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This page was intentionally left blank. 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 1 Report This page was intentionally left blank. 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 3 Index REPORT Leading business indicators 4 Introduction 7 Highlights of 2014 14 Financial structure and business 16 Human resources 17 Distribution channels 18 Digital banking 20 The BPI Brand 22 Social responsibility 25 Background to operations 31 Domestic commercial banking 41 Bancassurance 52 Asset management 53 Investment banking 55 International operations 58 Financial review 64 Risk management 99 Banco BPI shares 126 Rating 128 Proposed appropriation of net income 129 Final acknowledgements 130 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES Consolidated financial statements 131 Notes to the consolidated financial statements 140 Statement of the Board of Directors 274 Statutory audit certification and audit report 275 Report and opinion of the Supervisory Board 277 BPI GROUP CORPORATE GOVERNANCE REPORT Part I – Information on Shareholder structure, organisation and corporate governance 287 A. Shareholder Structure 287 B. Governing Bodies and Committees 290 C. Internal Organisation 314 D. Remuneration 319 E. Transactions with Related Parties 336 Part II – Corporate Governance assessment 337 1. Identification of the Corporate Governance Code Adopted 337 2. Analysis of Compliance with the Corporate Governance Code Adopted 337 3. Other Information 343 Annex 352 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 4 Leading business indicators (Consolidated figures in M.€, except where indicated otherwise) 2010 2011 2012 2013 2014 Net total assets 45 660 42 956 44 565 42 700 42 629 Assets under management1 18 592 14 425 13 445 13 121 15 911 Loans to Customers (gross) and guarantees 33 621 31 535 30 519 29 004 28 474 Customer deposits 22 209 23 778 23 800 24 551 26 518 Total Customer resources2 33 168 32 818 31 004 31 669 35 401 Business turnover3 66 789 64 353 61 523 60 673 63 875 Business turnover3 per Employee (thousands of euro) 7 155 7 287 7 088 6 958 7 509 Loans to deposits ratio4,5 122% 109% 106% 96% 84% Net operating revenue 1 098.8 1 020.1 1 330.0 1 048.1 857.7 Net operating revenue per Employee (thousands of euro) 117 112 151 120 99 Operating costs / net operating revenue6 64.5% 67.2% 48.1% 62.1% 78.3% Operating costs / net operating revenue, excluding non-recurring impacts7 62.5% 64.4% 62.1% 69.4% 61.6% Net profit 184.8 (284.9) 249.1 66.8 (163.6) Return on average total assets (ROA) 0.6% (0.4%) 0.8% 0.4% (0.1%) Return on Shareholders’ equity (ROE)8 8.9% (13.5%) 13.1% 2.9% (7.3%) Adjusted data per share (euro)9 Net profit per share 0.184 (0.284) 0.216 0.048 (0.115) Book value 1.441 0.467 1.235 1.389 1.467 Weighted average no. of shares (in millions)9 1 003.5 1 003.8 1 154.6 1 383.7 1 422.3 Credit at risk / Loans to Customers5 2.7% 3.2% 4.2% 5.1% 5.4% Impairments cover of credit at risk10 72% 70% 71% 77% 82% Net credit loss11 0.46%12 0.43% 0.92% 0.96% 0.70% Pension liabilities to Employees 2 306 836 937 1 082 1 278 Cover of pension obligations13 105% 100% 105% 105% 98% Shareholders’ equity and minority interests 1 964 822 2 061 2 306 2 546 Core Tier 1 capital ratio (Bank of Portugal)5 8.7% 9.2% 15.0% 16.5% - Common Equity Tier 1 ratio (CRD IV / CRR rules for 2014) 15.6% 10.2%14 Common Equity Tier 1 ratio (CRD IV / CRR fully implemented) 11.2% 8.6%14 Closing price (euro)9 1.232 0.471 0.943 1.216 1.026 Stock market capitalisation at year end 1 247 476 1 311 1 690 1 495 Distribution network (no.)15 959 917 914 871 835 BPI Group staff complement (no.)16 9 335 8 831 8 680 8 720 8 506 1) Figures not corrected for double counting (investments of financial products in other financial products). Includes unit trust funds, Table 1 retirement-savings plans (PPR’s) and equity savings plans (PPA’s), capitalisation insurance, limited-risk / capital-guaranteed bonds, Private Banking and institutional Clients’ assets under discretionary management and advisory mandate and assets of pension funds under management (including the BPI Group’s Employees’ pension funds). 2) On-balance sheet Customer Resources (deposits, bonds placed with Customers and capitalisation insurance) and off-balance sheet resources (financial-asset and real-estate unit trust funds, equity savings plans and retirement savings plans). Figures corrected for double counting. 