tourism area.
Express Glass – Advising in the study leading to the
taking of a strategic investment decision in the USA.
Report | Investment banking
61
EQUITIES
Secondary market
In 2010, BPI brokered share dealings totalling
10.2 th.M.€ and generated net brokerage commissions of
11.4 M.€. This figure relating to net commissions
compares with 11.5 M.€ in 2009. In online brokerage
Banco BPI is market leader with a 19.2% share. BPI has
an aggregate market share of 20.8% having brokered
deals worth 3.4 th.M.€.
Primary market
The most noteworthy event was BPI’s participation as
lead manager in the placing of convertible bonds
amounting to 110 million euro for the Spanish company
Pescanova (Joint Global Coordinator).
Research and sales
At the end of 2010, the universe of BPI Equity Research
coverage included 107 Iberian companies (76 in Spain
and 31 in Portugal). During the year, BPI initiated
coverage of Unipapel, BME, FAES and Fersa, and
resumed coverage of Amadeus. In 2010 the geographic
perimeter of BPI’s research coverage extended beyond the
Iberian Peninsula as part of the Bank’s aim of becoming
a European specialist in renewables, commencing with
coverage of EDF EN (France) and Vestas (Denmark).
BPI’s stock broking business model is founded on the
provision of a high value-added service to its institutional
and individual Clients.
BPI’s positioning is based on specialised research coverage
of the Iberian market where it is currently the house with
the largest coverage of the Iberian market, catering for the
principal institutional investors (Iberian and international),
not only in the generation of investment recommendations
but also in bringing these investors and companies closer
together. In 2010, leveraging its knowledge of the
renewables sector, it unveiled the “Renewables Specialist”
project, which translated into the expansion of the coverage
universe to beyond the Iberian Peninsula. In 2010, BPI
maintained active contact with some 400 institutional
investors, roughly 90% of whom are international Clients.
In 2010, a total of 499 research reports were compiled
covering Iberian companies (excluding daily newswires).
The “Iberian Small & Mid Caps Guide” and the “Iberian
Strategist” (top-down approach to key sectors and larger
cap companies) are today prestige reference works
amongst institutional investors specialising in this type of
company.
BPI continued to organise various events with the object
of approximating companies and the institutional investor
community. Amongst these initiatives, we cite the VII
Iberian Conference, which was attended by 37 companies
and some 80 institutional investors. Also in 2010, BPI
organised 81 road shows with companies and analysts
and 14 reverse road shows (international investors’ visits
to Portugal and Spain).
Trading
At the beginning of 2010, trading activity was segregated
with the formation of BPI Alternative Fund – Iberian
Equities Long Short, in which the Bank held 77.8% of
the participating units at the end of the year.
This team received widespread recognition in the main
brokers’ rankings at Iberian level, having received awards
from Thomson Extel (#1 Iberian Brokerage firm – Small &
Mid Caps Sales & Research) and AQ (#1 Top RQ Brokers
Ibex35).
Turning to stock brokerage for individuals, 95% of the
volume brokered was realised via the internet. The BPI
Group offers primarily two online channels which permit
access to the national market and to 12 international
markets:
j
j
At the close of 2010, the team dedicated to these Clients
comprised 35 Employees, of whom 15 work in the Madrid
office: 16 constituted the research team and 19 were
involved in sales and trading.
62
BPI NetBolsa, which is integrated into the range of
homebanking services at the disposal of Banco BPI
Customers, being the leader in Portugal in online stock
brokerage by volumes traded;
BPI Online, the Investment Bank’s exclusive channel.
All the research produced by BPI is also available through
these channels.
PRIVATE BANKING
At the end of 2010, BPI Private Banking’s business
volume was 3 612 M.€, representing an 8% increase
relative to the end of 2009. Assets under BPI Private
Banking’s discretionary management and effective
advisory mandate recorded 11% growth to stand at
3 025 M.€ at the end of the year. Stable investments
under custody declined 6% relative to the same period
last year, while the loan portfolio totalled 146 M.€ in
December 2010, 6% lower than at the end of the
previous year.
2010 was characterised by increased volatility on the
financial markets as a consequence of the escalating
sovereign debt crisis, which introduced greater complexity
into the selection of investments and originated greater
aversion to risk. In this context, and although remaining
very vigilant as regards the preservation of Clients’ assets,
commercial activity continued to be guided by a proactive
approach to the gradual diversification of investments, for
which the availability of new investments during the year
contributed greatly. This movement led to a 50%
increase in resources invested in funds and a 27%
increase in BPI bonds.
Canvassing for new Clients resulted in a 29% increase
relative to 2009.
Finally, also worth noting is that BPI’s Private Banking
service was for the fourth consecutive year rated the
“Best Local Private Banking” in Portugal by the
“Euromoney Private Banking Survey 2011”.
Private Banking
Selected indicators
Amounts in M.€
Discretionary management
Advisory services
[= 1 + 2]
Stable investments
under custody
Loans portfolio
Business volume
1
2
3
4
[= Σ 3 to 5]
5
6
2009
2010
∆%
2 206
517
2 723
2 601
423
3 025
18%
(18%)
11%
468
155
3 346
441
146
3 612
(6%)
(6%)
8%
Table 21
Report | Investment banking
63
Private Equity
In 2010, BPI’s involvement in private equity business
began to be conducted through the company BPI Private
Equity, which owned 49% of Inter-Risco’s capital, as part
of a partnership with the respective management team.
As part of this process:
j
j
the previously named Inter-Risco was renamed BPI
Private Equity;
a new venture capital management company was
formed, called Inter-Risco, which is controlled 49%1 by
BPI, in partnership with the management team which
holds the remaining 51%.
The Private Equity area closed the year with an exposure
to this class of assets amounting to some 90 M.€
(75 M.€ in 2009) at market values, composed of its own
investment portfolio in both companies and venture
capital funds.
The changes occurring in the year are primarily due:
j
j
j
Inter-Risco assumed the management of the
risk-management funds2 while BPI Private Equity
maintained the portfolio of direct equity holdings.
In 2010, Inter-Risco launched a new venture capital fund,
the Fundo Inter-Risco II, in which BPI assumes the role of
sponsor with an investment of 37.5 M.€. This fund
realised its first closing in November with a total
commitment of 75 M.€ and a target of 150 M.€. Besides
BPI, amongst Fundo Inter-Risco II’s other investors is
Fundo PVCi, a 111 M.€ fund geared to investments in
private equity and venture capital funds in Portugal, and
in which the BPI Group also has a stake. The PVCi fund
invested 15 M.€ in the Fundo Inter-Risco II.
to the subscription for participating units in the Fundo
Inter-Risco II in the amount of 37.5 M.€;
to the sale of 51% of Inter-Risco (management company
of the Fundo Caravela and Fundo Inter-Risco II);
to the sale of 80% of Cold Land (Frissul).
The Caravela fund – a venture capital fund promoted by
the BPI Group –, with a capital of 30 million euro, saw
its stake in Moneris diluted from 45.6% to 35.7% during
the first half of 2010, by virtue of a capital increase
subscribed to by two new shareholders.
Fundo Inter-Risco II made its first investment in Cold
Land (Frissul), company specialising in cold logistics
services, acquiring 80.0% of the company’s capital.
The current portfolio of investments under BPI’s Private
Equity area is as follows:
The first half of the year also saw the formalisation of the
Fundo de Reestruturação e Internacionalização
Empresarial’s liquidation (FRIE), approved during 2009.
31 December 2010
PRIVATE EQUITY INVESTMENTS
Managed funds
Own portfolio
Caravela fund
52.0%
Inter-Risco II fund
50.0%
PVCi
9.0%
Investments in early-stage and
development capital in Portuguese
SME
Arco Bodegas Unidas
Expansion and buyout investments
in Portuguese SME
Caravela Gest
Investment in private equity and
venture capital funds in Portugal
Conduril
Wine production and sales
2.1%
20.0%
Food retailer
(Haagen Dazs)
Construction
9.2%
Management of private equity funds
Inter-Risco
49.0%
Figure 3
1) Through BPI Private Equity, which is 100% held by Banco BPI.
2) Caravela fund and Inter-Risco II Fund.
64
BANCO DE FOMENTO ANGOLA
In 2010, BFA pursued the policy of reinforcing its
presence in the Angolan market through the expansion of
its commercial network to a total of 143 branches, with
the opening of a further 14 units and increasing the
number of Employees to 2 038.
The Bank attracted 105 thousand new Customers,
bringing the total to 781 thousand, and consolidated its
position as leader in electronic banking with more than
135 thousand users. It pursued the goal of providing a
segmented array of innovative banking products and
services for individual and corporate Customers to an
increasingly vast number of Angolans.
Resources
Customer resources1 registered in 2010 growth of 10.6%
to 5 531 M.US$ (4 176 M.€). In December BFA had an
18.9% market share in deposits, which equates to
second place.
Loans
The loan and guarantees portfolio, measured in dollars1,
registered an 11% decrease to stand at 1 831 M.US$
(1 382 M.€), with loans in American dollars being the
most expressive component of this item. According to the
Central Bank’s statistics, BFA’s market share in December
2010 was 12.6% (for this purpose, loans are deemed to
include loans, Treasury Bills and Treasury Bonds, as well
as financial investments), which percentage corresponds
to fourth place in the market.
BFA retained its leadership in the number of active POS
and ATM in 2010, terminating the year with 2 018 POS
terminals and 262 ATM, which correspond in both cases
to top place with market shares of 33% and 22%,
respectively.
Banco de Fomento Angola
Selected indicators
Amounts in M.€
Total assets
Loans to Customers
Loans to Customers and guarantees
Customer resources
Employees (no.)
Traditional branches (no.)
ATM machines (no.)
POS (no.)
Customers (thousand)
2010
4
1
1
4
086
216
434
487
375
1 838
129
241
1 123
676
∆%
858
189
382
176
481
2 038
143
262
2 018
781
19%
(2%)
(4%)
20%
28%
11%
11%
9%
80%
15%
Table 22
Customer loans
Customer resources
M.€
4 176
M.€
3 856
1 235 1 216
1 189
3 487
961
1 958
624
1 440
At 31 December 2010, 72% of the loan and guarantees
portfolio corresponded to the companies segment, and
the remaining 28% to the individuals segment.
Cards and automated banking
BFA occupies a leading position in debit and credit cards
in Angola – at the close of 2010, it had 627 thousand
valid debit cards in circulation, which corresponded to a
30% market share, and 8 488 active credit cards
(Classic and Gold).
2009
4
1
1
3
06
07
08
09
10
06
Chart 49
07
08
09
10
Chart 50
Securities portfolio
BFA’s securities portfolio is composed exclusively of
Angolan public-debt issues and at 31 December 2010
totalled 2 115 million euro, which represented 43.5% of
the Bank’s total assets.
B Com Inter
1) When analysing the performance of BFA’s commercial activity, variances in dollars are used for those items bearing in mind that more than 62% of Customer resources and 76% of the
loan book are denominated in dollars, and therefore are more representative of the evolution of business in Angola. When analysing the impact on the Group’s financial statements, the
consolidation currency is the euro. Expressed in euro, Customer resources grew by 20% while the loan and guarantees portfolio decreased by 4% in 2010.
BFA4
Report | Private Equity and International activity
65
Short-term securities (Treasury Bills and Central Bank
Securities) represented 44.2% of the total portfolio, while
the remainder was composed of medium-term securities
(TB).
In 2010, dealing activity with debt securities commenced
with the goal of boosting direct business with Customers,
simultaneously contributing to the energising of the
interbank secondary market. This portfolio’s share of the
total portfolio reached 6.3%. In terms of the key
currency, securities in national currency (TBills, CBS and
TBonds indexed to the CPI) accounted for 51.7% of the
portfolio, while securities denominated in USD
represented the other 48.3%.
Customers
Prospecting for new Customers maintained a good pace
with 15% growth, from 676 thousand in December 2009
to 781 thousand in December 2010.
Customers
Subscribers of homebanking
services
Thousands
Thousands
676
135
781
85
553
299
405
19
06
07
08
09
10
06
32
07
50
08
09
Chart 51
Chart 52
BFA NET Empresas (companies)
BFA NET Particulares
(individuals)
CAMPAIGNS
We grow with Angola
Institutional campaign launched in March, centred on
BFA’s strategic commitment to keep pace with and support
the development of Angola’s economy and spearheaded by
Lesliana Pereira and Paulo Flores.
Transfers – Western Union
Promotional campaign of the money-transfers service via
BFA branches, fruit of the partnership with Western Union.
66
10
Angola 35 years
On 11 November, Angola commemorated 35 years of
independence with the banner “Independence, Peace and
Development”. BFA associated itself with this important
festive moment through the media campaign
commemorating the event.
B Com Inter
BFA Solution – Civil Servant
Campaign launched in December with the objective of
promoting the signing up of civil servant Customers via the
opening and domiciliation of a salary account.
BFA6
The survey “Angola All Media and Products Study 2010
(AAMPS 2010)” – conducted by Marktest Angola has
confirmed BFA’s ability to attract Customers, as borne out
by the following statistics:
j
j
j
in 2010, BFA was the Bank which differentiated itself
by attracting the most Customers;
according to AAMPS 2010, BFA obtained a 33%
market share in the capture of new Customers and a
35% market share as principal bank;
in the period 2009-2010, in the increase in market
share in the capture of new Customers was 4 percentage
points.
servant Customers via the opening of the domiciled-salary
account.
Employees
At the end of 2010, BFA’s headcount comprised 2 038
Employees, 11% more than in 2009.
Commercial network
The distribution network continued to expand with an
increase of 11% relative to December 2009. 14 new
branches were opened.
Distribution network
No.
Following the Angola government’s decision in July to
liberalise the domiciliation of public servants’ salaries
(previously a state monopoly), BFA was one of the first
banks to sign in October 2010 a protocol with the
Ministry of Finance for adherence to the civil servants’
salary processing system.
BFA offers very competitive conditions in the domiciliation
of civil service salaries given that it boasts a branch
network that ensures an ample geographic coverage
throughout Angolan territory, the best communications
conditions for salary processing – borne out by tests of the
Ministry of Finance –, and a diversified spectrum of
innovative banking products and services.
In December the Bank launched a media campaign with
the objective of bolstering the prospecting for civil
74
6
96
7
4
2
66
06
85
07
113
9
5
99
08
129
10
5
Employees
143
13
No.
6
1 528
1 598
1 838
2 038
1 234
114
09
124
10
06
07
08
09
Chart 53
10
Chart 54
Corporate centres
Investment centres
Retail branches
RECOGNITION
EMEA Finance award – Most Innovative Bank in Angola
BFA was distinguished with the award “The Most
Innovative Bank in Angola” by the magazine EMEA
Finance, after having been rated in the previous year the
Best Bank in Angola.
automatic processing of foreign currency operations. It is
recognition for the fact that BFA processed more than
99.1% of payment orders automatically without the need
for any subsequent correction.
Deutsche Bank – Straight Through Processing
BFA was honoured for the 8th consecutive year by Deutsche
Bank Trust Company with the award for “Straight Through
Process Excellence Award”, for the high index of the
Superbrands Angola – Brand of Excellence
Out of 400 competing brands, BFA was distinguished as
the Brand of Excellence 2009 / 2010 by Superbrands
Angola.
B Com Inter
BFA2
Report | International activity
67
BCI – BANCO COMERCIAL E DE INVESTIMENTOS
Total assets amounted to 1 076 M.€, which represents
30% growth relative to 2009. In November 2010, the
Bank had a 27.3% market share of the Mozambique
financial system’s total assets.
Deposits
Deposits taken from Customers registered in 2010, when
measured in euro, 29% growth, amounting to 779 M.€.
Deposits in national currency constituted the most
important component of that growth. At the end of
November 2010, BCI’s market share of deposits stood at
27.2%, which represents a share gain (+2.6 p.p.) when
compared with the figure at the end of 2009.
Banco Comercial e de Investimentos
Selected indicators
Total assets
Loans to Customers (net)
Customer deposits
Employees (no.)
Traditional branches (no.)
ATM machines (no.)
POS (no.)
Customers (thousand)
BCI’s market share in the lending segment was situated
at 33.2% in November 2010.
Distribution network
During 2010, BCI continued to bolster its physical
branch network, opening 22 new branches and two
business centres. It also embarked on the enlargement of
the ATM network, adding 69 units to the Ponto 24
network. As concerns the POS capability, the bank
focused its attention on the reallocation of low return
machines, although installing 20 new POS terminals in
2010. At the end of the year, the bank thus had a total
of 89 branches, 6 business centres, 218 ATM and 1 365
POS, which served some 262 thousand Customers. The
workforce comprised 1 344 Employees.
2009
2010
∆%
827
565
603
60
1 023
71
149
1 345
142
1 076
692
779
75
1 344
95
218
1 365
262
30%
22%
29%
25 %
31%
34%
46%
1%
84%
Table 23
Customer loans
Lending
The net loans portfolio, valued in Euros, posted a 22%
expansion to 692 M.€. This positive variation was chiefly
propelled by foreign currency operations with export
Customers and reversed the recent trend of the local
currency’s dominance.
Amounts in M.€
Customer deposits
M.€
M.€
779
692
565
371
224
248
06
07
08
343
09
10
06
Chart 55
454
07
500
08
603
09
10
Chart 56
Banco BPI continues to be actively involved in the study
of a number of structural-making projects in
Mozambique, linked to various sectors. Of these, special
mention is made of the following due to their scale and
importance, not only in the national but also the regional
context:
Power generation and transmission, in which the most
salient, besides the transmission line between the North
and the South of Mozambique, are the projects relating
to the hydroelectric generation development of Mphanda
Nkuwa (Zambezi Valley) and the thermoelectric projects
associated with the future
commissioning
of the coal
B Com
Inter
mines of Moatize and Benga (Tete).
BCI1
Transport infrastructures, namely the rehabilitation and
boosting of the major rail-port development projects –
Northern (Nacala) and Beira corridors, in the centre of
the country.
68
Financial review
Selected indicators
(Amounts in M.€, except when indicated otherwise)
2009
Net total assets1
Assets under management2
Business turnover3
Loans to Customers (gross) and guarantees4
Business turnover3 per Employee5 (thousands of euro)
Net operating revenue per Employee5 (thousands of euro)
Operating costs / net operating revenue6
Personnel costs and outside supplies and services / net operating revenue
Personnel costs / net operating revenue and equity accounted results7
Operating costs / net operating revenue and equity accounted results7
Net profit
Data per share (euro)8
Net profit8
Book value8
Weighted average number of shares (in millions)8
Net operating revenue and equity accounted results / ATA7
Profit before taxation and minority interests / ATA7
Return on average total assets (ROA)
Profit before taxation and minority interests / average Shareholders’
equity and minority interests7
Return on Shareholders’ equity (ROE)9
Loans in arrears for more than 90 days / Customer loans
Loan impairments (in the balance sheet) / Customer loans
Net credit loss10
Adjusted net credit loss11
BPI Group Employees’ pension funds assets
Pension obligation cover
Shareholders’ equity12
Own funds13
Risk weighted assets13
Ratio of own funds requirements7, 13
Tier I7, 13
Core Tier I13, 14
∆%
2010
Consolidated
Domestic
activity
International
activity
Consolidated
Consolidated
47 449
16 879
68 837
34 465
34 372
7 294
1 164.8
124
57.9%
53.4%
33.8%
57.1%
175.0
40 779
18 043
64 030
32 988
31 042
8 588
776.0
101
73.0%
68.6%
43.3%
70.9%
86.5
4 881
5 637
1 461
4 176
2 766
322.8
169
33.1%
29.6%
15.1%
32.4%
98.3
45 660
18 043
69 667
34 449
35 218
7 338
1 098.8
115
61.2%
57.1%
35.1%
59.6%
184.8
(3.8%)
6.9%
1.2%
0%
2.5%
0.6%
(5.7%)
(7.0%)
0.196
2.069
893.3
2.7%
0.7%
0.6%
0.097
1.331
892.8
1.8%
0.2%
0.2%
0.110
0.288
892.8
7.3%
4.4%
4.4%
0.207
1.619
892.8
2.4%
0.6%
0.6%
5.6%
(21.7%)
(0.1%)
14.7%
8.8%
1.8%
1.8%
0.50%
0.38%
2 463.8
108.3%
1 847.0
2 866.7
26 059.9
11.0%
8.6%
7.8%
5.5%
4.7%
1.8%
1.7%
0.30%
0.41%
2 409.4
104.5%
1 189.2
43.8%
37.6%
3.6%
6.6%
1.46%
1.46%
13.9%
8.8%
1.9%
1.9%
0.35%
0.46%
2 409.4
104.5%
1 446.6
2 902.2
26 035.8
11.1%
9.1%
8.7%
257.4
5.6%
(2.2%)
(21.7%)
1.2%
(0.1%)
1) The amount of net total assets presented for each geographical segment has been corrected for the balances resulting from operations between these segments.
Table 24
2) Amounts not corrected for double counting (investments of financial products in other financial products). Includes unit trust (mutual) funds,
Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary
management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff
pension funds).
3) Loans, guarantees and total Customer resources.
4) Mortgage loans written off from the balance sheet were added back (gross balance of 903 M.€ at the end of 2009 and 828 M.€ at the end of 2010).
5) Number of Employees of the companies which are consolidated in full.
6) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue.
7) Calculated in accordance with the Bank of Portugal's Instruction 16 / 2004. ATA – Average total assets.
8) Corresponds to net profit and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-year number in the case of the indicator
“book value per share”).
9) In the ROE calculation, the annual average Shareholders' equity (excluding minority interests) was taken into account and the revaluation reserves were excluded.
10) Loan impairments in the year, deducted of recoveries of loans in arrears written-off (in the income statement) / Customer loans.
11) For purposes of calculating the above indicator, impairments for the year excluding the extraordinary charge of 33.2 M.€ made in December were taken into account in 2009, and in
2010 the utilisation of that extraordinary charge was added to impairments for the year.
12) Excludes minority interests.
13) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements.
14) Core capital corresponds to basis own funds, before deductions relating to equity interests in credit institutions and insurance undertakings, and excludes preference shares.
Report | Financial review
69
OVERVIEW
Consolidated
BPI’s consolidated net profit was 184.8 M.€ in 2010,
which corresponds to a 5.6% improvement relative to the
profit of 175.0 M.€ reported in 2009. The return on
consolidated average shareholders’ equity (ROE) was 8.8%
in 2010.
growth, which is the most important overseas market for
BPI. The ROE from international operations, to which
12.5% of the Group’s average capital was allocated, stood
at 37.6%.
Domestic operations contributed with 86.5 M.€ to
consolidated net profit, up 1.2% on the previous year. The
domestic banking business in 2010 continued to be mired
in a challenging environment which dates back to 2007
and which has affected the recovery of profitability levels.
With the deterioration of the sovereign debt crisis in 2010,
the medium and long-term debt markets were closed to
Portuguese banks from April onwards, while competition
intensified for the attraction of Customer resources. On the
other hand, there was a deceleration in economic activity
in Portugal, resonating the implementation of restrictive
measures directed at the imperative consolidation of the
public accounts.
Consolidated net profit
The ROE on domestic activity, to which 87.5% of the
Group’s average capital is allocated, was situated at 4.7%
in 2010.
For its part, the contribution from international operations
to consolidated net profit improved by 9.7% to 98.3 M.€,
benefiting from the acceleration in Angola’s economic
Return on consolidated
M.€
%
36.8
309
67
242
06
355
25.9
77
278
07
150
141
10
08
41.2
31.0
37.6
24.7
24.0 23.4
175
185
90
98
8.8
85
87
0.7
09
10
06
07
08
Chart 57
Domestic activity
8.8
4.9
8.8
4.7
09
10
Chart 58
Consolidated
Domestic activity
ROE by business area in 2010
Amounts in M.€
International
activity
Domestic activity
Net profit
Net profit
Adjustment to profit due to capital reallocation
[= 1 + 2]
Average risk weighted assets
Capital allocated
Shareholders' equity (average)
Capital reallocation
ROE
39.5
1
2
3
4
Commercial
banking
Investment
banking
Participating
interests and
other
Total of
domestic
activity
51.0
1.5
52.5
23 325.2
6.8
(0.5)
6.4
355.7
28.7
(1.0)
27.7
171.7
86.5
86.5
23 852.6
1 678.2
119.5
1 797.7
2.9%
63.7
(36.3)
27.4
23.2%
96.5
(83.3)
13.2
209.3%
98.3
98.3
2 602.3
BPI Group
(consolidated)
184.8
184.8
26 454.9
Análise Financeira
5
6
[= 5 + 6]
7
[= 3 / 7]
8
1 838.4
C1
-
261.6
1 838.4
4.7%
261.6
37.6%
2 099.9
2 099.9
8.8%
Segmentation of the BPI Group’s domestic activity
Table 25
1) The domestic activity comprises the commercial banking activity conducted in Portugal, including the provision of banking services to non-residents abroad (namely,
amongst Portuguese emigrant communities) and those of the Madrid branch, as well as the activities relating to investment banking, private equity and other investments.
2) International operations comprise the activity conducted by Banco Fomento Angola (50.1% held), as well as the appropriation of the 30% equity interest held in BCI in Mozambique and
the activity of BPI Dealer in Mozambique (92.7% held). International operations’ contribution to net profit in 2010 from Banco Fomento Angola amounted to 92.7 M.€ from BCI was
5.6 M.€ and from BPI Dealer Mozambique was -0.005 M.€.
Calculation of ROE by business areas
The return generated by each area results from the quotient between the contribution to the consolidated net profit and the capital allocated to the area.
In determining the capital allocated to the domestic activity and to the international activity business areas, the accounting capital (shareholders' equity), excluding revaluation reserves, was
taken into consideration. As regard each business area integrating the domestic operations, it is assumed that the capital employed is identical to the average capital employed for this
activity as a whole, except as regards the revaluation reserves which were excluded from the capital allocated. The amount of capital allocated to each area is calculated by multiplying the
assets weighted by the quotient between shareholders’ equity (excluding revaluation reserves) and the assets weighted for the whole of the aforesaid areas. Whenever the shareholders’
equity of a business area is more (or less) than the allocated capital, it is assumed that there has been a redistribution of capital, whereby that area’s contribution is adjusted by the costs
(revenue) resulting from the increase (decrease) in outside resources by virtue of the capital reallocation.
70
Consolidated
BPI maintained in 2010 a sound financial situation, a
comfortable liquidity position and stable risk levels.
Capital. BPI ended the year with a Core Tier I capital
ratio of 8.7% – essentially shareholders’ equity and
minority interests, excluding preference shares – up
0.9 p.p. on the previous year (7.8%). The Tier I capital
ratio rose 0.5 p.p. to 9.1%, while the total capital ratio
stood at 11.1% at the end of 2010.
Liquidity. In domestic operations, BPI maintained a
comfortable liquidity position:
j
j
j
j
Customer resources on the balance sheet expanded 2%.
This growth was greater than the trend in the loan
portfolio, which presents virtual stabilisation (0.2%
growth in domestic operations), with the result that the
commercial liquidity gap shows an improvement;
the Bank refinanced a large portion (around 77%) of
the medium and long-term debt repayments through
issues with identical maturities (debt securities of
1 982 M.€ issued in 2010), thus preserving the
equilibrium between short-term and medium, long-term
resources;
on the interbank market, BPI maintained throughout the
year a negligible net debtor position;
it reduced short-term funding from the ECB from
2 500 M.€ at the end of 2009 to 1 000 M.€ at the
end of 2010.
Accordingly, at the end of the year BPI presented an
adequate liquidity position:
j
j
j
the transformation ratio of resources into loans (loans /
Customer resources on the balance sheet) was situated
at 131% in domestic operations (115% in consolidated
terms);
it had a net debtor position in the interbank market of
198 M.€;
it possessed a portfolio of eligible assets for ECB
funding of some 7 500 M.€, net of haircuts, which
represented 18% of total assets employed in domestic
operations;
j
the medium and long-term debt refinancing
requirements to take place in 2011 are relatively minor
(742 M.€).
In international operations (i.e. in Angola), the balance
sheet remained very liquid: at the close of 2010,
Customer resources funded 86% of assets and loans
represented only 28% of Customer resources.
Credit risk. The bank maintained good risk indicators:
impairment charges in the year (net of loan recoveries)
represented 0.35%1 of the average loan portfolio in
2010. In domestic activity, that indicator stood at
0.30%1, while in international activity the figure was
1.46%.
The ratio of loans in arrears for more than 90 days stood
at 1.9% at the end of December 2010. Total exposure in
the case of operations with instalments outstanding for
more than 90 days, that is, including instalments not yet
due associated with these operations, represented 2.4%
of the total gross loan portfolio at the end of 2010.
Results and profitability. The return on domestic
operations has been greatly affected in the last three
years by the contraction in the revenue base, namely net
interest income, pressured by the increase in the average
costs of resources and the deceleration in lending
expansion, and by lower commission income via the
deceleration in the growth in commercial banking and the
reduction in asset management fees. Added to this is the
increase in loan impairments, despite the loan losses
indicator as a percentage of the portfolio presenting a
relatively good level of 0.30%1 in domestic operations.
The bank’s attention to income and costs in domestic
operations, oriented towards improving profitability, has
focused on the following areas:
j
net interest income – continuing adjustment of credit
spreads so as to reflect the rise in the bank’s funding
costs and the management of the margin on deposits,
the latter affected by a low interest-rate environment
and by the worsening conditions for Portuguese banks
accessing the international financial markets. Net
interest income stabilises in 2010 (climbs 0.5%) after
having fallen 5% and 10% in 2008 and 2009,
respectively;
1) Considering the impairment losses for the year and the utilisation of the extraordinary impairment charge made in the previous year of 33.2 M.€, the indicator (adjusted) loan
impairments as a percentage of the loan portfolio was situated at 0.46% in consolidated activity and at 0.41% in domestic activity.
71
Consolidated
j
j
commissions and fees – adjustment to the fees and
charges schedule, in large part made in 2009, and
improvement in asset management commissions,
benefiting from the recovery of the markets. Commercial
banking fees (which decreased 0.9% in 2010) are
8.5% higher than those charged in 2007 before the
outbreak of the international financial crisis, while asset
management fees grew 12.9% in 2010, although
situated 41% below those earned in 2007;
costs – reduction of 361 people in the staff
complement deployed in domestic operations since
2007 (-4.6%) and tighter cost control. Costs, excluding
early retirements, decreased 4.4% relative to 2007 (a
reduction of 2% in 2010) notwithstanding the effect of
the revision of nominal salaries and the price of outside
supplies and services.
72
In international operations, BFA recorded a substantial
expansion in business in 2010. Customer resources
increased 20% while net total assets grew 19% based on
the 34% increase in the securities portfolio, while loans
(which represent 24% of total assets) still record a 2.2%
decrease. BFA’s net interest income grew 27.5% and the
contribution from international operations to consolidated
net profit (which includes BCI’s contribution in
Mozambique, although less important in absolute terms)
grew 9.7%.
REVIEW OF THE CONSOLIDATED INCOME STATEMENT
Reported consolidated operating profit decreased 20.4%
due:
j
j
to the 5.7% drop in net operating revenue, and is
explained by the drop in profits from financial operations
and other operating gains, bearing in mind that net
interest income advanced 7.7% (reflecting increases of
27.5% in international operations and 0.5% in domestic
operations), and commissions grew 0.8%;
to the 5% increase in costs, greatly influenced by
early-retirement payments borne in 2010 in domestic
operations (36.1 M.€). Costs, excluding early
retirement costs, were down 0.3% in consolidated
terms and 2.0% in domestic operations.
The decrease in impairment charges recorded in the
income statement, both in domestic operations
Consolidated
(-28.4%) and in international operations (-30.4%),
explains why consolidated profit before tax declined by
relatively less (-15.1%).
In domestic operations, impairments for the year
absorbed 62% of operating profit, despite the
maintenance of low risk indicators, whilst in international
operations impairments absorbed only 12% of operating
profit.
Consolidated profit grew 5.6% in 2010. Domestic
operations contributed with 47% to that profit while
international operations – which correspond to BPI’s
appropriation of 50.1% of BFA’s individual profit and, on
a smaller scale, the appropriation of 30% of BCI’s profit
in Mozambique – contributed the remaining 53%. Profit
from domestic operations improved by 1.2% and from
international operations by 9.7%.
Consolidated income statement
Amounts in M.€
Domestic activity
∆%
2009
420.3 417.2
(0.7%)
3.3
4.1
27.2%
4.9
3.7 (24.0%)
24.7
30.3
22.7%
453.1 455.4
0.5%
11.8
16.1
36.3%
262.5 267.4
1.9%
92.7
50.9 (45.1%)
9.6 (13.8) (243.3%)
829.7 776.0 (6.5%)
(356.7) (345.8)
(3.1%)
(181.3) (186.3)
2.8%
(39.5) (34.0) (13.9%)
164.0
164.0
49.0
122.3
(0.2)
335.1
(43.5)
(40.7)
(13.3)
(577.5) (566.1) (2.0%)
(0.05) (36.1)
(577.5) (602.2)
4.3%
252.2 173.8 (31.1%)
18.2
13.8 (24.5%)
(135.3) (99.9) (26.1%)
(34.6) (22.4) (35.3%)
100.5
65.2 (35.1%)
(18.9)
5.3 (128.1%)
12.7
23.0
80.8%
(8.8)
(7.0) (20.7%)
85.5
86.5
1.2%
294.9 242.8 (17.6%)
(97.5) (106.7)
9.4%
(97.5) (106.7)
9.4%
237.6 216.1 (9.0%)
3.0
2.1 (28.3%)
(31.0) (21.2) (31.8%)
(9.0)
(6.7) (25.0%)
200.6 190.3 (5.1%)
(26.5)
0.5 (102.0%)
5.5
6.1
10.8%
(90.0) (98.7)
9.7%
89.6
98.3
9.7%
142.8 137.4 (3.8%)
2009
Net interest income (narrow sense)
Unit linked gross margin
Income from securities (variable yield)
Commissions related to deferred cost (net)
Net interest income
[= Σ 1 to 4]
Technical result from insurance contracts
Commissions and other similar income (net)
Profits from financial operations
Operating income and charges
[= Σ 5 to 9]
Personnel costs, excluding early-retirements costs
Outside supplies and services
Depreciation of fixed assets
Operating costs, excluding
early-retirements costs
[= Σ 11 to 13]
Early-retirements costs
Operating costs
[= 14 + 15]
Operating profit
[= 10 + 16]
Recovery of loans written-off
Loan provisions and impairments
Other impairments and provisions
Profits before taxes
[= Σ 17 to 20]
Corporate income tax
Equity-accounted results of subsidiaries
Income attributable to minority interest
Net profit
[= Σ 21 to 24]
[= 25 - 13 - 19 - 20]
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
2010
2010
∆%
209.2
27.5%
584.3 626.4
3.3
4.1
4.9
3.7
24.7
30.3
209.2
27.5%
617.1 664.5
11.8
16.1
46.5
(5.0%)
311.4 313.9
68.3 (44.2%)
215.0 119.2
(1.1) (490.7%)
9.4 (14.9)
322.8 (3.7%) 1 164.81 098.8
(49.7)
14.1% (400.2) (395.4)
(45.8)
12.6% (222.0) (232.1)
(11.2) (15.4%)
(52.7) (45.2)
7.2%
27.2%
(24.0%)
22.7%
7.7%
36.3%
0.8%
(44.6%)
(257.9%)
(5.7%)
(1.2%)
4.6%
(14.3%)
2010
∆%
BPI Group (consolidated)
2009
(675.0)
(0.05)
(675.0)
489.8
21.2
(166.4)
(43.6)
301.0
(45.4)
18.3
(98.9)
175.0
437.7
(672.8)
(36.1)
(708.8)
389.9
15.9
(121.1)
(29.1)
255.5
5.9
29.1
(105.7)
184.8
380.2
(0.3%)
5.0%
(20.4%)
(25.1%)
(27.2%)
(33.2%)
(15.1%)
(112.9%)
59.6%
6.9%
5.6%
(13.1%)
Table 26
73
REVIEW OF THE CONSOLIDATED BALANCE SHEET
ASSETS
Consolidated net total assets were 45 660 M.€ at
31 December 2010. The 3.8% decrease in consolidated
net total assets in 2010 reflects the 5.5% decline in net
total assets in domestic operations, which account for
89% of the consolidated total, whereas net total assets in
international operations grew 18.9%.
Consolidated
j
In domestic operations, Customer loans constitute the
major component of total assets, accounting for 70% of
that total at the end of 2010.
j
The second most important asset component corresponds
to an arbitrage portfolio made up of European public debt
(recorded in the portfolio of available-for-sale financial
assets), the amount of which was 4 193 M.€ at the end
of 2010 (10% of domestic operations’ total assets). This
portfolio (created during the course of 2009) was
financed with recourse to short-term funding1, so as to
take advantage of the positively sloping yield curve. This
portfolio’s interest rate risk is being hedged.
Total third party resources taken in the Bank’s domestic
operations amounted to 36 767 M.€2 at the end of
2010, and corresponded to:
j
Customer resources – deposits, bonds placed with
Customers and capitalisation insurance – in the amount
of 26 174 M.€, which represented 71% of total third
party resources. The ratio loans / on-balance sheet
Customer resources3 was situated at 131% in domestic
operations at the end of 2010;
medium and long-term resources raised from the capital
market4 of 6 088 M.€ (17% of total third party
resources). BPI has undertaken the refinancing on the
capital market of a large portion of the medium and
long-term debt repaid, maintaining the equilibrium
between medium / long-term and short-term resources.
Medium and long-term issues amounted to 1 982 M.€
in 2010, which corresponded to 77% of medium and
long-term debt repayments occurring in the year;
short-term resources of 4 505 M.€ (12% of total third
party resources), the majority of which allocated to the
funding of the abovementioned arbitrage portfolio.
Short-term funding at the end of 2010 referred to
securities repos (3 306 M.€), a net debtor position on
the money market (198 M.€) and ECB funding
(1 000 M.€). During 2010, BPI maintained a
marginally negative net borrowing position in the money
market and reduced the funding obtained from the ECB
from 2 500 M.€ at the end of 2009 to 1 000 M.€ at
the end of 2010, which corresponded to 2.4% of total
assets employed in domestic operations.
International operations present a highly liquid and sound
balance sheet. All asset funding is covered by Customer
resources and Shareholders’ equity. The loans / Customer
resources ratio was situated at 28% at the end of 2010.
Consolidated balance sheet structure in 2010
Assets
7%
Cash assets and loans to
credit institutions
22%
Liabilities and
shareholders' equity
10%
15%
Financial assets
held for dealing5
available for sale
held to maturity
2%
18%
2%
Money market
Repos
ECB financing
1%
7%
2%
Medium and long term resources4
66%
67%
Customer resources
5%
8%
Shareholders' equity, minorities and
other liabilities
Loans to Customers
Financial investments, fixed assets
and other
Short-term resources
2010
Retail bonds
Deposits
8%
10%
49%
2010
Chart 59
1) The investment made, given that it translated into an increase in assets eligible for ECB funding, ensures its own financing.
2) Includes short-term resources raised on the interbank market, net of placements, on-balance sheet Customer resources (deposits, bonds and capitalisation insurance) and medium and
long-term funding on the capital market.
3) In calculating the loans / resources ratio, capitalisation insurance is excluded from total Customer resources.
4) Includes senior and subordinated bonds, medium and long-term resources from credit institutions, resources raised from asset securitisations and excludes preference shares
(accounted for in minority interests).
5) Derivatives with positive fair value recorded under the caption Financial assets held for trading were included in “other assets”.
74
Consolidated
Consolidated balance sheet
Amounts in M.€
Domestic
activity1
∆%
2009
601.1
475.8 (20.8%)
262.4
260.8 (0.6%)
343.7
1 437.1 (38.7%)
739.9 28 865.8
0.4%
388.0
1 168.7 (15.8%)
761.7
6 114.0 (21.2%)
803.1
1 043.6 29.9%
316.5
250.3 (20.9%)
842.2
57.1
285.4
1 215.7
403.1
1 173.2
-
2009
Assets
Cash and deposits at central banks
Amounts owed by credit institutions
Loans and advances to credit institutions
Loans and advances to Customers2
Financial assets held for dealing
Financial assets available for sale
Investments held to maturity
Hedging derivatives
Investments in associated companies and
jointly controlled entities
Other tangible assets
Intangible assets
Tax assets
Other assets
Total assets
[= Σ 1 to 13]
Liabilities and shareholders' equity
Resources of central banks
Financial liabilities held for dealing
Credit institutions' resources
Customer resources and other loans
Debts evidenced by certificates
Technical provisions
Financial liabilities associated
to transferred assets
Hedging derivatives
Provisions
Tax liabilities
Participating bonds
Other subordinated loans
Other liabilities
Share capital, share premium account,
reserves and other equity instruments
Treasury stock
Net profit
Minority interests
Total Shareholders’ equity and
minority interests
[= Σ 28 to 31]
Total liabilities and
shareholders' equity
[= Σ 15 to 31]
Note:
Bank guarantees
Off-balance sheet
Customer resources3
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
2
28
1
7
International
activity1
2010
140.9
153.4
9.2
213.5
916.0
43 649.3 41
2010
18.1
100.2
0.6
8.3
4 103.9
22.6
116.0
0.6
15.3
4 881.2
2 773.4
1 245.5 (55.1%)
318.9
261.5 (18.0%)
4 963.1
5 142.5
3.6%
19 032.6 19 026.1 (0.0%)
9 083.6
7 782.3 (14.3%)
2 139.4
2 991.9 39.8%
43.7
3 585.3
-
73.5
4 214.8
-
1 764.6
423.8
63.6
36.2
11.8
652.4
476.3
1 570.4 (11.0%)
499.4 17.8%
79.1 24.3%
29.7 (17.7%)
7.2 (39.2%)
640.4 (1.8%)
532.9 11.9%
26.1
25.0
30.9
31
1 584.7
(23.0)
85.5
262.6
1 124.4 (29.0%)
(21.7)
5.8%
86.5
1.2%
270.4
2.9%
110.4
89.6
193.0
159.1
98.3
247.0
32
1 909.7
1 459.6 (23.6%)
393.0
504.4
(5.5%)
4 103.9
4 881.2
21
22
23
24
25
26
27
28
29
30
33
43 649.3 41 268.5
34
2 857.9
2 818.9
(1.4%)
218.1
35
6 113.0
5 783.4
(5.4%)
-
∆%
852.4
1.2%
98.8 72.9%
470.9 65.0%
1 189.2 (2.2%)
73.0 (81.9%)
2 042.4 74.1%
-
171.7 21.9%
136.1 (11.3%)
5.8 (37.1%)
430.6 101.7%
908.5 (0.8%)
268.5 (5.5%)
2009
68.2%
17.6%
-
∆%
2010
1 443.3
1 328.2 (8.0%)
296.7
338.6 14.1%
2 347.8
1 439.1 (38.7%)
29 955.6 30 055.0
0.3%
1 791.1
1 241.7 (30.7%)
8 935.0
8 156.3 (8.7%)
803.1
1 043.6 29.9%
316.5
250.3 (20.9%)
25.0%
15.7%
10.5%
82.9%
18.9% 47
31.5 20.8%
8.0 (68.1%)
49.0 58.5%
158.9
253.6
9.7
213.5
924.4
449.2 45
194.2 22.2%
252.1 (0.6%)
6.4 (34.3%)
430.6 101.7%
923.8 (0.1%)
659.8 (3.8%)
2 773.4
1 245.5 (55.1%)
318.9
261.5 (18.0%)
4 702.7
4 726.1
0.5%
22 617.9 23 240.9
2.8%
9 083.6
7 782.3 (14.3%)
2 139.4
2 991.9 39.8%
1 764.6
423.8
89.7
61.2
11.8
652.4
507.2
1 570.4 (11.0%)
499.4 17.8%
110.6 23.3%
37.7 (38.3%)
7.2 (39.2%)
640.4 (1.8%)
582.0 14.7%
44.2%
9.7%
28.0%
1 695.0
(23.0)
175.0
455.7
1 283.5 (24.3%)
(21.7)
5.8%
184.8
5.6%
517.4 13.5%
28.4%
2 302.7
1 963.9 (14.7%)
18.9% 47 449.2 45 659.8
193.1 (11.5%)
-
BPI Group
(consolidated)
-
3 076.1
3 012.0
6 113.0
5 783.4
(3.8%)
(2.1%)
(5.4%)
Table 27
1) The balance sheet presented for each geographical segment has not been corrected for the balances resulting from operations between these segments. For consolidation purposes,
these balances have been eliminated (304.1 M.€ in 2009 and 489.9 M.€ in 2010).
2) In December 2007, BPI sold 35% of the bonds relating to the capital tranche of the mortgage-loan securitisation operations which resulted in the derecognition of loan assets totalling
1 264 M.€. At 31 December 2010 the amount of Customer loans (net) derecognised from the balance sheet was 824 M.€.
3) The amount of unit trust funds included in these resources has been corrected for fund units held in the portfolios of the Group’s banks and pension funds under BPI management.
75
Consolidated
GROUP CAPITAL
Accounting shareholders’ equity
Accounting shareholders’ equity, including minority
interests, totalled 1 963.9 M.€ at the end of 2010,
which corresponds to a 14.7% decline (-338.7 M.€)
relative to December 2009.
The principal factors behind this trend are the following:
The increase in the core capital ratio reflects the increase
in core capital of 226.3 M.€, which essentially
corresponds to the profit earned in the year given that
risk-weighted assets remained virtually unchanged.
With positive impact,
j consolidated net profit generated in the year of
290.5 M.€, of which 184.8 M.€ is attributable to
Shareholders and 105.7 M.€ attributable to BFA’s
minority interests.
With negative impact,
1
j negative change in the fair value reserve of 517.1 M.€
as a consequence of unrealised losses on public debt
bonds in the portfolio of available-for-sale bonds,
reflecting the widening risk premiums on the sovereign
debt of EU periphery countries;
j payment of dividends relating to 2009: 69.7 M.€ paid
to Banco BPI Shareholders and 56.5 M.€
corresponding to BFA dividends paid to Unitel.
Shareholders´ equity and minority
interests trend in 2010
1%
Minority
7%
interests
3
4
(517.1)
-
(517.1)
5
10.9
(9.3)
11.7
0.7
22.6
(8.6)
7
By source
At 31 December 2010
Total
2 302.7
(126.2)
290.5
6
Own funds requirements
Loans to Customers
1 446.6
8.8
2%
455.7
(56.5)
105.7
2
Consolidated own funds
requirements ratio
%
1 847.0
(69.7)
184.8
1
The improvement in Tier I capital and shareholders’
equity was however less than that recorded by the core
capital ratio as a result of the 132.7 M.€ increase in
deductions relating to investments in credit institutions
and insurers, since 1/2 of their value is deducted from
Tier I capital and deducted in full from total
shareholders’ equity.
Amounts in M.€
Money
market
Shareholders’
Repos
equity
ECB financing
Shareholders’ equity and
minority interests at
year-beginning
2009 dividend payment
2010 net profit
Change in the fair value
reserve, net of taxes2
Foreign exchange translation
of subsidiaries
Other
Shareholders’ equity and
minority interests
at year-end
[= Σ 1 to 6]
Capital ratios
At the end of 2010, the core capital3 ratio stood at
8.7%, which corresponds to a 0.9 p.p. increase relative
to the 7.8% ratio at the end of the previous year. The Tier
I capital ratio (basis own funds / risk-weighted assets)
rose 0.5 p.p. to 9.1% in 2010, while the own funds
requirements ratio was up 0.1 p.p. at 11.1%.
517.4
1 963.9
7.4
5.9
8.6
69%
9.1
6.2
5.4
8.0
7.8
15%
8.7
8%
Other
Operational
risk
06
07
Table 28
8%
08
09
10
Chart 60
Financial
assets and
investments
Chart 61
Tier I
Core Tier I
1) According to Bank of Portugal Notice 6 / 2008, unrealised losses on bonds available for sale recorded in the fair value reserve, and therefore deducted directly from accounting
Shareholders’ equity, are not subtracted from regulatory capital in the calculation of the own funds requirements ratio. Accordingly, the increase in unrealised losses on bonds registered
in 2010 is not reflected in the trend in own funds.
2) Change in the fair value reserve (net of deferred taxes) stemming from the revaluation of available-for-sale financial assets.
3) Core capital corresponds to basis own funds, before the deductions relating to interests in credit institutions and insurance undertakings, and excluding the amount of preference shares.
Mainly includes share capital and share-issue premiums, reserves, retained earnings and minority interests, excluding preference shares.
Análise Financeira
76
C3
Consolidated
Own funds requirements ratios
Calculated according to the Bank of Portugal rules
Accounting shareholders’ equity attributable to BPI shareholders
Dividends attributable to BPI shareholders
Minority interests, excluding preference shares
BFA dividends attributable to minority interests
Exclusion of:
Fair value reserve in bonds in the available-for-sale portfolio (net of deferred taxes)2
Positive fair value reserve in equities in the available-for-sale portfolio3
Revaluation reserves of fixed assets included in Tier II
Other adjustments
Inclusion of:
Contributions to the pension funds still not disclosed as a cost4
Intangible fixed assets
Loan provisions calculated in accordance with Bank of Portugal rules deducted of loan impairments
recognised in the income statement5
Deferred adjustments resulting from the transition to IAS / IFRS6
Core capital
Preference shares
Deduction of participating interests in credit institutions and insurance companies
Basis own funds
Complementary own funds
of which, complementary own funds before deductions
of which, deduction of participating interests in credit institutions and insurance companies
of which, other deductions
Total own funds
Risk-weighted assets
Total own funds requirements (risk-weighted assets x 8%)
Core Tier I ratio
Tier I ratio
Own funds requirements ratio
Amounts in M.€
1
2
3
[= Σ 1 to 4]
4
5
6
7
8
[= Σ 6 to 9]
9
10
11
12
13
[= Σ 11 to 14]
[= 5 + 10 + 15]
14
15
16
17
[= Σ 16 to 18]
18
19
20
21
22
23
[= 19 + 20]
24
25
[= 25 x 8%]
26
[= 16 / 25]
27
[= 19 / 25]
28
[= 24 / 25]
29
2009
2010
1 847.0
(70.2)
193.7
(50.3)
1 920.3
1 446.6
-1
249.2
(63.6)
1 632.2
201.0
(22.5)
(8.5)
(6.5)
163.4
711.9
(23.7)
(8.5)
0.5
680.2
(0.4)
(9.7)
(0.2)
(6.4)
(128.8)
96.1
(42.8)
2 040.8
272.8
(68.2)
2 245.3
621.4
692.0
(68.2)
(2.4)
2 866.7
26 059.9
2 084.8
7.8%
8.6%
11.0%
(111.0)
72.3
(45.2)
2 267.1
246.7
(134.5)
2 379.3
523.0
663.1
(134.5)
(5.6)
2 902.2
26 035.8
2 082.9
8.7%
9.1%
11.1%
1) The core capital figure at the end of 2010 presupposes the non distribution of dividends by Banco BPI relating to 2010, in conformity with the Board of Directors’
Table 29
proposal to the Shareholders’ General Meeting.
2) Effective from October 2008, through Bank of Portugal Notice 6 / 2008, unrealised losses on the portfolio of available-for-sale bonds, without signs of impairment, which are recorded
directly in shareholders’ equity, in the fair value reserve, are not deducted to the regulatory own funds. Similarly, the unrealised gains on bonds available for sale (recorded in the fair
value reserve) are excluded from the regulatory own funds.
3) The unrealised gains on shares available for sale which are recorded directly in shareholders’ equity (in the fair value reserve), are excluded from core capital. Subsequently, 45% of the
unrealised gains is added to complementary own funds (in 2010 the amount added to complementary own funds was 10.6 M.€, corresponding to 45% of 23.7 M.€).
4) At the end of 2010, BPI had 16 M.€ of negative actuarial variances recorded outside the accounting corridor. However, the facility of the transitional widening of the corridor provided for
in Bank of Portugal Notice 11 / 2008 permitted the accommodation in full of the above mentioned negative actuarial deviation without giving rise to any impact in capital, while still
holding, at 31 December 2010, a 175 M.€ margin available for use.
Bank of Portugal Notice 11 / 2008 laid down a transitional regime which consisted of a temporary widening of the revelant corridor in order to accommodate part of the 2008 actuarial
and financial variances of the pension funds that were situated outside the accounting corridor provided for by IAS / IFRS and thus, avoiding its deduction from regulatory own funds.
The transitional regime envisaged in Notice 11 / 2008 was already applied with respect to the reporting of financial information at 31 December 2008, being in force for four years (until
31 Dec. 2012).
Notice 11 / 2008 widened the corridor considered for purposes of determining the amount of the actuarial losses to be deducted from own funds in 2008 by 383.1 M.€ in the case of
BPI, by allowing adding to the accounting corridor the amount of the negative actuarial variances recorded in 2008 (544.3 M.€), after deducting the pension funds’ expected income in
that year (161.2 M.€). This addition will be gradually reduced over the next 4 years until its extinction at 31 Dec. 2012: 100% (383.1 M.€) until 30 Dec. 2009; 75% (287.3 M.€) from
31 Dec. 2009 until 30 Dec. 2010; 50% (191.5 M.€) from 31 Dec. 2010 until 30 Dec. 2011; 25% (95.8 M.€) from 31 Dec. 2011 until 30 Dec. 2012; and 0% after 31 Dec. 2012.
5) The amount of the loan provisions (specific and general), calculated according to the Bank of Portugal’s rules, which exceeds the value of the impairment allowances recognised in the
consolidated accounts, is deducted from basis own funds. The part of this figure which corresponds to general provisions, is then added to complementary own funds.
6) The impacts of the transition to IAS / IFRS are being recognised in own funds until 2014, including.
77
Domestic activity
DOMESTIC ACTIVITY RESULTS
Net profit
Net profit in 2010 earned from domestic operations was
86.5 M.€ (85.5 M.€ in 2009).
Operation profit
Net operating revenue fell by 6.5% (-53.8 M.€), given
that the 65.2 M.€ decline in profits from financial
operations and other operating gains was not offset by
the moderate improvement in net interest income,
commissions and the technical insurance profit, which
together posted an increase of 11.4 M.€.
The increase in costs (as reported) of 4.3% (+24.6 M.€)
was greatly influenced by non recurrent costs with early
retirements in 2010 (36.1 M.€). Excluding non-recurrent
costs, costs were down 2% (-11.4 M.€) in 2010.
The operating profit as reported declined by 31.1%
(-78.4 M.€). Excluding early-retirement costs, the
operating profit was down 16.8%.
The decrease in impairments (net of recoveries) of
43.1 M.€, corporate income tax of 24.2 M.€ and the
increase in the equity-accounted results of subsidiaries of
10.3 M.€, compensated for the drop in operating profit,
with the result that net profit improved by 1.2%.
Domestic activity income statement
Unit linked gross margin
Income from securities (variable yield)
Commissions related to deferred cost (net)
Net interest income
Technical result from insurance contracts
Personnel costs, excluding early-retirements costs
Operating costs, excluding early-retirements costs
Early-retirements costs
Operating costs
Operating profit
Net profit
Amounts in M.€
1
2
3
[= Σ 1 to 4]
4
5
6
7
8
[= Σ 5 to 9]
9
10
11
12
[= Σ 11 to 13]
13
14
15
[= 14 + 15]
16
[= 10 + 16]
17
18
19
[= Σ 17 to 20]
20
21
22
23
[= Σ 21 to 24]
[= 25 - 13 - 19 - 20]
24
25
26
2009
2010
∆%
420.3
3.3
4.9
24.7
453.1
11.8
262.5
92.7
9.6
829.7
(356.7)
(181.3)
(39.5)
(577.5)
(0.05)
(577.5)
252.2
18.2
(135.3)
(34.6)
100.5
(18.9)
12.7
(8.8)
85.5
294.9
417.2
4.1
3.7
30.3
455.4
16.1
267.4
50.9
(13.8)
776.0
(345.8)
(186.3)
(34.0)
(566.1)
(36.1)
(602.2)
173.8
13.8
(99.9)
(22.4)
65.2
5.3
23.0
(7.0)
86.5
242.8
(0.7%)
27.2%
(24.0%)
22.7%
0.5%
36.3%
1.9%
(45.1%)
(243.3%)
(6.5%)
(3.1%)
2.8%
(13.9%)
(2.0%)
4.3%
(31.1%)
(24.5%)
(26.1%)
(35.3%)
(35.1%)
(128.1%)
80.8%
(20.7%)
1.2%
(17.6%)
Table 30
78
Domestic activity
Profitability
The operating return from domestic operations in 2010
(operating profit as % of ATA) was 0.4%, the return on
assets (ROA = Profit / ATA) was 0.2% and the ROE was
4.7%.
Domestic activity net profit
M.€
Return on average Shareholders' equity (ROE)
2009
Operating return (Operating profit as % ATA)
Net operating revenue1 as % ATA
Operating costs (as reported) as % ATA
1
[= 1 - 2]
Impairments impact [=1-(Impairments /
Operating profit)]
Income tax impact (=Net profit /
profit before taxes)
Return on average
total assets (ROA)2
[= 3 x 4 x 5]
ATA / average Shareholders' equity
and minority interests3
ROE
[= 6 x 7]
2010
3
2.1%
1.4%
0.6%
1.8%
1.4%
0.4%
4
x 0.41
x 0.43
5
x 0.82
x 1.06
6
0.2%
0.2%
2
7
8
22.8
4.9%
242
%
278
22.1
85
23.4
87
06
07
08
4.9
0.7
10
09
10
06
07
08
4.7
09
Chart 62
23.4
4.7%
ATA = Average total assets.
Domestic activity return on
10
Chart 63
Table 31
The domestic operations’ balance sheet mainly reflects the
commercial banking business carried on in Portugal.
Customer loans represent 70% of assets and Customer
resources constitute the principal source of balance sheet
funding. At the end of 2010, Customer resources on the
balance sheet (excluding capitalisation insurance) financed
76% of loans.
Short-term funding corresponds primarily to resources
obtained from securities repo operations, while the position
on the money market was not significant (net debtor
position of 198 M.€) and short-term funding from the ECB
amounted to 1 000 M.€, which corresponds to a decrease
of 1 500 M.€ relative to the end of 2009.
At the close of 2010, BPI had a portfolio of assets eligible
for ECB funding of roughly 7 500 M.€, net of haircuts,
which represented 18% of total assets employed in
domestic operations.
Medium and long-term resources represented 17% of
assets. The Bank refinanced a large part of M / L-term debt
on the medium and long-term capital market, thereby
ensuring relative stability in the funding structure. The
debt repayments falling due in 2011 amount to 742 M.€,
while in the portfolio of available-for-sale bonds a total of
Análise Financeira
314 M.€ will mature, with the result that the net resources
required amount to 428 M.€.
D4
Domestic activity balance sheet structure in 2010
Assets
5%
Cash assets and loans to
credit institutions
19%
Liabilities and
12%
17%
Financial assets
held for dealing4
available for sale
held to maturity
2%
15%
2%
Money market
Repos
ECB financing
2%
8%
2%
Medium and long term resources5
70%
64%
Customer resources
6%
7%
Shareholders' equity, minorities and
other liabilities
Loans to Customers
Financial investments, fixed assets
and other
Short-term resources
2010
Insurance capitalisation
Retail bonds
Deposits
9%
11%
44%
2010
Chart 64
1) For analysis purposes, the equity-accounted results of subsidiaries and the income paid to the holders of preference shares (recorded under minority interests), were respectively added
to and deducted from net operating revenue.
2) Considering the net profit attributed to BPI shareholders and to the minority interests, after deducting the preference share dividends paid.
3) Shareholders’ equity excludes revaluation reserves and minority interests exclude preference shares.
4) Derivatives with fair value accounted for under the caption Financial assets held for trading were included in other assets.
5) Includes senior and subordinated bonds, medium and long-term resources from credit institutions, raised from asset securitisations and exclude preference shares (recorded in minority
interests).
79
Domestic activity
CUSTOMER LOANS
The domestic operations’ Customer loans portfolio was
virtually unchanged, expanding by a mere 0.2%,
considering that the 4.2% increase in the mortgage loans
portfolio was counterbalanced by the 3.7% decrease on
the corporate loans, project finance and institutional
sector’s portfolios and the 5.8% decline in the small
business loan book.
Customer loans portfolio
Corporate banking, institutional
banking and project finance
Large corporations
Companies
Project finance
Institutional banking and
state business sector
[= Σ 1 to 4]
Loans to individuals and
small businesses
Mortgage loans2
Loans to individuals –
other purposes
[= Σ 6 to 8]
Other loans
Loans in arrears
Loan impairments
Interests
Total1,2
[= 5 + Σ 9 to 13]
Securitised loans written off
from the balance sheet
Balance sheet value [= 14 + 15]
Guarantees
Loans to Customers2
2006 to 2010
Breakdown in 2010
th.M.€
24.0
27.5
29.0
29.6
29.7
Companies
Mortgage
loans
42%
42%
Amounts in M.€
2009
2010
∆%
4 802.0
3 895.4
2 225.3
4 371.3
3 568.1
2 328.1
(9.0%)
(8.4%)
4.6%
2 105.1
2 284.4
5 13 027.7 12 552.0
8.5%
(3.7%)
6
11 894.0 12 392.3
4.2%
7
1 331.5
1 357.2
2 495.8
2 350.4
15 721.3 16 099.9
715.3
852.1
565.0
576.2
(463.8)
(478.7)
73.9
88.5
29 639.5 29 689.9
1.9%
(5.8%)
2.4%
19.1%
2.0%
3.2%
19.7%
0.2%
3% 8% 5%
1
2
3
4
8
9
10
11
12
13
14
15
(899.6)
(824.1)
16 28 739.9 28 865.8
17
2 857.9
2 818.9
(8.4%)
0.4%
(1.4%)
Table 32
Other
06
07
08
09
Small
businesses
10
Chart 65
Personal
and
consumer
loans
Chart 66
The backdrop of historically low interest rates and the
resilience of prices on the real-estate market underpinned
the demand for home loans in 2010. The balance on the
mortgage loans portfolio increased by 498 M.€. However,
the behaviour of the mortgage loan portfolio during the
course of the year evidenced a progressive deceleration in
its expansion, to almost stabilisation in the last quarter of
the year. This situation reflects the impact on demand of
the announcement and implementation of budgetary
consolidation measures and the fall in individuals’
confidence indicators.
The large corporations, companies and small business
loan portfolios posted
declines
of 9%, 8.4% and 5.8%,
Análise
Financeira
respectively, reflecting on the one side the retraction in
private investment, with a consequent recoil in demand
and, on the other, the effect of selectivity in the
contracting of new loans.
D5
1) Net loan portfolio.
2) Includes securitised mortgage loans written off from the balance sheet following the sale, in December 2007, of 35% of the bonds relating to the capital tranche of the securitisation
operations.
80
Domestic activity
CUSTOMER RESOURCES
The Customer resources portfolio expanded 0.5% in
2010. This trend reflects the increase in balance sheet
resources of 2% (+487 M.€) which offset the 5.4%
decrease (-330 M.€) in off-balance sheet resources.
1
Amounts in M.€
2009
2010
∆%
1
On-balance sheet resources
Deposits
Sight deposits
Term and savings deposits
[= 1 + 2]
Capitalisation insurance2
Structured products3
and fixed-rate bonds
Subordinated bonds4
Preference shares4
[= Σ 3 to 7]
5 373.5
5 152.2
12 190.1 11 993.1
3 17 563.6 17 145.3
4
3 028.3
3 802.6
1
2
(4.1%)
(1.6%)
(2.4%)
25.6%
3 911.6
4 103.1
4.9%
6
241.8
207.7 (14.1%)
7
26.7
0.0 (100.0%)
8 24 772.0 25 258.7
2.0%
Total Customer resources1
2006 to 2010
Breakdown in 2010
th.M.€
26.5
30.1
30.3
8.0
5.1
30.9
6.1
31.0
Off-balance
sheet
Sight
deposits
5.8
8.2
18.3
22.1
25.2
24.8
17%
19%
14%
25.3
12%
38%
Debt
securities6
Term
deposits
5
Off-balance sheet resources
9
Unit trust (mutual) funds
Equity (PPA) and retirement (PPR)
10
savings plans
11
Hedge funds
Pension funds5
12
1 628.3
(15.8%)
966.8
934.9
26.0
50.4
3 185.4
3 169.8
[= Σ 9 to 12] 13
6 113.0 5 783.4
[= 8 + 13] 14 30 885.0 31 042.1
(3.3%)
93.8%
(0.5%)
(5.4%)
0.5%
Total1
Note:
Corrections for double counting 15
On-balance sheet resources,
before corrections for
double counting
[= 8 + 15] 16
1 934.9
400.4
06
07
08
09
Capitalisation
insurance
10
Chart 67
Chart 68
Off-balance sheet
On-balance sheet
The increase in balance sheet resources resulted from the
expansion of longer-maturity resources (2 to 5 years) –
capitalisation insurance and bonds –, with growth of
966 M.€, while Customer deposits decreased 2.4%
(-418 M.€).
915.4
25 172.4 26 174.0
4.0%
Table 33
The drop in off-balance sheet resources is explained by
the 15.8% decline in unit trust funds after having grown
by 76% in 2009. The unit trust funds however recorded
a distinct trend in their components. While the portfolio
of money market funds decreased 521 M.€ (-48%),
leading to the fall in
the aggregate’s
global amount, the
Análise
Financeira
value-added funds – equity and diversification funds –,
increased by 219 M.€ (+25%).
D6
1) Corrected for double counting: placements of unit trust funds and pension funds managed by BPI in the Group's deposits, structured products and unit trust funds.
2) BPI Vida savings products with discretionary participation in results are recorded under the caption “Amounts owned to Customers” (810.7 M.€, at 31 December 2010) and those with
discretionary profit sharing are recorded under the caption “Technical provisions” (2 991.9 M.€, at 31 December 2010).
3) Bonds whose remuneration is indexed to the equity, commodities and other markets, with total or partial guarantee of the capital invested at the end of the term.
4) Subordinated bonds and preference shares placed with Customers.
5) Includes BPI Group Employees pension funds.
6) Includes structured products and fixed-rate bonds placed with Customers.
81
Domestic activity
SECURITIES AND FINANCIAL INVESTMENTS PORTFOLIO
The securities and financial investments portfolio
amounted to 8 497.9 M.€ at the end of 2010.
The most important components correspond to public
debt and corporate bonds in the available-for-sale
portfolio which at market prices totalled 4 452.4 M.€
and 1 481.4 M.€ respectively, representing 52% and
17% of the global value of the securities and financial
investments portfolio.
The decrease in the securities and financial investments
portfolio in 2010 was caused by the reduction in the
available-for-sale portfolio as a result of some sales made,
mainly during the 1st half of the year, realising losses of
5 M.€, and the drop in the value of public debt
securities held as a consequence of the worsening
sovereign debt crisis in Europe which in turn was
mirrored in the expressive widening of the risk premiums
on the debt of the so-called periphery countries.
The following table presents the evolution of the exposure
to public and corporate debt on the portfolio of
available-for-sale financial assets.
Bonds in the available-for-sale portfolio
2009
Acquisition cost
Public debt
Portugal
Italy
Greece
Ireland
1
2
3
[= Σ 1 to 4]
Brazil
4
5
6
[= 5 + 6]
7
Corporate bonds
Total
[= 7 + 8]
8
9
Amounts in M.€
2010
Market
value
2 884.8 2 961.6
1 104.2 1 117.9
616.2
593.5
567.6
578.1
5 172.9 5 251.2
312.2
324.8
5 485.1 5 576.0
2 051.7 2 001.7
7 536.8 7 577.8
Acquisition cost
Market
value
2 884.9 2 614.1
1 003.5
971.7
530.4
324.6
357.3
282.8
4 776.2 4 193.2
248.9
259.2
5 025.1 4 452.4
1 510.9 1 481.4
6 535.9 5 933.8
Securities and financial investments portfolio
Financial assets
available for sale
Bonds – public debt
Bonds – corporate
Equities
Other
2010
∆%
5
5 576.0
2 001.7
66.6
117.4
7 761.7
4 452.4
1 481.4
55.8
124.3
6 114.0
(20.2%)
(26.0%)
(16.1%)
5.9%
(21.2%)
6
367.7
292.3
(20.5%)
7
335.1
6.7
709.5
678.6
1 388.0
803.1
140.9
10 093.8
313.6
46.8
652.7
516.0
1 168.7
1 043.6
171.7
8 497.9
(6.4%)
(8.0%)
(24.0%)
(15.8%)
29.9%
21.9%
(15.8%)
2
3
Financial assets
held for dealing
Banco BPI and Banco Português
de Investimento trading portfolio
Equities portfolio
Derivative instruments
at fair value1
Bonds and other
[= Σ 6 to 8]
BPI Vida trading portfolio2
4
8
9
10
[= 9 + 10] 11
12
Financial investments3
13
Total
[= 5 + 11 + 12 + 13] 14
Table 35
The balance sheet caption “Financial assets held for
dealing and at fair value through the income statement”
includes the following securities:
j
j
j
Table 34
2009
1
[= Σ 1 to 4]
Amounts in M.€
equities (292.3 M.€) associated with the trading
activity through the management of an arbitrage
portfolio realised at Banco Português de Investimento
and in the participation and management of BPI
Alternative Fund: Iberian Equities Long Short4;
portfolio of BPI Vida’s securities portfolio (516.0 M.€)
associated with the portfolio of capitalisation insurance
commercialised by that subsidiary;
derivative instruments at fair value (313.6 M.€). These
essentially correspond to interest rate swaps and
options incorporated into structured issues, classified as
“embedded derivates” and which for accounting
purposes are separated from the respective base
contract.
1) Recorded on the liabilities side are positions in dealing derivatives of 318.9 M.€ in Dec. 2009 and 261.5 M.€ in Dec. 10.
2) Assets allocated to cover capitalisation insurance policies issued by BPI Vida.
3) Investments in associated companies and jointly controlled entities.
4) As from January 2010, trading activity in equities began to be carried out through a fund of long-short equities created on that date, to which BPI’s portfolio of trading shares was
transferred. At the end of December 2010, that fund had an allocated capital of 78 M.€, of which 77.7% was held by BPI, with the result that it was consolidated using the purchase
method.
82
Domestic activity
Pension funds
At 31 December 2010, the Employee pension funds had
net assets of 2 409.4 M.€, which covered the funding of
104.5% of the value of pension liabilities.
Pension fund annual
average return
Banco BPI pension
funds’ assets
Until December 2010
At 31 December 2010
%
Pension funds
Selected indicators
Total past service pension liabilities
Pension funds
Financing surplus
[= 2 – 1]
Financing of pension liabilities
[= 2 / 1]
Accounting corridor
Actuarial and financial deviations
(accumulated)
Negative deviations recorded
in the corridor
Positive (/ negative) deviations
outside the corridor
Pension funds return
Equities
27%
Amounts in M.€
1
2
3
4
5
2009
2010
2 274.6
2 463.8
189.2
108.3%
246.4
2 306.1
2 409.4
103.3
104.5%
240.9
Portuguese
9.4
20%
6.7
5.7
6
(207.0)
(238.7)
7
0.3
14.7%
(16.0)
2.9%
8
Employee pension liabilities
Pension liabilities amounted to 2 306.1 M.€ at the end
of 2010 and covered a universe of 6 847 Employees on
the payroll, 7 584 pensioners and 3 000 ex-Employees.
The actuarial and financial assumptions used in the
calculation of liabilities remained unchanged in 2010.
Main financial assumptions
2010
5.25%
5.50%
3.00%
1.75%
Table 37
It is worth referring that up till the end of 2010, the
fund’s effective return since its creation in 1992 was on
average 9.4% per annum, and that in the last ten and
five years the effective annual return was on average
6.7% and 5.7%, respectively.
35%
8%
Other
Indexed-rate
Real estate
Chart 69
Chart 70
Actuarial and financial variances
At the end of 2010, BPI had actuarial losses of
238.7 M.€ which are recorded within the 10%
“accounting corridor” provided for in the IAS (equivalent to
240.9 M.€) and 16 M.€ outside the accounting corridor.
It is important to mention that the facility of the
transitional widening of the corridor envisaged in Bank of
Portugal Notice 11 / 2008 would permit fully
accommodating the actuarial loss of 16 M.€ outside the
abovementioned accounting corridor without giving rise to
an impact on own funds; meanwhile BPI has an unused
margin of 175 M.€.
Análise Financeira
Financing of pension liabilities
111%
114%
D9Accounting corridor usage
M.€
99%
108%
104%
39
(43)
247
2.5
2.8
2.3
2.5
280
230
07
08
2.4
(502)
09
10
06
246
07
08
532
09
Chart 71
Pension fund
Pension liabilities coverage
241
(207) (255)
611
06
1) Temporary corridor in accordance with Bank of Portugal Notice 11 / 2008, which permits
accommodating variances outside the accounting corridor without causing an impact on
own funds.
7%
14%
Beginning Last
Last
In
(1991) 10 years 5 years 2010
th.M.€
Returns
In 2010, the pension funds earned an effective return of
2.9%, which was therefore below the pension funds’
return assumption.
Fixed-rate
16%
2.9
Table 36
Discount rate
Pension fund income rate
Pensionable salary increase rate
Pension increase rate
Bonds
43%
Foreign
432
10
Chart 72
Corridor
Actuarial deviations
Temporary corridor1
83
Domestic activity
The accumulated actuarial losses increased by 48.1 M.€
in 2010. This behaviour is explained by the losses
recorded in the year of 59.9 M.€ resulting from the
difference between the fund’s actual return and the
corresponding financial assumption and 6.6 M.€ relating
to mortality variances, only partially compensated by the
positive variance of 17.1 M.€ stemming from the annual
salary increases within the ambit of the collective
EMPLOYEE PENSION FUNDS
According to Bank of Portugal rules, the Group Employees’
pension funds fully guarantee the old-age, infirmity and
survivors’ retirement pensions of Employees and former
Employees of the banks (Banco BPI and Banco Português
de Investimento) and of the subsidiaries which adhered to
the Vertical Collective Employment Accord (BPI Gestão de
Activos).
Employees recruited from 3 March 2009 onwards who
were not in the service of another banking institution at
which the social security scheme’s substitute regime was
in force, are obligatorily covered by the social security
scheme’s respective general regime in accordance with
Decree-Law 54 / 2009 of 2 March, those Employees are
also covered by a defined-contribution pension plan in
addition to the pension-related benefits they will be
entitled to under the Social Security scheme.
With the publication of Decree-Law n.1-A / 2011, of
3 January, all beneficiary bank Employees of the CAFEB –
Caixa de Abono de Família dos Empregados Bancários were
integrated into the Social Security’s General Regime with
effect from 01/01/2011, and are now covered by this
regime as regards old-age pensions and in the event of
maternity, paternity and adoption the costs of which the
Bank will cease to bear. In view of the complementary
character envisaged in the rules of the Collective
Employment Agreement for the Banking Sector, the Bank
continues to guarantee the difference between the amount
of the benefits payable under the Social Security's General
Regime for the eventualities integrated and those
contemplated in terms of the aforesaid Agreement.
bargaining agreement (ACTV) below the financial
assumption figure.
Liabilities for the Directors’ complementary pension plan
At 31 December 2010, the liabilities for the
complementary pension plan for Directors totalled
29.4 M.€ and were 100% covered by the pension fund.
The rules laid down in the Collective Employment Accord
for the banking sector continue to apply as regards welfare
benefits, which did not suffer any alteration, with the
result that the pensions borne by the Bank will be
deducted from the pensions that will be paid by the Social
Security for the period of service rendered to the Bank with
effect from 1/1/2011.
According to the instructions of the National Council of
Financial Supervisors, and despite the amount of the
pensions relating to the current Employees in the Bank’s
service decreasing in the future as a consequence of the
integration into the Social Security system, the amount of
obligations for past services remains unchanged in 2010,
while the current service cost decreases as from 2011,
compensating for the higher SSR payable by the Bank.
Investment policy
The Banco BPI Pension Fund’s investment policy is
defined in the management contract and takes into
consideration for each asset class the core objectives
indicated below.
Equities
Fixed-rate bonds
Variable-rate bonds
Hedge Funds
Real estate
Liquidity
Total
Asset class
Benchmark
30%
25%
20%
5%
15%
5%
100%
MSCI Europe
EFFAS > 1
3-month Euribor
3-month Euribor
EFFAS > 1
3-month Euribor
Table 38
As concerns those Employees, the Bank is still responsible
for the payment of infirmity and survivor pensions and
illness subsidies.
The SSR contributions (Single Social Rate) borne by the
Bank and Employees ceased to be made to the CAFEB and
are now made within the ambit of the Social Security’s
general regime:
j
j
84
the SSR rate borne by Employees remains unchanged at
3.0%;
the SSR rate borne by the Bank increases from 11.0% to
23.6%.
DIRECTORS’ COMPLEMENTARY PENSION PLAN
The Directors forming part of Banco BPI’s Executive
Committee, as well as the other directors of Banco
Português de Investimento, benefit from the
complementary retirement and survivors’ pension plan.
The liabilities associated with this plan are covered by a
pension fund.
Domestic activity
INCOME
Net operating revenue generated by domestic operations
decreased 6.5% (-53.8 M.€) in 2010, owing to the lower
profits from financial operations (-41.8 M.€, -45%) and
to the caption other operating gains and losses
(-23.4 M.€).
Net interest income
Net interest income advanced 0.5% in 2010,
interrupting the descending trend seen in 2009, year in
which it fell 10%. Contributing to the aforesaid
stabilisation were the continuation of the adjustment
process of loan spreads and the reinforcement during
2009 of the debt securities portfolio.
Net interest income
Amounts in M.€
Gross margin on unit link products
Income from securities –
dividends
Commissions related to
deferred cost (net)
Net interest income [= Σ 1 to 4]
2009
2010
∆%
2
420.3
3.3
417.2
4.1
(0.7%)
27.2%
3
4.9
3.7
(24.0%)
4
24.7
453.1
30.3
455.4
22.7%
0.5%
1
5
In a scenario of falling market interest rates, and
notwithstanding the aforementioned management of
lending spreads, the decline in the average interest rate
on loans was more pronounced than the decline observed
in the average interest rate on resources, which resulted
in a narrowing of unit net interest income1 of 0.09 p.p.
This impact was not offset by the positive effect of the
7.4% increase in the average balance on interest-earning
assets – average balance on loans (+2.9%) and debt
securities (+31%) –, with the result that narrow net
interest income decreased 0.7%.
Analysis of the trend in spreads
The following factors had an impact on the behaviour of
unit net interest income:
j
the relative stabilisation of the intermediation margin2
(0.03 p.p. improvement in 2010), which mainly
reflects:
j
Table 39
Trend in net interest income
Loans and deposits spread
Quarterly average interest rates
M.€
495
%
531
7
504
453
455
5.3
6
4.7
5
5.8
4.2
j
4
454
477
470
420
417
3.2
3.9
3
2.4
2.6
2
1.4
1.4
1
06
07
08
09
10
0
0.7
2007 2008 2009 2010
Chart 73
Other income
Net interest income
(narrow sense)
1.0
Chart 74
Loans
Deposits
Euribor 3-months
the positive impact of the continuing adjustment
process involving loan spreads3, with the portfolio’s
average contractual spread (spread vis-à-vis
benchmarks on the respective repricing dates) having
risen by 0.18 p.p. It is also worth noting that the
slight improvement in the term deposit spread
(+0.05 p.p.), even though greatly influenced by the
intensified competition for the procurement of
Customer resources and by the low interest rate
environment;
the negative impact directly associated with the
direction of market rates. On the one hand, there was
a contraction in the average margin on sight deposits
occasioned by the decline in market interest rates4
(the annual average Euribor 3-month rate fell from
1.22% in 2009 to 0.81% in 2010). On the other
hand, the temporary widening of the spread5 between
average lending rates and market rates which
occurred in 2009 as a result of the steep drop in the
latter, reversed course in 2010, with their moderate
climb as from the end of the 1st quarter.
1) Narrow net interest income as % of average interest-earning assets.
2) Difference between the average remuneration rates on loans and deposits.
3) On the renewal date of operations in loans to companies and for new operations in the majority of the segments. A significant portion of loan portfolio’s remuneration is indexed to market
rates, by means of a non-reviewable contractual spread during the term of the operation, as is the case of virtually the entire mortgage-loan portfolio (which represents about 40% of the
loan portfolio associated with domestic operations).
4) The fall in market interest rates is almost fully reflected in a contraction in the average margin on sight deposits, given that these are remunerated at rates close to zero, with the result
that the possibility of adjusting their remuneration is negligible.
5) The remuneration on floating rate loan operations is fixed on the repricing date, in accordance with the benchmark on that date, and remains fixed until the next repricing date. The
steep drop in market rates this gives rise to a temporary widening of the spread between the lending interest rate and current market rates until the lending rate is revised once again.
Análise Financeira
D10
85
Domestic activity
j
an arbitrage portfolio composed of European public debt
securities (the average balance on the public debt
portfolio increased by 1 560 M.€ relative to 2009).
the higher cost of medium and long-term debt issues
realised relative to issues redeemed. BPI issued
between January and April 2010, 1 980 M.€ with an
average cost of around 70 b.p. for an average maturity
of 4 years.
That arbitrage portfolio’s contribution to net interest
income (after deducting the cost of resources employed)
was 73.1 M.€ in 2010. In 2009, the same portfolio
contributed to net interest income for only part of the
year, so that the respective contribution was only
35.9 M.€.
Analysis of volumes
The increase in average interest-earning assets of
2 601 M.€, relative to the previous year’s average
balance, mainly reflected the constitution during 2009 of
Average interest rates on remunerated assets and liabilities
Amounts in M.€
2009
Average
balance2
Loans to Customers
Companies, institutionals and project finance
Mortgage loans
Other loans to individuals
Other
1
2
3
4
[= Σ 1 to 5]
Customer resources1
Other income and costs
Narrow net interest income
[= 6 - 7 + 8]
Interest-earning assets2
Interest-bearing liabilities2
[= 9 / 10]
Unitary interest margin
[= 6 - 7]
Intermediation margin
(= interest rate on loans – interest rate on Customer resources)
Net interest margin as % do ATA
Euribor 3 months (annual average)
Euribor 3 months (3 month moving average)
5
6
7
12
10
1
2
859.5
285.0
260.0
520.7
748.7
27 673.9
20 784.7
8
9
10
11
12
13
14
15
16
2010
Interest
Average
interest rate
393.2
304.4
84.9
99.8
11.4
893.6
440.3
(32.9)
420.3
3.1%
3.0%
6.7%
4.0%
1.5%
3.2%
2.1%
35 136.0
35 259.9
Average
balance2
13
10
1
2
031.9
942.4
296.9
439.8
775.5
28 486.5
19 169.0
Interest
Average
interest rate
318.1
179.6
84.3
76.4
12.6
671.1
232.5
(21.3)
417.2
2.4%
1.6%
6.5%
3.1%
1.6%
2.4%
1.2%
37 737.3
38 107.6
1.20%
1.11%
1.11%
1.14%
1.05%
1.22%
1.60%
0.96%
0.81%
0.77%
Table 40
1) Deposits, checks, orders payable and other Customer resources.
2) BPI Vida's remunerated assets and liabilities and corresponding interest income and expense were excluded from the table for the reason that the interest income and expense earned
on capitalisation insurance is essentially recorded in the captions “Gross margin on unit links” and “Technical results of insurance contracts”.
86
Domestic activity
Commissions
Commissions and other net fees rose by 1.9%, as a result
of the 12.9% increase (+5.8 M.€) in asset management
commissions and the 4.4% (+0.8 M.€) improvement in
investment banking fees, while commercial banking fees
were down 0.9% (-1.7 M.€).
Profits from financial operations totalled 50.9 M.€ in
2010, which compares with a figure of 92.7 M.€ in the
previous year. The 2009 figure benefited from the gains
of 47.4 M.€ realised on the sale of bonds, whereas
losses of 5 M.€. were recorded in 2010.
Commissions and other fees (net)
The share of profits from financial operations relative to
net operating revenue in domestic operations fell from
11.2% in 2009 to 6.6% in 2010.
Commercial banking
Cards
Intermediation of insurance
products
Deposits and related services
Banking services
Other
[= Σ 1 to 6]
Asset management
Investment Banking
Brokerage and placing
Corporate finance
Other
Total
1
2
3
4
5
6
7
8
9
10
11
[= Σ 9 to 11]
12
[= 7 + 8 + 12]
13
Amounts in M.€
2009
2010
∆%
57.8
61.5
63.9
54.8
10.5%
(10.9%)
36.7
28.4
12.1
2.7
199.2
45.2
37.3
27.0
10.3
4.2
197.5
51.1
1.8%
(4.9%)
(15.5%)
56.1%
(0.9%)
12.9%
13.6
2.8
1.6
18.0
262.5
14.7
3.3
0.8
18.8
267.4
7.8%
18.9%
(49.1%)
4.4%
1.9%
Operations at fair value
Equities
Interest rate hedging
Structures products
Hedge funds
Currency
The trend in commercial banking fees was penalised by
the lower fees associated with lending (-10.9%), in large
part reflecting the lower volume of lending business. On
the positive side, fees earned from cards posted 10.5%
growth.
2
3
4
[= Σ 1 to 5]
Available for sale assets
Bonds
Equities
Other
5
6
7
8
[= Σ 7 to 9]
Table 41
The positive behaviour of asset management commissions
reflects the increase in the value of managed assets, in
terms of average balances, and the higher relative weight
of capital growth (equities) and diversification funds from
30% of total funds under management at the end of
2009 to 42% at the end of 2010: because they offer
more added value, they generate higher unitary
commissions.
1
9
10
Subtotal
[= 6 + 10] 11
Financial income
from pensions
Expected pension funds
12
return
Interest cost
13
Total
[= 12 + 13]
14
[= 11 + 14]
15
Amounts in M.€
2009
2010
∆ M.€
8.3
14.3
15.5
3.3
9.1
50.5
4.0
10.4
3.1
2.3
5.1
24.8
(4.3)
(3.9)
(12.4)
(1.0)
(4.1)
(25.7)
47.4
(1.6)
0.3
46.1
96.6
(5.0)
0.7
18.1
13.9
38.7
(52.3)
+2.3
+17.8
(32.2)
(57.9)
123.4
(127.3)
(3.9)
92.7
131.4
(119.2)
12.2
50.9
+8.0
+8.2
+16.1
(41.8)
Table 42
Profits from financial
operations
Commissions
M.€
269
M.€
299
256
262
267
176
101
171
182
175
199
741
197
93
51
(20.2)
06
07
08
09
10
Chart 75
1) Excluding the loss realised on the sale of the investment in BCP.
06
07
08
09
10
Chart 76
Investment banking
Asset management
Commercial banking
87
Domestic activity
As regards the principal components of profits from
financial operations:
j
therefore equity accounted1 (the investment was
previously recorded in the portfolio of available-for-sale
assets), by virtue of the fact that BPI increased its
equity interest in the company from 17.6% to 21%;
the profits from operations at fair value were 24.8 M.€,
and primarily resulted from:
j
j
j
j
j
j
gains of 10.4 M.€ on interest-rate risk-hedging
positions;
gains from equities dealing of 4.0 M.€, associated
with a long-short equities portfolio and an arbitrage
portfolio with PSI-20 futures;
currency gains of 5.1 M.€ resulting from the currency
margin on operations effected by the commercial
network with Customers;
gains of 3.1 M.€ on structured products derived from
dealings on the secondary market in order to
guarantee the liquidity of the securities, from the
revaluation of positions and from the early winding up
of hedge positions;
gains on available-for-sale financial assets totalled
13.9 M.€, and were occasioned by:
j
income of 21.8 M.€ arising from the revaluation of
the shareholding in Unicre. The revaluation of this
interest is explained by the fact that Unicre is now
regarded as being an associated company and is
j
losses of 5 M.€ realised on the sale of bonds;
the net financial surplus with pensions2 was situated at
12.2 M.€ and resulted from the existence of surplus
funding of the pension funds and a positive difference
between the pension fund’s expected rate of return
(5.5%) and the discount rate (5.25%).
Other operating gains and losses
Other operating gains (net of losses) were a negative
13.8 M.€ in 2010, and relate primarily to subscriptions
and donations, contributions to the deposit guarantee
fund and indirect taxes.
In the previous year, the caption “Other operating gains”
presented a positive figure of 9.6 M.€, greatly influenced
by the 11.8 M.€ gains from the contribution-in-kind
(fixed properties) made to the pension fund and 8.2 M.€
from the alteration in the VAT pro rata figure.
Hence the change in the above caption over the year was
a negative 23.4 M.€.
1) According to IAS / IFRS, when an equity investment acquired in phases becomes an associated company, the investment previously held must be revalued in accordance with the fair
value of the additional holding. The resulting gain / loss is recognised in the period, with BPI having adopted the procedure of recognising the gains in net profit for the year, compared
with the alternative procedure of recognising the gains directly in shareholders’ equity (reserves).
2) The financial net income with pensions corresponds the difference between the pension funds’ expected income and the interest cost of the liabilities.
88
Domestic activity
OPERATING COSTS
Operating costs – personnel costs, outside supplies and
services and depreciation and amortisation – excluding
costs with early retirements, decreased by 2% in 2010.
However, the decline in net operating revenue resulting
from the lower profits from financial operations and
“other operating income” –, reflected itself in an adverse
behaviour of the indicator “operating costs as a
percentage of net operating revenue” which climbed from
69.6% in 2009 to 73% in 2010.
Operating costs
Amounts in M.€
2009
Operating costs, before
depreciation and amortisation
Personnel costs, excluding
early-retirements costs
356.7
181.3
538.0
39.5
577.5
0.05
577.5
69.6%
1
2
[= 1 + 2]
3
Depreciation and amortisation
Subtotal
[= 3 + 4]
Costs with early retirements
Total
[= 5 + 6]
Efficiency ratio3
4
5
6
7
8
∆%
2010
345.8
186.3
532.1
34.0
566.1
36.1
602.2
73.0%
(3.1%)
2.8%
(1.1%)
(13.9%)
(2.0%)
4.3%
Table 43
Operating costs as reported, which include
early-retirement costs, rose by 4.3% in 2010.
Net operating revenue and
operating costs
M.€
875
530
06
Operating costs as % of net
operating revenue
1 019
592
70.0
830
5862
578
776
Personnel costs
Remunerations
Fixed remunerations
Variable remunerations
Other4
60.6
5662
69.6
081
09
10
06
07
08
09
Operating costs2
10
2
operating revenue1
4
230.0
26.8
11.6
268.3
234.1
21.4
10.2
265.8
1.8%
(20.2%)
(11.3%)
(1.0%)
5
88.4
80.0
(9.5%)
6
356.7
0.05
356.7
345.8
36.1
381.8
(3.1%)
7.0%
3
7
8
Reported personnel costs, which include a 36.1 M.€
charge for retirements in 2010, increased by 7.0%. The
aforesaid retirement charge refers to the departure of
202 Employees by virtue of early retirement and
65 departures to be completed at the beginning of 2011.
Personnel costs
Breakdown in 20102
2006 to 2010
319
Chart 78
∆%
Table 44
50
Chart 77
2010
2
Pension costs and
social charges5
Remunerations, pension costs
and social charges
[= 4 + 5]
Costs with early retirements
Total
[= 6 + 7]
73.0
58.1
2009
1
[= Σ 1 to 3]
269
07
Amounts in M.€
M.€
%
8371
Personnel costs
Personnel costs (excluding early-retirement costs) were
down 3.1% in 2010. This trend reflects the downsizing
of the workforce deployed in domestic operations, the
very moderate behaviour of unit costs in nominal terms
and the decrease in pension costs.
06
Fixed
remunerations
and other
354
51
387
38
24
357
27
382
36
21
302
326
330
324
07
08
09
10
Chart 79
71%
6%
23%
Variable
remunerations Social charges
and pension
costs
Chart 80
Early retirements
Variable remunerations
Fixed remunerations, social
charges and pension costs
1) Net operating revenue in 2008 adjusted: excludes the impact of the losses realised on the sale of the investment in BCP and the gains realised on the sale of 49.9% of BFA.
2) Excluding early-retirement costs.
3) Operating costs, excluding early-retirement costs, as a percentage of net operating revenue.
4) Includes bonuses and motivation incentives for the commercial network, long service awards, cost of loans to Employees and others.
5) Includes current service cost (33.5 M.€ in 2009 and 31.0 M.€ in 2010), other Employer’s contributions (43.8 M.€ in 2009 and 48.1 M.€ in 2010), the amortisation of actuarial and
fund income variances recorded outside the corridor and the amortisation of changes to pension plan conditions.
89
Domestic activity
As concerns the main components of personnel costs,
excluding early retirements, the following is worth noting:
j
j
j
Third party supplies and services increased by 2.8% in
2010.
increase in fixed remuneration of 1.8% (+4.2 M.€),
which incorporates the effect of the 1%1 reduction in
the average headcount and the impact of the 1% salary
review in Portugal under the ACTV2;
Costs relating to the size of the operational structure –
costs with premises, communications and IT systems and
others – were up 1.7%, which corresponds to a real
growth rate of virtually nil.
the amount of variable remuneration to be awarded in
relation to 2010 is situated at 22.0 M.€3, a figure that
presupposes the granting of the identical amount to
Employees as that in 2009 and 2008. It should be
pointed out that as regards 2009 the accounting costs
recognised in that year (26.8 M.€) included 3.4 M.€ of
variable remuneration which relates to 2008.
the decrease of 8.4 M.€ in pension and employer’s
contribution costs, which reflects:
j
j
j
the lower cost related to the amortisation of negative
actuarial variances, from 10.7 M.€ in 2009 to
0.6 M.€ in 2010, given that in 2010 the losses
began to be fully accommodated in the accounting
corridor;
the decrease of 2.5 M.€ in the normal cost with
pensions, influenced by the lower average headcount;
increase of 4.3 M.€ in other employer’s contributions.
Advertising, communication,
public relations and studies
Costs related to businesses
Costs with premises,
communications, IT
and other
Costs related with
human resources
Other costs
Total
[= Σ 1 to 5]
Amounts in M.€
2009
2010
∆%
2
16.8
32.9
17.3
33.8
3.0%
2.6%
3
126.1
128.2
1.7%
4
5.5
0.1
181.3
7.0
0.1
186.3
27.7%
2.8%
1
5
6
Table 45
Depreciation and amortisation in domestic operations
registered a decrease of 13.9% (-5.5 M.€), explained
chiefly by the lower depreciation charge on IT equipment
(-1.8 M.€) and the lower amortisation of intangible
assets (-2.3 M.€) bearing in mind that because of the
associated shorter depreciation / amortisation periods, the
slowdown in capital expenditure reflects itself sooner in
the income statement.
Intangible assets
Tangible assets
Computer hardware
Interior premises
Fixed properties
2010
∆%
1
7.4
5.1
(31.0%)
2
12.1
11.1
5.3
3.7
32.1
39.5
10.2
10.9
4.4
3.3
28.9
34.0
(15.1%)
(1.2%)
(16.5%)
(10.2%)
(10.0%)
(13.9%)
3
4
[= Σ 2 to 5]
Total
Amounts in M.€
2009
[= 1 + 6]
5
6
7
Table 46
1) Excluding temporary labour which is recorded in the caption “Outside supplies and services”.
2) Banking Sector’s Vertical Collective Employment Agreement.
3) The accounting cost recognised in 2010 of 21.4 M.€, differs from that amount because, in addition to the cost of variable remuneration paid in cash, it includes the proportional accrual
/ deferral of the amount of prior years’ RVA incentives and, on the other, because a part of the RVA incentive for the current year is deferred to following years.
90
Domestic activity
Customer loan impairments
Loan impairments amounted to 99.9 M.€ in 2010,
which is equivalent to 0.35% of the average loan
portfolio. In addition, it was used the extraordinary charge
booked in 2009 of 33.2 M.€, which makes a total of
impairments utilised in the year (hereinafter referred to
as cost of risk) of 133.1 M.€, corresponding to 0.46% of
the loan portfolio.
IMPAIRMENTS AND PROVISIONS
Impairments in the year, after deducting recoveries of
loans previously written off, totalled 108.6 M.€ and
corresponded to:
j
j
loan impairments (net of recoveries) of 86.2 M.€;
impairments for other purposes of 22.4 M.€. This
figure includes impairments for foreclosure fixed
properties and equipment of 12.6 M.€1.
