Report and Accounts - Banif Investment Bank

Transcription

Report and Acounts
Contents
1
Governing Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Joint Statement by the Chairman of the Board of Directors and Chief Executive Officer . . . . . . . . . . . .
5
Management Report and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
1. Economic Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
1.1. The International Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
1.2. The Portuguese Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
1.3. Financial Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
2. Banif Banco de Investimento, SA and subsidiary Operations in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1. Corporate Finance and Mergers and Acquisitions. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
2.2. Leverage & Project Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
2.3. Capital, Treasury and Debt Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
2.4. Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
2.5. Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
2.6. Cross-Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
2.7. Private Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42
2.8. Corporate Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
2.9. Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
2.10. Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
2.11. Securitisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
2.12. Marketing & Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
3. Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
4. Proposed Allocation of Net Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54
5. Closing Remarks . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56
6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
Individual Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
Consolidated Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Banif Banco de Investimento, SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Banif Banco de Investimento, SA and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117
Notes to the Management Report and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Banif Group Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
216
Organisation Chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Reports and Opinion of the Audit Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Legal Certification of the Individual Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Certification of the Consolidated Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
01
223
I NDEX
Banif Banco de Investimento, S.A.
GOVERNING BODIES
General Meeting
Chairman
Joaquim Filipe Marques dos Santos
Secretaries
Carlos Manuel Graça Ramos Oliveira
Ângela Maria Simões Cardoso Seabra Lourenço
Board of Directors
Chairman
Comendador Horácio da Silva Roque
Vice-Chairmen
Carlos David Duarte de Almeida
Artur Manuel da Silva Fernandes
Members
João Paulo Pereira Marques de Almeida
Nuno José Roquette Teixeira
Raul Manuel Nunes da Costa Simões Marques
José Paulo Baptista Fontes
Pedro Nuno Munhão Pinto Coelho
Jorge Manuel dos Santos Matos
Maria da Conceição Rodrigues Leal
Paulo César Rodrigues Pinho da Silva
Audit Board
Chairman
Substitute Deputy Members
Fernando Mário Teixeira de Almeida
Sérgio António do Rosário Vaz Monteiro
João Carlos Miguel Alves (ROC)
Members
Ernst & Young Audit & Associados, SROC
Rui Manuel Braga de Almeida
I NDEX
03
Report and Acounts
EXECUTIVE COMMITTEE
CHIEF EXECUTIVE OFFICER
COMPANY SecretarY
Ângela Maria Simões Cardoso Seabra Lourenço
Members
deputy COMPANY SecretarY
Tiago dos Santos Matias
ADVISORY Board
Pedro Miguel Duarte Rebelo de Sousa
Almeida do Pranto Nogueira Leite
Gonçalo Cristóvam Meireles de Araújo Dias
João Vieira de Almeida
António Luís de Andrade Magalhães
Fernando José Inverno da Piedade
Jorge Manuel de Oliveira Godinho
Jorge Armindo de Carvalho Teixeira
Maria Teresa Henriques da Silva Moura Roque dal Fabbro
José Almeida Guerra
António Fernando Caldeira da Paula Santos
Miguel Maria Sá Paes do Amaral
Nuno Manuel Branco Ribeiro da Silva
José Romão Leite Braz
remuneration Committee
José Marques de Almeida, em representação da Rentipar Financeira- SGPS, S.A.
Fernando José Inverno da Piedade, em representação da Fundação Horácio Roque
Victor Hugo Simmons, em representação da Renticapital- SGPS, S.A
I NDEX
04
Report and Acounts
Joint Statement of the Chairman
of the Board of Directors
and the Chief Executive Officer
I NDEX
Joint Statement by the Chairman of the Board
of Directors and the Chief Executive Officer
Banif – Banco de Investimento met its targets for the financial year within the scope of the strategy that has been
followed during the six years since it was founded.
The launch of new areas of business, namely those of real estate finance and private investment in Miami, through
Banif Securities, and the transformation of the London offices into a branch of Banif – Banco de Investimento,
increased the profile of the Company in those markets.
The separation of the commercial and investment banking businesses in Brazil, with the founding of Banif – Banco
de Investimento (Brasil) and a new broker, in collaboration with the existing asset management company allowed the
business to develop in a more focused and effective way.
The financial year 2006 was therefore marked by significant investment in human and material resources with
dedicated teams being formed for the areas of Leverage & Project Finance, Corporate Banking and Credit, in addition
to reinforcement of those areas of the business which already existed, with increased autonomy being given to Internet
Banking, Institutional Banking and the SME Financial Advisory Service.
Banif - Banco de Investimento has broad experience in the businesses and markets in which it operates. It currently
has 242 employees in twelve offices and six markets in eight different countries. In every area, the Bank can count
on a team of highly professional, experienced people with a strong entrepreneurial and innovative spirit. It has proven
this through the creation of special mutual funds, bringing an innovative spirit to the Portuguese market whether in
alternative classes (e.g. Art Invest, Luso Carbon Fund) or Asset Allocation (e.g. multi-class funds).
The dynamism and vitality of the Bank were proven during the 2006 financial year by a growth rate in consolidated
banking products of 25.7% against the previous year. This was largely due to a 20.6% growth in net commissions,
of which it is worth highlighting their quality and diversity, and managed assets (up 22.8% in relation to year end
2005 – including asset management, pension funds, investment in mutual funds, real estate and special mutual funds,
reaching almost 1,700 million euros under management).
Equity and brokerage markets also showed modest growth, with Banif Investimento structuring, syndicating, placing
and brokering approximately 8 thousand million euros during the year.
I NDEX
06
Report and Acounts
Banif Investimento assets kept their low-risk profile. 90% of credit lent continues to have real guarantees as collateral.
Considering these facts, the large growth of credit lent should be emphasised, the growth rate of which was 84.6% in
comparison to December 2005.
Operational performance meant consolidated net profits grew to 6.47 million euros, an increase of 32.6% in relation
to 2005 and a return on equity of approximately 17.65%.
The main objectives for 2007 are based on the consolidation and reinforcement of the Bank’s international position,
taking advantage of existing opportunities and the synergies and economies of scale in all areas of the business and
also in diversifying sources of income without harming the financial strength and risk controls of the Bank.
Banif – Banco de Investimento continues to want to broaden its business to Spain, the United Kingdom and central and
Eastern Europe and expand the investment banking business of Banif Grupo Financeiro in South America (Brazil and
Argentina) and North America (the United States and Mexico).
Expansion to Spain and central and eastern Europe are short-term priorities. Our presence in the Spanish market will
probably be through a partnership with a locally institutional investor and will favour a shareholding by a local bank.
We also intend to establish a partnership with a regional bank in the central and eastern European market, initially
concentrating on project finance and public-private partnerships.
We end with a word of thanks to all our Employees, Governing Bodies, and Official Bodies for their dedication and
co-operation. We also extend our thanks to our clients, whose trust and preference is essential to our success.
We would also like to thank those companies which form the Banif Group, especially Banif – Banco Internacional
do Funchal and Banco Comercial dos Açores for their fundamental contribution to the growth of Banif – Banco de
Investimento.
Artur Silva FernandesHorácio da Silva Roque
Chief Executive Officer
I NDEX
Chairman
07
Report and Acounts
Management Report
and Financial Statements
I NDEX
I NDEX
Report and Acounts
1.1. The International Economy
2006 was marked by acceleration in global economic growth despite also being marked by a greater divergence
between different economic blocks. According to International Monetary Fund estimates, the global
economy grew by 5.1% against 4.9% in 2005. The American economy slowed to levels close to its predicted
rate whilst Europe and Asia grew faster than expected initially.
Last year was also marked by the end of deflation in Japan, with the Central Bank announcing the end of its zero
interest rate policy; the continuation of strong growth in Latin America during an election year in both Brazil and
Mexico; a fall in the dollar against the main international currencies due to a smaller differential between interest rates
in the USA and other global economic blocks, less attractiveness of dollar-denominated assets and the appointment of
Ben Bernanke as Chairman of the Federal Reserve (Fed)
Estimates suggest that the American economy grew at a rate of 3.4% in 2006, slightly higher than the 3.2% in
2005. Following a first quarter marked by robust economic growth (an annual rate of 5.6%), brought about by the
performance of the manufacturing industry and a growth in underlying inflation in response to the job market overheating.
The second quarter saw an economic slowdown when the growth rate fell to approximately 2.6% due to the housing
market cooling down, an increase in interest rates and the price of oil and other raw materials.
In August, with the price of oil reaching $75 ppb, the Fed decided to keep interest rates at 5.25% thus interrupting a
425 basis point-cycle of increases since June 2004. This revealed a greater preoccupation with economic slowdown
than with inflationary pressures. The third quarter saw an evident correction in the housing market with used
house sales slowing, an increase in the number of houses on the market and a sharp fall in the house builders’ confidence
index. In a context of a wider economic uncertainty, there was a shift from investment in risk assets
(stocks, credits and emerging market debts) to national debt (without associated credit risk), with
the 10-year yield for American national debt bonds below 5.00%.
In the last quarter, despite a slowdown in industrial growth, the strength of the labour market
showed itself to be a determining factor in keeping American consumer confidence high. The unemployment
rate reached its lowest point in the economic cycle (4.4% in October); salaries grew by 3.6% per annum, which,
in conjunction with the fall in oil prices, meant that families’ disposable income remained unchanged.
I NDEX
10
With regards consumer prices in the USA, it is estimated that inflation increased to 3.6% in 2006, compared
to 3.4% in 2005, resulting mainly from the increase in oil prices (17% in annual terms). The underlying rate,
excluding food and utility bills, remained above the level considered comfortable by the Federal Reserve
and always above 2.5% during the last seven months of the year.
In Europe, 2006 was marked by an economic recovery stronger than that initially forecast, causing international
organisations to review their growth and inflation forecasts. Following strong growth at the beginning
of the year, the Eurozone saw the greatest growth of the previous six years in the second quarter (0.9%
in comparison to the previous quarter and 2.4% compared with the same period the previous year),
overtaking the growth rate of the USA and OCDE.
Source: International Monetary Fund, Bloomberg
I NDEX
11
Report and Acounts
In the second quarter, the majority of indicators reinforced the belief that economic recovery would be structural and
not only temporary. Estimates suggest that the Eurozone grew 2.4% in 2006 (against 1.3% in 2005), based on an upturn
in internal demand (annual growth rate of 2.0%), and the rate of inflation rose from 2.2% to 2.3%. Considering strong
growth in the labour market, funds accumulated by the business sector, the strong growth in money supply and credit
and with the rate of inflation above the 2.0% ceiling, the European Central Bank (ECB) following its usual monetary
policy, raised interest rates by 125 basis points (bps) to 3.50%.
It is estimated that the Japanese economy grew 2.7% in 2006, in line with 2005, based on greater internal demand
(up 0.2% to 2.5%), and stimulated by greater export demand, especially to China. Structural reforms, especially those
in the financial sector, and the resolving of the bad debt problem, brought about more sustainable growth. In this
context, the Japanese economy finally managed to rid itself from the deflationary cycle, with inflation rate for the year
registering 0.3%. Considering a general increase in business confidence indicators and with growth in the number
of people in work (the unemployment rate fell from 4.4% to 4.1%) supporting private consumption, the Bank of Japan
ended the zero interest rate policy in force since2001 in July 2006 by raising the base rate to 0.25%.
The main Asian economies grew above 8.0%, slightly below the 8.5% in 2005, resulting from dynamic growth in China
(10.0%) and India (8.3%), the internal demand of which have helped increase international trade significantly.
It is estimated that Latin America grew from 4.3% in 2005 to 4.8% in 2006, with inflation falling from 6.3% to 5.6%
in the same period. Domestic demand was the main factor fuelling the Latin American block, whilst growth in the
American economy and external demand in China, as well as favourable prices in raw materials benefited the export
market.
Brazil grew faster than in 2005, accompanied by a fall in inflation and unemployment. It is estimated that GDP grew
by 3.6% against 2.3% in the previous year, with inflation for the same periods falling 2.4% to 4.5%. It should also be
mentioned that Brazil kept its primary balance at 4.25% of GDP. The Central Bank maintained the rate-cutting policy
it began in September 2005, with cuts during the year of 475 bps, with the SELIC rate being 13.25% at the end of
the year. An improvement in public accounts and in the external balance, allied to greater political stability, caused a
strengthening of the Real against the dollar (approximately 8.5% over the year to 2.13 Reais/dollar) and a narrowing of
the spread on the main Brazilian risk reference (the EMBI+ index) to an historically low level: 169 bps, in comparison
to 245 bps at the end of 2005.
I NDEX
12
1.2. The Portuguese Economy
2006 signalled the beginning of Portuguese economic recovery. According to Bank of Portugal estimates, the economy
grew at a faster rate, with GDP growing at 1.2% against 0.4% for the previous year. This was particularly due to export
growth caused by the expansion of export markets.
