TIDMEOS
ESPÍRITO SANTO FINANCIAL GROUP S.A. ANNOUNCES ITS UNAUDITED CONSOLIDATED RESULTS FOR THE FIRST QUARTER OF 2012
Luxembourg/Portugal - 24 May 2012 - Espírito Santo Financial Group S.A. ("ESFG" or the "Company") (NYSE Euronext Lisbon: ESF; Bloomberg: ESF PL; Reuters: ESF LS) today announces its unaudited consolidated results for the first quarter of 2012. The report is compiled under IFRS as implemented by the EU.
HIGHLIGHTS FOR THE REPORTING PERIOD1
Despite the extremely challenging environment including the contraction of economic activity and domestic demand in Portugal, the sharp rise in unemployment as well as the demands for recapitalisation and deleveraging ESFG was able to achieve positive, though diminished, results for the first quarter of 2012. Key highlights for the reporting period are:
-- Consolidated Q112 Net Income fell to EUR 2.0 million (EUR 13.7
million);
-- Consolidated Commercial Banking Income at ESFG rose by 8.9% to
EUR 518.0 million (EUR 475.8 million);
-- Consolidated Net Interest Income increased 9.6% YoY to EUR
308.4 million (EUR 281.5 million);
-- Consolidated Net Fees and Commissions rose 7.9% YoY to EUR
209.6 million (EUR 194.3 million) as ESFG continues to support
enterprises abroad;
-- Consolidated Market Results2 and Other
Income fell 32.3% to EUR 106.3 million (EUR 157.0 million);
-- Consolidated Insurance Earned Premiums Net of Reinsurance rose
1.6% YoY to EUR 85.1 million (EUR 83.7 million) despite competitive
pressures and weak market environment;
-- Consolidated Claims Incurred Net of Reinsurance fell 7.9% YoY
to EUR 68.1 million (EUR 73.9 million) as claims management measure
take full effect;
-- Consolidated Operating Expenses rose by 14.7% to EUR 685.8
million (EUR 597.9 million) on the prudent decision by ESFG's banking
unit, Banco Espírito Santo, to further increase provisioning;
-- Staff Costs and General Administrative Expenses however fell by
4.8% to EUR 308.5 million (EUR 324.0 million).
CONFERENCE CALL
A conference call for investors and analysts will be held today at 3:00 PM (UK & Portugal) / 4:00PM (CET) / 10:00AM (Eastern). An instant replay of the call will be available for two weeks. For details, please contact Miles Chapman at King Worldwide on telephone number +44 (0) 207 614 2900.
MACRO ECONOMIC ENVIRONMENT
The first quarter of 2012 saw a contraction in the Eurozone's GDP and a deceleration in the growth of both the US and China's economies. Despite worsening conditions in the second quarter, the first months of 2012 saw a decrease in perceived systemic risk. Greece's second bailout package and the ECB's Long Term Refinancing Operations (LTRO), totalling EUR 1 trillion helped improve the overall picture in the first quarter. The second LTRO further reduced restrictions on liquidity faced by the Eurozone banking system. This led to a tightening of spreads in the credit and currency markets, as well as, a contraction in peripheral sovereign spreads.
The quarter saw a decrease of 58 bps in the 3 month Euribor rate to 0.777%. The EUR/USD rose by 2.9%, with the USD reaching 1.333 versus the EUR. The DAX and CAC indices rose 17.8% and 8.4% respectively. By the end of the first quarter however, doubts, over Spain's budget consolidation process resulted in a further wave of negative sentiment which led to the IBEX falling by 6.5% in the period. In the US, on the back of increased confidence in a recovery driven by low interest rates, the Dow Jones, S&P500 and Nasdaq climbed by 8.1%, 12.0% and 18.7% , respectively. In China, the Shanghai Composite rose by 2.9% and in Brasil the Bovespa rose by 13.7%. In Portugal, the financial and economic environment continued to contract as restrictions on budgetary policies, the deceleration of external demand and the requirement for the private sector to deleverage took its toll. The PSI-20 Index rose by 1.14% in the first quarter.
In Portugal, GDP fell 0.1%, well above the forecast of 1.0%, as a result of strong export growth and lower contraction in domestic demand. The effects of a highly restrictive fiscal policy and the deleveraging process among households and firms will continue to put a downward pressure on activity.
