RNS Number:7913P
Espirito Santo Financial Group S.A.
16 September 2003
FOR IMMEDIATE RELEASE
Contact:
Manuel Villas-Boas
Espirito Santo Financial Group
+44-20-7332-4350
- or -
Bernard Compagnon
Taylor Rafferty, London
+44-20-7936-0400
- or -
James P Prout
Taylor Rafferty, New York
+1-212-889-4350
ESPIRITO SANTO FINANCIAL GROUP ANNOUNCES CONSOLIDATED RESULTS FOR THE FIRST HALF
OF 2003*
- Consolidated net income of 13.2 million Euros in the first half of 2003,
against a loss of 32.3 million Euros in the corresponding period of 2002
- Turnaround results from considerable recovery in insurance combined with
strong banking results in Portugal
- Improved technical results, combined with strong investment performance,
underpin the results of insurance subsidiaries
- Significant growth in fee generation and capital markets results reinforce
banking subsidiaries performance in Portugal
Luxembourg/Portugal - September 16, 2003 - Espirito Santo Financial Group S.A.
("ESFG") (Euronext Lisbon, NYSE: ESF) today announced un-audited consolidated
results for the first half of 2003.
General Comments
Consolidated net income reached 13.2 million Euros, against a loss of 32.3
million Euros in the same period of 2002. This turnaround resulted mainly from
the significant recovery in the performance of the insurance operations combined
with the strong performance of the banking activities. The recovery in insurance
reflected improved operational results achieved in both life and non-life
activities as well as a considerable improvement in the results from the
insurance companies' investment portfolios.
* Readers may find it useful to read the results releases of the main banking
and insurance subsidiaries in conjunction with this release; all are available
on ESFG's website: www.esfg.com
ESFG's banking subsidiaries in Portugal, the BES Group, outperformed the large
banking groups in Portugal in the first half of 2003, against an environment of
reduced economic activity. This reflects the continuing pursuit of organic
growth and a highly selective approach to the credit portfolio combined with a
vigorous strategy of cost containment and a policy of enhancing fee-generating
activities linked to an increase in the quality of services.
The substantial turnaround in the performance of the insurance subsidiaries
resulted from a combination of factors, which include the measures undertaken to
render Companhia de Seguros Tranquilidade Vida's ("Tranquilidade Vida")
investment portfolio less vulnerable to declines in stock exchange prices, the
improvement in the performance of Portuguese and international stock exchanges
and the effects of the increased selectivity and new business orientation in
both Tranquilidade Vida's life assurance activity and the non-life activity at
Companhia de Seguros Tranquilidade ("Tranquilidade").
Main Item Analysis
ESFG's consolidated net interest income decreased by 14.0 per cent in June 2003
to 255.6 million Euros, mainly as a result of a modest 1.3 per cent growth in
consolidated loans combined with a 44.4 per cent increase in provisions for loan
losses, which reflect the economic slowdown experienced in Portugal over the
year. In fact, BES Group increased its net provision charge by 77.1 per cent in
the first half of 2003 compared with the same period in the preceding year, with
particular emphasis on credit provisions.
Consolidated fees and commissions at ESFG in June 2003, showed an increase of
9.3 per cent over the same period in the preceding year, to reach 173.5 million
Euros. This reflected a significant growth at the level of BES Group, partly
offset by lower fee generation at the level of the Swiss private banking
subsidiary, Compagnie Bancaire Espirito Santo ("CBESSA"). At BES Group, growth
in fee income was primarily driven by traditional products, with positive
contributions also derived from investment funds and bancassurance, as well as
in fees and commissions arising from project finance activities. Improved
service quality and initiatives aimed at strengthening loyalty among BES Group's
customer base were crucial contributors to the growth achieved. At CBESSA, fee
generation was hampered by the decline in fees related to credit transactions
and brokerage activities in the first half of 2003, as well as increased
competition in the Swiss market.
Net trading Result on Trading and Investment Securities and Net gains on Foreign
Currency Transactions posted a 143.6 per cent aggregate growth to 113.5 million
Euros in the first half of 2003. This reflected improved results from capital
markets activities at the BES Group, both from the commercial banking area and
the investment banking activities. In commercial banking, BES continued to steer
financial management in order to benefit from opportunities afforded by the
recovering equity market as well as by the changing interest rate environment,
benefiting from rate cuts during the first half of the year. In the investment
banking area, BES Investimento consolidated its leadership in Portugal where it
was given Euromoney's award for best M&A house, and reinforced its presence in
Spain and Brazil, particularly as originator of cross-border transactions.
