Welcome to the CGD's conference call. This call follows the first quarter 2023 consolidated results release, which took place yesterday. It is possible to follow the results presentation from the CGD website. The CFO, Mr. Francisco Ravara Cary, and the Head of IR, Mr. Nuno Pereira, will guide you through the presentation, and the Q&A session will follow. Hello, good morning, welcome to CGD's first quarter 2023 results presentation. This has been another quarter where the bank has delivered a strong result close to EUR 300 million in net income, while presenting a sound capital and liquidity position. Without further ado, I will hand you over to CGD's CFO, Mr. Francisco Cary. Good morning. Good morning everyone, thank you for assisting the call. I mean, the proposed methodology is that we follow the presentation being trying to be brief to leave more time for Q&A. As Nuno has just introduced, we announced the first quarter results. Now we are on page five of our presentation with the main highlights. The net in terms of profitability, EUR 285 million for the first quarter, 96% improvement versus last year. With all these positive trends and numbers, we are confirming the dividend distribution that will be decided in the general assembly. Which includes the cash dividend of EUR 352 million, and predictably to be added by a dividend in kind, which will result from the distribution of our current head office to the shareholder. We are still in the process of discussing the details of that with the shareholder. The estimate is that, if it is completed on time, we can be talking about a value equivalent to the cash dividend. The net income from our international activities also continues to grow 41% year-on-year. The operating costs are moderately increasing. Of course with the upward trending revenue, a significant increase in efficiency ratios. In terms of business activity, the credit volumes remain relatively stable with a modest decrease. We highlight that our portfolio of loans to SMEs and the public sector are both growing. Despite swelling demand in mortgages, CGD continues to be the market leader. On the deposit which will be commented further on, there is a decrease for explainable reasons across the board in the banking sector. We keep our market share stable and we believe it's shaping the segment. In terms of capital and MREL, we continue to have very strong capital ratios which continue also to evolve positively in this quarter. We have our MREL position already accounting with everything that is expected to happen during the year. We currently meet or exceed the requirements applicable or mandatory from January 1st, 2024. The expectation is that it will continue to be so during the year, no additional issuance will be required for that purpose. In terms of asset quality, it remains despite the more unstable or challenging environment, it continues to remain relatively stable. Highlighting that our NPL ratio net of impairments remains at zero. The costs of credit risk for the quarter increased to 30 basis points, essentially reflecting a conservative and preventive approach to the uncertainties of the environment. Moving to page six, and just the main numbers on the loan portfolio. As mentioned, the slight decrease in the overall portfolio, both on consolidated and on a domestic basis. In the domestic market, we continue to be market leader in terms of total credit with a market share of 18%. If we skip to page seven. The message here on the combined portfolio to corporates and the public sector increases marginally about 1% in the quarter. The highlights on the SME, which is the main focus of development of our activity, the loan book has grown 4.4% year-on-year compared to the contraction of the market. I mean, very positive performance also on the leasing financing, where we hold the markets, the leadership market share, 24% with an increase in production year-on-year of 54%, which is, I mean, which is supporting the investments in equipment of Portuguese corporates. Also highlight the increase in the level of digitization of our business and the increased weight of ESG business with EUR 1.2 billion of green issues, structure either alone or in co-leadership roles by our investment bank, the Caixa BI. Also that, according to our internal ESG ratings, 50% of the loan portfolio to companies has the strongest levels of rating, good or strong. The weight is growing, also reflecting the increased tendency and focus on sustainability of our overall banking development. Moving to page 8 regarding mortgage loans. When you look at the stock of the portfolio, there is in the quarter some decrease, minus year-on-year, minus 0.5%. We continue to be market leaders with a market share of 24%. Overall, yes, there is a trend, there is a reduction in the demand for new mortgage loans, resulting from the greater uncertainty regarding the economic developments and also, of course, the increase in interest rates. I mean, on the good side, in terms