Total impairments net of
recoveries
Cost of risk and net credit loss
The loan risk indicator as a percentage of the loan
portfolio in 2010 increased by 0.10 p.p. relative to the
0.37% indicator in the previous year (excluding the
extraordinary charge).
As % of loan portfolio
As % of net operating revenue
%
This trend reflects:
%
j
51
18
7
2
5
06
18
9
60
133
62
13
0.40
14
33
33
082
09
50
9
07
10
0.21
0.21
0.11
0.12
06
07
0.30
08
Chart 81
Extraordinary charge (33.2 M.€)
Other purposes
Loans4
0.46
0.37
j
0.41
0.30
09 4
10 4
Chart 82
the higher impairments in the companies segment, with
the respective indicator rising to 0.68%. This indicator
compares with an average figure for the past 5 years of
0.26%;
relative stability of the indicator in the individuals and
small businesses segment (0.31% in 2010), keeping in
line with the average figure for the past 5 years of
0.32%, considering that the higher indicator in
mortgage loans was offset by decreases in other
segments. It should be mentioned that the mortgage
loan indicator rises from a virtual nil amount in 2009 to
0.20% in 2010, a figure which is close to the average
for the period 2005 to 2008 (0.16%).
Loan impairments
Net credit loss
Análise Financeira
D14
1) In the Risk Management chapter (page. 111), the criteria used by BPI in the calculation of impairments on foreclosure properties are described in detail.
2) 2008 adjusted for non-recurrent impacts.
3) Corresponds to an extraordinary impairment charge of 33.2 M.€.
4) In 2009 impairments for the year excluding the extraordinary charge made in that year (of 33.2 M.€) were considered, and in 2010 the utilisation of that extraordinary charge was added
to impairments for the year.
91
Domestic activity
Net credit loss, which corresponds to the amount of
impairment losses plus the extraordinary additional
charge and net of recoveries of loans and outstanding
interest previously written off, was 119.4 M.€ in 2010,
which corresponded to 0.41% of the loan portfolio’s
average balance. The average value of this indicator in
the past five years was 0.20%.
Net credit loss, by segment2
2009 and 2010
As % of loan portfolio
In 2010
M.€
84
12
The impact of the net credit loss on net profit for the
year (that is, excluding the use of the extraordinary
charge) was 86.2 M.€ (0.30% of the average loan
portfolio).
119
9
6
22
24
50
(2)
2009
0.65%
Corporate,
institutionals and
project finance
Mortgage
loans
0.19%
Small
businesses
0.23%
83
Other
loans
0.41%
Total
0.41%
2010
Chart 84
Chart 83
Other loans
Small businesses
Mortgage loans
Corporate, institutionals and
project finance
Loan impairments
Amounts in M.€
2009
Corporate banking,
institutional banking
and project finance
Individuals and small
businesses banking
Mortgage loans
other purposes
Loans to small
businesses
[= Σ 2 to 4]
Other
Subtotal2
[= 1 + 5 + 6]
Extraordinary charge
Utilisation of the
extraordinary charge
Total3
[= 7 + 8 + 9]
2010
Impairments
As % of
the loan
portfolio1
Impairments
net of
recoveries
1
53.5
0.42%
50.5
0.40%
2
(2.3)
(0.02%)
(2.5)
(0.02%)
3
13.7
1.06%
11.4
0.88%
4
5
6
7
8
36.6
48.0
0.6
102.1
33.2
1.46%
0.33%
0.11%
0.37%
0.12%
23.8
32.8
0.6
83.9
33.2
0.95%
0.23%
0.11%
0.30%
0.12%
135.3
0.49%
117.1
0.42%
9
10
As % of
the loan
portfolio1
Impairments
net of
recoveries
As % of
the loan
portfolio1
87.4
0.68%
83.3
0.65%
22.3
0.20%
21.8
0.19%
9.7
0.72%
As % of Impairments
the loan
portfolio1
Análise
12.7 Financeira
0.95%
D150.47%
11.4
46.4
(0.7)
133.1
0.31%
(0.08%)
0.46%
5.5
37.0
(0.9)
119.4
0.23%
0.24%
(0.11%)
0.41%
(33.2)
99.9
(0.12%)
0.35%
(33.2)
86.2
(0.12%)
0.30%
Table 47
1) Average performing loan portfolio.
2) Does not correspond to the impairment charges recorded in the income statement, given that, for purposes of calculating the above indicators, in 2009 the impairments for the year were
considered excluding the extraordinary charge made in December of that year (of 33.2 M.€), and in 2010 the utilisation of that extraordinary charge was added to impairments for the year.
3) Total recognised in each financial year’s income statement.
92
Domestic activity
RESULTS OF EQUITY-ACCOUNTED SUBSIDIARIES
The contribution of the equity-accounted subsidiaries to
the net profit from domestic operations rose from
12.7 M.€ in 2009 to 23.0 M.€ in 2010, to which
contributed in particular the higher contribution from
Allianz Portugal, which doubled the amount to 16.2 M.€.
The contribution of the subsidiaries in the insurance area
– Allianz Portugal and Cosec – was 18.4 M.€ and
represented some 80% of the total contribution of the
total of the equity-accounted subsidiaries.
Allianz Portugal
Cosec
1
2
[= 1 + 2]
Viacer
Finangest
Unicre1
Other
Total
3
4
5
6
[= Σ 3 to 7]
7
8
Amounts in M.€
2009
2010
∆%
7.9
0.7
8.7
2.8
1.1
0.12
12.7
16.2
2.2
18.4
1.8
1.7
1.2
(0.05)
23.0
103.7%
197.6%
111.7%
(36.4%)
51.4%
80.8%
Table 48
MINORITY INTERESTS
Minority interests in the net profit from domestic
operations essentially correspond to the non-cumulative
dividend on the preference shares issued by BPI Capital
Finance.
Minority interests in net profit fell from 8.8 M.€ in 2009
to 7.0 M.€ in 2010. This decrease mainly reflects the
behaviour of market rates given that the dividend on
preference shares is indexed to three-month Euribor.
At the end of 2010, the balance sheet value of the
preference shares was 236.5 M.€.
Equity-accounted results of
subsidiaries
M.€
M.€
24
17
3
23
5
10
14
5
4
1
06
13
13
4
14
Minority interests
07
08
17
18
9
18
7
9
09
10
06
07
08
09
Chart 85
10
Chart 86
Other
Insurance
CORPORATE INCOME TAX
The caption corporate income tax registered a negative
figure of 5.3 M.€ in 2010. Amongst other factors, this
amount was influenced by the increase relative to 2009
in the amount of the deferred tax assets resulting from
the alteration in the tax treatment of activity in Portugal
following the coming into force of Law 12-A / 2010, of
30 June.
As part of the measures adopted by the Stability and
Growth Programme II (Programa de Estabilidade e
Financeira law
Crescimento II – PECAnálise
II) the abovementioned
introduced a State surcharge of 2.5% levied on that part
of taxable profit which exceeds 2 M.€. Consequently, BPI
had to recalculate the Group’s deferred taxes recorded at
31 December 2009, having booked an income item of
10 M.€ in 2010 income statement, in accordance with
the provisions of IAS 12.
D16
1) In 2010, Unicre began to be treated as an associated company and hence equity accounted by virtue of BPI having increased its interest in Unicre’s capital from 17.6% to 21%
(previously, this investment was recorded in the portfolio of available-for-sale financial assets).
93
INTERNATIONAL ACTIVITY RESULTS
NET PROFIT
The contribution from international operations to
consolidated net profit grew 9.7% in 2010 to 98.3 M.€,
and corresponded to:
j
j
International activity net profit
M.€
M.€
Banco de Fomento Angola’s (BFA) contribution, relating
to the appropriation of 50.1% of its individual profit,
grew 9.7% (+8.2 M.€) to 92.7 M.€;
Banco Comercial e de Investimentos’s (BCI)
contribution, relating to the appropriation of 30% of its
individual profit (equity accounted1), grew 10.8%
(+0.5 M.€) to 5.6 M.€.
BFA individual net profit
appropriation
141
4
9
90
5
77
3
67
4
63
06
98
6
90
136
74
136
85
93
07
08
09
10
63
06
74
07
08
85
93
09
10
Chart 87
BCI
BFA
Chart 88
By minority interests
By BPI
International activity income statement
Amounts in M.€
2010
∆%
164.0
209.2
164.0
209.2
3
49.0
46.5
4
122.3
68.3
5
(0.2)
(1.1)
6
335.1
322.8
7
(43.5)
(49.7)
8
(40.7)
(45.8)
9
(13.3)
(11.2)
10
(97.5)
(106.7)
Análise
Financeira 216.1
11
237.6
12
3.0
2.1
13
(31.0)
(21.2)
14
(9.0)
(6.7)
15
200.6
190.3
16
(26.5)
0.5
17
5.5
6.1
18
(90.0)
(98.7)
19
89.6
98.3
20
142.8
137.4
27.5%
27.5%
(5.0%)
(44.2%)
(490.7%)
(3.7%)
14.1%
12.6%
(15.4%)
9.4%
(9.0%)
(28.3%)
(31.8%)
(25.0%)
(5.1%)
(102.0%)
10.8%
9.7%
9.7%
(3.8%)
2009
Net interest income
Personnel costs
Operating costs
Operating profit
Net profit
99
1
[= 1]
[= Σ 2 to 5]
[= Σ 7 to 9]
[= 6 + 10]
2
I17
[= Σ 11 to 14]
[= Σ 15 to 18]
[= 19 - 9 - 13 - 14]
Table 49
1) BCI’s contribution to consolidated net profit, besides the equity-accounted results, also includes the deferred tax relating to the BCI’s distributable earnings.
94
Operating profit generated by international operations was
down 9% (-21.5 M.€) as a result of the 3.7% retraction
in net operating revenue and the 9.4% rise in costs.
Despite the impact of the costs of the ongoing expansion
of the commercial network, these only represent 1/3 of
income. The operating profit return was situated at 4.9%
in 2010.
The decrease in impairments and in the caption
corporate income tax explain why the contribution from
international operations advanced 9.7%. The return on
average total assets was 4.4%, which represented a gain
of 0.3 p.p. relative to the year before.
Return on average Shareholders' equity (ROE)
2010
3
7.7%
2.2%
5.5%
7.3%
2.4%
4.9%
4
x 0.85
x 0.88
5
x 0.87
x 1.00
6
4.1%
4.4%
7
9.7
39.5%
8.6
37.6%
Operating return (Operating profit as % ATA)
1
Net operating revenue1 as % ATA
Operating costs as % ATA
2
[= 1 - 2]
Impairments impact [=1-(Impairments /
Operating profit)]
Income tax impact (=Net profit / profit
before taxes)
Return on average total
assets (ROA)2
[= 3 x 4 x 5]
ATA / average Shareholders' equity3 and
minority interests4
ROE
[= 6 x 7]
Amounts in M.€
2009
8
ATA = Average total assets.
Table 50
The return on average capital allocated to international
operations was situated at 37.6% in 2010.
CONSOLIDATION OF INTERNATIONAL ACTIVITY
International operations encompass the activity carried on
by the following companies:
Entity
Country
% of
Consolidation
capital method
held
BFA
Angola
50.1% Full consolid.
BCI
Mozambique 30.0% Eq. accounted
BPI Dealer Mozambique 92.7% Full consolid.
Contribution
to 2010
profit (M.€)
92.7
5.6
(0.005)
Table 51
The costs and income captions, as well as the captions
assets and liabilities, presented as being derived from
international operations, refer almost exclusively to Banco
de Fomento Angola, given that BCI's (Mozambique)
contribution is recognised in the BPI Group’s financial
statements using the equity method, while the accounts of
BFE Dealer Mozambique (also consolidated in full) are not
material.
Full consolidation of BFA
The inclusion of Banco de Fomento’s financial statements in
the consolidated financial statements is preceded by the
conversion of the income statement and balance sheet
balances into euro in accordance with the principles
embodied in IAS 215, based on the indicative exchange rates
disclosed by Banco Nacional de Angola (central bank).
The Angolan currency is the Kwanza; however, the Angolan
economy’s high utilisation of the dollar explains why the
major share of business with Banco de Fomento Angola’s
Customers is expressed in American dollars. At the end of
2010, more than 62% of Customer resources and 76% of
the loan portfolio were denominated in dollars.
A substantial portion of revenue and costs is expressed in
the American currency or is indexed thereto, as is the case
with personnel costs.
At 31 December 2010, the net exposure of BFA’s balance
sheet to foreign currencies was not material.
Euro exchange interest rates
At year end
2009 2010
1 EUR = AKZ
1 EUR = USD
∆%
128.2 122.7 (4.3%)
1.434 1.324 (7.6%)
Year average
2009 2010
∆%
111.2 121.4 9.3%
1.394 1.320 (5.3%)
Table 52
1) For analysis purposes, the equity-accounted results of the subsidiaries were added to net operating revenue.
2) Taking into consideration the net profit attributable to BPI Shareholders and to minority interests.
3) Excludes revaluation reserves.
4) Minority interests in BFA capital.
5) The income and costs generated each month are converted into euro at the exchange rate of the month in which they are recognised. In the case of assets and liabilities, the exchange
rate ruling at the end of the year is used. The gains or losses resulting from this conversion are recognised directly in Shareholders’ equity, in the caption “Revaluation reserves”.
95
CUSTOMER LOANS
BFA’s Customer loans portfolio contracted 2.2% in 2010,
with BFA continuing to apply stringent risk evaluation
criteria. This behaviour follows a period of strong
expansion of the loan portfolio which expanded in the
previous 5 years at an average rate of 42% per annum.
CUSTOMER RESOURCES
The gradual improvement of conditions in the Angolan
economy in 2010, spurred by the revival of the oil sector,
reflected itself in an acceleration of the expansion of
bank deposits in the economy as from the middle of the
year.
Loans to companies record a marginal decrease of 0.3%,
while loans to individuals fell by 9%, with a 7.5%
increase in mortgage loans and a 15.3% decrease in
other loans to individuals.
BFA’s resources portfolio resumed in the second half of
the year positive growth rates, reversing the descending
trend seen in the previous 12 months, which enabled the
Bank to finish the year with an annual growth rate
expressed in the currency of the consolidated accounts,
the Euro, of 19.8% (+689.2 M.€).
Customer loans portfolio
Loans to companies
Housing loans
Consumer loans
Other
Amounts in M.€
2009
2010
∆%
1
819.9
817.6
(0.3%)
2
118.7
227.6
81.5
427.8
31.9
(69.9)
6.0
1 215.7
218.1
127.6
195.3
66.5
389.4
50.1
(78.7)
10.7
1 189.2
193.1
7.5%
(14.2%)
(18.4%)
(9.0%)
57.1%
12.5%
77.2%
(2.2%)
(11.5%)
3
[= Σ 2 to 4]
4
5
6
Loans in arrears
7
Loan impairments
Interests and other
8
Total1
[=1 + Σ 5 to 8] 9
Guarantees
10
This growth outpaced that of the market, as a result of
which BFA’s market share posted a gain of 1.3 p.p. to
18.9% in December 2010.
Sight deposits
Term and savings deposits
Total2
[= 1 + 2]
Amounts in M.€
1
2
3
2009
2010
∆%
1 806.7
1 680.4
3 487.1
2 008.0
2 168.3
4 176.2
11.1%
29.0%
19.8%
Table 54
Table 53
Customer resources
Loans to Customers
2006 to 2010
2006 to 2010
Breakdown in 2010
M.€
1 235 1 216
1 189
Companies
68%
Individuals
32%
Mortgage
loans
3 856
961
624
68%
07
08
09
10
Chart 89
4 176
Sight
deposits
Term
deposits
48%
52%
3 487
11%
5%
06
Breakdown in 2010
M.€
Other
16%
1 440
1 958
Consumer
loans
06
Chart 90
07
08
09
10
Chart 91
Chart 92
1) Net loan portfolio. Loans expressed in American dollars represented at the end of 2010 roughly 76% of the balance of BFA’s loans. When expressed in American dollars, BFA’s loan
portfolio records a 9.7% decline in 2010.
2) Customer resources expressed in dollars represented at the end of 2010, roughly 62% of the total balance on BFA’s Customer resources. Measured in dollars, Customer resources
recorded in 2010 10.6% growth.
96
SECURITIES AND FINANCIAL INVESTMENTS
PORTFOLIO
The financial assets portfolio is composed of short-term
securities with maturities of up to one year, expressed in
kwanza and issued by Banco Nacional de Angola (Títulos
do Banco Central – TBC) and by the State (Bilhetes do
Tesouro) and Angolan treasury bonds (Obrigações do
Tesouro Angolano). This portfolio is used for investing
BFA’s surplus liquidity and for managing its balance sheet.
The 34% increase (+539.0 M.€) in the securities
portfolio is explained by the reinforcement of the
short-term securities portfolio, in particular, of securities
issued by Angola’s central bank (TBC), whereas the
treasury bonds portfolio remained relatively stable
throughout the year.
Securities and financial investments portfolio
Central Bank securities (TBC)1
Angolan Treasury Bills (BT)
Angolan Treasury Bonds
Other
1
2
3
4
[= Σ 1 to 4]
5
Financial investments2,3
Total
[= 5 + 6]
7
6
Amounts in M.€
2009
2010
∆%
110.2
292.7
1 173.0
0.5
1 576.4
18.1
1 594.4
728.5
206.4
1 179.7
0.6
2 115.3
22.6
2 137.9
561.0%
(29.5%)
0.6%
20.8%
34.2%
25.0%
34.1%
Angolan Treasury Bills and
TBC portfolio
th.M.€
1.3
0.6
Angolan Treasury Bonds
portfolio
th.M.€
1.5
1.1
0.90.9
0.8
0.3
2008
1.0
0.2
0.4
2009
0.3
0.6
0.40.4
2010
0.50.5
1.21.2 1.3
1.4
1.11.2
0.6
2008
2009
2010
Chart 93
Chart 94
Table 55
In international operations, the Bank has an extremely
liquid balance sheet founded on the procurement of
Customer resources and the application of that liquidity in
loans (roughly 28% of Customer resources), in securities
issued by the Angolan Central Bank and by the Angolan
Treasury with maturities up to one year (22% of Customer
resources) and in Angolan Treasury bonds (28% of
Customer resources).
At the end of 2010, Customer resources totalling
4 176 M.€ funded 86% of assets and, together with own
resources, funded practically all the Bank’s assets.
International activity balance sheet structure in 2010
Liquid assets
and deposits at
central banks
and CI
Loans to credit
institutions
4 881 M.€
19%
Análise Financeira
10%
Financial assets
43%
Loans to Customers
24%
Other
4 881 M.€
3%
Assets (net)
I22
86%
Customer
resources
3%
10%
Liabilities
and shareholders’
equity
Other
Shareholders'
equity and
minority
interests
Chart 95
1) As from the beginning of 2010, the short-term securities acquired by BFA (BT – Angolan Treasury Bills and TBC – securities issued by the Angolan central bank), which had hitherto
been recorded in the portfolio of Assets held for trading, began to be recorded in the portfolio of Available-for-sale financial assets. This fact explains the decrease in the portfolio of
financial assets held for trading in international operations.
2) Investments in associated companies and jointly controlled entities.
3) Corresponds to the 30% participating interest in BCI (in Mozambique) which is recognised using the equity method.
97
REVENUE1
Net operating revenue derived from international
operations (BFA’s activity) decreased by 3.7%
(-12.3 M.€), bearing in mind that the 27.5% increase
(+45.2 M.€) in net interest income was not sufficient to
offset the 44% fall (-54.1 M.€) in profits from financial
operations and the 5% drop (-2.5 M.€) in commissions.
M.€
263
143
56
87
Contributing to this trend were:
j
M.€
335
Net interest income
Net interest income increased by 27.5% in 2010,
resuming the upward trend which was only interrupted in
2009 when it fell by 5%.
j
Net interest income generation
in 20105
an increase in average lending rates and the securities2
portfolio, which offset the higher average cost of
interest-bearing liabilities. Hence, the average spread
between remunerated assets and liabilities increased by
1.5 p.p;
06
196
91
171
323
114
(23)
140
65
131
07
173
164
08
09
209
209
92
10
Loans Securities
Other
Chart 96
Net
interest
income
Chart 97
Commissions, profits from
financial operations and other
Net interest income
the positive volume effect resulting from the expansion of
the securities portfolio, mainly Central Bank securities,
which grew by 12% in terms of average balances.
Factors influencing the trend in net interest income from BFA
Amounts in M.€
2009
Average
balance
Interest-earning assets
Placements with credit institutions 1
2
Loans to Customers
3
Financial assets
Other
4
Interest-earning
assets3
[= Σ 1 to 4] 5
Interest-bearing liabilities
6
Customer deposits
Securities sold with repurchase
7
agreements4
8
Other interest-bearing liabilities
Other
9
Interest-bearing
liabilities3
[= Σ 6 to 9] 10
Net interest income
[= 5 - 10] 11
Average spread (between
interest-earning assets and
interest-bearing liabilities)
634.5
1 291.2
1 629.6
Change in net interest income
2010
Interest Average
Average (income / balance
costs)
rate
Interest
Average (income /
costs)
rate
0.8%
7.9%
9.8%
5.1
413.2 0.8%
101.6 1 269.9 10.6%
160.3 1 824.4 11.1%
1.7
3.5
135.2
202.6
2.7
3 555.3 7.6%
268.7 3 507.6 9.8%
344.1
2 732.6
1.9%
Volume effect and
residual effect
Volume
effect
Rate
effect
Residual
Total
effect Crédito Títulos
(1.8)
(0.1)
(1.9)
Análise
Financeira
Outros
Total
Margem
Financeira
(0.6)
2.5
(2.3)
21.6
0.2
35.9
20.7
(1.6)
33.6
42.4
1.1
15.7
1.8
17.5
56.8
75.4
(1.7)
19.2
I21
51.8 3 848.4
3.4%
132.3
21.1
17.2
38.3
42.1
80.5
43.8
8.1
1.0
3.1%
0.1
2.6
0.0
(43.8)
1.2
(0.9)
(43.8)
0.3
0.1
(5.8)
(43.7)
(5.5)
(1.0)
3 839.0 2.7%
104.7 3 931.3 3.4%
164.0
134.9
209.2
(21.4)
37.1
16.3
(14.5)
(5.1)
22.6
36.4
20.5
30.3
45.2
4.8%
6.4%
1 034.7 4.2%
71.8 11.2%
0.1
82.9
Table 56
1) Income and costs from international operations refer to BFA’s business in Angola (full consolidation method) given that the 30% shareholding in BCI in Mozambique is equity accounted.
2) The increase in the average remuneration rate on the securities portfolio primarily reflects the higher average yield on the TBC. The average interest rates on the placing of TBC, which
were situated below 15% up till September 2009, rose to close to 25% at the beginning of 2010, after which there has been a gradual decline. In the fourth quarter, average interest
rates on the placing of 91-day and 182-day issues were situated at 15.2% and 19%, respectively.
3) The volume, price and residual effects calculated for the total interest-earning assets and the total interest-bearing liabilities correspond to the sum of the values of the parts.
4) Recorded in the caption “Resources of Customers and other loans”.
5) Considering the average cost of interest-bearing liabilities.
98
Commissions
Commissions and other fees totalled 46.5 M.€, which
corresponds to a 5% decrease in 2010.
Commissions and other fees (net)
Banking services
Deposits and related services
Other
Total
[= Σ 1 to 4]
1
2
3
4
5
Amounts in M.€
2009
2010
∆%
24.1
15.7
6.1
3.0
49.0
23.9
15.7
4.6
2.2
46.5
(0.8%)
0.0%
(24.2%)
(26.6%)
(5.0%)
Table 57
Profits from financial operations refer primarily to
currency gains derived from commercial business with
Customers.
In 2010, profits from financial operations declined 44%
to 68.3 M.€, after having trebled in value in the previous
year from 40.8 M.€ in 2008 to 122.3 M.€ in 2009.
OPERATING OVERHEADS
Operating costs rose by 9.4% in 2010. The ongoing
enlargement of the distribution network in Angola, which
grew 10.9% in 2010, and the associated larger workforce
(with an 11.1% increase in the average number of
Employees) constitute the principal factors behind the
trend in costs.
The indicator “operating costs as a percentage of net
operating revenue” was situated at 33.1% in 2010.
Operating costs
Amounts in M.€
Operating costs, before
depreciation and amortisation
Personnel costs
1
2
[= 1 + 2]
3
Total
[= 3 + 4]
Efficiency ratio1
4
5
6
2009
2010
43.5
40.7
84.2
13.3
97.5
29.1%
49.7
45.8
95.5
11.2
106.7
33.1%
∆%
14.1%
12.6%
13.3%
(15.4%)
9.4%
Table 58
Net operating revenue and
operating costs
operating revenue
M.€
%
335
323
263
32.5
196
143
46
06
60
07
74
08
97
09
30.6
28.2
29.1
08
09
33.1
107
10
06
07
Chart 98
10
Chart 99
Operating costs
1) Operating costs as percentage of net operating revenue.
Análise Financeira
I23
99
LOAN IMPAIRMENTS AND PROVISIONS
Loan impairments in the year, after deducting
recoveries of loans previously written off, amounted to
19.1 M.€, which corresponded to 1.46% of the
average loan portfolio.
EQUITY-ACCOUNTED RESULTS OF SUBSIDIARIES
Equity-accounted results – which correspond to the
appropriation of net income attributable to the 30%
participating interest in BCI in Mozambique – grew by
10.8% to 6.1 M.€3.
At the end of 2010, BFA had a ratio of Customer loans
in arrears for more than 90 days of 3.6%, while loans
in arrears for more than 90 days were 186% covered
by total loan provisions.
BCI’s results reflect the buoyant growth in banking
business, underpinned by the vast expansion
programme which involves the enlargement of the
distribution network, the larger workforce, the
development of a segmented market approach and the
redesign of the range of banking products.
Loan impairments
Amounts in M.€
2009
Loan impairments
(-)Recoveries of loans
in arrears written off
Net credit
loss2
[= 1 - 2]
As % of
loan
portfolio1
2010
As % of
loan
portfolio1
1
31.0
2.34%
21.2
1.62%
2
3.0
0.22%
2.1
0.16%
3
28.1
2.12%
19.1
1.46%
Table 59
Total impairments net of
recoveries
Equity-accounted results of
subsidiaries
As % of net operating revenue
2006 to 2010
%
M.€
19
1
19
23
3
16
21
9
4
5
06
07
08
4
12
12
9
09
10
4.6
3
3.6
4.5
5.5
6.1
Total assets grew 30%, deposits and loans registered
growth rates of 29% and 22% respectively, and the
number of Customers increased by 84%.
MINORITY INTERESTS
Minorities interests in the net profit relating to
international operations correspond to the 49.9%
equity interest in BFA held by Unitel.
BPI recognised minority interests of 90.0 M.€ and
98.7 M.€ in BFA’s 2009 and 2010 net profit,
respectively.
CORPORATE INCOME TAX
The caption corporate income tax presents a negative
figure of 0.5 M.€ in 2010. This is mainly attributable
to:
j
j
06
07
Chart 100
08
09
income derived from Angolan public debt securities
(treasury bonds and bills) is exempt from tax;
a correction (decrease) to the estimated tax to be
borne by BFA with respect to 2009 of 7.4 M.€.
10
Chart 101
Other purposes
Loans
1) Average performing loan portfolio.
2) Loan provisions and impairments deducted of recoveries of loans and interests in arrears previously written off.
3) BCI’s contribution to BPI consolidated net profit, besides the equity-accounted results also includes the deferred tax relating to BCI’s distributable results. In 2010, BCI’s contribution was
5.6 M.€, up 10.8% on the previous year’s contribution.
Análise Financeira
100
I24
Risk management
At the BPI Group, risk management is founded on the
ongoing identification and analysis of the exposure to the
different risks (counterparty risk, country risk, market
risks, liquidity risks, operational and other risks) and on
the execution of strategies aimed at maximising the
results vis-à-vis risks, within predefined and duly
supervised limits. Risk management is complemented by
the analysis à posteriori of performance indicators.
In the specific sphere of Individuals’ credit risk, it is the
task of the Individuals’ Credit Risk Division to perform
the functions of independently analysing proponents,
sureties and operations, backed by the various risk
indicators and scoring models produced by the Risk
Analysis and Control Division. The management of
recovery processes also forms part of the functions of the
Individuals’ Credit Risk Division.
ORGANISATION
The BPI Group’s global risk management is entrusted to
the Executive Committee. At the Executive Committee
level, a Director without direct responsibility for the
commercial divisions is placed in charge of the risk
divisions.
In specific segments such as those of financial
institutions or derivatives, there are credit risk analysis
areas which carry out similar functions to those described
for companies or individuals.
At senior level, there are also two specialised executive
committees: the Global Risks Executive Committee
(global Market, Liquidity, Credit, Country, Operational
risks) and the Credit Risks Executive Committee, which
concentrates its activity on the analysis of large-scale
operations.
The Bank has a centralised and independent structure for
dealing with the analysis and control of risk in accordance
with the best organisational practices in this domain and
with the requirements of the Basel Accord. The Risk
Analysis and Control Division is responsible for monitoring
global risks and for the management of the risk datamart
for the whole Group (to where all the important
information about the Bank’s systems converge).
In the specific domain of corporates, small businesses,
institutional Clients and project finance credit risks, the
Credit Risk Division undertakes an independent appraisal
of the risk of the various proponents or sureties and of
the characteristics of the operations, irrespective of the
commercial structures. The granting of ratings falls within
this Division’s terms of references, and – in high profile
cases – those of the Rating Committee. Quantitative
models produced by the Risk Analysis and Control
Division are available to support the attribution of ratings.
The Corporate Loans Recovery Division undertakes the
management of recovery proceedings in the event of
default.
The management of operational risk at the BPI Group is
entrusted to two specific bodies: the Operational Risk
Committee and an Operational Risk Area, as well as to
members of each one of the Group’s bodies charged with
the identification and management of operational risks in
their areas of activity.
The BPI Group’s Compliance Division has as its mission
contributing to the prevention and mitigation of the
“Compliance Risks”, which translate into the risk of legal
or regulatory sanctions, financial or reputational loss as a
consequence of the failure to comply with the law,
regulations, code of conduct and good banking practices,
fostering the observance by the BPI Group and its
Employees of all the applicable rules by way of an
independent involvement, in conjunction with all the
Bank’s organic units. It is worth pointing out that the
ambit of the Compliance Division’s terms of reference
covers all the areas, processes and activities which
constitute the BPI Group, including the affiliates,
branches, subsidiaries and overseas representative
offices.
Report | Risk management
101
Matrix of responsibilities for risk management and control
Identification and analysis of exposure
Credit /
counterparty risk
DACR: rating and scoring models
(probabilities of default), and loss
given default for all loan segments
DACR and DF: external rating
identification for debt securities and
for credit to financial institutions
DRC: Rating for Corporates, Small
Businesses, Project Finance and
Institutionals
Strategy
Limits and control
Recovery
DRCE:
CA, CECA, CERC, Credit
Board, DRC, DRCP, DACR, Companies
DF: limits
DRCP:
CECA, CERC:
approval of
CECA, CACI, CERC, CERG, Individuals and
Small
substantial operations Credit Board, DACR, DO,
Businesses
Internal and external
Credit Board, DRC,
1
Auditors , Supervisory
DBI, DRCP, DF:
Board, Bank of Portugal:
approval of
control
operations
CECA, CERG: overall
strategy
Performance Evaluation
CECA
CERG, CERC, DCPE,
DACR
All other Divisions
Rating Committee: Rating for large
Corporates and Institutionals
DRCP: Expert System for loans to
Individuals
DACR: exposure to derivatives
DACR: analysis of overall exposure to
credit risk
Country risk
DF: analysis of individual country risk
with recourse to external ratings and
analyses
DACR: analysis of overall exposure
Market risk
Liquidity risk
CECA, CERG: overall
strategy
DF, DA, DIAPE:
operations
CECA, CACI, CERG, DACR,
DC, Internal and external
Auditors1, Supervisory Board,
Bank of Portugal: control
DACR: analysis of risk by books /
instruments and global risks – interest
rates, currencies, shares,
commodities, other.
CECA, CERG: overall
strategy
CECA, CERG, DACR, DF,
DA: limits
DF, DA, DIAPE:
operations
DF, DA, DIAPE: individual risk analysis
of liquidity, by instrument
CECA, CERG: overall
strategy
CECA: overall
organisation
DJ, DAI, DO,
CECA, CERG, DORG,
DACR: regulation and limits Commercial
CECA, CACI, DORG, DACR, Divisions
DACR: analysis of overall liquidity risk
Operating risks
DORG and all the Divisions:
identification of critical points
Operating Risk
Committee
DORG: regulations
Legal and
compliance risks
DJ, DC
CECA, DORG
Auditors1, Supervisory
control
CECA, CACI, DJ, DC,
CA – Conselho de Administração (Board of Directors); CACI – Comissão de Auditoria e de Controlo Interno (Audit and Internal Control Committee); CECA – Comissão Executiva do Conselho
de Administração (Board of Directors Executive Committee); CERC – Comissão Executiva de Riscos de Crédito (Credit Risks Executive Committee); CERG – Comissão Executiva de Riscos
Globais (Global Risks Executive Committee); DA – Departamento de Acções (Equity Department); DACR – Direcção de Análise e Controlo de Riscos (Risk Analysis and Control Division);
DAI – Direcção de Auditoria e Inspecção (Audit and Inspection Division); DC – Direcção de Compliance (Compliance Division); DF – Direcção Financeira (Financial Division); DIAPE –
Direcção de Investimentos Alternativos e Produtos Estruturados (Alternative Investments and Structured Products Division); DJ – Direcção Jurídica (Legal Division); DO – Direcção de
Operações (Operations Division); DORG – Direcção da Organização (Organisation Division); DP – Direcção de Planeamento (Planning Division); DRC – Direcção de Riscos de Crédito (Credit
Risk Division); DRCE – Direcção de Recuperação de Crédito a Empresas (Corporate Credit Recovery Division); DRCP – Direcção de Riscos de Crédito a Particulares (Individuals Credit Risk
Division).
1) As part of the execution of the audit and statutory audit of the BPI Group’s accounts, the external auditors also contribute to the process of controlling the various risks to which the
Group is exposed.
102
CREDIT RISK
Management process
Credit risk associated with the possibility of actual
default by a counterparty (or with the change in the
economic value of a given instrument or portfolio
stemming from a deterioration in the risk quality of a
counterparty) constitutes the primary risk factor inherent
in the BPI Group’s business spectrum.
Specific approval for loans to companies and small
businesses or to institutional Customers follows the
principles and procedures laid down in the credit
regulations, and in essence result from the following:
j
In order to mitigate credit risk on companies’ derivative
operations, in addition to the drafting of contracts with
clauses which permit the set-off of obligations in the
event of default, BPI has as a rule signed collateralisation
accords with its counterparties.
The specific approval of loans to individuals follows the
principles and procedures laid down in the credit
regulations and in essence result from the following:
j
Rejection filters: the existence of incidents and
defaults, liens or debts to the Tax Administration and to
the Social Security Department; others.
j
j
j
j
Exposure limits to credit risk: evaluation of the present
capability to service debt and the establishment of
corresponding maximum exposure limits, also paying
attention to the Bank’s involvement capacity.
Acceptance / rejection boundary according to the
probability of the counterparty defaulting: a boundary is
set in accordance with the internal rating (potential
Customers whose classification places them in a risk
class which is deemed to be excessive are turned down,
that is, whose probability of defaulting is high) or in
accordance with an equivalent analysis by an expert
system.
j
Mitigation of risk attaching to operations: regard is had
to any personal or tangible guarantees which contribute
to reducing risks.
In the corporate segment, the object is to become
involved with long-term operations which are associated
with tangible guarantees (financial and non-financial),
with collateral cover levels (net of haircuts and temporal
adjustments in the case of financial assets) of 100%.
In the small businesses segment, the medium / long-term
operations must as a rule be fully secured by tangible
guarantees.
j
Rejection filters: the existence of incidents and
defaults, liens or debts to the Tax Administration and to
the Social Security Department, minimum and
maximum age restrictions and others.
Exposure limits: evaluation of the present capability to
service debt through the calculation of the
housing-to-income ratio or the estimated value of the
savings of the loan applicants, guarantors or sureties.
As a general rule, applications where the
housing-to-income ratio is considered to be excessive or
where savings become negative due to the costs of the
new loan, are turned down.
Acceptance / rejection boundary, according to the
probability of the counterparty defaulting: there are
reactive scorings for each loan segment (housing,
personal loans, credit cards and motor car finance)
designed to evaluate the probability of default by the
counterparty, guarantors or sureties. In complex cases,
the identification of the risk class (probability of
default) requires the involvement of the Individuals
Credit Risk Division. Potential Customers whose
classification places them at risk which is deemed to be
excessive are turned down, that is, whose probability of
defaulting is high.
Mitigation of risk attaching to operations: in the
acceptance or rejection of Customers and operations,
regard is had to any personal or tangible guarantees
which contribute to reducing risks.
In the home loans segment, the relationship between
loan and guarantee bears a maximum figure of 85%.
103
In motor vehicle finance, the amount financed can not
exceed the vehicle’s selling price. Moreover, the
relationship between the net borrowing (equal to the
selling price of the vehicle minus the down payment) and
the commercial value of the vehicle must be less than or
equal to 130%. The vehicle’s commercial value
corresponds, in the case of new vehicles, to the average
market selling price to the public without extras and, in
the case of used vehicles, to an independent valuation by
recourse to the Eurotax selling price catalogue.
In order to access BPI personal loans, an insurance
policy must be taken out which protects the loan against
the eventuality of unemployment and hospitalisation.
On the commercial front, the overall evaluation of
operations or Customers – Companies, Individuals and
other – must take into consideration the objectives
relating to the profitable employment of shareholders’
equity relative to the risks assumed.
For each one of the different divisions involved, the
relevant hierarchical levels for the approval of credit
according to their risk or commercial characteristics have
been defined with the object of decentralising decisions
and, therefore, ensuring processing speed and efficacy.
Subsequently, the Bank maintains constant vigilance over
the evolution of its exposure to the different
counterparties, the evolution of its portfolio
(diversification by geographical area, sector, segment,
counterparty, currency and maturity), and the profitability
results and indices achieved vis-à-vis the risks assumed.
Moreover, problematic credit situations, provisioning
cover indices, write-offs and recoveries are analysed every
month. The alert signalling non-performing loans is
available on-line via the internal network for the
information of the Bank’s managers.
An estimate is also made of the provisions for impairment
losses, involving both a statistical calculation for
performing loans with incidents or loans in default, and
an evaluation of the same impairment by expert systems
for all the larger loans. The impairment losses and
provisions are the object of a monthly assessment by the
Board of Directors’ Executive Committee (Executive
Committee for Credit Risk), and are reviewed every six
months by the external auditors and reviewed regularly by
the Audit and Internal Control Committee.
Functioning as agents controlling this entire management
process, in addition to the Board of Directors, the Audit
and Internal Control Committee, the Supervisory Board
and the Executive Committee for Credit Risk, are the Risk
Analysis and Control Division, the internal and external
auditors1 and the Bank of Portugal.
Evaluation of exposure to credit risk
Companies, institutional Customers, specialised finance
and small businesses
BPI uses an internal rating system for companies
(excluding small businesses) with ten classes (E1 to E10)
plus two classes in the case of incidents (ED1 and ED2)
and one in the case of default (ED3, which corresponds
to a 100% “probability of default”). Default probabilities
are associated to each classification for the evaluation of
loans, guarantees and securities of medium and
large-sized companies.
Internal rating of companies
Breakdown of exposure by risk classes in 2010
Value2
(M.€)
% of
portfolio
amount
One-year default
probability3
470.7
326.9
109.6
077.4
812.2
118.4
018.0
890.8
343.3
152.8
367.3
102.3
63.9
395.3
10 249.0
4.6%
13.0%
10.8%
10.5%
17.7%
10.9%
9.9%
8.7%
3.4%
1.5%
3.6%
1.0%
0.6%
3.9%
100.0%
0.03%
0.15%
0.19%
0.43%
0.54%
0.81%
1.46%
2.64%
4.34%
8.08%
8.08%
35.39%
49.34%
100.00%
1.99%
Risk classes
E1
E2
E3
E4
E5
E6
E7
E8
E9
E10
Without rating
ED1
ED2
ED3 (default)
Total
[= Σ 1 to 14]
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
1
1
1
1
1
Table 60
Group is exposed.
2) The portfolio includes bonds, bank guarantees and commercial paper of the Companies segment and excludes factoring without recourse.
3) In the calculation of default probabilities, all the operations in default of a single Customer were regarded as being a single negative case (and not various cases). The calculation of the
portfolio’s average default probabilities naturally excludes the ED3 class.
104
The average default probability of the companies portfolio
from a one-year perspective weighted by the amount of
liabilities stood at 1.99% at 31 December 2010. The
loss on each operation in default in this segment is on
average 18.21%, a figure that is higher than that of the
past, indicating greater difficulties in recovering
operations in default owing to the economic crisis.
The expected loss is on average 0.36% for the entire
portfolio.
In the project finance and structured finance areas, there
is a classification system based on five classes. The
portfolio is composed in the majority of cases of projects
with “good” or “strong” ratings.
Internal rating of project finance
Breakdown of exposure by risk classes in 2010
Value (M.€)
Risk classes
Strong
Good
Satisfactory
Weak
Default
Total
1
2
3
4
[= Σ 1 to 5]
5
6
489.1
2 317.3
245.5
99.4
7.7
3 159.0
% of portfolio
amount
15.5%
73.4%
7.8%
3.1%
0.2%
100.0%
Table 61
The segment of small businesses is still at an initial
stage of a rating evaluation process. Notwithstanding this
fact, it is possible to estimate an average default
probability over a one-year period in the case of this
portfolio, and a loss in the event of default of 3.2% and
54.5%, respectively (the definition of default used in the
calculations of impairment losses is that of loans in
arrears for 180 days or more).
These systems for evaluating counterparty risk are
complemented by other methodologies, in particular, the
calculation of the capital at risk, in accordance with the
assessment enshrined in regulations governing solvency
ratios or a variation thereof.
Indices relating to exposure concentration are also
analysed. In global terms, the portfolio reveals an average
degree of concentration by counterparty or group
(including conservative compliance with the regulations
governing “large exposures”) and a low degree of
concentration by sectors. According to the Bank of
Portugal’s calculation methodology, the individual
concentration index stands at 40.4% and the sector
concentration index at 11.6%. The concentration at
geographic level is inherent to the location of the Group’s
operations.
Financial institutions
In financing granted to other financial institutions, BPI
bases its risk analysis on available external ratings.
Financing relations are restricted to investment grade
institutions.
This system for evaluating counterparty risk is
complemented by the calculation of the capital at risk, in
accordance with the assessment enshrined in regulations
governing solvency ratios or a variation thereof.
Individuals
In the individuals domain, there is a reactive scoring
model for each segment, designed to represent default
probabilities (distribution of the results of each scoring by
ten classes, plus two in the case of incidents and one
class in the case of default).
Over the life of the operations, the default probabilities
are assessed by behavioural scorings. It should be noted
that in the home loan segment, notwithstanding the
difficult economic environment, there is a decline in the
portfolio’s average probability of default (1.75% in 2009
and 1.59% in 2010). This favourable trend is due not
only to tighter decision criteria, but also to the natural
decline in default probabilities on older loans (the
portfolio’s average age is 5 years while the peak of
default probabilities in their lifespan is situated between
3 and 4 years).
Default probabilities of loans to individuals in 2010
Classes of risk
Mortgage loans
Personal loans
Motor car finance
Credit cards
Probability of
default within a
year1,2
Loss given
default
Expected
loss
1.59%
1.41%
1.74%
1.14%
27.39%
27.16%
11.76%
40.64%
0.44%
0.38%
0.20%
0.46%
Table 62
1) Probability of default weighted by the liabilities in portfolio or potential liabilities (credit cards).
2) The calculation of the average default probability includes situations of loans in arrears for less than 90 days.
105
The estimated loss on each operation in default in these
segments is also revised periodically over the lifespan of
the operations. The lowest expected loss in the event of
default in the motor-car and housing finance is directly
related to the existence of tangible guarantees,
facilitating the recoupment of loans. The existence of
promissory notes and, at times, financial collateral, also
facilitates the recovery of amounts (relatively low)
advanced in the form of personal loans.
Loan-to-value ratio in housing loans
At 31 December 2010
2010
Bonds and fixed-interest securities’
investment portfolio1
Rating
Aaa
Aa
A
Baa
Other / without rating (NR)
Commercial paper with
guarantees from credit
institutions
Commercial paper
without guarantees
Total
[= Σ 1 to 7]
2009
1
2
3
4
5
6
7
8
Amounts in M.€
%
2010
%
182.4
1.8%
5 005.5 49.9%
666.4
6.6%
1 995.6 19.9%
651.6
6.5%
67.7
993.3
3 414.9
1 180.5
1 204.3
0.8%
12.1%
41.7%
14.4%
14.7%
5.3
0.1%
10.4
0.1%
1 520.9 15.2% 1 327.1 16.2%
10 032.7 100.0% 8 193.1 100.0%
Table 64
New loans contracted1
Housing loan portfolio
Loans in default (more than 90 days))
59.7%
49.0%
62.4%
Table 63
This system for evaluating counterparty risk is
complemented by the calculation of the capital at risk, in
accordance with the assessment enshrined in regulations
governing solvency ratios or a variation thereof.
Securities portfolio
In what regards the evaluation of risks stemming from its
securities portfolio, BPI resorts primarily to information
obtained from external rating reports. Notwithstanding
recent downgrades and the fact that bond valuations at
market prices implicitly contain, in this environment,
high risk premiums, the investment portfolio is
predominantly composed of the securities of low
credit-risk issuers.
Bonds investment portfolio in 2010
Equities and participating interests portfolio
As regards the structural position of the equities and
participating interests portfolio, the corresponding market
risk is not easily measured by traditional methodologies
such as VaR, given the investment’s time horizon, the
importance of the positions or the lack of quoted prices
in the equity market. According to the Basel Accord, this
risk is treated as credit risk (and eventually included in
the treatment of large exposures).
The realisation of a stress test on this portfolio (30% fall
in quoted prices) reveals a capital at risk of 67.7 M.€.
Derivative operations
Credit risk analysis relating to operations in derivates is
founded on the replacement value (exposure equivalent
to credit), and on default probabilities and loss values in
the case of default attaching to the counterparty and to
the operations, respectively.
Breakdown of exposure by classes of risk (external rating)
Aaa, Aa, A
55%
Commercial paper
16%
15%
Others,
not rated
14%
Baa
Chart 102
1) Loans granted in December 2010.
106
The set-off and collateralisation contracts naturally have
an influence on the calculation of this type of exposure.
These agreements, which entail the receipt (and
payment) of collateral amounts for hedging risks between
counterparties, permitted a reduction in the substitution
value of the derivatives portfolio from 488 M.€ (gross
amount) to 176 M.€ (net amount, after set off and
collateralisation) at the end of 2010.
Current credit risk – substitution value
of derivatives by type of counterparty1
Over-the-counter market
Financial institutions
Local and administrative
public sector
Companies
Unit trust funds and
pension funds
Individuals
Total
[= Σ 1 to 5]
Amounts in M.€
2009
%
2010
%
1
44.9
24.0%
25.1
14.3%
2
0.2
134.6
0.1%
72.0%
0.3
145.7
0.2%
82.9%
3
4
5
6
4.4
2.4%
2.9
1.5%
187.0 100.0%
1.0
0.6%
3.7
2.1%
175.9 100.0%
Table 65
This form of evaluating exposure to counterparty risk is
complemented by the traditional regulatory approach
(own funds requirements by capital at risk).
Default levels, provisioning and recovery
2010 saw a stabilisation of the credit-quality indicators
at BPI at relatively good levels, although below the
historical average for the Bank as a consequence of the
deterioration in these indicators in the previous two years.
Customer loans in arrears for more than 90 days increased
from 559.9 M.€ at the end of 2009 to 577.0 M.€ in
2010, which corresponded to a rise in the ratio of loans in
arrears from 1.8% in 2009 to 1.9% in 2010.
arrears. In mortgage loans, BPI normally initiates the
recovery process 5 months after the date of the 1st
default, at which moment the loan becomes a litigation
situation, and all the outstanding capital is in this
manner recognised as loans in arrears.
Total exposure in operations with instalments or interests
overdue, that is, loans in arrears for more than 90 days
added with falling due loans associated with loans in
default, represented 2.4% of the total gross loan portfolio
at the end of 2010, which compares with 2.3% in the
previous year.
At the end of 2010, the consolidated balance sheet
recognised estimated losses relating to the Customer loan
portfolio, that is, Customer loan impairments2
(accumulated) of 582.2 M.€, which corresponded to
1.9% of the gross loan portfolio. Loan impairments in
domestic operations totalled 498.1 M.€ and
corresponded to 1.7% of the gross loan portfolio. In
international operations, loan impairments totalled
84.1 M.€, which corresponded to 6.6% of the gross loan
portfolio and 185.5% of loans in arrears for more than
90 days.
Ratio of loans in arrears
%
In the domestic activity which represents about 96% of
the consolidated loan portfolio, the ratio of loans in
arrears (over 90 days) remained unchanged at 1.8%,
while in international activity which accounts for the
remaining 4% of the loan portfolio, the indicator stood at
3.6% at the end of 2010 (2.0% in 2009).
Loans in arrears for more than 90 days corresponds to
instalments of principal and interests overdue for more
than 90 days, with the exception of loans handed over for
legal recovery, in which case all the outstanding capital
(instalments due and not yet due) is classified as loans in
1.6
1.1
1.1
06
07
1.1
1.0
1.9
1.8
2.0
1.9
1.2
08
Loans in arrears for more than
30 days
Loans in arrears for more than
90 days
09
10
Chart 103
1) The total substitution value is the sum of the substitution values of the counterparties, when positive. It does not include options inserted into bonds issued or bought. The substitution
value incorporates the effect of the risk reduction that results from the set-off of credit and debit balances between the same counterparties and agreements with counterparties, which
serve as guarantee for compliance with obligations.
2) Loan impairments correspond to the estimated total loss, in relation to both performing loans and non-performing loans, taking into consideration the total amount of the exposure, the
probability of entry into default, the amount recoverable and the time period to recovery.
-5 alt
Gestão de riscos
Report | Risk management 107
2
Loans to Customers in arrears, provisions and impairments
Amounts in M.€
2006
2007
2008
2009
2010
Domestic International Consolidated
activity
activity
Customer loan portfolio (gross)
Loans in arrears
Loans in arrears for more than 90 days1
Loans in arrears for more than 30 days1
Doubtful loans
Loan impairments
Ratio of loans in arrears and
doubtful loans
Loans in arrears for more than 90 days,
[= 2 / 1]
as % of total loans
Loans in arrears for more than 90 days
and doubtful loans2
% of total loans3
[= (2 + 4) / 1]
Loans in arrears for more than 90 days
2
and doubtful loans , net of specific loan
provisions, as % of total net loans3
Loans in arrears for more than 30 days,
as % of total loans
[= 3 / 1]
Loan impairments
(accumulated in the balance sheet)
Loan impairments,
[= 5 / 1]
as % of total loans
Loan impairments, as % of loans
in arrears for more than 90 days
[= 5 / 2]
Write-offs
Recovery of loans and interests
in arrears written-off
1
24 941.4
27 603.2
29 723.8
30 485.9
29 341.1
1 267.9
30 608.9
2
276.9
296.5
6.7
385.7
357.1
460.8
6.6
464.5
559.9
591.4
8.3
552.7
531.6
570.2
10.0
498.1
45.3
50.1
5
263.5
277.6
3.3
341.0
84.1
577.0
620.3
10.0
582.2
6
1.1%
1.0%
1.2%
1.8%
1.8%
3.6%
1.9%
7
1.1%
1.0%
1.2%
1.9%
1.8%
3.6%
1.9%
8
0.4%
0.2%
0.3%
0.4%
0.5%
(2.8%)
0.4%
9
1.1%
1.1%
1.6%
1.9%
1.9%
4.0%
2.0%
10
1.4%
1.4%
1.6%
1.8%
1.7%
6.6%
1.9%
11
12
129.4%
30.5
139.3%
37.4
130.1%
41.0
98.7%
53.1
93.7%
73.1
185.5%
20.6
100.9%
93.6
13
21.0
20.9
25.9
21.2
13.8
2.1
3
4
15.9
Table 66
New entries of loans in default (for more than 90 days) in
2010, calculated as the change in the balance of loans
in arrears between the year-beginning and the year-end
added with write-offs made in the year, amounted to
110.7 M.€, corresponding to 0.37% of the average loan
portfolio. That figure represents a reduction compared to
the 255.9 M.€4 variation (adjusted for write-offs) of in
loans in arrears for more than 90 days in the previous
year (representing 0.88% of loan portfolio).
1)
2)
3)
4)
New entries in the year of loans in default (for more than
90 days), after deducting recoveries of loans previously
written-off, amounted to 94.8 M.€, corresponding to
0.32% of the average loan portfolio.
When total loans in arrears are taken into consideration
(that is, in default for more than 30 days), the respective
change in 2010, adjusted for write-offs and after
deducting recoveries in the year of overdue loans and
interest, was 106.7 M.€, corresponding to 0.35% of the
performing loan portfolio.
Includes interests in arrears.
Loans in arrears for more than 90 days and doubtful loans treated as being in arrears for purposes of provisioning.
Calculated according to the Bank of Portugal Instruction 16 / 2004.
Of that figure, 71.3 M.€ refers to a single default situation which in December 2008 was classified as a loan in arrear for more than 30 days.
108
Net credit loss2
Loan impairment charges in 2010 (121.1 M.€) added
with the utilisation of the extraordinary impairment
charge booked in 2009, of 33.2 M.€, were 154.3 M.€,
which corresponded to 0.51% of the performing loan
portfolio.
As % of the average performing loan portfolio
%
0.8
0.6
Net credit loss in the year, measured by the loan
impairment losses and after deducting recoveries of
overdue loans written off, was 138.4 M.€, which
corresponded to 0.46% of the performing loan portfolio.
0.4
0.28
The impact1 of loan impairments, net of recoveries of
loans previously written off, in the income statement for
the year was 105.2 M.€ in 2010, corresponding to
0.35% of the average loan portfolio.
0.2
0.10
0.0
97
98
0.24
99
0.40
0.13
00
01
0.32
0.25
02
0.33
033 04
0.24
0.19
0.32
064 074 08
05
09
10
Chart 104
Credit loss and cost of risk
Amounts in M.€
Domestic activity
2009
Performing loan portfolio (average balance)
Change in loans in arrears
Increase in loans in arrears (for more than 90 days)
adjusted by write-offs
as percentage of the performing loan portfolio
[= 2 / 1]
(average balance)
– Recovery of loans and interests in arrears written-off
= Increase in loans in arrears (for more than 90 days),
adjusted by write-offs and deducted of recoveries of
[= 2 - 4]
loans and interests written-off
(average balance)
[= 5 / 1]
Net credit loss
Loan impairments, excluding in 2009 the extraordinary charge
booked in that year (33.2 M.€) and 2010 added of that
extraordinary charge5
[= 7 / 1]
(average balance)
– Recovery of loans and interests in arrears written-off
[= 7 - 9]
= Net credit loss5
(average balance)
[= 10 / 1]
+ Extraordinary charge in 2009 and respective
utilisation in 2010
= Loan impairments, net of recoveries (in the profit and
[= 10 + 12]
loss account)
as percentage of the performing
loan portfolio (average balance)
[= 13 / 1]
0.23
0.465
0.385
1
2010
2009
2010
27 803.7 28 792.0
1 324.9
1 308.1
BPI Group (consolidated)
2009
2010
29 128.7 30 100.2
2
229.5
70.3
26.4
40.4
255.9
110.7
3
4
0.83%
18.2
0.24%
13.8
1.99%
3.0
3.09%
2.1
0.88%
21.2
0.37%
15.9
5
211.3
56.5
23.4
38.3
234.7
94.8
6
0.76%
0.20%
1.77%
2.93%
0.81%
0.32%
7
102.1
133.1
31.0
21.2
133.2
154.3
8
10
0.37%
18.2
83.9
0.46%
13.8
119.4
2.34%
3.0
28.1
1.62%
2.1
19.1
0.46%
21.2
112.0
0.51%
15.9
138.4
11
0.30%
0.41%
2.12%
1.46%
0.38%
0.46%
12
33.2
(33.2)
33.2
(33.2)
13
117.1
86.2
28.1
19.1
145.2
105.2
14
0.42%
0.30%
2.12%
1.46%
0.50%
Gestão de riscos
3
9
0.35%
Table 67
1) Before taxes.
2) Loan provisions (PCSB until 2004) and loan impairments (IAS since 2005) recognised in the year and after deducting recoveries of loans and interests in arrears previously written off.
3) In 2003, 27.2 M.€ of generic provisions were reversed. It corresponded to the excess of provisions resulting from the application of the new Bank of Portugal provisioning rules. This
amount represented 0.16% of the average loan portfolio.
4) 2006 figure includes impairment charges of 6.2 M.€ booked at the beginning of 2007 and relating to the revaluation of properties at 31 December 2006 (that amount was excluded from
the 2007 figure).
5) In 2009, impairments charges for the year excluded the extraordinary charge booked in December of that year (33.2 M.€), while in 2010 that extraordinary charge was added to
impairments for the year.
109
In average terms, total arrear loans and associated falling
due instalments were 84.5% covered by real guarantees
(455.6 M.€) and individual impairment allowances set
aside for these loans (345.9 M.€).
At the close of 2010, total loans in arrears stood at
620.3 M.€, while the portion not yet due on these
operations totalled 328.3 M.€.
Loans in arrears and falling due loans
At 31 December 2010
Amounts in M.€
Full exposure to credit operations with
capital or interests in arrears
Loans with collateral
Loans without collateral
In arrears
Falling due
loans1
Total
255.9
364.5
620.3
213.8
114.5
328.3
469.6
479.0
948.6
1
2
[= 1 + 2]
3
Real guarantees2
(mortgages and
other3)
Impairments4
455.6
455.6
108.1
237.8
345.9
Table 68
Loans in arrears for more than 90 days amounted to
577.0 M.€, which represented 1.9% of the gross loan
portfolio, while the portion of falling due loans on these
operations amounted to 159.5 M.€. Total loans in arrears
for more than 90 days and associated falling due
instalments (736.4 M.€) represented 2.4% of the gross
loan portfolio.
portfolio at the end of 2010, is lower – 0.9% of the loan
portfolio –, given the existence of real (tangible) guarantee
and a history of minimal actual loss.
In international operations, accumulated impairments in the
balance sheet represented 6.6% of the gross loan portfolio
at the end of 2010, which corresponded to 185.5% cover
for loans in arrears for more than 90 days.
At the end of 2010, accumulated impairment allowances in
the balance sheet relating to domestic operations
represented 1.7% of the gross loan portfolio.
The table below presents the ratios for loans in arrears (for
more than 90 days) and for loans in arrears added by falling
due loans associated and the impairment allowances in the
balance sheet by market segment, as well as the
contribution of each segment to the gross loan portfolio.
It is important to note that the expected loss on mortgage
loans, which accounted for 39% of the consolidated loan
Loans in arrears and impairments accumulated in the balance sheet, by market segment
2009
Loan
portfolio
(gross), as
% of total
Domestic activity
Corporate banking,
institutional banking and
project finance
Individuals and small
businesses banking
Mortgage loans
other purposes
Loans to small
businesses
[= Σ 2 to 4]
Other
Ratios by segment
(as % of the gross loan portfolio)
Loans in Loans in arrears Impairments
arrears for
for more than (accumulated
more than
90 days +
in the ba90 days falling due loans lance sheet)
Ratios by segment
(as % of the gross loan portfolio)
Loans in Loans in arrears Impairments
arrears for
for more than (accumulated
more than
90 days +
in the ba90 days falling due loans lance sheet)
1
43%
1.3%
1.6%
1.5%
42%
1.4%
2.0%
1.9%
2
37%
2.0%
2.7%
0.9%
39%
1.8%
2.4%
0.9%
3
4%
2.2%
2.9%
2.9%
5%
2.2%
2.8%
2.9%
4
9%
50%
3%
96%
4%
100%
3.6%
2.3%
0.4%
1.8%
2.0%
1.8%
4.6%
3.0%
0.4%
2.3%
2.0%
2.3%
3.9%
1.6%
4.9%
1.6%
6.0%
1.8%
8%
51%
3%
96%
4%
100%
4.1%
2.2%
0.3%
1.8%
3.6%
1.9%
4.7%
2.8%
0.3%
2.4%
3.6%
2.4%
4.3%
1.6%
0.3%
1.7%
6.6%
1.9%
5
6
[=1 + 5 + 6]
7
Total
[=7 + 8]
8
1)
2)
3)
4)
2010
Loan
portfolio
(gross), as
% of total
9
Table 69
Falling due loans associated with loans in arrears.
It was considered the amount owed if lower than the fair value of the collateral received.
Other collateral includes pledged deposits and securities.
For purposes of determining impairments in housing loans under legal action, pledged property is valued at the amount in the event of execution, which is less than market value.
110
At 31 December, the accumulated amount of impairment
allowances for loan-foreclosure properties stood at
40.0 M.€, which corresponded to 35% of their gross
balance sheet carrying value. Accordingly, the net
balance sheet carrying value of these properties was
74.4 M.€, which compares with a market value of the
same properties of 128.1 M.€.
At the end of 2010, BPI held in its portfolio
loan-foreclosure properties with a gross balance sheet
value of 114.4 M.€. Of this figure, 43.6 M.€ refers to
repossessed properties relating to home loans, and
70.8 M.€ refers to repossessed properties relating to the
recovery of other loans.
Property repossessed from loans recoverage
Amounts in M.€
2007
Gross value
Impairments
Net value
Market value
1
2
[= 1 - 2]
3
4
2008
2009
2010
Housing
Other
Total
Housing
Other
Total
Housing
Other
Total
Housing
13.2
5.3
7.9
15.8
38.3
6.1
32.2
37.8
51.5
11.4
40.1
53.6
22.5
8.5
14.1
27.9
42.5
8.0
34.5
40.1
65.0
16.4
48.6
68.0
34.5
9.7
24.7
42.3
60.1
21.7
38.4
59.3
94.6
31.5
63.1
101.7
43.6
14.6
29.1
55.3
Other
Total
70.8 114.4
25.4
40.0
45.4
74.4
72.8 128.1
Table 70
In calculating the impairment losses on properties
repossessed under foreclosures, Banco BPI uses
especially prudent criteria, listed as follows.
In properties repossessed under home-loan foreclosures,
the amount of the impairment corresponds to the
difference, if positive, between the gross amount and the
valuation after taking into account certain discount
factors.
Property acquisition
date (AD) in years
AD ≤ 1 year
1 year < AD ≤ 2 years
2 years < AD ≤ 3 years
AD > 3 years, rented
or no sale possible
Impairment if
Discount factor
applied to the valuation equals the
gross value
assessment value
25%
50%
75%
100%
25%
50%
75%
100%
Table 71
In the case of the other properties, the following
minimum values are considered for the impairment
losses, if the valuations do not lead to the booking of
higher impairments.
Age of property (AD) in years
2 years < AD ≤ 5 years
AD > 5 years
No sale possible
GV = Gross Value.
COUNTRY RISK
Management process
Country risk is very similar in terms of its respective
effects to counterparty risk and is associated with the
changes or specific turmoil of a political, economic or
financial nature in those places where the counterparties
operate (or, more rarely, in a third country where the
business transaction takes place), which impede full
compliance with the contract, irrespective of the
counterparties’ will or capacity. The “country-risk”
designation is also used to classify the counterparty risk
involved in loans to state entities, given the similarity
between the analysis methods for country risk and those
for a state’s counterparty risk (sovereign risk).
The Board of Directors’ Executive Committee approves
the list of countries in respect of which country-risk
exposure is authorised. Eligible countries considered are
large-sized emerging markets which embrace market
economy principles, are open to international trade and
are of strategic importance within the framework of
international politics.
Minimum impairment
30% GV
50% GV
100% GV
Table 72
In addition, the operations defined as eligible are
short-term financing for external trade, the loans of
certain multilateral banks, certain medium-term
operations with political risk hedging or which, due to
their structuring, are not subject to transfer risk.
111
Country risk exposure assessment
Individual evaluation of each country’s risk is performed
with recourse to external ratings, external studies (IIF and
others) and internal reports prepared by the Finance
Division. Only warranting mention are the exposures to
Greek public debt (325 M.€) and to Irish public debt
(283 M.€).
Country risk exposure
At 31 December 2010
Rating
Country
Countries from
group I3
Euro zone
Other EU
countries
Switzerland
USA
Other
Offshore
[= Σ 1 to 6]
1
2
3
4
AAA
AAA
5
6
7
Amounts in M.€
Gross Personal Tangi- Exposure
net of
exposure1 guaran- ble guatees2 rantees guarantees
4 504.3
2.5
522.5
197.6
80.3
16.4
105.2
5 426.3
4.1
13.2
Countries from
group II4
Brazil
Trade Finance 8
9
Public debt
Other
10
[= Σ 8 to 10] 11
[= 12 + 13] 14
15
16
17
18
19
20
21
22
BBB
71.7
193.3
265.1
67.7
59.6
44.9
56.8
24.9
18.4
42.1
10.2
7.7
978.9
B
BBB
BBB
BB
BBB
B
B
B
BBB
23
[= 11 + Σ 14 to 23] 24
Subsidiaries
25
Angola (BFA)
Mozambique (BCI 26
[= 25 + 26] 27
Total [=7 + 24 + 27] 28
4 418.6
(4.5)
(2.6)
(17.2)
0.1
(0.9)
(0.4)
19.9 (113.8)
522.1
208.2
63.0
15.6
104.9
5 332.3
15.7
251.3
114.3
381.3
Angola
Trade Finance 12
Other
13
Russia
Kazakhstan
Turkey
Mexico
Mozambique
Venezuela
Cape Verde
South Africa
Other
(88.2)
248.0
22.2
270.2
6 675.4
(2.1)
(2.1)
15.7
251.3
112.2
379.2
(4.0)
(1.4)
(37.6) (24.0)
71.7
182.9
254.7
67.7
59.6
44.9
56.8
24.6
12.8
4.5
6.2
6.3
917.3
(17.7) (137.8)
248.0
22.2
270.2
6 519.8
(10.4)
(10.4)
(0.4)
(5.6)
(37.6)
Table 73
The exposure to country / sovereign risk via trading
activity is included in the section dealing with market
risks – trading.
MARKET RISKS – TRADING POSITIONS
Management process
Market or price risk (interest rates, foreign exchange
rates, equity prices, commodity prices and other) is
defined as the possibility of incurring losses due to
unexpected variations in the price of financial
instruments or operations.
The trading positions are managed autonomously by
traders and kept within the exposure limits by market or
products, fixed and revised periodically. There are
different exposure limits including overall VaR limits set
by the Global Risks Executive Committee and later
distributed autonomously amongst the various books, by
the divisions involved in trading activities. In addition,
stop-loss limits are defined.
As a general rule, the Bank abstains from any open
positions in options sales.
Market risk exposure assessment – trading
In evaluating exposure under trading operations, this
function is carried out on a daily basis which calculates
the VaR – Value at Risk – according to standardised
assumptions, which as a rule are consistent with the
BIS’s set of recommendations. Exposure arising from
options is controlled by recourse to specific models. The
information generated by the risk evaluation and control
system is available online to authorised users.
The VaR figures found show that the trading exposure
levels are not material.
Market risk in trading books5
Interest rate risk
Currency risk
Equities risk
Commodities
Amounts in M.€
2009
2010
Average Maximum
VaR
VaR
Average Maximum
VaR
VaR
0.3
0.6
1.3
-
2.7
4.2
2.6
0.2
0.2
0.7
0.5
-
0.8
2.3
3.0
Table 74
1) Gross exposure includes on-balance sheet and off-balance sheet operations (current exposure of derivatives).
2) The guarantees given by an entity from one country to an entity of another appear with a negative sign (decrease the exposure) relative to the country receiving the guarantee; and
appear with a positive sign (increase the exposure) in relation to the grantor country.
3) Group I – General authorisation. Includes operations with banks domiciled in offshore centres, provided that these banks are 100% owned or are the branches of authorised
counterparties whose registered head offices are domiciled in Group I countries.
4) Group II – Remaining Countries / Operations.
5) Maximum potential loss with a 99% confidence level resulting from an adverse movement in prices, indices and interest rates over a period of two weeks, taking into consideration in the
calculation of the overall risk the effect of the correlation of returns. A normal distribution of returns is assumed. Maximum VaR based on daily calculations.
112
MARKET RISKS – STRUCTURAL INTEREST RATE RISK
POSITION
Management process
The risk management of structural interest rate positions
(excluding trading activity) of up to one year has been
delegated to the Finance Division within limits fixed by
the Global Risks Executive Committee.
Long-term structural positions are managed in
accordance with the rules laid down by the Global Risks
Executive Committee.
Structural interest rate risk exposure assessment
The assessment of treasury positions (short term) and
structural risk positions relating to interest rates (long
term) is based on gap schedules (currency gaps, repricing
gaps, duration gaps). In addition, several stress tests are
conducted (parallel shift of the yield curves, slope of the
curves, spread / basis risk).
At 31 December 2010, the repricing gap (of interest
rates) accumulated up to 1 year was 4.7 thousand M.€.
Interest rate risk1
Structural position, at 31 December of 2010
Accumulated gap
Amounts in M.€
1 year
1 to 2
years
2 to 5
years
5 to 7 7 to 15
years
years
4 688
4 894
5 256
5 384
5 485
> 15
years
MARKET RISKS – STRUCTURAL POSITION OF
EXCHANGE RATE RISK
Management process
The management of currency risk on structural positions
resulting from business dealings with the Bank’s
Customers is delegated to the Finance Division, within
the operating bands set at senior level. As a general rule,
the Bank seeks substantial hedging of these currency
positions.
The structural currency positions resulting from
investments or participating interests are managed in
accordance with the directives laid down by the Global
Risks Executive Committee. “Hedging” or “non hedging”
are options to be decided upon depending on the
prospects surrounding the direction of foreign exchange
rates and the risk level involved.
Evaluation of the exposure to structural foreign exchange
rate risk
In the currency arena, the position in kwanza reaches a
significant value due to the participating interest in BFA’s
capital. The positions in the remaining currencies are of
minor significance. A stress test to this structural position
(depreciation of between 20% and 30%) reveals a capital
at risk of 82 M.€.
5 466
Table 75
The Bank has positioned itself for an eventual rise in
interest rates in the domestic activity and, therefore, is
structurally exposed to the risk of a fall in interest rates,
with a loss in net interest income of 27.9 M.€ associated
with a stress test change in interest rates of 100 basis
points.
1) Customers sight deposits were considered to be not sensitive to interest rates.
113
Foreign exchange rate risk
Structural position, at 31 December of 2010
Amounts in M.€
Assets and liabilities by currency
Type of financial instrument
Assets
Amounts owed by credit institutions repayable
on demand
Financial assets held for dealing and at fair value
through profit and loss1
Financial assets available for sale2
Loans and advances to Customers
Hedging derivatives
Other assets
[= Σ 1 to 9]
Liabilities
Financial liabilities held for dealing1
Credit institutions' resources
Clients' resources and other loans
Debts evidenced by certificates
Financial liabilities associated to transferred assets
Hedging derivatives
Provisions
Other subordinated loans
Participating bonds
[= Σ 11 to 21]
Forward currency operations1
Structural position1
Stress test3
EUR
USD
AKZ
Other
Total
1
471
421
432
4
1 328
2
231
72
14
21
339
3
985
768
005
417
044
192
68
39 181
152
1 314
424
1 185
6
161
3 735
73
1 020
273
4
1 816
32
11
10
180
52
310
242
112
439
055
044
250
233
45 042
1 194
219
4 235
18 010
7 517
1 570
453
79
2 992
377
7
36 653
(988)
52
42
465
3 633
179
33
31
4 435
788
(22)
(4)
1 440
1 440
303
91
1
26
157
86
13
1
263
548
248
(21)
(4)
1 246
261
4 726
23 241
7 782
1 570
499
111
2 992
640
7
43 076
48
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
6
1
28
1
1
9
1
30
1
82
Table 76
1) Positions excluded from the calculus of the structural position.
2) Excludes revaluation reserves.
3) Stress test on the currency structural position (excluding assets and liabilities held for dealing and at fair value through profit and loss). The stress test considers the impact of a 20%
positive change in foreign exchange rates, except with regard to the Kwanza, in which case a 30% change was taken into account.
114
LIQUIDITY RISK
Management process
Liquidity risk is monitored in terms of its two
components: i) in the tradability of the different assets;
ii) in its overall context, whereby liquidity risk is defined
at grassroots level as the (in)ability to monitor the asset’s
growth and to satisfy treasury requirements without
incurring abnormal losses.
In terms of the different assets, the various managers
keep a constant watch over the transaction levels of the
various instruments in accordance with a variety of
indicators (BPI’s market share, number of days to unwind
positions, size and volatility of spreads, etc.), although
always observing the operating limits set for each market.
At global level, responsibility for liquidity riskmanagement strategy is vested in the Executive
Committee for Market Risks and the Group’s Finance
Division and is founded on the constant vigilance of the
exposure indicators. There are no predefined limits but
merely guidelines relating to these indicators.
Liquidity and funding
BPI’s funding strategy during 2010 was influenced by
the difficulty experienced by Portuguese banks in
accessing the international markets in the wake of the
eruption of the sovereign-debt crisis.
Liquidity management at BPI during 2010 was market by
two distinct periods:
j
During the first four months, it was possible to resort to
medium and long-term funding on the international
markets. Between January and April, the Bank thus
raised 1 982 M.€, which included a 5-year
mortgage-bond issue of 1 000 M.€ with a spread of
62 b.p. and a 2-year senior debt issue of 500 M.€ with
a spread of 85 b.p. over Euribor, both floated in
January. The total medium and long-term debt repaid in
2010 was 2 579 M.€.
j
From April onwards, with the flare-up of the
sovereign-debt crisis, there was a retraction in the
demand for Portuguese issuers’ debt: the Portuguese
Republic risk premium on the international markets
began to move along a rising trajectory which extended
into 2011, making it impossible for Portuguese banks
and BPI in particular, to place debt with foreign
institutional investors.
In this scenario of strong uncertainty surrounding
Portuguese debt that characterised the greater part of
2010, BPI maintained liquidity management as one of its
key priorities, in fact, as it had already recognised as far
back as 2007. This concern was reflected in the
following aspects:
j
j
j
j
permanent and detailed monitoring of the short-term
gap;
stringent utilisation of ECB funding;
focus on Customer resources, acknowledged as the most
important source of funding strategy;
increase in the portfolio of assets eligible for
Euro-system operations.
Short-term gap
Between 2009 and 2010, BPI’s short-term gap in
domestic operations fell by 1 374 M.€.
Contributing to the decrease in the GAP were sales of
securities during the year, as well the increase in
Customer resources.
Short term liquidity position
Amounts in M.€
Short term lending
Loans to credit institutions
1
[=1]
Short term borrowing
Money market
Repos
3
4
[= 3 + 4]
Euro Commercial Paper
Funding from the ECB
Short term gap
2
5
6
7
[= Σ 5 to 7]
8
[= 2 + 8]
9
2009
2010
1 536
1 536
677
677
(2 153)
(1 913)
(4 066)
(849)
(2 500)
(7 415)
(5 879)
(875)
(3 306)
(4 181)
(1)
(1 000)
(5 182)
(4 505)
Table 77
115
From April onwards it was no longer possible to carry out
new placings of Euro Commercial Paper, so that
short-term funding began to comprise solely money
market operations, securities repos and ECB drawings.
During this period, BPI maintained marginally negative
net borrowings on the money market and, simultaneously,
sought to promote repo operations through dealings with
new counterparties. Towards the end of the year, steps
were taken to adhere to the LCH Clearnet, which will
permit from 2011 onwards access to a much broader
market with a greater choice of maturity terms.
ECB funding
During 2009, BPI participated in two special ECB
12-month funding operations, one in June and another in
December, totalling 2 500 M.€. In May 2010, in the
light of fears of a possible default by Greece, the ECB
announced a new special 6-month operation, in which
BPI participated. The funding obtained from the ECB at
this time reached the maximum of 3 500 M.€.
At the end of the year, after the repayment of 1 500 M.€
on 1 July and 1 000 M.€ on 11 November, BPI
maintained a total exposure to the ECB as a funding
source of only 1 000 M.€, which represented around
2.7% of Portuguese banks’ net total funding from the
Euro-system on that date.
Customer resources
During 2010, Customer resources maintained their role
as a strategic funding source.
In tandem with deposits, the emphasis remained on the
issue of bonds for the commercial network. Bonds placed
with Customers rose from 4 199 M.€ to 4 339 M.€.
Bonds, fixed or floating rate or indexed to assets, enabled
Customers to benefit from the upward-sloping
interest-rate curve and, for the Bank, they mean stable
resources, bearing mind that their maturity terms vary
between 3 and 5 years.
116
On-balance sheet Customers resources
Domestic activity
Amounts in M.€
2010
∆%
17 944.6 18 032.6
0.5%
4 199.4
4 338.8
22 144.0 22 371.4
4
3 028.3
3 802.6
5 25 172.4 26 174.0
6 29 200.3 29 341.1
3.3%
1.0%
25.6%
4.0%
0.5%
2009
Customer deposits
Bonds and other products
placed with Customers
[= 1 + 2]
Total
[= 3 + 4]
Gross loan portfolio
Loan to Customer
resources ratio
[= 6 / 3]
1
2
3
7
131.9%
131.2%
Table 78
During 2010, the contribution of deposits and bonds
placed with Customers for BPI’s funding increased by
227 M.€. The rate of transformation of Customer
resources (deposits and debt issues placed with
Customers) into credit was situated at 131% in domestic
operations at the close of 2010 (115% in consolidated
activity).
Total Customer resources carried on the balance sheet
(which also include capitalisation insurance) increased by
roughly 1 000 M.€.
Portfolio of assets eligible for Euro-system operations
At the end of 2010, BPI had a portfolio of assets eligible
for Euro-system funding, net of regulatory haircuts, of
7 486 M.€.
Taking into account portfolio drawings at that date for
repo operations with the market or for funding from the
ECB itself, totalling 3 187 M.€, BPI still had assets
eligible for ECB funding of 4 299 M.€.
During 2010, BPI continued to carry out asset
securitisation operations in order to bolster the portfolio
of available assets. A new home-loan securitisation
operation was thus realised – Douro RMBS 5, with a
nominal value of 1 500 M.€ and a PME-loan
securitisation operation initiated known as PME – Douro
SME 2, for 3 500 M.€, the latter already finalised in
2011. Furthermore, the home-loan securitisation
operation Douro RMBS 4, was restructured in order to
obtain credit ratings by two agencies in terms of the new
rules which came into force on 1 March 2011.
Besides the securitisations, the Bank also issued
mortgage bonds and public sector bonds to hold in the
portfolio of eligible assets. Three new issues were floated
with a total nominal value of 1 200 M.€.
Liquidity management in 2011
As regards the Portuguese financial system’s liquidity,
2011 begins with the same type of restrictions that were
in play during the greater part of 2010.
m.M.€
Repayment of medium and
long-term debt issued by BPI
(0.3) (0.2)
(0.7)
(1.0)
(2.3)
(4.5)
Bonds portfolio redemptions
(available for sale portfolio)
2.8
BPI’s programme of medium and long-term debt
maturities for 2011 envisages the repayment of some
742 M.€ of debt, of which 372 M.€ during the first
quarter.
Medium and long term debt
redemption in 2011
2
3
4th
1
quarter quarter quarter quarter
MLT debt
redemption
Bond portfolio
redemptions
Net effect
[= 1 + 2]
0.3
Amounts in M.€
st
nd
rd
Total
1
(372)
(43)
(125)
(202)
(742)
2
39
(333)
132
89
101
(24)
42
(160)
314
(428)
3
1.4
0.2
Net effect (repayments deducted
of redemptions of bonds held)
(0.4)
11
(0.9)
12
(0.1)
13
0.3
0.1
14
0.6
(0.4)
(1.7)
O
15
11/15
Table 79
Chart 105
Securities portfolio redemptions during 2011 should
generate liquidity of 314 M.€, which reduces the net
effect of medium and long-term debt repayments to just
428 M.€, 78% of which occurs during the first quarter.
It is worth pointing out that already in January 2011 a
200 M.€ 7-year mortgage bond issue has been floated
which was fully taken up by the European Investment
Bank.
Gestão de riscos
4
As for 2012, once again the effect of the repayment of
medium and long-term debt will be minimised by the
redemption of securities occurring in that year, including
the maturity of a Portuguese public-debt position
amounting to 1 030 M.€.
117
OPERATIONAL RISKS
Management process
Operational risks are defined as those which could result
in unexpected losses arising from human failure,
shortcomings in internal control procedures, failures in
the information systems or from external causes. The
definition of operational risks excludes strategic errors or
reputation risks.
The management of operational risk is primarily founded
on the training and quality of the human resources and
on their proper organisation: segregation of functions,
definition of responsibilities, definition of ethical and
deontological principles, procedures and supervision. All
the internal and external audit work and the central
management of alerts also contribute to this supervision.
In the quest to adopt the best practices stemming from
the new regulations (Basel II), BPI has a system for
gathering information concerning operational risks from
the various divisions (frequency and severity). The
gathering of this information by the various Divisions is
not done without previously training properly the so-called
operational risk pivots. This information is useful for
formulating the operational-risk management strategy. In
this domain, under the supervision of the Executive
Committee, the Organisation Division and, naturally, all
the Divisions where critical operational-risk factors have
been identified, play a crucial role.
There is also in place a business continuity plan
anchored to the contingency programmes for the most
crucial central information systems. In the case of
necessity caused by equipment breakdown or by a major
incident, it is possible to recoup these systems on site or
at an alternative location after a period of time that varies
with the type of risk. Also guaranteed – even under
extreme conditions – is minimum functioning under an
exceptional situation. The same method is employed in
the case of the main telecommunications equipment. The
voice and data services at the BPI Group’s main buildings
are guaranteed through the recourse to alternative
equipment, in accordance with formal disaster-recovery
processes. The BPI Group has also identified alternative
procedures for each one of its most critical operations.
A data base is on stand-by which identifies all these
procedures, thereby enabling these to be activated at any
point in time. These disaster-recovery schemes are tested
and subjected to periodic reviews.
Finally, the BPI Group annually reviews its insurance
cover, adjusting cover to its operating requirements and
market conditions, with the object of obtaining an
appropriate level of outside protection against operational
risk.
Evaluation of the exposure to operational risk
The frequency and severity of the losses arising from
operational problems are classified into seven risk
categories or factors (damages to physical assets, failures
in IT systems, failure in the management and execution
of processes, external fraud, internal fraud, violation of
professional duties and contravention of labour norms).
In terms of frequency, the occurrences of Operational
Risk in 2010 were slightly higher than that of 2009
(2 744 events) and presented the following distribution:
Losses associated with the occurrence of operational risk in 2010
Breakdown by frequency
Execution, delivery and
management of processes
External fraud
55.6%
33.1%
10.5% 0.7%
Internal fraud
Other1
Chart 106
1) Clients, products and commercial practices (4.7%), damages to physical assets (3.6%), disturbance in commercial activities and system failure (2.0%) and employment and on-the-job
safety practices (0.1%).
Gestão de riscos
5
118
The losses associated with these events totalled 3.2 M.€.
Losses associated with the occurrence of operational risk in 2010
Breakdown by loss amount
Execution, delivery and
management of processes
External fraud
51.7%
31.7%
10.7% 6.0%
Internal fraud
Other1
Chart 107
At the end of 2010, according to the basic method for
analysing operational risks, the capital at operational risk
at BPI was situated at 170.3 M.€.
LEGAL RISKS
In the specific domain of Operational Risks – legal risks –
there is the possibility of incurring unexpected losses
stemming from shortcomings in the analysis of the legal
framework applicable at a given moment to the contracts
/ positions to be established or from an alteration to the
same legal framework.
Special attention is paid in the realm of legal risks to the
analysis of the legal framework and to the identification
of any regulatory shortcomings; to the analysis of the
prospects of changes to the legal framework and their
consequences; to the clarification of the nature of
contractual relationships and the interpretation given to
them by the counterparties; the analysis of products,
their legal situation, centralisation of communications to
the supervision authorities and the drawing up of the
respective processes for submission to such authorities;
and to the identification / proposals of measures capable
of reducing eventual litigation risks.
Gestão de riscos
6
1) Clients, products and commercial practices (3.4%), damages to physical assets (6.9%), disturbance in commercial activities and system failure (0.2%) and employment and on-the-job
safety practices (0.1%).
119
ADOPTION OF THE RECOMMENDATIONS OF THE FINANCIAL STABILITY FORUM AND OF THE COMMITTEE OF
EUROPEAN BANKING SUPERVISORS RELATING TO THE TRANSPARENCY OF INFORMATION AND VALUATION OF
ASSETS
The Financial Stability Forum (FSF), in the report “Report of the
Financial Stability Forum on Enhancing Market and Institutional
Resilience”, of 11 April 2008, and the Committee of European
Banking Supervisors (CEBS), in the reports “CEBS report on
banks' transparency on activities and products affected by the
recent market turmoil” and “Report on issues regarding the
valuation of complex and illiquid financial instruments”, both of
18 June 2008, issued a series of recommendations relating to the
transparency and disclosure of information.
The Bank of Portugal, through the circular-letters 97 / 08 / DSBDR
of 3 December 2008 and 58 / 09 / DSBDR of 5 August 2009, has
recommended that, in the accounting reporting, a separate chapter
or a specific annex is prepared as part of the Annual and Interim
Reports, designed to respond to the recommendations of the CEBS
and of the FSF, taking into account the principle of proportionality
and following the questionnaire presented as an annex to the Bank
of Portugal’s circular-letter 46 / 08 / DSBDR.
BPI attributes great importance to the maintenance of a frank and
transparent relationship with Shareholders, Investors, Financial
Analysts, Authorities and other capital market players. The
I. BUSINESS MODEL
1. Description of the business model
In the chapter of the Directors’ Report dealing with the financial
and business structure, a detailed description is presented of the
Group’s financial structure and the main business areas.
The BPI Group’s activity is centred on the commercial banking
business, predominantly focused on the attraction of Customer
resources and on the granting of loans to individuals, companies
and institutions, in Portugal through Banco BPI, and in Angola
through BFA. The Group also carries on investment banking
activities – Equities, Corporate Finance and Private Banking –,
asset management – unit trust fund management, pension funds
and capitalisation insurance – and private equity.
DR – Financial and business structure, page 12.
2. Description of strategies and objectives
Management’s strategic priorities and an evaluation of the
Group’s performance and results in 2010 are presented in the
“Introduction to the Report” and in the chapters entitled
“Financial review” and “Risk management”.
With effect from the third quarter of 2007, BPI implemented a
programme designed to respond to the immediate challenges
posed by the international financial crisis: (i) defence and
reinforcement of capital; (ii) ensuring comfortable liquidity levels,
(iii) reducing and controlling risks; and (iv) strengthening the
relationship with Customers. In 2009 it added to this set of
120
dissemination of accurate, timely, regular, clear and unbiased
information which is important for evaluating their listed shares
constitutes a concern of paramount importance at BPI.
Throughout the Directors’ Report, the financial statements and
respective notes and the Corporate Governance Report, BPI
describes in detail the Group’s business and governance models,
the major risks inherent in the Group’s operations, the processes
of risk analysis and management and the division of
responsibilities amongst the various bodies, makes a detailed
analysis of the activity carried out and the results obtained in
2010, and the impacts of the international financial crisis on
business, results and capital, and it describes the accounting
policies and valuation methods of financial assets and presents
qualitative and quantitative information concerning the exposures
to financial assets.
In order to comply with the Bank of Portugal’s recommendation,
the present chapter provides a response to the aforesaid
questionnaire, using cross-references to the more detailed
information presented in the Report and Accounts for 2010.
priorities (v) improvement in profitability, inevitably affected by
the impact of the international crisis.
The disciplined execution of this programme permitted the Bank to
weather this whole period with tranquillity and security, with a sound
financial base, stable risk levels and a comfortable liquidity situation.
DR – Presentation of the report, page. 5; Financial review, pages
69 and Risk management, page 115.
3. Description of the importance of the operations carried out
and the respective contribution to business
In the chapters “Domestic commercial banking”,
“Bancassurance”, “Asset Management”, “Investment Banking”,
“Private Equity” and “International commercial banking”, the
activity carried out in 2010 is described in detail for each
business area. In the “Financial review” chapter, and in the notes
to the financial statements, in note “3 – Segment Reporting”, an
analysis is made of each business area’s contribution to the BPI
Group’s net profit, the balance sheet and investments, as well as
of the capital allocation to each one of these areas.
DR – Domestic commercial banking, page 40; Bancassurance,
page 56; Asset Management, page 57; Investment banking 61;
Private Equity, page 64; International commercial banking, page
65; Financial review, page 69;
NFS – 3 Segment reporting, page 148.
4. Description of the type of activities undertaken
5. Description of the objective and extent of the institution’s
involvement relating to each activity undertaken.
In the chapter dealing with financial and business structure, a
detailed description is presented of the Group’s financial
structure and the main business areas. In the chapters
“Domestic commercial banking”, “Bancassurance”, “Asset
Management”, “Investment Banking”, “Private Equity” and
“International commercial banking”, the activity carried out in
2010 is described for each business area.
The importance to BPI of the capital markets stems primarily
from the recourse to it for raising medium and long-term funding.
The BPI Group also resorts to the capital market for trading in
interest-rate instruments and equities and, over the past few
years, has maintained a portfolio of investments in bonds and
participating interests as a form of diversifying the bank’s sources
of income. The state of the capital market is also crucial for asset
management and investment banking business.
The chapter “Background to operations” reviews impacts of the
international financial crisis in the functioning of capital markets
and the “Risk management” and “Financial review” chapters
describe BPI’s activities in the interbank and medium and
long-term capital markets in 2010, as well as the behaviour of
the financial assets and investments portfolios.
7. Description of major risk-management practices in
operations
In the “Risk management” chapter and in the Corporate
Governance Report, in chapter “5. Risk management”, a detailed
description is given highlighting the major risks attaching to the
Group’s operations, risk analysis and management and the
division of the responsibilities amongst the various bodies.
The note to the financial statements, “4.48 – Financial risks”,
presents the fair value of the financial instruments and the
valuation of the risk exposure resulting from financial instruments
– credit risk, liquidity risk, market risk (interest-rate risk, equities
risk and currency risk).
DR – Risk management, page 101;
NFS – 4.48 Financial risks, page 203 and following;
CGovR – 5. Risk management, page 302.
III. IMPACT OF THE PERIOD OF FINANCIAL TURBULENCE
ON EARNINGS
8. Qualitative and quantitative description of earnings
In the “Financial review” chapter, a qualitative and quantitative
review is presented dealing with the Group’s operations and
results and the impacts of the economic and markets
background to operations in 2010.
DR – Financial review, page 69.
DR – Domestic commercial banking, page 40; Bancassurance,
page 56; Asset Management, page 57; Investment banking, page
61; Private Equity, page 64; International commercial banking,
page 65; Background to operations, page 28; Financial review,
page 69; Risk management, page 115.
II. RISK AND RISK MANAGEMENT
6. Description of the nature and extent of the risks incurred in
relation to the activities carried out and the instruments
utilised
In the “Risk Management” chapter and in the notes to the
financial statements, in note “4.48 – Financial risks”, a
description is given of the major risks attaching to the Group’s
operations and the financial instruments used by it.
NFS – 4.48 Financial risks, page 203 and following.
9. Breakdown of the write-downs / losses by types of products
and instruments affected by the period of turbulence
The notes to the financial statements “4.5 Financial assets
available for sale” and “4.7 Loans and advances to Customers”,
present details of impairment and unrealised losses, security by
security.
The notes to the financial statements “4.20 Provisions and
impairment losses” and “4.40 Net income on financial
operations”, present details of the losses recognised in
consolidated net profit, resulting from the loans and securities
portfolios held by the BPI Group.
NFS – 4.5 Financial assets available for sale, page 158; 4.7
Loans and advances to Customers, page 165; 4.20 Provisions
and impairment losses, page 184; 4.40 Net income on financial
operations, page 197.
10. Description of the reasons and factors responsible for the
impact suffered
In the “Financial review” chapter, a qualitative and quantitative
review is presented showing the Group’s operational and financial
performance and the impacts of the international financial crisis.
Report | Annexes
121
In the “Background to operations” chapter, a description is given
of the economic environment behind the domestic and
international operations (Angola and Mozambique), the behaviour
of the financial markets and the impact of the international
financial crisis on the economies and markets.
unexpected changes in the price of instruments or operations
and risk indicators based on VaR and stress test models.
DR – Financial review, page 69; Background to operations,
page 28.
15. Disclosure of the impact that the trend in spreads
associated with the institution’s own liabilities had on earnings
An analysis is presented in the “Financial review” chapter of the
trend in remunerated asset and liability spreads and their impact
on the Group’s earnings.
11. Comparison of the i) impacts between (relevant) periods
and ii) financial statements before and after the turbulent
period
A description of the effects of the international financial crisis and
a comparative review of the 2010 financial statements relative to
the previous year are presented in the “Financial review” chapter.
DR – Financial review, page 69.
12. Breakdown of the write-downs between realised and
unrealised amounts
The impact on the Group’s results of the drop in the value of the
equities and bond portfolios is described in the “Financial
review” chapter, in “Profits from financial operations”, in
“Impairments in the year” and in the notes to the financial
statements “4.40 Net income on financial operations” and “4.20
Provisions and impairment losses”.
In the notes to the financial statements “4.5 Financial assets
available for sale” and “4.7 Loans and advances to Customers”,
details are presented of the impairment losses and unrealised
losses, security by security, at 31 December 2010.
The Bank did not revalue its liabilities.
DR – Financial review, page 85 and 98.
IV. EXPOSURE TYPES AND LEVELS AFFECTED BY THE
TURBULENT PERIOD
16. Nominal value (or amortised cost) and fair value of
exposures
In the note to the financial statements “4.48 Financial risks”, the
book value is compared with the estimated fair value for most of
the BPI Group’s assets and liabilities at 31 December 2010.
The note to the financial statements “4.5 Financial assets
available for sale”, presents details of the nominal value, book
value and unrealised gains and losses recorded in the fair value
reserve, security by security, at that date.
NFS – 4.48 Financial risks, page 203 and following; 4.5 Financial
assets available for sale, page 158.
DR – Financial review, pages 87;
NFS – 4.5 Financial assets available for sale, page 158; 4.7
Loans and advances to Customers, page 165; 4.40 Net income
on financial operations, page 197; 4.20 Provisions and
impairment losses, page 184.
17. Information about credit risk mitigation and respective
effects on existing exposures
In the “Risk management” chapter, a description is presented of
the impact of credit risk mitigation on credit operations with
Customers and on derivative operations.
13. Description of the influence of the financial turbulence on
the behaviour of Banco BPI shares
In the Group’s Corporate Governance Report, the chapter “11.
Banco BPI Shares”, a description is presented of the stock
exchange behaviour of Banco BPI shares and of the influence
that the performance of the equity markets at global level had on
the share’s behaviour.
DR – Risk management, page 103.
CGovR – 11. Banco BPI shares, page 332.
14. Disclosure of the maximum loss risk
In the “Risk management” chapter and in the note to the
financial statements “4.48 Financial risks”, information is
presented regarding the maximum losses resulting from the
122
DR– Risk management, page 101;
NFS – 4.48 Financial risks, page 203 and following.
18. Detailed disclosure of exposures
In the Risk Management chapter and in the note to the financial
statements – “4.48 Financial risks” – an analysis is presented of
the quality of the loan and securities portfolios based on rating
systems and internal scoring and on the recourse to external
ratings. The information is complemented by the analysis of the
default levels, the existence of tangible guarantees and cover by
impairment allowances.
The exposure to country risk is described in a separate section of
the “Risk management” chapter.
In the notes to the financial statements “4.5 Financial assets
available for sale” and note “4.7 Loans and advances to
Customers”, details are presented of the exposures to
available-for-sale securities and securitised loans, security by
security (including structured products, namely SIV and ABS).
NFS – 4.48 Financial risks, page 203; 4.5 Financial assets
available for sale, page 158; and 4.7 Loans and advances to
Customers, page 165.
