Welcome to CGD's Conference Call. This call follows the first half 2021 consolidated results release, which took place last Friday. It is possible to follow the consolidated results presentation from the CGD website. The CFO, Mr. José Brito, and the Head of IR, Mr. Nuno Pereira, will guide you through the presentation. A Q&A session will follow. It is now my private pleasure to turn the call over to Mr. Nuno Pereira, Head of IR. Good afternoon, everyone, and welcome to CGD's first half 2021 results presentation, which will be presented to us by CGD CFO, Mr. José Brito. Without further ado, I will hand you over to him, and we'll start our presentation. Thank you. Hello. Good afternoon, and thanks for joining this call. I will start in slide four of our presentation, which has the main highlights for this first half accounts. We have achieved a net income of EUR 294 million, which translates in a return on equity of 7.2%, and it is an increase of 18.3% over the same period of last year. It's important to mention that the net income improved the extraordinary results of EUR 44 million, so that the current net income achieved EUR 250 million and a return on equity of 6.2%. I will get in more detail during the presentation. We also highlight the increase in the balance sheet of the group with the total net assets exceeding EUR 100 billion, and this represents an increase of more than 10% over the accounts of December. Like in previous reports, we continue to reinforce the loan impairments on a preventive basis to account for the potential impact of the pandemic, and especially for the end of the moratoriums which will happen in the end of September. We continue to reinforce our capital ratios. The CET1 reached 18.9% and the total capital ratio 21.5%. We also had a significant growth in loans to corporate and business, 5.4% if we exclude construction and real estate, like we usually do. Those are the sectors where we concentrate more the leveraging of NPLs. Also to highlight the very good dynamic in terms of the mortgage market, where CGD achieved a market share close to 25% in the new production. As you will see, we have the best quarter in terms of new production for sure of the last 10 years. We continue to improve our asset quality. The NPL ratio drops to 3.2%, at the same time, we continue to increase the coverage level, which reaches 66.5%, which compares to 44.7% on average for our European peers. We continue to improve also our efficiency levels. The recurrent operating costs decreased by 1.5% over the same period of last year, our cost-to-income ratio actually reaches 45.3%. We also highlight that this is an important milestone for CGD, the recent upgrade by Moody's, which makes that CGD is now rated at investment grade level by two of the rating agencies. This is precisely what we have on slide five, where we have the actual ratings for CGD with Moody's and the DBRS rating, Caixa, at investment grade level. The following slide, we have the slide six, the evolution of our rating with Moody's, where we can see the big drop during the financial crisis back in 2011. In recent years, we are recovering back that, and now we have achieved after the conclusion of the strategic plan, we achieved again the investment grade level. On slide seven, we have the comparison with our Portuguese peers and also the Portuguese sovereign. I won't detail there because it's clear. The following slides where we have also some information on the growth in the digital platforms, the digital business, also in terms of our commercial activity, the market share, and also on sustainability. This is mainly descriptive, so I will skip those slides, but maybe to highlight that on slide 14, we make a reference to the publishment by CGD of our sustainable finance framework, which will allow CGD to issue ESG bonds in the near future. I will move to slide 16, where we have precisely the consolidated net income. As we can see, we have a fairly good second quarter with a net income of EUR 240 million. If we exclude the non-recurring items, even though the net income achieved EUR 169 million, which is the best quarter since the third quarter of 2019, so from the pre-pandemic levels. With that, the return on equity, they've achieved 7.2%, if we consider the total of the net income. If we consider just the recurring net income, this reaches to 6.2%. In any case, a good evolution since last year. However, we continue to have some pressure coming from the net interest margin. On slide 17, we have the evolution of the core operating income, and for us the concept of the core income is just the net interest margin plus net fees and commissions, minus the operating costs. We can see that we have a good evolution from the first to the second quarter, but even though in annual terms and in comparison to the same period of last year, we have a decrease of 6.6%. This is precisely a consequence of the evolution of the net interest margin, which we have on slide 18. Where we can see that even with a good evolution from the first to the second quarter in the consolidated accounts, we continue to have a decline in the domestic interest income. This is, as you know, a consequence of the evolution of the Euribor rate in the market and also a consequence of the excess liquidity that the bank currently holds. However, having said this, it is our conviction that the net interest margin might have reached the bottom for CGD, and that in the following quarters we can see some recovery from the actual levels. As the repricing of loans is almost