of asset quality, it continues to be perceived as very strong. When you look at the graph on the right-hand side, the loan-to-value of new production continues to decrease over time. We have here a long series, but the tendency has been for a decrease in the loan-to-values of new loan origination. In the middle, you have the loan-to-values of our credit, our total credit portfolio. Here you, the positives are that, I mean, overall the average LTV is relatively comfortable 60% and only 12% above 80% loan-to-values. Skipping to page nine, focusing on deposits. The main message is, well, we continue to keep the leadership market share in deposits. I mean, here probably all the messages are important. You can see on the left-hand side that it's sort of a recollection that after the pandemic, the stock of deposits has been growing continuously from, and very significantly, from EUR 65.7 billion - EUR 83.8 billion as of the end of last year. In this first quarter, there was a significant Decrease these numbers on the left are the consolidated numbers, but 90% of this reduction approximately comes from the domestic deposits portfolio. You can check in the middle, on the graph in the middle that when there is a significant reduction in the first quarter. Basically when you compare it to the stock at the end of the first quarter of last year, it's there is some decrease that a minor decrease. I mean, this flow of deposits, it has been widely discussed in the press for the case of Portugal. In the press and in the other banking sector conference calls on their first quarter results. I mean, it's driven essentially by probably around two-thirds of these from a diversion to other savings products. In the specific case of Portugal, the government has a very competitive savings product that up to a certain amount allows for a total remuneration of 3.5%. Because of the structural excess liquidity in the Portuguese market, the banks were slow to react, and also CGD slow to react in the increase of rates for their deposits. The other third of the reduction is explained by some early redemption of mortgage loans and also diversion to other off-balance sheet savings products promoted by CGD, both on the financial insurance and asset management. The graph in the pie in the right show that, I mean, what has happened hasn't really affected our overall liquidity, as you will see in the following slides. Our deposits, the structure of the deposits is stable in the concept that 78% and the percentage is kept stable are retail deposits, which tend to be very sticky over time and that we continue to hold exactly the same market share. Being the market leader in retail deposits as well with a market share of around 32%. If we move to page 10. Of course, in this first quarter, we didn't feel the need to move so fast, even if we started launching the new term deposits during the... You here you will see it's not extensive, but it's a timeline of the rates of some of the products that we have launched in terms of term deposits. In the graph below, the evolution of the rates of production of new term deposits over time, so it is increasing. We have launched recently a new term deposit with 2.25% rate, which is very competitive. It is it can be easily subscribed in our, in our app. There is no restriction attached. In the sense that all clients can subscribe it. It has a total limit of EUR 60,000, which covers in terms of number of clients, about 95% of our clients, meaning that 95% of our clients have savings below or equal to EUR 60,000. I mean, as you would expect, and even if I can share the exact numbers with you, this trend of decrease in deposits has reduced very significantly from April onwards. Moving to page 11 and 12. I mean, these probably I will cover them more quickly. I mean, digital and digitization of our operations is a key pillar of our strategy, it is producing the desired results. I mean, we always ambition to do it faster, we are happy with the rhythm that at which it is developing. On page 11, some highlights in terms of evolution of number of digital customers, the active mobile customers. About half of our client base trades actively on our app, and also the increase in penetration and of the digital operation with the digital sales on retails and corporates, and also the recognition of the quality of our digital service from clients, the NPS from digital channels standing at 59 percentage points and going up, and the index of satisfaction calculated by an external study conducted by Scope in the first quarter of 2023 is at, stands at 87.1%. On page 12, also some of the highlights of the novelties that we keep on launching and the recognition that we get from external parties. Moving to page 13. Sustainability is another key pillar of our strategy. Here in a slide, a highlight of the developments on the right-hand side, as you know, Caixa is committed to the major ESG initiatives and commitments globally and regionally. On the specific topic of