BANIF FINANCIAL GROUP
Financial Statements
Notes to the Financial Statements
31 December 2010
1 – BALANCE SHEET
BANIF - SGPS, S.A.
CONSOLIDATED BALANCE SHEET
31 DECEMBER 2010 AND 31 DECEMBER 2009
(amounts in Euros thousand)
31-12-2010 31-12-2009 Before Impairment and Impairment and Net Net depreciation depreciation
Cash and balance at Central Banks 118.734 - 118.734 306.519 Due from other banks 217.814 - 217.814 200.657 Trading securities 461.311 - 461.311 352.487 Other financial assets at fair value through profit or loss 393.508 - 393.508 470.314 Financial assets available-for-sale 298.529 (4.119) 294.410 105.371 Loans and advances to banks 491.022 - 491.022 322.114 Loans and advances to customers 12.801.111 (594.857) 12.206.254 11.487.864 Investment securities held to maturity 63.939 - 63.939 80.399 Securities subject to repurchase agreements 51.004 - 51.004 36.500 Derivatives held for hedging - - - 884 Non-current assets available for sale 172.835 (5.379) 167.456 85.552 Investment Property 272.591 - 272.591 199.808 Other tangible assets 432.629 (162.672) 269.957 286.682 Intangible assets 91.620 (68.557) 23.063 28.522 Investments in associates and affiliates excluded from Cons. Accounts 160.320 (9.040) 151.280 115.257 Current tax assets 27.104 - 27.104 24.829 Deferred tax assets 72.697 - 72.697 59.535 Underwriting provisions - outwards reinsurance - - - - Other Assets 435.720 (7.172) 428.548 278.911 Receivables - direct insurance and reinsurance - - - - Other assets 435.720 (7.172) 428.548 278.911 Total Assets 16.562.488 (851.796) 15.710.692 14.442.205
Deposits from Central Banks - - 1.938.147 1.196.559 Trading liabilities - - 145.259 84.330 Financial liabilities at fair value through profit or loss - - 118.886 220.249 Deposits from other banks - - 1.286.879 1.813.496 Customer deposits and other loans - - 7.840.050 6.801.474 Debt securities in issue - - 2.380.021 2.256.935 Financial liabilities linked to transferred assets - - - - Derivatives held for hedging - - 1.303 2.606 Non-current liabilities available-for-sale - - - - Provisions - - 15.230 14.881 Underwriting provisions - - - - Current tax liabilities - - 10.850 8.448 Deferred tax liabilities - - 32.211 24.687 Instruments representing capital - - 45.651 47.975 Other subordinated Liabilities - - 268.178 322.483 Other Liabilities - - 349.150 468.156 Payables - direct insurance and reinsurance - - - - Other liabilities - - 349.150 468.156 Total liabilities - - 14.431.815 13.262.279
Share Capital - - 570.000 490.000 Issue Premiums - - 104.114 104.114 Other equity instruments - - 95.900 95.900 Treasury shares - - (1.043) (1.035) Revaluation reserves - - (10.572) 6.645 Other reserves and retained earnings - - 243.328 192.053 Profit for the year - - 33.426 54.075 Interim dividends - - - - Minority interests 243.724 238.174 Total Equity - - 1.278.877 1.179.926
Total Liabilities + Equity - - 15.710.692 14.442.205
The Accountant The Board of Directors
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2 – INCOME STATEMENT
BANIF - SGPS, S.A.
CONSOLIDATED INCOME STATEMENT
31 DECEMBER 2010 AND 2009
(amounts in Euros thousand)
31-12-2010 31-12-2009 Interest and similar income 750.988 772.926 Interest and similar expense (402.856) (484.432) Net Interest Income 348.132 288.494 Dividend Income 905 1.524 Fees and commission income 145.218 125.975 Fees and commission expense (23.143) (14.858) Net gain or loss on assets and liabilities at fair value through profit or loss 452 (28.377) Net gain or loss on assets available for sale 13.130 22.508 Net gain or loss on foreign exchange 10.778 41.577 Net gain or loss from disposal of other assets 2.895 5.544 Net reinsurance premium written - - Cost of net reinsurance claims - - Variation in net underwriting provisions - reinsurance - - Other operating income 54.097 66.666 Net Operating Income 552.464 509.053 Personnel Costs (184.906) (170.407) Overheads (144.176) (127.130) Depreciation and amortisation (37.327) (34.668) Provisions net of write-offs 1.121 (2.993) Loan Impairment net of reversal and recovery (107.944) (112.178) Impairment of other financial assets net of reversal and recovery (5.113) (19.244) Impairment losses on other assets net of reversal and recovery (12.005) (1.257) Negative consolidation differences - 41.533 Income from associates and joint ventures (equity method) (4.039) (16.042) Profit before tax 58.075 66.667 Income Tax (13.904) (471) Current (13.022) (12.555) Deferred (882) 12.084 Profit after tax and before minority interest 44.171 66.196 Of which: Profit after tax from discontinued operations - - Minority Interest (10.745) (12.121) Consolidated Net Profit 33.426 54.075
The Accountant The Board of Directors
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3 – STATEMENT OF CHANGES IN EQUITY
BANIF - SGPS, S.A.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
31 DECEMBER 2010 AND 2009
(amounts in Euros thousand)
Share Other Equity Own Issue Revaluation Retained Other Profit for the Non Controlling Capital Instruments Shares Premiums Reserves Earnings Reserves Fiscal Year Interest Total Balances as at 31-12-2009 490.000 95.900 (1.035) 104.114 6.645 328.715 (136.662) 54.075 238.174 1.179.926 Transfer to reserves - - - - - 45.745 - (45.745) - - Dividend ------(11.270) (8.330) - (19.600) Capital Increase 80.000 ------80.000 Acquisition/disposal of treasury shares - - (8) ------(8) Compreehensive Income - - - - (17.217) - 15.726 33.426 - 31.935 Repurchase Preference Shares ------1.401 - (2.754) (1.353) VMOC's premium ------(2.100) - - (2.100) Operations with non-controlling interests ------8.304 8.304 Other changes in equity ------1.773 - - 1.773 Balances as at 31/12/2010 570.000 95.900 (1.043) 104.114 (10.572) 374.460 (131.132) 33.426 243.724 1.278.877
Balances as at 31-12-2008 350.000 - (764) 78.214 (24.539) 292.228 (171.007) 59.237 279.401 862.770 Transfer to reserves - - - - - 36.487 - (36.487) - - Dividend ------(22.750) - (22.750) Capital Increase 140.000 95.900 (271) 25.900 - - - - - 261.529 Acquisition/disposal of treasury shares ------Compreehensive Income - - - - 31.184 - 9.172 54.075 - 94.431 Repurchase Preference Shares - - - - - 7.809 - (7.809) - VMOC's premium ------15.600 - (45.108) (29.508) Operations with non-controlling interests ------11.690 11.690 Other changes in equity ------1.764 - - 1.764 Balances as at 31/12/2008 490.000 95.900 (1.035) 104.114 6.645 328.715 (136.662) 54.075 238.174 1.179.926
The Accountant The Board of Directors
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4 – CASH FLOW STATEMENT
BANIF - SGPS, S.A.
CASH FLOW STATEMENT
31 DECEMBER 2010 AND 2009
(amounts in Euros thousand)
OPERATING ACTIVITIES 31-12-2010 31-12-2009 Operating Results Net profit for the fiscal period 33.426 54.075 Impairment of overdue credit 107.944 112.178 Other impairment losses 17.118 20.501 Provisions for the fiscal year (1.121) 2.993 Depreciation for the fiscal year 37.327 34.668 Allocation to taxes for the fiscal year 13.904 471 Non-controlling interests 10.745 12.121 Derivatives (net) 25.644 69.416 Profits from companies excluded from consolidated accounts 4.039 16.042 Dividends income (905) (1.524) Interest paid on subordinated liabilities 14.706 12.183 Interest paid on non-subordinated liabilities 18.042 - unrealized gains on investment properties (11.853) 6.254 Negative consolidation differences - (41.533) 269.016 297.845
Changes in operating assets and liabilities (Increase) / Decrease in trading assets (78.234) (57.412) (Increase) / Decrease in financial assets at fair value through profit or loss 76.806 (209.803) (Increase) / Decrease in financial assets held for sale (194.147) 24.403 (Increase) / Decrease in loans and advances to other banks (168.908) (78.448) (Increase) / Decrease in investments held to maturity 16.460 3.604 (Increase) / Decrease in loans and advances to customers (826.334) (474.542) (Increase) / decrease in non-current assets held for sale (84.403) (12.315) (Increase) / Decrease in assets with repurchase agreement (14.504) 54.783 (Increase) / Decrease in other assets (182.127) 99.066 (Increase) / Decrease in deposits from central banks 741.588 230.716 (Increase) / Decrease in trading liabilities 4.276 24.092 (Increase) / Decrease in other financial liabilities at fair value through profit or loss (101.363) (46.947) (Increase) / Decrease in deposits from other banks (526.617) (536.812) (Increase) / Decrease in customer deposits 1.038.576 283.733 (Increase) / Decrease in debt securities in issue (26.914) (55.516) (Increase) / Decrease in other liabilities (113.427) (45.890) (439.272) (797.288)
Net Cash Flow from Operating Activities (170.256) (499.443)
INVESTMENT ACTIVITIES
Investment in subsidiaries (47.744) (250) Cash and cash equivalentsin the acquired subsidiary - 92.804 Acquisition of tangible assets (36.181) (50.688) Disposable of tangible assets 14.128 27.531 Acquisition of intangible assets 6.119 (8.473) Acquisition of Investment property (47.654) (51.477) Disposal of Investment property 11.000 8.525 Dividend income 905 1.524 Net Cash Flow from Investment Activities (99.427) 19.496
FINANCING ACTIVITIES Increase in Share Capital 80.000 70.000 Acquisition of own shares (8) (1.176) Disposal of own shares - 905 Issue of Subordinated liabilities - 107.606 Repayment of subordinated liabilities (54.141) (111.146) Interest paid on subordinated liabilities (14.706) (15.061) Issue of non-subordinated bonds 150.000 500.000 Repayment of non-subordinated bonds - (34.544) Instruments represeting capital - 40.826 Interest paid on non-subordinated bonds (18.042) - Dividends paid from common shares and VMOC's (22.400) (22.750) Dividends paid on preference shares (9.410) (9.967) Net Cash Flow from Financing Activities 111.293 524.693
(158.390) 44.746 CHANGES IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start of the fiscal year 507.176 462.430 effect of exchange rate changes on cash and cash equivalents - - Cash and cash equivalents at the end of the fiscal year 336.548 507.176 (170.628) 44.746
Balance sheet value of cash and cash equivalents as of 31 December Cash 57.923 65.821 Sight deposits with Central Banks 60.490 240.698 Sight deposits with other banks 137.031 117.227 Cheques to be collected 26.865 28.750 Others 54.239 54.680 336.548 507.176
Cash and equivalents not avaliable for use by entity --
The Accountant The Board of Directors
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5 – Notes to the Consolidated Financial Statements at 31 December 2010 and 2009, BANIF – SGPS, SA and Subsidiaries (Figures in ‘000 euros, except as otherwise stated)
1. GENERAL INFORMATION
The Banif Financial Group (Group) comprises Companies specializing in the banking and insurance sectors, supported by a number of other companies operating in various areas of the financial sector. The main Group entities and the nature of their business activities are described in greater detail in the Management Report.
Banif SGPS, SA, the parent company of the Group, with registered head offices at Rua João de Tavira No. 30, 9004-509 Funchal, has the sole object of managing shareholdings in other Companies, as detailed in Notes 4 and 21.
A shareholding of 53.871% in Banif SGPS, SA is owned directly and indirectly by Rentipar Financeira SGPS, SA, which is in turn owned by the Undivided Inheritance of Comendador Horácio da Silva Roque.
The shares of Banif SGPS, SA are listed on Euronext Lisboa.
On March 15, 2011, the Company’s Board of Directors has reviewed, approved and authorized the Financial Statements as at December 31, 2010 and the Management Report, which was submitted for approval at the Annual General Meeting of Shareholders of April 15, 2011, which has the power to modify them. However, the Group Management admits that they will be approved without significant changes.
2. ADOPTION OF NEW OR REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
The accounting policies adopted in the fiscal year are consistent with those used in previous years, except for the adoption of the following new standards and interpretations, amendments or reviews of Standards and new interpretations issued by the IASB/IFRIC and endorsed by the European Union.
IFRS 5 (Review) - Non-current Assets Held for Sale and Discontinued Operations The Review clarifies that: - when a subsidiary is held for sale, all its assets and liabilities should be classified as held for sale under IFRS 5, even when the entity will retain a non-controlling interest in the subsidiary after the sale; - the disclosures required regarding non-current assets, groups available for sale or discontinued operations are the ones listed in IFRS 5 only.
IFRS 2 (Amendment and Review) - Share-based payments The Amendment to IFRS 2 clarifies the situations in which an entity receives services or products from its employees or suppliers, but whose financial compensation is paid by its parent company or another company within the Group. The Review clarifies that the contribution of a deal to establish a Joint Venture and combinations under common control are not part of IFRS 2.
IAS 1 (Review) - Presentation of Financial Statements The Review clarifies that the terms of settlement of a liability, from which may result, at any time, settlement by issuing equity instruments at the option of the counterparty does not affect the classification of convertible instruments as current and non-current in the Statement of Financial Position. - 6 -
As a result of the Amendment to IAS 27, it becomes necessary to include two additional lines in the Statement of changes in equity: (i) acquisition of subsidiaries and (ii) acquisition of non-controlling interests, to reflect transactions with owners as a result of changes in ownership of subsidiaries that do not result in loss of control.
IAS 38 (Review) - Intangible Assets The Review: - states that if an intangible asset acquired in a business combination is identifiable only with another intangible asset, the two can be accounted as a single intangible provided that they have a similar useful life; - clarifies that the valuation techniques to measure the fair value of intangible assets acquired in business combinations are merely examples and do not restrict the methods that can be used.
IAS 39 (Amendment and Review) - Financial Instruments: recognition and measurement - eligible hedged items
This Amendment: - clarifies that it is permitted to designate a part of the changes in fair value or variability in cash flows of a financial instrument as a hedged item; - states that inflation is not a separately identifiable risk and cannot be designated as a hedged risk unless it represents contractually specified cash flows.
The Review introduces the following changes: - the exemption from the application of the standard in contracts involving business combinations applies only to forward contracts between a buyer and a selling shareholder in order to buy or sell an acquiree at a future date and not to derivative contracts in which is necessary that further actions occur; - in cash flow hedges, if the hedge of an expected transaction results in the subsequent recognition of a financial asset or liability, gains or losses that are accounted in comprehensive income should be reclassified to gains or losses over the same period or periods in which the expected hedged cash flows affects profits or losses; - a prepayment option is considered closely related to the host contract when the price for exercise repays the lender for an amount up to the approximate present value of lost interest during the remaining term of the host contract.
IFRIC 18 - Transfers of assets from customers This interpretation seeks to clarify how to account tangible fixed assets or cash received from customers with the purpose of being used to acquire or construct specific assets, therefore, it is not applicable.
IFRIC 17 - Distributions of non-cash assets to owners This interpretation clarifies how to account for the distribution of non-cash assets to owners, establishing that all owners should have equal rights.
IFRIC 12 - Service concession arrangements This interpretation applies to concession operators and clarifies how to account for accepted liabilities and received rights under concession agreements.
Other reviews to IFRS The annual review process of IFRS standards seeks to solve situations that need to be improved in order to increase their general awareness, but are not classified as priorities to solve. Some reviews concern terminology or editorial amendments in order to have consistency of standards, therefore, their impact is minimal. Other reviews are likely to produce changes in recognition and measurement. The main improvements that took effect in 2010, in addition to the above, are summarized as follows: - 7 -
2009 reviews applicable in 2010: IFRS 8 - Operating Segments: The reviews clarify that assets and liabilities by segment only need to be reported when they are included in the measures decided by the operations manager.
IAS 17 - Leasings: Specific provisions on land and buildings are removed and kept general provisions only.
IAS 18 - Revenue: Guidelines are added to determine whether an entity is acting as an agent or as a seller.
IAS 36 - Assets Impairment: The reviews clarify that by testing Goodwill’s impairment acquired in a business combination, the largest unit permitted for allocation of Goodwill is the operating segment defined in IFRS 8 which, depending on circumstances, may be of a lower level than the reportable segment.
IFRIC 9 - Reassessment of embedded derivatives: The reviews clarify that IFRIC 9 does not apply to possible reassessments, at the date of acquisition, of embedded derivatives in contracts acquired in business combinations between entities or deals under common control or in the establishment of Joint Ventures.
IFRIC 16 - Hedges of a Net Investment in a Foreign Operation: The reviews clarify that qualified hedging instruments may be held by an entity of the Group provided that the requirements for designation, documentation and effectiveness of IAS 39 are met.
IAS 7 - Cash flow Statement: Clarifies those operations that must be classified as investing activities, defining that only those spendings that result in an asset accounted in the statement of financial position are eligible for classification as investing activities.
The standards and interpretations issued recently by the IASB whose application is mandatory only in periods beginning after January 1, 2010 and were not adopted in advance are those listed below. Enforcement of these standards and interpretations do not have expected relevant impacts to the Group’s financial statements.
a) Already endorsed by the EU
IFRS 1 (Amendment) - Exemptions to the disclosure of comparatives required by IFRS 7 in the first- time adoption of IFRS.
This Amendment takes effect, at the latest, as from the starting date of the first fiscal year commencing on June 30, 2010. It establishes that a first-time adopter does not need to present comparatives regarding the disclosures required by IFRS 7 - Financial Instruments: Disclosures.
IFRS 7 (Amendment) - Financial Instruments: Disclosures
This Amendment takes effect, at the latest, as from the starting date of the first fiscal year commencing on June 30, 2010. It establishes that improvements to this standard do not need to allocate financial statements or comparatives of financial statements prior to December 31, 2009.
IAS 24 (Review) - Transactions with related parties This revised standard takes effect, at the latest, as from the starting date of the first fiscal year commencing on December 31, 2010. The main changes are the following:
- modification to the definition of related parties, with the result that some entities are no longer considered related and others start to be considered as such;
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- partial exemption for disclosures concerning transactions with government entities as well as with the Government itself; - express requirement to disclose commitments with related parties, including enforceable contracts.
IAS 32 (Amendment) - Clarification of rights offering
This Amendment takes effect, at the latest, as from the starting date of the first fiscal year commencing on January 31, 2010. The Amendment changes the definition of financial liabilities to start classifying rights offering (and certain options and warrants) as equity instruments if:
- the rights are allocated proportionally to all owners of the same class of non-derivative equity instruments of the entity; - the rights are used to purchase a fixed number of equity instruments of the entity against a fixed amount of any currency.
IFRIC 14 (Amendment) - Advance payments regarding minimum funding requirements
This Amendment takes effect, at the latest, as from the starting date of the first fiscal year commencing on December 31, 2010. With the Amendment, an entity shall account as an asset the payments made in advance and, each year, the plan's surplus analysis should be done as if there were no advance payments made.
IFRIC 19 - Extinguishing financial liabilities with Equity instruments
This IFRIC standard takes effect, at the latest, as from the starting date of the first fiscal year commencing on June 30, 2010. It clarifies that equity instruments issued to a creditor in order to extinguish liabilities are considered payments for purposes of paragraph 41 of IAS 39.
b) Not yet endorsed by the EU
IFRS 9 - Financial instruments - introduces new requirements for the classification and measurement of financial assets.
Other amendments to IFRS - 2010 reviews. The IASB adopted 11 amendments to six standards.
3. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
3.1 Basis of presentation
The consolidated financial statements of the Banif Financial Group have been drawn up in accordance with the International Financial Reporting Standards (IFRS) as adopted in the European Union, as at December 31, 2010, under the terms of Regulations of the European Council and the European Parliament No. 1606/02, and assuming the continuity of operations.
The financial statements have been drawn up on a historical cost basis, except for financial assets and liabilities held for trading (including derivatives), assets and liabilities at fair value through profit or loss, financial assets available for sale, property reported under tangible assets and investment properties which are measured at fair value. The main accounting policies used by the Group are presented below.
The financial statements are expressed in thousands of euros, rounded up or down to the nearest one thousand.
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3.2 Comparative information
The Company has not changed its accounting policies, meaning that all amounts presented are comparable, in relevant aspects, with those of the previous fiscal year.
3.3 Use of estimates in the preparation of the Financial Statements
The preparation of the Financial Statements requires the use of estimates and assumptions by the Group's Management that affect the reported amounts of assets and liabilities, revenues and costs, together with the contingent liabilities disclosed. In making these estimates, the Management used its judgement, together with the information available at the date of preparation of the financial statements. Consequently, future amounts effectively achieved may differ from the estimates made.
The use of estimates by the management is most significant in the following situations:
Continuity of operations
The financial statements were drawn up assuming the continuity of operations, given that the Group’s Management considers that the Group and the parent company have the means and capacity to continue their business in the foreseeable future. In making this judgement, the Group’s Management took into consideration the information at its disposal on current conditions and future projections of returns, cash flows and capital.
Fair value of financial instruments
When the fair value of the financial instruments cannot be marked to market, in active markets, it is determined through the use of appreciation techniques which include mathematical models of discounted cash flows (marked to model). The input data in these models are, whenever possible, observable market data. However, when this is not possible, a degree of judgement is required to establish the fair value, namely in terms of liquidity, correlation rates and volatility (see Notes 3.10.2 and 45).
Impairment losses on client credits
Client credits with past due positions and total liabilities which amount to a significant sum are analyzed individually to assess the need for reporting impairment losses. This analysis involves estimating the value and timing of future flows. These estimates are based on assumptions concerning a number of factors which may be modified in the future and, consequently, modify the impairment amounts. Additionally, a collective analysis of impairment is conducted by credit segments with similar characteristics and risks, and impairment losses are determined on the basis of the historical behaviour of losses for the same type of assets.
Impairment on equity instruments
The financial assets available for sale are analyzed when there is concrete evidence of impairment, namely when there is a significant or prolonged decline in fair values, below cost price. Determining when a level of decline is considered "significant or prolonged" requires judgement. In this context, the Group considers that a decline in the fair value of an equity instrument of more than or equal to 30% or a decline over more than one year may be considered significant or prolonged.
Investment properties and property in own use
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The fair value of investment properties and property in own use, classified under Other Tangible Assets, is determined on the basis of evaluations conducted by independent experts using estimates of income, maintenance or replacement costs, and comparable market values.
Deferred tax assets
Deferred tax assets are accounted for unused fiscal losses, to the extent that it is considered likely that positive fiscal results will exist in the future period established by law. Judgement is required to determine the value of the deferred tax assets which may be recognized, based on the level of expected future fiscal results.
Consolidation of special purpose entities (SPE)
The Group uses the incorporation of special purpose entities (SPE) in order to carry out asset securitization and debt issue operations.
The Group does not consolidate SPEs which are not under its control. As it can be difficult to determine whether control is exercised over an SPE, a judgement is made to determine whether the Group is exposed to the risks and rewards involved in the activities of the SPE and whether it has decision making powers in these SPEs.
The decision on whether an SPE should be consolidated by the Group requires the use of assumptions and estimates to determine the residual gains and losses and to determine who retains the majority of those gains and losses. Other assumptions and estimates could lead to a different scope in the Group's consolidation.
Retirement benefits
The level of liabilities concerning retirement benefits (defined benefit plans) is determined through an actuarial assessment, which uses assumptions on discount rates, expected return rates on Pension Fund assets, future salary and pension raises and mortality tables. In view of the long term nature of pension plans, these estimates are subject to significant uncertainties.
3.4 Consolidation principles
The consolidated financial statements include the accounts of Banif SGPS, SA and entities under its control ("subsidiaries"), including investment funds in which the Group holds more than 50% of the investment units and special purposes entities (SPEs), drawn up for the same reference date as the present financial statements. Control is deemed to exist whenever the Group has the possibility of determining the operating and financial policies of an entity with the purpose of obtaining benefits from its activities, which normally happens when the Group holds no less than 50% of the voting rights in the entity. Special purposes entities, in relation to which the Group retains the majority of risks and benefits involved in their activities, are also included in the consolidated accounts. These include essentially the entities used by the Group in credit securitisation operations and in the issue of structured debt.
Whenever applicable, the subsidiaries' accounts are adjusted in order to reflect the use of the accounting policies of the Banif Financial Group.
Significant balances and transactions between Group companies are eliminated in the course of the consolidation process.
The value corresponding to third party holdings in subsidiaries is presented under the item "Noncontrolling interests", in shareholders' equity.
3.5 Business combinations and goodwill - 11 -
The acquisition of subsidiaries is reported by the purchase method. The acquisition cost corresponds to the fair value, on the transaction date, of delivered assets, accepted liabilities, equity instruments issued, plus any costs directly assignable to the transaction. The identifiable assets, liabilities and contingent liabilities of the acquired entity are measured by the fair value at the acquisition date.
Goodwill corresponds to the difference between the acquisition cost and the proportion acquired by the Group of the fair value of the assets, liabilities and contingent liabilities identified. Whenever it is found that the fair value exceeds the acquisition cost ("negative goodwill"), the differential is immediately recognized in profit or loss.
When the acquisition cost exceeds the fair value of the assets, liabilities and contingent liabilities, the positive goodwill is reported under assets, and is not depreciated. However, it is subject to annual impairment tests, and any impairment losses which may be determined are reflected.
For the purposes of implementation of the impairment test, the goodwill determined is imputed to each of the Cash Flow Generating Units (CFGU) which benefited from the combination. The goodwill attributed to each unit is subject to an annual impairment test, or whenever there is an indication that impairment may exist.
Goodwill’s impairment is determined by calculation the recoverable amount for each CFGU or CFGU group to which the goodwill relates. When the recoverable amount for the CFGUs is less than the amount reported, impairment is accounted.
Impairment losses on goodwill cannot be reversed in future periods.
3.6 Investment in associates
These are investments in entities where the Group has significant influence and which are neither subsidiaries, nor Joint Ventures, nor holdings owned through investment funds, venture capital funds or Banks (seed capital), classified as financial instruments at fair value through profit or loss on initial accounting. Significant influence is deemed to exist whenever the Group holds more than 20% of the voting rights, directly or indirectly.
Investments in associates are reported by the equity method. The investment is initially reported at acquisition cost, which is increased or decreased through the accounting of subsequent variations in the parcel held in the associate's net worth. Goodwill originated in the acquisition is therefore reflected in the investment value. Any negative goodwill is immediately accounted in profit or loss. The value of the investment is subject to impairment analysis on an annual basis.
As in the procedure for subsidiaries, the associate's accounts are adjusted, whenever applicable, in order to reflect the use of the Group's accounting policies.
3.7 Joint Ventures
These correspond to investments in entities in which the Group shares the control with another party, on the basis of a contractual arrangement whereby the strategic, financial and operating decisions concerning the business activities require unanimous consensus between the parties sharing control.
The Group's interests in Joint Ventures are accounted using the proportional consolidation method. Proportional consolidation is an accounting method in which the Group's share in each of the assets, liabilities, income and expenses of the jointly controlled entity is combined line by line with equivalent items of the Group's financial statements. There are no non-controlling interests in this method.
3.8 Foreign currency transactions
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Foreign currency transactions are reported on the basis of the indicative exchange rates of the functional currency at the date of transaction. Monetary assets and liabilities expressed in foreign currency are translated to Euros at the exchange rate ruling at the balance sheet date. Nonmonetary items which are valued at fair value are translated on the basis of the exchange rate ruling at the last appreciation date. Non-monetary items which are kept at historical cost are kept at the original exchange rate.
Exchange rate differences resulting from translation are accounted as gains or losses of the fiscal year in the income statement, except for those resulting from non-monetary financial instruments classified as available for sale, which are reported against a specific item or shareholders’ equity until disposal of the asset.
3.8.1 Financial statements of subsidiaries and associates expressed in foreign currency
At the balance sheet date, assets and liabilities with a functional currency other than the Euro are translated at the exchange rate ruling at the closing date of the balance sheet, whilst income and cost items are translated at the average exchange rate for the period. Differences that result from the use of the closing exchange rate and the average exchange rate are reported, without tax effects, against a specific equity item until disposal of the respective entities.
3.9 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise national and foreign currency, in cash, sight deposits with central banks, sight deposits with other banks in Portugal and abroad, and cheques to be drawn on other banks.
3.10 Financial instruments
3.10.1 Initial recognition and measurement of financial assets
Purchases and sales of financial assets which involve the delivery of assets in accordance with the deadline established by regulations or market conventions are accounted at the transaction date, i.e., at the date on which the commitment to purchase or sell is accepted. Derivative financial instruments are also accounted at the transaction date.
The classification of financial instruments on the initial accounting date depends on their characteristics and on the intention with which they are acquired. All financial instruments are initially measured at fair value plus costs directly assignable to purchase or issue, except in the case of assets and liabilities at fair value through profit or loss where those costs are accounted directly in profit or loss.
3.10.2 Subsequent measurement of financial assets
Financial assets and liabilities held for trading
Financial assets and liabilities held for trading are those acquired with a purpose to sale in the short term and to profit from price fluctuations or on the trader's margin, including all derivative intruments not acquired for hedging operations.
After initial accounting, the gains and losses generated by subsequent measurement at fair value are reflected in the income statement of the fiscal year. In derivatives, positive fair values are reported under assets and negative fair values are reported under liabilities. Interest and dividends or costs are reported in the corresponding profit or loss accounts when the right to their payment is established.
Financial liabilities held for trading also include sales of overdraft securities. These operations are reported in the balance sheet at fair value, with subsequent variations in fair value reported in the
- 13 - income statement of the fiscal year under the item "Profit or loss from assets and liabilities at fair value through profit or loss".
Financial assets and liabilities at fair value through profit or loss
These items comprise financial assets and liabilities irrevocably classified by the Group on initial accounting as being at fair value through profit or loss, in accordance with the option envisaged in IAS 39 (fair value option), provided the conditions stipulated for accounting are met, namely: i) the designation eliminates or significantly reduces accounting mismatches between measurement of financial assets and liabilities and recognition of the corresponding gains or losses; ii) the financial assets and liabilities are part of a group of assets or liabilities or both which is managed and its performance assessed on a basis of fair value, in accordance with a duly documented investment and risk management strategy; or iii) the financial instrument incorporates one or more embedded derivatives, except when the embedded derivatives do not significantly modify the cash flows involved in the contract, or when it is clear, with little or no analysis, that the embedded derivatives cannot be separated.
After initial recognition, the gains and losses generated by subsequent measurement at fair value of financial assets and liabilities are accounted in the income statement of the fiscal year under the item "Profit or loss on assets and liabilities at fair value through profit or loss".
The Group classifies under financial assets at fair value through profit or loss almost all the securities portfolio for banking activities, which is managed and its performance assessed on the basis of fair value, except for strategic holdings and securities for which reliable valuations cannot be obtained.