Source: Eurostat
A more careful analysis of GDP components reveals that household spending fell from 1.7% in 2005 to 1.2% in 2006,
essentially caused by the gradual increase in interest rates, higher oil prices and salary freezes. Investment also fell in
relation to the previous year by approximately 3.1%. However, net external demand grew during the period (by 1.1% in
comparison to a 0.3% fall in 2005), which compensated for the slowdown in internal demand. Exports grew by 9.3%,
one of the fastest rates of the last decade, exceeded only by 11.7% in 2000. In terms of public finances, the need to
comply with budgetary restraints penalised public expenditure, which fell by 1.1% in real terms. It is also important to
emphasise that the economic recovery seen in 2006 was accompanied by effective budgetary consolidation, with the
deficit falling from 6.0% to 4.6% of GDP.
I NDEX
13
Report and Acounts
Source: IMF Forecasts
As far as inflation is concerned, the Harmonised Index of Consumer Prices (HICP) showed growth of 3.1% against 2.1%
registered in 2005. This increase of approximately one percentage point is not only due to the significant increase in
import prices of non-energy goods, but also reflects the impact of an increase in Tobacco Duty and the standard rate
of Value Added Tax, introduced in July 2005.
I NDEX
14
1.3. Financial Markets
1.3.1. OVERVIEW
2006 was an important year for the Portuguese financial sector for a variety of reasons: the ECB consolidated its
financial standardisation progress, increasing its base rate from 2.25% to 3.5%, which had an impact on the margins
of banks. The Portuguese economy gave encouraging signs for the first time in a number of years, reflected in an
increase in credit conceded to the private sector. The improvement in operational conditions caused some banks,
amongst which were Banco Espírito Santo and BANIF – SGPS, SA to increase share capital.
On the other hand, the sector saw a takeover bid by Millennium BCP for BPI, which could create the largest Portuguese
bank should the takeover be successful. The size of the companies involved – the new bank could hold a third of market
share in certain segments – triggered an in-depth investigation by the Competition Commission which meant that there
were no significant developments in the process for the remainder of the year.
From a financial point of view, the sector continued to benefit from a credit growth rate of slightly above 10%,
although the business sector grew more in comparison to previous years (cumulative growth of 6% to November),
the mortgage and consumer credit segments expanded in the region of 15%. Despite the market becoming
more aggressive – margins of 0% were offered for the first time on mortgages – the increase in interest
rates mitigated this effect, allowing a greater increase in financial margins. On the other hand, the positive
environment created by the capital markets, namely in shares, also meant above average growth in financing
transactions.
Looking at savings, performance was modest. Despite the increases in interest rates, private savings in financial
institutions grew by 1.9%, a slight increase on the 1.2% growth of 2005.
Weak investment in savings contrasts with the sums invested by individuals and organisations in funds, in an ever
more growing tendency to exclude brokers from such transactions. The volume managed in pension funds reached
20,601.00 million euros at the end of 2006 – 12.4% higher than at the end of the previous year. Assets managed by
Real Estate Investment Trusts grew by 19.5% in comparison with 2005 to 9,757.70 million euros. The value of assets
managed by Mutual Funds grew to 29,137.70 million euros – an increase of 3% against the previous year.
The year was also marked by the preparation for the implementation of the Basle II Accord, implying new criteria for
calculating capital risks. Its implementation will begin in 2007 although the transition period for banks based in the
European Union will run until 2017 for certain risk positions within the IRB methodology. Despite this, the ultimate
impact of Basle II is unclear in terms of the capital position of the various banks, considering the anticipated releasing
of risk capital on the one hand and assimilation of operational capital on the other.
I NDEX
15
Report and Acounts
1.3.2. Retail and Companies Market
The tendency to raise interest rates by the ECB was reflected in the interest rates charged by financial institutions
of loans given. In the company sector, the large companies and SMEs saw their average rate increased by 70 and 88
bps, respectively, whilst in the retail sector, increases were more substantial. The average mortgage rate increased
from 3.53% to 4.38%, an increase of 85 bps, whilst the average rate for new personal loans increased by 235 bps to
10.6%.
The deposit rates paid by financial institutions increased significantly as banks sought to reinforce the influence of
deposits on their financial base considering the increase in the base rate. Private individuals saw their rate increase
from 1.99% in December 2005 to 3.08% a year later; an increase of 109 bps. The average corporate rate increased 104
bps to 3.44% in the same period.
Due to the improvement in the economic environment in 2006, volumes of credit conceded grew significantly,
especially in the corporate sector. In consolidated terms until November, data from the Bank of Portugal shows a
growth of 6.5% in comparison with the same period the previous year. However, some banks saw growth rates above
10%. The mortgage lending sector saw a growth rate of 14.6% whilst the number of approved personal loans increased
by 14.9%. Performance was modest in the savings sector despite the increase in interest rates, with private savings in
banking institutions increasing by 1.9% against 1.2% in 2005.
Weak savings growth was in stark contrast to sums invested by individuals and organisations in funds, in a sustained
tendency to exclude brokers. The volume managed only in pension funds reached 20,601 million euros at the end of
2006, 12.4% higher than previous year’s levels, which was accompanied by an increase in the number of Pension
Funds operating by 11 to 171. Assets managed in Real Estate Investment Trusts grew by 19.5% in comparison with the
previous year, to 9,757.7 million euros.
I NDEX
16
1.3.3. Money and Exchange Markets
2006 was marked by the significant depreciation of the dollar against the Euro, and its high level of volatility against the
yen. Factors such as the uncertainty over the growth in the American economy, especially when compared with the
sustained recovery of the European block, and the increasing tendency for Central Banks to invest in Euro denominated
assets rather than in dollars, lead to an 11% fall in the value of the dollar against the Euro, ending the year at 1.32 dollars
to the Euro, in comparison to 1.18 at the end of 2005.
The announcement of the end of zero interest rates in Japan caused the appreciation of the yen against the dollar
which reached its annual peak of 110.02 yen to the dollar on 14 May. The release of economic data showing signs of
a slowdown in the Japanese economy at the beginning of the third quarter meant the appreciation of the yen was
checked with the yen ending the year at 119.07 to the dollar in comparison to 117.75 at the end of the previous year.
As a result of economic recovery in the first half, the expectation that Euribor rates would increase were reinforced.
In the second half, neither the appreciation of the Euro, with negative repercussions for export markets, nor the
anticipated increase in VAT rates in Germany from January shook economic confidence. In anticipation that the ECB
would continue with orthodox monetary policy, the increase in interest rates followed a common pattern across all
rates, with 3 months ending the year at 3.73% (up 124 bps), 6 months at 3.85% (up 122 bps) and 12 months at 4.03%
(up 118 bps).
I NDEX
17
Report and Acounts
I NDEX
18
1.3.4. BOND MARKETS
Trends in bond markets were not as linear as they might have been. Whilst the first half was marked by increased
yield curves in response to economic growth above forecast, the last six months of the year saw an interruption in
interest rate increases by the Federal Reserve, with markets anticipating a downward turn. Signs of a slowdown
in the real estate market and fears that the employment market would not be sufficiently strong to avoid an abrupt
correction in consumer confidence, the US yield curve fell, revealing an expectation of a sharp economic slowdown.
Ten-year Treasury Bonds traded between 3.4% and 4.1%, ending the year at 3.9% against 3.3% at the end of 2005.
I NDEX
19
Report and Acounts
In Europe, signs of economic recovery were greater than expected and markets anticipated more aggressive interest
rate rises by the ECB. The positive yield curve slowed with the differential between interest rates and 2 and 10 year
maturity falling 44.7 bps to 4.5%. Thus the opinion that the American and European economies are in distinct stages
of the economic cycle meant the differential between 10-year bond yields in the USA and Germany fell from 108 bps
to 75 bps at the end of 2006.
The Portuguese yield curve followed the movements of the Eurozone, namely the rise during the first half in
anticipation of rate rises by the European Central Bank. The 10-year Portuguese Treasury Bond yield closed
the year at 4.1% (a 65 bp rise in comparison to 2005), with the differential to the Bund at 11 basis points.
1.3.5. EQUITY MARKETS
In 2006, the main global equity markets rose substantially, despite having shown great intra-year volatility.
The Eurostoxx50, the European reference, closed the year up 15.12%, slightly above the S&P index (13.29%, but
lower than the Dow Jones (16.29%). Nevertheless, some European markets grew more, beginning with Portugal,
which showed its best returns since 1997, growing by 29.92%, a performance largely due to Takeover Bids launched
against Portugal Telecom (February) and BPI (March) by Sonaecom and Millennium BCP respectively. The size and
implications of these transactions, both of which were hostile, would dominate the minds of investors along the
year in addition to having attracted foreign investors to the Portuguese market. On the other hand, the privatisations
of GALP and Portucel in the last quarter also contributed to the growth of the Portuguese bourse in 2006.
The Spanish IBEX35 also deserves mentioning in the European context as it grew by 31.79%, largely due to economic
performance data, but mainly because of consolidation, especially in the energy sector.
In Asia, markets closed up, although substantially below other global markets. In 2006 the Nikkei grew modestly,
closing the year 6.92% up, having been one of the best performers of 2005.
I NDEX
20
The abundance of liquidity resulting from historically low interest rates continues to be one of the main factors
justifying investor preference for equities. On the other hand, the tendency for consolidation in Europe, across all
sectors, sparked interest by investors and was a major factor in keeping equity prices high, with attractive companies
registering higher prices than the main indices.
In intra-annual terms, the correction experienced by equity markets in mid-May should be mentioned. This was due
to changes in forecasts with a delay in ending the cycle of rate rises by the Federal Reserve. However, the strength
of company results released in the meantime and the continuation of high liquidity were to result in sustained market
rises which would bring markets to beat 2001 highs in mid-December. The fall in oil prices at the end of the year,
helped to maintain high levels of optimism.
Due to the favourable climate and due to M&A activity and the privatisations of Portucel and GALP, volumes in the
Portuguese market grew by 59.6%, from EUR 31,500 million to EUR 50,300 million.
I NDEX
21
I NDEX
Report and Acounts
Banif – Banco de Investimento, SA, and (“Banif Investimento”) is the unit of the Banif Group that conducts and
coordinates investment banking operations both domestically and abroad. It has a total of approximately 300
employees.
As a result of an increase in the share capital of the bank from 20 to 30 million euros, finalised in November 2005,
and an increase in the number of members of the Board of Directors and its Executive Committee in March 2006,
alterations were made to the organisational structure of the Bank, considering: (i) a broadening of the areas in which
the Bank operates in order to complement the range of products and services it already offers, (ii) creating synergies
and the continuous development of its human resources, and (iii) reinforcing the control and management structures
of the business.
Therefore, March 2006 saw the creation of a Credit Department and the division of various Departments, giving
rise to the Capital and Security Markets Department, the Project Finance Department, the Legal and Compliance
Department and the Audit Department. At the end of October, the Institutional Banking Department, the Internet Banking
Department and the Financial Advisory Department were created. At the end of 2006 the human and material
resources necessary were being deployed in order that they would be able to develop their professional activity.
Simultaneously during 2006, some departments were repositioned in the existing structure and other Departments
altered their scope of business and name in order that it would be clearer to understand the activity they undertook.
2006 can therefore be seen as a year in which the Bank made significant investments in human and material
resources, forming teams dedicated exclusively to its new business areas and reinforcing those in which it already
operated. This caused a significant increase in structural costs, the benefits of which will only been seen from 2007.
In Portugal, Management of Funds (Mutual, Real Estate and Pension) and Risk Capital is done by companies owned by
Banif Investimento, whilst all other activity falls within the scope of the Bank itself.
I NDEX
23
The Bank’s proprietary equity portfolio, the largest asset owned by the Bank, reached a value of approximately 330
million euros at the end of 2006. The management of this portfolio was marked by higher investment in the first half,
followed by a reduction of directional exposure in the last months of the year. This resulted from the Bank having
analysed the market in terms of credit risk assets (the largest part of the portfolio), considering a number of economic
indicators. It suggested the end of a cycle which had begun 4 years previously which was characterised by narrowing
of credit spreads and a historically low level of defaults. The portfolio reached its highest value at the end of July
(approximately 368 million euros), which fell until the end of the year as it was more greatly exposed to credit
derivatives and relative trading and hedging strategies. Other segments of the portfolio were more dynamic, namely
in euro/dollar interest rate trading and currency markets. The evolution of these markets, characterised by almost
predictable increases in Eurozone interest rates and an interruption in the upwards tendency of America interest rates,
favoured the position of the Bank.