climate risk, we have improved the quality of our financial disclosure, and we have been recognized by what we have been doing as one of the 500 companies at European level leading the fight against climate change, according to the Europe Climate Leader study of 2023. On the more practical impact, some of the numbers increase in sustainable finance, of the EUR 1.2 billion referred before. We kept in our balance sheet, EUR 648 million, so, an increase of 13% in from the year-end. Also the support that example of support to education through our prize, Caixa Mais Mundo, and also the participation of, and the development of Caixa volunteering program, involving in the first until April, participation of about 600 volunteers in 24 initiatives, something to be continued during the year. Moving to page 15 and with a break and entering into an analysis of the results. The net income, as I have said, EUR 285 million, 96% year-on-year. Here the breakdown to show where this increase is mostly coming from. As you would expect, with the market conditions, most of the increase comes from Net Interest Margin. Part of it, EUR 182 on the domestic Net Interest Income retail, EUR 137 from treasury, essentially, and also an increase in the international Net Interest Income. I mean, the driver for the results increase is not coming from anymore. I mean, we are at a different period, a different trend. It's not coming from cost reductions or increases of commissions. On the negatives, there is also a positive extraordinary contribution from in the income from financial operations. It is extraordinary because as part of the liquidation of the extinction of the pension fund. We have to deliver to the state or to the organism that manages the pension fund our responsibilities. We have to hand on cash and cash equivalent. We have to retain the assets from the extension of our former pension fund. We liquidated almost all of the financial assets and that generated in the first quarter. I mean that it was a circumstantial positive advantage that we took of market conditions. We liquidated shares and bonds with an extraordinary gain of EUR 80 million. On the negative side, would highlight of course, an increase in credit impairments of EUR 46 million, and also the impact of EUR 56 million of provisions for restructuring costs. Of course, higher profits mean higher taxes. The negative contribution from taxes as well. Moving to page 16. This is just a reminder that regulatory costs are significant, and they continue to increase, even if at a slower pace than in previous years, 4% year-on-year. It is also here a reminder that we account all these regulatory costs in the first quarter. Moving to page 17. On the commission as mentioned, the driver of increasing in income is not anymore the level of commissions. The commissions are relative. They are growing, which is of course positive, but at a slower pace, 2% consolidated, 3% in Portugal. The drivers are essentially payments and insurance payments. We were reflecting the increase in purchases with CGD card. I mean, year on year, the first quarter of last year was also a negative quarter in the sense that it was when the war in Ukraine went to started and that led to a decrease in immediate decrease in the level of consumption. Now it has recovered. Also highlighting the increase in the commissions from insurance 16% positive evolution with here non-financial insurance means that we are just brokers of insurance products sold to our network. As we sell more and more, we are developing a larger portfolio that will bring in recurrent commissions. Overall, the other commissions are down 3%. On asset management, even if we are now putting an effort to make it grow again, this reflects the year-on-year reflects the fact that there was a devaluation in the portfolio last year, and so a reduced level of commissions. On the operating costs, skipping to page 18. There was a slight increase in operating costs, both consolidated and domestic. I mean, on employee costs, personnel costs, we have a slight reduction, which is coming still, a combination, an effect of the reduction of the people, but also the fact that last year we had more non-recurrent costs than this year. On the administrative expenses and depreciation, they reflect somewhat also the level of inflation and also the impact of the increased investments that we have made in previous years. Overall, I mean, the costs are growing, but they are growing at a very controlled level. Skipping to page 19. Of course, with the combination is that, with costs relatively stable and the big increase in revenues coming from Net Interest Margin, essentially the cost to incomes have decreased significantly, both the recurrent and the total consolidated. Around this 30%, 29% recurrent, 33% total, which is, I mean, we can consider these very exceptional levels. Positive but exceptional in the sense that the trend over time will probably be towards just slight increase of this cost-to-income