The financial liabilities designated as liabilities at fair value through profit or loss refer to debt instruments (subordinated and nonsubordinated) with one or more embedded derivatives.
Financial assets available for sale
This item comprises instruments which may be disposed of in response to or in anticipation of liquidity needs or changes in interest rates, exchange rates or changes in their market price, and which the Group has not classified in any of the other categories. Accordingly, at the reference date for the present financial statements, this item includes, essentially, holdings regarded as strategic and equity instruments for which reliable valuations cannot be obtained.
After initial accounting, they are subsequently measured at fair value, or at acquisition cost in the case of equity instruments to which it is not possible to determine the fair value reliably, with related gains and losses reflected under the item "Revaluation Reserves" until its sale (or the accounting of impairment losses), at which time the accumulated value is transferred to the income statement of the fiscal year under the item "Profit or loss from financial assets available for sale".
Interest on financial assets are calculated in accordance with the effective rate method and accounted in the income statement under the item "Interest and similar income". Dividends are accounted in the income statement under the item "Earnings from equity instruments", when the right to their payment is established. For debt instruments issued in foreign currencies, exchange rate differences are accounted in the income statement of the fiscal year under the item "Profit or loss on exchange rate revaluation".
An analysis of the existence of evidence of impairment losses on financial assets available for sale is conducted at the reference date of each set of financial statements. Impairment losses are accounted in the income statement under the item "Impairment of other financial assets net of reversal and recovery".
- 14 -
Financial assets held to maturity
The financial assets held to maturity comprise the financial investments with fixed or determinable payments and fixed maturities, where there is the intention and the ability to hold them to maturity.
After initial recognition, they are subsequently measured at amortized cost, using the effective interest rate method, less impairment losses. The amortized cost is calculated taking into account the bonus or discount at the acquisition date and other charges directly imputable to the purchase as part of the effective interest rate. Amortization is accounted in profit or loss under the item "Interest and similar income". Impairment losses are accounted in profit or loss under the item "Impairment of other financial assets net of reversal and recovery".
Assets with repurchase agreement
This item corresponds to the asset purchase price plus the implied interest rate in the resale price, which is being accounted in accordance with the specialization principle. The Group does not account these assets under an asset item, since it does not assume the risks or benefits of holding them.
Loans and advances to Banks and Loans and advances to customers
These items comprise funds advanced to banks and to Group customers.
These are financial assets with fixed or determinable payments, not listed on an active market, which are not assets acquired or generated with a purpose to dispose in the short term (held for trading) or classified as financial assets at fair value through profit or loss when initially accounted.
After initial recognition, normally at the disbursed value, including all the costs involved in the transaction, such as commissions charged (except from services), these assets are subsequently measured at amortized cost, using the effective rate method, and subject to impairment tests.
The amortized cost is calculated taking into account earnings or costs directly imputable to the sourcing of the asset as part of the effective interest rate. Depreciation of these earnings or costs is accounted in the income statement under the item "Interest and similar income" or "Interest and similar costs". Impairment losses are accounted in the income statement under the item "Credit impairment net of reversal and recovery".
Granted loans and receivable accounts are only written-off from assets where there are no realistic expectations of recovering the amounts in question, including through collateral. This assessment is independent of the procedures for writing-off lending assets in the individual accounts of the subsidiaries, under the local rules applicable to those entities.
Deposits from other banks, Deposits by customers and other loans, Debt securities in issue and Other subordinated liabilities.
Other financial liabilities, which include essentially deposits from banks, deposits by customers and debt issues not designated as financial liabilities at fair value through profit or loss, for which the contractual terms result in the obligation to deliver funds or financial assets to the holders, are accounted initially at the value of the funds received net of directly associated transaction costs and subsequently valued at amortized cost, using the effective rate method. Depreciation is recognized in the income statement under the item "Interest and similar charges".
Fair value
As stated above, the financial instruments reported under the items of financial Assets and Liabilities at fair value through profit or loss and financial assets available for sale are valued at fair value. - 15 -
The fair value of a financial instrument corresponds to the amount for which a financial asset ou liability may be sold or settled between independent and informed parties interested in materialize the transaction under normal market conditions.
The fair value used in valuing trading financial assets and liabilities, classified as being at fair value against profit or loss, and financial assets available for sale, is determined in accordance with the following criteria:
- In the case of instruments traded on active markets, the fair value is determined on the basis of the closing price, the price of the last transaction made or the value of the last known bid; - In the case of intruments not traded on active markets, the fair value is determined using valuation techniques, which include prices of recent transactions in equivalent instruments and other valuation methods normally used by the market (discounted cash flow, options valuation models, etc.).
Floating rate assets (e.g. shares) and their derivative instruments for which it is not possible to obtain reliable valuations are kept at acquisition cost, less impairment losses, if any.
3.10.3 Impairment of Financial Assets
Financial Assets at amortised cost
The Group assesses on a regular basis whether there is objective evidence of impairment in financial assets reported at amortised cost, namely, loans and advances to banks, instruments held to maturity, its lending portfolio and receivables. The impairment losses identified are reported against profit or loss. Whenever, in a subsequent period, there is a reduction in the value of the estimated impairment loss, the amount previously accounted is reversed by adjusting the account for impairment losses. The amount corresponding to such reversal is accounted directly in the income statement in the same item.
A credit, or a portfolio of customer loans, defined as a set of credits with similar risk characteristics, is impaired whenever:
- there is objective evidence of impairment resulting from one or more events which occurred after their initial accounting and; - when this event (or events) has an impact on the recoverable value of future cash flows from the loan or portfolio of customer loans, the measurement of which being reasonably estimated.
Two analytical methods are used to determine impairment losses:
a) Individual analysis
The existence of impairment losses in individual terms is assessed by means of a case-by-case analysis of the situation of customers where the total credit exposure is regarded as significant. For each customer, the Group assesses, at each balance sheet date, the existence of objective evidence of impairment, considering the following factors:
- the economic-financial situation of the customer; - the customer's overall exposure and any credit default within the Group and the financial system; - commercial information on the customer; - analysis of the business sector in which the customer operates, when applicable; - connections between the customer and the Group to which it belongs, when applicable, and analysis of the Group in terms of the variables considered above.
- 16 -
In determining impairment losses in individual cases, the following factors are considered:
- The economic-financial viability of the client and its ability to generate sufficient cash flow to cope with the debt service the in future; - The value of the associated real guarantees and the amount and recovery period estimated; - The customer's assets in situations of settlement or bankruptcy and the existence of preferential creditors.
The loans analyzed individually without any objective evidence of impairment being found are grouped together on the basis of similar risk characteristics and assessed jointly for impairment purposes. The loans analyzed individually where an impairment loss is estimated are not included for the purposes of the collective assessment.
Whenever an impairment loss is identified in customer credits assessed individually, the amount of the loss is determined by the difference between the accounting value of that credit and the present value of its estimated future cash flows, discounted at the original interest rate for the contract. In the balance sheet, loans to customers are reduced by using an impairment losses account, with the amount accounted in the income statement under the item "Impairment of loans net of recovery and reversal". For lending with a variable interest rate, the discount rate used to determine any impairment loss is the effective annual rate stipulated by the contract.
Calculation of the present value of estimated future cash flows from collateralized lending reflects the cash flows which may result from the recovery and disposal of the collateral, less the costs involved in its recovery and sale.
b) Collective analysis
The loans assessed on a collective basis are grouped by segments with similar characteristics and risks. Impairment losses for these loans are estimated considering the historical experience of losses on similar risk portfolios, the economic environment and its influence on the level of historical losses. At regular intervals, the Group updates the historical parameters used to estimate losses through collective analysis.
Whenever a loan is regarded as uncollectable, and the respective impairment loss is estimated at 100% of the value of the loan, the loan is written off against the value of the loss. The loan is thereby deducted from assets.
If written off loans are recovered, the amount recovered is credited to the income statement under the item "Impairment of loans net of recovery and reversal", referred above.
Financial Assets available for sale
In addition to the signs of impairment referred above for financial assets reported at amortised cost, IAS 39 also provides for the following specific signs of impairment in equity instruments:
- Information on significant changes with adverse impact on the technological, market, economic or legal environment, in which the issuer operates, which suggest that the investment cost will not be fully recovered; - A significant or prolonged decline in market value below cost price.
At each reference date for the financial statements, the financial assets available for sale are analyzed when there is concrete evidence of impairment, namely when there is a significant or prolonged decline in fair values, below cost price. Determining when a level of decline is considered "significant or prolonged" requires judgement. In this context, the Group considers that a decline in the fair value of an equity instrument of more than or equal to 30% or a decline over more than one year may be considered significant or prolonged. - 17 -
Whenever there is objective evidence of impairment, accumulated losses which have been accounted in reserves are transferred to costs of the fiscal year in the form of impairment losses, reported under the item "Impairment of other assets net of reversal and recovery".
Impairment losses on equity instruments cannot be reversed, meaning that any potential gains originated after the accounting of impairment losses are reported under the item "Fair value reserve". If any additional losses are subsequently determined, impairment is still deemed to exist, with these losses reflected in the profit or loss of the fiscal year.
The Group also carries out periodic analyses of impairment in financial assets reported at cost, namely unlisted equity instruments whose value cannot be reliably measured. The recoverable value here corresponds to the best estimate of the future flows receivable from the asset, discounted at a rate which properly reflects the risk associated with holding the asset. The value of the impairment loss found is directly accounted in the profit or loss of the fiscal year. Impairment losses on these assets cannot be reversed also.
3.10.4 Derivatives
In the course of its normal operations, the Group uses a number of derivative financial instruments both to satisfy its customers' needs and to manage its own positions of risk in interest rate or other market risks. These instruments involve variable degrees of lending risk (maximum potential accounting loss due to possible default by borrowers on contractual obligations) and of market risk (maximum potential loss due to the value modification of a financial instrument due to variations in interest rates, exchange rates and listed prices).
The notional values of derivative operations, reported under off-balance-sheet items, are used to calculate the flows to trade on contractual terms, eventually in net terms, and although they constitute the most usual form of measurement used in these markets, they do not correspond to any quantification of the lending or market risk on the respective operations. For interest or exchange rate derivatives, the lending risk is measured by the substitution cost at current market prices for the contracts in which a potential gain position is held (positive market value) in the event of defaulting by the borrower.
The derivatives embedded in other financial instruments are separated from the host instrument whenever their risks and characteristics are not closely related to those of the host contract and the entire instrument is not reported on initial accounting at fair value through profit or loss (fair value option).
The derivative instruments that the Group uses to manage exposure to financial and market risks are accounted for as hedge derivatives in accordance with the criteria defined in IAS 39, provided they meet the eligibility requirements set by this standard, namely for the reporting of the exposure hedges to variation in the fair value of hedged assets ("Fair value hedges"). Otherwise, derivatives are considered at their fair value as trading financial assets or liabilities, depending on whether their fair value is positive or negative.
Hedge accounting
The derivative financial instruments used for hedging are classified as a hedge for accounting purposes as long as they meet all the following requirements:
- At the starting date of the transaction, the hedge ratio must be identified and formally documented, including the identification of the hedged item and the hedge instrument, and the assessment of the hedge effectiveness; - There must be an expectation that the hedge ratio will be highly effective, at the starting date of the transaction and throughout the life of the operation; - 18 -
- The effectiveness of the hedge must be reliably measured at the starting date of the hedge and throughout the lifetime of the operation; - For cash flow hedges, it must be highly likely that the cash flows will occur.
At the date of the financial statements, tests to the effectiveness of hedges are conducted and documented through comparison of the variations in the fair value of the hedge instrument and of the item hedged (with regard to the parcel assignable to the hedged risk). In order for hedge accounting to be used under IAS 39, this ratio must fall within a range from 80% to 125%. Additionally, prospective effectiveness tests are also conducted, in order to estimate the future effectiveness of hedges.
Fair Value Hedges
In hedge operations for the fair value of an asset or liability, the balance sheet value of such asset or liability, determined on the basis of the respective accounting policy, is adjusted in order to reflect the variation in its fair value assignable to the hedged risk. The variations in the fair value of hedging derivatives are accounted under profit or loss, together with the variations in the fair value of the hedged assets or liabilities, assignable to the hedged risk.
If the hedge ceases to meet with the requirements for hedge accounting, the derivative financial instrument is transferred to the trading portfolio and hedge accounting is discontinued prospectively. If the hedged asset or liability corresponds to a fixed yield instrument, the revaluation adjustment is amortised to maturity by the effective rate method.
Cash flow hedges
In hedge operations against exposure to variability in cash flows highly likely to happen in the future, the effective part of the variations in the fair value of the hedging derivative is accounted in reserves and transferred to profit or loss of the periods in which the respective hedged item affects profit or loss. The non-effective part of the hedge is reported under profit or loss.
When a hedging instrument expires or is sold, or when the hedge ceases to meet the requirements for hedge accounting, the variations in the fair value of the derivative accumulated in reserves are accounted in profit or loss, when the hedged operation also affects profit or loss. If it is foreseeable that the hedged operation will not occur, the amounts still reported under equity are immediately accounted under profit or loss and the hedging instrument is transferred to the trading portfolio.
3.10.5 Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, when applicable, a part of a financial asset or part of a group of financial assets) is derecognized when: i) The rights to receive cash flows from the asset expire; or ii) The rights to receive cash flows have been transferred, or the Group has accepted the obligation to pay all the cash flows receivable, without significant delay, to third parties, under a passthrough agreement; and iii) The risks and benefits of the assets have been substantially transferred, or the risks and benefits have not been transferred or retained, but control over the asset has been transferred.
When the rights to receive the cash flows have been transferred or when a pass-through agreement has been celebrated and not all the risks and benefits of the asset have been substantially transferred or retained, and control over the asset has not been transferred also, the financial asset is accounted to the extent of continued involvement, which is measured at the lesser between the original value of the asset and the maximum value of the payment which may be claimed from the Group. - 19 -
When continued involvement takes the form of a purchase option over the transferred asset, the extent of the continued involvement is the value of the asset which may be repurchased, except in the case of a sale option measurable at fair value, when the value of the continued involvement is limited to the lowest between the fair value of the asset and the price for exercise the option.
Financial liabilities
A financial liability is derecognized when the underlying obligation expires or is cancelled. When an existing financial liability is replaced by another with the same counterparty on substantially different terms from those initially established, or the initial terms are substantially changed, such replacement or modification is addressed as a derecognition of the original liability and the recognition of a new liability, and any difference between the respective values is accounted in profit or loss of the fiscal year.
3.10.5 Reclassification between categories of Financial instruments
In October 2008, the IASB issued a revised version of IAS 39 - Reclassification of financial instruments. The new version permits an entity to transfer, under certain circumstances, financial instruments from the categories of Financial assets held for trade and Financial assets available for sale to the categories of Financial assets available for sale, Other loans and receivables or to Financial assets held to maturity, provided those financial assets meet the criteria for each category. The Group adopted this possibility for a set of financial assets dated as from July 1, 2008 and October 31, 2008 (more details about these reclassifications in notes 12 and 14).
Reclassifications are recorded at the fair value of the instuments at the date of reclassification which thus becomes the new basis of amortized cost in the new categories for financial assets reclassified to the categories of Other loans and receivables or Financial assets held to maturity.
For a financial asset reclassified from the category of Financial assets available for sale, the gains or losses on that asset previously accounted in Reserves are amortized to profit or loss of the fiscal year over the remaining life of the financial asset by the method of effective interest rate. If further on, the existence of impairment in these assets is consider, the amount that is still accounted in reserves is recycled in the income statement.
The Group may reclassify trading assets that are not derived from the category of Financial assets held for trading to the category of Other loans and receivables if the assets meet the definition of a loan or receivable and the Group has the intention and the ability to hold the asset in the future or to maturity. If a financial asset is reclassified and subsequently the Group estimates an increase in the future cash flows resulting from a better prospect of recovery of such cash receipts, the effect of that increase is recorded as an adjustment to the effective rate as from the estimate’s changing date.
Reclassifications are made discretionarily by the Group’s Board of Directors, one instrument at a time. The Group does not make any reclassification to the category of Financial assets at fair value through profit or loss after initial accounting.
3.11 Non-current assets held for sale
Non-current assets are classified as held for sale whenever it is established that their balance sheet value will be recovered through sale. This condition is only met when the sale is highly likely to happen and the asset is available for immediate sale in its current state. The sale operation should take place within one year after the classification in this category. An extension to the period during which it is required that the sale should be concluded does not exclude an asset (or set of assets for sale) from being classified as held for sale, if the delay is caused by events or circumstances beyond the Group's control, and if the commitment to sell the asset is maintained.
- 20 -
In this item, the Group reports essentially properties received as settlement of debts relating to lending.
The assets recorded in this category are valued at the lower of the acquisition cost and the fair value, determined by independent appraisers, less costs to incur in the sale. These assets are not depreciated.
In the cases where the assets classified in this category no longer meet the conditions for immediate sale, namely because the Group has received no reasonable offers, these assets are reclassified to the item "Investment Properties".
3.12 Investment properties
Investment properties are initially recognized at cost, including transaction costs. The amount entered in the accounts comprises additional investment costs in existing investment property, if the recognition criteria are met, but excludes the routine maintenance costs.
Subsequent to initial recognition, investment properties are recorded at fair value, reflecting market conditions at the balance sheet date. The gains and losses resulting from modifications to the fair value of investment properties are included in the profit or loss of the year in question.
Investment properties are derecognized when disposed of or when future economic benefits from owning them are no longer expected. On disposal, the difference between the net disposal value and the recorded asset value is accounted in profit or loss for the period of the disposal.
The transfers from and to investment properties are made when there is a change in use. On investment properties transferred to buildings in the Group's own use, the estimated cost for subsequent entry in the accounts is the fair value at the date of the change of use. If a building in the Group's own use is reclassified as investment property, the Group reports this asset in accordance with the applicable policy for building in the Group's own use until the date of its transfer to investment properties.
3.13 Other tangible fixed assets
The item for tangible fixed assets comprises buildings in the Group's own use, vehicles and other equipment.
The buildings used by the Group in its business activities are classified as buildings in the Group's own use. The buildings in the Group's own use are valued at fair value, as determined by independent appraisers, less subsequent depreciation and impairment losses. The buildings in the Group's own use are also valued at the intervals necessary, so that the accounting values do not differ significantly from their fair value at the balance sheet date, with three year intervals between revaluations being taken as the norm.
The positive variations in fair value are credited to revaluation reserves, included in equity, except and to the extent that such variation constitutes a reversal of losses on the same asset accounted in profit or loss, in which case that positive variation shall be accounted in profit or loss.
The negative variations in fair value are accounted in profit or loss, except and to the extent that they can be offset by positive revaluation reserves existing for the same asset.
Other tangible fixed assets are recorded at cost, less subsequent depreciation and impairment losses. Repair and maintenance costs and other expenses associated with their use are accounted as costs when they occur. - 21 -
Tangible assets are depreciated on a linear basis, in accordance with their expected useful life, which is: Buildings [10-50] years Vehicles 4 years Other Equipments [2 to 15] years
On the transition date, the Group used the option permitted by the IAS of considering as "estimated cost" of tangible assets the respective fair value or, in some cases, the balance sheet value resulting from legal revaluations effected up to January 1, 2004 under Portuguese legislation.
A tangible asset is derecognized when sold or when no further economic benefits are expected from its use or sale. On the date of derecognition, the gain or loss calculated by the difference between the net sale value and the net accounting value is accounted in the income statement under the item "Other operating Income".
3.14 Leases
The Group classifies operations as finance leases or operating leases in accordance with their substance and not because of their legal form. Leases are classified as finance leases when the risks and rewards of ownership of an asset are transferred to the lessee. All other leases are classified as operating leases.
These operations are recorded as follows:
3.14.1 Operating leases
As lessee
The payments made by the Group under operating lease contracts are recorded under costs in the periods to which they relate.
As lessor
The assets under operating leases correspond essentially to vehicles and are recorded in the balance sheet under the item "other tangible assets", at cost, less depreciation and impairment losses.
The rentals under operating leases are recorded under income in the period to which they relate.
3.14.2 Finance leases
As lessee
The assets under finance leases are recorded under the item "Other tangible fixed assets", at the fair value of the asset or, if lower, at the present value of the minimum leasing payments.
The rentals under finance leases are divided into financial charges and depreciations, in order to obtain a constant interest rate up to the maturity of the liability. Interest rates paid are recorded as financial costs. The assets under finance leases are depreciated over the course of their useful life. However, if there is no reasonable certainty that the Group will obtain the ownership at the end of the contract, the asset is depreciated for the lesser of its useful life or of the finance lease.
As lessor
The assets under finance lease are recorded in the balance sheet as granted loans, for the amount equal to the net investment of the leased item, which is repaid through the equity depreciations listed in - 22 - the contracts’ financial plan. Interests included in rentals are recorded as financial income, according to the effective contract rate.
3.15 Intangible assets
Intangible assets, which correspond essentially to software, are recorded at acquisition cost, less accumulated depreciation and impairment losses. Depreciation is recorded on a linear basis, throughout the estimated useful life of the assets, which currently lies between three and four years.
The depreciation period and method for intangible fixed assets are reviewed at the end of each year. Changes on the estimated useful life or consumption pattern of the future economic benefits are treated as changes to estimates. Depreciations are accounted in the respective item of the income statement.
The intangible assets may include internal capitalized expenses, namely with in-house software development. To this end, expenses are only capitalized from the moment when the conditions established in IAS 38, namely the requirements relating to the development phase, are met.
3.16 Taxes on income
The costs with taxes on income correspond to the sum of current taxes and deferred taxes.
Current taxes are calculated on the basis of the tax rates in force in the jurisdictions where the Group operates.
The Group also reports under deferred tax assets or liabilities those sums related to accounting of taxes payable/recoverable in the future, resulting from temporary taxable/deductible differences, namely those relating to provisions temporarily not deductible for fiscal purposes, the taxation rules on pension liabilities, other employee benefits and capital gains not taxed due to reinvestment. In addition, deferred tax assets are accounted in relation to reportable fiscal losses presented by certain Group companies.
Deferred tax assets and liabilities are calculated and assessed on an annual basis, using the taxation rates expected to be in force at the date of reversal of the temporary differences, which correspond to the rates approved or substantially approved at the balance sheet date. Deferred tax liabilities are always recorded. Deferred tax assets are only recorded to the extent that it is likely the existence of future taxable income to allow their use.
The taxes on income are recorded against the results of the fiscal year, except in situations where the events which gave rise to them were reflected in a specific equity item, namely, with regard to the valuation of financial assets available for sale and buildings in own use. In this case, the fiscal effect associated with valuations is also reflected against equity, not affecting the profit or loss of the fiscal year.
3.17 Employee benefits
Employee benefit liabilities are accounted under the rules defined by IAS 19. Accordingly, the policies reflected in the consolidated accounts as at December 31, 2010 are the following:
Pension and healthcare liabilities
There are various pension plans within the Group, including those with defined benefits and those with defined contributions. These liabilities are normally financed through independent pension funds or payments to insurance companies.
The following Banif Financial Group entities have liabilities in relation to the payment of pensions:
- 23 - a) Banif - Banco Internacional do Funchal, SA
The employees are included in the Portuguese Social Security Scheme since their admission in the Company, with exception of the employees incorporated after the merger by incorporation of Banco Banif e Comercial dos Açores, SA (BBCA), as at January 1, 2009, which were integrated into the Portuguese Social Security Scheme as from January 1, 2011, as stipulated in the Decree-Law No. 1- A/2011, of January 3.
Under the terms of the referred ordinance, the Portuguese Social Security Scheme will ensure the protection of BBCA employees in the contingencies of maternity, parenthood and adoption, and even old age, remaining under the Company’s liabilities the protection in illness, disability, survival, and death. The contribution rate will be 26.6% (23.6% by the employer and 3% by the employees), in substitution of Caixa de Abono de Família dos Empregados Bancários (CAFEB), which is extinct. As a result of this amendment, the pension rights of BBCA present employees shall be covered under the terms defined by the Portuguese Social Security Scheme, taking into account the length of service as from January 1, 2011 until the retirement age, with the Company to pay the differential required for the guaranteed pension under the Collective Labour Agreement (CLA).
According to the guidance issued in a Notice of the Portuguese Council of Financial Supervisors, attached to the Fax Message No. 11/11/DSPDR, of January 26, 2011, of Bank of Portugal, given that the CLA plan remains unchanged and that there is no reduction of benefits from the beneficiary point of view, liabilities for past services should remain unchanged as at December 31, 2010. Medical assistance for banking employees is provided by Serviço de Assistência Médico Social (SAMS) , an independent entity managed by the Union. SAMS provides services to its beneficiaries and/or contributions in spending on medical care, diagnostic aids, medications, hospitalizations and surgeries, in accordance with internal regulation.
In 2008, the Company agreed a Benefits Plan with the banking trade unions, which established important changes relating to careers and to social security for its employees, except for those incorporated after the merger of BBCA into the Company, which are not covered by this Benefits Plan.
Following the entry into force of the Benefits Plan, as at October 1, 2008 Banif’s, previous Fund was turned into a mixed fund with three Pension Plans, designated as Pension Plans I, II and III.
Accordingly, the Company provides to its employees the following benefits regarding to pensions and medical care:
- Pension Plan I (defined benefit), whereby the Company assumes the liability (i) for the payment of invalidity and presumable invalidity retirement pensions and survivors' pensions to employees covered by the defined Benefits Plan and the respective Pension Plan, complementing the Social Security system, and (ii) for the future payment of the compulsory contributions relating to post-employment medical care of Serviço de Assistência Médico Social (SAMS) , an independent entity managed by the Unions, on the following terms:
- for the employees eligible for retirement pension, the Company makes the contribution of 6.5% on the respective pensions; - for other employees included under the defined benefits plans, this benefit is changed to a lump sum on retirement, corresponding to 6.50% of the constituted capital, on the basis of the initial contribution plus the value of future defined contributions;
- Pension Plan II (defined contribution), whereby the Company agrees to contribute on a monthly basis with a sum equivalent to 4.5% of the salary to which the plan applies, and through an initial contribution paid up on the Plan’s establishment date; - Pension Plan III (defined contribution), whereby the Company agrees to contribute on a monthly basis with a sum equivalent to 1.5% of the salary to which the plan applies;
- 24 -
- BBCA Pension Plan (defined benefit), closed to new members, under which the Company accepts the liability for the payment of retirement pensions, invalidity and presumable invalidity pensions and survivors' pensions to BBCA employees and pensioners at the date of the merger of BBCA into the Company, or to their families, in accordance with the CLA and Decree-Law No. 1-A/2011, of January 3, under which the pension rights of BBCA present employees shall be covered under the Portuguese Social Security Scheme, taking into account the length of service as from January 1, 2011 until the retirement age, with the Company to pay the differential required for the guaranteed pension under the CLA. In addition to the benefits established in the pension plan, the Company accepts the liability for paying compulsory contributions to the Serviço de Assistência Médico Social (SAMS) , with a contribution rate of 6.5%, and also Death Allowances, under the Vertical Collective Labour Agreement (VCLA).
The Company's liabilities are financed through two independent Pension Funds:
- Banif Pension Fund, which funds Pension Plans I, II and III; - BBCA Pension Fund, which funds the BBCA Pension Plan. b) Other Group entities
The companies Banif Go, Instituição Financeira de Crédito, SA, Banif Rent - Aluguer Gestão e Comercio de Veículos Automóveis, SA, Banif - Banco de Investimento, SA and the subsidiaries Banif Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliário, SA, Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA, Banif New Capital - Sociedade de Capital de Risco, SA, Banif Mais, SA, Tecnicrédito ALD - Aluguer de Automóveis, SA and Margem - Mediação de Seguros, Lda, provide their employees with defined contribution pension plans, financed through independent pension funds.
The assets or liabilities accounted in the balance sheet in relation to the defined benefit plans correspond to the difference between the current value of pension liabilities and the fair value of the assets of the pension funds, considering the adjustments relating to deferred actuarial gains and losses. The value of the liabilities is determined on an annual basis by independent actuaries, using the projected unit credit method and actuarial assumptions regarded as appropriate (Note 46). Liabilities are reviewed on the basis of a discount rate which reflects the market interest rates for high quality corporate bonds, denominated in the currency in which the liabilities are payable, with deadlines to maturity similar to those for settlement of pension liabilities.
The gains and losses resulting from differences between the actuarial and financial assumptions used and the amounts effectively observed concerning liabilities and pension fund earnings are deferred in an item ("corridor") on assets or liabilities, up to the limit of 10% of the higher of the present value of the liabilities for past services or the value of the pension funds, with reference to the end of the current ear. The accumulated value of actuarial gains and losses which exceeds the corridor is accounted against profit or loss over the average remaining period of service of the employees covered by the plan.
The increase of liabilities with early retirements, when the retirement occurs before the employee reaches 65 years of age, are accounted in costs of the fiscal year.
The costs with defined contribution plans are accounted as costs in the respective fiscal year.
The Group assesses, for each defined benefit plan, the impairment of any fund’s surplus concerning the liabilities with retirement pensions, on the basis of any expected reduction in required future contributions.
At the date of transition to IFRS, the Group adopted the possibility permitted by IFRS 1 of not recalculating the actuarial gains and losses deferred since the starting date of the plans. Accordingly,
- 25 - the deferred actuarial gains and losses reflected in the Group's accounts as at December 31, 2003 were written-off in full against retained earnings, under the transition adjustments to IFRS.
Other long term benefits
In addition to pensions and medical care, the Group has other liabilities for employee benefits concerning length of service bonus referred in the VCLA.
The liabilities for these benefits are also determined on the basis of actuarial valuations, in a way similar to that for pension liabilities, and are recorded under the item "Other liabilities" against Profit or Loss.
3.18 Provisions and contingent liabilities
A provision is made when a present obligation (legal or constructive) exists, resulting from past events where the future outflow of resources is likely to happen, and this may be reliably determined. The provision corresponds to the Group's best estimate of the amounts which it would be necessary to pay out in order to settle the liability at the balance sheet date. If the time effect of the cost of money is significant, the provisions are discounted using a pre-tax interest rate reflecting the specific risk of the liability. In these cases, the increase in the provision due to the passage of time is accounted under financial costs.
If the future outflow of resources is not likely to happen, then this is a contingent liability. Contingent liabilities only need be disclosed, unless the possibility of their event is remote.
3.19 Dividends
Dividends are accounted as liabilities and deducted from Capital items when approved by shareholders. Dividends for the fiscal year approved by the Board of Directors after the date of the financial statements are disclosed in the Notes to the Financial Statements.
3.20 Recognition of income and costs
In general, income and costs are accounted in accordance with the period when the operations took place, on accruals basis, i.e., they are recorded as they are generated, regardless of the moment in which they are charged or paid. Income is accounted to the extent that it is likely that economic benefits associated with the transaction will accrue to the Group and the amount of the revenue can be reliably measured.
