9M11 Results Presentation(Unaudited Figures)
27th October 2011
19M11 Results Presentation
27 October 2011
The third quarter of 2011 was marked by the deepening of the Euro Zone debt crisis, with an increase in fears over Greece’s default, a more visible effect of contagion to Spain and Italy and the growing difficulties of European financial institutions to access the interbank money market and medium and long term debt issues. Reflecting high risk aversion levels, the deposits of monetary financial institutions with the ECB increased from Eur 66 billion to Eur 200 billion (reaching Eur 256 billion in October).
The period of July to September 2011 was also marked by the worsening of expectations about global economic growth, which, together with fears of contagion to the financial sector, was responsible for the poor performance of the main stock market indices. In this context, the Fed maintained the fed funds target rate close to 0% and announced new measures to contain long-term interest rates. In Europe, by contrast, the ECB lifted in July the key benchmark rate by 25 bps, to 1.5% (having in October announced a reinforcement of liquidity injections in the financial system). Demand for safe haven assets caused the yield on 10-year Bunds to fall from 3.025% to 1.887%.
In Portugal, the first assessment of Portugal’s adjustment program by the IMF/EU/ECB (carried out in August) was globally favourable, citing the “broad and ambitious” compliance of the program. This gave way to the disbursement of additional tranches of the financial assistance program. The early identification of some deviations from the 2011 fiscal target has allowed for the adoption of timely corrective measures. The commitment of the Government to the targets agreed in the MoU has been highlighted in this first assessment.
The Government presented the 2012 Budget to Parliament, maintaining the targets for the public deficit agreed with the IMF/EU/ECB. This deficit is expected to be cut from 5.9% to 4.5% of GDP, with GDP falling 2.8%. Should the 2011 and 2012 fiscal targets be met, we expect Portugal to avoid a Greek-style vicious circle and to return to growth in 2013-2014, with the economy showing sounder economic indicators, including an external deficit close to 2% of GDP and a declining public debt ratio. Exports and net external demand are growing (real annual growth in exports should reach close to 7% in 2011 and slightly above 4% in 2012) and should continue to show strong potential, as firms increasingly focus on external markets and, particularly, on fast growing markets in Africa, Latin America and Asia. Over the medium term, economic growth should be supported by the ongoing structural reforms, implemented in the context of the MoU.
Macroeconomic highlights
29M11 Results Presentation
27 October 2011
150
160
170
180
190
200
210
220
230
240
250
Jan.2008
Jul.2008
Jan.2009
Jul.2009
Jan.2010
Jul.2010
Jan.2011
Jul.2011
An extremely challenging environment for Portuguese Banks
Since April 2010 Portuguese Banks have been facing a strong squeeze of liquidity, not only having no access to MLT debt markets but also assisting to a significant reduction of short term liquidity facilities (CD, CP, money market). At the end of September, BES closed a 3-year USD 300 million credit facility agreement with China Development Bank Corporation, a senior unsecured deal which is a relevant capital markets transaction in the Portuguese Market.
Despite having to cope with liquidity needs without markets, ie, having to use ECB facilities vis-à-vis the lack of funding alternatives, banks are required to reduce ECB exposure and, at the same time, to hold low levels of sovereign debt (even because it is now damaging for the capital base), while the sovereign debt is the only one not affected by ratings downgrades for eligibility criteria with the ECB.
Moreover, amidst a process of adjustment of the economy with significant impacts expected at asset quality levels, Portuguese banks are required to strengthen provisions, to deleverage the balance sheet while avoiding a credit crunch, and to reinforce capital ratios while continuing to finance the corporate sector.
On top of a tough operating environment, markets and rating agencies continue penalising Portuguese banks, on the back of liquidity concerns, capital concerns, macroeconomic concerns and an overall negative sentiment towards European banks.
In this context, Portuguese banks have been maintaining a resilient operating performance, deleveraging the balance sheets, strengthening capital ratios and reinforcing provision levels. Furthermore, Portuguese banks’ deposits continue to show a rising trend in 2011, with a 14% YoY growth as of August, which reflects Portuguese depositors confidence in the banking sector.
Portuguese Banks’ deposits Eur bn, August 2011
39M11 Results Presentation
27 October 2011
A strict financial discipline has been the main focus of BES, implementing a wide set of measures focusing on deleveraging the balance sheet, reinforcing provisioning coverage and strengthening capital ratios, while maintaining a sound international profile and a strict cost control, key to sustain future profitability
Deleverage the Balance Sheet
Reinforce Risk Mgmt
Strengthen capital ratios
Early adoption of a deleverage plan since 2H10 has driven a significant decrease of the LTD ratio from 198% in Jun 10 to 146% in Sep 11
Strong focus on deposit growth (+ Eur 7.8bn since Jun 10), bolstered by BES franchise
Reduction of the net loan portfolio (- Eur 1.8 bn since Jun 10) focused on international credit has allowed to continue supporting Portuguese SME sector, namely exporting and innovative companies
On-balance sheet provisions have been significantly reinforced to Eur 2.1 bn (4.04% of gross loans) in Sep 11, in anticipation of an expected macro deterioration
Asset quality indicators consistently better that system average, even in periods of recession, and despite higher weight of corporate loans (73% of loan book)
Low European sovereign exposure, concentrated in Portuguese short term sovereign debt (total Eur 3.6bn Portugal, 4% of net assets, 84% maturing within 1Y. Total potential loss on European sovereign debt amounts to Eur 121mn, an impact of 13bps in core capital as of Sep 11.
Following the latest EU Summit, BES announced that according to BoP and applying EBA’smethodology, total capital needs for the new 9% EBA CTI is Eur 687mn. In October, BES convened an EGM to propose, among other items, the increase of BES’ share capital by new contributions in kind, up to Eur 790.7mn to boost core capital ratios. This transaction could generate a positive impact of up to 145 bp in core capital (which stands at 8.1% in Sep 11)
49M11 Results Presentation
27 October 2011
146%
198% 171%165%
163%155%
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 (…) Target
Main KPI show management’s focus on deleverage plan and balance sheet strength. Resilient core operating performance backed by sustained international business and domestic cost control
0Greece
5Spain
3 600Total
0Italy
0Ireland
3 595Portugal
4.043.833.473.38
3.07
2.382.29
2007 2008 2009 2010 1Q11 2Q11 3Q11
Resilient core operating performance
Deleverage of the B/S on track Asset quality: strong provision coverage
Loans to Deposit Ratio
120%
B/S provisions as % of Gross Loans
242
197169
0.00
50.00
100.00
150.00
200.00
250.00
1Q11 2Q11 3Q11
Limited exposure to Sovereign debt
European Sovereign portfolio (Eur mn)
<3M33%
3M to 1Y
51%
> 1Y16%
* According to BoP Instruction 23/2011
*
(Core Net Operating Income: Commercial Bkg Income – Op. Costs; Eur mn)
+ 43%
59M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap upAppendix 1: Detailed financial dataAppendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
69M11 Results Presentation
27 October 2011
*
26.5 26.1
29.9 30.8 30.532.0
33.9
24.425.225.3 25.4
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
50.849.9 49.7 49.9
51.049.9
49.047.647.347.1
51.7
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Net Loan Portfolio Evolution(EUR bn; excludes securitised credit)
Total Deposits(EUR bn)
Loans to Deposits Ratio
155%163%
146%
188%192%195%188%186%
171%165%
198%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Targ
et
-1.8 bn+4.6 bn
+0.8 bn
LTD of 120% should be achieved by reducing the loan portfolio, namely by disposing of international credit portfolios (such as project finance), and simultaneously focusing on increasing core deposits.
In the absence of debt markets for 18 months, BES management has implemented a deleverage programme in 2H2010, acting on both assets and liabilities. LTD ratio continues a downward trend, having decreased to 146% from 198% in 1H2010
120%
+7.8 bn
* According to BoP Instruction 23/2011
79M11 Results Presentation
27 October 2011
Gross Loan Portfolio Evolution since 2H10 (beginning of deleverage plan)
On the asset side, the sale of international loans coupled with the reduction of the Spanish loan book more than offset increasing loans in Angola. Consolidated portfolio decreased Eur 1.4bn since 2H10, with domestic loan book barely unchanged
Loan
Boo
kJu
n-10
Dom
estic
UK
& U
S
Spai
n
Ang
ola
Bra
zil
Oth
er
Loan
Boo
k3Q
11
-0.2
-1.8
-0.6
+1.1+0.2
-0.1
53.4
52.0
Dom.:41.7 (78%)
Int.:11.7 (22%)
Gross Loan Portfolios growth rates by country
(from Jun-10 to Sep-11 Deleverage plan)
Total: Eur -1.4 bn, o.w:Domestic: Eur -0.2bn
International: Eur -1.2bn
(EUR bn)
Dom.:41.5 (80%)
Int.:10.5 (20%)
0%
-26%
58%
47%
-15%
-10%
-30%
-57%
Other
Brazil
Angola
Spain
US
UK
International
Domestic
YtD
0%
-6%
-23%
-36%
-13%
+27%
+45%
-20%
89M11 Results Presentation
27 October 2011
On the liability side, the focus has been on growing core deposits, which increased 13% YoY (Eur 3.9bn) or 30% since 2H10 (Eur 7.8 bn)
Total Deposits
(EUR bn)
Domestic deposits(EUR bn)
26.1
30.8 30.532.0
33.9
Jun-10 Dec-10 Mar-11 Jun-11 Set-11
20.023.3 23.0 24.6 26.4
Jun-10 Dec-10 Mar-11 Jun-11 Set-11
6%
30%
International deposits
(EUR bn)
6.17.5 7.6 7.4 7.5
Jun-10 Dec-10 Mar-11 Jun-11 Set-11
77% 76% 75% 77%
Weight in total deposits
23% 24% 25% 23%
Weight in total deposits
32%
23%
78%
10%
22%
99M11 Results Presentation
27 October 2011
The credit sale programme as well as domestic Retail and Private Banking had a strong contribution to the deleverage program
-31pp
27pp
-50pp-41pp
-25pp
YoYevolution of Loans-to-Deposits3Q11
Total Group Retail*Private
Banking
Corporate and Institutional
Clients
Investment Banking and International Commercial
Banking
Loans-to-Deposits3Q11.
146% 116% 46% 209% 154%
Focus on deposits growth and reinforced credit selectivity
Focus on credit sales in non-core geographies
* Excludes securitized credit. Including these portfolios, Retail’s Loans-to-Deposits ratio is 152% (-50pp YoY)
Support to exporting and
innovative companies
109M11 Results Presentation
27 October 2011
Domestically, Retail and Private Banking showed a remarkable ability to grow deposits, that more than compensated the impact of the current economic context in terms of the treasury levels of corporations
-11.4%
28.4%17.4%
52.0%
117.8%
3.0%
-6.6%
4.1%
-3.3%-4.2%
On-Balance Sheet Client FundsΔ YoY. %. 3Q11
Gross Loans to Clients*Δ YoY.%. 3Q11
PrivateBanking
Corporate and InstitutionalMass Market
Small BusinessesAffluent
* Includes securitized credit
119M11 Results Presentation
27 October 2011
Total MLT debt maturing in 2011 was fully repaid. BES closed a 3-year USD 300mn credit facility agreement with China Development Bank (senior unsecured)
0.0
0.6
1.1
2.6
1Q11 2Q11 3Q11 4Q11
0.00.2
0.6
2.8
1Q12 2Q12 3Q12 4Q12
14%3Q11
26%2Q11 60%
1Q11
Medium and Long Term Debt maturing in 2011 Medium and Long Term Debt maturing in 2012
Already repaid
Medium and Long Term Debt maturity profile
(Eur bn)
0.0
3.6
2.1
3.3 3.5
2011 2012 2013 2014 2015
(EUR bn; Total Eur 4.3bn) (EUR bn; Total Eur 3.6bn)
Ow: Eur 0.5bn EMTN and Eur
0.4bn Sub. Ow: Eur 0.5bn EMTN
Ow: Eur 1. 5bn Senior Guar.
and Eur 1.2bn EMTN
Ow: Eur 0.4bn EMTN and Eur
0.2bn Sub (UTII).
Eur 0.2bn EMTN
129M11 Results Presentation
27 October 2011
ECB
Use
Dec
10
9M11
MLT
Red
empt
ions
Loan
por
tfolio
redu
ctio
n
Dep
osits
Shor
t-ter
mfu
ndin
g
Oth
er
ECB
Use
Set
11
ECB liquidity facilities have been key to cope with short term liquidity needs. BES increased its exposure to ECB to Eur 9.3bn as of Sep-11. The buffer of repoablesecurities (ECB and other) continues to be increased
BES use of ECB liquidity facilities (net)
(EUR bn)
15 Mar
16.5
14.3
16.9
19.5
10.89.7
13.2
15.6
FY2010 1Q11 2Q11 3Q11
ECB Eligible Total
Total Repoable Securities
(EUR bn)
ECB: +4.8 bnTotal: +3.8 bn
3.9
4.3
-0.6
-3.1
2.9
9.31.9
139M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
149M11 Results Presentation
27 October 2011
258327
126
37
62
56
146
9M10 9M11
OtherSecuritiesAdditional Credit provisionsCredit
Total Provisions Credit Provisions
(Eur mn) (EUR mn)
126
0
100
200
300
400
500
600
700
1Q11 2Q11 3Q11 9M10 9M11
88%76%
An expected deterioration of macro conditions in 2011 and 2012 led to a continued effort to reinforce the provision reserve. Total provisions increased to Eur 660.7 in 9M11 (+88.3% YoY)
258
453
81
225
351
661
In order to adapt the risk structure to the Medium
Term Plan assumptions,
total provisions reached Eur
661mn (+88% YoY). Credit provisions totalled Eur
453mn (including an additional
credit provision charge of Eur
126mn in 1H11). Additionally,
Securities and Other provisions
were also reinforced in a total amount of
Eur 208mn
Securities & Other Provisions
(EUR mn)
0
50
100
150
200
250
300
1Q11 2Q11 3Q11 9M10 9M11
2.2x
148
142
2243
93
207
99
159M11 Results Presentation
27 October 2011
8199
148
97
138104 96
80 95 84 94
12640
66
0
50
100
150
200
250
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Quarterly Credit Provisions Cost of Risk
Eur 40 mnadditional charge
(Eur mn) (%)
Credit provisions continued to be increased in light of the expected deterioration of asset quality. The new austerity measures announced by the government reinforce the need of a prudent stance vis-à-vis 2012. Including additional LLC in 2Q11, accumulated cost of risk stands at 1.16% in 9M11
Eur 66 mnadditional charge
0.8
1.14
0.85 0.760.62 0.71 0.63 0.71 0.63
0.76
1.14
0.33
0.52
0.98
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Eur 126 mnadditional charge
1.47%, includingadditional LLC
1.28%, includingadditional LLC
1.74% includingadditional LLC
169M11 Results Presentation
27 October 2011
Total provisions reserve is now Eur 2.1 bn, or 4.04% of the loan portfolio. Total credit at risk totals 6.2% of the loan portfolio, with a 65% coverage by provisions on BS
BES On-BS Provisions Reserve
1 9832 101
1 7901 777
1 552
1 148
990
2007 2008 2009 2010 1Q11 2Q11 3Q11
Overdue and Credit at Risk (*) ratios and coverage
(Eur mn) (%)
Provisions as % of Gross Loans
2.29% 2.38% 3.07% 3.38% 3.47%
2.1x
3.83%
Overdue loans
+ 90 days
4.04%
6.22%
2.85%2.60%
Overdue loans
+ 30 days
Credit at Risk
155%
Coverage
142% 65%
(*) According to Instruction 23/2011 of Bank of Portugal. Credit at risk includes: a) total value of credit with capital or interest past due by 90 days or more; b) other restructured credit, where the principal or interest payments were past due by more than 90 days and have been capitalized or refinanced without full coverage by collaterals or the interest fallen due have not been fully paid by the debtor and c) credits of an insolvent or bankrupt debtors.