Due to the outperformance of the Iberian and Latin American equity markets, especially in Brazil, the Bank’s
proprietary equity portfolio saw an increase in investment and a directional strategy towards these markets. It was
therefore possible to achieve gross returns of 19.7% using the stock-picking process, supported by the research
produced by Banif Investimento companies in Portugal, Brazil, Argentina and Mexico.
In terms of funding, the growth of diversification in levels of deposit boosting from institutional and private investors
was very positive. Access to the repo market was maintained and there was a continuation in sourcing funding from
other Banif Group institutions. This year also saw an issue of 10-year junior debt, resulting from early returns on the
2001 junior debt issue, which not only allowed maturity on remunerated liabilities to be lengthened, but also allowed
the Bank’s own complementary funds to be reinforced.
I NDEX
24
Report and Acounts
Banif Banco de Investimento generated a banking income of 17.6 million euros, cash-flow of 7.0 million euros and net
profit of approximately 4.9 million euros:
I NDEX
25
In consolidated terms, banking income reached 24.9 million euros, which translated into a cash-flow of 9.9 million
euros and net profit of 6.5 million euros:
Key performance figures in 2006 by Banif Investimento were the following, by activity:
I NDEX
26
Report and Acounts
2.1. CORPORATE FINANCE AND MERGERS AND ACQUISITIONS
The Corporate Finance and M&A department consolidated its financial advisory service with special emphasis
on the quality of the work provided, in permanently accompanying its clients and seeking new opportunities.
Important transactions took place during the period which highlighted the active role of the Bank in the
primary Portuguese equity market. In this context, its role as an intermediary in public offerings and in
organising a public offering in Banif SGPS and the conclusion of the public offering of shares in
Cipan – Companhia Industrial Produtora de Antibióticos, both of which underwent increases in share capital.
It is also worth mentioning the advice provided in the total sale of Barrabrita and of Manuel Joaquim Pinto and various
company assessment projects undertaken, namely those for “O Jogo” newspaper and Auto Viação Micaelense.
I NDEX
27
Assessoria Financeira na
Gestão e Optimização
da Estrutura de Balanço
Oferta Pública de Subscrição
Advisor
Junho 2006
Outubro
2006
Assessoria na venda de 100% da
Barrabrita e de Manuel
Joaquim Pinto
Advisor
Outubro
2006
Junho 2006
I NDEX
28
Operação Harmónio
Avaliação
Advisor
Outubro
Fevereiro2006
2006
Avaliação
Advisor
Outubro
Fevereiro2006
2006
Advisor
Organização
e Montagem
Outubro 2006
Fevereiro 2006
Report and Acounts
2.2. leverage & project finance
Making this area independent and giving it its own resources served to complement the range of services offered by
the Bank. Offering new services allowed the Bank, on one hand, to have a more competitive position in the market,
and on the other hand, to offer added value to its existing or potential clients who intend to participate in developing
infrastructure projects in Portugal and abroad through private financing initiatives or PPPs. This department was
also given responsibility for providing leverage finance services in the final part of 2006 in the context of leveraged
company or asset acquisitions.
The Leverage & Project Finance team provides services in project finance and public-private partnership sectors
within the scope of infrastructure projects in various sectors such as transport (road, rail, airports, ports), water
and sewerage distribution, public accommodation (schools, hospitals, prisons and others) and renewable energy.
The services provided consist of financial advisory (to public and private entities) and structuring, arranging and
underwriting long-term financing for projects in either project finance or public-private partnerships. The department
also provides structuring and underwriting capacity of leverage financing, in the context of M&A transactions involving
MBO, MBI or LBO type transactions in which the acquisition is levered through acquisition debt.
Of the projects in which the Leverage and Project Finance department was involved during the year, the following
deserve a special mention: the financial advisory services and submission of financing commitment letters provided to
the Nova Saúde Consortium in preparation for their bid for the new Vila Franca de Xira Hospital PPP tender, financing
commitments to a group bidding for two water distribution concessions in Portugal and the arranging and underwriting
of project finance debt financing for a photovoltaic project. The department has also been actively involved in analysing
and structuring long-term project financing for renewable energy projects in addition to providing financial advisory to
a consortium bidding for a public-private partnership in the water and sewerage sector.
In terms of leverage finance, the department has sought to extend its recognition in the market and has analysed
various financing and acquisition projects in different sectors. Considering the confidential nature of these
transactions, it is forecast that a significant part of these opportunities will be completed in 2007.
I NDEX
29
Advisor
Concurso Público para a Selecção
de Parceiro Privado para a
da Estrutura
de Balanço
Empresa
Municipal
águas da
Covilhã, EM
Compromisso de Financiamento
Advisor
Novembro
2006
Outubro
2006
Concurso
para
o PPP do novo
Gestão
e Optimização
Hospital
de Vilade
Franca
Xira
da Estrutura
Balanço
Assessoria Financeira
Concurso Público para a
Concessão dos Sistemas de
da
Estrutura ede
Balanço
Distribuição
Recolha
de
Efluentes do Concelho de Campo
Maior
Advisor
Compromisso
de Financiamento
Novembro
2006
Outubro
2006
Concurso para o PPP do novo
Franca Xira
Hospital
de Vila
Gestão
e Optimização
Advisor
Advisor
Outubro 2006
Outubro
2006
Junho 2006
I NDEX
30
Junho 2006
Assessoria
Outubro
2006
Financeira na
Concurso para atribuição de
Gestão eno
Optimização
Participação
agrupamento
Pontos de Recepção para Energia
da Estrutura
de Balanço
concorrente
aos Concursos
para
Eléctrica
Produzida
atribuição de Pontosem
de Centrais
Recepçãoa
Biomassa
para Energia Eléctrica Produzida
em Centrais a Biomassa
Advisor
Outubro
Setembro
2006
Setembro2006
2006
Report and Acounts
2.3. Capital, Treasury and Debt Markets
Banif consolidated its presence in the capital, treasury and securities markets in 2006 and participated in the
structuring, syndication, placing and intermediation of operation to the value of approximately 8,000 million euros. This
significant increase was due to the Bank having taken advantage of favourable conditions in the main financial markets,
in addition to an increased range of products and services and its distribution base, which currently has approximately
300 national and overseas investors.
The Bank was involved in structuring and placing 17 primary market transactions of a value equivalent to 800 million
euros. Within the scope of generating resources of the Banif Group companies based in Brazil, the following
transactions are worth mentioning: (i) two notes issuances for Trade Invest Limited and Euro Invest Limited, with
the intention of funding Banif Banco de Investimento (Brasil), SA, to the sum of 45 million euros, (ii) two Certificates
of Deposit, for the same Brazilian organisation, to the sum of 4.5 million dollars and 10.3 million dollars respectively,
and (iii) an issuance for the issuer Euro Invest Limited, to the sum of 25 million euros, for 3 years, with Banif Banco Internacional do Funchal (Brasil), SA Unsecured Notes forming its underlying security. Still within the context
of business in Brazil, the Bank was invited to form part of the initial issuing syndicate of SAG do Brasil, SA
(Unidas) which reached 60 million euros and in which it became Co-Manager and advised on a structured
financing operation for the Odebrecht Group to the sum of 10 million euros.
In Portugal, in the structured products segment, the sum deposited with the Banif Group’s commercial network in
Portugal and abroad, was 206 million euros. The supply of structured products was centred on interest rate hedging.
However, it is worth mentioning a particularly innovative issue of Banif – Banco Internacional do Funchal Obrigações
de Caixa, Overseas Financial Branch – Multi-Indices 2006/2009, to the value of 7.5 million euros, the yield of which is
indexed to the performance of equity and commodity indices and the EONIA Rate. Two bond issues for Banco Comercial dos Açores SA (BCA) were also structured; one for senior debt and another for junior debt, to an overall sum of
25 million euros. Furthermore, a 10-year junior debt issue for Banif Investimento, resulting from the early refund of
the junior debt issue in 2001.
The Bank was also invited to participate in placing two issues of Protection Certificates issued by ABN AMRO, to the
total value of 60 million euros as Placing Bank.
Under the terms of the Banif – Banco Internacional do Funchal, SA Euro Medium Term Notes, a record sum of 475
million euros were issued, with Banif Banco de Investimento leading the issuance of senior notes and two issuances
of junior debt. As arranger of the aforementioned programme, the Bank undertook an updating programme in order to
reflect legal requirements as a result of the entry into force of the Prospectus Directive and, simultaneously increased
the value of the programme from 1,000 to 1,500 million euros.
I NDEX
31
Within the scope of financial advice in capital markets, the Bank formed a partnership with Oporto Municipal Council in
a project which involves a total investment of approximately 35 million euros to form a real estate investment fund and
subsequent sale of assets located in the city of Oporto.
The Bank advised ANAM – Aeroportos de Navegação Aérea da Madeira, SA, in managing and optimising its balance
sheet layout with a view to greater rationalisation of liquidity, financial liabilities and swaps.
In addition to its usual business activities in the derivatives sector, the Bank undertook various interest rate hedging
operations, the value of which was 38 million euros with operations for Serviço Regional de Saúde EPE being the
largest share at 32.5 million euros.
With regards to the secondary market, the volume of bonds transacted in 2006 was greater than 4,600 million euros
which represents an increase of over 45% against 2005. The national and overseas flat payment investor base
grew strongly by approximately 25%, reaching the current number of 300 investors over all the major international
markets.
I NDEX
32
Report and Acounts
Via Norte
EUR 10.000.000
EUR 10.195.838
EUR 16.070.000
Operação de Titularização
de Créditos Futuros
Líder
Outubro 2006
Financiamento Estruturado
Alienação de Património
Imobiliário
Organizador e Líder
Organizador e Líder
Dezembro 2006
Maio 2006
Serviço Regional de Saúde
EUR 32.500.000
Swap de Cobertura de Risco
de Taxa de Juro
Advisor
Outubro 2006
I NDEX
Líder
Maio 2006
33
2.4. EQUITIES
2006 was especially favourable for European equity markets. Euronext Lisbon showed strong growth supported by
a number of takeover bids in a number of sectors including banking, telecoms, media, construction and others.
This consolidation in the Portuguese market allied to the GALP IPO and other privatisations which took place or
were announced in 2006, attracted the attention of the national and international investment community and provided
the Bank with a gross increase of income in the order of 60% to almost 3.9 million euros. Brokerage volumes also
increased significantly to approximately 1,500 million euros (up 50%). This environment was especially favourable
to trading and selling to institutional investors. Due to these factors, in conjunction with the Research department,
a successful campaign to widen the customer base in Spain and the United Kingdom took place.
The first year of the sales/brokerage project to European institutional investors of Latin American organisations was
surprisingly successful. To prove this, there was significant increase in the number of accounts opened by the most
prestigious international investors based in London. This performance is largely due to the work of the Latin American
team and the operational department of Banif Banco de Investimento (Brasil).
As a Liquidity Provider, the Bank traded over 1.5 million shares in Banif SGPS on Euronext Lisbon (827,000 prior to
revaluation and 686,000 after that date). This number represented an increase of some 70% in comparison to the
previous year and accompanied the increase in the liquidity level of this stock.
I NDEX
34
Report and Acounts
2.5. ASSET MANAGEMENT
Assignment of asset management operations within the Group was as follows: private and institutional business to
Banif Investimento, mutual and real estate funds to Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, SA, and pension funds to Banif Açor Pensões – Sociedade Gestora de Fundos de Pensões, SA.
The strategy for this area in 2006 was based on the following priorities:
n Increase
n Raise
cross-selling and penetration rates within the Banif Group;
added value by focussing efforts on equity, real estate and multi-asset class funds as well as maintaining high
market shares in this type of funds;
n
Increase the regularity of purchases by investors whilst avoiding excessive dependence on occasional
placing campaigns;
n
Develop the relationship with companies and institutional investors outside the Banif Group in order
to promote the combined sale of investment products and management services;
n
Maintain the momentum in innovation, especially through launching new types of funds, highlighting special
investment funds in assets or emerging markets.
On 31 December 2006 the volume of assets under management was 1,673 million euros, in comparison to 1,362 million
euros on 31 December 2005, that is, an increase of 22.8%
I NDEX
35
Report and Acounts
2.5.1. Banif Gestão de Activos (Mutual, real estate and special mutual funds)
Following the strategic guidelines for the Asset Management business, Banif Gestão de Activos continued to
position most of its funds above the average returns of its peers, customising its offer to the different risk profiles of its
investors and reinforcing relationships with its distribution networks.
As a consequence, Banif Gestão de Activos continues to be one of the Fund Managers with the best track record for
the last five years.
Banif Gestão de Activos was once again awarded with the first prize in the third edition of the Diário Económico /
Standard and Poor’s competition for the best funds marketed in Portugal when its Banif Euro Tesouraria fund was
rated the best in the 3-year euro class.