19. Movements which occurred in the exposures between the
relevant reporting periods and the underlying reasons for these
variations (sales, write-downs, purchases, etc.)
In the “Financial review” chapter the principal changes occurring
in the financial assets and investments portfolio are described.
The debt securitisation operations originated by BPI are
recognised in financial liabilities associated with transferred
assets (notes to the financial statements 2.2.4 and 4.19).
NFS – 2.2 Financial assets and liabilities, page 139; 2.2.3.
Financial assets available for sale, page 140; 2.2.4 Loans and
other receivables, page 141; 4.19 Financial liabilities relating to
transferred assets, page 181.
23. Consolidation of Special Purpose Entities (SPE) and other
vehicles and their reconciliation with the structured products
affected by the turbulent period
The vehicles through which Banco BPI’s debt securitisation
operations are effected are recorded in the consolidated financial
statements according to the BPI Group’s continued involvement
in these operations, determined on the basis of the percentage of
the equity interest held of the respective vehicles.
DR – Financial review, page 82 and 97.
20. Explanations about exposures which have not been
consolidated (or which have been recognised during the crisis)
and the associated reasons
The BPI Group consolidates all the exposures in which it has
significant control or influence, as envisaged in IAS 27, 28 and
IFRS 3. No changes were made to the BPI Group’s consolidation
scope as a consequence of the turbulent period in the financial
markets.
21. Exposure to “mono-line” insurers and quality of insured
assets
At 31 December 2010, BPI’s exposure to mono-line insurers was
totally indirect and stemmed from the existence of portfolio
positions, the interest and principal of which were unconditionally
guaranteed by this type of company. There were no losses worth
noting, given that none of these securities were in default. At the
end of 2010, BPI exposure to mono-line insurers amounted to
27 M.€ (book value).
V. ACCOUNTING AND VALUATION POLICIES
22. Classification of transactions and structured products for
accounting purposes and the respective accounting treatment
The note to the financial statements “2.2 Financial assets and
liabilities”, describes the accounting criteria used in the
recognition and valuation of financial assets and liabilities are
described.
24. Detailed disclosure of the fair value of financial
instruments
The note to the financial statements “4.48 Financial risks”
presents details of the estimated fair value for virtually all of the
BPI Group’s financial assets and liabilities at 31 December 2010.
NFS – 4.48 Financial risks, page 203.
25. Description of the modelling techniques utilised for valuing
financial instruments
The notes to the financial statements “2.2. Financial assets and
liabilities” and “4.48 Financial risks” describe the techniques
utilised in valuing financial instruments.
NFS – 2.2 Financial assets and liabilities, page 139 and 4.48
Financial risks, page 203.
VI. OTHER IMPORTANT DISCLOSURE ASPECTS
26. Description of disclosure policies and principles which are
used in financial reporting
In the BPI Group’s Corporate Governance Report, in point “10.
Communication with the market”, detailed information is provided
regarding the principles of financial information disclosure and the
communication channels used, the Investor Relations Division’s
terms of reference and the activity carried out in the year.
CGovR – 10. Communication with the market, page 331.
BPI’s investments in structured products (namely SIVs and ABS)
were included in the debt securities portfolio and in
available-for-sale assets (notes to the financial statements 2.2.3
and 2.2.4).
DR – Directors’ Report; NFS – Notes to the financial statements. CGovR – Corporate governance report.
Report | Annexes
123
Rating
Since the start of the financial crisis in the summer of
2007 and into the early months of 2010, BPI stood up
the only financial institution in the Iberian Peninsula to
see its ratings reaffirmed.
In April 2010, following the downward revision of the
Portuguese Republic’s long term rating notation,
Standard & Poor’s cut the ratings of the Portuguese
financial institutions, with BPI’s long term rating moving
from A to A- and short term rating moving from A-1 to
A-2, with the Outlook kept at negative. Subsequently, in
December, in the same way as that for the Republic, S&P
placed BPI ratings on credit watch with negative
implications.
In July, also following the downward revision of the
Portuguese republic’s rating notation, Moody’s cut its
rating notations on Portuguese banks. BPI’s long term
rating was changed from A1 to A2, with a negative
Outlook, and the short term rating was kept unchanged at
P-1. The Bank Financial Strength Rating (BFSR)
remained at C-. At the end of 2010, the ratings of the
Portuguese Republic and banks, including BPI, were
placed under review for a possible downgrade.
Fitch Ratings also carried out a downward revision of
Portuguese banks’ ratings. In July, BPI’s long term rating
was cut from A+ to A, while the short term rating was
kept at F-1, and in November, the ratings were revised to
A- and F2, respectively. The outlook remained negative.
Fitch Ratings
Moody's
Standard & Poor's
Banco BPI
Credit rating (LT / ST)
Outlook
Individual
Support rating
Support rating floor
Banco BPI1
Bank deposits (LT / ST)
A2 / P-1
Outlook
Under revision
Bank financial strength (BFSR)
CIssuer rating
A2
Banco BPI 4
Credit rating (LT / ST)
A- / A-2
Outlook
Under revision
Certificate of deposit (LT / ST)
A- / A-2
Senior secured2
Senior unsecured
Subordinated debt
Junior subordinated
Other short term debt
Preference stock
Senior secured
5
j Mortgage
6
j Public sector
Senior unsecured
Subordinated debt
Junior subordinated
Commercial paper
Short term debt
Preference stock
Senior secured
Senior unsecured (LT / ST)
Subordinated debt
Commercial paper
Preference stock
A- / F2
Negative
B/C
2
BBBAA+
A- / F2
BBB+
F2
BBB
Aa1
A2
A3
Baa3
P-1
Ba2
AA
A
ABBB+
BBBA-2
A-2
BBB-
Sovereign rating – Portuguese Republic
Long term / Short term
A+ / F1
Sovereign rating – Portuguese Republic3
A1/ P-1
Sovereign rating – Portuguese Republic7
A- / A-2
Outlook
Outlook
Outlook
Negative
Under revision
Under revision
Figure 4
1)
2)
3)
4)
5)
6)
7)
Placed
Placed
Placed
Placed
Placed
Placed
Placed
124
under revision for possible downgrade on the 9th December 2010.
under revision for possible downgrade on the 10th December 2010.
under revision for possible downgrade on the 21st December 2010.
on credit watch with negative implications on the 3rd December 2010.
on credit watch with negative implications on the 7th December 2010.
on credit watch with negative implications on the 17th January 2011.
on credit watch with negative implications on the 30th November 2010.
Proposed appropriation of net profit
Whereas:
a) Banco BPI, S.A. reported a consolidated net profit of 184 795 897.00 euro and an individual net profit of
89 139 023.91 euro for the year 2010;
b) Banco BPI’s Long Term Dividend Policy, adopted at the General Meeting of Shareholders held on 19 April
2007, provides for the payment of annual dividends, upon proposal to be submitted by the Board of
Directors to the General Meeting, projected to be not less than 40% of net profit reported in the
consolidated accounts for the year to which it refers, unless exceptional circumstances justify, at the Board
of Directors’ reasonable discretion, a proposal for a lower dividend payment;
c) In light of the applicable legal rules and Banco de Portugal’s recent general guidance on the strengthening
of banks’ shareholders’ equity, the Board of Directors acknowledges that it is its duty to propose to the
General Meeting that the net profit reported on its individual accounts for the year 2010 be totally
transferred to reserves;
d) Banco BPI’s net worth, reported in its individual balance sheet as at 31 December 2010, included in the
report and accounts for discussion under item 1 on the agenda of the abovementioned General Meeting,
includes an amount of negative retained earnings of 312 873 429.85 euro, resulting from the accounting
of the impact of transition to IAS, from 2005 to the aforesaid date, which may be covered by share
premium reserve figures.
1. The Board of Directors proposes that Banco BPI’s individual net profit for the year 2010 be allocated as follows:
Legal reserve1
8 913 902.39 euro
Free reserve
80 225 121.52 euro
Total
89 139 023.91 euro
2. The Board of Directors proposes that, from the total amount of 441 305 624.54 euro of the share premium
reserve reported in Banco BPI’s individual balance sheet as at 31 December 2010, 312 873 429.85 be used
to cover the amount of 312 873 429.85 euro of negative retained earnings reported in the aforesaid balance
sheet.
Lisbon, 16 March 2011
The Board of Directors
1) Under the terms of Article 97 (1) of the Legal Framework of Credit Institutions and Financial Companies.
Report | Rating and Proposed appropriation of net profit
125
Final acknowledgements
The international financial and economic crisis which has manifested itself without interruption since the summer
of 2007, assumed in 2010 an additional dimension centred on the sovereign debt of certain euro zone states,
amongst which Portugal and Spain. Portugal’s direct involvement in this specific new facet of the crisis and the
IMF’s intervention in Greece and Ireland prolonged and intensified the pressure on the banking sector, affected by
the anomalous functioning of the markets and by a progressively adverse economic landscape. In this extremely
challenging and uncertain scenario, BPI pre-empted the situation by adjusting with flexibility management
priorities, protecting above all its margin (degree) of autonomy as regards liquidity, solvency and the consolidation
of the Customer base, strengthening without public help the reputation of a sound and independent bank.
Meriting special acknowledgement in this achievement were the dedicated and competent contribution of our
Employees, the unequivocal and constant support of the Shareholders and the loyalty and trust of our Customers,
which once again placed the Bank in the top market position from the standpoint of the main satisfaction and
quality of service indicators.
The Board also expresses its gratitude for the cooperation received from the Authorities within the scope of their
respective jurisdictions against a particularly challenging backdrop engendered by the repercussions of the financial
crisis.
Oporto, 16 March 2011
126
Consolidated financial
statements
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2010 AND 2009
(Amounts expressed in thousands of euro)
31 Dec. 10
Notes
Amounts before
Impairment,
impairment, depreciation and
depreciation and
amortisation
amortisation
31 Dec. 09
Net
Net
ASSETS
4.1
1 328 222
1 328 222
1 443 315
Deposits at other credit institutions
4.2
338 551
338 551
296 744
Financial assets held for trading and
at fair value through profit or loss
4.3 / 4.4
1 241 651
4.5
8 209 541
53 220
1 241 651
1 791 149
8 156 321
8 934 978
4.6
1 439 527
382
1 439 145
2 347 750
4.7
30 608 938
553 932
30 055 006
29 955 585
Held to maturity investments
4.8
1 043 584
1 043 584
803 124
Hedging derivatives
4.4
250 263
250 263
316 455
253 603
4.9
749 308
497 231
252 077
Intangible assets
4.10
90 495
84 117
6 378
9 714
Investments in associated companies and jointly controlled entities
4.11
194 221
194 221
158 909
4.12
430 610
430 610
213 502
4.13 / 4.26
965 712
41 928
923 784
924 351
46 890 623
1 230 810
45 659 813
47 449 179
2 773 383
Tax assets
Other assets
Total assets
LIABILITIES
4.14
1 245 537
4.15 / 4.4
261 493
318 852
4.16
4 726 084
4 702 677
Resources of Customers and other debts
4.17
23 240 863
22 617 852
Debt securities
4.18
7 782 274
9 083 621
Financial liabilities relating to transferred assets
4.19
1 570 418
1 764 610
4.4
499 444
423 811
Provisions
4.20
110 573
89 676
4.21
2 991 907
2 139 437
Tax liabilities
4.22
37 728
61 153
Participating bonds
4.23
7 167
11 792
Subordinated debt
4.24
640 389
652 408
Financial liabilities held for trading
Resources of other credit institutions
Hedging derivatives
Other liabilities
4.25 / 4.26
Total liabilities
581 988
507 217
43 695 865
45 146 489
SHAREHOLDERS' EQUITY
Subscribed share capital
4.27
900 000
900 000
Share premium account
4.28
441 306
441 306
Other equity instruments
4.29
9 894
10 484
Revaluation reserves
4.30
(716 874)
(210 628)
Other reserves and retained earnings
4.31
649 153
553 872
(Treasury shares)
4.29
(21 699)
(23 036)
Consolidated net income of the BPI Group
4.46
Shareholders' equity attributable to the shareholders of BPI
Minority interests
4.32
Total shareholders' equity
Total liabilities and shareholders' equity
OFF BALANCE SHEET ITEMS
Guarantees given and other contingent liabilities
4.7 / 4.33
184 796
175 034
1 446 576
1 847 032
517 372
455 658
1 963 948
2 302 690
45 659 813
47 449 179
3 012 038
3 076 072
[2 820 405]
[2 818 084]
Of which:
[Guarantees and sureties
[Others]
Commitments
4.33
[191 633]
[257 988]
3 856 696
4 301 135
The accompanying notes form an integral part of these balance sheets.
The Accountant
128
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED 31 DECEMBER 2010 AND 2009
Notes
Interest and similar income
Interest and similar expenses
31 Dec. 10
31 Dec. 09
1 909 307
2 245 815
(1 282 916)
(1 661 502)
Financial margin (narrow sense)
4.34
626 391
584 313
Gross margin on unit links
4.35
4 136
3 251
Income from equity instruments
4.36
3 733
4 912
Net commission relating to amortised cost
4.37
30 266
24 666
664 526
617 142
Financial margin
Technical result of insurance contracts
16 081
11 802
Commissions received
308 147
297 519
Commissions paid
(46 195)
(41 656)
Other income, net
51 928
55 555
313 880
311 418
Gain and loss on operations at fair value
93 075
172 837
Gain and loss on assets available for sale
13 885
46 121
Net commission income
4.38
4.39
Interest and financial gain and loss with pensions
4.26
12 197
(3 929)
Net income on financial operations
4.40
119 157
215 029
Operating income
Operating expenses
Other taxes
Net operating income
4.41
Operating income from banking activity
16 445
32 801
(25 165)
(18 427)
(6 163)
(4 952)
(14 883)
9 422
1 098 761
1 164 813
Personnel costs
4.42
(431 515)
(400 286)
General administrative costs
4.43
(232 148)
(222 012)
4.9 / 4.10
Overhead costs
Recovery of loans, interest and expenses
Impairment losses and provisions for loans and guarantees, net
4.20
Impairment losses and other provisions, net
4.20
Net income before income tax
(45 183)
(52 716)
(708 846)
(675 014)
15 870
21 178
(121 116)
(166 358)
(29 122)
(43 586)
255 547
301 033
(45 387)
Income tax
4.44
5 850
Earnings of associated companies (equity method)
4.45
29 131
18 254
290 528
273 900
Global consolidated net income
Income attributable to minority interests
4.32
(105 732)
(98 866)
4.46
184 796
175 034
Earnings per share (in euro)
Basic
0.207
0.196
Diluted
0.205
0.195
The accompanying notes form an integral part of these statements.
The Accountant
129
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
31 Dec. 10
Consolidated net income
Foreign exchange translation differences
Attributable to
shareholders' of the
BPI Group
184 796
Attributable to
minority interests
Total
105 732
290 528
10 854
11 714
22 568
Revaluation reserves of financial assets available for sale:
Revaluation of financial assets available for sale
Tax effect
Transfer to income resulting from sales
(743 601)
(743 601)
222 483
222 483
4 237
4 237
(1 468)
(1 468)
Transfer to income resulting from impairment recognized in the period
1 735
1 735
Tax effect
(486)
(486)
(14 429)
(14 429)
Tax effect
Valuation of assets of associated companies
Tax effect
4 154
4 154
Income not included in the consolidated statements of income
(516 521)
11 714
(504 807)
Consolidated comprehensive income
(331 725)
117 446
(214 279)
The Accountant
130
31 Dec. 09
Attributable to
shareholders' of the
BPI Group
175 034
Attributable to
minority interests
Total
98 866
273 900
(40 348)
(38 383)
(78 731)
364 651
364 651
(68 854)
(68 854)
(46 136)
(46 136)
12 146
12 146
3 953
3 953
(402)
(402)
15 647
15 647
(4 086)
(4 086)
236 571
(38 383)
198 188
411 605
60 483
472 088
131
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Balance at 31 December 2008
Subscribed
share capital
Share premium
account
Other equity
instruments
Revaluation
reserves
900 000
441 306
12 307
(435 638)
Dividends distributed in 2009
Appropriation of net income for 2008 to reserves
Dividends paid on preference shares
Dividends paid to minority interests
Variable Remuneration Program (RVA)
(1 823)
Sale / purchase of treasury shares
Sale / purchase of preference shares
Comprehensive income in 2009
225 010
Other
900 000
441 306
10 484
(210 628)
Dividends distributed in 2010
Appropriation of net income for 2009 to reserves
Dividends paid to minority interests
Variable Remuneration Program (RVA)
(590)
Sale / purchase of treasury shares
Sale / purchase of preference shares
Redemption of preference shares
Consolidation of BPI Alternative Fund
Consolidation of BPI Taxa Variável Fund
Comprehensive income in 2010
(506 246)
Other
The Accountant
132
900 000
441 306
9 894
(716 874)
Other reserves and
retained earnings
Treasury
shares
Net
income
Minority
interests
Shareholders'
equity
452 509
( 22 686)
150 305
463 427
1 961 530
(59 752)
90 553
(59 752)
(90 553)
(305)
(1 259)
(4)
909
11 561
(9 988)
(9 988)
(57 573)
(57 573)
(3 387)
905
(691)
(691)
175 034
60 483
472 088
175 034
455 658
2 302 690
(442)
553 872
(442)
(23 036)
(69 700)
105 334
(69 700)
(105 334)
(5 836)
(5 836)
(56 455)
(56 455)
1 160
570
177
(10 275)
177
(8 706)
(8 706)
(17 233)
(17 233)
17 180
17 180
15 318
15 318
184 796
117 446
(214 279)
184 796
517 372
1 963 948
222
649 153
222
(21 699)
133
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
Interest, commissions and similar income received
Interest, commissions and similar expenses paid
Recovery of loans and interest in arrears
Payments to personnel and suppliers
Net cash flow from income and expenses
Decrease (increase) in:
Financial assets held for trading, available for sale and held to maturity
Other assets
Net cash flow from operating assets
Increase (decrease) in:
Resources of central banks and other credit institutions
Resources of Customers
31 Dec. 10
31 Dec. 09
3 636 506
(2 386 520)
15 870
(632 967)
3 489 263
(2 339 483)
21 178
(646 108)
632 889
524 850
481 775
(4 474 176)
896 685
1 133 219
(170 566)
(818 270)
41 210
(17 958)
1 249 104
(4 177 185)
(1 495 042)
5 480 461
1 466 927
(2 986 828)
(57 359)
60 400
Other liabilities
152 024
(212 786)
Net cash flow from operating liabilities
66 550
2 341 247
Contributions to the Pension Funds
(3 026)
(46 463)
Income tax paid
Investing activities
Acquisition of participation in subsidiary and associated companies
Unicre – Instituição Financeira de Crédito, S.A.
Inter-Risco – Sociedade de Capital de Risco, S.A.
Purchase of other tangible assets and intangible assets
Sale of other tangible assets
Dividends received and other income
(14 550)
(67 284)
1 930 967
(1 424 835)
(4 428)
(368)
(38 378)
(52 959)
269
771
14 429
10 556
(28 476)
(41 632)
134
31 Dec. 10
Financing activities
Liability for assets not derecognised
Issuance of debt securities and subordinated debt
Redemption of debt securities
Purchase and sale of own debt securities and subordinated debt
Redemption of preference shares
31 Dec. 09
(194 297)
(287 728)
4 037 215
5 263 939
(4 741 799)
(3 045 491)
(671 798)
328 294
(17 233)
Purchase and sale of preference shares
Interest on debt securities and subordinated debt
(8 706)
(692)
(248 305)
(236 619)
(5 836)
(9 988)
Dividends distributed
(69 700)
(59 752)
Dividends distributed to minority interests
(56 455)
(57 573)
Purchase and sale of treasury shares
Net increase (decrease) in cash and equivalents
Cash and equivalents at the beginning of the year
Cash and equivalents at the end of the year
970
(2 481)
(1 975 944)
1 891 909
(73 453)
425 442
1 739 722
1 314 280
1 666 269
1 739 722
The Accountant
Alberto Pitôrra
President
Vice-President
Artur Santos Silva
Carlos da Camara Pestana
Fernando Ulrich
Ruy Octávio Matos de Carvalho
Members
Alfredo Rezende de Almeida
António Domingues
António Farinha Morais
António Lobo Xavier
Armando Leite de Pinho
Carlos Moreira da Silva
Edgar Alves Ferreira
Henri Penchas
Herbert Walter
Ignacio Alvarez-Rendueles
Isidro Fainé Casas
José Pena do Amaral
Juan Maria Nin
Klaus Dührkop
Manuel Ferreira da Silva
Marcelino Armenter Vidal
Maria Celeste Hagatong
Mário Leite da Silva
Pedro Barreto
Roberto Egydio Setúbal
Tomaz Jervell
135
Notes to the consolidated financial statements
as of 31 December 2010 and 2009
(Unless otherwise indicated, all amounts are expressed in thousands of euro – th. euro)
1. THE FINANCIAL GROUP
Banco BPI is the central entity of a multi-specialised financial group
dedicated to banking, which provides a broad range of banking
services and products to companies, institutional investors and
private individuals. Banco BPI has been listed on the Stock
Exchange since 1986.
In June 2010 the BPI Group acquired 3.4% of the share capital of
Unicre – Instituição Financeira de Crédito, S.A., and now holds a
21.01% participation in that company. The participation of the BPI
Group in Unicre is now recorded in accordance with the equity
method of accounting.
The BPI Group started operating in 1981 with the foundation of SPI –
Sociedade Portuguesa de Investimentos, S.A.R.L. By public deed
dated December 1984, SPI – Sociedade Portuguesa de
Investimentos, S.A.R.L. changed its corporate name to BPI – Banco
Português de Investimento, S.A., which was the first private
investment bank created after the re-opening, in 1984, of the
Portuguese banking sector to private investment. On 30 November
1995 BPI – Banco Português de Investimento, S.A. (BPI
Investimentos) was transformed into BPI – SGPS, S.A., which
operated exclusively as the BPI Group’s holding company, and BPI
Investimentos was founded to act as the BPI Group’s investment
banking company. On 20 December 2002, BPI SGPS, S.A.
incorporated, by merger, the net assets and operations of Banco BPI
and changed its corporate name to Banco BPI, S.A.
In 2010 the BPI Group dissolved and liquidated Simofer, a fully
owned subsidiary of Banco BPI.
At 31 December 2010 the Group’s banking operations were carried
out principally through Banco BPI in the commercial banking area
and through BPI Investimentos in the investment banking area. The
BPI Group is also the holder of a 50.1% participation in Banco de
Fomento, S.A. which operates as a commercial bank in Angola.
In 2009 BPI Rent and Douro BPI, SGPS, were dissolved and
liquidated by Banco BPI, which was their sole shareholder.
In January 2010, the BPI Alternative Fund was established.
On 31 December 2010 the BPI Group held 77.7% of the fund’s
participating units through BPI Investimentos, the financial
statements of the fund being fully consolidated with the financial
statements of the BPI Group.
In December 2010 the BPI Group held 63.6% of the participating
units of BPI Taxa Variável Fundo de Investimento Aberto de
Obrigações de Taxa Variável (BPI Taxa Variável Fund), which is
managed by BPI Gestão de Activos. As from 30 June 2010 the BPI
Group has fully consolidated the financial statements of BPI Taxa
Variável Fund.
136
In 2010 the corporate name of Inter-Risco – Sociedade de Capital de
Risco, S.A., was changed to BPI Private Equity – Sociedade de
Capital de Risco, S.A. Subsequently, a new company called InterRisco – Sociedade de Capital de Risco, S.A. was incorporated, 49%
of its capital being held by BPI Private Equity, and is recorded in
accordance with the equity method of accounting.
In December 2010 the BPI Group founded the commercial company
BPI Capital Africa (Proprietary), Limited in South Africa. After
obtaining the necessary permits, including membership to the
Johannesburg Stock Exchange (JSE), the company will start
operating in the areas of brokerage and investment consultancy
(research) for, among others, companies listed in the JSE. This
company, which is wholly owned by the BPI Group, is consolidated
by the full consolidation method in the financial statements of the
BPI Group.
The vehicles through which the Bank’s loan securitisation is carried
out are recorded in the consolidated financial statements in
accordance with the BPI Group’s continuing involvement in these
operations, based on the percentage held of the equity piece of the
corresponding vehicles.
At 31 December 2010 the BPI Group was made up of the following companies:
Head
Office
Shareholders'
equity
Total Net income
assets
(loss)
for the year
Banks
Portugal 1 054 677 42 418 618
Banco BPI, S.A.
Banco Português de Investimento, S.A.
Portugal
64 263 3 783 272
Banco Comercial e de Investimentos, S.A.R.L.
Mozambique
75 236 1 077 694
Banco de Fomento, S.A. (Angola)
Angola
494 989 4 864 923
Banco BPI Cayman, Ltd.
Cayman Islands
151 533
332 634
Specialised loan companies
BPI Locação de Equipamentos, Lda.
Portugal
3 423
3 555
Asset management companies and dealers
BPI Dealer – Sociedade Financeira
Mozambique
63
75
de Corretagem (Moçambique), S.A.R.L.
BPI Gestão de Activos – Gestão de Fundos
de Investimento Mobiliários, S.A.
Portugal
24 331
44 938
BPI – Global Investment Fund Management Company, S.A.
Luxembourg
1 375
1 682
BPI Pensões – Sociedade Gestora de Fundos de Pensões, S.A.
Portugal
7 569
8 406
BPI (Suisse), S.A.
Switzerland
1 480
4 443
BPI Alternative Fund: Iberian Equities Long / Short Fund
Portugal
77 872
85 632
Fundo BPI Taxa Variável
Portugal
44 035
44 283
Venture capital companies
Portugal
29 036
33 698
BPI Private Equity – Sociedade de Capital de Risco, S.A.1
Portugal
254
1 053
Inter-Risco – Sociedade de Capital de Risco, S.A.2
Portugal
5 783
5 996
TC Turismo Capital – SCR, S.A.3
Insurance companies
Portugal
187 222 4 107 893
BPI Vida – Companhia de Seguros de Vida, S.A.
Cosec – Companhia de Seguros de Crédito, S.A.
Portugal
44 765
107 066
Companhia de Seguros Allianz Portugal, S.A.
Portugal
213 568 1 167 856
Other
Cayman Islands
250 489
250 496
BPI Capital Finance Ltd.4
BPI Capital Africa (Proprietary) Limited
South Africa
410
410
U.S.A.
1 117
3 202
BPI, Inc.5
BPI Madeira, SGPS, Unipessoal, S.A.
Portugal
152 848
152 866
Finangeste – Empresa Financeira de Gestão
e Desenvolvimento, S.A.
Portugal
74 196
78 504
Ulissipair ACE
Portugal
617
617
Portugal
73 102
310 155
Viacer – Sociedade Gestora de Participações Sociais, Lda.
Portugal
79 612
79 650
Direct
participation
Effective
participation
Consolidation /
Recognition
method
139
135
043
158
302
100.00%
29.70%
50.08%
100.00%
30.00%
50.10%
100.00%
Full consolid.
Equity Method
Full consolid.
Full consolid.
378
100.00%
100.00%
Full consolid.
(6)
13.50%
92.65%
Full consolid.
11 547
910
3 284
803
705
1 718
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.90%
77.70%
63.59%
Full
Full
Full
Full
Full
Full
1 439
(146)
235
100.00%
25.00%
100.00%
49.00%
25.00%
Full consolid.
Equity Method
Equity Method
13 863
5 305
43 753
100.00%
50.00%
35.00%
100.00%
50.00%
35.00%
Full consolid.
Equity Method
Equity Method
7 175
100.00%
5
11
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Full consolid.
Full consolid.
Full consolid.
Full consolid.
5 157
609
11 270
8 454
32.80%
32.80%
50.00%
21.01%
25.00%
Equity Method
Prop. method
Equity Method
Equity Method
89
5
21
196
3
20.65%
25.00%
consolid.
consolid.
consolid.
consolid.
consolid.
consolid.
Note: Unless otherwise indicated, all amounts are as of 31 December 2010 (accounting balances before consolidation adjustments).
The financial statements of subsidiaries, associates and jointly controlled entities are pending approval by the respective governing bodies. However, the Board of Directors of Banco
BPI believes that there will be no changes with significant impact on the consolidated income of the Bank.
1) In 2010 the corporate name of Inter-Risco – Sociedade de Capital de Risco, S.A., was changed to BPI Private Equity – Sociedade de Capital de Risco, S.A.
2) In 2010 a new company called Inter-Risco – Sociedade de Capital de Risco, S.A., was incorporated, with 49% of its capital being held by BPI Private Equity.
3) Amounts as of 30 November 2010.
4) Share capital is made up of 5 000 ordinary shares of 1 Euro each, and 250 000 000 non-voting preference shares of 1 euro each. The BPI Group’s effective participation
corresponds to 0.002% considering the preference shares.
5) Amounts as of 30 June 2010 translated using the US dollar exchange rate as of 31 December 2010.
Consolidated financial statements | Notes
137
2. BASIS OF PRESENTATION AND MAIN ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The consolidated financial statements were prepared from the
accounting records of Banco BPI and its subsidiary and associated
companies in conformity with International Accounting Standards /
International Financial Reporting Standards (IAS / IFRS), as
endorsed by the European Union in accordance with Regulation (EC)
1606 / 2002 of 19 July of the European Parliament and Council,
incorporated into Portuguese legislation through Bank of Portugal
Notice 1 / 2005 of 21 February.
j
IFRIC 17 – Distribution of non-monetary assets: This interpretation
clarifies the accounting treatment to be given to the distribution of
dividends in the form of non-monetary assets, namely that the
entity must record such a dividend at the fair value of the net
assets distributed. These amendments are of mandatory application
for years beginning on or after 1 July 2009. Implementation of
these changes had no significant impact on the financial
statements presented.
Adoption of standards (new or revised) issued by the
“International Accounting Standards Board” (IASB) and
interpretations issued by the “International Financial Reporting
Interpretation Committee” (IFRIC), as endorsed by the European
Union.
j
IFRC 18 – Transfers of assets from Customers: this interpretation
clarifies the accounting treatment to be given to agreements in
which an entity receives from a Customer an item of property,
plant, and equipment that the entity must then use either to
connect the Customer to a network or to provide the Customer with
ongoing access to the supply of goods or services. These
amendments are of mandatory application for years beginning on or
after 1 July 2009. Implementation of these changes had no
significant impact on the financial statements presented.
j
Improvements to international financial reporting standards –
2009: this process involved a review of 12 accounting standards,
most of which with mandatory application for years beginning on or
after 1 January 2010. Implementation of these changes did not
have a significant impact on the financial statements presented.
The standards (new or revised) and interpretations applicable to the
operations of the BPI Group and reflected in the financial statements
as of 31 December 2010, were as follows:
j
j
j
j
IAS 39 – Financial instruments: Recognition and Measurement:
this standard was amended in July 2008 in order to clarify two
aspects of hedge accounting, namely the identification of inflation
as a hedged risk and hedging through options. This amendment is
of mandatory application for annual periods beginning on or after
1 July 2009. Implementation of these changes had no significant
impact on the financial statements presented.
IFRS 2 – Share-based payments: the amendments made in June
2009 are intended to clarify how a subsidiary in a group should
record certain share-based payment programs in its own in separate
financial statements. In accordance with this standard the
subsidiary that receives such goods or services under a share-based
remuneration program must record such goods or services,
independently of the entity of the group that carries out the
transaction, and no matter whether the transaction is made in
shares or cash. This standard is of mandatory application in years
beginning on or after 1 January 2010. Implementation of these
changes had no significant impact on the financial statements
presented.
IFRS 3 – Business Combinations and IAS 27 – Consolidated and
Separate Financial Statements: the revision of these standards
introduced changes to the measurement and recording of
“Goodwill”, the accounting treatment of step acquisitions and the
recording of transactions with shares of subsidiaries, with or
without maintaining control. These amendments are of mandatory
application for years beginning on or after 1 July 2009.
Implementation of these changes had no significant impact on the
financial statements presented.
IFRC 16 – Hedges of a net investment in a foreign operation: the
amendments resulting from the 2009 annual improvements to
international financial reporting standards, provide guidance on
hedge accounting for net investments in foreign operations. These
amendments are of mandatory application for years beginning on or
after 1 July 2009. Implementation of these changes had no
significant impact on the financial statements presented.
138
At 31 December 2010 the following standards (new and revised) and
interpretations, already endorsed by the European Union, were
available for early adoption:
j
IAS 24 – Related entities: the changes made in November 2009
are intended to clarify the definition of related entity and introduce
simplifications to the disclosure requirements for government
entities. The revised standard is mandatory for years beginning on
or after 1 January 2011.
j
IAS 32 – Financial instruments: Presentation: this standard was
amended to clarify under what conditions the rights issues are
classified as equity instruments. These amendments are of
mandatory application for years beginning on or after 1 February
2010.
j
IFRIC 14 – Early payments under minimum funding requirements:
the changes to this interpretation made in November 2009 permit
an entity to recognize early payments under minimum funding
requirements, as an asset. This change is of mandatory application
in years beginning on or after 1 January 2011.
j
IFRIC 19 – Extinguishing Financial Liabilities through Equity
instruments: this standard established the accounting treatment to
be given by an entity that issues equity instruments for the purpose
of settling a financial liability in full or in part. It is of mandatory
application for years beginning on or after 1 July 2010.
These standards, although endorsed by the European Union, have
not been adopted by the BPI Group at 31 December 2010,
because their application is not yet mandatory. Significant
impacts are not expected in the financial statements as a result of
adopting these standards.
B) MAIN ACCOUNTING POLICIES
The following accounting policies are applicable to the consolidated
financial statements of the BPI Group.
2.1. Consolidation of subsidiaries and jointly controlled entities
and recognition of associated companies (IAS 27, IAS 28, IAS
31 and IFRS 3)
Banco BPI has direct and indirect participations in subsidiary and
associated companies. Subsidiary companies are entities over which
the Bank has control or power to manage their financial and
operating policies. Associated companies are entities over which
Banco BPI has direct or indirect significant influence over their
management and financial policies but over which it does not have
control. As a general rule, it is presumed that significant influence
exists when the participation exceeds 20%.
The financial statements of subsidiary companies are consolidated
using the full consolidation method. Significant inter-group
transactions and account balances were eliminated in the
consolidation process. The amount of share capital, reserves and net
results corresponding to third party participation in these subsidiaries
is reflected in the caption MINORITY INTEREST. When necessary,
adjustments are made to the subsidiary companies’ financial
statements to ensure their consistency with the BPI Group’s
accounting policies.
Goodwill arising from the difference between the cost of acquisitions
(including expenses) and the fair value of the identifiable assets,
liabilities and contingent liabilities of subsidiary companies as of the
date of the first consolidation are recorded as assets and are subject
to impairment tests. When a subsidiary company is sold, net goodwill
is included in determining the gain or loss on the sale.
The financial statements of companies under joint control of the BPI
Group and other entities are consolidated using the proportional
method, under which the assets, liabilities, costs and income of the
entities are included in the consolidated financial statements in
proportion to the BPI Group’s participation in their share capital.
Associated companies are recorded in accordance with the equity
method of accounting. In accordance with this method, the amount
of the investment, which is initially recognised at cost, is adjusted by
post-acquisition changes in the net asset value of the associated
companies, in proportion to the BPI Group’s participation.
Goodwill relating to associated companies is included in the book
value of the investment. The book value of associated companies
(including goodwill) is subject to impairment tests in accordance
with IAS 36 and IAS 39.
In the case of associated companies acquired in stages, goodwill is
calculated at the time that the acquired company becomes an
associate, being determined by the difference between the total
acquisition cost of the investment and the proportion held of the fair
value of the identifiable assets and liabilities of the associate as of
that date. As provided for in IAS 28, the total acquisition cost
corresponds to the fair value of the original investment on the date
that significant influence is achieved, plus the amount paid for the
additional participation. In accordance with the policy established by
the BPI Group, gains or losses on the revaluation to fair value of the
original investment are recognized in the statement of income on the
date the acquired company becomes an associate.
In accordance with IFRS 1 and the BPI Group’s accounting policies
up to the date of transition to IAS / IFRS, goodwill on investments
acquired up to 1 January 2004 was deducted in full from
shareholders’ equity.
Negative goodwill arising from the difference between the cost of
acquisitions (including expenses) and the fair value of the
identifiable assets, liabilities and contingent liabilities of subsidiary
and associated companies as of the date of the first consolidation or
the date the equity method is first applied is immediately recognised
in the statement of income.
The financial statements of subsidiary or associated companies
which are inactive or in liquidation were excluded from the
consolidation and from application of the equity method. These
participations are classified as financial assets available for sale.
Consolidated net income is the sum of the individual net result of
Banco BPI and the percentage of the net results of subsidiary and
associated companies, equivalent to Banco BPI’s effective
participation in them, considering the period the participations are
held for, after elimination of income and expenses resulting from
inter-group transactions.
Foreign currency subsidiary and associated companies (IAS 21
and IAS 29)
The foreign currency financial statements of subsidiary and
associated companies were included in the consolidation after being
translated to Euro at the exchange rates published by the Bank of
Portugal:
j
assets and liabilities expressed in foreign currencies are translated
to Euro using the exchange rates in force at the balance sheet
date;
j
income and expenses expressed in foreign currencies are translated
to Euro using the exchange rates in force in the months in which
they are recognized;
j
exchange differences resulting from the translation to Euro are
recognised directly in the shareholders’ equity caption REVALUATION
RESERVES, since the Bank does not have participations in
subsidiaries and associated companies whose functional currency is
that of a hyperinflationary economy.
2.2. Financial assets and liabilities (IAS 32 and IAS 39)
Financial assets and liabilities are recognised in the BPI Group’s
balance sheet on the trade or contracting date, unless there is an
express contractual stipulation or applicable legal or regulation
regime under which the transactions’ inherent rights and obligations
are transferred at a different date, in which case the latter date is
applicable.
Financial assets and liabilities are initially recorded at fair value plus
direct transaction costs, except for assets and liabilities that have
been recognised at fair value through profit or loss, in which case the
transaction costs are immediately recorded in the statement of
income.
139
Fair value is the amount for which an asset could be exchanged, or a
liability settled, between equally knowledgeable, willing parties. On
the date of contracting or starting an operation, fair value is generally
the amount of the transaction.
j
securities related to capitalisation insurance portfolios;
j
derivatives (including embedded derivatives on financial assets and
liabilities), except for those designated as hedging instruments
under hedge accounting (note 2.2.7).
Fair value is determined based on:
j
the price in an active market, or
j
valuation methods and techniques (when there is not an active
market) supported by:
– mathematical calculations based on recognised financial
theories; or,
– prices calculated based on similar assets or liabilities traded on
active markets or based on statistical estimates or other
quantitative methods.
Such assets and liabilities are valued daily at fair value. The book
value of bonds and other fixed income securities includes accrued
interest.
Gains and losses resulting from changes in fair value are recognised
In the case of default, derivatives are settled in advance and
recorded at their replacement value. Derivative operations are subject
to credit risk analysis, their value being adjusted with a
corresponding entry to loss on financial operations.
2.2.2. Held to maturity investments
Financial assets are initially recognized, at the time of their
acquisition or inception, under one of the four categories defined in
IAS 39:
j
financial assets held for trading and at fair value through profit or
loss;
j
held-to-maturity financial assets;
j
available-for-sale financial assets;
j
loans and other receivables.
This caption includes non-derivative financial assets with fixed or
determinable payments and defined maturities that the BPI Group
has the intention and ability to hold until maturity.
These investments are measured at amortized cost, using the
effective interest rate method and subject to impairment tests. If, in
a subsequent period, the amount of an impairment loss decreases
and that decrease can be related objectively to an event occurring
after the date on which the impairment loss was recognized, the
previously recognized impairment loss is reversed through the
statement of income for the year.
2.2.3. Financial assets available for sale
Following the amendment to IAS 39 in October 2008 entitled
“Reclassification of financial assets”, it became possible to reclassify
financial assets between the financial asset categories, as follows:
(i) in specific circumstances, non-derivative financial assets (other
than those initially designated as financial assets at fair value
through profit or loss under the “fair value option”) can be
reclassified out of the fair value through profit and loss category, and
(ii) financial assets which meet the definition of loans and
receivables can be reclassified from the available-for-sale financial
assets category to the loans and receivables category, provided that
the entity has the intention and the ability to hold the asset for the
foreseeable future or until maturity. For reclassifications made up to
1 November 2008, the reference date of the changes made by the
BPI Group was 1 July 2008. The reclassifications made on or after
1 November 2008 are effective only as from the reclassification date.
In note 4.48 the valuation methods of assets and liabilities recorded
at fair value (Financial assets held for trading and at fair value
through profit or loss, Financial liabilities held for trading and
Financial assets available for sale) are presented in detail.
2.2.1. Financial assets held for trading and at fair value through
profit or loss and financial liabilities held for trading
These captions include:
j
fixed income securities and variable-yield securities traded on
active markets, which the Bank has opted, on the recognition date,
to record and value at fair value through profit or loss, can be
classified as held for trading or at fair value through profit or loss;
140
This caption includes:
j
fixed income securities which have not been classified in the
trading, held to maturity or loan portfolios;
j
variable yield securities available for sale;
j
shareholders’ loans and supplementary capital contributions in
financial assets available for sale.
Assets classified as available for sale are valued at fair value, except
for equity instruments that are not traded on active markets and for
which their fair value cannot be reliably measured or estimated. In
this case they remain recorded at cost.
Gains and losses resulting from changes in the fair value of financial
assets available for sale are recognised directly in the shareholders’
equity caption FAIR VALUE REVALUATION RESERVE, except for impairment
losses and exchange gains and losses on monetary assets, until the
asset is sold. At this time, the gain or loss previously recognized in
shareholders’ equity is transferred to the statement of income.
Interest accrued on bonds and other fixed income securities and
differences between their cost and nominal value (premium or
discount) are recorded in the statement of income using the effective
interest rate method.
Income from variable-yield securities (dividends in the case of
shares) is recorded as income when it is attributed or received. In
accordance with this procedure, interim dividends are recorded as
income in the period in which they are declared.
IAS 39 identifies some events that are regarded as objective
evidence of impairment of financial assets available for sale, namely:
j
significant financial difficulty of the issuer;
j
a breach of contract by the issuer in terms of the repayment of
principal or payment of interest;
j
probability of bankruptcy of the issuer;
j
the disappearance of an active market for the financial asset
because of financial difficulties of the issuer.
In addition to the events indicating objective evidence of impairment
of debt instruments referred to above, the following specific events
are also considered for equity instruments:
j
significant changes with adverse impact on the technological,
market, economic or legal environment in which the issuer operates
indicating that the cost of the investment may not be fully
recovered;
j
a significant or prolonged decrease in the market value of the
financial asset below its cost.
On the date of preparation of the financial statements, the Bank
assesses the existence of objective evidence of impairment which
indicates that the cost of investments may not be recovered in the
medium term, considering the market situation and the available
information about the issuers.
In the case of objective evidence of impairment the accumulated
loss in the fair value revaluation reserve is removed from equity and
recognized in the statement of income.
Impairment losses recorded on fixed income securities are reversed
through the statement of income if there is a positive change in the
fair value of the security resulting from an event which has occurred
after determination of the impairment. Impairment losses on
variable-yield securities cannot be reversed. In the case of securities
for which impairment losses have been recognised, subsequent
negative changes in fair value are always recognised in the statement
of income.
Exchange differences on non monetary assets (equity instruments)
classified in the available-for-sale portfolio are recognised in the
exchange difference revaluation reserve. Exchange differences on
other securities are recorded in the statement of income.
Financial assets available for sale, designated as hedged assets, are
valued as explained in note 2.2.7. Hedge Accounting – derivatives
and hedged instruments.
2.2.4. Loans and other receivables
Loans and other receivables include loans and advances made by the
Bank to Customers and to credit institutions, including finance lease
operations, factoring operations, participation in syndicated loans
and securitised loans (commercial paper and bonds issued by
companies) that are not traded on an active market and which are
not intended to be sold.
Loans and securitised loans traded on active markets are included in
the caption FINANCIAL ASSETS AVAILABLE FOR SALE.
At the inception date, loans and other receivables are recognised at
fair value. In general, fair value at the inception date corresponds to
the amount of the transaction and includes commission, taxes and
other costs and income relating to credit operations.
Loans and other receivables are subsequently valued at amortised
cost, using the effective interest rate method and are subject to
impairment tests.
Interest income, commission, fees and other costs and income on
credit operations are recognised on an accruals basis over the period
of the operations, regardless of when they are received or paid.
Commission received relating to credit commitments is deferred and
recognised on a straight-line basis over the period of the
commitment.
The Bank classifies as overdue credit, instalments of principal and
interest overdue for more than 30 days. Credits under legal collection
procedures include the full amount of the principal (both overdue
and not yet due). Mortgage loans are considered to be under legal
collection procedures when the petition to execute is delivered to the
court, which is usually 180 days after the first default.
The BPI Group writes off loans on operations considered to be
unrecoverable, for which provisions (in accordance with the Adjusted
Accounting Standards (Normas de Contabilidade Ajustadas – NCA)
established by Bank of Portugal Notice 1 / 2005) and impairment
losses have been recorded for their full amount in the month
preceding the write-off.
Loans designated as hedged assets are valued as explained in note
2.2.7. Hedge Accounting – derivatives and hedged instruments.
Finance leasing (IAS 17)
Lease operations in which the Bank transfers substantially all the
risks and rewards of ownership of an asset to a Customer or to a third
party, are reflected on the balance sheet, at the inception date, as
loans granted, at the net amount paid to acquire the leased asset.
Lease instalments are composed of an interest income component
and a principal repayment component. The interest income
component for each period reflects an effective interest rate of return
on the outstanding amount of principal.
Factoring
Assets resulting from factoring operations with recourse are recorded
on the balance sheet as loans granted, by the amount advanced on
account under the terms of the corresponding contracts.
Assets resulting from factoring operations without recourse are
recorded on the balance sheet as loans granted, by the amount of
the credit taken, with a corresponding entry to the liability caption
CREDITORS FOR FACTORING OPERATIONS. Amounts advanced under the
contracts are debited to the caption CREDITORS FOR FACTORING
OPERATIONS.
Invoices received under factoring contracts with recourse, in which
amounts are not advanced, are recorded in the off-balance sheet
caption, CONTRACTS WITH RECOURSE – INVOICES NOT FINANCED, by the
amount of the invoices received. The balance of this caption is
reduced as the invoices are settled.
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Commitments resulting from unused credit lines negotiated with
Customers are recorded as off-balance sheet items.
Securitized credit not derecognized
The Bank does not derecognize credits sold in securitisation
operations when:
j
it retains control over the operations;
j
it continues to receive a substantial part of the remuneration;
j
it retains a substantial part of the risk on the credits transferred.
Credits sold that have not been derecognized are recorded in the
caption LOANS AND ADVANCES TO CUSTOMERS and are subject to the
accounting principles used for other credit operations. Interest,
commission and fees relating to the securitized loan portfolio are
accrued over the period of the credit operation.
In accordance with IAS 39 a financial asset is considered to be
impaired when there is evidence that one or more loss events have
occurred after initial recognition of an asset, and such events have
an impact on the estimated recoverable value of the future cash
flows of the financial asset considered.
IAS 39 defines some events that may be considered as objective
evidence of impairment (breach of contract, such as delay in the
payment of principal or interest; probability that the borrower will
become bankrupt, etc.). However, in certain circumstances
determination of impairment loss requires professional judgement.
Objective evidence of impairment situations is assessed as of the
date of the financial statements.
Impairment assessment is made based on individual credits where
they are significant in amount and on an individual or collective
basis where the credits are not significant in amount.
Amounts received relating to securitization operations are recorded
under the caption FINANCIAL LIABILITIES RELATING TO TRANSFERRED ASSETS.
The respective interest, commission and fees are accrued based on
the remuneration ceded by the Bank, in accordance with the
expected average life of the securitisation operation at the launching
date.
BPI’s loan portfolio is segmented as follows for purposes of
determining impairment:
The risks and / or benefits maintained are represented by the bonds
with the highest degree of risk, issued by the securitization vehicle.
The amount recorded in assets and liabilities represents the
proportion of risk / benefit held by the Bank (continuing
involvement).
j
Bonds issued by securitisation vehicles and held by BPI Group
entities are eliminated in the consolidation process.
Impairment losses relating to the Corporate Banking, Project
Finance, Institutional Banking and the State Business Sector
segments are determined on an individual basis whenever the credits
show signs of impairment or are in default. Credit operations in these
segments that do not show signs of impairment, as well as operations
of the other segments are subject to collective assessments to
determine the amount of the related impairment.
Securities under repurchase and resale agreements
Securities purchased with resale agreements are not recorded in the
securities portfolio. Funds paid are recorded as loans at the
settlement date, while interest is accrued.
Securities sold with repurchase agreements are maintained in their
original securities portfolio. Funds received are recorded in the
corresponding liability caption at the settlement date, while interest
is accrued.
Guarantees given and irrevocable commitments
Guarantees given and irrevocable commitments are recorded in offbalance sheet accounts by the amount at risk, while interest,
commission, fees and other income are recorded in the statement of
income over the period of the operations. These operations are
subject to impairment tests.
Impairment
Loans, other receivables and guarantees given are subject to monthly
impairment tests. Impairment losses identified are recorded by
corresponding charge to the statement of income for the year. If, in
subsequent periods, there is a decrease in the estimated impairment
loss, the impairment loss initially recorded is reversed by credit to
the statement of income.
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j
j
j
j
j
j
Corporate Banking;
private individuals and small businesses;
specialised credit: housing loans, equipment leasing, real estate
leasing, vehicle financing, consumer credit and credit cards;
commercial portfolio: discounts, credit with a plan, credit without a
plan and overdrafts;
Project Finance;
Institutional Banking and the State Business Sector;
others.
Individual assessment
In the case of assets for which there is objective evidence of
impairment on an individual basis, impairment is calculated
operation by operation, based on the information included in the
Bank’s credit risk analysis models which consider, among others, the
following factors:
j
overall exposure of the Customer and nature of the liabilities
contracted with the Bank: financial or non financial operations
(namely, liabilities of a commercial nature or performance
guarantees);
j
notation of client risk determined based on a calculation system
implemented by the BPI Group. The risk notation includes, among
others, the following characteristics:
j
financial situation of the Customer;
j
risk of the business sector in which the Customer operates;
j
quality of management of the Customer, measured by the
experience in the relationship with the BPI Group and the
existence of incidents;
The inputs used for calculating collective impairment are determined
based on statistical models for credit groups and revised regularly to
approximate the estimated amounts to the actual amounts.
j
quality of the accounting information presented;
j
nature and amount of the guarantees relating to the liabilities
contracted with the Bank;
For exposures with objective evidence of impairment, the amount of
the loss results from a comparison of the book value with the present
value of the estimated future cash flows. The interest rate of the
operations at the date of each assessment is used to calculate the
present value of the future cash flows.
j
non-performing loans for a period exceeding 30 days.
2.2.5. Deposits and other resources
In such situations the amount of the loss is calculated based on the
estimated recoverable amount of the credit, after recovery costs,
discounted at the effective rate of interest during the period from the
date the impairment to the expected date of recovery.
The expected recoverable amount of the credit reflects the cash
flows that can result from execution of the guarantees or collateral
relating to the credit granted, less costs of the recovery process.
Assets evaluated individually, for which there are no objective signs
of impairment, are included in a group of assets with similar credit
risks, and impairment losses are assessed collectively.
Impairment for these groups of assets is assessed as explained in the
following section – Collective assessment.
Assets assessed individually, for which an impairment loss is
recognised, are excluded from the collective assessment.
Collective assessment
Future cash flows of groups of credit subject to collective impairment
assessment are estimated based on the past experience of losses on
assets with similar credit risk characteristics.
After initial recognition, deposits and other financial resources of
Customers and credit institutions are valued at amortised cost, using
the effective interest rate.
This category includes life capitalisation insurance without a
discretionary participation feature.
Deposits designated as hedged liabilities are valued as explained in
note 2.2.7 Hedge Accounting – derivatives and hedged instruments.
2.2.6. Debt securities issued by the Bank
Debt securities issued by the Bank are recorded under the captions
SUBORDINATED DEBT and DEBT SECURITIES.
At the date of issue, debt securities are recorded at fair value (issue
value), including transaction expenses, commission and fees, and
subsequently valued at amortised cost using the effective interest
rate method.
Derivatives embedded in bonds are recorded separately and revalued
at fair value through the statement of income.
Bonds designated as hedged liabilities are valued as explained in
note 2.2.7. Hedge Accounting – derivatives and hedged instruments.
Collective assessment involves estimating the following risk factors:
j
the possibility of a performing operation or Customer coming to
show signs of impairment through delays arising during the
emergence period (period between the occurrence of a loss event
and identification of that event by the Bank).
In accordance with IAS 39 these situations correspond to losses
incurred but not reported, that is cases in which, for part of the
credit portfolio, the loss event has already occurred, but the Bank
has not yet identified it;
j
j
the possibility of an operation or Customer that has already had
delays, going into default (situations of legal collection) during the
remaining period of the operation;
financial loss on operations in default.
For purposes of determining the percentage of estimated loss on
operations or Customers in default, the Bank considers payments by
Customers after default, less direct costs of the recovery process.
The flows considered are discounted at the interest rate of the
operations and compared to the exposure at the time of default.
Bonds issued by the Bank can be listed, or not, on the Stock
Exchange.
Secondary market transactions
The Bank repurchases bonds issued in secondary market. Purchases
and sales of own debt securities are included proportionately in the
respective captions of debt issued (PRINCIPAL, INTEREST, COMMISSION,
FEES and DERIVATIVES), and the differences between the amount
liquidated and the decrease or increase in the amount of the liability
are immediately recognised in the statement of income.
2.2.7. Hedge accounting – derivatives and hedged instruments
The BPI Group designates as hedging instruments contracted
derivatives to hedge interest rate and foreign exchange rate risk (fair
value hedge operations) on financial assets and liabilities identified
individually (bond portfolio, issuance of own debt securities and
loans), and on groups of operations (term deposits and fixed rate
loans).
The BPI Group has formal documentation of the hedge relationship
identifying, at the inception of the transaction, the instrument (or part
of the instrument, or part of the risk) that is being hedged, the
strategy and type of risk being hedged and the methods used to
demonstrate the effectiveness of the hedge.
Monthly, the Bank tests the effectiveness of the hedge by comparing
changes in the fair value of the hedged instrument, attributable to the
hedged risk, with changes in the fair value of the hedging derivative, the
relationship between them being within the range of 80% to 125%.
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Hedging derivative instruments are recorded at fair value and the
gains and losses resulting from their revaluation are recognised in
the statement of income. Gains and losses resulting from changes in
the fair value of hedged financial assets or liabilities, attributable to
the hedged risk, are also recognised in the statement of income, by
corresponding entry to the book value of the hedged asset or liability
in the case of operations at amortised cost (loans, deposits and debt
issued) or to the fair value revaluation reserve in case of financial
assets available for sale (bonds portfolio).
As established in IFRS 1, tangible assets acquired by the BPI Group
up to 1 January 2004 have been recorded at their book value at the
date of transition to IAS / IFRS, which corresponds to cost adjusted
for revaluations recorded in accordance with the legislation, based on
price level indices. In accordance with current tax legislation, 40%
of the additional depreciation charge resulting from such revaluations
is not deductible for income tax purposes, the resulting deferred tax
liability being recognised.
Tangible assets acquired under finance lease
A hedged asset or liability may have only one part or one component
of its fair value hedged (interest rate risk, foreign exchange rate risk
or credit risk), provided that the effectiveness of the hedge can be
measured separately.
Tangible assets acquired under finance lease operations, in which
the Bank has all the risks and rewards of ownership, are depreciated
in accordance with the procedures explained in the preceding
section.
When using hedge accounting, the Bank does not value the
commercial spreads of the hedged assets or liabilities.
Lease instalments comprise an interest charge and a principal
repayment component. The liability is reduced by the amount
corresponding to the principal repayment component of each of the
instalments and the interest is reflected in the statement of income
over the term of the lease
If the hedging relationship ceases to exist as a result of the
relationship between the fair value changes of the derivatives and the
hedged instruments being outside the 80% to 125% range, the
derivatives are reclassified to trading instruments and the amount of
the revaluation of the hedged instrument is recognised in the
statement of income for the remaining period of the operation.
Hedging effectiveness tests are duly documented on a monthly basis,
thus ensuring the existence of evidence during the period of the
operation.
2.2.8. Foreign currency financial assets and liabilities
Foreign currency financial assets and liabilities are recorded in
conformity with the multi-currency system that is in their original
currencies.
Foreign currency assets and liabilities are translated to Euro at the
official market rates published by the Bank of Portugal.
Foreign currency income and expenses are translated to Euro at the
exchange rates in force on the dates they are recognised.
2.4. Tangible assets available for sale
Assets (property, equipment and other assets) received as settlement
of loan operations are recorded in the caption OTHER ASSETS as they
are not always in condition to be sold immediately and may be held
for periods in excess of one year. Such assets are recorded at the
amount stated in the settlement agreement, which is the lower of the
amount of the outstanding debt or the appraised value as of the date
of the agreement. Such property is subject to periodic appraisals,
with impairment losses being recorded whenever the appraised value
(net of costs to sell) is lower than its book value.
The caption OTHER ASSETS also includes the Bank’s tangible assets
retired from use (unused property and equipment) which are in the
process of sale. Such assets are transferred from tangible assets at
their book value in accordance with IAS 16 (cost less accumulated
depreciation and impairment losses) when they become available for
sale, and are subject to periodic appraisals with impairment losses
being recorded whenever the appraised value (net of selling costs) is
lower than their book value.
2.3. Tangible assets (IAS 16)
Tangible assets used by the Bank in its operations are stated at cost
(including directly attributable costs) less accumulated depreciation
and impairment losses.
Unrealised gains on other assets are not recognised on the balance
sheet.
2.5. Intangible assets (IAS 38)
Depreciation of tangible assets is recorded on a straight-line basis
over their estimated useful lives, which corresponds to the period the
assets are expected to be available for use:
Useful life (years)
Property
Improvements in owned property
Non-recoverable expenditure capitalized
on leasehold buildings
Equipment
20 to 50
10 to 50
3 to 10
3 to 12
3 to 10
Non-recoverable expenditure on improvements in leasehold buildings
is depreciated in accordance with its estimated useful life or the
remaining period of the lease contract.
144
The Bank recognises, in this caption, expenses relating to the
development stage of projects implemented and to be implemented,
as well as the cost of acquiring software, in both cases where the
impact extends beyond the financial year in which the cost is
incurred.
Intangible assets are amortised on a straight-line monthly basis over
the estimated period of useful life of the assets which, in general,
corresponds to a period of three years.
To date the Bank has not recognised any intangible assets generated
internally.
2.6. Retirement and survivor pensions (IAS 19)
The majority of Employees of the BPI Group are not covered by the
Portuguese Social Security system. The BPI Group companies that
have adhered to the Collective Vertical Labour Agreement (Acordo
Colectivo de Trabalho Vertical) for the Portuguese Banking Sector
have assumed the commitment to pay their Employees or their
families, pensions for retirement due to age or incapacity, pensions
for early retirement or survivor pensions (defined benefit plan). The
pensions consist of a percentage, which increases with the number
of years of service of the Employees, applied to their salaries.
Annually, the BPI Group determines the amount of its past service
liability by actuarial calculation using the “Projected Unit Credit”
method in the case of retirement due to age, and the “Single
Successive Premiums” method in the case of retirement due to
incapacity and survivor benefits. The actuarial assumptions used
(financial and demographic) are based on the expectations, as of the
balance sheet date, regarding salary and pension increases, using
mortality tables adapted to the Bank’s population. The discount rate
is determined based on market rates for high quality corporate bonds
with similar terms to those of the related pension liability. An
analysis of actuarial assumptions and, if applicable, their
corresponding change, is carried out by the BPI Group as of 30 June
and 31 December of each year. In 2009 the BPI Group updated the
actuarial assumptions as of 31 December. At 30 June and
31 December 2010, the BPI Group did not change the actuarial
assumptions because it considers that the assumptions as of
31 December 2009 are still applicable considering the current
market conditions and expectations at the balance sheet date. The
updating of these assumptions is reflected prospectively in pension
costs and in the determination and amortization of actuarial
deviations that exceed the corridor. The amount of the liability
includes, in addition to the retirement pension benefits, postemployment healthcare benefits (SAMS) and death subsidy during
retirement.
j
the establishment of a transitory period to fund the increase in the
liability resulting from application of IAS 19 at 31 December
2004. This increase in the liability can be financed through the
application of an amortization plan of uniform instalments up to 31
December 2009, except for the part concerning the liability for
post-employment medical care and changes in actuarial
assumptions relating to the mortality table for which the funding
plan can go up to 31 December 2011;
j
at 31 December 2005 the Bank opted to fund the full amount of
the liability for retirement pensions of its Employees and so is not
applying the uniform amortisation plan allowed by the Bank of
Portugal.
The past service liability for retirement pensions net of the amount of
the pension fund is recorded in the BPI Group’s financial statements
under the caption OTHER LIABILITIES (insufficient coverage) or OTHER
ASSETS (excess coverage).
The following costs relating to retirement and survivor pensions are
included in the consolidated statement of income of the BPI Group:
j
j
j
j
j
j
The BPI Group recognises, under the caption OTHER ASSETS or OTHER
LIABILITIES – ACTUARIAL DEVIATIONS, the net accumulated amount (after
1 January 2004) of actuarial gains and losses resulting from changes
in the actuarial and financial assumptions, as well as differences
between the actuarial and financial assumptions used and the actual
amounts. A corridor has been established to absorb accumulated
actuarial gains and losses of up to 10% of the higher of the present
value of the past service liability or the amount of the pension fund.
Amounts that exceed the corridor are amortised to the statement of
income over the average period up to the expected retirement age of
the Employees covered by the plan, which at 31 December 2010
corresponded to 21 years.
The increase in the past service liability resulting from early
retirements is fully recognised as cost in the statement of income for
the year.
Increases in the past service liability resulting from changes in the
conditions of the Pension Plans are recognised in full as costs in the
case of vested benefits, or amortised over the period up to the time
the benefits become vested. The amount of the liabilities not yet
recognised as cost is reflected in the caption OTHER ASSETS.
The past service liability (post employment benefits) is covered by
Pension Funds. The value of the Pension Funds corresponds to the
fair value of their assets at the balance sheet date.
The funding requirements of the Pension Fund are defined in Bank
of Portugal Notice 4 / 2005, which establishes:
j
current service cost (cost for the year);
interest cost on the total liability;
expected income of the Pension Funds;
cost relating to the increase in the past service liability due to early
retirements;
amortisation of the actuarial deviations or changes in assumptions
outside the corridor;
cost (or amortisation) resulting from changes in the conditions of
the Pension Plan.
At the transition date, the BPI Group adopted the option, allowed
under IFRS 1, of not recalculating actuarial gains and losses
deferred since the inception of the pension plans (reset option).
Consequently, deferred actuarial gains and losses reflected in the
BPI Group’s financial statements as of 31 December 2003 were
reversed by corresponding entry to retained earnings at the transition
date (1 January 2004).
2.7. Long service premiums (IAS 19)
The BPI Group companies that have adhered to the Collective
Vertical Labour Agreement (Acordo Colectivo de Trabalho Vertical) for
the Portuguese Banking Sector have assumed the commitment to
pay current Employees that have fifteen, twenty five or thirty years of
good service to the Group companies, a long service premium
corresponding, respectively, to one, two or three months of their
effective monthly remuneration (in the year the premium is
attributed).
Annually, the BPI Group determines the present value of the liability
for long service premiums by actuarial calculation using the
“Projected Unit Credit” method. The actuarial assumptions used
(financial and demographic) are based on the expectations, as of the
balance sheet date, regarding salary increases, using mortality tables
adapted to the Bank’s population. The discount rate used is
determined based on market rates for high quality corporate bonds
with similar terms to those of payment of the liability. The
assumptions are mutually compatible.
the requirement to fully fund pensions under payment and a
minimum of 95% of the past service liability for current personnel;
145
The liability for long service premiums is reflected under the caption
OTHER LIABILITIES.
The following costs relating to the liability for long service premiums
are included in the consolidated statement of income of the BPI
Group:
j
current service cost (cost for the year);
j
interest cost;
j
gain and loss resulting from actuarial deviations, changes in
assumptions or changes in the conditions of the benefits.
For the purpose of share-based payments, the Bank has created a
portfolio of BPI shares transferring ownership of the shares to
Employees on the grant date. However, for accounting purposes, the
shares remain in the Bank’s treasury share portfolio until the date
they are made available. The shares are then derecognised by
corresponding entry to the amounts accumulated under the caption
OTHER EQUITY INSTRUMENTS.
For purposes of the share-based payment in options, the BPI Group
has created a portfolio of BPI shares in order to hedge the liability
resulting from issuing call options over the BPI shares, following a
delta hedging strategy (determined using a model to evaluate the BPI
share options, developed in-house based on Black-Scholes
methodology).
2.8. Treasury shares (IAS 32)
Treasury shares are recorded at cost in equity captions and are not
subject to revaluation. Realised gains and losses, as well as the
resulting taxes, are recorded directly in shareholders’ equity, not
affecting net income for the year.
2.9. Share-based payments (Remuneração variável em acções –
RVA) (IFRS 2)
The share-based payment program (Remuneração Variável em Acções –
RVA) is a remuneration plan under which, whenever it is decided to
grant variable remuneration to Executive Directors and Employees of
the BPI Group (in the latter case provided that it exceeds 2 500 euro)
it is made up of BPI shares and BPI share options. The individual
remuneration under the RVA program varies between 10% and 50%,
the percentage increasing with the responsibility level of the
beneficiary.
The shares granted to Employees under the RVA program are
transferred in full at the grant date, but 75% of the transfer is subject
to a resolutive condition (relating to termination of the employment
relationship, unless made by just cause of the Employee), which
terminates on a gradual basis over the three years following the grant
date (25% each year). The share purchase options may be exercised
between the 90th day and the fifth year as from the grant date. The
termination of the employment relationship between the Employee and
BPI Group also affects the options granted, in accordance with RVA
Regulations.
The shares and share options granted to the Executive Directors under
the RVA program are subject to the following suspensive condition:
Banco BPI’s consolidated shareholders’ equity, based on the
consolidated accounts for the third year following that to which the
variable remuneration relates, must be greater than Banco BPI’s
consolidated shareholders’ equity for the year to which the variable
remuneration relates, observing the assumptions established in the
RVA Regulations. The granting of shares is also subject to the
suspensive condition of non termination of the management or
employment relationship established in the RVA Regulations. In
addition to these conditions, the granting of the shares is also subject
to a suspensive term of three years as from the grant date and the
share options only become due after the same period.
Costs relating to the share-based payment program (RVA program)
are accrued under the caption PERSONNEL COSTS with a corresponding
entry to OTHER EQUITY INSTRUMENTS, as established by IFRS 2 for
share-based payments. The cost of the shares and option premiums,
as of the date they are granted, is accrued on a straight-line basis
from the beginning of the year of the program (1 January) to the
moment they become available to the Employees.
146
This strategy corresponds to the creation of a portfolio with delta
shares for each option granted, delta corresponding to the
relationship between evolution of the price of an option and evolution
of the price of the underlying shares. The treasury shares held to
hedge the risk of variation in the value of the options sold are
recorded under the caption TREASURY SHARES HEDGING THE SHARE-BASED
PAYMENT PROGRAM, where they remain while they are held for that
purpose.
When the options are exercised, the treasury shares are derecognised
together with transfer of their ownership to the Employees. At that
time the Bank recognises a gain or loss resulting from the difference
between the exercise price and the average cost of the treasury share
portfolio hedging each program, less the cost of the option premiums
accumulated in the caption OTHER EQUITY INSTRUMENTS.
Realised gains and losses on treasury shares in the coverage and
exercise of the options of the share-based payment program, as well
as the related taxes, are recorded directly in shareholders’ equity, not
affecting net income for the year.
2.10. Technical provisions (IFRS 4)
The BPI Group sells capitalisation life insurance products through its
subsidiary BPI Vida. Capitalisation insurance products without
discretionary participation features are recorded in accordance with
IAS 39 and included in the caption RESOURCES OF CUSTOMERS AND
OTHER DEBTS. Capitalisation insurance products with discretionary
participation features are recorded in accordance with IFRS 4, in the
caption TECHNICAL PROVISIONS.
The technical provisions recorded for life insurance contracts
represent, collectively, the liability to the insured Customers and
include:
j
mathematical provisions determined using prospective actuarial
methods in accordance with the technical bases of each product.
They also include a provision for rate commitments, which is
recorded when the effective profitability rate of the assets which
represent the mathematical provisions of a certain product is lower
than the technical interest rate used to calculate the mathematical
provisions.
j
provision for participation in profits to be attributed to the
contracts in force at the end of each year. The amount is
calculated in accordance with the technical bases of each contract,
duly approved by the Portuguese Insurance Institute (Instituto de
Seguros de Portugal), using the profitability rates for investments
covering the respective mathematical provisions.
j
provision for claims to cover indemnities payable relating to claims
incurred but not yet settled. Since the BPI Group does not
commercialise risk insurance, no provision has been recorded for
claims incurred but not yet reported (IBNR).
Net income distributed to Banco BPI by subsidiary and associated
companies in Portugal are not taxed in Banco BPI as a result of
application of the regime established in article 51 of the Corporate
Income Tax Code, which provides for the elimination of double taxation
of net income distributed.
2.11. Provisions for other risks and charges (IAS 37)
This caption includes provisions to cover other specific risks, namely
tax contingencies, legal processes and other losses arising from the
operations of the BPI Group.
2.13. Preference shares (IAS 32 and IAS 39)
Preference shares are classified as equity instruments when:
j
there is no contractual obligation for the BPI Group to redeem the
preference shares acquired by a holder (in cash or in another
financial asset);
j
remission or early redemption of the preference shares can only be
made at the option of the BPI Group;
j
dividends distributed by the BPI Group to the preference
shareholders are discretionary.
2.12. Income taxes (IAS 12)
All the Group companies are taxed individually.
Banco BPI and its subsidiary and associated companies with head
offices in Portugal are subject to the tax regimes established in the
Corporate Income Tax Code (Portuguese initials – CIRC) and in the
Statute of Tax Benefits.
The Madeira and Santa Maria Off-shore Financial Branches of Banco
BPI are exempt from corporate income tax up to 31 December 2011,
in accordance with article 31 of the Statute of Tax Benefits. Under
the provisions of Ministerial Order 555 / 2002 of 4 June, for the
purpose of applying this exemption, at least 80% of the taxable
income from Banco BPI’s global operations is considered to result
from activities outside the institutional scope of the Madeira and
Santa Maria Free Trade Zones. This regime came into force on
1 January 2003.
The BPI Group classified the preference shares issued by BPI Capital
Finance Ltd. as equity instruments. The payment of dividends and
redemption of the shares are guaranteed by Banco BPI.
The preference shares classified as equity instruments, held by third
parties, are presented in the consolidated financial statements in the
caption MINORITY INTERESTS.
2.14. Insurance and reinsurance brokerage services
Current taxes are calculated based on the legal tax rates in force in
the countries in which the Bank operates during the reporting period.
Deferred tax assets and liabilities correspond to the tax recoverable and
payable in future periods resulting from temporary differences between
the carrying value of assets and liabilities and their respective tax bases.
Tax losses carried forward and tax credits also give rise to the
recognition of deferred tax assets.
Deferred tax assets are recognised only to the extent of the probable
existence of sufficient expected future taxable income to absorb the
deductible temporary differences.
Deferred tax assets and liabilities have been calculated using the tax
rates decreed for the period in which the respective assets or liabilities
are expected to be realised.
Banco BPI is duly authorized by the Portuguese Insurance Institute
(Instituto de Seguros de Portugal) to provide insurance brokerage
services, in the Insurance Brokerage Services area, in accordance
with the article 8, paragraph a), subparagraph i) of Decree-Law 144 /
2006 of 31 July, operating in the life and non life insurance
brokerage areas.
In the insurance brokerage services area, Banco BPI sells insurance
contracts. As remuneration for the insurance brokerage services
rendered, Banco BPI receives commission for brokering insurance
contracts, which is defined in agreements / protocols established
between Banco BPI and the Insurers.
Commission received for insurance brokerage services refer to:
j
commission that includes a fixed and a variable component. The
fixed component is calculated by applying a predetermined rate
over the amounts of subscriptions made through Banco BPI and a
variable component calculated based on predetermined criteria,
total annual fees being the sum of the fees calculated monthly;
j
commission for participation in the results of insurance, which are
calculated annually and paid by the insurer in the beginning of the
year following that to which they refer (up to 31 January).
Current and deferred taxes are recognised in the statement of income,
except for those relating to amounts recorded directly in shareholders’
equity (namely gains and losses on treasury shares and securities
available for sale).
The BPI Group does not record deferred tax assets and liabilities on
temporary taxable differences relating to investments in subsidiary and
associated companies, as these differences are not expected to revert in
the foreseeable future, except for the following:
j
deferred tax liabilities relating to the estimated dividends that
Banco de Fomento Angola is expected to pay to the BPI Group
companies in the next year out of net income for the year, are
recognized;
j
deferred tax liabilities relating to all distributable net income
(including the undistributed part) of Banco Comercial e de
Investimentos are recognized.
Commission received for insurance brokerage services are recognized
in an accruals basis. Fees paid in a different period from that to
which it relates is recorded as a receivable in the caption OTHER
ASSETS by corresponding entry to COMMISSIONS RECEIVED – FOR INSURANCE
BROKERAGE SERVICES.
147
Banco BPI does not collect insurance premiums on behalf of
Insurers, or receive or pay funds relating to insurance contracts.
Thus, there are no other assets, liabilities, income or expenses to be
recognized relating to the insurance brokerage services rendered by
Banco BPI, other than those already disclosed.
Commercial banking
The BPI Group’s operations are focused mainly on commercial
banking. Commercial banking includes:
j
Retail banking – Retail banking includes commercial operations
with private clients, businesses and sole traders with turnover of up
to 2.5 million euro through a multi-channel distribution network
made up of commercial branches, investment centres, home
banking services (BPI Net), telephone banking (BPI Directo),
specialised branches and a network of external promoters.
j
Corporate banking – Corporate banking includes commercial
operations with private, public and municipal companies and
public sector organisations (including the Central and Local
Administration), as well as Foundations and Associations. Corporate
banking also includes Project Finance and Public-Private
Partnership operations in the commercial promotion area,
structuring and organising financial operations and consultancy
services relating to this area.
2.15. Main estimates and uncertainties regarding the application
of the accounting standards
The BPI Group’s financial statements have been prepared using
estimates and expected future amounts in the following areas:
Retirement and survivor pensions
Retirement and survivor pension liabilities and Pension Fund income
have been estimated based on actuarial tables and assumptions of
the increase in pensions and salaries and future income of the
Pension Funds. These assumptions are based on the BPI Group’s
expectations for the period during which the liabilities will be settled.
Loan impairment
Loan impairment has been determined based on expected future
cash flows and estimated recoverable amounts. The estimates are
made using assumptions based on the available historical
information and assessment of the situation of the Customers.
Possible differences between the assumptions used and the actual
future behaviour of the loans and changes in the assumptions used
by the BPI Group have an impact on the estimates.
Investment banking
Investment banking covers the following business areas:
j
Brokerage – includes brokerage (purchase and sale of securities) on
account of Customers;
j
Private Banking – Private Banking is responsible for implementing
strategies and investment proposals presented to Customers and
managing all or part of their financial assets under management
mandates given to the Bank. In addition, Private Banking provides
asset management, tax information and business consulting
services;
j
Corporate Finance – This includes rendering consultancy services
relating to the analysis of investment projects and decisions,
market privatisation operations and the structuring of merger and
acquisition processes.
Fair value of derivatives and unlisted financial assets
The fair value of derivatives and unlisted financial assets was
estimated based on valuation methods and financial theories, the
results of which depend on the assumptions used.
The environment of the financial markets, particularly in terms of
liquidity, can influence the realisable value of these financial
instruments in some specific situations, including their sale prior to
maturity.
Income taxes
Current and deferred taxes have been recognised based on the tax
legislation currently in force for the BPI Group companies or on
legislation already published for future application. Different
interpretations of tax legislation can influence the amount of income
taxes. Additionally, deferred tax assets are recognised based on the
assumption of the existence of future taxable income.
Equity investments and others
3. SEGMENT REPORTING
This segment also includes the Bank’s residual activity, such
segments representing individually less than 10% of total income,
net profit and the Group’s assets.
The BPI Group’s segment reporting is made up as follow:
j
Domestic activity: is the activity related to banking services
provided to domestic Customers, including members of emigrant
communities and subsidiaries of Portuguese companies, and
includes:
j
j
j
j
Commercial Banking;
Investment Banking;
Equity investments and others.
International activity: is the activity carried out in Angola by Banco
de Fomento, S.A, and in Mozambique by Banco Comercial de
Investimentos, S.A.R.L. and by BPI Dealer – Sociedade Financeira
de Corretagem, S.A.R.L.
148
This segment includes essentially Financial Investments and Private
Equity activities. The BPI Group Private Equity area invests
essentially in unlisted companies with the following objectives: the
development of new products and technologies, financing of
investments in working capital, acquisitions and the strengthening of
financial autonomy.
Inter-segment operations are presented based on the effective
conditions of the operations and application of the accounting
policies used to prepare the BPI Group’s consolidated financial
statements.
The reports used by Management consist essentially of accounting
information based on IFRS.
149
Investments made in:
Property
Equipment and other tangible assets
Intangible assets
65
11 792
1 768
ASSETS
475 516
Loans and advances to other credit institutions
repayable on demand
539 341
1 041 226
6 039 361
3 167 783
28 741 641
1 022 077
Hedging derivatives
305 089
133 837
Intangible assets
5 711
Investment in associated companies
and jointly controlled entities
76 195
Tax assets
427 470
Other assets
987 023
Total assets
42 962 270
LIABILITIES
1 245 537
332 195
8 616 782
17 364 900
Debt securities
7 934 078
1 570 774
Hedging derivatives
503 423
Provisions
78 608
2 615 888
Tax liabilities
27 835
Participating bonds
7 167
Subordinated debt
898 314
Other liabilities
513 512
Total liabilities
41 709 013
Shareholders' equity attributable to the shareholders of BPI 1 000 255
Minority interest
253 002
1 253 257
42 962 270
Commercial
banking
159
18
132 880
141 894
132 880
4 603
9 014
10 089
64 849
4 183 534
56 066
17 365
73 431
4 256 965
(2 271)
6 682
95 457
(194)
1 151
141 894
1
38 062
2 883
245
446
376 019
4 181
73 498
23 274
3 630 833
100
3 327
57 151
4 256 965
306
539
812
374
918
161
2 243
45
246
36
3 522
146
146
1
6
1
28
1
403)
234)
411)
987)
168
113
437
865
043
250
136
5
700
962
075
781
584
263
081
756
65
11 951
1 786
1 189 201
270 367
1 459 568
(6 092 601) 41 268 528
(144 200)
(3 504 254)
(1 969 622)
(151 904)
(356)
(4 224)
1 245 537
261 493
5 142 484
19 026 111
7 782 274
1 570 418
499 444
79 054
2 991 907
29 745
7 167
(268 014)
640 389
(50 027)
532 937
(6 092 601) 39 808 960
171 652
430 603
(136 807)
908 518
(6 092 601) 41 268 528
(5 256
(22
(125
(54
(118 832)
260 769
94 821
Total
475 784
(377 927)
Inter segment
operations
268
4 534
Investment
Equity investbanking ments and others
Domestic operations
951
359
924
225
23 037
5
23 042
23 055
234 338
247 000
481 338
4 858 099
3 632
19 794
177
13
13
49 038
4 376 761
3 632
19 794
177
257 375
247 005
504 380
4 881 154
49 051
4 376 774
7 983
7 983
73 469
4 214 752
22 569
7
15 266
4 881 154
115 996
622
72
2 042
470
1 189
31 519
22 569
7
3
23 055
2
55
98 797
852 438
Total
31 519
73 469
4 214 752
15 263
4 858 099
115 996
622
896
359
922
225
9
98 788
72
2 042
470
1 189
410
852 028
Angola Mozambique
The BPI Group’s balance sheet as of 31 December 2010 and investments made in tangible and intangible assets during the year, by segment, are as follows:
(489 869)
(489 869)
(489 869)
(489 869)
(468 854)
(21 015)
Inter
segment
operations
241
156
439
055
043
250
252
6
651
321
145
006
584
263
077
378
3 697
31 745
1 963
1 446 576
517 372
1 963 948
45 659 813
1 245 537
261 493
4 726 084
23 240 863
7 782 274
1 570 418
499 444
110 573
2 991 907
37 728
7 167
640 389
581 988
43 695 865
194 221
430 610
923 784
45 659 813
1
8
1
30
1
338 551
1 328 222
BPI Group
150
416 188
1 195
3 227
30 266
Financial margin
450 876
15 955
Commission received
276 448
Commission paid
(63 982)
Other income, net
24 489
236 955
19 324
(8 143)
12 201
23 382
Operating income
14 104
Operating expenses
(23 029)
Other taxes
(4 792)
Net operating expenses
(13 717)
713 451
Personnel costs
(361 379)
(174 812)
(32 582)
Overhead costs
(568 773)
13 751
Impairment losses and provisions for loans
and guarantees, net
(100 482)
(22 076)
35 871
Income tax
5 742
16 203
57 816
(6 831)
50 985
Cash flow after taxes
206 125
Overheads as a % of operating income from banking activity
80%
Commercial
banking
7 009
(185)
6 824
7 953
81%
536
(274)
7 827
(818)
5 930
126
42 493
(12 506)
57
30 044
5 508
19
(4)
5 523
546
(865)
(787)
(1 106)
40 517
(20 292)
(11 269)
(1 391)
(32 952)
2 852
2 941
137
28 729
28 767
2%
(37)
21 521
393
6 815
28 729
21 999
1 067
(7)
(7)
1 053
21 986
(174)
(253)
(1)
(428)
21 999
385
389
(4)
(1 451)
369
(1 820)
Investment
Domestic operations
(33 663)
33 663
Inter segment
operations
The BPI Group’s income statement for the year ended 31 December 2010, by segment, is as follows:
(99 946)
(22 387)
65 219
5 317
23 018
93 554
(7 016)
86 538
242 845
78%
417 220
4 136
3 733
30 266
455 355
16 081
285 667
(42 829)
24 546
267 384
24 832
13 875
12 197
50 904
15 717
(23 901)
(5 586)
(13 770)
775 954
(381 845)
(186 334)
(33 974)
(602 153)
13 751
Total
191 386
(98 716)
92 670
131 784
33%
(21 170)
(6 735)
190 333
1 053
68 253
726
(1 263)
(577)
(1 114)
322 801
(49 659)
(45 814)
(11 209)
(106 682)
2 119
23 979
(4 865)
27 382
46 496
68 243
10
209 166
209 166
5 588
5 588
(5)
(520)
6 113
5 588
(11)
1
6
(11)
2
(1)
5
5
Angola Mozambique
23 979
(4 865)
27 382
46 496
68 243
10
209 171
209 171
Total
(21 170)
(6 735)
190 328
533
6 113
196 974
(98 716)
98 258
137 372
33%
68 253
728
(1 264)
(577)
(1 113)
322 807
(49 670)
(45 814)
(11 209)
(106 693)
2 119
(1 499)
1 499
Inter
segment
operations
(121 116)
(29 122)
255 547
5 850
29 131
290 528
(105 732)
184 796
380 217
65%
626 391
4 136
3 733
30 266
664 526
16 081
308 147
(46 195)
51 928
313 880
93 075
13 885
12 197
119 157
16 445
(25 165)
(6 163)
(14 883)
1 098 761
(431 515)
(232 148)
(45 183)
(708 846)
15 870
BPI Group
151
Investments made in:
Property
Equipment and other tangible assets
Intangible assets
ASSETS
Loans and advances to other credit institutions
repayable on demand
Hedging derivatives
Intangible assets
Investment in associated companies and
jointly controlled entities
Tax assets
Other assets
Total assets
LIABILITIES
Debt securities
Hedging derivatives
Provisions
Tax liabilities
Participating bonds
Subordinated debt
Other liabilities
Total liabilities
Shareholders' equity attributable to the
shareholders of BPI
Minority interest
69 962
1
69 963
2 812 985
1 475 593
262 628
1 738 221
46 214 336
1
194
40
1 022
5 976
11 607
31 636
2 743 022
45
12 094
2 372
(2 271)
2
101 546
107 522
101 546
54
6 304
867
192 171
28 394
2 140 845
139
(2 316)
830
481
337 419
1 816
65 258
(47)
978
107 522
1
37 943
1 378
2 010
1
2 773 383
510 215
7 916 802
17 998 178
9 208 205
1 765 432
429 098
63 048
1 802 018
36 607
11 792
1 212 294
749 043
44 476 115
5 125
56 927
2 812 985
75 597
208 417
1 000 937
46 214 336
397
45
1 902
146
142
496
539
612
824
650
220
2 648
40
675
675
613
638
761
318
150
9
112 734
485 449
282
085
825
846
834
302
718
112
1
7
4
28
170
Investment
600 932
Commercial
banking
Domestic operations
1
7
2
28
388
761
343
739
803
316
153
9
030
744
658
915
124
455
367
152
262 392
601 103
Total
46
12 290
2 412
1 647 101
262 629
1 909 730
(5 485 548) 43 649 295
2 773 383
318 852
4 963 057
19 032 580
9 083 621
1 764 610
423 811
63 583
2 139 437
36 152
11 792
(571 493)
652 408
(305 422)
476 279
(5 485 548) 41 739 565
(383 534)
(2 988 443)
(1 107 310)
(124 723)
1 494
(6 117)
140 855
213 495
(142 837)
916 005
(5 485 548) 43 649 295
(684 748)
3 177
(4 174 157)
(45 755)
(101 360)
(2 067)
(337 801)
Inter segment
operations
119
234
377
670
18 120
5
18 125
18 139
181 811
193 024
374 835
4 085 804
13 601
24 078
533
12
14
13 601
24 078
533
199 931
193 029
392 960
4 103 943
30 938
3 710 983
25 001
24 999
30 926
3 710 969
26 093
26 093
18 054
7
8 346
4 103 943
100 236
562
403
1 173
285
1 215
43 679
3 585 272
2
18 054
7
2
18 139
35
43 679
3 585 272
8 344
4 085 804
100 236
562
084
234
377
670
57 126
57 085
403
1 173
285
1 215
842 212
Total
842 212
41
Angola Mozambique
The BPI Group’s balance sheet as of 31 December 2009 and investments made in tangible and intangible assets during the year, by segment, are as follows:
(304 059)
(304 059)
(304 059)
(304 059)
(281 285)
(22 774)
Inter
segment
operations
791
934
347
955
803
316
253
9
149
978
750
585
124
455
603
714
13 647
36 368
2 945
1 847 032
455 658
2 302 690
47 449 179
2 773 383
318 852
4 702 677
22 617 852
9 083 621
1 764 610
423 811
89 676
2 139 437
61 153
11 792
652 408
507 217
45 146 489
158 909
213 502
924 351
47 449 179
1
8
2
29
296 744
1 443 315
BPI Group
152
424 961
879
4 037
24 666
Financial margin
454 543
11 680
Commission received
266 794
Commission paid
(59 488)
Other income, net
26 369
233 675
40 897
47 478
(3 861)
84 514
Operating income
30 437
Operating expenses
(16 610)
Other taxes
(3 454)
Net operating expenses
10 373
794 785
Personnel costs
(333 769)
(169 750)
(38 015)
Overhead costs
(541 534)
18 224
Impairment losses and provisions for loans
and guarantees, net
(134 978)
(31 014)
105 483
Income tax
(20 927)
8 062
92 618
(8 844)
83 774
Cash flow after taxes
287 781
Overheads as a % of operating income from banking activity
68%
Commercial
banking
1 851
3 937
96%
1 851
(346)
(290)
804
1 047
(394)
122
34 714
(6 713)
30
28 031
9 606
289
(65)
9 830
192
(456)
(536)
(800)
36 789
(22 557)
(11 342)
(1 450)
(35 349)
(2 906)
2 372
140
(142)
3 167
(3 308)
(5 805)
990
4 673
(142)
(1 646)
(3)
(1 649)
54
(9)
(7)
38
(1 864)
(414)
(218)
(1)
(633)
755
759
(4)
(1 008)
735
(1 743)
Investment
Domestic operations
(29 011)
29 011
Inter segment
operations
The BPI Group’s income statement for the year ended 31 December 2009, by segment, is as follows:
(135 324)
(34 612)
100 482
(18 890)
12 735
94 327
(8 844)
85 483
294 885
70%
420 312
3 251
4 912
24 666
453 141
11 802
273 256
(37 194)
26 399
262 461
50 503
46 121
(3 929)
92 695
30 683
(17 075)
(3 997)
9 611
829 710
(356 740)
(181 310)
(39 466)
(577 516)
18 224
Total
174 532
(90 023)
84 509
137 767
29%
(31 034)
(8 974)
200 561
(26 029)
122 334
2 118
(1 347)
(955)
(184)
335 104
(43 537)
(40 702)
(13 250)
(97 489)
2 954
25 509
(5 705)
29 156
48 960
122 334
163 994
163 994
(10)
(468)
5 519
5 041
1
5 042
5 042
(9)
(5)
(1)
(9)
(5)
(3)
4
(7)
7
7
Angola Mozambique
(31 034)
(8 974)
200 551
(26 497)
5 519
179 573
(90 022)
89 551
142 809
29%
122 334
2 118
(1 352)
(955)
(189)
335 103
(43 546)
(40 702)
(13 250)
(97 498)
2 954
25 513
(5 712)
29 156
48 957
122 334
164 001
164 001
Total
(1 250)
1 250
Inter
segment
operations
(166 358)
(43 586)
301 033
(45 387)
18 254
273 900
(98 866)
175 034
437 694
58%
584 313
3 251
4 912
24 666
617 142
11 802
297 519
(41 656)
55 555
311 418
172 837
46 121
(3 929)
215 029
32 801
(18 427)
(4 952)
9 422
1 164 813
(400 286)
(222 012)
(52 716)
(675 014)
21 178
BPI Group
4. NOTES
4.1. Cash and deposits at central banks
4.3. Financial assets held for trading and at fair value through
profit or loss
This caption is made up as follows:
31 Dec. 10 31 Dec. 09
Cash
Demand deposits at the Bank of Portugal
Demand deposits at foreign central banks
Accrued interest
264 655
290 803
772 494
270
1 328 222
296 765
405 163
741 093
294
1 443 315
The caption DEMAND DEPOSITS AT THE BANK OF PORTUGAL includes
deposits made to comply with the minimum cash reserve
requirements of the European Central Bank System (ECBS). These
deposits bear interest and correspond to 2% of the amount of
Customers’ deposits and debt securities maturing in up to 2 years,
excluding deposits and debt securities of entities subject to the
ECBS minimum cash reserves regime.
31 Dec. 10 31 Dec. 09
FINANCIAL ASSETS HELD FOR TRADING
Debt instruments
Bonds issued by Portuguese government entities
Bonds issued by foreign government entities
Bonds issued by other Portuguese entities
Non-subordinated debt
Subordinated debt
Bonds issued by foreign financial entities
Bonds issued by other foreign entities
Subordinated debt
Equity instruments
Shares issued by Portuguese entities
Shares issued by foreign entities
4.2. Deposits at other credit institutions
31 Dec. 10 31 Dec. 09
Domestic credit institutions
Demand deposits
Cheques for collection
Other
Foreign credit institutions
Demand deposits
Cheques for collection
Accrued interest
11 453
100 513
888
3 166
101 787
1 569
209 190
16 273
234
338 551
186 927
3 252
43
296 744
Cheques for collection from domestic credit institutions correspond
to cheques drawn by third parties against domestic credit
institutions, which in general do not remain in this account for more
than one business day.
Other securities
Participating units
FINANCIAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS
Equity instruments
DERIVATIVE INSTRUMENTS WITH
POSITIVE FAIR VALUE (NOTE 4.4)
89 989
140 388
2 718
556 690
51 069
1 962
77
109 740
42
108
100 336
20 155
403 976
166 579
28 641
864 518
118 728
195 545
314 273
199 612
225 238
424 850
158 408
158 408
876 657
120 801
120 801
1 410 169
51 421
51 421
45 858
45 858
313 573
1 241 651
335 122
1 791 149
This caption includes the following assets hedging capitalisation
insurance products issued by BPI Vida:
31 Dec. 10 31 Dec. 09
Debt instruments
Of public entities
Other entities
Equity instruments
Other securities
Derivative instruments with positive fair value
136
147
73
158
291
912
384
408
515 995
155
299
103
120
150
559
041
800
4
678 554
In 2008 and 2009 the BPI Group reclassified bonds from Financial
assets held for trading to Financial assets available for sale (note
4.5), Loans and advances to Customers (note 4.7) and Held to
maturity investments (note 4.8), under the amendments to IAS 39
and IFRS 7 (notes 2 and 4.48). The reclassifications made up to
31 October 2008 were based on prices at 1 July 2008 and the
reclassifications made after that date were made based on prices at
the reclassification date.
153
4.4. Derivatives
The caption
DERIVATIVE INSTRUMENTS HELD FOR TRADING
(notes 4.3 and 4.15) is made up as follows:
31 Dec. 10
Notional
value1
Exchange rate contracts
Futures2
Options
Exchange forwards and swaps
Interest rate contracts
Futures
Options
Swaps
Contracts over shares
Futures
Swaps
Options
Contracts over credit events
Swaps
Contracts over other underlying items
Futures2
Others
Options3
Others4
Overdue derivatives
Assets
Liabilities
239 824
1
1
239 448
966 898
506
253
82 308
1 012 999
11 170 352
1
13 784
171 573
101 382
260 880
156 659
690
5 277
2 349
2 622 795
4 106 984
Book value
Assets
Liabilities
1 540 065
1
2 111
1 643
9
12 843
122 948
10 665
1 235 096
13 594 912
100
11 730
190 722
10 663
175 846
16
4 758
1 009
94 349
366 222
100 711
84
14 261
1 222
2 259
9 285
1 233
8 000
144
144
11 269
20 732 350
1)
2)
3)
4)
31 Dec. 09
Notional
value1
Book value
95 071
118 940
66
386
313 573
119 626
30
3 273 032
4 421 965
114 747
114 886
2 893
261 493
24 979 536
335 122
318 852
In the case of swaps and forwards only the asset amounts were considered.
The book value of futures is nil, since they are traded on organised stock exchanges and financial settlement is made daily.
Parts of operations that are autonomous for accounting purposes, commonly referred to as “embedded derivatives”.
Corresponds to derivatives associated to Financial liabilities relating to transferred assets (note 4.19).
The caption
DERIVATIVE INSTRUMENTS HELD FOR HEDGING
is made up as follows:
31 Dec. 10
Notional
value1
Assets
Exchange forwards and swaps
Futures
Swaps
Contracts over shares
Swaps
Options
Swaps
Swaps
Others
Options2
23 659
Liabilities
Book value
Assets
Liabilities
9
46 813
100
68
9 916 926
16 060 867
245
212 021
35 844
406 054
18 500 133
16 168 774
430
286 153
12 754
343 664
632 038
425
19 808
733 587
796
32 296
49 163
556
1 292
49 722
1 145
2 534
204 202
4 033
3 457
271 742
3 639
8 303
903 516
27 790 371
32 983
250 263
32 980
499 444
708 151
36 478 922
24 192
316 455
24 192
423 811
1) In the case of swaps and forwards only the asset amounts were considered.
2) Parts of operations that are autonomous for accounting purposes, commonly referred to as “embedded derivatives”.
154
31 Dec. 09
Notional
value1
Book value
The BPI Group’s operations include carrying out derivative
transactions to manage its own positions based on expectations
regarding market evolution (trading), meet the needs of its Customers
or hedge positions of a structural nature (hedging).
Derivatives are also recorded as off balance sheet items by its
theoretical value (notional value). Notional value is the reference
value for purposes of calculating the flow of payments and receipts
resulting from the operation.
The BPI Group carries out financial derivative transactions in the
form of contracts over exchange rates, interest rates, goods and
metals futures price, shares or share indices (relating to inflation,
shares, among others) or a combination of these. These transactions
are realised in over-the-counter (OTC) markets and in organised
markets (especially stock exchanges).