The unemployment rate increased further in Q1, reaching close to 15% of the labour force. Most indicators point, however, to a stabilising trend in activity over the next quarters, with less intensive YoY declines. Exports remained an important source of growth, with an 11.6% YoY nominal increase in merchandise exports. While sales to the EU increased 5.5%, extra-EU exports rose 32.3%, with emerging markets in Africa, Latin America and Asia continuing to increase their weight in total exports.
Despite the extremely challenging environment, the Adjustment Programme and the financial stabilisation efforts in the Eurozone contributed to the Portuguese Sovereign Debt 10-year spread tightening by 180 basis points to 974 basis points over the German 10-year Bund. Portuguese T Bill yields also fell sharply during the period.
OVERVIEW OF OPERATIONS
Espírito Santo Financial Group S.A. ('ESFG') is recognised by the European Banking Authority ('EBA') as one of the 91 leading banking groups that makes up 65% of the EU banking system's total assets. In 2011, in light of the substantial increase in systemic risk, triggered by the sovereign debt crisis in the Euro Area, the EBA announced that banking groups subject to the EBA stress tests must strengthen their levels of capital in order to reach a Core Tier I capital of 9.0% by 30 June 2012. In the same year the Bank of Portugal set a Core Tier I of 10.0%, for banks and financial groups under its supervision, by 31 December 2012.
In order to meet these requirements ESFG and its principal banking subsidiary Banco Espírito Santo ('BES') have undertaken initiatives which include the deleveraging of their respective balance sheets, liability management exercises and lastly, capital raising operations. On the 23April 2012 ESFG announced that it had successfully completed a EUR 500 million capital raise. On the 11 May 2012 BES announced the completion of an equally successful rights issue of EUR 1.01 billion. The ESFG capital increase and full consolidation of the BES rights issue enables ESFG to meet the capital requirements of the EBA and that of the Bank of Portugal (when compared against the risk weighted assets of ESFG as at the 31 December 2011).
ESFG's un-audited consolidated net profit for the first quarter of 2012, attributable to equity holders of the Company fell to EUR 2.0 million. The results reflect the challenges faced principally by BES and its measures to mitigate them, namely the 26.9% increase in provisioning charges during the period, an 84.2% increase in credit provisioning, the continued deleveraging of its balance sheet and a decline in trading results.
The deleveraging programme at BES, which began in 2010 and pre-empted the Portuguese Government's request for assistance, has continued into the first quarter of 2012. ESFG's banking subsidiary's aim is to reach a loan to deposit ratio ('LDR') of below 120.0% by the end of 2014; at the end of Q112, BES achieved an LDR of 135.0%. Total consolidated assets at ESFG increased by 1.3%, from EUR 84.1 billion at the end of the first quarter 2011 to EUR 85.5 billion at the end of the first quarter of 2012.
BES further strengthened provisions for impairments on the Bank's activities with a special focus on the coverage of risks relating to the loans book. The provisions charge in the quarter totalled EUR 190.7 million; the credit provisions charge for the first quarter 2012 at the Bank reached EUR 149.0 million. The balance of provisions reserve rose to EUR 2.27 billion from EUR 1.79 billion a year earlier. The credit provisions charge, as a percentage of gross loans remained stable at 1.17% and helped bolster the credit provisions/gross customer loans ratio to 4.45% from 3.47% a year earlier. The deleveraging programme and provisioning for impairments impacted negatively on the consolidated results at ESFG in the first quarter.
Although overall asset quality remained resilient, the worsening economic situation has had its effect on the levels of overdue loans both in Portugal and internationally. Non-Performing Loans ('NPL') of over 90 days rose from 2.74% at year-end 2011 to 3.0% by the end of the quarter.
The marked improvement in the LDR to 135% was supported by the increase in customer deposits at the banking unit. Deposits reached EUR 36.0 billion, an increase of EUR 1.8 billion by the end of March 2012, a year-on-year rise of 17.7%.
ESFG posted an increase in consolidated Net Interest Income ('NII') and Net Fees and Commissions. NII rose during the period to EUR 308.4 million despite the increase in funding costs and the volume reduction caused by the deleveraging process. Fees and commissions totalled EUR 209.6 million, capital markets however, fell to -EUR 32.9 million in the first quarter of the year. Overall, recurrent income remained healthy and despite a very difficult operating environment, commercial banking income rose by 8.9% year-on-year to EUR 518.0 million.