On 31 December, assents under management reached 1,177 million euros, representing an increase of 24.8% in relation
to the previous year. This represented an increase in market share for Banif Gestão de Activos from 2.6% in 2005 to
3.0% at the end of 2006.
Assets invested in mutual funds rose from 393 million euros at the end of 2005 to 474 million euros at year-end 2006 (a
growth rate of 20.4%). Real estate funds continued to grow, this year by 27.9%, from 550 to 704 million euros. Special
mutual funds grew 88.3% from 130 to 245 million euros in the same period.
The Company maintained its progress by launching 3 new truly innovative funds, Banif Europa de Leste, specialising in
various classes of assets in Eastern European markets, the Luso-Carbon Fund, dedicated to investing in carbon credit
projects within the scope of the Kyoto Protocol (launched in partnership with Ecoprogresso as investment consultant
and Banco Espírito Santo de Investimento as commercial partner) and Banif Property, a real estate fund. 2006 also
saw the approval (with marketing beginning in January 2007) of Banif Gestão Dinâmica, which will complete the FEI
global asset allocation portfolio until now made up of Banif Gestão Patrimonial and Banif Gestão Activa. The Company
also submitted 3 new FEIs to CMVM, the market regulator, for approval. These shall specialise in alternative assets, and
will be known as Media Invest, Infrastructure Invest and the New Energy Fund, with the latter operating in partnership
identical to that of the Luso-Carbon Fund.
These transactions were intended to significantly attract the participation in the managed funds of institutional
investors from outside the Banif Group. This effort will be stepped up in coming years.
I NDEX
36
The market share of special mutual funds was 8.0% at year-end, while real estate funds had a market share of 7.2%.
Net profit for the Company was 3.9 million euros while equity amounted to 6.1 million euros.
I NDEX
37
Report and Acounts
I NDEX
38
Report and Acounts
2.5.2. Banif Açor Pensões (Pension Funds)
Following extensive sales efforts whereby more than 500 organisations, including professional associations and trades
unions, were approached for pension fund mandates, two important mandates were secured, to be concluded in the first
quarter of 2007. Banif Açor Pensões has also been shortlisted for a number of mandates to be awarded in 2007.
The investment strategy pursued in managed funds was clearly less conservative than that pursued in the previous year,
with equities representing averages of between 20% and 25%.
As in previous years, the Company maintained managed fund yield in the top quartile of the market, with annual yield of
6.41% (weighted average), higher than the market average of 5.4% estimated by Mercer. The Banif Previdência Empresas
Fund also performed well with a yield of 6.04% during the year, giving a 3-year return of 19.50%.
Assets under management increased 12.5% during the year, from 216 million euros at the end of 2005 to 243 million
euros.
Net profit for the company was 323.1 million euros, against 279.8 million euros at the end of 2005.
I NDEX
39
2.5.3. BANIF INVESTIMENTO (Portfolio Management)
The restructuring of the portfolio management business during the year led to improved personal service for larger
clients while smaller clients were channelled to funds such as Banif Gestão Patrimonial or Banif Gestão Activa. In
the opinion of the Bank, this management model assures adequate economies of scale and provides a higher, more
consistent level of service.
On 31 December, Banif Investimento managed assets of 249.3 million euros, in comparison to 223.5 million euros in
2005, a growth rate of 11.5%.
I NDEX
40
Report and Acounts
2.6. CROSS-SELLING
Following encouraging growth between 2003 and 2005 in cross-selling activity within the Banif Group in addition
to weight outside the Group’s balance sheet, the Retail & Personal Banking department set the following guidelines:
n
Adding value by raising unit margins and increasing sales of investment funds and structured products to the
Group’s clients;
n
Promote the sale of products destined to distinct Client groups, strengthening the innovative image of the Group
such as Art Invest, Banif Gestão Patrimonial, Banif Gestão Activa and privately-placed, closed-end real estate funds;
n
Promoting
the
launch
of
Double
Products
combining
Time
Deposits
with
the
Banif
Gestão
Patrimonial FEI within the Banif and BCA sales networks;
n
Improve sales force training in order to raise the quality of investment product marketing.
In 2006, 205 million euros worth of mutual funds and structured products were placed through the Banif Group network,
which led to a cumulative total over the last three years of 710 million euros. The value of higher added-value mutual
funds (real estate and special funds) subscribed rose 28% from 144 million to 184.3 million euros.
In this context, it is important to highlight the significant growth and decentralisation of training programmes which
took place within the Banif Group sales network. A particularly successful sales initiative was the Fórum do Investidor
(Investors’ Forum), a series of events that met with particular enthusiasm across the mainland, Madeira and Azores. It
is also worth mentioning the inauguration of BCA Privado, a result of the partnership between Banif Investimento and
Banco Comercial dos Açores.
I NDEX
41
2.7. PRIVATE BANKING
Throughout 2006, Banif Investimento continued to raise its profile in the Private Banking sector, focusing on
a thorough analysis of client needs and tailoring solutions to maximise tax efficiency and investment returns.
The direct client base expanded in this segment by 26%, reaching a total of 414 in December 2006. Better knowledge
of clients’ needs generated increased volumes under management, which by approximately 57 million euros in 2006
to a total at year-end of some 200 million euros.
Continuous accompaniment of Clients and the quality of advice given on managing assets which allow clients to receive
the highest returns for their own risk profiles were the main factors contributing to business growth.
The Bank continued to offer funding facilities to investment clients and the volume of lending in this segment reached
102.6 million euros, an increase of 59.5% in comparison to 2005.
I NDEX
42
Report and Acounts
2.8. CORPORATE BANKING
The Corporate Banking department, formed in 2005, has the purpose of proactively generating business in the
area of medium and large companies, organisations and public bodies, with a view to creating financial solutions
within the Investment Banking area, establishing long-term, trusting relationships with its clients, contributing to the
reinforcement and growth of the Banif Group.
The product departments of the Bank have been responsible for gathering business in the corporate sector. With the
growth of business, contact with the client has become key to growing and levering the client base and bring about
new business opportunities. It has therefore become necessary to create exclusive business support units to deepen
the relationship with the client and promote the goods and services the Bank offers.
Competitors and clients demand an integrated, broad product range including investment banking products. Due to this,
a partnership was established to promote cross-selling between Banif and the Investment Bank.
The main aims of the Corporate Banking department are:
n
A proactive approach to potential clients, demonstrating the main competitive advantages of Banif
Investimento, including sector and technical expertise by the Corporate Banking team and selecting
products and target customers with the greatest potential to generate business;
n
Promote products and services in an integrated way, making proposals to the client which offer the greatest
possible added value and create an image of a financial group capable of offering such products and services
to businesses in all their business cycles;
n Deepen
n
relationships with clients to create trust and partnerships, maximising share of wallet;
Coordinate the Banif/Banif Investimento partnership to offer investment banking products to Business Association
companies.
The planning process of the strategy and business plan of the department was begun at the end of 2006, with the team
already in place. Potential clients were selected and contact was established which should bear fruit during 2007.
I NDEX
43
2.9. CREDIT
A Credit department was created in Banif Investimento in 2006 with the intention of managing a variety of different
credit operations, especially those which do not fall within the scope of other Product departments.
Through pursuing a prudent risk strategy, credit operations have valuable security (securities and/or real estate). There
has been some emphasis on larger operations, normally shared with other members of the Banif Financial Group, in
addition to participating in association with other banks.
The objectives of the Bank for 2007 predict a substantial increase in its credit portfolio, assuming a continuation
of existing credit characteristics. The responsibilities of the Risk Management department will be increased and
intermediary committees will be established to assure extensive analysis of associated risks.
The Executive Committee will retain the right to approve all operations involving granting credit.
I NDEX
44
Report and Acounts
2.10. PRIVATE EQUITY
2006 saw some adjustments in Private Equity with the needs of the most influential markets related
to investment banking being met.
The Private Equity team was reinforced in April 2006 with the new structure aimed at sustaining long-term growth
in this area. It is hoped various new segments of the market will be attracted, supported by venture capital fund
management aimed at SMEs.
In order to maximise the public relations policy of the group and its expansion into all business areas, the name
of NewCapital, Sociedade de Capital de Risco, S.A. (“NewCapital”), was changed to Banif Capital - Sociedade de Capital
de Risco, SA.
Banif Capital is currently the main venture capital company within Banif Investimento and is the main vehicle for
its Private Equity business. Banif Capital currently manages four venture capital funds to a total committed value
of 22 million euros: (i) CAPVEN, a fund with paid-up capital of 7.5 million euros, whose primary purpose is to provide
expansion financing for Portuguese SMEs in accordance with European Union criteria, (ii) New Early Stage Fund, with
a committed capital of 4.5 million euros with 1.8 million euros being paid-up, focusing on start-ups, early stage finance
and innovative projects by Portuguese SMEs, (iii) Fundo Madeira Capital with committed capital of 4 million euros with
1 million euros being paid-up, set up to invest in SMEs based in Madeira, focusing on start-ups, early stage finance and
innovative projects, and (iv) the New Family Companies Fund, with forecast capital of up to 6 million euros of which
2.5 million euros is paid-up, focusing on acquiring holdings in family-owned SMEs which are established in the market,
but experiencing succession or other family management difficulties.
During 2006, CAPVEN acquired two shareholdings – one in Portuvinus, a holding company owning two wine
producers and one distributor, and another in Hozar, the company which controls the commercial network of the
clothing retailer Throttleman / Boxer Short and the coffee house chain Stória del Caffè – and sold its shareholding
in Money Media, the publisher of personal finance magazine Carteira, resulting in an internal rate of return of 10.15%.
In the same period, Fundo Madeira Capital acquired a shareholding in Arquipélago Verde, a company commercialising
promotional material for Madeira as an innovative concept in the regional market.
I NDEX
45
Aumento de Capital
I NDEX
46
Participação no agrupamento
concorrente aos Concursos para
atribuição de Pontos de Recepção
para Energia Eléctrica Produzida
em Centrais a Biomassa
CAPVEN
Fundo de Capital de Risco Para
Investidores Qualificados
Setembro 2006
Junho 2006
Aumento de Capital
Aumento de Capital
Madeira Capital
CAPVEN
Fevereiro 2006
Fevereiro 2006
On 31 December 2006, Banif Capital had net assets of just under 3.1 million euros, equity of 970.9 thousand euros and
a net profit for the year of 82.5 thousand euros.
The first quarter of 2006 saw the creation of Centro Venture – Sociedade de Capital de Risco, SA (Centro Venture),
resulting from a partnership between Banif Investimento (holding 51% of the capital) and CEC – Conselho Empresarial
do Centro (an employers’ federation) / CCIC - Câmara de Comércio e Indústria do Centro (a chamber of commerce)
(jointly holding 49% of the capital). Centro Venture manages venture capital funds which contribute to the growth of
the centre of Portugal and is promoted by the relevant economic bodies. Centro Capital is the first Portuguese venture
capital fund specialising in one region, namely the centre of Portugal (the districts of Aveiro, Castelo Branco, Coimbra,
Guarda, Leiria and Viseu and the NUTS II municipalities), where approximately 20% of the country’s companies are
located and generate some 19% of GDP.
The company was registered at CMVM (the market regulator) on 14 December 2006. Centro Venture’s accounts
therefore only show the costs associated with viability studies as the Centro Capital Fund has not yet been constituted
(due April 2007).
I NDEX
47
Report and Acounts
Centro Venture had equity and net assets of 508.3 thousand euros at the end of December 2006.
An investment was also made in the venture capital company GED Sur Capital, SA, SGECR, with Banif Investimento
now owning 10%. This Spanish venture capital company, majority-owned by the independent management team GED
Partners, manages venture capital funds for investments in the southern Iberian Peninsula. The first venture capital
fund of this manager was also created, the Fondo GED Sur FCR, and was launched on the market in the second half of
the year, in which Banif Investimento has an investment of 5 million euros.
2006 also saw investigations into the feasibility of creating new private equity solutions to be launched in 2007.
These solutions will undoubtedly be considered innovations in the Portuguese market and will broaden the range of
options for traditional investors in private equity investment funds and also potential investment targets, which will find
alternative forms of financing.
I NDEX
48
2.11. SECURITISATION
Banif Investimento continued to be responsible for managing establishment operations for mortgage and consumer
credit and leasing contracts undersigned by the Banif Group, during 2006 within the scope of its securitisation
operations. These duties include: monitoring establishment credit, controlling financial operations cashflow, preparing
regular reports, giving support to those organisations involved in such operations and liaison with third parties, namely
ratings agencies, the Bank of Portugal and investors.
The sustained growth of this business area led to the founding of Gamma – Sociedade de Titularização de Créditos,
SA, a company wholly owned by Banif Investimento with the following objectives: (i) to manage existing operations
within the Banif Group, (ii) to manage future operations of the Banif Group, (iii) to make the company receptive to
other issuers/originators, (iv) to diversify operation included within legislation, through enlarging the investment base
and the traditional asset classes in this market.