levels. Page 20. Just the highlight of our international activity. It is the represents EUR 53 million of the EUR 285 million of net income. Growing 41% year-on-year and with the minor contributors continuing to be the four larger core units of Mozambique, Macau, Angola and France. I would highlight specifically the recovery in Macau which was pretty much stalled for two years because of COVID, with the reopening of China the movement is growing again. Also, referring that, contrary to what happened last year where part of the increased contribution from international activity was coming from exchange rate or positive exchange rate fluctuations. In this year, the contribution of that effect is much, is small. Much smaller but, in relative terms, small. On page 21, it is a reminder of the capitalization and the flow of dividend distribution. Which is a matter that's very important from a cash flow standpoint in the domestic context, where we have the ambition to give back to the Portuguese State and the Portuguese citizens the amount that they had to invest in the recapitalization of early 2017. Including the EUR 350 million cash dividend that we are proposing to pay in this in the next general assembly. We have already paid back more than 50% of the cash increase of EUR 2.5 billion of early 2017. We have also on the, on the private side, we have called the AT1 last year. We now have the option to call the Tier two in June 2023. No formal decision has been taken to date, but we have the supervisor authorization to make the call if we decide to. There is this possibility of the extra dividend right, to be paid in kind with our current headquarters that would then be used by the government which is still in definition. We already account here on the right-hand side with EUR 111 million, which would be the distributable amount resulting from our current dividend policy based on the first quarter results. On the asset quality and moving to page 22, I mean, there is a slight deterioration of the NPL ratio. I mean, overall we consider the asset quality to be relatively stable. In terms of the FM, gross NPL numbers, they are stable from, I mean, a minor increase from the end of last year. The ratio goes from 2.5 - 2.4 - 2.5, essentially because of the decrease in total assets. Part of the decrease in total assets comes from a reduction in the credit, but also in deposits in central banks. That's why there is this slight increase from 2.4 - 2.5. If we move to page 23, when you look at the breakdown and evolution by stages of our credit to what flow we both consolidated and domestic. It is pretty stable. Even with a slight increase in the classification at Stage one, decrease in Stage two, slight increase in Stage three. I mean, the variations are really small, so it's fair to consider it's stable even to moderate to positive evolution. When you look at the NPL numbers now in slide 24, on NPL is already commented, the same effect on NPEs. The net ratio of NPLs is continues to stand at zero. The past due over 90 days, stable, both NPLs and NPEs. Again, in page 25, also a reminder of the good coverage that we have with NPEs and NPLs by impairments and collaterals. 123 NPE, 142 NPL, slight increase from the end of the year. In terms of specific impairments, for the guided, the identified NPLs, we have a coverage, an increased coverage from 66% - 75% year on year, which is, and it's a reminder, fairly above the European banks average of 43.4%. In terms of credit risk, if we now skip to page 26. I mean, even with this stable trend, we decided to conservatively and with the preventive approach, there was an increase in the level of impairments, which results in a cost of credit risk of 30 basis points. I mean, even there is no real impact in the numbers to date. I mean, the environment is more unstable. We anticipate that there can be some pressure on families and companies from the continued increase, the level of interest rates. We have decided to create these impairments, which is basically the same level of credit risk that we had in the first quarter of 2020 after the COVID started. In terms of non-productive assets on page 27. I mean, there are some changes that result essentially from the extinction of the pension fund. I mean, starting on the right, bill, on the graph, on the right below. In terms of restructuring funds, the amount has decreased last year, resulting from the big transaction of selling one of the largest restructuring funds that we have together with the other banks, the FAS funds. It is stable in the quarter, so nothing to say particularly on that side. On the foreclosed assets or, I mean, there is an extended classification. Basically real estate that we hold for sale. The comparable number would be that there continues to be a decrease from 291 to this 264 in the first 291 and the last year to 264. The first quarter, we have here 68 million EUR, which justifies the increase of EUR 291 million- EUR 332 million coming from the