179M11 Results Presentation
27 October 2011
On top of a strong coverage, BES’s overdue loans ratios have been consistently below the Portuguese average
1. 9%2 . 1%
1. 9%
1. 5%1. 3 %
1. 2 %1. 3 %
1. 8%
2 . 1%2 . 4%
4. 8%
2 . 1% 2 . 2%2 . 0%
1. 7%
2 . 2 %
3 . 4%
2 . 9%2 . 6%
3 . 2%
2 . 4%2 . 3%
1. 8%
2 . 1%
4. 3%
3 . 8%3 . 9%
3 . 6%
2 . 6%
2 . 2% 2 . 3%
1. 9%1. 6%
3 . 2%
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Total Overdue Loans/Gross Loans BESTotal Overdue Loans/Gross Loans System
BES Overdue Loans Ratio* Evolution vs Portuguese System
Source: BES and BoP. Data for System as of Aug 2011* Overdue loans + 30 days
3.33%
0.85%
4.87%
5.57%
1.81%
9.15%Consumer
& Other
Mortgage
Corporate
System
BES
1Q11
2Q11
Overdue loans continue to increase, reflecting the
deterioration of macroeconomic conditions
3Q11
189M11 Results Presentation
27 October 2011
Credit portfolio is mainly composed by Corporate loans. Despite its higher weight, there is no major concentration per sector
Credit Portfolio as of September 2011 (Eur 52.0 bn Gross Loans)
Excludes securitised credit
Corporate72.8%
(Eur 37.9 bn)
Consumer & Other4.9% (Eur 2.5bn)
Mortgage22.3%
(Eur 11.6 bn)
1 Represents a composite of other sectors of the economy none representing more than 2% per se.
Services
Con.& Pub Works
Real Estate
Retail
Other Man.
T&C
Other Services1
Fin. Inst.
15.7%
9.8%
13.5%
6.6%
6.7%
4.3%
3.6%
12.6%
Services
Const. & Public Works
Real Estate
Whol. & Retail
Other Manuf.
T&C
Fin. Inst.
Other Sectors1
(15.5%)
(9.9%)
(11.7%)
(7.0%)
(6.3%)
(4.2%)
(4.9%)
(12.7%)
(2Q11)
% of Total Credit Portfolio
199M11 Results Presentation
27 October 2011
Credit Portfolio as of September 2011 (Eur 52.0 bn Gross Loans)
Excludes securitised credit
Domestic79.8%
(Eur 41.5 bn)
International20.2%
(Eur 10.5 bn)
6.9%
6.9%
4.0%
1.2%
0.9%
0.4%
Angola
Spain
UK
EUA
(Eur 3.6bn)
Brazil
Other
(Eur 3.6bn)
(Eur 2.1bn)
(Eur 0.6bn)
(Eur 0.5bn)
(Eur 0.2bn)
International loans accounts for 20.2% (Eur 10.5bn) of total credit portfolio. Main exposures are Angola, Spain and UK which, individually, do not represent more than 7% each
209M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
219M11 Results Presentation
27 October 2011
BES European sovereign exposure amounts to Eur 3.6 bn (4% of net assets) in Sep 11, concentrated in short term Portuguese public debt. No exposure to Greece or Ireland. Total potential loss on European sovereign debt amounts to Eur 121mn
3 6001 1692 431Total
000Greece
884
4
0
0
1 165
Bonds
51Spain
3 3202 436Total 1H11
00Italy
00Ireland
3 5952 430Portugal
TotalTreasury Bills
European Sovereign Exposure
<3M31%
3M to 1Y
53%
> 1Y16%
Maturity profile of the European Sovereign Exposure
(Eur mn) (%)
Breakdown of European Sovereign Exposure by portfolio
(Eur mn)
AFS95%
HTM0%
Trading5%
84% of BES’
sovereign exposure matures within 1
year
229M11 Results Presentation
27 October 2011
Core capital at 8.1% in Sep 11. Proposed Debt / Equity transaction could add up to 145bps in core capital, considering Sep 11 RWA of Eur 66.7bn. The mark-to-market of total European sovereign debt would impact 13bps on core capital
8.4
8.8
9.2
8.18.27.97.9
9.0
Jun-10 Dec-10 Jun-11 Sep-11
Core Tier I
Notes: BIS II IRB corresponds to calculations based on IRB Foundation for credit risk and standardised approach for operational risk. Preliminary data as of Sep 11.
Solvency Ratios (%) Risk weighted assets and Capital
1,517
6,127
384
187
5,445
7,644
3,973
2,976
59,482
66,431
Jun 11
373359- Actuarial Dif.
ow deductions:
26484- AFS
5,3805,416… Core Tier I
6,0206,040… Tier I
2,2184,219… Trading book
3,9733,973… Oper. Risk
7,0387,798Total Capital
1,018
60,524
66,715
Sep 11
1,758
60,610
68,802
Dec 10
... Tier II and Other
… Banking book
RWA (BoP)
Eur bn
239M11 Results Presentation
27 October 2011
Following the latest EU Summit, BES announced that according to BoP and applying EBA’s methodology, total capital needs for the new 9% EBA CTI is Eur 687mn. In October, BES convened an EGM to propose, among other items, the increase of BES’share capital by new contributions in kind, up to Eur 790.7mn
Targeted securities
1,040.1
409.4
158.1
152.7
50.0
4.9
265.0
OutstandingAmount
61% * Nominal value / Max (P5; Eur 1.8)BES FinanceXS0171467854VM BESF 3
-
BES Finance
BES Finance
BES Investimento
BES
BES
Issuer
--Total
Nominal value / Max (P5; Eur 1.8)PTESSMOOM0016VM BESI
74% * Nominal value / Max (P5; Eur 1.8)XS0147275829VM BESF 1
66% * Nominal value / Max (P5; Eur 1.8)XS0207754754VM BESF 2
Nominal value / Max (P5; Eur 1.8)
Nominal value / Max (P5; Eur 1.8)
Number of new shares
PTBER00M0030
PTBENBOM0021
ISIN
VM BES 2
VM BES 1
Short reference
P5 = Volume-weighted average price of BES on the 5 trading days prior to the date of launching the Public Offer
In order to continue to reinforce its capital ratios, BES will maintain itsdeleverage plan and will consider, if necessary, other options in capital markets
249M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
259M11 Results Presentation
27 October 2011
Resilient core operating performance backed by international business and strict cost control measures. Profitability hampered by conservative provision charges and international credit sales.
Core Operating Performance Core revenues (NII + Fees & Commissions)
(Eur mn)
460.9 484.8 526.6
0
100
200
300
400
500
600
700
800
1Q11 2Q11 3Q11
+14.3%
Operating Costs
(Eur mn)
292.3 287.7 284.2
0
50
100
150
200
250
300
350
400
450
500
1Q11 2Q11 3Q11
-2.8%168.6
197.1
242.4
0
50
100
150
200
250
300
1Q11 2Q11 3Q11
+43.7%
(Core Net Operating Income: Commercial Bkg Income – Op. Costs; Eur mn)
269M11 Results Presentation
27 October 2011
653
211 209 202
0
100
200
300
400
500
600
700
9M10 9M11 1Q11 2Q11 3Q11
827981
201
0
50
100
150
200
250
300
9M10 9M11 1Q11 2Q11 3Q11
287.7
26.2
107.9
153.6
2Q11
864.3
78.8
313.5
472.0
9M11
-9.0%98.1107.5-3.2%323.8Admin.
QoQ3Q11
1.2%
4.0%
3.9%
YoY
853.9
75.8
454.3
9M10
-1.2%284.2292.3Total
3.9%159.6158.7Staff
26.1
1Q11
26.5 1.0%Dep.
Domestic operating costs
International operating costs
(Eur mn)
(EUR mn)
Operating costs under strict control, with cost cutting measures already producing results. Like-for-like costs decreased 4.8% YoY
Operating costs affected by the incorporation of domestic employees in Social Security and by
international expansion (namely the consolidation of Execution Noble). Excluding these effects, costs would
have reached Eur 812.9mn, decreasing 4.8%
Operating costs
(Eur mn)
854
292 288 284
9M10 9M11 1Q11 2Q11 3Q11
864
622
241
Includes Eur 10.1mn related to additional social contribution costs. Without these effect, domestic costs would have decreased 6.2% YoY
Includes Eur 41.3mn related to changes in consolidation perimeter. Without these
effect, international costs would have decreased 0.2% YoY
51813
-4.7%
-3%
20%
4%
1.2%
-1%
279M11 Results Presentation
27 October 2011
Domestic activity reflects Portuguese adverse macro conditions and focus on balance sheet management, with a significant increase in provisioning coverage. International activity affected by loan sales in UK, but supported by the Strategic Triangle
50.1%-11.2%304.6343.00.9%303.5300.9Net operating Income ex-Mkts& Other
95.0%-21.2%130.9166.2-97.1%6.9239.2Net Income=
InternationalDomestic
7.4%
-28.6%
-14.3%
-8.7%
-13.3%
20.3%
-1.5%
-38.2%
0.5%
3.2%
-0.6%
YoY
94.1
37.4
262.4
60.2
322.6
241.9
564.5
18.0
546.5
149.6
396.9
9M11
87.6
52.3
306.1
65.9
372.0
201.0
573.0
29.0
544.0
144.9
399.1
9M10
n.a.
-25.7%
-96.0%
110.7%
16.5%
-4.7%
4.8%
37.6%
-2.9%
-2.5%
-3.3%
YoY
1.1
1.7
9.7
600.5
610.2
622.4
1,232.6
306.7
925.9
448.6
477.3
9M11
-2.8
2.4
238.8
284.9
523.7
652.9
1,176.6
222.9
953.7
460.2
493.5
9M10
-
-
=
-
=
-
=
+
=
+
+
n.a.Minority Interests
n.a.Taxes
96.5%Income Bef. Taxes and Minorities
9.1%Net Provisions
34.6%Net Operating Income
27.9%Operating Costs
31.4%Banking Income
5.5%Capital Markets Results & Other
37.1%Commercial Banking Income
25.0%Fees and Commissions
45.4%Net Interest Income
% of Total (Consolid.)
(Eur million)
289M11 Results Presentation
27 October 2011
Net income from the Strategic Triangle (Africa, Brazil and Spain) reached Eur 95.4mn and already accounts for 73% of international business. Deleverage plan with a significant impact on UK and US
-21%9.512.0US
69%25%% of consolidated
-21%130.9166.2Total International
73%61%% of international
-62%19.049.7UK
2.8
101.7
9M10
Net Income Contribution
7.0
95.4
9M11
150%
-6%
YoY
France, Lux. & Other
Strategic Triangle(1)
International Net Income Breakdown – 9M11
(Eur mn)
UK: 19.0(49.7)
( ) 9M10
US: 9.5(12.0)
France, Luxembourg & Other: 7.0
(2.8)
(1) Includes Africa, Brazil and Spain
Strategic Triangle:
95.4(101.7)
Africa: 71.9 *(65.4)
Brazil: 18.6(26.0)
Spain: 4.9(10.3)
International Business(Eur mn)
(*) Includes Angola, C. Verde, Libya and Mozambique
299M11 Results Presentation
27 October 2011
Investment Banking: Focusing on Advisory and Capital Markets with increased geographic diversification
• Portugal: #1 in the Brokerage market (11.4% market share) and #1 in
the M&A market, by both number and value of announced transactions
(Mergermarket/Bloomberg). Mandated Lead Arranger (MLA) on the
financing to Mares Lusos, S.A. for the acquisition of ETE Group.
• Spain: # 4 in the Madrid Stock Exchange with a market share of 7.2%
and #3 in the Iberian M&A market, by number of announced deals
(Bloomberg). Co-Bookrunner on the Banca Cívica’s IPO (Eur 599mn) and
Financial Adviser and MLA on the financing to Gusanitos I for a 3,5 MW
solar photovoltaic power generation facility in Córdoba.
• Brazil: Joint Global Coordinator and Bookrunner in the follow-on of EDP
- Energias do Brasil, (R$ 811mn); Joint Bookrunner in the debentures
issue by IESA (R$ 60 mn) and in the commercial paper issue by Unidas
(R$ 325mn). Financial adviser to Bascol Group on the sale of a 50% stake
in Bascol Brasil Incorporação Imobiliária to Espírito Santo Property Brasil.
• UK: Joint Bookrunner on the GBP 66mn rights Issue of Workspace
Group Plc.
Banking Income: Eur 182 mn (-7.5%)
NII31%
Fees & Commissions
59%
Capital Mkts10%
0
50
100
150
200
9M10 9M11
197 182
International
Domestic
Net Profit: Eur 10mn (-80%)
32%
68%
29%
71%
0
10
20
30
40
50
60
9M10 9M11
49
10
Domestic Market: Leadership of the Brokerage and M&A activities
International activity: continued business flow with emphasis in Brazil
309M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
319M11 Results Presentation
27 October 2011
Under an extremely challenging environment, BES has been deleveraging the balance sheet, strengthening capital ratios and reinforcing provision levels, while maintaining a resilient core operating performance backed by international business and strict cost control measures
Implementation of a balance sheet deleverage plan in 2H10 aiming to reduce the LTD ratio to 120%. Core deposits increased 30% since Jun 10 (+Eur 7.8bn), reflecting Portuguese depositors confidence. Net loan portfolio decreased Eur 1.8bn in the same period, leading the LTD ratio to fall by 52 p.p., from 198% to 146%.
Proposal of a Debt/Equity exchange transaction that could increase core capital up to 145bps (which reached 8.1% in Sep 11).
Low exposure to European sovereign debt (Eur 3.6bn, 4% of net assets), concentrated in Portugal, of which 84% matures within 1 year. No exposure to Greece, Ireland or Italy and immaterial exposure to Spain.
Strong provision reserve covering 4.04% of gross loans provides a cushion to expected asset quality deterioration in domestic business.
Resilient core operating performance backed by international business and strict cost control measures. International activity affected by loan sales in UK, but supported by the Strategic Triangle, which accounted for 73% of 9M11 international net income. Operating costs under strict control, with cost cutting measures already producing results: 9M11 like-for-like costs decreased 4.8% YoY.
Prudent and
conservative
management
329M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
339M11 Results Presentation
27 October 2011
23.0%242.4197.1168.6-5.5%608.1643.8Net Op. Income ex-Mkts & Other
95.1
16.9
7.6
-21.0
91.0
366.5
457.5
287.7
745.3
-7.2
15.7
244.7
484.8
213.3
271.5
2Q11
-66.0%
12.3%
n.a.
-28.5%
-50.1%
88.3%
4.1%
1.2%
2.7%
n.a.
n.a.
57.2%
-1.7%
-1.1%
-2.1%
YoY
405.4
84.8
-
54.7
544.9
350.8
895.7
853.9
1,749.6
-1.4
11.0
240.9
1,497.7
605.1
892.6
9M10
-7.67.622.9o.w. Special tax on banks
n.a.-23.0-38.6-68.8o.w. Sale of other assets
137.8
95.2
39.1
272.1
660.7
932.8
864.3
1,797.1
-54.1
378.8
1,472.4
598.2
874.2
9M11
60.9
39.1
29.9
129.8
103.1
233.0
292.3
525.3
-35.9
100.4
460.9
189.6
271.3
1Q11
n.a.
132.3%
n.a.
-43.8%
-47.9%
-47.1%
-1.2%
-29.4%
n.a.
-86.2%
8.6%
-8.5%
22.1%
QoQ
-18.2Net Income=
-33.9Other results+
-
-
=
-
=
-
=
+
=
+
+
39.2Minority Interests
30.2Taxes
51.1Income Bef. Taxes and Minorities
191.0Net Provisions
242.2Net Operating Income
284.2Operating Costs
526.4Banking Income
33.7Capital Markets Results
526.6Commercial Banking Income
195.2Fees and Commissions
331.4Net Interest Income
3Q11(EUR million)
Consolidated P&L: quarter performance hampered by provisions and credit sales
349M11 Results Presentation
27 October 2011
Quarterly consolidated income statement
23.0%-10.5%242.4197.1168.5157.7270.9196.4176.3Net Op. Income ex-Mkts & Other
59.3%
38.6%
95.1
16.9
7.6
-79.4
50.7
-21.0
91.0
366.5
457.5
287.7
745.2
15.7
244.7
484.8
213.3
271.5
2Q11
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
-43.8%
-47.9%
-47.1%
-1.2%
-29.4%
n.m.