For financial instruments measured at amortized cost and for financial instruments classified as "Financial assets available for sale", interest rates are accounted using the effective rate method, which corresponds to the rate which discounts exactly the set of future cash receipts or payments up to maturity, or up to the next repricing date, for the net amount currently recorded for the financial asset or liability. When the effective interest rate has been calculated, future cash flows are estimated considering the contractual terms and considering all the other income or charges directly attributable to the contracts.
Dividends are accounted when the entitlement to receive the payment is established.
3.21 Income and charges for services and commissions
The Group charges commissions to its customers for the provision of a wide range of services. These include commissions for the provision of ongoing services, for which clients are usually debited periodically, or commissions charged for a particular significant act.
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The commissions charged for services rendered during a given period are accounted over the lifetime of the service. Commissions related to a significant act are accounted at the time of the act in question.
The commissions and charges associated with financial instruments are included at the effective interest rate of such instruments.
3.22 Financial guarantees
In the normal course of its banking business, the Group provides financial guarantees, such as letters of credit, bank guarantees and documentary credits.
Financial guarantees are initially accounted as a liability, at fair value. The liability is subsequently stated at the amount of the estimated future expenses for settling the obligation, at the balance sheet date. Commissions obtained for the provision of the financial guarantees are accounted in results, under the item "Income from services and commissions", during the lifetime of the guarantees.
4. GROUP UNDERTAKINGS
As at December 31, 2010 and 2009, the Group undertakings included in the consolidation process were the following:
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31-12-2010 31-12-2009
Registered % effective Minority % effective Minority Company name Holder Offices holding interests holding interests
Banif Comercial, SGPS, S.A. Portugal Banif SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif - Investimentos - SGPS, S.A. Banif - Banco Internacional do Funchal, S.A. Portugal Banif Comercial, SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif (Açores ) SGPS, S.A. Portugal Banif Comercial, SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Finance, Ltd. Cayman Isl. Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Numberone, SGPS, Lda Banif & Comercial Açores, Inc San José U.S.A. Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Banif & Comercial Açores, Inc Fall River U.S.A. Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Investaçor, SGPS, S.A. Portugal Banif (Açores) SGPS, S.A. 59,20% 40,80% 59,20% 40,80% Investaçor Hoteis S.A. Portugal Investaçor, SGPS, SA 59,20% 40,80% 59,20% 40,80% Açortur Investimentos Turísticos dos Açores, S.A. Portugal Investaçor, SGPS, SA 49,37% 50,63% 49,37% 50,63% Turotel, Turismo e Hoteis dos Açores, S.A. Portugal Investaçor, SGPS, SA 58,07% 41,93% 58,07% 41,93% Investimentos Turísticos e Similares e Apart-Hotel Pico Lda. Portugal Açortur Investimentos Turísticos dos Açores, S.A. 49,37% 50,63% 49,37% 50,63%
Banif Go, Instituição Financeira de Crédito, S.A. Portugal Banif Comercial, SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Rent - Aluguer Gestão e Comercio de Veículos Portugal Banif Comercial, SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif - Banco InternacionalAutomóveis do Funchal (Brasil), S.A. Brazil Banif Comercial, SGPS 98,50% 1,50% 98,50% 1,50% Banif International Holdings, Ltd Banif - Investimentos - SGPS, S.A. Portugal Banif - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Holding (Malta), plc Banif - Banco de Investimento, S.A. Portugal Banif - Investimentos - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Gestão Activos - Soc. Gestora de Fundos de Investimento Portugal Banif - Banco de Investimento, S.A. 100,00% 0,00% 100,00% 0,00% Mobiliario, S.A. Banif Açor Pensões - Soc. Gestora Fundos Pensões, S.A. Portugal Banif - Banco Internacional do Funchal, S.A. 61,89% 38,11% 61,89% 38,11% Banif - Banco de Investimentos, S.A. Centro Venture - Soc. Capital de Risco, S.A. Portugal Banif - Banco de Investimento, S.A. 51,00% 49,00% 51,00% 49,00%
Banif Capital - Soc. de Capital. de Risco S.A. Portugal Banif - Banco de Investimento, S.A. 100,00% 0,00% 80,00% 20,00% Gamma - Soc. Titularização de Créditos, S.A. Portugal Banif - Banco de Investimento, S.A. 100,00% 0,00% 100,00% 0,00% Numberone SGPS, Lda Portugal Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Banif International Asset Management Ltd. Cayman Isl. Banif - Banco de Investimento, S.A. 100,00% 0,00% 100,00% 0,00% Banif Multifund Ltd. Cayman Isl. Banif International Asset Management Ltd. 100,00% 0,00% 100,00% 0,00% Banif - Banco Internacional do Funchal (Cayman) Ltd Cayman Isl. Banif - Investimentos - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Internacional Holdings, Ltd Cayman Isl. Banif - Investimentos - SGPS, S.A. 85,00% 15,00% 85,00% 15,00% Banif Financial Services, Inc U.S.A. Banif Internacional Holdings Ltd 85,00% 15,00% 85,00% 15,00% Banif Finance (USA) corp. U.S.A. Banif Internacional Holdings Ltd 85,00% 15,00% 85,00% 15,00% Banif Forfaiting Company, Ltd. Bahamas Banif Internacional Holdings Ltd 85,00% 15,00% 85,00% 15,00% Banif Trading, Inc U.S.A. Banif International Holding Ltd 85,00% 15,00% 85,00% 15,00% Banif Securities, Inc. U.S.A. Banif Securities Holding, Ltd 100,00% 0,00% 100,00% 0,00% Econofinance, S.A Brazil Banif Securities Holding, Ltd 100,00% 0,00% 100,00% 0,00% Banif Securities Holding, Ltd Cayman Isl. Banif - Investimentos - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif ( Brasil), Ltd. Brazil Banif - Investimentos - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif - Banco Internacional do Funchal, S.A. Banif International Bank, Ltd Bahamas Banif Comercial - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif - Investimentos - SGPS, S.A. Banif - Banco de Investimento (Brasil), SA Brazil Banif - Investimentos - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif Securities Holding, Ltd Banif Correctora de Valores e Câmbio, S.A. Brazil Banif - Banco de Investimento (Brasil), S.A. 100,00% 0,00% 100,00% 0,00% Banif Gestão de Activos (Brasil), S.A. Brazil Banif - Banco de Investimento (Brasil), S.A. 100,00% 0,00% 100,00% 0,00% Banif - Imobiliária, S.A. Portugal Banif - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Sociedade Imobiliária Piedade, S.A. Portugal Banif - Imobiliária, S.A. 100,00% 0,00% 100,00% 0,00% Banifserv-Empresa de Serviços, Sistemas e Tecnologias de Portugal ACE (*) 100,00% 0,00% 100,00% 0,00% Informação A.C.E. Banif Bank (Malta) PLC Malta Banif - SGPS, S.A. 72,00% 28,00% 72,00% 28,00% Banco Caboverdiano de Negócios S.A. Cape Verde Banif - SGPS, S.A. 51,69% 48,31% 51,69% 48,31% Banif Holding (Malta) PLC Malta Banif - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif - Banco Internacional do Funchal (Cayman), Ltd
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30-12-2010 31-12-2009 Registered % effective Minority % effective Minority Company name Holder Offices holding interests holding interests
Banif Mais, SGPS, SA Portugal Banif - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Tecnicrédito ALD Portugal Banif Mais, SGPS, SA 100,00% 0,00% 100,00% 0,00% Banco Mais, SA Portugal Banif Mais, SGPS, SA 100,00% 0,00% 100,00% 0,00% Bank Plus Bank ZRT Hungry Banco Mais, SA 100,00% 0,00% 100,00% 0,00% Margem Mediação de Seguros, Lda Portugal Banif Mais, SGPS, SA 100,00% 0,00% 100,00% 0,00% Banco Mais SGPS, SA TCC Investments Luxembourg Luxembourg Banco Mais, SA 100,00% 0,00% 100,00% 0,00% Ecoprogresso Trading, SA Portugal Banif - Banco de Investimento, SA 50,00% 0,00% 50,00% 0,00% Banif Europa Holding, SL Spain Banif - SGPS, S.A. 100,00% 0,00% 100,00% 0,00% Banif US Real Estate Brazil Banif - Banco de Investimento, S.A. 100,00% 0,00% 100,00% 0,00% Beta Securitizadora Brazil FIP Banif Real Estate 99,25% 0,75% 99,25% 0,75% FIP Banif Real Estate Brazil Banif - Banco Internacional do Funchal (Brasil ) S.A. Banif - Banco de Investimento (Brasil) S.A. 99,25% 0,75% 99,25% 0,75% SPE Panorama Brazil FIP Banif Real Estate 94,29% 5,71% 94,29% 5,71% Art Invest Portugal Banif - Banco de Investimento S.A. 62,58% 37,42% 62,58% 37,42% Portugal Banif - Banco de Investimento S.A. Banif Fortuny Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Portugal Banif - Banco de Investimento S.A. Ifra Invest FEIA Banif - Banco Internacional do Funchal, S.A. 100,00% 0,00% 100,00% 0,00% Banif Nitor FI Ações Brazil Banif - Banco de Investimento (Brasil), S.A. 82,10% 17,90% 70,03% 29,97% Banif Nitor Maestro FIM Brazil Banif - Banco de Investimento (Brasil), S.A. 94,06% 5,94% 91,83% 8,17% Banif Nitor FIM Brazil Banif - Banco de Investimento (Brasil), S.A. - - 75,00% 25,00% Banif Nitor Institucional FIM Brazil Banif - Banco de Investimento (Brasil), S.A. 66,15% 33,85% 97,35% 2,65% Imogest Portugal Banif - Banco de Investimento, SA Banif - Banco Internacional do Funchal, S.A. 62,59% 37,41% 60,61% 39,39% Capven Portugal Banif Capital - Soc. de Capital. de Risco S.A Banif - Banco de Investimento, S.A. 66,66% 33,34% 60,07% 39,93% Banif. Inv. Conservador Portugal Banif - Banco de Investimento, S.A. 62,29% 37,71% 89,51% 10,49% Banif Inv. Moderado Portugal Banif - Banco de Investimento, S.A. 59,10% 40,90% 77,26% 22,74% Banif Renda Habitação Portugal Banif - Banco Internacional do Funchal (Brasil), S.A. 100,00% 0,00% 100,00% 0,00% Banif Gestão Imobiliária Portugal Banif - Banco Internacional do Funchal (Brasil), S.A. 100,00% 0,00% 100,00% 0,00% Banif Gestão Patrimonial Portugal Banif - Banco de Investimento, S.A. 69,13% 30,87% - - Banif Equity Hedge FIM Brazil Banif - Banco de Investimento (Brasil), S.A. 87,84% 12,16% - - Gestarquipark Portugal Imogest 62,59% 37,41% - - ZACF - Participações Ltda Brazil Banif - Banco Internacional do Funchal (Brasil), S.A. 98,50% 1,50% - - Banif Gestão Activa Portugal Banif - Banco de Investimento, S.A. 53,69% 46,31% - - Gavea Empreend. E Participações Brazil Banif - Banco Internacional do Funchal (Brasil), S.A. 95,50% 1,50% - -
(*) BanifServ - ACE is a joint venture betw een the follow ing Banif Group entities: Banif – Banco Internacional do Funchal, S.A. 85.0% Companhia de Seguros Açoreana, S.A. 1.5% Banif GO 8.0% Banif Banco de Investimento, S.A. 1.5% Banif Rent - Aluguer, gestão e Comércio de Veiculos Automóveis 4.0%
As at December 31, 2010 and 2009, the special purpose vehicles included in the consolidated accounts were the following:
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30-12-2010 31-12-2009 Company name Nature % participation % participation
Atlantes Mortgage No1 plc Special Purpose Vehicle 100,00% 100,00% Atlantes Mortgage No2 plc Special Purpose Vehicle 100,00% 100,00% Atlantes Mortgage No3 plc Special Purpose Vehicle 100,00% 100,00% Atlantes Mortgage No4 plc Special Purpose Vehicle 100,00% 100,00% Atlantes Mortgage No5 plc Special Purpose Vehicle 100,00% 100,00% Atlantes Mortgage No6 plc Special Purpose Vehicle 100,00% - Atlantes Mortgage No7 plc Special Purpose Vehicle 100,00% - Azor Mortgage No 1 Special Purpose Vehicle 100,00% 100,00% Azor Mortgage No 2 Special Purpose Vehicle 100,00% 100,00% Atlantes Finance No3 Special Purpose Vehicle 100,00% - Euro Invest Series 3A, 3B, 8 e 9 Asset Backed Securities 100,00% 100,00% Trade Invest Series 14 Special Purpose Vehicle 100,00% 100,00%
In the course of the period ended at December 31, 2010, the following changes took place within the Group:
- Share issue by Banif Bank (Malta) with a value of 10 million euros;
- Share issue by Banif - Banco Internacional do Funchal with a value of 214 million euros, wholly subscribed by Banif Comercial SGPS, SA;
- Share issue by Banif - Banco Internacional do Funchal (Brasil) with a value of 15 million BRL, subscribed by Banif Comercial, SGPS (90%) and Banif International Holdings, Ltd (10%);
- Share issue by Banif - Banco de Investimento (Brasil) with a value of 15 million BRL, subscribedby Banif Investimentos, SGPS (75%) and Banif Securities Holdings (25%);
- Share issue by Banif Gestão de Activos (Brasil) with a value of 3.9 million euros, subscribed by Banif - Banco de Investimento (Brasil);
- Share reduction in Bankpime, by incorporation of reserves, with a value of 66.7 million euros;
- Sale by Banif - Banco Internacional do Funchal of 31,814,651 shares (14.7%) of Rentipar Seguros, SGPS, for a sum of 26,664 thousand euros, to Banif SGPS, SA;
- Acquisition of 100% of ZACF, for a sum of 293 thousand euros, through Banif – Banco Internacional do Funchal (Brasil);
- Acquisition of 100% of Gavea Empreend. e Participações through Banif - Banco Internacional do Funchal (Brasil);
- Disposal of the shareholding in FINAB (60%), for a sum of 125 thousand USD;
- Consolidation, by the Group, of Atlantes Mortgage No. 6, Atlantes Mortgage No. 7 and Atlantes Finance No. 3, relating to securitization of consumer credits and mortgages; - Consolidation, by the Group, due to the acquisition of shareholding units, of the following investment funds: Banif Gestão Patrimonial, Banif Equity Hedge FIM, Gestarquipark and Banif Gestão Activa.
5. SEGMENT REPORTING
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The Banif Financial Group is organised in separate business areas, through two sub-holdings: Banif Comercial SGPS, SA, which brings together banking and specialised lending businesses, and Banif Investimentos SGPS, SA, which manages interests in investment banking and other financial activities. The Group has also an independent unit engaged exclusively to the management of the Group's property interests, which is of no material relevance.
In this context and as required by IFRS 8, disclosures by the Group's operating segments correspond to the form in which information is analysed by the Group's Management:
Commercial Banking - It comprises deposits business and specific credit products for individual, corporate and institutional clients, such as Housing Loans, Consumer Credit, products for sole traders (ST) and small businesses, Factoring, Short Term Credit Facilities and Import and Export Credits.
Investment Banking - It comprises business on the primary and secondary capital markets, in the Bank's own name or on behalf of third parties, such as transactions, corporate finance, and mergers and acquisitions.
Asset Management - It comprises the offering of investment products and respective management services for individual and corporate customers, as well as other financial services. This segment includes investment funds managed by entities of the Group, in which the Group helds the majority of their investment units.
Holdings and Others - It comprises all the operations carried out by the Group's holding companies and segments not covered by any of the operating segments defined above.
Reporting by geographical areas in which the Group carries on its business: Portugal, Rest of the European Union, North America (USA), Latin America (Brazil) and rest of the world.
The reports used by the Management are based on accounting information drawn up under the IAS/IFRS, excluding non-recurring operations.
5.1. Business segments
Commercial Investment Asset Holdings and 31-12-2010 Total Banking Banking Management Others
Cash and balances with central banks 116.509 2.218 - 7 118.734 Due from other banks 133.981 82.541 1.154 138 217.814 Financial assets held for trading 85.704 346.271 29.336 0 461.311 Other financial assets at fair value through profit or loss 167.878 133.752 86.898 4.980 393.508 Available-for-sale financial assets 100.609 192.551 0 1.250 294.410 Loans and advances to banks 472.363 6.042 12.617 0 491.022 Loans and advances to customers 11.662.024 522.312 0 21.918 12.206.254 Held-to-maturity investment securities 3.548 60.391 0 0 63.939 Securities subject to repurchase agreements 22.615 28.389 0 0 51.004 Derivatives held for hedging 0 0 0 0 0 Available-for-sale non-current assets 153.445 2.657 0 11.354 167.456 Investment Property 37.671 0 177.331 57.589 272.591 Other tangible assets 177.156 17.922 6.898 67.981 269.957 Intangible assets 15.809 4.297 24 2.933 23.063 Investments in associates and affiliates excluded from Cons. Accounts 55.411 15.308 1.084 79.477 151.280 Current tax assets 17.645 4.467 724 4.268 27.104 Deferred tax assets 47.355 19.807 1 5.534 72.697 Other assets 253.462 60.390 26.426 88.270 428.548 Total Assets 13.523.185 1.499.315 342.493 345.699 15.710.692
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Commercial Investment Asset 31-12-2010 Others Total Banking Banking Management
Deposits from Central Banks 1.650.966 287.181 0 0 1.938.147 Financial liabilities held for trading 28.349 116.773 137 0 145.259 Financial liabilities at fair value through profit or loss 104.501 14.385 0 0 118.886 Deposits from other banks 1.042.591 180.768 11.500 52.020 1.286.879 Customer accounts and other loans 7.455.978 282.207 0 101.865 7.840.050 Debt securities in issue 2.155.350 126.657 0 98.014 2.380.021 Financial liabilities linked to transferred assets 0 0 0 0 0 Derivatives held for hedging 1.303 0 0 0 1.303 Available-for-sale non-current liabilities 0 0 0 0 0 Provisions 9.016 4.702 533 979 15.230 Underwriting provisions 0 0 0 0 0 Current tax liabilities 8.000 2.769 0 81 10.850 Deferred tax liabilities 20.103 1.721 0 10.387 32.211 Instruments representing capital 40.000 0 0 5.651 45.651 Other subordinated Liabilities 253.465 14.713 0 0 268.178 Other liabilities 201.582 140.396 6.060 1.112 349.150 Total Liabilities 12.971.204 1.172.272 18.230 270.109 14.431.815
Commercial Investment Asset Holdings and 31-12-2009 Total Banking Banking Management Others
Cash and balances with central banks 300.164 6.347 1 7 306.519 Due from other banks 172.453 27.689 8 507 200.657 Financial assets held for trading 89.728 228.859 28.514 5.386 352.487 Other financial assets at fair value through profit or loss 167.477 169.467 63.463 69.907 470.314 Available-for-sale financial assets 12.600 65.161 0 27.610 105.371 Loans and advances to banks 301.903 2.059 18.152 0 322.114 Loans and advances to customers 10.951.454 474.042 0 62.368 11.487.864 Held-to-maturity investment securities 0 80.399 0 0 80.399 Securities subject to repurchase agreements 12.960 23.540 0 0 36.500 Derivatives held for hedging 884 0 0 0 884 Available-for-sale non-current assets 82.197 0 0 3.355 85.552 Investment Property 42.344 0 155.206 2.258 199.808 Other tangible assets 95.478 23.215 6.939 161.050 286.682 Intangible assets 7.566 4.142 49 16.765 28.522 Investments in associates and affiliates excluded from Cons. Accounts 57.188 29.920 0 28.149 115.257 Current tax assets 15.341 3.913 1.133 4.442 24.829 Deferred tax assets 38.440 12.291 1 8.803 59.535 Other assets 176.129 39.015 23.369 40.398 278.911 Total Assets 12.524.306 1.190.059 296.835 431.005 14.442.205
Commercial Investment Asset 31-12-2009 Others Total Banking Banking Management
Deposits from Central Banks 1.103.424 93.135 0 0 1.196.559 Financial liabilities held for trading 26.360 57.738 232 0 84.330 Financial liabilities at fair value through profit or loss 182.919 37.330 0 0 220.249 Deposits from other banks 1.532.630 270.178 8.306 2.382 1.813.496 Customer accounts and other loans 6.526.369 257.856 0 17.249 6.801.474 Debt securities in issue 2.155.510 52.189 0 49.236 2.256.935 Financial liabilities linked to transferred assets 0 0 0 0 0 Derivatives held for hedging 2.606 0 0 0 2.606 Available-for-sale non-current liabilities 0 0 0 0 0 Provisions 9.822 4.080 0 979 14.881 Underwriting provisions 0 0 0 0 0 Current tax liabilities 8.131 216 0 101 8.448 Deferred tax liabilities 20.405 26 464 3.792 24.687 Instruments representing capital 40.000 0 0 7.975 47.975 Other subordinated Liabilities 307.456 15.027 0 0 322.483 Other liabilities 269.447 149.734 6.632 42.343 468.156 Total Liabilities 12.185.079 937.509 15.634 124.057 13.262.279
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Commercial Investment Asset Holdings and 31-12-2010 Total Banking Banking Management Others Net Interest Income - External Customers 322.019 24.414 1.844 -145 348.132 Net Interest Income - Inter Segments 18.464 3.272 184 -21.920 0 Net interest income 340.483 27.686 2.028 -22.065 348.132 Dividend income 385 176 0 344 905 Fee and Commission Income - External Customers 99.123 34.144 10.017 1.934 145.218 Fee and Commission Income - Inter-Segments 9.399 1.174 3.562 596 14.731 Fee and Commission Income 108.522 35.318 13.579 2.530 159.949 Fee and Commission Expense - External Customers -18.763 -3.489 -728 -163 -23.143 Fee and Commission Expense - Inter-Segments -3.950 -377 -6.606 -1.526 -12.459 Fee and Commission Expense -22.713 -3.866 -7.334 -1.689 -35.602 Income from assets and liabilities valued at fair value through profit or loss -3.163 -2.620 3.257 2.978 452 Income from available-for-sale financial assets -71 1.149 0 0 1.078 Foreign exchange income 8.675 2.253 -30 -120 10.778 Income from disposal of other assets 1.435 0 0 1.460 2.895 Other operating assets 41.758 1.958 1.976 8.355 54.047 Operating revenue 475.311 62.054 13.476 -8.207 542.634 Personnel costs -154.192 -24.231 -3.406 -3.077 -184.906 Overheads -111.590 -24.043 -6.988 -3.828 -146.449 Depreciation in the period -32.458 -2.443 -90 -2.336 -37.327 Provisions net of write-offs 1.121 0 0 0 1.121 Impairment of loans and advances net of reversals and recovery -106.472 -1.472 0 0 -107.944 Impairment of other financial assets net of reversals and recovery -233 -53 0 0 -286 Impairment of other assets net of reversals and recovery -2.065 0 -834 0 -2.899 Negative goodwill 0 0 0 0 0 Results from associates and joint ventures (equity method) 1.920 -8.169 62 2.148 -4.039 Profit before tax and non-controlling interests 71.342 1.643 2.220 -15.300 59.905 Taxes -8.126 -3.960 -2.313 495 -13.904 Current -5.338 -5.306 -2.313 -65 -13.022 Deferred -2.788 1.346 0 560 -882 Profit after tax and before non-controlling interests 63.216 -2.317 -93 -14.805 46.001 Non-controlling Interests -9.681 -62 -1.157 155 -10.745 Profit for the period 53.535 -2.379 -1.250 -14.650 35.256
Recurring income from 2010 does not comprise the impairment of goodwill (9.1 million euros) and the net capital gain on the sale of the shareholding of Finibanco Holdings, SGPS (7.2 million euros).
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Commercial Investment Asset Holdings and 31-12-2009 Total Banking Banking Management Others Net Interest Income - External Customers 267.533 24.639 2.363 -6.041 288.494 Net Interest Income - Inter Segments 14.326 -612 255 -13.969 0 Net interest income 281.859 24.027 2.618 -20.010 288.494 Dividend income 326 278 0 920 1.524 Fee and Commission Income - External Customers 80.445 33.983 11.266 281 125.975 Fee and Commission Income - Inter-Segments 2.219 2.250 2.238 524 7.229 Fee and Commission Income 82.664 36.233 13.502 805 133.204 Fee and Commission Expense - External Customers -12.307 -1.932 -451 -168 -14.858 Fee and Commission Expense - Inter-Segments -2.662 -730 -4.793 -307 -8.492 Fee and Commission Expense -14.969 -2.662 -5.244 -475 -23.350 Income from assets and liabilities valued at fair value through profit or loss -8.765 -24.268 1.584 863 -30.586 Income from available-for-sale financial assets 985 1.150 0 2.828 4.963 Foreign exchange income 16.024 23.474 6 2.073 41.577 Income from disposal of other assets 2.901 53 0 2.590 5.544 Other operating assets 48.601 -7.858 5.541 16.773 63.057 Operating revenue 409.626 50.427 18.007 6.367 484.427 Personnel costs -137.492 -21.122 -2.411 -9.382 -170.407 Overheads -83.779 -21.536 -7.998 -12.554 -125.867 Depreciation in the period -17.845 -1.854 -145 -14.824 37.668 Provisions net of write-offs -24.354 -2.927 0 24.288 -2.993 Impairment of loans and advances net of reversals and recovery -115.442 3.264 0 0 -112.178 Impairment of other financial assets net of reversals and recovery -1.788 -198 0 0 -1.986 Impairment of other assets net of reversals and recovery 203 5 -772 -693 -1.257 Negative goodwill 19.497 0 0 0 19.497 Results from associates and joint ventures (equity method) -609 -3.540 0 -2.649 -6.798 Profit before tax and non-controlling interests 48.017 2.519 6.681 -9.447 47.770 Taxes 4.511 -4.039 -854 4.225 3.843 Current -6.582 -3.882 -2.024 -67 -12.555 Deferred 11.093 157 1.170 4.292 16.398 Profit after tax and before non-controlling interests 52.528 -1.519 5.827 -5.222 51.613 Non-controlling Interests -10.928 3 -720 -476 -12.121 Profit for the period 41.600 -1.516 5.107 -5.698 39.492
Recurring income from 2010 does not comprise the capital gains on the disposal of Zon Açores, Zon Madeira and Via Litoral (15 million euros), negative consolidation difference (22.1 million euros), Impairment of the shareholding of Finibanco Holdings, SGPS (13 million euros), Impairment of financial assets (6.5 million euros) and other (-3 million euros):
Recurring income from 2010 does not comprise the capital gains on the disposal of Zon Açores, Zon Madeira and Via Litoral (15 million euros), negative consolidation difference (22.1 million euros), Impairment of the shareholding of Finibanco Holdings, SGPS (13 million euros), Impairment of financial assets (6.5 million euros) and other (-3 million euros):
5.2. Geographical Segments
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Rest of Latin North Rest of the 31-12-2010 Portugal European Total America America World Union
Cash and balances with central banks 95.173 6.607 6.228 0 10.726 118.734 Due from other banks 204.629 1.911 4.017 4.388 2.869 217.814 Financial assets held for trading 96.153 3.594 361.164 0 400 461.311 Other financial assets at fair value through profit or loss 357.259 0 31.739 0 4.510 393.508 Available-for-sale financial assets 276.176 0 1.498 0 16.736 294.410 Loans and advances to banks 459.965 356 29.711 956 34 491.022 Loans and advances to customers 10.955.140 157.292 619.913 203.419 270.490 12.206.254 Held-to-maturity investment securities 60.391 0 3.409 0 139 63.939 Securities subject to repurchase agreements 28.389 0 22.615 0 0 51.004 Derivatives held for hedging 0 0 0 0 0 Available-for-sale non-current assets 146.112 0 21.344 0 0 167.456 Investment Property 241.690 0 9.834 21.067 0 272.591 Other tangible assets 242.867 5.470 17.039 293 4.288 269.957 Intangible assets 21.606 620 613 0 224 23.063 Investments in associates and affiliates excluded from Cons. Accounts 70.974 80.306 0 0 0 151.280 Current tax assets 10.187 0 16.917 0 0 27.104 Deferred tax assets 36.358 5.351 30.619 139 230 72.697 Other assets 302.421 1.753 103.119 10.467 10.788 428.548 Total Assets 13.605.490 263.260 1.279.779 240.729 321.434 15.710.692
Rest of Latin North Rest of the 31-12-2010 Portugal European Total America America World Union
Deposits from Central Banks 1.938.147 0 0 0 0 1.938.147 Financial liabilities held for trading 144.425 78 360 0 396 145.259 Financial liabilities at fair value through profit or loss 4.343 0 20.313 0 94.230 118.886 Deposits from other banks 1.136.169 0 140.521 120 10.069 1.286.879 Customer accounts and other loans 7.032.755 437.256 35.919 0 334.120 7.840.050 Debt securities in issue 1.754.926 0 580.759 0 44.336 2.380.021 Financial liabilities linked to transferred assets 0 0 0 0 0 0 Derivatives held for hedging 1.303 0 0 0 0 1.303 Available-for-sale non-current liabilities 0 0 0 0 0 0 Provisions 9.607 0 5.158 0 465 15.230 Underwriting provisions 0 0 0 0 0 0 Current tax liabilities 4.804 58 3.058 2.738 192 10.850 Deferred tax liabilities 28.518 0 1.696 0 1.997 32.211 Instruments representing capital 45.651 0 0 0 0 45.651 Other subordinated Liabilities 268.178 0 0 0 0 268.178 Other liabilities 182.300 1.264 148.476 3.604 13.506 349.150 Total Liabilities 12.551.126 438.656 936.260 6.462 499.311 14.431.815
Rest of Latin North Rest of the 31-12-2009 Portugal European Total America America World Union
Cash and balances with central banks 283.889 5.051 2.655 0 14.924 306.519 Due from other banks 167.468 2.458 6.218 1.663 22.850 200.657 Financial assets held for trading 64.302 3.267 284.665 0 253 352.487 Other financial assets at fair value through profit or loss 428.215 0 34.343 0 7.756 470.314 Available-for-sale financial assets 86.803 0 9.587 0 8.981 105.371 Loans and advances to banks 278.585 0 28.333 1.271 13.925 322.114 Loans and advances to customers 10.497.781 60.166 436.199 225.369 268.349 11.487.864 Held-to-maturity investment securities 80.399 0 0 0 0 80.399 Securities subject to repurchase agreements 0 0 36.500 0 0 36.500 Derivatives held for hedging 884 0 0 0 0 884 Available-for-sale non-current assets 74.442 0 11.110 0 0 85.552 Investment Property 187.661 0 0 12.147 0 199.808 Other tangible assets 252.433 5.781 23.646 484 4.338 286.682 Intangible assets 26.861 442 907 0 312 28.522 Investments in associates and affiliates excluded from Cons. Accounts 25.591 89.666 0 0 0 115.257 Current tax assets 9.959 0 14.870 0 0 24.829 Deferred tax assets 32.343 3.905 21.240 831 1.216 59.535 Other assets 203.627 564 53.883 3.828 17.009 278.911 Total Assets 12.701.243 171.300 964.156 245.593 359.913 14.442.205
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Rest of Latin North Rest of the 31-12-2009 Portugal European Total America America World Union
Deposits from Central Banks 1.196.559 0 0 0 0 1.196.559 Financial liabilities held for trading 84.330 0 0 0 0 84.330 Financial liabilities at fair value through profit or loss 15.930 0 42.356 0 161.963 220.249 Deposits from other banks 1.715.341 0 82.383 8.012 7.760 1.813.496 Customer accounts and other loans 6.257.508 147.473 11.086 0 385.407 6.801.474 Debt securities in issue 1.885.513 0 338.946 0 32.476 2.256.935 Financial liabilities linked to transferred assets 0 0 0 0 0 0 Derivatives held for hedging 2.606 0 0 0 0 2.606 Available-for-sale non-current liabilities 0 0 0 0 0 0 Provisions 14.117 516 0 0 248 14.881 Underwriting provisions 0 0 0 0 0 0 Current tax liabilities 1.589 26 5.372 1.456 5 8.448 Deferred tax liabilities 21.947 0 891 29 1.820 24.687 Instruments representing capital 47.975 0 0 0 0 47.975 Other subordinated Liabilities 322.483 0 0 0 0 322.483 Other liabilities 291.719 1.087 147.174 8.930 19.246 468.156 Total Liabilities 11.857.617 149.102 628.208 18.427 608.925 13.262.279
Rest of Latin North Rest of the 31-12-2010 Portugal European Total America America World Union Net Interest Income - External Customers 265.236 2.287 67.928 9.430 3.252 348.132 Net Interest Income - Inter Segments 1.212 2.035 -5.022 -6.854 8.629 0 Net interest income 266.447 4.321 62.906 2.576 11.881 348.132 Dividend income 813 0 0 0 92 905 Fee and Commission Income - External Customers 111.804 446 25.243 4.093 3.632 145.218 Fee and Commission Income - Inter-Segments 10.529 0 0 1.144 3.058 14.731 Fee and Commission Income 122.333 446 25.243 5.237 6.690 159.949 Fee and Commission Expense - External Customers -17.865 -245 -3.496 -220 -1.317 -23.143 Fee and Commission Expense - Inter-Segments -8.579 -34 0 -3.844 -1 12.459 Fee and Commission Expense -26.445 -279 -3.496 -4.064 -1.318 -35.602 Income from assets and liabilities valued at fair value through profit or loss -1.339 68 -493 1 2.214 452 Income from available-for-sale financial assets 1.078 0 0 0 0 1.078 Foreign exchange income 6.581 530 3.304 -152 515 10.778 Income from disposal of other assets -2.348 0 2.362 2.915 -33 2.895 Other operating assets 70.512 -377 -11.791 451 -4.687 54.108 Operating revenue 437.632 4.709 78.035 6.964 15.354 542.695 Personnel costs -139.849 -3.758 -34.283 -3.305 -3.711 -184.906 Overheads -105.656 -3.830 -32.709 -2.232 -2.022 -146.448 Depreciation in the period -33.014 -613 -2.924 -56 -720 -37.327 Provisions net of write-offs 1.121 0 0 0 0 1.121 Impairment of loans and advances net of reversals and recovery -98.819 -670 461 -2.635 -6.282 -107.944 Impairment of other financial assets net of reversals and recovery -286 0 0 0 0 -286 Impairment of other assets net of reversals and recovery -2.961 0 0 0 0 -2.961 Negative goodwill 0 0 0 0 0 Results from associates and joint ventures (equity method) 2.110 -6.148 0 0 0 -4.039 Profit before tax and non-controlling interests 60.278 -10.310 8.580 -1.264 2.620 59.905 Taxes -13.675 1.446 -173 -1 -1.501 -13.904 Current -7.715 0 -5.115 0 -192 -13.022 Deferred -5.960 1.446 4.942 -1 -1.309 -882 Profit after tax and before non-controlling interests 46.604 -8.864 8.407 -1.265 1.120 46.001 Non-controlling Interests -10.148 784 -334 -121 -925 -10.745 Profit for the period 36.455 -8.080 8.073 -1.386 194 35.256
Recurring income from 2010 does not comprise the impairment of goodwill (9.1 million euros) and the net capital gain on the sale of the shareholding of Finibanco Holdings, SGPS (7.2 million euros).