3) Customer loans, guarantees and total Customer resources. 4) Deposits as a percentage of net loans. 5) Calculated in accordance with Bank of Portugal Instruction 16 / 2004. 6) Operating costs (personnel costs, outside supplies and services and depreciation and amortisation) as a percentage of net operating revenue. 7) Excluding non-recurring impacts both in costs and revenues. 8) In calculating ROE, it was considered the Shareholders’ equity prior to deduct the fair value reserve (negative) relating to the portfolio of available-for-sale financial assets. 9) Figures adjusted for capital increases by way of the incorporation of reserves in May 2011 and through cash injection in August 2012. 10) Cover by accumulated loans and guarantees impairment allowances in the balance sheet and without considering the effect of collaterals. 11) Loan impairment charges in the year, after deducting recoveries of loans written off (income statement) / Customer loans. 12) The extraordinary charge of 33.2 M.€ made in 2009 was added to impairments for the year in 2010 by virtue of that extraordinary charged having been utilised. 13) Includes contributions to the pension fund made at the beginning of the following year. 14) Pro forma figures considering the adherence to the special regime applicable to deferred tax assets (DTA) and the change to the risk weightings applied to Banco BPI's indirect exposure to the Angolan State and to BNA. 15) Includes network of traditional branches and investment centres in Portugal, in France (Paris branch) and in Angola (BFA), and the network geared to serving large and medium-sized companies, project finance centre and the institutional centres in Portugal, the corporate centre in Madrid (Madrid branch) and the corporate centres in Angola. 16) Excludes temporary workers. 4 Banco BPI | Annual Report 2014 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 5 Net profit Shareholders’ equity ROE M.€ th.M.€ % 249 2.2 13.1 2.1 2.2 2.1 185 8.9 67 1.7 2.9 2.1 1.9 1.7 -164 1.4 -7.3 -285 0.5 -13.5 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Shareholders’ equity – before deduction Net profit per share (euro) of fair value reserve (negative) 0.18 (0.28) 0.22 0.05 (0.12) Shareholders’ equity Common Equity Tier 1 ratio Book value per share Stock market capitalisation 31 December 2014 % € th.M.€ 1.7 10.2 1.5 1.3 8.6 1.2 1.44 1.39 1.47 1.23 0.5 0.47 Rules for Fully 10 11 12 13 14 10 11 12 13 14 2014 implemented Total assets Loan portfolio and on-balance Net credit loss sheet Customer resources th.M.€ th.M.€ % 45.7 44.6 43.0 42.7 42.6 0.92 0.96 30.3 32.5 30.4 28.5 28.7 0.70 30.1 28.3 27.3 0.43 26.0 25.3 0.46 57% 59% 55% 58% 49% 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Total assets Loan portfolio Risk-weighted assets On-balance sheet Customer resources Figure 1 Report | Leading business indicators 5 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 6 ACRONYMS AND ABBREVIATIONS BPI Group entities – some designations adopted “BPI Group” / “BPI”*: The financial group as defined in page 16. “Banco BPI” (S.A.) / ”BPI” or “the Bank”*: Head of the BPI Group and responsible for conducting the Commercial Banking business; listed on the stock exchange. “Banco Português de Investimento” (S.A.), “the Investment Bank”*: The group's investment bank. “Banco de Fomento Angola” (S.A.), “BFA”: Angolan law bank, 50.1% held by BPI, develops BPI Group banking business in Angola. “BCI” / “Banco Comercial e de Investimentos”: Mozambican law bank, in which BPI has an equity interest of 30%. Units € euro US$ American dollar th.€ thousands of euro M.€, M.US$, M.AKZ millions of euro, millions of American dollar, millions of Angolan Kwanza th.M.€, th.M.US$, th.AKZ thousand millions of euro, thousand millions of dollar, thousand millions of kwanza b.p. basis points p.p. percentage points * if the context so permits. 6 Banco BPI | Annual Report 2014 1822-001-130_Relatorio ING_1822-001-130_Relatorio ING.qxd 15/07/01 16:13 Page 7 Introduction NEW CHALLENGES The repayment of public capital As envisaged and three years ahead of schedule, BPI complied with management’s principal goal that had been announced for the 2014 financial year: the full repayment of the contingent capital subscribed by the Portuguese State in 2012. Between June 2012 and June 2014, BPI paid to the State for this operation a total of 167 million euro in interest, corresponding to an average interest rate of 8.6%.