Market value (fair value) corresponds to the value of the derivatives if
they were traded on the market on the reference date. Changes in
the market value of derivatives are recognised in the appropriate
balance sheet accounts and have an immediate effect on net
income.
Derivatives traded on organised markets follow the standards and
rules of these markets.
Derivatives traded on the over-the-counter (OTC) markets are
normally based on a standard bilateral contract that covers the group
of operations over derivatives between the parties. In the case of
inter-professional relationships, there is an ISDA – International
Swaps and Derivatives Association Master Agreement. In the case of
relations with Customers there is a BPI contract.
These types of contract include offsetting responsibilities in the
event of non compliance (the scope of the offsetting is established in
the contract itself and is regulated by Portuguese legislation and, in
the case of contracts with foreign counterparties or subject to foreign
legislation, by the appropriate legislation).
Derivative contracts can also include an agreement to collateralise
the credit risk generated by the transactions covered by them.
Derivative contracts between two parties normally include all the
derivative OTC transactions carried out between the two parties,
irrespective of whether they are for hedging purposes or not.
In accordance with IAS 39, the parts of operations normally known
as “embedded derivatives” are also considered separately and
recorded as derivatives, in order to recognise, in net income, the fair
value of these operations.
In note 4.48 are presented in detail the valuation methods to
determine the fair value of derivatives financial instruments.
The amount of the exposure corresponds to the present value of the
estimated loss, in the case of counterparty default. In the case of a
derivative contract that establishes the compensation of
responsibilities in the event of non-compliance, the amount of the
exposure is the sum of the market values of the operations covered
by the contract, when positive. In the case of operations for which
the contract does not establish the compensation of responsibilities,
the amount of the exposure is equal to the sum of the market values
of each individual transaction, if positive. The scope of the
compensation clauses, in the case of default, is considered by the
BPI Group on a conservative perspective, considering that, in the
case of doubt, compensation does not exist.
The potential loss in a group of derivative operations on a given date
corresponds to the amount of the exposure on that date. In futures
contracts, the stock markets being the counterparties for the BPI
Group’s operations, the credit risk is eliminated daily through
financial settlement. For medium and long term derivatives,
contracts usually provide for the netting of outstanding balances with
the same counterparty, which eliminates or reduces the credit risk.
Additionally, in order to control the credit risk in OTC derivatives,
some agreements have also been signed under which the Bank
receives from, or transfers to, the counterparty, assets (in cash or in
securities) to guarantee fulfilment of the obligations.
All derivatives (embedded or autonomous) are recorded at market
value.
155
At 31 December 2010 the notional value, by term remaining to maturity was as follows:
Forwards
Swaps
Swaps
Options
Contracts over indexes and shares
Swaps
Options
Swaps
Swaps
Others
Options
Others
Organized markets
Futures
Futures
Futures
Futures
<= 3 months
> 3 months
<= 6 months
> 6 months
<= 1 year
841 371
174 842
666 529
1 222 055
1 142 969
79 086
325 298
325 298
80 373
12 564
67 809
1 333 873
1 309 282
24 591
39 107
39 107
68 813
58 872
9 941
4 536 484
4 431 950
104 534
149 419
147 669
1 750
44 258
44 258
299 560
299 560
74 318
74 318
316 791
316 791
2 732 542
1 844 462
239 824
239 824
2 098 036
2 098 036
101 382
101 382
1 712
1 712
2 440 954
5 173 496
602 547
448 257
154 290
5 357 263
> 1 year
<= 5 years
12 114 111
11 337 636
776 475
520 123
365 964
154 159
49 163
49 163
75 551
75 551
3 109 647
1 756 531
1 353 116
15 868 595
1 944 198
1 944 198
4 030 000
4 030 000
1 927 000
1 927 000
1 506
1 506
1 945 704
3 790 166
2 498
2 498
4 032 498
9 389 761
5 553
5 553
1 932 553
17 801 148
> 5 years
Total
10 075
10 075
3 304 750
705 172
2 599 578
12 368 150
990 557
246 278
744 279
28 244 218
27 231 219
1 012 999
1 049 577
892 918
156 659
49 163
49 163
204 202
204 202
7 633 295
3 526 311
4 106 984
38 171 012
12 368 150
239 824
239 824
9 999 234
9 999 234
101 382
101 382
11 269
11 269
10 351 709
48 522 721
> 5 years
Total
13
13
1 586 878
440 130
1 146 748
30 998 642
29 763 686
1 234 956
1 200 520
1 099 809
100 711
57 722
57 722
271 742
271 742
8 403 148
3 981 183
4 421 965
42 518 652
9 037 695
9 009 382
28 313
15 630
14 880
750
At 31 December 2009 the notional value, by term remaining to maturity was as follows:
Forwards
Swaps
Swaps
Options
Swaps
Options
Swaps
Swaps
Others
Options
Others
Organized markets
Futures
Futures
Options
Futures
Futures
156
<= 3 months
> 3 months
<= 6 months
> 6 months
<= 1 year
> 1 year
<= 5 years
1 259 923
343 942
915 981
1 123 603
1 104 457
19 146
344 349
344 349
233 171
12 625
220 546
1 331 810
1 322 924
8 886
164 724
84 066
80 658
93 771
83 550
10 221
3 848 026
3 529 119
318 907
160 192
160 192
48 655
48 655
158 459
158 459
17 908
17 908
143 374
143 374
213 270
213 270
2 934 989
1 890 987
4 315 259
12 208 034
11 507 243
700 791
508 316
489 013
19 303
57 722
57 722
190 404
190 404
3 560 267
2 665 233
895 034
16 524 743
87 399
87 399
908 798
908 798
20 353
20 353
2 224 000
2 224 000
40 227
40 227
4 448 000
4 448 000
91 469
91 469
10 930 000
10 930 000
12 487 169
12 299 943
187 226
22 939
22 189
750
14 775
14 775
4 327 778
800 847
3 526 931
16 852 674
140
140
94 349
94 349
95 071
95 071
1 185 617
4 120 606
2 244 353
4 135 340
4 488 227
8 803 486
11 021 469
27 546 212
140
16 852 814
239 448
239 448
18 510 938
18 510 798
140
94 349
94 349
95 071
95 071
18 939 806
61 458 458
At 31 December 2010 the distribution of derivative operations, by
counterparty, was as follows:
31 Dec. 10
OTC with Financial Institutions
OTC with Local and
Administrative Public Sector
OTC with Investment /
Pension funds
OTC with Companies
OTC with Individuals
Regulated markets
Stock exchange
Notional
value1
At 31 December 2009 the distribution of derivative operations, by
counterparty, was as follows:
Net % of notional
exposure2
value
30 537 717
26 804 033
175 870
25 085
74.7%
65.6%
6 784
344
0.0%
130 549
3 535 702
60 649
10 351 709
10 351 709
40 889 426
1 034
145 733
3 674
0.3%
8.6%
0.1%
25.3%
25.3%
100.0%
175 870
1) Does not include embedded derivates and other options in the amount of
7 633 295 th. euro.
2) Amount of exposure considering netting agreements and collaterals.
x
Notional
value1
31 Dec. 09
OTC with Financial Institutions
OTC with Local and
Administrative Public Sector
OTC with Investment /
Pension funds
OTC with Companies
OTC with Individuals
Regulated markets
Stock exchange
Net % of notional
exposure2
value
34 115 504
29 523 181
186 989
44 934
64.3%
55.6%
7 245
208
0.0%
277 067
4 246 519
61 492
18 939 806
18 939 806
53 055 310
4 400
134 560
2 887
1
1
186 990
0.5%
8.0%
0.1%
35.7%
35.7%
100.0%
1) Does not include embedded derivates in the amount of 8 403 148 th. euro.
2) Amount of exposure considering netting agreements and collaterals.
At 31 December 2010 the distribution of derivative operations, by counterparty external rating, was as follows:
31 Dec. 10
Over-the-counter market (OTC)
AA+
AA
AAA+
A
ABBB+
N.R.
Traded on the stock exchange
Futures5
Notional value1
Gross exposure2 Exposure considering
netting3
Net exposure4
5 250
380 293
469 688
895 674
593 047
201 723
15 146
5 976 896
30 537 717
088
322
420
969
032
891
164 187
487 909
389
125
101
879
345
891
162 356
287 086
389
4 832
3 872
9 892
225
891
155 769
175 870
10 351 709
10 351 709
40 889 426
487 909
287 086
175 870
1
5
10
6
16
125
78
98
4
79
15
26
2
Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch
agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where
there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings.
2) Amount of exposure without considering netting agreements and collateral.
3) Amount of exposure without considering collateral.
4) Amount of exposure considering netting agreements and collateral.
5) The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.
At 31 December 2009 the distribution of derivative operations, by counterparty external rating, was as follows:
31 Dec. 09
Over-the-counter market (OTC)
AAA
AA+
AA
AAA+
A
ABBB+
N.R.
Traded on the stock exchange
Futures5
Options
Notional value1
Gross exposure2 Exposure considering
netting3
Net exposure4
19 191
41 000
2 714 190
9 376 993
12 930 009
571 242
1 000
44 892
8 416 987
34 115 504
360
472
924
722
003
246
91
215
580
18 831
55 472
13 800
91
215
580
19 166
10 932
2 695
54
159 512
434 293
54
158 198
247 241
54
153 256
186 989
18 939 666
140
18 939 806
53 055 310
1
1
434 294
1
1
247 242
1
1
186 990
11
72
173
16
Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch
agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where
there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings.
2) Amount of exposure without considering netting agreements and collateral.
3) Amount of exposure without considering collateral.
4) Amount of exposure considering netting agreements and collateral.
5) The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.
157
4.5. Financial assets available for sale
31 Dec. 10 31 Dec. 09
Debt instruments
Bonds issued by Portuguese government entities 2 614 116
3 880 253
151 411
Subordinated debt
Bonds issued by international financial organisations
643 306
Subordinated debt
688 653
Impairment
(1 968)
7 975 771
Equity instruments
Issued by Portuguese entities
66 949
Shares
Impairment
(25 294)
Quotas
1
31 424
Impairment
(16 864)
56 216
Other securities
124 551
Participating units
Impairment
(3 221)
121 330
Loans and other receivables
8 287
Impairment
(5 283)
3 004
Overdue bonds
590
Impairment
(590)
8 156 321
158
2 961 637
3 787 364
527 690
77
514
820 007
655 735
(2 284)
8 750 740
77 069
(25 017)
1
31 474
(16 712)
66 815
119 876
(4 627)
115 249
9 007
(6 833)
2 174
8 934 978
Banco BPI holds a portfolio of fixed rate bonds, issued by national
and international entities, in which the interest rate risk is hedged by
derivative instruments.
The caption LOANS AND OTHER RECEIVABLES corresponds to shareholders’
loans to, and supplementary capital contributions in, companies
classified as financial assets available for sale.
In the review made by the Bank, no impaired securities were
identified, other than the amounts already recognised.
The changes in impairment losses and provisions in 2010 and 2009
are shown in note 4.20.
At 31 December 2010 this caption was made up as follows:
Quantity
Nature and type of security
SECURITIES
Debt instruments
Portuguese public debt
Treasury Bonds
OT 3.6% – 15.10.2014
OT 4.75% – 14.06.2019
OT 5% Junho 2002 / 2012
Other residents
Bonds
ANA – Aerop. Portugal – TV – 28.08.2013
Banco Espírito Santo – 3.75% – 19.01.2012
Banco Itau Europa – TV. (27.07.2011)
JMR – Gestão Empresas Retalho – 2007 / 2012
Mota Engil – TX.VR. 2004 / 2011
Parpublica – 3.5% – 08.07.2013
Portucel Tv 27.10.2012
Semapa / 2006 / 2016 2.ª
Sonae Distribuição Setembro – 2007 / 2015
Issued by non-residents
By foreign government entities
Bonds
Buoni Poliennali del T – 4.25%-01.09.2019
Buoni Poliennali del T 4.5% – 01.03.2019
Irish Treasury – 4% – 15.01.2014
Irish Treasury – 4.4% – 18.06.2019
Irish Treasury – 5.9% – 18.10.2019
Bilhetes do Tesouro
Títulos Banco Central (Angola)
Obrigações do Tesouro (Angola)
Obrigações do Tesouro (Angola)
Obrigações do Tesouro – IPC (Angola)
Rep. Grécia – 6% – 19.07.2019
Republic of Brasil – 7.375% (03.02.2015)
Republic of Brasil – 11% (26.06.2017)
By other non resident issuers
Bonds
Aleutian Inv LLC-TV – 25.10.2012
Alpha Credit Group – Tv – 17.01.2012
Alpha Credit Group – TV. (02.06.2011)
Alrosa Finance S.A. – 8.875% – 17.11.2014
Altadis Emis. Finance – 4% (11.12.2015)
Atlantes Mortgage – SR.1 – CL.A (17.1.2036)
Autostrade SPA – Tx.Vr. (09.06.2011)
Avoca Clo BV – Sr. – II.X – CL – A1 (15.01.2020)
Euro-Vip 1990
Banca Popolare Di Milano – Tv – 31.01.2014
Bank Of America Corp – Tv – 28.06.2011
BES Finance LTD – TV 08.02.2011
Bra. Mer Vouch R – 5.911% (15.06.2011) S.144A
Brazil Foreign Div. P.R.F – 5.5% (20.09.2011)
Nominal
Listing /
Price
0.01
0.01
0.01
0.01
0.01
0.01
990 000
1 700 000 000
1 030 185 000
50
35
30
4
2
20
4
000 000
000 000
000 000
800 000
000 000
000 000
900 000
500 000
4 800 000
800 000 000
175 000 000
20 000 000
235 000 000
100 000 000
18 505 142
96 101 038
759 031
73 869
153 149
480 000 000
150 400 000
52 500 000
Cost Book value
/ Fair
value1
Amounts per unit
50
50
50
50
000.00
000.00
000.00
000.00
2.50
50 000.00
1 000.00
50 000.00
10.00
1 000.00
1 000.00
0.01
0.01
0.01
8.15
8.15
815.02
163.00
815.02
1 000.00
1 000.00
1.00
4 490 346 74 839.10
1 450 000
1 000.00
3 800 000 50 000.00
9 729 082
748.39
45 000 000
1 000.00
1 632 802 32 656.04
7 000 000 100 000.00
760 632
950.79
4 490 346
748.39
500 000
1 000.00
10 000 000
1 000.00
4 000 000 100 000.00
5 000 000
1 000.00
4 000 000
1 000.00
218 737
72.91
912 216
182.44
51
48
48
50
230.00
266.50
169.50
000.00
2.50
45 325.50
994.00
47 500.00
10.00
1 008
935
(77)
1 804 908 1 548 917 (287 907)
1 078 997 1 064 264
(16 199)
2 884 913 2 614 116 (304 183)
50
35
29
4
2
19
4
000
896
595
800
000
948
920
495
4 800
152 454
978.57
999.73
0.01
0.01
0.01
818 068
185 458
20 124
229 115
108 108
132 638
674 176
680 210
309 220
155 965
649.10
530 378
1 155.00
173 482
1.38
75 420
4 092 362 3
68 590.03
921.28
48 005.50
836.64
1 030.14
26 777.95
99 980.00
912.95
516.39
958.28
996.90
99 610.00
964.03
983.19
74.01
186.09
Net gain /
Hedge
(loss) on accounting
2
securities
effect2
4 085
1 437
3 800
11 229
42 197
1 424
6 921
742
4 490
494
9 718
4 000
5 000
4 000
216
898
51
35
28
4
2
18
4
922
031
975
821
000
468
891
478
4 825
151 411
(66 602)
(32 101)
(98 703)
1 230
(1 658)
(1 013)
(970)
(437)
(1 883)
(43)
(22)
(664)
(3 389)
(2 071)
794 095
(33 644)
177 556
(9 478)
18 949
(1 929)
180 524
(54 917)
83 365
(24 865)
133 738
728 529
709 347
313 044
157 323
324 587 (213 208)
183 771
11 734
75 425
5 920
880 253 (320 387)
(33 086)
(8 213)
(703)
(4 823)
(1 959)
4 126
1 340
3 652
10 979
46 455
1 343
7 005
735
3 105
480
9 970
3 991
4 832
3 942
223
944
(222)
(111)
(152)
419
2 864
(294)
12
(21)
90
(18)
13
(16)
(180)
(67)
3
22
Impairment
(22 799)
(12 462)
(4 789)
(88 834)
(1 208)
(3 240)
1 481
1) Net of impairment.
2) Amount recorded in revaluation reserves (note 4.30).
159
Quantity
Bonds (cont.)
Caixa Eco Montepio Geral – Tv – 03.05.2012
Celf Loan Part.BV – Sr. 2005 – 1x CL.A 2021
CEMG (CAY) – TV – (19.09.2011)
CEMG (CAY) – TV – (31.01.2011)
Cimpor Financial Opertns – 4.5% (27.5.2011)
CM Bancaja FTA – SR.1 CL.A TV. (22.12.2036)
Corsair Fin Ire – Tv – 20.06.2012
Cosan Finance Ltd. – 7% – 01.02.2017
Cosipa Commercial – 8.25% (14.06.2016)
Csn Islands VIII Corp – 9.75% (16.12.2013)
Diageo Finance PLC – TV – 22.05.2012
Dollar Divers RI.F – 6.55% (16.12.2013) – REG
Dresdner Bank / 1998 – 2013 – PTE – C. Zero
Duchess – SR.V – X CL.B – TV. 25.05.2021
Dutch Mor. Port. Loans (20.11.52) O. HIP – CL.A
Edison SPA – TX.VR. (19.07.2011)
EFG Hellas PLC – 4.25% – 26.05.2011
Eirles Two Limited – TV. PERP.
Eletrobras – C. E. Brasil – 7.75% (30.11.2015)
Etab Econ Casino – 4.875% – 10.04.2014
FTA Santander EMP – SR.1 – CL.A2 (04.11.38)
Gaz Capital (Gazprom) – 6.212% (22.11.2016)
Glitnir Banki HF – TV – 24.05.2011
Harvest CLO – SR.II – X CL.A (21.05.2020)
HSBC Finance Corp – TV. (05.04.2013)
ING BANK NV – TX.VR (16.5.2012)
Intl Lease Finance Corp – TX. VR. 15.8.2011
Intergas finance BV – 6.875% – 04.11.2011
Kazakhstan Temir Zholy – 6.5% (11.05.2011)
Kion Mortgage Fin SR.06 – 1 CL.A – 15.07.51
Koninklijke KPN NV – Tx.Vr. (22.06.2015)
Lafarge – 4.25% (23.03.2016)
Lafarge – 6.5% (15.07.2016)
Madison Avenue C. Ltd (24.3.14) – O. HIP – CL.A
Magritte Finance NV – SR.2004 – CL.A (1.6.32)
Midgaard Finance – SR.1 – CL.A2 (23.4.2029)
Orion Finance PLC – T.V. (15.08.2040)
OTE PLC – 4.625% (20.05.2016)
Pemex Proj. FDG Mast. TR – 6.375% – 2016
Port. Telecom Int. Fin. – 4.375% (24.03.2017)
RCI Banque SA – TV – 24.01.2012
SNS Bank Nederland – TV (6.10.2011)
Telecom Italia SPA – 4.5% (28.1.2011)
Telecom Italia SPA – TV.(06.12.2012)
Telecom Italia SPA. – 4.75% (19.05.2014)
Tengizchevroil Fin – 6.124 (15.11.2014)
TNK – BP Finance – 6.875% (18.07.2011)
Vale Overseas Lim (CAY) – 6.25% (11.01.2016)
Vivendi – TV. 3.10.2011
Amounts per unit
Nominal
300 000
757 750
1 500 000
16 250 000
52 000 000
265 485
6 500 000
14 967 819
7 858 105
14 967 819
250 000
1 813 445
5 125 148
800 000
1 080 438
5 000 000
18 000 000
800 000
24 322 706
2 500 000
667 052
24 322 706
500 000
515 474
500 000
800 000
900 000
14 593 624
19 083 969
198 861
19 000 000
30 000 000
6 735 519
850 434
812 207
500 000
255 716
25 000 000
28 000 000
24 000 000
100 000
3 000 000
3 700 000
5 000 000
62 500 000
14 978 025
24 322 706
18 709 774
6 000 000
1 000.00
909.17
947.19
859.67
50 000.00 47 856.50
50 000.00 49 819.00
1 000.00
999.57
13 274.27 11 283.19
50 000.00 33 270.00
748.39
795.17
748.39
864.83
748.39
863.93
1 000.00
994.60
362.69
362.69
498.80
1 101.88
1 000.00
720.00
180 073.05 179 031.28
1 000.00
999.60
1 000.00
956.67
100 000.00 80 000.00
748.39
864.77
50 000.00 52 918.00
16 676.30 15 925.87
748.39
792.29
1 000.00
9 725.93
8 558.82
1 000.00
968.40
10 000.00
9 383.30
50 000.00 47 625.00
748.39
778.80
748.39
758.37
3 107.21
2 388.51
1 000.00
1 033.98
1 000.00
985.86
748.39
787.83
85 043.36 83 002.32
81 220.71 77 102.82
500 000.00 465 000.00
8 523.86
8 097.67
50 000.00 43 592.00
1 000.00
1 083.75
1 000.00
949.65
50 000.00 49 383.00
10 000.00
9 934.00
100 000.00 100 143.00
50 000.00 49 095.00
50 000.00 51 959.00
427.94
447.56
748.39
768.74
748.39
831.28
50 000.00 50 020.00
Subordinated debt
Bonds
Allianz Finance BV – 4.375% Perp
135 000 000
1 000.00
Allianz France – 4.625% – PERP
20 000 000
1 000.00
Avoca Clo BV – Sr. – IV.X – CL – B – TV (18.02.2022)
800 000 100 000.00
Axa S.A. – 5.777% Perp / Sub
100 000 000
1 000.00
Banco Sabadell – 5.234% – Perpetua
50 000 50 000.00
Bayer AG – 5% (29.07.2105)
75 000 000
1 000.00
Caja Ahorros de Galicia – TV – Perpetua
50 000 50 000.00
160
Listing /
Price
873.34
866.67
64 470.00
833.34
29 996.00
991.50
27 500.00
Cost Book value
/ Fair
value1
Net gain /
Hedge
2
securities
effect2
294
732
1 500
16 250
51 184
228
6 500
14 625
8 813
16 942
249
1 974
10 028
742
1 027
5 079
17 855
794
26 370
2 482
637
24 239
487
499
494
788
891
15 007
19 347
197
17 793
28 721
6 926
779
776
493
243
24 888
30 526
22 013
98
3 000
3 700
4 999
62 005
14 846
25 025
18 537
6 000
618 273
273
692
1 436
16 227
53 375
226
4 329
16 337
9 110
17 339
249
1 818
11 802
577
1 076
5 014
17 679
645
28 262
2 734
638
25 909
(25)
(70)
(64)
(59)
100
(5)
(2 175)
1 153
673
1 444
(1)
(58)
1 294
(180)
3
(10)
(793)
(160)
2 659
154
(1)
1 477
455
486
753
859
15 343
19 505
153
20 046
30 564
7 291
832
772
467
243
22 509
31 069
23 603
99
2 989
3 859
4 915
66 787
15 779
25 737
21 331
6 023
641 338
(62)
(13)
(46)
(41)
518
232
(44)
1 309
263
249
12
(35)
(29)
(1)
(3 140)
710
120
(1)
(20)
5
(90)
2 660
755
577
2 164
2
13 752
128 393
19 481
746
104 579
49
71 236
50
123 030
17 850
520
86 151
31
75 955
27
(12 991)
(2 330)
(250)
(19 345)
(19)
1 514
(22)
Impairment
(559)
(3 283)
(1 100)
(2 339)
(50)
(3 548)
(176)
(3 747)
487
(601)
(361)
(1 501)
(3 056)
(1 038)
(1 643)
(2 225)
(2 657)
(4 155)
(1 326)
(620)
(2 902)
(41 335)
(11 262)
(1 625)
(7 765)
(5 623)
1 968
Quantity
Bonds (cont.)
C8 Capital SPV – 6.64% – PERPETUA
Cibeles Ftypme – SR.III – CL.BSA(26.11.2030)
Claris Millesime CDO – SR.1 – CL.2(10.06.24)
Cloverie 2004 – 72 – TX.VR.(17.11.2024)
DONG A/S – 5.5% (29.06.3005)
ELM BV (Swiss Rein Co) – TV – Perpetua
Generali Finance BV – 5.479% – Perpétuas
Granite Master – Sr.2006 – 1A – ClA5 – 20.12.54
Granite Mortg. – TV(20.3.2044) – SR.04 – 1/2C
Granite Mortg. – TV(20.3.2044) – SR.04 – 1/2M
Granite Mortg. – TV(20.9.2044) – SR.04 – 3/2C
Harbourmaster CLO – S.4X – CL.A3 (11.10.2019)
Harvest CLO SA – SR.IX – CL.B2 (29.3.2017)
Henkel KGAA – T.V. (25.11.2104)
Lusitano MTGE – SR.1 – CL.D – TV (15.12.2035)
Madrid RMBS FTA – SR.06 – 1 CL.A2 – 22.06.2049
Marlin BV – SR.1 – CL.B (23.12.2012)
Old Mutual PLC – Ob. Perpetua
Opera Finance(DE) – SR.GER3 CL.B – 25.1.2022
Pelican Mortgages – 2/B (15.9.2036)
Provide PLC – SR.A05 – 1 CL.B TV. 25.08.2048
Residential Mortg.Sec – 17X – M1C(13.05.37)
Rhodium BV – SR.1X – CL.C (27.5.2084)
Siemens Financieringsmat – 5.25% (14.09.2066)
Siena Mortgages – TX.VR.(16.12.2038)CL.B
Vattenfall Treasury AB – TV. PERP.
Vinci – 6.25% Perpetuas
Amounts per unit
Nominal
48 645 412
109 316
500 000
500 000
65 000 000
48 000 000
75 000 000
1 382 590
500 000
500 000
153 488
500 000
750 000
5 000 000
200 000
286 283
37 497
25 000 000
1 000 000
290 000
500 000
54 204
800 000
50 000 000
360 000
65 000 000
25 000 000
Equity instruments
Issued by residents
Shares
Agrogarante, S.A.
Alberto Gaspar, S.A.
Alar – Emp. Ibérica de Material Aeronautico, S.A.
Apis – Soc. Ind. Parquetes Azarujense
Apor – Agência p/ Modernização do Porto – Cl. B
Boavista Futebol Clube
Bombardier Transportation Portugal
Buciqueira – SGPS – Cap. Red. – Em. 2001
Caderno Verde – Comunicação (C)
Caravela Gest, SGPS, S.A.
Carmo & Braz
CIMPOR – CIM. DE PORTUGAL – SGPS
Coimbravita – Agência Desenvolvimento Regional
Companhia Águas da Fonte Santa de Monfortinho, S.A.
Companhia Aurifícia, S.A. (Valor Nominal 7 EUR)
Companhia de Diamantes de Angola
Companhia de Diamantes de Angola – P (II)
Companhia de Fiação e Tecidos de Fafe, S.A.
Companhia Prestamista Portugueza
Comundo – Consórcio Mundial de Import.e Export., S.A.
Conduril – Construtora Duriense, S.A.
Corticeira Amorim – SGPS
Digitmarket – Sistemas de Informação, S.A.
EIA – Ensino, Investigação e Administração, S.A.
Empresa Cinematográfica S. Pedro – Águeda
Empresa O Comércio do Porto, S.A.
552 910
60 000
2 200
65 000
2 877
21 900
31
8
134 230
272 775
65 000
3 565
15 000
10
1 186
166 716
1 000
240
10
3 269
184 262
127 419
4 950
10 000
100
50
Listing /
Price
748.39
522.00
27 329.03 25 689.29
500 000.00 212 000.00
500 000.00 33 900.00
1.00
1.00
50 000.00 43 666.50
50 000.00 42 807.50
251.38
233.91
100 000.00 66 510.00
100 000.00 78 000.00
383.72
250.57
1.00
0.60
250 000.00 200 000.00
1 000.00
1 010.83
100 000.00 48 410.00
71 570.71 46 005.65
37 496.68 30 747.28
1 000.00
762.50
50 000.00 39 500.00
10 000.00
6 089.00
100 000.00 99 490.00
9 034.00
7 497.32
100 000.00 30 000.00
1 000.00
1 004.25
10 000.00
9 910.00
1 000.00
1 011.25
50 000.00 50 541.50
1.00
5.00
4.99
4.99
5.00
5.00
5.00
5.00
1.00
5.00
4.99
1.00
4.99
5.00
7.00
2.49
2.49
4.99
1.00
0.50
5.00
1.00
1.00
4.99
4.99
2.49
Cost Book value
/ Fair
value1
Net gain /
Hedge
2
securities
effect2
48 441
108
450
475
65 105
48 364
76 049
1 365
499
499
152
491
745
4 913
198
281
37
24 324
937
286
490
54
785
50 906
353
64 214
25 082
740 137
33 930
103
213
35
67 056
42 168
67 881
1 287
333
390
100
302
604
5 081
97
184
31
19 258
792
177
498
45
241
50 989
357
67 461
25 476
688 653
553
141
20
553
12
110
12
1
967
1 895
1
231
26
5.07
7
75
18
75
11
1 111.30
25
1 318
1 294
1.16
6
806
315
742
50
2
10 036
148
9 231
74
1
1
1.00
(14 610)
(5)
(247)
(446)
172
(6 284)
(11 432)
(95)
(167)
(110)
(53)
(193)
(150)
103
(103)
(98)
(7)
(5 587)
(161)
(113)
(3)
(9)
(555)
(364)
(3)
1 183
217
(72 563)
Impairment
(6 176)
(7 211)
(4 006)
(6 447)
(384)
(1 803)
(4 130)
(7 183)
(1 866)
(65 481)
141
20
110
967
1 691
4
34
241
742
16
161
Quantity
Shares (cont.)
Esence – Soc. Nac. Corticeira – Nom.
54 545
Estamparia Império – Emp.Industriais e Imobiliários, S.A.
170
Eurodel – Ind.Metalurgicas e Participações
23
Eurofil – Ind. de Petróleos, Plástico e Filamentos, S.A.
11 280
Fábricas Vasco da Gama – Ind. Transformadoras, S.A.
33
Fit – Fomento e Industria do Tomate, S.A.
148
Futebol Clube do Porto
105 000
Gap – Gestão Agro-Pecuária, SGPS, S.A.
548
Garval – Sociedade de Garantia Mutua – (C)
4 023 120
GEIE – Gestão de Espaços de Incub. Empres.S.A.
12 500
Gestinsua – Aq. Al. Patrimonio
430
Gregório & Ca.
1 510
Impresa – SGPS
6 200 000
Incal – Indústria e Comércio de Alimentação, S.A.
2 514
Inovcapital – Soc. de Capital de Risco S.A.
241 527
Intersis, S.A.
42 147
J. Soares Correia – Armazéns de Ferro, S.A.
84
Jotocar – João Tomás Cardoso, S.A.
3 020
Lisgarante – Soc. de Garantia Mutua
1 648 990
Lisnave – Est. Navais
180
Margueira – Sociedade Gestora
de Fundos Investimento Imobiliário, S.A.
3 511
Matur – Sociedade de Empreend. Tur. da Madeira, S.A.
13 435
Matur – Sociedade de Empreend. Tur. da Madeira, S.A.
4
Maxstor
8 190
Metalurgia Casal, S.A.
128
Mimalha, S.A.
40 557
NET – Novas Empresas e Tecnologias, S.A.
10 539
Newplastics
1 445
Norgarante – Soc. de garantia Mutua
641 190
Norgarante – Soc. de garantia Mutua – C
750 000
Nutroton – Industrias da Avicultura
11 395
Oficina da Inovação
10 000
Plastrade – Comércio Intern.Plásticos – N
19 200
Porto de Cavaleiros, SGPS
2
Primus – Prom. e Desenvolvimento Regional, S.A.
8 000
Salvor – Soc. Investimentos Hoteleiros, S.A.
10
Sanjimo – Sociedade Imobiliária
1 620
Saphety Level – Trusted Services
5 069
SDEM – Soc. de Desenv. Empr. Madeira, SGPS – N
937 500
Senal – Soc. Nacional de Promoção de Empresas, S.A.
450
SIBS – Forward Payment Solutions, S.A.
738 455
Soc. Port. Inovação, Consul. Empres. Fom. Inovação, S.A.
1 500
Sociedade de Construções ERG
50
Sociedade de Construções ERG (Em. 93) – IR C
6
Sociedade Industrial Aliança, S.A.
1
Sodimul – Soc. de Comércio e Turismo
25
Sofid – Soc. P/ Fin. Des. – Inst. Fin. Credito S.A.
1 000 000
Somotel – Soc. Portuguesa de Moteis, S.A.
1 420
Sonae SGPS
36 868
Sopeal – Soc. Promoção Educacional Alcacerense, S.A.
100
SPGM – Sociedade de Investimento – N
665 150
Spidouro – Sociedade Promoção
e Investimento Douro e Trás-os-Montes
15 000
Star – Turismo, S.A.
533
Tagusparque – Sociedade de Promoção
e Desenvolvimento do Parque, S.A.
436 407
Telecine Moro, S.A.
170
Terologos – Tecnologias de Manutenção – P
7 960
Textil Lopes da Costa, S.A.
4 900
162
Cost Book value
/ Fair
value1
Amounts per unit
Nominal
4.99
4.99
5.00
4.99
4.99
4.99
5.00
4.99
1.00
1.00
5.00
4.99
0.50
1.13
5.00
4.99
5.00
4.99
1.00
5.00
5.00
5.00
5.00
4.99
4.99
5.00
5.00
1.00
1.00
1.00
5.00
5.00
5.00
4.99
4.99
5.00
4.99
1.00
1.00
0.50
5.00
5.00
4.99
4.99
2.49
14.96
1.00
2.50
1.00
4.99
1.00
Listing /
Price
0.90
1.00
4
1.40
22
5.45
1
1
1.00
1
1
1
25
1
3
539
3
023
12
2
4
791
2
205
307
2
8
649
1
25
1
3
95
3
4 023
18
146
Net gain /
Hedge
2
securities
effect2
Impairment
445
12
2
4
8 680
2
1 315
4 340
18 451
111
1 307
2
8
1 649
1
18
146
41
1
336
25
1
641
750
50
50
96
41
1
641
750
50
67
96
40
16
24
8
98
938
882
8
98
255
3 115
7
3 115
7
1.12
2
1 250
2
1 121
0.78
69
29
14
1.00
664
665
1
4.99
4.99
75
3
21
3
5.00
4.99
4.99
4.99
2 177
1
40
8
2 177
3.86
1.00
1.00
4.38
6.70
5.00
0.94
41
1
336
15
27
200
10
129
55
54
1
40
8
Quantity
Shares (cont.)
Turopa – Operadores Turisticos, S.A.
Unicer – Bebidas de Portugal
ViaLitoral – Conc. Rodoviária da Madeira
Xelb Cork – Co. e Ind. Cortiça
5
1 002
4 750
87
Quotas
Propaço – Soc. Imob. de Paço D' Arcos
Rights over equity operations
Atlântis – Pref. S/ Voto – Dir. Inc./ Em. 97
Cimpor – Cim. Portugal – SGPS – Dir. Inc. – Em. 99
Corticeira Amorim – SGPS – Dir. Inc. Em. 00
Fabricas Triunfo – Dir. reduçao Em. 2001
Oliva – Ind. Metalurgicas – Direitos de redução
Portugal Telecom, SGPS – D. Inc. – Em. 2001
Sicel – Soc. Industr. Cereais – Di/ EM. 94
Soc. Construções Erg / 93
Sonae – SGPS – D. Cisão 2005
Sonae Industria – SGPS – D.I. / Em. 97 – 2.ª
Sonae – SGPS – D. Cisão 2008
Others
Participating units
Citeve – Cent. Tec. Ind. Tex. Vest. Portugal
EGP – University Of Porto Bus. School ASS.
FCR – Fundo Recuperação
FCR – Inovcapital
FCR – Inovcapital Actec
FCR – Inovcapital Valor
FCR – Turismo Capital (TC TUR.CAP.SCR)
Fun. Cap. Risco AICEP Capital Global – FIEP
Fun. Cap. Risco AICEP Capital Global II
Fun. Cap. Risco F – Hitec (Es Ventures)
Fundo Caravela
Fundo Inter-Risco II
Inegi Instituto de Engenharia Mecanica
UNICAMPUS-FEIIF
Equity instruments
Issued by non residents
Shares
Altitude Software
Amsco – African Management Services Com
Arco Bodegas Unidas
Club Financiero Vigo
European Investment Fund
Growela Cabo Verde
Nasdaq Europe SA/VN
Parque Industrial da Matola – MZM
Swift – Society for Worldwide Inf. Dev
Tharwa Finance (dirhams)
Unirisco Galicia
Visa Europe Limited
Visa Inc-Class C
BVDA
CLD – Credit Logement Developpment
Emis – Empresa Interbancária de Serviços
IMC – Instituto de Mercado de Capitais
Sofaris
Sopha / BFA e FESA
Amounts per unit
Nominal
4.99
1.00
161.25
4.99
Listing /
Price
8.07
766.95
Cost Book value
/ Fair
value1
Net gain /
Hedge
2
securities
effect2
8
792
8
3 643
2 852
48 754
41 655
18 196
1.00
1
1
1
1
498.80
4.99
1 000.00
24 939.89
10
70
50 000
2 868
500
998
3 568
5 343
200
500
11 742
37 500
25
3 000
116 324
10
70
49 291
1 258
455
436
2 525
5 215
230
464
19 662
37 500
25
3 023
120 164
Impairment
25 294
1
1
1
8
100
8
0
3
7
4
2
50
5
3
7
5
3
20
2
000
115
50
40
164
343
40
10
122
500
000
000
24 939.89
24 939.89
1 000.00
4 987.98
50 000.00
5 000.00
5 000.00
985.82
10 941.94
9 102.12
10 892.93
15 395.75
976.12
5 752.33
46 395.70
6 297.75
1 007.66
6 386 243
0.04
1 807
748.39
63 382
1 15 626.31
9 1 000 000.00 1 150 525.13
19 000
9.07
100
49.96
1 920 000
0.02
63
125.00
20 895
8.94
80
1 202.02
1
10.00
32 134
0.75
34.24
100
13
13 810
748
4 399
18
9 410
172
25
44
91
187
96
15.25
107.89
29 000
2 410
12
10 355
(709)
1 609
(45)
562
1 043
(128)
38
(36)
7 919
7
23
7 062
3 221
13 810
748
1 989
6
945
172
21
44
4
91
187
82
1 095
227
2
87
3
2
3
14 560
13
27
1 095
47
2 053
16 864
163
Quantity
Others
Participating units
Fundo BPI – Europa (Luxemburgo)
Portugal Venture Capital Initiative – PVCI
23 405
1 199 115
Amounts per unit
Nominal
Listing /
Price
0.01
1.00
10.78
0.76
Loans and Shareholder's loans
Emis – Empresa Interbancária de Serviços (Suprimentos)
GEIE
Intersis
Maxstor
Newplastic
Propaço – Imob. Paços d' Arcos
Petrocer
Plastrade
Saphety Level – Trusted Services, S.A.
Cost Book value
/ Fair
value1
171
1 199
1 370
252
914
1 166
58
58
600 000
1 000.00
Impairment
81
(285)
(204)
31
23
50
973
264
3 788
1 199
1 393
200
154
3 004
154
5 283
590
590
8 684 236 8 156 321
590
590
53 220
58
Overdue bonds
Kaupthing Bank HF – Tx. Var. (25.05.2010)
Net gain /
Hedge
2
securities
effect2
(659 663)
(296 424)
At 31 December 2010 this caption included the following securities reclassified from the caption
under the amendments to IAS 39 and IFRS 7 (notes 2 and 4.48).
Debt instruments
Other residents
Bonds
Banco Itau Europa – Tv. (27.07.2011)
By other non resident issuers
Bonds
Dresdner Bank / 1998-2013 – PTE – C. ZERO
Madison Avenue C. Ltd (24.3.14) – O. HIP – CL.A
Bra. Mer Vouch R – 5.911% (15.06.2011) S.144A
Brazil Foreign Div. P.R.F – 5.5% (20.09.2011)
Dollar Divers RI.F – 6.55% (16.12.2013) – REG
164
FINANCIAL ASSETS HELD FOR TRADING,
in 2008,
Quantity
Book Value /
Fair Value
30 000 000
28 975
124 699
850 434
218 737
912 216
1 813 445
265
832
223
944
1 818
33 057
4.6. Loans and advances to credit institutions
(continuation)
31 Dec. 10 31 Dec. 09
Loans and advances to other
Portuguese credit institutions
Very short term loans and advances
Deposits
Loans
Other loans
Other advances
Accrued interest
Loans and advances to other
foreign credit institutions
Very short term loans and advances
Deposits
Loans
Securities purchased with resale agreements
Other loans and advances
Accrued interest
Correction of the amount of hedged assets
Commission relating to amortised cost (net)
Overdue loans and interest
Impairment
169 743
74 604
108 850
23 497
13 573
2 994
393 261
4 859
332 833
107 500
145 157
10 036
5 578
605 963
442 932
42 017
7 053
244 027
1 145 313
79
80 096
262 675
6 193
1 738 383
529
(132)
397
2 344 743
4 786
(1 779)
2 347 750
552 562
275
1 044 839
1 448
(21)
1 427
1 439 527
(382)
1 439 145
are presented in note 4.20.
4.7. Loans and advances to Customers
31 Dec. 10 31 Dec. 09
Securities
Issued by Portuguese government entities
Issued by other Portuguese entities
Non subordinated debt securities
Bonds
Commercial paper
Issued by foreign entities
Non subordinated debt securities
Bonds
Commercial paper
Subordinated debt securities
Accrued interest
Deferred interest
Correction of the amount of hedged assets
Loan impairment
Loans
Domestic loans
Companies
Discount
Loans
Commercial lines of credit
Demand deposits – overdrafts
Invoices received – factoring
Finance leasing
Real estate leasing
Other loans
Housing
Consumer
Other loans
Foreign loans
Companies
Discount
Loans
Commercial lines of credit
Demand deposits – overdrafts
Invoices received – factoring
Other loans
Housing
Consumer
Other loans
Accrued interest
668 814
1 333 289
558 951
1 531 267
337 205
265 644
6 942
11 406
7 340
(1 630)
2 379 920
22 266
(12 479)
29 894 549
591 401
(530 365)
29 955 585
4 500
9 338
(2 251)
2 450 702
25 524
(6 917)
29 988 596
620 342
(553 932)
30 055 006
The caption LOANS TO CUSTOMERS includes the following
non-derecognised securitised assets:
31 Dec. 10 31 Dec. 09
Non-derecognised securitised assets
Loans
Loans to SME's
Housing
Ceded risk / benefit
Accrued interest
31 Dec. 10 31 Dec. 09
99 807
140 837
5 222 092
(820 949)
4 054
4 546 034
220 299
4 051 024
(896 752)
2 751
3 377 322
The securities portfolio includes the following assets to cover
capitalization insurance contracts issued by BPI Vida:
31 Dec. 10 31 Dec. 09
188
5 873
1 357
331
832
457
599
25
131
366
218
444
218
164
470
680
228
5 550
1 613
371
780
583
653
29
253
943
634
682
306
832
573
074
11 682 269 11 113 756
1 025 935
1 022 435
630 916
683 482
7
3 171
392
33
2
301
026
491
823
180
277
996
10
3 719
186
10
790
266
861
965
135
413 049
242 903
192 992
242 009
218 097
48 893
55 203
72 878
66 514
27 519 287 27 504 842
(continues)
x
Debt instruments
Issued by Portuguese government entities
Issued by other Portuguese entities
Issued by foreign entities
99 807
51 227
261 509
412 543
50 222
179 383
229 605
The loans subject to securitisation operations carried out by Banco BPI
were not derecognised from the Bank’s balance sheet and are recorded
under the caption LOANS. The amounts received by Banco BPI from
these operations are recorded under the caption LIABILITIES RELATING TO
ASSETS NOT DERECOGNISED IN SECURITISATION OPERATIONS (notes 2.2.4 and
4.19). In December 2007 the Bank sold to the Banco BPI Pension
Fund a portion of the risk / benefit relating to the housing loan
securitisation operations. The assets and liabilities relating to these
operations were derecognised in the percentage sold, and the difference
to the product of the sale was recognised in the statement of income.
At 31 December 2010 and 2009 the caption LOANS TO CUSTOMERS also
included operations allocated to the Cover Pool given as collateral for
Covered Bonds issued by Banco BPI (note 4.18), namely:
j 4 080 757 th. euro and 3 358 761 th. euro, respectively,
allocated as collateral to mortgage bonds;
j 392 870 th. euro and 213 746 th. euro allocated as collateral to
public sector bonds.
165
The BPI Group’s portfolio of loans and advances to Customers and guarantees given at 31 December 2010, by business sector, is made up as follows:
Loans1
Amount
Residents:
Agriculture, animal production and hunting
Forestry and forest operations
Fishing
Mining
Manufacturing industries
Beverage, tobacco and food
Textiles and clothing
Leather and related products
Wood and cork
Pulp, paper and cardboard and graphic arts
Coke, oil products and nuclear fuel
Chemical and synthetic or artificial fibres
Rubber and plastic materials
Other mineral non-metallic products
Metalworking industries
Manufacturing of machinery and equipment
Manufacturing of electrical and optical equipment
Manufacturing of transport material
Other manufacturing industries
Electricity, gas and water
Construction
Wholesale and retail trading
Restaurants and hotels
Transport, warehousing and communications
Banks
Other credit institutions
Other financial institutions and insurance companies
Investment holding companies
Real estate, rental and services provided to companies
Public administration, defence and mandatory social security
Education
Healthcare and welfare
Leisure, cultural and sports activities
Other service companies
Individuals
Housing loans
Others
Multinational financial institutions
Other sectors
Non-residents:
Financial and credit institutions
Multinational Financial Institutions
Administrative public sector
Non-financial companies
Individuals
224
13
22
30
504
010
909
428
425 937
130 059
23 821
129 262
261 785
454
132 830
55 775
234 199
232 452
71 317
36 986
55 226
190 137
563 888
796 184
1 802 866
396 929
1 235 127
12 923
Guarantees given2
%
0.8
0.1
0.1
1.4
0.4
0.1
0.4
0.9
10
1
1
14
440
634
266
309
596 679
402 860
1 339 685
1 753 646
42 571
234 334
229 029
32 226
2.0
1.3
4.5
5.9
0.1
0.8
0.8
0.1
20 519
15 539
590
8 455
6 279
6 367
8 306
11 720
32 036
69 206
30 408
23 490
31 984
25 882
269 372
750 533
272 564
50 197
377 812
55 377
18 366
4 695
160 244
139 857
37 298
6 543
13 265
37 627
6 674
11 682 269
1 656 851
56 340
223
39.1
5.6
0.2
59 779
633
265 152
142 545
81 358
3 761 443
533 805
29 890 024
0.9
0.5
0.3
12.6
1.8
100.0
0.4
0.2
0.8
0.8
0.2
0.1
0.2
0.6
1.9
2.7
6.0
1.3
4.1
1) Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortized cost.
2) Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities.
166
Amount
68
24
6
331
953
613
941
578
687
3 012 038
%
0.3
0.1
0.5
0.7
0.5
0.3
0.2
0.2
0.3
0.4
1.1
2.3
1.0
0.8
1.1
0.9
8.9
25.0
9.0
1.7
12.6
1.8
0.6
0.2
5.3
4.6
1.2
0.2
0.4
1.2
0.2
2.0
2.3
0.8
0.2
11.1
100.0
The BPI Group’s portfolio of loans and advances to Customers and guarantees given at 31 December 2009, by business sector, is made up as follows:
Loans1
Amount
Residents:
Agriculture, animal production and hunting
Forestry and forest operations
Fishing
Mining
Manufacturing industries
Beverage, tobacco and food
Textiles and clothing
Leather and related products
Wood and cork
Pulp, paper and cardboard and graphic arts
Coke, oil products and nuclear fuel
Chemical and synthetic or artificial fibres
Rubber and plastic materials
Other mineral non-metallic products
Metalworking industries
Manufacturing of machinery and equipment
Manufacturing of electrical and optical equipment
Manufacturing of transport material
Other manufacturing industries
Electricity, gas and water
Construction
Wholesale and retail trading
Restaurants and hotels
Transport, warehousing and communications
Banks
Other credit institutions
Other financial institutions and insurance companies
Investment holding companies
Real estate, rental and services provided to companies
Public administration, defence and mandatory social security
Education
Healthcare and welfare
Leisure, cultural and sports activities
Other service companies
Individuals
Housing loans
Others
Multinational financial institutions
Other sectors
Non-residents:
Financial and credit institutions
Multinational Financial Institutions
Administrative public sector
Non-financial companies
Individuals
216
12
18
61
248
395
222
104
466 672
144 696
26 295
135 109
303 674
881
104 659
61 526
280 286
238 591
100 725
46 635
62 581
98 911
609 216
850 720
1 892 898
383 075
1 292 607
12 120
Guarantees given2
%
0.7
0.1
0.2
1.6
0.5
0.1
0.5
1.0
Amount
8
1
1
9
137
589
169
138
%
0.3
0.1
0.3
176 740
748 045
1 432 260
1 414 937
44 509
321 650
247 250
38 040
0.6
2.6
4.8
4.7
0.1
1.1
0.8
0.1
20 825
14 825
480
8 980
7 524
6 369
8 152
13 857
33 038
58 417
32 304
26 028
36 468
11 525
251 137
832 308
295 673
91 589
299 242
71 071
27 909
6 028
117 930
153 372
45 333
2 130
43 983
42 808
7 418
11 113 756
1 705 917
20 146
38 358
37.3
5.7
0.1
0.1
65 337
62
5 686
2.1
194 628
189 613
1
4 243 228
466 292
29 815 216
0.7
0.6
66 538
2.2
14.2
1.6
100.0
347 611
4 082
3 076 072
11.3
0.1
100.0
0.4
0.2
0.9
0.8
0.3
0.2
0.2
0.3
2.0
2.9
6.3
1.4
4.3
0.7
0.5
0.3
0.2
0.2
0.3
0.4
1.1
1.9
1.0
0.8
1.2
0.4
8.2
27.1
9.6
3.0
9.7
2.3
0.9
0.2
3.8
5.0
1.5
0.1
1.4
1.4
0.2
0.2
1) Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortized cost.
2) Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities.
167
The caption SECURITIES at 31 December 2010 is made up as follows:
Impairment3
Quantity
Cost
Gross book
value
50 000 000
50 000 000
49 904
49 903
99 807
49 904
49 903
99 807
Other residents
Asset Backed Securities (ABS's)
Tagus – Soc. Tit. Credito – CL.A – 12.02.2025
Tagus – Soc. Tit. Credito – CL.B – 12.02.2025
105 229 676
50 000
105 230
50
105 280
105 230
50
105 280
Bonds
ADP – Aguas de Portugal, SGPS – TV – 20.06.2022
Banif – Tax. Var. (30.12.2015)1
Celbi Celulose Beira Ind. – TV (08.02.2015)
EDIA SA – TV – 30.01.2027
EDIA – Emp. Des. do Alqueva – TV – 11.08.2030
Galp – Energia SGPS – TV – 20.05.2013
Grupo Visabeira SGPS – TV – 13.07.2014
Jeronimo Martins – JM2011 – TV – 28.03.2011
Jeronimo Martins – JM2012 – TV – 28.03.2012
JMR – Gestão Empresas Retalho – 2007 / 2012
Mota Engil – TX. VR. 2004-2011
Polimaia / 1989 – SR. C (AC.CRED.)
Portucel – Emp. Celu. Papel – TV. (27.10.2012)
Portucel – Emp. Celu. Papel – TV. (27.10.2012)1
Semapa – 2006 / 2016 2.ª
Sonae Distribuição Setembro – 2007 / 2015
Zon Multimedia 2009-2012
Zon Multimedia 2010-2014
50 000 000
11 800 000
75 000 000
16 180 000
19 250 000
65 000 000
5 000 000
17 500 000
17 500 000
45 200 000
5 500 000
7
13 100 000
4 904 000
50 000 000
35 200 000
32 530 000
100 000 000
50 000
11 800
75 000
16 180
19 250
64 838
5 000
17 500
17 500
45 200
5 500
50 000
11 800
75 000
16 180
19 250
64 866
5 000
17 500
17 500
45 200
5 500
13 115
4 901
50 000
35 200
32 530
100 000
563 514
1 333 290
2 101 891
13 107
4 901
50 000
35 200
32 530
100 000
563 534
1 333 289
2 101 910
7 442
7 442
2 993 564
3 741 955
2 994
3 742
6 736
2 994
3 742
6 736
2 994
3 742
6 736
950 000
5 809 385
1 169 361
2 926 910
940 792
560 731
12 691 463
2 145 000
2 806 466
1 552 408
7 483 910
2 245 173
2
2 806 466
624 017
950
5 582
1 169
2 927
913
363
11 926
2 054
2 707
1 552
7 484
2 245
950
5 732
1 169
2 927
913
363
12 193
2 137
2 763
1 552
7 484
2 245
2 808
624
2 807
624
SECURITIES
Debt instruments
Portuguese public debt
OT – TV – 05.01.2021
República Portuguesa – TV – 03.11.2015
Commercial paper
Bonds
Structured Investment Vehicles (SIV's)
Links Finance Corp – TV – 15.06.2017
Nightingale Fin LTD – TV – 06.06.2017
Asset Backed Securities (ABS's)
Alfa Div Pymt RT FIN – TV – 15.12.2011
ARTS – SR.2005 – AA – CL.A – 15.06.2012
Bosphorus Finantial Serv. TV (15.02.2012)
Dali Capital – Sr. 2006 – 1Cl.A (25.12.2046)
Dali Capital – Sr. 2006 – 1Cl.A (25.12.2046)1
Eddystone Fin. Sr. 2006 – 1 CLA 1B 19.04.20212
HSBC Brazil – SR. 2006 – A – 15.04.2016
Garanti Diversified – Sr. 06A – CL.1 – 04.2011
Garanti Diversified – Sr. 2005 – A – CL.1 – 2013
Red & Black Prime Rus – S07 – 1 CA – 01.19.35
Saratoga CLO I Ltd. – Sr. 2006 – 1X – Cl – A2 – 2019
Saratoga CLO I Ltd. – Sr. 2006 – 1X – Cl – B – 2019
Stichting Eurostar CDO (10/03/2013) O.H – Cl – A1
TIB Diversified – SR.05 – DX CL.D – 15.08.2012
Ukraine Mort – Sr. 2007 – 1 CL.A – 15.12.2031
1) Securities reclassified from the caption FINANCIAL ASSETS HELD FOR TRADING, in 2008, under the amendments to IAS 39 and IFRS 7 (notes 2 and 4.48).
3) Additionally, the Bank recorded collective impairment of 816 th. euro on bonds issued by residents.
168
Asset Backed Securities (ABS's) (cont.)
VB DPR FIN CO – SR.2010 – 1A – CL.A – 15.06.2014
VB DPR FIN CO – SR.2006 – 1A – CL.B – 15.06.2014
Kazakh Mortgage – S.07 – 1 – C.A – 15.02.2029
Roof Russia – TV – (25.07.2017)
VB DPR Fin. Comp. – SR.2006 – 1X – CL.E – 2013
YAPI Kredit Fin – SR.2010 – CL.A – 21.11.2014
YAPI Kredit Fin – SR.2010 – CL.C – 21.11.2014
YAPI Kredit Fin – SR.2010 – CL.E – 21.02.2015
Other bonds
Banco Financia Intl. Ltd. Cay. Tv. (04.05.2015)1
Banco Financia Intl. Ltd.Tv. (26.07.2017)1
Banco Financia Intl. Ltd.Tv. (28.07.2016)1
Banif Finance (Cay) – Tv. 29.12.20141
Bie Bank & Trust LTD – 4.20% – 13.02.2013
Bie Bank & Trust LTD – TV – 13.02.2013
CA Valencia & Alicante – TV – 18.03.2012
Caixa D' Estalvis Cataluna – TV. 05.06.2012
Caja de Ahorros de Avila TV 30.04.2012
Caja General Canarias TV 16.03.2012
Espirito Santo Invest PLC – 4.384% – 26.04.2011
Subordinated debt
Bonds
Espirito Santo Invst. PLC – TV (20.12.2015)1
Impairment3
Quantity
Cost
Gross book
value
3 934 168
4 954 079
593 137
214 726
2 458 855
8 381 979
4 800 000
6 997 456
3 787
4 805
593
215
2 459
7 923
4 622
6 353
74 061
3 797
4 815
593
215
2 459
7 960
4 637
6 401
74 736
3 500 000
8 500 000
4 000 000
4 220 000
75 000 000
10 000 000
15 000 000
15 000 000
15 000 000
30 000 000
75 000 000
3 500
8 500
3 999
4 220
75 000
10 000
15 089
15 113
15 095
30 217
75 000
255 733
336 530
3 500
8 500
3 999
4 220
75 000
10 000
15 089
15 113
15 095
30 217
75 000
255 733
337 205
6 736
4 500
4 500
4 500
4 500
9 338
(2 251)
2 450 702
14 178
4 500 000
Accrued interest
Deferred interest
2 442 921
3) Additionally, the Bank recorded collective impairment of 816 th. euro on bonds issued by residents.
The impairment losses recorded in the Structured Investment
Vehicles (SIVs) portfolio mentioned above were calculated based on a
nil Net Asset Value.
4.8 Held to maturity investments
Evidence of impairment of the Asset Backed Securities (ABSs)
portfolio is determined through regular monitoring of the
performance indicators of the underlying transactions. At 31
December 2010 this analysis did not show impairment situations in
other securities, apart from those already recorded. A significant part
of the securities in this portfolio does not have reference market
values. However, the losses identified for the securities for which
indicative prices could be obtained do not show evidence of
impairment.
Debt instruments
Subordinated debt
Subordinated debt
Impairment
Accrued interest
31 Dec. 10 31 Dec. 09
363 343
5 450
212 170
323 097
4 469
46 531
442 332
10 353
384 019
43 450
(4 830)
6 388
803 124
9 936
1 043 584
The portfolio of held to maturity investments includes assets to cover
capitalization insurance contracts issued by BPI Vida.
In 2010 and 2009, a sale of securities prior to their maturity was
made, following a significant deterioration in the credit risk of the
issuer of the bonds. These transactions fall within the situations
provided for in IAS 39 that do not taint the BPI Group’s intention to
hold the remaining investments to maturity.
169
At 31 December 2010 this caption was made up as follows:
Quantity
Amounts per unit
Cost
Book value
Listing / Price
SECURITIES
Debt instruments
Other residents
Bonds
Banco Comercial Portugues – Tv – 09.05.2014
Banco Espirito Santo – 3.75% – 19.01.2012
Banco Intl Funchal – 3.25% – 08.05.2012
Bankinter Sa – Tx.Vr. – 15.01.2013
Bcp – 3.75% – 17.06.2011
Bcp – Tv – 28.02.2013
Bes – Floating Rate Notes Due 2012
Bes – Tv – 08.05.2013
Bes – Tv – 25.02.2013
Caixa Eco Montepio Geral – 3.25% – 27.7.2012
Caixa Eco Montepio Geral – Tv – 29.05.2013
Cgd – 3.875% – 12.12.2011
Cgd – 5.125% – 19.02.2014
Modelo Continente, SGPS – Tv. (02.08.2012)2
Parpublica – 3.5% – 08.07.2013
Semapa – Tv (20.04.2016)2
13 500 000
25 000 000
71 220 000
22 500 000
12 650 000
27 300 000
1 700 000
3 500 000
6 000 000
16 750 000
8 150 000
50 000 000
10 000 000
4 767 000
91 950 000
1 200 000
84.49
100.62
99.96
99.95
99.05
97.14
99.11
97.92
98.98
99.99
97.11
100.71
103.93
100.00
99.70
95.48
11 406
25 154
71 191
22 488
12 530
26 518
1 685
3 427
5 939
16 749
7 915
50 357
10 392
4 767
91 679
1 146
363 343
11 406
25 154
71 191
22 488
12 530
26 518
1 685
3 427
5 939
16 749
7 915
50 357
10 392
4 767
91 679
1 146
363 343
5 450 000
100.00
5 450
5 450
5 450
5 450
Issued by foreign government entities
Bonds
Bonos Y Oblig Del Estado – Tv – 17.03.2015
Rep. Grécia – 4.3% – 20.03.2012
Rep. Grécia – Tv – 20.02.2013
60 000 000
45 000 000
109 000 000
99.79
98.81
98.92
59 876
44 466
107 828
212 170
59 876
44 466
107 828
212 170
Issued by other non resident entities
Bonds
Alfa Div Pymt Rights Fin – Tv.15.03.20121
Alfa Div Pymt Rt Fin – Tv – 15.12.20111
Allied Irish Banks – Tv – 15.09.2011
Alpha Credit Group – Tv. (02.06.2011)1
Anglo Irish Bank Corp – Tv – 23.12.2011
Ayt Cedulas Cajas Global – Tv – 14.12.2012
Baa Funding Ltd. – 3.975% – 15.02.20142
Banca Carige Spa – Tv – 07.06.20162
Banca Intesa Spa – Tv. (11.05.2012)2
Banco Sabadell Sa – Tv – 20.02.2012
Banesto Financial Plc – Tv – 11.01.2013
Banif Finance(Cay) – Tv – 05.22.2012
Banif Finance(Cay) – Tv – 05.22.20122
Bankinter – Tv – 21.06.2012
Bat Intl Finance Plc – 3.625% (29.06.2012)2
Bcp Finance Bank – Tv – 06.02.2012
Bcp Finance Bank – Tx. Var. (03.02.2011)1
Bear Stearns Co – Tx. Var. (27.07.2012)2
Bes Finance – Tv. (18.07.2011)
Bes Finance Ltd – Tv. (08.02.2011)
Bes Finance Ltd – Tv. (08.02.2011)1
Bpe Financiaciones – Tx. Vr. – 08.02.2012
Caixa D'estalvis Cataluna – Tv.06.07.20122
Caixa Eco Montepio Geral – Tv. (03.05.2012)
Caixa Eco Montepio Geral – Tv. (03.05.2012)1
Caixanova – Tv – 02.03.20121
Caja Valencia Cast. – Tx. Var. (06.06.2012)2
812
320
000
300
053
900
442
000
000
500
000
100
000
000
688
615
300
000
000
500
000
500
000
600
500
404
900
000
000
98.19
98.47
95.98
99.62
100.00
98.03
85.88
93.11
98.18
99.85
98.90
97.95
97.95
98.69
99.55
96.78
96.78
96.08
99.92
94.54
99.01
99.72
99.72
99.11
91.56
98.22
98.22
98.62
84.95
798
315
4 799
299
3 053
1 862
380
931
3 927
27 458
26 704
1 081
4 894
3 947
4 667
14 189
11 860
1 922
2 998
3 309
19 802
29 416
997
11 497
1 373
7 282
11 679
9 862
1 699
798
315
4 799
299
3 053
1 862
380
931
3 927
27 458
26 704
1 081
4 894
3 947
4 667
14 189
11 860
1 922
2 998
3 309
19 802
29 416
997
11 497
1 373
7 282
11 679
9 862
1 699
Subordinated debt
Banco Itau Europa – Tx. Vr. (22.12.2015)2
1) Securities reclassified from the caption
170
5
3
1
1
4
27
27
1
5
4
4
14
12
2
3
3
20
29
1
11
1
7
11
10
2
500
000
000
000
400
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
under the amendments to IAS 39 and IFRS 7, in 2008 (notes 2 and 4.48)
under the amendments to IAS 39 and IFRS 7, in 2009 (notes 2 and 4.48).
Quantity
Amounts per unit
Cost
Book value
Listing / Price
Bonds (cont.)
Cam Global Finance – Tx. Var. (29.06.2012)2
Cemg (Cay) – Tv – (19.09.2011)
Cemg (Cay) – Tv – (19.09.2011)1
Cimpor Financial Opertns – 4.5% (27.05.2011)2
Credito Emiliano – Tv. (04.05.2012)1
Criteria Caixa Corp. – 4.125% – 20.11.2014
Cx Montepio Geral (Cay) – Tv.(31.01.2011)1
Degussa Ag – 5.125% (10.12.2013)2
Dexia Credit Local – Tv – 06.02.2012
Dresdner Bank Ag – Tv. (01.08.2012)2
Efg Hellas Plc – Tv. (15.03.2011)
Goldman Sachs Group Inc. – Tv. (04.02.2013)1
Hbos Treasury Srvcs Plc – Tv. (14.06.2012)
Hsbc Finance Corp – Tv. (05.04.2013)1
Ibercaja(Ca.Zaragoza A.R.)Tv – 20.04.20181
Ibercaja(Ca.Zaragoza A.R.)Tv – 25.04.20191
Iberdrola Finanzas Sau – Tv – 08.02.2013
Ing Bank Nv – Tv. (22.08.2011)
Ing Groep Nv – Tv. (11.04.2016)1
Ing Verzekeringen Nv – Tv (18.09.2013)1
Koninklijke Kpn Nv – 4,5% (21.07.2011)1
Kraft Foods Inc – 5.75% – 20.03.20122
Macquarie Bank Ltd – Tv – 06.12.20161
Morgan Stanley – Tv – 29.11.20131
Port.Telecom Int.Fin. – 3.75% (26.03.2012)1
Raiffeisen Zentralb.Oest. – Tv – (22.06.16)1
Rci Banque Sa – Tv – 24.01.20122
Repsol Intl Finance – Tv – 16.02.2012
Royal Bank Of Scotland – Tv – 08.06.2015 12
Santander Intl Debt Sa – Tv – 18.01.2013
Santander Intl Debt – Tv. (05.04.2013)
Santander Intl Debt – Tx. Vr. – 25.04.2012
Santander Intl Debt – Tx. Vr. – 30.01.2012
Tdc As – 6.5% (19.04.2012)1
Telecom Italia Spa – Tv – 19.07.2013
Telecom Italia Spa – 4.5% (28.1.2011)1
Telecom Italia Spa – Tv. (06.12.2012)1, 2
Vivendi – Tv. 3.10.20111
Vodafone Group Plc – Tv – 06.06.2014
Vodafone Group Plc – Tv. (05.09.2013)
Subordinated debt
Bonds
Cam International – Tv – 26.04.20172
Fortis Bank Nederland Nv – Tv. (22.06.2015)2
Standard Chartered Bank – Tv – 28.03.20181
2 500 000
3 000 000
3 300 000
2 500 000
1 545 000
14 800 000
2 000 000
500 000
5 000 000
200 000
2 500 000
1 600 000
1 750 000
3 400 000
6 000 000
8 400 000
31 000 000
2 200 000
3 900 000
4 000 000
9 375 000
6 100 000
6 000 000
2 500 000
10 767 000
5 000 000
2 600 000
2 500 000
6 000 000
35 000 000
2 500 000
5 100 000
700 000
1 000 000
2 500 000
1 300 000
2 700 000
3 000 000
10 000 000
17 383 000
86.81
99.05
99.05
98.23
99.31
99.63
99.89
96.89
99.95
97.23
99.95
97.72
97.65
97.14
95.89
100.00
100.00
100.23
95.00
97.60
99.17
101.52
95.94
93.91
96.65
99.02
92.75
99.53
100.00
99.66
99.21
99.30
99.59
98.68
97.91
99.89
100.00
99.48
98.25
99.25
2 170
2 972
3 269
2 456
1 534
14 745
1 998
484
4 997
194
2 499
1 563
1 709
3 303
5 753
8 400
31 000
2 205
3 705
3 904
9 297
6 193
5 757
2 348
10 407
4 951
2 412
2 488
6 000
34 882
2 480
5 064
697
987
2 448
1 299
2 700
2 985
9 825
17 252
442 332
2 170
2 972
3 269
2 456
1 534
14 745
1 998
484
4 997
194
2 499
1 563
1 709
3 303
5 753
8 400
31 000
2 205
3 705
3 904
9 297
6 193
5 757
2 348
10 407
4 951
2 412
2 488
6 000
34 882
2 480
5 064
697
987
2 448
1 299
2 700
2 985
9 825
17 252
442 332
1 900 000
1 000 000
8 500 000
69.79
100.00
94.43
1 326
1 000
8 027
10 353
1 326
1 000
8 027
10 353
9 936
1 043 584
Accrued interest
1 033 648
under the amendments to IAS 39 and IFRS 7, in 2008 (notes 2 and 4.48)
under the amendments to IAS 39 and IFRS 7, in 2009 (notes 2 and 4.48).
171
172
173 424
161 382
Machinery and tools
Interior installations
8
16 502
35 442
14 695
26 665
715 578
16 494
11 970
15 243
430 611
Tangible assets in progress
27
752
263
26 042
2 008
1 330
9 362
514
1 250
Other equipment
Security equipment
6 655
13 769
Vehicles
49 076
3 697
258 302
Machinery and tools
1 652
2 045
113 703
944
143 655
Furniture and fixtures
Equipment
Leasehold improvements
Other property
Property for own use
Property
(6 807)
(11)
(11)
(6 174)
(343)
(474)
(1 751)
(2 954)
(394)
(258)
(622)
(420)
(202)
Balance at Purchases Sales and
31 Dec.
write-offs
09
(1 207)
(13 342)
(892)
(12 450)
3 572
438
153
160
1 423
1 145
22
231
8 563
2 140
(293)
6 716
Transfers and
others
Gross
The changes in other tangible assets in 2010 were as follows:
4.9. Other tangible assets
6 302
236
236
1 658
20
165
218
188
592
100
375
4 408
1 537
6
2 865
749 308
30 050
13 800
16 250
444 910
748
26 769
8 567
162 572
181 569
14 011
50 674
274 348
118 612
455
155 281
Foreign Balance at
exchange
31 Dec.
differences
10
9 256
129 298
319
39 694
10 097
461 975
30 119
322 580
319
6
230
10 097
1 348
1 205
11 303
13 328
878
19 978
5 101
93 357
153 564
11 225
2 051
6 443
92 972
39 125
6
2 807
330
35 996
(6 423)
(10)
(10)
(5 900)
(338)
(444)
(1 609)
(2 867)
(387)
(255)
(513)
(412)
(101)
(5)
(87)
(87)
2
2
9
3
(12)
80
77
(36)
39
Transfers and
others
Depreciation
Balance at Depreciation Sales and
31 Dec. for the year write-offs
09
1 990
908
27
166
123
399
63
130
1 082
891
1
190
497 231
10 319
10 319
347 709
238
21 015
6 037
103 174
164 424
11 782
41 039
139 203
99 971
200
39 032
Foreign Balance at
exchange
31 Dec.
differences
10
Net
252 077
19 731
253 603
16 568
4 598
11 970
16 250
3 481
108 031
33
6 064
1 554
68 025
19 860
2 544
9 951
129 004
20 731
614
107 659
97 201
510
5 754
2 530
59 398
17 145
2 229
9 635
135 145
18 641
255
116 249
Balance at Balance at
31 Dec.
31 Dec.
10
09
173
1 108
50 015
811 326
(117 599)
(27)
(27)
(5 773)
(138)
(453)
(447)
(3 902)
(510)
(323)
(111 799)
(960)
(67)
(110 772)
(27 834)
(2 436)
(91)
(2 345)
(6 599)
(8)
(706)
(948)
(722)
(2 438)
(442)
(1 335)
(18 799)
(6 170)
(59)
(12 570)
715 578
26 665
14 695
11 970
430 611
263
26 042
6 655
161 382
173 424
13 769
49 076
258 302
113 703
944
143 655
Foreign Balance at
exchange
31 Dec.
differences
09
479 672
9 702
9 702
299 766
229
18 907
5 304
82 707
143 827
11 112
37 680
170 204
88 518
369
81 317
Balance at
31 Dec.
08
44 796
419
419
32 005
5
1 318
965
11 416
15 204
906
2 191
12 372
9 402
15
2 955
Depreciation
for the year
(53 953)
(24)
(24)
(5 636)
(117)
(447)
(373)
(3 876)
(507)
(316)
(48 293)
(853)
(47)
(47 393)
Sales and
write-offs
Depreciation
(8 540)
(3 555)
(4)
(130)
(721)
(393)
(1 591)
(286)
(430)
(4 985)
(4 095)
(7)
(883)
461 975
10 097
10 097
322 580
230
19 978
5 101
93 357
153 564
11 225
39 125
129 298
92 972
330
35 996
Foreign Balance at
exchange
31 Dec.
differences
09
Net
253 603
16 568
4 598
11 970
108 031
33
6 064
1 554
68 025
19 860
2 544
9 951
129 004
20 731
614
107 659
331 654
19 783
4 590
15 193
120 727
30
6 530
1 534
75 192
25 080
2 608
9 753
191 144
23 889
701
166 554
31 Dec.
31 Dec.
09
08
includes 62 556 th. euro relating to the contribution in kind to the BPI Pension Fund. The contribution amounted to
(330)
(24 048)
517
(24 565)
9 813
341
332
3 831
3 424
323
1 562
13 905
5 364
8 541
Transfers and
others
Gross
Sales and
write-offs
WRITE-OFFS OF PROPERTY FOR OWN USE
23 691
29 485
The net amount of the caption SALES AND
74 347 th. euro (notes 4.26 and 4.41).
4
14 292
23 687
15 193
Tangible assets in progress
12
25 437
Security equipment
821
886
12 677
6 838
259
157 899
7 433
678
1 739
420 493
168 907
Computer hardware
Other equipment
47 433
13 720
13 647
361 348
Furniture and fixtures
3 062
10 585
Purchases
112 407
1 070
247 871
Machinery and tools
Equipment
Leasehold improvements
Other property
Property for own use
Property
Balance at
31 Dec.
08
The changes in other tangible assets in 2009 were as follows:
174
OTHER INTANGIBLE ASSETS
OTHER INTANGIBLE ASSETS
(1 452)
(1 018)
(434)
(1 452)
Gross
1 417
(1 259)
158
1 417
143
61
82
143
57 659
31 152
88 811
1 684
90 495
79 969
53 596
26 373
79 969
Balance at
31 Dec.
09
Depreciation
5 489
2 052
3 437
5 489
(1 452)
(1 018)
(434)
(1 452)
Amortisa- Sales and
tion for write-offs
the year
111
41
70
111
1 664
127
1 791
1 154
2 945
(445)
(21)
(424)
(445)
(115)
(346)
(461)
(115)
(680)
(373)
(307)
(680)
56 617
31 501
88 118
1 565
89 683
Foreign Balance at
exchange
31 Dec.
differences
09
72 960
51 380
21 580
72 960
Balance at
31 Dec.
08
Depreciation
7 920
2 465
5 455
7 920
(420)
(21)
(399)
(420)
(14)
(14)
(14)
Amortisa- Sales and Transfers
tion for write-offs and others
the year
(477)
(214)
(263)
(477)
30.0
35.0
50.0
25.0
32.8
49.0
21.0
25.0
F. Turismo – Capital de Risco, S.A.
Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A.
InterRisco – Sociedade de Capital de Risco, S.A.
25.0
32.8
25.0
50.0
35.0
30.0
20 157
158 909
19 903
23 581
1 463
21 520
74 134
18 054
194 221
28 552
296
24 323
1 446
22 383
74 749
22 569
31 Dec. 10 31 Dec. 09
Book value
31 Dec. 10 31 Dec. 09
Effective participation (%)
Investments in associated companies and jointly controlled entities, recorded in accordance with the equity method, are as follows:
79 969
53 596
26 373
79 969
Foreign Balance at
exchange
31 Dec.
differences
09
84 117
54 671
29 446
84 117
Foreign Balance at
exchange
31 Dec.
differences
10
at 31 December 2009 includes 4 096 th. euro relating to the net amount of lease rights to areas for the establishment of branches.
55 462
32 105
87 567
757
88 324
Balance at Purchases Sales and Transfers
31 Dec.
write-offs and others
08
4.11. Investments in associated companies and jointly controlled entities
The caption
Intangible assets in progress
Software
Other intangible assets
582
3
585
1 378
1 963
Foreign Balance at
exchange
31 Dec.
differences
10
at 31 December 2010 includes 801 th. euro relating to the net amount of lease rights to areas for the establishment of branches.
56 617
31 501
88 118
1 565
89 683
The changes in intangible assets in 2009 were as follows:
The caption
Intangible assets in progress
Software
Other intangible assets
Gross
Balance at Purchases Sales and Transfers
31 Dec.
write-offs and others
09
The changes in intangible assets in 2010 were as follows:
4.10. Intangible assets
Net
3 021
5 128
8 149
1 565
9 714
3 021
5 128
8 149
1 565
9 714
4 082
10 525
14 607
757
15 364
31 Dec.
31 Dec.
09
08
Net
2 988
1 706
4 694
1 684
6 378
31 Dec.
31 Dec.
10
09
(continuation)
In June 2010 the BPI Group acquired 3.4% of the share capital of
Unicre – Instituição Financeira de Crédito, S.A., and now holds a
21.01% participation in that company. The participation of the BPI
Group in Unicre is now recorded in accordance with the equity
method of accounting (note 4.40)
31 Dec. 10 31 Dec. 09
In 2010 a new company, Inter-Risco – Sociedade de Capital de
Risco, S.A., was incorporated, in which BPI Private Equity –
Sociedade de Capital de Risco, S.A. has a 49% participation
(note 1).
4.12. Tax assets
31 Dec. 10 31 Dec. 09
Current tax assets
Corporate income tax recoverable
Others
Deferred tax assets
Due to temporary differences
Due to tax losses carried forward
1 231
2 433
3 664
20 767
418
21 185
416 719
10 227
426 946
430 610
185 173
7 144
192 317
213 502
Details of deferred tax assets are presented in note 4.44.
Liability for pensions and
and other benefits (note 4.26)
Pension Fund Asset Value
Pensioners and Employees
Directors
Past Service Liabilities
Pensioners and Employees
Directors
Others
Employees
Directors
Changes in the Pension Plan conditions
to be amortised
Employees
Directors
Other accounts
Foreign exchange transactions pending settlement
Stock exchange transactions pending settlement
Non Stock exchange transactions
pending settlement
Operations on assets pending settlement
2 409 393
29 477
2 463 809
26 564
(2 306 127) (2 274 641)
(29 402)
(27 664)
(712)
(537)
254 766
(515)
206 677
(787)
69
162
357 111
138
283
393 842
48 511
31 564
23 942
16 641
136 909
216 984
923 784
11 300
118 312
170 195
924 351
4.13. Other assets
31 Dec. 10 31 Dec. 09
Debtors, other applications and other assets
Debtors for future operations
Collateral accounts
Other applications
VAT recoverable
Debtors for loan interest subsidy receivable
Other debtors
Overdue debtors and other applications
Impairment
Other assets
Gold
Other available funds and other assets
Tangible assets available for sale
Impairment
Accrued income
For irrevocable commitments assumed
in relation to third parties
For banking services rendered to third parties
Other accrued income
Deferred expenses
Insurance
Rent
Other deferred expenses
28 662
3 318
16 328
9
12 216
172 435
966
(970)
38 595
5 533
635
298
17 544
190 399
817
(1 196)
51
823
233 838
117 288
(40 958)
76 330
118
849
253 592
102 527
(36 607)
65 920
315
4 384
25 112
29 811
310
5 301
25 885
31 496
19
2 457
7 234
9 710
250
3 400
5 656
9 306
(continues)
The caption OTHER APPLICATIONS at 31 December 2010 includes
15 904 th. euro relating to collateral pledged in guarantee under
derivative transactions relating to bonds issued through Sagres –
Sociedade de titularização de créditos, S.A.
The caption OTHER DEBTORS at 31 December 2010 and 2009 includes
153 420 th. euro and 166 597 th. euro, respectively, relating to
instalments receivable from the sale in 2008 of 49.9% of the share
capital of Banco de Fomento (Angola). The selling price was
365 671 th. euro and part of the proceeds from the sale is being
paid in eight annual instalments, from 2009 to 2016, plus
compensation due to monetary correction.
x
175
The changes in tangible assets available for sale in 2010 were as follows:
Acquisitions
Balance at 31 Dec. 09
Gross
Impairment
Net
Impairment
Increase /
Reversals
of impairment
Gross
Sales and write-offs
Gross
Impairment
Net
Assets received in settlement
of defaulting loans
Real estate
94 583
Equipment
5 695
(4 249)
61
(61)
Others
(31 474) 63 109
1 446
42 011
(22 198)
3 836
(12 347)
114 396
6 260
(9 532)
3 719
(288)
2 423
(39 985) 74 411
(818)
61
(61)
408
(94)
1 605
Real estate
Others
408
(94)
314
1 780
(729)
1 051
(1 780)
729
(36 607) 65 920
48 271 (33 510)
8 284
102 527
(12 635) 117 288
314
(40 958) 76 330
The changes in tangible assets available for sale in 2009 were as follows:
Acquisitions
Gross
Impairment
Gross
Impairment
Increase /
Reversals
of impairment
43 764
(14 194)
2 106
(17 133)
94 583
3 837
(3 113)
655
(1 199)
5 695
(4 249)
61
(61)
Net
Sales and write-offs
Gross
Impairment
Net
Assets received in settlement
of defaulting loans
Real estate
65 013
Equipment
4 971
(3 705)
1 266
61
(60)
1
(1)
(1)
Others
(16 447) 48 566
(31 474) 63 109
1 446
Real estate
Others
408
(93)
315
1 780
(729)
1 051
72 233
(21 034) 51 199
47 601 (17 307)
2 761
408
(94)
314
1 780
(729)
1 051
(18 334) 102 527
(36 607) 65 920
In addition, at 31 December 2010 and 2009 this caption also
includes:
The caption OTHER ACCRUED INCOME at 31 December 2010 and 2009
includes 16 609 th. euro and 17 758 th. euro, respectively, relating
to accrued commission for participation in the results of insurance
(notes 2.14 and 4.39).
j
The caption PAST SERVICE LIABILITIES – OTHERS corresponds to the
liability of Banco de Fomento Angola in accordance with Law 18 /
90 of Angola, regarding the Angola Social Security system, which
defines that retirement pensions must be granted to all Angolan
Employees enrolled in the Social Security.
securitisation operations carried out by the BPI Group (notes 4.7
and 4.19), resulting from temporary differences between
settlement of the securitised loans and settlement of the liability
for assets not derecognized;
j
mortgage loans pending settlement;
j
transfers under SEPA (Single Euro Payment Area).
The caption STOCK EXCHANGE TRANSACTIONS PENDING SETTLEMENT at
31 December 2010 and 2009 refers to the sale of securities only
settled in the following month.
The caption OPERATIONS ON ASSETS PENDING SETTLEMENT at 31 December
2010 and 2009 includes 16 209 th. euro and 16 761 th. euro,
respectively, relating to taxes to be settled, of which 11 977 th. euro
and 12 529 th. euro, respectively, relate to taxes under litigation
which were paid under the provisions of Decree-Law 248-A / 02 of
14 November.
176
4.14. Resources of central banks
4.17. Resources of Customers and other debts
31 Dec. 10 31 Dec. 09
Resources of the Bank of Portugal
Deposits
Accrued interest
Resources of other central banks
Deposits
Accrued interest
1 051 639
251
2 500 000
8 333
193 034
613
1 245 537
265 000
50
2 773 383
In 2010 and 2009, Banco BPI took funds from the EuroSystem,
using part of its portfolio of eligible assets for this purpose (note
4.33).
4.15. Financial liabilities held for trading
31 Dec. 10 31 Dec. 09
Derivative instruments with negative
fair value (note 4.4)
261 493
261 493
318 852
318 852
31 Dec. 10 31 Dec. 09
Demand deposits
7 673 321
7 418 464
Term deposits
14 138 443 13 530 282
Savings deposits
377 629
456 292
Compulsory deposits
13 818
9 021
Cheques and orders payable
42 763
67 762
Debt securities sold with repurchase agreements
40
Other resources of Customers
48 959
117 058
Capitalisation insurance products – Unit links
560 346
558 378
Capitalisation insurance products
– guaranteed rate
250 369
330 504
Accrued interest
114 733
106 180
23 220 381 22 593 981
Correction of the amount of hedged liabilities
20 482
23 871
23 240 863 22 617 852
The caption RESOURCES OF CUSTOMERS at 31 December 2010 included
deposits of investment funds and pension funds managed by the
BPI Group (270 672 th. euro and 110 339 th. euro, respectively, at
31 December 2009).
4.16. Resources of other credit institutions
31 Dec. 10 31 Dec. 09
Resources of Portuguese credit institutions
Very short term resources
Deposits
Other resources
Accrued interest
Resources of foreign credit institutions
Deposits of international financial organisations
Very short term resources
Deposits
Debt securities sold with repurchase agreements
Other resources
Accrued interest
Correction of the amount of hedged liabilities
Commission relating to amortised cost
2 500
238 980
1 330
180
242 990
73 564
421 463
1 887
985
497 899
327 281
928
696 525
3 321 747
134 516
3 798
4 484 795
4 289
(5 990)
4 726 084
536 047
94 220
1 551 924
1 913 399
107 812
4 337
4 207 739
2 365
(5 326)
4 702 677
The balance of the caption DEBT SECURITIES SOLD WITH REPURCHASE
AGREEMENTS is made up essentially of money market repurchase
operations, used for liquidity management purposes.
177
4.18. Debt securities
31 Dec. 10
Issued Repurchased
Deposit certificates
EUR
Commercial paper
EUR
Covered bonds
EUR
Fixed rate cash bonds
EUR
CZK
CHF
USD
CAD
JPY
Variable rate cash bonds
EUR
Variable income cash bonds
EUR
USD
Average
interest rate
Balance
Average
interest rate
76
76
76
76
3.5%
110
110
110
110
4.0%
990
990
990
990
1.1%
848 915
848 915
848 915
848 915
0.6%
3 725 000 (1 259 750)
3 725 000 (1 259 750)
2 465 250
2 465 250
2.5%
3 225 000
3 225 000
(969 100)
(969 100)
2 255 900
2 255 900
3.2%
3 284 233
19 951
796
150 617
22 726
36 815
3 515 138
3.3%
3.7%
1.3%
2.1%
2.2%
2.5%
2 707 299
18 887
(97 666)
2 609 633
18 887
3.2%
3.7%
28 310
(869)
27 441
4.1%
30 039
2 784 535
(98 535)
30 039
2 686 000
2.5%
(290 804)
2 998 512
19 951
796
145 969
22 291
36 815
3 224 334
1 716 572
1 716 572
(590 523)
(590 523)
1 126 049
1 126 049
1.7%
2 451 989
2 451 989
(328 264)
(328 264)
2 123 725
2 123 725
1.1%
1 350 829
(550 566)
88 460
(57 141)
1 439 289 (607 707)
10 397 065 (2 748 784)
800 263
31 319
831 582
7 648 281
82 133
1 650 314
126 663
1 776 977
11 087 526
(625 173)
(91 550)
(716 723)
(2 112 622)
1 025 141
35 113
1 060 254
8 974 904
74 510
(285 721)
(4 648)
(435)
Accrued interest
Correction of the amount
of hedged liabilities
Premiums and commission (net)
88 546
(36 686)
133 993
7 782 274
The average interest rates mentioned in the preceding table were
calculated based on the interest rate of each issue in relation to the
nominal value of the bonds. It is not possible to calculate the rate for
the Variable Income Bonds as the income is only known when it is
due.
As part of its medium and long term funding plan, the BPI Group
issues cash bonds. Some of the bonds are issued under the Euro
Medium Term notes (EMTN) program.
The maximum amount for emissions under the EMTN program is
10 000 000 000 euro.
Cash bonds can only be issued by institutions under the Bank of
Portugal’s supervision. They are an instrument currently used by the
BPI Group to provide investment solutions for its Customers, as an
alternative to term deposits.
Bonds issued, being cash bonds or bonds issued under the EMTN
program, can be issued in different currencies.
In 2008 the BPI Group set up two collaterized bond issue programs
(mortgage bonds and bonds over the public sector), under Decree-Law
59 / 2006. In 2009 the BPI Group made three issues of mortgage
bonds and in 2010 it made four issues of mortgage bonds and one
issue of bonds over the public sector, under these programs.
178
31 Dec. 09
Balance
Issued Repurchased
84 591
(50 384)
108 717
9 083 621
In accordance with this law, the holders of the mortgage bonds
benefit from a special credit privilege over the autonomous assets,
which consists of a guarantee of the debt to which the bondholders
have access in the event of the issuer’s insolvency.
The mortgage bonds program was set up for up to a maximum of
7 000 000 000 euros.
The mortgage bonds are secured by a portfolio of mortgage loans and
other assets that together constitute an autonomous cover pool.
Assets allocated to the cover pool include mortgage loans for housing
or commercial purposes located in a EU Member State and other
eligible assets, such as deposits at the Bank of Portugal, deposits
with financial institutions with ratings equal to or greater than “A-”
and other low risk and highly liquid assets. The total value of the
other assets cannot exceed 20% of the cover pool. The amount of
the allocated mortgage loans cannot exceed 80% of the value of the
mortgaged property in the case of residential property, or 60% of the
value of the mortgaged property, in the case of commercial property.
The legislation applicable to mortgage bonds imposes prudential
limits, which must be met during the period of the bonds:
j
The total nominal amount of the outstanding mortgage bonds
cannot exceed 95% of the total amount of mortgage loans and
other assets assigned to the bonds;
j
The average maturity of the outstanding mortgage bonds cannot
exceed, at any time, the average maturity of the mortgage loans
and other assets assigned to the bonds;
j
The total amount of interest payable to the holders of mortgage
bonds cannot exceed, at any time, the amount of interest
receivable related to the mortgage loans and other assets assigned
to the bonds;
Issue date
Nominal amount
ISIN
Maturity Date
Rating (Moody's / S&P / Fitch)
Reimbursement
Interest payment frequency
Coupon
Repurchases
OH – Series 9
Issue date
21-05-2010
Nominal amount
EUR 350 000 000
ISIN
PTBBP6OE0023
Maturity date
21-05-2025
Aaa / - / Reimbursement
At maturity
Quarterly
Coupon
Euribor 3 m + 0.65%
Repurchases
EUR 350 000 000
j
The net present value of the liabilities arising from the outstanding
mortgage bonds cannot exceed, at any time, the net present value
of the cover pool given as collateral of these bonds, after
consideration of any financial derivative instruments. This ratio
must be maintained when considering a 200 basis points parallel
up or down shift of the yield curve;
j
The credit institutions’ risk exposure, except for positions with
residual maturity less than or equal to 100 days, cannot exceed
15% of the total nominal amount of the outstanding mortgage
bonds.
At 31 December 2010 the amount of mortgage bonds issued by the
BPI Group was 3 325 000 000 euro, split into 6 issues as follows:
x
OH – Series 5
OH – Series 6
OH – Series 7
OH – Series 8
28-05-2009
EUR 175 000 000
PTBB1XOE0006
28-05-2016
Aaa / - / At maturity
Quarterly
Euribor 3 m + 1.20%
-
17-07-2009
EUR 1 000 000 000
PTBB24OE0000
17-07-2012
Aaa / AAA / AAA
At maturity
Annual
3.00%
EUR 49 000 000
15-01-2010
EUR 1 000 000 000
PTBB5JOE0000
15-01-2015
Aaa / AAA / AAA
At maturity
Annual
3.25%
EUR 10 750 000
12-02-2010
EUR 200 000 000
PTBB5WOE0003
12-02-2017
Aaa / - / At maturity
Quarterly
Euribor 3 m + 0.84%
-
OH – Series 10
05-08-2010
EUR 600 000 000
PTBBQQOE0024
05-08-2020
- / - / AAA
At maturity
Quarterly
Euribor 3 m + 0.65%
EUR 600 000 000
At 31 December 2010 and 2009, the cover pool allocated to the
mortgage bonds amounted to 4 292 188 th. euro and
3 509 472 th. euro, respectively, of which 4 080 757 th. euro and
3 358 761 th. euro corresponded to mortgage loans (note 4.7).
The bond program over the public sector was constituted for up to a
maximum of 2 000 000 000 euros.
The prudential limits applicable to public sector bonds are similar to
those applicable to the mortgage bonds, except for the limit on the
maximum nominal amount of outstanding bonds in relation to the
loans and other assets allocated to the cover pool, which in the case
of bonds over the public sector is 100%.
At 31 December 2010 Banco BPI held one issue of outstanding
bonds over the public sector amounting to 400 000 000 euros, as
follows:
OSP – Series 1
Issue date
17-07-2008
Nominal amount
EUR 150 000 000
ISIN
PTBP14OE0006
Maturity date
15-06-2016
- / AAA / Reimbursement
At maturity
Quarterly
Coupon
Euribor 3 m -0.004%
Repurchases
-
OSP – Series 2
30-09-2010
EUR 250 000 000
PTBBRHOE0024
30-09-2017
-/A/At maturity
Quarterly
Euribor 3 m +0.4%
EUR 250 000 000
The bonds over the public sector are secured by a portfolio of public
sector loans and other assets that together constitute the cover pool.
Loans granted to central public administrations, regional or local
authorities of any EU Member State as well as loans with a specific
guarantee from these entities may be allocated to the cover pool.
At 31 December 2010 and 2009 the cover pool allocated to bonds
over the public sector amounted to 503 245 th. euro and
313 952 th. euro, respectively, of which 392 870 th. euro and
213 746 th. euro corresponded to loans (note 4.7).
179
The BPI Group issues bonds on a regular basis, with different
remuneration conditions:
j
j
fixed rate – bonds issued on which the BPI Group is committed to
pay a previously defined rate of income, calculated based on a
fixed interest rate from the time of issue to maturity;
j
variable rate – bonds issued on which the BPI Group is committed
to pay income calculated based on a specified interest rate index
published by an outside source (market);
variable income – bonds issued for which the remuneration is not
known, or certain, at the issue date, and can be subject to changes
depending on the evolution of certain underlying assets (indices or
indexing rates) announced at the date of issue. Such bonds have
embedded derivatives which are recorded in specific accounts as
required by IAS 39 (note 4.4.). In addition, the BPI Group has
options to hedge the risks of change in the cost incurred with these
bonds.
x
The changes in the bonds issued by the BPI Group in 2010 were as follows:
Bonds issued during the period
Bonds redeemed
Repurchases (net of resales)
Exchange difference
Deposit
certificates
Commercial
paper
Covered
bonds
Fixed rate
bonds
Variable rate
bonds
Variable income
bonds
Total
110
(34)
848 915
990
(848 915)
2 255 900
2 400 000
(1 900 000)
(290 650)
2 123 725
590 001
(1 325 418)
(262 259)
76
990
2 465 250
2 686 000
783 668
(62 107)
(192 253)
9 026
3 224 334
1 126 049
1 060 254
262 556
(605 325)
112 526
1 571
831 582
8 974 904
4 037 215
(4 741 799)
(632 636)
10 597
7 648 281
The changes in the bonds issued by the BPI Group in 2009 were as follows:
Bonds issued during the period
Bonds redeemed
Exchange difference
Deposit
certificates
Commercial
paper
Covered
bonds
Fixed rate
bonds
Variable rate
bonds
Variable income
bonds
Total
185
(75)
234 201
848 915
(234 201)
1 130 000
1 675 000
(1 000 000)
450 900
3 004 682
312 217
(1 109 024)
(84 150)
110
848 915
2 255 900
770 406
2 156 567
(182 942)
(55 666)
(2 365)
2 686 000
1 191 805
271 240
(489 249)
87 796
(1 338)
1 060 254
6 331 279
5 263 939
(3 015 491)
398 880
(3 703)
8 974 904
2 123 725
Bonds issued by the BPI Group at 31 December 2010, by maturity date, are as follows:
Maturity
EUR
Commercial paper
EUR
2011
2012
2013
31
31
30
30
15
15
Variable rate bonds
EUR
Variable income bonds
EUR
USD
Total
180
> 2017
990
990
951 000
951 000
1 172 613
19 951
Total
76
76
990
990
Covered bonds
EUR
Fixed rate bonds
EUR
CZK
CHF
USD
CAD
JPY
2014-2017
1 274 547
1 514 250
1 514 250
222 673
2 465 250
2 465 250
270 568
58 111
270 568
36 815
94 926
796
129 763
22 291
16 206
1 208 770
1 274 547
524 515
524 515
501 534
501 534
296 320
2 021
298 341
2 032 647
113 663
17 851
131 514
2 858 625
375 523
264 565
11 447
276 012
651 550
2 998 512
19 951
796
145 969
22 291
36 815
3 224 334
100 000
100 000
1 126 049
1 126 049
125 715
800 263
31 319
831 582
7 648 281
125 715
2 010 533
94 926
Bonds issued by the BPI Group at 31 December 2009, by maturity date, are as follows:
Maturity
2010
2011
2012
2013-2016
33
33
32
32
30
30
15
15
EUR
Commercial paper
EUR
> 2016
110
110
848 915
848 915
Covered bonds
EUR
848 915
848 915
980 000
980 000
Fixed rate bonds
EUR
CZK
USD
JPY
950 900
950 900
325 000
325 000
1 080 895
202 918
43 309
12 253
1 241 286
18 887
15 188
53 478
1 275 361
1 080 895
202 918
30 039
73 348
1 180 077
1 180 077
562 727
562 727
280 921
280 921
100 000
100 000
377 144
15 006
392 150
3 454 653
321 050
2 569
323 619
2 161 739
121 216
17 538
138 754
2 451 500
200 501
5 230
200 501
828 434
5 230
78 578
41 225
Variable rate bonds
EUR
Variable income bonds
EUR
USD
Total
Total
2 255 900
2 255 900
2 609 633
18 887
27 441
30 039
2 686 000
2 123 725
2 123 725
1 025 141
35 113
1 060 254
8 974 904
4.19. Financial liabilities relating to transferred assets
31 Dec. 10 31 Dec. 09
Liabilities relating to assets not derecognised
in securitisation operations (note 4.7)
Loans
Housing loans
Loans to SME's
Liabilities held by the BPI Group
Risk / benefit on housing loans ceded
Accrued costs
Banco BPI launched securitisation operations, the main features of
which are summarised in the tables below. These were issued
through Sagres – Sociedade de Titularização de Créditos S.A.