Operating expenses during the period grew by 14.7% year-on-year on the back of provisioning cost growth, staff costs were down by 5.7% to EUR 191.6 million, reflecting ESFG's continued organic drive towards business outside of its traditional markets whilst containing staff costs in its established markets. Staff costs at BES fell by 2.9% year-on-year; staff costs outside Portugal however increased by 4.5% whilst staff costs in Portugal decreased by 6.3%. In the last quarter of 2011, at BES, EUR 991 million of pension liabilities were allocated for transfer to the Social Security following the integration of the banking sector employees into the General Social Security Scheme, (of which EUR 529 million has been transferred). The reduction in staff costs in Portugal was driven by a decrease in namely variable remunerations and the decreased burden of pension liabilities. ESFG continues to focus on streamlining its business costs whilst maintaining its drive for business outside of its traditional markets.
Retail banking at BES, supported by a domestic branch network of 686 branches and a net reduction of 15 branches over the past twelve months, benefits from the Bank's partnership with ESFG's insurance agents Companhia de Seguros Tranquilidade ('Tranquilidade') under the assurfinance programme. Cross-selling activities, including the drive to attract customer funds and retain client deposits, have helped mitigate the impact of non-performing loans.
International operations at BES continues to contribute positively to consolidated net income; international NII reached EUR 22.9 million, a reduction of 59.1% year-on-year whilst NII from Portugal grew by 58.1% year-on-year to EUR 197.3 million. International Fees and Commissions rose by 15.2% year-on-year to EUR 63.7 million. Domestic commercial banking income at BES increased by 31.3% year-on-year, whilst commercial banking income outside Portugal decreased by 20.3% during the same period. Consolidated banking income at BES rose to EUR 528.8 million from EUR 525.3 million in Q111.
International operations play a key role in ESFG's strategy of diversification. Banco Espírito Santo Angola ('BESA') continues to make positive contributions to BES's international growth and is now the second largest bank in Angola. Banking income dropped to EUR 45.0 million by the end of the first quarter of 2012, customer funds fell by 4.4% year-on-year to EUR 2.36 billion. In Spain and Brazil both contributed positively to consolidated results. The three regions make up the Bank's strategic triangle. Net income from the strategic triangle contributed EUR 25.3 million to the Bank's international business.
At Banque Espírito Santo et de la Vénétie ('BESV') (France) net income reached EUR 2.1 million in the period, a decrease of 27.6% year-on-year. The negative impact of low interest rates combined with increasingly high refinancing costs was countered by the improved performance in commercial banking and by the increase in credit spreads, coupled with increased fee revenues. Individual banking income increased by 15.0% year-on-year to EUR 10.6 million. However, Operating Costs rose by 10.0% year-on-year to EUR 6.3 million.
Banque Privée Espírito Santo ('BPES') in Switzerland, which focuses on private banking business, continues to support ESFG's consolidated results in the first quarter of the year, with individual income stable at CHF 1.4 million, net of increased provisioning. Operating expenses were down 2.2% at CHF 11.8 million in the quarter. Assets under Management (AuM) remained stable at CHF 4.6 billion with positive net new money of CHF 13.0 million, but did suffer from the impact of a strong Swiss Franc against the Euro and negative market evolution in the later part of the quarter. Interest Income reached CHF 1.4 million, up 52.8% from the previous year (CHF 0.9 million). Banking Income was down by 2.5% to CHF 12.1 million.
Net Income at ES Bankers (Dubai) Limited (ESBD) reached USD 1.6 million against USD 1.0 million a year earlier, an increase of 54.0% year-on-year. Fees and Commissions rose by over 60.0% when compared to the previous year, from USD 1.4 million in Q111 to USD 2.2 million in Q112. ESBD closed the first quarter of 2012 with Total Equity of USD 35.2 million, an increase of 12.6% year-on-year generating a ROE of 17.1%. The balance sheet increased to USD 178.9 million by the end of the quarter, the portfolio of credit to clients increased by 106.5% year-on-year, from USD 47.8 million to USD 98.7 million.