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Rest of Latin North Rest of the 31-12-2009 Portugal European Total America America World Union Net Interest Income - External Customers 214.721 925 62.599 9.747 502 288.494 Net Interest Income - Inter Segments -633 933 -5.520 -5.571 10.790 0 Net interest income 214.088 1.858 57.079 4.176 11.292 288.494 Dividend income 1.524 0 0 0 0 1.524 Fee and Commission Income - External Customers 96.497 126 25.879 1.639 1.835 125.975 Fee and Commission Income - Inter-Segments 5.038 0 5 2.183 3 7.229 Fee and Commission Income 101.536 126 25.883 3.822 1.838 133.204 Fee and Commission Expense - External Customers -12.550 -48 -1.517 -39 -704 -14.858 Fee and Commission Expense - Inter-Segments -7.052 -5 -933 -444 -58 -8.492 Fee and Commission Expense -19.602 -52 -2.450 -483 -762 -23.350 Income from assets and liabilities valued at fair value through profit or loss -11.222 146 -30.123 0 15.501 -25.698 Income from available-for-sale financial assets 6.607 0 887 0 0 7.493 Foreign exchange income 13.769 108 25.525 2.066 109 41.577 Income from disposal of other assets 1.328 0 408 3.808 0 5.544 Other operating assets 78.499 -182 -6.868 1.462 -8.628 64.284 Operating revenue 386.526 2.004 70.341 14.851 19.350 493.073 Personnel costs -135.509 -2.892 -26.893 -2.350 -2.763 -170.407 Overheads -92.023 -3.117 -24.742 -3.300 -2.686 -125.868 Depreciation in the period -31.121 -557 -2.175 -72 -744 -34.668 Provisions net of write-offs -1.911 0 0 0 -1.082 -2.993 Impairment of loans and advances net of reversals and recovery -80.115 -367 -6.584 -15.864 -9.248 -112.178 Impairment of other financial assets net of reversals and recovery -1.984 0 0 0 0 -1.984 Impairment of other assets net of reversals and recovery -1.258 0 0 0 0 -1.258 Negative goodwill 19.481 0 0 0 0 19.481 Results from associates and joint ventures (equity method) -5.808 -991 0 0 0 -6.798 Profit before tax and non-controlling interests 56.278 -5.919 9.947 -6.735 2.827 56.399 Taxes -4.730 1.700 -3.048 -4 1.296 -4.786 Current -4.052 0 -8.503 0 0 -12.555 Deferred -678 1.700 5.455 -4 1.296 7.769 Profit after tax and before non-controlling interests 51.548 -4.219 6.899 -6.738 4.124 51.614 Non-controlling Interests -11.148 988 -355 -474 -1.133 -12.121 Profit for the period 40.400 -3.231 6.544 -7.212 2.990 39.492
6. CASH AND BALANCES WITH CENTRAL BANKS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Cash 57.923 65.821 Sight deposits with central banks 60.490 240.698 Interests on liquid funds 321 - Total 118.734 306.519
Sight deposits in Central Banks comprise the amount of 42,253 thousand euros, to comply with the legal requirements on minimum cash resources in Bank of Portugal. In accordance with Bank of Portugal Notice No. 7/94, of 19 October, the coefficient to be applied is 2% of the eligible liabilities. These deposits have been interest bearing since January 1, 1999.
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7. DUE FROM OTHER BANKS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Cheques awaiting collection 26.865 28.750 In Portugal 26.759 28.401 Abroad 106 349
Sight deposits 137.031 117.227 In Portugal 13.125 8.534 Abroad 123.906 108.693
Others 53.918 54.680 Total 217.814 200.657
Cheques in course of collection from banks in Portugal, as at December 31, 2010, were cleared through the Clearing Chamber during the first few business days of January 2011.
8. TRADING SECURITIES
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Financial derivative instruments with positive fair value 115.023 84.433 Debt Instruments 280.930 223.121 Equity Instruments 65.358 44.933 Total 461.311 352.487
Note 15 details derivatives by type of instrument.
The portfolio of trading securities had the following composition as at December 31, 2010 (balance sheet value of debt instruments comprises accrued interest; the listed price of equity instruments is stated in euros):
- 38 -
Nature and Type Quantity Listed Price Balance Sheet Value Debt Instruments Letras do Tesouro Nacional Brasil 50.000 450,74 22,537 NTN-F 46.971 444 20,844 NTN-F 40.869 456 18,623 NTN-B 18.350 904 16,596 Letras do Tesouro Nacional Brasil 33.300 426,98 14,219 NTN-F 32.117 436 13,997 CCI-Ambev 13.717.943 1 13,718 Notes Promissórias Unidas 15 0,45 13,545 NTN-B 13.813 894 12,342 Debentures Trisul 20.000 0,45 9,560 NTN-B 10.637 894 9,504 NTN-B 8.970 904 8,113 Certificado de Crédito Imobiliário 2 3.411 6,822 NTN-F 14.131 456 6,439 Debentures Trisul 10 0,45 4,570 NTN-B 5.000 894 4,468 Tesouro Brasil 9.840 444 4,371 LFT 2.000 0,45 4,056 NTN-B 4.250 904 3,844 LFT 1.882 0,45 3,817 NTN-B 4.000 903 3,612 NTN-B 3.513 0,45 3,143 CDB Pos-Tbanco Fator 5.000 0,45 2,278 Rentipar Financeira SGPS SA 2.419.000 94,00% 2.274 NTN-B 2.500 894 2.274 NTN-F 5.000 436 2.179 Banco Bradesco SA 04/15/14 1.730.000 109,50% 1.923 NTN-B 2.078 894 1.857 CCI-OR 1.811.046 1 1.811 CCB SMI 3.748.410 0,45 1.691 CCB SMI 3.594.826 0,45 1.622 CCB SMI 3.438.443 0,45 1.551 CCB SMI 3.294.317 0,45 1.486 NTN-B 1.620 894 1.447 CCB SMI 3.150.272 0,45 1.421 LFT 700 0,45 1.420 CCB SMI 3.016.545 0,45 1.361 NTN-F 3.029 444 1.344 LFT 623 0,45 1.264 NTN-F 2.883 436 1.256 Telemar N Leste SA 1.390.000 86,81% 1.225 FED Republic of Brazil 09/12 46.971 110,16% 1.119 Petrobras Int Finance 07/02/13 40.869 86,81% 1.110 Petrobras Intl Finance 18.350 88,50% 971 Fimbank 4,25% 33.300 100,00% 958 LFT 32.117 0,45 908 Petrobras Intl Finance CO 13.717.943 77,46% 802 CIA Saneamento Básico 11/16 15 82,51% 792 Midi PLC Bond 7% 2016-2018 13.813 101,85% 780 Debentures Unidas 20.000 0,45 767 Votoratim Overseas 06/20 10.637 82,32% 758 Melita Capital PLC 2014/2016 8.970 100,00% 754 Banco do Brasil (Cayman) 10/49 2 86,25% 731 Trade Invest Limited 4,7 06/18/11 14.131 97,85% 727
- 39 -
Nature and Type Quantity Listed Price Balance Sheet Value Banco do Brasil (Cayman) 01/15 10 77,83% 634 Embraer Overseas LTD 01/17 5.000 77,65% 630 LFT 9.840 0,45 619 LFT 2.000 2.028,00 619 Notes do Tesouro Nacional Brasil 4.250 465 618 Cesp-Comp Ener São Paulo 03/11 Regs 1.882 75,42% 615 Letras do Tesouro Nacional Brasil 4.000 439 615 CIA SEG Açores SA 17/12/2017 3.513 80,00% 549 Central Elet Brasileiras SA 07/19 5.000 84,19% 525 LFT 2.419.000 45,00% 471 FED Republic of Brazil 03/30 2.500 135,46% 461 Banco Daycoval SA 5.000 75,03% 434 Banco Nac Desenv Econ 09/17 1.730.000 99,25% 425 Letras do Tesouro Nacional Brasil 2.078 439 422 Fed Republic of Brazil 01/22 1.811.046 53,10% 414 Tele N L Participacoes 3.748.410 76,15% 412 Telemar N L TLMP 5 1/8 12/17 3.594.826 96,75% 388 BR Properties Sa BRPRSA9 12/49-15 3.438.443 74,84% 382 Fed Republic of Brasil 3.294.317 89,62% 372 Petroleos Mexicanos 1.620 104,13% 356 Petroleos Mexica Pemex 4 7/8 03/15 3.150.272 79,14% 325 CIA Bras Bebidas 12/11 700 80,64% 322 National Steel SA 3.016.545 74,84% 303 Petroleos Mexica Pemex 8 08/03/19 3.029 90,37% 300 4,8% Bank of Valleta PLC Sub Bonds 2020 623 100,29% 295 Euro Invest Limited 6 29/12/2011 289.000 100,00% 289 Banco do Brasil (Cayman) 370.000 75,21% 282 Fed Republic of Brazil 11/01 250.000 100,55% 274 Cesp-Comp Ener São Paulo 08/11/13 295.000 84,57% 257 Petrobras Intl Finance 12/18 273.000 90,93% 249 LPG International INC 12/20/2015 281.000 82,70% 233 Fed Republic of Brazil 422.000 52,10% 231 Trade Invest Limited 0 06/18/11 5.750.000 99,00% 230 Vale Overseas Limited 11/21/36 254.000 81,44% 208 Central Elet Brasileiras SA 225.000 87,37% 198 5,35% Bank of Valletta PLC Sub Bonds 2019 185.900 103,29% 192 GP Investments LTD 12/23/2049 251.000 74,84% 191 Pemex Proj FDG Master TR 175.000 97,25% 178 Banco Bradesco 8 3/4 10/13 200.000 85,32% 173 Banco Nac Desenv BNDES 0 06/16/08 210.000 81,48% 171 Fimbank 4,25% 166.617 100,00% 167 Pemex Proj FDG Master TR 03/01/2018 202.000 79,70% 164 NTN-B 180 894 161 Votorantim Overseas 01/14 189.000 82,51% 161 Marfrig Overseas Ltd 11/16/2016 198.000 78,58% 157 Banco Nac Desenv Econ 07/20 200.000 76,52% 157 Gerdau Holding INC 180.000 81,76% 151 CSN Resources SA 6 1/2 07/20 170.000 78,58% 137 Intl Finance Corporation 9 1/4 265.000 46,30% 126 Bertin LTDA 10/05/16 150.000 80,83% 124 Banco Industr e Comrcl 153.000 75,59% 119 Euro Invest Limited 5 29/12/2011 157.000 74,28% 117 Vale Overseas Limited 01/23/2017 135.000 83,17% 115 Banco Cruzeiro do Sul SA 02/15 150.000 74,46% 114 Banco Bradesco (Cayman) 3 1/8 04/13 142.000 75,96% 108 Banco Fibra SA 140.000 74,65% 105 NTN-B 103 0,45 91 NTN-B 103 0,45 91 Fed Republic of Brasil 105.000 83,45% 90 Unibanco 8,7 07/29/49 118.000 74,93% 90 Braskem Intl LTD 97.000 88,12% 86 CSN Islands XI Corp 6 7/8 09/19 103.000 80,83% 85 Midi PLC Bond 7% 80.802 101,48% 82 - 40 -
Euro Invest Limited 6 29/12/2011 289.000 100,00% 289 Banco do Brasil (Cayman) 370.000 75,21% 282 Fed Republic of Brazil 11/01 250.000 100,55% 274 Cesp-Comp Ener São Paulo 08/11/13 295.000 84,57% 257 Petrobras Intl Finance 12/18 273.000 90,93% 249 LPG International INC 12/20/2015 281.000 82,70% 233 Fed Republic of Brazil 422.000 52,10% 231 Trade Invest Limited 0 06/18/11 5.750.000 99,00% 230 Vale Overseas Limited 11/21/36 254.000 81,44% 208 Central Elet Brasileiras SA 225.000 87,37% 198 5,35% Bank of Valletta PLC Sub Bonds 2019 185.900 103,29% 192 GP Investments LTD 12/23/2049 251.000 74,84% 191 Pemex Proj FDG Master TR 175.000 97,25% 178 Banco Bradesco 8 3/4 10/13 200.000 85,32% 173 Banco Nac Desenv BNDES 0 06/16/08 210.000 81,48% 171 Fimbank 4,25% 166.617 100,00% 167 Pemex Proj FDG Master TR 03/01/2018 202.000 79,70% 164 NTN-B 180 894 161 Votorantim Overseas 01/14 189.000 82,51% 161 Marfrig Overseas Ltd 11/16/2016 198.000 78,58% 157 Banco Nac Desenv Econ 07/20 200.000 76,52% 157 Gerdau Holding INC 180.000 81,76% 151 CSN Resources SA 6 1/2 07/20 170.000 78,58% 137 Intl Finance Corporation 9 1/4 265.000 46,30% 126 Bertin LTDA 10/05/16 150.000 80,83% 124 Banco Industr e Comrcl 153.000 75,59% 119 Euro Invest Limited 5 29/12/2011 157.000 74,28% 117 Vale Overseas Limited 01/23/2017 135.000 83,17% 115 Banco Cruzeiro do Sul SA 02/15 150.000 74,46% 114 Banco Bradesco (Cayman) 3 1/8 04/13 142.000 75,96% 108 Banco Fibra SA 140.000 74,65% 105 NTN-B 103 0,45 91 NTN-B 103 0,45 91 Fed Republic of Brasil 105.000 83,45% 90 Unibanco 8,7 07/29/49 118.000 74,93% 90 Braskem Intl LTD 97.000 88,12% 86 CSN Islands XI Corp 6 7/8 09/19 103.000 80,83% 85 Midi PLC Bond 7% 80.802 101,48% 82 Banco Nac Desenv 6 1/2 06/19 98.000 82,32% 81 Banco Votorantim SA 100.000 76,34% 78 Banco Bradesco (Cayman) 03/15 100.000 76,30% 77 Banco Itau Cayman, SA 08/11 85.000 78,58% 69 Sul America Participações 02/15/12 132.000 78,02% 69 BFF International LTD 7 1/4 01/20 85.000 77,83% 68 LTN 150 451 68 LFT 33 0,45 67 LFT 33 0,45 67 Pemex Proj FDG Master TR 60.000 107,48% 66 Banco do Brasil (Cayman) 136.000 45,09% 64 Odebrecht Finance LTD 7 04/21/20 78.000 80,83% 64 Petrobras INTL Finance 71.000 87,56% 63 Petroleos Mexica Pemex 6 5/8 49-15 83.000 75,03% 62 Vale SA 50.000 101,33% 52 CCL Finance LTD 9 1/2 08/14 56.000 86,06% 50 Mizzi Organisations Finance - 6,2% 49.300 100,65% 50 NTM-F 109 0,45 48 Fibria Overseas Finance 60.000 78,58% 48 NTM-B 53 0,45 46 Odebrecht Finance LTD 50.000 87,37% 44 Vale Overseas Limited 5 5/8 09/19 48.000 79,73% 39 Banco Santader SanBBz4 1/2 04/15 50.000 76,34% 39 Cosan Finance LTD 02/01/2017 45.000 79,98% 37 Fed Republic of Brasil 27 30.000 114,65% 35 - 41 -
Nature and Type Quantity Listed Price Balance Sheet Value Banco Mercant do Brasil 9 5/8 07/20 39.000 78,21% 32 Fed Republic of Brasil 02/25 30.000 103,09% 32 Banco do Brasil (CI) 09/14 33.000 88,31% 30 Telemar N Leste SA 5 1/2 10/20 35.000 72,33% 26 Fed Republic of Brazil 01/20 16.000 121,43% 20 Banco BMG SA 25.000 75,40% 19 Banco Mercant do Brasil 05/08/2012 35.000 75,87% 18 Brazil DEV Fund BNDES 9 5/8 12/11 21.000 80,08% 17 Banco Mercant do Brasil 20.000 77,08% 16 LFT 5 0,45 10 CIA BRAS Bebidas 09/13 10.000 86,25% 9 LFT 4 0,45 8 JBS Finance II Limited 10.000 75,59% 8 Gol Finance 04/03/2017 8.000 75,59% 6 HSBC Bank Malta PLC 4,6% - 01/02/2017 4.659 101,91% 5 Energipe Y Saelpa 07/19/13 5.000 85,32% 4 Vale Overseas Limited 01/34 1.000 92,52% 1 280.930
Nature and Type Quantity Listed Price Balance Sheet Value Equity Instruments Lindencorp Desenv. Imob. SA 10.599.669 1,36 21.891 Real Estate Brasil 3.226 0,45 18.372 Fidc Credipar 20.000 0,45 9.074 Cotas de Fdo. Em Direitos Créditórios 13.199.476 0,00 5.952 Mapfre Plus 2.807.760 0,45 2.061 Multi Fund Realty Co 1 1565,30 1.565 Cetip 109.753 10,53 1.155 Fidc Oderbrecht 2 0,45 900 Millennium TiBR6 21.600.000 0,45 877 Grau ORYX 193.548 0,45 825 CTIP3 ON 53.169 0,45 560 Mapfre Inversion FIM 454.322 0,45 548 OREN Dinamico 779.674 0,45 462 NP Tatico FIM 924.386 0,45 456 NP Hedge FIC de FIM 430.785 0,45 231 NP Institucional FIM 495.003 0,45 231 Cotas Amazonia FIP Cotas Amazonia FIP 190.000 0,45 107 BMF 10.000 ~5,93 59 BPI SGPS 18.629 1,38 26 Cipan 27.451 0,19 5 Impresa SGPS 100 1,40 0 Parmalat Finanziaria SPA 30.000 0,00 0 65.358
9. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Equity Instruments 233.306 213.656 Debt Instruments 160.202 256.658 Total 393.508 470.314
The portfolio of securities at fair value through profit or loss had the following composition as at December 31, 2010 (balance sheet value of debt instruments comprises accrued interest; the listed price of equity instruments is stated in euros):
- 42 -
Nature and Type Quantity Listed Price Balance Sheet Value Debt Instruments Obrigações Tes Medio Prazo 5% 38.000.000 100,75% 39.321 Rentipar Seguros 2015 28.500.000 100,00% 28.710 Rentipar 2008/20012 24.685.000 100,00% 24.685 Tesouro Brasil 10.828 2.028 21.960 Bayer 0% Mar 11 14.795.000 98,62% 14.591 HSN Nordbk 3,5%Out 15 10.000.000 95,10% 9.571 Hsn Nordbk 3,85% Out14 5.000.000 104,52% 5.260 O.T. PGB 3,2% 04//15/11 3.000.000 99,69% 3.059 Rep Angola FLT 15NOV2012 (USD) 3.500.000 74,84% 2.631 Açoreana Tx VR DEZ 17 2.452.000 100,00% 2.454 Claris LTD/Millesime CDO 2.000.000 68,61% 1.375 Deutsche Bank Ag London 2.000.000 63,22% 1.264 Bayer Hipo 05Mai2014 1.250.000 97,09% 1.247 BVMF 1.458.448 0,50 657 PETR 1.262.805 0,40 560 Milk 1.218.580 0,40 547 Euro Invest 1,5% 29Dez2049 371.000 99,82% 371 Mwet 515.052 0,40 227 Trade Invest Limited Serie 7 - Tranche A 220.000 98,10% 216 Milk 476.546 0,50 214 DB Glob Mast L 07/07 836 155,90 130 OT 5,45%Set 2013 126.000 101,32% 130 Irish Gov 4 01/15/14 90.000 90,88% 84 PGB 4 3/8 06/16/14 JUN 80.000 97,38% 80 Telebras 153.842 0,50 69 Portb 0 11/18/11 60.000 96,32% 58 Usiminas 114.086 0,40 51 Socgen Var 49-13 50.000 98,00% 51 DB Glob Mast Ser4-05 238 210 50 OGXP 100.846 0,40 45 CXGD 4,375% 13/05/13 40.000 92,49% 38 MTNA 9,375% 06/16 29.000 122,24% 37 Bespl Float 03/12 40.000 90,00% 36 BCP Finance 02/12 40.000 88,25% 36 ENIIM 4,75 11/17 28.000 106,13% 30 KPN 5,625% 09/30/24 27.000 106,11% 29 Vodafone 4,65% 01//22 27.000 101,67% 29 ALOFP 4,125% 02/17 28.000 101,06% 29 Cofp 5,5% 01/15 25.000 108,44% 28 BNP Var 06/49-18 26.000 103,50% 28 Gerdau 54.024 0,40 24 FIB 50.475 0,40 22 TITIM 5,25% 02/22 20.000 96,48% 20 BBVASM Var 10/49 20.000 98,00% 20 SGOFP 4 10/08/18 20.000 98,20% 20 ISPIM Var 10/49 20.000 96,05% 20 ENEL Fin 5% 09/14/22 18.000 101,67% 18 UCGIM Var 12/49 15.000 95,70% 15 CYRE 21.362 0,40 10 Unipar 19.245 0,40 9 BACR 4 7/8 12/29/49 10.000 78,00% 8 ROSSI 15.926 0,40 7 PMAM 14.918 0,40 7 NATURA 13.798 0,40 6 PDGR 12.125 0,40 5 MPXE 9.282 0,40 4 160.203
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Nature and Type Quantity Listed Price Balance Sheet Value Equity Instruments Banif Impredial 10.376.209 7,5 77.918 Fundo INV. Part Amazonia Energia 95.000.000 0,5 42.837 Banif Capital Infrastructure Fund 3.485 9.377,4 32.680 Aplicação Urbana XIV SA 450.000 36,4 16.375 New Energy Fund 200 48.848,6 9.770 Luso Carbon Fund ESP Fechado 82 56.498,9 4.633 Porto Novo 41.575 106,3 4.371 Aviva Cent Europ Fun 5.299.712 0,8 4.240 B. Euro Acções 2.220.851 1,9 4.125 Banif Multi-Fund Global Real Estate 31.690 113,6 3.599 Preff-Pan Euro R Est 29.750 80,7 2.400 Ged Sur FCR-CL B 49.900 44,6 2.223 Flroesta Atlantica-SGDII (CL B) 40.000 51,2 2.049 Hozar Portugal SA 502.391 2,5 1.239 Fine art Fund 18.170 66,8 1.198 Banif Nitor Ref Di 1.166 1,0 1.166 Banif Global Private Equity F. FCR 1.000.000 1,0 1.044 JPM Greater China 151.073.527 0,0 1.022 DWS Invest Conv. 6.960 131,8 917 Schroder Conv Bond 8.556 104,0 890 Belm Asset Based Len 39.401 21,4 843 Franklin Mutual Beac 33.662 18,1 611 Espirito Santo Finl 42.107 14,0 589 Galp energia SGPS Sa 40.000 14,3 574 Schroder Emerg Mkt 59.944 9,3 557 Companhias SGPS SA 360.000 1,5 536 F&C GL Convert Bond 34.120 14,9 508 Pictet us Equi Sel R 5.928 82,0 486 Pictet Japan Que Sel 7.112 67,8 482 BNY Mellon Arx Cash 332.743 1,4 469 Mellon Cash II FI CP 756.621 0,6 469 Mellon Cash III FI CP 756.655 0,6 469 Mellon Cash IV FI CP 756.655 0,6 469 Mellon Cash V FI CP 756.747 0,6 469 DB Glob Mast Ser4-05 2.170 209,6 455 Banif Property 432 1.000,0 432 Cimpor SGPS-NO 82.500 5,1 418 Petrobraspn 32.000 12,3 395 Repsol SA 17.000 20,9 354 DB Glob Mast L 07/07 1.988 155,9 310 BBVA SA 38.000 7,6 287 Belm RX SPC FI DEC08 3.982 71,8 286 OGX Petroleoon 29.000 9,0 262 J. Martins- PO 22.200 11,4 253 SLC Agricolaon NM 25.000 9,9 248 Lojas Reneron NM 9.100 25,4 231 Telefonica SA 13.000 17,0 221 EDP Renovaveis 48.000 4,3 208 Pescanova SA 8.400 24,6 207 Naturaon NM 9.400 21,5 202 AMILON 24.400 8,0 195 Odontoprevon NM 17.200 11,3 195 Sonae.Com 134.415 1,4 194 Teixeira Duarte SA 259.737 0,7 190 Tecnicas Reunidas 3.800 47,6 181 Drogasilon NM 28.200 6,1 172
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Nature and Type Quantity Listed Price Balance Sheet Value Equity Instruments Greff Euro R Est A 2.292 71,5 164 Portucel SGPS Em-95 71.000 2,3 162 INAPA 416.372 0,4 156 Portugal Venture Capital Initiative 249.750 0,6 155 FERBASAPN 25.000 6,1 152 P. Telecom NO EM 95 18.000 8,4 151 Obrascon Huarte 6.600 22,7 150 Fleury Sa 12.000 12,0 144 Gamesa SA 25.000 5,7 143 BR Properton 15.000 8,2 123 Grifols SA 12.000 10,2 122 Mellon Glob Asian EQ 45.821 2,6 120 Inditex 2.100 56,0 118 Brookfield Incorporacoes SA 30.000 3,9 117 Semapa SGPS Nom 14.000 8,3 116 Bradescopn EJ N1 7.000 14,7 103 Mellon Global Fund 78.362 1,3 100 SITA 97 1,0 97 Pictet Emerging MKTS 217 436,9 95 Minervaon NM 30.000 3,1 94 Hypermarcas S/A 8.800 10,2 89 Mellon FIR DI LP 93.088 0,9 83 Mellon RF II 133.252 0,6 83 Mellon RF III 133.236 0,6 83 Mellon RF X 133.244 0,6 83 Mellon RF IX 133.250 0,6 83 Mellon RF VII 133.255 0,6 83 Mellon RF VIII 133.245 0,6 83 Mellon RF VI 133.262 0,6 83 Mellon RF IV 133.259 0,6 83 Mellon RF V 133.253 0,6 83 Zon Multimedia 24.000 3,4 81 Cofina - SGPS 115.000 0,7 79 BR Malls Paron NM 10.000 7,7 77 Pictet Lat Ame "R" 737 100,1 74 Belm Asset Based B+ 7.837 9,0 70 Fidelity Americ USD 18.340 3,8 69 Fibria Celulose SA 5.700 11,9 68 Sacyr Vallehermoso 14.000 4,8 67 Enacol 64 1,0 64 Vueling Airlines 6.500 9,7 63 Brisa - Nom (Priv.) 12.000 5,2 63 Viscofan SA 2.200 28,4 61 SAG GEST - SGPS 120.000 0,5 61 Altri SGPS SA 18.000 3,4 61 Mapfre 29.000 2,1 60 Ebro Foods 3.800 15,8 60 BSCH 7.500 7,9 59 Pictet Conv Bonds 444 105,7 47 Pioneer Abs return 431 109,1 47 Allianz RCM US EQ AT 545 79,8 44 Rossi Residon NM 6.300 6,7 42 Allianz RCM EU EQ AT 229 166,9 38 Schroder Europ. Large 242 146,2 35 Arcelor Mittal Spain 1.100 28,4 31 Ishares MSCI EMERG 897 34,1 31
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Nature and Type Quantity Listed Price Balance Sheet Value Equity Instruments Telecinco SA 3.500 8,2 29 SPDR Truste Series 1 276 94,1 26 Banif euro financeir 5.402 4,8 26 Ecodieselon NM 50.000 0,5 23 Dasaon NM 2.200 10,1 22 Redecardon NM 2.300 9,5 22 JP Morgan Europ Prop 4 5.528,0 22 DWS Aktien STRA Deut 122 172,6 21 FCP 19.920 0,9 18 DWS INV. Dividend NC 138 111,4 15 DWS Invest Europ EQ 48 116,8 6 GED Sur FCR-CL A 100 44,6 4 Galerias Nazoni 750 0,0 - Shotgun Pictures 10.000 0,0 - 233.306
As per the accounting policy described in Note 3.6, the Group classifies in its securities portfolio of "Other financial assets at fair value through profit or loss" its holdings in investment funds in excess of 20% but where it does not have control, when held through investment, venture capital or banks' funds, given the characteristics of these operations (seed capital).