finished for these actual levels of market rates. On slide 19, we have precisely the recurring net interest margin, and as we can see, it continues to decrease. There is also some pressure coming from the spreads in the commercial markets in Portugal. Nevertheless, in the last months the spreads seems to be stabilizing. This reinforces also our conviction that net interest margin should have reached the bottom in the second quarter. With that, our net interest margin in the domestic activity decreases 11 basis points to 1.38% on the right-hand graph. In the consolidated activity, it decreases 16 basis points to 1.69%. By the contrary, on slide 20, the evolution of net fees and commissions was very positive. As you can see, we have the best quarter of the last two and a half years. Even with the still same lockdown in the Portuguese economy and generally in the different geographies where we operate, even with this lockdown, we have a very significant increase in fees and commissions on an yearly basis from the first half of 2020. To the first half of 2021, we have an increase of 10.1%, which is important especially to counterbalance the negative impact coming from the net interest margin. On slide 21, we have precisely the drawdown of those fees and commissions for the domestic activity, and what you can see is that they are mainly coming from off-balance sheet products, mainly banc assurance and investment funds, and also for the better dynamic in terms of new loans, both for households and for corporates. In terms of costs on slide 22, it's important to mention that we have an extraordinary negative impact on staff costs. It's one of the components that we consider one-off, that are linked to the actual calculation for the post-employment benefits, mainly the medical plan, but also for the pension fund. With that, we have the negative impact of EUR 96 million. The staff costs are, how can I say, by these extraordinary impacts have a very significant reduction, but that we, of course, don't consider it as recurring. If we look just to the recurring component, we have just a decrease of 0.1% on employee costs. In terms of other administrative costs, we continue to improve our efficiency levels with a decline of 8%, and in total we have this decline of 1.5%, also excluding these non-recurring effects. The increase in amortizations and depreciations are a consequence of the very significant increase in investment in the last two years, mainly in the digital platforms and the several IT systems in the bank. On slide 23, we have the evolution of the cost-to-income, and as you can see, we have a very substantial reduction for the overall cost-to-income, excluding, once again, these non-recurring effects, both on the consolidated and in the domestic activity. If we look just to the cost-to-income in the same concept of core income, we have a slight small increase precisely due to the impact of the net interest margin on the income component. On slide 24, we have the contribution from the international activity, where we also have a good performance. In overall terms, this contribution increased by more than 50%. If you look to the core entities of the group, we are seeing that this increase in terms of euros is 17%, but in local currency, in some geographies, the evolution of activity is much more significant as is the case in Angola, where the contribution in euros decreased, but in local currency increased. We have also here some exchange rate impacts, negative impacts, mainly coming from Mozambique and Angola, and to a certain extent also in Macau. Nevertheless, this is a fairly positive evolution that we also want to highlight. The line of other relates to the subsidiaries that are to be sold. They are in the sale process, and they are the subsidiary in Brazil and one of our subsidiaries in Portugal. There we also have good evolutions. In this case, especially because in 2020, we still have some negative impacts from the closure of our branches in Luxembourg and in Spain. Moving to the balance sheet on slide 25, we have the progress in terms of the business volume, an increase of 6.2%, mainly driven by the increase in customer resources, especially deposits, as you will see, but also a significant evolution in loans and advances to customers in the credit portfolio of the bank. On slide 26, we have the evolution of the net assets of CGD. This is clear that during the first two years of the previous strategic plan, there was clearly a deleveraging in terms of the NPLs, in terms of non-core assets and with the sale of some international subsidiaries. Since the end of 2019, we are again increasing our overall group volume of assets. On slide 27, we can see the evolution of resources. I would highlight mainly the evolution of deposits that since December increased almost EUR 4 billion. We have in this right chart that you can see that this increase happens in all segments, not only households, but also corporate and institutional. This is a consequence, of course, of the low level of interest rates in the market, but also of the very significant increase in the savings rate in Portugal which the last data we have, the savings rate in Portugal is higher than 14%, coming from levels of 7% or 8%. This increase in deposits is putting some pressure on CGD because this translates in excess liquidity. Excess liquidity has a charge in the actual market conditions. Of course, we will try. We are trying to manage the best way we can. A consequence of that was also the very significant increase in the