Having gained authorisation to operate in July 2006, Gamma structured and placed an establishment operation, known
as Via Norte, to the sum of approximately 16 million euros. The establishment bonds issued by Gamma had future traffic
flows associated to a road concession in northern Portugal as collateral. This operation was the second of this type in
Portugal involving this type of asset, with the bonds issued being wholly placed on the international market.
In December 2006, the Azor Mortgages de Sagres – Sociedade de Titularização de Créditos, SA had its establishment
operations to Gamma, and includes mortgage credit underwritten by Banco Comercial dos Açores, SA to the sum of
approximately 206 million euros. As a result of both operations, Gamma had, on 31 December 2006, establishment
bonds issued to a total sum of 222 million euros. Its net assets at this time were 312 thousand euros, equity stood at
292.7 thousand euros, with net profit at 42.7 thousand euros.
During January 2007, and considering its compliance with the Equity / Issued Bonds ratio, Banif Investimento issued
fringe benefits to the company of 300 thousand euros.
I NDEX
49
Report and Acounts
2.12. MARKETING AND COMMUNICATION
The Marketing and Communication department undertook a number of activities to meet the strategic plan set out for
the business areas developed by the Bank and its associated companies.
It was for this reason that the department was spun-off from the Commercial department in July, thus giving the Bank
the means and resources necessary to be more efficient and effective in this area. The activity of the department is
resumed below.
In addition to its on-going activity, the Marketing and Communication department defined its objectives as the
following:
n Inform
n
clients of its objectives, products, services and benefits;
Reinforce the brand image of the Banif Investimento group by unifying the brand;
n Increase
and retain its customer portfolio.
In complying with the first objective, the department developed and implemented a marketing and communication plan
to launch its new products, namely the Banif Europa de Leste and Luso Carbon Fund special mutual funds.
The brand image of the group was standardised following the restyling which took place for the Banif Investment
Banking and Banif Asset Management brands at the end of 2005.
However, due to the scope and implications of the project, it will only be implemented in full in 2007, with a brand
strategy having been developed in line with the principles and values of the Bank.
As the client is the main focus of the Group, the department undertook a number of public relations exercises to attract
potential clients, deepen existing relationships with clients and emphasis the good customer relationships to be had
with Banif Investimento.
Finally, the valuable contribution made by the Marketing and Communication department to the development and
implementation of projects in partnership with other members of the Banif Financial Group, should be commended.
I NDEX
50
Report and Acounts
I NDEX
77
The 10 million euro increase in Share Capital by Banif Investimento in November 2005 and issuance of Subordinate
Bonds to the value of 15 million euros in June 2006, gave the Bank its own funds to be able to grow its business
activity. This, along with the increases in members of the Board of Directors from 9 to 11 members and the Executive
Board from 5 to 7 members created the conditions necessary to broaden the scope of the Bank’s business.
2006 can be characterised as a year in which significant investments were made in human resources, through
the reinforcement and/or formation of teams in different areas of the business and respective support networks.
Developments also took place in the Bank’s computer systems, with new position managing and risk control packages
being acquired, both of which also represented a substantial investment.
As a result of these investments, there was a significant increase in costs, which, considering the nature of the
business pursued, should be reflected in income figures for 2007.
A consistent and coordinated Investment Banking policy was pursued internationally with a special mention being given
to new areas of business (real estate finance and private banking), the restructuring of the Broker Dealer in the United
States, which lead to increased and more diverse business. The consolidation of operations in Brazil following the
creation of Banif – Banco de Investimento (Brasil), SA and a new brokerage, as well as the development of the asset
management business pursued by Banif Primus Asset Management, Lda led to a more specialised approach in this
market for Banif – Grupo Financeiro.
Consistent growth and the diversification of the business of the Bank in 2007 are expected to reflect, financially, the
investments made in 2006
In is expected that some areas of the Portuguese business will be spun off (Institutional Banking, Internet Banking
and Financial Advice), those areas which were created and given resources in 2006 will develop (Leverage & Project
Finance, Corporate Banking and Credit), the continued expansion of existing departments (Private Banking, Private
equity, Capital Markets and Securitisation and Corporate Finance and M&A) and the consolidation and development
of the other departments of the Group (Trading and Sales, Asset Management and Real Estate Finance).
I NDEX
52
Report and Acounts
The overall volume of the Bank’s own portfolio should remain at 2006 year-end levels. In order to achieve more
efficient management and risk control, a greater number of derivative instruments will be used, managed using IT
applications acquired and being phased in.
In terms of diversifying sources of income, the market will be opened to other markets which emerge from the
intermediary business in primary and secondary markets, a significant increase in credit activity, in addition to selling
structured products to organisations or through the Group’s sales network.
The consolidation and broadening of the cross-selling process to other parts of Banif – Grupo Financeiro in order
to sell investment banking products through different sales networks.
It is also anticipated that the international operations of the Investment Banking division of Banif – Grupo Financeiro
will become more comprehensive as a result of changing the London Office into a full Branch and the proposed
expansion into Spain and Eastern Europe.
In order to meet these goals for 2007, Banif Banco de Investimento will continue to observe the core values on which
it has built its relationship with its clients and, consequently, its business: Expertise, Professionalism, Innovation
and Attention to Detail.
I NDEX
53
Banif
BanifBanco de Investimento, S.A.
4. Proposta de Aplicação de Resultados
4. Proposed Allocation of Net Profits for the year
I NDEX
86
Report and Acounts
Under the terms of Article 31, paragraph 1 of the Articles of the Company, Article 376, paragraph 1, subparagraph b) of
the Companies’ Code and Article 97 of the Financial Institutions Act (Legal Decree number 298/92 of 31 December), the
Board of Directors proposes that the Annual General Meeting approve the allocation of the Net Profit for the Financial
Year 2006 of EUR 4,855,623.24 (four million, eight hundred and fifty-five thousand, six hundred and twenty-three euros
and twenty-four eurocents) as follows:
Legal Reserve: EUR 485,562.32 (four hundred and eighty-five thousand, five hundred and sixty-two euros and
thirty-two eurocents),
Retained earnings: EUR 480,912.17 (four hundred and eighty-thousand, nine hundred and twelve euros and seventeen
eurocents),
Free Reserves: EUR 1,889,148.75 (one million, eight hundred and eighty-nine thousand, one hundred and forty-eight
euros and seventy-five eurocents),
Distribution to Shareholders: EUR 2,000,000.00 (two million euros), corresponding to a dividend of EUR 0.33(3), per
share.
I NDEX
55
Banif
5. Notas Finais
5. Closing Remarks
I NDEX
88
Report and Acounts
At the Annual General Meeting held on 23 March 2006, the members of the Governing Bodies were elected for the
three-year period from 2006-2008. The Board of Directors, meeting on the same day, agreed to appoint Comendador
Horácio da Silva Roque as Chairman of the Board of Directors and Messrs Carlos David Duarte de Almeida and Artur
Manuel da Silva Fernandes as Vice-Chairmen. At a meeting of the Advisory Board held on 3 May 2006, Comendador
Horácio da Silva Roque and Messrs António do Pranto Nogueira Leite and Pedro Miguel Duarte Rebelo de Sousa were
appointed Chairman and Vice-Chairmen respectively.
At the same Annual General Meeting, it was decided to increase the number of members of the Board of Directors
from 9 to 11, with a consequent alteration to the Articles of the company. The Governing Bodies are now as follows:
General Meeting
Joaquim Filipe Marques dos Santos (Chairman)
Carlos Manuel Graça Ramos Oliveira (Secretary)
Ângela Maria Simões Cardoso Seabra Lourenço (Secretary)
Board of Directors
Comendador Horácio da Silva Roque (Chairman)
Carlos David Duarte de Almeida (Vice-Chairman)
Artur Manuel da Silva Fernandes (Vice-Chairman)
Paulo Cezar Rodrigues Pinho da Silva
I NDEX
57
Audit Board
Fernando Mário Teixeira de Almeida (Chairman)
Ernest & Young Audit & Associados, SROC (Member)
Rui Manuel Braga de Almeida (Member)
Sérgio António do Rosário Vaz Monteiro (Substitute Deputy Member)
João Carlos Miguel Alves (ROC) (Substitute Deputy Member)
Advisory Board
Prof. Dr. António do Pranto Nogueira Leite
João Vieira de Almeida
Fernando José Inverno da Piedade
Jorge Armindo de Carvalho Teixeira
José Almeida Guerra
Miguel Maria Sá Paes do Amaral
Pedro Miguel Duarte Rebelo de Sousa
Gonçalo Cristóvam Meireles de Araújo Dias
António Luís de Andrade Magalhães
António Fernando Caldeira de Paula Santos
Jorge Manuel de Oliveira Godinho
Nuno Manuel Branco Ribeiro da Silva
José Romão Leite Braz
Maria Teresa Henriques da Silva Moura Roque dal Fabbro
Remuneration Committee
José Marques de Almeida, representing Rentipar Financeira S.G.P.S., S.A.
Fernando José Inverno da Piedade, representing Fundação Horácio Roque
Vítor Hugo Simmons, representing Renticapital – S.G.P.S., S.A.
I NDEX
58
Report and Acounts
At the aforementioned meeting of 23 March 2006, the Board of Directors agreed to create an Executive Committee, to
which it delegated management powers and is made up as follows:
Artur Manuel da Silva Fernandes (Chairman)
The same meeting of the Board of Directors also agreed to nominate Ms Ângela Maria Simões Cardoso Seabra
Lourenço as Company Secretary and Mr Tiago dos Santos Matias as Deputy, in compliance with Article 28 of the
Articles of Association of the Company.
As a final note, the Board of Directors expressed its acknowledgment of the support a co-operation shown by the Audit
Board and supervising authorities
Lisbon, 27 February 2007
I NDEX
59
Banif
6. DEMONSTRAÇÕES FINANCEIRAS
6. FINANTIAL STATEMENTS
I NDEX
92
INDIVIDUAL ACCOUNTS
Balance Sheet as at 31 December 2006 and 2005
I NDEX
61
Report and Acounts
Income Statement as at 31 December 2006 and 2005
I NDEX
62
Cash Flow Statement as at 31 December 2006 and 2005
I NDEX
63
Report and Acounts
Consolidated Cash Flow Statement for the years ended 31 December
I NDEX
64
CONSOLIDATED ACCOUNTS
Consolidated Balance Sheet as at 31 December 2006 and 2005
I NDEX
65
Report and Acounts
Consolidated Income Statement
I NDEX
66
Consolidated Cash Flow Statement as at 31 December 2006 and 2005
I NDEX
67
Report and Acounts
Changes in Consolidated Equity in 2006 and 2005
I NDEX
68
I NDEX
I NDEX
Notes to the Management Report and Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 2006 AND 2005
BANIF BANCO DE INVESTIMENTO, S.A.
(Amounts in Thousand Euros – t€)
1. GENERAL INFORMATION
Banif – Banco de Investimento, S.A. (the “Company”) resulted from the break-up on 15 December 2000 of Ascor
Dealer – Sociedade Financeira de Corretagem, S.A. In the process, Banif Ascor – Sociedade Corretora, S.A.,
a brokerage house, was also created. Most Banif Group holdings in investment banking-related areas were transferred
on that date to the new bank.
The company’s shares are wholly owned by Banif Investimentos, SGPS, S.A., a sub-holding of Banif Financial Group
(the Group), having Banif SGPS, S.A. as the parent company, which reports consolidated accounts in accordance with
IAS/IFRS.
On 31 January 2007, the Company’s Board of Directors reviewed and approved the Balance Sheet and Financial
Statements as of 31 December 2006. On 26 February 2007, the Board of Directors globally approved the Management
Report that, together with the Financial Statements, will be submitted for approval by the Stockholder’s at the Annual
General Meeting of 28 March 2007.
2. BASES FOR THE PRESENTATION OF ACCOUNTS AND MAIN ACCOUNTING PRINCIPLES
2.1. Bases for the presentation of accounts
The company’s separate financial statements have been prepared for the first time in accordance with the accounting
principles set out in Bank of Portugal’s Aviso no 1/2005, nos 2 and 3, the so-called Adjusted Accounting Standards
(NCA in the Portuguese terminology).
The NCA are based on IAS/IFRS as adopted by the European Union, except for the following areas:
n
Measurement and provisioning of extended credit;
n Deletion
of the fair value option for the valuation of tangible assets.
The international financial reporting standards that have been approved by the European Union differ from the
full-sized version of IAS/IFRS as published by the International Accounting Standards Board (IASB) in respect of the
deletion of certain restrictions to the application of hedge accounting as provided in IAS 39 – Financial instruments:
Recognition and Measurement.