The amount of 3,096 thousand euros in Treasury Bonds corresponds to "Assets given as security" that are endorsing the irrevocable commitments to the Deposit Guarantee Fund, the Investor Compensation System and the Intraday Credit with the Bank of Portugal.
Securities with a value of 59,869 thousand euros are used as security for refinancing operations with the ECB, as described in Note 23.
NORDBK MSM bonds, with a value of 14,736 thousand euros, are used as a security with the Market Intervention Operations.
10. FINANCIAL ASSETS AVAILABLE FOR SALE
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Debt Instruments 1.141.568 275.314 Equity Instruments 39.365 23.215
Impairment -4.121 -4.119 Total 1.176.812 294.410
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The portfolio of securities available for sale had the following composition as at December 31, 2010:
Maturity and Type Quantity Balance Sheet Value Debt Instruments BTA Bank JSC - GDR'S 27.324 186 BTA Bank 10,75% JUL18 5.646.324 4.800 BTA Bank 7,2% JUL 25 1.279.360 724 BTA Bank 0% JUL 20 11.664.749 663 Obrigações Tes Medio Prazo 5% 20.500.000 21.212 PGB 3,35 10/15/15 20.000.000 18.023 Portuguese OT's 4,35 10/16/17 5.000.000 4.496 Parpublica 3 1/2 07/13 10.000.000 9.191 Obrigações do Tesouro 4,8 06/15/20 17.155.000 15.433 CP Comboios de Portugal 4,17 10/19 5.000.000 3.890 Parpublica parpubs 1/4 09/17 2.000.000 2.077 Banco Nac Desenv 6 1/2 06/19 1.000.000 826 Voto Votoratim LDA 04/17 1.200.000 1.240 Cimpor Financial Opertns 2.000.000 2.054 Cimpor Financial Opertns 55.000 56 Tele N L Participações 1.774.000 1.354 Caixa Geral Depósitos Finance 1.150.000 574 CESP-Comp Ener São Paulo 01/15/2015 1.654.000 1.004 ETAB Econ Casino Guich-P 04/04/2013 250.000 283 Caixa Geral FIN 209.000 105 Aqueduct Trading Services CO 28.131.478 23.371 GE CAP EUR FUND 5 1/4 01/31/13 3.250.000 3.583 Bank of America Corp 7 06/15/16 1.000.000 1.114 Citigroup Inc 7 3/8 06/16/14 2.500.000 2.863 Lloyds Bank TSB Bank Plc 5 3/8 2.500.000 2.493 RCI Banque SA 4 10/21/11 500.000 512 Bank of Ireland 4 5/8 09/14 1.000.000 842 Enel Finance Intl SA 4 09/14/16 500.000 507 Allied Irish BKS PLC 4 1/2 10/01/12 500.000 406 Albertis Infraestructuras 10/16 500.000 478 Gas Natural Capital 4 3/8 11/16 500.000 475 Goldman Sachs Group Inc Float 10/19 1.000.000 982 Telefonica Emisiones SAL 2.000.000 1.966 Morgan Stanley 4 1/2 10/29/14 1.000.000 1.017 Anglo American Capital 12/16 500.000 522 Nomura Europe Finance NV 12/14 500.000 523 Vivendi 4 7/8 12/19 500.000 507 Dong Energy A/S 250.000 256 EDP Finance BV 3 1/4 03/15 3.000.000 2.834 Goldman Sachs Group Inc 03/17 2.000.000 1.996 Glencore Finance Europe 750.000 782 RaboBank Nederland 03/20 500.000 500 Royal Bank of Scotland PLC 03/20 1.500.000 1.486 Vale SA 1.500.000 1.571 BES Investimento Brasil 5 5/8 03/15 800.000 594 Merck Fin Services GMBH 1.000.000 1.037 Intesa Sanpaolo SPA 2.000.000 1.938 Lafarge SA 5 1/2 12/19 250.000 244
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Maturity and Type Quantity Balance Sheet Value Nationwide BLDG Society 01/15 1.000.000 1.011 Gas Natural Capital 4 1/8 01/18 1.000.000 908 Daimler AG 4 1/8 01/17 1.500.000 1.605 Vodafone Group PLC 01/22 3.000.000 3.159 Barclays Bank PLC 01/17 4.500.000 4.616 Alstom 4 1/8 02/17 500.000 516 Casino Guichard 4,379 02/17 250.000 263 Telecom Italia SPA 5 1/4 02/22 1.000.000 1.003 Independencia Internatio 12/30/16 287.100 18 caixa Eco Montepio Geral 0 12 3.000.000 2.624 Veolia Environnement 500.000 558 CitiGroup INC 7 3/8 09/04/19 500.000 567 Caixa Geral Depositos 12/12/2011 300.000 306 Caixa Geral Depositos 12/12/2011 5.000.000 5.101 Eni SPA 4 06/29/20 1.000.000 997 Deutsche Telekom Int Fin 07/13/22 2.000.000 1.973 Schneider electric SA 3 5/8 07/20 500.000 491 Morgan Stanley 5 3/8 08/10/20 500.000 489 Areva Sa 3 1/2 03/21 1.000.000 932 Telefonica Emisiones SAL 3,661 17 500.000 482 Koninklijke KPN NV 3 3/4 09/21/20 500.000 477 BBVA Senior Finance SA 2 3/4 09/12 2.000.000 1.977 Portucel - Emkp Celul Papel 03/10 2.000.000 2.006 Caixa Geral Depo 5 1/8 02/14 3.250.000 3.134 Banco BPI SA 3 07/17/12 1.000.000 970 Banco BPI SA 01/12 5.000.000 4.721 Banco Comercial Portugues 950.000 956 Banco Comercial Portugues 100.000 101 Obrig. Tesouro Setembro 1998/2013 5.787.980 5.978 Obrig. Tesouro 09/14Jun2019 4,75% 33.750.000 30.738 BES 5,625% 5Jun2014 5.000.000 4.545 CGD 3,625% Jul14 5.000.000 4.729 CGD 5,125% Fev14 3.750.000 3.637 BCP 3,625% 19Jan2012 5.000.000 5.077 BCP 4,75% Out14 5.000.000 4.674 Rentipar Seguros 2015 10.000.000 10.117 Grecia 4,3% Mar12 2.000.000 1.889 German Bond Obl 1 3/4 10-09-2015 2.000 201 UK Bond UKT 4 3/4 09-07-2015 1.700 225 BK Irland 4 4,625% Set14 2.500.000 2.115 Cajamadrid 4,25% Fev 14 5.000.000 5.091 NTN-B 50 45 NTN-B 100 89 NTN-B 400 357 Tesouro Cabo Verde 0 10.247 275.314
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Maturity and Type Quantity Balance Sheet Value Impairment Equity Instruments Habiprede SA 5.000 1.250 - nova Companhia Grande Hotel 50.300 184 -155 Companhia das Quitas SGPS, SA 34.317 172 -120 Ações Millenium 20.300.000 1.007 - Acções Não Residentes 24 24 - Fomentinvest SGPS 3.076.924 5.915 - Floresta Atlantica - SGFII SA 10.125 120 - Ged Sur Capital SGECR 30.000 27 - New Energy Fund 19 928 - Preff-Pan European Real State Fund 12.750 1.016 - Aviva Centr European Property Fund 1.543.012 1.204 - JP Morgan European Property Fund 15 81 - Pradera European Retail Fund 2 300.000 1.626 - Fine Art Fund (CP) 12.645 1.188 - Prax Capital III, SCA SICAR 3.000 701 - NYSE Euronext - US6294911010 201 4 - S.W.I.F.T. 14 11 - Visa Class C 2.533 65 - Finangest 526 535 -180 SIBS,SA 103.436 445 - Unicre, SA 35.076 916 - Kalouma Holdings LTD 1.168.000 699 - CEIM, LDA 800 4 - Coliseu Micaelense, S.A. 83 0 - Didier & Queiroz, SA 50.000 150 -2 Garval 500 1 - Imovalor 19.890 281 - Lisgarante 500 1 - Macedo & Coelho 188 0 - Norgarante 500 1 - Norma-Acçores - Soc. Estud. Apoio Desenv. Reg. 10.000 50 - Pretória LDA 5.736 6 - Lusitania Seguros 476 228 -129 SC Braga SAD 20 0 - Sogeo - Soc Geotermica dos Açores, SA 24.529 122 - Teatro Micaelense, SA 83 0 - Transinsular (Açores) - Trasp. Mariti. Insul. 2.000 11 - Beira Vouga 20.317 10 -10 Beira Vouga Acçoes Pref 21.500 10 -10 Açorline 3.280 3.280 -3280 Act - C -Industria de Cortiças, SA 170.410 852 -233 Socied. Interb.SistPagto.SISP 91 91 - 23.215 -4.119
Movement in the impairment of financial assets available for sale, during the fiscal year of 2010, is presented in Note 42.
The amount of 35,201 thousand euros in Treasury Bonds corresponds to "Assets pledged as collateral" that are endorsing the irrevocable commitments to the Deposit Guarantee Fund, the Investor Compensation Scheme and the Intraday Credit with the Bank of Portugal.
Securities with a value of 32,491 thousand euros are used as security for refinancing operations with the ECB, as described in Note 23.
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11. DUE FROM BANKS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Interbank money market 250.000 150.000 Purchase operation with resale agreement In portugal -- Abroad -- Deposits In Portugal 2.988 8.570 Abroad 175.323 62.665 Loand In Portugal -- Abroad 20.784 54.121 Very Short term investments In Portugal -- Abroad 40.425 44.180 Others 1.502 2.578
Total 491.022 322.114
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12. LOANS AND ADVANCES TO CUSTOMERS
This item breaks down as follows:
Lending Items 31-12-2010 31-12-2009
Corporate Customers Current accounts 1.858.327 1.837.912 Discount and other credits represented by effects 281.340 326.298 Loans 2.616.700 2.540.690 Overdrafts 90.604 80.385 Factoring 172.284 172.284 Finance leases 389.884 389.884 Others 331.172 331.172 Personal customers Home loans 3.369.796 3.369.796 Consumer credit 1.064.537 1.064.837 Other purposes Loans 668.146 668.146 Current accounts 201.571 201.571 Discount and other credits represented by effects 17.877 17.877 Financial Leases 91.959 91.959 Overdrafts 54.256 54.256 Others 244.609 244.609
Other credits and receivables (secured) 440.737 440.737
Overdue credit and interest 931.401 831.401
Income receivable 91.012 91.012 Expenses relating to deferred income 0 0 Revenues relating to deferred income (15.401) (15.401)
Impairment on lending (594.857) (594.857)
Total 12.206.524 11.487.864
In lending to corporate customers, the sum of 94,170 million euros is being used as security for refinancing operations with the ECB, as described in Note 23.
The item "Other loans and receivables" comprises 214,844 thousand euros of debt securities, of which the amount of 147,267 thousand euros is being used as security for refinancing operations with the ECB, as described in Note 23.
The item "loans and accrued interest" comprises overdue instalments for more than 90 days. Loans and advances to customers comprises the sum of 3,298,791 thousand euros in securitised credits.
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Lending through finance leases is as follows:
31-12-2010 31-12-2009
Rentals and residual values accrued: Less than 1 year 53.890 54.163 1 to 5 years 260.972 333.709 More than 5 year 253.848 288.190 568.710 676.062 Interests accrued: Less than 1 year -7.930 -6.699 1 to 5 years -23.406 -26.673 More than 5 year -55.531 -54.718 -86.867 -88.090 Equity accrued: Less than 1 year 45.961 47.464 1 to 5 years 237.565 307.036 More than 5 year 198.317 233.472 481.843 587.972 Total 963.686 1.175.944
Unguaranteed residual values accruing to the benefit of the lessor: 37,111 thousand euros. The maturing rentals and residual values represent the minimum value of lease receivables.
The securities reclassified in this item, in 2008, are as follows:
Balance Market Market Name Quantity Sheet Value 2010 Value 2009 Value
Granite Mortgages PLC 1.000.000 984 1.034 1.082 Marble Arch Residential Securisatio 3.000.000 1.022 1.076 1.139 Harvest Clo SA 1.500.000 1.499 1.554 1.260 Marlin (ECM-II) BV 7.000.000 520 533 537 Granite Mortgages PLC 2.000.000 744 781 854 Harbourmaster CLO 5.000.000 4.497 2.764 1.026 Alfa Bank 2.000.000 72 75 392 Alfa DIV PYMT RT 12/15/2011 2.500.000 481 503 1.011 Total 9.819 8.320 7.301
Had these securities not been reclassified, they would have had a negative impact of 680 thousand euros in the profit or loss of 2010’s fiscal year.
In compliance with IFRS 7, securities are valued according to internal valuation methodologies, considering, mostly, observable market data (level 3).
No impairment losses were recorded on debt securities classified under this item.
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13. INVESTMENT SECURITIES HELD TO MATURITY
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Debt Instruments 63.939 80.399 Total 63.939 80.399
Securities with a value of 36,839 thousand euros are being used as security for refinancing operations with the ECB, as described in Note 23.
The portfolio of investment securities held to maturity had the following composition as at December 31, 2010:
Balance Nature and Type Quantity Sheet Value Debt Instruments Certificado Deposito Bancário 7.648.095 3.409 National Bank of Greece SA 1.000.000 935 Brisa Finance BV 09/13 2.500.000 2.435 GE Capital Euro Funding 4.200.000 4.204 Citigroup Inc 06/14/12 2.537.000 2.490 Portugal Telecom Int Fin 12 2.500.000 2.492 Morgan Stanley & CO Intl 3.000.000 2.904 Credit Suisse USA INC 04/12/13 7.500.000 5.524 Friesland Bank Float 04/13 2.500.000 2.439 Goldman Sachs Group INC 1.500.000 1.436 BCP Finance Bank LTD 02/03/2011 5.000.000 5.004 BES Finance LTD 5.000.000 4.989 Banco BMG SA 1.000.000 742 Banco Fibra SA 06/06/2011 800.000 594 EDP Finance BV 5 1/2 02/14 1.500.000 1.681 Portugal Tel Int Fin 3.900.000 3.921 Criteria CaixaCorp SA 2.500.000 2.571 Banco Totta SA 3 3/4 06/12 8.000.000 8.308 Banco Espirito Santo 5 5/8 06/14 2.400.000 2.594 Banco Comercial Portugues 5.000.000 5.128 Tecnicil Imobiliaria 91 91 SOGEI 48 48 Total 63.939
The securities reclassified in this item, in 2008, are as follows:
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Balance Market Market Name Quantity Sheet Value 2010 Value 2009 Value Brisa Finance BV 09/13 2.500.000 2.435 2.532 2.619 Citigroup INC 06/14/12 2.537.000 2.490 2.494 2.426 Portugal Telecom INT FIN 12 2.500.000 2.492 2.589 2.563 Morgan Stanley & CO INTL 3.000.000 2.903 2.913 2.834 Credit Suisse USA INC 04/12/13 7.500.000 5.524 5.548 5.137 Friesland Bank Float 04/13 2.500.000 2.439 2.399 2.330 Goldman Sachs Group Inc 1.500.000 1.436 1.370 1.361 BCP Finance Bank LTD 02/03/2011 5.000.000 5.004 4.956 4.967 BES Finance LTD 5.000.000 4.989 4.812 4.938 Total 29.712 29.613 29.175
Had these securities not been reclassified, they would have had a negative impact of 99 thousands euros in profit or loss of 2010’s fiscal year.
In compliance with IFRS 7, securities are valued according to market listed prices (level 2).
No impairment losses were recorded on debt securities classified under this item.
14. SECURITIES SUBJECT TO REPURCHASE AGREEMENTS
Securities subject to Repurchase Agreements, with a value of 51,004 thousand euros (against 36,500 thousand euros in 2009), correspond to securities purchased, where there is an agreement to resell them at a preset price, which are registered at Banco Banif Brasil and Banif - Banco de Investimento.
The securities (collateral) break down as follows:
Balance Sheet Security Name Value Letras do Tesouro Nacional Brasil 22.615 Royal Bank of Scotland Loat 09/12 235 ENI SPA 4 3/4 11/17 252 GE CAP EUR Fund Float 05/25/12 441 Schneider Electric SA 3 5/8 07/20 276 Glencore Finance Europe 460 Banco Espirito Santo Float 02/11 389 Caixa Eco Montepio Geral 0 11 305 Morgan Stanley & CO INTL 275 Banco Comercial Portugues 01/02 25.756 Total 51.004
15. DERIVATIVES
Trading Derivatives
The financial derivatives, in which the Group is counterparty with the variations in fair value accounted against profit or loss, correspond to the following types of instruments:
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31-12-2010 31-12-2009 Fair Value Fair Value
Description Notional Values Listed Price Balance Sheet Value Listed Price Balance Sheet Value Exhange rate contracts Swap Fx 3.054.552 2.172 6.949 6.238 3.375 Currency 296.132 10.207 7.950 8.732 4.616 Interest Rate Contracts Interest Rate Swaps 4.330.937 44.919 52.377 23.240 29.313 Equity/ indexes contracts Equity Swap - - - 646 12 Credit Contracts Credit Default Swap 128.749 54.793 68.406 38.165 42.707 Futures and other forward transactions Currency forwards 279.459 2.942 1.222 7.412 228 8.089.829 115.033 136.904 84.433 80.251
The fair value of the derivative financial instruments is accounted in the balance sheet in separate Assets and Liabilities items. The positive fair value is accounted under the item “Trading assets” (Note8) and the negative fair value under the item “Trading Liabilities” (Note 24)
Hedging Derivatives
This item breaks down as follows:
31-12-2010 31-12-2009
Assets Interest rate Swap - 884
Liabilities -1303 -2606 Interest rate Swap -1.303 -1.722
The Group contracts derivative financial instruments to hedge against its exposure to interest rate risk. The accounting treatment depends on the nature of the hedged risk, namely whether the Group is exposed to the variations in fair value or to variations in cash flows, or whether the hedges relate to future transactions. At December 31, in accordance with the applicable accounting criteria, the Group presented in its portfolio of issued liabilities a set of variable rate issues for which it had, at that date, derivative financial instruments (DFI) in order to hedge against the interest rate risk associated with those issues.
For those hedge relationships which comply with the mandatory requirements of IAS 39, the Group has adopted the formal hedge accounting, namely the cash flow hedge model. The Group's portfolio of derivatives comprises interest rate swaps, which hedge the risk of variations in cash flows from Deposits from other Banks and Debt securities in issue.
The Group periodically carries out effectiveness tests on existing hedge relationships. For the fiscal year in question, the sum of 1,706 thousand euros is recorded against Fair Value Reserves, corresponding to the effective part of the fair value of the cash flow hedge derivatives. This effect in 2010 fiscal year was 1,474 thousand euros.
Fair value hedge operations as at December 31, 2010 break down as follows:
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Derivate Product Product Hedged Risk Hedged Notional Market Value Interest rate Swap Bullets Interest rate 35.000 -251 Interest rate Swap Bonds Interest rate 30.000 -776 Interest rate Swap Securitization bonds Interest rate 27.329 -276 92.329 -1.303
The portfolio of hedging derivatives breaks down as follows, by maturity:
Up to 3 months 12776 -129 3 months to 1 year 34553 -398 1 to 5 years 45000 -776 92.329 -1.303
In compliance with IFRS 7, hedging derivatives are valued according to internal valuation methods, considering, mostly, observable market data (level 2) (See Note 45).
16. NON-CURRENT ASSETS AVAILABLE FOR SALE
Movements in this account over the fiscal year ended were as follows:
Movement in the Fiscal Year Entities included for the first time Net Balance in the Recognized Reversed Net Balance Asset at 31-12- consolidated Other impairment Impairment at 31-12- Accrued Category 2009 accounts Acquisitions Disposals Movements losses losses 2010 Impairment
Property 65923 - 88116 -8124 -288 -3025 814 143416 5108 Equipment 2068 - 301 -203- - - 2166 271 Other Tangible Assets 2151 - 7775- - - - 9926 - Holdings 15410 - 11948 -15410- - - 11948 - Total 85.552 - 108.140 (23.737) (288) (3.025) 814 167.456 5.379
The Group disposed 30% of Banco Pecúnia (Brasil) to Banco Société Générale Brasil, SA by the amount of 15.4 million euros.
The acquisitions over the period correspond to the amount recovered through foreclosure or auctioning of collateral securities for loans, corresponding essentially to property.
17. INVESTMENT PROPERTIES
Movements in this account over the fiscal year ended were as follows:
Entities included for first Transfers Balance at time in consolidated Property in Assets held Other Exchange rate Balance at Asset Category 31-12-2009 accounts Acquisitions Revaluations Disposals own use for sale Assets differences 30-12-2010
Buildings and land 199.808 14.361 47.654 11.853 -11.000 - 288 8.283 1.344 272.591 199.808 14.361 47.654 11.853 (11.000) - 288 8.283 1.344 272.591
Valuations of the investment properties are conducted by specialist and independent appraisers in accordance with the criteria and methods generally accepted for this purpose, which include cost method and market method analyses, the fair value being set as the amount which can reasonably be expected for the transaction between an interested buyer and an interested seller, on a fair basis, neither being obliged to sell or to buy and both being fully aware of all the relevant factors at a given date. - 56 -
Investment properties presented the following values in the fiscal year:
- Rental income: 3,773 thousand euros - Direct operating expenses: 854 thousand euros
Property temporarily unlet stood at 141,005 thousand euros, with the sum of 29,935 thousand euros referring to property received in repayment of loans.
18. OTHER TANGIBLE ASSETS
As stated in Note 3.13, buildings in the Group's own use are recorded at the fair value, reviewed every three years. These properties were last revalued as at 2009/12/31.
18.1 Movement during the period
Entities included Movement in the Fiscal Year for the first time Impairment Net Balance in the Depreciation for the Exchange Asset at 31-12- consolidated Revaluations for the Fiscal Fiscal Year Write- Rate Net Balance Category 2009 accounts Acquisitions (Net) Year Disposals Offers Adjustments Differences at 31-12-2010
Property 151.149 - 3.655 4.249 -8.918 - -568 -367 - 727 149.927 Equipment 33.638 - 6.255 1.547 -10.157 - -39 -1.336 400 745 31.053 Assets on operation lease 75.642 - 24.311 1.971 -11.232 - -13.521 - - - 77.171 Assets on finance lease------0 Tangible assets under construction 26.046 - 1.787 -16.303 ------11.530 other tangible assets 207 - 173 - -104 - - - - - 276
Total 286.682 - 36.181 -8.536 -30.411- -14.128 -1.703 400 1.471 269.957
Had the net value of the property been determined by the cost method, it would have been 131,072 thousand euros.
18.2 Tangible fixed assets on an operating lease basis
Future Payments on Non-Cancellable Contigent Earnings Residual Maturity Gross Operating Lease Recognized in Results
Less than 1 Year 291 28 - 1 to 5 Year 76.880 21.811 - More than 5 Year - - - 77.171 21.839 -
Fixed assets under operating lease are mostly vehicles.
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19. GOODWILL AND OTHER TANGIBLE ASSETS
The movement during the period was:
Entities included for the first time Net Balance in the Depreciation Exchange at 31-12- consolidated for the Fiscal Write - Offs Ajdustmends Rate Net Balance Asset Category 2009 accounts Acquisitions Transfers Year Differences at 31-12-2010
Goodwill 4.253 - - - - -1.320 - - 2.933
Intangible assets in progress 13.566 - 4.494 -3.447- - - - 14.613 Automatic processing systems (software) 9.866 - 1.625 3.371 -6.831 -129 -3.532 91 4.461 Other tangible assets 837 - 0 330 -86 -25 - 0 1.056
Total 28.522 - 6.119 254 -6.917 -1.474 -3.532 91 23.063
The Goodwill item corresponds to the following holdings:
With reference to December 31, 2010, the Group carried out the following impairment tests on goodwill:
- For the company Investaçor SGPS, SA, an initial study was conducted which justifies the goodwill accounted (with a value of 2,218 thousand euros). This study was reviewed in 2010 and an impairment of 314 thousand euros was recorded. This analysis used the Discounted Cash Flows method, on the basis of the prospective analysis of the company's future activity and business, in the form of medium and long term economic and financial projections (six years), and determination of the respective projected financial flows. In this assessment, the following parameters were used:
Inflation rate: 2.00% (2009: 2.00%) Yield to maturity: 3.00% (2009: 2.50%) Risk rate: 4.00% (2009: 4.00%) Discount rate: 9.26% (2009: 8.73%) Additional risk rate (perpetuity): 1.00% (2009: 1.00%) Capitalization rate: 8.19% (2009: 7.67%)
- For the company Banco Caboverdiano de Negócios, an initial study was conducted which justifies the goodwill accounted (with a value of 872 thousand euros in 2007, of which 215 thousand euros relate to the acquisition of 5.7% in 2008). This study was reviewed in 2010 and an impairment of 57 thousand euros was recorded. This analysis used the Discounted Cash Flows method. In this assessment, the following parameters were used:
Euro Risk free Rate (Rf): 3.21% (2009: 3.20%) Mature Market Risk Premium (Rm - Rf): 5.50% (2009: 5.50%) Country Rating B1, Default spread: 4.50% (2009: 6.50%) Relative Volatility Equity vs Fixed Income Markets: 1.5 (2009: 1.5) Adjusted Risk Premium: 12.25% (2009: 15.25%) Implied KE: 16.66% (2009: 18.32%) Perpetual growth rate: 3.00% (2009: 3.00%) Analysis period considered was six years
- In 2010 fiscal year, the Group recorded an impairment, with a value of 949 thousand euros, relating to 100% of the goodwill of Banif Gestão Activos (Brasil), SA, concluding that there are no grounds for recording impairment of goodwill at the date of acquisition, in the current year.
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Valuations of goodwill were conducted assuming the continuity of operations and using historical and accounting data from the entities valued. The methods and key assumptions used in the valuations are commonly accepted for company valuations and were applied in accordance with the international corporate valuation practices accepted by the Group Management. No possible alterations were identified in key assumptions that would justify quantifying the respective impacts, as required by paragraph 134 (f) of IAS 36.
No impairment losses on intangible assets were recorded in 2010.
20. INVESTMENT IN ASSOCIATES
At December 31, 2010 and 2009, the item for Investment in Associates broke down as follows:
20. INVESTMENT IN ASSOCIATES 31-12-2010
Owner of Value of Goodwill Total Equity Net Company Name Registered Officers Main Business Capital % of Holding Holding Net Profits Countribution
Rentipar Seguros Avenida Barbosa du Banif SGPS, Insurance SGPS,SA Bocage, 85 SA 47,69% 64.017 834 134.239 4.438 2.116
Virgen de Guadalupe Banif SGPS, Banca Pueyo 2 Villanuea de la Banking SA Serena, Badajoz 33,32% 27.963 27.449 83.922 5.761 1.920 Travessera de Banif SGPS, Bankpime Gràcia, no. 11 Banking SA Barcelona 27,50% 6.903 7.067 25.101 -29.474 -8.105 Parque de la Inmobiliaria Vegas Constitucion 9 Banif SGPS, Real Estate - Altas Villanueva de la SA Serena 33,33% 2.589 7.766 112 37 Banif Avenida Barbosa du Espaço10 Real Estate Investimento -- Bocage, 83-85 s SGPS, SA 25,00% -941 -46 -11 Rua Tierno Galvan, Banif Investment MCO2 Torre 3, 10º Piso, Investimento - Management Amoreiras s SGPS, SA 25,00% 1.338 5.351 -254 -63 Pedidos Liz Portugal Investment Fund Imogest 31,30% 2 - 6 -2 -1 Banif Holding Centaurus Reality (Malta); São Paulo - Brasil Real Estate - Group Banif International Holdings 41,77% 12.036 29.602 -30 - Rua Tierno Galvan, Banif Banif Europa Leste Torre 3, 10º Piso, Investment Fund Investimento - Amoreiras s SGPS, SA 40,29% 1.082 2.686 169 68
Total 0 - 0 0 115.930 35.350 287.732 -19.326 -4.039
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31-12-2009
Owner of Value of Goodwill Total Equity Net Company Name Registered Officers Main Business Capital % of Holding Holding Net Profits Countribution
Rentipar Seguros Avenida Barbosa du Banif SGPS, Insurance SGPS,SA Bocage, 85 SA 47,69% 24.675 834 51.505 -16.784 -8.004
Virgen de Guadalupe Banif SGPS, Banca Pueyo 2 Villanuea de la Banking SA Serena, Badajoz 33,32% 28.788 28.400 86.397 7.521 2.506 Travessera de Banif SGPS, Bankpime Gràcia, no. 11 Banking SA Barcelona 27,50% 15.125 14.795 54.999 -12.840 -3.531 Parque de la Inmobiliaria Vegas Constitucion 9 Banif SGPS, Real Estate - Altas Villanueva de la SA Serena 33,33% 2.560 7.680 102 34 Banif Avenida Barbosa du Espaço10 Real Estate Investimento -- Bocage, 83-85 s SGPS, SA 25,00% -896 -222 -55 Rua Tierno Galvan, Banif Investment MCO2 Torre 3, 10º Piso, Investimento - Management Amoreiras s SGPS, SA 25,00% 80 405 -45 -9 Total 71.228 44.029 200.090 -22.268 -9.059
For goodwill recorded in the holdings in Banca Pueyo and Bankpime, impairment tests were conducted using the “Discounted Free Cash Flows to Equity” method, with the following assumptions:
- Bankpime:
CoE: 12.5% (2009:10.9%) Financing of change in Assets (min. Tier I): 8.0% (2009: 8.0%) Perpetual growth rate: 3.0% (2009: 2.0%) Tax rate: 30.0% (2009: 30%) Multiple implicit P/E - End Value: 9.2 (2009: 13.6) Analysis period: 9 years The estimated value for Bankpime ranges from 50.8 million euros (transaction value) and 66 million euros (intrinsic value). In the analysis of Bankpime’s impairment, the Group used the transaction value.