extinction of the pension fund. We have to incorporate the assets of the pension fund. We now have an extra 68 million EUR of assets that we intend to put for sale in the coming quarters. They are, so to speak, normal assets, no stranded or stranded assets. In the sense that we believe they will be easy to sell. On investment properties, this big increase from EUR 56 million - EUR 653 million comes from again, from the incorporation of investment units of property funds that were held by the pension fund. Most of these and really the significant chunk of this is one real estate fund called Fundimo that you probably have heard about. It's managed by Caixa de Estabilização which is a very marketable fund. We have other retail and institutional investors. It has been yielding 4% or 5% per annum. What happened is that, with the incorporation of the participation units sold by the pension fund, there is a direct increase in the level of participation units from EUR 56 million - EUR 266 million. Because we now hold a majority stake in Fundimo, we have to start consolidating. That justifies the difference of 266 - 653, which are numbers that we consolidate in our balance sheet, but are then deducted also as minority interests. We have a plan to bring back these participating units to a level that don't require consolidation. It's something that will be developed during the next quarters, and when we have the exact plan, we will make it, we will announce it. Entering into liquidity and funding structure, we on the liability structure, it continues to be relatively stable. About 90% of our stable and comfortable. 90% of our balance sheet is funded by customer deposits. There is a slight increase in the loan to deposits, 61% to now in page 28, sorry. 61%-63%. That's resulting essentially from a reduction in deposits, but still at very conservative levels and really low levels. Also that had also a combined effect in the LCR and NSFR even if the numbers 285 on LCR and 176 on NSFR are above... I mean, they are very comfortable and well above the regulatory requirements. On page 29, we continue to have, I mean, extensive capacity of access to funding for the size of our balance sheet. We still have EUR 33.4 billion of balances at central banks or eligible assets for ECB funding. It's about EUR 19 billion in central banks and 14.1 eligible assets, which are essentially or it is basically our portfolio of sovereign debt. On the ECB funding, just a reminder that we have paid back all the TLTRO funding before the end of last year. Zero dependence on ECB funding. Moving to page 30, sorry. On the sovereign debt, year-on-year, there was a decrease of 15% from EUR 17.2 billion to EUR 14.6 billion. The composition in the middle, we have over time been diversifying that portfolio. When you compare it to 10 years ago, where it was essentially made out of Portuguese sovereign debt, now the Portuguese sovereign debt is less than 50% of the total. In total, 90% Eurozone sovereigns, 10% other sovereigns. Part of this also comes, of course, from our international subsidiaries that in Angola, we have Angolan debt, in Mozambique debt, Brazil debt, so on. Also highlighting in the right-hand side, a breakdown of the portfolios at fair value and amortized costs. 13.1 amortized, 1.4 fair value. The tenors, so we have a significant percentage, more than 25% in both portfolios maturing in a two-years time horizon. The average duration of the portfolio at amortized costs stands below five years. On page 31, capital. There was a decrease in the capital requirements. We are meeting these requirements with a very comfortable margin. The total requirements 13.4%. We have a total capital of 20.9%. With CET1 of 19.5%. The reduction as you would remember was on the Pillar two requirements that decreased in 2023 from 2% - 1.9%. The second reduction in a row. In the year before, it was 2.25%, reflecting the improved recognition of our business model by the supervisors. On page 32, it's essentially the same information, but showing that the capital position improved from the end of the year to the end of the first quarter. On page 33, the MREL targets, 26.44% required in terms of percentage of RWA. We stand currently at 28.23%. We enforce that with all that is planned during the year. We believe that we will be in a condition to meet the requirements without having to make further issues. On page 34, just a reminder of the RWAs, taxes ratio, level two ratios. I mean, the numbers are relatively stable, and we believe them to, on the taxes and the leverage to be comfortable. On the RWAs it's not a matter of being comfortable or not. It's these are the numbers. There is this slight increase which comes from the again from the reduction of the total balance sheet. Part of the reduction comes from the reduction of deposits with the ECB. The increase to RWA density from 42% - 44%. Finally, on page 35, just the normal comparison with European average. We are comparing first quarter with the