ESFG's consolidated Insurance Revenues grew by 13.1 per cent to 673.8 million
Euros in the first half of 2003, when compared with the same period in 2002, due
to the increase in premium income at ESFG's life assurance subsidiary,
Tranquilidade Vida. As a consequence of the increased emphasis on traditional
products (such as private pension plans and traditional risk products) over
capitalization products, premiums in private pension plans increased 19.3 per
cent in the first six months of 2003. At the same time, Tranquilidade Vida's
total market share is estimated to have risen from 16.7 per cent in the first
half of 2002 to 17.5 per cent this year.
At the ESFG consolidated level, Insurance Benefits and Claims increased 10.1 per
cent to 561.2 million Euros against the above-mentioned 13.1 per cent increase
in insurance revenues. This reflects improvements in technical results both at
Tranquilidade's level, where technical results increased 147.5 per cent in the
first half of 2003, and at Tranquilidade Vida, where technical results rose by a
more modest 20.4 per cent in the same period. At Tranquilidade's level, this
improvement, as well as reduction in the combined ratio from 111.1 per cent in
June 2002 to an exceptional 91.0 per cent in June 2003, resulted primarily from
measures taken over the past eighteen months to improve Tranquilidade's
underwriting results and reduce costs, which produced better than anticipated
results. At Tranquilidade Vida, the improvement reflects the strategic decision
to emphasize traditional life and pension products and the cost-cutting policies
undertaken over the past eighteen months.
The 50.0 per cent decline in Insurance Underwriting and Related Expenses, from
108.2 million Euros in the first half of 2002 to 54.1 million Euros this year,
primarily reflects the turnaround in the profitability of the investment
portfolio at Tranquilidade Vida and, to a lesser extent, the greater efficiency
of the insurance operations already highlighted in the performance of technical
results. The combination of active measures designed to protect Tranquilidade
Vida's investment portfolio from declines in equity values with careful
day-to-day management of the company's portfolio and a slight improvement in the
performance of Euronext Lisbon (the PSI-20 index grew 0.32 per cent in the first
six months of 2003 against a decline of 13.1 per cent in the first half of
2002), were the main contributors to this improved profitability.
The cost-containment policies carried out at all levels of the ESFG group of
companies led to a rise of just 2.0 per cent in Salaries and Benefits and a 1.4
per cent reduction in Occupancy Costs in the first half of 2003 against the same
period in 2002.
Other Developments
In March 2003, Fitch Ratings initiated the public rating of ESFG (A- long term,
F2 short term, outlook stable). In April 2003, ESFG terminated the rating
contract with Standard and Poor's and all ratings issued by this agency
pertaining to ESFG were withdrawn at ESFG's request. Standard and Poor's
continue to rate BES.
In May 2003, BES decided to merge its subsidiaries Besleasing Mobiliaria,
Besleasing Imobiliaria and Euroges Factoring into a single non-bank credit
institution, which will combine the businesses of those three institutions. Also
in May 2003, BES decided to merge its subsidiaries Espirito Santo Dealer into
BES Investimento, in order to concentrate investment banking and stockbrokerage
activities. In July 2003, BES announced the sale of its participation in
Credibom, a consumer credit company, to Banque Sofinco S.A. for a total
consideration of 78.8 million Euros. The profit generated by this transaction
was offset by a reserve against potential risks which may arise from the
economic downturn in Portugal.
An interview with Manuel Villas-Boas, Director, in video/audio and text is
available on http://www.esfg.com and http://www.cantos.com
###
The Espirito Santo Financial Group provides, through its subsidiaries, a global
and diversified range of financial services to its clients including Commercial
banking, Insurance, Merchant banking, Stock-brokerage and Asset management in
Portugal and internationally.