placement of investment funds, which increased almost EUR 1 billion in this first half of 2021. With that, we increased once again our market share in investment funds in Portugal which now accounts for about one third of the market for investment funds. Looking on slide 28 to the evolution of the credit portfolio, we have a positive evolution in all segments of corporates on general government and others, on households, even on the consumer credit. This translates in an increase for the total portfolio of 2.4%. Of course, this is also benefiting from the existence of the moratoriums, which makes some loans are not returning the capital. This is good for the stock, but it also shows a strong dynamic in terms of the market in those last six months. On slide 29, we have some data on precisely the credit portfolio. There's no changes there. The numbers are almost the same as we had three months ago, not only in terms of the segment diversification, but also in terms of the split between households and corporates and on the average LTV in the mortgage portfolio. Moving to slide 30, where we have the evolution of new mortgage loans. As you can see, we have a very strong increase from the first half of 2020 to the first half of 2021. In the case of CGD, we have close to 65% of new production. The market increase is 31%, so we reinforce our position as market leaders. With that, we also reinforce our market share, which comes from 14.8% in 2018 to 24.4% in this first half of 2021. This is particularly important for CGD as this is a key product and a key business line for Caixa in Portugal. On slide 31, we have the detail of our exposure to sovereign debt. Not significant changes from the previous numbers. We have almost EUR 20 billion in total exposure to sovereign debt. As you can see, I think we have a very well-balanced diversification between Portugal, Italy, Spain, and in some cases, other Eurozone members. In the African countries, our exposure is mainly in the short term. We present here the details of our sovereign debt portfolio. Moving to asset quality on slide 32. We have a decline on the cost of credit risk. This is precisely because in the last quarters, we have been increasing the buffer of preventive impairments, and so we are now at a level that we think are comfortable. There's no reason to continue to increase that potential buffer. Especially because so far we haven't seen any deterioration in the quality of our credit books. Of course, we know that we have this pending issue at the end of the moratoriums. We have been working closely with all the clients that are under moratoriums, not only corporates, but also households, with regular contacts. What I can say is that for the time being, we are very comfortable with the impairment levels that we have in our balance sheet. On slide 33, we have the evolution of the NPLs. We continue to decrease the ratio. It stands at the end of June at 3.2%. Especially, we have a very high level of coverage by impairments, 66.5%, which compares with the European average of 44.7%. If we add on top of that the total credit impairments that we have on the balance sheet, plus the value of the collateral for those NPLs, we have a coverage level of close to 135%. On slide 34, we have precisely the evolution of the NPL ratio. As you can see in these past six months, the stock didn't move too much. Small declines due to cures and cash recoveries. Also some new entries, nothing significant. The decline of the ratio is coming more from the increase in exposures rather than a decrease in the NPL stock. On slide 35, we have the evolution of the real estate foreclosed assets, a small reduction of 2.5%. As you can imagine, this was not the best time to the sale of the most complex assets, mainly commercial, industrial, or logistical assets. Even though we continue to have the sale, especially on residential assets, but not so significant as in previous quarters. The same for, as we have in slide 36, the same for investment properties or registered funds, where the stocks are more or less the same as we had in December. On slide 37, we have the detail on the moratoriums. We have a decline since the beginning of the year of more than EUR 500 million. We have a stock at the end of June close to EUR 5.5 billion, and this represents 13.7% of our total credit portfolio, being 16.5% on the corporate segment and 9.5% on the household segment. We also have there the split. The first table is just for CGD portfolio. The second table is for interconsolidated terms. As you can see, we are having no significant changes in terms of the classification of the moratoriums in the different stages, according to IFRS 9. We have this decrease, which is positive, but as I already mentioned, we continue to monitor very closely this particular stock and in frequent contact with our clients. On slide 38, we have some reference to the credit lines that were important during this period of the pandemic and the lockdown. We have placed now more than EUR 2 billion in terms of these COVID credit lines, more than EUR 1.2 billion in the credit lines with public guarantee and more than EUR 800 million with credit lines with guarantees from the European Investment Fund. We also, in this case, we granted an extension of the grace period to some of the credits in an amount of EUR 570 million. We don't include in the numerator items because those ones benefit from the public guarantee. It's a different risk type. Moving to slide 39. In terms of liquidity, this is something new as we increase very