Investment banking activities at ESFG, through the investment banking subsidiaries Espírito Santo Investment Bank ('BESI'), include advisory services in project finance, mergers and acquisitions, placements of shares and bonds, stock broking and other investment banking services. Banking Income at BESI fell by 7.2% year-on-year to EUR 59.7 million with the non-Portuguese business rising to 71% of total business. Pre-tax profits for the period fell to EUR 10.9 million as operating performance decreased, coupled with an increase in credit impairments.
During the quarter BESI announced the launch of two new joint ventures. Espírito Santo Securities India Private Limited, in a 75/25 party with the Burman family, has received authorization to begin brokerage activities in India. BESI also announced its joint ventures with stockbroker Avior Research of South Africa to provide research on South African equities in Europe.
ESFG's insurance operations contributed positively to the overall net profit of the Group in the first quarter of 2012 despite a difficult operating environment in Portugal. ESFG's insurance market share in the non-Life sector, through Tranquilidade, BES Seguros and Seguros LOGO ('LOGO'), increased to 10.3% in Q112 (10.0% in Q111), and is now the second largest non-Life group in Portugal. When combining both Life and non-Life business ESFG ranks as the fourth largest insurance group in Portugal, with a combined market share of 7.4%. This ranking reflects the performance of the Life operations which was impacted by the liquidity shortage as banks competed for deposits. The combined market share in the Life business of T-Vida and BES Vida stood at 5.5% in the quarter.
On the 11 April 2012, BES announced its acquisition of 50.0% of the share capital of BES Vida, S.A., from the Crédit Agricole Group, for EUR 225 million. Following this acquisition, which concluded on 11 May 2012, the Bank holds the entire share capital of BES Vida and has management control. ESFG believes that the inclusion of the remaining stake in the Group will offer greater opportunities of growth in bancassurance namely the provision of pension plan business as budgetary constraints limit the capacity of Governments to provide adequate social security support.
Tranquilidade's net individual income reached EUR 12.4 million, a 23.9% year-on-year increase. Technical results increased during the period by 8.4% to EUR 17.6 million. Financial results stood at EUR 15.1 million, with operating costs down by 3.8% year-on-year to EUR 16.5 million. Tranquilidade's market share rose to 8.3% from 8.0% a year earlier. Tranquilidade's market share in workers' compensation, fire and other damage and motor increased from 9.6%, 7.9% and 8.3% in the first quarter of 2011 to 10.2%, 8.5% and 8.6% in the first quarter of 2012, respectively.
The assurfinance programme of cross-selling banking products through its agents accounted for 19.0% of new clients at BES and represents 10.0% of the total increase in retail assets under management. Tranquilidade's distribution chain is made up of more than 1,700 points of sale, of which 38 are own branches and 179 tied agent stores.
The private healthcare sector proved resilient in 2011 and into the first quarter of 2012, in contrast to the public healthcare sector in Portugal, which continues to suffer from on-going budgetary constraints. The private healthcare sector, in which ESFG's healthcare Espírito Santo Saúde ('ESS') is a market leader, saw a slight increase in growth due to a shift in demand towards private healthcare services.
Year-on-year operating revenues at operator ESS, for the quarter, rose by 13.5% to EUR 80.7 million from EUR 71.2 million in the same of 2011. Quarterly individual Net Income however fell to -EUR 0.9 million (EUR 2.4 million). EBITDA declined 22.9% to EUR 9.8 million from EUR 12.7 million. The expected decline in profitability in the quarter coincides with the launch of ESS' newest hospital, in Loures, and consequent rise in start-up costs.
Costs rose by 21.5% year-on-year to EUR 71.1 million, though significant savings were generated through the negotiations with suppliers, the adherence to a centralised buyers' catalogue as well as improved human resource management. Operations at the new PPP project Hospital Beatriz ngelo began in January. Opening costs of Hospital Beatriz ngelo weighed down on operator Saúde's profitability in the period. The hospital is the largest hospital controlled by the medical care unit with 424 beds, 63,000m2 of operating space and 1,200 new employees. Hospital da Luz, the largest private hospital in Portugal and key investment at ESS, saw a growth in revenue of 6.9%. The healthcare operator's positive performance is one of the key growth drivers reported in consolidated Other Operating Income.