-86.2%
8.6%
-8.5%
22.1%
QoQ
n.m.7.67.60000… Special Tax
n.m.0.413.3-0.518.86.734.8… Income Tax
54.8%22.29.0-10.314.3-15.3-4.6… Deferred Taxes
54.0%
54.0%
-18.2
39.2
30.2
51.1
191.0
242.2
284.2
526.4
-33.9
33.7
526.6
195.2
331.4
3Q11
66.7%
48.2%
105.1
61.7
-10.8
155.9
182.8
338.7
315.5
654.2
52.9
128.1
473.2
201.8
271.4
4Q10
63.4%
55.6%
60.9
39.1
29.9
129.9
103.1
233.0
292.3
525.3
-35.9
100.4
460.9
189.6
271.3
1Q11
51.7%
47.8%
123.2
49.0
33.1
205.3
112.0
317.3
290.6
607.9
0.2
46.2
561.7
215.5
346.2
3Q10
60.0%60.4%Cost to Income ex-Markets
50.2%48.5%Cost to Income
n.m.163.1119.1= Net Income
14.1
-8.6
168.6
123.7
292.3
294.1
586.4
-1.9
97.8
490.5
197.8
292.7
2Q10
21.7
30.2
171.0
115.1
286.1
269.2
555.3
12.7
97.1
445.5
191.8
253.7
1Q10
-19.9%
-8.7%
-75.1%
70.5%
-23.7%
-2.2%
-13.4%
n.m.
-26.8%.
-6.3%
-9.4%
-4.3%
YoY
- Minorities
- Taxes
= Income Bef. Tax & Min.
+ Other Results
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Markets Results
= Commercial Bkg Income
+ Fees and Commissions
+ Net Interest Income
(EUR million)
359M11 Results Presentation
27 October 2011
Quarterly domestic income statement
14.1%17.1%136.0119.247.833.8116.1105.279.4Net Op. Income ex-Mkts & Other
59.7%
61.0%
-65.8
2.4
18.0
-45.7
174.7
128.9
202.7
331.7
-7.1
338.8
150.6
188.2
3Q11
n.m.
n.m.
n.m.
n.m.
-47.9%
-65.3%
-3.0%
-42.8%
n.m.
3.2%
-8.1%
14.5%
QoQ
81.6%
65.8%
4.9
-0.2
14.2
18.8
90.7
109.6
211.3
320.9
61.8
259.0
134.2
124.8
1Q11
87.3%
51.5%
67.5
25.1
-18.4
74.1
145.5
219.8
233.7
453.5
186.0
267.4
149.8
117.7
4Q10
63.7%
36.0%
67.8
-1.1
-30.5
36.2
335.1
371.3
208.9
580.2
252.1
328.1
163.7
164.4
2Q11
65.3%
59.2%
53.2
0.4
6.7
60.2
90.7
150.9
218.8
369.7
34.8
334.9
163.1
171.8
3Q10
68.4%72.2%Cost to Income ex-Markets
53.9%53.7%Cost to Income
n.m.115.071.0= Net Income
-1.5
-20.5
93.1
101.4
194.4
227.4
421.9
89.2
332.7
147.8
184.9
2Q10
-1.8
16.3
85.5
92.8
178.3
206.7
385.0
98.9
286.1
149.3
136.8
1Q10
n.m.
n.m.
n.m.
92.5%
-14.4%
-7.4%
-10.2%
n.m.
1.2%
-7.7%
9.5%
YoY
- Minorities
- Taxes
= Income Bef. Taxes and Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Mkts & Other Results
= Commercial Bkg Income
+ Fees and Commissions
+ Net Interest Income
(EUR million)
369M11 Results Presentation
27 October 2011
Quarterly international income statement
36.8%-31.4%106.477.8120.9123.9155.091.196.9Net Op. Income ex-Mkts & Other
43.7%
42.1%
47.6
36.9
12.2
96.9
16.4
113.3
81.5
194.8
7.0
187.9
44.6
143.2
3Q11
75.1%
104.7%
28.8%
76.8%
-47.9%
31.4%
3.4%
18.0%
-17.1%
19.9%
-10.0%
33.7%
QoQ
40.1%
39.6%
56.0
39.3
15.7
111.0
12.4
123.4
81.0
204.4
2.5
201.9
55.3
146.6
1Q11
39.8%
40.9%
37.6
36.6
7.4
81.7
37.2
118.9
81.8
200.7
-5.0
205.8
52.0
153.7
4Q10
50.3%
47.8%
27.3
18.0
9.4
54.9
31.3
86.2
78.9
165.1
8.4
156.7
49.6
107.1
2Q11
42.3%
40.5%
48.0
15.6
12.0
75.4
22.3
97.8
66.7
164.5
6.7
157.8
50.0
107.8
2Q10
31.6%39.2%Cost to Income ex-Markets
-32.0%70.148.1= Net Income
30.1%36.7%Cost to Income
48.6
26.4
145.1
21.3
166.4
71.8
238.2
11.4
226.8
52.4
174.4
3Q10
23.5
13.9
85.5
22.3
107.8
62.5
170.3
10.9
159.4
42.5
116.9
1Q10
-24.1%
-54.0%
-33.4%
-23.2%
-32.1%
13.6%
-18.4%
-41.0%
-17.2%
-15.0%
32.9%
YoY
- Minorities
- Taxes
= Income Bef. Taxes & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Mkts & Other Res.
= Commercial Bkg Income
+ Fees and Commissions
+ Net Interest Income
(EUR million)
379M11 Results Presentation
27 October 2011
Accumulated income statement: domestic, international and consolidated
58.7%57.0%44.3%36.9%67.2%68.5%Cost to Income ex-Markets
75.6%453.2258.1-14.2%53.562.3n.m.399.7195.8… credit
65.9%61.737.2-88.1%.-0.1-0.464.2%61.837.6… securities
n.m.145.855.570.6%6.84.0n.m.139.051.5… other
ConsolidatedInternationalDomestic
48.1%
137.8
134.3
272.1
660.7
932.8
864.3
1,797.1
324.7
1,472.4
598.2
874.2
9M11
-21.2%
-6.1%
-14.3%
-8.7%
-13.3%
20.3%
-1.5%
-38.2%
0.5%
3.2%
-0.6%
YoY
35.1%
166.2
140.0
306.2
65.9
372.1
201.0
573.1
29.0
544.1
144.9
399.1
9M10
-66.0%
-3.7%
-50.1%
88.3%
4.1%
1.2%
2.7%
28.9%
-1.7%
-1.2%
-2.1%
YoY
42.9%
130.9
131.6
262.4
60.2
322.6
241.9
564.5
18.0
546.5
149.6
396.9
9M11
n.m.
n.m.
-96.0%
n.m.
16.5%
-4.7%
4.8%
37.6%
-2.9%
-2.5%
-3.3%
YoY
48.8%50.5%55.5%Cost to Income
405.46.9239.3= Net Income
2.7
9.7
600.5
610.2
622.4
1,232.6
306.7
925.9
448.6
477.3
9M11
-0.7
238.6
285.0
523.6
652.9
1,176.5
222.9
953.6
460.2
493.4
9M10
139.5
544.9
350.8
895.7
853.9
1,749.6
251.9
1,497.7
605.1
892.6
9M10
- Taxes & Minorities
= Income Bef. Tax & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Markets & Other
= Commercial Bkg Income
+ Fees and Commissions
+ Net Interest Income
(EUR million)
389M11 Results Presentation
27 October 2011
Accumulated income statement: Strategic Triangle (Angola, Brazil and Spain)
57.3%
10.2
2.6
12.8
36.5
49.3
66.1
115.5
5.2
110.2
40.1
70.2
9M10
Spain
56.2%
4.9
0.0
4.9
44.6
49.5
63.6
113.1
7.6
105.6
37.5
68.1
9M11
-51.8%
n.m.
-61.7%
22.1%
0.3%
-3.8%
-2.0%
44.7%
-4.2%
-6.5%
-2.9%
YoY
Strategic TriangleBrazilAngola
21.8%
64.6
112.1
176.8
9.0
185.8
51.7
237.5
14.6
222.9
19.5
203.4
9M10
21.1%
70.7
123.2
193.9
17.2
211.1
56.5
267.6
13.0
254.6
18.2
236.3
9M11
9.4%
9.9%
9.7%
90.6%
13.6%
9.2%
12.7%
-11.0%
14.2%
-6.7%
16.2%
YoY
33.4%
94.2
138.9
233.1
65.0
298.0
149.3
447.3
20.0
427.5
84.6
342.7
9M11
-28.5%
-2.5%
-18.5%
-19.8%
-18.7%
7.9%
-8.8%
n.m.
-0.9%
1.4%
-2.5%
YoY
37.0%
26.0
16.1
42.1
3.9
46.0
27.0
73.1
5.2
67.9
28.5
39.3
9M10
-6.5%
1.1%
0.6%
31.6%
6.0%
3.1%
5.0%
-20.0%
-4.0%
-4.0%
9.6%
YoY
43.8%
18.6
15.7
34.3
3.2
37.4
29.2
66.6
-0.6
67.3
28.9
38.3
9M11
34.0%Cost to Income
100.8= Net Income
130.8
231.7
49.4
281.1
144.8
426.1
25.0
401.0
88.1
312.6
9M10
- Taxes & Min.
= Income Bef. Tax & Min.
- Net Provisions
= Net Op. Income
- Operating Costs
= Banking Income
+ Markets & Other
= Com. Bkg Income
+ Fees and Com.
+ Net Interest Income
(EUR million)
399M11 Results Presentation
27 October 2011
Angola: Quarterly income statement
653.6
3579.5
6,880.8
19.4%
29.0
50.3
79.3
7.4
86.7
20.8
107.5
9.4
98.0
5.8
92.3
3Q11
11.1%
14.8%
-27.4%
98.7%
96.4%
97.2%
44.9%
91.3%
26.2%
73.9%
n.m.
54.3%
-8.6%
61.2%
QoQ
556.1526.9485.7419.0369.0303.1Equity
3,029.4
6,210.1
19.5%
27.1
47.3
74.4
4.7
79.2
19.2
98.3
5.3
93.0
6.2
86.8
1Q11
3,221.2
5,992.8
26.7%
14.6
25.6
40.2
5.1
45.3
16.5
61.8
-1.8
63.6
6.3
57.3
2Q11
2,823.6
5,923.9
18.6%
26.3
46.6
72.9
14.2
87.1
20.0
107.1
8.8
98.3
6.0
92.3
4Q10
2,443.1
5,520.8
35.2%
10.8
18.6
29.5
3.0
32.4
17.6
50.0
3.9
46.1
7.5
38.6
2Q10 (EUR million)
2,553.9
5,211.6
15.7%
35.8
63.1
98.9
3.8
102.7
19.2
121.9
-0.5
122.4
6.3
116.1
3Q10
1,966.9
4,775.5
22.8%
18.0
30.4
48.4
2.3
50.7
14.9
65.6
11.2
54.4
5.8
48.7
1Q10
32.0%Total Assets
40.2%Total Credit (Gross)
23.3%Cost to Income
-19.9%= Commercial Bkg Income
-19.1%= Net Income
-20.3%
-19.9%
94.5%
-15.6%
8.8%
-11.8%
n.m.
-8.1%
-20.5%
YoY
- Taxes & Minority Interests
= Income Bef. Taxes & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Mkts & Other
+ Fees and Commissions
+ Net Interest Income
409M11 Results Presentation
27 October 2011
Brazil: Quarterly income statement
2,502.1
49.7%
5.0
4.4
9.4
0.0
9.4
9.3
18.7
-1.8
20.5
6.9
13.6
3Q11
-7.7%
-37.6%
-22.1%
-31.1%
-
-38.3%
-10.0%
-26.9%
n.m.
-9.2%
-41.9%
27.4%
QoQ
2,755.7
42.7%
5.7
5.6
11.3
1.5
12.8
9.6
22.4
-1.8
24.2
10.1
14.1
1Q11
8.7%2,711.42,672.22,301.52,340.51,962.4Assets
40.4%
8.0
5.6
13.6
1.6
15.2
10.3
25.5
3.0
22.6
11.9
10.7
2Q11
55.8%
6.1
1.8
7.9
1.2
9.1
10.2
19.2
-3.2
22.4
8.5
14.0
4Q10
40.2%
7.3
6.0
13.3
-0.1
13.2
8.9
22.1
0.2
21.9
7.9
14.0
2Q10(EUR million)
28.0%
15.7
7.8
23.4
1.4
24.8
9.6
34.5
7.8
26.7
13.9
12.8
3Q10
51.6%
3.1
2.3
5.4
2.6
8.0
8.5
16.5
-2.8
19.3
6.8
12.5
1Q10
Cost to Income
-23.1%= Commercial Bkg Income
-68.2%= Net Income
-43.3%
-59.9%
-
-62.2%
-3.6%
-45.8%
n.m.
-50.1%
6.0%
YoY
- Taxes & Minority Interests
= Income Bef. Taxes & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Markets & Other
+ Fees and Commissions
+ Net Interest Income
419M11 Results Presentation
27 October 2011
Spain: Quarterly income statement
4,874.2
161 bp
3,564.8
64.5%
-1.7
-1.0
-2.7
14.4
11.6
21.1
32.7
-0.1
32.8
12.3
20.5
3Q11
1.7%
-0.7%
n.m.
n.m.
n.m.
-15.2%
-32.3%
3.9%
-12.7%
n.m.
-6.1%
-2.5%
-8.1%
QoQ
5,502.6
142 bp
3,736.4
51.9%
5.8
1.6
7.4
13.3
20.7
22.3
43.0
5.1
37.9
12.5
25.4
1Q11
4,792.0
178 bp
3,690.5
54.1%
0.8
-0.6
0.2
16.9
17.2
20.3
37.5
2.5
34.9
12.7
22.3
2Q11
5,498.4
60 bp
4,093.7
64.7%
2.6
1.0
3.5
8.8
12.4
22.7
35.1
-0.5
35.6
11.1
24.5
4Q10
5,722.3
105 bp
4,197.7
55.0%
5.6
0.5
6.0
11.1
17.2
21.0
38.1
1.4
36.7
12.8
23.9
2Q10(EUR million)
5,527.0
103 bp
4,111.7
60.1%
2.1
1.8
3.9
10.7
14.6
22.0
36.7
2.2
34.5
12.8
21.7
3Q10
6,029.4
141 bp
4,156.1
56.9%
2.5
0.4
2.9
14.6
17.5
23.1
40.7
1.6
39.1
14.6
24.5
1Q10
Cost of Risk (bp)
-13.3%Credit (Gross)
Cost to Income
-4.8%= Commercial Bkg Income
n.m.= Net Income
-11.8%
n.m.
n.m.
33.8%
-20.5%
-4.5%
-10.9%
n.m.
-3.2%
-5.8%
YoY
Assets
- Taxes & Minority Interests
= Income Bef. Taxes & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Markets & Other
+ Fees and Commissions
+ Net Interest Income
429M11 Results Presentation
27 October 2011
UK: Quarterly income statement
2,079
93.5%
11.5
-4.0
7.5
-6.2
1.3
18.7
20.0
-2.6
22.6
13.0
9.6
3Q11
-2.5%
n.m.
n.m.
n.m.
n.m.
-2.3%
6.7%
6.1%
n.m.