- Banca Pueyo:
RoE - Sustainable/Long Term: 13.0% CoE - Cost of Equity: 11.0% (2009: 9.5%) g: 3.0% (2009: 2.0%) Implicit P/BV: 1.24 Analysis period: 7 years
- Rentipar Seguros, SGPS:
Inflation rate: 2.00% Yield to maturity: 2.92% Risk rate: 4.71% Discount rate: 9.92% Additional risk rate (perpetuity): 0.00% Capitalization rate: 7.92% Risk free interest rate : 4.98% Nominal growth rate (perpetuity): 2.0% Analysis period: 7 years
Valuations of goodwill were conducted assuming the continuity of operations and using historical and accounting data from the entities valued. The methods and key assumptions used in the valuations are - 60 - commonly accepted for company valuations and were applied in accordance with the international corporate valuation practices accepted by the Group Management. No possible alterations were identified in key assumptions that would justify quantifying the respective impacts, as required by paragraph 134 (f) of IAS 36.
On the basis of the tests conducted, an impairment of 7,727 thousand euros was recorded in the goodwill relating to the shareholding in Bankpime (362 thousand euros in 2009) and 951 thousand euros in the goodwill relating to the shareholding in Banca Pueyo.
During the period ended at December 31, 2010, the changes in associated companies were as follows:
- Acquisition of a shareholding of 100% of the share capital and voting rights of Global - Companhia de Seguros, SA and of a shareholding of 100% of the share capital and voting rights of Global Vida - Companhia de Seguros de Vida, SA, for a sum of 137.2 million euros, through Rentipar Seguros SGPS, SA, whose process was concluded in March 2010; - Share issue by Rentipar Seguros SGPS, SA from a value of 65.57 million euros to a value of 135.57 million euros in 2010 fiscal year.
The Companies recorded under the equity method report their data in accordance with the accounting policies of the Banif Financial Group (Note 3). No problems with the standardization of accounting policies are found.
21. TAX ON INCOME
21.1 Current taxes
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Description 31-12-2010 31-12-2009
Brasil - Banco Internacional do Funchal (Brasil) 12.657 10.958 Grupo Banif Mais SGPS 3.679 3.505 Banif Banco de Investimento (Brasil) SA 3.450 3.260 Banif SGPS SA 2.759 2.687 Banif (Açores) SGPS SA 768 525 Banif Corretora Valores Cambios 636 457 Banif Gestão de Activos 625 1.044 Banif Go 468 411 Banif 467 467 Banif Investimentos SGPS SA 382 142 Banif Banco de Investimento (Brasil) SA 308 73 Banif Imobiliaria 255 859 BanifServ 185 1 Banif Rent SA 107 78 Banif Gestao de Activos (Brasil) 87 89 Beta Securitizadora 82 101 Gamma 47 10 Açortur 36 40 Turotel 23 26 Investaçor Hoteis SA 21 22 Banif Capital 16 4 Gestarquipark 12 - Banif Comercial SGPS SA 9 8 Numberone SGPS 5 5 Soc Imobiliaria Piedade 5 5 Econofinance SA 5 4 Investaçor SGPS SA 5 6 Centro Venture 3 2 Banif Açor Pensões 1 35 Hotel do Pico 1 5 27.104 24.829 The current taxes assets recorded in Banif - Banco Internacional do Funchal (Brazil), SA comprise 6,093 thousand euros (R$13,511 thousand: R$7,452 thousand of COFINS credit and $ 6,059 thousand for monetary correction) of credits recognized by final and unappealable judicial decision by the Supreme Court of Brazil, in a process relating to the enlargement of the basis of Cofins, which await compensation against taxes and contributions administered by the Federal Revenue Service of Brazil. Following this decision, the Federal Revenue Service of Brazil intends, with retroactive effects, the enlargement of the basis for calculating the Cofins, situation considered by the Group not likely to happen.
21.2 Deferred taxes
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Description 31-12-2010 31-12-2009
Provisions/Impairment not accepted for fiscal purposes Other risks and costs 36 100 Impairment on loans 1.513 -4.637 Deferral of taxation of capital gains Disposal of fixed assets - -3 Fiscal losses to carry forward Fiscal losses to carry forward 37.990 22.754 Valuations not accepted for fiscal purposes Investment properties -2.428 -571 Property in own use -3.371 -2.726 Assets available for sale -3.793 -711 Assets at fair value through profit or loss -664 8.079 Others Employee benefits 7.354 7.933 Commissions 177 1.144 Others 3.672 3.486 TOTAL 40.486 34.848 Deferred tax assets 72.697 59.535 Deferred tax liabilities 32.211 24.687
The deferred tax assets refer primarily to deferred taxes on tax losses amounting to 37,990 thousand euros (22,754 thousand euros in 2009). The deferred tax liabilities are primarily related to investment properties, buildings in own use and assets available for sale (9,592 thousand euros).
31-12-2010
Balance at 1 January 34.848 Entities inclued for the first time in consolidated accounts 0 Recognized in profit or loss -882 Recognized in reserves 6.520 Balance at December 31 40.486
The current taxes assets recorded in Banif - Banco Internacional do Funchal (Brazil), SA comprise 6,093 thousand euros (R$13,511 thousand: R$7,452 thousand of COFINS credit and $ 6,059 thousand for monetary correction) of credits recognized by final and unappealable judicial decision by the Supreme Court of Brazil, in a process relating to the enlargement of the basis of Cofins, which await compensation against taxes and contributions administered by the Federal Revenue Service of Brazil. Following this decision, the Federal Revenue Service of Brazil intends, with retroactive effects, the enlargement of the basis for calculating the Cofins, situation considered by the Group not likely to happen.
21.3 Reconciliation of the normal tax rate with the effective rate
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31-12-2010 Rate Tax
Consolidated profits before tax and non-controlling interests 58.075 Tax determined on basis of nominal rate 29,00% 16.842 Depreciation not accepted 0,03% 19 Impact of entities with different tax rate -5,80% -3.369 Effect of different rates applied at Foreign branches 0,54% -316 Losses on tangible assets (net) 4,52% 2.624 Fiscal benefits -0,52% -303 Other benefits Profits appropriated from companies recorded through the equity method 2,02% 1.171 Employee benefits -1,55% -897 Negative Goodwill 6,05% -3.495 Others 2,80% 1.628 23,94% 13.904
31-12-2009 Rate Tax
Consolidated profits before tax and non-controlling interests 66.667 Tax determined on basis of nominal rate 26,50% 17.667 Depreciation not accepted 0,44% 293 Impact of entities with different tax rate -13,07% -8.715 Effect of different rates applied at Foreign branches -1,53% -1.021 Losses on tangible assets (net) -2,07% -1.378 Fiscal benefits -0,57% -379 Other benefits Profits appropriated from companies recorded through the equity method 5,09% 3.394 Employee benefits -0,22% -143 Negative Goodwill -16,51% -11.006 Others 2,64% 1.759 0,71% 471
Tax losses not used in relation to which no deferred tax asset was accounted in the balance sheet:
- Banif Investimentos SGPS: 444 thousand euros - Banif SGPS, SA: 21,848 thousand euros - Banif (Açores) SGPS, SA: 405 thousand euros
22. OTHER ASSETS - 64 -
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Gold 22 22 Other precious metals, coins and metals 525 511 Other receivables from residents 1 1 548 534 Subsidies receivable 10.335 6.409 10.335 6.409 Shareholders' Loans 22.116 22.095 Sundry debtors 145.176 100.585 Public administrative sector 5.199 5.327 Other earnings receivable 4.972 3.256 Pension Fund 17.329 14.422 Operations on Securities to settle 405 1.166 Insurance 786 1.958 Foreign currency position 7.105 5.571 Investment - securities account 2.979 1.629 Other assets 218.770 122.386 424.837 278.395 Impairment Losses -7.172 -6.427 428.548 278.911
In 2010, the item “other assets” comprises 68,339 thousand euros in advance for the purchase of property to the Banif IMOPREDIAL Investment Fund, to materialize in 2011.
23. DEPOSITS FROM CENTRAL BANKS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Deposits from central banks 1.937.628 1.193.799 Interes on deposits from central banks 519 2.760 1.938.147 1.196.559
“Deposits from Central Banks” correspond to refinancing operations with the European Central Bank (ECB), as part of the liquidity-providing operations, secured against eligible assets, as described in Note 28 on securities issued under securitization operations, Note 12 on Loans and advances to customers and Notes 9, 10 and 13 on securities.
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24. TRADING LIABILITIES
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Derivative financial instruments with negative fair value 136.904 80.251 Overdrafts 8.355 4.079 145.259 84.330
Note 15 provides the detail of the derivatives by type of instrument.
25. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
The financial liabilities at fair value through profit or loss refer to debt instruments issued by the Group, with one or more embedded derivatives which under the amendment to IAS 39 – “Fair value option”, were designated on initial accounting at fair value through profit or loss.
This item breaks down by issuers as follows:
31-12-2010 31-12-2009
Banif - Banco Internacional do Funchal, S.A. 4.957 20352 Euro Invest Série 8 19.518 30410 Euro Invest Série 9 42.020 39993 Trade Invest Série 14 - 59910 Banif - Banco Internacional do Funchal, S.A. (Brasil) 5.521 5025 Banif - Banco de Investimento (Brasil) 20.476 37330 Banif Cayman 42.837 47183
Held by Banif - Financial Group -16.443 -19954 118.886 220.249
At December 31, 2010, the debt issued by the Group presented the following conditions:
Nominal Value Held by the Balance Sheet Name Issue Date Repayment Date Interest Rate in Issue Group Value
Year 1: fixed rate of BBCA 2006/2011 31-03-2006 31-03-2011 3,25%, other 4 years: 4.957 -252 4.705 Euribor 6M plus 1% Euro Invest Série 8 13-04-2007 13-04-2012 5% 19.518 -8.875 10.643 Euro Invest Série 9 22-10-2007 22-10-2012 6% 42.020 -1.632 40.388 BBI Brasil 2010 26-03-2012 5,3% 5.642 -680 4.962 BBI Brasil 2010 26-03-2012 5% 14.834 -5.004 9.830 Banco Banif Brasil 2014 17-12-2004 17-12-2014 7% 5.521 - 5.521 Banif Cayman Zero Coupon 02-06-2008 02-06-2018 - 42.837 - 42.837 135.329 -16.443 118.886
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In 2010, the following issues were repaid:
- Banif Euro Stoxx 50 2005/2010: 5,848 thousand euros - Banif SFE Dólar Multi-activos 2005-2010: 1,309 thousand euros - Banif Euro Multi-activos 2005-2010: 3,823 thousand euros - Banif Cayman 2008-2010 USD: 6,128 thousand euros - Banif Cayman 2008-2010 EUR: 2,000 thousand euros - BBI Brasil 2010: 5,488 thousand euros - BBI Brasil 2010: 4,660 thousand euros - BBI Brasil 2010: 7,143 thousand euros - BBI Brasil 2010: 20,039 thousand euros - Trade Invest S14: 53,455 thousand euros
26. DUE FROM OTHER BANKS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
From Banks in Portugal Deposits 165.761 326.106 Loans 294.750 284.946 Others 13.879 4.042 474.390 615.094 From Banks abroad Deposits 589.724 55.570 Loans 54.103 1.017.254 Sales with repurchase agreements 151.558 65.497 Others 11.788 54.045 807.173 1.192.366 Financial Costs 5.316 6.036 1.286.879 1.813.496
27. LOANS AND ADVANCES TO CUSTOMERS
This item breaks down as follows:
Description 31-12-2010 31-12-2009
Deposits Sight 1.647.748 1.281.592 Ter 5.521.242 4.846.045 Savings 108.826 117.128 Others 409.842 489.252 7.687.658 6.734.017 Others debits Loans 100.908 16.679 Others 51.484 41.778 152.392 58.457 7.840.050 6.792.474
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28. DEBT SECURITIES IN ISSUE
This item breaks down by issuers as follows:
31-12-2010 31-12-2009 Banif Finance 357.902 552.464 Banif 652.292 498.854 Atlantes Mortgage Nº3 524.246 560.917 Atlantes Mortgage Nº2 305.817 330.203 Atlantes Mortgage Nº4 550.000 550.000 Atlantes Mortgage Nº5 500.000 500.000 Atlantes Mortgage Nº6 87.159 - Atlantes Mortgage Nº7 397.000 - Azor Mortgage Nº2 252.900 269.889 Atlantes Mortgagr Nº1 188.534 210.704 Azor Mortgage Nº1 78.817 88.578 Atlantes Finance Nº3 341.116 - Banif SGPS 100.000 50.000 Banif Go - 20.000 Banif Cayman 84.969 32.613 Banif International Bank Ltd 35.000 35.000 Beta Securitizadora 19.540 18.616 Grup Banif Mais SGPS 348.329 462.713 Held by Banif Financial Group -3.120.006 -2.274.867 Sub - Total 1.703.615 1.905.684 Deposit Certificates 661.616 339.447 Financial Charges 14.790 11.804 2.380.021 2.256.935
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At December 31, 2010, the debt issued by the Group presented the following conditions :
Nominal Value in Balance Sheet Name Issue Date Repayment Date Interest Rate Issue Held by Group Value Banif Finance 2007-2012 22-05-2007 22-05-2012 Euribor 3M + 0,30% 280.482 - 280.482 Banif Finance 2010-2013 EUR 23-10-2010 23-10-2013 6,00% 40.000 -7.456 32.544 Banif Finance 2010-2013 USD 23-10-2010 23-10-2013 5,00% 37.423 -7.039 30.384 Atlantes Mortgage Nº1 classe A 01-02-2003 17-07-2036 Euribor 3M + 0,27% 151.034 -9.470 141.564 Atlantes Mortgage Nº1 classe B 01-02-2003 17-07-2036 Euribor 3M + 0,65% 22.500 - 22.500 Atlantes Mortgage Nº1 classe C 01-02-2003 17-07-2036 Euribor 3M + 1,305 12.500 - 12.500 Atlantes Mortgage Nº1 classe D 01-02-2003 17-07-2036 Euribor 3M + 3,75% 2.500 - 2.500 Azor Mortgage Nº1 classe A 25-11-2004 20-09-2047 Euribor 3M + 0,15% 50.817 -3.536 47.281 Azor Mortgage Nº1 classe B 25-11-2004 20-09-2047 Euribor 3M + 0,,38% 19.000 - 19.000 Azor Mortgage Nº1 classe C 25-11-2004 20-09-2047 Euribor 3M + 0,75% 9.000 - 9.000 Atlantes Mortgage Nº2 classe A 05-03-2008 18-09-2060 Euribor 3M + 0,33% 279.917 -279.917 0 Atlantes Mortgage Nº2 classe B 05-03-2008 18-09-2060 Euribor 3M + 0,95% 18.400 -18.400 0 Atlantes Mortgage Nº2 classe C 05-03-2008 18-09-2060 Euribor 3M + 1,65% 7.500 -7.500 0 Azor Mortgage Nº2 classe A 24-07-2008 21-10-2065 Euribor 3M + 0,30% 206.400 -206.400 0 Azor Mortgage Nº2 classe B 24-07-2008 21-10-2065 Euribor 3M + 0,80% 46.500 -46.500 0 Atlantes Mortgage Nº3 classe A 30-10-2008 20-08-2061 Euribor 3M + 0,20% 482.846 -482.846 0 Atlantes Mortgage Nº3 classe B 30-10-2008 20-08-2061 Euribor 3M + 0,50% 41.400 -41.400 0 Atlantes Mortgage Nº4 classe A 16-02-2009 30-03-2064 Euribor 3M + 0,15% 514.250 -514.250 0 Atlantes Mortgage Nº4 classe B 16-02-2009 30-03-2064 Euribor 3M + 0,30% 35.750 -35.750 0 Atlantes Mortgage Nº5 classe A 19-12-2009 23-11-2068 Euribor 3M + 0,15% 455.000 -455.000 0 Atlantes Mortgage Nº5 classe B 19-12-2009 23-11-2068 Euribor 3M + 0,30% 45.000 -45.000 0 Atlantes Mortgage Nº6 classe A 30-06-2010 23-10-2016 4,50% 87.159 -87.159 0 Atlantes Mortgage Nº7 classe A 19-11-2010 19-11-2066 Euribor 3M + 0,15% 357.300 -357.300 0 Atlantes Mortgage Nº7 classe B 19-11-2010 19-11-2066 Euribor 3M + 0,30% 39.700 -39.700 0 Atlantes Finance Nº3 classe A 29-07-2010 29-04-2026 Euribor 3M + 1,10% 167.079 -167.079 0 Atlantes Finance Nº3 classe B 29-07-2010 29-04-2026 Euribor 3M + 2,50% 174.037 -174.037 0 1st Year: 6,25%, Banif - SGPS 2008-2011 15-07-2008 15-07-2011 other years: Eur 6M 50.000 -2.508 + 0,75% 47.492 Banif - SGPS 2010-2013 21-12-2010 21-12-2013 6,00% 50.000 - 50.000 Banif Cayman Zero Coupon EUR 08/11 22-12-2008 22-12-2011 - 20.000 - 20.000 Banif Cayman Zero Coupon USD 08/11 22-12-2008 22-12-2011 - 14.968 - 14.968 Banif Cayman 22-10-2007 22-10-2012 Euribor 6M + 1,40% 50.000 -50.000 0 Beta Securitizadora 2017 06-06-2008 06-06-2017 11,00% 2.652 - 2.652 Beta Securitizadora 2018 06-11-2008 06-11-2018 10,50% 1.106 - 1.106 Beta Securitizadora 2010 30-09-2026 6,77% 1.990 - 1.990 Beta Securitizadora 01-09-2021 6,25% 13.791 - 13.791 Banif International Bank 13-04-2007 13-04-2012 Euribor 6M + 0,25% 35.000 -35.000 0 Banco Mais PC 8ª emissão 08-10-2009 06-04-2011 1,88% 20.000 - 20.000 BMORE Finance Nº5 plc 01-11-2007 01-11-2017 Conduit + 1,00% 275.000 - 275.000 Banco Mais 2007/2012 26-10-2007 26-10-2012 3,25% 30.000 - 30.000 BMORE Nº4 Class A Secured Floating Rate 01-05-2004 01-05-2014 Euribor 3M + 0,20% - - - BMORE Nº4 Class B Secured Floating Rate 01-05-2004 01-05-2014 Euribor 3M + 0,35% - - - BMORE Nº4 Class C Secured Floating Rate 01-05-2004 01-05-2014 Euribor 3M + 0,55% 15.329 - 15.329 BMORE Nº4 Class D Secured Floating Rate 01-05-2004 01-05-2014 Euribor 3M + 0,94% 8.000 - 8.000 Banif 2009-2012 com Garantia da Republica Portuguesa 08-05-2009 08-05-2012 3,25% 502.292 -46.759 455.533 Banif 2011 24-06-2010 27-06-2011 Eur 12M + 0,50% 150.000 - 150.000 4.823.621 3.120.006 1.703.615
In 2010, the following issues were repaid: - Bmore No. 3 C Class: 4,128 thousand euros - Banco Mais 2007/2010: 50,000 thousand euros - Banco Mais 2005/2010: 20,000 thousand euros - Banif Finance 2006/2010: 268,892 thousand euros - Banif Go 2006: 15,000 thousand euros
Securitization Operations
The Group securitized consumer credit and mortgage lending through the disposal of those assets to special purposes entities (vehicles) incorporated for this purpose .
Securitization operations are described as follows:
Atlantes Mortgage No. 1
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In the Atlantes Mortgage No. 1 operation, the contracts transferred consisted entirely of home loans from Banif SA, with a value of 500 million euros. Under the legislation in force, a Credit Securitization Fund was created with the name Atlantes Mortgage Finance No. 1 Fund, which acquired the mortgage lending from the transferor and issued participation units subscribed by the Irish corporation Atlantes Mortgage No. 1 Plc. In order to obtain finance, the company Atlantes No. 1 Plc issued Bonds with a total value of 500 million euros.
Azor Mortgage No. 1
Azor Mortgages, launched in November 2004, was the first securitisation operation of home loan credits undertaken by the former BBCA (the second in the Banif Financial Group), with a total value of 281 million euros. In Azor Mortgages, under the legislation in force, the credits initially transferred were acquired by the securitisation company Sagres - Sociedade de Titularização de Créditos, which issued the bonds Azor Notes, fully subscribed by an Irish corporation named Azor Mortgages Plc. In order to obtain finance, the company Azor Mortgages Plc issued Bonds with a total value of 281 million euros.
In December 2006, in accordance with the objectives established for the Banif Financial Group's newly incorporated securitization company, Gamma STC, the Azor Notes together with the respective rights to receive credits and duties of payment to the vehicle Azor Mortgages, plc, originally belonging to Sagres STC, were transferred to Gamma STC. This transfer was approved by the originator of the credits, the original securitization company, rating agencies, the Securities Market Commission, the investors, and other entities involved in the operation, after assessing Gamma's capacity to ensure its management.
Atlantes Mortgage No. 2
In the Atlantes Mortgage No. 2 operation, the contracts transferred consisted entirely of home loans from Banif SA, with a value of 375 million euros. Under the legislation in force, a Credit Securitization Fund was created with the name Atlantes Mortgage Finance No. 2 Fund, managed by Gamma - Sociedade Titularização de Créditos, SA, which acquired the mortgage lending from the transferor and issued participation units subscribed by the Irish corporation Atlantes Mortgage No. 2 Plc. In order to obtain finance, the company Atlantes No. 2 Plc issued Bonds with a total value of 375 million euros.
Azor Morgage No. 2
Azor Mortgages No. 2 was launched in July 2008 as an issue of securitized bonds, collateralized by a portfolio of mortgage lending originated by the former BBCA. Unlike previous issues, which involved foreign-based vehicles, this issue was conducted directly by Gamma STC, without the involvement of any other vehicle from outside Portugal.
In this issue, BBCA transferred to Gamma STC a portfolio of 300 million euros. This acquisition, together with the constitution of the necessary cash reserves, were financed through the issue of the securitized bonds Azor Mortgages No. 2 Class A, B and C, with a total nominal value of 306.75 million euros.
Atlantes Mortgage No. 3
In October 2008, a new operation went ahead, under the name Atlantes Mortgage No. 3, in the form of an issue of securitized bonds involving a portfolio of mortgage lending originating from Banif SA. The Bank transferred to Gamma a portfolio of mortgage lending with a value of 600 million euros. This acquisition, together with the constitution of the necessary cash reserves, were financed through the issue of the securitized bonds Atlantes Mortgages No. 3 Class A, B and C, with a total nominal value of 623.7 million euros.
Atlantes Mortgage No. 4 - 70 -
In February 2009, an operation was conducted under the name Atlantes Mortgage No. 4, under which Banif transferred to Gamma a portfolio of mortgage lending, with a value of 550 million euros, financed through the issue of securitized bonds Atlantes Mortgage No. 4, Class A, B and C with an aggregate nominal value of 567.2 million euros.
Atlantes Mortage No. 5
In December 2009, an operation was conducted under the name Atlantes Mortgage No. 5, under which Banif transferred to Gamma a portfolio of mortgage lending, with a value of 500 million euros, financed through the issue of securitized bonds Atlantes Mortgage No. 5, Class A, B and C with an aggregate nominal value of 520.5 million euros.
Atlantes Mortgage No. 6
In June 2010, an operation was conducted under the name Atlantes Mortgage No. 6, under which Banif transferred to Gamma a portfolio of mortgage lending, with a value of 91 million euros, financed through the issue of securitized bonds Atlantes Mortgage No. 6, Class A and B with an aggregate nominal value of 113 million euros.
Atlantes Mortgage No. 7
In November 2010, an operation was conducted under the name Atlantes Mortgage No. 7, under which Banif transferred to Gamma a portfolio of residential mortgage lending, with a value of 397 million euros, financed through the issue of securitized bonds Atlantes Mortgage No. 7, Class A, B and C with an aggregate nominal value of 460.55 million euros.
Atlantes Finance No. 3
In July 2010, an operation was conducted under the name Atlantes Finance No. 3, under which Banif, Banco Mais and Banif Go transferred to Gamma a portfolio of car credit, car lease, long-term rental and consumer credit, with a value of 382.5 million euros, financed through the issue of securitized bonds Atlantes Finance No. 3, Class A, B and C with an aggregate nominal value of 411.2 million euros.
BMORE Finance No. 4 Plc
The securitization operation BMORE Finance No. 4 plc was carried out on May 18, 2004 with a Special Purpose Entity (SPE) based in Dublin, under which Banif Mais sold consumer credit contracts, finance lease contracts and finance rent contracts in various tranches. The selling price was 105% of par, and the process costs of the initial sale represented 1% of par. The total duration of the operation is 10 years, with a revolving period of three years and a fixed cap of 400 million euros on the operation.
BMORE Finance No. 5 Plc
The securitization operation BMORE Finance No. 5 plc was carried out on December 7, 2007 with a Special Purpose Entity (SPE) based in Dublin, under which Banif Mais sold consumer credit contracts, finance lease contracts and finance rent contracts in various tranches. This is an integrated operation, in two phases, the first being a ramp-up asset backed commercial paper operation with a revolving period of three years, which corresponds to the duration of this phase, and the second an asset backed securitization programme with a duration of 10 years. A fixed cap of 400 million euros was set on the operation.
The bonds issued under Atlantes Mortgage No. 2, Atlantes Mortgage No. 3, Atlantes Mortgage No. 4, Atlantes Mortgage No. 5, Atlantes Mortgage No. 7, Azor Mortgage No. 2 and Atlantes Finance No. 3 are held by entities of the Group, and used as security for refinancing operations with the ECB.
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29. PROVISIONS AND CONTINGENT LIABILITIES
Movements in provisions during the period ended at December 31, 2010 were as follows:
Balance at Reversal and Balance at Description 31-12-2009 Increase Use and Adjustment Recovery 31-12-2010
Provision for guarantees and commitments 2.404 3.082 - -3.360 2.126 Fiscal contigencies 9.887 - 1.470 -171 11.186 Others provisions 2.590 2.783 - -3.455 1.918 Total 14.881 5.865 1.470 -6.986 15.230
In view of the high degree of uncertainty regarding the payment periods for the provisioned contingencies, no time discount was considered.
The item “provision for fiscal contingencies” contains the sum of 1,076 thousand euros (1,714 thousand in 2009), relating to the dispute between BBCA and the European Commission regarding the latter's decision on the adaptation of the Fiscal System to the specific circumstances of the Autonomous Region of the Azores, which excludes the financial sector from the application of a lower IRC rate (corporation tax) in the Azores.
Below are detailed the nature of the obligations in question:
Fiscal contingencies: a present obligation resulting from past events exists where the future outflow of resources relating to tax on profits is likely to happen.
Provisions for guarantees and commitments: a present obligation resulting from past events exists where the future outflow of resources relating to the provision of guarantees and commitments is likely to happen.
Other provisions: a present obligation resulting from past events exists where the future outflow of resources (judicial proceedings against the Group and other banking risks) is likely to happen.
Operations not included in the balance sheet:
The guarantees provided correspond to the following nominal amounts recorded in memorandum accounts: Description 31-12-2010 31-12-2009 Guarantess given (of which): 1.071.263 923.651 Guarantess and sureties 870.638 825.031 Bills and endorsements - 64.302 Letters of Credits and Stand-by - 3.145 Documentary credits opened 200.625 31.173
- The contingencies and other commitments to third parties, not recognized in the Financial Statements as at December 31, 2010 and December 31, 2009 break down as follows:
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Description 31-12-2010 31-12-2009 Other contigent liabilities (of which): 2.712.255 1.806.443 Sureties and compensation -- Other personal guarantess provided and other contigent liabilities - - Assets given as Securities 2.712.255 1.806.443 Commitments to third parties (of Which): 1.197.193 1.611.862 Irrevocable commitments 411.516 410.970 Revocable commitments 785.677 1.200.892 3.909.448 3.418.305
The “Assets given as security” correspond to securities granted in repos and Treasury Bills, which secure the irrevocable commitments to the Deposit Guarantee Fund, the Investor Compensation System, the Intraday Credit with the Bank of Portugal and the refinancing operations with the European Central Bank.
30. INSTRUMENTS REPRESENTING CAPITAL
The item “Instruments representing capital” corresponds to the following situations:
- Fixed remuneration on VMOCs (fixed: 0.03 Eur per VMOC / year). Banif SGPS, SA has recorded a liability of 5,651 thousand euros relating to this fixed remuneration of VMOCs. - Perpetual Subordinated securities with conditional interest, issued by Banif, on the following terms:
Issue: 50 million euros Issue date: 2009/12/30 Maturity date: undetermined Interest rate: Subject to the adoption of a resolution to this effect by the Banif Board of Directors and to the restrictions on the maturity of interest:
(i) For the first two interest payment periods, the Issuer will pay a fixed rate interest of 6.25% p.a.; (ii) After the first anniversary of the Issue Date (exclusive), the Issuer will pay interest at a variable rate corresponding to the Euribor 6 months rate, listed on the second “Target Business Day” immediately to the starting date of each interest period, plus 5,00% per year.
At 2010/12/31, there were 10 million euros held by entities of the Group.