I NDEX
71
Report and Acounts
The financial statements were prepared on the basis of historical cost except for the revaluation of financial
instruments. The main accounting principles are presented below.
The company applied in advance, as of 31 December 2005, the changes to IAS 39 made by the International
Accounting Standards Board (IASB), and adopted by the European Union, limiting the application of the fair value option
to the designation of financial assets and liabilities on initial recognition. Application of the changes is mandatory for
the financial years starting on or after 1 January 2006.
2.2. Use of estimates in the preparation of the Financial Statements
Preparation of the financial statements requires that estimates and assumptions should be made by the company’s
management. These affect the valuation of assets and liabilities, revenue and costs as well as disclosed contingent
liabilities. In the process, management exercised its best judgement and used the information available on the date of
preparation of the financial statements. Consequently, future values might differ from estimated values.
The most significant situations regarding the use of estimates are the following:
Fair Value of financial instruments
When the fair values of the financial instruments cannot be determined through cotation (marked to market) in the
assets market, they are determined by using valuation techniques that include mathematical models (marked to model).
The input data used on these models is, whenever possible, data that can be observed in the market. When this is not
possible, a degree of judgement is required to establish the fair values, namely in terms of liquidity, correlation and
volatility.
Impairment of capital instruments
Financial assets available for sale are considered impaired when a significant and prolonged decline in their fair
value, below cost price, is apparent or when there is another objective evidence of impairment. A level of decline
considered “significant and prolonged” requires judgment. Within this context the Company established as significant and
prolonged a decline in fair value of a capital instrument equal to or over 20% for a 6 months period. Additionally, other
factors are evaluated such as the volatility behavior of assets prices.
I NDEX
72
Assets through deferred taxes
Assets through deferred taxes are recognized for unused tax losses in extend of probable positive tax results within
the future legally established timeframe. For this effect judgments are made to determine the amount of deferred tax
assets that can be recognized based on the level of future expected tax results.
2.3. Cash and Cash Equivalents
For cash flow statement purposes, cash and cash equivalents include cash on hand, demand deposits at central banks
and other domestic and foreign banks, in domestic and foreign currency.
2.4. Transactions in foreign currency
Transactions in foreign currency are recorded on the basis of the exchange rates traded on the date of the transaction.
Monetary assets and liabilities that are expressed in foreign currency are converted to euros at the exchange rate on
the balance date. Nonmonetary items carried at fair value are converted on the basis of the exchange rate on the latest
valuation date. Non-monetary items carried at historical value are converted at the original exchange rate. Exchange
differences are recognised on the income statement as gains or losses for the period, except for those arising from
non-monetary financial instruments classified as available for sale, which are recorded against an equity item until
they are sold.
2.5. Investments in subsidiaries and associates
The Investments in subsidiaries and associates item corresponds to the equity stakes held by the company,
on a permanent basis, in such enterprises where it has or controls the majority of voting rights (in the case
of subsidiaries) or exerts significant influence (in the case of associates). Significant influence is considered to exist
every time the company holds, directly or indirectly, more than 20% of the voting rights. Investments in subsidiaries
and associates are recorded at acquisition cost adjusted for impairment losses, if any.
I NDEX
73
Report and Acounts
2.6. Financial instruments
2.6.1. Recognition and initial measurement of financial instruments
The purchase and sale of financial assets implying the delivery of assets within the established timeframe, according
to market regulations or conventions in force, are recognised on the date of trading, that is to say, on the date of the
purchase or sale agreement. Derivative financial instruments are also recognised on the date of trading.
Classification of financial instruments on the date of initial recognition depends on their features and acquisition intent.
All financial instruments are initially measured at fair value plus accrued costs directly attributed to the purchase or
emission, except for the caso of assets and liabilities at fair value through earnings and losses, where the said costs
are directly recognised in the profit and loss.
2.6.2 Subsequent measurement of financial instruments
Financial assets held for trading
Financial assets held for trading are those acquired for the purpose of being sold on a short-term and generating a
profit from fluctuations in price or dealer’s margin, including derivative financial instruments not classified as hedges.
After initial recognition, gains and losses generated by the subsequent measurement of fair value are reflected in the
year’s profit and loss. Derivatives’ positive fair values are recorded under assets and the negative fair values under
liabilities. Interests’ expenses and dividends are recognised in the respective profit and loss accounts when the right
to its payment or receipt is established.
I NDEX
74
Financial assets and liabilities at fair value through profit and loss
These items include financial assets and liabilities irrevocably designated at inception as at fair value through profit
and loss, according to the option provided in IAS39; as long as the necessary conditions for their recognition have
been satisfied, namely:
1. The designation eliminates or significantly reduces inconsistencies accounting mismatch;
2. The financial assets and liabilities are part of a group of managed assets or liabilities, or both, being their
performance evaluated on a fair value basis, according to a documented risk management or investment strategy; or
3. The financial instrument contains one or more embedded derivatives, except when the embedded derivatives do
not significantly modify the associated cash flows or when it is clear, with little or no analysis, that separation of the
embedded derivatives inherent to the contract is prohibited.
After initial recognition, gains and losses generated by the subsequent measurement of the financial assets and
liabilities fair value are reflected in the year’s profit and loss under the item “Profit and Loss of the assets and liabilities
evaluated at fair value through results”.
Financial assets available for sale
Financial assets available for sale include those instruments that have not been classified otherwise and that may be
sold in response to or anticipation of liquidity requirements, interest, exchange rate or market price changes.
On initial recognition these assets are subsequently measured at fair value or, in case its fair value can not be
reliably calculated, by maintaining the acquisition costs. The respective gains and losses are reflected under the item
“Revaluation Reserves” until their sale (or until recognision of losses through impairment), at which point the
accumulated value is transferred from the year’s profit and loss to “Profit and losses of financial assets available
for sale”.
An analysis is made of the evidence of losses through impairment in financial assets available for sale on each
reference date of the financial statements. Losses through impairment are recognised as profit and loss under the item
“Impairment of other financial assets net of reversions and recoveries”.
I NDEX
75
Report and Acounts
Loans and accounts receivable
Loans and accounts receivable are unlisted financial assets with fixed or determinable payments that are not acquired
for sale in the near term, i.e. held for trading, or otherwise classified on initial recognition, by exercise of the fair value
option, as financial assets at fair value through profit or loss. This item includes primarily credit extended to the company’s
clients.
On initial recognition, these assets are recorded at nominal value, which usually equates to the value disbursed for
their acquisition. Subsequently, these assets are recognised on the balance sheet at their nominal value adjusted for
amortisation and any regulatory provisions in accordance with Bank of Portugal’s Aviso no3/95
Interest on assets classified as loans and accounts receivable is recognised according to the matching principle.
Funding from other credit institutions, funding from clients and other borrowers, debt securities and other
subordinated liabilities
The remaining financial liabilities, which primarily include funds borrowed from credit institutions, deposits from clients
or debt issued not designated as financial liabilities at fair value through results, with its contractual terms resulting on the
delivery obligation to the fund or to the financial assets’ owner, are initially valued at fair value, which usually corresponds
to the proceeds net of any direct transaction costs.
Repos
Repos are sales of financial assets providing for the repurchase of the sold asset on a future date. The relationship
between the sales proceeds, or funding, and the repurchase price of the asset implies an interest rate called the repo
rate. The value of the funding is recorded under the item Funds from other credit institutions and interest expense is
recognised according to the matching principle. The assets remain in the lender’s custody as guarantee for the funding.
I NDEX
76
Fair value
Fair value as used in the valuation of financial assets at fair value through profit or loss and financial assets available
for sale is determined according to the following criteria:
n
In the case of instruments traded on active markets, fair value is determined on the basis of the closing price, the
price of the last trade or the value of the last known bid;
n
In the case of assets that are not traded on active markets, fair value is determined by valuation techniques such
as the recent pricing of comparable instruments or valuation methods used by markets such as discounted cash flow
(DCF) and option valuation models;
Variable-income assets such as common stock and derivative instruments whose underlying assets are
variable-income assets, for which reliable valuations are not possible to obtain, are carried at acquisition cost,
adjusted for impairment losses, if any.
Derivatives
In its current activity, the Company uses some derivative financial instruments both to satisfy their clients’ needs
and to manage their own interest rate or other market risks. These instruments involve variable degrees of credit
risk (maximum potential accounting loss due to a possible non-compliance by the counterparts of the respective
contractual obligations) and market risks (maximum potential loss due to value changes of financial instruments as a
result of variations in the interest rates, foreign exchange and NSC).
The nacional amounts of derivative transactions are used to calculate the flows to be exchanged in contractual terms,
in possibly net terms, and although they constitute the most common volume measurement of these markets, they do
not correspond to any quantification of credit or market risk for the respective transactions. In the caso of interest
and exchange rate derivatives, credit risk is measured according to the replacement cost at current market prices
of the contracts where a potential gaining position is held (positive market value) should one of the parties enter into
default.
Derivatives that are embedded in other financial instruments are separated from the host instrument whenever their
risks and features are not closely related to the host contract and the whole contract is not recorded at fair value
through profit or loss.
I NDEX
77
Report and Acounts
Derivative instruments that are used for managing exposure to financial and market risks are accounted for in
accordance with IAS 39 in case they fulfil eligibility criteria, namely such instruments that hedge fair-value items.
On the contrary, derivatives are considered by their fair value as financial negotiable assets or liabilities, depending on
its fair respective positive or negative fair value.
In the designation of a hedging operation, the relation between the hedging and the hedged element is formally
documented, namely in what regards:
n The
nature of the underlying risk(s) and the hedging strategy according to the Company’s risk policies;
n Description
n Evaluation
of the financial hedging and hedged instruments;
method of the hedging effectiveness and performance frequency.
Regular analyses are carried out for hedging derivatives and the actual performance achieved with the hedge relation,
namely by comparing the variation in the fair value of the hedging instrument and the hedged item, caused by hedged
risk.
The results obtained from derivative hedging instruments are recorded in the year’s profit and losses, as well as the
ones of the derivative trading instruments, should the efficiency test results be within the parameters defined in IAS
93 (80%-125%).
The Results of the subsequent measurement of fair value are recognised in the year’s profit and loss together with the
measurement results at fair value of the hedged instrument under “Results of assets and liabilities evaluated at fair
value through profit and loss”.
The Company have been using derivatives mainly for hedging derivative transactions with clients: OTC derivatives
are contracted (cross currency swap, interest rate swap, equity swap, etc.) with clients whose risk is hedged with
back-to-back transactions with counterparts in the market.
There are no hedging transactions reflected in the financial statements as all the existing derivative instruments were
either classified for trading because they did not meet the IAS 93 hedging accounting requirements or are linked
to liabilities designated to fair value through results. Consequently, all derivatives are registered under assets and
liabilities available for trading.
I NDEX
78
2.6.3. Derecognition of financial assets and liabilities
Financial assets
A financial asset (or when applicable, part of a financial asset or part of a group of financial assets) is derecognized
when:
1. The assets cash collection rights expire; or
2. The cash collection rights have been transferred or has been assumed the obligation to make full pay-out, without
a significant delay, to third parties under a a pass-through agreement; and
3. The asset’s risks and benefits were substantially transferred, or when the control over the asset was transferred
but the risks and benefits were not transferred or retained.
Financial Liabilities
Financial liabilities are derecognised when the underlying obligation expires or is cancelled. When an existing
financial liability is replaced by another and is the same debtor in substantially different terms from those
initially agreed, or when the initial terms are substantially altered, the said replacement or alteration is treated
as a derecognition of the original liability and as a recognition of a new liability, and any difference between the
corresponding values is reflected in the annual results.
2.6.4. Impairment and writedowns of credit extended to clients and accounts receivable from other
debtors
The company tests financial assets for impairment in accordance with the guidelines contained in Bank of Portugal’s
Instrução no 7/2005. A financial asset is impaired if, and only if, there is evidence that an event or events will have a
measurable impact on the expected future cash flows from that asset or group of assets. Expected losses as a result
of future events, irrespective of their likelihood, are not recognised.
Writedowns of credit extended to clients and accounts receivable from other debtors are determined according to
Bank of Portugal’s Aviso n° 3/2005.
Whenever, in a subsequent period, the amount of impairment losses attributable to a certain event decreases,
the previously recognised amount is reversed against the account for impairment losses. The reversed amount
is recognised through profit and loss.
I NDEX
79
Report and Acounts
2.7. Other tangible fixed assets
The Tangible fixed assets item includes the company’ own premises as well as vehicles and other equipment.
Property used by the company for its operations abroad is classified as own premises. These are recorded at historical
value less accumulated depreciation and revalued according to the legal regulations in force.
The remaining tangible fixed assets are recorded at cost less accumulated depreciation. Repair, maintenance and other
costs incurred in the use of these assets are recognised as costs as they occur.