INCOME STATEMENT SUMMARY
FIG. I
(EUR Thousands) Q111 Q112 YoY
+ Net Interest Income 281 515 308 401 9.6%
+ Net Fees and Commissions 194 256 209 559 7.9%
= Commercial Banking Income 475 771 517 960 8.9%
+ Capital Markets Results 152 023 106 348 (32.3%)
+ Other Operating Income
+ Insurance Earned Premiums* 83 746 85 124 1.6%
+ Dividend Income 4 395 36 917 -
= Operating Income 720 935 746 349 3.5%
- Staff costs and General Expenses 324 044 308 549 (4.8%)
- Depreciation, Provisioning and Impairments 134 703 224 881 66.9%
- Claims* , Technical Reserves* & Commissions 66 990 70 189 4.8%
- Other Expenses 72 211 82 201 13.8%
-Operating Expenses 597 948 685 820 14.7%
= Profit before Tax (inc. Gains 127 485 64 645 (49.3%)
from Financial Investments
& Share of profit of Associates
- Tax 28 661 24 711 (13.8%)
- Minority Interests 85 160 37 958 (55.4%)
= Net Income 13 664 1 976 (85.5%)
* Net of Reinsurance
PRINCIPAL ITEM ANALYSIS
ESFG is a financial holding company, with its shares quoted on the Luxembourg, London and NYSE Euronext Lisbon exchanges. It consolidates the financial results from its broad range of banking, insurance and healthcare activities.
Banking Income:
Consolidated Net Interest Income ('NII') rose by 9.6% year-on-year to EUR 308.4 million from EUR 281.5 million in Q111. Increases in the cost of funding and the adjustment of credit spreads to reflect perceived risk, coupled with the reduction in volume resulting from the deleveraging process at BES, interest earned assets at BES in Q112 fell by EUR 1.67 billion from a year earlier, all impacted on results. NIM rose by 15 basis points to 1.71% from 1.56% in March 2011.
ESFG noted that NII business at BES increased by 8.6% to EUR 294.5 million with its domestic business growing by 58.1% EUR 197.3 million. The average rate on interest earning assets at BES increased to 5.52% with the average rate on interest bearing liabilities increasing to 3.70%. A 16.0% rise in interest on customer loans to 5.57% attests to the Group's capacity to adjust its pricing to market conditions. BES also announced that its depositor base benefited from the increase in the average deposit rate to 3.44% or 240 over the 3 month Euribor. The increase in the NII at the Bank was driven by the price effect where NIM rose by EUR 25.3 million whilst volume decreased by EUR 2.1 million as activity declined.
Consolidated Fees and Commissions (Net of Expenses) saw an increase of 7.9% year-on-year to EUR 209.6 million (EUR 194.3 million in Q111). The first quarter of 2012 saw a growth in fees on documentary credit and commissions on loans, driven by corporate banking and trade finance business. Bancassurance business also grew during the period. Other areas, including securities, guarantees and asset management also contributed positively, but their contribution fell when compared to a year earlier.
Consolidated Capital Markets totalled -EUR 32.9 million in Q112 from EUR 24.2 million reported in Q111. Trading results at BES were affected by the price adjustment of shares held in their AFS portfolio.
Consolidated Dividend Income at ESFG increased year-on-year to EUR 36.9 million from EUR 4.4 million a year.
Insurance Income:
Consolidated Insurance Earned Premiums Net of Reinsurance increased by 1.6% to EUR 85.1 million in the first quarter of 2012 from EUR 83.7 million a year earlier. Consolidated Claims Incurred Net of Reinsurance fell 7.9% to EUR 68.1 million in Q112, compared to EUR 73.9 million in the first quarter of 2011 as claims management controls take full effect. Net change on the technical reserves fell by 73.7%% year-on-year to -EUR 3.6 million from -EUR 13.7 million a year earlier. Overall, consolidated contribution of all insurance activities rose strongly at ESFG, rising by 31.7% when compared to a year earlier.
The assurfinance programme of cross-selling banking products through its agents accounted for 19.0% of new clients at BES and represents 10.0% of the total retail assets under management increase. Tranquilidade's distribution chain is made up of more than 1,700 points of sale, of which 38 are own branches and 179 tied agents' stores.
Tranquilidade's direct insurance business, LOGO, reported that its customer base had reached 116,183 clients and gross written premiums of EUR 5.4 million. The combined ratio at Tranquilidade improved from 97.5% to 95.8%. The expense ratio remains at 24.5%, reflecting the on-going cost reduction programme which includes a 3.8% fall in expenses.