31. OTHER SUBORDINATED LIABILITIES
The item breaks down by issuer as follows:
Description 31-12-2010 31-12-2009 Banif - Banco de Investimento 30.000 30.000 Banco Mais 5.688 5.814 Banif - Banco Internacional do funchal 428.388 433.868 Banif Go 21.000 21.000 Banif Finance Ltd 158.784 182.826 Held by - Grupo financeiro -373.424 -349.265 Sub Total 270.436 324.243 Financial Costas and deferred costs -2.258 -1.760 268.178 322.483 - 73 -
At December 31, 2010, the liabilities issued by the Group presented the following composition:
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Nominal Value in Held by the Balance Sheet Name Issue Date Repayment Date Interest Rate Issue Name Value 1st 5year Eur 6M + Banif - Banco de Investimento 2006 - 2016 29-06-2006 29-06-2016 0,875% other year 15.000 -15.000 0 Eur 6M + 1,15% Banif - Banco de Investimento 2007 - perpétua 05-05-2007 Perpétua Eur 3M + 1,35% 15.000 -250 14.750 1st coupon: 5,375%; subsequent Banif - Banco Internacional do Funchal 2011-2011 16-07-2001 16-07-2011 12.498 -8.720 3.778 coupons: Eur 6M + 0,75% up to 31/12/2010 Eur 3M + 0,75% Banif - Banco Internacional do Funchal 2005 - 2015 30-12-2005 30-12-2015 45.000 -18.536 26.464 remaining period Eur 3M + 1,25% up to 22/12/2014 Eur 3M + 1% Banif - Banco Internacional do Funchal 2006 - perpétua 22-06-2006 Perpétua 30.272 -30.272 0 remaining Eur 3M + 2% Eur 3M + 0,75% Banif - Banco Internacional do Funchal 2006 - 2016 22-12-2006 22-12-2016 remaining period Eur 38.040 -38.040 0 3M + 1,25% up to 22/12/1016 Eur 6M + 1,37% Banif - Banco Internacional do Funchal SFE 2007 22-12-2007 Perpétua 23.056 -23.056 0 remaining period Eur 3M + 2,37% up to 28/12/1017 Eur 6M + 3,0362% Banif - Banco Internacional do Funchal SFE 2008 30-06-2008 Perpétua 15.000 -15.000 0 remaining period Eur 3M + 3,0362% Banif - Banco Internacional do Funchal SFE 2009 - 2019 31-12-2009 31-12-2019 6,47% 75.000 -75.000 0 1st year: 6,25% up to 11th coupon Eur 6M + Banif - Banco Internacional do Funchal 2008 - 2018 18-08-2008 18-08-2018 24.948 -1.063 23.885 1% remaining period + 1,15% up to 30/06/2014 4,5% remaining Banif - Banco Internacional do Funchal 2009 - 2019 30-06-2009 31-12-2019 99.682 - 99.682 period Eur 6M + 2,75% first 5y Eur 6M + BBCA 2006 - 2016 23-10-2006 23-10-2016 1% Other year Eur 19.892 -1.677 18.215 6M +1,25% up to the 11th coupon Eur 6M + BBCA 2007 - 2017 25-09-2007 25-09-2017 10.000 -777 9.223 1% other year Eur 6M +1,25% up to 22/12/2016Eur 3M + 1,37% BBCA 2007 perpétua 22-12-2007 Perpétua 25.000 -25.000 0 remaining period Eur 3M + 2,37%
up to the 11th coupon Eur 6M + BBCA 2008 perpétua 30-06-2008 Perpétua 10.000 -10.000 0 1% other year Eur 6M +1,25% Banif Go 2005 - 2015 30-06-2005 30-06-2015 Eur 12M + 1,5% 6.000 -6.000 0 up to 28/12/2017Eur 3M + 3,0362% Banif Go 2008 30-06-2008 Perpétua 15.000 -15.000 0 remaining period Eur 3M + 4,0362%
up to 21th coupon Eur 3M + 0,80%, Banif finance 2004 - 2014 29-12-2004 29-12-2014 14.890 -1.197 13.693 remaining period Eur 3M + 1,30% up to 22/12/2016Eur 3M + 1,37% Banif Finance 2006 - perpétua 22-12-2006 Perpétua 32.754 - 32.754 remaining period Eur 3M + 2,37% up to 22/12/2011 Eur 3M + 0,75% Banif Finance 2006 - 2016 22-12-2006 22-12-2016 11.140 - 11.140 remaining period Eur 3M + 1,25% 3% liability issued Banif Finance 2009 - 2019 31-12-2009 31-12-2019 100.000 -88.836 11.164 at 75% Fixed rate 2,25% + Banco Mais 2011 Dec 04 40.603 supplementary 5.688 - 5.688 interes 643.860 -373.424 270.436
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Banif Finance and Banif repurchased emissions in the sum of 47,538 thousand euros and 5,000 thousand euros, respectively:
32. OTHER LIABILITIES
The item breaks down as follows:
Description 31-12-2010 31-12-2009 Creditors and other deposits 60.700 171.396 Personal costs 31.095 30.592 Overheads 3.883 2.532 Other interest and similar charges 3.826 3.213 Securities operations for settlement 4.284 548 Guarantees given and other contingent liabilities 211 215 Foreign exchange position 6.246 7.910 Public Administration 20.923 17.108 Others 217.982 234.642 Total 349.150 468.156
33. SHAREHOLDERS' EQUITY OPERATIONS
Shareholders’ Equity items broke down as follow at December 31, 2010 and December 31, 2009:
Description 31-12-2010 31-12-2009 Equity 570.000 490.000 Issue premiums 104.114 104.114 Other equity premiums 95.900 95.900 Treasury shares -1.043 -1.035 Revaluation reserve -10.572 6.645 Legal reverse 30.091 28.881 Other reserves and retained earnings (free) 213.237 163.172 Profit for the period 33.426 54.075 Interim dividends -- Non-controlling interests 243.724 238.174 Total Equity 1.278.877 1.179.926
The share capital is represented by 570,000,000 shares, with a nominal value of €1.00 per share, and is fully paid up.
In the course of 2010 fiscal year, the Company distributed dividends of 19.6 million euros for the fiscal year of 2009, corresponding to €0.04 per share (490,000,000 shares).
In 2010 fiscal year, the Company paid the variable remuneration component of VMOCs in the sum of 2.8 million euros (equivalent to €0.04 per VMOC).
In December, the Company conducted a capital increase reserved for shareholders, accounting to 80 million euros, fully paid up.
The revaluation reserves recorded correspond essentially to the following situations (amounts net of taxes): Rentipar Seguros, SGPS portfolio of securities (-16,848 thousand euros), Banif - Banco de Investimento portfolio of securities (-6,991 thousand euros), Banif - Banco Internacional do Funchal securities (-2,883 thousand euros) and revaluation of property (18,647 thousand euros). - 76 -
The information on the solvency ratio, on an IFRS and Basel basis, is presented in chapter III Analysis of Individual and Consolidated Accounts, in the Management Report.
The consolidated profit of the Banif Financial Group was determined as follows:
31-12-2010 31-12-2009 Banif SGPS -9.651 33.627 Sociedade Imobiliaria Piedade -9 -16 Espaço Dez -11 -56 Banif Imobiliaria -796 -369 Banif Bank (Malta) -1.942 -2.326 Banca Pueyo 1.920 2.506 Banco Caboverdiano de Negocios 248 589 BankPime -8.105 -3.531 Inmobiliaria Vegas Altas 37 34 Banif Holdnigs (Malta), Ltd -169 301 Centaurus Reality Group -- Grupo Banif Mais SGPS 22.521 4.140 Banieuropa Holding -9 - Banif Comercial - SGPS -4.814 -426 Banif - Banco Internacional do Funchal 5.433 -12.726 Numberone SGPS 44 7 Banif Finance Ltd 13.631 30.052 Banif Açores SGPS -1.303 1.008 Investaçor SGPS -61 -111 Investaçor Hoteis -177 200 Açortur 39 -37 Turotel -73 -156 Hotel Pico -15 16 Banif & Comercial Açores, Inc Fall River -- Banif & Comercial Açores, Inc San José -1 1 Banif Go -3.442 3.726 Banif Rent 260 675 Banco Banif Brasil 12.183 8.202 ZACF 62 - Rentipar Seguros SGPS 2.116 -8.004 Banif - Investimentos SGPS -779 -1.798 Banif Banco de Investimento 7.621 1.676 Banif (Cayman) -375 -4.062 Banif Banco de Investimento (Brasil) -6.141 99 Banif Gestão de Activos (Brasil) -1.941 -443 Banif Corretora de Valores e Cambios 2.543 3.261 Beta Securitizadora 535 213 Banif Int. Asset Management 20 63 Banif Gestao de Activo 2.888 1.546 Banif Açor Pensoes 156 81 banif (Brasil) -6 -1 FINAB - 158 Banif Intern. Holdings Ltd -27 937 Banif Securities Holdings -1.836 -1.047 Econofinance -3 2 Banif Financial Services 3 2 Banif Securities Inc. -209 491 Banif Finance (USA) CORP 1.688 734
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31-12-2010 31-12-2009 Banif Forfaiting company -1.513 719 Banif International Bank -588 -3.081 Banif Capital - Soc de Capital de Risco 84 -221 Banif Multifund 1 24 Centro Venture 1 2 Gamma 328 186 Banif Trading INC -11 -11 MCO2 -63 -9 Banif Ecoprogresso Trading 33 - Atlantes N.2 - 2 Atlantes Mortgage -1.054 -2.336 Atlantes Mortgage 2 -1.422 -1.289 Atlantes Mortgage 3 -675 -2.757 Atlantes Mortgage 4 1.869 858 Atlantes Mortgage 5 1.021 928 Atlantes Mortgage 6 -4.891 - Atlantes Mortgage 7 2.898 - Atlantes Finance 3 6.711 - Azor Mortgage 40 330 Azor Mortgage 2 -687 -1.825 Trade Invest S14 461 482 Euro Invest S3a, S3b, S8, S9 -331 -224 FIP Banif Real Estate 697 3.349 Banif US Real estate -- Banif Nitor FI Açoes -- Banif Nitor Maestro FIM -- Banif Nitor Institucional FIM -- Real Estate Brasil -- Banif Equity Hedge FIM -- Art Invest 129 - Banif Fortuny -111 -222 SPE Panorama -361 -37 Imogest -- Capven -- Infra Invest FEIA -416 -13 Banif Inv Conservador 8 - Banif Inv Moderado 16 1 Banif Iberia -6 16 Banif Renda Habitação -- Banif Gestão Imobiliaria -- Banif Gestão Patrimonial -865 - Gestarquipark -- Banif Gestão Activa 27 - Banif Europa Lesta 45 - Pedidos Liz -1 - 33.426 54.075
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34. NON-CONTROLLING INTERESTS
At December 31, 2010 and December 31, 2009, the non-controlling interests item broke down as follows:
31-12-2010 31-12-2009 31-12-2010 31-12-2009 Entity Balance Balance Result Result Sheet Value Sheet Value Banif Finance 133.760 134.996 -9.410 -10.471 Imogest 53.122 54.717 -1.160 -1.378 Banif Cayman 13.009 12.822 -579 -680 Investaçor Hoteis SA 5.591 4.748 122 -138 Açortur - Investimentos Turisticos dos Açores 5.349 5.222 -40 38 Banco Caboverdiano de Negocios 5.011 4.593 -346 -550 Banif Nitor Institucional FIM 4.496 288 -234 -9 Banif Gestao Patrimonial 4.300 - 317 - Banif Bank (Malta) 3.923 4.856 811 919 Banif Iberia 3.017 1.925 6 -10 Gestarquipark 2.424 - -96 - Banif International Holdings 2.363 2.099 - -165 Banif Gestao Activa 1.873 - -35 - Turotel - Turismo e Hoteis dos Açores 1.643 1.466 53 113 Banif Açor Pensoes 1.542 1.446 -47 -50 Capven 1.313 1.795 157 651 Banif Banco Internacional do Funchal (Brasil) 1.195 1.060 -5 -170 Art Invest 1.037 1.011 -77 146 Banif Equity Hedge 949 - -85 - SPE Panorama 481 458 22 2 Investimentos Turisticos e Similares Hoteis e Apart-Hotel Pico 457 448 15 -16 Banif Maestro 423 482 -24 -12 Banif Nitor FI Ações 397 196 - -19 Banif Inv Moderado 358 147 -11 - Banif Inv Conservador 309 59 -5 - FIP Banif Real Estate 279 248 -11 1 Centro Venture 261 260 - -2 Beta Securitizadora 46 28 -4 -2 Banif Financial Services Inc 41 23 - - Banif Trading Inc 20 20 2 - ZACF 5 - - - Banif Forfaiting Company -70 132 148 -124 Banif Finance (USA) -1.129 408 -271 -131 Investaçor SGPS SA -4.071 -4.632 42 77 Finab - 181 - -105 Banif Capital - 55 - 55 Banif Fortuny - 4.778 - 222 Banif Nitor FIM - 1.839 - -313 243.724 238.174 -10.745 -12.121
The non-controlling interests item for Banif Finance comprises:
- The issue, on December 22, 2004, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 75 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, quarterly and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (December 22, 2014), plus: i) a sum corresponding to the preferential dividend accumulated and not paid in relation to the most - 79 -
recent preferential dividend period, declared or not, up to the date set for the repayment, and ii) any additional sums, provided prior authorisation is obtained from the Bank of Portugal and the Issue Guarantor (Banif - Banco Internacional do Funchal), and provided the requirements of Cayman Islands Law are satisfied. Preference shares with a value of 47.9 million euros were repurchased in 2009;
- The issue, on December 28, 2007, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 25 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, quarterly and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (December 28, 2017). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law;
- The issue, on December 29, 2008, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 20 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, quarterly and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (December 29, 2018). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law;
- The issue, on December 29, 2008, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 35 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, quarterly and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (December 29, 2018). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law;
- The issue, on December 31, 2008, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 25 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, quarterly and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (December 31, 2018). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law;
- The issue, on June 30, 2009, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 15 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, annually and in arrears. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date as from the first repayment date (June 30, 2019). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law;
- The issue, on June 30, 2009, of Guaranteed Perpetual Preference Shares with a unit preference liquidation value of 1,000 euros, with a total value of 10 million euros. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, annually. Banif Finance has a call option, permitting it to repay all or part of this issue, at its preferential liquidation value, at any dividend payment date - 80 -
as from the first repayment date (June 30, 2019). Exercise of this option is subject to prior authorisation from the Bank of Portugal and compliance with the requirements of Cayman Islands Law.
The non-controlling interests item for Banif Cayman refers to:
- The issue, on November 12, 2003, of 16,000,000 Preference Shares with a unit preferential liquidation value of 1 dollar, issued in two tranches of 10 million dollars and 6 million dollars. The preferential dividends are paid to the holders of the preference shares, if and when declared by the Company's Board of Directors, annually and in arrears, on December 12 each year.
35. INTEREST AND SIMILAR INCOME AND INTEREST AND SIMILAR COSTS
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Interest and Similar Income Interest on liquid funds 2.474 2.602 Interest on funds due from banks 19.296 25.755 Interest on lending to customers 554.035 564.050 Interest on overdue credit 12.784 11.588 Interest and similar income from other assets 150.117 158.861 Commissions received associated with amortized with amortized cost 12.282 10.070 750.988 772.926 Interest and Similar expense Interest on deposits from central banks 12.770 11.692 Interest on deposits from other banks 44.140 59.042 Interest on customer deposits 151.482 188.733 Interest on loans 2.540 11.485 Interest on liabilities represented by securities, non-subordinated 83.482 72.987 Interest and similar expense on other financial liabilities 36.992 73.960 Interest on subordinated liabilities 14.706 12.183 Commissions paid associated with amortized cost 16.350 7.064 Others 40.394 47.286 402.856 484.432
36. INCOME FROM EQUITY INSTRUMENTS
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Dividends from financial assets available for sale 905 1.524 905 1.524
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37. INCOME AND COSTS WITH COMMISSIONS
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Comission income Guarantees provided 14.592 12.041 Credit operations 1.863 1.246 Annuities 3.551 3.255 Card management 11.165 9.725 Transfers 1.138 1.023 Collective investment institutions in securities 12.239 14.041 Administration 1.406 554 Collection 5.636 4.728 Deposit and Custody 320 303 Other services rendered 24.835 22.747 Other commissions received 68.473 56.312 145.218 125.975 Commission expenses Guarantees received 4.980 3.483 For other services received 11.163 7.780 Others commissions paid 7.000 3.595 23.143 14.858
Commission income includes a sum of 12,239 thousand euros (14,041 thousand euros in 2009) for management of collective investments in securities.
38. PROFIT AND LOSS ON FINANCIAL OPERATIONS
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Gains on financial operations Foreign exchange gains 133.438 199.647 Gains on other financial assets at fair value through profit or loss 54.940 37.199 Gains on trading assets 362.616 429.736 Gains on financial assets available for sale 14.003 22.508 564.997 689.090 Losses on financial operations Foreign exchange gains 122.660 158.070 Gains on other financial assets at fair value through profit or loss 37.096 30.268 Gains on trading assets 380.008 465.044 Gains on financial assets available for sale 873 - 540.637 653.382
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39. PROFIT AND LOSS FROM DISPOSAL OF OTHER ASSETS AND OTHER OPERATING INCOME
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Other income Services Rendered 7.188 7.193 Recovery of credit and interest 7.253 4.643 Reimbursement of expenses 14.012 14.820 Gains on disposal of other non-financial assets 2.895 5.544 Operating lease income 17.092 14.327 Repurchase of issued liabilities 14.800 32.111 Others 91.647 45.656 154.887 124.294 Other costs Membership fees and donations 737 665 Contributions to FGD and FGCAM 4.183 2.288 Other taxes 10.486 10.932 Losses on the disposal of customer loans 26 - Others 82.463 38.199 97.895 52.084
40. COSTS WITH PERSONNEL
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Remuneration of directors and auditors 11.328 9.112 Remuneration of employees 124.477 114.750 135.805 123.862 Mandatory social charges Charges on remuneration 31.434 27.668 Charges relating to pensions: -Defined benefit plan (Note 46,1,2, and Note 46,1,4) 4.429 6.692 -Defined contribution plans 2.610 2.984 Other social charges 2.822 2.281 41.295 39.625 Other costs with personnel 7.806 6.920
184.906 170.407
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41. OVERHEADS
This item breaks down as follows:
Description 31-12-2010 31-12-2009 Specialist services 45.231 38.466 Communications 14.550 13.303 Advertising and publications 10.080 11.736 Travel, accommodation and entertainment 5.841 6.283 Upkeep and repair 8.516 6.879 Water, power and fuel 5.737 4.855 Rentals 25.986 22.254 Insurance 3.048 2.789 Transport 2.081 2.111 Consumables 1.445 1.673 Training 710 1.072 Others 20.951 15.709 Total 144.176 127.130
The item “specialized services” comprises the following values with the Portuguese Society of Chartered Accountants and its network of companies, as mentioned in paragraph b) No. 1 of Article 508 - F of the Companies Act:
Statutory audit services: 1,273 thousand euros Other assurance services: 214 thousand euros Tax consultancy services: 24 thousand euros Others: 5 thousand euros
42. IMPAIRMENT OF LOANS AND OTHER ASSETS
Movements in the account for Impairment of Loans and Advances to Customers in the period ended at December 31, 2010 were as follows:
Entities included the first time in Balance at consolidate Use and Reversal and Balance at Description 31-12-2009 accounts Increase adjustments Recovery 31-12-2010 Impairment on lending 517.199 - 177.095 -30.286 -69.151 594.857 Total 517.199 - 177.095 -30.286 -69.151 594.857
Movements in the account for Impairment of other Assets in the period ended at December 31, 2010 were as follows:
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Balance at Use and Reversal and Balance at Description 31-12-2009 Increase adjustments Recovery 31-12-2010 Financial assets available for sale 21.086 5.113 -22.080 - 4.119 Non-current assets held for sale 4.269 3.025 -1.101 -814 5.379 Investments in subsidiaries and affiliates 362 8.678 - - 9.040 Goodwill - 371 - - 371 Debtors and other investments 6.427 1.449 - -704 7.172 Total 32.144 18.636 -23.181 -1.518 26.081
43. EARNINGS PER SHARE
43.1 Basic earnings per share
Description 31-12-2010 31-12-2009 Basics Profit for the fiscal year 33.426 54.075 Weighted average number of ordinary shares in issue 490.921.474 384.259.464 Basic gain per share (expressed in € per share) 0,07 0,14
43.2 Diluted earnings per share
Description 31-12-2010 31-12-2009 Diluted profit for the fiscal year 33.426 54.075 Average number of shares: Weighted average number of ordinary shares in issue 490.921.474 384.259.464 VMOC's 70.000.000 17.643.836 Weighted average number of ordinary shares in issue adjusted for calculation of diluted gain per share (in €) 560.921.474 401.903.300 Diluted gain per share (expressed in € per share) 0,06 0,13
44. FINANCIAL INSTRUMENTS RISK
The analysis of financial instruments risk is presented in chapter II - Operations of the Banif Financial Group in 2010, item 2.3 Control of Operating Risks, Management Report.
45. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments at fair value
The following tables present an analysis of the categories of financial instruments accounted at fair value in the financial statements as at December 31, 2010 and December 31, 2009, and respective valuation methods:
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Market Value Valuation Techniques 31-12-2010 or Listed Total Market Analysis Others Price Assets Trading assets 262.194 144.334 54.783 461.311 Other financial assets at fair value through profit or loss 302.802 90.706 - 393.508 Financial assets available for sale 249.604 10.117 34.689 294.410
Liabilities Trading liabilities - 68.498 68.406 136.904 Other financial liabilities at fair value through profit or loss - 118.886 - 118.886
Market Value Valuation Techniques 31-12-2009 or Listed Total Market Analysis Others Price Assets Trading assets 176.062 138.260 38.165 352.487 Other financial assets at fair value through profit or loss 324.632 145.682 - 470.314 Financial assets available for sale 84.511 10.644 10.216 105.371
Liabilities Trading liabilities - 41.623 42.707 84.330 Other financial liabilities at fair value through profit or loss - 220.249 - 220.249 Debt securties in issue - 48.034 - 48.034
The following assumptions were used in constructing the above tables:
- Market values (Level 1): this column includes the financial instruments valued on the basis of two-way market prices;
- Market analysis (Level 2): this column includes the financial instruments valued on the basis of internal models using observable market inputs;
- Others (Level 3): this column includes the financial instruments valued on the basis of internal models which include non-observable market parameters.
Unlisted equity instruments, accounted under Financial assets available for sale at acquisition cost, due to the impossibility of a reliable valuation, are found in the column "others".
The reconciliation between opening balances and closing balances of the level 3 is as follows:
Total Level 31-12-2009 (losses)/Gains Aquisitions Disposals transfers 31-12-2010 Trading assets Credit derivatives 38.165 16.618 - - - 54.783 Financial assets available for sale Equity instruments 10.216 - 6.050 -4.948 - 11.318 Debt instruments - - 23.371 - - 23.371 Trading liabilities Credit derivatives -42.707 -25.699 - - - -68.406
Fair value is determined in line with the policies defined in Note 3.10.2.
In the internal valuation models for trading securities and financial instruments at fair value through profit or loss, the market interest rates are determined on the basis of information disclosed by Bloomberg. The rates for maturities up to one year are the market rates in the interbank money market, whilst the rates for maturities of more than one year are obtained through listings for interest rate swaps. The interest rate curve obtained is then adjusted against the values of short term interest rate futures. Interest rates for specific maturities are determined by interpolation methods. The same interest rate curves are also used in projecting the nondeterministic cash flows, such as benchmarks. - 86 -
The interest rates used for determining the interest rate curve with reference to December 31, 2010, for EUR and USD, are as follows:
Maturity EUR USD
1 day 0,25% 0,20% 7 days 0,35% 0,23% 15 days 0,43% 23,00% 1 month 0,62% 0,23% 2 months 0,78% 0,25% 3 months 0,96% 0,29% 4 months 1,07% 0,34% 5 months 1,16% 0,40% 6 months 1,26% 0,46% 7 months 1,31% 0,51% 8 months 1,35% 0,56% 9 months 1,40% 0,62% 10 months 1,44% 0,56% 11 months 1,48% 0,51% 1 year 1,53% 0,45% 2 years 1,56% 0,83% 3 years 1,89% 1,31% 4 years 2,23% 1,76% 5 years 2,56% 2,21% 6 years 2,75% 2,54% 7 years 2,93% 2,86% 8 years 3,06% 3,04% 9 years 3,19% 3,23% 10 years 3,32% 3,41% 20 years 3,70% 4,03% 30 years 3,50% 4,13%
The changes in the fair value of "Other financial liabilities at fair value through profit or loss", imputable to credit risk changes of the entity, had an impact of 517 thousand euros on profit or loss in 2010 (917 thousand euros in 2009).
Financial instruments at cost or amortized cost
The following tables present a comparative analysis between the balance sheet value and the fair value of the categories of financial instruments accounted at cost or amortized cost.
Balance Unrecognize 31-12-2010 Sheet Value Fair Value d Gain/Loss Assets Due from banks 708.836 708.836 - Lending and other receivables 12.206.354 12.204.755 -1.499 Non-current assets held for sale 167.456 175.496 8.040 Investmensts held to maturity 63.939 63.840 -99
Liabilities Deposits from other banks 1.286.879 1.286.879 - customer deposits and other loans 7.840.050 7.840.050 - Debt securities 2.380.021 2.380.021 -
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Balance Unrecognize 31-12-2010 Sheet Value Fair Value d Gain/Loss Assets Due from banks 829.290 829.290 - Lending and other receivables 11.487.864 11.487.864 -2.753 Non-current assets held for sale 85.552 88.629 3.077
Liabilities Deposits from other banks 3.010.055 3.010.055 - customer deposits and other loans 6.801.474 6.801.474 - Debt securities 1.776.501 1.776.501 -
For liquid assets, investments and lending with a maturity of less than one year, it was considered that the amount recorded in the balance sheet is a reliable approximation to their fair value. For lending with a maturity of more than one year at an indexed rate, it was also considered that the balance sheet value is a reliable approximation to the fair value. For the fixed rate lending with a maturity of more than one year, the fair value was estimated by discounting the expected cash flows, at the average rate of the operations carried in December 2010 (current market conditions).
For deposits with a maturity up to one year or without a set maturity, which includes deposits without an associated interest rate, it was considered that the amount repayable at the reporting date is a reliable approximation to the fair value.
46. RETIREMENT BENEFIT OBLIGATIONS: LIABILITIES RELATING TO RETIREMENT AND SURVIVORS' PENSIONS
46.1 Banif - Banco Internacional do Funchal, SA
46.1.1 General description
As described in Note 3.16, Banif - Banco Internacional do Funchal SA (the Company) offers its employees various benefits in pension plans and medical care, covering:
- Pension Plan I, a defined benefit (DB) plan, took over the provision assured by the former DB Pension Plan, prior to the Company Agreement (CA), covering not only the pensioners, as follows directly from the applicable legislation, but also the staff working for the Company who, at December 31, 2006, were five or less years away from presumable invalidity retirement (65 years), with exception of the employees incorporated after the merger by incorporation of BBCA, who are not covered by the CA; - Pension Plan II, a defined contribution (DC) plan, covers all employees contracted for active service in the Company prior to January 1, 2007, who had not passed away, retired or rescinded up to the date on which the CA took effect, with exception of the employees incorporated after the merger by incorporation of BBCA, who are not covered by the CA. In relation to the employees integrated in this Plan II, it was defined a specific plan of periodic monthly contributions, in line with their respective salaries, and also made an initial contribution to be allocated to their respective individual accounts, calculated on the grounds of: (i) the complementary old age pensions estimated in the assessment of liabilities conducted by the Pension Plan Actuary at December 31, 2006 and duly reported to the Portuguese Insurance Institute and the Bank of Portugal, and (ii) the current value of future contributions;
- Pension Plan III, also a defined contribution (DC) plan, covers all employees contracted for active service in the Company after January 1, 2007, who had not passed away, retired or rescinded up to the date on which the CA took effect. In relation to these employees, a specific plan of periodic monthly contributions in line with their respective salaries was defined;
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- BBCA Pension Plan, a defined benefit (DB) plan, covers the employees incorporated after the merger by incorporation of BBCA, at January 1, 2009, and the pensioners at the date of the merger by incorporation.
Liabilities relating to these pension plans are financed by two Pension Funds:
- Banif Pension Fund, a closed-end fund, incorporated on December 7, 1989, with the purpose of financing the obligations provided for in Pension Plans I, II and III which are attached to the fund;
- BBCA (former Banco Banif e Comercial dos Açores, SA) Pension Fund, a closed-end fund, incorporated on December 29, 1988, with the purpose of financing the obligations under the BBCA Pension Plan.
In addition to the Pension Funds, there are two insurance contracts providing annuities to cover the retirement pension of one pensioner, taken out with two separate Insurance Companies, not belonging to the same group as the Company. The insured pension is fixed, paid 14 times a year, and is 40% reversible on the death of the pensioner under the terms of the Pension Plan, the respective annual accruals being incurred by the Pension Fund.
The Funds are managed by Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA, a related entity which has subcontracted Banif - Banco de Investimento, SA for the financial management of the funds and valuation of the respective assets.
The actuarial studies on the current value of the liabilities of the defined benefits plan, carried out as at December 31, 2010 and 2009, are the responsibility of the actuary Drª Ana Marta Vasa, of Towers Watson (Portugal).
46.1.2 Pension Plan I (defined benefit)
At December 31, 2010, Pension Plan I (defined benefit) covered a population of 90 Pensioners (86 in 2009) and 12 Current Employees (18 in 2009), beneficiaries of retirement pensions and SAMS, and 2,548 Current Employees (2,411 in 2009), for the purposes of liabilities relating to SAMS. a) Actuarial assumptions
The main actuarial and financial assumptions used for the calculations are as follows:
2010 2009 Actuarial valuation method Unit Credit Proj. Unit Credit Proj. Mortality table: -Men Tv 73/77 Tv 73/77 -Women Tv 88/90 Tv 88/90 Invalidity table EVK80 EVK80 Discount Rate - Pension Liabilities 5,00% 5,00% Discount Rate - SAMS Liabilities 5,50% 6,00% Return Rate on fund Assets 5,00% 5,00% Salary Growth Rate 3,00% 3,00% Pension Growth Rate 2,00% 2,00% Turnover Rate Not applied Not applied
In relation to the 2009 actuarial valuation, the discount rate has been kept for the retirement pension benefit under Pension Plan I, and has been changed from 6.00% to 5.5% for the SAMS benefit, also under Pension Plan I. This change was made to reflect the economic situation, in line with the requirements established by the International Accounting Standard IAS 19. The value of these discount rates corresponds to the interest rate on private debt bonds with high credit rating ("AA") and with the - 89 - maturity similar to that of the liabilities, determined on the basis of the average life expectancy weighted by the payments made by the fund for each of the benefits.
Given that the population covered by pension benefits is closed to new subscriptions, and given that the majority are already receiving pensions, the duration of its liabilities is only 9 years. In contrast, for the purposes of the SAMS benefit, the plan is not closed to new subscriptions, and the duration of its liabilities is 17 years.
The overall expected yield for the fiscal year reflects the expected returns on the fund assets at the end of the previous fiscal year, taking into consideration the characteristics of the fund portfolio and the investment policies.
No turnover rate is applied for the sake of prudence and to the extent that it cannot be reliably determined. b) Liabilities and Hedges
Liabilities accounted in the Balance Sheet were as follows:
2010 2009 Current Value of Liabilities Pensions currently payable 18.052 18.799 Past services of current staff 2.196 3.015 SAMS charges 5.971 4.986 Total 26.219 26.800 Fair Value of Plan assets -25.865 -26.930 Deficit 354 -130 Unrecognized actuarial gains (losses) "Corridor" -3.622 -2.693 Surplus to "Corridor" -1.959 -2.353 Total -4.581 -5.046 Liabilities (Assets) recognized in the Balance Sheet -4.227 -5.176
Liabilities hedge complies with the requirements of Bank of Portugal Notice No. 12/2001.
As at December 31, 2010, the Current Value of Liabilities for Future Services stood at 3,443 thousand euros (349 thousand euros in 2009).
Of unrecognized actuarial losses, the sum of 2,622 thousand euros (2,693 thousand euros in 2009) is included in the corridor and the surplus, in the sum of 1,959 thousand euros (2,353 thousand euros in 2009), will be amortised over 4.9 years, corresponding to the average remaining working life of the plan participants for each of the benefits.