ESPIRITO SANTO FINANCIAL GROUP SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
30 Jun 2003 30 Jun 2002 31 Dec 2002
(In millions of Euro)
ASSETS
Cash and due from banks 1,334.9 1,244.1 1,815.2
Interest-earning deposits with banks 4,873.9 3,495.1 4,929.7
Trading account securities 372.4 838.8 483.3
Investment securities 7,887.6 7,672.8 7,947.7
Other equity holdings 823.9 818.7 808.4
Loans and advances to customers 27,658.4 27,300.2 27,199.5
Allowance for loan losses (820.7) (675.2) (782.6)
Accrued interest income 251.9 260.6 252.6
Property and equipment, net 457.1 515.3 527.6
Other assets 2,492.3 1,950.9 2,407.2
TOTAL ASSETS 45,331.7 43,421.3 45,588.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits from banks 3,258.6 3,359.1 3,977.0
Demand deposits 6,599.1 5,812.4 6,832.2
Time deposits 11,185.0 12,412.5 12,383.4
Securities sold under repurchase agreements 1,534.9 1,315.2 1,536.3
Other short-term borrowings 1,206.3 1,256.1 1,433.5
Insurance reserves 5,155.4 4,704.9 4,977.5
Accrued interest and other liabilities 1,732.2 1,353.3 1,088.6
Corporate borrowings and long-term debt 12,307.0 10,822.0 10,983.1
Convertible bonds 310.0 310.0 307.3
TOTAL LIABILITIES 43,288.5 41,345.6 43,518.9
MINORITY INTERESTS 1,995.4 2,068.9 2,029.4
SHAREHOLDERS' EQUITY
Common stock, EUR 10 par value 479.1 479.1 479.1
Treasury stock, at cost (35.9) (71.5) (35.9)
Retained earnings and reserves (390.3) (407.9) (407.8)
Accumulated foreign currency translation (6.7) 5.6 1.5
Accumulated unrealized gains on investment securities
held by insurance operations 1.6 1.5 3.4
TOTAL SHAREHOLDERS' EQUITY 47.8 6.8 40.3
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 45,331.7 43,421.3 45,588.6
ESPIRITO SANTO FINANCIAL GROUP SA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited Unaudited Audited
30 Jun 2003 30 Jun 2002 31 Dec 2002
(In millions of Euro, except for earnings per share)
Interest income
Interest on loans 694.1 725.9 1,489.6
Interest and dividends on securities
Trading securities 41.1 26.1 98.0
Investment securities 106.2 100.9 180.5
Other interest income 55.9 61.0 119.6
Total interest income 897.3 913.9 1,887.7
Interest expense
Interest on deposits 238.6 264.0 524.1
Interest on securities sold under 22.7 13.5 41.9
repurchase agreements
Interest on short-term borrowings 21.2 27.8 47.5
Interest on corporate borrowings and 221.3 214.2 438.3
long-term debt
Interest on convertible bonds 6.6 6.3 12.9
Total interest expense 510.4 525.8 1,064.7
Net interest income 386.9 388.1 823.0
Provisions for loan losses (131.3) (90.9) (231.8)
Net interest income after provision for 255.6 297.2 591.2
loan losses
Other income
Fee and commission income 173.5 158.7 297.5
Net trading result on trading and 14.4 0.4 (77.5)
investment securities
Insurance revenues 673.8 595.6 1,219.0
Net gains on foreign currency transactions 99.1 46.2 216.5
Other operating income 63.9 62.5 152.4
Total other income 1,024.7 863.4 1,807.9
Other expenses
Salaries and benefits 220.6 216.2 441.8
Occupancy cost 27.4 27.8 55.2
Insurance benefits and claims 561.2 509.9 1,053.1
Insurance underwriting and related expenses 54.1 108.2 230.3
Depreciation 31.4 32.4 65.6
Amortization 48.0 42.9 93.3
Other expenses 184.6 162.6 342.4
Total other expenses 1,127.3 1,100.0 2,281.7
Income before income taxes and minority 153.0 60.6 117.4
interests
Income taxes (41.3) (27.5) (14.2)
Minority interests in income of (98.2) (64.4) (146.4)
consolidated subsidiaries
Earnings in Equity subsidiaries (0.3) (1.0) (1.9)
Net income 13.2 (32.3) (45.1)
Net income per share 0.29 (0.75) (1.04)
Weighted average number of shares 45,586,141 43,212,594 43,253,371
outstanding:
This information is provided by RNS
The company news service from the London Stock Exchange
END
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