T-Vida reported an individual net income of EUR 0.8 million. Premiums decreased by 18.2% following an increased focus on deposits by banks in Portugal. Risk products continue to be the main focus for ESFG's insurance operations in life. The technical margin decreased by 37.4% (EUR 2.2 million in Q111 to EUR 1.4 million in Q112), mainly due to an increase in the claims ratio of risk products, which stood at abnormally low levels in 2011. Operating costs decreased 11.4% year-on-year to EUR 1.4 million.
Pastor Vida posted individual net profits of EUR 2.4 million in the quarter, which represents a 40.1% year-on-year increase. This performance is mainly related to an improvement in technical results and to the development of risk products. Tranquilidade acquired the 50.0% stake from Banco Pastor's, with management control in 2010 and is therefore a consolidated subsidiary of ESFG. In 2011 Banco Pastor was fully acquired by Banco Popular Español S.A. ('Banco Popular'). Banco Popular has its own bancassurance operations. As a result of the change of control ESFG Group has the right to require Banco Pastor to purchase its interest in Pastor Vida. The timing of the purchase, and the amount to be paid, has yet to be determined.
ESFG's Angolan insurance operation, through Tranquilidade, has begun and is expected to contribute positively to full year results in 2012. In Mozambique, the Group expects the new carrier to be operational by the second half of the year.
Healthcare and Other Income:
Consolidated Net Other Operating Income & Dividend Income increased to EUR 139.3million (EUR 132.9 million in Q111) and EUR 36.9 million (EUR 4.4 million in Q111) respectively. ESS, a key contributor to Other Operating Income, operates 18 hospitals (of which it owns 17), out-patient clinics, residential hospitals, senior care residencies, as well as participating in the Public-Private Partnership at the Loures Hospital in Portugal. EBITDA fell to EUR 9.8 million in the quarter; net individual income fell to -EUR 0.9 million in the quarter, however, operating revenues were up by 13.5% to EUR 80.7 million.
AdvanceCare, ESFG's managed care platform for healthcare insurers provides the link between the Company's insurance and healthcare operations. AdvanceCare continues to provide positive results, and in the period net individual income decreased by 5.0% to EUR 0.40 million from EUR 0.42 million a year earlier.
Costs:
Consolidated Staff Costs and General Administrative Expenses fell by 4.8% to EUR 308.5 million from EUR 324.0 million in Q111. The decrease in staff costs resulted from ESFG's subsidiaries continued strict control over variable salaries both in Portugal and throughout the 27 countries ESFG operates in.
Other Expenses increased year-on-year by 13.8% to EUR 82.2 million from EUR 72.2 million in Q111; costs include the business and running costs at ESS and a EUR 11.0 million increase in costs at BES.
Core Tier 1Solvency and Capital Increase. ESFG is approved by the Bank of Portugal to use the Internal Ratings Based ('IRB') method for calculating the minimum core capital requirements to cover credit risk. The authorisation covers ESFG and its subsidiaries BES and BESI and their respective subsidiaries. ESFG provides information on regulatory capital and capital ratios under the BIS IRB II, as of 31 December 2010, 31 December 2011 and Pro-Forma 31 December 2011.
ESFG's capital ratios, reported to the Bank of Portugal, under IRB Foundation at year end 2011 were: Core Tier 1 8.3%, 8.6% and 10.1%. ESFG's capital position, during the first half of the second quarter 2012, however saw further significant improvements in its Core Capital with the successful completion of a EUR 500 million capital increase and a EUR 1.01 billion rights issue at its fully consolidated banking subsidiary BES. The combined effect is an estimated 180 bp improvement in Core Capital. The full impact of capital raise will be further improved by the Group's on-going deleveraging programme and resulting reduction in Risk Weighted Assets (RWA).
Fig. II
Solvency FY10 FY11 Pro-Forma FY11* EBA 30 June BoP 31 Dec 2012
2012
(Basel II IRB
Foundation)
Core Tier I 7.0% 8.3% 10.1% 9.0% 10.0%
Tier I 8.0% 8.6% 10.4% - -
Total 9.6% 9.4% 11.6% - -
*Compared against the risk weighted assets of ESFG as at the 31 December 2011
As a result of the EUR 500 million capital increase, on the 23 April 2012 102,040,816 new ordinary shares were placed at an issue price of EUR 4.90 per share. The total number of shares outstanding on that date rose to 207,075,338.