24.2%
53.0%
-1.0%
QoQ
2,349
76.2%
10.2
-0.2
10.0
-4.3
5.7
18.3
24.0
-7.2
31.1
18.4
12.8
1Q11
2,123
92.9%
-2.7
-3.6
-6.3
7.6
1.3
17.5
18.9
0.6
18.2
8.5
9.7
2Q11
2,699
84.9%
-2.5
-6.7
-9.1
11.5
2.3
13.1
15.4
-10.8
26.2
13.3
12.9
4Q10
2,987
14.0%
20.9
2.2
23.1
3.6
26.7
4.4
31.1
0.8
30.3
11.3
19.0
2Q10(EUR million)
2,814
16.5%
20.5
1.9
22.4
-0.2
22.2
4.4
26.7
-0.3
26.9
6.5
20.5
1Q10
2,980
22.0%
8.3
2.9
11.2
6.1
17.3
4.9
22.2
1.2
20.9
5.7
15.2
3Q10
-30.5%Credit (Gross)
Cost to Income
8.2%= Commercial Bkg Income
38.4%= Net Income
n.m.
-33.0%
n.m.
n.m.
n.m.
-9.7%
n.m.
n.m.
-36.7%
YoY
- Taxes & Minority Interests
= Income Bef. Taxes & Min.
- Net Provisions
= Net Operating Income
- Operating Costs
= Banking Income
+ Capital Markets & Other
+ Fees and Commissions
+ Net Interest Income
439M11 Results Presentation
27 October 2011
Quarterly Net Interest Income(N
IM in
bp;
Qua
rterly
Fig
ures
)
254
293
346
271
271
272
331
258
253
269
306
315
335
300
250
187155
156152
190161141
176 169167188193 171199
141
0
50
100
150
200
250
300
350
400
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
0
50
100
150
200
NII
NIM
454 455 507437397401380375423 406 395
3.923.553.553.32.983.08
3.583.38 3.253.02 3.03
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Credit NII (LHS, Eur mn) Credit Margin (RHS, %)
-146-129-136-110
-66-57
-52-41-39-36
-47
-1.78-1.64-1.78-1.45
-0.97-0.88-0.83-0.66-0.61-0.59-0.74
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Deposits NII (LHS, Eur mn) Deposits Margin (RHS, %)
Credit Margin Deposit Margin
Quarterly Net Interest Income & NIM Euribor 3M (quarterly average)(%)
0.660.690.871.021.091.411.56
4.484.864.98
4.21
2.01
1.310.870.72
0
1
2
3
4
5
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
75
95
115
135
155
175
195
449M11 Results Presentation
27 October 2011
Quarterly fees & commissions
(1) Includes trade finance and letters of credit(2) Includes Brokerage(3) Includes discretionary management
195.4
16.2
2.2
10.3
10.2
21.2
19.5
27.4
10.8
32.9
24.9
20.0
3Q11
-8.4%
-0.2%
12.0%
1.9%
2.1%
-15.3%
-14.0%
-25.7%
-50.8%
53.5%
-10.2%
2.0%
QoQ
189.6
16.8
1.9
11.7
9.7
23.7
29.6
25.6
15.0
12.3
23.8
19.4
1Q11
213.3
16.1
2.0
10.2
10.0
25.0
22.6
36.9
21.9
21.4
27.7
19.6
2Q11
201.8
17.8
2.1
12.9
10.8
26.1
14.8
28.4
15.6
15.4
35.3
22.4
4Q10
197.8
21.3
1.9
17.0
9.8
24.7
12.1
23.6
17.2
16.3
32.6
21.2
2Q10
191.8
20.6
2.2
13.0
8.9
25.2
15.6
18.1
13.9
27.6
27.1
19.6
1Q10
215.5
17.8
2.2
13.5
10.5
25.9
8.4
22.1
22.8
35.0
35.8
21.6
3Q10
-9.3%
-9.4%
1.6%
-23.6%
-3.5%
-18.2%
131.5%
24.1%
-52.7%
-5.8%
-30.4%
-7.8%
YoY
Trade Finance & Exp. related (1)
Corporate & Project Finance
Other
Bancassurance
Factoring
Guarantees
Total Fees & Commissions
Cards
Asset Management (3)
Securities related fees (2)
Commissions on Loans
Account Management Fees
(EUR million)
459M11 Results Presentation
27 October 2011
Quarterly capital markets results and VAR
0.4%
22.2
-17.1
19.0
10.3
10.0
188.8
55.8
244.6
136.7
100.3
237.0
-12.2
14.3
5.5
7.6
2Q11
0.4%
21.83
-13.42
13.03
11.51
10.71
28.6
5.3
33.9
1.2
-131.5
-130.3
18.2
99.6
46.4
164.2
3Q11
0.6%
38.2
-19.1
32.9
9.4
15.0
99.8
0.6
100.4
4.3
45.6
49.9
4.3
8.4
37.8
50.5
1Q11
0.4%
22.4
-27.1
19.1
14.2
16.2
88.7
39.4
128.1
116.9
144.9
261.8
-8.0
-147.7
22.0
-133.7
4Q10
0.7%
38.6
-33.2
43.2
15.1
13.5
41.2
4.8
46.0
7.5
-19.6
-12.1
22.9
44.7
-9.5
58.1
3Q10
0.6%
34.5
-20.0
13.4
31.6
9.5
81.8
16.0
97.8
65.7
32.7
98.4
28.7
-32.3
3.0
-0.6
2Q10
0.8%
43.3
-15.5
35.1
18.7
4.9
80.7
16.4
97.1
3.2
45.2
48.4
16.0
18.3
14.4
48.7
1Q10
VAR – Value at Risk
Interest Rate
FX
Equity & Commodities
Diversification Effect
Global VAR
Capital Markets net of Provisions for securities
… Interest rate
… Credit
… FX & Other
Provisions for Securities
Capital market results
… Income from securities
Global VAR as % of Tier I
… Trading
Equity
Interest Rate, Credit & FX
(EUR million)
469M11 Results Presentation
27 October 2011
64
36
3
24
-115
88
283525
5150545355
193526
51
84
13
46
8082
44
666873
196
3955
72
155
-14
16
48
124108
9798
46
128
100
245
3449
27
2
84
109
109
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
2Quarterly capital markets results
Quarterly history of capital markets results since 1999
(EUR mn)
479M11 Results Presentation
27 October 2011
Quarterly equity accounted earnings and other results
15.7
-7.2
6.9
9.0
-0.2
8.8
2Q11
-35.9
-38.6
-40.0
1.2
2.9
4.1
1Q11
-33.9
-23.0
-24.5
3.1
-12.6
-9.5
3Q11
0.2
1.9
-16.5
11.4
5.3
8.4
3Q10
52.9
35.4
44.9
4.8
3.2
8.0
4Q10
-2.6-0.6… Results from sale other assets
1.73.8… Other
-14.14.1Other Results, ow
12.7
4.8
8.6
1Q10
-1.9
2.2
12.2
2Q10
Equity Accounted Earnings and Other Results (Quarterly)
Total Equity Accounted and Other Results
… BES Vida
Equity Accounted Earnings
(EUR million)
-57.5-33.1-40.018.4-26.5-10.04.1Other Results, ow
-33.1
2.7
12.9
6M11
-40.0
2.9
4.1
3M11
-68.8
-9.9
3.4
9M11
-26.5
12.3
29.2
9M10
-10.0
7.0
20.8
6M10
4.1
4.8
8.6
3M10
18.4
15.5
37.2
FY10
Equity Accounted Earnings and Other results (Accumulated)
… Results from sale of other assets
… BES Vida
Equity Accounted Earnings, ow
(EUR million)
489M11 Results Presentation
27 October 2011
Quarterly other results: Reconciliation between IFRS P&L and Presentation
14.1
-7.6
111.4
9.3
127.2
2Q11
-1.4
-7.6
36.0
9.0
36.0
1Q11
-7.6--------… Special Tax on Banks
9.5
-29.1
6.2
-13.4
4Q10
-10.0
-7.6
12.6
-5.1
3Q10
-11.4
-8.1
8.2
-11.2
2Q10
-1.44.6-2.2-24.1-11.7-7.2… Other
-16.7
14.2
-4.8
4Q09
0.8
10.7
16.1
1Q10
13.3
9.1
-1.7
3Q09
10.2
5.3
3.8
2Q09
96.5
9.2
98.5
1Q09
Quarterly
192.1… Capital Markets
7.7… Fees
190.7Other Results (IFRS), ow
3Q11(EUR million)
12.7
-15.2
147.4
18.3
163.2
6M11
-1.4
-7.6
36.0
9.0
36.0
3M11
-22.9--------… Special Tax Banks
-7.3
-44.0
37.7
-13.6
FY10
-16.8
-14.9
31.5
-0.2
9M10
-6.8
-7.3
18.9
4.9
6M10
11.34.6-45.2-43.0-18.9-7.2… Other
0.8
10.7
16.1
3M10
103.3
37.8
95.8
FY09
120.0
23.6
100.6
9M09
106.7
14.5
102.3
6M09
96.5
9.2
98.5
3M09
Accumulated
339.5… Capital Markets
26.0… Fees
353.9Other Results (IFRS), ow
9M11(EUR million)
499M11 Results Presentation
27 October 2011
864.3
78.8
313.5
72.8
53.7
345.4
471.9
9M11
292.3
26.1
107.5
24.6
18.1
116.0
158.7
3M11
580.0
52.3
215.4
48.9
35.5
227.9
312.3
6M11
1,169.4
100.1
441.0
71.9
90.7
465.8
628.4
12M10
563.3
50.5
213.9
33.7
40.9
224.3
298.9
6M10
269.2
23.7
100.6
16.5
20.3
108.1
144.9
3M10
42.7%51.0…Long term service benefits & Other
-18.6%66.0…Pension Benefits
853.9
75.8
323.8
337.3
454.3
9M10
1.2%
4.0%
-3.2%
2.4%
3.9%
YoY
…Remunerations
Admin costs
Total Operating Costs
Depreciation
Staff costs
Accumulated Operating Costs(EUR million)
Breakdown of operating costs
-1.0%
1.1%
-9.1%
-1.6%
4.6%
5.0%
3.9%
QoQ
284.2
26.5
98.1
23.9
18.2
117.5
159.6
3Q11
292.3
26.1
107.5
24.6
18.1
116.0
158.7
1Q11
287.7
26.2
107.9
24.3
17.4
111.9
153.6
2Q11
315.5
24.3
117.2
20.9
24.7
128.5
174.1
4Q10
294.1
26.8
113.3
17.2
20.6
116.2
154.0
2Q10
269.2
23.7
100.6
16.5
20.3
108.1
144.9
1Q10
38.2%17.3…Long term service benefits & Other
-27.5%25.1…Pension Benefits
290.6
25.3
109.9
113.0
155.4
3Q10
-2.2%
4.7%
-10.7%
4.0%
2.7%
YoY
…Remunerations
Admin costs
Total Operating Costs
Depreciation
Staff costs
Quarterly Operating Costs(EUR million)
509M11 Results Presentation
27 October 2011
Quarterly operating costs: domestic and international
78.9
6.2
29.3
2.2
0.8
40.3
43.4
208.8
20.0
78.6
22.1
16.6
71.6
110.3
2Q11
81.0
5.8
28.9
2.2
0.9
43.2
46.3
211.3
20.3
78.6
22.4
17.2
72.8
112.4
1Q11
81.5
6.2
27.8
1.3
0.8
45.9
48.0
202.7
20.2
70.4
22.7
17.4
71.6
111.7
3Q11
3.4%
0%
-5.1%
-40.9%
0%
13.9%
10.6%
-3.0%
1%
-10.4%
2.7%
4.8%
0%
1.2%
QoQ
81.9
4.7
30.4
5.0
0.4
41.4
46.8
233.7
19.6
86.8
15.8
24.3
87.1
127.3
4Q10
71.8
6.4
25.1
1.9
1.1
37.3
40.3
218.8
18.9
84.8
15.5
24.1
75.6
115.1
3Q10
62.5
4.3
21.0
1.1
0.8
35.2
37.2
206.7
19.4
79.6
15.3
19.4
73.0
107.7
1Q10
-31.6%2.3… Long term service benefits & Other
46.5%14.9…Long term service benefits & Other
-27.8%19.6…Pension Benefits
23.1%34.0…Remunerations
19.1%37.3Staff Costs
International
66.7
5.3
24.1
1.0
227.4
21.6
89.2
82.2
116.7
2Q10
13.6%
-3.1%
10.8%
-27.3%
-7.4%
6.9%
-17.0%
-5.3%
-3.3%
YoY
…Remunerations
International Operating Costs
Admin costs
Depreciation
Admin costs
…Pension Benefits
Domestic Operating Costs
Depreciation
Staff costs
Domestic
(EUR million)
519M11 Results Presentation
27 October 2011
Breakdown of accumulated operating costs: domestic and international
241.9
18.2
86.0
5.7
2.5
129.4
137.6
622.4
60.5
227.6
67.1
51.2
216.0
334.3
9M11
81.0
5.8
28.9
2.2
0.9
43.2
46.3
211.3
20.3
78.6
22.4
17.2
72.8
112.4
3M11
159.9
12.0
58.2
4.4
1.7
83.5
89.6
420.2
40.3
157.2
44.5
33.8
144.4
222.7
6M11
282.9
20.7
100.6
10.3
3.3
147.9
161.6
886.6
79.5
340.4
61.5
87.4
317.9
466.8
12M10
201.0
16.0
70.2
5.3
2.9
106.5
114.8
652.9
59.8
253.5
45.7
63.1
230.8
339.6
9M10
62.5
4.3
21.0
1.1
0.8
35.2
37.2
206.7
19.4
79.6
15.3
19.4
73.0
107.7
3M10
7.5%3.4… Long term service benefits & Other
46.8%30.2…Long term service benefits & Other
-18.9%39.0…Pension Benefits
21.5%69.3…Remunerations
19.9%74.6Staff Costs
International
129.2
9.6
45.0
1.8
434.1
41.0
168.9
155.1
224.4
6M10
20.3%
13.7%
22.5%
-13.8%
-4.7%
1.2%
-10.2%
-6.4%
-1.6%
YoY
…Remunerations
International Operating Costs
Admin costs
Depreciation
Admin costs
…Pension Benefits
Domestic Operating Costs
Depreciation
Staff costs
Domestic
(EUR million)
529M11 Results Presentation
27 October 2011
Quarterly provisions
366.5
86.1
55.7
104bp
27.2
191bp
197.4
174bp
224.6
2Q11
191.0
37.9
5.3
59bp
15.4
128bp
132.4
114bp
147.8
3Q11
70.5%
60.9%
9.6%
-9bp
-20.8%
66bp
106.5%
51bp
76.8%
YoY
-47.9%
-56.0%
-90.5%
-45bp
-43.2%
-63bp
-32.9%
-60bp
-34.2%
QoQ
660.7
145.8
61.7
68bp
53.5
128bp
399.7
116bp
453.2
9M11
103.0
21.6
0.6
40bp
10.7
68bp
70.1
63bp
80.9
1Q11
350.8
55.5
37.2
73bp
62.3
63bp
195.8
65bp
258.1
9M10
182.8
49.7
39.4
110 bp
30.8
61 bp
62.9
71 bp
93.7
4Q10
112.0
23.6
4.8
68 bp
19.5
62 bp
64.1
63 bp
83.6
3Q10
115.1
18.7
16.4
74bp
19.9
59bp
60.1
62bp
80.0
1Q10
123.7
13.2
16.0
78 bp
22.9
69 bp
71.6
71 bp
94.5
2Q10
-5bpcost of risk (bp)
104.2%… Domestic
65bpcost of risk (bp)
-14.4%… International
65.9%…Securities
162.6%…Other
51bpcost of risk (bp)
88.3%
75.6%
YoY
…Credit
Total Provisions
(EUR million)
Note: Detailed credit provisions and asset quality data in following slides
539M11 Results Presentation
27 October 2011
Quarterly balance sheet: assets
82,767
4,467
375
40
948
223
823
-
674