The bonds issued by securitization vehicles and held by BPI Group
entities were eliminated in the consolidation process.
5 350 568
4 150 345
154 290
241 999
(3 099 873) (1 716 458)
(835 615)
(911 556)
2 877
2 290
(1 829)
(2 010)
1 570 418 1 764 610
In December 2007 the Bank sold part of the highest risk bonds
issued under the housing loan securitisation operations, usually
referred to as equity pieces, having thus ceded part of the benefits
and risks of these transactions. The impact of this operation on
liabilities is shown in the table above. The assets and liabilities
relating to these operations were derecognised by the percentage
ceded, and the difference to the product of the sale was recognised
181
On 6 April 2005 Banco BPI launched its first small and medium companies securitisation operation, in the amount of 500 000 th. euro, under
the name of Douro SME Series 1. The operation was issued in 4 lots, their main characteristics being as follows:
Description
Class A Notes
Class B Notes
j Class C Notes
j Class D Notes
Total of the issues
Liabilities held by BPI Group
Total
j
j
Amount
Estimated residual
average life (years)
Rating (Moody’s,
S&P, Fitch)
Guarantee
Spread
99 280
26 000
24 000
5 010
154 290
(46 787)
107 503
1.25
3.21
3.25
3.25
Aaa / AAA / AAA
Aaa / AAA / AAA
Without guarantee
European Investment Fund
Credit Securitisation Guarantee Fund
Without guarantee
0.10%
0.08%
1.00%
2.00%
On 24 November 2005 Banco BPI launched its first housing loan securitisation operation, in the amount of 1 500 000 th. euro, under the name
of DOURO Mortgages No. 1. The operation was issued in 5 lots, their main characteristics being as follows:
Description
Class A Notes
Class B Notes
j Class C Notes
j Class D Notes
j Class E Notes
Total of the issues
Reserve Fund
Other funds
Risk / benefit ceded
Total
j
j
Amount
Estimated residual
Rating (Moody’s,
S&P, Fitch)
Spread1
538 572
11 396
10 360
8 633
9 000
577 961
(3 186)
3
(8 982)
(199 101)
366 695
5.72
5.72
5.72
5.72
5.72
Aaa / AAA / AAA
Aa2 / AA / AA+
A1 / A / A+
Baa1 / BBB / A-
0.14%
0.17%
0.27%
0.47%
Residual interest
1) Until the date of the call option (September 2014); after this date, if the option is not exercised, the spread doubles.
On 28 September 2006 Banco BPI launched its second housing loan securitisation operation in the amount of 1 500 000 th. euro under the
name of DOURO Mortgages No. 2. The operation was issued in 6 lots, their main characteristics being as follows:
Description
Class A1 Notes
Class A2 Notes
j Class B Notes
j Class C Notes
j Class D Notes
j Class E Notes
Total of the issues
Reserve Fund
Total
j
j
Amount
Estimated residual
Rating (Moody’s,
S&P, Fitch)
Spread1
7 012
708 762
17 483
11 340
8 978
9 000
762 575
(3 165)
(58 252)
(263 736)
437 422
0.21
6.21
6.28
6.28
6.28
6.28
Aaa / AAA / AAA
Aaa / AAA / AAA
Aa3 / AA / AA
A2 / A- / A+
Baa2 / BBB / BBB+
0.05%
0.14%
0.17%
0.23%
0.48%
Residual interest
1) Until the date of the call option (April 2015); after this date, if the option is not exercised, the spread doubles.
182
On 31 July 2007 Banco BPI launched its third housing loan securitisation operation in the amount of 1 500 000 th. euro under the name of
DOURO Mortgages No. 3.The operation was issued in 6 lots, their main characteristics being as follows:
Description
Class A Notes
Class B Notes
j Class C Notes
j Class D Notes
j Class E Notes
j Class F Notes
Total of the issues
Reserve Fund
Other funds
Total
j
j
Amount
Estimated residual
Rating (Moody’s,
S&P, Fitch)
Spread1
1 016 069
26 051
15 490
13 377
4 895
1 251
1 077 133
(4 199)
(54)
(42 352)
(372 778)
657 750
7.13
7.13
7.13
7.13
2.56
7.13
Aaa / AAA / AAA
nr / AA / AA
nr / A / A
nr / BBB / BBB
nr / BBB- / BBB-
0.16%
0.17%
0.23%
0.48%
0.50%
Residual interest
1) Until the date of the call option (August 2016); after this date, if the option is not exercised, the spread is multiplied by 1.5.
In December 2008 Banco BPI launched a new series of housing loan securitisation operations in the amount of 1 500 000 th. euro under the
name of DOURO Mortgages No. 4, which was settled financially in January, 2009. The operation was issued in 4 lots, their main characteristics
being as follows:
Description
Class A Notes
Class B Notes
j Class C Notes
j Class D Notes
Total of the issues
Total
j
j
Amount
Estimated residual
Rating
(S&P, DBRS)
Spread
1 275 000
180 000
45 000
22 500
1 522 500
(1 522 500)
8.57
21.88
22.49
22.49
AAA / AAA
nr / nr
nr / nr
nr / nr
0.15%
0.20%
0.25%
Residual interest
This issue was made in order to be eligible for possible funding from the European Central Bank.
On 6 August 2010 Banco BPI launched its fifth housing loan securitisation operation in the amount of 1 421 000 th. euro under the name of
DOURO Mortgages No. 5.The operation was issued in 3 lots, their main characteristics being as follows:
Description
Amount
31 Dec. 10
Estimated residual
Rating
(S&P, DBRS)
Spread
Class A Notes
Class B Notes
j Class C Notes
Total of the issues
Total
1 099 000
301 000
21 000
1 421 000
(1 421 000)
5.65
5.65
5.65
AAA / AAA
nr / nr
nr / nr
0.20%
0.00%
Residual interest
j
j
This issue was made in order to be eligible for possible funding from the European Central Bank.
183
4.20. Provisions and impairment losses
The changes in provisions and impairment losses of the Group in 2010 were as follows:
Impairment losses on loans and advances to credit institutions (note 4.6)
Impairment losses on loans and advances to Customers (note 4.7)
Impairment losses on financial assets available for sale (note 4.5)
Debt instruments
Equity instruments
Other securities
Impairment losses on financial assets held to maturity (note 4.8)
Debt instruments
Impairment losses on other assets (note 4.13)
Tangible assets held for sale
Impairment losses and provisions for guarantees and commitments
Other provisions
Balance at
31 Dec. 09
Increases
Decreases
and reversals
Utilisation
1 779
530 365
360
134 072
(360)
(19 262)
(1 616)
(97 819)
219
6 576
864
334
1 127
264
(590)
(5)
(2 533)
(1 845)
100
2
41
4
6
284
729
627
833
4 830
36 607
1 196
28 556
61 120
719 926
Exchange Balance at
differences 31 Dec. 10
and others
31
382
553 932
2
42
3
5
558
158
221
283
(4 830)
18 181
143
8 390
14 940
178 675
(5 546)
(20)
(2 084)
(575)
(28 437)
(8 284)
(275)
(1 122)
(118 329)
(74)
156
1 192
8 200
40 958
970
35 018
75 555
760 035
Utilisation of impairment losses on loans and advances to Customers recorded in 2010 corresponds to write-offs and loans sold, in the amounts
of 89 272 th. euro and 8 547 th. euro, respectively.
The caption
OTHER PROVISIONS
at 31 December 2010 includes provisions for tax contingencies and litigation in progress.
The changes in provisions and impairment losses of the Group in 2009 were as follows:
Impairment losses on loans and advances to credit institutions (note 4.6)
Impairment losses on loans and advances to Customers (note 4.7)
Impairment losses on financial assets available for sale (note 4.5)
Debt instruments
Equity instruments
Other securities
Impairment losses on financial assets held to maturity (note 4.8)
Debt instruments
Impairment losses on other assets (note 4.13)
Tangible assets held for sale
Impairment losses and provisions for guarantees and commitments
Other provisions
Balance at
31 Dec. 08
Increases
Decreases
and reversals
14
448 575
1 828
178 428
(12)
(4 787)
1
54
4
24
809
317
527
628
475
3 378
100
(2 498)
Utilisation
Exchange Balance at
differences 31 Dec. 09
and others
(90 261)
(51)
(1 590)
(15 899)
(67)
(15 297)
23 655
155
207
23 240
236 296
2
41
4
6
(5 321)
(51)
(5 791)
(1 363)
(19 823)
(2 761)
(441)
(2 914)
(127 573)
29
(310)
(958)
(2 947)
36 607
1 196
28 556
61 120
719 926
In 2009 the utilisation of impairment losses includes 56 573 th. euro relating to the sale of Vista Alegre, of which 25 266 th. euro relates to
loans to Customers. In addition, the utilisation of impairment losses on loans and advances to Customers also includes write-offs recorded in
2009.
The increase in 2009 in impairment losses on loans to Customers and on financial assets held to maturity includes 1 699 th. euro and
4 830 th. euro, respectively, relating to BPI Vida’s operations which were included in caption TECHNICAL RESULT OF INSURANCE CONTRACTS
(note 4.38).
The decreases and reversals of impairment losses in 2009 includes 6 891 th. euro relating to the sale of Vista Alegre.
The caption
184
OTHER PROVISIONS
at 31 December 2009 includes provisions for tax contingencies and litigation in progress.
284
729
627
833
4 830
4 830
21 034
1 504
34 450
43 115
633 973
1 779
530 365
4.21. Technical provisions
4.22. Tax liabilities
31 Dec. 10 31 Dec. 09
31 Dec. 10 31 Dec. 09
Immediate Life Annuity / Individual
Immediate Life Annuity / Group
Family Savings
BPI New Family Savings
BPI Retirement Guaranteed
BPI Retirement Savings
BPI Non Resident Savings
Planor
PPR BBI Life
Savings Investment Plan / Youths
South PPR
6
45
218
1 813 154
103 595
929 348
134 445
5 579
4 148
1 279
90
2 991 907
6
47
486
1 341 962
43 913
641 738
99 161
5 815
4 687
1 529
93
2 139 437
Current tax liability
Corporate income tax payable
Other
Deferred tax liability
On temporary differences
6 273
341
6 614
25 408
1
25 409
31 114
31 114
37 728
35 744
35 744
61 153
Details of the deferred tax liability are presented in note 4.44.
The technical provisions were computed on a prospective actuarial
basis, contract by contract, in accordance with the technical bases of
the products.
Immediate income
Individual
Interest Rate
Mortality Table
Group
Interest Rate
Mortality Table
Deferred capital with Counter-insurance
with Participation in Results
Group
Interest Rate
Mortality Table
PF 60 / 64, TV 73-77
6%
PF 60 / 64
6%
PF 60 / 64
4% and 0%
and GRF 80
The technical provisions also include a provision for rate
commitments, which is recorded when the effective profitability of
the assets that represent the mathematical provisions of a
determined product is lower than the technical interest rate used to
calculate the mathematical provisions.
The BPI New Family Savings, BPI Retirement Savings PPR and BPI
Non Resident Savings are capitalisation products with guaranteed
capital and participation in the results.
185
4.23. Participating bonds
31 Dec. 10
Issued Repurchased
Participating bonds
EUR
28 081
28 081
(20 959)
(20 959)
Accrued interest
The changes in debt issued by the BPI Group in 2010 were as
follows:
31 Dec. 09
Balance
Average
interest rate
7 122
7 122
45
7 167
1.6%
Issued Repurchased
28 081
28 081
(16 362)
(16 362)
Average
interest rate
11 719
11 719
73
11 792
1.6%
follows:
Participating bonds
Balance
Participating bonds
11 719
(4 597)
7 122
x
28 078
(16 359)
11 719
The participating bonds can be redeemed at par at the request of the
participants with the approval of the Bank or at the initiative of the
Bank with six months notice.
4.24. Subordinated debt
31 Dec. 10
Issued Repurchased
Perpetual bonds
EUR
JPY
Other Bonds
EUR
JPY
420 000
69 029
489 029
434 200
161 068
595 268
1 084 297
(360 000)
(360 000)
(111 869)
(111 869)
(471 869)
Accrued costs
Correction of the amount
of hedged liabilities
Premiums (net)
186
Balance
Average
interest rate
60 000
69 029
129 029
2.4%
4.0%
322 331
161 068
483 399
612 428
3 031
2.4%
2.8%
Issued Repurchased
720 000
56 323
776 323
464 200
131 421
595 621
1 371 944
(660 000)
(660 000)
(77 303)
(77 303)
(737 303)
Average
interest rate
60 000
56 323
116 323
1.5%
4.0%
386 897
131 421
518 318
634 641
3 463
2.4%
2.8%
follows:
Perpetual
bonds
Other
bonds
Total
116 323
518 318
(34 566)
(353)
483 399
634 641
(34 566)
12 353
612 428
12 706
129 029
Balance
14 983
(679)
17 767
652 408
25 175
(245)
27 961
640 389
follows:
Exchange difference
31 Dec. 09
Bonds redeemed
Exchange difference
Perpetual
bonds
Other
bonds
Total
119 458
609 859
(30 000)
(54 227)
(7 314)
518 318
729 317
(30 000)
(54 227)
(10 449)
634 641
(3 135)
116 323
Debt issued by the BPI Group at 31 December 2010 is made up as follows, by residual term to maturity:
Maturity
2011
Perpetual bonds
EUR1
JPY2
Other bonds
EUR
JPY
Total
2012
2013
2014-2017
> 2017
60 000
69 029
69 029
60 000
69 029
129 029
60 000
28 499
28 499
97 528
Total
2 369
2 369
2 369
60 000
291 463
291 463
291 463
161 068
161 068
161 068
322 331
161 068
483 399
612 428
> 2016
Total
1) Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up.
2) Date of the call option (November 2011); after that date, if the option is not exercised, the remuneration is stepped up.
Debt issued by the BPI Group at 31 December 2009 is made up as follows, by residual term to maturity:
Maturity
2011
Perpetual bonds
EUR1
JPY2
Other bonds
EUR
JPY
Total
2012
2013-2016
60 000
56 323
56 323
60 000
57 149
57 149
113 472
60 000
56 323
116 323
2 531
60 000
2 531
2 531
327 217
131 421
458 638
458 638
386 897
131 421
518 318
634 641
1) Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up.
2) Date of the call option (November 2011); after that date, if the option is not exercised, the remuneration is stepped up.
187
4.25. Other liabilities
31 Dec. 10 31 Dec. 09
Creditors and other resources
Creditors for futures operations
Consigned resources
Captive account resources
Subscription account resources
Guarantee account resources
State administrative sector
Value Added Tax (VAT) payable
Tax withheld at source
Social Security contributions
Other
Contributions to other health systems
Creditors for factoring contracts
Creditors for the supply of assets
Other creditors
Deferred costs
Accrued costs
Creditors and other resources
Personnel costs
Others
Deferred income
On guarantees given and other contingent liabilities
Others
Other accounts
Securities operations pending settlement
- non stock exchange operations
Liabilities pending settlement
Other operations pending settlement
8 789
15 630
5 036
1
16 200
15 474
17 190
5 519
169
16 361
6 672
24 181
2 644
480
1 450
10 682
8 404
125 553
(69)
225 653
620
16 185
2 705
263
1 388
10 498
12 700
110 921
(71)
209 922
295
120 864
31 864
1 308
154 331
186
101 814
20 219
639
122 858
5 636
4 064
9 700
5 836
3 895
9 731
46 992
104 472
40 840
192 304
581 988
142 109
22 597
164 706
507 217
At 31 December 2010 the caption ACCRUED COSTS – PERSONNEL COSTS
included 13 000 th. euro relating to the increased liability resulting
from an early retirements program approved in December 2010 that
is expected to include 65 Employees of the Group (note 4.26).
The caption OTHER OPERATIONS
2010 and 2009 includes:
PENDING SETTLEMENT,
at 31 December
j
7 514 th. euro and 5 587 th. euro, respectively, relating to the
revaluation of options not yet exercised, under the RVA programs
(these amounts are recorded by corresponding entry to OTHER
ASSETS).
j
5 662 th. euro and 15 013 th. euro, respectively, relating to the
settlement of payments and receipts of Leasing / ALD / Factoring
operations.
4.26. Liability for pensions and other benefits
The past service liability relating to pensioners and personnel that
are, or have been, Employees of BPI Group companies1 and are
covered by pension Funds, is calculated in accordance with IAS 19.
With the publication of Decree-Law 1-A / 2011 of 3 January all the
bank Employees that benefit from CAFEB – Caixa de Abono de
Família dos Empregados Bancários were incorporated into the
General Social Security System, as from 1 January 2011, being
covered by this regime as regards old age pensions and in the case
of maternity, paternity and adoption leave, the cost of which the
Bank will no longer cover. Given the complementary nature of the
rules under the Collective Labour Agreement for the Portuguese
Banking Sector (Acordo Colectivo de Trabalho do Sector Bancário),
the Bank will continue to guarantee the difference between the
amount of the benefits that will be paid under the General Social
Security System for the eventualities covered and the benefits
established in the Collective Labour Agreement.
Following the instructions of the National Council of Financial
Supervisors (Conselho Nacional dos Supervisores Financeiros)1, the
amount of the past service liability remained unchanged in 2010,
despite the fact that pensions of the current Employees to be paid by
the Bank will decrease in the future as a result of integration into the
Social Security System. The current service cost will decrease after
that date and the Bank will become subject to the Single Social Tax
(Taxa Social Única) of 23.6%.
Pensions for incapacity and survivor and sickness subsidy of these
Employees will continue to be the Bank’s responsibility.
The amounts recorded under the caption SECURITY OPERATIONS PENDING
– NON STOCK EXCHANGE OPERATIONS at 31 December 2010
corresponds to securities purchased which were only settled in the
following month.
BPI Pensões is the entity responsible for the actuarial calculations
used to determine the amounts of the retirement and survivor
pension liability, as well as for managing the respective Pension
Funds.
The caption LIABILITIES
2009 includes:
The “Projected Unit Credit” method was used to calculate the
normal cost and past service liability due to age, and the “Single
Successive Premiums” method was used to calculate the cost of the
incapacity and survivor benefits.
SETTLEMENT
PENDING SETTLEMENT
at 31 December 2010 and
j
electronic interbank transfer transactions;
j
10 860 th. euro and 37 309 th. euro, respectively, relating to loan
securitisation fund transactions;
j
10 178 th. euro and 9 680 th. euro, respectively, relating to ATM /
POS transactions to be settled with SIBS;
j
transfers made through the “SPGT”.
1) Companies consolidated by the full consolidation method (Banco BPI, BPI Investimentos, BPI Gestão de Activos, BPI Private Equity and BPI Vida).
188
The main actuarial and financial assumptions used to calculate the
pension liability are as follows:
Assumptions
31 Dec. 10 31 Dec. 09
Actual
31 Dec. 10 31 Dec. 09 31 Dec. 10 31 Dec. 09
Demographic assumptions:
TV 73 / 77
Mortality table1
M-1 year
TV 88 / 90
W-1 year
Incapacity table
EKV 80
Personnel turnover
0%
Decreases
By
mortality
Financial assumptions:
5.25%
Discount rate
Pensionable salary
increase rate
3.00%
1.75%
Pension fund
income rate
Banco BPI
5.50%
Other companies
5.50%
TV 73 / 77
M-1 year
TV 88 / 90
W-1 year
EKV 80
0%
By
mortality
-
-
5.25%
-
-
3.00%
1.75%
3.13%2
1.00%3
3.61%2
1.50%3
5.50%
5.50%
2.85%
2.26%
14.81%
7.57%
1) The life expectancy considered was one year greater than the mortality table used.
2) Calculated based on the changes in the pensionable wages of the Employees working
for the Group companies in the beginning and end of the year (includes changes in
remuneration levels and does not reflect new arrivals and departures).
3) Corresponds to the ACTV table update rate.
6 305
1 089
7 227
2 846
17 467
The past service liability for pensioners and Employees of the BPI
Group and respective coverage by the Pension Fund at 31 December
2010 and 2009 are as follows:
31 Dec. 10 31 Dec. 09
Total past service liability
Liability for pensions under payment
Of which: [increase in the liability resulting
from early retirements during the period]
Past service liability of current and
former Employees
1 746 955
1 716 324
[19 809]
[30 414]
559 172
2 306 127
Net assets of the pension funds
2 409 393
Contributions to be transferred to the Pension Fund
1 375
Excess / (Insufficient) cover
104 641
Degree of coverage
105%
558 317
2 274 641
2 463 809
18
189 186
108%
Contributions in cash amounting to 1 375 th. euro were made to the
Pension Fund in January and February 2011.
Evolution of the degree of coverage of the liabilities in the last five
years was as follows:
At 31 December 2010 and 2009 the number of pensioners and
Employees covered by the pension plans funded by the pension
funds was as follows:
x
2010
2009
2008
2007
2006
2 306 127
2 409 393
1 375
104 641
105%
2 274 641
2 463 809
18
189 186
108%
2 298 177
2 150 110
119 296
(28 771)
99%
2 445 429
2 798 494
2 230 837
2 470 458
353 065
114%
239 621
111%
The changes in the present value of the past service liability in 2010
and 2009 were as follows:
At 31 December 2010 and 2009 the net assets of the Banco BPI
Employees’ Pension Fund were as follows:
31 Dec. 10 31 Dec. 09
Liability at the beginning of the year
Current cost:
Of the BPI Group
Of the Employees
Interest cost
Actuarial (gain) and loss in the liability
Early retirements1
Pensions payable (estimate)
Liability at the end of the year
6 458
1 126
6 847
3 000
17 431
-
-
Net assets of the Pension Fund
Excess / (insufficient) cover
Degree of coverage
Retired pensioners
Survivor pensioners
Current Employees
Former Employees (clauses 137 A and 140 of the ACTV)
2 274 641
2 298 177
29 736
3 536
117 636
(10 533)
19 809
(128 698)
2 306 127
32 297
3 519
125 824
(91 129)
30 414
(124 461)
2 274 641
1) Includes 28 972 th. euro at 31 December 2009, relating to the 200 early retirements
program approved in December 2008.
The changes in the pension funds in 2010 and 2009 were as
follows:
31 Dec. 10 31 Dec. 09
Liquidity
Fixed rate bonds
Indexed rate bonds
Shares issued by Portuguese entities
Real estate
Others
13.8%
34.6%
8.5%
19.9%
6.5%
14.2%
2.6%
100.0%
3.0%
40.9%
14.1%
18.9%
7.2%
13.7%
2.3%
100.0%
In 2010 the contributions to the Pension Funds were paid in cash.
In 2009, the contributions to the Pension Funds were made in
properties and cash in the amounts of 74 347 th. euro (notes 4.9
and 4.41) and 44 952 th. euro, respectively.
31 Dec. 10 31 Dec. 09
at the beginning of the year
Contributions made:
By the BPI Group
By the Employees
Pension Fund income (net)
Pensions paid by the Pension Funds
at the end of the year
2 463 809
2 150 110
18
3 536
70 015
(127 985)
119 299
3 519
316 943
(126 062)
2 409 393
2 463 809
189
The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities in
2010 were as follows:
31 Dec. 09
Fair value of the plan assets:
Financial instruments issued by the BPI Group
Shares
Bonds
10 894
164 411
175 305
199 243
374 548
Premises used by the BPI Group
Purchases
1 605
1 605
Changes in
fair value
Sales
(3 777)
(5 169)
(8 946)
1 516
(7 430)
80 000
80 000
80 000
31 Dec. 10
7 117
79 242
86 359
202 364
288 723
The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities in
2009 were as follows:
Fair value of the plan assets:
Financial instruments issued by the BPI Group
Shares
Bonds
Premises used by the BPI Group
31 Dec. 10 31 Dec. 09
Changes in the conditions of the pension plan
(238 734)
(16 032)
(254 766)
(69)
(254 835)
(207 021)
344
(206 677)
(138)
(206 815)
The changes in actuarial deviations1 from 2006 to 2010 were as
follows:
Amount at 31 December 2006
Amortisation of deviations outside the corridor
Adjustment in the ACTV Table above the estimate
Change in the actuarial and financial assumptions
Deviation in pension fund income
Deviation in pensions paid
Adjustment in the ACTV Table above the estimate
Deviation in mortality
Others
Adjustment in the ACTV Table below the estimate
Others
(42 561)
43
(16 805)
(166 341)
266 018
(993)
39 361
35
(2 468)
203 809
(733 832)
(191)
(8 000)
(560)
(501 846)
10 744
17 385
84 083
194 897
(1 601)
(5 545)
(4 794)
(206 677)
(continues)
190
Purchases
8 993
155 821
164 814
125 518
290 332
6 603
6 603
76 944
83 547
Changes in
fair value
31 Dec. 09
1 901
1 987
3 888
(3 219)
669
10 894
164 411
175 305
199 243
374 548
(continuation)
The pension liabilities not yet recognized as income and (cost) at
31 December 2010 and 2009 were as follows:
Within the corridor
Outside the corridor
31 Dec. 08
x
Adjustment in the ACTV Table below the estimate
Others
568
17 144
(59 904)
714
(6 621)
10
(254 766)
1) Actuarial gains and losses due to differences between the actuarial and financial
assumptions and the amounts effectively realised and changes in the actuarial and
financial assumptions.
The consolidated financial statements as of 31 December 2010 and
2009 include the following amounts relating to coverage of the
pension liability, in the captions INTEREST, FINANCIAL GAIN AND LOSS WITH
PENSIONS (note 4.40) and PERSONNEL COSTS (note 4.42):
31 Dec. 10 31 Dec. 09
Interest cost
Expected Fund income
Personnel costs
Current service cost
Increase in liability for early retirements1
Compensation due to early retirement2
Change in the conditions of the pension plan
117 636
(129 919)
(12 283)
125 824
(122 046)
3 778
29 736
568
31 059
5 018
69
66 450
32 297
10 744
1 442
(1 381)
69
43 171
1) Includes 11 250 th. euro at 31 December 2010, relating to the 65 early retirements
program approved in December 2010 (note 4.25).
2) Includes 1 750 th. euro at 31 December 2010, relating to the program referred to in
the preceding footnote (note 4.25).
The Members of the Executive Board of Banco BPI, S.A. and the
remaining Board Members of BPI Investments benefit from a
supplementary retirement and survivor pension plan. At 31 December
2006 a pension fund was started to cover these liabilities.
The main actuarial and financial assumptions used to calculate the
pension liability were as follows:
Assumptions
31 Dec. 10
Demographic assumptions:
TV 73 / 77
Mortality table1
M-1 year
TV 88 / 90
W-1 year
Incapacity table
EKV 80
Personnel turnover
0%
Decreases
By
mortality
Financial assumptions:
5.25%
Discount rate
Pensionable salary
increase rate
2.00%
1.75%
Pension fund
income rate
5.50%
At 31 December 2010 and 2009 the past service liability of this
plan and respective coverage by the Pension Fund were as follows:
Actual
31 Dec. 10 31 Dec. 09
31 Dec. 09 31 Dec. 10 31 Dec. 09
TV 73 / 77
M-1 year
TV 88 / 90
W-1 year
EKV 80
0%
By
mortality
Present value of the past service liability
Liability for pensions under payment
Past service liability relating to the
current and former directors
Net assets of the pension fund
Excess / (Insufficient) cover
Degree of coverage
10 709
11 164
18 693
29 402
29 477
16 500
27 664
26 564
1 308
208
101%
75
100%
5.25%
2.00%
1.75%
1.00%2
0.00%
1.50%2
1.50%3
5.50%
2.45%
8.20%
1) The life expectancy considered was one year greater than the mortality table used.
2) Calculated based on the changes in the pensionable wages of directors serving in the
Group companies in the beginning and end of the year (includes changes in
remuneration levels and does not reflect changes in directors).
3) Correspond to the updating rate of the ACTV table.
x
The changes in the degree of coverage of the liabilities in the last five years were as follows:
Excess / (insufficient) cover
Degree of coverage
2010
2009
2008
2007
2006
29 402
29 477
27 664
26 564
1 308
208
101%
26 120
23 871
1 511
(738)
97%
23 388
23 372
21 931
21 941
(16)
100%
10
100%
75
100%
191
The changes in the present value of the past service liability of the
plan in 2010 and 2009 were as follows:
31 Dec. 10 31 Dec. 09
Liability at the beginning of the year
Current service cost
Interest cost
Actuarial (gain) / loss in the liability
Pensions payable (estimate)
Liability at the end of the year
27 664
1 504
1 538
(424)
(880)
29 402
26 120
1 428
1 520
(532)
(872)
27 664
The changes in the pension fund in 2010 and 2009 were as follows:
31 Dec. 10 31 Dec. 09
at the beginning of the year
Contributions made
Pension Fund income (net)
Pensions paid by the Pension Fund
at the end of the year
26 564
3 008
651
(746)
23 871
1 511
1 957
(775)
29 477
26 564
At 31 December 2010 and 2009 the net assets of the Banco BPI
Directors’ Pension Fund were as follows:
31 Dec. 10 31 Dec. 09
Liquidity
Fixed rate bonds
Indexed rate bonds
Shares
Real Estate
Others
15.7%
37.6%
6.5%
33.7%
2.2%
4.3%
100.0%
9.6%
37.2%
9.9%
34.3%
2.3%
6.7%
100.0%
Contributions to the Pension Funds in 2010 and 2009 were paid in
cash.
The pension liability for the Directors at 31 December 2010 and
2009 not recognised as income and (cost) was as follows:
31 Dec. 10 31 Dec. 09
Actuarial deviations – Executive Directors
Within the corridor
Outside the corridor
Changes in the conditions of the
Executive Directors' pension plan
192
129
386
515
468
319
787
(162)
353
(283)
504
The changes in actuarial deviations from 2006 to 2010 were as
follows:
Deviation in pension fund income s
Change in actuarial and financial assumptions
Others
Others
Others
Actuarial gains and (losses)
1 126
(9)
(390)
1 373
2
529
2 631
(51)
(3 148)
1 315
(39)
(1 138)
(430)
588
1 020
97
(488)
787
(29)
424
(801)
134
515
The consolidated financial statements as of 31 December 2010 and
2009 include the following amounts relating to coverage of the
pension liability for Directors, in the captions INTEREST AND FINANCIAL
GAIN AND LOSS WITH PENSIONS (note 4.40) and PERSONNEL COSTS
(note 4.42):
31 Dec. 10 31 Dec. 09
Interest cost
Expected Fund income
Personnel costs
Personnel costs
Change in the pension plan conditions
1 538
(1 452)
86
1 520
(1 369)
151
1 504
(29)
120
1 595
1 428
120
1 548
4.27. Capital
4.28. Share Premium account
At 31 December 2010 and 2009 Banco BPI’s share capital was
made up of 900 million fully paid shares of 1 euro each.
The share premium account at 31 December 2010 and 2009
amounted to 441 306 th. euro. In 2010 and 2009 there were no
changes on this caption.
The Shareholders’ General Meeting held on 22 April 2010
empowered Banco BPI’s Board of Directors to do the following during
a period of eighteen months:
a) to purchase treasury shares of up to 10% of Banco BPI’s share
capital, provided that:
In accordance with Ministerial Order 408 / 99 of 4 June published
in Diário da República – 1st B Series, no. 129, the share premium
account may not be used to pay dividends or to acquire treasury
shares.
4.29. Other equity instruments and treasury shares
i) the treasury shares are purchased on a market registered by the
Securities Market Commission (Comissão do Mercado de Valores
Mobiliários – CMVM), at a price not exceeding 110% of the
weighted average of the weighted daily average prices of Banco
BPI shares on the 10 official price market sessions managed by
Euronext Lisboa – Sociedade Gestora de Mercados
Regulamentados, S.A. (Euronext) preceding the date of
purchase, and a minimum of 1 euro;
or
ii) the purchases result from agreements to settle obligations
arising from loan agreements entered into by Banco BPI,
provided that the value attributed, for that purpose, to the
shares does not exceed the value determined by application of
the criteria defined in (i) above, with reference to the
settlement agreement date;
b) to sell Banco BPI shares provided that:
i) the shares and options to purchase shares of Banco BPI are sold
to Employees and Directors of Banco BPI and subsidiaries, as
share-based payments under the terms and conditions
established in the Variable Remuneration Program (RVA)
regulations; or
ii) the shares are sold to third parties under the following
conditions:
1. the shares are sold in a market registered at the Securities
Market Commission (CMVM);
2. the shares are sold at a price not less than 90% of the
weighted average of the daily weighted average prices of
Banco BPI shares on the 10 official price market sessions
managed by Euronext preceding the date of sale; or,
c) carry out repurchase or resale agreements or the loan of shares of
Banco BPI, provided that such operations are conducted with
qualified investors that meet the requirements to be eligible
counterparties of Banco BPI, in accordance with articles 30 and
317-D of the Securities Code (Código dos Valores Mobiliários).
These captions are made up as follows:
31 Dec. 10 31 Dec. 09
Other equity instruments
Cost of shares to be made available
to Group Employees
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Costs of options not exercised
(premiums)
RVA 2004
RVA 2005
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Treasury shares
Shares to to be made available
to Group Employees
RVA 2007
RVA 2008
RVA 2009
Shares hedging RVA options
RVA 2004
RVA 2005
RVA 2007
RVA 2008
RVA 2009
Other treasury shares
664
78
15
13
1 230
5 729
830
814
521
9 894
1 090
92
85
462
1 230
5 740
903
882
10 484
613
85
22
1
12
3
3
806
813
045
315
21 699
1 256
136
3
1
12
3
365
806
812
484
177
23 036
The caption OTHER EQUITY INSTRUMENTS includes accrued share-based
payment program (RVA) costs relating to shares to be made available
and options not yet exercised.
Details of the share-based Variable Remuneration Program (RVA) are
included in note 4.49.
The financial statements of the BPI Group as of 31 December 2010
and 2009 reflect 6 647 837 and 7 174 450 treasury shares,
respectively, including 255 553 and 473 215 treasury shares to be
made available under the RVA program for which ownership was
transferred to the Employees on the grant date.
In 2010 the Bank recorded directly in shareholders’ equity, a gain of
348 th. euro on the sale of treasury shares hedging the variable
remuneration (RVA) program. In 2009 the Bank recorded directly in
shareholders’ equity, a loss of 414 th. euro on the sale of treasury
shares hedging the variable remuneration (RVA) program and a loss
of 5 th. euro on the sale of other treasury shares.
193
4.30. Revaluation reserves
4.31. Other reserves and retained earnings
31 Dec. 10 31 Dec. 09
31 Dec. 10 31 Dec. 09
Revaluation reserves
Reserves resulting from valuation
to fair value of financial assets
available for sale (note 4.5):
Debt instruments
Securities
Hedging derivatives
Equity instruments
Other
Reserve for foreign exchange difference
on investments in foreign entities
Subsidiary or associated companies
Equity instruments available for sale
Legal revaluation reserve
Deferred tax reserve
Resulting from valuation to fair value of
financial assets available for sale:
Tax assets
Tax liabilities
Legal reserve
Merger reserve
Other reserves
(686 770)
(296 424)
20 249
6 858
(96 587)
(147 719)
22 920
2 928
(32 171)
(112)
703
(987 667)
(43 025)
(112)
703
(260 892)
275 105
(4 312)
270 793
(716 874)
57 180
(6 916)
50 264
(210 628)
Deferred taxes have been calculated in accordance with current
legislation and correspond to the best estimate of the impact of
recognising the unrealized gains and losses included in the caption
REVALUATION RESERVES.
Consolidation reserves and retained earnings
Gain on treasury shares
Taxes relating to gain on treasury shares
149 463
(2 463)
514 818
661 818
(7 951)
(6 384)
1 670
649 153
138 843
(2 463)
488 879
625 259
(66 390)
(6 780)
1 783
553 872
In accordance with Article 97 of the General Regime for Credit
Institutions and Financial Companies, approved by Decree-Law 298 /
91 of December 31 and amended by Decree-Law 201 / 2002 of 25
September, Banco BPI must appropriate at least 10% of its net
income each year to a legal reserve until the amount of the reserve
equals the greater of the amount of share capital or the sum of the
free reserves plus retained earnings.
On 31 December 2010 and 2009 the share premium account and
legal reserve of the companies included in the consolidation of the
BPI Group which, under the applicable regulations, may not be
distributed, amounted to 206 567 th. euro and 188 367 th. euro,
respectively, which, adjusted by Banco BPI’s effective participation
percentage in these companies, amounted to 93 578 th. euro and
87 305 th. euro, respectively. These reserves are included in the
captions CONSOLIDATION RESERVES and RETAINED EARNINGS AND
REVALUATION RESERVES.
The caption CONSOLIDATION RESERVES at 31 December 2010 and 2009
includes (8 187) th. euro and 4 710 th. euro, respectively, relating
to the amount of the revaluation reserves of the companies recorded
in accordance with the equity method, weighted by BPI Group
(effective) participation in them.
194
4.32. Minority interests
Balance sheet
31 Dec. 10
Minority shareholders in:
Banco Fomento, S.A. (Angola)
BPI Capital Finance Ltd.
BPI Alternative Fund
BPI Taxa Variável Fund
BPI Dealer – Sociedade financeira de Corretagem (Moçambique), S.A.R.L.
BPI (Suisse), S.A.
247
236
17
16
000
963
364
039
5
1
517 372
Statement of income
31 Dec. 09
31 Dec. 10
31 Dec. 09
193 025
262 627
98 716
6 110
184
721
90 023
8 844
5
1
455 658
(1)
1
105 732
98 866
Minority interests in BPI Capital Finance at 31 December 2010 and 2009 includes 236 527 th. euro and 262 467 th. euro, respectively, relating
to preference shares:
31 Dec. 09
31 Dec. 10
“C” Series Shares
“D” Series Shares
“E” Series Shares
Issued
Repurchased
Balance
Issued
Repurchased
Balance
250 000
(13 473)
236 527
250 000
(13 473)
236 527
250 000
200 000
100 000
550 000
(14 188)
(183 077)
(90 268)
(287 533)
235 812
16 923
9 732
262 467
The C, D and E series correspond to preference shares with a
nominal value of 1 000 euros each, issued in August 2003 (C series)
and June 2005 (D and E series), respectively. The payment of
dividends and redemption of the preference shares are guaranteed by
Banco BPI.
The C Series preference shares entitle the holders to a
non-cumulative preference dividend, if and when declared by the
Directors of BPI Capital Finance, Ltd., at an annual rate equal to the
three month Euribor rate plus a spread of 1.55 percentage points up
to 12 August 2013 and thereafter to a non-cumulative preference
dividend at a rate equal to the three month Euribor rate plus a
spread of 2.55 percentage points. The dividends are payable
quarterly on 12 February, 12 May, 12 August and 12 November of
each year.
The D Series preference shares entitled the holders to a noncumulative preference dividend, if and when declared by the
three month Euribor rate plus a spread of 0.075 percentage points
over their nominal value. The dividends were payable quarterly on
30 March, 30 June, 30 September and 30 December of each year.
BPI Capital Finance, Ltd. will not pay any dividend on the preference
shares if, during the year or quarter in progress, such dividend plus
amounts already paid exceed Banco BPI’s distributable funds.
The C Series preference shares are redeemable in whole or in part at
their nominal value, at the option of BPI Capital Finance, Ltd. on any
dividend payment date as from August 2013, subject to prior
consent of the Bank of Portugal and Banco BPI. The C series
preference shares are also redeemable in whole, but not in part, at
the option of BPI Capital Finance, Ltd, with prior approval of the
Bank of Portugal and Banco BPI, if a disqualifying capital event or
tax event occurs.
The D and E Series preference shares were redeemed on 30 June
2010 at the option of BPI Capital Finance, Ltd, with prior approval
of the Bank of Portugal and Banco BPI.
These shares are subordinated to all liabilities of Banco BPI and
“pari passu” with any other preference shares that might be issued
by the Group in the future.
The E Series preference shares entitled the holders to a
non-cumulative preference dividend, if and when declared by the
three month Euribor rate over their nominal value. The dividends
were payable quarterly on 30 March, 30 June, 30 September and
30 December of each year.
195
4.33. Off balance sheet items
31 Dec. 10 31 Dec. 09
Transactions with recourse
Stand-by letters of credit
Documentary credits
Sureties and indemnities
Assets given as collateral
Commitments to third parties
Irrevocable commitments
Options on assets
Irrevocable credit lines
Securities subscription
Term commitment to make annual
annual contributions to the
Deposit Guarantee Fund
Commitment to the Investor
Indemnity System
Other irrevocable commitments
Revocable commitments
Responsibility for services provided
Deposit and safeguard of assets
Amounts for collection
Assets managed by the institution
The caption
includes:
ASSETS GIVEN AS COLLATERAL
Investment funds and PPRs
Pension funds1
2 820
17
27
146
405
500
216
836
81
3 012 038
5 710 853
2 818 084
40 777
217 155
56
3 076 072
4 446 826
66 087
39 296
419 191
66 790
43 808
413 579
38 326
37 917
11 622
1 591
3 280 583
3 856 696
8 422
7 495
3 723 124
4 301 135
28 772 225 26 404 040
198 662
217 318
7 709 454
8 278 206
36 680 341 34 899 564
at 31 December 2010
j
786 544 th. euro relating to captive credit and 4 878 875 th. euro
relating to securities eligible for funding from the European Central
Bank (ECB).
j
5 613 th. euro relating to securities given in guarantee to the
Securities Market Commission (Comissão do Mercado de Valores
Mobiliários – CMVM) under the Investor Indemnity System (Sistema
de Indemnização aos Investidores);
j
39 820 th. euro relating to securities given in guarantee to the
Deposit Guarantee Fund.
The OPTIONS ON ASSETS caption at 31 December 2010 and 2009
corresponds to share options issued by the BPI Group under the
share-based payments program (RVA).
The COMMITMENTS TO THIRD PARTIES – SECURITIES SUBSCRIPTION caption at
31 December 2010 and 2009 corresponds to Banco BPI’s
commitment to subscribe for commercial paper if the securities
issued are not totally or partially subscribed for by the market.
The
TERM COMMITMENT TO MAKE ANNUAL CONTRIBUTIONS TO THE DEPOSIT
caption at 31 December 2010 and 2009
corresponds to BPI’s legally required irrevocable commitment, to pay
to the Fund, upon request by it, the amount of the annual
contributions not yet paid.
GUARANTEE FUND
The COMMITMENT TO THE INVESTOR INDEMNITY SYSTEM caption at
31 December 2010 and 2009 corresponds to BPI’s irrevocable
commitment, legally required under the applicable legislation, to pay
the System, if required to do so, its share of the amounts necessary
to indemnify investors.
196
At 31 December 2010 the BPI Group managed the following third
party assets:
2 612 287
3 169 780
1) Includes the Group companies’ Pension Funds.
4.34. Financial margin (narrow sense)
31 Dec. 10 31 Dec. 09
Interest and similar income
Interest on deposits with banks
Interest on placements with credit institutions
Interest on loans to Customers
Interest on credit in arrears
Interest on securities held for trading
and available for sale
Interest on securitised assets not derecognised
Interest on derivatives
Interest on securities held to maturity
Interest on debtors and other applications
Other interest and similar income
Interest and similar expense
Interest on resources
Of central banks
Of other credit institutions
Deposits and other resources of Customers
Debt securities
Interest from short selling
Interest on derivatives
Interest on liabilities relating to assets
not derecognised on securitised operations
Interest on subordinated debt
Other interest and similar expenses
4
21
736
12
511
065
408
222
3
26
886
8
343
519
240
379
473 437
69 445
575 573
1 273
5 263
10 110
1 909 307
372 867
109 308
823 176
392
9 158
6 433
2 245 815
24 493
42 857
368 331
250 926
219
552 545
10 700
46 945
521 839
237 164
6
739 222
26 327
17 189
29
1 282 916
81 059
23 475
1 092
1 661 502
4.35. Gross margin on unit links
31 Dec. 10 31 Dec. 09
Income from financial instruments
Interest
Gains and losses on financial instruments
Gains and losses on capitalisation
insurance – unit links
Management and redemption commission
9 068
(2 992)
12 034
37 388
(6 119)
4 179
4 136
(49 450)
3 279
3 251
4.36. Income from equity instruments
31 Dec. 10 31 Dec. 09
Conduril
SIBS
Unicre
Others
369
1 082
2 024
258
3 733
369
939
2 817
787
4 912
4.37. Net commission relating to amortised cost
31 Dec. 10 31 Dec. 09
At 31 December 2010 and 2009, commissions received on
insurance brokerage services or reinsurance is made up as follows:
31 Dec. 10 31 Dec. 09
Commission received relating to amortised cost
Loans to Customers
Others
Commission paid relating to amortised cost
Loans to Customers
Others
38 153
2 166
31 159
2 069
(7 974)
(2 079)
30 266
(7 478)
(1 084)
24 666
4.38. Technical result of insurance contracts
Life insurance
Housing
Consumer
Others
Non-life insurance
Housing
Consumer
Others
31 Dec. 10 31 Dec. 09
Premiums
Income from financial instruments
Impairment (note 4.20)
Cost of claims, net of reinsurance
Changes in technical provisions, net of reinsurance
Participation in results
1 066 657
62 538
(340 071)
(727 815)
(45 228)
16 081
491 356
65 648
(6 529)
(676 768)
182 984
(44 889)
11 802
This caption includes the result of capitalisation insurance with a
discretionary participation feature (IFRS 4). Participation in the
results of capitalisation insurance is attributed at the end of each
year and is calculated in accordance with the technical bases of
each product, duly approved by the Portuguese Insurance Institute
(note 2.10).
4.39. Net commission income
31 Dec. 10 31 Dec. 09
Commissions received
On guarantees provided
On commitments to third parties
On insurance brokerage services
On banking services rendered
On operations realised on behalf of third parties
Other
Commissions paid
On guarantees received
On commitments to third parties
On financial instrument operations
On banking services rendered by third parties
On operations realised by third parties
Other
Other income, net
Refund of expenses
Income from banking services
Charges similar to fees
26 940
1 836
37 333
212 725
17 047
12 266
308 147
38 480
1 759
36 673
191 813
17 253
11 541
297 519
109
882
39 897
4 280
1 027
46 195
143
34
247
37 609
3 298
325
41 656
30 898
30 244
(9 214)
51 928
31 660
32 519
(8 624)
55 555
17 763
3 345
3 779
24 887
17 488
2 662
4 187
24 337
4 500
4 422
3 524
12 446
37 333
3 796
5 136
3 404
12 336
36 673
Commission received on insurance brokerage services were paid in
full in cash and more than 90% thereof relate to insurance brokerage
services in insurances of Allianz.
4.40. Net income on financial operations
31 Dec. 10 31 Dec. 09
Foreign exchange gain, net
Gain and loss on financial assets
held for trading
Debt instruments
Equity instruments
Other securities
Gain and loss on trading derivative instruments
Gain and loss on other financial assets valued
Gain and loss on financial liabilities held
for trading
Gain and loss on the revaluation of assets
and liabilities hedged by derivatives
Gain and loss on hedging derivative
instruments
Other gain and loss on financial operations
Gain and loss on the sale of loans and advances
to Customers
Gain and loss on financial assets available
for sale
Debt instruments
Equity instruments
Others
Interest and financial gain and loss
with pensions (note 4.26)
Interest cost
Expected fund income
73 312
131 254
1 831
(18 086)
5
38 363
6 044
130 206
1
(107 210)
2 233
2 875
609
(1 384)
173 860
79 067
(181 367)
2 315
93 075
(68 197)
181
172 837
(355)
(1)
(4 959)
22 242
(3 043)
13 885
47 373
(937)
(314)
46 121
(119 174)
131 371
12 197
(127 344)
123 415
(3 929)
197
In 2010 and 2009, the caption GAIN AND LOSS ON TRADING DERIVATIVE
includes 10 293 th. euro and (94 781) th. euro,
respectively, relating to equity swaps contracted with Customers,
which are hedged with shares classified in the caption FINANCIAL
ASSETS HELD FOR TRADING.
INSTRUMENTS
The caption REMUNERATION at 31 December 2010 and 2009 includes
the following costs relating to remuneration granted to the members
of Banco BPI’s Board of Directors:
j
remuneration paid in cash;
j
113 th. euro and 208 th. euro, respectively, relating to the accrued
cost of the share-based remuneration program (RVA) in accordance
with IFRS 2.
The GAIN AND LOSS ON EQUITY INSTRUMENTS AVAILABLE FOR SALE caption at
31 December 2010 includes 21 828 th. euro resulting from the
revaluation of the participation in Unicre, resulting from the
acquisition of 3.4% of its share capital (notes 1 and 4.11). The gain
recorded corresponds to the revaluation to fair value of the original
investment (recorded at historical cost in the caption FINANCIAL ASSETS
AVAILABLE FOR SALE) in accordance with the fair value of Unicre
underlying the increase in the participation realized in June 2010
(note 2.1).
The caption PENSION FUND at 31 December 2010 and 2009 includes
3 179 th. euro and 2 700 th. euro, respectively, relating to costs of
the Defined Contribution Pension Plan for Employees of Banco de
Fomento Angola.
4.41. Net operating expenses
4.43. Administrative costs
31 Dec. 10 31 Dec. 09
31 Dec. 10 31 Dec. 09
Operating income
Gain on the sale of investments in subsidiaries
and associates
Gain on tangible assets held for sale
Gain on other tangible assets
Other operating income
Operating expenses
Subscriptions and donations
Contributions to the Deposit Guarantee Fund
Loss on tangible assets held for sale
Loss on other tangible and intangible assets
Other operating expenses
Other taxes
Indirect taxes
Direct taxes
The captions
524
1 184
9 066
5 671
16 445
956
18 109
13 736
32 801
4 786
3 681
455
11 972
4 271
25 165
3 901
4 082
358
6 319
3 767
18 427
4 333
1 830
6 163
4 006
946
4 952
and LOSS ON OTHER
at 31 December 2009 include
contributions in kind (properties) to Banco BPI’s Pension Fund
(note 4.9).
GAIN ON OTHER TANGIBLE ASSETS
TANGIBLE AND INTANGIBLE ASSETS
4.42. Personnel costs
31 Dec. 10 31 Dec. 09
Remuneration
Long service premium (note 2.7)
Pension costs (note 4.26)
Early retirements (note 4.26)
Other mandatory social charges
Other personnel costs
198
297 691
2 422
35 233
36 077
50 002
10 090
431 515
293 710
2 883
47 366
61
45 284
10 982
400 286
Administrative costs
Supplies
Water, energy and fuel
Consumable material
Other
Services
Rent and leasing
Communications and computer costs
Travel, lodging and representation
Publicity
Maintenance and repairs
Insurance
Fees
Legal expenses
Security and cleaning
Information services
Temporary labour
Studies, consultancy and auditing
SIBS
Other services
11 186
6 582
1 188
10 325
7 419
1 297
50 936
37 755
9 526
20 226
18 224
5 291
4 699
1 434
10 770
4 008
4 048
6 768
19 393
20 114
232 148
48 416
38 296
8 938
19 551
15 644
4 343
2 869
1 269
9 563
3 740
3 073
8 783
18 233
20 253
222 012
The caption STUDIES, CONSULTANCY AND AUDITING at 31 December 2010, includes the remuneration paid to Deloitte and its network1,3 in the amount
of 2 306 th. euro. This amount is made up as follows, by nature and entity to which the services were provided:
Type of service
Statutory audit
Audit related to bonds issuance
Other assurance services
Tax consultancy
Other services
Banco BPI
BFA
BPI-BI
BPI GA2
Others3
Total
% of total
615
237
138
39
365
1 394
106
121
126
204
109
40
94
54
9
108
254
215
189
312
1 172
237
502
88
365
2 364
50%
10%
21%
4%
15%
100%
1) The “network” of BPI auditors includes Deloitte and Deloitte & Associados, SROC, S.A., and it agrees with the definition of “network” established by the European Commission in its
Recommendation no. C (2002) 1873, of 16 May 2002.
2) Includes the amounts paid by securities and real estate funds managed by BPI Gestão de Activos.
3) In order of decreasing importance of the amounts paid: BPI Vida, BPI Suisse, BPI Pensões, Banco BPI Cayman, Banco BPI – Offshore de Macau, BPI Private Equity, BPI Luxemburgo,
BPI – Locação de Equipamentos, BPI Capital Finance and BPI Madeira.
Deloitte and its network did not provide any services in areas relating
to financial information technologies, internal audit, valuations,
litigation, recruitment, among others, that could generate conflicts of
interest or a potential damage to the quality of the statutory audit
work.
All the services rendered by Deloitte, including the remuneration
conditions, independently of their nature, are subject to prior
examination and approval by the Supervisory Board, which is an
additional mechanism to ensure the independence of the External
Auditor.
4.44. Income tax
Income tax recognised in the statements of income for the years
ended 31 December 2010 and 2009, as well as the tax burden,
measured by the relationship between the tax charge and profit
before tax, are as follows:
The caption CURRENT INCOME TAX – CORRECTION OF PRIOR YEARS” for the
year ended 31 December 2010, includes (7 427) th. euro relating to
corrections of estimated taxes to be paid by BFA with respect to the
year 2009.
As a result of the coming into force of Law No. 12 – A / 2010 of
30 June a State surcharge of 2.5% on taxable income in excess of
2 000 th. euro was introduced. The impact of this change on the
BPI Group’s deferred tax at 31 December 2009 is presented in the
caption DEFERRED TAX – CHANGE IN TAX RATE.
In 2010 and 2009, Banco BPI recorded, directly in shareholders’
equity, income tax of 113 th. euro and (110) th. euro, respectively,
on net gain / loss on treasury shares recognised in equity
(note 4.31).
31 Dec. 10 31 Dec. 09
Current income tax
For the year
Correction of prior years
Deferred tax
Recognition and reversal of temporary differences
Change in tax rate
On tax losses carried forward
Total tax charged to the statement of income
Net income before income tax1
Tax burden
21 017
(7 453)
13 564
37 216
(849)
36 367
(6 201)
(10 130)
(3 083)
(19 414)
(5 850)
255 547
(2.3%)
7 972
136
912
9 020
45 387
301 033
15.1%
1) Considering net income of the BPI Group plus income tax and income attributable to
minority interest less the earnings of subsidiary companies excluded from
consolidation.
199
Reconciliation between the nominal rate of income tax and the tax burden in 2010 and 2009, as well as between the tax cost / income and the
product of the accounting profit times the nominal tax rate are as follows:
31 Dec. 09
31 Dec. 10
Income tax computed based on the nominal tax rate
Effect of tax rates applicable to foreign branches
Income exempt from income tax (SFE's)
Capital gain and impairment of investments (net)
Capital gain of tangible assets (net)
Income on Angolan public debt1
Non taxable dividends
Tax on dividends of subsidiary and associated companies
Conversion of shareholders' equity of associated companies
Tax benefits
Impairment of and provision for loans
Non tax deductible pension costs
Interest recognised in minority interests
Provision for tax contingencies
Correction of prior year taxes
Tax losses
Effect of change in the rate of deferred tax
Autonomous taxation
Other non taxable income and expenses
Tax rate
Amount
33.2%
2.3%
(0.1%)
(2.3%)
0.0%
(21.3%)
(1.2%)
2.1%
0.0%
(0.8%)
(0.3%)
0.0%
(0.7%)
255 547
84 805
5 856
(144)
(5 911)
(68)
(54 338)
(3 145)
5 471
(13)
(1 930)
(640)
(71)
(1 774)
(0.3%)
(9.5%)
(4.0%)
0.4%
0.0%
(2.3%)
(832)
(24 206)
(10 130)
1 118
102
(5 850)
Tax rate
Amount
32.1%
1.7%
0.0%
0.3%
(1.8%)
(16.6%)
(1.0%)
2.1%
0.1%
(0.6%)
(0.2%)
0.0%
(0.8%)
(0.1%)
(0.2%)
(0.6%)
0.0%
0.4%
0.1%
15.1%
301 033
96 738
5 056
(132)
1 047
(5 283)
(50 042)
(2 929)
6 401
411
(1 715)
(630)
(50)
(2 350)
(236)
(593)
(1 682)
136
1 056
184
45 387
1) At 31 December 2010, includes corrections of prior year taxes of 7 427 th. euro.
Deferred tax assets related to tax losses and not recognized in the financial statements at 31 December 2010 and 2009 amount to
13 604 th. euro and 25 696 th. euro, respectively.
Current taxes are calculated based on the nominal tax rates legally in force in the countries in which the Bank operates:
31 Dec. 10
Net income before
income tax
Companies with income tax rate of 25% and Surcharge of 4% (1.5% at Dec. 09)
Companies with income tax rate of 25% and Surcharge of 3.8% (1.4% at Dec. 09)
Companies with income tax rate of 35% (Angola)
Investment funds1
69 719
(6 929)
190 333
2 423
255 547
31 Dec. 09
Current
tax rate
Net income before
income tax
Current
tax rate
29.0%
28.8%
35.0%
46 488
53 984
200 561
26.5%
26.4%
35.0%
33.2%
301 033
32.1%
1) Regime applicable under the provisions of article 22 of the EBF.
Deferred tax assets and liabilities correspond to the amount of tax
recoverable and payable in future periods resulting from temporary
differences between the amount of assets and liabilities on the
balance sheet and their tax base. Deferred tax assets are also
recognised on tax losses carried forward and tax credits.
Profits distributed to Banco BPI by subsidiary and associated
companies in Portugal are not taxed in Banco BPI as a result of
applying the regime established in article 46 of the Corporate
Income Tax Code, which eliminates double taxation of profits
distributed.
Deferred tax assets and liabilities are calculated using the tax rates
decreed for the periods in which they are expected to reverse.
Deferred tax assets and liabilities at 31 December 2010 and 2009
are as follows:
31 Dec. 10 31 Dec. 09
Deferred tax
Assets (note 4.12)
Liabilities (note 4.22)
Recorded by corresponding entry to:
Retained earnings
Fair value reserve (note 4.30)
Financial instruments available for sale
Net income
426 946
(31 114)
395 832
192 317
(35 744)
156 573
105 625
115 329
270 793
19 414
395 832
50 264
(9 020)
156 573
Deferred tax assets are recognised up to the amount expected to be
realised through future taxable profits.
200
The changes in deferred taxes in 2010 are as follows:
Balance at
31 Dec. 09
Deferred tax assets
Pension liability
Early retirements
Advertising campaigns
“Taxa garantida” operations
Banco BPI Cayman net income
Taxed provisions and impairment
Long service premium
Tax losses
Tax deferral of the impact of transition to NCA
Others
Deferred tax liabilities
Revaluation of tangible fixed assets
“Taxa garantida” operations
Revaluation of assets and liabilities hedged by derivatives
Subsidiary's equity conversion
Dividends to be distributed by subsidiary
and associated companies
RVA's
Loan impairment
Others
Corresponding entry to
net income
Costs
Income
(6 262)
(17)
(1 180)
(92)
3 090
4 222
33 146
26 144
2 089
254
206
58 930
6 779
7 144
57 133
467
25
192 317
(467)
(7)
(8 050)
(1 815)
(253)
(547)
(1 614)
(80)
(24)
(917)
16
(1)
92
(6 111)
(3)
(17 540)
(7 288)
(113)
(460)
(35 744)
156 573
(6 962)
5 782
102
4 116
(25)
Increases
Balance at
31 Dec. 10
Decreases
24
19
12 646
537
3 083
681
218 623
(779)
29 974
30 349
909
186
225
71 551
7 316
10 227
275 658
529
24 831
17
218 640
(13)
(792)
551
426 946
55
(16)
(7 928)
(15 978)
Corresponding entry to reserves
and retained earnings
113
357
10 561
35 392
(1 896)
(185)
(1 464)
(1 598)
1
(579)
(100)
2 942
(258)
(7 869)
(1)
(13 424)
(4 549)
2 943
221 583
(9)
(946)
(1 738)
(128)
(31 114)
395 832
The changes in deferred taxes in 2009 were as follows:
Balance at
31 Dec. 08
Deferred tax assets
Pension liability
Early retirements
Advertising campaigns
"Taxa garantida" operations
Banco BPI Cayman net income
Taxed provisions and impairment
Long service premium
Tax losses
Others
Deferred tax liabilities
Revaluation of tangible fixed assets
"Taxa garantida" operations
Subsidiary's equity conversion
Dividends to be distributed by subsidiary
and associated companies
RVA's
Loan impairment
Others
38 792
33 521
2 960
338
207
206
44 851
6 450
8 056
109 958
935
27
246 301
Corresponding entry to
net income
Costs
Income
(5 759)
(7 417)
(871)
(84)
(207)
113
40
(19)
(2 972)
(468)
(7)
(17 804)
(4 006)
(337)
(1 203)
(6 681)
(6)
(5 089)
(6 908)
(226)
(290)
(24 746)
221 555
Corresponding entry to reserves
and retained earnings
Increases
Decreases
33 146
26 144
2 089
254
14 079
348
2 060
465
4
17 109
(53 290)
1
1
(53 290)
2 191
84
(22 109)
(39 913)
5 876
3
5 687
113
(170)
13 784
30 893
206
58 930
6 779
7 144
57 133
467
25
192 317
(1 815)
(253)
(547)
(1 614)
(547)
(411)
(6 344)
(109)
(12 451)
(2 247)
Balance at
31 Dec. 09
1 038
109
(3 820)
1 147
1 148
(3 820)
(57 110)
(6 111)
(3)
(17 540)
(7 288)
(113)
(460)
(35 744)
156 573
Consolidated financial statements | notes
201
4.45. Earnings of associated companies (equity method)
The BPI Group does not recognise deferred tax assets and liabilities
on temporary taxable differences relating to investments in subsidiary
and associated companies as it is improbable that such differences
will revert in the foreseeable future, except as follows:
j
j
deferred tax liabilities relating to estimated dividends that Banco
de Fomento Angola is expected to pay to the BPI Group companies
in the following year out of profit for the year, are recognized;
deferred tax liabilities relating to all the distributable net income
(including the undistributed part) of Banco Comercial e de
Investimentos are recognized.
x
31 Dec. 10 31 Dec. 09
TC Turismo Capital – SCR, S.A.
Finangeste – Empresa Financeira de Gestão
e Desenvolvimento, S.A.
InterRisco – Sociedade de Capital de Risco, S.A.
Viacer – Sociedade Gestora de Participações
Sociais, Lda.
6 113
16 177
2 201
26
5 519
7 942
740
119
1 675
(72)
1 212
1 107
1 799
29 131
2 827
18 254
4.46. Consolidated net income of the BPI Group
The contribution of Banco BPI and subsidiary and associated companies to consolidated net income in 2010 and 2009 is as follows:
Banks
Banco BPI, S.A.1
Banco Português de Investimento, S.A.1
Banco de Fomento S.A. (Angola)1
Banco Comercial e de Investimentos, S.A.R.L.1
Banco BPI Cayman, Ltd.
Specialised credit
BPI Locação de Equipamentos, Lda.
BPI Rent – Comércio e Aluguer de Bens, Lda.1
Asset management and brokerage
BPI Dealer – Sociedade Financeira de Corretagem (Moçambique), S.A.R.L.
BPI Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliários, S.A.1
BPI – Global Investment Fund Management Company, S.A.
BPI Pensões – Sociedade Gestora de Fundos de Pensões, S.A.
BPI (Suisse), S.A.1
BPI Alternative Fund: Iberian Equities Long / Short Fund1
BPI Taxa Variável Fund1
Venture capital / development
TC Turismo Capital – SCR, S.A.1
BPI Private Equity – Sociedade de Capital de Risco, S.A.
Insurance
BPI Vida – Companhia de Seguros de Vida, S.A.
Cosec – Companhia de Seguros de Crédito, S.A.1
Companhia de Seguros Allianz Portugal, S.A.1
Others
BPI, Inc.1
BPI Madeira, SGPS, Unipessoal, S.A.
BPI Capital Finance
Douro SGPS, S.A.1
Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A.1
Unicre – Instituição Financeira de Crédito, S.A.2
Simofer – Sociedade de Empreendimentos Imobiliários e Construção Civil, Lda.
Ulissipair ACE
Viacer – Sociedade Gestora de Participações Sociais, Lda.1
1) Adjusted net income.
2) Includes 21 828 th. euro relating to the gain resulting from the revaluation of the participation in Unicre (note 4.40).
202
31 Dec. 10
31 Dec. 09
2
4
92
5
3
40
3
84
5
5
985
152
670
593
302
834
356
509
050
640
166
20
1 152
(5)
11 551
910
3 286
781
567
(1 425)
(9)
9 303
886
3 003
146
26
1 439
(72)
119
(2 020)
13 863
2 201
16 177
10 110
740
7 942
(25)
11
(35)
17
1 676
23 039
(176)
305
1 799
184 796
(68)
1 107
(34)
439
2 827
175 034
4.47. Personnel
The average and year-end number of Employees1 in 2010 and 2009 were as follows:
31 Dec. 10
31 Dec. 09
Average for the period
End of period
Average for the period
End of period
11
622
4 598
4 328
9 559
10
624
4 705
4 155
9 494
12
588
4 516
4 314
9 430
11
601
4 484
4 341
9 437
2
Executive directors
Management staff
Other staff
Other Employees
1) Personnel of the Group’s entities that were consolidated by the full consolidation method. This includes the personnel of the branches of Banco BPI abroad.
2) This includes the executive directors of Banco BPI and BPI Investimentos.
4.48. Financial risks
Fair value
Fair value is determined whenever possible based on the price in an
active market. A market is considered to be active, and therefore
liquid, when it is accessed by equally knowledgeable counterparties
and is traded on a regular basis.
The majority of over-the-counter derivatives (swaps, fras, caps, floors
and standard options) are valued based on generally accepted
methods:
j
based on the present value of future flows (cash flows), considering
the relevant interest rate curve, at the time of the calculation
(mark-to-market: eg. swaps); or
j
through models to determine the price from statistical models (eg
Black & Scholes), based on generally accepted assumptions (mark
to model: eg. options).
The valuation for financial instruments for which there are no prices
in an active market is described in the following sections.
Financial instruments recorded in the balance sheet at fair value
Debt instruments and equity instruments
In the case of debt instruments with no prices in active markets, due
to the lack of liquidity and absence of regular transactions,
alternative methods of valuing assets are used, namely:
– assets valued based on third party bid prices considered to be
reliable; or,
– assets valued based on Net Asset Value updated and disclosed by
their managers;
– assets valued based on prices disclosed by the entities involved
with the structuring of the transactions; or
– assets for which impairment tests are made based on indicators of
the performance of the underlying operations (degree of protection
by subordination of the parts owned, rates of delinquency of the
underlying assets, evolution of the ratings).
For unquoted shares, fair value is estimated based on an analysis of
the issuer’s financial position and results, risk profile and market
valuations or transactions for companies with similar characteristics.
If a market value is not available and it is not possible to determine
fair value reliably, equity instruments are recognized at historical cost
and are subject to impairment tests.
Valuation techniques use as input representative variables of market
conditions at the date of the financial statements.
Market interest rates are determined based on information published
in electronic trading platforms (eg. Bloomberg, Reuters), and
adjusted for liquidity and credit risk.
Interest rates for specific terms of cash flows are determined by
suitable interpolation methods. The same interest rate curves are
also used in the projection of nondeterministic cash flows such as
the indexers.
For derivatives in which there has been counterparty default in the
payment of contractual flows, fair value corresponds to its
replacement value at the moment of early settlement, adjusted by
the expectation of collectibility.
In determining the fair value of derivatives specific valuations
provided by counterparties or by external parties are also used,
ensuring in the latter case the reliability of the information provided
through regular monitoring and validation of the valuations obtained,
and through regular backtesting in relation to observable market
transactions.
Financial derivative instruments
Financial derivative transactions in the form of foreign exchange
contracts, interest rate contracts, contracts on shares or share
indices, inflation contracts or a combination of these, are carried out
in over-the-counter (OTC) markets and in organised markets
(especially stock exchanges).
203
For presentation purposes in this note, the financial instruments
recorded in the balance sheet at fair value are classified in
accordance with the following hierarchy established in IFRS 7:
j
Financial instruments recorded in the balance sheet at amortized
cost
Level 1 – Price in an active market
This category includes, in addition to financial instruments listed on
Stock Exchanges, financial instruments valued based on prices in
active markets (executable bids) published in electronic trading
platforms.
j
It should be noted that the fair value may not correspond to the
realizable value of these financial instruments in a sale scenario or
liquidation.
Level 2 – Valuation techniques based on market inputs
This level includes financial instruments valued by reference to
valuation techniques based on market prices for instruments with
similar characteristics or similar financial instruments held by the
Group or internal models using inputs which are mainly observable in
the market (such as interest rate curves or exchange rates). This level
also includes financial instruments valued based on third party
purchase prices (indicative bids), considering observable market
data.
j
The fair value of financial instruments recorded at amortized cost is
determined by the BPI Group through valuation techniques. In this
note, the fair value of these instruments is presented in level 3, as it
is considered that its fair value depends on relevant data not
observable in the market.
Level 3 – Valuation techniques using mainly inputs not based on
observable market data
j
unlisted shares, bonds and derivative financial instruments that are
valued based on in-house developed models for which there is no
generally accepted market consensus as to the inputs to be used;
and
j
bonds valued based on third party indicative bids, based on
theoretical models.
1.01%
0.76%
0.30%
0.19%
1.23%
1.05%
0.46%
0.35%
The fair value of “Held to maturity investments” is based on market
prices or third party purchase prices, when available. If these do not
exist, fair value is estimated based on the discounted value of the
expected cash flows of principal and interest.
204
– in bond issuances (Debt securities and Subordinated debt)
reference interest rates and spreads available in the market are
applied, taking into account the residual maturity and degree of
subordination.
The reference rates used to calculate the discount factors at
31 December 2010 are listed in the table below. For each set of
operations the above explained spreads applicable are added.
1 month 3 months 6 months
0.78%
0.59%
0.26%
0.13%
– in interbank operations (Loans and advances to credit institutions
and Resources of credit institutions) yield curves for interbank
operations at the reference date of the financial statements are
used;
– in operations with Customers (Loans to Customers and Resources
of Customers) the weighted average of spreads over the reference
rates used by the Bank in the previous month for similar operations
is considered, taking into account the need to obtain a significant
sample of operations for each class of product considered;
Financial assets and liabilities are classified as Level 3 if a
significant proportion of their book value is the result of inputs not
based on observable market data, namely:
EUR
GBP
USD
JPY
The valuation techniques used are based on market conditions
applicable to similar operations as of the date of the financial
statements, such as the value of their discounted cash flows based
on interest rates considered as most appropriate, namely:
1 year
2 years
3 years
5 years
7 years
10 years
30 years
1.51%
1.51%
0.78%
0.57%
1.55%
1.51%
0.81%
0.38%
1.89%
1.95%
1.29%
0.43%
2.48%
2.63%
2.19%
0.57%
2.89%
3.10%
2.83%
0.80%
3.29%
3.54%
3.40%
1.16%
3.47%
3.92%
4.13%
1.91%
The fair value of spot operations (including Cash and deposits at
central banks, Deposits at other credit institutions repayable on
demand and Demand deposits included in Resources of Customers
and other debts) corresponds to their book value.
The fair value of financial instruments at 31 December 2010 is made up as follows:
Assets valued
at historical
cost1
Assets and liabilities valued at fair value
Assets
Trading derivatives2
Hedging derivatives
Liabilities
Debt securities
Financial liabilities relating
Trading derivatives
Hedging derivatives
Subordinated debt
Participating bonds
Net book
value
Method used to determine fair value
Active
market
listings
(Level 1)
Valuation techniques
Market
data
(Level 2)
1 328 222
338 551
928 078
142 290
439 145
055 006
043 584
313 573
250 263
43 838 712
8
1
30
1
1
4
23
7
245
726
240
782
1 328 222
338 551
155 920
928 078
2 304 357
8 142 290
1 435 503
1 435 503
(3 642)
28 509 650 28 509 650 (1 545 356)
970 827
970 827
(72 757)
693 171 846
141 034
313 573
245 164 677
85 341
250 263
6 272 783 674 769 35 269 405 42 216 957 (1 621 755)
1
4
23
7
245
738
186
353
561
749
347
659
1
4
23
7
245
738
186
353
561
749
347
659
14 031
14 031
(24)
(12 665)
54 516
428 615
1 569 742
1 569 742
676
137 381
261 493
59 151
499 444
2 991 907
2 991 907
602 861
602 861
37 528
6 759
6 759
408
35 870 528 535 41 892 117 42 456 522
509 054
(239 565) (1 112 701)
26
35 844
Book value
1 328 222
338 551
115 997
222 249
537
084
863
274
1 570 418
261 493
499 444
2 991 907
640 389
7 167
42 965 576
873 136
Difference
Models
(Level 3)
1 328 222
338 551
656 161
5 615 684
Total
fair value
Total book
value
1
4
23
7
124 086
404 449
Valuation differences in
financial assets recognised
in revaluation reserves
Total
928 078
156 321
439 145
055 006
043 584
313 573
250 263
43 852 743
8
1
30
1
14 031
245
726
240
782
537
084
863
274
1 570 418
261 493
499 444
2 991 907
640 389
7 167
42 965 576
887 167
(956 199)
(2 068 900)
1) Unlisted securities for which it was not possible to determine fair value on a reliable basis.
2) This caption is presented in the balance sheet as Financial assets held for trading and at fair value through profit or loss.
205
The fair value of financial instruments at 31 December 2009 is made up as follows:
Assets valued
at historical
cost1
Assets and liabilities valued at fair value
Assets
Hedging derivatives
Liabilities
Debt securities
Financial liabilities relating
Trading Derivatives
Hedging derivatives
Subordinated debt
Participating bonds
Net book
value
Method used to determine fair value
Active
market
listings
(Level 1)
Valuation techniques
Market
data
(Level 2)
1 443 315
296 744
1
8
2
29
456 027
863 823
347 750
955 585
803 124
335 122
316 455
45 817 945
2
4
22
9
773
702
617
083
1 443 315
296 744
596 138
1 456 027
1 508 229
8 863 823
2 355 725
2 355 725
29 915 483 29 915 483
800 575
800 575
184 196 955
137 983
335 122
430 251 718
64 307
316 455
8 151 773 512 997 37 118 499 45 783 269
(34 676)
2
4
22
9
394
481
485
471
(11)
(10 804)
(29 633)
4 150
1 782 236
1 782 236
137 650
318 852
80 245
423 811
2 139 437
2 139 437
632 152
632 152
11 478
11 478
15 012 509 756 43 997 029 44 521 797
1 261 472
(17 626)
2 258
12 754
Book value
1 443 315
296 744
63 065
1 259
383
677
852
621
1 764 610
318 852
423 811
2 139 437
652 408
11 792
44 488 443
1 329 502
Difference
Models
(Level 3)
1 443 315
296 744
796 824
7 354 335
Total
fair value
Total book
value
773
713
647
079
394
481
485
471
2
4
22
9
773
713
647
079
71 155
7 975
(40 102)
(2 549)
71 155
Valuation differences in
financial assets recognised
in revaluation reserves
Total
456 027
934 978
347 750
955 585
803 124
335 122
316 455
45 889 100
2
4
22
9
178 944
330 812
20 256
314
(33 354)
(68 030)
1
8
2
29
71 155
773
702
617
083
383
677
852
621
1 764 610
318 852
423 811
2 139 437
652 408
11 792
44 488 443
1 400 657
(218 570)
(286 600)
1) Unlisted securities for which it was not possible to determine fair value on a reliable basis.
At 31 December 2010 and 2009 financial assets held for trading
and at fair value through profit or loss (non derivatives) included in
Level 3 correspond essentially to bonds valued through indicative
Bids based on theoretical models or in-house developed models.
At 31 December 2010 and 2009 financial assets available for sale
included in Level 3 correspond essentially to Angolan public debt
securities. They also include bonds collateralized by assets (ABS’s)
and private equity investments.
206
At 31 December 2010 and 2009, trading and hedging derivatives
included in Level 3 refer mainly to:
j
options or swaps negotiated with Customers with an optional
component and the related hedging with the market;
j
embedded options in structured bonds issued by Banco BPI, with
remuneration indexed to baskets of shares / share indexes,
commodities and exchange rates, and operations negotiated with
the market to hedge the optional risk of these bonds.
For financial instruments recorded at fair value in the balance sheet, the changes between 31 December 2009 and 31 December 2010 on
assets and liabilities classified in Level 3, is made up as follows:
Financial assets and liabilities
Held for trading and
at fair value through
profit or loss
Available
for sale
Trading
derivatives
(net)
Hedging
derivatives
(net)
Total
596 138
(287)
1 508 229
(2 161)
333
(1 383)
(15 938)
49 324
2 088 762
45 493
4 408
2 070
2 338
259
3 093
3 094
(1)
15 435
17 636
(2 201)
667
(470)
(3 350)
6 620
1 413
3 653
(25 901)
26 190
23 195
22 800
395
(38)
(1 702)
948 146
(549 684)
(129 666)
88 242
(22 628)
2 490 120
Net book value at 31 December 2009
Accrued interest (amount at 31 December 2009)
Gain / (loss) recognized in net income
In net income on financial operations
Potential gain / (loss)
Effective gain / (loss)
In impairment loss
Gain / (loss) recognized in revaluation reserves
Purchases
Sales / settlements
Transfers out
Transfers in
Accrued interest (amount at 31 December 2010)
Net book value at 31 December 2010
Sales / settlements on assets held for trading and at fair value
through profit or loss correspond mainly to bonds held by Banco de
Fomento Angola that have matured. The acquisitions of assets
available for sale relate mostly to bonds acquired by Banco de
Fomento Angola.
43 090
(392 247)
(96 252)
935
135
155 920
259
(38)
(1 702)
907 739
(163 587)
(33 414)
87 307
1 725
2 304 357
Derecognition of financial instruments
In 2010 and 2009 no financial instruments for which it was not
possible to reliably determine their fair value were derecognised,
therefore, there was no impact on net income of the period arising
from this.
Sales / settlements on assets available for sale correspond mainly to
securities that have matured.
The continuous improvement in the databases related to fair value
calculation methodologies in accordance with the hierarchy
established in IFRS7, resulted in reclassifications between various
levels that explain the transfers made in 2010.
207
Reclassification of financial assets
As a result of the amendments to IAS 39 in October 2008 (note 2.2), the BPI Group reclassified bonds, from Financial assets held for trading to
Financial assets available for sale (note 4.5), Loans and advances to Customers (note 4.7) and Held to maturity investments (note 4.8), as
follows:
Book value on Book value at
reclassification
31 Dec. 10
date
Reclassification of bonds in 2008
Financial assets held for trading
Loans represented by securities
Reclassification of bonds in 2009
(189 787)
38 076
41 807
109 904
(57 370)
339
57 031
Fair value at
31 Dec. 10
33 057
42 429
115 076
33 057
33 124
108 473
365
61 994
252 921
537
60 631
235 822
In the case of the lack of liquidity in the bond market, the valuation
prices that can be obtained for these securities do not reflect the
prices on an active market with transactions on a regular basis.
Therefore, the BPI Group decided to reclassify these bonds to
financial assets available for sale, loans and advances to Customers
and held to maturity investments. To determine the fair value of the
financial assets available for sale, alternative valuation methods were
used as described previously in this note.
208
Fair value at
31 Dec. 09
Effective
interest rate
on reclassification date
39 985
53 194
246 696
39 985
46 190
239 210
5.81%
6.37%
6.29%
3 925
82 891
426 691
3 861
86 309
415 555
5.34%
5.98%
31 Dec. 09
31 Dec. 10
Book value on Book value at
reclassification
31 Dec. 09
date
(344 839)
43 571
54 301
246 967
(81 980)
3 689
78 291
The gain / (loss) relating to fair value changes of these securities
recognized in the statements of income for 2010 and 2009, were as
follows:
Gain / (loss) associated with fair value
changes up to the reclassification date
Reclassification of bonds
in 2009
Held-to-maturity investments
31 Dec. 10
31 Dec. 09
n.a.
n.a.
n.a.
(345)
(804)
(1 149)
After the reclassification date, gain / (loss) relating to fair value changes of these securities not recognized in the statements of income and other
gain / (loss) recognized in reserves and in the statements of income, were as follows:
31 Dec. 091
31 Dec. 10
Gain / (loss) associated
with fair value changes
not recognized in the
statement of income
(1)
(3 806)
(7 928)
(11 735)
The amounts of gain / (loss) relating to fair value changes not
recognized in the statement of income correspond to gain / (loss)
that would affect net income if the bonds had remained in the
“Financial assets held for trading” portfolio. A portion of these
amounts would be offset by opposite results under the caption
TECHNICAL PROVISIONS, namely in the case of gain / (loss) on securities
allocated to insurance portfolios with profit participation.
The amounts presented in other gain / (loss) recognized in the
statement of income include interest, premiums / discounts and
other expenses. The amounts presented in other gain / (loss)
recognized in reserves correspond to the fair value changes of
financial assets available for sale after the reclassification date.
For purposes of determining the effective interest rate of the
reclassified assets at the reclassification date, the BPI Group
estimated that it would recover all future cash flows relating to the
reclassified securities.
Other gain / (loss)
recognized in:
Reserves
Statements
of income
(1)
1 397
1 593
11 177
14 167
(1)
Gain / (loss) associated
with fair value changes
not recognized in the
statement of income
2 691
6 063
19 730
28 484
Other gain / (loss)
recognized in:
Reserves
Statements
of income
2 691
1 363
3 375
19 037
23 775
2 691
Financial instrument risks
The BPI Group assesses and controls risk in accordance with best
practices and in compliance with the prudential rules and
regulations, following the precepts, definitions and valuation
methods recommended by the Basel Banking Supervision Committee
in its three pillars.
The Directors’ Report, presented together with the notes to Banco
BPI’s financial statements, also includes a section relating to “Risk
management”, which contains additional information about the
nature and extent of the BPI Group’s financial risks.
Credit risk
Maximum exposure to credit risk
Credit risk is one of the most significant risks of the BPI Group’s
operations. More information about this risk, particularly about the
management process for the various segments of credit, can be
found in the section “Risk Management” in the Directors’ Report.
209
Maximum exposure to credit risk at 31 December 2010, by type of financial instrument, is as follows:
Balance sheet items
Derivatives
Hedging derivatives
Off balance sheet items
Guarantees given
Gross
book value
Impairment
338 551
928 078
8 209 541
1 439 527
30 608 938
1 043 584
Net
book value
338 551
(53 220)
(382)
(553 932)
928 078
8 156 321
1 439 145
30 055 006
1 043 584
250 263
313 573
43 132 055
(607 534)
250 263
313 573
42 524 521
2 820 405
39 296
2 859 701
45 991 756
(34 997)
(21)
(35 018)
(642 552)
2 785 408
39 275
2 824 683
45 349 204
Impairment
Net
book value
Maximum exposure to credit risk at 31 December 2009, by type of financial instrument, is as follows:
Balance sheet items
Derivatives
Hedging derivatives
Guarantees given
Gross
book value
296 744
1 456 027
8 990 451
2 349 529
30 485 950
807 954
(55 473)
(1 779)
(530 365)
(4 830)
1 456 027
8 934 978
2 347 750
29 955 585
803 124
316 455
335 122
40 548 595
(592 447)
316 455
335 122
40 014 725
2 818 084
43 808
3 171 762
43 720 357
(28 519)
(37)
(28 556)
(568 320)
2 789 565
43 771
3 137 312
43 152 037
210
296 744
Breakdown of overdue loans
Overdue loans and interest at 31 December 2010, by non performing classes, are as follows:
Total
Non performing classes
up to 1
month
Subject to individual assessment
Impairment
Subject to collective assessment
Impairment
from 1 to from 3 months
3 months
to 1 year
from 1 to 5
years
more than
5 years
566
(511)
55
26 221
(7 062)
19 159
87 146
(42 224)
44 922
130 914
(68 831)
62 083
12 090
(8 290)
3 800
256 937
(126 918)
130 019
3 712
(91)
3 621
12 420
(2 561)
9 859
59 692
(21 507)
38 185
251 448
(112 324)
139 124
36 133
(15 006)
21 127
363 405
(151 489)
211 916
In addition, at 31 December 2010 collective impairment of 275 907 th. euro was recognised on performing loans.
Overdue loans and interest at 31 December 2009, by non performing classes, are as follows:
Total
Non performing classes
up to 1
month
from 1 to from 3 months
3 months
to 1 year
Impairment
Subject to collective assessment
Impairment
In addition, at 31 December 2009, collective impairment of
280 884 th. euro was recognised on performing.
Collateral
Banco BPI receives, among others, the following collateral in its loan
granting business:
j
j
j
j
more than
5 years
4 786
(1 617)
3 169
4 786
(1 617)
3 169
Impairment
j
from 1 to
5 years
166
(160)
6
12 959
(4 375)
8 584
77 867
(38 173)
39 694
116 656
(67 244)
49 412
9 208
(6 630)
2 578
216 856
(116 582)
100 274
533
(128)
405
17 161
(2 750)
14 411
80 124
(29 991)
50 133
243 350
(89 106)
154 244
33 377
(11 086)
22 291
374 545
(133 061)
241 484
The fair value of collateral received is determined based on market
value considering its nature. For example, property received in
guarantee is valued by external appraisers or by Banco BPI’s units
using methods considered appropriate.
The coverage of overdue loans by collateral received at 31 December
2010 was as follows:
Housing mortgages;
Mortgage of buildings and land;
Deposit of assets;
Pledge of securities;
Guarantees provided by other credit institutions.
Coverage
>=100%
>=75% and <100%
>=50% and <75%
>=25% and <50%
>=0 and <25%
Without collateral
Total
Impairment3
Collateral1
Loans with default
Performing amount associated
with defaulting loans
Overdue
Total
Mortgages
Other collateral2
153 883
55 408
2 953
635
874
114 499
328 252
200 558
43 518
6 651
3 065
2 081
364 469
620 342
354 441
98 926
9 604
3 700
2 955
478 968
948 594
351 057
84 555
4 924
786
36
3 383
8 734
1 191
662
302
441 358
14 272
79 500
22 333
3 119
1 486
1 694
237 784
345 916
1) The value of collateral presented is the lower of the fair value of the collateral received and the amount owed at 31 December 2010.
2) Other collateral includes pledged deposits and securities.
3) For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. The amount of impairment shown includes
67 509 th. euro relating to performing loans associated with overdue loans.
211
The coverage of performing loans on which impairment was determined on an individual basis at 31 December 2010 is as follows:
Collateral1
Loans with impairment
Coverage
Impairment
3
Performing loans
Mortgages
Other collateral2
39 213
74 743
32 502
3 746
6 711
60 166
8 306
1 040
4 438
6 222
120 505
245 121
245
40
1 704
886
36 533
69 467
1 554
2 464
33 367
46 731
Loans not represented by securities
>=100%
>=75% and <100%
>=50% and <75%
>=25% and <50%
>=0 and <25%
Without collateral
Without collateral
Guarantees provided
>=100%
>=75% and <100%
>=50% and <75%
>=0 and <25%
Without collateral
13 886
11 636
8 397
2 399
75
180
95 588
106 639
365 646
2 561
150
5 836
1 087
19
15
2 711
39 244
6 957
76 424
1 437
451
8
18 244
20 140
78 507
1) The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at 31 December 2010.
3) For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.
The coverage of overdue loans by collateral received at 31 December 2009 is as follows:
Coverage
Performing amount associated
with defaulting loans
>=100%
>=75% and <100%
>=50% and <75%
>=25% and <50%
>=0 and <25%
Without collateral
Total
203 867
51 161
2 017
1 531
1 598
26 079
286 253
Impairment3
Collateral1
Loans with default
Overdue
271
61
5
2
336
225
318
363
846
250 313
591 401
Total
Mortgages
Other collateral2
475 203
112 386
7 335
3 894
2 444
276 392
877 654
454 685
97 653
3 001
741
135
20 518
8 612
1 622
851
155
556 215
31 758
107 338
26 764
2 699
1 289
1 090
190 896
330 076
3) For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. Impairment presented includes
80 433 th. euro relating to performing loans associated with overdue loans.
The coverage of performing loans on which impairment was determined on an individual basis at 31 December 2009 is as follows:
Coverage
Loans not represented by securities
>=100%
>=75% and <100%
>=50% and <75%
>=25% and <50%
>=0 and <25%
Without collateral
Without collateral
Guarantees provided
>=100%
>=75% and <100%
>=50% and <75%
>=25% and <50%
Without collateral
Performing loans
Mortgages
Other collateral2
178 791
4 645
1 911
3 645
7 237
76 106
272 335
42 516
4 073
523
159
180
136 275
106
852
1 500
426
47 451
139 159
13 347
4 218
2 196
180
48 611
55 205
340 887
11 217
1 528
231
1 323
2 401
30 560
47 260
11 097
816
816
48 267
3) For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.
212
Impairment3
Collateral1
Loans with impairment
3 403
1 047
1 098
90
458
4 591
143 750
10 780
12 285
70 642
Credit risk quality (rating)
This section presents information concerning the quality of the credit
risk of the BPI Group’s main financial assets, excluding derivatives
which are analysed in detail in note 4.4. In the case of financial
assets with ratings assigned by the international rating agencies
(Moody, Standard & Poor and Fitch) the rules set in the prudential
regulations issued by the Bank of Portugal were followed, selecting
the second best in the case of different external ratings for the same
instrument. When no specific external ratings were found, Banco BPI
used external ratings assigned by the issuer of instruments with the
same degree of subordination. In the case of local authorities, banks
and other similar institutions, the ratings used are based on the
external ratings assigned to the State where the entity has its
headquarters. In the specific case of the central banks in the Euro
zone the rating is AAA. External rating is an important element to
consider in the management of positions, especially in security
portfolios, and is also used for calculating weights used to determine
prudential capital by the standard method, in accordance with the
regulations issued by the Bank of Portugal.
Loan exposures without external ratings were distributed by rating
classes (for company exposure), by quality levels (for project finance)
or by scorings (for private Customer exposure). External and internal
ratings, where they exist, are an indicator of increasing importance to
the BPI Group’s internal management of loans, being used by the
Deposits, loans and advances to credit institutions
Origin
External rating
N/A
teams responsible for monitoring Customers in order to inform the
decisions regarding new loans or the situation of existing exposure.
This internal classification does not include all the Group’s exposure.
It excludes sovereign exposures or exposure to other banks, in which
case external ratings are used, loans granted locally by Banco de
Fomento de Angola which uses its own methodologies, as well as
loans granted to entrepreneurs and the business segment.
Actual internal ratings and scorings include ten classes for regular
operations, from E 01/01 (less probability of default) to E 10/10
(more probability of default); two classes (ED 1/D 01 and ED 2/D 02)
for “incidents” (delays in payment of less than 60 and 90 days,
respectively) and finally one class for default (ED 3/D 03), when
delay in payment of a given amount by a counterparty exceeds
90 days.
Project finance operations have a separate internal classification
from other loan operations due to their specific nature, so that at any
moment the quality of the credit risk can be determined (from Weak
to Strong).
Deposits and loans and advances to credit institutions, by ratings, at
31 December 2010 are as follows:
Gross
exposure
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to BN/A
1 203 493
425 474
20 056
1 054
2 801
4 932
1 657 810
Impairment
379
3
382
Net
exposure
1 203 493
425 474
19 677
1 054
2 801
4 929
1 657 428
Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.
Loans to Customers, by ratings, at 31 December 2010 are as follows:
Loans to Customers
Origin
External rating
Project Finance rating
Internal rating
Scoring
N/A
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to B< BStrong
Good
Satisfactory
Weak
E01 to E03
E04 to E06
E07 to E10
ED1 to ED3
01 to 03
04 to 06
07 to 10
D01 to D03
Gross
exposure
135 801
1 935 443
264 773
5 909
109 144
3 742
303 995
1 438 664
171 599
80 928
2 191 465
3 180 283
1 997 146
421 394
8 340 697
3 015 029
1 095 384
510 302
5 334 192
30 535 890
Impairment
203
209
38
Net
exposure
135
1 935
264
5
109
598
234
735
909
144
3 742
676
133
4 008
4 436
8 004
23 928
161 375
10 680
7 622
10 965
114 263
203 650
553 932
303 995
1 437 988
171 466
76 920
2 187 029
3 172 279
1 973 218
260 019
8 330 017
3 007 407
1 084 419
396 039
5 130 542
29 981 958
Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.
213
The Securities portfolio, by ratings, at 31 December 2010 is as follows:
Securities
Origin
External rating
N/A
Gross
exposure
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to B< BN/A
607 709
4 641 743
1 396 572
577 700
2 153 867
1 343
792 333
10 171 267
Impairment
131
487
78
590
51 934
53 220
Net
exposure
607 709
4 641 612
1 396 085
577 700
2 153 789
753
740 399
10 118 047
Deposits and loans and advances to credit institutions, by ratings, at 31 December 2009 are as follows:
Deposits, loans and advances to credit institutions
Origin
External rating
N/A
Gross
exposure
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to BN/A
2 305 990
105 517
93 067
1 719
6 078
17 181
2 529 552
Impairment
160
1 619
1 779
Net
exposure
2 305 990
105 517
92 907
1 719
6 078
15 562
2 527 773
Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.
Loans to Customers, by ratings, at 31 December 2009 are as follows:
Loans to Customers
Origin
External rating
Project Finance rating
Internal rating
Scoring
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BB< BStrong
Good
Satisfactory
Weak
E01 to E03
E04 to E06
E07 to E10
ED1 to ED3
01 to 03
04 to 06
07 to 10
D01 to D03
N/A
Gross
exposure
1 570
270
104
15
722
532
549
466
501
365 674
1 189 670
29 777
37 087
1 799 519
2 918 397
1 925 621
399 220
7 673 613
2 969 109
966 790
754 429
7 438 207
30 428 883
Impairment
452
1 354
3 641
7 807
21 360
140 315
12 529
8 160
7 182
100 528
227 037
530 365
Net
exposure
1 570
270
103
15
270
532
195
466
501
365 674
1 189 670
29 777
37 087
1 795 878
2 910 590
1 904 261
258 905
7 661 084
2 960 949
959 608
653 901
7 211 170
29 898 518
Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.
The Securities portfolio, by ratings, at 31 December 2009 is as follows:
Securities
Origin
External rating
N/A
214
Rating grade class
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to B< BN/A
Gross
exposure
3 704 695
2 883 783
2 045 442
109 212
46 200
6 335
2 458 765
11 254 432
Impairment
2 088
3 229
590
54 396
60 303
Net
exposure
3 704 695
2 883 783
2 043 354
105 983
46 200
5 745
2 404 369
11 194 129
Restructured loans
Renegotiated loan operations with impairment by individual
assessment are not presented in this section.
Operations for which the conditions were renegotiated due to credit
risk deterioration (being or not in default), after increase in the
guarantees or full payment of overdue interest and other expenses,
for which impairment has not been recognised by individual
assessment, have been considered as restructured credit operations
in the consolidated financial statements of Banco BPI.