Tangible assets are depreciated on a straight-line basis in accordance with the provisions of Aviso no 9/94 as
follows:
Property
[ 3-20 ] years
Veihcles
4 years
Other equipment
[ 3-10 ] years
2.8. Intangible assets
Intangible assets, primarily computer software, are recorded at acquisition cost less accumulated depreciation and
impairment losses. The assets are depreciated on a straight-line basis over their estimated economic life, which is
usually 3 years.
Intangible assets may include capitalised internal expenditure, particularly incurred by in-house software development.
For this purpose, expenditure is not capitalised until the requirements of IAS 38 are met, namely those related to the
development stage.
I NDEX
80
2.9. Income taxes
Income tax expense equals the sum of current and deferred tax.
Current tax is calculated according to the rates applicable in the jurisdictions where the company
operates.
The company also records as deferred-tax liabilities or assets those amounts recognised as tax
payable or recoverable in the future resulting from temporary taxable or deductible differences, namely those
related to provisions that are temporarily not deductible for tax purposes, the revaluation of securities and
derivatives that are not taxed until they are sold, the taxation of pension liabilities and other employee
benefits and capital gains that are not taxable if reinvested.
Deferred-tax assets and liabilities are calculated and valued on an annual basis using tax rates anticipated
to be in force when the temporary differences are expected to be reversed. These shall correspond to
the approved rates or those deemed to be approved on balance date. Deferred-tax liabilities are always
recorded. Deferred-tax assets are recorded only to the extent they are likely to materialise through the existence
of future taxable profits.
Income taxes are charged to profit and loss.
2.10. Provisions and contingent liabilities
A provision is recognised when there is a present (legal or constructive) obligation as a result of past events,
when it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. The provision shall correspond to the company’s best
estimate of the expenditure required to settle the obligation at the balance sheet date.
If the future expenditure is unlikely to materialise, the liability is considered to be contingent. Contingent liabilities have
to be disclosed unless there is only a remote probability that they will materialise.
I NDEX
81
Report and Acounts
2.11. Recognition of income and expenditure
In general, the income and expenditure recognition is based upon the transactions period according to the matching
principle, meaning they are recorded upon generation, irrespectively the moment they are collected or paid. Income is
recognised when it is probable that transaction benefits flow to the Company and there is the possibility to accurately
measure the credit value.
For financial instruments measured at their amortised cost and for financial instruments classified as “Financial Assets
available for sale” interest is recognised by using an effective rate method corresponding to the rate that accurately
deducts the group of future cash receiving or payments till their maturity or up to the next repricing date, in the case of
the net amount currently registered for the financial assets or liabilities. Upon calculation of the effective interest rate,
future cash flows are estimated taking into account the contractual terms and all remaining income or expenditures
directly assigned to the contracts.
2.12. Commissions for the provision of services
The company charges commissions to its clients for the provision of a broad range of services either on a continued
basis for which the company charges periodic commissions or on a one-off basis for significant stand-alone
transactions.
Commissions charged for services that are performed for a certain period are recognised along that period.
Commissions that are related to a significant stand-alone transaction are recognised when the transaction occurs.
2.13. Dividends
Dividends obtained are recognised when their right of receipt is established.
Dividends distributed to the stockholders are recognised as liabilities and are deducted on the Capital item when
approved by the stockholders.
Dividends approved by the Board of Directors after the financial statements reference date, are published in the
Financial Statements Notes (Note 22).
I NDEX
82
Report and Acounts
3. SEGMENTED REPORTING
The company’s segmented reporting as up to 31 December 2006 is primarily done by business area. The business
areas are: Corporate finance, Trading and sales, Brokerage, Retail banking, Commercial banking, Payments and
settlements, Custody, Asset management and Other (the residual item).
27. Secondarily, reporting is made by geographical area in which the company operates.
3.1. Business Segments
I NDEX
83
3.2. Geographic Segments
The company exclusively operates in Portugal.
I NDEX
84
Report and Acounts
4. CASH AND CASH EQUIVALENTS AT CENTRAL BANKS
This item consists of:
5. CASH AND CASH EQUIVALENTS AT OTHER CREDIT INSTITUTIONS
I NDEX
85
6. FINANCIAL ASSETS HELD FOR TRADING
2006
2005
Securities Portfolio
29,251
3,122
Derivative instruments with positive value
23,842
19,944
53,093
23,066
(201)
(21)
52,892
23,045
Provisions
This item is composed by derivative financial instruments, which are totally classified as held for negotiation. The
negative fair value corresponds to the derivatives registered. This item is composed of derivative instruments that
have been totally classified as held for trading. The negative fair value corresponds to the derivative registered in the
financial liabilities held for trading (note 15).
I NDEX
86
Report and Acounts
Securities Portfolio on 31 December 2006
Item
Currency
Quantity
Price
Balance
Sheet Value
DEBT INSTRUMENTS
Issued by residents
BANIF SFE
EUR
10,000
1.10
11
BANIF BANCO INTERNACIONAL DO FUNCHAL
EUR
86,000
0.98
85
Issued by non-residents
LETRA TESOURO NACIONAL 01/01/2007
BRL
447
967.70
154
BANCO NAC DESENV BNDES 0 06/16/08
USD
2,846,000
0.99
2,140
BANCO NAC DESENV BNDES 9 10/30/17
DEM
68,000
1.04
37
EUROPEAN INVESTMENT BANK 11/14/08
BRL
130,000
1.06
50
CSN ISLANDS VIII CORP
USD
1,068,000
1.14
924
TRADE INVEST LIMITED 10/29/08
USD
110,000
0.95
80
SAG DO BRASIL SA 10/06/09
USD
4,090,000
1.00
3,154
KFW 09/22/2008
BRL
250,000
0.99
97
BANCO VOTORRANTIM SA
USD
600,000
1.04
477
TRADE INV GLOBAL CREDIT 4 1/8 04/07
EUR
662,000
0.99
666
BANCO FIBRA SA
USD
180,000
1.01
140
EMBRATEL
USD
439,000
1.10
367
PETROBRAS INT FINANCE 02/01/07
USD
383,000
1.00
303
BANCO DO BRASIL (CAYMAN) 06/07
USD
157,000
1.02
122
TELEMIG CELULAR 01/09
USD
83,000
1.05
68
CSN ISLANDS VII CORP
USD
95,000
1.07
80
CIA SIDERURGICA PAULISTA
USD
190,000
1.05
156
CESP COMPENER SAO PAULO 03/04
USD
280,000
1.06
169
ABN AMRO BANK NV 12/22/10 BsKT
EUR
36,000
0.96
35
UNIBANCO 7 3/8 12/15/13 USD
USD
227,000
1.03
178
BANCO VOTORANTIM 4 1/2 03/07
USD
240,000
1.00
184
ODEBRECHT OVERSEAS LTD 02/09
USD
55,000
1.11
48
MARLIM PETRO 12 1/4 08
USD
20,000
1.06
8
BANCO NAC DESENV ECON 04/10
ITL
80,000,000
1.10
48
BANCO VOTORANTIM 0 07/11/08
USD
50,000
1.01
39
TRADE INVEST LIMITED 02/16/09
EUR
5,232,000
1.00
5,405
ABN AMRO BANK NV 12/01/2009 BSkt
EUR
5,000
1.00
5
BANCO FIBRA SA 12/18/2009
USD
100,000
1.00
76
TELE N L PARTICIPACOES
USD
972,000
1.07
788
BANCO INDUSTR E COMRCL
USD
200,000
1.01
157
CESP - COMP ENERG SAO PAULO 03/11 REGS
USD
100,000
1.11
87
BANCO BMG 8 3/4 01072010
USD
300,000
1.02
241
FED REPUBLIC OF BRAZIL 01/22
BRL
850,000
1.14
356
BANCO BRADESCO CI 4,375% 01/08
USD
50,000
0.99
38
CESP - COMP ENERG SAO PAULO 02/04
EUR
80,640
1.07
95
FED REPUBLIC OF BRAZIL
USD
850,000
0.53
362
EURO INVEST LIMITED
EUR
215,000
0.96
207
BANCO BBM INVESTIMENTOS 11/21/09
USD
1,770,000
1.02
1,376
BRASTURINVEST INV TUR 04/09
EUR
1,792,000
1.01
1,880
BANIF SGPS SA 03/08
EUR
680,700
1.00
679
SOIL SGPS, SA
EUR
30,000
0.99
30
UNIBANCO 04/12
USD
980,000
1.01
762
EQUITY INSTRUMENTS
Issued by residents
GALP ENERGIA SGPS-S/BF
EUR
855
1.00
1
IMPRESA-CAUTELAS 2003
EUR
12,650
4.68
59
PAPELARIA FERNANDES IND E COM
EUR
8
2.34
0
SONAE SGPS
EUR
290,864
1.51
439
BANIF SGPS SA - DT INCORPORAÇÃO
EUR
251,778
5.30
1,334
GRUPO SOARES DA COSTA SGPS
EUR
7,225,035
0.69
4,985
50
TOTAL
I NDEX
TELEMAR-TELE NORTE LESTE PARTICIP
BRL
2,500
55.70
PARMALAT FINANZIARIA SPA
EUR
30,000
0.11
3
MAN IP 220 INTERNATIONAL LTD - $
USD
25,000
0.88
17
29,278
87
Provisions changed as follows:
Description
I NDEX
12-31-2005
Additions
Reinstatement
12-31-2006
Provisions for country risk
21
452
272
201
TOTAL
21
452
272
201
88
Report and Acounts
7. Other Financial Assets at Fair Value through Profit or Loss
Item
Currency
Quantity
Price
Balance
Sheet Value
DEBT INSTRUMENTS
Issued by residents
SAGRES SOCIEDADE DE TITULARIZACAO
EUR
2,000,000
0.95
O.T. Maio 2000/2010
EUR
205,000
1.06
1,927
224
SAGRES SOCIEDADE DE TITULARIZACAO
EUR
1,000,000
0.99
1,007
CAIXA ECO MONTEPIO GERAL
EUR
5,000,000
1.00
4,986
O.T. JULHO 04/2008
EUR
60,000
0.99
60
GAMMA - VIA NORTE - CLASSE A
EUR
10,000,000
1.00
10,093
GAMMA - VIA NORTE - CLASSE B
EUR
5,720,000
1.00
5,779
MUNDILEASING 06/07
EUR
299,278
1.00
300
PORTUCEL - EMP CELUL PAPEL 03/10
EUR
2,000,000
1.00
2,022
PORTUCEL - EMP CELUL PAPEL 03/10
EUR
6,000,000
1.00
6,087
BANCO ITAU EUROPA SA
EUR
6,000,000
1.00
6,018
BUNDESREPUB. DEUTSCHLAND 04/04/16
EUR
25,000,000
1.00
25,722
BARCLAYS BANK PLC
EUR
500,000
0.90
451
OPERA FINANCE UNI INVEST BV
EUR
2,500,000
1.00
2,315
DEUTSCHE BANK AG LONDON
USD
2,000,000
0.99
1,556
UBS AG JERSEY BRANCH
EUR
2,500,000
0.99
2,620
WINDERMERE CMBS PLC
EUR
3,500,000
1.00
3,502
PILLAR FUNDING PLC
USD
2,700,000
1.00
2,050
ALLIANCE DPR CO 11/15/2013
USD
2,000,000
1.00
1,528
HYPO PUBLIC FINANCE BANK
EUR
5,000,000
1.00
4,987
ATHLON SECURITISATION BV
EUR
3,000,000
1.01
3,027
PARAGON MORTGAGES PLC
EUR
1,500,000
1.00
1,515
UBS AG JERSEY VAR 09/08/10
EUR
1,500,000
0.98
1,474
LEEK FINANCE PLC
EUR
1,500,000
1.01
1,513
ALFA BANK
USD
2,000,000
1.00
1,291
CEDO PLC 06/29/12
EUR
2,000,000
1.00
1,997
MAGI FUNDING PLC
EUR
2,500,000
1.00
2,516
MARLIN (EMC-II) BV
EUR
7,000,000
1.00
819
GRANITE MORTGAGES PLC
EUR
1,000,000
1.01
1,009
GALP INVESTMENT PLC
EUR
500,000
1.01
505
WINDERMERE CMBS PLC
EUR
2,750,000
1.00
1,341
LA DEFENSE PLC
EUR
3,000,000
1.01
2,941
PILLAR FUNDING PLC
USD
2,000,000
1.00
1,522
CLARIS LTD/MILLESIME CDO
EUR
2,000,000
0.98
1,972
IRISH NATIONWIDE BLDG SO
EUR
5,000,000
1.00
5,018
HYPO REAL ESTATE BANK AG 02/25/09
EUR
2,500,000
1.00
2,508
HEWETT,S ISLAND CDO, LTD
USD
2,000,000
1.00
1,523
HEWETT,S ISLAND CDO, LTD
USD
2,000,000
1.00
1,523
EURO INVEST LIMITED 4 03/31/07
EUR
138,000
1.00
142
BROOKLANDS EURO REFERENCED LINKED N
EUR
2,500,000
1.00
2,504
GAMA RECEIVABLES FUNDING PLC
EUR
5,000,000
1.00
5,003
HARBOURMASTER CLO
EUR
5,000,000
1.00
5,014
UBB DIVERSIFIED PAYMENT RIGHTS FIN
USD
2,000,000
1.00
1,541
RUSSIAN CAR LOANS S.A. 10/16/17
EUR
2,000,000
1.00
2,010
MDM DPR FINANCE COMPANY S.A. 2011
EUR
2,500,000
1.00
2,516
MAGNOLIA FINANCE VI PLC 06/20/2014
EUR
2,000,000
1.00
2,000
ALFA DIV PYMT RT 12/15/2011
EUR
2,500,000
1.00
2,509
GRESHAM CAPITAL CLO BV 2006-3X C
EUR
2,000,000
1.00
2,005
OMEGA CAPITAL EUROPE PLC SYCA B
EUR
2,500,000
1.00
2,504
BLUEBONNET FINANCE PLC 12/20/2016
EUR
2,000,000
1.00
2,003
I NDEX
89
Item
Currency
Quantity
Price
Balance
Sheet Value
I NDEX
90
AMSTEL SECURITISATION 2006-1X D
EUR
1,500,000
1.00
1,503
ALPHA CREDIT GROUP PLC 09/10
EUR
3,000,000
1.00
3,003
EIRLES THREE LIMITED 152
EUR
5,000,000
1.00
520
B-TRA
EUR
3,500,000
1.00
3,532
CIT GROUP INC 11/30/2011
EUR
2,500,000
1.00
2,510
CAIXA ECO MONTEPIO GERAL
EUR
3,500,000
1.00
3,520
PROVIDE PLC
EUR
2,500,000
1.00
2,512
GRANITE MORTGAGES PLC
EUR
2,000,000
1.01
2,017
FRIESLAND BANK FLOAT 04/13
EUR
2,500,000
1.00
2,515
DAIMLERCHRYSLER NA HLDG 03/16/2010
EUR
2,000,000
1.00
2,002
IBERDROLA FINANZAS SAU
EUR
5,000,000
1.00
5,027
INVESTEC FINANCE PLC
EUR
2,000,000
1.00
2,018
EDP FINANCE BV 06/14/10
EUR
5,000,000
1.00
5,005
COCA-COLA HBC FIN PLC
EUR
6,000,000
1.00
6,006
MOSCOW NARODNY FINANCE 10/09/09
USD
2,000,000
1.00
1,543
MARBLE ARCH RESIDENTIAL SECURISATIO
EUR
3,000,000
1.01
1,830
AVOCA CLO BV
EUR
2,500,000
1.00
2,532
AURUM INVESTMENTS SA
EUR
2,000,000
1.00
2,013
GERMAN RESIDENTIAL ASSET
EUR
2,000,000
1.00
1,994
RUSSIAN CONSUMER FINANCE NO.1 S.A.