435
-
2,092
(2,101)
49,933
4,049
12,137
1,487
3,458
610
1,015
Sep 11
3.2%
-5.0%
-0.4%
-62.5%
-1.4%
0.7%
3.1%
5.8%
32.3%
-7.1%
5.9%
0.4%
17.7%
11.1%
39.8%
15.0%
13.5%
-6.4%
QoQ
80,746
3,886
292
99
961
230
780
-
605
296
-
2,349
( 1,790)
49,862
3,765
10,777
1,525
3,398
671
1,252
Mar 11
80,162
4,704
377
108
961
221
798
-
637
329
-
2,252
(1,983)
49,718
3,439
10,925
1,063
3,007
538
1,085
Jun 11
83,655
4,083
283
99
962
234
809
-
575
447
-
2,459
(1,777)
50,829
4,245
11,775
1,424
3,942
558
931
Dec 10
82,137
3,719
220
29
868
153
792
-
636
524
-
2,606
(1,725)
51,032
2,596
11,642
1,618
4,300
555
847
Sep 10
84,874
3,705
237
25
852
153
746
-
486
533
-
2,757
(1,682)
51,674
3,570
10,115
1,611
5,966
501
1,943
Jun 10
0.8%
20.1%
70.8%
37.8%
9.2%
45.7%
3.9%
6.1%
-16.9%
-19.7%
21.8%
-2.2%
56.0%
4.2%
-8.1%
-19.6%
9.9%
19.8%
YoY
84,098Total Assets
3,670Other assets
191Deferred income tax assets
18Current income tax assets
872Investments in associated companies
135Intangible assets
712Other tangible assets
-Investment property
440Non current assets held for sale
486Hedging derivatives
-Financial Assets with repurchase agreements
2,664Held to maturity investments
(1,609)(Provisions)
49,898Loans and advances to customers
6,635Loans and advances to banks
9,058Financial assets available for sale
2,653Financial assets at fair value through P&L
4,041Financial assets held for trading
509Deposits with banks
2,115Cash and deposits at central banks
Mar 10(Eur mn)
549M11 Results Presentation
27 October 2011
Quarterly balance sheet: liabilities
75,863
1,950
1,158
-
94
24
200
5
225
18,649
33,854
6,170
-
2,113
11,422
Sep 11
3.7%
18.7%
-26.6%
18.0%
-4.6%
-3.2%
-
-2.2%
-6.3%
5.9%
3.5%
11.5%
18.1%
QoQ
73,386
1,603
2,327
-
110
27
212
5
217
-
20,742
30,545
7,199
-
1,875
8521
Mar 11
73,175
1,642
1,578
-
79
25
207
5
230
-
19,907
31,972
5,961
-
1,895
9,673
Jun 11
76,179
1,935
2,292
-
116
25
215
5
229
-
24,110
30,819
6,381
-
2,088
7,965
Dec 10
74,874
1,226
2,311
-
94
84
192
43
214
-
25,643
29,923
6,215
-
2,275
6,654
Sep 10
76,978
1,219
2,306
-
70
126
172
26
215
-
33,062
26,522
7,302
-
1,736
4,222
Mar 10
1.3%
59.0%
-49.9%
-0.7%
-71.9%
4.0%
-87.5%
5.1%
-27.3%
13.1%
-0.7%
-7.1%
71.7%
YoY
77,959Total Liabilities
1,197Other liabilities
2,306Other subordinated loans
-Instruments representing capital
92Deferred income tax liabilities
97Current income tax liabilities
180Provisions
35Non current liabilities held for sale
241Hedging derivatives
-Financial liabilities assoc. to transferred assets
29,451Debt securities
26,082Due to customers
7,112Deposits from banks
-Financial assets at fair value through P&L
2,169Financial liabilities held for trading
8,996Amounts owed to central banks
Jun 10(Eur mn)
559M11 Results Presentation
27 October 2011
Quarterly balance sheet: equity
6,904
634
-
138
1,337
(467)
409
(1)
269
1,085
3,500
6,132
Sep 11
-1.2%
8.7%
-
1.1%
-
-10.2%
-
-
-
-
-1.9%
QoQ
7,361
562
-
61
1,317
(33)
600
(1)
269
1,085
3,500
6,738
Mar 11
6,987
583
-
156
1,322
(383)
456
(1)
269
1,085
3,500
6,274
Jun 11
7,476
491
-
511
979
( 10)
600
-
320
1,085
3,500
6,474
Dec 10
7,263
412
-
405
993
292
600
(25)
-
1,085
3,500
6,446
Sep 10
7,120
315
-
119
1,198
326
600
(25)
-
1,086
3,500
6,686
Mar 10
6,915
390
-
282
1,023
60
600
(25)
-
1,085
3,500
6,243
Jun 10
-4.9%
53.8%
-66.0%
34.6%
-
-31.8%
-
-
-
-
-4.9%
YoY
Total Equity
Minority interests
Anticipated dividends
Net Profit for the period / year
Other reserves and retained earnings
Fair value reserve
Preference shares
Treasury stock
Other capital instruments
Share premium
Share capital
Shareholders' Equity
(Eur mn)
569M11 Results Presentation
27 October 2011
Quarterly loan portfolio (including securitised)
19%
10,534
44,431
54,965
9,718
28,159
37,877
334
2,228
2,562
483
14,044
14,527
17,089
Sep 11
0.7%
0.5%
0.5%
0.8%
1.4%
1.3%
-2.1%
-3.3%
-3.2%
1.9%
-0.8%
-0.7%
-1.1%
QoQ
20%
10,686
44,011
54,697
9,878
27,441
37,319
335
2,348
2,683
473
14,222
14,695
17,378
Mar 11
19%
10,460
44,229
54,689
9,645
27,764
37,409
341
2,305
2,646
474
14,160
14,634
17,280
Jun 11
20%
11,186
44,527
55,713
10,349
27,734
38,083
354
2,468
2,822
483
14,324
14,808
17,630
Dec 10
20%
11,403
44,427
55,929
10,577
27,701
38,278
329
2,428
2,757
496
14,398
14,894
17,651
Sep 10
20%
10,810
44,054
54,864
9,972
27,164
37,136
333
2,461
2,794
504
14,429
14,933
17,728
Mar 10
21%
11,673
44,925
56,597
10,833
27,990
38,823
343
2,451
2,794
497
14,484
14,981
17,775
Jun 10
-7.6%
-0.2%
-1.7%
-8.1%
1.7%
-1.0%
1.4%
-8.2%
-7.1%
-2.7%
-2.5%
-2.5%
-3.2%
YoY
… International
… Domestic
Loan portfolio
… International
Int as % total
… ow Other
… Domestic
Corporate Lending
… International
… Domestic
… International
… Domestic
… ow Mortgages
Loans to Individuals
(EUR million)
(1) Considering the outstanding amounts of securitised credit. Securitised credit only includes domestic loans.
579M11 Results Presentation
27 October 2011
Quarterly gross loan portfolio (excluding securitised)
20%
10,534
41,499
52,033
9,717
28,159
37,876
334
2,228
2,562
483
11,112
11,595
14,157
Sep 11
0.7%
0.6%
0.6%
0.8%
1.4%
1.3%
-2.1%
-3.4%
-3.2%
1.9%
-0.5%
-0.4%
-0.9%
QoQ
21%
10,686
40,966
51,652
9,878
27,441
37,319
335
2,348
2,683
473
11,177
11,650
14,333
Mar 11
20%
10,460
41,241
51,701
9,645
27,764
37,409
341
2,305
2,646
474
11,172
11,646
14,292
Jun 11
21%
11,186
41,420
52,606
10,349
27,734
38,083
354
2,468
2,822
483
11,217
11,701
14,523
Dec 10
22%
11,403
41,354
52,757
10,577
27,701
38,279
329
2,428
2,757
496
11,225
11,722
14,479
Sep 10
21%
10,810
40,697
51,507
9,972
27,164
37,137
333
2,461
2,794
504
11,072
11,576
14,371
Mar 10
22%
11,673
41,682
53,355
10,833
27,990
38,823
343
2,451
2,794
497
11,242
11,739
14,532
Jun 10
-7.6%
0.4%
-1.4%
-8.1%
1.7%
-1.0%
1.4%
-8.2%
-7.1%
-2.7%
-1.0%
-1.1%
-2.2%
YoY
… International
… Domestic
Loan portfolio
… International
Int as % total
… ow Other
… Domestic
Corporate Lending
… International
… Domestic
… International
… Domestic
… ow Mortgages
Loans to Individuals
(EUR million)
589M11 Results Presentation
27 October 2011
Quarterly asset quality indicators
183bp
104bp
191bp
174bp
3.83%
148.3%
3.00%
4.55%
0.82%
2.59%
163.0%
2.35%
Jun11
142bp
40bp
68bp
63bp
3.47%
145.4%
2.27%
4.46%
0.84%
2.38%
159.4%
2.17%
Mar11
165bp
59bp
128bp
114bp
4.04%
141.6%
3.33%
4.87%
0.85%
2.85%
155.0%
2.60%
Sep11
103 bp
68 bp
62 bp
63 bp
3.27%
157.8%
2.30%
4.14%
0.84%
2.07%
172.5%
1.90%
Sep 10
60 bp
110 bp
61 bp
71 bp
3.38%
160.6%
2.36%
4.08%
0.80%
2.10%
173.0%
1.95%
Dec 10
141 bp
74 bp
59 bp
62 bp
3.12%
160.7%
2.16%
3.59%
0.86%
1.94%
187.5%
1.67%
Mar 10
1.70%Overdue Loans >90 days / Gross Loans
184.9%Coverage of Overdue Loans > 90 days
2.09%Corporates (>30d)
3.64%Consumer (>30d)
0.82%Mortgage (>30d)
106 bpSpain
69 bp… Domestic
78 bp… International
71 bpQoQ Provision Charge
166.3%Coverage of Overdue Loans >30 days
3.15%Provisions for Credit / Total Gross Loans
1.90%Overdue Loans >30 days / Gross Loans
Jun 10
(1) According to Bank of Portugal rules (Circular Letter N. 99/09/2003)
599M11 Results Presentation
27 October 2011
1.60% 1.67% 1.70%1.90% 1.95%
2.17%2.35% 2.60%
192% 188%185%
173% 173%
159% 163%155%
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
0.13%
1.03%
0.23%
0.74%
0.37%
1.23%
0.88%
1.29%
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Overdue loans ratios and coverage
Total Overdue Loans Ratio (+30d) & Coverage (%)
Net New Entries as % of Performing Loans
(quarterly annualised)Quarterly Write Offs (Eur mn)
Overdue Loans +90 days Ratio & Coverage (%)
17.7 22.8 20.0 14.1 34.8 30.0
1.77% 1.94% 1.90% 2.07% 2.10%2.38% 2.85%2.59%
174% 161% 166% 158% 161%145% 148% 142%
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
5.0 16.4
609M11 Results Presentation
27 October 2011
Quarterly asset quality indicators: Domestic and International
287.8
1,694.8
1,982.6
220.2
996.0
1,216.2
236
1,101.1
1,337.1
10,459.7
41,240.9
51,700.5
Jun11
273.8
1,516.3
1,790.1
191.0
931.7
1,122.7
212.8
1018.7
1,231.5
10,685.8
40,966.3
51,652.1
Mar11
301.8
1,798.7
2,100.6
253.9
1,101.3
1,355.2
270
1,213.5
1,483.4
10,534.3
41,499.2
52,033.5
Sep11
256.0
1,469.2
1,725.3
167.9
833.1
1,000.1
192.5
900.9
1,093.4
11,402.7
41,354.3
52,757.0
Sep 10
1,494.71,421.91,367.1…Domestic
282.3259.6241.8… International
913837.4812.4…Domestic
193174.0189.0… International
1,777.0
176.7
850.4
1,027.1
1,106.7
11,186.5
41,419.6
52,606.1
Dec 10
41,682.340,697.3…Domestic
11,672.810,809.8… International
764.6719.0…Domestic
144.7139.0… International
1,608.9
858.0
1,001.3
51,509.2
Mar 10
53,355.1Gross Loans
1,011.4Total Overdue Loans (> 30 days)
1,681.5Total Credit Provisions (BS)
909.3Overdue Loans > 90 days
Jun 10(EUR million)
619M11 Results Presentation
27 October 2011
Quarterly asset quality indicators: Domestic and International
121.9%
153.9%
148.3%
2.26%
2.67%
2.59%
130.7%
170.2%
163.0%
2.11%
2.41%
2.35%
Jun 11
128.6%
148.8%
145.4%
1.99%
2.49%
2.38%
143.3%
162.7%
159.4%
1.79%
2.27%
2.17%
Mar 11
146.0%
163.7%
160.6%
1.73%
2.21%
2.10%
159.5%
175.8%
173.0%
1.58%
2.05%
1.95%
Dec 10
133.0%
163.1%
157.8%
1.69%
2.18%
2.07%
152.5%
176.4%
172.5%
1.47%
2.01%
1.90%
Sep 10
148.2%170.4%168.3%…Domestic
111.8%149.2%127.9%… International
163.3%186.0%190.1%…Domestic
118.9%179.4%174.0%… International
141.6%
2.56%
2.92%
2.85%
155.0%
2.41%
2.65%
2.60%
Sep 11
1.83%1.77%…Domestic
1.24%1.29%… International
2.01%2.00%…Domestic
1.49%1.75%… International
160.7%
1.94%
187.5%
1.67%
Mar 10
1.70%Overdue Loans >90 days / Gross Loans
184.9%Coverage of Overdue Loans > 90 days
166.3%Coverage of Overdue Loans >30 days
1.90%Overdue Loans >30 days / Gross Loans
Jun 10
(1) According to Bank of Portugal rules (Circular Letter N. 99/09/2003)
629M11 Results Presentation
27 October 2011
Quarterly and accumulated credit provision charge & net new entries
5.0
105bp
88bp
331bp
71bp
130bp
118bp
29.7
37.9
267.5
305.4
183bp
104bp
191bp
174bp
16.4
27.2
197.4
224.6
2Q11
30.0
123bp
123bp
142bp
40bp
68bp
63bp
13.3
10.7
70.1
80.9
142bp
40bp
68bp
63bp
13.3
10.7
70.1
80.9
1Q11
16.4
113bp
129bp
167bp
68bp
128bp
116bp
44.0
53.5
399.7
453.2
161bp
59bp
128bp
114bp
14.3
15.4
132.4
147.8
3Q11
14.1
66 bp
74 bp
118 bp
73 bp
63 bp
65 bp
36.3
62.3
195.8
258.1
103 bp
68 bp
62 bp
63 bp
10.6
19.5
64.1
83.6
3Q10
20.0
61 bp
23 bp
123 bp
73 bp
63 bp
65 bp
25.7
42.8
131.7
174.5
106 bp
78 bp
69 bp
71 bp
11.1
22.9
71.6
94.5
2Q10
59 bp103 bpNet new entries as % Performing Loans (accum.)