The following restructured loan operations, without impairment by
individual assessment, at 31 December 2010 and 2009 have been
identified:
31 Dec. 10
31 Dec. 09
Collective
impairment
Loans
Without impairment by individual assessment
Companies
Housing
Other loans
Performing
Overdue
Total
63 617
955
64 572
60 031
14 762
138 410
22 094
2 248
25 297
82 125
17 010
163 707
Collective
impairment
Loans
Performing
Overdue
Total
1 983
60 890
1 816
62 706
1 767
12 015
2 781
16 779
48 260
11 345
120 495
16 038
1 713
19 567
64 298
13 058
140 062
7 937
2 027
11 731
Liquidity risk
The schedules presented below were prepared based on the
requirements of IFRS 7 relating to Liquidity Risk, considering the
total contractual undiscounted cash flows expected to be paid or
received in the periods relating to outstanding transactions on the
reference dates.
j
defaults and early repayment are not considered (except for
perpetual debt instruments);
j
shares and overdue loans are included (by their book value) as
“undetermined”;
The main assumptions used in preparing the tables below were:
j
demand deposits (including interest) and the bills and coins on
hand are considered as “on demand”;
j
trading portfolio operations and all derivatives are considered in
these schedules by their projected or estimated cash flows, on the
contractual dates, and not by the market values that would be
obtained by their possible sale in the short term.
j
in the case of interest depending on market indices or other
references which are only identifiable on a future date (eg. interest
based on the Euribor) assumptions were made regarding the future
value of such references, based on the last known value;
215
The contractual undiscounted cash flows of financial assets and liabilities at 31 December 2010 were as follows:
on demand
Assets
and at fair value through profit or loss
Hedging derivatives1
Contractual interest cash flows of derivatives
Contractual interest cash flows of other assets
Liabilities
Debt securities
Subordinated debt
Participating bonds
Contractual interest cash flows of other liabilities
1) Includes the notional amount of swap operations.
216
1 327 952
221 531
up to 3 from 3 months
months
to 1 year
undetermined
1 244 673
2 762 819
7 963 985
668 511
103 336
834 099
33 303
58 584
108 745
183 858
7 673 321 13 961 913
Total
1 327 952
338 317
116 786
168 867
214 211
42 311
1 253 411
4 296 496
826 449
39 675
119 474
504
313 644
1 549 987 7 391 324
7 673 321
from 1 to 5 more than 5
years
years
57 413
88 326
89 371
2 490 239
2 500 704
2 780 873
123 451
853 221
14 665
37 938
133 164
10 318
3 353 733
8 616 115 13 623 680
4 048 753
7 187 499
4 883 570
2 268 795
4 165 871
4 961 363
325 442
931 418
669 502
910 521
2 913 113
3 754 619
13 616 285 27 389 432 30 787 961
1 424 397
6 383 563
1 353 303
54 188
4 067 307
2 270 613
415 928
97 496
358 844
1 011 150
4 974 547
898 013
7 208 122
4 132 232
1 539 022
62 348
177 747
73 629
651 920
513 798
4 861 540
5 002 705
978 373
452 584
7 122
377 703
1 443 358
1 035 714
338 348
619 538
361 018
16 782 846 22 247 174 14 116 150
524 101
223 514
928 078
8 209 541
1 033 648
1 434 831
620 342 30 510 366
16 946 270
11 435 705
2 045 836
7 892 401
1 367 957 82 102 946
1 244 673
4 723 807
23 105 648
7 648 281
1 569 335
16 971 069
11 438 852
2 991 907
612 428
7 122
2 965 519
1 502 763
74 781 404
The contractual undiscounted cash flows of financial assets and liabilities at 31 December 2009 were as follows:
on demand
Assets
Contractual interest cash flows of other assets
Liabilities
Debt securities
Subordinated debt
Participating bonds
Contractual interest cash flows of other liabilities
1 443 021
191 662
up to 3 from 3 months
months
to 1 year
undetermined
265 000
2 060 726
7 505 368
1 649 296
4 980
311 220
664 249
6 887
127 265
138 751
7 418 464 12 733 742
Total
1 443 021
296 701
105 039
473 667
39 977
72 205
2 008 174
4 788 491
311 235
558 564
109 700
338
263 341
1 635 021 8 730 392
7 418 464
from 1 to 5 more than 5
years
years
124 779
157 574
108 498
546 255
2 843 950
5 331 849
151 687
551 468
26 206
152 461
171 861
79
3 025 986
8 921 885 13 078 854
3 208 095
6 233 902
7 470 593
2 086 514
6 267 263
5 056 793
400 370
996 418
817 413
809 564
2 765 223
3 451 366
10 505 711 28 909 543 35 341 651
2
1
5
1
500
797
738
800
000
919
784
083
3 207 943
2 034 804
131 043
26 859
396 134
382 146
18 015 715
662 296
1 174 581
5 103 134
650 335
6 233 608
6 201 269
1 552 599
136 564
179 375
650 604
422 391
1 108 344
7 470 239
5 069 728
448 908
471 218
11 719
1 891 206
1 254 686
489 977
393 046
24 095 569 17 480 258
591 509
228 420
1 456 027
8 990 451
801 566
4 786
2 337 361
591 401 30 406 617
17 223 825
13 969 133
2 323 901
7 289 831
1 416 116 86 538 434
2 765 000
4 700 316
22 487 801
8 974 904
1 763 659
17 223 010
13 970 050
2 139 437
634 641
11 719
3 669 291
1 403 920
79 743 748
1) Includes the notional amount of swap operations.
The Bank continuously tracks the evolution of its liquidity,
monitoring incoming and outgoing funds in real time. Projections of
short and medium term liquidity are carried out in order to help
planning the funding strategy in the monetary and capital markets.
In 2010, BPI Group redeemed a total of 2 579 940 th. euro (net of
repurchases) in medium and long-term debt and issued new debt
totalling of 1 982 252 th. euro. The funding obtained from the ECB
was reduced from 2 500 000 th. euro to 1 000 000 th. euro from
the end of December 2009 to the end of December 2010. At 31
December 2010 BPI held a portfolio of assets eligible to obtain
funding from the ECB at any time, totalling 7 485 940 th. euro, net
of ECB valuation margins. This amount includes 4 299 076 th. euro
available for immediate use. In the section on Liquidity Risk in the
Directors’ Report, additional procedures used by the Group in its
daily management of liquidity risk are presented.
Market Risk
Market risk (interest rate, exchange rate, share price, commodity
price and spread) is defined as the potential to incur losses due to
unexpected changes in the price of instruments or operations
(“price” includes index value, interest rate or exchange rate). Spread
risk is the risk resulting from the variability of interest rates of some
counterparties in relation to the interest rate used as a reference.
The Executive Board for Global Risks (EBGR) is responsible for
managing the BPI Group’s market risk and differentiates between the
trading portfolio (trading) and the remaining businesses. In the
specific case of exchange risk, the assessment is made for the
activity as a whole (trading and non-trading).
More information about market risks in the BPI Group is contained in
the “Risk Management” section of the Directors’ Report.
Trading portfolio (trading)
Trading positions are managed autonomously by the traders, within
the limits established by the Trading Department Manual for the
entire BPI Group, approved by the Executive Committee of the Board
of Directors. The trading portfolio is defined for financial and risk
management purposes, independently of the accounting
classification (although the concepts largely match) and includes all
types of financial instruments traded by the Trading Rooms
(derivatives, repurchases, shares and bonds) that cause various types
of market risk, namely interest rate, shares, exchange, commodities
and spread risks.
Market risk in trading operations is assessed and controlled daily
through the calculation of VaR – Value at Risk – using a standard
model (of the “variance co-variance” type), based on the activity of
the Banks of the BPI Group as a whole.
217
In compliance with its legal obligations, the Group also produces
prudential information for purposes of control by the supervisor and
calculates regulatory capital relating to market risks in accordance
with the standard methodology established by the Bank of Portugal.
Calculated VaR corresponds to the maximum potential loss, with a
confidence level of 99%, resulting from an adverse evolution of risk
factors within a timeframe of two weeks (risk factors are increase
rates of prices, indexes and interest rates that affect the value of the
portfolio, or that are taken as representative of those prices, indexes
and rates). The model uses, as risk factor volatility, the standard
deviation of historical samples of their amounts on an annual basis
and uniform weight. In calculating the overall risk, the effect of the
diversification of investments is included in the model through the
statistical effect of the correlation between risk factors (the
correlation is calculated from annual historical samples and uniform
weight of relevant pairs of risk factors). A normal distribution of risk
factors is assumed, with a mean of zero and standard deviation
leading to the above mentioned confidence level.
Banking portfolio (non-trading)
The Financial Committee, chaired by the Executive Board’s member
responsible for the financial portfolio, monitors and manages the
positions that are part of the banking portfolio, from reports
produced for the purpose and within the guidelines of EBGR. When
necessary an extraordinary meeting of EBGR is requested to make
the more important decisions.
Interest rate risk
Following is a sensitivity analysis of the BPI Group’s financial margin
and shareholders’ equity to a 2% increase in the reference interest
rate, considering all the instruments of the banking portfolio
sensitive to interest rate variations (including the securities portfolio
of the international activity classified in the accounting records as of
trading):
In 2010 and 2009 the average VaR in the Bank’s trading books was
as follows:
Interest rate risk
Currency risk
Equity risk
Commodities
31 Dec. 10
31 Dec. 09
VaR
VaR
(average) (maximum)
VaR
VaR
(average) (maximum)
205
729
475
780
2 277
2 993
14
321
615
1 300
31
2 684
4 217
2 624
176
x
Financial margin
31 Dec. 10
Time band
on demand
on demand-1 month
1-2 months
2-3 months
3-4 months
4-5 months
5-6 months
6-7 months
7-8 months
8-9 months
9-10 months
10-11 months
11-12 months
Total
31 Dec. 09
Position
Weighting
factor
Weighted
position
Position
Weighting
factor
Weighted
position
1 733 353
(1 624 546)
531 677
2 162 973
(59 026)
(119 387)
3 174 966
(112 752)
188 337
(59 944)
(154 286)
21 320
82 123
2.00%
1.92%
1.75%
1.58%
1.42%
1.25%
1.08%
0.92%
0.75%
0.58%
0.42%
0.25%
0.08%
34 667
(31 191)
9 304
34 175
(838)
(1 492)
34 290
(1 037)
1 413
(348)
(648)
53
66
78 413
567 831
1 780 623
289 653
2 019 663
521 418
(483 787)
2 513 156
(568 149)
14 330
(98 500)
(164 612)
(215 805)
(906 388)
2.00%
1.92%
1.75%
1.58%
1.42%
1.25%
1.08%
0.92%
0.75%
0.58%
0.42%
0.25%
0.08%
11 357
34 188
5 069
31 911
7 404
(6 047)
27 142
(5 227)
107
(571)
(691)
(540)
(725)
103 376
Note: The positions were distributed by the asset, liability and respective maturity class columns.
The weighted position indicates an estimate of the impact on the
financial margin obtained at the end of 12 months starting on
1 January of each year resulting from a single and instantaneous
change of 2% in the overall market interest rates affecting the
respective positions. Thus, the impact on each date depends on the
existence and time distribution of the re-pricing gaps.
218
In medium and long-term fixed rate operations, the BPI Group has
the policy of hedging interest rate risk through derivatives. The
hedging is usually carried out for the entire exposure, but certain
future cash flows can also be hedged (forward start). At 31
December 2010 and 2009 the BPI Group did not have significant
medium and long-term exposure to fixed interest rates during the life
of the operations.
Equity risk
In accordance with the prudential requirements, the BPI Group
calculates the impact of a 20% decrease in share prices and
participating units classified as financial assets available for sale and
financial assets at fair value through profit or loss. This stress test
was based on the following exposures in shares and participating
units:
31 Dec. 10 31 Dec. 09
- at fair value and without impairment
- at fair value and with impairment
at historical cost
Participating units in liquidity, bond
and real estate funds
51 421
45 858
28 537
32 874
13 920
15 132
13 864
17 655
121 225
228 967
116 403
227 922
At 31 December 2010 and 2009, a 20% decrease in the price of
the above securities (except for securities recorded at cost and
participating units in liquidity, bond and real estate funds and
assuming that the Group does not identify impairment situations in
addition to those that already existed on the date of the financial
statements), would result in a decrease of 18 776 th. euro and
18 773 th. euro, respectively, in their fair value, implying the
recognition of a loss of 13 068 th. euro and 12 198 th. euro, the
remaining devaluation being reflected in the fair value reserve.
Note: Does not include the trading portfolio which is considered in market risk.
Currency risk
Financial assets and liabilities at 31 December 2010, by currency, were as follows:
Assets
Hedging derivatives
Debtors and other applications
Liabilities
Debt securities
Hedging derivatives
Provisions
Subordinated debt
Participating bonds
Forward currency operations
Stress test
EUR
USD
471 489
230 525
420 908
72 487
432 114
14 471
3 711
21 068
1 328 222
338 551
984 700
6 767 726
1 005 424
28 417 015
1 043 584
192 493
68 110
39 181 066
152 069
1 314 297
423 547
1 184 928
72 711
1 019 518
273 463
32 171
10 867
10 174
179 600
3 768
1 816 045
52 140
291
310 022
1 241 651
9 112 408
1 439 145
30 055 006
1 043 584
250 263
232 964
45 041 794
1 193 897
218 649
4 235 048
18 010 142
7 517 195
1 570 418
453 193
78 604
2 991 907
377 111
7 167
36 653 331
(987 884)
5 630
160 795
3 734 661
51
42
465
3 633
178
640
030
306
248
834
33 092
30 666
AKZ Other currencies
1 440 150
282
814
25 730
157 323
86 245
13 159
1 021
263 278
4 434 816
788 293
88 138
17 628
1 440 432
93
375 706
112 712
547 570
247 633
10 085
2 017
Total
1 245 537
261 493
4 726 084
23 240 863
7 782 274
1 570 418
499 444
110 573
2 991 907
640 389
7 167
43 076 149
48 135
1) Excludes the amount recorded in the Fair Value Reserve.
219
Financial assets and liabilities at 31 December 2009, by currency, were as follows:
Assets
Hedging derivatives
Debtors and other applications
Liabilities
Debt securities
Hedging derivatives
Provisions
Subordinated debt
Participating bonds
Forward currency operations
EUR
USD
598 060
222 291
336 061
46 560
506 003
1 130
1 224 622
7 655 808
2 121 554
28 247 385
803 124
280 988
75 574
41 229 406
132 909
1 301 602
219 716
1 384 740
402 872
185 732
2 773 383
285 396
4 115 420
18 040 755
8 426 915
1 764 610
385 996
65 329
2 139 437
444 330
11 792
38 453 363
(1 397 826)
Stress test
1 632
173 783
3 597 003
32
554
3 357
93
551
659
705
832
27 714
23 955
AKZ Other currencies
137 841
3 236
1 236 814
1 050 940
334
3 191
26 763
30
10
6
185
746
294
480
619
33 835
32
296 960
905
32 598
168 452
562 873
10 101
58
208 078
4 090 416
724 957
231 544
46 309
1 051 274
(1)
185 539
55 662
983 065
696 440
10 335
2 067
Total
1 443 315
296 744
1 791 149
9 153 436
2 347 750
29 955 585
803 124
316 455
252 625
46 360 183
2 773 383
318 852
4 702 677
22 617 852
9 083 621
1 764 610
423 811
89 676
2 139 437
652 408
11 792
44 578 119
23 570
1) Excludes the amount recorded in the Fair Value Reserve.
The stress test consists of assessing the impact of a 20% variation in
the exchange rate of each currency against the euro, with the
exception of the Kwanza (AON) in which the impact of a 30%
220
variation against the euro was assessed. The amounts presented
above are absolute amounts, and correspond to the potential impact
(before taxes) on total equity including minority interests.
Hedge accounting
Interest rate swaps and forward currency operations are the main
hedging instruments used.
The BPI Group applies fair value hedge accounting for several
business lines, including hedging for:
j
j
j
j
Application of Hedge Accounting eliminates the “accounting
mismatch” that would result from the recognition of the hedged
items at amortised cost, while the hedging instruments (derivative
financial instruments) would have to be recorded at fair value
through profit or loss. The value of hedged financial instruments is
its exposure (nominal value contracted).
fixed rate deposits;
fixed rate debt issues;
structured debt issues;
fixed rate securities.
The BPI Group uses “back-to-back” hedging relationships and
macro-hedging.
The BPI Group hedges interest rate risk and exchange risk relating to
the above items.
The book value of hedged instruments and the fair value of hedging
instruments at 31 December 2010 is made up as follows:
Hedging instruments
Hedged items
Fair value types of hedge
Nominal Interest, premiums
amount and potential gain
/ loss
Assets
Loans and advances to credit institutions 100 000
Loans to Customers
573 098
Fixed rate securities portfolio
6 083 637
6 756 735
Liabilities
43 548
Resources of credit institutions
Customer deposits
4 569 803
Debt issues
6 294 362
10 907 713
2 512
3 326
(614 904)
(609 066)
Value
Impairment corrections
(1 721)
(1 721)
815
61 326
24 539
86 680
1 448
25 524
296 421
323 393
Total
Notional
amount
103 960
100 567
600 227
622 984
5 765 154 14 739 572
6 469 341 15 463 123
4 289
48 652
43 659
20 482
4 651 611
4 636 366
113 721
6 432 622
6 743 707
138 492 11 132 885 11 423 732
Interest
and
premiums
Revalua- Fair value
tion
(363)
(4 511)
(4 874)
(5 484)
(25 415) (30 899)
(76 839) (295 540) (372 379)
(82 686) (325 466) (408 152)
654
49 260
(11 807)
38 107
4 180
22 212
94 471
120 863
4 834
71 472
82 664
158 970
Embedded options were not included.
The book value of hedged instruments and the fair value of hedging instruments at 31 December 2009 is made up as follows:
Hedging instruments
Hedged items
Nominal Interest, premiums
amount and potential gain
/ loss
Assets
Loans and advances to credit institutions 100 000
641 740
Loans to Customers
6 694 647
7 436 387
Liabilities
66 682
Customer deposits
3 797 763
Debt issues
5 927 429
9 791 874
2 360
2 107
261 906
266 373
Value
Impairment corrections
(1 556)
(1 556)
830
62 336
(1 302)
61 864
Total
Notional
amount
529
22 266
147 719
170 514
102 889
394 395
664 557
667 698
7 104 272 24 065 867
7 871 718 25 127 960
2 365
23 871
99 574
125 810
69 877
66 813
3 883 970
4 255 149
6 025 701
6 320 849
9 979 548 10 642 811
Interest
and
premiums
Revalua- Fair value
tion
(465)
(368)
(833)
(4 829)
(21 416) (26 245)
(70 404) (158 196) (228 599)
(75 698) (179 980) (255 677)
13 140
49 647
(38 409)
24 378
2 332
22 298
99 313
123 943
15 472
71 945
60 904
148 321
Embedded options were not included.
The tables above include the nominal amounts of hedged items for
which hedge accounting is being applied. The notional amount of
hedging instruments corresponds to the sum of the notional amounts
of the hedging derivatives contracts, including forward start
operations (swaps and futures), and therefore the notional amount
may be higher than the nominal amounts of the hedged items. For a
given asset or liability (namely fixed rate securities) the Bank may
have entered into several derivatives to hedge the corresponding
future flows.
Net income on financial operations recognised in hedging derivative
financial instruments and in hedged items in 2010 and 2009 was
the following:
31 Dec. 10 31 Dec. 09
Hedging derivatives
Hedged items
Loans to Customers
Customer deposits
Liability for assets not derecognised
Debt issues
(181 367)
(68 197)
919
3 258
177 760
(1 924)
3 390
0
(9 543)
173 860
(7 507)
148
2 244
33 943
2 009
20 805
3 597
16 321
79 067
10 870
221
4.49. Share-based variable remuneration program
The share-based variable remuneration program (Remuneração
Variável em Acções – RVA) is a remuneration plan under which,
whenever it is decided to grant variable remuneration to Executive
Directors and Employees of the BPI Group (in the latter case
provided that it exceeds 2500 euro) it is made up of BPI shares and
BPI share options. The individual remuneration under the RVA
program varies between 10% and 50%, the percentage increasing
with the responsibility level of the beneficiary.
The shares granted to Employees under the RVA program are
transferred in full at the grant date, but 75% of the transfer is,
subject to a resolutive condition (relating to termination of the
employment relationship, unless made by just cause of the
Employee), which expires in a gradual basis over the three years
following the grant date (25% each year). The options to purchase
shares may be exercised between the 90th day to the fifth year as
from the grant date. In accordance with RVA Regulation, termination
of the employment relationship between the Employee and the BPI
Group also affects the options granted.
The shares and share options granted to Executive Directors under
the RVA program are subject to the following suspensive condition:
Banco BPI’s consolidated shareholders’ equity, based on the
consolidated accounts for the third year following that to which the
variable remuneration relates, must be greater than Banco BPI’s
consolidated shareholders’ equity for the year to which the variable
remuneration relates, observing the assumptions established in the
RVA Regulations. The granting of shares is also subject to the
suspensive condition of non termination of the management or
employment relationship established in the RVA Regulations. In
addition to these conditions, the granting of the shares is also
subject to a suspensive term of three years as from the grant date
and the share options only become due after the same period.
In the case of RVA 2007, the Employees whose variable
remuneration was equal to or greater than 2 500 euro and less than
or equal to 10 000 euro could choose to receive this amount fully in
“cash”. In the case of RVA 2008, 2009 and 2010, Executive
Directors and Employees, whose variable remuneration was equal to
or greater than 2 500 euro could choose to receive the variable
remuneration entirely in “cash” without affecting the deferral of the
availability and Conditions of Access referred to above to up to 50%
of the variable remuneration paid to the Executive Directors.
In 2006, there was no RVA because Banco BPI was under a public
share purchase offering. All the other RVA programs remain in force
under the conditions mentioned in this note.
The shares are made available (in the three years following the date
they are attributed) subject to the beneficiaries remaining with the
BPI Group. The price of the shares attributed, as well as the period
in which they are made available, are summarised in the following
table:
Shares
Program
RVA 2005
RVA 2007
RVA 2008
RVA 2009
Date of
assignment
Strike
price
2006-02-23
2008-03-21
2009-03-16
2010-03-11
4.44
3.33
1.41
1.94
Date of availability of tranches
2nd
3rd
4th
2007-02-23
2009-03-21
2010-03-16
2011-03-11
2008-02-23
2010-03-21
2011-03-16
2012-03-11
2009-02-23
2011-03-21
2012-03-16
2013-03-11
The share options can be exercised between the 90th day and the
end of the 5th year following the date they were attributed. The share
options are made available subject to the beneficiaries remaining with
the BPI Group.
The strike price of the options, as well as the period the options can
be exercised, are summarised in the following table:
Options
Program
Date of
assignment
Strike
price1
RVA
RVA
RVA
RVA
RVA
RVA
2004-02-23
2005-02-28
2006-02-23
2008-03-21
2009-03-16
2010-03-11
3.01
2.98
4.27
3.20
1.41
1.94
2003
2004
2005
2007
2008
2009
Strike period
From
To
2005-02-23
2006-02-28
2006-05-24
2008-06-23
2009-06-17
2010-06-12
2009-02-23
2010-02-28
2011-02-23
2013-03-21
2014-03-16
2015-03-11
1) Strike price after considering the effect of the share capital increase made in June
2008.
The number of Employees and directors covered by the RVA 2009
and RVA 2008 programs was as follows:
RVA 2009
RVA 2008
3
201
204
12
304
316
Directors
Employees
The total cost of the RVA programs is as follows:
Total cost
Program
The price of the shares granted corresponds to the weighted average
list price of the BPI shares traded in the last ten stock exchange
sessions prior to the date the shares are granted. The price of the
shares granted also corresponds to the strike price of the options.
Shares
RVA
RVA
RVA
RVA
RVA
RVA
RVA
RVA
RVA
2001
2002
2003
2004
2005
2007
2008
2009
2010
2
2
3
3
4
2
478
507
202
834
006
649
115
29
29
18 849
The RVA 2010 amounts are estimated for the whole year.
222
Options
2
2
2
2
3
5
478
507
272
169
075
938
634
814
738
20 625
Total
4
5
5
6
7
8
956
014
474
003
081
587
749
843
767
39 474
MODEL FOR VALUING THE EQUITY INSTRUMENTS GRANTED TO THE EMPLOYEES AND DIRECTORS OF THE BPI GROUP
Shares
The changes in the number of shares not yet made available to the
Employees and directors of the BPI Group in 2010 and 2009, as
well as the fair value of the respective instruments, are as follows:
The Bank, for purposes of the share-based payment program,
acquires a portfolio of BPI shares and transfers ownership of the
shares to the Employees and directors on the date the RVA
remuneration is granted.
RVA 2005
Number of
shares
RVA 2007
Number of
shares
Fair value
On the On the
date referenattri- ce date
buted
Shares attributed up to 2008
Shares made available
up to 2008
early up to 2008
Shares refused up to 2008
Shares not made available
at 31 December 2008
Shares attributed in 2009
in 2009
early in 2009
Shares refused in 2009
at 31 December 2009
Shares attributed in 2010
in 2010
early in 2010
Shares refused in 2010
at 31 December 2010
RVA 2008
Number of
shares
Fair value
On the On the
buted
904 340
4 015
1 583
796 235
2 651
1 393
671 690
2 982
1 175
200 123
666
350
4 083
10 405
18
46
7
18
9 381
31
16
218 162
969
382
586 731
1 954
1 027
210 940
937
447
191 422
637
406
6 807
415
30
2
14
1
17 060
1 151
57
4
36
2
377 098
1 256
799
RVA 2009
Number of
shares
Fair value
On the On the
buted
128 252
181
272
32 135
45
68
96 117
136
204
186 041
620
258
30 168
43
42
6 745
212
22
1
9
5 659
8
8
184 100
613
255
60 290
85
84
In the case of death, incapacity or retirement of the Employee or
director, the shares not yet made available are made available early,
becoming freely available to the person or to the respective heirs.
Fair value
On the On the
buted
14 937
29
21
3 774
7
5
11 163
22
15
The shares refused include shares granted but not made available, to
which the Employee or director has lost his / her right because he /
she has left the BPI Group.
223
224
Options attributed up to 2008
7
Options made available up to 2008 7
Options cancelled up to 2008
Options exercised up to 2008
5
Options in circulation and exercisable
at 31 December 2008
1
Options in circulation
at 31 December 2008
1
Options attributed in 2009
Options made available in 2009
Options cancelled in 2009
Options exercised in 2009
at 31 December 2009
1
Options in circulation
at 31 December 2009
1
Options attributed in 2010
Options made available in 2010
Options cancelled in 2010
1
at 31 December 2010
14 540 349
2 844 391
1 229
5 729
11
1 229
28 172
2 845 391
1 000
462
551 957
137
348 614
248
5 740
5 877
20 14 917 383
14 568 521
462
551 957
6 116
6 156
6 156
39
1
On the
date
attributed
218
219
2 812
67
2 879
2 208
2 222
2 222
14
On the
reference
date
Fair value
RVA 2007
64 14 917 383
153 15 013 916
153 15 013 916
1
94 903
88
1 630
On the
reference
date
Number of
options
5 741
1 229
27
1 257
1 309
3 128
3 128
11
1 808
On the
date
attributed
Fair value
RVA 2005
20 14 568 521
2 845 391
11
2 908 577
462
11
2 908 577
551 957
463
552 545
50
6 950 436
6 950 436
24 939
4 016 920
63 186
481
552 545
226
225
1
175
On the
reference
date
Number of
options
588
2 188
2 180
14
1 693
On the
date
attributed
Fair value
RVA 2004
338
038
325
468
059
033
44
462
Number of
options
2 219 435
193 826
2 413 261
2 413 261
926 109
3 339 370
3 339 370
Number of
options
830
72
903
903
346
1 249
1 249
On the
date
attributed
555
48
603
1 890
725
2 615
2 615
On the
reference
date
Fair value
RVA 2008
2 079 992
2 079 992
2 079 992
Number of
options
763
763
763
On the
date
attributed
295
295
295
On the
reference
date
Fair value
RVA 2009
The changes in the number of share options in circulation, held by Employees and directors of the BPI Group (options that can be exercised) in 2010 and 2009, as well as their respective fair values are
as follows:
Options
When an Employee or director of the BPI Group leaves the Group he
/ she loses the right to the options attributed and not yet made
available. In the case of options made available but not yet
exercised, the director or Employee has a maximum period of 30
days from the date the labour relationship terminates to exercise the
option, after which the option expires (options cancelled).
In the case of death, incapacity or retirement of directors or
Employees, the options attributed become immediately exercisable,
having to be exercised within a period of 2 years from the date of the
event, otherwise they expire. Cancelled options include options not
exercised within this period.
In 2010 and 2009 the weighted average price of the shares on the
date the options were exercised was as follows:
Program
RVA 2007
RVA 2008
Number of
options
Average price
of the shares
Number of
options
Average price
of the shares
193 826
1.95
248
926 109
1.85
2.13
In determining the number of options to be granted to Employees
and directors, the BPI Group determines the financial value of the
options as of the date they are granted.
The premium of the options over Banco BPI shares was determined
in accordance with an internally developed model, based on the
Black-Scholes model, for the RVA 2003 to RVA 2009 programs.
The parameters used to determine the financial value of the options
under each RVA program, as of the date the options are attributed,
are as follows:
BPI listing
Strike price
Implicit volatility
Interest rate
Expected dividends
Value of the option
RVA
2004
RVA
2005
RVA
2007
RVA
2008
RVA
2009
3.13
3.10
17.70%
2.72%
0.10
0.31
4.47
4.44
17.10%
3.08%
0.12
0.45
3.33
3.33
29.34%
3.73%
0.19
0.41
1.41
1.41
44.27%
3.10%
0.07
0.37
1.94
1.94
32.25%
2.68%
0.08
0.37
The number of outstanding options under each RVA Program, as well
as their respective fair values at 31 December 2010 was as follows:
RVA 2007
RVA 2008
RVA 2009
No. of outstanding options 2 844 391 14 540 349
Strike price
4.27
3.20
Value of option
0.00
0.02
RVA 2005
2 219 435
1.41
0.25
2 079 992
1.94
0.14
The number of outstanding options under each RVA Program, as well
as their respective fair values at 31 December 2009 was as follows:
RVA 2004
No. of outstanding options 1 551 957
Strike price
2.98
Value of option
0.01
RVA 2005
RVA 2007
RVA 2008
2 845 391 14 568 521
4.27
3.20
0.01
0.19
2 413 261
1.41
0.78
The critical factors of the model used to manage the RVA programs
are as follows:
j
volatility of Banco BPI shares, which was determined as follows:
j
j
j
j
j
60% of the historical volatility of Banco BPI shares in the last
3.33 years;
10% of the VIX volatility index;
10% of the VDAX volatility index;
20% of the implicit volatility of the listed options traded in
Spain over Spanish banks which are similar to Banco BPI.
average expected life of the option, which depends, among others,
on the following factors:
j
j
j
responsibility level of the beneficiaries: Directors and other
Employees;
ratio between the market price and the strike price;
volatility of the share price.
The model also enables the number of shares of Banco BPI
necessary to ensure adequate coverage of the inherent risk of issuing
options under the RVA program to be determined.
225
ACCOUNTING IMPACT OF THE RVA PROGRAM
Shares
The book value and fair value of the share component of the RVA
program not yet made available to the Employees / Directors at
31 December 2010 and 2009 are as follows:
In order to cover the share-based payments, the Bank acquires a
portfolio of treasury shares at the time the RVA remuneration is
attributed. The shares remain in Banco BPI’s portfolio until they are
made available to the beneficiaries. At that time they are
derecognised by corresponding charge to the accumulated costs
caption OTHER EQUITY INSTRUMENTS.
31 Dec. 10
Shares
Program
Cost of the shares to be made available
to the Group's Employees / directors,
recognized in shareholders' equity
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Cost of the shares to be made available
to the Group's Employees / directors, not
recognized shareholders' equity
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Treasury shares made available early
to the Group's Employees / directors
Treasury shares to be made available
to the Group's Employees / directors
Book value
Total
RVA 2005
RVA 2007
RVA 2008
Total
RVA 2007
RVA 2008
RVA 2009
Total
Number of
shares
31 Dec. 09
Fair value
664
78
15
13
770
28
15
94
16
153
923
255 553
354
79
8
87
613
85
22
720
184 100
60 290
11 163
255 553
255
84
15
354
Book value
Number of
shares
Fair value
473 215
1 003
75
1 256
136
377 098
96 117
799
204
1 392
473 215
1 003
1 090
92
85
1 267
223
44
96
363
1 630
18
57
Options
The BPI Group has created a portfolio of BPI shares to cover its
share-based payment program responsibilities resulting from the
issuance of options to purchase BPI shares in accordance with a
delta strategy (determined in accordance with BPI’s options
evaluation model developed in-house based on the Black-Scholes
model). The strategy corresponds to the creation of a portfolio with
delta shares for each option issued, the delta number corresponding
to the relationship between the variation in the price of an option
and variation in the price of the underlying share. The treasury
shares held to hedge the risk of variation in the amount of the
options sold are recorded in the caption TREASURY SHARES HEDGING THE
RVA, where they remain while they are held for that purpose.
226
When the options are exercised, the treasury shares are derecognised
together with transfer of share ownership to the Employees /
Directors. At that time a gain or loss is recognised, in the amount
corresponding to the difference between the strike price and the
average cost of acquiring the treasury share portfolio covering each of
the programs, less the cost of the option premiums accumulated in
the caption OTHER EQUITY INSTRUMENTS.
The book value and fair value of the outstanding option component of the RVA program attributed to the Employees / Directors at 31 December
2010 and 2009 are as follows:
31 Dec. 10
Book value
Options
Program
Cost of outstanding options (premiums)
recognized in shareholders' equity
RVA 2004
RVA 2005
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Cost of outstanding options (premiums)
not recognized in shareholders' equity
RVA 2009
RVA 2010
Total
RVA 2004
RVA 2005
RVA 2007
RVA 2008
RVA 2009
Total
Treasury shares hedging the RVA
options
Fair value
31 Dec. 09
Unrealized
gain / (loss)
Book value
Fair value
Unrealized
gain / (loss)
367
9 584
3 365
1 806
12 812
3 484
4 732
2 122
849
7 763
3 260
4 852
(1 243)
(957)
(5 049)
(224)
21 467
13 994
(7 473)
(2 621)
462
1 230
5 740
903
882
1 230
5 729
830
814
521
9 124
9 217
367
217
217
9 341
1 970
7 371
1 806
12 813
3 045
3 315
20 979
554
5 072
1 861
1 366
8 853
(1 252)
(7 741)
(1 184)
(1 949)
(12 126)
(4 755)
Unrealized gain / (loss)
The gain and loss realised on treasury shares hedging the exercise of
RVA options, as well as the respective taxes, are recorded directly in
shareholders’ equity, not affecting net income.
The total cost of the share-based payment program recognised in
2010 and 2009 was as follows:
31 Dec. 09
31 Dec. 10
Program
The gain and loss recorded in making the shares available and in the
exercise of the options, as well as in the corresponding hedge,
recorded in shareholders’ equity at 31 December 2010 and 2009,
are as follows:
Program
Gain-loss
Shares
In making the shares available
Options In the exercise of options
On the sale of
hedging shares
Transaction costs
RVA 2008
RVA 2009
RVA 2003
RVA 2004
RVA 2008
31 Dec. 31 Dec.
10
09
(50)
(21)
(21)
461
(93)
368
RVA 2007
1
348
(50)
272)
(305)
(33)
(340)
(340)
9
(414)
The cost of the share-based remuneration program is accrued in
personnel costs, by corresponding entry to the OTHER EQUITY
INSTRUMENTS caption, as required by IFRS 2 for share-based payment
programs. The cost of the shares and option premiums when they are
granted, is accrued on a straight-line basis from the beginning of the
program (1 January) to the date they are made available to the
Employees / Directors.
Shares Options
RVA 2005
RVA 2007
RVA 2008
RVA 2009
RVA 2010
Total
214
37
(63)
13
201
(11)
(68)
521
442
Total
203
37
(131)
534
643
Shares Options
Total
26
472
(366)
85
(27)
(137)
(403)
882
(1)
335
(769)
967
217
315
532
4.50. Capital management
Banco BPI’s policy regarding the distribution of results is to distribute
an annual dividend, by proposal of the Board of Directors to the
Shareholders’ General Meeting, usually of not less than 40% of net
profit reflected in the consolidated accounts for the year to which it
relates, unless exceptional circumstances justify the distribution of a
smaller dividend. Given the international financial markets and the
Portuguese economic environment in 2010, the Board of Directors of
Banco BPI decided to submit to the Shareholders’ General Meeting
the appropriation of the full amount of net income for 2010 into
reserves, therefore no dividends being distributed.
Considering the above, in 2010 Banco BPI’s own funds assume the
incorporation into reserves of the full amount of net income for 2010,
therefore not considering distribution of dividends.
227
Banco BPI’s dividend policy also includes the maintenance of a sound
financial position through maintaining:
j
unrealized gain and loss in the portfolio of bonds available for sale
is no longer included in Tier II and Tier I, respectively,
j
a ratio of basic Own Funds to assets weighted by risk – Tier I –
tending to exceed 7%;
j
the limit for inclusion of deferred tax assets in Own Funds was
removed (the limit was 10% of Tier I),
j
the level of preference shares not exceeding 20% of basic Own
Funds, that is a Core Tier I indicator tending to exceed 5.5%.
j
the period for recognition of the deferral of the IAS impact on
pensions that at 30 June 2008 had not been recognized in
retained earnings was extended by 3 years, and
j
under the terms of Notice 11 / 2008 of 23 December, negative
actuarial deviations determined in 2008, less the expected return
on assets of the pension fund for that year, are deferred gradually
up to 30 December 2012.
The potential components of Tier I (including Core Tier I) and Tier II
(including upper Tier II and lower Tier II) Own Funds are in
accordance the regulations established in Bank of Portugal Notice 5 /
2007. The regulatory proportions to be observed indicate that the
amount of Tier II cannot exceed Tier I and the amount of the lower
Tier II level (long-term subordinated debt and redeemable preference
shares) cannot exceed 50% of Tier I.
According to the new regulations of the Bank of Portugal, issued in
2008, the following changes to the calculation of Own Funds were
made:
In accordance with the Bank of Portugal’s rules the BPI Group’s Own
Funds are made up as follows:
x
Base own funds
Subscribed share capital, share premium, reserves (excluding positive fair value reserves) and retained earnings
Contributions to the pension fund not yet recognised as cost
Preference shares
Other minority interests
Intangible assets
Treasury shares
Difference between impairment and provisions
Deferred transition adjustments to IAS / IFRS
Base own funds
Revaluation reserves of fixed assets
Perpetual subordinated debt
Positive fair value reserve
Subordinated debt and participating securities
Difference between impairment and provisions
Deductions
Deduction of participations in insurance companies and other financial institutions
Others deductions
Deductions
Total own funds
Total requirements
Assets weighted by risk1
Own Funds requirements ratio
Tier I2
Core Tier I (excluding preference shares)2,3
Percentage of preference shares to Tier I
1) Total requirements x 12.5.
2) Calculated in accordance with Bank of Portugal Instruction 16 / 2004.
3) In accordance with Bank of Portugal, Core Tier I should not reflect 50% of deductions in financial institutions and insurance companies.
228
31 Dec. 10
31 Dec. 09
2 138 555
(232)
246 698
185 597
(6 378)
(11 805)
(110 955)
72 317
2 513 797
1 952 757
(421)
272 762
143 425
(9 714)
(12 552)
(128 816)
96 108
2 313 549
8 548
69 029
10 643
480 019
94 862
663 101
8 548
56 323
10 148
506 462
110 502
691 983
(269 067)
(5 589)
(274 656)
2 902 242
2 082 865
26 035 817
11.1%
9.1%
8.7%
9.8%
(136 409)
(2 383)
(138 792)
2 866 740
2 084 788
26 059 850
11.0%
8.6%
7.8%
11.8%
4.51. Related parties
The BPI Group’s related parties at 31 December 2010 were as follows:
Name of related entity
Associated and jointly controlled entities of Banco BPI
TC Turismo Capital – SCR, S.A.
Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A.
Unicer – Bebidas de Portugal, SGPS, S.A.
Ulissipair ACE
Pension fund of Employees and Directors of the BPI Group
Fundo de Pensões Banco BPI
Fundo de Pensões Aberto BPI Acções
Fundo de Pensões Aberto BPI Valorização
Fundo de Pensões Aberto BPI Segurança
Fundo de Pensões Aberto BPI Garantia
Shareholders of Banco BPI
Grupo Itaú
Grupo La Caixa
Members of the Board of Directors of Banco BPI
Artur Santos Silva
Fernando Ulrich
António Domingues
Isidro Fainé Casas
Henri Penchas
Juan Maria Nin
Klaus Dührkop
Pedro Barreto
Allianz Europe Ltd. – Represented by Herbert Walter
Tomaz Jervell
In accordance with IAS 24, related parties are those in which the
Bank has significant influence (direct or indirect) in decisions relating
to their financial and operating policies – associated and jointly
controlled companies and pension funds – and entities which have
Head Office
Effective
participation
Direct
participation
Mozambique
Portugal
Portugal
Portugal
Portugal
Portugal
Portugal
Portugal
Portugal
Portugal
30.0%
35.0%
50.0%
49.0%
25.0%
32.8%
14.0%
25.0%
50.0%
21.0%
29.7%
35.0%
50.0%
Portugal
Portugal
Portugal
Portugal
Portugal
100.0%
19.8%
45.2%
33.5%
19.1%
Brazil
Spain
18.9%
30.1%
25.0%
32.8%
25.0%
20.7%
significant influence on the management policy of the Bank –
shareholders and members of Banco BPI’s Board of Directors.
229
The total assets, liabilities, income and off-balance sheet
responsibilities relating to operations with associated and jointly
controlled companies and pension funds of Employees of the BPI
Group at 31 December 2010 are as follows:
Associated and jointly
controlled companies
Assets
Loans
Responsibilities for services rendered
371 275
60 070
93
20 513
431 345
391 695
60 070
93
451 858
364
35
(1 432)
(1 033)
(1 506)
3
(15 112)
(16 615)
(1 142)
38
(16 544)
(17 648)
24 817
24 817
1 024 523
1 049 340
The total assets, liabilities, income and off balance sheet
responsibilities relating to operations with shareholders, members of
the Board of Directors and companies in which members of the
Shareholders of
Banco BPI1
Net income
8
110 126
110 134
20 420
Net income
Liabilities
Deposits and technical provisions
Derivatives
Other liabilities
Total
8
110 126
110 134
Liabilities
Other financial resources
Other liabilities
Assets
Financial applications
Loans
Derivatives
Other amounts receivable
Pension funds of Employees
of the BPI Group
98 572
2 035
28 975
204
5 453
14 697
24
149 960
130 289
9 788
713
140 790
4 334
128
4 001
8 463
94
Responsibilities for services rendered
610 446
Foreign exchange operations and derivatives instruments
400 000
Purchases
Sales
(400 000)
610 540
1 887 842
1 887 842
2 912 365
2 937 182
Board of Directors have significant influence at 31 December 2010
are as follows:
Members of the Board of
Directors of Banco BPI2
Companies in which Members of the
Board of Directors of Banco BPI have
significant influence
98
2
28
154
5
14
572
035
975
461
453
697
24
304 217
11 122
143 135
11 122
143 135
7 270
109 619
25
7 295
196
109 815
(13)
14
436
11
1
447
4 757
153
4 001
8 911
93
41 918
42 105
37 669
171 570
819 685
37 762
149 956
(149 994)
213 450
549 956
(549 994)
861 752
1) With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20%
2) In individual name.
230
Total
247 178
9 788
934
257 900
responsibilities relating to operations with associated and jointly
controlled companies and pension funds of Employees of the BPI
Group at 31 December 2009 are as follows:
Associated and jointly
controlled companies
Assets
Loans
74 346
60 057
711
23 994
600
41
(1 422)
(781)
Responsabilities for services rendered
134 403
97 629
60 057
711
158 397
(4 534)
372
11 791
(11 063)
(3 434)
(3 934)
413
11 791
(12 485)
(4 215)
26 295
26 295
1 003 749
1 030 044
responsibilities relating to operations with shareholders, members of
the Board of Directors and companies in which members of the
Shareholders of
Banco BPI1
Net income
8
64 325
64 333
23 283
Net income
Net operating income
Liabilities
Financial liabilities held for trading and derivatives
Other liabilities
Total
8
64 325
64 333
Liabilities
Other financial resources
Other liabilities
Assets
Financial applications
Loans
Other amounts receivable
Pension funds of Employees
of the BPI Group
2 204 763
2 204 763
3 208 512
3 234 807
Board of Directors have significant influence at 31 December 2009
are as follows:
Members of the Board of
Directors of Banco BPI2
Companies in which Members of the
Board of Directors of Banco BPI have
significant influence
Total
127 679
16 384
51 513
454
5 466
35
201 531
11 210
182 648
11 210
182 648
679
384
513
312
466
35
395 389
13 859
127 806
88
141 753
14 380
25
14 405
9 705
1
9 706
13 859
151 891
114
165 864
(42)
8
297
8
(34)
305
2 809
108
42
2 959
117
41 008
41 219
2 554
92
42
2 688
94
Commitments to third parties
200
Revocable commitments
Responsabilities for services rendered
934 401
Foreign exchange operations and derivatives instruments
Purchases
400 000
Sales
(400 000)
934 695
127
16
51
194
5
200
41 511
209 795
1 185 707
41 628
149 874
(149 925)
250 752
549 874
(549 925)
1 227 075
1) With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20%
2) In individual name.
231
Remuneration attributed to the members of the Board of Directors of
the BPI Group in 2010 and 2009 was as follows:
31 Dec. 10 31 Dec. 09
1
Remuneration in cash
Equity-based remuneration1
Pensions paid
4 887
156
970
6 013
4 704
418
1 003
6 125
1) Includes accrued variable remuneration to be attributed at the end of the year. As a
result of the resolution of the Shareholders’ General Meeting held in April 2010, the
amount of variable remuneration of members of Banco BPI’s Executive Committee of
the Board of Directors became limited to 1.3% of consolidated net income.
Under the share-based payment program (RVA) the members of the
Executive Committee of Banco BPI benefit from a loan scheme to
purchase BPI shares through exercise of the options granted under
the share-based payment program (RVA), available to all the Banks’
Employees. At 31 December 2010 the total loans granted to
members of the Executive Committee amounted to 5 619 th. euro.
A line of credit in force in the Banks was also made available to
Employees for the purchase of BPI shares under the capital increase.
At 31 December 2010 the balance of credit granted to the members
of Executive Committee amounted to 942 th. euro.
Therefore, at 31 December 2010 the total balance of loans made by
the Group’s Banks to members of the Executive Committee
amounted to 6 561 th. euro.
In accordance with the Bank’s policy, the members of the Executive
Committee of Banco BPI are entitled to participate in the Subsidised
Housing Loan Scheme available to all the Banks’ Employees. At 31
December 2010 the outstanding mortgage own housing loans
granted to the members of the Executive Committee, by the Group’s
banks, amounted to 2 095 th. euro.
x
In accordance with the terms of article 477 of the Commercial
Company Code (Código das Sociedades Comerciais), the
shareholdings of the members of the Board of Directors at
31 December 2010 were as follows:
Shares1
Held at Purchases
31
Dec. 09
Artur Santos Silva
Fernando Ulrich3
António Domingues3
António Farinha Morais3
Henri Penchas
Herbert Walter
Isidro Fainé Casas
José Pena do Amaral3
Juan Maria Nin
Klaus Dührkop
Manuel Ferreira da Silva3
Maria Celeste Hagatong3
Pedro Barreto3
Tomaz Jervell
805
360
1 901
155
1 910
278
354
399
658
983
574
000
220
418
Sales
Held at
31
Dec. 10
399
658
983
574
000
220
418
1 115
500
2 634
245
2 645
385
491
42 862
1 449 653
59
2 008
66 075
66 075
92
658 118
658 118
911
804 684
804 684
1 114
430 908
430 908
597
10 132
10 132
14
21 000
42 862
220 000 1 229 653
805
360
1 901
176
1 910
278
354
Value at UnavailaShares
Shares
Shares
31 ble shares pledged in pledged in pledged in
2
Dec. 10
guarantee guarantee guarantee
A
B
C
D
35 660 1 440 951
26 538
290 409
200 535
235 295
Loans
Loans
E
F
4 033
695
283
332
15 570
123 457
18 919
155 556
40 671
370
97
344 000
86 000
600
150
A – Shares attributed under the RVA program, the availability of which at 31 December 2010 is subject to a resolutive condition.
B – Shares which at 31 December 2010 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program.
C – Shares which at 31 December 2010 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions under the capital increase.
D – Shares which at 31 December 2010 were pledged in guarantee for purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais).
E – Amount owed at 31 December 2010, on the loan referred to in B.
F – Amount owed at 31 December 2010, on the loan referred to in C
1) Includes securities held by their spouses.
2) Fair value of the shares.
3) Member of the Executive Committee.
232
In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholder position of the
members of the Board of Directors in terms of options held at 31 December 2010 was as follows:
Options1
Held at
31 Dec. 09
Artur Santos Silva
Fernando Ulrich3
António Domingues3
António Farinha Morais3
Henri Penchas
Herbert Walter
Isidro Fainé Casas
José Pena do Amaral3
Juan Maria Nin
Klaus Dührkop
Manuel Ferreira da Silva3
Maria Celeste Hagatong3
Pedro Barreto3
Tomaz Jervell
951 702
639 262
Purchases
Exercised2
Held at
31 Dec. 10
951 702
913 922
274 660
860 963
1 512 770
860 963
137 331
338 174
1 311 927
242 790
718 332
242 790
274 660
992 992
1) Includes securities held by their spouses
2) Includes shares extinguished through expiry.
3) Member of the Executive Committee.
In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of
the other directors of Banco BPI, members of the Board of Directors of Banco Português de Investmentos, in terms of the shares held at 31
December 2010 was as follows:
Shares
Held Purchases
at 31
Dec. 09
Alexandre Lucena e Vale
Carlos Jaime Amoedo Casqueiro2
José Miguel Morais Alves
João Pedro Oliveira e Costa
99 064
12 893
11 351
Sales
Held
at 31
Dec. 10
99 064
12 893
11 351
Value UnavailaShares
Shares
Shares
at 31 ble shares pledged in pledged in pledged in
Dec. 101
guarantee guarantee guarantee
A
B
C
D
137
18
16
1 876
43 699
15 562
Loans
Loans
E
F
97
37
A – Shares attributed under the RVA program, the availability of which at 31 December 2010 is subject to a resolutive condition.
B – Shares which at 31 December 2010 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program.
C – Shares which at 31 December 2010 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions rights under the capital increase.
D – Shares which at 31 December 2010 were pledged in guarantee for purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais).
E – Amount owed at 31 December 2010, on the loan referred to in B.
F – Amount owed at 31 December 2010, on the loan referred to in C
1) Fair value of the shares.
2) Position at the date of effective resignation – 31 May 2010.
233
the other directors of Banco BPI, members of the Board of Directors of Banco Português de Investimentos, in terms of the options held at
31 December 2010 was as follows:
Options
Held at
31 Dec. 09
Carlos Jaime Amoedo Casqueiro2
447
285
320
237
Purchases
Exercised1
698
041
943
546
75 523
50 349
31 216
Held at
31 Dec. 10
372
234
320
206
175
692
943
330
1) Includes shares extinguished due to expiry.
2) Position at the date of effective resignation – 31 May 2010.
the other directors of Banco BPI, in terms of shares and options held at 31 December 2010 was as follows:
Shares1
Held at
31 Dec. 09
Susana Trigo Cabral
Luis Ricardo Araújo
Graça Graça Moura
Ana Rosas Oliveira
João Avides Moreira
19
52
33
5
13
Purchases
127
000
760
898
500
3 500
Sales
Options1
Held at
31 Dec. 10
3 500
19
52
33
5
13
127
000
760
898
500
Value at
31 Dec. 102
26
72
47
8
19
Held at
31 Dec. 09
143
96
169
83
21
Purchases
136
486
775
836
783
Exercised3
31 468
29 973
72 168
7 555
13 624
Held at
31 Dec. 10
111
126
97
76
35
668
459
607
281
407
1) Includes securities held by their spouses
2) Fair value of shares.
3) Includes shares and options extinguished through expiry.
ARTUR SANTOS SILVA
Did not purchase or sell any securities.
ARMANDO LEITE DE PINHO
CARLOS DA CAMARA PESTANA
The company Arsopi – Holding, SGPS, S.A., of which he is the President
of the Board of Directors owned 2 674 789 Banco BPI shares at
31 December 2010.
At 31 December 2010 IPI – Itaúsa Portugal Investimentos, SGPS, Lda.,
in which he is a member of the Management Board, held 169 855 148
shares.
The company ROE, SGPS, S.A., of which he is President of the Board of
Directors, owned 4 038 447 Banco BPI shares at 31 December 2010.
FERNANDO ULRICH
The company Security, SGPS, S.A., of which he is President of the Board
of Directors, owned 3 104 004 Banco BPI shares at 31 December 2010.
At 31 December 2010, his spouse held 53 386 shares.
CARLOS MOREIRA DA SILVA
RUY OCTÁVIO MATOS DE CARVALHO
On 5 May 2010 he acquired 20 000 Banco BPI shares, at 1.529 euro,
on the stock exchange.
On 23 December 2010 his spouse acquired 10 000 Banco BPI shares, at
1.44 euro, on the stock exchange. At 31 December 2010, his spouse
held 14 100 Banco BPI shares.
ALFREDO REZENDE DE ALMEIDA
ANTÓNIO DOMINGUES
ANTÓNIO FARINHA MORAIS
Under RVA 2009, 274 660 Banco BPI share purchase options were
granted to him at the price of 0.367 euro. At 31 December 2010 he held
913 922 options over Banco BPI shares.
ANTÓNIO LOBO XAVIER
Does not hold and has not made any transactions with Banco BPI shares.
234
EDGAR ALVES FERREIRA
On 2 August 2010 he acquired 1 229 653 Banco BPI shares, at the
price of 1.74 euro, on the stock exchange.
On 31 December 2010, his spouse held 220 000 Banco BPI shares.
The company HVF – SGPS, S.A., of which he is a member of the Board of
Directors, owned 25 774 355 Banco BPI shares at 31 December 2010.
HENRI PENCHAS
HERBERT WALTER
The person named by Allianz Europe, Ltd. to represent it as a member of
the Board of Directors for which the company was elected.
The company Allianz Europe Ltd held 77 896 561 shares, at 31
December 2010. The entity to which the above qualified shares are
allocated is the company Allianz SE, which in turn is the sole shareholder
of Allianz Europe Ltd.
IGNACIO ALVAREZ RENDUELES
ISIDRO FAINÉ CASAS
Is President of Caja de Ahorros y Pensiones de Barcelona “la Caixa”,
which has full control over Criteria CaixaCorp, S.A. which owned
270 900 000 Banco BPI shares at 31 December 2010.
JOSÉ PENA DO AMARAL
JUAN MARIA NIN
KLAUS DÜHRKOP
MANUEL FERREIRA DA SILVA
On 28 February 2010, 214 819 purchase options of Banco BPI shares
under RVA 2004 were extinguished through expiry. 137 331 purchase
options of Banco BPI shares were attributed to him on 11 March 2010
under RVA 2009, at the price of 0.367 euro. Therefore, at 31 December
2010 he held 998 296 purchase options of Banco BPI shares.
At 31 December 2010 his spouse held 212 320 Banco BPI shares. On
28 February 2010, 123 355 purchase options of Banco BPI shares were
extinguished through expiry. Therefore, at 31 December 2010 his spouse
held 313 631 purchase options of Banco BPI shares.
MARCELINO ARMENTER VIDAL
Is Executive Director of Caja de Ahorros y Pensiones de Barcelona
“la Caixa”, which has full control over Criteria CaixaCorp, S.A.
For further information about these companies’ transactions and
participation in Banco BPI’s capital, see the above information concerning
the member Isidro Fainé Casas.
MARIA CELESTE HAGATONG
At 31 December 2010 her husband held 370 288 shares.
MÁRIO LEITE DA SILVA
Is President of the Board of Directors of Santoro Financial Holdings, SGPS,
S.A. and its subsidiary Santoro Finance – Prestação de Serviços, S.A.
Santoro Finance – Prestação de Serviços, S.A. purchased on the stock
exchange:
on 22 November, 398 206 shares at the price of 1.490 euro;
on 2 December, 128 105 shares at the price of 1.425 euro;
at 31 December 2010 held 89 949 996 shares.
PEDRO BARRETO
274 660 purchase options of Banco BPI shares at the price of 0.367
euro were attributed to him on 11 March 2010, under RVA 2009.
Therefore, at 31 December 2010 he held 992 992 purchase options of
Banco BPI shares.
ROBERTO EGYDIO SETÚBAL
Is Vice-President of the Board of Directors, President-Director and
member of the International Consultative Committee of Banco Itaú
Holding Financeira, S.A.
TOMAZ JERVELL
The companies Norsócia, SGPS, S.A. and Auto Maquinaria Tea Aloya, SL,
of which he is a member of the Boards of Directors, held
7 140 081 and 7 162 457 shares, respectively, at 31 December 2010.
ALEXANDRE LUCENA E VALE
were extinguished through expiry. Therefore, at 31 December 2010, he
CARLOS JAIME CASQUEIRO
At the date of his effective resignation – 31 May 2010 – he had 12 893
Banco BPI shares. On 28 February 2010, 50 349 purchase options of
Banco BPI shares were extinguished through expiry. Therefore, at the date
of his effective resignation – 31 May 2010 – he held 234 692 purchase
options of Banco BPI shares.
JOSÉ MIGUEL MORAIS ALVES
JOÃO PEDRO OLIVEIRA COSTA
were extinguished through expiry. Therefore, at 31 December 2010, he
SUSANA TRIGO CABRAL
were extinguished through expiry. Therefore, at 31 December 2010, she
235
LUÍS RICARDO ARAÚJO
29 973 purchase options of Banco BPI shares were attributed to him, at
the price of 0.367 euro, under RVA 2009. Therefore, at 31 December
2010, he held 126 459 purchase options of Banco BPI shares.
GRAÇA GRAÇA MOURA
were extinguished through expiry. Therefore, at 31 December 2010 she
On 31 December 2010, her husband held 25 162 Banco BPI shares. On
28 February 2010, 55 384 purchase options of Banco BPI shares under
RVA 2004 were extinguished through expiry. Therefore, at 31 December
ANA ROSAS OLIVEIRA
On 28 February 2010, 2 519 purchase options of Banco BPI shares were
extinguished through by expiry. Therefore, at 31 December 2010, she
On 31 December 2010 her husband held 1 672 Banco BPI shares. On
28 February 2010, 5 036 purchase options of Banco BPI shares under
RVA 2004 were extinguished through expiry. Therefore, at 31 December
JOÃO AVIDES MOREIRA
On 30 November 2010 he sold on the stock exchange, 3 500 shares at
the price of 1.391 euro.
On 30 November 2010 he purchased 3 480 shares at the price of
1.392 euro and 20 shares at the price of 1.395 euro.
13 624 purchase options of Banco BPI shares were attributed to him, at
the price of 0,367 euro under RVA 2009. Therefore, at 31 December
236
4.52. Subsequent events
At the next Shareholders’ General Meeting the Board of Directors of
Banco BPI will submit a capital increase of 90 millions of euros
through incorporation of reserves.
5. NOTE ADDED FOR TRANSLATION
These consolidated financial statements are a translation of financial
statements originally issued in Portuguese in conformity with the
International Financial Reporting Standards as endorsed by the
European Union, some of which may not conform to or be required by
generally accepted accounting principles in other countries. In the
event of discrepancies, the Portuguese language version prevails.
Statement from the Board of Directors
DECLARATION REFERRED TO IN ARTICLE 245 (1) C)
OF THE SECURITIES CODE
Article 245 (1) (c) of the Securities Code prescribes that each one of the persons responsible for the company issues a
declaration, the content of which is defined therein.
The Members of Banco BPI’s Board of Directors, identified here by name, individually subscribe to the declaration
transcribed as follows1,2:
“I declare in the terms and for the purposes for article 245 (1) (c) of the Securities Code that, to the best of my
knowledge, the directors’ report, the annual accounts, the statutory audit certification and other documents forming
part of Banco BPI, S.A.’s annual report, all relating to the 2010 financial year, were prepared in conformity with the
applicable accounting standards, giving a true and fair view of the assets and liabilities, the financial situation and the
results of that company and of the companies included in the consolidation perimeter, and that the directors’ report
provides an accurate account of that company’s and of the companies included in the consolidation perimeter
business, performance and financial position, as well as containing a description of the principal risks and
uncertainties which they confront.”
Artur Santos Silva
Fernando Ulrich
António Domingues
Henri Penchas
Herbert Walter
Ignacio-Alvarez Rendueles
Isidro Fainé Casas
Juan Maria Nin
Klaus Dührkop
Pedro Barreto
Tomaz Jervell
(Chairman)
(Deputy-Chairman)
(Deputy-Chairman)
(Deputy-Chairman)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
(Member)
Porto, 16 March 2011
1) Within the scope of the documents for which they are responsible, the External Auditors have signed an equivalent declaration.
2) Translation of a declaration originally issued in Portuguese.
Statement from the Board of Directors
237
Legal certification of accounts and audit report
Deloitte & Associados, SROC S.A.
Inscrição na OROC nº 43
Registo na CMVM nº 231
Edifício Atrium Saldanha
Praça Duque de Saldanha, 1 - 6º
1050-094 Lisboa
Portugal
Tel: +(351) 210 427 500
Fax: +(351) 210 427 950
www.deloitte.pt
LEGAL CERTIFICATION OF ACCOUNTS AND AUDIT REPORT
CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of Euros – th. euro)
Introduction
1. In compliance with the applicable legislation we hereby present our Legal Certification of Accounts and Audit Report on the
consolidated financial information contained in the Directors’ Report and the accompanying consolidated financial statements
of Banco BPI, S.A. and subsidiaries (“the Bank”) for the year ended 31 December 2010, which comprise the Consolidated
Balance Sheet as of 31 December 2010 (that reflects total assets of 45 659 813 th. euro and total shareholders’ equity of
1 963 948 th. euro, including consolidated net income of 184 796 th. euro), the Consolidated Statements of Income,
Comprehensive Income, Changes in Shareholders’ Equity and Cash flows for the year then ended and the corresponding notes.
Responsibilities
2. The Board of Directors of the Bank is responsible for: (i) the preparation of consolidated financial statements that present a
true and fair view of the financial position of the companies included in the consolidation, the consolidated income and
comprehensive income from their operations, the changes in their consolidated shareholders’ equity and their consolidated
cash flows; (ii) the preparation of historical financial information in accordance with International Financial Reporting
Standards as endorsed by the European Union that is complete, true, timely, clear, objective and licit, as required by the
Portuguese Securities Market Code (Código dos Valores Mobiliários); (iii) the adoption of adequate accounting policies and
criteria and maintenance of appropriate systems of internal control; and (iv) the disclosure of any significant facts that have
influenced the operations of the companies included in the consolidation, their financial position or their comprehensive
income.
3. Our responsibility is to examine the financial information contained in the documents of account referred to above, including
verifying that, in all material respects, the information is complete, true, timely, clear, objective and licit, as required by the
Portuguese Securities Market Code, and to issue a professional and independent report based on our examination.
A expressão Deloitte refere-se à Deloitte Touche Tohmatsu, uma Swiss Verein, ou a uma ou mais entidades da sua rede de firmas membro, sendo cada uma delas uma entidade
legal separada e independente. Para aceder à descrição detalhada da estrutura legal da Deloitte Touche Tohmatsu e suas firmas membro consulte www.deloitte.com/about.
Tipo: Sociedade civil sob a forma comercial | Capital Social: 500.000,00 euros | Matrícula CRC de Lisboa e NIPC 501 776 311
Sede: Edifício Atrium Saldanha, Praça Duque de Saldanha, 1 – 6º, 1050-094 Lisboa | Porto: Bom Sucesso Trade Center, Praça do Bom Sucesso, 61 - 13º, 4150-146 Porto
Member of Deloitte Touche Tohmatsu
238
Deloitte & Associados, SROC S.A.
Inscrição na OROC nº 43
Registo na CMVM nº 231
Page 2 of 2
Scope
4. Our examination was performed in accordance with the auditing standards (“Normas Técnicas e Directrizes de Revisão /
Auditoria”) issued by the Portuguese Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require
that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the
consolidated financial statements are free of material misstatement. Our examination included verifying, on a sample basis,
evidence supporting the amounts and disclosures in the financial statements and assessing the estimates, based on
judgements and criteria defined by the Board of Directors, used in their preparation. Our examination also included verifying
the consolidation procedures used, application of the equity method and verifying that the financial statements of the
companies included in the consolidation have been adequately examined, assessing the adequacy of the accounting principles
used, their uniform application and their disclosure, taking into consideration the circumstances, verifying the applicability of
the going concern concept, assessing the adequacy of the overall presentation of the consolidated financial statements, and
assessing if, in all material respects, the financial information is complete, true, timely, clear, objective and licit. Our
examination also included verifying that the consolidated financial information included in the Directors’ Report is consistent
with the consolidated financial statements, as well as the verifications established in items 4 and 5 of article 451 of the
Commercial Companies Code (“Código das Sociedades Comerciais”). We believe that our examination provides a reasonable
basis for expressing our opinion.
Opinion
5. In our opinion, the consolidated financial statements referred to in paragraph 1 above present fairly, in all material respects,
the consolidated financial position of Banco BPI, S.A. and its subsidiaries as of 31 December 2010, the consolidated
income and comprehensive income from their operations, the changes in their consolidated shareholders’ equity and their
consolidated cash flows for the year then ended in conformity with the International Financial Reporting Standards as
endorsed by the European Union and the financial information included therein is, in terms of the definitions included in the
standards referred to in paragraph 4 above, complete, true, timely, clear, objective and licit.
Report on other legal requirements
6. It is also our opinion that the financial information included in the consolidated Directors’ Report is consistent with the
consolidated financial statements for 2010 and that the report on corporate governance includes the items required to the
Bank in accordance with article 245 – A of the Portuguese Securities Market Code.
Deloitte e Associados, SROC S.A.
Represented by António Marques Dias
EXPLANATION ADDED FOR TRANSLATION
(This report is a translation of a report originally issued in Portuguese. Therefore according to Deloitte & Associados, SROC, S.A. internal
procedures, the report should not be signed. In the event of discrepancies, the Portuguese language version prevails.)
Legal certification of accounts and audit report
239
REPORT AND OPINION OF THE SUPERVISORY BOARD
CONSOLIDATED ACCOUNTS
2010
The present report on the work carried out by the Supervisory Board during 2010 was prepared with a view to complying with
the requirements of article 420(g) of the Commercial Companies Code (CCC).
1. REPORT ON THE SUPERVISORY BOARD’S ACTIVITY DURING 2010
During 2010 the Supervisory Board met eleven times, at which all its members were present.
Besides these meetings, the Supervisory Board attended nine meetings of the Audit and Internal Control Committee held in
2010, which enabled it:
j
j
j
j
to analyse all the documentation distributed as support for their respective work;
to be present to hear the explanations given by the persons responsible for each one of the areas reviewed;
to put questions and to ask for clarifications concerning any doubts about the documents analysed;
to monitor directly the evolution of the Bank’s operations, paying special attention to compliance with the company’s
memorandum and articles of association, regulations and legal requirements.
The Supervisory Board was also present at the Board of Directors’ meeting which approved the annual accounts and at Banco
BPI’s General Meeting.
In compliance with the terms of reference legally entrusted to it and which appear in its regulations, it carried out a number of
oversight procedures during 2010, of which the following are highlighted:
1.1. Overseeing compliance with legal and regulatory provisions, the statutes and the standards issued by the supervisory
authorities, as well as with the general policies, standards and practices instituted internally
The Board scrutinised the reports on the audits carried out by the Audit and Inspection Division and the reports on the
procedural reviews conducted by the external auditor, paying special attention to the anomalies detected and the
recommendations presented with a view to overcoming them, as well as to compliance with the deadlines set out in its
regulations.
It also monitored the results of the work done by the external auditor in the areas related to compliance with the Group’s
obligations relating to income tax matters. It also kept abreast of the activity of the Compliance Division.
1.2. Checking that at Banco BPI and other Group companies subject to supervision on a consolidated basis, there has been
adherence to the fundamental objectives laid down in the field of internal control and risk management by the Bank of Portugal
and by the Securities Market Commission (CMVM) in the supervision directives applicable to credit institutions and financial
companies
The Board paid special attention to the guidelines issued by the Bank of Portugal, in particular its Notice 5 / 2008, in respect
of aspects pertaining to internal control and risk control, having evaluated the operational procedures at Banco BPI, Banco
Português de Investimento and the other Group companies, including branches and subsidiaries.
The opinions on the Group’s, Banco BPI’s and all the other group companies’ internal control reports were prepared in June and
submitted to the Bank of Portugal.
1.3. Verifying the appropriateness of and overseeing compliance with the accounting policies, criteria and practices adopted and
the proper state of the supporting documents
Both on a quarterly basis and as regards the consolidated results reported at the end of 2010 by Banco BPI, the Supervisory
Board carried out the analysis of the results and the conclusions of the financial statements’ audit procedures undertaken by
the external auditor, as well as the information provided at the time relating to the accounting policies and practices.
The situation of the Pension Fund was reviewed regularly.
240
1.4. Giving an opinion on the report, accounts and proposals presented by the Board of Directors
The Board considered and issued an opinion on Banco BPI’s consolidated and individual accounts and considered the Report of
the Board of Directors relating to the 2010 financial year, as well as the Company’s Corporate Governance Report.
In terms of article 422(1)(a) of the Commercial Companies Code, the Supervisory Board was present at the Board of Directors’
meeting which approved the 2010 accounts.
1.5. Monitoring the process involving the preparation and dissemination of financial information by the company
To this end, the Board monitored the preparation of the documentation during the course of the year, having met with the
Accounting, Planning and Statistics Division in order to obtain more detailed information concerning the preparation and closing
of the accounts.
Besides the scrutiny of the documents relating to the statutory certification of the consolidated and individual accounts, it met
with the Portuguese statutory auditors to keep abreast of the work performed by them and to clarify any doubts they may have
encountered during their examination.
1.6. Proposing to the General Meeting the appointment of the Portuguese statutory auditors (art. 3(7)(a) of the SBR and art.
420 – (2)(a) of the CCC)
The Supervisory Board, after taking into account the provisions of clause 4 of Banco BPI’s statutes, articles 420(2)(b) and
446(1) of the Commercial Companies Code, as well as the provisions of point III.1.3 of the CMVM’s Recommendations on the
Corporate Governance Code, and after having reviewed the matter at Board level and with the Bank’s Board of Directors, and
taking into account the following aspects:
j
j
j
j
j
j
this decision was published in 2010, from which date it should start to be applied;
the current external auditors’ / Portuguese statutory auditors’ first mandate during the validity period of this recommendation,
terminates with the approval of the accounts relating to the 2010 financial year;
the period of economic and financial crisis that the country is experiencing and its implications for the banking system dictate
that the external auditors have a thorough knowledge of the Bank, as well as of the procedures implemented;
the work which has been carried out has received a positive assessment on the part of both the Supervisory Board and the
Board of Directors;
at all the meetings and in all the contacts throughout the year with the external auditors, there has been objective
independence in the work performed, in both the audit and the consultancy areas, and in the respective findings and
recommendations;
the Board of Directors’ intention, during the next term of office, to prepare the opening of a tender for the selection of the
external auditors / Portuguese statutory auditors for the period commencing in 2013, in which the current auditors may
compete,
decided to propose at the next General Meeting that the firm Deloitte & Associados, SROC S.A. be appointed as the Company’s
Portuguese statutory auditors for the three-year term 2011 / 2013.
1.7. Presenting to the Board of Directors the proposal relating to the external auditors to be engaged by the company, including
not only the proposal concerning who should provide this service, but also the proposal relating to their fees (art. 3(8)(a) of the
SBR and Point II.4.4 of the CMVM’s Recommendations on the CGS
The Supervisory Board presented the proposal referred to in the previous point to the General Meeting, and transmitted to the
Board of Directors its agreement with the external auditors’ proposed remuneration for the 2011 financial year.
1.8. Overseeing the independence of the Portuguese statutory auditors and in this context to consider and decide, after having
heard the Audit and Internal Control Committee, on the provision by the Portuguese statutory auditors of additional services to
the company and its group companies, as well as on the respective conditions
In terms of article 420(2) (d) of the Commercial Companies Code, the Supervisory Board supervised and evaluated the work and
independence of Banco BPI’s Portuguese statutory auditors (Deloitte & Associados, S.R.O.C.).
It approved the proposals for the performance of the audits and the annual plan for reviewing procedures.
It approved the fees relating to the “Statutory Audit” and “Other Assurance Services” for all the Group entities under its direct
supervision and, through specific opinions, the contracting of additional services, controlling the proportion of the fees charged
referring to “Tax consultancy services” and “Other non-statutory audit services” relative to the total fees contracted.
241
During 2010 the following fees payable to Deloitte for services rendered were adjudicated for the Group as a whole:
j
j
j
j
statutory audit
other assurance services
tax advisory services
other non-audit related services
1 257
784
154
592
033
541
850
250
euro
euro
euro
euro
The above figures correspond to the provision of services adjudicated in 2010 and only appear in the Board of Directors Report
to the extent that they are actually rendered and billed.
The tax advisory and other non audit-related services correspond to roughly 27% of Deloitte’s total fees adjudicated in 2010.
It should be noted that a significant portion of this amount corresponds:
j
j
to critical review of procedures to be undertaken in Angola, with the aim of contributing to improving the internal control of
Banco de Fomento de Angola’s information systems and reinforcing the reliability of the Bank’s information systems (roughly
19% of this total);
to documenting and critical analysis of all the processes and procedures of Banco BPI’s Securities Division (about 42% of the
total).
1.9. Approving, after having heard the Audit and Internal Control Committee, the External Auditors’ annual work plan (art.
3(8)(e) of the SBR)
The obligation to approve the External Auditors’ work plan was inserted into the Supervisory Board’s Regulations (SBR) in July
2010.
The external auditors’ work plan for 2010 was reviewed at the Audit and Internal Control Committee’s meeting held on 3 April
2010, and approved by all the Supervisory Board members present.
1.10. Monitoring the inspections of the Bank of Portugal, the CMVM, the Instituto de Seguros de Portugal, the
Directorate-General for Taxes and the Inspectorate-General of Finance carried out at Banco BPI and other group companies
subject to supervision on a consolidated basis
The Board gathered information throughout the year on the relationship with the Bank of Portugal, the supervision authorities,
and the Inspectorate-General of Finance relating to all the Group companies subject to supervision on a consolidated basis,
having paid special attention to the reports on the audits conducted by the Bank of Portugal.
1.11. Appraising the operational procedures, with the object of certifying that there is an effective management of the
respective activities through the proper management of risks and of complete, reliable and timely financial and accounting
information, as well as of an adequate monitoring system
The Supervisory Board gave special attention to the guidelines laid down by the Bank of Portugal, namely its Notice 5 / 2008,
relating to aspects involving risk control and operational control systems, having appraised the operational procedures at Banco
BPI, Banco Português de Investimento and the other Group companies, including branches and subsidiaries.
The analysis was conducted based essentially on the findings of the audit examinations performed by the Audit and Inspection
Divisions, as well as the procedural reviews conducted by the external auditors, and on the activity reports of the Audit,
Operational Risk Management, Compliance and Risk Control functions.
This information was complemented by the clarifications and information provided by the Divisions and Managements
responsible, not only during the meetings of the Audit and Internal Control Committee but also the meetings of the Supervisory
Board at which the presence of the persons in charge of the Bank’s units was solicited. Special mention is made of the
meetings with the Risk Analysis and Control Division, with the Accounting, Planning and Statistics Division, with the Audit and
Inspection Division and with the Information Systems Division.
1.11.1. Operational risk
Besides the information received through the audits and the annual report prepared by the area which controls Operational Risk,
the Supervisory Board received information and all the documentation dealt with at the five meetings of the Operational Risk
Control Committee, having had access to the portal where all the information relating to operational risk and to the meetings of
the Operational Risk Committee are available.
242
1.11.2. Credit risk
The Supervisory Board participated in the systematic analysis of the trend in Customers’ liabilities, as carried out by the Credit
Risk Control and Corporate Loan Recovery Divisions, amongst which:
j
j
j
j
analysis of Customers with risk exposure of more than 75 million euro;
the largest individual impairment losses and those by groups, whose exposure exceeds 25 million euro;
the defaults of more than 100 thousand euro by Customers with exposure of more than 500 thousand euro;
the reports presented by the external auditors on the quantification of the economic provisions appropriate to the risk implicit
in the loan portfolios.
Business dealings between the company and shareholders with qualified holdings, or with entities with whom they have any
relationship as envisaged in terms of article 20 of the Securities Market Code, are always submitted for prior pronouncement by
the Supervisory Board, irrespective of the amount involved.
During 2010 the Supervisory Board was approached to issue an opinion only once in which a credit limit of twenty million euro
was extended to the business of a shareholder with a qualified holding, subject to normal market terms and conditions.
1.11.3. Financial risks
Special attention was devoted to accompanying the evolution of the financial markets’ crisis, with the aim of evaluating the
strategy and initiatives followed in order to monitor the exposure to both higher-risk products and markets.
1.11.4. Reputational risk
Updated information about BPI’s Service Quality Indices (SQI), in which the European Customer satisfaction index was used as
the benchmark, was analysed, as were the service-quality indices relating to the competition and the Bank’s quality index.
The Supervisory Board analysed the report on the work of the Investor Relations Division dealing with the performance of its
functions of disseminating financial information and interacting with investors, analysts and other market players.
It also reviewed and followed up all Irregularity Communications, meaning the facts which seriously violate or compromise:
j
j
j
compliance with the legal, regulatory, ethical and deontological principles to which the Members of the Governing Bodies and
the Employees of the companies forming part of the BPI Group are bound, in the discharge of their professional functions;
the preservation of Customers’, Shareholders’ and BPI’s own assets;
the preservation of BPI’s institutional image and reputation, as well as those situations capable of constituting abuse of
authority or bad management.
During the year, 12 communications were received, of which only two had yet to be finalised at 31 December. Of the 10
irregularity communications dealt with and filed away, only in one case was the interest charged to a Customer annulled, while
as regards the rest of the cases, the issues raised were analysed and the Customers given the necessary clarifications, which
were accepted without impinging upon the quality of the Bank’s image.
Also subjected to analysis were the monitoring reports of the rating agencies.
1.11.5. Compliance risk
The Board monitored the Compliance Division’s activity, namely with respect to the control over money laundering activities and the
relationship with the authorities charged with overseeing this matter.
The Board reviewed the report on this Division’s activity drawn up to June 2010.
1.11.6. Monitoring of audit work
As regards the monitoring of the audit areas, both internal and external, besides a specific meeting with the Audit and
Inspection Division, special mention is made of the Supervisory Board’s participation:
j
j
j
j
in the drafting of the report on and accompanying the quarterly Internal Audit work plans;
in the approval and monitoring of the external auditors’ annual procedural review plans, assessing the extent thereof, bearing
in mind the coverage of the areas exposed to the greatest potential risk;
in the appraisal of the findings of the audits realised, both internal and external, and keeping abreast of the recommendations
considered important, as well as the degree of their compliance and the time frames for their implementation;
in the analysis of the coverage schedules of the audits carried out in the past 3 years;
243
j
j
in the half-yearly review of the events giving rise to losses;
in the review of the activity report drawn up to June 2010.
The Supervisory Board was informed about the establishment at Banco BPI of a permanent inspection team from the Bank of
Portugal.
1.11.7. Report to the Bank of Portugal – Notice no. 5 / 2008
The Supervisory Board issued opinions which it submitted to the Bank of Portugal, in terms of Notice 5 / 2008, on the
effectiveness and coherence of Banco BPI’s and the BPI Group’s internal control and risk management systems. To this end:
j
j
j
it considered the annual internal control reports prepared by the Boards of Directors of all the Group companies subject to
Bank of Portugal supervision;
it analysed the opinions of the respective Portuguese statutory auditors on the internal control system underlying the
preparation and dissemination of financial information;
it reviewed the reports prepared by the Audit and Inspection Division; External Consultants; the Risk Analysis and Control
Division, the Compliance Division and the Organisation Division – Operational Risk.
1.12. Giving an opinion on the report, accounts and proposals presented by the Board of Directors
In terms of article 420(g) of the Commercial Companies Code, the Supervisory Board, besides the meetings for conducting the
detailed analysis of the accounts with:
j
j
the head of the Accounting, Planning and Statistics Division;
the Portuguese statutory auditors,
examined:
j the balance sheet at 31 December 2010, the consolidated income statement, the consolidated cash flow statement and the
consolidated statement of changes in shareholders’ equity, and the respective notes thereto;
j the Directors’ report prepared by the Board of Directors for the 2010 financial year;
j the report on the Audit and Internal Control Committee’s activity;
j the statutory audit certification and the audit report prepared by the Portuguese statutory auditors, with which it concurred.
During the year, the Supervisory Board discussed a number of issues relating to the Bank’s compliance with corporate
governance recommendations.
In analysing the report on the corporate governance structure and practices, it was noted that the matters referred to in article
245-A of the SMC were dealt with and that this corresponds to the practices that it monitored during the course of the year.
2. SUPERVISORY BOARD’S OPINION
In view of the foregoing, the Supervisory Board is of the opinion that the consolidated financial statements and the Directors’
Report, as well as the proposal contained in it, are in conformity with applicable accounting, legal and statutory requirements,
as a result of which it recommends that they be approved at the Shareholders General Meeting.
Abel Pinto dos Reis – Chairman
Jorge Figueiredo Dias – Member
José Neves Adelino – Member
244
BPI Group
Corporate Governance Report
0. Declaration of compliance
0.1. PLACES WHERE THE CORPORATE GOVERNANCE CODES TO WHICH BANCO BPI IS SUBJECT ARE AVAILABLE TO THE PUBLIC
BPI is subject to the binding corporate governance rules and recommendations appearing in the legislation referred to below, which can
be consulted at the places also mentioned below. For purposes of article 1(1) of CMVM regulation 1 / 2010, BPI adopted the Corporate
Governance Code disseminated by the CMVM.
Code / Regulation
Investor
Relations
website 1
BPI2
Head office
CMVM3
website
Official Journal (Diário da República4)
CMVM
CMVM’s Corporate Governance Code
¸
–
¸
Journal no. 21, Series II of 1 February 2010
¸
Republished by Decree-Law no. 357-A / 2007, of 31
October6
Issued in 2010
CMVM 1 / 2010 Regulation
on Corporate Governance
(In force since 2 February 20105))
Securities Code
Journal no. 200, Series II of 15 October 2008
CMVM 5 / 2008 Regulation
on duties of information
¸
¸
¸
Republished by Decree-Law no. 76-A / 2006, of 29
March and amended by Decree-Law no. 8 / 2007, of
17 January, by Decree-Law no. 357-A / 2007, of 31
October and by Decree-Law no. 33 / 2011 of 7 March
Company Law
Commercial Companies Code (CCC)
Other
Law no. 28 / 2009
on the financial sector’s penal regime and
remuneration policy for entities of public interest
Journal no. 117, Series I of 19 June 2009
Notice 1 / 2010 from the Bank of Portugal
Journal no. 27, Series II of 9 February 2010
Circular Letter 2 / 2010 from the Bank of Portugal
Issued on 1 February 2010 and published at
15 March 2010 on the Bank of Portugal’s Official
Bulletin no. 03 / 2010
General Regime of Credit and Financial Institutions
Approved by Decree-Law no. 298 / 92, of 31 December,
last amended by Decree-Law no. 140-A / 2010, of
30 December)
Codes of Conduct
Internal
Banco BPI Code of Conduct
¸
¸
Policies adopted by the BPI Group in the exercise
of financial intermediation activities
¸
Prevention of Money Laundering and the Financing
of Terrorism
¸
External
Associação Portuguesa de Bancos Code of
Conduct
¸
Deontological Code of the Associação Portuguesa
de Fundos de Investimento, Pensões e Patrimónios
¸
Regulations of the Management and Oversight
bodies
Board of Directors
¸
¸
Executive Committee of the Board of Directors
¸
¸
Audit and Internal Control Committee
¸
¸
Corporate Governance Committee
¸
¸
Nominations, Evaluation and Remuneration Committee
¸
¸
Supervisory Board
¸
¸
1) BPI Investor Relations website: www.ir.bpi.pt.
2) Located at Rua Tenente Valadim, 284, 4100-476 Porto.
3) CMVM – Comissão de Mercado de Valores Mobiliários website: www.cmvm.pt.
4) Electronic Official Journal (Diário da República) website: http://dre.pt/.
5) CMVM’s regulation 1 / 2010 on Corporate Governance revokes regulation 1 / 2007.
6) Amended by Decree-Law no. 211-A / 2008, of 3 November, by Law no. 28 / 2009, of 19 June, by Decree-Law no. 185 / 2009, of 12 August, by Decree-Law no. 49 / 2010 of 19 May, by
Decree-Law no. 52 / 2010 of 26 May and by Decree-Law no. 71 / 2010 of 18 June.
246
0.2. CMVM’S CORPORATE GOVERNANCE CODE RECOMENDATIONS ADOPTED AND NOT ADOPTED
The following table lists the recommendations appearing in the Corporate Governance Code issued by the Portuguese Securities Market
Commission (CMVM) in 20101, indicating which ones were adopted by BPI and which were not, even if only partially. When one of the
recommendations in question is not fully adopted by BPI and is composed of two or more sub-recommendations, it shows which one(s)
was (were) not adopted. Mention is also made of the points of the report where reference is made to the themes under review.
Adoption
References in the
governance report2
Point / (page no.)
Recommendation
I.
I.1
GENERAL MEETING
General Meeting Committee
I.1.1
The chairman of the General Meeting Committee must have human and logistical support resources
that are adequate to its requirements, after considering the company’s economic situation.
Adopted
3.2.12. (p.262)
I.1.2
The Remuneration of the Chairman of the General Meeting Committee must be disclosed in the
company’s annual corporate governance report.
Adopted
7.2.1. (p.317)
I.2
Participation at the meeting
I.2.1
The prior period for the deposit or immobilisation of shares in order to participate in the General Meeting
imposed by the statutes cannot be more than 5 working days.
Not applicable3
3.2.4. (p.261)
I.2.2
In case of suspension of the General Meeting, the company cannot demand the immobilisation during
the whole period until the session is resumed, with the ordinary prior period required before the first
session being sufficient.
Not applicable3
3.2.11. (p.262)
I.3
Vote and exercise of voting right
I.3.1
Companies should not impose any statutory restriction on postal voting and, when adopted and admissible,
to voting by electronic means.
Adopted
3.2.6. (p.261);
3.2.7. (p.261)
I.3.2
The statutory advance period for the reception of the voting paper issued by correspondence cannot be
more than three working days.
Adopted
3.2.6. (p.261)
I.3.3
Companies should ensure proportionality between the voting rights and Shareholder participation,
preferentially through the statutory provision that makes a vote correspond to each share.
The companies which do not comply with proportionality are those which, namely:
I.4
Not adopted
0.4. (p.252)
¸ 3.2.4. (p.261)
䊏
Have shares which do not confer the right to vote;
䊏
Prescribe that voting rights above a certain number shall not be counted, when issued by one only Shareholder
or by Shareholders related to it.
Deliberative quorum
Not adopted4
0.4. (p.252)
Companies should not fix a deliberative quorum larger than that provided for in the law.
I.5
Minutes and information about resolutions adopted
Excerpts of the minutes of the general meeting, or documents with similar content, should be made
available to the Shareholders on the company’s website within five days after the holding of the
general meeting, even if it does not constitute privileged information. The information disclosed
should cover the resolutions adopted, the capital represented and the result of voting.
This information must be kept on the company’s website for a period of at least three years.
I.6
 3.2. (p.260)
Adopted
3.2.13. (p.263)
Measures relating to the control of companies
I.6.1.1
Measures that are adopted with a view to impeding the success of takeover bids should respect the
interests of the company and its Shareholders.
Adopted
0.4. (p.253)
I.6.1.2
The company’s statutes which, observing this principle, provide for the limitation of the number of votes
which can be held or exercised by a single Shareholder, individually or in concert with other Shareholders,
should also provide that, at least every five years, the alteration or the maintenance of this statutory provision should
be subject to a resolution of the general meeting – without the requirement of a larger quorum vis-à-vis the legal
limit – and that in the aforesaid resolution, all the votes cast should be counted without that limitation functioning.
Not adopted
0.4. (p.253)
Defensive measures should not be adopted which have the effect of automatically provoking a serious erosion
of the company’s financial situation in case of the transfer of control or change in the composition of the
management body, jeopardising in this manner the free transferability of the shares and the free appraisal by
the Shareholders of the performance of the management body members.
Adopted
8.3. (p.324)
I.6.2
1) Applicable to financial years commencing on or after 1 January 2010.
2) Except when mentioned otherwise.
3) With the entry into force of Decree-Law 49 / 2010, 19 May, which eliminated the blocking of shares as a condition for attending the General Meeting.
4) As regards the deliberative quorum.
BPI Group Corporate Governance Report
247
Adoption
References in the
governance report1
Point / (page no.)
Recommendation
II.
MANAGEMENT AND OVERSIGHT BODIES
I.1
Generic themes
I.1.1
Structure and terms of reference
II.1.1.1
The management body must evaluate in its annual governance report the adopted model,
identifying any constraints to its functioning and proposing the appropriate actions which in
its opinion need to be taken to overcome them.
II.1.1.2
Companies must create internal risk control and management systems, for the safeguarding of its
value and to the benefit of the transparency of its corporate governance, for the effective risk
detection and management. These systems must incorporate, at least, the following components:
䊏
Setting the company’s strategic objectives on the issue of risk assumption;
䊏
Identification of the main risks linked to the specific activity exercised and of the events capable of
originating risks;
¸
Analysis and measurement of the impact and probability of the occurrence of each one of the potential risks;
¸
䊏
Risk management with a view to aligning the risks actually incurred with the company’s strategic option with
respect to risk assumption;
¸
䊏
Control mechanisms for the execution of the risk-management measures adopted and their effectiveness;
¸
䊏
Adoption of internal information and communication mechanisms concerning the various components
of the system and risk warnings;
¸
䊏
Periodic evaluation of the system implemented and adoption of the modifications that prove to be necessary.
¸
The management body should ensure the creation and functioning of internal control and risk management
systems, with the supervisory body being responsible for evaluating the functioning of these systems and
proposing the respective adjustment to the company’s requirements.
II.1.1.4
Companies should in the annual Corporate Governance report identify the principal economic, financial
and legal risks that the company is exposed to in the conduct of its business; describing the operation
and efficacy of the risk management system.
II.1.2
Adopted
5.1; 5.2. (p.302);
p.101 Management Report.
䊏
II.1.1.3
II.1.1.5
Adopted
1. (p.255)
Adopted
3.5.3. (p.276)
3.6.2. (p.280)
5.2. (p.302)
Adopted
¸ 5. (p.302)
¸ Management Report (p.101)
The management and supervisory bodies should have functioning regulations which should
be disclosed on the company’s website.
Adopted
0.1. (p.246)
Disqualifications and Independence
II.1.2.1
The Board of Directors must include a number of non-executive directors which ensures the effective
ability to supervise, oversee and evaluate the activity of the executive members.
II.1.2.2
Amongst the non-executive directors, there must be an adequate number of independent directors,
taking into consideration the company’s size and its Shareholder structure, which under no circumstances
can be less than one quarter of the total number of directors.
Not adopted2
0.4. (p.253)
II.1.2.3
The evaluation of the independence of its non-executive members carried out by the management body should
take into account the legal and regulatory rules in force concerning the independence requirements and the
disqualification regime applicable to the members of the other governing bodies, ensuring systematic and
time-based coherence in the application of the independence criteria to the entire company. A director who,
in another governing body, could not assume that role by virtue of the applicable rules should not be considered
as being independent
Adopted
3.3.2. (p.265)
3.3.3. (p.265)
II.1.3
Eligibility and Nomination
II.1.3.1
Depending on the adopted model, the Chairman of the Supervisory Board, the Audit Committee or the
Committee for the Financial Matters must be independent and have competence commensurate
with the exercise of the respective functions.
II.1.3.2
The process of selecting candidates for non-executive directors should be conceived in such a manner as
to impede the interference of the executive directors.
II.1.4
II.1.4.1
Adopted
3.5.1. (p.276);
3.5.2. (p.276);
Appendix (p.337)
Adopted
3.3.12 (p.268)
3.9.2. (p.291)
Policy regarding the communication of irregularities (whistle blowing)
The company must adopt a policy for the communication of irregularities allegedly occurring inside the
organisation, with the following details:
䊏 indication of the means by which the communication of irregular practices can be done internally, including
the persons with legitimacy to receive the communications;
䊏 indication of the treatment to be given to the communications, including confidential treatment, should
the whistleblower so intend.
2) With regard to the quantitative requirement mentioned in the recommendation.
248
Adopted
3.3.1. a 3.3.3.
(p.264 and 265)
Adopted
9.6. (p.329)
¸
¸
Adoption
References in the
governance report1
Point / (page no.)
Recommendation
II.1.4.2
II.1.5
II.1.5.1
This policy’s general lines (for communicating irregularities) must be disclosed in the corporate governance report.
Adopted
9.6. (p.329)
Remuneration
The Remuneration of the members of the management body must be structured in such a manner as to
permit the alignment of their interests with the long term interest of the company, be based on performance
evaluation and inhibit the excessive assumption of risks. To this effect, the remunerations must be
structured, namely, in the following manner:
Adopted
7.1. (p.306)
(i)
The remuneration of the directors who perform executive functions should incorporate a variable component,
the amount of which depends on the evaluation of performance, undertaken by the company’s relevant
bodies, in accordance with predetermined measurable criteria which takes into consideration the company’s
real growth and the value actually created for the Shareholders, its long-term sustainability and the risks
assumed, as well as compliance with the rules applicable to the company’s business.
Adopted
3.9.2. (p.291)
(ii)
The variable component of remuneration should be globally reasonable relative to the fixed component,
and maximum limits should be set for all the components.
Adopted
7.1.1. (p.306)
(iii)
A significant part of the variable remuneration should be deferred over a period of not less than three years,
and its payment should depend on the company’s positive performance throughout that period.
Adopted
7.1.1. (p.306)
(iv)
The members of the management body should not enter into contracts with the company and / or with third
parties which have the effect of mitigating the risk attaching to the variability of the remuneration which is
fixed for them by the company.
Adopted
7.1. (p.306)
(v)
Up till the end of their term in office, the executive directors should keep the company shares that they have
acquired under the variable remuneration schemes, up to the limit of twice the amount of the total annual
remuneration, with the exception of those which need to be sold in order to pay the taxes resulting from
the benefit of the said shares.
Adopted
7.1. (p.306)
(vi)
When the variable remuneration includes the granting of options, the start of the exercise period should be
deferred for a period of not less than three years.
Adopted
7.1.1. (p.306)
(vii)
Proper legal instruments should be laid down so that the compensation set for any form of removal from office
without just cause of a director is not paid where the dismissal or cessation by agreement is due to the
deficient performance of the director.
Adopted
7.1.4. (p.312)
(viii)
The remuneration of the non-executive members of the management body should not include any
component whose value depends on the company’s performance or value.
Adopted
7.1. (p.306)
The statement on the remuneration of the management and oversight bodies referred to article 2 of
Law no. 28 / 2009 of 19 June, should in addition to the content referred to therein,
contain sufficient information:
Adopted2
II.1.5.2
䊏
䊏
about which groups of companies whose remuneration policy and practices were taken as a comparative
element for the fixing of remuneration;
about the payments relating to the removal from office or cessation by accord of the functions of directors.
Adopted
7.1.1. D2) 8 b) (p.306)
Adopted
7.2.6. (p.320)
II.1.5.3
The statement on remuneration policy referred to in article 2. of Law no. 28 / 2009 should also cover the
remuneration of the managers within the meaning of article 248-B(3) of the Securities Code and whose
remuneration contains an important variable component. The statement should be detailed and the
policy presented should take into account, namely the company’s long-term performance, compliance with
the rules applicable to the company’s activity and containment in risk taking.