At December 31, 2010, an increase, or reduction, of 1% in the contribution rate to the SAMS would imply an increase in liabilities of 867 thousand euros (771 thousand euros at December 31, 2009), or the reduction of 867 thousand euros (765 thousand euros at December 31, 2009) and an increase in costs for the fiscal year (cost of current services and cost of interest) of 25.5 thousand euros (5.7 thousand euros at December 31, 2009), or the reduction of 25.5 thousand euros (0.9 thousand euros at December 31, 2009). c) Expenses accounted in the fiscal year
In the fiscal years of 2010 and 2009, the Company accounted the following costs relating to Pension Plan I:
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2010 2009 Cost of Current Services 220 76 Interest costs 1.390 1.502 Expected return -1.205 -1.388 Actuarial losses recognized in the year 545 1.982 Charges borne by beneficiaries / others - -19 Total expenses for the fiscal year 950 2.154
The cost of current services under the Pension Plan I (defined benefit), relating to liabilities with pensions for Group Directors, is nil (nil in 2009), to the extent that all of them have retired due to presumable invalidity (65 years) in 2009. The fact that this presupposition is not met does not invalidate the non-allocation of any amount by way of cost of current services insofar as the liability to be financed is now calculated in line with the total services. d) Variation in the current value of liabilities
The annual accrual of liabilities breaks down as follows:
2010 2009 Current Value of opening Liabilities 26.800 26.123 Cost of current services 220 76 Interest costs 1.390 1.502 Actuarial losses (gains) -632 544 Pensions paid -1.559 -1.445 Current Value of closing Liabilities 26.219 26.800 e) Variation in the value of the pension fund allocated to Pension Plan I
The variation in the fair value of the fund assets was:
2010 2009 Value of the fund at the beginning of the year 26.930 25.913 Expected return 1.205 1.388 Actuarial (financial) (losses) gains -712 -64 Contribuiton paid to the fund 0 1.139 Pensions paid by the fund -1.559 -1.445 Value of the Fund at the end of the year 25.865 26.930
In 2010, no contributions were made to Pension Plan I, to the extent that the levels of funding required by Notice No. 12/2001, of the Bank of Portugal and the Portuguese Insurance Institute, were met. In 2009, the contributions amounted to 1,139 thousand euros and were paid in cash.
In 2011, the Company expects to make contributions in the sum of 537 thousand euros.
At December 31, 2010 and 2009, fund assets broke down as follows:
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2010 2009 Amount % Amount % shares 871 3,4% 1.629 6,0% Investments Funds 5.302 20,5% 8.156 30,3% Public Debt 1.614 6,2% - 0,0% Miscellaneous bonds 2.767 10,7% 3.436 12,8% Property 9.333 36,1% 9.332 34,7% Money market 4.894 18,9% 3.046 11,3% Others 1.084 4,2% 1.332 4,9% Total 25.865 100,0% 26.930 100,0%
The Company, or other companies belonging to the same group, use let properties, which are assets of the Pension Fund, with a value of 6,049 thousand euros (6,049 thousand euros in 2009).
Of the Fund's assets at December 31, 2010, 2,510 thousand euros (2,553 thousand euros in 2009) corresponded to securities issued by the Company, or by other companies belonging to the same group, and 1,217 thousand euros (2,925 thousand euros in 2009) corresponded to deposits with the Company, or other companies belonging to the same Group. f) Other information
The main figures effectively recorded in the fiscal year and in the previous fiscal year were as follows:
2010 2009 Mortality Table 1,94% 0,11% Invalidity Table 0,00% 0,00% Return Rate on fund assets 1,92% 5,31% Salary Growth Rate 0,81% 4,61% Pension Growth 0,33% 1,45% Turnover Rate 0,00% 0,00%
The following table shows the evolution of the liabilities and the evolution of the value of the fund allocated to the defined benefits plan, over the last five years:
2010 2009 2008 2007 2006 Current Value of Liabilities 26.219 26.800 26.123 73.567 72.499 Value of the Fund 25.865 26.930 25.913 71.140 65.881 (Deficit) Surplus -354 130 -210 -2.427 -6.618 Actuarial (losses) gains on liabilities 623 -544 -351 4.888 -2.121 Actuarial (losses) gains on the fund -712 -64 -2.283 -2.169 828
46.1.3 Pension Plans II and III (defined contribution)
In the fiscal year of 2010, the Company made contributions of 2,419 thousand euros (2,793 thousand euros in 2009) to Pension Plans II and III (defined contribution), accounted as costs of the fiscal year.
The cost of contributions to Pension Plans II or III, relating to Group Directors, was 76 thousand euros in current contributions (89 thousand euros in 2009).
46.1.4 BBCA Pension Plan (defined benefit)
At December 31, 2010, the Fund covered a population of 252 Pensioners (251 in 2009) and 382 Current Employees (391 in 2009).
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The main actuarial and financial assumptions used for the calculations made are as follows:
2010 2009 Actuarial valuation method Unit Credit Proj. Unit Credit Proj. Mortality table: -Men Tv 73/77 Tv 73/77 -Women Tv 88/90 Tv 88/90 Invalidity table EVK80 EVK80 Discount Rate - Pension Liabilities 5,50% 5,50% Return Rate on fund Assets 5,50% 5,50% Salary Growth Rate 3,00% 3,00% Pension Growth Rate 1,75% 1,75% Turnover Rate Not applied Not applied
In relation to the 2009 actuarial valuation, the discount rate has been kept, which reflects the economic situation, in line with the requirements established by the International Accounting Standard IAS 19. The value of this discount rate, of 5.50%, corresponds to the interest rate on private debt bonds with high credit rating ("AA") and with the maturity similar to that of the liabilities determined as the average life expectancy weighted by the payments made (16 years).
The overall expected yield for the fiscal year reflects the expected returns on the fund assets at the end of the previous fiscal year, taking into consideration the characteristics of the fund portfolio and the investment policies.
No turnover rate is applied for the sake of prudence and to the extent that it cannot be reliably determined. b) Liabilities and Hedges
Liabilities accounted in the Balance Sheet were:
2010 2009 Current Value of Liabilities: Pensions currently payable 52.607 51.284 Past services of current staff 50.214 49.198 SMS charges 6.729 6.584 Death allowance 1.907 1.839 Total 11.457 108.905 Fair value of Plan assets -105.551 -101.073 Deficit 5.906 7.832 Unrecognized actuarial gains (losses) "Corridor" -11.146 -10.891 Surplus to "Corridor" -7.862 -6.187 Total -19.008 -17.077 Liabilities (Assets) recognized in the Balance Sheet -13.102 -9.245
Liabilities hedge complies with the requirements of Bank of Portugal Notice No. 12/2001.
As at December 31, 2010, the Current Value of Liabilities for Future Services stood at 8,647 thousand euros (26,558 thousand euros in 2009).
As mentioned in Note 3.16, the employees covered by this Pension Plan, were integrated into the Portuguese Social Security Scheme as from January 1, 2011, as stipulated in the Decree-Law No. 1-
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A/2011 of January 3. This integration leads to a effective decrease in the current value of the total benefits reported at the normal retirement age, to be paid by the pension fund. Since there is no reduction in benefits from the beneficiary’s point of view, liabilities for past services remained unchanged. Thus, the Company recorded no impact on the financial statements at December 31, 2010 as a result of the incorporation of these employees into the Portuguese Social Security Scheme, according to guidance issued in a Notice of the Portuguese Council of Financial Supervisors, attached to the Fax Message No. 11/11/DSPDR, of January 26, 2011, of Bank of Portugal.
Of unrecognized actuarial losses, the sum of 11,146 thousand euros (10,891 thousand euros in 2009) is included in the corridor and the surplus, in the sum of 7,862 thousand euros (6,187 thousand euros in 2009), will be amortised over 16.8 years, corresponding to the average remaining working life of the plan participants.
At December 31, 2010, an increase (or reduction) of 1% in the contribution rate to the SAMS would imply an increase in liabilities of 1,034 thousand euros (1,012 thousand euros in 2009), or reduction of 1,036 thousand euros (1,013 thousand euros in 2009) and an increase in costs for the fiscal year (cost of current services and cost of interest) of 20 thousand euros (20 thousand euros in 2009), or reduction of 19 thousand euros (17 thousand euros in 2009). c) Expenses accounted in the fiscal year
In the fiscal years of 2010 and 2009, the Company accounted the following costs for the hedge of retirement and survivor's pension liabilities:
2010 2009 Cost of current services 2.116 2.025 Interest costs 5.990 5.914 Expected return -5.267 -5.048 Actuarial losses recognized in the year 387 346 Charges with Early Retirements 382 1.395 Charges borne by baneficiaries -128 -94 Total expenses for the fiscal year 3.479 4.538
This plan does not include any liabilities relating to Group Directors. d) Variation in the current value of liabilities
The annual accrual of liabilities breaks down as follows:
2010 2009 Current Value of opening Liabilities 108.905 102.855 Cost of current services 2.116 2.025 Interest costs 5.990 5.914 Actuarial losses (gains) -2.072 322 Increase liabilities with early retirements 382 1.395 Pensions paid -3.864 -3.606 Current Value of closing Liabilities 111.457 108.905 e) Variation in the value of the pension fund
The variation in the fair value of the fund assets was:
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2010 2009 Value of the Fund at the beginning of the year 108.905 102.855 Expected return 2.116 2.025 Actuarial (financial) (losses) gains 5.990 5.914 Contributions paid to the fund -2.072 322 Pensions paid by the fund 382 1.395 Value of the Fund at the end of the year -3.864 -3.606
In 2010, contributions of 7,463 thousand euros (8,175 thousand euros in 2009) were made, in cash.
In 2011, the Company expects to make contributions in the sum of 4,320 thousand euros.
At December 31, 2010 and 2009, fund assets broke down as follows:
2010 2009 Amount % Amount % shares 3.083 2,9% 5.734 5,7% Investments Funds 39.223 37,2% 54.024 53,5% Public Debt 8.384 7,9% - 0,0% Miscellaneous bonds 10.526 10,0% 12.329 12,2% Property 13.971 13,2% 14.231 14,1% Money market 26.663 25,3% 11.217 11,1% Others 3.700 3,5% 3.537 3,5% Total 105.551 100,0% 101.073 100,0%
The Company, or other companies belonging to the same group, use let properties, which are assets of the Pension Fund, with a value of 9,185 thousand euros (9,185 thousand euros in 2009).
Of the Fund's assets at December 31, 2010, 9,459 thousand euros (9,075 thousand euros in 2009) corresponded to securities issued by the Company, or by other companies belonging to the same group, and 11,134 thousand euros (10,802 thousand euros in 2009) corresponded to deposits with the Company, or other companies belonging to the same Group. f) Other information
The main figures effectively recorded in the fiscal year were as follows:
2010 2009 Mortality Table 0,94% 0,77% Invalidity Table 0,26% 0,49% Return Rate on fund assets 0,90% 4,89% Salary Growth Rate 2,91% 4,40% Pension Growth 0,41% 0,43% Turnover Rate 0,52% 0,25%
The following table shows the evolution of the liabilities and the evolution of the value of the fund over the last five years:
2010 2009 2008 2007 2006 Current Value of Liabilities 111.457 108.905 102.855 98.670 102.374 Value of the Fund 105.551 101.073 92.046 97.597 90.854 (Deficit) Surplus -5.906 -7.832 -10.809 -1.073 11.520 Actuarial (losses) gains on liabilities 1.072 -322 2.752 9.477 2.094 Actuarial (losses) gains on the fund -4.389 -591 -16.456 -2.575 1.638
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46.2 Banif Go - Instituição Financeira de Crédito, SA
On December 31, 2008, Banif Go - Instituição Financeira de Crédito, SA established an agreement with Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA for collective subscription of the open-ended pension funds Banif Reforma Jovem, Banif Reforma Activa, Banif Reforma Sénior and Banif Reforma Garantida. This is a defined contribution pension plan, based on contributions.
The initial number of participation units of this collective subscription, with a value of 1,124.5 thousand euros, corresponds to the value of the mathematical provisions existing at the starting date of this agreement, under the previous Collective Insurance agreement, named Plano Investimento Futuro, established with Companhia de Seguros Açoreana, which were transferred to the new contract.
In 2010, the gross value of the contributions made by the Associate in favour of the respective participants was 4.9 thousand euros (25.5 thousand euros in 2009).
The pension plan of this entity does not envisage any contributions for Group Directors.
46.3 Banif Rent - Aluguer, Gestão e Comércio de Veículos Automóveis, SA
On June 5, 2009, Banif Rent - Aluguer, Gestão e Comércio de Veículos Automóveis, SA established an agreement with Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA for collective subscription of the open-ended pension funds Banif Reforma Jovem, Banif Reforma Activa, Banif Reforma Sénior and Banif Reforma Garantida. This is a defined contribution pension plan, based on contributions.
In 2010, the gross value of the contributions made by the Associate in favour of the respective participants was 13.0 thousand euros (6.4 thousand euros in 2009).
The pension plan of this entity does not envisage any contributions for Group Directors.
46.4 Banif - Banco de Investimento, SA and Associates
On December 26, 2003, Banif - Banco de Investimento, SA and its subsidiaries Banif Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliário, SA, Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA and Banif New Capital - Sociedade de Capital de Risco, SA, set up, as Associates, the pension fund BBI & Associadas, with Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA This is a closed-end pension fund designed to finance the obligations established in the respective pension plan, of defined contribution and contributory nature. In 2010, the gross value of the contributions made by the Associates in favour of the respective participants was 125.4 thousand euros (159.1 thousand euros in 2009), of which 106.2 thousand euros (137.1 thousand euros in 2009) had been made by Banif - Banco de Investimento, 16.4 thousand euros (18.5 thousand euros in 2009) by Banif Gestão de Activos and 2.8 thousand euros (3.5 thousand euros in 2009) by Banif Açor Pensões.
The cost of contributions to the pension plan of these entities, in what refers to Group Directors, stood at 24.1 thousand euros (35.2 thousand euros in 2009).
46.5 Banco Mais, SA and Associates
On December 7, 2010, Banco Mais, SA and the Companies Tecnicrédito ALD - Aluguer de Automóveis, SA and Margem - Mediação de Seguros, Ltd, SA, as Associates, established an - 96 - agreement with Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, SA for collective subscription of the open-ended pension funds Banif Reforma Jovem, Banif Reforma Activa, Banif Reforma Sénior and Banif Reforma Garantida. This is a pension plan of defined contribution and contributory nature.
In 2010, the gross value of the contributions made by the Associates in favour of the respective participants was 47.8 thousand euros, of which 47.7 thousand euros had been made by Banco Mais, SA, 0.1 thousand euros by Tecnicrédito ALD - Aluguer de Automóveis, SA and 0 thousand euros by Margem - Mediação de Seguros, Lda, SA
The pension plan of this entity does not envisage any contributions for Group Directors.
47. ASSETS ON OPERATING LEASES
The costs incurred on assets used under operating leases are recorded in the fiscal year to which they relate under the item "Rentals" in Overheads (Note 41) and refer mainly to buildings rented for branch offices.
The assets used under operating leases and respective expenses for future fiscal years are as follows:
Minimum future payments Minimum Contigent rentals Other Assets on operating on non-cancellable payments on recognized in Leases operating leases Leases profit or loss Residual Maturiry Less than 1 year 7.283 124 47 1 to 5 years 2.473 702 268 More than 5 years 36.587 - - Total 46.343 826 315
48. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
In the normal course of its financial business, the Group carries out transactions with related entities. These include banking credit and products, deposits, shareholder loans, guarantees and other banking operations and services.
The balance of those transactions with related entities in the balance sheet and respective costs and income for the fiscal year ended are as follows:
Close family members of Key Management Personnel key management Associates Shareholders Other Entities personnel Description 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 Credit and products 2.615 1.859 247 81 55.214 65.079 50.501 16.447 68.898 1.250 Deposits 6.000 3.706 887 812 32.914 22.865 4.668 81.880 9.197 7.767 Shareholder loans - - - - 65.947 6.677 846 - 21.889 13.500 Loans obtained - - - - - 1.136 100.689 13.505 - - Guarantees provided - - - - - 6 - - - - 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 31-Dez-10 31-Dez-09 Commisions and services provided 21 - - - 1.312 726 - 14 - 7 Interest and costs 122 127 13 29 93 1.159 2.188 1.635 1 56 Interest and income 30 28 3 2 2.467 2.741 - 420 348 472
The transactions with related parties are analyzed in accordance with the criteria applicable to similar operations with third parties and are conducted on normal market conditions. These operations are subject to approval by the Board of Directors.
In the fiscal year ended, no specific provisions were made for balances with related parties.
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Remuneration of key management personnel
2010 Fixed remuneration: 2,712 thousand euros Variable remuneration: 473 thousand euros
2009 Fixed remuneration: 1,708 thousand euros Variable remuneration: 1,624 thousand euros
The related parties of Banif Financial Group are the following:
Key management personnel: Dr. Joaquim Filipe Marques dos Santos Dr. Carlos David Duarte de Almeida Dr. António Manuel Rocha Moreira Dr. Artur Manuel da Silva Fernandes Dr. José Marques de Almeida Eng.º Diogo António Rodrigues da Silveira Dr. Fernando José Inverno da Piedade Sr. Vítor Hugo Simons Dra. Maria Teresa Henriques Moura Roque Dal Fabbro Dr. Nuno José Roquette Teixeira
Close relatives of key-Members of the management: Maria Luísa Cardoso da Silva Maçanita de Almeida Pedro David Maçanita Duarte de Almeida Lina Inês de Gouveia Marques dos Santos Inês de Gouveia Marques dos Santos Henriques Pires Filipe Gouveia Marques dos Santos Sandra Margarida Amaro de Oliveira Boarotto Artur Rangel Fernandes Nicole Rangel Fernandes Mateus Boarotto Fernandes Maria João da Silva Sá dos Reis Rocha Moreira Joana Sá Reis Rocha Moreira Guilherme Sá Reis Rocha Moreira Maria Alice Pereira de Almeida João Paulo Pereira Marques de Almeida Maria José Pereira Marques de Almeida Maria João Pereira Marques de Almeida Catherine Thérèse Laurence da Silveira Alexandre Tiago da Silveira Héloise Maria da Silveira Gaspar Antoine da Silveira Luisa Maria Campina Pinto da Piedade Carolina Pinto Inverno da Piedade Leonor Pinto Inverno da Piedade Anabela Delgado Courinha e Ramos Simons Nidia da Mota Simons João Pedro da Mota Simons Daniel Hugo Courinha Ramos Simons Lorenzo Roque Dal Fabbro Bianca Maria Roque Dal Fabbro Sara Dolores Militão Silva de Cima Sobral Roquette Teixeira Maria Cima Sobral Roquette Teixeira - 98 -
José Maria Cima Sobral Roquette Teixeira Isabel Maria Cima Sobral Roquette Teixeira
Associated Entities: Rentipar Seguros, SGPS Companhia de Seguros Açoreana Global - Companhia de Seguros, SA Global Vida - Companhia de Seguros de Vida, SA Espaço Dez Banca Pueyo Bankpime Inmobiliaria Vegas Altas MCO2 Centaurus Reality Group
Shareholders: Rentipar Financeira, SGPS Vestiban - Gestão e Investimentos Auto-Industrial - Investimentos e Participações, SGPS Joaquim Ferreira de Amorim Evalesco SGPS Jorge Sá J. Sá & Filhos, Lda Oliveira, Freitas & Ferreira, Lda
Other entities: Pension Funds (See Note 46) Renticapital, Investimentos Financeiros Rentipar Investimentos, SGPS Rentipar Industria SGPS Rentiglobo, SGPS Empresa Madeirense de Tabacos SIET Savoy VITECAF - Fabrica Rações da Madeira RAMA - Rações para Animais SODIPRAVE - Soc. Dist. De Produtos Avícolas Aviatlântico SOIL, SGPS Rentimundi - Investimentos Imobiliários Mundiglobo - Habitação e Investimentos Habiprede - Sociedade de Construções Genius - Mediação de Seguros Rentimedis - Mediação de Seguros Pension funds for employees of the Group Dualimo
49. POST-BALANCE SHEET EVENTS
At the date of approval of the present Financial Statements by the Board of Directors of Banif SGPS, SA, no event had taken place since December 31, 2010, reference date for the said Financial Statements, which required adjustments or modifications to the value of assets or liabilities under the terms of IAS 10 - Events after the balance sheet date.
In June 2010, Banif SGPS, SA established a partnership with Grupo Caixa Geral de Depósitos, under Banif Corretora de Valores e Câmbio (‘Banif CVC’), which incorporates BanifInvest, online broker of the - 99 -
Banif - Financial Group, in Brazil. This partnership has been materialized through an agreement concluded between Banif Banco de Investimento (Brasil), SA, Banco Caixa Geral Brasil, SA and Caixa Banco de Investimento SA, which comprises the acquisition of a shareholding position of 70% in Banif CVC by those two banks of Grupo Caixa Geral de Depósitos. It is estimated that the Group will obtain a capital gain, net of taxes, of 28.1 million euros.
On March 7, 2011, the rating agency Moody's Investors Service downgraded its rating of the Greek public debt from Ba1 to B1, while maintaining a negative outlook on it. Nevertheless, depending on the support mechanisms established in the European Union, no impact of this event is estimated in the fiscal year ended at December 31, 2010.
On March 15, 2011, the rating agency Moody's Investors Service downgraded its rating of the Portuguese public debt from A1 to A3, while maintaining a negative outlook on it.
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6 – REPORT AND OPINION OF THE AUDIT BOARD
Shareholders,
1. In compliance with paragraph (g) of Art. 420 of the Companies Code, the Audit Board has drawn up this report on its auditing work during 2010 and hereby also issues its opinion on the report, accounts and proposals presented by the Board of Directors of Banif SGPS, SA.
2. As in previous years, the Audit Board has continued an ongoing dialogue with the Official Audit Firm, Senior Executives and Directors of the Company, which is a key part of allowing audit work to proceed.
3. In this context, the Audit Board requested all the company information and documentation from the aforementioned bodies regarding various aspects and areas of its business, also requesting and obtaining all the additional clarifications during the process that it deemed necessary or convenient, without meeting with any difficulties or constraints in this regard.
4. The Chairman of the Audit Board was present at all the Directors’ meetings, had access to all the documentation that informed these meetings, followed the decision-making process and was aware of the content of the corresponding minutes.
5. For these reasons, the Audit Board is in a position to declare that the Directors’ Report describes in detail the activities of the various Group companies during the 2010 financial year.
6. The Audit Board has analysed the Report of the Official Audit Firm and the respective Legal Certificate issued by such firm, and hereby declares its agreement with this, for the purposes of Art. 452 (2) of the Companies Code.
7. The Audit Board examined the Company’s Consolidated Accounts, with regard to 31 December 2010, and for the purposes of establishing concordance with these accounts, the Consolidated Management Report, in accordance with Art. 508-D (1), of the Companies Code.
8. Accordingly, and as required by Art. 245 (1) (c) of the Securities Commission Code, applicable by operation of Art. 8 (1) (a) of Securities Commission Ruling 5/2008, each of the undersigned members of the Audit Board, identified below, declares on his own individual honour that, to the best of their knowledge, the management report, the annual accounts, the legal accounts certificate and other financial statements required by law or regulation were drawn up in accordance with the applicable accounting rules, providing a true and fair view of the assets and liabilities, the state of affairs and the results of Banif SGPS, SA and of the companies included in the consolidated accounts, and that the management report provides a faithful account of the business affairs, performance and position of Banif SGPS, SA and of the companies included in the consolidated accounts, and contains a description of the main risks and uncertainties that they face.
9. In conclusion, the Audit Board recommends that the General Meeting: a) Approves the Directors’ Report for the Financial Year ending 31 December 2010 b) Approves the Accounts for the same financial year c) Approves the proposal for the Distribution of Profits contained in the Directors’ Report, which accords with the relevant legal requirements d) Approves the Consolidated Management Report and the Consolidated Company Accounts for that period
- 101 - e) Under the terms of Art. 455 of the Companies Code, assesses the work of the Bank’s Directors and the Audit Board
Lisbon, 24 March 2011
FERNANDO MÁRIO TEIXEIRA DE ALMEIDA – Chairman______
ANTÓNIO ERNESTO NETO DA SILVA ______
JOSÉ LINO TRANQUADA GOMES ______
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7 – REPORT OF THE STATUTORY AND INDEPENDENT AUDITOR
7.1. Report of the Statutory and Independent Auditor
(Translation of the report originally issued in Portuguese)
Introduction
1. In accordance with the applicable legislation, we present the Report of the Statutory and Independent Auditor on financial information contained in the Management Report and Financial Statements attached for the financial year ended 31 December 2010 of Banif - SGPS, S.A., which comprise the Balance Sheet as at December 31, 2010 (presenting a total of 1.298.494 thousand euros and total shareholders' equity of 814.226 thousand euros, including a net income for the year of 14.365 thousand euros), the Income Statements, the Comprehensive Income Statement, the Statement of Changes in Equity and the Statements of Cash Flows for the year then ended and the corresponding notes to the financial statements.
Responsabilities
2. The Company’s Board of Directors is responsible for:
a) the preparation of the financial statements that present in a true and appropriate manner the financial position of the Company, the result of its operations and cash flows; b) the historic financial information, that shall be prepared in accordance with generally accepted accounting principles in Portugal and that is complete, true, current, clear, objective and licit, as required by the Securities Code (“Código dos Valores Mobiliários); c) the adoption of appropriate accounting policies and criteria; d) the maintenance of an appropriate internal control system; and e) the information on any relevant event that has influenced the Company’s activity, financial position and results.
3. Our responsibility comprises the verification of the financial information contained in the documents referred to above, namely if it is complete, true, current, clear, objective and licit, as required by the Securities Code (“Código dos Valores Mobiliários”), and to express a professional and independent opinion, on such information, based on our audit.
Scope
4. Our audit was conducted in accordance with the auditing and technical standards issued by the Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require an audit to be planned and performed with the objective of obtaining an acceptable level of assurance as to whether the financial statements are free of material misstatement. As such, our audit included:
- the verification, on a test basis, of evidence supporting the amounts and disclosures in the financial statements and the assessment of the estimates, based on judgments and criteria defined by the Board of Directors, used in preparing the financial statements; - the assessment of whether the accounting policies adopted and their disclosure are appropriate, under the circumstances; - the verification of the appropriateness of the going concern principle; - the assessment as whether the overall presentation of the financial statements is adequate; and - the assessment as whether the financial information is complete, true, current, clear, objective and licit.
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5. Our examination also covered the verification of the consistency of the financial information included in the Management report with the documents comprising the financial statements.
6. We believe that the examination carried out provides an acceptable basis for the expression of our opinion.
Opinion
7. In our opinion, the consolidated financial statements referred to above present a true and fair view, in all material respects, of the financial position of Banif, SGPS, S.A. at 31 December 2010, the results of its operations, the Income Statements, the Comprehensive Income Statement, the Statement of Changes in Equity and the Statements of Cash Flows for the year then ended, in accordance with the International Financial Reporting Standards as adopted by the European Union and the information is information is complete, true, current, clear, objective and licit.
Report on Other Legal Requirements
8. It is also our opinion that the information in the Management Report is in agreement with the financial statements for the financial statements for the period and the corporate governance report includes the elements eligible by article 245.º-A of the Securities Code (“Código dos Valores Mobiliários).
Lisbon, 24 March 2011
Ernst & Young Audit & Associados – SROC, S.A. Sociedade de Revisores Oficiais de Contas (nº 178) Registada na CMVM com o n.º 9011 Representada por:
Signed João Carlos Miguel Alves (ROC nº 896)
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7.2. Report of the Statutory and Independent Auditor (Consolidated Accounts)
Introduction
1. In accordance with the applicable legislation, we present the Report of the Statutory and Independent Auditor on financial information contained in the Management Report and consolidated Financial Statements attached for the financial year ended 31 December 2010 of Banif - SGPS, S.A., which comprise the consolidated Balance Sheet as at December 31, 2010 (presenting a total of 15.710.692 thousand euros and total shareholders' equity of 1.035.153 thousand euros, including a net income for the year of 33.426 thousand euros), the consolidated Income Statements, the consolidated Comprehensive Income Statement, the Statement of Changes in Equity and the consolidated Statements of Cash Flows for the year then ended and the corresponding notes to the financial statements.
Responsibilities
2. The Company’s Board of Directors is responsible for:
a) the preparation of the consolidated financial statements that present in a true and appropriate manner the financial position of the Company, the result of its operations and the consolidated cash flows; b) the historic financial information, that shall be prepared in accordance with generally accepted accounting principles in Portugal and that is complete, true, current, clear, objective and licit, as required by the Securities Code (“Código dos Valores Mobiliários); c) the adoption of appropriate accounting policies and criteria; d) the maintenance of an appropriate internal control system; and e) the information on any relevant event that has influenced the Company’s activity, financial position and results.
3. Our responsibility comprises the verification of the financial information contained in the documents referred to above, namely if it is complete, true, current, clear, objective and licit, as required by the Securities Code (“Código dos Valores Mobiliários), and to express a professional and independent opinion, on such information, based on our audit.
Scope
4. Our audit was conducted in accordance with the auditing and technical standards issued by the Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require an audit to be planned and performed with the objective of obtaining an acceptable level of assurance as to whether the consolidated financial statements are free of material misstatement. As such, our audit included:
- the verification, on a test basis, of evidence supporting the amounts and disclosures in the consolidated financial statements and the assessment of the estimates, based on judgements and criteria defined by the Board of Directors, used in preparing the financial statements; - the verification of consolidation operations; - the assessment of whether the accounting policies adopted and their disclosure are appropriate, under the circumstances; - the verification of the appropriateness of the going concern principle; - the assessment as whether the overall presentation of the consolidated financial statements is adequate; and - the assessment as whether the consolidated financial information is complete, true, current, clear, objective and licit.
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5. Our examination also covered the verification of the consistency of the financial information included in the Management report with the documents comprising the financial statements, as well as the checks provided for in nºs 4 e 5 of article 451.º of the companies Code (“Código das Sociedades Comerciais”).
6. We believe that the examination carried out provides an acceptable basis for the expression of our opinion.
Opinion
7. In our opinion, the consolidated financial statements referred to above present a true and fair view, in all material respects, of the consolidated financial position of Banif, SGPS, S.A. at 31 December 2010, the consolidated results of its operations, the consolidated Income Statements, the consolidated Comprehensive Income Statement, the Statement of Changes in Equity and the consolidated Statements of Cash Flows for the year then ended, in accordance with the International Financial Reporting Standards as adopted by the European Union and the information is information is complete, true, current, clear, objective and licit.
Report on Other Legal Requirements
8. It is also our opinion that the information in the Management Report is in agreement with the financial statements for the financial statements for the period and the corporate governance report includes the elements eligible by article 245.º-A of the Securities Code (“Código dos Valores Mobiliários).
Lisbon, 24 March 2011
Ernst & Young Audit & Associados – SROC, S.A. Sociedade de Revisores Oficiais de Contas (nº 178) Registada na CMVM com o n.º 9011 Representada por:
Signed
João Carlos Miguel Alves (ROC nº 896)
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