substantially the funding from the TLTRO. This is precisely to benefit from the very good conditions that this specific instrument can give to the banks. In the first instance, we don't go so heavily on the TLTRO because we could not be sure that we could benefit from the -1% final cost. As the months progress, we think that we could be much more confident that we could benefit from the -1%. We increased substantially the TLTRO funding in the sense that this could contribute positively to the net interest margin of CGD. In terms of the eligible assets, nothing new. Of course, with the available eligible assets reduced in the same proportion that the funding increases, but nothing new there. On slide 40, we have the maturity profile of our wholesale debt. We include here for 2022 the exercise of the call on our AT1. We will start the process with ECB and SRB to get the necessary authorization to exercise that call. As you can imagine, considering the costs of this AT1, we will do all our efforts to get this authorization, and to announce to the market the exercise of the call. Of course, we will just start the process in the next weeks. On slide 41, we have some data on the funding structure of CGD. As we all know, for the time being, the main source of funding is precisely the customer deposits. This was visible in the evolution of the loan-to-deposit ratio, which reduced once again from 76% at the end of 2020 to 64%. With that, on slide 42, we continue to have very strong regulatory ratios on the liquidity front, with the LCR at 393% and the NSFR at 177%. Moving to capital on slide 43. We have the evolution of our CET1 and also the total ratio. We continue to strengthen the capital ratios, which is positive and it's of course important to get the necessary authorization to be able to exercise the call on the AT1. On slide 44, we have the comparison with the regulatory requirements, where we can see that we have a strong buffers in all dimensions of capital. On slide 45, we have the risk-weighted asset density that continues to decrease, which is, of course, also a consequence of the excess liquidity on balance sheet, which makes the density of risk-weighted assets decreasing. I would also highlight the decrease on the Texas ratio, which is, of course, positive considering the purpose of this and considering the decrease of the risk levels in our balance sheet. On slide 46, we have the distributable items and the MDA, as you can see, we have also very comfortable buffers in both dimensions, in both cases close or above EUR 3 billion. On slide 47, we have also some information on our pension fund. We increased the discount rate from 1.05%- 1.35% due to the evolution of the marketplace. That aspect, plus the good performance of the assets of the fund, which have a rate of return of 3.3% in the first six months, this makes that at the end of June, we have a coverage level of the liabilities of the fund at 106.2%. Also with a positive impact in terms of reverse in our equity. This don't translate to the capital ratios because it needs to be deducted, but it also has an expression in terms of the equity of CGD. In summary, on slide 48, we have the comparison between the CGD capital ratios and the European average. Understanding that the European average is coming from the EBA risk dashboard for March, the comparison is not totally fair. That's why we also put here the values for CGD for March. As you can see, we have these strong capital ratios. This was also shown in the stress test that the EBA released last Friday, where CGD has the 10th lowest depletion of capital. On slide 49, we have the cost-to-income and return on equity. In the cost-to-income, we also compare very favorably with the European average. On return on equity, we understand that the average for March is especially affected by this extraordinary number from Spain. This is also a one-off impact. It is our conviction that we also compare very favorably with the European average. It is also important to mention that the return on equity for CGD for March is affected by the fact that we account all the regulatory costs in the first quarter of each year. The return on equity is always lower in the first quarter accounts. Finally, on slide 50, we have the NPL ratio and the coverage ratio by impairments. Once again, I think I already mentioned that in our last call, if we cross those two dimensions, the net NPL ratio at CGD is already below the average of European banks, which is also an important milestone for CGD. In summary, on slide 51, two very important aspects during these first six months, the closure of the strategic plan, the 2017-2020, the closure by DG Comp. The upgrade of the senior rating by Moody's, which puts CGD at investment grade level, and a good progress on profitability, a good progress in terms of the commercial activity, especially in Portugal. We continue to improve our efficiency levels, and also we continue to strengthen the asset quality of CGD. Finally, we continue to strengthen also our capital ratios, which are of utmost importance for Caixa. This is it. I think we can now move to any Q&A that you might have. Thank you very much. We will take our first question from Paul [Canner] with Société Générale. Please go ahead. Hi. Good afternoon, everyone. I've got three quick questions. The first is obviously you're now extremely well-capitalized. I just wanted to get a sense of the speed and the trajectory of getting the capital down and what ratio you think it ends up being over the course of the next