Credit Rating: ESFG is rated by two international rating agencies; DBRS and Moody's. On the 1 February 2012, DBRS, in the wake of its downgrade on Portugal, downgraded ESFG to BBB (low); ESFG's short term credit rating was moved to R-2 (middle). ESFG's DBRS rating, both long and short term remains investment grade. On the 29 March 2012, Moody's announced the downgrade of ESFG's long term debt rating to B2 from B1. The downgrade followed Moody's rating action on all Portuguese Banks, including that of BES, and the Portuguese sovereign rating.
Indebtedness: ESFG's external debt at the end of the first quarter 2012 stood at EUR 737.1 million representing a reduction in total indebtedness of 43.3% from EUR 1.3 billion a year earlier.
DEVELOPMENTS DURING Q112 AND SUBSEQUENT EVENTS
-- On the 23 April 2012, ESFG announced that it had raised EUR 500
million through the issuance of 102,040,816 new shares. The order book
was increased from EUR 400 million on the back of an access in demand.
The price of the new shares was set at EUR 4.90 per share.
-- On the 12 April 2012, ESFG announced its intention to raise up to EUR
400 million of new equity through a capital raise and issuance of new
shares.
-- On the 29 March 2012, Moody's announced the downgrade of ESFG's long
term debt rating to B2 from B1. The downgrade followed Moody's rating
action on all Portuguese Banks, including that of BES.
-- On 1 March 2012, the BoP announced the completion of the third and
final stage of the Special Inspections Programme (SIP). ESFG's
evaluation was confirmed as 'clearly adequate'; the highest
classification in the scale.
-- On 1March 2012, the NYSE Euronext Lisbon announced that
ESFG would enter the Portuguese PSI20 index on 19 March 2012.
-- On 1 February 2012, ESFG announced that on 31 January 2012, DBRS had
in the wake of its downgrade on Portugal, downgraded ESFG to BBB
(low); ESFG's short term credit rating was moved to R-2 (middle).
-- On 16 December 2011, the Bank of Portugal announced the first global
results of the Special Inspections Programme (SIP), undertaken as part
of the measures and actions agreed by the Portuguese authorities with
the IMF, EU and ECB. The SIP noted, as of September 2011, the ESFG
Group constituted additional impairments for the sum of EUR 21.0
million.
CONTACTS
Espírito Santo Financial Group King Worldwide
Filipe Worsdell Faisal Kanth
+44 (0) 203 4292 100 +44 (0) 207 614 2900
fworsdell@esfg.com fkanth@king-worldwide.com
The Espírito Santo Financial Group provides, through its subsidiaries, a global and diversified range of financial services to its clients including Commercial banking, Insurance, Investment banking, Stock-brokerage, Healthcare services and Asset management in Portugal and internationally. For additional information on Espírito Santo Financial Group, its subsidiaries, operations and results, please visit the Company's website on www.esfg.com.