28.8
103 bp
141 bp
74 bp
59 bp
62 bp
14.6
19.9
60.1
80.0
141 bp
74 bp
59 bp
62 bp
14.6
19.9
60.1
80.0
1Q10
37 bpNet new entries as % Performing Loans (quarter)
258.7… Domestic
93.1… International
42.5ow Spain
62 bp… Domestic
83 bp… International
104 bpow Spain
61 bp… Domestic
110 bp… International
60 bpow Spain
6.2ow Spain
62.9… Domestic
30.8… International
34.8
67 bp
351.8
71 bp
93.7
4Q10
Quarterly Write Offs (Eur mn)
As % Loan Portfolio (bp)
P&L Credit Provisions Accumulated
As % Loan Portfolio (bp)
P&L Credit Provisions Quarter
(EUR million; % annualised)
639M11 Results Presentation
27 October 2011
Quarterly customer funds
24%
13,430
42,057
55,487
14,788
40,699
5,273
1,573
25,124
8,730
33,854
Sep 11
-2.5%
-0.7%
-1.1%
-10.5%
2.7%
-11.9%
-4.7%
6.9%
3.1%
5.9%
QoQ
25%
14,281
41,732
56,013
17,715
38,298
5,747
2,006
22,401
8,145
30,545
Mar 11
25%
13,781
42,351
56,132
16,522
39,610
5,988
1,650
23,506
8,466
31,972
Jun 11
23%
12,841
43,147
55,988
17,094
38,894
6,326
1,749
22,143
8,676
30,819
Dec 10
28%
15,472
40,375
55,847
18,006
37,841
5,924
5,834
18,108
7,974
26,082
Jun 10
23%31%% total
18,865
41,728
60,594
18,985
41,609
6,460
8,626
19,469
7,053
26,522
Mar 10
12,965
43,969
56,934
17,763
39,171
5,596
3,653
21,994
7,929
29,923
Sep 10
10.1%… Sight
14.2%… Term
13.1%Deposits
-56.9%Certificates of Deposits
3.6%
-4.3%
-2.5%
-16.7%
3.9%
-5.8%
YoY
Total
… International
… Domestic
Off-BS Funds
On-BS Customer Funds
Debt Securities placed with Clients
(EUR million)
649M11 Results Presentation
27 October 2011
Quarterly off-BS customer funds
3,895
12,627
16,522
804
2,349
3,153
4,315
239
2,448
2,687
80
1,249
1,329
2,772
2,267
5,038
Jun 11
-9.4%
-10.8%
-10.5%
-20.6%
-20.2%
-30.3%
-12.1%
-6.5%
-4.8%
-4.9%
9.3%
-3.2%
-2.4%
-7.0%
-9.5%
-8.1%
QoQ
3,873
13,842
17,715
806
2,638
3,444
4,805
134
2,539
2,673
81
1,275
1,356
2,852
2,585
5,437
Mar 11
3,528
11,260
14,788
639
1,874
2,513
3,794
223
2,332
2,555
88
1,209
1,297
2,578
2,051
4,629
Sep 11
2,700
14,394
17,094
430
2,801
3,231
5,374
133
2,522
2,655
84
1,291
1,375
2,053
2,406
4,459
Dec 10
2,666
15,340
18,006
450
3,053
3,503
5,716
153
2,486
2,639
86
1,353
1,439
1,977
2,732
4,709
Jun 10
2,838
16,147
18,985
488
3,437
3,925
5,846
138
2,569
2,707
77
1,251
1,328
2,135
3,044
5,179
Mar 10
2,611
15,152
17,763
436
2,930
3,366
5,705
135
2,508
2,643
79
1,350
1,429
1,961
2,659
4,620
Sep 10
-10.5%… Domestic
11.3%… International
35.1%
-25.7%
-16.7%
46.5%
-36.0%
-25.3%
-33.5%
65.4%
-7.0%
-3.3%
-9.3%
31.5%
-22.9%
0.2%
YoY
… Domestic
Total Off-BS Funds
… International
… Domestic
… International
Pension Funds
Other (*)
Bancassurance (Domestic)
… International
… Domestic
Real Estate Funds
… International
… Domestic
Mutual Funds
(EUR million)
(*) Other includes off-BS structured products, discretionary management and venture capital
659M11 Results Presentation
27 October 2011
Available for Sale Portfolio – main equity holdings potential gains & losses. Potential losses on equity holdings are deducted to Core Tier I
-161.7
5.2
-146.8
-20.1
0.0
2Q11
112.6
6.3
-28.7
0.0
135.0
1Q11
120.3
7.3
-7.3
-49.9
170.2
4Q10
-224.8
6.2
-200.9
-30.1
0.0
3Q11
383.4
6.5
141.2
-55.8
291.5
3Q10
324.5
7.1
51.4
-18.9
284.9
1Q10
162.9
6.0
46.5
-74.7
185.1
2Q10
977.7Total
Bradesco
0.25%
11.70%*
1.98%
Stake (%)
2.5BMCE
777.7PT
197.5EDP
Acquis.
Value(EUR million)
Potential Gains and Losses
(*) BES reduced the position in PT to 10.74% in October 2011
669M11 Results Presentation
27 October 2011
Quarterly solvency ratios
11. 5%
9.2%
8.2%
13%
775
1,517
6,127
5,445
7,577
3,973
2,976
59,482
66,431
Jun 11
(IRB)
11.4%
8.8%
7.9%
15%
920
1,805
6,033
5,395
7,838
3,973
4,389
60,214
68,576
Mar 11
(IRB)
11.3%
8.8%
7.9%
15%
920
1,758
6,040
5,416
7,798
3,973
4,219
60,610
68,802
Dec 10
(IRB)
11.0%
8.3%
7.9%
11%
600
1,807
5,589
5,303
7,393
3,668
3,900
59,642
67,210
Sep 10
(IRB)
10.6%
9.0%
8.1%
12%
729
1,018
6,020
5,380
7,038
3,973
2,218
60,524
66,715
Sep 11
(IRB)
10.6%
8.1%
7.9%
11%
600
1,699
5,405
5,276
7,104
3,668
4,303
59,092
67,063
Mar 10
(IRB)
11.2%
8.4%
7.9%
11%
600
1,857
5,668
5,300
7,516
3,668
4,408
59,115
67,191
Jun 10
(IRB)
As % Tier I
…Banking Book
…Trading Book
…Oper. Risk
Core Tier I
Tier I (%)
Total Capital
Tier I
Tier II and Other
Core Tier I (%)
Total (%)
Hybrid Capital
RWA (BoP)
(EUR million)
Notes: BIS II IRB corresponds to calculations based on IRB Foundation for credit risk and standardised approach for operational risk. Preliminary data as of Sep 2011.
679M11 Results Presentation
27 October 2011
Table of contents
I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected
II. Conservative risk management: continued increase of provision reserve to anticipate
asset quality deterioration in the domestic portfolio
III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity
transaction to reinforce core capital
IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business
to sustain future profitability. Strict cost control measures producing results
V. Wrap up
Appendix 1: Detailed financial data
Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil
689M11 Results Presentation
27 October 2011
Following several rating downgrades, Portugal requested financial aid on April 6th. The MoU signed between the new Portuguese government and IMF / EC / ECB implies several adjustments for the economy and for the banking sector
6 Apr
5 Jul
MoU signed between Portugal and IMF / EC and ECB3 May
Portuguese General Elections took place. A coalition between Social Democrats and Popular party obtained a right-wing majority in the Parliament
5 Jun
17 Jun New government announced
30 JunPortuguese Government announced new austerity measures, including a new social one-off tax on income
Moody’s downgraded Portugal to Ba2, below investment grade
ECB suspended minimum credit rating threshold for Portuguese debt
EBA released Stress Tests results. All Portuguese banks passed
8 Jul
15 Jul
4th Growth & Stability Programme rejected by the Parliament23 Mar
Mar - Apr Potugal faced several rating downgrades
Portugal announced the financial aid request
Jul-Aug
MoU: targets for the Portuguese banking sector
Ratings and recent downgrades
Target
Loans to Deposit Ratio 120% Dez 2014
Core Tier I Ratio 9% Dez 2011
Core Tier I Ratio 10% Dez 2012
Stable Funding Ratio 100% Dez 2014
Dec. 10 Sep. 11 Notches
Portugal A- BBB- -3
BES A- BBB- -3
Portugal A1 Ba2 -7
BES A2 Ba1 -5
Portugal A(L) BBB(H) -1
BES A(L) BBB(H) -1
Portugal A+ BBB- -5
BES - - -
European summit of July seemed to calm down markets. However, in August fears regarding contagion effects spread and the European debt crisis worsened
699M11 Results Presentation
27 October 2011
Provision of EUR 78 billion in financing for the Portuguese economy between 2011 and 2013.
Budget deficit to be reduced from 9.8% of GDP in 2010 (EUR 16.7 billion) to 5.9% in 2011 (EUR 10.1 billion), 4.5% in 2012 (EUR 7.6 billion) and 3% in 2013 (EUR 5.2 billion).
Positive: Special focus on growth enhancing measures and competitiveness; extension of the budget consolidation period.
Negative: Expected retreat in real GDP in 2011 and 2012.
Risks: Implementation, Greece contagion, negative external environment.
Social Security Reform
Financial Sector Stability
Liquidity support, with the increase in Government guarantees to Banks’bond issues to a total of EUR 35 billion.
Periodic targets for leverage ratios.
Core Tier 1 ratio of 9% by end-2011 and of 10% by end-2012. Public solvency support facility increased to EUR 12 billion.
Structural Reforms – Public Sector
Acceleration of the privatization program (EDP, REN and TAP to be fully privatized by end-2011). Updated privatization program to be presented by 1Q 2012.
State-Owned Enterprise sector to be streamlined. Lower spending and higher fees in National Health System. Review of the PPP program.
Structural Reforms – Economy
Labor Market: Lower value and duration of unemployment benefits. Reduction in severance payments, with gradual alignment with average EU practices. Higher flexibility in dismissals and working time arrangements. Promotion of the rental market. Reform of the judicial system and higher competition in energy, transports and telecoms.
Fiscal Consolidation
Lower Spending: Up to 10% cuts in public sector wages (Budget 2011) and in pensions above EUR 1500; Cuts in health care spending, unemployment insurance, operating costs, capital expenditure, etc.
Higher Revenues: Increases in corporate and personal income taxes, VAT, property taxes and excise taxes.
IMF/EC/ECB Stabilisation Program is on the way
709M11 Results Presentation
27 October 2011
-15000
-13000
-11000
-9000
-7000
-5000
-3000
-1000
Jan Feb Mar Apr May Jun Jul Aug Set Oct Nov Dec
2010
2011
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal consolidation is going in the right direction, but there is still a lot to do
State Budget Balance on a Cash Basis (EUR million)
General Government Deficit on a National Accounts Basis (% GDP)1
Deficit for the year ending in each quarter
2Q 20118.8%
September 2011– 30 % y-o-y
Inclusion of some public companies and PPP projects in the Public Administration perimeter, and the one off accounting Government assistance to two minor banks resulted in upward revision of the 2010 deficit, to 9.8% of GDP.
The State deficit on a cash basis fell 30% y-o-y in September. On a National Accounts basis (the relevant criteria for the 5.9% of GDP 2011 target), the General Government deficit1 reached 8.3% of GDP in 1H 2011 and 8.8% of GDP in the year ending in 2Q 2011, in this case down from a peak of 10.5% in 2Q 2010.
Target for 4Q 2011: 5.9%
(1) Includes the deficit for the State, Autonomous Funds, Social Security and Local/Regional Government. In contrast with the cash basis criteria, revenues and spending in the National Accounts criteria are accounted for when they are earned and incurred, and not necessarily when a payment is made or received.
OE2011 target
719M11 Results Presentation
27 October 2011
Deviations related
to the budget
execution
Total deviation
before corrective measures
2% of GDPor
aroundEUR 3.4bn
Wages
Intermediate consumptions
Concessions and sales
Interests
EUR 300 mn
EUR 560 mn
EUR 250 mn
EUR 200 mn
Dividends EUR 220 mn
Deviations related to one-off operations
Expenditure
side
0.8% of GDPor
aroundEUR 1.3 bn
0.7% of GDPor
aroundEUR 1.3 bn
Fees and other revenues (from Justice) EUR 500 mn
Social Security contributions EUR 80 mn
BPN privatization EUR 350 mn
Consolidation of two SOE’s debt (from Madeira) EUR 570 mn
Other operations EUR 350 mn
Revenue side
0.5% of GDPor
aroundEUR 0.8bn
Early identification of some deviations from the 2011 fiscal target…
Estimated deviations from the 2011 fiscal target (5.9% of GDP ) on a National Accounts basis.
Sources: MF, ES Research – NCPAMoU.
729M11 Results Presentation
27 October 2011
… has allowed for the timely adoption of further consolidation measures
Total corrective measures
2% of GDPor
aroundEUR3.4bn
One-time surcharge in the personalincome tax
Partial transfer of banks’ pensionfunds
Anticipation of the VAT increase ingas and electricity
Concessions
0.5% ofGDP
1.6% ofGDP
0.1% ofGDP
-0.2% ofGDP
Specific corrective measures
on the revenue
side
Sources: IMF, ES Research –NCPAMoU.
Additional fiscal consolidation measures to cover the estimated deviations from the 2011 fiscal target, on a National Accounts basis.
739M11 Results Presentation
27 October 2011
The implementation of the MoU measures is on track
Sources: MF,FMI, BCE, CE, ES Research – NCPAMoU.
Assessment of the MoU execution – Measures to be implemented by August 2011.
Measures not executed or with no decision by September 2011, by
subject.Number Implementation
Implemented or decided No decision or no implementation
Competitiveness(19 measures)
Public financial management and
contingent liabilities(17 measures)
Previous actions
Previous actions
JuneJune
55
1212JulyJuly 99
AugustAugust 33
11
5
3
6
SeptemberSeptember 5959 2336
1
3
Renegotiated
749M11 Results Presentation
27 October 2011
First IMF review with a globally favourable assessment…
The first quarterly review of Portugal’s performance under the economic and financial assistance program took place between August 1st and August 12th. According to the IMF, the European Commission and the ECB, the assessment is globally positive. The second review is projected to take place in November.
First review of the economic and financial assistance programme
+• Economic growth and inflation in line with the assistance program forecasts;• Strong commitment to the target for the budget deficit of 5.9% of GDP in end-2011, namely through the adoption
of measures aimed at correcting the fiscal slippages occurred in the first half of the year;• Bank capital is improving and the deleveraging process is on track;• Strengthening of government guarantees’ mechanisms for bank bond issuance and of the capital position of the
financial system;• Progress in enhanced bank regulation and supervision;• All special rights of the State in private companies have been abolished;• Labour market reform;
• Progress in the convergence between open-ended and fixed-term contracts in what concerns labour protection rights;
• Preparation of a draft law regulating the functioning of the employer-financed dismissal fund;• Preparation of a fiscal devaluation, and commitment to further steps in the 2012 Budget.
June July August September October November December
1st Assessment
2nd Assessment
-Negative remarks
Reviews of the Economic and Financial Assistance Program
• Deviation from fiscal target;• Recourse to one-off revenue measures, with low expenditure cuts;• Not all measures related to SOEs have been attended.
Positive remarks
759M11 Results Presentation
27 October 2011
… leading to the disbursement of another tranche of financial assistance
IMF, EFSM and EFSF Disbursements within the Economic Adjustment Program for Portugal, 2011(EUR billion and percentages)
Sources: IMF, EC, EFSF, Bank of Portugal, ES Research –NCPAMoU. (1) Notincluding administrative costs.
Tranches already received
Tranche Loan Date Entity Maturity Value CouponRate
Est. InterestRate1
(NºYears)
(EUR billion) (%) (%)
1ª 1º 25/May IMF 7.5 6.3 Variable 3.25
1ª 1º 01/Jun EFSM 10 1.75 5.65 5.692º 04/Jun EFSM 5 4.75 4.90 4.96
1ª 1ª 23/Jun EFSF 10 4.6 3.375 5.812ª 30/Jun EFSF 5 2.5 2.75. 5.03
2ª 1º 14/Sep IMF 7.5f 4.0 Variable 3.25
2ª 1º 21/Sep EFSM 10 5.0 n.d. n.d.2º 29/Sep EFSM 15 2.0 n.d. n.d.
Tranches to receive by end-2011
Exp. Date Entity Est. ValueEst.
InterestRate
(EUR billion) (%)
15/Dec
IMF 2.7 3.25
EFSM5.0
5.5
EFSF 3.5
769M11 Results Presentation
27 October 2011
Public refinancing needs 2011-2013 (EUR million).*
Public refinancing needs in 2012-2013 close to EUR 34 billion
Sources: Ministry of Finance, Bloomberg. * Not including state-owned enterprises.