Adopted
7.1.6. (p.312)
II.1.5.4
A proposal must be presented to the General Meeting relating to the approval of the scheme for the granting
of shares, and / or the acquisition of share options or based on the variations in the share price,
to members of the management, oversight bodies and other managers within the meaning of article 248.º-B (3)
of the Securities Code (CVM). The proposal must contain all the details needed for a proper evaluation of the
scheme. The proposal must be accompanied of the scheme’s regulations or, where these have not yet been
drawn up, of the general conditions that these must comply with. In the same way, the principal characteristics
of the retirement benefits system to which the members of the management and oversight bodies and other
managers are entitled, within the meaning of art. 248(3)-B of the CVM. must be approved in General Meeting.
Adopted3
7.1.8. (p.314)
II.1.5.6
At least one representative of the Remuneration Committee must be present at the Shareholders’ annual
general meetings.
Adopted
3.10.4. (p.293)
II.2.
II.2.1
Board of Directors
Within the limits laid down by law for each management and oversight structure, and except owing to the
small size of the company, the Board of Directors must (1) delegate the day-to-day running of the company,
(2) while the duties and powers delegated must be identified in the company’s annual corporate
governance report.
Adopted
3.1. (p.257)
(1) ¸ 3.4. (p.272)
(2) ¸ 3.4.3. (p.273)
2) Declaration presented to the AGM of April 2010, with respect to the remuneration policy of the other managers, within the meaning of art. 248(3)-B of the CVM.
3) Declaration presented to the AGM of April 2010, with respect to the principal characteristics of the retirement benefits system
249
Recommendation
II.2.2
The Board of Directors must ensure that the company acts in a manner consentaneous with its objectives,
and must not delegate its responsibilities as regards:
䊏 defining the company’s strategy and general policies;
䊏 defining the group’s business structure;
䊏 decisions which must be considered strategic due to their amount, risk or other special characteristics.
II.2.3
Not applicable as the Chairman of the Board of Directors does not exercise executive functions.
II.2.4
The annual directors’ report must include a description of the work done by the non-executive
directors, referring in particular to any constraints ascertained.
II.2.5
The company should describe its policy on the rotation of the areas of responsibility within the Board
of Directors, namely of the person responsible for the financial area, and to inform about it in the annual
report on Corporate Governance.
II.3.
Adoption
References in the
governance report1
Point / (page no.)
Adopted
¸ 3.3.5. (p.267)
¸ 3.3.5. (p.267)
¸ 3.3.5. (p.267)
Not applicable
Adopted
3.3.17. (p.270); 3.6.5. (p.282);
3.8.4. (p.290); 3.9.4. (p.292)
Adopted
3.4.6. (p.274)
Executive Committee
II.3.1
The directors performing executive functions, when solicited by other members of the governing bodies,
must provide, in good time and in keeping with the request, the information by them demanded.
Adopted
3.4.7. (p.274)
II.3.2
The Chairman of the Executive Committee must send the meeting notices and minutes of this Committee
respectively to the Chairman of the Board of Directors and to the Chairman of the Supervisory Board.
Adopted
3.4.7. (p.274)
II.3.3
Not applicable because it refers to a governance model which differs from that adopted by BPI.
Not applicable
II.4.
Supervisory Board
II.4.1
Not applicable because it refers to a governance model which differs from that adopted by BPI.
Not applicable
II.4.2
The annual reports on the work carried out by the Supervisory Board must be disclosed on the
company’s website, together with the annual report and accounts.
Adopted
3.5.10. (p.279)
II.4.3
The annual reports on the work carried out by the Supervisory Board must include a description of the
supervisory activity undertaken, referring in particular to any constraints detected.
Adopted
3.5.10. (p.279)
II.4.4
The Supervisory Board must represent the company for all purposes in dealings with the External Auditor,
being charged with namely proposing to the provider of these services, the respective remuneration,
ensuring that the proper conditions exist within the company, as well as acting as the company’s spokesman
and being the first recipient of the relevant reports.
Adopted
3.5.3. (p.276);
3.5.5. (p.278)
II.4.5
The Supervisory Board must annually evaluate the External Auditor and propose to the General Meeting
its removal whenever there is just cause for such action.
Adopted
3.5.3. (p.276);
3.5.11. (p.279)
II.4.6
The internal audit unit and those who oversee compliance with the rules applied to the company
(compliance services) should report functionally to the Audit Committee, to the General and Supervisory
Board or, in those companies which adopt the Latin model, to an independent director or to the
Supervisory Board, irrespective of the hierarchical relationship that these services maintain with the
company’s executive committee.
Adopted
3.5.8. (p.279)
II.5
II.5.1
Specialised committees
Except owing to the company’s small size, the Board of Directors must create the committees
that it deems necessary for:
Adopted
3.1. (p.257);
䊏
ensuring a competent and independent evaluation of the executive directors’ performance and for
the assessment of its own overall performance, as well as of the various existing committees;
3.9. (p.290)
䊏
reflecting on the governance system adopted, verifying its efficacy and proposing to the relevant bodies
the measures to be taken with a view to its improvement;
3.8. (p.288)
䊏
timely identifying potential candidates with the high profile necessary for the performance of
directors’ functions.
3.9. (p.290)
II.5.2
II.5.2.1. – The members of the Remuneration Committee or equivalent must be independent in relation to
the members of the management body.
Not adopted
0.4. (p.254)
II.5.2
II.5.2.2. – The members of the remuneration or equivalent committee should include at least one member
with knowledge and experience in matters relating to remuneration policy.
Adopted
3.10.1. (p.293)
250
Adoption
References in the
governance report1
Point / (page no.)
Recommendation
II.5.3
In order to support the Remuneration Committee in the performance of its functions, no natural or
legal person should be contracted who renders or has rendered in the last three years services to
any structure reporting to the Board of Directors, to the company’s Board of Directors itself or who
has a current relationship as the institution’s consultant. This recommendation is equally applicable
to any natural or legal person who has an employment or service contract with them.
Adopted
3.10.1. (p.293)
II.5.4
All the committees must draw up minutes of the meetings held.
Adopted
3.6.3. (p.282);
3.8.3. (p.290);
3.9.3. (p.292)
III.
III.1
INFORMATION AND AUDIT
General information duties
III.1.1
Companies must ensure the existence of a permanent contact with the market, respecting the principles
of equality of Shareholders and preventing asymmetries in the access to information by investors.
To this end, the company must maintain an investor-support office.
III.1.2
The following information available on the company’s website must be disclosed in English:
a) The name, status of a publicly-traded company, the registered office and other details stipulated in
article 171 of the Commercial Companies Code;
b) Statutes;
c) Identity of the members of the governing bodies and of the representative for market relations;
d) Investor Support Office, respective functions and means of access;
e) Annual report and accounts;
f) Half-yearly calendar of company events;
g) Proposals submitted for discussion and voting at General Meetings;
h) Notices convening General Meetings.
III.1.3
Companies should promote the rotation of the auditor at the end of two or three terms of office,
depending on whether these are respectively for four or three years. Their continued tenure beyond
that period should be substantiated in a specific opinion of the supervisory body which expressly
appraises the auditors’ independence and the advantages and costs of their replacement.
III.1.4
The external auditors should, within the scope of their duties, verify the application of remuneration
policies and systems, the effectiveness and functioning of the internal control mechanisms and report
any shortcomings to the company’s supervisory body.
III.1.5
The company should not contract from the external auditors, nor from any entities in which they have
an equity interest or which form part of the same network, services other than audit services. Where there
is a need to contract such services – which must be approved by the supervisory body and detailed in its
annual report on Corporate Governance –– these should not amount to more than 30% of the total value
of the services rendered to the company.
IV.
IV.1
Adopted
10. (p.331)
Adopted
10.2.2. (p.331)
www.ir.bpi.pt
Adopted
Supervisory Board
Report
1.6. (p.241)
Adopted
3.6.5. (p.282)
Adopted
6.3. (p.303)
CONFLICTS OF INTEREST
Relationship with Shareholders
IV.1.1
The company’s business dealings with Shareholders having a qualified holding, or with entities with
which they have a relationship within the terms of article 20 of the Securities Code, should be
realised under normal market conditions.
Adopted
9.2.2. (p.326)
IV.1.2
Significant business dealings with Shareholders having a qualified holding, or with entities with which
they have a relationship within the terms of article 20 of the Securities Code, should be submitted for
the prior opinion of the supervisory body. This body must lay down the necessary procedures and
criteria for defining the relevant level of significance of those business dealings and the other
terms of its involvement.
Adopted
Supervisory Board
Report
1.11.2. (p.243)
0.3. OVERALL EVALUATION, DULY SUBSTANTIATED, OF THE DEGREE OF ADOPTION OF GROUPS OF INTERCONNECTED
RECOMMENDATIONS
Not applicable.
251
0.4. JUSTIFICATION FOR THE NON-ADOPTION OF RECOMMENDATIONS
The following table lists those recommendations of the Corporate Governance Code which BPI did not adopt, presenting the Bank’s
explanations and arguments for that non adoption.
Recom.
Explanation
I.3.3.
Principle of one share / one vote
Recommendation not adopted
In reality, article 12(3) of the statutes prescribes that one vote corresponds to every five hundred company shares.
Banco BPI believes that this rule constitutes a solution which, in a balanced manner, conjugates two types of interest:
䊏
on the one hand, the interest in encouraging Shareholders’ active participation in the company’s affairs and which is founded on the
interest that there should be no material obstacles to Shareholders taking part in the company’s General Meeting and, in this way, in the
decisions that it is legally and statutorily capable of making;
䊏
on the other hand, the interest of the General Meeting functioning satisfactorily, whereby it is advisable that the number of participants is
not such that it jeopardises the proper progress of the items on the agenda and the possibility that those who are present have time to
have an effective say in these meeting proceedings.
It should be noted that the minimum investment in BPI shares which permits participation at an AGM amounted to around 700 euro at
2010 closing prices.
It will be recalled as well that in terms of the law and Banco BPI’s statutes, Shareholders who do not own the minimum number of shares
required to have the right to vote can pool their shares in order to do so and appoint one of their number to represent them at the General
Meeting.
Although the Board of Directors does not identify any significant advantage in the adoption of the principle “one share, one vote” in the light
of the present regime, it considers that maintaining the onus of non adoption of the recommendation in question is not justified, with the
result that it will propose to the General Meeting of 27 April 2011 an amendment to the statutes so that these shall henceforth provide that
each share corresponds to one vote.
As regards the second sub-recommendation of Recommendation I.3.3. see justification regarding Recommendation I.6.1.2.
I.4.
Relating to the constitutive or deliberative quorum
Recommendation not adopted, as regards that part which recommends that companies should not set a deliberative quorum larger than that
provided for by law.
In effect, according to article 30(2) of Banco BPI’s statutes, the alterations to numbers four and five of article 12 of the said statutes
(provisions which set and regulate the limit on the number of votes capable of being issued by a Shareholder and entities related to
him / her), to number one of article thirty one (provision which fixes a special qualified majority for the company’s winding up), as well to
this number two of article 30, require the approval of seventy five per cent of the votes cast, which majority is higher than that envisaged in
article 386(3) of the Commercial Companies Code (two thirds of the votes cast).
It will be recalled in this regard and in the first place, that the aforesaid rule laid down in the Commercial Companies Code is mandatory
only as regards the minimum limit. That is, companies are free to set in their statutes higher qualified majorities.
In second place, Banco BPI is of the opinion that there exists justification for the alteration to the statutory rules in question to be subject to
a more demanding qualified majority than the qualified majority envisaged in the law. This justification stems from the conjugation of the
following two aspects:
䊏
the statutory rules in question (remember, rules governing the limitation on voting and the company’s winding up) refer and represent
options relating to highly important aspects relating to the company’s affairs; in the first case, with a solution which as explained in relation
to the recommendation I.6.2., it seeks to promote a balanced participation of the Shareholders in the company’s affairs; in the second
case, what is at stake is the company’s own subsistence;
䊏
in the case of statutory rules which take the form of very important options for the company’s affairs, their alteration should only take place
when there is an unequivocal and large majority will in this regard; it is deemed for this purpose that it is appropriate to set the
aforementioned seventy five per cent majority of the votes cast.
Finally, it will be recalled that the qualified majority of seventy five per cent in question, even though it is higher than the qualified majority
laid down in the law, is, just as the latter, defined according to the votes cast and not the votes corresponding to the share capital.
252
Recom.
Explanation
I.6.1.
Relating to the limit on the number of votes
(1.6.1.2.) Recommendation not adopted.
In reality, article 12(4) of Banco BPI’s statutes stipulates that the votes cast by a single Shareholder or entities related to him / her in the
terms laid down by this provision which exceed 20% of the total votes corresponding to the share capital, shall not be counted. The change
to this statutory provision requires, as referred to in relation to Recommendation I 4.1., the approval of seventy five per cent of the votes cast
in General Meeting (GM).
The principal limiting the number of votes cast by a sole Shareholder was proposed by the General Board with the object of promoting a
framework conducive to a balanced participation of the principal Shareholders in the company’s affairs, from the standpoint of
Shareholders’ long-term interests. In its initial formulation, which was approved by the Shareholders at the GM held on 21 April 1999 by a
majority of 90.01% of the votes cast, a limit was set of 12.5% of the total votes corresponding to the share capital. At the GM of 20 April
2006, that limit was raised to 17.5%, by way of a resolution approved by a majority of 77.4% of the votes cast and was finally increased to
the current 20% by unanimous voting at the GM of 22 April 2009.
Banco BPI’s statutes do not incorporate the measures defined in the Recommendation in question as regards the maintenance of those
limits being the object of periodic reappraisal in General Meeting, which is explained by:
䊏
on the one hand, it is always possible for Shareholders who wish to alter or suppress the aforesaid statutory rule to propose at any
moment and after observing the requisites for this purpose envisaged in the law, to submit to the General Meeting a proposal advocating
such alteration or suppression;
䊏
on the other hand, and as already partly explained as regards Recommendation I.4., because it is considered to be a rule which
constitutes a very important option in the company’s affairs, its modification should only take place when there is a will that (i) is
unequivocal and backed by a large majority in this regard and (ii) results from a balanced participation of the various Shareholders,
desirous that these are not considered attainable if it is accepted that this modification may be approved by resolution passed by a simple
majority and without the voting limit functioning.
II.1.2.2. Relating to the number of independent non-executive directors
Recommendation not adopted.
At 31 December 2010 and on the date this report was concluded, the situation regarding Banco BPI’s 18 non-executive directors, as
concerns the circumstances envisaged in article 414(5)(a) and (b) of the Commercial Companies Code and whose verification relating to
one director determines his consideration as not independent, was as follows:
䊏
the Directors António Lobo Xavier and Carlos Moreira da Silva were, in the light of this criterion, deemed to be independent;
䊏
as concerns the remaining 16 non-executive Directors and their situation vis-à-vis the two sets of circumstances envisaged in the
abovementioned article 414(5)(a) and (b), it should be noted that:
䊏
䊏
article 414(5)(a) – to be the holder or to act in the name of or for the account of the holders of a qualified majority equal to 2% or more
of the company’s capital
䊏
none of the Directors concerned is the holder of a qualified majority equal to 2% or more of the company’s capital;
䊏
there are 11 Directors who occupy management positions in companies holding a qualified holding of 2% or more of the company’ s
capital or in entities of their group1;
䊏
the circumstance mentioned in the previous indent does not mean nor have as a consequence that the Directors concerned must be
deemed to be persons who act in the name of or for the account of the aforesaid entities owning a qualified holding of 2% or more of
the company’s capital;
䊏
if however one has a broad interpretation of the expression “act in the name or on behalf of entities owning qualified holdings of 2%
or more of the company’s capital” in such a way that such action is deemed to exist by the mere fact that one is a Director / officer
of the said entity, then there are 11 Directors who fall within that situation.
article 414(5)(b) – for having been re-elected for more than two consecutive or interspersed terms of office
䊏
5 Directors are solely covered by the provision of this sub-paragraph b).
䊏
in summary, and considering the broad interpretation of the abovementioned article 414(5)(a), there are 16 non-executive directors who
were not, in the light of the criterion resulting from the CMVM regulation, deemed to be independent;
䊏
as a consequence, and in the terms referred to above, BPI does not objectively meet the quantitative requirement defined in CMVM
recommendation II.1.2.2. according to which “Amongst the non-executive directors, there should be a suitable number of independent
directors, taking into account the size of the company and its Shareholder structure, which under no circumstance can be less than one
quarter of the total number of Directors”.
1) Four of which are also covered by paragraph b).
253
Recom.
Explanation
II.1.2.2. Relating to the number of independent non-executive Directors (cont.)
Recommendation not adopted. (cont.)
BPI’s Board of Directors believes however that the substantive evaluation of the independence of its non-executive members is not limited to
the non verification of the circumstances envisaged in article 414(5)(a) and (b) of the CCC, nor to the verification of these circumstances in
relation to one director, and therefore does not necessarily determine the loss of their impartiality of analysis or decision.
The Board of Directors has never felt that the verification, in relation to certain of its members in the terms referred to above, of the
situations envisaged in article 414(5) of the CCC has affected these Directors’ impartial analyses or decisions.
In this regard the Board stresses that all the Directors are, in terms of the CCC1, bound to the fundamental duties of care and loyalty in the
company’s interest, paying attention to the members’ long-term interests and taking cognisance of the interests of the other key parties for
the company’s sustainability.
In addition, in terms of legal rules and internal regulations – the Board of Directors’ Code of Conduct and Regulations –, the Directors who
find themselves in any situation of conflict of interest, must inform the nature and extent of such interest and, where this is substantial, they
must abstain from participating in the discussion and resolutions relating there to.
Banco BPI’s Board of Directors believes that its composition, insofar as the non-executive Directors are concerned, guarantees the desirable
participation of persons who perform very important functions at some of the prime international financial institutions which are
Shareholders of the Bank, as well as of founder Shareholders and other people with vast experience in the financial sector and with indepth knowledge of the Bank.
In this domain, the Board benefits greatly from the fact that it unites at its core the existence of a professional executive team independent
of any specific interests, with the presence of a non-executive structure clearly in the majority composed, as stated before, of executives of
major international financial institutions, the Portuguese founding Shareholders and directors independent of any specific interests.
In terms of the foregoing, and in line with the recommendations of the European Union2 relating to the independence of the non-executive
members of the Board of Directors, the setting of criteria for the determination of independence is vested fundamentally in the actual Board
of Directors, which issues its opinion that the involvement of all and the contribution which one or other makes to the Bank’s development,
fruit of the importance and complementariness of their knowledge, ability of appraisal and professional experiences, ensures an
independent decision-making process.
II.5.2.
Relating to the independence of the members of the Remuneration Committee
Recommendation not adopted.
Banco BPI believes that it is justified that the members of the Remuneration Committee be independent of the members of the Executive
Committee, an aspect that is guaranteed in the case of Banco BPI’s Remuneration Committee.
It is now no longer considered that there are reasons which justify that there has to exist independence between the members of this
Remuneration Committee and the non-executive members of the Board of Directors. Banco BPI, in the light of the European
recommendations on this issue that the non-executive members of the Board of Directors must have an active role in the evaluation and
definition of the remuneration of the members of the Executive Committee, stemming from which that there is even advantage where the
abovementioned independence does not exist. This role of the non-executive members of the Board of Directors in the definition of the
remuneration of the members of the Executive Committee is assured by the existence within the ambit of this Board, of the Evaluation and
Remuneration Committee.
It should be emphasised that the non-executive members of the Board of Directors earn exclusively fixed remuneration and, to the extent
they exercise functions on specialised commissions of the Board, attendance vouchers relating to the meetings of these commissions at
which they are present. The maximum amount of the fixed remuneration (excluding attendance vouchers) of the members of the Board of
Directors is deliberated at the General Meeting.
1) Article 64 – Fundamental duties.
2) Recommendation of the Commission of the European Communities of 15 February 2005, relating to the role of non-executive directors or of members of the supervisory boards of listed
companies and to the management or audit committees.
254
1. Introduction
Banco BPI’s Board of Directors hereby submits for the
consideration of its Shareholders and the market the BPI Group’s
Report on Corporate Governance for 20101, prepared by the
Corporate Governance Committee, in compliance with its duty of
informing and transparency, in conformity with the law and
regulations in force.
This BPI Group’s Governance report is prepared in accordance
with the structure contemplated in CMVM Regulation no.
1 / 2010 and addresses the recommendations of the Corporate
Governance Code issued by the CMVM also in 20102.
DECLARATION OF THE BOARD OF DIRECTORS
ON ITS ASSESSMENT OF BPI’S GOVERNANCE MODEL
(issued within the ambit of CMVM recommendation II.1.1.1)
1. The Board of Directors of Banco BPI is of the opinion that the governance structure and practices, the functioning of the
management and oversight bodies, as well as BPI’s communication policies and and practices, ensure in a balanced
manner the protection of the interests of the Shareholders and other interested parties – Customers, Employees, Suppliers,
the community in general – and the provision of adequate information so that the market can form an informed opinion on
the Group’s strategy, activity, risk management and conflicts of interest, its financial situation and the results.
2. The BPI Group’s corporate governance report relating to 2010, describes in detail the principal governance guidelines, the
structure, division of the roles and responsibilities and the functioning of the management and oversight bodies, risk
management, the remuneration policy, Shareholder control, the ethical and deontolotigical principles observed, the market
communication policy, amongst other aspects, in terms which justify the above judgment expressed by the Board.
The report refers to the degree of compliance with the new set of recommendations concerning corporate governance
matters and remuneration policy recently approved by the CMVM and by the Bank of Portugal (CMVM Recommendations
published in January 2010 and Bank of Portugal Letter-Circular 2 / 2010 of 1 February 2010), while in those cases where
the said recommendations have not been adopted, the relevant justification is presented. Still in this regard, and as
concerns the issue of the remuneration of the executive members of the Board of Directors, it is worth highlighting that as
a result of the measures approved at the General Meeting of 22 April 2010, Banco BPI’s remuneration policy complies,
overall, with the new recommendations dealing with this subject.
3. The Board of Directors did not identify any relevant constraint on its functioning, or that of the consultative committees
formed within its ambit, nor did it become aware of constraints on the functioning of Banco BPI’s other governing bodies.
4. Banco BPI’s Board of Directors is permanently concerned with refining the governance structure, practices and report. In
this fashion, it also responds to the initiatives of the Securities Market Commission (Comissão do Mercado de Valores
Mobiliários – CMVM), and follows closely the reflections and documents published by the various national and European
bodies, namely, the European Union (including the recent Directive 2010 / 76 of 24 November) and the Organisation for
Economic Cooperation and Development (OECD). The Board of Directors considers that in this regard it should underline
the four statutory amendments that it is going to propose to the General Meeting to be held on 27 April of this year and
which have special relevance from a corporate governance standpoint:
䊏
the adoption of the one share / one vote rule;
䊏
the proposed existence of a new Board of Directors Committee to be responsible for specifically monitoring the BPI
Group’s financial risks;
䊏
raising the maximum number of members who may form part of the Board of Directors’ Committees from five to six and
the possibility that the aforesaid Committees be composed of non-executive members of the Board and, where justified,
other persons who are not members of this Board;
䊏
substitution of the statutory rule that provided for the cessation of functions of members of the Executive Committee
once the accounts were approved for the financial year relating to the year in which such members turned 62 years of
age, which could entail the cessation of functions halfway during a term of office, for a rule which provides for the
impossibility of appointing to the Executive Committee any person who has reached 62 years of age in the year prior to
that in which the appointment takes place.
Porto, 16th March 2011
1) The present document, structured as an annex, forms an integral part of the 2010 Directors’ Report.
2) The Corporate Governance recommendations issued by the CMVM in 2010 apply to the financial years commencing on or after 1 January 2010.
255
2. Guiding principles of the BPI Group’s corporate governance
policy
Creation of value
Transparency
in management
Independence
Internal information – in such a manner that the non-executive members of the Board of Directors, the
members of the Supervisory Board can carry out their oversight and supervisory functions with facility and
efficacy.
External information – in such a manner that the Shareholders, Authorities, Auditors, Investors and the
community can broadly assess the quality and conformity of the information provided and the results attained.
Of the executive management vis-à-vis any individual Shareholder or specific interests.
Equity
In the relationship with Shareholders, Customers and Employees.
Loyalty
Through the implementation of mechanisms which impede the occurrence of conflict of interest situations.
Efficiency
Rigour
Decision sharing
256
As the primary goal of BPI’s Directors and Employees.
In the functioning and interaction of the company’s governing and supervisory bodies.
In the management of the various risks underlying the
Group’s operations.
Through the adoption of committee-type models in decision-making processes and in the fostering of
team spirit.
Performance
and merit
As fundamental criteria governing the remuneration policy as concerns Employees and Directors.
Harmony
In the alignment between the interests of the Shareholders and those of Directors and Employees.
3. BPI Group’s governing bodies – structure, division of duties
and functioning
3.1. STRUCTURE
BPI’s governance model is structured according to one of the
three models contemplated in the Commercial Companies Code
– commonly referred to as the Latin model:
䊏
the company’s management is entrusted to the Board of
Directors which includes an Executive Committee – formed by
professionals independent from any Shareholders’ or specific
interests – to which the Board has delegated wide management
powers for conducting the day-to-day activity.
Within the ambit of the Board of Directors, three specialist
commissions function, composed exclusively of non-executive
members: (i) the Audit and Internal Control Committee, whose
remit is to work especially close to the Executive Committee;
(ii) the Corporate Governance Committee, which is charged
with supporting and advising the Board of Directors for the
improvement of the governance and oversight model and
making pronouncements on matters relating to social
responsibility, ethics, professional conduct, and environmental
protection and (iii) the Nominations, Evaluation and
Remuneration Committee, whose role is to give opinions on the
filling of vacancies occurring on the governing bodies, on the
choice of Directors to be appointed to the Executive Committee
and on the evaluation and annual variable remuneration of this
body’s members.
䊏
the oversight functions are attributed to the Supervisory Board
– whose key terms of reference include, overseeing
management, supervising compliance with the Law and the
company’s Statutes, verifying the accounts, supervising the
independence of the Portuguese Statutory Auditor and the
external auditor, as well as evaluating the last-mentioned’s
work – and to the Portuguese Statutory Auditor (ROC), whose
prime function is to examine and then certify the accounts.
䊏
the General Meeting is composed of the Shareholders with
voting rights – that is, all the owners of at least five hundred
Banco BPI shares. It deliberates on the issues which are
specifically attributed to it by the law or by the Statutes –
including the election of the governing bodies, the approval of
the directors’ reports, the annual accounts, the distribution of
profits, and capital increases –,as well as if so solicited by the
Board of Directors, on matters dealing with the company’s
management.
The Remuneration Committee, comprising three Shareholders,
is elected by the General Meeting. The Committee fixes the
remuneration of the officers serving on Banco BPI’s governing
bodies, observing the limits defined by the General Meeting as
regards the fixed compensation of the members of the Board of
Directors and the variable compensation of the Executive
Committee.
The Company Secretary is appointed by the Board of Directors
and performs the functions contemplated in the law and others
attributed by the Bank.
The Board of Directors decided at its meeting of 16 March 2011
to propose to the AGM a statutory amendment which envisages
the creation of the Financial Risks Committee, composed of 3 to
6 members, whose duties, without prejudice to the functions of
the Supervisory Board relating to these matters, involve
monitoring the policy relating to the management of all financial
risks, including credit risks, inherent in the Bank’s activity, as
well as monitoring the management of the Bank’s pension fund.
The full version of the Regulations of the following-mentioned bodies can be consulted at the website www.ir.bpi.pt or at the registered
office of BPI, situated at Rua Tenente Valadim, 284, 4100-476 Oporto: Board of Directors, Executive Committee, Audit and Internal Control
Committee, Corporate Governance Committee, Nominations, Evaluation and Remuneration Committee and Supervisory Board.
257
1) IPI-Itaúsa Portugal Investimentos, SGPS, Lda. Nominated Carlos da Camara Pestana to represent it in the exercise of this office.
2) Arsopi-Holding, SGPS, S.A. nominated Armando Leite de Pinho to represent it in the exercise of this office.
3) HVF,SGPS, S.A. nominated Edgar Alves Ferreira to represent it in the exercise of this office.
4) Deloitte & Associados, SROC, S.A. nominated António Dias to represent it in the exercise of this office, starting on 19 July 2010 in replacement of Maria Augusta Francisco
(see point 3.7. of this report for further details).
5) Allianz Europe, Ltd. Nominated, in terms of article 15(2) of Banco BPI, S.A.’s Statutes, Herbert Walter to exercise the terms in his own name.
258
ELEGIBILITY FOR THE MANAGEMENT AND SUPERVISORY BODIES – REQUISITES EMBODIED IN PORTUGUESE LAW
Requirements of integrity, professional experience and
availability
According to the General Regime of Credit and Financial
Institutions (Regime Geral das Instituições de Crédito e
Sociedades Financeiras – RGICSF) for a specific person to be
eligible to occupy a management or oversight position at a
credit institution or financial company, it is imperative that
such person meets a number of requisites and not be in any of
the disqualification situations envisaged therein. The
evaluation process is the responsibility of the Bank of Portugal,
which for this purpose exchanges information with the
Insurance Institute of Portugal (Instituto de Seguros de
Portugal), the Securities Market Commission (Comissão do
Mercado de Valores Mobiliários – CMVM) as well as with
foreign supervision authorities, taking into consideration three
aspects: the integrity of the persons concerned, their professional
experience and their availability to exercise the office.
Integrity of the members of the management and supervisory
bodies1
The RGICSF lays down that only “persons whose integrity and
availability provide guarantees of sound and prudent
management, taking into account in particular the security of
the funds entrusted to the institution” can form part the
management and supervisory bodies of a credit institution or
financial company. In appraising integrity, account will be
taken of “the manner in which the person concerned generally
manages business enterprises or exercises the profession,
especially in aspects where he displays an inability to decide in
a pondered and scrupulous manner, or a tendency to not
comply promptly with their obligations, or to behave in a way
that is incompatible with the preservation of the market’s
confidence”. Amongst other pertinent circumstances, an
indicator of the lack of integrity is the fact that the person has
been judged “responsible for the bankruptcy or insolvency of a
company controlled by him, or in respect of which he was an
administrator, director or manager”, or has been found guilty of
crimes such as favouring creditors, forgery, theft, extortion,
breach of trust, corruption, issuing cheques without funds,
prejudicial management, false declarations, money laundering,
misuse of information, etc.
Professional experience2
The RGICSF considers that there is a presumption of
“adequate experience when the person concerned has
previously performed functions involving responsibility in the
financial field in a competent manner”.
Accumulation of positions3
The Bank of Portugal can oppose situations in which the
members of the Board of Directors of a bank perform
management functions at other companies “where it is of the
opinion that the accumulation is capable of prejudicing the
exercise of the functions which he is already carrying out,
namely, because there exist grave conflicts of interest or, in the
case of persons who are responsible for the institution’s day-today management, there are significant impediments as
concerns their availability for the office”.
Supervisory Board
The Commercial Companies Code stipulates that in the case of
companies whose shares are listed on a regulated market, the
supervisory board must include at least one member who has a
university degree that is commensurate with the exercise of his
/ her functions and is well versed in auditing and accountancy.
In such companies, the majority of the supervisory board’s
members must be independent.
According to article 414(5) of the CCC,persons are deemed to
be independent if they are not associated to any specific
interest group in the Company, nor find themselves in a
situation capable of affecting their impartiality of analysis or
decision making, in particular, by virtue of:
a) being the holder of or acting on behalf of or for the account
of holders of a qualified holding of 2% or more of the
Company’s share capital;
b) having been re-elected for more than two terms of office,
consecutive or interspersed.
The CCC also sets out a number of disqualifications. In terms
of article 414-A, the following cannot be elected or appointed
as members of the Supervisory Board:
a) the beneficiaries of specific advantages of the company
itself;
b) these who are directors of the company;
c) the members of the company’s management bodies who are
in a relationship of control or group with the company
overseen;
d) the member of a body corporate who controls the company
overseen;
e) those who, in a direct or indirect manner, provide services or
establish a significant commercial relationship with the
company overseen or company in respect of which it has a
controlling or group relationship;
f) those who carry out functions at a rival company and who
act in representation or for its account or who in any other
manner are linked to the interests of the rival company;
g) the spouses, parents and other direct-line relatives and
those up to the 3rd degree inclusive, in collateral line, of
persons disqualified by force of the provisions of
sub-paragraphs a), b), c), d) and f), as well as the spouses
of the persons covered by the provisions of sub-paragraph e);
h) those who exercise management or oversight functions at
five companies, except firms of lawyers, firms of statutory
auditors and statutory auditors, with the regime of article 76
of Decree-Law no 487 / 99 of 16 November applying to the
latter;
i) the statutory auditors in respect of whom the other
disqualifications envisaged in the respective legislation
apply;
j) interdicted persons, those with no legal capacity, the
insolvent, the bankrupt and those sentenced with a penalty
which entails the prohibition, even if only temporarily, of the
exercise of public functions.
1) Extracts from Article 30 of Chapter III of the RGICSF.
259
3.2. SHAREHOLDERS’ GENERAL MEETING
The Shareholders’ General Meeting (SGM) is the governing body
composed of the Shareholders entitled to vote – that is, all
Shareholders owning at least 500 Banco BPI shares.
Shareholders holding less than the aforesaid minimum number
of 500 shares, may pool their shares with other Shareholders in
order to reach that number.
The members of the General Meeting Committee were elected at
the General Meeting of 23 April 2008 for the term ended on
31 December 2010, while remaining in office until the new
election which will place at the GM for the approval of the 2010
accounts.
3.2.1. Composition
to propose to the AGM a statutory amendment which enshrines
the rule “one share / one vote”.
COMPOSITION OF THE GENERAL MEETING
Chairman João Vieira de Castro
Deputy-Chairman Manuel Cavaleiro Brandão
Banco BPI’s statutes stipulate that the votes cast by a single
Shareholder, in his own name or as the representative of another
or others, which exceed 20% of the company’s total votes,
representing the share capital, shall not be counted.
Secretaries Alexandra Magalhães
Luis Manuel Alves de Sousa Amorim
3.2.2. Terms of reference
GENERAL MEETING’S PRINCIPAL TERMS OF REFERENCE
䊏
Election of members of the Board of Directors, the
and of the maximum percentage of consolidated profit
Supervisory Board, the Remuneration Committee and
which, not exceeding 5%, the variable remuneration of
Chairman, Deputy-Chairman and Secretaries of the
the members of the Executive Committee may represent
General Meeting Committee, as well as the election of
each year.
the Portuguese Statutory Auditor.
䊏
䊏
discussion and voting on the consolidated and individual
䊏
accounts, as well as on the Portuguese Statutory
Auditor’s opinion.
䊏
Deliberation on the capital increases and the issue of
bonds convertible into shares or that confer the right to
䊏
Definition of a maximum limit for the annual fixed
subscribe for shares.
As part of this policy, BPI has implemented a number of
measures aimed at combating Shareholder absences at General
Meetings:
the ample disclosure of the holding of General Meetings (by
post, electronic mail and through the Internet), the issues to
be deliberated and the different forms of exercising the vote;
the possibility of voting by correspondence, either by post or
electronically, and the placing at Shareholders’ disposal of
ballot papers;
1) Also available on the Internet at the website www.ir.bpi.pt.
2) To Shareholders with at least ten voting rights.
260
stock.
䊏
Deliberation on the appropriation of the annual results.
3.2.3. Encouraging participation and the exercise of voting rights
Banco BPI actively promotes the exercise of voting rights,
whether directly – in person or by correspondence (postal or
electronic) – or by representation.
䊏
Deliberation on the acquisition and sale of treasury
䊏
remuneration of the members of the Board of Directors
䊏
Deliberation on a long-term dividend policy proposed by
the Board of Directors.
䊏
Evaluation of the Board of Directors’ and the Portuguese
Statutory Auditor’s performance.
Review of the strategic orientation and policies
adopted.
Consideration of the Board of Directors’ annual report,
䊏
䊏
Deliberation on changes to the statutes.
the clear and detailed description in the text of the meeting
notice, in the letter and the General Meeting preparatory
documents1 which are sent to Shareholders2, of the procedures
to be adopted for exercising the vote by correspondence or by
way of representation (regime embodied in the statutes).
The proposals to be submitted for the consideration and
deliberation in General Meeting, as well as the other information
elements needed for the preparation of the meetings are placed at
the Shareholders’ disposal on the date of disclosure of the
respective notice of meeting, at Banco BPI’s registered office (Rua
Tenente Valadim, 284, Porto) and on the website www.ir.bpi.pt.
The dispatch of any one of the abovementioned elements
including the ballot papers for the exercise of correspondence
votes may also be requested from the e-mail disclosed publicly.
3.2.4. Attribution of voting right
A Shareholder can vote provided he owns at least 500 Banco
BPI shares on the fifth trading day prior to the date set for the
General Meeting.
As referred to previously, a proposed statutory amendment is
expected to be submitted to the General Meeting which
envisages enshrining the rule “one share / one vote”.
3.2.5. Procedures relating to proxy representation
At its own initiative BPI pursues a policy of sending to
Shareholders1 the full content of proposed matters to be
included in the order of business, as well as proxy forms,
accompanied by a self-addressed postage-paid envelope.
The proxies are communicated by means of a signed written
document addressed to the Chairman of the General Meeting
Committee, at the latest by 18h00 of the fifth business day
before the date of the General Meeting.
3.2.6. Procedures relating to postal voting
BPI sends annexed to the notice convening the General Meeting,
ballot papers addressed to the Chairman of the General Meeting
Committee, by means of which the Shareholder can express in a
clear form his vote. Each ballot paper, available in Portuguese
and English, must be signed and this signature duly certified (by
a notary, lawyer or legal clerk). Ballot papers must be received at
Banco BPI’s head office by 6 p.m. on the third working day prior
to the date set for the General Meeting.
Correspondence votes count for the formation of the General
Meeting’s constitutive quorum and are taken into account just
like the other votes for the passing of resolutions. The votes cast
by correspondence are deemed to be negative votes in relation to
proposed resolutions after the date on which the said votes were
cast.
The postal votes are opened by the Chairman of the General
Meeting Committee, who is responsible for checking their
authenticity, conformity with the rules and the non-existence of
duplicate votes taking into account the presence of the
respective Shareholders at the General Meeting.
The Bank is charged with ensuring the confidentiality of the
votes received by correspondence until the day of the General
Meeting. On that date, this responsibility is transferred to the
Chairman of the General Meeting Committee up to the moment
of voting.
The postal vote cast by a Shareholder who is present or
represented at the General Meeting shall be ignored.
3.2.7. Procedures relating to voting by electronic means
BPI offers its Shareholders the possibility of casting votes by
means of electronic mail. The procedures required for voting by
electronic mail are in part similar to those required for postal
voting: BPI sends beforehand to its Shareholders, as an annex to
the General Meeting preparatory documents, a draft – available
in Portuguese and English – that allows them to opt for the
system of electronic voting. This draft can also be obtained from
the website www.ir.bpi.pt or upon request to the Investor
Relations Division. The draft must be signed and the signature
must be authenticated by a notary, lawyer or legal clerk.
In the draft, which must be addressed to the Bank, the
Shareholder is asked, amongst other details, to provide a
password and indicate the email address. BPI sends the
Shareholder an email indicating his counter password which,
jointly with the initial password, will give him access to an
electronic ballot paper on a page at the site www.ir.bpi.pt. The
Shareholder can exercise his voting right until 6 p.m. of the
third business day before that set for the Meeting.
3.2.8. Representative of the external auditor
The external auditor, through the partner responsible for the
audit of Banco BPI’s consolidated financial statements, is
present at the Annual General Meetings, and is available to
clarify any query related to the opinions issued on Banco BPI’s
individual or consolidated accounts.
3.2.9. Representative of the Remuneration Committee
The presence of at least one member of the Remuneration
Committee at the General Meetings is always assured.
The Chairman of the General Meeting Committee informs those
present of the number and results of the votes received by
correspondence.
The manner in which the scrutiny of votes cast by
correspondence at the General Meeting is conducted is set out
in the notice of meeting and is also described in a separate
section of the Investor Relations website devoted to this event.
1) Shareholders owning more than a specified number of shares (5 000, at the last GM’s held).
261
3.2.10. Functioning rules
In terms of the law1, Banco BPI’s Annual General Meeting must
be held before the end of May.
Notice of meeting
The Committee Chairman must convene the General Meeting
extraordinarily whenever this is so requested by the Board of
Directors, the Supervisory Board or by Shareholders owning
shares corresponding to the minimum number imposed by
prevailing law and who solicit this by way of a letter whose
signatures are legally attested or certified by the company, which
letter indicates in precise terms the matters to be included in
the order of business and where the need for the General
Meeting to take place is justified.
by two thirds of the votes cast, with the exception of resolutions
to amend the Statutes regarding the limitation of voting rights
issued by a single Shareholder (article 12(5)(4) and article
30(2)), and to wind up the Company, both of which require the
approval of 75% of the votes cast.
Right to information
During the course of General Meetings, any Shareholder can
request that information be supplied so that he / she can form a
substantiated opinion about the matters being deliberated.
The Shareholders’ principal rights are embodied in the
Commercial Companies Code (CCC) and in the Securities Code (SC).
Right:
to propose to the AGM a statutory amendment eliminating the
above-mentioned legal attestation and certification requirement.
Inclusion in the order of business and presentation of the
proposed resolutions
The Shareholder or Shareholders who own shares corresponding
to at least 2% of the share capital can present proposed
resolutions relating to the points on the order of business
included in the notice of meeting or added to it, as well as
request the inclusion of matters in the order of business. The
request for inclusion of proposals or matters in the order of
business must be addressed in writing to the Chairman of the
General Meeting Committee, and in the last-mentioned case,
must be accompanied by a proposed resolution for each matter
whose inclusion is requested.
The matters included in the order of business, as well as the
related proposed resolutions, are disclosed to the Shareholders
by the same means as those used for the disclosure of the notice
of meeting as soon as possible and, in any event, up until
midnight of the 5th business before that of the Meeting.
Constituent Quorum and required majority
The General Meeting can deliberate at its first convocation
irrespective of the number of Shareholders present or
represented, except if it deliberates on altering the Bank’s
statutes, merger, demerger, transformation, dissolution of the
Company or other matters for which the law requires a qualified
majority without specifying it. In these cases, it is necessary that
Shareholders who own at least shares corresponding to a third of
the share capital must be present or represented.
At the second convocation, the Meeting can deliberate
irrespective of the number of Shareholders present or
represented and the capital represented by them.
The relating to issues for which the law requires a constituent
quorum of at least a third of the share capital must be approved
䊏
to information (CCC, Title IV, Chapter II, Section III – arts.
288 to 292.º);
䊏
to profits (CCC, Title IV, Chapter II, Section IV – art. 294);
䊏
to participate in the company’s deliberations (CCC, Title I,
Chapter III, Section II – art. 21);
䊏
to request the convening of a meeting and to include matters
in the order of business (SC, Title I, Chapter IV,
Section III – art. 23-A);
䊏
to present proposed resolutions (SC, Title I, Chapter IV,
Section III – art. 23-B).
3.2.11. Procedure in the case of suspension of the GM
In case of the suspension of the General Meeting, and whenever
the interval between the initial session and the new session
exceeds 40 days, only Shareholders can attend and vote at the
new session who, in relation to the date of the last meeting,
meet the requirements laid down for their participation.
to propose to the AGM a statutory amendment to reduce the
above-mentioned period to 20 days.
3.2.12. Human and logistical resources placed at the disposal of
the Chairman of the GM Committee
The Chairman of the General Meeting Committee has the proper
human and logistical back-up resources for the programming,
preparation and conduct of the General Meeting to the extent
that it is supported in the whole process by a multi-disciplinary
team made up of the heads and support staff of the Legal,
Investor Relations, Securities, Information Systems, Public
Relations, Procurement, Outsourcing and Fixed Assets Divisions,
and even by the Company Secretary and the Representative for
Relations with the Market and the CMVM.
Besides the human back-up, BPI has a computer support
application for the organisation and realisation of General
Meetings which allows it to execute in a rapid, efficient and
reliable manner the various tasks which take place at a General
1) In terms of article 376(1) of the Commercial Companies Code, the Shareholders’ General Meeting must meet within three months from the date of the financial year end, or within five
months in the case of companies which have to present consolidated accounts or which apply the equity accounting method.
262
Meeting, such as the accreditation of the participating
Shareholders, the ballot results, of the quorum present, etc.
䊏
䊏
The preparation of the annual Ordinary General Meeting (GM)
begins about 2 months in advance with the holding of a general
programming meeting of the event attended by the
abovementioned representatives. The procedures to be adopted,
the timings for their execution and the responsibilities of each
person involved are defined at this meeting.
The principal functions performed by the divisions involved
during the course of the process can be succinctly described in
the following manner:
䊏
䊏
䊏
Legal Division: coordination of the preparation of the
documents (notice, motions, etc.) and support for the
functioning of the GM in the juridical / legal aspects and the
drafting of the proposed minute to be presented to the
Committee Chairman.
Investor Relations Division: coordination of the communication
with the Shareholders and the market, including the
management of the support channels via Internet and
telephone.
Securities Division: coordination and operational management
of the procedures, including those encouraging Shareholder
participation at the GM and the staging of the event (control of
access, voting).
䊏
Information Systems Division: management of the IT systems
involved.
Public Relations Division: support for the event.
Procurement, Outsourcing and Fixed Assets: mailing.
3.2.13. Information on GM results
In compliance with article 23-C of the Securities Code and
CMVM’s recommendation I 5.1, Banco BPI discloses imediately
after the General Meeting, information containing the company’s
identification, the location, day and time of the Meeting, the
name of the Chairman of the Shareholders General Meeting and
of the Meeting’s secretaries, the notice of meeting’s agenda, the
percentage of share capital attending, reference to the
documents and reports there submitted, the content of the
deliberations and results of votes taken, through the publication
of an announcement on CMVM’s information system
(www.cmvm.pt) and on BPI’s Investor Relations web site
(www.ir.bpi.pt).
We believe that the disclosure of this information meets the
objective advocated by CMVM Recommendation I.5.
Finally, it should be noted that the order of business at the GM
meetings appear in the meeting notices publicised on the Bank’s
website. The motions presented in General Meeting have
consistently been approved by all or almost all of the
Shareholders present or represented thereat as can be seen from
the following table.
Results of the motions presented at the Shareholders’ Meetings held in the last five years
20 Apr. 06
19 Jan. 07
(10:00)
19 Jan. 07
(11:30)
19 Apr. 07
23 Apr. 08
22 Apr. 09
22 Apr. 10
% share capital present or represented
67.5%
77.57%
79.31%
64.83%
62.15%
78.62%
79.06%
Report and accounts
100%
–
–
100%
100%
100%
100%
Appropriation of results
100%
–
–
100%
100%
99.98%
100%
General appraisal of management and supervision1
100%
–
–
100%
100%
99.98%
100%
Authorisation for a capital increase from
760 000 000 euro to 900 000 000 euro
–
–
–
–
100%
–
–
Acquisition and disposal of treasury stock
–
–
–
99.30%
99.60%
98.98%
99.50%
Three-yearly election of governing bodies
–
–
–
–
99.60%2
–
–
Election of the members of the Remunerations Committee
and definition of limits for the fixed and variable
remunerations of the members of the Board of Directors
–
–
–
–
99.60%
–
–
Election of the Deputy-Chairman of the GM
–
99.99%
–
–
–
–
–
Amendments to the statutes
77.4%
to 96.7%
–
–
–
100%
100%
–
–
Alteration to the composition of the Board of Directors
88.1%
to 97.8%
–
–
–
–
98.97%
and 99.03%
–
Appointment of the members of the Audit Committee
97.40%
–
–
–
–
–
–
Approval of the long term dividend policy
–
–
–
99.90%
–
–
–
Authorisation for the BD to deliberate on the
sale of the Bank’s and BPI Vida’s holdings in
BCP’s share capital
–
–
81.81%
–
–
–
–
Approval of the expansion programme for the branch network
–
–
81.80%
–
–
–
–
Election of the alternate members to the Supervisory Board
–
–
–
–
–
98.98%
–
Approval of the statements on the remuneration policy
relating to the members of the management and supervisory
bodies and managers, presented respectively by the
Remuneration Committee and by the Board of Directors.
–
–
–
–
–
99.42%
– and 99.83%
1) Proposed vote of confidence and praise to the members of the Board of Directors and the Supervisory Board presented by a Shareholder.
2) Proposed by a Shareholder.
263
3.2.14. Meeting held on 22 April 2010
In 2010 only one Shareholders’ General Meeting was held,
which took place on 22 April. 184 Shareholders were present or
represented, owning 711 158 120 shares corresponding to the
voting rights stemming from 79.02% of the share capital.
A further 13 Shareholders voted by correspondence (0.04%),
holders of 357 899 shares, with the result that the capital
entitled to vote totalled 79.06%.
Attendance at General Meeting of 22 April 2010
No.
Shareholders
No. shares
(million)
% share
capital
184
711.2
79.02%
Present or represented
Vote by correspondence
Total
13
0.4
0.04%
197
711.5
79.06%
By virtue of the rules embodied in article 12(4) of BPI’s
Statutes, the Shareholder Criteria CaixaCorp, S.A., holder of
270 900 000 shares which would correspond to 541 800 votes,
saw this number reduced to 360 000 votes.
Results of the vote of the General Meeting of 22 April 2010
Percentage of the
votes cast1
In favour
Banco BPI’s individual and consolidated
Directors’ report and accounts
relating to 2009
100%
Appropriation of net profit for 2009
100%
General review of the management and
supervision (vote of confidence and praise for
the Board of Directors and Supervisory Board)
100%
Approval of the statements on the
remuneration policy relating to the members of
the management and supervisory bodies and
managers, presented respectively by the
Remuneration Committee and by the Board
of Directors.
Acquisition and sale of own shares
Against
99.42%
0.58%
and 99.83% and 0.17%
99.50%
0.50%
3.2.15. Annual General Meeting scheduled for 27 April 2011
The Annual General Meeting relating to the 2010 financial year
is scheduled for 27 April 2010, at 11 a.m. at the Fundação de
Serralves, in the city of Oporto.
1) Abstentions are not counted as votes cast.
264
3.3. BOARD OF DIRECTORS
The Board of Directors is the governing body that has been
vested with the widest powers to manage and represent the
Company, without prejudice to the specific powers which the law
has conferred on the Supervisory Board. It is responsible for
formulating the BPI Group’s major strategic policies.
3.3.1. Composition
Banco BPI’s Board of Directors is presently composed of 25
members, seven of whom make up the Executive Committee.
The Board of Directors is composed of a minimum number of
eleven and a maximum number of twenty five members, elected
by the General Meeting. They shall appoint a Chairman from
amongst their number and if they deem it appropriate, one or
more Deputy-Chairmen. Where a legal person is elected, it shall
nominate a natural person to exercise the office in his own name.
Chairman of the Board of Directors
The Chairman of Banco BPI’s Board of Directors is Artur Santos
Silva. He was simultaneously Chairman of the Board of Directors
and Chairman of the Executive Committee up until the
Shareholders’ General Meeting of 20 April 2004. On that date,
he ceased executive functions in terms of article 29(3) of the
Bank’s Statutes, which stipulate that directors who are members
of the Executive Committee cease functions on this Committee
once the accounts for the year in which they reach the age of 62
are approved.
The Chairman of the Board of Directors is responsible for
coordinating the Board’s activity, chairing the respective
meetings and overseeing the execution of its resolutions. It is
also the Chairman’s duty to act as the institution’s front-line
representative before the public and other authorities.
Structure of Banco BPI’s Board of Directors
At 31 December 2010
Consultative committee’s of the Board of Directors
Executive
Committee
Chairman
Artur Santos Silva
Audit and Internal
Control Committee
Corporate
Governance
Committee
Chairman
Chairman
Deputy-Chairman
Fernando Ulrich
Incompatibility
referential2
Chairman
b)
¸
Member
a) b)
¸
Deputy-Chairman
Members
Independence
referential1
Chairman
Rui Octávio Matos de Carvalho
António Domingues
Nominations,
Evaluation and
Remunerations
Committee
b)
¸
-
-
-
Member
-
-
-
-
-
Independent
¸
Member
Member
Henri Penchas
b)
c)
Member
Independent
c)
Member
a)
¸
Member
Herbert Walter3
Member
Isidro Fainé Casas
Member
-
-
-
Juan Maria Nin
Klaus Dührkop
Member
-
-
Member
Member
-
-
Member
-
-
Tomaz Jervell
3.3.2. Independence of the non-executive members
The table presented in point 3.3.1. relating to the composition
of the Board of Directors, depicts the individual situation of each
one of Banco BPI’s 18 non-executive Directors as regards the
independence requisite envisaged in the Commercial Companies
Code for the Supervisory Board.
3.3.3. Board of Directors’ assessment of its members’
independence
In accordance with the European Union’s principles and
recommendations4 relating to the independence of the
Member
a)
c)
a)
c)
a)
¸
a) b)
c)
-
-
a)
c)
a) b)
¸
-
-
-
Member
a)
c)
-
Pedro Barreto
¸
-
-
b)
-
Member
-
Deputy-Chairman
Non-executive members
-
-
-
a)
c)
-
-
a) b)
c)
b)
c)
non-executive members of the Board of Directors, “A director
must be considered independent if he has no commercial, family
or other relations – with the company, with the Shareholder who
holds control, or with the management bodies of any of them –
which may originate a conflict of interest capable of jeopardising
his / her ability to evaluate”5. Likewise, in the light of the
aforesaid European Union recommendations, enshrined in the
fundamental principle, the fixing of the criteria for determining
independence is the responsibility fundamentally of the actual
Board of Directors.
1) According to the independence requirements applicable to the members of the Supervisory Board envisaged in article 414(5)of the CCC and who, by virtue of a CMVM
recommendation, serve as reference for the non-executive members of the Board of Directors:
a) The director concerned is not the owner of a qualified holding of 2% or more of the company’s capital; the director concerned occupies management position(s) at (an) entity(ies)
owning a qualified holding of 2% or more of Banco BPI’s capital or in (an) entity (ies) of that group, circumstance which, in the opinion of the Board of Directors, does not mean, nor
does it have as a consequence, that the aforesaid director must be considered to be a person who acts in the name or on behalf of the abovementioned entity(ies); if however a
broad interpretation is given to the expression “acting in the name or on behalf of entities owning a qualified holding of 2% or more of the company’s capital”, in such a manner as to
deem that such action exists by the mere fact of being a director of the aforementioned entity(ies), then the director indicated falls under that situation.
b) Was re-elected for two more terms, continuous or interspersed.
2) According to the disqualification rules applicable to the members of the Supervisory Board envisaged in art. 414-A of the CCC and which by virtue of a CMVM recommendation serve as
reference for the non-executive members of the Board of Directors:
c) Exercises management or oversight functions at five or more companies.
¸ The director concerned is not covered by any of the situations mentioned in article 414-A(1) of the CCC which constitute the reference in question.
3) Indicated by Allianz Europe, Ltd. to occupy the position in his own name.
4) Recommendation of the Commission of the European Communities of 15 February 2005, relating to the role of non-executive directors or of members of the supervisory boards of listed
companies and to the management or audit committees.
5) Point 13.1 of the CCE’s Recommendation of 15 February.
265
Banco BPI’s Board of Directors believes that its composition as
relates to the non-executive Directors guarantees the desirable
participation of persons who perform, or have recently performed,
functions of the utmost importance at some of the most prominent
international financial institutions which are Shareholders of the
Bank, as well as of the founding Shareholders and other persons
possessing vast experience in the financial sector and profound
knowledge of the Bank.
Indeed it is worth highlighting that at the end of 2010:
Allianz is the world’s 3rd largest insurer in terms of stock market
capitalisation and the 4th largest by turnover.
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Herbert Walter was, until 2009, executive Director of Allianz AG
and Executive Chairman of Dresdner Bank AG;
Klaus Durhkop was, until 2009, Executive Chairman of the
Mondial Assistance Group, of the Allianz Group.
Banco Itaú Unibanco is latin America’s largest bank and the world’s
9th largest in terms of stock market capitalisation.
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Carlos da Camara Pestana was, until 2009, Chairman of Banco
Itaú;
Roberto Egydio Setúbal is Director-Chairman and DeputyChairman of Itaú Unibanco Holding;
Henry Penchas is a Director and member of the strategy,
nominations and corporate governance committees of Itaú
Unibanco Holding.
Caja de Ahorros y Pensiones de Barcelona (“La Caixa”) is Spain’s
3rd biggest financial institution, with the largest retail banking
network in Spain.
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Isidro Fainé Casas is the Chairman of “La Caixa” and of Criteria
CaixaCorp;
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Juan Maria Nin is the CEO of “La Caixa”;
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Marcelino Armenter Vidal is head of Risk Control at “La Caixa”’s;
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Ignacio Alvarez-Rendueles is the Executive Vice-President for
Internacional Banking at “La Caixa”.
The Chairman of the Board of Directors, Artur Santos Silva, was
the founder of BPI, at which he occupied the office of Executive
Chairman between 1981 and 2004;
The Vice-Chairman of the Board of Directors Ruy de Carvalho has
extensive knowledge of the insurance business, having been
Chairman of the Instituto Nacional de Seguros, Chairman of the
Associação Portuguesa de Seguradores, Chairman of the
Insurance Committee of the Chambre de Commerce International
and Vice-Chairman of the Comité Européen des Assurances;
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Alfredo Rezende de Almeida, Armando Leite de Pinho, Tomaz
Jervell and Edgar Alves Ferreira have vast experience in executive
administration at some of the major Portuguese companies and
are all associated with the founding of BPI;
Mário Leite da Silva is the Chairman of the Board of Directors at
Santoro.
In terms of the aforegoing and in line with the principles and
recommendations of the European Union relating to the
independence of the Board of Directors’ non-executive directors,
the Board of Directors issues its opinion that the effective
involvement of all of its constituents, and the contribution they
make towards the Bank’s development, fruit of the importance and
complementarity of their knowledge, analytical ability and
professional experience, guarantee an independent decision-making
process, while acknowledging that in spite of a certain director not
complying with any of the criteria adopted at national level for
assessing the independence of the Directors, he / she may be
deemed to be independent, due to the specific circumstances of
the person or the company, while the opposite is similarly
applicable.
3.3.4. Incompatibility referential
The annex to CMVM Regulation no. 1 / 2010 of the structure of
the corporate governance report establishes a duty of information
which consists of the identification of the non-executive
members of the Board of Directors who, although not directly
covered by the disqualification rules of Article 414 (1) – A of the
Commercial Companies Code applicable to the members of the
Supervisory Board, do not find themselves in any of the
situations contemplated therein (with the exception of paragraph
b).
At 31 December 2010 and on the date of the conclusion of this
report, eight directors, the Chairman Artur Santos Silva, the
Vice-chairmen Carlos Camara Pestana and Ruy de Carvalho, and
the members Alfredo Rezende de Almeida, António Lobo Xavier,
Edgar Alves Ferreira, Ignacio Alvarez-Rendueles and Klaus
Dührkop were not covered by any of the situations envisaged in
the abovementioned disqualification rules. Ten directors are
covered by one of the envisaged situations by virtue of exercising
management or oversight functions at five or more companies.
The Board of Directors’ powers are subordinated to the
resolutions of the Shareholders and to the intervention of the
Supervisory Board, in the cases contemplated in the Law and in
the Statutes.
3.3.5. Board of Directors’ terms of reference
PRINCIPAL TERMS OF REFERENCE OF THE BOARD OF DIRECTORS
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To appoint the Executive Committee from amongst their
members.
To define the BPI Group’s general policies: for this
purpose, the BPI Group shall mean the group of credit
institutions and financial companies controlled directly or
indirectly by Banco BPI, S.A., including the entities with
management contract to be assumed by BPI.
To approve the strategic plan and operating plans and
budgets, both annual and pluri-annual, and the
alterations thereto, and to periodically monitor their
execution.
To prepare the documents forming the annual report and
accounts and the proposed appropriation of net income,
to be presented at the General Meeting.
To take the initiative to propose any amendments to the
statutes and capital increases, as well as bond issues
which do not fall within its powers, presenting the
corresponding proposals to the General Meeting.
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to represent the company in and out of court, as plaintiff
and defendant, to institute and contest any legal or
arbitration proceedings, to confess, withdraw or reach a
compromise in any legal actions or to abide by
arbitrators’ decision;
to acquire, dispose of or encumber any assets or rights;
3.3.6. Board of Directors’ meetings
The Board of Directors meets at least every quarter and always
when convened by its Chairman or by two Directors.
The meetings are held each year on the dates set, at the very
latest, at the last meeting of the previous year. Such dates shall
be notified immediately in writing to the members who did not
attend the meeting at which they were set.
The meetings shall be convened in writing, with a minimum
notice period of 10 days, while the notice of the meeting must
contain the order of business.
Each of the Directors must notify the Company Secretary up to
five days before the appointed date if he / she will be present.
to approve shareholdings in banks and insurance
companies, as well as their disposal;
to approve loan operations to companies or groups of
companies where the exposure exceeds 300 M.€;
to appoint the Directors of the banks controlled by BPI;
to appoint authorised signatories to perform certain acts
or categories of acts, defining the extension of the
respective mandates.
The Board of Directors is also responsible for the following:
To approve the code of conduct of the companies
controlled fully by the BPI Group.
Furthermore, the Board of Directors is responsible for
practising all the other acts which are necessary or
appropriate for the pursuance of the business activities
falling within its objects clause and, in particular:
to deliberate, in the terms of paragraph two of Article
three of the Articles of Association, on the company’s
participation in the equity capital of other companies and
in partnership association (joint venture) contracts, in
complementary corporate groupings and in European
economic-interest groupings;
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to delegate to an Executive Committee, composed of
three to nine members, the day-to-day management of
the Company, subject to the limits to be fixed in the
resolution approving such delegation;
to co-opt directors to fill any vacancies which may occur;
to appoint a Company Secretary and an alternate
Secretary;
to draw up a set of internal rules of procedure and
approve the functioning regulations for the Executive
Committee to be appointed, as well as for the Audit and
Internal Control Committee, the Nominations, Evaluation
and Remuneration Committee and the Corporate
Governance Committee; these last two committees must
prepare reports (at least annually) for the Board of
Directors’ review and approval.
3.3.7. Order of business for meetings
The Chairman shall draw up the order of business for each
meeting of the Board of Directors which shall be sent to its
members, together with the respective notice of meeting in the
case of meetings not set in the previous year; in the case of
meetings to be held on a date which was set in the previous year,
the order of business shall be sent at least seven days beforehand.
The documents relating to the meetings, except those relating to
financial information, shall be sent up to seven days prior
thereto in their original version in Portuguese, accompanied by
the respective summaries in English.
The order of business for the last meeting of each year must
mandatorily include approval of the Annual Operating Plan and
Budget of the BPI Group and the banks controlled by it, as well
as the calendar of the meetings for the same period if such has
not yet been set.
267
The following must mandatorily form part of the order of
business of the preparatory meeting of the General Meeting:
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a resolution on the report and accounts relating to the previous
financial year;
the drafting of a proposal for the appropriation of net profit to
be tabled at the General Meeting;
the drafting of other proposals to be tabled by the Board to the
Shareholders.
3.3.8. Functioning of the meetings
The meetings of the Board of Directors shall be presided over by
its Chairman and in his absence or impediments by one of the
Deputy-Chairmen, in the order in which the Board was
appointed. In their absence, the Board of Directors must choose
who must perform the respective functions at such meeting.
It is the Chairman of the Board of Directors function to conduct
the meeting and to formulate in the appropriate manner the
proposals to be submitted for the Board’s decision.
Whenever he deems it appropriate, the Chairman or whoever
substitutes him / her can delegate to one of the members the
task of preparing a report on any of the matters submitted for
the Board’s consideration.
The meetings of the Board of Directors shall be held in
Portuguese, without prejudice to the organisation of a
simultaneous translation.
3.3.9. Participation at meetings
The Directors and senior Employees of the Banks or other
companies of the BPI Group and / or their consultants may be
summoned to attend meetings of the Board of Directors
whenever this is beneficial to the good progress of proceedings.
The meetings of the Board of Directors shall also be attended by
the Company Secretary or his alternate, whose function it is to
assist the Chairman in formulating the resolutions, organising
the matters to be dealt with at the meetings, in particular,
ensuring that the pertinent documents are sent to all the
members of the Board of Directors, and to draw up the
respective minutes.
For the performance of their functions and whenever they
consider it appropriate, the members of the Supervisory Board,
jointly or separately, may attend the meetings of the Board of
Directors. This attendance is mandatory in the meeting in which
the annual accounts are addressed.
268
3.3.10. Resolutions
The Board of Directors shall be deemed to be validly constituted
and in a position to deliberate provided that the majority of its
members are present or represented, but none of them can
represent at each meeting more than one member. The proxy
shall take the form of a letter addressed to the Chairman and
cannot be used more than once.
The resolutions of the Board of Directors shall be passed by an
absolute majority of the votes cast by the members present or
represented, with the Chairman having the casting vote in the
event of a tie.
In exceptional circumstances or for reasons of acknowledged
urgency, the Chairman of the Board of Directors may resort to
resolutions being passed through the circulation of documents
amongst all the Board members, provided that all these give
their prior agreement to this form of resolution.
The circulation of documents shall be done by mail, fax or
electronic mail, while the response of each member must be
given via one of these channels in a reasonable period set by the
Chairman in each case, in accordance with the urgency and
complexity of the matter for consideration.
3.3.11. Minutes
With respect to each meeting of the Board of Directors, the
Company Secretary or the respective Alternate, shall draw up a
draft minute which shall contain the proposals presented, the
resolutions passed in relation thereto and the votes cast by any
member during the meeting. The draft minutes shall be written
in Portuguese, with an English translation.
The minutes shall be written up in conformity with applicable
legal requirements and recorded in a proper minute book.
Whenever it becomes necessary to ensure the immediate
production of all its effects, the resolutions of the Board shall be
reduced immediately to writing.
3.3.12. Information provided to the non-executive members
With the object of keeping the non-executive directors
permanently acquainted with the Group’s affairs, they are sent
monthly information concerning the Group’s consolidated
economic and financial situation, as well as the performance of
the principal business units, including the situation regarding
Banco BPI’s pension fund. This information gives an account of
the most important changes that took place and compares,
whenever possible, monthly and accumulated trends with
budgeted and previous-year figures.
On the other hand, the Chairman of the Executive Committee
sends to the Board of Directors’ Chairman the notices of
meetings and makes available the minutes of the respective
meetings. The non-executive Directors are regularly informed of
the main decisions taken by the Executive Committee.
3.3.13. Rules relating to election and dismissal
Members of the Board of Directors are elected in their personal
capacity for terms of three years at the Shareholders General
Meeting, while re-election is always possible.
As referred to previously in this chapter, the members of the
Board of Directors are subject to the scrutiny of and registration
with the Bank of Portugal. If the central bank is of the opinion
that the candidate member does not meet the integrity,
professional experience and availability requirements that ensure
“a sound and prudent management taking into consideration in
particular the security of the funds entrusted”, the Bank of
Portugal may turn down his / her registration.
In terms of article 401 of the CCC, should subsequent to the
director’s appointment, some incapacity or disqualification which
constitutes an impediment to such appointment occur and the
director does not relinquish the position or does not remove the
supervening incompatibility within 30 days, then the Supervisory
Board must declare the termination of his / her functions.
The Board of Directors must then appoint by co-option another
to replace him / her. This co-option must be ratified at the first
Meeting thereafter.
3.3.15. Liability and adherence to the codes of conduct
Portuguese law1 provides that the directors are jointly liable to
the company and to the company’s creditors2, for culpable noncompliance with legal requirements and statutory duties.
The Directors are also subject to the provisions of the BPI
Group’s Code of Conduct.
3.3.16. Duties of care and loyalty at the Commercial Companies
Code
The Commercial Companies Code stipulates in article 64 that
the Directors must observe duties of care, revealing the
appropriate availability, technical competence and knowledge of
the company’s business commensurate with their functions,
employing in this domain the diligence of a scrupulous and
thorough manager.
On the other hand, the company is also subjected to the duty of
loyalty, taking into consideration the long-term interests of both
the Shareholders and the other relevant parties for the
company’s sustainability, such as the Employees, Customers and
Creditors.
The members of the Board of Directors are bound to a strict duty
of confidentiality concerning the matters discussed at the board
meetings.
These members of the Board of Directors are bound in the same
manner to strict duties of information and with the object of
ensuring that in the performance of their functions they cannot
be placed in a situation in which there are or may be conflicts of
interest.
A Director can be dismissed by a resolution passed by a simple
majority at a Shareholders’ General Meeting.
CONFLICTS OF INTEREST
The executive Directors do not have, nor have they ever had, any
involvement in the selection of candidates for non-executive
directors, such appointment being made by way of proposal and
decision of the Shareholders. In the case of co-option of
Directors, the power to identify such candidates is vested in the
Nominations, Evaluation and Remuneration Committee, which is
composed solely of non-executive Directors. Consequently, the
Bank complies with recommendation II.1.3.2. relating to the
selection process for non-executive Directors and the manner to
ensure no interference from the executive directors.
3.3.14. Induction of new Directors
When new directors are admitted, they are given a folder with
the Bank’s Statutes and the Board of Directors’, the Supervisory
Board’s and the Board of Directors consultative committees’
regulations, as well as a summary of the legal and regulatory
framework holding the rights and duties that lie upon them
within the scope of their new functions.
(Article 10 of the Board of Directors’ Regulations)
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Members of the Board of Directors must disclose any interest,
direct or indirect, which they, any member of their families or
entities with which they have professional ties, may have in a
company in respect of which the possibility is being
considered of acquiring a participating interest, or in respect
of which the BPI Group’s Banks or companies are considering
granting a loan or provide any service.
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In the circumstances referred in the preceding paragraph,
they must declare the nature and extent of any such interest
and, in the case where this is substantial, they must refrain
from taking part in the discussion and / or voting on any
proposal that the said operation refers to.
Information on the academic and professional experience of the
members of Banco BPI’s Board of Directors, as well as a list of
positions held by them on BPI Group or other companies is
provided in an appendix to this report (pages 337 to 343).
1) Companies Code – Chapter VII: “Civil responsibility for the constitution, management and supervision of the company – art. 72 and 78”.
2) When the company’s net assets are inadequate to meet the aforementioned debts.
269
3.3.17. Exercise of the Board of Directors’ functions in 2010
and up until 16 March 2011
The Board of Directors met 6 times in 2010, having recorded an
average attendance rate of 85% (excluding attendances by
representation mandate).
During the 2010 financial year and at the two meetings that
took place between 1st January and 16th March 2011, Banco
BPI’s Board of Directors deliberated on and approved amongst
others the following issues:
Main deliberations / matters addressed at the Board of Directors’ meetings
Dates (2010, except if
indicated otherwise)
Deliberations / Matters addressed
Approval of plans and budget
14 December
Consideration / analysis of estimated results for 2010
14 December
Consideration / analysis and approval of the Plan and Budget for 2011
21 July
Strategic plan 2010-2014
Annual report and accounts and proposed appropriation of net profit
29 January
Consideration / analysis and approval of the 2009 consolidated accounts, as well as deliberation on their public release.
29 January
Consideration / analysis and approval of the proposal to be presented to the AGM of 22 April 2010, that a dividend of
0.078 euro per share in relation to 2009.
9 March
Approval of the draft annual Report to be presented at the AGM of 22 April 2010.
9 March
Consideration / analysis of the consolidated accounts at 31 January 2010.
23 April
Consideration / analysis of the consolidated accounts at 31 March 2010 as well as deliberation on their release.
21 July
Consideration / analysis of the consolidated accounts at 30 June 2010 as well as deliberation on their release.
29 October
Consideration / analysis of the consolidated accounts at 30 September 2010 as well as deliberation on their release.
2011: 26 January
Consideration / analysis and approval of the 2010 consolidated accounts, as well as deliberation on their release.
2011: 16 March
Approval of the draft Annual Report to be presented at the AGM of 27 April 2011
2011: 16 March
Consideration / analysis of the consolidated accounts at 28 February 2011
Initiatives for presentation of proposals to the Shareholders’ General Meeting
9 March
Approval of the proposed notice of meeting and the proposals to be presented to the AGM to be held on 22 April 2010.
2011: 16 March
Approval of the proposed notice of meeting and the proposals to be presented to the AGM to be held on 27 April 2011.
Analysis of the trend in the principal shareholdings and strategic partnerships
21 July
BPI Vida’s capital increase.
21 July
Shareholder restructuring of an affiliated company.
Monitoring the trend in the BPI Group pension funds’ pension obligations and assets
29 January, 9 March, 23 April, Consideration / analysis of retirement and survivor pension obligations and the respective cover by the pension fund,
as well as of its achieved rate of return.
21 July, 29 October,
14 December
2011: 26 January, 16 March
Monitoring the Bank’s exposure to larger risks and financing operations
29 January, 23 April, 21 July,
Consideration / analysis of credit risk exposures in excess of 300 M.€.
29 October
29 January
Loan exposure limit for a Customer that is also a Shareholder with a qualified interest.
2011: 26 January
270
Main deliberations / matters addressed at the Board of Directors’ meetings (cont.)
Dates (2010, except if
indicated otherwise)
Deliberations / Matters addressed
Bonds issuance
29 January
Approval of the renewal / review of the Euro Medium Term Note Programme (EMTN Programme).
2011: 26 January
Approval of the renewal / review of the Euro Medium Term Note Programme (EMTN Programme).
Internal functioning
29 January, 9 March, 23 April, Information about the activity of the Audit and Internal Control Committee
21 July, 29 October,
Amendment to the Audit and Internal Control Committee’s regulations
21 July
Integration of bank Employees in the Social Security System
29 October
Cost reduction projects
2011: 26 January
Other matters of general interest to the Company
29 January, 9 March, 23 April,
Analysis of the behaviour of the Banco BPI shares
21 July,
29 October, 14 December
29 October
Consideration / analysis on the situation of the Financial and Credit Markets
2011: 26 January
29 January
Internationalisation of the investment banking activity
29 January
BPI’s asset management business activity
9 March
Activity of the home loans business area
23 April
Comparative information: 5 largest Portuguese banks (period 2003 to 2009)
23 April
BPI Group’s market shares in the domestic activity
23 April
Market shares according to the BASEF methodology
21 July
Crisis’ management until December 2011
21 July
Selling process in retail banking
29 October
Basel III
29 October
Stress-tests’ results
14 December
Activity of the project finance and public-private partnerships areas
2011: 16 March
Evolution of net interest income in the Portuguese banking sector
271
3.4. EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS
The Executive Committee has the widest management powers to
conduct the Group’s day-to-day activity, the exercise of which is
the object of permanent monitoring by the Board of Directors.
Those powers are delegated by the Board of Directors and are
specifically set out at any moment in the regulations governing
that committee’s functioning. Hence, the Executive Committee is
barred from performing all the management acts that are not
contemplated in the list of responsibilities forming part of the
respective regulation.
3.4.1. Composition
The Executive Committee of Banco BPI’s Board of Directors
(Executive Committee, CECA) is presently composed of seven
professional executive Directors who are independent from any
shareholders or specific groups.
It is the BPI Group’s policy that the persons making up the
Executive Committee only occupy other positions by indication of
and after approval by the Bank.
COMPOSITION OF THE EXECUTIVE COMMITTEE
Chairman
Fernando Ulrich
Deputy-Chairman António Domingues
Members
Pedro Barreto
Principal areas of responsibility of the members of the Executive Committee of Banco BPI’s Board of Directors
Chairman
Deputy-Chairman
Fernando Ulrich
António Domingues
Planning, Accounting and
Financial; Audit and Inspection;
Credit Risk; Risk Analysis and
Human Resources and Training;
Statistics; Asset Management;
Information Systems; Alternative
Control; Real Estate Financing;
Individuals Marketing; Remote
Private Banking; International
Investments and Structured
Corporate Credit Recovery; Cards
Channels; Communication and
Private Banking; Investment
Products; Security; Banco de
and Acquiring; Insurance;
Brand Management; Public
Centres.
Fomento Angola; BCI
Operations; Procurement,
Relations.
(Mozambique); Business
Outsourcing and Fixed Assets;
Develoment Unit – Africa.
Legal; Compliance; Affiliated
Companies.
Pedro Barreto
Equities; Corporate Finance;
Corporate Banking; Institutional
Individuals and Small Businesses
Private Equity; BPI’s Branch in
and State Business Sector
Banking; Non Residentes;
Spain; Economic and Financial
Banking; Project Finance;
Commercial Partnerships;
Studies; Investor Relations.
Corporate Marketing; Construction
Organisation.
Finance; Office for Angola; Banco
BPI’s Branch in Spain; Cosec.
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3.4.2. Chairman of the Executive Committee
The Chairman of the Board of Directors’ Executive Committee is
Fernando Ulrich. He was appointed unanimously for the first
time to assume the executive leadership of the Bank by the
Board of Directors on 3 December 2003, such appointment
taking effect from the General Meeting held on 20 April 2004.
election for a new three-year period (2011-2013) at the
Shareholders’ Meeting scheduled to take place at 27 April
2011. He was in 2005 and in 2008 once again unanimously
appointed by the Board of Directors to serve as the Chairman of
the Executive Committee.
He was re-elected at the General Meeting of 20 April 2005 and
again at the SGM of 23 April 2008, for a term of three years
ended at 31 December 2010, maintaining in functions, just like
the other governing body members, up until these bodies’
The terms of reference of the Chairmen of the Board of Directors
and of the Executive Committee are clearly demarcated through
the existence of two autonomous regulations which encapsulate
the functions and responsibilities of each one.
PRINCIPAL TERMS OF REFERENCE OF THE EXECUTIVE COMMITTEE
Pursuant to the resolution of the Board of Directors, the
day-to-day management of the Company shall be vested in
the respective Executive Committee of the Board of
Directors, encompassing all management powers necessary
or convenient to conduct banking business under the terms
and to the extent permitted by law, and namely, such
powers to decide and represent the Company in the
following:
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credit granting;
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provision of remunerated personal guarantees;
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provision of real guarantees for securities, deemed
necessary or convenient to pursue all activities comprised
in the Company’s object;
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to carry out foreign exchange transactions;
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to carry out deposit-taking transactions;
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to exercise disciplinary power and impose sanctions;
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to set up or close branches or agencies;
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to issue of cash bonds and financial instruments of a
similar nature;
to subscribe, acquire, dispose of or encumber
shareholdings in any companies, other than
shareholdings in banks and insurance companies;
to acquire, dispose of or encumber any other securities;
to acquire, dispose of and encumber movable and
immovable assets;
to acquire services;
to appoint a person to represent the Bank at general
meetings of associated companies, establishing how
votes shall be cast;
to appoint persons to perform any duty assigned to the
bank, as well as the persons who the Bank may elect to
perform any duty, except for members of the Board of
Directors of the banks controlled by the Company;
to issue instructions binding the companies forming part
of the group fully controlled by the Company;
to represent the Bank in court or elsewhere, actively or
passively, including to institute and prosecute any suits,
confess, admit or waive any proceeding and abide by the
arbitrator’s decision;
to appoint proxies, with or without powers of attorney, to
do specific acts or classes of acts, defining the extent of
their terms of office.
With regard to lending or financing operations and to the
remunerated provision of personal guarantees, these cannot
result in the involvement in relation to a single entity (or if it
forms part of a group, in relation to the group) of more than
300 million euro. Above this amount, any involvement must
be decided at the plenary meeting of the Board of Directors.
to recruit staff, definition of levels, categories,
remuneration conditions and other Employee benefits, as
well as promotion to executive positions;
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3.4.4. Executive Committee meetings
The Executive Committee meets at least once a month for the
purpose of dealing with matters of general interest relating to
Banco BPI and its subsidiaries. It normally meets on a weekly
basis.
analysing global risks (market, liquidity, credit, country,
operational and other risks). Besides the members of Banco
BPI’s Executive Committee, this body includes the heads of
the divisions more closely related with such matters. Since the
beginning of the international financial crisis the Executive
Committee has assumed as a management priority the
monitoring by it of the aforementioned risks.
In 2010, the Executive Committee met 64 times.
3.4.5. Functioning rules
The Executive Committee can only adopt resolutions when the
majority of its members are present, while representation is not
permitted.
The resolutions of the Board of Directors’ Executive Committee
are adopted by an absolute majority of the votes, with the
Chairman having the casting vote.
The Directors who are members of the Executive Committee
relinquish their positions on the Committee once the accounts
relating to the financial year in which they celebrate their
sixty-second birthday are approved.
to propose to the AGM an amendment to the statutory rule which
provides for the cessation of functions of the Executive
Committee members once the accounts for the financial year in
which they turn 62 years old have been approved, replacing it
with a rule that lays down the impossibility of appointment to
the Executive Committee of Directors who have reached 62 years
of age in the year prior to that in which the appointment takes
place, thereby avoiding the cessation of functions halfway
through the term of office.
3.4.6. Policy of rotation of areas of responsibility in the
Executive Committee
All the members of the Executive Committee play an active role
in the day-to-day management of the Group’s business, having
under their stewardship one or more specific business areas, in
accordance with the respective profile and with individual
expertise, and corresponding to the distribution of
responsibilities which at any moment best contributes to that
body’s effective and balanced functioning. The Executive
Committee meets weekly to review the Bank’s operations and
risks. Without limitation to the greater or lesser concentration of
one or other person in a specific area, the Executive Committee’s
decision-making process on matters pertaining to the conduct of
the Group’s operations is based on a collegial format and is the
object of systematic monitoring by the Board of Directors.
In addition, given the importance of market risks in financial
activity:
䊏
Banco BPI has a specialised committee functioning, the
Executive Committee for Global Risks, the body charged with
274
䊏
On the other hand, financial risks, such as credit risk, are the
object of close monitoring by the Audit and Internal Control
Committee, a consultative body of the Board of Directors which
meets monthly. Operational risks and the exercise of the
compliance function are also the object of this type of
monitoring.
to propose to the AGM a statutory amendment which provides for
the creation of a Financial Risks Committee, composed of 3 to
6 members, whose duties, without prejudice to the functions of
the Supervisory Board relating to these matters, involve
monitoring the policy relating to the management of all financial
risks, including credit risks, inherent in the Bank’s activity, as
well as monitoring the management of the Bank’s pension fund.
BPI does not see advantage, in the present circumstances and
bearing in mind the conditions and manner of the Executive
Committee’s functioning, in the periodic rotation of areas of
responsibility of any executive director, including that of the
financial area.
3.4.7. Information to the Board of Directors and to the
Supervisory Board
The Chairman of the Executive Committee sends to the
Chairman of the Board of Directors and to the Chairman of the
Supervisory Board, for his knowledge, the notices of that
Committee’s meetings prior to their realisation.
The minutes of the respective meetings are also made available.
The members of the Executive Committee furnish in a timely
and proper manner the information solicited from them by other
members of governing bodies.
3.4.8. Specialist Executive Committees
Bearing in mind the importance that credit and market risks
assume in banking activity, as well as the importance of the
information technologies as a platform for competitiveness, three
specialist committees were created – the Executive Committee
for Credit Risk, the Executive Committee for Global Risks and
the Executive Committee for Information Technologies, which
comprise, besides the members of the Executive Committee, the
members of the Group’s senior management responsible for the
respective areas.
3.4.8.1. Executive Committee for Credit Risks
The Executive Committee for Credit Risk is the body which
monitors and decides on the concession and recovery of loans,
analysing mandatorily all the exposures to any one entity
involving more than a defined limit. Besides members of the
Executive Committee, also participating are the principal staff
members of Corporate Banking.
Composition of the Executive Committee for Global Risks
Banco BPI’s Executive Committee
Fernando Ulrich
António Domingues
Pedro Barreto
Composition of the Executive Committee for Credit Risks
Economics Research Department
Cristina Veiga Casalinho
Banco BPI’s and Banco Português de
Investimento’s Financial Divisions
Isabel Castelo Branco
Equities Department
Paulo Freire Oliveira
Fernando Ulrich
António Domingues
Risk Analysis and Control Division
Rui Martins dos Santos
Planning, Accounting and Statistics
Division
Susana Trigo Cabral
Pedro Barreto
Southern Large Corporates and
Madrid Branch
Francisco Costa
Northern Large Corporates
Maria do Carmo Oliveira
Project Finance
Miguel Alves
Credit Risks
Luís Camara Pestana
Southern and Islands Corporate
Joaquim Pinheiro
Central Corporate
Pedro Fernandes
Institutional Banking / State
Corporate Sector
Filipe Cartaxo
Northern Corporate – Porto Region
Coordination Area
João Azevedo Gomes
Northern Corporate – North Region
Coordination Area
Miguel Ribeiro
Southern Large Corporates
Pedro Coelho
Legal Affairs
3.4.8.3. Executive Committee for Information Technologies
The Executive Committee for Information Technologies is the
body which defines and monitors the Bank’s priorities regarding
information systems and the control over related projects.
Besides the members of the Executive Committee, this body
comprises the heads of the Information Systems, Organization,
Individuals Marketing, Corporate Marketing and Operations
divisions.
Composition of the Executive Committee for Information
Technologies
Fernando Ulrich
António Domingues
3.4.8.2. Executive Committee for Global Risks
The Executive Committee for Global Risks is the body charged
with managing global exposure to risks related with the BPI
Group’s activity, specifically, liquidity risks, market risks (trading,
bank portfolio interest rate, refinancing, bank portfolio exchange
rate), credit / counterparty risks (global perspective only);
country risk; operational risks (global perspective only); other
risks materially relevant. Besides members of the Executive
Committee, this body comprises the heads of the relevant
Divisions.
Pedro Barreto
Information Systems
Maria Teresa Rocha
Organisation
Francisco Barbeira
Individuals Marketing
Paulo Vila Luz
Corporate Marketing
Frederico Silva Pinto
Operations
Manuel Maria Meneses
The policy, procedures and allocation of powers amongst the
Group’s various bodies and departments on matters relating to
the control and management of the Group’s risks – credit risk,
market risk, liquidity risk and operational risk – are described in
detail in chapter 4 of the present Corporate Governance Report
and in a separate chapter of the Directors’ Report, which must
be read together.
275
3.5. SUPERVISORY BOARD
The composition of the Supervisory Board is governed by the
provisions of the law, the Statutes and its internal regulations.
3.5.1. Composition
The Supervisory Board is composed of a Chairman and two
members in office, as well as two alternates.
The members of the Supervisory Board possess technical
qualifications – namely in the areas of law, accountancy,
auditing and financial management – and professional
experience, including operational knowledge of the banking
industry, all of which enable them to discharge in a effective
manner with the responsibilities entrusted to them.
The members of the Supervisory Board, including its Chairman
and, where this is the case, one or more Deputy -Chairmen, are
elected by the General Meeting.
Composition of Banco BPI’s Supervisory Board
Em 31 de Dezembro de 2010
Independence
(according to art.414,
no.5 CCC)
Disqualification
(according to
art.414-A, no.1 CCC)
Date of
First appointment
End of current
term1
Nationality
Complies
Complies
23 Apr. 08
31 Dec. 2010
Portuguese
-2
Complies
21 Apr. 99
31 Dec. 2010
Portuguese
José Neves Adelino
Complies
Complies
23 Apr. 08
31 Dec. 2010
Portuguese
Alternate members
Rui Guimarães
-
-
22 Apr. 09
31 Dec. 2010
Portuguese
Francisco Olazabal
-
-
22 Apr. 09
31 Dec. 2010
Spanish
Chairman
Abel António Pinto dos Reis
Members
Jorge de Figueiredo Dias
3.5.2. Independence requirements and disqualification rules
Portuguese law, in articles 414 and 414-A of the Commercial
Companies Code (CCC), lays down a series of independence
requirements and situations of disqualification. The description of
this regime in this report is presented in the section “Eligibility of
the Management and Oversight Bodies – Requirements enshrined
in Portuguese law” (page 259).
The Chairman of the Supervisory Board complies with all the
criteria relating to the abovementioned disqualification and
independence, and possesses the appropriate technical
competencies for the performance of his functions, as evidenced
in his curriculum vitae presented in an annex to this report
(page 337).
The situation of each one of the members of the Supervisory
Board in the light of the aforementioned provisions is presented
in the above table, underlining the compliance by all the
members of the Supervisory Board with all the criteria relating to
disqualification and independence, with the exception, relating to
one member, of the independence criterion of article 414(c) of
the CCC on the grounds of having been re-elected for more than
two terms of office on BPI governing bodies.
3.5.3. Terms of reference of the Supervisory Board
The Supervisory Board’s core terms of reference entail overseeing
the management of the Company, supervising compliance with
the Law and the Statutes, verifying the true and fair presentation
of the company’s annual report and accounts, overseeing the
statutory audit and the independence of the Portuguese
Statutory Auditor and of the External Auditor, as well as
evaluating the latter’s work.
1) General Meeting to be held in 2011, at which the 2010 accounts will be approved.
2) Is covered by article 414 (2) of the CCC for having been re-elected for more than two terms on BPI’s governing bodies.
276
SUPERVISORY BOARD’S PRINCIPAL TERMS OF REFERENCE
In the performance of the legally and statutorily-attributed
functions, namely those envisaged in article 420 of the
Commercial Companies Code, it is the Supervisory Board’s
function:
䊏 to ensure observance of the legal and regulatory
provisions, the statutes and other regulations issued by
the supervisory authorities, as well as of the general
policies, standards and practices instituted internally;
䊏
䊏
䊏
䊏
䊏
to ensure at Banco BPI and other Group companies
subject to supervision on a consolidated basis, the
pursuance of the fundamental objective fixed in the area
of internal control and risk management by the Bank of
Portugal and by the Securities Market Commission in the
supervision directives directed at credit institutions and
financial companies;
䊏
䊏
to accompany the inspections conducted by the Bank of
Portugal, CMVM, the Insurance Institute of Portugal, the
Directorate-General of Taxes and the General Inspectorate
of Finance at Banco BPI and at the other Group
companies subject to supervision on a consolidated
basis;
to certify the effectiveness of the internal control,
internal audit and risk management systems, carrying out
for this purpose:
䊏
evaluate the reliability of the prudential reports relating
to the Group and the Group companies subject to this
obligation;
i) evaluation of operational procedures taking into
account the certification of the existence of a proper
control and risk management environment, in
particular, as regards the following risks:
䊏 operational risk;
䊏 compliance risk;
䊏 credit risk;
䊏 market risk;
䊏 interest rate risk:
䊏 currency risk;
䊏 liquidity risk;
䊏 reputational risk.
ii) keeping abreast of the activity reports of the Audit
and Inspection Division, the External Auditor and
the Compliance Division, transmitting to the Board
of Directors the recommendations which it deems
opportune concerning the matters audited;
iii) holding of periodic meetings with the entities
referred to in the previous sub-paragraph.
to verify the appropriateness of and to supervise
compliance with the accounting policies, criteria and
practices adopted and the proper state of the supporting
documents;
to express an opinion on the report, accounts and
proposals presented by the Board of Directors;
to oversee the process involving the preparation and
disclosure of financial information;
As regards the Portuguese Statutory Auditor:
䊏 it has to propose the respective appointment at the
General Meeting;
䊏
䊏
it has to oversee the review of the company’s annual report;
it has to verify the Portuguese Statutory Auditor’s
independence and, in this regard, to consider and
decide, after having heard the Audit and Internal Control
Committee, on the provision of additional services by the
Portuguese Statutory Auditor to the company and Group
companies, as well as on the respective conditions.
䊏
䊏
In what concerns the company’s external auditor:
䊏 to present to the Board of Directors the proposal relating
to the external auditor to be contracted by the company,
including not only the proposal as to whom should
provide such services, but also the proposal relating to
the respective remuneration;
䊏
䊏
䊏
䊏
䊏
to represent the company for all purposes in dealings
with the external auditor, in particular, being the
company’s interlocutor with him and the first recipient of
the relevant reports;
to evaluate annually the work done by the External Auditor.
to approve, after having heard the Audit and Internal Control
Committee, the external auditor’s annual activity plan.
issuing opinions on the activity plans of the Audit and
Inspection Division and of the Compliance Division, to
be approved by the Audit and Internal Control
Committee;
to review the annual reports produced by the areas
responsible for the functions of:
i) compliance;
ii) risk management
iii) internal audit
䊏
䊏
to ensure that the company provides the external auditor
with all the proper conditions so that he can provide his
services;
to oversee the external auditor’s independence and in this
regard to consider and decide, after having heard the
Audit and Internal Control Committee, on the provision
by the external auditor of additional services to the
company and to the Group companies, as well as on the
respective conditions.
an assessment of the operational procedures, with a
view to verifying the existence of an efficient
managament of the respective activities, through proper
management of risks and complete, reliable and timely
accounting and financial information, as well as of an
adequate monitoring system, through, namely:
to review the opinion of the Portuguese Statutory
Auditor on the adequacy and effectiveness of the
internal control system underlying the preparation and
to issue an annual opinion under the terms defined by
the Bank of Portugal, on:
i) the efficacy, adequacy and coherence of the internal
control, risk management and internal audit systems
at Banco BPI and the Group;
ii) the internal control reports prepared by the Boards
of Directors of Banco BPI, the Group and the
entities subject to the Bank of Portugal’s
supervision on a consolidated basis.
䊏
to receive and follow up communications of
irregularities presented by Shareholders, Employees of
the company and others.
277
3.5.4. Functioning
Meetings and resolutions
The Supervisory Board meets ordinarily at least once every two
months and also whenever its Chairman deems this necessary or
when requested by any of its members.
In urgent cases, the Supervisory Board can meet without
observing the prior formalities, providing that its members
manifest the wish to meet and deliberate on a particular matter.
Besides the members of the Supervisory Board, the Portuguese
Statutory Auditor, Directors, senior staff members or even third
parties may be present at the respective meetings, provided they
are invited by the Chairman or whoever substitutes him at this
meeting, according to the utility of this in the light of the
matters to be analysed.
The resolutions of the Supervisory Board are passed by a
majority, with those members dissenting with these having to
insert into the minutes the motives for their disagreement.
Minutes
Minutes of each meeting must be written up in the respective
book or on loose sheets, and must be signed by all those who were
present.
Support services
The Supervisory Board, besides the advisors allocated to it, may
request the Board of Directors when it this deems necessary, the
collaboration of one or more persons with experience in the areas
of its terms of reference, to provide information and to carry out
work for the purpose of substantiating the respective analyses
and conclusions.
3.5.5. Supervisory Board’s representation of the company in
relations with the External Auditor
Banco BPI’s Supervisory Board represents the company in all
respects in dealings with the External Auditor, in the terms
defined in the law, the Statutes and in the CMVM’s
Recommendation II.4.4. relating to this issue. In this respect, it
is responsible for proposing the provider of these services, the
respective remuneration, ensuring that the proper conditions exist
within the company for the provision of services, as well as being
the company’s first interlocutor and the first recipient of the
respective reports.
The Supervisory Board which is in office was elected in April
2008 in the wake of the modification to the governance model
approved at that time (from the Anglo-Saxon model to the Latin
model).
3.5.6. Coordination between the Supervisory Board and the
Audit and Internal Control Committee
In the terms laid down by the respective statutes, there is within
the ambit of the Board of Directors an Audit and Internal Control
Committee (AICC), formed by non-executive members. The
existence of this Committee is warranted, amongst other reasons,
by the following:
䊏
䊏
existence of an experience which for many years proved to be
very positive involving the functioning of a structure within the
ambit of the Board of Directors which has as its mission
monitoring and overseeing the work of the Executive
Committee;
conviction that the non-executive members of the Board of
Directors are in a particularly favourable position to exercise
the function of monitoring and overseeing the Executive
Committee.
The AICC therefore plays a very important role of monitoring and
overseeing the Executive Committee, role which complements
but does not substitute the role which in this ambit and
according to the Law and the Statutes is performed by the
Supervisory Board.
The coordination between the Supervisory Board and the Audit
and Internal Control Committee is assured by the respective
Chairmen.
As referred to further on when dealing with the functioning of
the Audit and Internal Control Committee, the Supervisory
Board’s members can participate in that Committee’s meetings,
and have access to all the documentation distributed for those
meetings, hearing the explanations given by those responsible
for each one of the areas object of analysis, and asking the
questions and requesting the clarification which the documents
under review may necessitate.
As referred to previously, it should be underlined that the
coordination between the Supervisory Board and the AICC has
shown itself to be efficient.