dashboard, which is based on the end, on the year-end results of last year. In some variables the comparison may look more favorable than it probably is, since the other European banks have also been presenting favorable results. On cost-to-income, a very good performance. CET1, less affected by the quarter results, we stand clearly above Portuguese and European average. Return on equity, 13.1%. Also a good return on equity. For the first time in many years, above what we perceive to be the required cost of capital of 10%. On the NPLs, gross NPLs, below Portuguese average, above the European average. If you combine these with the coverage ratio of non-performing loans, we stand above Portugal and European average. The two combined would produce a net non-performing of specific coverage also below European average. That's it for the presentation about. Sorry, it took me a bit longer than I was expecting, but open for Q&A. At this time, if you would like to ask a question, please press star one on your touch tone phone. You may remove yourself from the queue by pressing the pound key. Once again, that is star one to ask a question. Our first question will come from Maks Mishyn with JB Capital. Your line is open. Hi. Good morning. Thanks for the presentation and taking our questions. I have two. The first one is on outlook for loan book growth in 2023. If you could share your expectations for each segment, that would be very helpful. The second one is on the deposit pass-through. What kind of beta do you expect beyond 2023? Have you noticed any increase in competition for deposits in Portugal? Just a small follow-up. I think you mentioned the average size of deposit and just wanted to confirm it was EUR 16,000. Thank you. Your first question was regarding deposit outflow and how we see it continuing throughout the year. I mean. Sorry, because I didn't got the question, but Nuno, on the Which one? I'm sorry. No, no. Nuno will assist me in not really the translation. It's, It's, I mean, of course, they were clear questions, but the sound in our room is not that good. That's why I asked Nuno what. The first question is. Yeah, I believe you were asking how we see deposit outflows continuing throughout the year. Am I correct? No. The first one was on the outlook for the growth in loan book by segment. If you could just give your expectations for corporate mortgages and consumer loans. I mean, overall, we and it's probably equivalent for the three segments. The out, on the loan book, we expect overall a small contraction during the year in a continuation to what has happened during this first quarter. I mean, we're not expecting any acceleration, but the same continued trend. That was the first question. Sorry, can you repeat the second question? Yeah, yeah, sure. I'm sorry. The second was on the cost of deposits. I was wondering if you see the competition increasing for funding in Portugal and what kind of overall beta you expect beyond 2023. In 2024, cost of deposits. Thanks. On the cost of deposits, what, I mean, of course, for this first quarter, they started. The cost started increasing, but the impact is to date in terms of average, really moderate. I mean, we continue to. As you probably know, I mean, most of our deposits currently are site deposits or savings deposits, I mean, which in many aspects are, they are very sticky, but equivalent to site deposits in the sense that the customer can move the money at any point in time. What we see is an increase in the competition. We have shown also what we have been doing on that, increasing on slide 10 with the example of our rates paid for our term deposits. I mean, we were current level of interest of Euribor. We believe that these levels around where we stand today with a bit, give or take, are sufficient to retain most of the money that the clients want to move into term deposits. What we expect over time, and that we don't have a definition of what this exactly will mean, is that over time, and assuming that the rates stay around EUR 3, EUR 3.25, EUR 3.50, is that gradually we will be converging for our traditional structure of deposits with a greater share of the traditional share of term deposits and versus sight deposits. Currently, we still our level of term deposits is still relatively low by historical standards. I mean, contrary to... We expect and we are seeing a lot of competition on the loan portfolio. On the liabilities, of course, there is an increased competition, but we don't see the same level of competitiveness that you would find in the loan book. Thank you. All right. There are no further questions in the queue. If, in that case, if there's no further questions, we wanna thank you for taking time out to be a part of our presentation today. As always, the investor relations team remains available to take your questions at a later moment in time. Thank you and have a nice day. Thank you for attending the conference call. The audio webcast will be available on the CGD website.