10163 9738
0
2000
4000
6000
8000
10000
12000
14000
Nov. 2011 Mai. 2012 Nov. 2012 Mai. 2013 Nov. 2013
EUR
Milli
on
OTs PrincipalOTs Interest
BTs PrincipalOTs PrincipalOTs Interest
BTs Principal
2011: 5 8382012: 205062013:13 899
779M11 Results Presentation
27 October 2011
The Government presented the 2012 Budget to Parliament, maintaining the targets for the public deficit agreed with the IMF/EU/ECB…
Budget 2012: Macroeconomic Environment Fiscal Consolidation
The deficit is expected to be cut from 5.9% to 4.5% of GDP. However, because of the deviations in the budget execution identified in 1H 2011, the 2011 target will be met through one-off revenues, which means that the underlying 2011 deficit (and the actual starting point for the 2012 deficit) will be higher than 5.9% (around 2 p.p. higher, or 7.9% of GDP). The need for a stronger deficit reduction effort next year has resulted in the adoption of new, tough, austerity measures in the 2012 Budget. Overall, measures on the revenue side will represent 1.7% of GDP, while expenditure cuts will reach 4.4% of GDP, or 72% of the effort. Naturally, this strongly restrictive nature of fiscal policy will have a negative short-term impact on economic activity, deepening the recession that was already expected.
The Government expects GDP to fall 2.8% in 2012, with a significant retreat in all components of domestic demand. Exports are seen decelerating, following a deterioration in the external environment (particularly in Europe). But, with imports also contracting as a result of lower domestic demand, the contribution of net external demand to growth should remain supported. The unemployment rate should increase to 13.4% of the labour force. Although these macroeconomic assumptions should be seen as credible, we see downside risks toGDP growth in 2012, mainly related to the possibility of a worse than expected external environment (leading to lower than expected exports growth), as well as to the possibility of a slightly stronger decline in private domestic demand. Our own forecast now points to a real fall in GDP of around 3% in 2012, after a 2% fall in 2011.
Real growth in % 2011 2012 GDP -1.9 -2.8 Private Consumption -3.5 -4.8 Public Consumption -5.2 -6.2 Investment (GFCF) -10.6 -9.5 Exports 6.7 4.8 Imports -4.5 -4.3 Unemployment rate (%) 12.5 13.4 Inflation rate (%) 3.5 3.1 GDP deflator (%) 1.0 1.7
2011 2012
% GDP EUR
Million % GDPTotal Expenditure 49.3 79557 47.0 of which:
Current Primary Expenditure 41.1 65545 38.7
Interest Payments 4.3 8824 5.2 Capital Spending 4.0 5188 3.1 Total Revenues 43.4 72000 42.5 of which: Taxes and Social
Contributions 35.9 61481 36.4
Budget Balance -5.9 -7557 -4.5 Primary Balance -1.6 1267 0.7
Public Debt* 100.3 - 105.8
Budget 2012: Main Indicators
Source: Ministry of Finance, Budget 2012. * Excluding any support to bank recapitalisation.
789M11 Results Presentation
27 October 2011
… with very tough new measures, mainly (but not only) on the spending side.
Source: Ministry of Finance, Budget 2012.
‐4.4
‐1.6 ‐1.8
‐0.5 ‐0.5
1.7 1.40.4
‐0.2
0.1
‐5‐4‐3‐2‐10123
Expend
iture
Wage bill
Social transfers
Consum
ption &
Subsidies
Capital expenditure
Revenu
e
Indirect Taxes
Direct Taxes
Social Con
tributions
Non
‐Tax Revenue
Breakdown of fiscal savings, 2012 Budget (% of GDP)
799M11 Results Presentation
27 October 2011
… with very tough new measures, mainly (but not only) on the spending side.
On the spending side
• A reduction in public sector pay, in the amount of EUR 2.7 billion (or 1.6% of GDP). This will be achieved through (i) a freeze in wages (with the 5% average cut implemented in 2011 still in place), (ii) a further cut in public sector employment in the Central Government (-2%, at least, or close to 10000 workers) and, above all, (iii) the suspension (“for the duration of the financial adjustment programme”) of the holiday and Christmas bonuses (basically equivalent to 2 months wages) for public sector workers with wages above EUR 1000. Between EUR 485 and EUR 1000, the average reduction will amount to 1 month’s wage.
• Cuts in social transfers. Pecuniary social payments will be reduced in the amount of EUR 2.1 billion (or 1.2% of GDP), mainly through the suspension of the holiday and Christmas bonuses in pension payments in the general pension system. Social payments in kind will be cut by EUR 1 billion (or 0.6% of GDP), mainly through reductions in health related spending.
• Cuts in intermediate consumption (EUR 690 million, 0.4% of GDP)and in subsidies (EUR 88 million, 0.1% of GDP).
• Cuts in public investment of public institutes, State Owned Enterprises (SOEs) and Local and Regional Government (EUR 923 million, 0.5% of GDP).
Source: Ministry of Finance, Budget 2012.
• A change in the VAT rate structure – with the VAT rate for several goods and services increasing from 6% to 23% (eg. electricity) and from 13% to 23% (eg. several food and beverage products, restaurant services, etc.). An increase in property taxes (lower exemptions, higher rates, revaluations). An increase in specific consumption taxes (eg. road tax) and the creation of a new electricity tax. The overall increase in indirect taxes should lead to additional revenues in the amount of EUR 2.4 billion (1.4% of GDP), mainly related to the changes in the VAT.
• Benefits and deductions should be strongly limited or cut, both in personal and corporate income taxes (eg. households with taxable incomes above EUR 66045 will not be able to deduct any spending on health, education, housing, etc. Below these levels, deductions will see the respective limits strongly reduced).
• Households with taxable incomes above EUR 153300 will pay a special tax of 2.5%, on top of the maximum marginal rate of 46.5%. The tax on capital gains will increase from 20% to 21.5%.
• Corporate profits above EUR 1.5 million will be subject to a surtax of 3%, on top of the regular 25%+1.5% tax rate. Profits above EUR 10 million will be subject to a 5% surtax. The lower 12.5% corporate tax rate will be eliminated.
• Overall, the increases in direct taxes will lead to additional revenues of EUR 683 million (0.4% of GDP). This takes into account the loss of revenue associated with the expected fall in labour and pension income.
On the revenue side
809M11 Results Presentation
27 October 2011
Public debt expected to peak in 2013.
* Assumptions: Nominal GDP growth: 2013, 0%; 2014, 2%; 2015-2020, 3.5%. Interest spending (% GDP): 2013, 5%; 2014-2020, 4.5%. Primary balance (% GDP): 2013, 2.1%; 2014, 3.3%; 2015, 4.5%; 2016-2020, 3%.
Sources: Ministry of Finance (Budget 2012), ES Research.
Privatisations are expected to generate revenues of close to EUR 5 billion in 2011 and 2012, of which EUR 4.6 billion should be allocated to public debt redemptions (EUR 600 million in 2011, EUR 4 billion in 2012). The pipeline of privatisations includes mainly companies in the energy and transport sectors: EDP, REN, GALP, TAP, ANA, CP Carga and, outside these sectors, CTT (postal services). The privatisations of Águas de Portugal (the water company) and RTP (television), which were previously part of this pipeline, appear to have been postponed and should not take place in 2012.
In this context, the Budget sees public debt rising from 100.3% to 105.8% of GDP in 2012. In a scenario of banking sector recapitalization with the support of public funds, the Budget assumes public debt ratios of 101.9% in 2011 and 110.5% in 2012. With a 0.7% of GDP surplus, the primary balance is already assumed to contribute to a reduction in the debt ratio in 2012, but this is still insufficient to counterbalance the effects of higher interest payments and negative nominal GDP growth.
The Government’s medium term fiscal strategy assumes primary surpluses of 2.1% of GDP in 2013, 3.3% in 2014 and 4.5% in 2015.Assuming very conservative scenarios for nominal growth and interest payments, this would mean that the stock of public debt as a percentage of GDP would start to decline in 2014, peaking in 2013 at around 108% (or at around 113%, in a scenario of public support to bank recapitalization).
60
70
80
90
100
110
120
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
A scenario for public debt (% of GDP).*
819M11 Results Presentation
27 October 2011
The June 2011 General Election resulted in a change in Government. The new Government is supported by a coalition between two centre-right parties, PSD and CDS-PP. Together, these two parties hold a comfortable majority in Parliament. The IMF/EU/ECB stabilisation program is being implemented in an environment of political stability.
It should be highlighted that the three parties that publicly supported the IMF/EU/ECB stabilisation program (PSD, PS and CDS-PP) received close to 80% of the votes.
The Budget will be discussed in Parliament in the beginning of November, with a first general vote expected for November 4th. The different Parliamentary commissions will then hold discussions on the specific sectoral issues of the Budget, which could give way to minor changes in the document. The final vote in Parliament will take place on November 29th. There is no doubt that the Budget will be approved.
The Stabilisation Program is being implemented by a Government supported by an absolute majority in Parliament
829M11 Results Presentation
27 October 2011Sources: INE, Bank of Portugal.
GDP growth in 2Q 2011 better than expected GDP and components (%, q-o-q).
GDP posted 0% q-o-q growth in 2Q 2011 (-0.9% y-o-y), up from a 0.6% retreat in 1Q (-0.6% y-o-y), a better result than expected. While domestic demand continues its downward adjustment (also leading to a retreat in imports), exports posted yet another strong reading (8.4% y-o-y in real terms), therefore continuing to support GDP growth. This is particularly important, as better than expected growth improves the chances of a successful fiscal consolidation.
Real exports growth (%, y-o-y). GDP and components (%, y-o-y).
Year Quarter Private Cons
Public Cons Inv Exp Imp GDP
2007 4Q 0.8 -0.1 3.5 0.7 1.2 1.0
2008
1Q 0.0 -0.2 -2.1 1.8 0.4 0.02Q -0.2 0.1 1.2 -1.2 -0.1 -0.23Q 1.1 0.5 -1.7 -0.5 1.8 -0.54Q -0.9 0.9 -3.7 -8.8 -6.7 -1.3
2009
1Q -2.1 2.7 -12.1 -9.8 -11.4 -1.92Q 0.3 -0.7 0.6 3.6 1.2 0.73Q 1.4 1.2 4.6 6.1 9.2 0.54Q 0.7 -0.3 -4.8 -0.2 -0.7 -0.4
2010
1Q 0.4 0.3 -3.2 -0.3 -3.2 0.92Q 0.5 3.1 -0.5 3.9 4.5 0.43Q 0.4 -5.1 -0.4 5.0 0.8 0.34Q -0.2 4.0 -1.2 -0.9 1.8 -0.5
2011 1Q -2.9 -5.0 -4.3 0.2 -7.6 -0.62Q -0.7 1.8 -7.1 4.0 -0.2 0.0
Year Quarter Private Cons
Public Cons Inv Exp Imp GDP
2007 4Q 3.0 0.6 7.0 5.5 7.4 2.4
2008
1Q 2.1 0.1 2.5 5.0 7.0 0.92Q 1.3 -0.1 2.7 2.7 4.0 0.73Q 1.8 0.2 0.8 0.8 3.4 0.34Q 0.1 1.2 -6.2 -8.8 -4.7 -2.0
2009
1Q -2.0 4.1 -15.7 -19.2 -15.9 -3.92Q -1.6 3.3 -16.2 -15.3 -14.8 -3.03Q -1.2 4.1 -10.9 -9.7 -8.6 -2.04Q 0.4 2.8 -12.0 -1.2 -2.8 -1.1
2010
1Q 2.9 0.4 -3.1 9.2 6.2 1.72Q 3.1 4.3 -4.1 9.6 9.6 1.43Q 2.1 -2.2 -8.7 8.5 1.2 1.24Q 1.1 2.1 -5.2 7.8 3.7 1.1
2011 1Q -2.2 -3.3 -6.2 8.4 -0.9 -0.52Q -3.4 -4.5 -12.5 8.4 -5.4 -0.9
839M11 Results Presentation
27 October 2011
2000 2002 2004 2006 2008 2010
Per
cent
-5
-4
-3
-2
-1
0
1
2
3
4
5
Bal
ance
-60
-50
-40
-30
-20
-10
0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
2006 2007 2007 2008 2008 2009 2009 2010 2010 2011
%
Total
-4.4
Food products
Non Food products
Total excl. fuel
-3.6
-0.5
-7.9
2000 2002 2004 2006 2008 2010
-70-65-60-55-50-45-40-35-30-25-20-15-10
3
4
5
6
7
8
9
10
11
12
13
Retail sales (% y-o-y)
Sources: INE, Bank of Portugal, European Commission.
Lower private consumption is expected for 2011, mainly as a result of restrictive fiscal policy measures (eg. lower wages, higher taxes and social contributions) and a fall in confidence levels. Domestic demand should also be constrained by tighter financing conditions.
Loans to households are showing a decelerating trend, reflecting the ongoing deleverage in the economy. Non-performing loans have remained contained as a proportion of total loans.
Loans to households (% y-o-y)
Households’ savings rate (% disposable income) and 12-month savings’ intentions (net balances)
Households’ savings rate remains supported, and loans to households are showing a decelerating trend, reflecting the ongoing deleverage in the economy
Private consumption coincident indicator (y-o-y) and consumer confidence indicator (net balances).
2Q 2011
September2011
September2011
September 2011
August 2011
Per
cent
849M11 Results Presentation
27 October 2011
-5
0
5
10
15
20
25
30
35
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
-0.4-40
-30
-20
-10
0
10
20
30
40
50
Nov. 2006
Abr. 2007
Set. 2007
Fev. 2008
Jul. 2008
Dez. 2008
Mai. 2009
Out. 2009
Mar. 2010
Ago. 2010
Jan. 2011
Jun. 2011
%
21%
Sources: Reuters EcoWin Pro, Bank of Portugal, European Commission, INE.
Exports(nominal % y-o-y, 3-month MA)
New manufacturing orders, external market (%, y-o-y, 6-month MA)
Stronger external demand has continued to support business activity. In August 2011, merchandise exports were up by 13.2% YoY and services exports were up by 8.2% YoY (nominal growth, 3 month MA). New external orders to the manufacturing sector increased close to 21% YoY in August (6 month MA).
Loans to non-financial corporations are showing low growth, reflecting lower demand for business investment and tighter financing conditions.
Loans to non-financialcorporations (%, y-o-y)
External demand remains strong, partially compensating the ongoing decline in domestic demand
August2011
August2011
2006 2007 2008 2009 2010 2011
-25
-20
-15
-10
-5
0
5
10
15
20
25
859M11 Results Presentation
27 October 2011
Euro Area 64.5
EU-27 (excl. Euro Area)
10.5
Africa9.9
Other4.6
Asia3.4
Americas 7.1
Portugal with stronger growth in exports to the Euro Area in 2011, while also expanding its relevant market to fast growing emerging markets
Portuguese Exports to selected countries and regions
(growth rate, %, August 2010 / August 2011)
Portuguese Exports breakdown
(August 2011, weight, %)
5.7
6.3
11.4
16.5
19.6
20.3
24.4
35.8
46.0
46.5
6.0
8.3
16.6
16.6
17.3
21.0
22.7
29.8
0 10 20 30 40 50 60
UKUSA
SpainAngola
ItalyFrance
GermanyBrazil
MozambiqueChina
Middle EastAmericasPALOP *
WorldEuro Area
OPEC Africa
Asia
(1) o.w.: PALOP*: 6.3%
*African Countries of Official Portuguese Language(Angola, Cape Verde, Mozambique, Guinea-Bissau and Sao Tome and Principe)
(1)
869M11 Results Presentation
27 October 2011
Portuguese exports profile has been changing, with an increase in the weight of high value added goods and services
1996 2010
Services
Goods with hightechnological components
(from 44% to 52%)
Traditional goods (from 56% to 48%)
Goods 68%
32%
76%
24% Services
Goods
Goods with high technological components: machinery and equipment, transport material, optical products, chemical products, plastic products.Traditional goods: textiles, food products, shoes, cork.
Sources: INE, Eurostat, ES Research.
Portuguese Exports Profile (1996-2010)
879M11 Results Presentation
27 October 2011
Strong transport and logistic potential. Portuguese ports can play an important role in the trade flows between America, Africa, Asia and Europe
(…)
Potential routes to the Portuguese ports
Main maritime trade routes from South America and Western Africa are experiencing very strong growth.