3.5.7. Coordination between the Supervisory Board and the
Board of Directors
The coordination between the Supervisory Board and the Board
of Directors is assured by their respective Chairmen.
The members of the Supervisory Board who participate in the
Board of Directors meetings, in terms of articles 421 and 422 of
the Commercial Companies Code, must give prior notification to
the other members of their intention to participate and must
subsequently inform the other members about the matters
relating to the Supervisory Board’s functions that were dealt with
at those meetings.
The Supervisory Board may request information from the Board
of Directors and its Executive Committee.
278
3.5.8. Reporting the Internal Audit and Compliance functions
From a functional viewpoint, the Supervisory Board has an active
participation in the definition of the annual programme of internal
audit and compliance services, monitoring at the same time the
respective execution.
3.5.10. Annual report on the activity of the Supervisory Board
The Supervisory Board met 11 times in 2010 at which all its
members were present. In 2011 and up until the issue of the
present report, the Supervisory Board has met in five occasions
with all its members present.
The Audit and Inspection and the Compliance divisions are
responsible for providing information to the Supervisory Board
about shortcomings or weaknesses detected by them which
evidence or indicate very serious situations. The Supervisory Board
can also:
In 2010 the Supervisory Board also attended 9 meetings of the
Audit and Internal Control Committee, the meeting of the Board
of Directors at which the annual accounts were approved and
Banco BPI’s General Meeting.
䊏
䊏
request from the Audit and Inspection Division, the external
auditors and the Compliance Division, the respective activity
reports;
promote the convening of periodic meetings with the entities
referred to in the preceding sub-paragraph.
The Audit and Inspection Division and the Compliance Division
report hierarchically to the Executive Committee of the Board of
Directors and to the persons designated by it for this purpose.
The Bank is presently in the process of amending the internal
regulations of the Audit and Inspection Division and the
Compliance Division so as to make it clear that these can:
䊏
䊏
present directly to the Chairmen of the Supervisory Board and
of the Audit and Internal Control Committee proposals for
action which within the scope of the respective functions they
consider appropriate;
communicate directly to the Supervisory Board any facts that
they believe this body may find warranted.
3.5.9. Rules relating to the appointment, replacement and
dismissal of the members of the Supervisory Board
The members of the Supervisory Board are elected by the
General Meeting, in terms of article 415 of the CCC. When the
GM does not do so, the Supervisory Board must designate its
Chairman. The rules for the substitution of the members of the
Supervisory Board appear in the same article 415. The General
Meeting can dismiss, in the terms of article 419 of the CCC, the
members of the Supervisory Board, provided this is done with
just cause.
In compliance with the functions attributed to it by article 420
of the CCC, the Supervisory Board prepares annually a report on
its activity and issues an opinion on the annual report and
accounts and on the proposed appropriation of net profit
presented by the Board of Directors to the General Meeting.
The entering into business dealings between the Company and
the Shareholders with qualified holdings or with entities with
whom they have any relationship within the terms of article 20
of the Securities Code, is always submitted for prior opinion of
the Supervisory Board, irrespective of the amount involved.
During 2010 the Supervisory Board was called on to issue an
opinion on only one situation.
The Supervisory Board’s Report and Opinion, besides forming
part of the annual report and accounts, is the object of
disclosure together with the annual report at the Investor
Relations website at www.ir.bpi.pt.
3.5.11. Evaluation of the External Auditor by the Supervisory
Board
DECLARATION
“Banco BPI’s Supervisory Board declares, for the purposes of
point II.4.5 of the Corporate Governance Code, that it oversaw
the work of the External Auditor, concluding that this was
performed in accordance with the statutory audit and review
standards and satisfied the monitoring requirements relating to
the company’s accounts.”
15 March 2011
Supervisory Board
Abel Pinto dos Reis – Chairman
Jorge Figueiredo Dias – Member
José Neves Adelino – Member
279
3.6. AUDIT AND INTERNAL CONTROL COMMITTEE
The Audit and Internal Control Committee is a consultative body
of the Board of Directors and its role, without prejudice to the
functions attributed to the Supervisory Board, involves
monitoring the Executive Committee’s work, overseeing the
preparation and disclosure of financial information and checking
the effectiveness of the internal control, risk management and
internal audit systems.
company’s Statutes. The members of the Audit and Internal
Control Committee are appointed by the Board of Directors,
which shall also designate a Chairman and a Deputy-Chairman.
COMPOSITION OF THE AUDIT
AND INTERNAL CONTROL COMMITTEE
Chairman Artur Santos Silva
Deputy-Chairman Ruy Matos de Carvalho
3.6.1. Composition
The Audit and Internal Control Committee is composed of three
to five members of the Board of Directors who do not form part
of the Executive Committee envisaged in article 18 of the
Members Alfredo Rezende de Almeida
Henri Penchas
PRINCIPAL TERMS OF REFERENCE OF THE AUDIT AND INTERNAL CONTROL COMMITTEE
Without prejudice to the legal terms of reference attributed to
the Supervisory Board, the Audit and Internal Control
Committee is responsible for:
䊏
䊏
monitoring the activity of the Executive Committee;
ensuring observance of the legal and regulatory
provisions, the statutes and other regulations issued by
the supervisory authorities, as well as of the general
policies, standards and practices instituted internally;
practices adopted and the proper state of the supporting
documents;
䊏
䊏
䊏
䊏
䊏
ensuring the appropriateness of and to supervise
compliance with the accounting policies, criteria and 䉯
In the performance of the functions “to ensure observance
of the legal and regulatory provisions, the statutes and
other regulations issued by the supervisory authorities, as
well as of the general policies, standards and practices
instituted internally” the Audit and Internal Control
Committee must, in particular:
䊏
䊏
䊏
promote at Banco BPI and other Group companies
subject to supervision on a consolidated basis, the
pursuance of the fundamental objective fixed in the area
of internal control and risk management by the Bank of
Portugal and by the Securities Market Commission in the
supervision directives directed at credit institutions and
financial companies;
evaluate the reliability of the prudential reports relating
to the Group and the Group companies subject to this
obligation;
monitor all the inspections carried out by the Bank of
Portugal, the CMVM, Insurance Institute of Portugal, the
Directorate-General of Taxes and the General Inspectorate
of Finance at Banco BPI and other Group companies
subject to supervision on a consolidated basis.
In discharging the function “to ensure the appropriateness
of and the compliance with the accounting policies, criteria
and practices adopted and the proper state of the
supporting documents”, “to monitor the statutory audit”,
and “to follow the process for the preparation and
dissemination of financial information”, the Audit and
Internal Control Committee reviews, namely:䉯
280
䊏
monitoring the statutory audit;
tracking the process involving the preparation and
overseeing and promoting the efficacy of the internal
control, internal audit and risk management systems;
ensuring the statutory auditor’s independence, namely,
when he / she / they provide additional services to the
company.
the financial statements relating to Banco BPI and the
opinions of the external auditors thereon;
䊏
the reliability of the accounting information;
䊏
the computation of corporate income tax;
䊏
the performance of Banco BPI’ and other Group
companies’ pension funds.
In discharging the function “to oversee and promote the
efficacy of the internal control, internal audit and risk
management systems”, the Audit and Internal Control
Committee is in relation to Banco BPI responsible for:
As regards the internal control system:
䊏
䊏
䊏
evaluating operational procedures, with a view to
promoting to the efficient management of the respective
activities, through a proper environment of control, solid
risk management, efficient information systems and
communication and effective monitoring of the internal
control system;
approving the internal audit activity plans, after the
Supervisory Board pronouncing thereon, and monitoring
their execution, assessing the conclusions of the
respective audit work and transmitting to the Executive
Committee and the Supervisory Board the
recommendations which its deems opportune concerning
the aspects audited;
issue opinion on the external auditors’ activity plans, to
be reviewed and approved by the Supervisory Board;
䊏
reviewing the risk management, compliance and internal
audit functions’ annual reports, the Board of Directors’
annual internal control report and reading the Supervisory
Board’s annual opinion on the adequacy and
effectiveness of the internal control system and the
Statutory Auditor’s opinion on the internal control system
underlying the preparation and dissemination of financial
information.
䊏
䊏
䊏
䊏
As regards risk management:
Operational risk
䊏
䊏
䊏
䊏
䊏
evaluating the effectiveness and adequacy of the
operational procedures and monitoring the measures
taken for their improvement;
verifying the existence and security of assets;
䊏
䊏
䊏
appraising the control of risks stemming from outsourcing
activities;
䊏
䊏
䊏
䊏
䊏
䊏
being informed about the aggregate amount of
operational losses, the most important claims and, on an
immediate basis, of individual losses of more than
2 million euro;
䊏
monitoring the development and updating of the business
continuity plan;
evaluating the reliability of the management information
system, both in the business and budgetary control area,
and in the risk control area;
䊏
being informed about the main statistical data relating to
Customers’ complaints;
being kept informed about the Bank’s activity in the
prevention of involvement in money-laundering
operations, the principal processes related to this crime
and, on an immediate basis, of situations involving more
than 1 million euro.
䊏
䊏
䊏
approving the Compliance Division’s activity plans, after
the Supervisory Board has made its pronouncements on
same, and reviewing the respective activity reports;
evaluating the effectiveness of compliance-risk
management, reviewing the procedures instituted and the
breaches detected;
evaluating the control of compliance with the BPI Group’s
Code of Conduct and being informed about shortcomings
detected in this control, as well as breaches of the Code;
being kept informed rating agencies’ reports on the rating
attributed to Banco BPI.
monitoring the application of the Basel II Accord, the
Community Directives and the Bank of Portugal’s
guidelines concerning this topic, as well as of the riskmeasurement models and the calculation of own funds
adopted internally;
appraising the consistency and efficacy of the credit-risk
management models, notably the rating and scoring
systems;
appraising the impairment-analysis, models and the
behaviour of impairment losses by Customer loans
segments;
reviewing the quantification of economic provisions
adjusted to the risk implicit in Banco BPI’s loan portfolio;
reviewing the most significant changes in credit-risk
exposures of more than 75 million euro and less than
300 million euro, as well as of Customers with exposures
of more than 25 million euro without impairment, but
whose situation warrants monitoring;
reviewing the evolution of defaults in excess of
100 thousand euro and ninety days by Customers with
exposure of more than 500 thousand euro, as well as the
credit risk exposures of the twenty Customers with the
greatest impairment but without legal proceedings
instituted.
The Group’s financial risks
䊏
Compliance risk
䊏
evaluating the communication plan in crisis situations;
Credit risk
appraising the operational risk management model;
evaluating the effectiveness and adequacy of the IT
systems, namely as regards the applications’
documentation and data, applications and equipment
security;
appraising the communication processes involving
Shareholders and Investors, Customers and the
Directorate-General for Taxes;
evaluating the management model, situation and trend in
market, interest rate, liquidity, settlement of foreign
exchange operations and credit derivatives risks,
including in relation to liquidity risk, the assessment of
the respective contingency plan.
As regards the internal audit system:
䊏
䊏
evaluating the effectiveness of the supervision and
control system for Banco BPI’s stock brokerage business.
䊏
keeping informed about the more important legal and
contractual risk situations identified.
䊏
reviewing the Internal Audit activity plans;
obtaining information, periodically updated, if the areas
or matters covered by the audits carried out by the
Internal Audit department in the last 3 years;
reviewing the activities undertaken in each half year by
Internal Audit;
monitoring the evolution of the principal matters falling
with Internal Audit’s terms of reference.
Reputational risk
䊏
evaluating the quality of service provided to Customers
and respective control, namely through the analysis of
the procedures relating to the handling of complaints and
to the IQS (service quality survey);
In discharging the function “to oversee and promote the
efficacy of the internal control, internal audit and risk
management systems”, the Audit and Internal Control
Committee is responsible, in relation to the BPI Group:
281
As regards to the internal control and internal audit
systems:
䊏
to comply with the abovementioned functions relating to
the internal control system and the internal audit system
relating to the Group companies subject to supervision on
a consolidated basis;
In discharging the function “to ensure the statutory
auditor’s independence, namely, when he / she / they
provide additional services to the company”, the Audit and
Internal Control Committee is responsible for:
䊏
䊏
As regards the risk management system:
䊏
to comply with the abovementioned functions relating to
the risk-management system relating to the Group
companies subject to supervision on a consolidated
basis, with the adaptations resulting from the nature,
characteristics and own activity of each one.
3.6.3. Functioning
The Audit and Internal Control Committee shall meet at least
every two months or whenever convened by its Chairman.
䊏
The documents relating to the meeting shall be sent at least
seven days prior to the date set for its realisation.
submitting to the Supervisory Board, the fees payable to
the Statutory Auditor for the provision of the audit service
to the Bank and to the other Group companies;
submitting to the Supervisory Board, the approval of the
contracting of additional services to be provided by the
Statutory Auditor, as well as the respective remuneration
terms.
respective analyses and conclusions. The provision of
information shall include in particular:
䊏
The meetings shall be held in each year on the dates set, at the
very latest, at the last meeting of the previous year.
The notice of each meeting to be sent by the Chairman to the
members of the Audit and Internal Control Committee at least
seven days in advance must contain the respective order of
business. The Board of Director is informed about the minutes
drawn up.
supervising the activity of the Statutory Auditor;
䊏
the progress of the projects and studies relating to the internal
control system under way at the Banco BPI and other Group
companies subject to supervision on a consolidated basis;
the progress of the initiatives and regulation-setting activity of
the national and international banking-supervision institutions
in the area of internal control.
The Audit and Internal Control Committee has at its disposal a
secretariat managed by an Employee who is functionally and
hierarchically subordinate to the Audit and Internal Control
Committee Chairman.
The meetings of the Audit and Internal Control Committee shall
be chaired by its Chairman or by the Deputy-Chairman in his
absence, who shall conduct the respective proceedings.
The Audit and Internal Control Committee may also request the
collaboration of a staff member to lend support to the secretariat
in the preparation and holding of meetings and the drawing up
of the respective minutes.
The meetings of the Audit and Internal Control Committee shall
be attended, without the right to vote, by the Chairman of the
Executive Committee of the Board of Directors, the members of
the Supervisory Board, the manager responsible for the internal
audit area of the BPI Group, the Portuguese Statutory Auditor, as
well as other staff whenever this is considered appropriate.
3.6.5. Activity
During 2010 the Audit and Internal Control Committee met nine
times. The average attendance at these meetings was 78%.
In 2011, and up until the approval of this report, the Audit and
Internal Control Committee met twice with an attendance rate of
80%.
The Directors and managers responsible for the areas which are
being reviewed may also be summoned to participate at the
meetings of the Audit and Internal Control Committee, whenever
this is considered appropriate for the satisfactory progress of the
proceedings.
3.6.4. Support structures
The Audit and Internal Control Committee can when it deems
necessary appoint one or more support staff members with
experience gained in the areas of his / her expertise, to provide
information and carry out work aimed at substantiating the
282
Given the interest for the exercise of the functions legally
conferred upon the Supervisory Board of the matters and issues
dealt with at the meetings of the Audit and Internal Control
Committee, the members of the Supervisory Board were present
and participated in the aforesaid meetings.
In terms of the respective regulations, the Chairman of the
Executive Committee of the Board of Directors, the
representative of the Portuguese statutory auditors (Deloitte e
Associados, S.R.O.C.) and the head of the Audit and Inspection
Division also regularly attended the meetings, but without the
right to vote.
REPORT OF THE ACTIVITY OF THE AUDIT AND INTERNAL CONTROL COMMITTEE IN 2010
During 2010, the Audit and Internal Control Committee held
nine meetings with the object of carrying out an in-depth
analysis of the most important matters relating to its terms of
reference, in accordance with the activity plan approved at the
January meeting.
In terms of the Committee’s regulations, the Chairman and
Deputy-Chairman of the Executive Committee of the Board of
Directors, the members of the Supervisory Board, the
representative of the Portuguese statutory auditors
(Deloitte & Associados, S.R.O.C.) and the head of the Audit
and Inspection Division (DAI) regularly attended the meetings
although without voting rights.
Besides the above, the Directors and managers responsible for
the areas whose matters were under review were also
summoned to attend the meetings.
The analyses effected and the decisions taken were mainly
founded on the work performed by the external auditors, by the
Audit and Inspection Division and by the Bank’s various
Divisions within the ambit of their respective functions.
Where this was the case, they were also backed up by
inspections and by the communications of the competent
supervision authorities.
The following is a summary of the work carried out by the
Committee in 2010 as part of its terms of reference:
1. Overseeing observance of the law and regulations, the
supervision authorities’ standards, the company’s statutes and
the internal policies, standards and practices
The Committee supervised compliance with legal, regulatory
and internal provisions in the various areas encompassed by
the audit and review work covering the internal and external
auditors’ procedures. To this end, not only were the findings of
these procedural reviews and work (which were submitted
regularly during the year) analysed, but it also monitored
compliance with the ensuing recommendations.
It is worth highlighting in this domain the review conducted at
the January and March meetings of the instructions and
communications issued by the Bank of Portugal for the
realisation of the so-called stress tests, and of the conditions
already existing or to be implemented at Banco BPI for the
execution of those tests and respective reporting.
The Committee also continued to monitor the implementation
of the Markets in Financial Instruments Directive (MiFID),
while referring in this regard to the consideration at the May
meeting of the DAI report relating to discretionary portfolio
management and the execution of Customers’ orders at the
Private Banking area.
The Committee also examined at the same meeting the reports
of the external auditors containing the findings of the review
carried out of the procedures implemented at the Group
companies in order to ensure the safeguarding of Customers’
assets, in compliance with the provisions of the Securities
Code.
The December meeting reviewed the report also prepared by
the DAI on the reliability of various prudential reports
submitted to the Bank of Portugal and to the CMVM by Banco
BPI and Banco Português de Investimento.
At that meeting, the Committee also became acquainted with
the alterations introduced to remuneration policy matters by
the CMVM’s new Corporate Governance Code, having
appraised, based on information supplied by the external
auditors, whether the internal procedures are in conformity
with the new recommendations.
As part of the process of keeping abreast of the inspections,
the Committee reviewed at the May meeting, the Bank of
Portugal report on the findings of the inspection carried out in
the mortgage-loan area, having subsequently been informed of
the review conducted, with the participation of the Divisions
involved, of the aforementioned report and of the reply to it
sent to the central bank.
2. Supervision of the adequacy and compliance with the
accounting policies and practices, review of the statutory audit
and of the process involving the preparation and dissemination
of financial information
Supervision of compliance with accounting policies, criteria
and practices and verifying the integrity of financial
information were also undertaken primarily through appraisal of
the findings of the audits and reviews of procedures conducted
during the year by the external and internal audit teams.
Moreover, the Committee analysed in detail Banco BPI’s
consolidated results relating to December 2009, as well as
those relating to the first, second and third quarters of 2010.
Already in January 2011, it analysed the results to December
2010.
It also reviewed at the March meeting the draft Board of
Directors’ Management Report relating to 2009 and, still with
reference to that financial year, the Supervisory Board’s opinion
on the report and accounts and the Portuguese statutory
auditor’s draft statutory audit certification and audit report.
At the September meeting, it analysed the report and accounts
for the first half of 2010.
In addition, it analysed at the May and December meetings the
“Quarterly consolidated information” of Banco BPI, prepared in
compliance with CMVM Regulation no. 5 / 2008.
283
The Committee also reviewed the principal conclusions of the
overall audit procedures performed by Deloitte covering Banco
BPI’s and Banco Português de Investimento’s financial
statements as at 31 March and 30 September 2010. It also
carried out an identical examination of Banco de Fomento
Angola’s financial statements to 30 June 2010.
Also subjected to review were certain specific matters relating
to the supervision of accounting policies and practices,
amongst which those contained in the report prepared by the
Legal Division on the company tax computation relating to
2009 and on the review of the Form 22 (annual tax return) for
Banco BPI and Banco Português de Investimento conducted by
the external auditors. Similarly, the Committee reviewed at the
March meeting the findings of Deloitte’s review of the
procedures from a tax perspective in areas deemed to be of
importance for the two banks.
In addition, the Committee monitored regularly the
performance of the Banco BPI Pension Fund, acquainting itself
with the trends registered in the asset management market,
the investment policy pursued and being kept informed about
the actuarial assumptions used in calculating the respective
liabilities.
3. Evaluating and enhancing the effectiveness of the internal
control system
The evaluation and enhancement of the efficacy of the internal
control systems within the BPI Group was a permanent concern
of the Committee.
With this goal, the Committee regularly evaluated the Group
companies’ operational procedures, including those of the
branches and subsidiaries, and those instituted with respect to
Banco BPI’s and Banco Português de Investimento’s specific
areas or issues.
The analysis carried out was essentially based on the findings
of the procedural reviews conducted by the external auditors,
as well as on the findings of Internal Audit’s audit and
inspection work and on the presentations and clarifications
which are the responsibility of the relevant Boards and
Divisions. The recommendations regarded as being important
were then transmitted to the Executive Committee.
The information furnished periodically by the Internal Audit
unit on the degree of compliance and the forecast of the
periods for implementation of the recommendations formulated
by that Audit and by the external auditors also constituted an
important indicator.
Another aspect of review takes the form of the regular
presentation by Internal Audit of the schedules indicating the
areas and issues covered by the audits undertaken by that
Division in the last three years.
An endeavour was thus made to promote the desired scope of
the audit work and its contribution to streamlining the internal
284
control systems. The steps taken in these domains will be
described in further detail in the chapters devoted to verifying
the efficacy of risk management and the monitoring of audit
activity.
Also the object of close analysis during the course of the year
given the usefulness it assumes as part of the internal control
environment was the document “Economic-financial risks–
domestic operations”, edited quarterly by the Planning Division
and containing a detailed analysis of the principal risks
attaching to the BPI Group’s domestic operations, namely,
those relating to the loan and securities portfolios, interest
rates, liquidity, country and currency risks and investments in
associated companies.
In more specific domains, of special note was the analysis of
Banco BPI’s interim report relating to 2009 on “ICAAP –
Internal Capital Adequacy Assessment Process”, sent to the
Bank of Portugal in terms of Instruction no. 15 / 2007.
On the other hand, the Committee reviewed at its May meeting
the most significant aspects and the principal rules for
managing the operating, compliance, credit, market, liquidity
and currency risks and the information systems of Banco de
Fomento Angola, while the Chairman of the respective
Executive Committee provided the necessary clarifications on
these matters.
As concerns compliance with the reporting duties to the
supervision authorities on the adequacy and efficacy of the
internal control systems instituted, in terms of the regulatory
provisions of the Bank of Portugal, CMVM and the Instituto de
Seguros de Portugal, the Committee analysed:
䊏
the annual reports on the risk-management, compliance and
internal audit functions at the BPI Group, prepared by the
respective persons in charge;
䊏
the annual internal control reports sent to the Bank of
Portugal and the CMVM (securities market commission) of
BPI Group and all the Group’s companies and offshore
branches subject to supervision on a consolidated basis;
䊏
the opinions of the respective oversight bodies and statutory
auditors, which accompany the internal control reports;
䊏
the annual report on the organisational structure and the risk
management and internal control systems of BPI Vida, sent
to the Instituto de Seguros de Portugal, and the external
auditors’ opinion thereon.
Finally, we mention the publication on 27 October of a service
instruction which regulated the formulation, approval and
overseeing of the implementation of the recommendations
formulated in the wake of the internal and external audits, with
the object of ensuring the more rigorous control of its
observance on the part of the director responsible for the DAI,
of the Executive Committee of the Board of Directors and of
the Audit and Internal Audit Committee.
4. Evaluating and monitoring the effectiveness of the riskmanagement system
a) Operational risk
One of the principal means used in assessing and promoting
the control of operational risk involved the appraisal of the
findings and recommendations resulting from the audits and
review procedures conducted by the Audits, in conjunction
with the heads of the Divisions and Group companies which
were the object of these reviews.
The abovementioned procedure permitted identifying the most
important shortcomings and resulted in the issue of guidelines
for the bodies audited, or the transmission of suggestions to
the Executive Committee regarding the issues at stake.
During 2010, the procedures’ audits and reviews analysed
according to that method encompassed the following areas:
(i) External auditors’ procedures’ reviews:
䊏 Constitution and recording of time deposits at Banco BPI
䊏
Tax area – withholding tax obligations and taxation of
commissions and expenses
䊏
Real Estate Finance Division – Leasing and Commercial
Loans with Mortgage Guarantee
䊏
Operations Division – reconciliation of Nostro accounts
䊏
BFA – General computer controls – capture, authorisation,
processing and reporting of information
䊏
Banco BPI, Banco Português de Investimento, BPI Gestão de
Activos – Safeguarding Customers’ assets
䊏
Review of company tax form 22
䊏
BPI Gestão de Activos – Subscription and redemption of PU’s
and realisation of off-market operations involving unit trust
funds
䊏
BFA – Granting, monitoring and recovery of loans to
individuals and small businesses
䊏
Acquisition of goods and services at Banco BPI
䊏
Banco Português de Investimento – Corporate Finance
Division
䊏
Human Resources Division – Remuneration, Data bases and
Budget area
䊏
Individuals’ Loans Recovery and Litigation Division – Legal
Recovery of Home Loans’ Area
(ii) Banco BPI’s Audit and Inspection Division’s audits
䊏 Cayman offshore branch
䊏
Banco BPI Cayman (follow up)
䊏
Offshore branches of the Azores, Madeira and Macau (follow
up)
䊏
Banco Português de Investimento – Private Banking Division –
Discretionary portfolio management within the ambit of the
DMIF
䊏
Personal loans
䊏
Madrid branch (follow up)
(iii) BFA’s Audit and Inspection Division’s audits
䊏
Human Resources Division
䊏
Loss incidents’ report
Furthermore, the Committee was informed at the January and
July meetings of all the incidents investigated by the DAI that
generated loss, respectively in the second half of 2009 and the
first six months of 2010, having analysed the operational
causes of these occurrences and the measures to eliminate
them. It also reviewed the financial loss incidents over the past
three years, with the cataloguing of the risks imputed to the
Bank, its Employees and those not assumed.
Also reviewed at those two meetings was the half-yearly
summary compiled by the New Channels Division covering
Customers’ complaints received at Banco BPI in the above
half-year periods, as well as the improvements of an
operational nature introduced stemming from the situations
which were the object of complaints.
The Compliance Division gave an account at the January
meeting of the activity undertaken by it and the increase in the
respective operating resources during 2009 as part of the
action directed at the prevention of money laundering and the
funding of terrorism, including the control action taken.
Special attention was also paid, at the October meeting, to the
report presented by the Procurement, Outsourcing and Assets
Division on outsourced activities, with indication of the inhouse and contracted procedures with the suppliers of services
in order to ensure proper control of this type of activity as
regards security, quality and pricing.
Finally, the July meeting’s agenda included the presentation of
the annual activity report relating to operational risk
management at the BPI Group during 2009, the coordination
of which is undertaken by the Organisation Division’s
Operational Risk Area. From the document presented, the
Committee learnt about the steps taken to promote selfevaluation of that risk and the adequate reporting of the
relevant events, the statistics of incidents and the resulting
losses as well as the tasks programmed in this area for 2010.
b) Credit risk
The Committee regularly analysed the trend and liabilities of
Customers being monitored by the Corporate Credit Risk
Division and by the Corporate and Small Businesses Credit
Recovery Division, and who find themselves in the following
situations:
䊏
defaults of more than 100 thousand euro of Customers with
exposure of more than 500 thousand euro;
䊏
twenty largest individual impairments, excluding Customers
in judicial recovery / action;
䊏
groups under observation, without impairment and with
exposure of more than 25 million euro.
285
In addition, the July and December meetings analysed the
situation of Customers with credit risk of more than 75 million
euro but less than 300 million euro, while exposures above the
latter limit are analysed by the Board of Directors.
The consideration of these matters was always backed by
clarifications given by the Director and the Central Managers
responsible for those Divisions, with special incidence on the
cases flagging greater risk or larger size.
The Committee also undertook when it considered it to be of
interest for the more in-depth evaluation of credit risk, the
review of Banco BPI’s exposure in specific sectors of activity,
having thus examined in particular credit risk incurred in the
motor vehicle, property development and State business
sectors.
In addition, it examined the first annual report on the
concentration of credit risk, to be lodged with the Bank of
Portugal pursuant to Instruction no. 2 / 2010.
On the other hand, the reviewing of the already-mentioned
half-yearly summaries on complaints prepared by the New
Channels Division provided the opportunity to assess
reputational risk linked to communications with Customers.
At the September meeting, it studied the Legal Division’s
report describing the procedures relating to the relationship
with the Directorate General for Taxes within the context of
compliance with its tax obligations.
Also analysed were the reports presented by the external
auditors on the quantification of sufficient economic provisions
relative to the risk implicit in Banco BPI’s and Banco
Português de Investimento’s loan portfolios with reference to
31 December 2009 and 30 June 2010.
The Committee also received information at the October
meeting about the work carried out during 2010 by the
Investor Relations Division in the discharge of its financial
information disclosure functions covering the control and
management of reputation risk in legally-stipulated terms, and
about the response to requests from investors, analysts and
other market agents.
Moreover, special attention was paid to the assessment by
those Auditors of the existing impairment models and the
proposed review of certain specific impairment analyses.
In addition, it reviewed the conclusions of the various
monitoring reports issued during the year by the rating firms
(Standard & Poor’s, Moody’s and Fitch Ratings).
c) Financial risks
In evaluating the management of the Group’s financial risks,
the Committee continued to pay special attention throughout
the year to analysing the behaviour of the monetary and
financial markets, and the attendant risks.
e) Compliance risk
The Committee examined at the January meeting the annual
report of the compliance function prepared by the Compliance
Division during 2009, in its mission of preventing and
mitigating compliance risk and more specifically, as already
mentioned, in the prevention of money laundering and antiterrorism financing.
Moreover, special attention was paid to the situation and
performance of the Group’s principal areas involved in
activities related to the financial markets, having carried out
the analysis of the specific policies and actions taken in this
domain.
In this regard, the Finance Division regularly furnished detailed
information about the chief aspects relating to the funding
structure and the Bank’s liquidity situation, namely the
evolution of Customer resources, long-term debt and the
medium and long-term liquidity projections; management of
the bond portfolio, including its composition and trend of the
main components; analysis of counterparties and respective
ratings; exposure to country risk.
The presentation of the quarterly document “Economicfinancial risks – domestic operations” (previously referred to
when dealing with the evaluation and promotion of the
effectiveness of the internal control system), also contributed
to elucidating the Committee in this area.
286
d) Reputational risk
The Committee reviewed at the July meeting the various
service quality evaluation factors, as well as the instruments
used at Banco BPI for its measurement, namely the service
quality indices “IQS – Índices da qualidade de serviços”.
It also acquainted itself with the behaviour of the indices and
the initiatives taken at central and commercial network level in
order to foster quality in Customer attendance and support.
The same meeting also studied the Legal Division’s report
describing the respective competencies and initiatives in the
function of controlling legal risk, i.e. as concerns the
compliance risk aspect, and its coordination with the
Compliance Division in this matter. Through this report, the
Committee learnt about the losses incurred in 2009 resulting
from that risk.
Still in the sphere of compliance, the Committee reviewed at
the April and July meetings the information prepared by the
Compliance Division about compliance with the BPI Group’s
Code of Conduct as regards Employees’ duties relating to
transactions involving financial instruments.
5. Monitoring the activity and evaluating the effectiveness of
internal audit activity
The monitoring of the Audit and Inspection Division’s work and
the evaluation of its efficacy were undertaken during the year
through:
䊏
the approval of the four-monthly audit plans;
䊏
the review of the activity undertaken by the Division in each
half year;
䊏
the four-monthly analysis of the audits performed in the last
three years and the underlying criteria;
䊏
the analysis of the principal findings of the half-yearly audits.
In endorsing the audit plans, the Committee was concerned
with guaranteeing as regards the central services and the
Group companies, adequate distribution of the audit work over
the major risk areas and, as regards the commercial network,
the greatest coverage possible of the branches and corporate
centres, namely, by means of distance audits.
6. Monitoring and evaluating the Portuguese statutory auditors’
independence and activity
The Committee supervised and evaluated throughout the year
the activity and independence of the Portuguese statutory
auditors, namely as regards the provision of additional services.
The Committee issued an opinion on the external auditors’
procedural review plan for 2010 at Banco BPI and Banco
Português de Investimento, with a view to its approval by the
Supervisory Board. In addition and as already referred to, it
studied the findings of those reviews and followed through the
adoption of the resulting recommendations.
It also pronounced for the same purpose on the proposed fees
relating to the External auditors’ annual work plan at those two
banks and at the other Group companies.
The Committee analysed and proposed to the Supervisory
Board the approval of the proposed services to be provided by
the External auditors for work not directly related with their
assurance functions.
Another important contribution to the measurement of audit
activity entailed the already-mentioned periodic verification of
the implementation of the recommendations issued by the
Audit and Inspection Division and by the external auditors, and
the review of the justification presented by the bodies audited
in those cases where these were not implemented.
The monitoring and control of the activity of BFA’s Audit,
Inspection and Security division were meanwhile undertaken
through the review of its 2009 activity report and the approval
of the respective audit plan for 2010, which functions are
exercised within the scope of the Committee’s terms of
reference as concerns the Group companies subject to
supervision on a consolidated basis.
287
3.7. PORTUGUESE STATUTORY AUDITOR
The Portuguese Statutory Auditor is responsible for performing
all the examinations and all the attest work needed to audit and
certify the accounts.
The Portuguese Statutory Auditor is appointed by the General
Meeting, following a proposal by the Supervisory Board. This can
be a natural person or a firm with the status of Portuguese
Statutory Auditor. In addition to the member in office, an
alternate member must be appointed.
3.7.1. Portuguese Statutory Auditor1
In office
Deloitte & Associados, SROC, S.A.,
represented by António Dias
Alternate
Carlos Luís Oliveira de Melo Loureiro
In a statement dated 19 July 2010, Deloitte communicated to
the Bank that for reasons of a professional nature, its
representation in the office of Portuguese statutory auditor,
hitherto assumed by Mrs. Maria Augusta Cardador Francisco, will
now be assumed by Mr. António Marques Dias. This alteration
permitted complying with the rules relating to the rotation of the
audit partner.
PRINCIPAL FUNCTIONS OF THE
PORTUGUESE STATUTORY AUDITOR
3.8. CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is a consultative body of
the Board of Directors. Its function is, besides its core mission
of supporting and advising the Board of Directors on matters
relating to corporate governance, to make pronouncements on
matters within the scope of corporate social responsibility,
ethics, professional conduct and environmental protection. The
Committee prepares an annual report on the functioning of the
company’s corporate governance structure.
3.8.1. Composition
The Corporate Governance Committee is composed of three to
five members of the Board of Directors who do not form part of
the Executive Committee (provided for in article 16(3)(a) of the
Company’s Statutes). Currently, this Committee is composed of 5
members of the Board.
If not a member of the Executive Committee, the Chairman of
the Board of Directors will form part of and chair the Corporate
Governance Committee, which shall appoint a Deputy-Chairman
from amongst its members, as well as the Chairman where, in
relation to the Chairman of the Board of Directors, that situation
does not apply.
COMPOSITION OF THE
CORPORATE GOVERNANCE COMMITTEE
Chairman
Artur Santos Silva
Members
䊏
䊏
䊏
䊏
Verifying that the books, accounting records and
supporting documents are in a fit and proper state.
Tomaz Jervell
Examining when deemed necessary and in the
manner it considers appropriate the cash balance
and the inventory of any type of assets or amounts
belonging to the company or received by it as
security, deposit or for whatever other reason.
Attesting to the accuracy and reliability of the
annual report and accounts.
Checking that the accounting policies and valuation
criteria adopted by the Company result in a true
and fair view of the assets and liabilities and its
profit or loss for the period.
3.7.3. Legal responsibility
Portuguese law provides that the Portuguese Statutory Auditor
(Portuguese Statutory Auditor – ROC) is liable to the Company,
the Shareholders and the Creditors, as well as enshrining the
Portuguese Statutory Auditor’s duty of vigilance.
1) Members re-elected at the Shareholders’ General Meeting of 23 April 2008 up to the end of the 2008 / 2010 term of office.
288
PRINCIPAL TERMS OF REFERENCE OF THE CORPORATE GOVERNANCE COMMITTEE
It is the function of the Corporate Governance Committee
䊏
on the definition of policies aimed at the exercise of
corporate responsibility and protection of the
to support and advise the Board of Directors:
environment;
䊏
on refining the BPI Group’s governance and oversight
䊏
䊏
conduct, designed to impose the observance of stringent
principles and practices which ensure a diligent, effective
principles of ethics and conduct in the performance of
and balanced management of the Shareholders’ and other
the functions attributed to the members of the BPI
stakeholders’ interests; 䉯
Group’s governing bodies and to Employees.
to ensure compliance with the guiding principles of the
BPI Group’s governance policy;
With regard to corporate responsibility and environmental
protection, the Corporate Governance Committee shall give
support to the Board of Directors in the definition of the
policy guidelines to be followed in these domains by the
BPI Group, taking into account their approval by the
Shareholders’ General Meeting.
to prepare annually for the Board of Directors a report on
the functioning of the governance structure implanted,
which includes an opinion on this structure’s efficiency
and the performance of the bodies comprising it, as well
as the proposals which it considers appropriate for its
improvement;
It is also responsible for pronouncing, at its initiative or
when requested by the Board of Directors, on issues
related to these matters, and specifically with the
execution of the social solidarity, education, research and
cultural patronage policies pursued by the BPI Group.
without prejudice to the annual report referred to in the
preceding paragraph, to propose to the Board of
Directors, whenever it deems this appropriate or when
solicited, measures directed at refining the corporate
governance model implanted and to facilitate the
pursuance of the respective objectives, in particular as
concerns:
䊏
䊏
䊏
䊏
䊏
䊏
on the preparation and implementation of rules of
model, with the object of promoting compliance with the
In the performance of its duties as regards the refining of
BPI Group’s governance and oversight model, it is the
function of the Corporate Governance Committee, namely:
䊏
䊏
Within the ambit of its function of drafting and
implementing standards of ethical and deontological
conduct, the Corporate Governance Committee is
responsible for, in particular:
䊏
the structure, division of duties and functioning of the
governing bodies,
the exercise of corporate rights by BPI Group entities,
the promotion of the right to vote and Shareholder
representation,
the promotion of relations with investors and
transparency of information to the market,
to inform the Board of Directors of any situations or
occurrences of which it has knowledge and which, in its
opinion, amount to non-compliance with the established
governance rules and practices or which may prejudice
the application of the respective guiding principles;
䊏
䊏
proposing to the Board of Directors the measures it
considers adequate for fostering a culture of ethics and
professional conduct at the heart of the BPI Group, and
its dissemination to the various hierarchical levels at the
companies belonging to its universe;
refining and updating the BPI Group’s Code of Conduct,
presenting to the Board of Directors proposals in this
regard;
promoting, guiding and overseeing the effective
compliance with the BPI Group’s Code of Conduct, as
well as with the Codes of Conduct of the Professional
associations applicable to the BPI Group’s companies or
their Employees.
to monitor and analyse latest practices and guidelines on
corporate governance produced by national and
international bodies with a view to their possible
incorporation into the BPI Group’s model.
289
3.8.3. Functioning
The Corporate Governance Committee shall meet whenever it is
convened by the respective Chairman or by two of its members
and, in particular, whenever it has to give an opinion on matters
within its jurisdiction, indicated in Article 2(1) of its
Regulations. 䉯
The meetings of the Corporate Governance Committee must be
convened with ten days prior notice, indicating the matters to be
dealt with.
At the meetings of the Corporate Governance Committee the
Company Secretary shall prepare succinct minutes containing
the principal matters addressed and the conclusions drawn.
3.8.4. Activity in the year
ACTIVITY OF THE CORPORATE GOVERNANCE COMMITTEE
25 February 2010
䊏
Consideration of the BPI Group’s proposed 2010 Corporate
The Corporate Governance Committee met on 25 February
Governance Report to be submitted to the Board of Directors
2010, having dealt with the following topics:
for approval;
䊏
䊏
䊏
Review of BPI’s situation vis-à-vis compliance with legal
and regulatory requirements, and the adoption of the
recommendations applicable to 2009, having deliberated
to prepare the Governance Report relating to 2009 in
accordance with CMVM Regulation no. 1 / 2007 and the
CMVM’s Corporate Governance Code in force at
31 December 2009;
Deliberation as to the opinion to give to the Board of
Directors relating to the content of the declaration to be
presented by this body to the Shareholders General Meeting;
Consideration of the proposed amendments to Banco BPI’s
statutes to be presented by the Board of Directors to the
Shareholders’ General Meeting of 27 April 2011;
䊏
Review of Banco BPI’s activity in 2010 within the ambit of
its social responsibility duties, with the Committee having
viewed very positively the fact that the Bank, notwithstanding
the constraints stemming from the international crisis and
attendant impacts on earnings, maintained its social
responsibility commitments, continuing the support given to
leading institutions in the fields of culture, education,
innovation, science and social solidarity. In the latter domain,
䊏
Consideration and approval of the BPI Group’s Corporate
Governance Report in 2009 to be submitted to the Board
of Directors for approval.
special mention is made of the initiative “Prémio BPI
Capacitar” designed to support projects covering Portuguese
society which improve the quality of life and the social
integration of handicapped or permanently disabled people,
14 March 2011
as well as the support given to the Madeira Autonomous
The Corporate Governance Committee met on 14 March 2011,
Region in the wake of the devastating storms and mudslides
having dealt with the following matters:
which occurred in February 2010, which funds were
earmarked for the reconstruction of housing in Ribeira Brava.
䊏
BPI’s situation relating to compliance with legal and
regulatory provisions and the adoption of the
recommendations applicable to the 2010 financial year;
3.9. NOMINATIONS, EVALUATION AND REMUNERATION
COMMITTEE
The Nominations, Evaluation and Remuneration Committee is a
consultative body of the Board of Directors and was created in
2006. Its function is to give opinions on the filling of vacancies
that may occur on the governing bodies, on the choice of
Directors to be appointed to the Executive Committee and on the
appraisal and fixing of this Executive Committee’s compensation.
3.9.1. Composition
The Nominations, Evaluation and Remuneration Committee is
composed of three to five members (currently five) of the Board of
Directors who do not form part of the Executive Committee
envisaged in article 16(3)(a) of the Company’s Statutes.
If not a member of the Executive Committee, the Chairman of the
Board of Directors will form part of and chair the Nominations,
Evaluation and Remuneration Committee, which shall appoint a
Deputy-Chairman from amongst its members, as well as the
Chairman where, in relation to the Chairman of the Board of
Directors, that situation does not apply.
COMPOSITION OF THE NOMINATIONS, EVALUATION
AND REMUNERATION COMMITTEE
Chairman
Artur Santos Silva
Members
Herbert Walter
290
At least one of the Members of the Nominations, Evaluation and
Remuneration Committee must meet the following requirements:
䊏
䊏
not be associated with any specific interest group in the
Company; 䉯
not be in a situation capable of affecting his / her impartiality
of analysis or decision making, namely by reason of being the
holder or acting in the name of or on behalf of the holders of
qualified shareholdings of 2% or more in the Company.
PRINCIPAL TERMS OF REFERENCE OF THE NOMINATIONS, EVALUATION AND REMUNERATION COMMITTEE
It is the function of the Nomination, Evaluation and
Remuneration Committee to support and advise the Board
of Directors:
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䊏
on the filling of vacancies occurring on the governing
bodies;
on the choice of Directors to be appointed to the
Executive Committee; 䉯
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䊏
on the conduct of the process involving the annual
evaluation of the members of the Executive Committee;
on the preparation of the report to be submitted to the
Remuneration Committee envisaged in Article 28(2) of
the Company's statutes, relating to the fixing of the
variable remuneration of the members of the Executive
Committee.
In its support functions for the filling of vacancies on the
Within the scope of the annual evaluation and fixing of the
governing bodies and for the appointment of Executive
variable remuneration of the members of the Executive
Directors, the Nomination, Evaluation and Remuneration
Committee, the Nomination, Evaluation and Remuneration
Committee shall:
Committee is responsible for proposing to the Board of
䊏
䊏
prepare and update all the qualifications, knowledge and
Directors the criteria to be used in this process, which
professional experience required for the performance of
should include proper appraisal of merit, individual
the functions attributed to the members of the various
performance and contribution to the Executive Committee’s
governing bodies and of the Executive Committee;
efficiency.
monitor the selection and appointment of the senior
personnel of the BPI group companies in order to ensure
that there is an available recruitment base of future
Executive Directors;
䊏
The Nomination, Evaluation and Remuneration Committee
is also responsible for reporting to the Board of Directors
on the recommendations which the latter makes to the
Remuneration Committee envisaged in Article 28(2) of the
prepare a substantiated report for the Board of Directors,
Companies Statutes relating to the definition and
identifying the persons who in its opinion possess the
alterations to the general remuneration policy of the
most suitable profile to fill a vacancy whenever this
Executive Committee, as well as to the variable
occurs on the governing bodies or on the Executive
remuneration programmes based on Banco BPI shares or
Committee.
options (i.e. the share incentive scheme).
The remuneration policy in force at the BPI Group is detailed in
chapter 7 of the present report (pages 306 to 323).
The Nominations, Evaluation and Remuneration Committee in
preparing its report to the Remuneration Committee, and the
Remuneration Committee itself define the variable remuneration
of executives according to their performance evaluation and carry
out that evaluation based on the following criteria which (i) are
consistently used over the years and are hence predetermined
and (ii) are quantitative. Effectively, besides the non-quantitative
parameters (such as those linked to reputation / level of
complaints, etc.), the Remuneration Committee also takes
special account the following quantitative parameters: i)
solvency (solvency ratio, non-performing loan ratios, repossessed
properties under foreclosure proceedings and the situation of
Banco BPI’s pension fund); ii) profitability (ROE and net interest
income after impairments) and efficiency (cost to income ratio);
iii) market position (market shares); iv) liquidity (ratio of
transformation of balance sheet resources into loans, maturity of
medium / long term debt and level of ECB utilisation).
The evaluation of performance assesses the contribution of each
one of the executives in the light of those criteria.
Consequently, the Bank complies with the recommendation
appearing in point II.1.5.1(i), according to which the
remuneration of the Directors who perform executive functions
should incorporate a variable component, the amount of which
depends on a performance evaluation carried out by the
company’s competent bodies, in accordance with predetermined
measurable criteria that takes into account the company’s real
growth and the value actually created for the Shareholders, its
long-term sustainability and the risks assumed, as well as
compliance with the rules applicable to the company’s business.
291
3.9.3. Functioning
The Nominations, Evaluation and Remuneration Committee
meets whenever convened by the respective Chairman or by two
of its members and, in particular, whenever it has to give an
opinion on matters falling under its terms of reference, as
indicated in article 2(1) of its Regulations.
The meetings of the Nominations, Evaluation and Remuneration
Committee must be convened with ten days prior notice, which
notice must indicate the matters to be dealt with.
At the meetings of the Nominations, Evaluation and
Remuneration Committee, the Company Secretary shall prepare
succinct minutes of the matters dealt with and the respective
conclusions arrived at.
ACTIVITY OF THE NOMINATIONS, EVALUATION AND REMUNERATION COMMITTEE
9 March 2010
Chairman and the Deputy Chairman and with the other
The Nominations, Evaluation and Remuneration Committee
members of the Executive Committee, at which it assessed its
met on 9 March 2010 with the following order of business:
performance in 2010 taking into consideration quantitative
(solvency, profitability, market position and liquidity) and
䊏
Evaluation and remuneration of the members of the
qualitative (reputation indicators and level of Customer
Executive Committee – after having held individual meetings
complaints) parameters.
with the Chairman and Deputy-Chairman of the Executive
As a result of the evaluation conducted the opinion to be
Committee, a decision was taken on the opinion to be
submitted to the Remuneration Committee was approved as
submitted to the Remuneration Committee relating to the
regards the fixing of the amounts of the variable remuneration
fixing of the variable remuneration to be granted to the
to be granted to the members of the Executive Committee for
members of the Executive Committee for their performance
in 2009;
䊏
their performance in 2010;
䊏
RVA 2010 – The Committee deliberated to recommend to
RVA 2009 – The Committee deliberated to recommend to the
the Remuneration Committee that, considering the
Remuneration Committee that, bearing in mind the situation
prevailing situation on the stock market and in line with
prevailing in the equity market and along the same lines as
what was deliberated by the Executive Committee for other
that deliberated by the Executive Committee for the
BPI Group Employees, the members of the Executive
remaining BPI Group Employees, the Executive Committee
Committee of the Board of Directors will receive the variable
members of the Board of Directors can elect to receive the
remuneration relating to 2010, at their option, in cash or in
variable remuneration relating to the 2009 financial year in
accordance with the RVA rules in force, without prejudice to
cash or according to the RVA rules in force.
the application of the relating to the deferral for 3 years and
subjection to the suspensive conditions laid down in the
Remuneration Policy approved at the General Meeting of
15 and 25 March 2011
22 April 2010;
The Nominations, Evaluation and Remuneration Committee met
on 15 March 2011, with the meeting continuing on 25 March,
having dealt with the following issues:
䊏
Identification of talent – The Committee considered and
discussed with the Chairman of the Executive Committee
the identification of talent in the Bank’s top ranks who meet
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292
Evaluation and remuneration of the members of the Executive
the conditions for qualifying for access to the Executive
Committee. The Committee held individual meetings with the
Committee, as well as the alternatives for their succession.
3.10. REMUNERATION COMMITTEE
The Remuneration Committee envisaged in article 28 (2) of the
Statutes is elected by the General Meeting.
3.10.1. Composition
The Remuneration Committee is composed of three Shareholders
elected for three-year terms by the General Meeting, and who in
turn elect a Chairman (who has the casting vote).
COMPOSITION OF THE REMUNERATION COMMITTEE
Nenhum
dos membros
designados para
Comissão de
IPI – Itaúsa
Portugal Investimentos,
SGPS,a Lda.,
Remunerações
o Conselho
Administração. No entanto,
representedintegra
by Carlos
da Camarade
Pestana
as pessoas singulares que os membros designados indicaram
Arsopi – Holding, SGPS, S.A.,
para represented
exercer os respectivos
cargosLeite
na Comissão
by Armando Costa
de Pinho de
Remunerações integram igualmente o Conselho de
HVF, SGPS, S.A.,
Administração.
represented by Edgar Alves Ferreira
None of the members designated to the Remuneration
Committee form part of the Board of Directors. On the other
hand, the individual persons who the designated members
indicated to occupy the respective positions on the
Remuneration Committee also form part of the Board of
Directors, as non-executive members. All the members of the
Remuneration Committee currently occupy or have occupied in
the past management positions at various other companies,
possessing the knowledge and experience in remuneration policy
matters (to comply with II.38. of Reg. 1 / 2010 CMVM and
recommendation II.5.2.).
The Remuneration Committee does not resort to the services of
natural or legal persons who are not considered independent
because they are linked by employment or service contract to the
Board of Directors as well as, when applicable, when those
persons have a current relationship with entities working as BPI’s
consultants.
The Remuneration Committee's function is to fix the
remuneration of the members of Banco BPI's governing bodies,
and to formulate the remuneration policy and the retirement
regime to apply to members of Banco BPI's Executive Committee
and to members of Banco Português de Investimento's Board of
Directors. The Committee also carries out the evaluation of the
members of Banco BPI’s Executive Committee and of Banco
Português de Investimento’s Board of Directors with a view to
determining their respective annual variable remuneration.
According to the Statutes (article 28) at the time of the
appointment of the Remuneration Committee by the General
Meeting, the latter shall prescribe for each term the limits of the
fixed remuneration for all the members of the Board of Directors
and the percentage of net profit (not exceeding 5%) that can be
allocated to the variable remuneration of the Executive
Committee.
No Director has the power to fix his / her own remuneration.
The principles, criteria and amounts involved in fixing the
remuneration of the members of Banco BPI’s governing bodies
are covered in greater detail in chapter seven (“Remuneration”)
of the present report.
3.10.3. Responsibility and adherence to codes of conduct
The members of the Remuneration Committee are bound by a
strict duty of confidentiality with respect to the matters
discussed at the Committee’s meetings.
3.10.4. Representation at the AGM
The Remuneration Committee is represented at the
Shareholders’ Annual General Meetings through the presence of
at least one of its members.
293
The three members of the Remuneration Committee were
present at the following meetings. The attendance level was
100%.
REMUNERATION COMMITTEE’S ACTIVITY
9 March 2010
The Committee approved the amount of the variable
The Remuneration Committee approved the specific values
remuneration to be granted to each one of the members of the
stemming from the application of the aforementioned
Executive Committee relating to the 2009 financial year, in
resolutions applicable to each one of the members of the
harmony with the recommendation of the Nominations,
Executive Committee for 2010.
Evaluation and Remuneration Committee.
The Committee, bearing in mind the situation prevailing in the
25 March 2011
equity market and along the same lines as that deliberated by
The Committee approved the amount of the variable
the Executive Committee for the remaining BPI Group
remuneration to be granted to each one of the members of the
Employees, approved the application to the Executive
Executive Committee relating to 2010, in consonance with the
Committee members of the Board of Directors of the possibility
content of the recommendation of the Nominations,
of them electing to receive the variable remuneration relating
Evaluation and Remuneration Committee.
to the 2009 financial year in cash or according to the RVA
rules in force.
The Committee, taking into consideration the situation
prevailing on the stock market and in line with the resolution
The Committee also approved the text of the declaration on the
of the Executive Committee relating to the BPI Group’s other
Remuneration Policy of the members of the management and
Employees, approved the application to the Executive
oversight bodies to be tabled at the Shareholders General
Committee members of the possibility of these receiving the
Meeting to be held on 22 April 2010.
variable remuneration relating to 2010, at their option, in
cash or according to the RVA rules in force, in any event,
21 July 2010
without prejudice to the application of the rules relating to the
Following the approval by the Shareholders General Meeting of
deferral for 3 years and subjection of access to the suspensive
22 April 2010:
conditions laid down in the Remuneration Policy approved at
the General Meeting of 22 April 2010.
䊏
of a rebalancing of the fixed and variable remuneration of the
The Committee also approved the content of the statement on
members of the Executive Committee of the Board of
Remuneration Policy of the members of the management and
Directors, by virtue of which of the total remuneration (fixed
supervisory bodies to be presented to the Shareholders
and variable), the fixed remuneration is increased by 30% at
General Meeting of 27 April 2011.
the expense of the variable remuneration;
䊏
of the making of an annual contribution of 12.5% of the
change in the fixed remuneration resulting from the
abovementioned rebalancing rules, earmarked for a defined
contribution pension plan with the beneficiary being the
respective executive Director;
294
3.11. COMPANY SECRETARY
The Company Secretary is appointed by the Board of Directors.
The duration of his / her functions coincides with the term of
office of the members of the Board of Directors which appointed
him / her. In the case of the secretary’s absence or impediment,
his / her functions will be performed by the alternate secretary. 䉯
3.11.1. Company Secretary
In Office
João Avides Moreira
Alternate
Fernando Leite da Silva
In addition to the other functions attributed by the Bank, the Company Secretary performs the functions contemplated in the law:
PRINCIPAL TERMS OF REFERENCE OF THE COMPANY SECRETARY
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䊏
䊏
䊏
䊏
solicited from the members of the governing bodies
which exercise oversight functions covering the
deliberations of the Board of Directors or of the Executive
Committee.
To serve as secretary at the meetings of the governing
bodies.
To record the minutes and sign them together with the
members of the respective governing bodies and the
Chairman of the General Meeting Committee, when this
is the case.
To keep, store and maintain in proper order the minute
books and loose minute sheets, the list of presences, the
share register, as well as attending to the routine matters
relating to these.
䊏
䊏
To expedite the legal notices convening the meetings of
all the governing bodies.
To authenticate the signatures of the members of the
governing bodies placed on the company’s documents.
䊏
䊏
To certify that all the copies or transcriptions extracted
from the company’s books or of filed documents are
genuine, complete and up-to-date.
䊏
䊏
To satisfy within the scope of the terms of reference, the
requests formulated by Shareholders in the exercise of
their right to information and to furnish the information
To certify the content, total or partial, of the company’s
statutes in force, as well as the identity of the members
of the company’s various bodies and which are the
powers vested in them.
To certify the up-dated copies of the statutes,
deliberations of the Shareholders and of management,
and of the entries in force appearing in the company’s
books, as well as ensuring that they are handed over to or
sent to the owners of the shares who have requested
them and have paid the respective cost.
To authenticate with his / her initials all the
documentation submitted to the General Meeting and
that referred to in the respective minutes.
To promote the registration of the company’s acts subject
to this requirement.
295
3.12. MANAGEMENT OF OTHER RELEVANT BPI GROUP
ENTITIES
3.12.1. Banco Português de Investimento’s management
Banco Português de Investimento is the Group unit specialising
in investment banking, namely Corporate Finance, Equities and
Private Banking.
Banco Português de Investimento’s Board of Directors is made
up of six members, of whom two, the Chairman and the DeputyChairman, are non-executive directors, and four are executive
Directors who constitute the Executive Committee responsible for
the day-to-day business management. This body is presided over
by Manuel Ferreira da Silva, executive Board member of the
entity heading the Group, Banco BPI.
Banco Português de Investimento’s Board of Directors
composition
Directors
Executive
Non-executive
Fernando Ulrich
Chairman
António Domingues
Deputy-Chairman
Chairman
•
•
•
The board member Carlos Jaime Casqueiro presented his
resignation from office at 30 April 2010, which, under the terms
of the law, was effective at the end of the following month, i.e.,
at 31 May 2010.
3.12.2. Banco de Fomento Angola’s management
Structure and functioning rules
Banco de Fomento S.A.R.L. – 50.1% held by Banco BPI – is an
Angolan-law bank engaged in commercial banking business in
the Republic of Angola.
In terms of the relevant Statutes, Banco de Fomento Angola,
S.A. (BFA) is managed by a Board of Directors composed of an
uneven number of members, with a minimum of seven and a
maximum of fifteen (currently eleven), which can delegate the
day-to-day running of the company to an Executive Committee,
composed of three or five directors (currently five).
Banco Português de Investimento’s Executive Committee
composition
Directors
As is the case at Banco BPI, all the members of the Board of
Directors are bound by strict confidentiality rules concerning the
matters discussed at the Board’s meetings, as well as by a set of
internal rules. These are embodied in a code of conduct aimed
at safeguarding against conflicts of interest or situations
involving the abuse of privileged information. This issue is dealt
with in greater detail under point 9 – Code of Ethics and
Professional Conduct, of this report (pages 325 to 330).
Office
Chairman
Member
Member
Member
The Board of Directors can only pass resolutions when the
majority of its members are present or represented. Resolutions
can only be passed by an absolute majority of votes, with the
Chairman having the casting vote. Any Director can be
represented at a meeting by another Board member, by means of
a letter addressed to the Chairman, although each proxy
instrument may not be used more than once.
The Board of Directors, which is attributed the widest powers to
manage and represent the company, meets every quarter and
whenever convened by its Chairman or at the request of more
than half of the Directors. The Executive Committee meets at
least once a month. The resolutions of the Board of Directors
and the Executive Committee are recorded in the minutes.
The Board of Directors and the Executive Committee can only
deliberate in the presence of the majority of their members, with
their resolutions being adopted by a majority of votes. The
Chairman has the casting vote.
PRINCIPAL TERMS OF REFERENCE OF BFA’S EXECUTIVE COMMITTEE
䊏
䊏
䊏
Admissions, definition of Employees’ levels and
categories, in the terms envisaged in the budget and in
the decisions approved by the Board of Directors.
Exercise of disciplinary power and application of any
sanctions.
䊏
Realisation of foreign-exchange operations.
䊏
Opening or closure of branches or agencies.
䊏
Realisation of deposit-taking operations.
䊏
Representation of BFA in and out of court.
䊏
296
Granting of loans, provision of personal guarantees and
acquisition, disposal or encumbering of negotiable
securities, provided that this does not result in an
involvement in one only entity or group of more than
USD 7.5 million.
Acquisition, disposal and encumbering of movable and
immovable assets or the acquisition of services up to an
individual amount of USD 1 million.
䊏
Constitution of authorised signatories for performing
certain acts or categories of acts, defining the extension
of the respective mandates.
All the members of Banco de Fomento Angola’s governing bodies
are bound by strict rules of confidentiality and are subject to a
set of rules designed to prevent the existence of conflicts of
interest or the abuse of privileged information, at the same
adhering to the best practices and principles of good and
prudent management.
BFA’s Executive Committee composition
Directors
Areas of responsibility
Emídio Pinheiro
Chairman of the Executive Committee,
Corporate Banking, Legal Affairs,
Corporate Loan Risk and Marketing
Carlos Ferreira
Human Resources, Operations, Information
Systems, Organisation, Audit and
Inspection, Material Resources
BFA’s Chair of the General Meeting composition
Mariana Assis
Accounting, Planning and Control
Rui de Faria Lélis
Chairman
António Matias
Secretary
Individuals’ and Small Businesses
Banking, Loans to Individuals and
Businesses Division
Vera Escórcio
Finance
BFA’s Board of Directors composition
Board
of Directors
Executive
Committee
Supervisory Board
Amílcar Safeca
Fernando Ulrich
Chairman
Isabel dos Santos
Deputy-Chairman
Susana Trigo Cabral
António Domingues
Deputy-Chairman
Henrique Camões Serra
Member
Mário Silva
Member
Diogo Santa Marta
Member
Emídio Costa Pinheiro
Member
Chairman
Carlos Alberto Ferreira
Member
Member
Mariana Assis
Member
Member
António Matias
Member
Member
Vera Escórcio
Member
Member
Chairman
Member
Certified Accountant
BFA’s external auditors are PKF – Angola, Auditores e
Consultores, Lda., while the contractual auditors are Deloitte &
Touche – Auditores, Lda.
In order to facilitate contact between the various members of
BFA’s senior management and Banco BPI, BFA’s head office
possesses a video-conferencing system which allows Luanda to
connect to Banco BPI’s main premises in Lisbon and Oporto.
The current members of the Executive Committee reside
permanently in Angola and are responsible for the following areas. 䉯
LEGAL AND REGULATORY FRAMEWORK GOVERNING BFA’S ACTIVITY
entered into between Shareholders, are subject to registration
1. Financial Institutions Act
The basic enactment for Financial Institutions (Law 1 / 99,
revised by Law 13 / 05) regulates the process for the
at the Banco Nacional de Angola;
䊏
the activity and the annual report and accounts are subject to
establishment, exercise of activity, supervision and funding of
external audit by a company recognised and established in
financial institutions, banking and non-banking (namely,
Angola.
financial-lending, micro-credit, leasing companies subject to
the jurisdiction of the Angolan Central bank (Banco Nacional
Law no. 13 / 05 prescribes that the supervisory entities for
de Angola) or financial holding, asset management, investment
financial institutions are Banco Nacional de Angola, the
fund, real-estate management and investment companies,
Insurance Supervision Institute (Instituto de Supervisão de
subject to the jurisdiction of the Securities Market Supervisory
Seguros) and the Securities Market Supervisory Body
Body).
(Organismo de Supervisão do Mercado de Valores Mobiliários).
The regulations require, amongst other aspects, that:
The Act also prescribes in a separate chapter rules of conduct
䊏
䊏
䊏
䊏
the credit institutions with head office in Angola adopt the
on matters such as: professional confidentiality, cooperation
form of public limited companies;
with the supervisory entities of other States, conflicts of
they have a share capital that is not less than the legal
interest of members of governing bodies and the defence of
minimum and which is represented by nominative shares;
competition.
the transactions between residents of blocks of shares
representing more than 10% of the capital or any transaction
Similarly, the prudential and supervisory rules are described in
involving non residents, are subject to the central bank’s
greater detail in a separate chapter, embracing in particular,
authorisation (Banco Nacional de Angola, BNA);
prudential relations and limits, supervisory procedures and the
the public deed of incorporation, the members of the
affirmation of sound and prudent management rules, as well as
management and supervisory bodies, as well as agreements
the duty to supply information to the supervisory body.
297
2. Supervision
As a bank subject to Angolan law, BFA is subject to the
supervision of Banco Nacional de Angola which, according to
its Organic Law, has as its principal objectives the preservation
This Notice revoked Notice 04 / 98 which fixed as the
minimum amount of share capital for commercial and
investment banks the local currency equivalent of 4 M.US$.
of the national currency’s value and the stability of the
financial system.
To this end, the BNA is vested with powers to regulate and
supervise the banking system.
Subsidiary, BFA as an entity invested in by Banco BPI, is
subject in terms of Portuguese banking legislation and
complementary regulations, to supervision on a consolidated
basis by the Bank of Portugal.
3. Money laundering and terrorism financing
Law 12 / 10 was published on 9 July 2010, the aim of which
is the combat against money laundering and terrorism
Adequacy of own funds
Notice 05 / 07 defines the general formula for the calculation
of the Regulatory Solvency Ratio (RSR) and prescribes a
minimum RSR of 10%. It provides that complementary own
funds can correspond to a maximum of 100% of the amount of
Basis Own Funds after making the deductions envisaged for
their calculation.
Instruction 06 / 09 classifies assets according to their degree
of risk and fixes the respective weightings for calculating RSR.
With the entry into force of this new instruction, certain
guarantees, public-debt securities and collateral deposits, can
be used for the deduction of the value of risk-weighted assets
providing that they meet all the requirements laid down.
financing. Financial entities are bound, in the carrying on of
their respective businesses, to observe the following general
RSR =FPR / [APR + (CRC / minimum ratio)]*100
obligations:
䊏
obligation of identification;
䊏
obligation of diligence;
䊏
obligation of refusal;
䊏
obligation of conservation;
䊏
obligation of communication;
䊏
obligation of abstention;
䊏
obligation of cooperation;
䊏
obligation of confidentiality;
䊏
obligation of control;
䊏
obligation of training.
In which,
FPR = Regulatory Own Funds
APR = Risk Weighted Assets
CRC = Capital for Currency Risk and gold, that is, amounts
exposed to market risk arising from variations in the exchange
rate and in the gold price, multiplied by the respective factors
determining the own funds requirement.
Currency position limit
Notice 05 / 10 defines the basis for calculating the exposure
to currency risk and states that the currency position is limited
to 20% of Regulatory Own Funds for long and short positions.
In order to enable financial institutions to adjust to the new limits,
the following implementation timetable should be observed:
In addition, financial entities which are credit institutions
䊏
at 31 December 2010, the limit is 70% for long positions
and 40% for short positions;
third countries.
䊏
at 30 June 2011, the limit is 50% for long positions and
30% for short positions;
In cases of operations which reveal special risk of money
䊏
at 31 December 2011, the limit is 30% for long positions
and 20% for short positions;
䊏
at 30 June 2012, the limit is 20% for long positions and
20% for short positions;
should also apply reinforced diligence measures to cross-border
banking correspondent relations with institutions established in
laundering or terrorism financing, the supervision authorities of
the respective sector can prescribe the obligation of immediate
communication of those operations to the competent
authorities who in turn notify the Banco Nacional de Angola,
when the amount thereof in local currency is equivalent to
5 M.US$.
4. Principal prudential rules
Share capital and minimum own funds
Notice 04 / 07 fixes the new minimum amounts for share
capital and regulatory own funds for financial institutions (for
banks it is 600 M.AKZ i.e. roughly 8 M.US$).
298
Revokes Notice 06 / 07 that set the limits at 100% for long
positions and 40% for short positions.
Fixed asset limits
Notice 07 / 07 fixes the limit for resources invested in fixed
assets. The amount of fixed assets less depreciation and
amortisation deducted from financial investments cannot exceed
50% of Regulatory Own Funds.
Limits on risk concentrations involving one single Customer or
According to the new legislation, the revaluation is done based
group
on the change in the property’s market value as per a valuation
Notice 08 / 07 defines the concept of Customer and provides that:
certificate.
䊏
the maximum exposure limit per Customer cannot exceed
25% of regulatory own funds (the revoked Notice 05 / 96
fixed that limit at 30% of own funds)
Establishment of overseas branches and acquisitions of
participating interests
Notice 12 / 07 regulates the conditions and procedures
䊏
the maximum exposure limit for the 20 largest debtors
cannot exceed 300% of regulatory own funds.
governing the setting up of branches abroad and the
acquisitions of participating interests.
Classification of risk levels on lending operations
Relative to previous legislation, this Notice introduces the
Notice 04 / 09 prescribes that financial institutions must
requirement for prior Banco Nacional de Angola authorisation.
classify the loans granted and the guarantees given according
The previous legislation limited the direct or indirect interest to
to 7 levels, both on the estimated basis of probable losses,
15% of the investor financial institution’s own funds.
according to the debtor, the operations and the guarantees,
On the other hand, the overall amount of the qualified
and on the basis of the delays registered in debt servicing.
shareholdings (direct or indirect shareholding of more than
10% of the share capital or voting rights) in companies could
The classification of loans according to risk levels must be
reviewed every 12 months and on a monthly basis in
not exceed 60% of the investor financial institution’s own
funds.
accordance with the delays in the payment of capital or
charges. The minimum and maximum levels of provisions by
risk levels are defined which are based on the capital overdue
and the loans not yet due.
Formation of financial institutions
Notice 13 / 07 regulates the procedures for the formation of
financial institutions in Angola.
Revokes Notice 09 / 07.
Publication of results
Monetary adjustment
Notice 15 / 07 lays down the rules / procedures and frequency
Notice 10 / 07 sets out new rules for monetary adjustment
for the preparation of consolidated financial statements by
based on the Consumer Price Index (CPI) in the case of
financial institutions authorised by BNA to carry on business.
hyper-inflation. The variation in the fixed assets and own funds
accounts is now added to the respective balance, with the
In relation to previous legislation, this regulation introduces the
exception of the share capital account which is recorded in the
obligation to publish quarterly financial statements.
“Share capital monetary adjustment reserve”.
The existing balances on the accounts “Own funds
Compulsory reserves
maintenance reserve” and “Provision for maintenance of own
Instruction 03 / 10 sets a coefficient of 25% on local currency
funds” shall be transferred to the “Share capital monetary
deposits and 15% on foreign currency deposits.
adjustment reserve” account.
The coefficient base is calculated weekly on the arithmetic
In the previous legislation, the monetary adjustment (share
average of the balances of the respective accounts on the
capital + reserves + retained earnings) was done monthly
previous week’s business days.
based on the currency variation occurring in the period,
through the creation of a provision for maintenance of own
Revokes Instruction 08 / 09 that set the coefficient at 30% of
funds. At the end of the year, the provision for maintenance of
total deposits.
own funds account was written off against the reserve for the
maintenance of own funds account.
Procedures of the system of management, settlement and
custody of securities issued by the national treasury and by
Revaluation of fixed properties for own use
BNA
Notice 11 / 07 define the rules for properties for own use.
Notice 01 / 08 defines the requirements for participation in
Previously, the revaluation of tangible fixed assets was carried out
the Assets Market Management System (Sistema de Gestão de
monthly based on the currency variation occurring in the period.
Mercado de Activos – SIGMA) in terms of the entering into
The variation in the tangible fixed asset accounts was added to
contracts between the participants and the BNA and the need
the respective balances (fixed asset account and respective
to comply with the rules laid down in SIGMA’s manual of
depreciation) and in the fixed asset revaluation account.
standards and procedures.
299
4. The Group’s functional organisation chart
Executive management, supervision and control
The composition and functions of the BPI Group’s management,
supervisory and control bodies are detailed in points 3.1. to
3.12. of this report.
BPI Group functions
The BPI Group units grouped according to their functions are
under the direct command of Banco BPI’s Executive Committee.
Central structures
These structures embrace the entire universe of shared services
(of the back-office kind) which act as direct support to the
Group’s other units by undertaking the development and
maintenance of its operational, physical and technological
infrastructure.
Credit risks
The Executive Committee for Credit Risk is the body that takes
the principal decisions concerning matters relating to the
concession, monitoring and recovery of lending operations. At a
more operational level, credit risk management is centralised at
the Credit Risk Division which manages in an integrated fashion
the Customer segments – small businesses, companies,
institutional banking and project finance in relation to the
granting, at the Corporate and Small Business Credit Recovery
Division which manages in an integrated manner the individual
entrepreneurs and small business, companies, institutional
banking and project finance Customer segments as regards
recovery and litigation and at the Individuals Credit Risk Division
which manages the Individual Customers segment. The manner
in which the various risks are managed at the BPI Group is
comprehensively dealt with in a separate chapter in the
Directors’ Report.
Global risks
The Executive Committee for Global Risks is the body that
makes the main decisions concerning the activities which entail
risks for BPI. It is primarily responsible for formulating overall
strategy and operating regulations, fixing the limits for treasury
exposures to be adhered by the Finance Division, and defining
the parameters for the management of long-term structural
positions (interest rate or currency risks) and fixing the global
limits for value-at-risk (VaR).
300
Marketing
The marketing function is carried out in a segregated manner
according to the segmentation between Individuals, on the one
hand, and Companies and Small Businesses, on the other.
The Individuals and Small Businesses Marketing Division
focuses on the management of the CRM (Customer Relationship
Management) systems and on the coordination of the sales
function, including responsibility for developing new products
and services. The Companies Marketing Division handles all
aspects relating to communication, information and the
management of databases associated with commercial activity
directed at corporate Customers.
Channels
BPI possesses a fully-integrated, multi-channel distribution
network, fully integrated, composed of 696 retail branches, 39
investment centres, Automated Banking (ATMs), agents network,
remote access channels, online brokerage, specialised branches
and structures dedicated to the corporate and institutional
segment (46 corporate centres, one project finance centre and
six institutional Client centres). Outside Portugal, BPI is engaged
in commercial banking business in Angola and Mozambique,
through two local-law banks – Banco de Fomento Angola (50.1%
held by the BPI Group) and Banco Comercial e de Investimentos
(30% held by the BPI Group). It also has a number of branches
and representative offices which essentially provide support to
Portuguese emigrant communities.
Brand, quality and training
Quality, communication and brand management are managed by
the same member of Banco BPI’s Executive Committee. This
situation has in its sights the goal of giving priority to the quality
of service, which dictates the close coordination of quality
programmes with the brand communication and development
programmes. This coordination also extends to the training area,
a critical element in securing high service standards.
THE BPI GROUP’S FUNCTIONAL ORGANISATION CHART
301
5. Risk management
5.1. RISK MANAGEMENT PRINCIPLES
Risk management at the BPI Group is based on the permanent
identification and analysis of exposure to different risks – credit
risk, country risk, market risks, liquidity risk, operating and legal
risks or other – and on the adoption of strategies aimed at
maximising profitability within predefined (and duly supervised)
limits. Management is complemented a posteriori by analysis of
performance indicators.
5.2. DIVISION OF RESPONSIBILITIES IN RISK CONTROL AND
MANAGEMENT
The policy, procedures and allocation of powers amongst the
Group’s various bodies and departments on matters relating to
the control and management of the Group’s risks are described
in detail in a separate chapter of the Directors’ Report and are
incorporated into this document by way of reference.
In 2010, the Executive Committee for Market Risks gave way to the
Executive Committee for Global Risks, clarifying the scope of this
body’s action in the monitoring of global risks (credit / counterparty,
risk, country risk, market, liquidity, operational, other risks).
We believe that the existing internal control system at Banco
BPI, which complies with that prescribed in Bank of Portugal
and CMVM regulations governing this subject, incorporates the
components referred to in CMVM recommendation II.1.12.2.
and, therefore, that the recommendation in question is
implemented. Amongst other aspects, it should be emphasised
that this system is founded on goals and guidelines laid down by
the Board of Directors and by the CACI, being monitored closely
by this last-mentioned Committee and based on a structure
which encompasses, amongst others, the Risk Control Division,
an Audit Division and a Compliance Division.
This system’s oversight and evaluation are conducted by the
Supervisory Board which not only functions in full coordination
with the CACI but is also directly involved at supervision level as
regards the principal risks and in the definition of the risk
management, compliance and internal audit programmes, as a
result of which it also complies with CMVM recommendation
II.1.1.3.
Matrix of responsibilities for risk management and control
Identification and analysis of exposure Strategy
Credit /
counterparty risk
Country risk
ACR: rating and scoring models
(Probabilities of Default), and loss
given default for all loan segments
DACR and DF: external rating
identification for debt securities and
for credit to financial institutions
DRC: Rating of Companies and Small
Businesses, Project Finance and
Institutionals
Rating Committee – Rating for large
sized Corporates and Institutionals
DRCP: Expert system for loans to
Individuals
DACR: Exposure to Derivatives
DACR: analysis of global exposure to
credit risk
CECA, CERG: overall
strategy
DF: analysis of individual country risk
with recourse to external ratings and
analyses
CECA, CERG: overall
strategy
Market risk
Liquidity risk
DRCE:
Corporate
DF, DA and DIAPE:
operations
CECA, CERG: overall
strategy
CECA, CERG, DACR, DF,
DA: limits
DF, DA and DIAPE:
operations
control
DF, DA, DIAPE: individual risk
analysis of liquidity, by instrument
CECA, CERG: overall
strategy
CECA, CACI, CERG,
DACR, DC, Internal and
external Auditors1,
Supervisory Board, Bank of
Portugal: control
CECA: overall
organisation
CECA, CERG, DORG,
DACR: regulation and limits
Operating Risk
Committee
CECA, CACI, DORG, DACR,
control
DORG: regulations
DJ, DC
DRCP:
Individuals and
Sole proprietors
Performance Evaluation
CECA, CERG, CERC,
DCPE, DACR,
All other Divisions
CECA, CACI, CERG,
DACR, DC, Internal and
external Auditors1,
Supervisory Board, Bank
of Portugal: control
DACR: analysis of risk by books /
instruments and global risks – interest
rates, currencies, shares,
commodities, other.
DORG and all the Divisions:
identification of critical points
Legal and
compliance risks
Recovery
CECA, CERC, Credit
Board, DRC, DRCP, DACR,
DF: limits
CECA, CERC:
approval of
CECA, CACI, CERC,
substantial operations CERG, Credit Board,
DACR, DO, Internal and
Credit Board, DRC,
external Auditors1,
DBI, DRCP, DF:
Supervisory Board, Bank of
approval of
Portugal: control
operations.
DACR: analysis of overall liquidity risk
Operating risks
Limits and control
DJ, DAI, DO,
Commercial
Divisions
CECA, DORG
DJ
CECA, CACI, DJ, DC,
CACI – Comissão de Auditoria e de Controlo Interno (Audit and Internal Control Committee); CECA – Comissão Executiva do Conselho de Administração (Board of Directors’ Executive
Committee); CERC – Comissão Executiva de Riscos de Crédito (Executive Committee for Credit Risks); CERG – Comissão Executiva de Riscos Globais (Executive Committee for Global Risks); DA
– Departamento de Acções (Equities Department); DACR – Direcção de Análise e Controlo de Riscos (Risk Analysis and Control Division); DAI – Audit and Inspection Division (Internal Audit
Division); DBI – Direcção de Banca Institucional (Institutional Banking Division); DC – Direcção de Compliance (Compliance Division); DF – Direcção Financeira (Financial Division); DIAPE –
Direcção de Investimentos Alternativos e Produtos Estruturados (Alternative Investments and Structured Products Division); DJ – Direcção Jurídica (Legal Division); DO – Direcção de Operações
(Operations Division); DORG – Direcção da Organização (Organisation Division); DRC – Direcção de Riscos de Crédito (Credit Risk Division); DRCE – Direcção de Recuperação de Crédito a
Empresas (Corporate Credit Recovery Division); DRCP – Direcção de Riscos de Crédito a Particulares (Individuals Credit Risk Division).
Group is exposed.
302
6. Portuguese statutory auditor and external auditor
Deloitte & Associados, SROC, S.A. (Deloitte), a member firm of
the international network Deloitte Touche Tohmatsu (DTTL
network), is the BPI Group’s Portuguese Statutory Auditor and
was elected in the General of Meeting of 23 April 2008 for the
2008 / 2010 three year period. António Marques Dias is
currently the partner in charge of the audit of Banco BPI’s
consolidated financial statements.
years as a member of a company’s administrative or
management bodies, cannot exercise the function of auditor of
the same company. In the same manner, the Portuguese
Statutory Auditor who in the last three years has acted as the
Portuguese Statutory Auditor of companies or entities, is barred
from exercising functions as a member of such companies’ or
entities’ administrative or management bodies.
Deloitte & Associados, SROC, S.A. is equally, for purposes of
article 8 of the Securities Code, the Bank’s External Auditor.
The EOROC furthermore provides that in the case of publicinterest entities the maximum period for carrying out audit
functions by the partner responsible for the direct organisation or
execution of the audit is seven years, commencing from the date
of his / her appointment, but may be appointed again after a
minimum period of two years has elapsed.
6.1. LIABILITY
In terms of the law1, auditors2 are jointly and severally liable for
the “damages caused to the issuers or to third parties for any
shortcomings in their reports or opinions”.
By the end of 2013, the Board of Directors will call for a tender
with the object of obtaining proposals so as to enable the
Supervisory Board to select the firm that will provide external
audit services.
6.2. INDEPENDENCE
BPI recognises and subscribes to the concerns manifested,
amongst others, by the CMVM (Securities Market Commission),
by the European Commission and by IOSCO – International
Organization of Securities Commissions, amongst other entities,
regarding the safeguarding of auditors’ independence vis-à-vis
the audit Client. BPI believes that this independence is essential
for ensuring the public’s trust in the reliability of their reports
and in the credibility of the financial information published.
BPI is of the opinion that its auditors are independent within the
context of the regulatory and professional requirements
applicable and that their objectivity is not compromised. BPI has
incorporated into its governance practices and policies several
mechanisms which safeguard the independence of the auditors.
Indeed, the company which audits the BPI Group’s accounts, as
well as the persons in charge of the relevant audit work, has to
the best of BPI’s knowledge, no interest – effective or imminent
– financial, commercial, employment, family or of any other
nature – other than those which result from the normal course of
their professional activity – in BPI Group companies, capable of
leading a reasonable and informed third party to consider that
such interests could compromise the auditor’s independence.
On the other hand, the Portuguese Statutory Auditors Act
(EOROC) provides that anyone who has served in the last three
Pursuant to the provisions of applicable legislation, BPI verified
the auditors’ independence by means of: (a) the auditors’ written
confirmation of independence as envisaged in article 62-B of the
EOROC; (b) the confirmation of compliance with the rotation
requirements relating to the partner in charge and (c) the
identification of the threats to independence and safeguard
measures adopted for their mitigation.
BPI has adopted the principle of not entering into employment
contract s with any person that has in the past been partner of
the audit firm which has provided audit services to any BPI
Group companies before at least three years have elapsed since
the cessation of the provision of such services.
6.3. REMUNERATION
The remuneration paid to Deloitte and its network3 for services
rendered to BPI Group companies in 2010 amounted to
2.36 M.€. This figure is broken down in the table below
according to the nature of the work performed and the company
to whom the services were provided.
Amounts in thousands of euro
Type of
service
BPI-BI BPI GA4 Other5
Banco
BPI
BFA
Total
% of
total
Statutory audit
615
106
121
126
Audit related
to bonds
issuance
204
1 172
50%
237
-
-
Other attest
services
-
-
237
10%
21%
138
109
94
54
108
502
Tax consulting
39
40
-
9
-
88
4%
Other services
365
-
-
-
-
365
15%
1 394
254
215
189
312
Total
2 364 100%
1) Article 10 of the Securities Code.
2) In terms of article 10 of the Securities Code, the term “auditors” includes “the Portuguese statutory auditors and other persons who have signed the report or the opinion” (paragraph 1a)
and “the firms of Portuguese statutory auditors and other audit companies, provided that the documents audited have been signed by one of their members / partners” (paragraph 1b).
3) BPI’s “Network” of auditors include Deloitte and Deloitte & Associados, SROC, S. A., and is in accordance with the definition of “Network” laid down by the European Commission in its
Recommendation C (2002) 1873, of 16 May 2002.
4) Includes amounts paid by securities and real estate funds managed by BPI Gestão de Activos.
5) By order of importance (decreasing) on the amount paid: BPI Vida, BPI Suisse, BPI Pensões, Banco BPI Cayman, Banco BPI - Offshore de Macau, BPI Private Equity, BPI Luxemburgo,
BPI - Locação de Equipamentos, BPI Capital Finance and BPI Madeira.
303
Deloitte and its network did not provide any service to the BPI
Group in areas such as financial information technology, internal
audit, valuations, legal defence, recruitment, amongst others,
which are capable of generating situations of conflict of interest
and impairment to the quality of the audit and statutory audit
work.
All the services provided by Deloitte, including the respective
remuneration terms are, irrespective of their nature, the object of
prior review and approval by the Supervisory Board, thus
constituting an additional mechanism safeguarding the
independence of the External Auditor.
DELOITTE’S POLICIES AND PROCEDURES
Deloitte, an audit firm registered with the CMVM and appointed by BPI, has, according to information supplied by it to BPI,
implemented policies and procedures designed to ensure that it provides quality services and complies with all the applicable
independence and ethical rules.
QUALITY CONTROL SYSTEM
DTTL has conceived a global quality control system which each
disclosure campaigns developed for this purpose.
member firm applies locally and which meets the requirements
Confirmations are required annually of compliance with the
of the International Standard on Quality Control 1 (“ISQC 1”).
Code of Ethics in force.
This system of internal quality control adopted by DTTL was
complemented by applicable Portuguese rules.
Deloitte utilises various management tools for monitoring
compliance with ethical requirements (in particular
The quality control system is backed by a number of policies,
independence), namely:
namely those dealing with the following aspects:
䊏
䊏
managers
Accountability and leadership commitment with the internal
quality control system;
䊏
Ethical requisites;
䊏
Acceptance and continuation of relationships with clients and
engagements;
GIMS – monitoring of the financial interests of partners and
䊏
DESC – global tool which permits identifying all the entities
to which audit services are rendered by the DTTL network
which are public-interest entities
䊏
Dcontact – client data base of companies of the Deloitte
network in Portugal
䊏
Development of its professional staff;
䊏
Process of consultations on technical matters;
䊏
Work execution;
powers for this purpose at all companies of the Deloitte
䊏
Work quality monitoring review;
network in Portugal.
䊏
Review of professional practice.
The post of Ethics Director is occupied by a partner with
Acceptance and continuation of relationships with clients and
Accountability and leadership commitment
The functioning of the internal quality control system is
assured in the first place by the designation at global and
national level of partners with vast experience in the practice
of auditing (Reputation and Risk Leaders), without day-to-day
management responsibilities, whose function in the relevant
jurisdiction entails playing the leading role in all matters
pertaining to quality, reputation and independence.
Ethical requisites
Deloitte conducts its activity based on ethical values and
principles which have a global reach and are common to all the
areas of activity undertaken in Portugal. An internal Code of
Ethics was published which is based on IFAC’s requirements,
while in certain instances it is even more restrictive. The Code
of Ethics is delivered to all professional staff as soon as they
are admitted to Deloitte, and updates and periodic alerts are
transmitted by means of training courses and internal
304
engagements
There are internal policies at Deloitte for accepting clients and
engagements encompassing a series of prior verifications that
influence the actual provision of services or the acceptance of
clients. The themes which are the object of verification are
diverse, such as for example, the reputation of entities and of
their managers, the nature of their operations, the internal
control environment, the motives of management and directors,
the skills required, independence and any conflicts of interest,
the reasonableness of deadlines imposed, amongst other
issues. Compliance with these policies is assured by a series of
internal control procedures, as well as by means of
management tools which permit documenting the verifications
carried out, namely the Deloitte Risk Management System
(DRMS) for purposes documenting the acceptance and
continuation processes.
Development of its professional staff
One of Deloitte’s principal objectives is the fostering of
In order to encourage specialisation amongst its professionals
Employees’ talent and the development of their leadership
and enhance their response capability to the needs of various
potential, offering rewarding career opportunities and, above
clients, Deloitte decided to adopt an in-house organisation
all, which constitute a permanent challenge to their
focusing on certain industrial segments.
capabilities.
In the execution of audit and related assignments, the Deloitte
The very rigorous standards in terms of professional
audit methodology is followed – Deloitte Audit Approach
recruitment, continuous training and the stringent evaluation
(“DAA”). Audit work is backed by electronic files, using
process of staff are the essential pillars of that strategy.
specific software developed by DTTL (AS / 2). The procedures
to be executed are described in detailed work programmes,
Technical consultations process
designed for each one of the work areas. These audit
There are in-house policies laid down at Deloitte for consulting
programmes are adapted to the reality of each entity, being
specialists (accounting, financial matters, taxation, legal
differentiated for certain specific industries – banking,
aspects etc.) and accessing the corresponding documentation.
insurance, retail, etc.
These consultations can be referred to internal or external
specialists.
Work quality monitoring review
All the reports issued are subject to an internal review
In order to respond to consultation needs, a structure was set
conducted by a qualified and experienced independent
up internally which consists of: (i) a group of professional
professional who is not involved in the assignment concerned.
specialists in international financial reporting standards who
This review is carried out before the reports are issued.
maintain regularly contacts with Deloitte’s international
excellence centres in this domain; (ii) a support group for
The nomination of professionals who execute the review
ethics, independence and conflicts of interest-related issues
adheres to a meticulous process, aimed at ensuing that there
has been set up; (iii) a practice support group for technical
are no conflicts of interest, that the independence principles
audit matters.
are observed and that the appointed reviewer has appropriate
competencies.
Execution of engagements
Engagements are executed by scrupulously-selected teams,
Review of professional practice
with the various individuals being designated according to their
The various internal quality control processes are periodically
experience and their specific knowledge of the various sectors
subjected to verifications for evaluating their operability and
of activity. Procedures are defined which guarantee the
effectiveness. These examinations essentially consist of an
monitoring of the workloads of partners and professional staff
analysis of representative samples and are performed by
so as to ensure that they have sufficient time for complying
independent persons.
with their professional obligations in an appropriate manner.
Besides these checks, all the DTTL network’s member firms
Deloitte boasts a group of technical staff with expertise in
are subject to periodic external reviews of their professional
computer auditing and information systems. These Employees
practice. These reviews are carried out by partners of another
are compulsorily involved in all audit assignments in which the
member firm, take place with a maximum frequency of three
use of IT equipment by the entity concerned is classified as
years and cover a representative sample of the partners and
important.
audit assignments undertaken in that year.
305
7. Remuneration
7.1. REMUNERATION POLICY
7.1.1. Remuneration policy of the members of Banco BPI’s management and oversight bodies1
Policy set out in the Statement on Remuneration Policy for the members of Banco BPI’s management and supervisory bodies, submitted
by the Remuneration Committee to the General Meeting of 22 April 2010 and approved thereat.
A) The overall limits fixed by the General Meeting in the terms
the Remuneration Committee composed of three Shareholders
envisaged by article 28(3) of the Statutes for the remuneration
elected every three years by the General Meeting;
of the members of the Board of Directors
1. Taking into account and having considered the existing
4. The Remuneration Committee currently in office, elected by
recommendations and guidelines, community and national (in
deliberation of the General Meeting of 23 April 2008 for the
particular, in this domain, those of the Bank of Portugal), on
three-year period 2008-2010, has the following composition:
the equilibrium between the variable and fixed components of
the remuneration of the members of Board of Directors who
make up the Executive Committee (hereinafter referred to as
Executive Directors), namely, those which indicate that the
fixed component of remuneration represents a sufficiently high
proportion of the total remuneration, with the object of
a) IPI – Itaúsa Portugal Investimentos, SGPS, S.A., who
indicated Mr. Carlos da Camara Pestana;
b) Arsopi – Holding, S.A., who indicated Eng. Armando Leite
de Pinho;
c) HVF, SGPS, S.A., who indicated Eng. Edgar Alves Ferreira.
permitting the application of totally flexible policy for the
variable component of remuneration, the limits relating to the
remuneration policy for the members of the management body
for the term 2008-2010 approved at the General Meeting held
on 23 April 2008 are revised, with a view to proceeding with
their rebalancing, so that in 2010 and following years, these
shall be as follows:
a) limit for the annual fixed remuneration of the members of
the Board of Directors as a whole (not including for this
purpose attendance allowances): 4 M.€;
b) maximum percentage of the annual consolidated net profit
which in each year can be allocated to the variable
remuneration of the Executive Directors as a whole: 1.3%.
C) Remuneration of the Non Executive Members of the Board
of Directors
5. The remuneration of the non executive members of the
Board of Directors does not contain any variable component
and, in this respect, is not dependent upon Banco BPI’s
results: it is composed of fixed monthly amounts payable in
cash (to which is added attendance allowances in the cases
where the said non executive members of the Board of
Directors serve on the Board of Directors’ consultative and
support bodies envisaged in the statutes);
6. In fixing the remuneration of the Non Executive Members of
the Board of Directors the limit prescribed in 2. a) above must
be observed.
2. The limit defined in sub-paragraph a) of 1. above is sub-
D) Remuneration of the Executive Directors
divided in the following manner:
D1) Fixed component
7. The fixing of the amount of the fixed remuneration of the
a) limit for the annual fixed remuneration of the members of
Executive Directors is undertaken by the Remuneration
the Board of Directors as a whole who do not form part of
Committee, after having heard the NERC, within the framework
the Executive Committee, hereinafter referred to as Non
of the limit envisaged in 2. b); the amount of this
Executive Members of the Board of Directors (not including
remuneration is adjusted annually by the application of the
for this purpose the attendance allowances): 1.4 M.€;
rate of increase identical to that which, under the Collective
b) limit for the annual fixed remuneration of the Executive
Employment Agreement for the banking sector, is applied to
Directors as a whole: 2.6 M.€.
level 18 remuneration.
B) Power to fix the remuneration of the members of the Board
D2) Variable component
of Directors and the Supervisory Board
8. The fixing of the overall amount of the variable component
3. According to the provisions of article 28(2) of the Statutes,
of the remuneration of the Executive Directors is undertaken by
the remuneration of the members of the Board of Directors and
the Remuneration Committee, having heard the NERC, based
the Supervisory Board is fixed, after having heard the
on their performance evaluation and taking in account:
Committee of the Board of Directors called the Nominations,
Evaluation and Remuneration Committee (hereinafter NERC)
a) observance of the limit referred to in 1. b) above;
with respect to the remuneration of the Executive Directors, by
b) the policy adopted in this domain at comparable institutions;
1) To which article 2 of Law no. 28 / 2009 of 19 June refers.
306
In fixing the overall amount of the variable component of the
13. Without prejudice to that envisaged in the second
remuneration of the Executive Directors, although no automatic
paragraph of the previous point 12., the amount of the variable
dependence relationship shall stem there from, the trend of
remuneration portion of each one of the Executive Directors
the overall amount defined for the variable remuneration of the
composed of Banco BPI shares and / or options to buy Banco
universe of Banco BPI Employees is also taken into
BPI shares cannot as a general rule be less than 50% of the
consideration; in this respect, it will be recalled that in
overall amount of the respective variable remuneration.
defining the overall amount of the variable remuneration of the
universe of Banco BPI Employees who perform their functions
14. In derogation of that envisaged in the Share Incentive
in Portugal, one of the most important factors taken into
Scheme Regulations – RVA, in awarding Banco BPI shares and
account is the consolidated net profit before tax from Banco
/ or options to buy Banco BPI shares to the Executive Directors
BPI’s domestic operations.
reserved for fulfilling the minimum limit envisaged in 13.
(but only as regards these), the following must be observed:
9. The amount earned from the exercise of functions at other
companies in representation of Banco BPI is deducted from
the amount of the variable remuneration of the Executive
Directors defined by the Remuneration Committee.
14.1 Important definitions
a) Shares: shares representing Banco BPI’s share capital;
b) Options: options to acquire shares representing Banco BPI’s
10. The awarding of variable remuneration to the Executive
Directors is done in the first half of the year following that to
share capital;
c) Payment date: the date on which the Shares and / or
which it relates, observing the provisions envisaged in the
Options, as the component of variable remuneration, are
following points and such other terms which may be set by the
awarded to an Executive Director;
Remuneration Committee.
11. The portion of the variable remuneration paid in cash to
d) Conclusion Date of the Deferment Period: date on which the
3 years are completed after the Payment Date;
each Executive Directors is, up to the limit of 50% of the
e) Payment year: the year in which the Payment Date occurs.
overall amount of this variable remuneration, made available
f) Reference year: the year whose performance is remunerated
immediately and without such availability being subject to
conditions.
12. As a rule, a portion of the variable remuneration of the
by the variable component paid on the Payment Date, that
is, the year prior to the Payment Year;
g) Conclusion year of the Deferment Period: the year in which
Executive Directors, having as the

Banco BPI 2010

Transcription

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