1 A quarter on quarter comparison of the key indicators is provided. Figures in parentheses following the operational and financial results for 2012 refer to the same item in 2011
2 Aggregate of Net Gains/Losses from Financial Assets at Fair Value through Profit and Loss, Net Gains on Available for Sale Financial Assets, Net Gains from Foreign Exchange Differences and Net Gains/Losses from the Sale of Other Assets
ESPÍRITO SANTO FINANCIAL GROUP SA
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2012. 31 MARCH 2011 AND 31 DECEMBER 2011
3/31/2012 3/31/2011 12/31/2011
(in thousands of euro)
Assets
Cash and deposits at central banks 1 566 091 1 275 315 1 130 515
Deposits with banks 938 909 1 028 777 998 345
Financial assets held for trading 3 913 177 3 407 892 3 466 900
Other financial assets at fair value through profit or loss 1 823 686 1 370 734 1 714 092
Available-for-sale financial assets 12 991 693 11 521 812 12 024 435
Loans and advances to banks 1 229 945 2 572 898 2 020 113
Loans and advances to customers 51 489 491 52 233 242 51 881 875
Held-to-maturity investments 1 408 547 2 372 250 1 751 193
Derivatives for risk management purposes 468 055 295 625 510 090
Non-current assets held for sale 1 826 674 604 876 1 646 683
Property and equipment 1 155 277 1 129 983 1 175 546
Investment properties 316 629 341 206 318 038
Intangible assets 544 387 552 319 549 196
Investments in associates 628 998 584 246 578 327
Technical reserves of reinsurance ceded 71 597 68 830 65 520
Current income tax assets 37 665 104 065 34 060
Deferred income tax assets 744 848 328 041 769 672
Other assets 4 006 572 4 306 574 3 384 904
Total assets 85 162 241 84 098 685 84 019 504
Liabilities
Deposits from central banks 13 315 607 8 922 341 10 013 719
Financial liabilities held for trading 1 987 137 1 909 348 2 176 258
Deposits from banks 5 038 466 7 272 835 6 216 006
Due to customers 36 725 727 30 811 463 34 951 984
Debt securities issued 16 148 113 21 246 976 19 509 623
Derivatives for risk management purposes 181 541 217 140 238 633
Investment contracts 122 723 336 506 148 764
Non-current liabilities held for sale 140 950 5 411 140 950
Provisions 189 362 232 955 212 796
Technical reserves of direct insurance 1 099 921 1 146 612 1 089 915
Current income tax liabilities 84 976 62 471 80 761
Deferred income tax liabilities 106 364 114 768 120 891
Subordinated debt 1 313 007 2 731 249 1 322 579
Other liabilities 2 277 800 1 762 786 1 556 802
Total liabilities 78 731 694 76 772 861 77 779 681
Equity
Share capital 105 035 778 549 105 035
Share premium 492 912 253 656 492 912
Preference shares 72 428 394 514 72 428
Other equity components 58 574 115 109 58 574
Capital reserve not available for distribution 700 970 - 700 970
Fair value reserve ( 105 130) ( 50 308) ( 165 624)
Other reserves and retained earnings 6 326 18 511 ( 118 847)
Profit for the year attributable to equity holders of the Company 1 976 13 664 121 352
Total equity attributable to equity holders of the Company 1 333 091 1 523 695 1 266 800
Non-controlling interest 5 097 456 5 802 129 4 973 023
Total equity 6 430 547 7 325 824 6 239 823
Total equity and liabilities 85 162 241 84 098 685 84 019 504
ESPÍRITO SANTO FINANCIAL GROUP SA
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTH PERIODS ENDED 31 MARCH 2012 AND 2011
3/31/2012 3/31/2011
(in thousands of euro)
Interest and similar income 1 112 714 989 524
Interest expense and similar charges 804 313 708 009
Net interest income 308 401 281 515
Dividend income 36 917 4 395
Fee and commission income 256 270 229 688
Fee and commission expenses ( 46 711) ( 35 432)
Net gains / (losses) from financial assets and financial liabilities at fair value through profit or loss 1 972 ( 16 134)
Net gains from available-for-sale financial assets ( 59 179) 37 090
Net gains from foreign exchange differences 34 667 41 792
Net gains / (losses) from the sale of other assets ( 10 386) ( 38 586)
Insurance earned premiums net of reinsurance 85 124 83 746
Other operating income 139 274 132 861
Operating profit 746 349 720 935
Staff costs 191 575 203 175
General and administrative expenses 116 974 120 869
Claims incurred net of reinsurance 68 076 73 922
Change on the technical reserves net of reinsurance ( 3 605) ( 13 707)
Insurance commissions 5 718 6 775
Depreciation and amortisation 37 693 35 650
Provisions net of reversals ( 5 331) 2 990
Loans impairment net of reversals and recoveries 143 360 73 618
Impairment on other financial assets net of reversals 2 212 1 158
Impairment on other assets net of reversals 46 947 21 287
Other operating expenses 82 201 72 211
Operating expenses 685 820 597 948
Gains on disposal of investments in subsidiaries and associates - -
Share of profit of associates 4 116 4 498
Profit before income tax 64 645 127 485
Income tax
Current tax 45 033 17 786
Deferred tax ( 20 322) 10 875
24 711 28 661
Profit for the year 39 934 98 824
Attributable to equity holders of the company 1 976 13 664
Attributable to non-controlling interest 37 958 85 160
39 934 98 824
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