Portuguese ports are becoming privileged gateways into the European market given the signs of congestion at the major seaports of Europe.
Container cargo, Portuguese Ports, 2009-2010 (annual change)
22% 19% 11% 39% Share in total
889M11 Results Presentation
27 October 2011
180
190
200
210
220
230
240
250
Jan-08 Jun-08 Nov-08 Abr-09 Set-09 Fev-10 Jul-10 Dez-10 Mai-11150
155
160
165
170
175
180
185
190
Jan-08Mai-08Set-08Jan-09Mai-09Set-09Jan-10Mai-10Set-10Jan-11Mai-11150
160
170
180
190
200
210
220
230
240
250
Jan. 2008 Jul. 2008 Jan. 2009 Jul. 2009 Jan. 2010 Jul. 2010 Jan. 2011 Jul. 2011
Sources: Reuters EcoWin Pro, Bank of Portugal, European Commission, INE; Central Bank of Greece.
Liquidity provision by the ECB
Portuguese Banks’ deposits Greek Banks’ deposits
• The increase in Portuguese banks’ demand for central bank liquidity has been a direct result of the downgrade in sovereignratings. It has not been the result of any intrinsic fragilities of the banking system.
• Without access to wholesale funding market for a year, Portuguese banks have been pursuing an aggressive deleverage process. Households deposits reached a historical high in June, reflecting the ongoing confidence in the banking sector.
• Portuguese banks deposits continue to show a rising trend in 2011, in contrast with deposits in Greek and Irish banks.
Irish Banks’ deposits
Portuguese banks’ fundamentals remain solid, as they had no exposure to toxic assets, are not suffering any effects of a real estate bubble and non-performing loans are contained, in spite of the recent increase
€ bn, July 2011 € bn, August 2011
-8.0% YoY -7.0%
YoY
€ bn, August 2011 +13.7% YoY
020406080
100120140160180200
2007 2008 2009 2010 2011
EUR
Billio
n
Portugal(45.6; Sep. 2011)
Spain(69.3; Sep. 2011)
Greece(93.1; Aug. 2011)
Ireland(100.4; Sep. 2011)
Italy(87.8; Aug. 2011)
France(69.8; Aug. 2011)
899M11 Results Presentation
27 October 2011
10
15
20
25
30
35
40
Jan. 2008 Jul. 2008 Jan. 2009 Jul. 2009 Jan. 2010 Jul. 2010 Jan. 2011 Jul. 201170
80
90
100
110
120
130
Jan. 2008 Jul. 2008 Jan. 2009 Jul. 2009 Jan. 2010 Jul. 2010 Jan. 2011 Jul. 2011
Source: Bank of Portugal
Households’ deposits continue to show a rising trend. External financial assistance to the Portuguese Government should contribute to an improvement in liquidity
Households’ deposits – the most important component of Banks’ deposits – have maintained a steady rising trend, as a result of (i) higher financial savings efforts on the part of households; (ii) a re-intermediation of savings and (iii) sustained confidence in the Portuguese banking sector. External financial assistance should allow for a recovery in Public Administration’s deposits.
Non-Financial Corporations’ depositsHouseholds’ deposits
€ bn, August 2011
€ bn, August 2011
+7.4% YoY
909M11 Results Presentation
27 October 2011
0
10
20
30
40
50
60
Germany Greece Spain Italy Netherlands Portugal
Q1 Q2 Q3 Q4
%
Households’ Mortgage Debt Service by Income Quartile(% of Disposable Income)
Household Financial Indebtedness(% of Disposable Income)
After reaching a peak of 129% of disposable income in 2009 (or 95% of GDP), aggregate household indebtedness started a correction trend in 2010, reflecting the beginning of a deleverage process that is expected to proceed in the future. In 2010, aggregate household indebtedness represented 127% of disposable income (and 93.8% of GDP). The increase in household indebtedness over the last decade has mainly reflected an increase in the number of households with access to mortgage loans, and not any significant increase in individual situations of heavy debt burdens. In average, mortgage debt service ratiosremain contained across all income quartiles. Vulnerability to interest changes is higher among lower income households.
Source: Bank of Portugal.
Household indebtedness mainly related to mortgages
0
1
2
3
4
5
6
7
8
9
0
20
40
60
80
100
120
140
160
1995 199619971998 19992000200120022003 200420052006 2007200820092010
Housing indebtedness (left scale)Consumption indebtebdness (left scale)Interest payments (right scale)
% %
127
919M11 Results Presentation
27 October 2011
10
43 46
103
‐5
15
35
55
75
95
115
Portugal Euro Area Ireland Spain
No bubble in house prices. Between 1998 and 2010, Portugal real estate prices have shown very little real growth, in clear contrast with other Euro Area economies
The Portuguese housing market faced the recent global financial crisis in a very different cyclical position from those in economies such as Ireland or Spain. House price growth has been moderate over the last years, essentially reflecting macroeconomic developments and fundamentals. In this context, Portuguese banks haven’t been facing the hangover of a bubble burst in house prices. The lack of evidence of overvaluation mitigates any potential downside expectations in prices.
Sources: ECB, Bloomberg, ES Research.
(1) Accumulated nominal house price growth minus accumulated CPI growth
Residential Property, Accumulated Real Price Growth 1998-2010 (%)1
100
120
140
160
180
200
220
240
260
280
300
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Nominal House Price Index1998 = 100
Spain
IrelandEuro Area
Portugal
929M11 Results Presentation
27 October 2011
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ongoing deleverage process in the Portuguese economy has already translated into a lower external deficit
The deleverage of the economy is underway, with the domestic savings rate (including all sectors of the economy) stabilising above 9% of GDP (9.1% in 2Q 2011 vs. 9% one year earlier). Net external financing needs have declined from 11.1% of GDP in 2008 to 7.7% of GDP in June 2011. This trend is expected to proceed in the near future, to an estimated external deficit around 6% and 4% of GDP by the end of 2011 and 2012, respectively.
Domestic Savings Rate (% GDP)
Sources: INE, ES Research
External Deficit (net external financing needs of the economy), % GDP
2Q 20119.1%
9.1 9.5
6.8
4.6
6.9
9.210
8.9
11.110.1
8.87.7
6.1
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jun-11
Est. Dec 2011
939M11 Results Presentation
27 October 2011
0
2
4
6
8
10
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011%
of G
DP0
25
50
75
100
125
150
175
200
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (2Q)
% o
f GDP
Sources: Bank of Portugal, ES Research.
Ample external assets provide stability in the face of a tough financing environment. Portugal is one of the main world holders of gold reserves
Portugal’s gold reserves (% GDP)Portugal’s gross external assets (% GDP)
In the face of a difficult financing environment, Portugal benefits from holding ample external assets (close to 176% of GDP in 2Q2011). Also, Portugal is one of the main world holders of gold reserves (currently estimated at 9% of GDP).
176 9.0
Oct(Est.)
949M11 Results Presentation
27 October 2011
2006 2007 2008 2009 2010 2011F 2012F
GDP 1.4 2.4 0.0 -2.5 1.3 -2.0 -3.0
Private Consumption 1.8 2.5 1.3 -1.1 2.3 -3.8 -4.9
Public Consumption -0.7 0.5 0.4 3.7 1.2 -3.7 -4.6
Investment -0.6 2.0 -0.1 -13.7 -5.3 -10.2 -8.7
Exports 11.6 7.6 -0.1 -11.6 8.8 6.7 4.1
Imports 7.2 5.5 2.3 -10.6 5.1 -3.2 -3.5
Inflation (%) 3.1 2.5 2.6 -0.8 1.4 3.6 2.3
Budget Balance (% GDP) -4.1 -3.1 -3.6 -10.1 -9.8 -5.9 -4.5
Public Debt (% GDP) 63.9 68.3 71.6 83.0 93.3 100.3 105.8
Unemployment (% Labour Force) 7.7 8.0 7.6 9.5 10.8 12.6 13.7
Current & Capital Account Balance (% GDP)
-10.0 -8.9 -11.1 -10.1 -8.8 -6.1 -3.9
Annual growth rates (%), except where indicated
E: Estimate; F: Forecast.Sources: Bank of Portugal, INE, ES Research, European Commission, IMF, OECD.
Portugal: Main Forecasts 2011-2012
959M11 Results Presentation
27 October 2011 95October 2011 9595
Macro Spain Highlights: Return to growth, but feeling the contagion of the debt crisis
Sources: INE & Bloomberg (Spain)
After the deep recession lived in 2009 (-3.7%) and stagnation in 2010 (-0.1%), the Spanish economy picked up in the first half of 2011, subsiding in the second half due to the slowdown of activity in the Euro Zone. The outlook for the European economy gradually deteriorated, largely as a result of persistent doubts over Greece’s financial situation, constant wavering on the part of several Euro Zone policy makers and fears of contagion of the debt crisis to the European financial system. This economic performance should not allow any improvement at the labour market level, with the rate of unemployment still above 20% of the labour force.
GDP growth(%, y-o-y and q-o-q).
-5-4-3-2-10123456
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
Y-o-Y
Q-o-Q
0.20.7
Investment, private consumption andexports (%, y-o-y)
-20
-15
-10
-5
0
5
10
15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
Private consumption
Investment Exports
969M11 Results Presentation
27 October 2011 969696
Sources: INE, Bank of Spain, ES Research, European Commission.
Spain: Main Forecasts 2011-2012
Annual real growth rates (%), except where indicated. 2006 2007 2008 2009 2010F 2011F 2012F
GDP 3.9 3.6 0.9 -3.7 -0.1 0.6 0.5
Private Consumption 3.9 3.6 -0.6 -4.3 1.3 0.5 0.5
Public Consumption 4.6 5.5 5.8 3.2 -0.1 -0.2 -0.3
Investment 7.1 4.6 -4.8 -16.0 -7.4 -3.3 -1.5
Exports 6.7 6.6 -1.1 -11.6 9.2 10.0 5.0
Imports 10.3 8.0 -5.3 -17.8 3.5 4.0 2.0
Inflation (%) 3.4 2.8 4.1 -0.3 1.8 3.0 1.6
Budget Deficit (% GDP) 2.0 1.9 -4.2 -11.1 -9.2 -6.0 -4.4
Public Debt (% GDP) 39.6 36.1 39.9 53.3 60.1 71.9 73.5
Current & Capital Account Balance (% GDP) -8.4 -9.6 -9.1 -4.5 -3.7 -3.5 -3.1
Unemployment (% of Labour Force) 8.5 8.3 11.3 18.0 20.0 20.5 20.5
October 2011
979M11 Results Presentation
27 October 2011 979797
GDP growth (%)*.
Macro Angola Highlights: Recovery underway, driven by oil and investment.
* IMF ForecastSources: BNA, OPEC & Bloomberg
The outlook for the Angolan economy for the final months of this year and 2012 is extremely bright. The International Monetary Fund estimates that the Angolan economy will grow by 10.8% in 2012, quite above the world economy’s (4%) and above the estimated average growth of emerging and developing economies (6.1%). Even against a background surrounded by uncertainties, namely global deceleration and consequent decrease in raw-materials prices, including oil, Angola’s growth will mainly derive from the resuming of oil production, after an interruption in 2011. The upward revision of Angola’s risk rating by the three main rating agencies, all with a stable outlook, attests for the confidence placed in the country.
1.4
1.5
1.6
1.7
1.8
1.9
2
579
1113151719212325
Jan. May Sep. Jan. May Sep. Jan. May Sep. Jan. May Sep.2008 2009
USD
billio
ns mb/diay
Oil production (Rhs)
Net external reserves(Lhs)
2010 2011
Net external reserves (%, yoy) and oil production (mb/day)
3.3
11.2
20.618.6
22.6
13.8
2.4 3.4 3.7
10.8
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008 2009 2010F2011F2012F
%
October 2011
989M11 Results Presentation
27 October 2011 989898
Sources: IMF, Angolan Central Bank, Finance Ministry, ES Research.
Angola: Main Forecasts 2011-2012
2006 2007 2008 2009 2010F 2011F 2012F
GDP (real growth rate, %) 20.7 22.6 13.8 2.4 3.4 3.7 10.0
GDP per capita (USD, current prices) 2 445 3 443 4 671 4 081 4 328 5 061 5 390
Inflation (%) 13.3 12.3 12.5 13.7 14.5 15.0 13.0
Current Account Balance (% GDP) 25.6 17.5 8.5 -10.0 8.9 12.0 7.3
Budget Balance (% GDP) 11.8 11.3 8.9 -4.9 7.7 7.9 7.7
Exchange Rate (USD/KZ), annual
average80.4 76.8 75.0 79.2 91.9 93.0 93.0
BNA Rediscount Rate (%), end of period 14.0 19.6 19.6 30.0 25.0 20.0 15.0
October 2011
999M11 Results Presentation
27 October 2011
Macro Brazil Highlights: Slowdown imposes interest rate cuts
Selic Target Interest Rate (%).Y-o-Y Inflation Rate (%).
Sources: IBGE, BACEN & Bloomberg
The financial instability of the summer months (August and September), driven largely by the sovereign debt crisis in the Euro Zone, rapidly deteriorated the growing environment of global economy. The shock waves were felt in Brazil, which was forced to reverse the cycle of rising rates, in order to contain inflation. The Central Bank made two cuts of 50 bp at the end of August and at mid-October, putting the Selic rate at 11.5%. Until the end of the year it can be admitted a further 50 bp cut to 11%, a level that should be kept in 2012. The continued acceleration of inflation since October 2010 peaked in September, 7.31% y-o-y, with an estimated a value at the end of this year at 6.5% and 5.7% in 2012. GDP should grow by only 3.5% this year and 4.5% in 2012.
2.0
3.0
4.0
5.0
6.0
7.0
2006 2007 2008 2009 2010 2011
%7.3%
Inflation target (2011-2012)
8
10
12
14
1618
20
22
24
26
28
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
11.5%
1009M11 Results Presentation
27 October 2011
Sources: IBGE, Central Bank of Brazil, ES Research.
Brazil: Main Forecasts 2010-2011
2006 2007 2008 2009 2010F 2011F 2012F
GDP (real growth rate, %) 4.0 6.1 5.2 -0.6 7.5 3.5 4.5
Inflation (%) 3.1 4.5 5.9 4.3 5.9 6.5 5.7
Primary Budget Balance (% GDP) 3.2 3.4 4.0 2.0 2.8 3.0 2.7
Public Debt (% GDP) 47.0 45.1 38.1 42.8 40.4 38.2 37.8
Unemployment (% of Labour Force) 10.0 9.3 7.9 8.1 6.7 6.2 6.7
Current Account Balance (% GDP) 1.2 0.1 -1.7 -1.5 -2.3 -2.2 -2.5
Exchange Rate (USD/BRL), annual
average2.18 1.95 1.84 1.99 1.76 1.64 1.63
SELIC Interest Rate (%, End of Period) 13.25 11.25 13.75 8.75 10.75 11.00 11.00
1019M11 Results Presentation
27 October 2011
Disclaimer
This news release may include certain statements relating to the Banco Espírito Santo Group that are neither reported financial results nor other historical information. These statements, which may include targets, forecasts, projections, descriptions of anticipated cost savings, statements regarding the possible development or possible assumed future results of operations and any statement preceded by, followed by or that includes the words “believes”, “expects”, “aims”, “intends”, “may” or similar expressions or negatives thereof are or may constitute forward-looking statements.
By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, changes in economic conditions in individual countries in which the BES Group conducts its business and internationally, fiscal or other policies adopted by various governments and regulatory authorities of Portugal and other jurisdictions, levels of competition from other banks and financial services companies as well as future exchange and interest rates.
Banco Espírito Santo does not undertake to release publicly any revision to the forward-looking information included in this news release to reflect events, circumstances or unanticipated events occurring after the date hereof.
1029M11 Results Presentation
27 October 2011
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