couple of years. The second question is on NPL. Obviously, you've done a great job on reducing that, Paul. What do you think happens over the course of the next six months? Do we get to a peak of NPLs this year, or is it next year? How far away from the current NPL ratio are we from the peak, in your opinion? Is it a matter of 50 basis points? Is it less than that? Is it maybe 1%? The last question is on funding. I know you now have your SREP ratio. You've been clear in your release about your intention to issue EUR 2 billion in either, is my understanding, either preferred senior or non-preferred senior by the end of 2023. Just wanted to know how keen you are to do something still this year, maybe you've got so much capital that you don't need to do it this year. Would like to get a sense of the timing on that. Thank you. Okay. Thank you, I think, Paul, for your questions. The first one in terms of the capital, in fact, we are very well capitalized. As our CEO already mentioned, we might discuss a potential extraordinary dividend, but this will happen clearly later this year because we want first to understand the real impact of the end of the moratoriums in September, whether this will be in line with our projections, with our forecasts or not. Any extraordinary dividend will clearly be discussed after that. If with the actual projections that we have for the NPLs, and I will elaborate a little bit on that, I will say that it is possible that we might pay an extraordinary dividend. Having said this, I think, and especially from the experience of CGD in the recent past, it is clear that we want always to work with very strong capital ratios. We understand that being owned by the state, will never be easy for CGD to raise capital from the shareholder, because we will need always to go through this process of the state aid. Having that in mind, in order to avoid that, I think we need always to work with higher capital ratios than our peers, because we don't have full access to the market to raise equity. Of course, we understand that the actual levels are very, very strong, and we could maybe work with slightly lower levels. To achieve that, the way forward is to increase the payouts for the shareholder. As I said, maybe this year, we might discuss an extraordinary dividend. In the following years, maybe we could increase the payouts for the shareholder, but always keeping very strong and very sound capital levels. In terms of the NPLs, I will say that we should maybe reach the peak in the first quarter of 2021. We are working, waiting to have a small increase on the NPL still this year, with the end of moratoriums, but I believe that the peak should come in the first quarter of 2021. Twenty-two. Sorry, 2022. Sorry. Of course, 2022. Of course, we will try to continue to reduce the actual stock. We might have a process of sale of an NPL portfolio in the second half of 2021. Nevertheless, we are expecting some impact coming from the moratoriums. We, in our more adverse scenarios, this could impact the NPL ratio in no more than 1%. Of course, there are still lots of uncertainty, not only from the pandemic, but also from the economic performance in Portugal. The actual numbers we have, we could expect the NPL ratio to go to slightly above 4%. This is the scenarios we are working on, but this is something that we are updating every week or almost every day. Finally, in terms of funding, yes, we have this funding plan to comply with the MREL requirements for 2024. I think we will catch the market still this year, because we have this funding plan for 2024. We have roughly two years and a half to comply with it. Even with so strong capital ratios, our shortfall is in MREL, so we should issue senior or senior non-preferred still this year. We don't have yet the dates. We will discuss that, but I will give a very strong probability that this could happen still in 2021. Thank you very much. Thank you. Once again, it is star and one on your touchtone phone if you would like to join the queue. We will move next with Alvaro Ruiz with Morgan Stanley. Please go ahead. Thank you very much for taking my question. I just have a follow-up question from Paul. Sorry, can you speak a little close to the. We are not hearing. Sorry, is that better? Yes, okay. That's fine. Apology. Thank you. It's just a follow-up question from Paul, and it's about the upcoming call in March 2022. Based on your current capital levels, is it possible that rather than refinance the security with another AT1, you may think of Tier 2 or senior non-preferred? Yes. Thank you. Yes. Because of our capital ratios are so strong, our concern is just the MREL. Of course, we will try to fulfill that with the cheapest option available. I would say that the most probably is to be senior non-preferred. It still has some degree of subordination, not so expensive as a Tier 2 and of course, as the issue of Tier 1. The most probably is that we will issue senior non-preferred. Thank you very much. Thank you. As a reminder, it is star and one on your touchtone phone if you would like to join the queue, star and one. We will pause another moment. There appear to be no further questions at this time. I would now like to turn the call over back to our presenters. Well, I want to thank everyone for their interest in today's conference call, and I'd just like to remind you that the investor relations side will remain available to take any questions that come up in the future. Thank you once again, and have a good week. Thank you. Have a nice day. Thank you.