EUR
2,000,000
1.00
2,010
LEHMAN BROS HOLDINGS 07/12
EUR
5,000,000
1.00
5,030
AVOCA CLO BV
EUR
1,000,000
1.01
1,026
QUARZ CDO IRELAND PLC
EUR
3,000,000
1.00
3,005
BANK OF AMERICA CORP
EUR
5,000,000
1.00
5,005
PREPS LIMITED PARTNERSHIP
EUR
1,000,000
1.01
1,013
MORGAN STANLEY & CO INTL
EUR
3,000,000
1.00
3,011
CITIGROUP INC 06/14/12
EUR
5,000,000
1.00
5,017
CORSAIR JERSEY NO.3 #9
EUR
4,000,000
1.00
4,011
LAMBDA FINANCE BV
EUR
2,000,000
1.00
2,015
FRIESLAND BANK FLOAT 05/11
EUR
2,500,000
1.01
2,523
LANSFORSAKRINGAR BANK
EUR
4,000,000
1.00
4,006
MERRILL LYNCH 03/11
EUR
5,700,000
1.01
5,747
AZOR MORTGAGES PLS
EUR
2,000,000
1.01
2,014
CREDIT SUISSE INC 04/12/13
USD
7,500,000
1.00
5,777
3ONDO IMMOBILI PUBBLICI FUNDING
EUR
5,000,000
1.00
5,111
HSBC FINANCE CORP
EUR
5,000,000
1.00
5,054
TELENOR ASA 09/28/2011
EUR
3,000,000
1.00
3,015
CEDO PLC
EUR
2,500,000
1.01
2,534
HARVEST CLO SA
EUR
1,500,000
1.02
1,539
KOREA DEVELOPMENT BANK
EUR
6,000,000
1.00
6,049
GOLDMAN SACHS GROUP INC
EUR
3,500,000
1.00
3,516
BANCA INTESA SPA
EUR
10,000,000
1.00
10,045
CHEYNE CREDIT OPPORTUNITY CDO
EUR
2,500,000
1.00
2,530
GE CAPITAL EURO FUNDING
EUR
4,200,000
1.00
4,231
GOLDMAN SACHS GROUP INC
USD
5,000,000
1.00
3,848
MAGNOLIA FINANCE I LTD
EUR
2,500,000
1.03
2,624
TEMPO CD0 1 LTD
EUR
2,000,000
1.02
2,048
AQUARIUS INVESTMENTS PLC/DYNAMO
EUR
1,000,000
1.04
1,042
LOCAT SECURITISATION VEHICLE SRL
EUR
3,000,000
1.02
3,060
Report and Acounts
Item
Currency
Quantity
Price
Balance
Sheet Value
EQUITY INSTRUMENTS
Issued by residents
GALERIAS NAZONI
EUR
750
0.00
0
FUNDO CAPITAL RISCO CAPVEN
EUR
450
4,982.40
2,242
FCR NEW FAMILY COMPANIES FUND
EUR
264
4.993,60
1,318
LUSO CARBON FUND-FUNDO ESP FECHADO
EUR
20
50,000.00
1,000
BANIF GESTÃO ACTIVA
EUR
10,000
5.37
54
BANIF EUROPA DE LESTE
EUR
100,000
5.46
546
BANIF ESTRATÉGIA AGRESSIVA
EUR
316,799
3.35
1,060
ART INVEST
EUR
300,880
5.76
1,733
BANIF IMOGEST
EUR
450,867
33.08
14,916
BANIF IMOPREDIAL
EUR
2,234,114
6.55
14,622
TOTAL
I NDEX
SHOTGUN PICTURES
EUR
5,000
30.00
150
CARADOR PLC
EUR
500,000
1.00
500
CONSERVATIVE STRATEGY FUND
USD
3,000
120.39
274
BANIF PRIMUS INFRA-ESTRUTURA
BRL
359
10,000.00
1,277
EUROPEAN MONEY MARKET FUND
EUR
1,500
108.98
163
BANIF US REAL ESTATE FUND CLASS
USD
30,000
100.44
2,288
BALANCED STRATEGY FUND
USD
2,250
123.72
211
EUROPEAN BOND FUND
EUR
4,500
115.18
518
AGRESSIVE STRATEGY FUND
USD
1,500
120.22
137
EUROPEAN EQUITY FUND
EUR
1,500
104.18
156
BRASILIAN BOND FUND
USD
4,500
115.98
396
BRASILIAN EQUITY FUND
USD
1,500
243.06
277
FINE ART FUND
USD
10,000
119.83
910
BANIF PRIMUS REAL ESTATE - CLASSE B
BRL
900
11,234.61
3,596
354,403
91
Provisions changed as follows:
Description
Balance at
12-31-2005
Additions
Reinstatement
Balance at
12-31-2006
Provisions for country risk
0
487
0
487
TOTAL
0
487
0
487
Debt instruments are carried on the balance sheet at market value plus accrued interest.
Financial assets available for trading comprise a participation of 10% in the share capital of GED SUR Capital, SA,
SGECR.
I NDEX
92
Report and Acounts
8. INVESTMENTS AT CREDIT INSTITUTIONS
I NDEX
93
9. CREDIT EXTENDED TO CLIENTS
In accordance with NCA, this item consists of:
2006
2005
Other credits
10,233
1,755
Credits on current account
90,284
51,132
Overdrafts
1,545
216
Syndicated loans
2,294
2,754
Loans
1,181
443
Credit on current account
9,818
9,507
122
95
15,854
6,681
-
17
231
-
DOMESTIC LOANS
Corporate
Retail
Overdrafts
FOREIGN LOANS
Corporate
Credit on current account
Overdrafts
Retail
Other credits
OVERDUE PRINCIPAL AND INTEREST
PROVISIONS (NOTE 19)
The residual term of credit extended to clients is presented on note 31.3.
I NDEX
94
131,562
72,600
493
56
132,055
72,656
(121)
(51)
131,934
72,605
Report and Acounts
10. OTHER TANGIBLE ASSETS
The movements in the period were the following:
No revaluations were made in 2006.
I NDEX
95
11. OTHER INTANGIBLE ASSETS
Pr e v i o u s Y e a r
Change In The Year
Balance At The End Of The Year
Cat e g o r y
Gross
D e p r e c i at i o n
+ I m pa i r m e n t
Aquisitions
For The Year
Gross
+ I m pa i r m e n t
Net
I N TAN G I B L E A S S E T S
S o ft w a r e
2,951
2 ,0 57
60
On going
0
0
74 0
2,951
2 ,0 5 7
800
TOTA L
428
428
3 ,0 1 1
2 ,4 8 5
5 26
74 0
0
74 0
3 ,7 5 1
2 ,4 8 5
1, 26 6
12. INVESTMENTS IN SUBSIDIARIES, AFFILIATES AND JOINT VENTURES
I NDEX
96
Report and Acounts
13. INCOME TAXES
13.1. Deferred taxes – changes in the period
13.2. Reconciliation of normal tax rate and effective rate
Item
Rate
Value / Tax
Profit/loss befora Tax
Income Tax on a nominal base
27.50%
1,463
Revenues Art. 46
(19.04%)
(1,013)
Other
TOTAL
I NDEX
5,321
-
8.74%
15
465
97
14. OTHER ASSETS
2006
Sundry debtors
2005
2,092
2,722
-
3,000
18,230
9,544
Exchange rates to be settled
410
843
Deferred-cost expenditures
325
315
1,890
765
22,947
17,189
Receivables on the subscription of not paid up
capital (Madeira Capital)
Securities transactions to de settled
Other revenue receivable
Impairment losses on other assets (note 19)
(149)
22,798
17,189
15. FINANCIAL LIABILITIES HELD FOR TRADING
2006
Short sales
Derivative instruments with negative fair value (note 6)
I NDEX
98
2005
3,162
4,434
20,638
19,847
23,800
24,281
Report and Acounts
Short sales as of 31 December 2006 are detailed as follows:
16. FUNDING FROM OTHER CREDIT INSTITUTIONS
2006
2005
99,332
53,079
99,332
53,079
29,437
28,906
264,050
215,777
293,487
244,683
392,819
297,762
From credit institutions in Portugal
Deposits
From credit institutions abroad
Deposits
Repos
I NDEX
99
17. FUNDING FROM CLIENTS AND OTHER BORROWERS
2006
2005
DEPOSITS
Demand
Term
109,330
113,237
47,333
49,178
156,663
162,415
18. DEBT SECURITIES
On 31 December 2005, this item consists solely of Cash Bonds Banif – Banco de Investimento, S.A. – Euros Brasil
Capital Protegido, 2003/2008, an issue of 15.000.000 notes. Interest on the notes is payable semi-annually in
arrears on 30 April and 31 October of each year. The gross nominal interest is equal to 6-month Euribor of the second
business day prior to the beginning of each interest period plus 1.5%. The base rate (6-month Euribor) is capped at 3.5%
provided a credit event does not occur. The notes were redeemed earlier, at the company’s choice, on 30/04/2006.
I NDEX
100
Report and Acounts
19. PROVISIONS
Des cr ipt io n
Balance at
Additions
Reinstatement
Tr a n s f e rs
1 2-3 1-2 0 0 5
Ge n e r a l p r o v is io n f o r c r e d i t r i s k s
e m 1 2-3 1-2 0 06
812
838
Oth e r p r o v is io n s
30
200
Do ub tf ul a n d o ver d u e r e c e i v a b l e s
51
Oth e r a s s e ts
TOTA L
Balance at
220
( 94 )
1,3 3 6
113
6
(36)
121
0
157
139
131
149
8 94
1,3 0 7
365
0
1, 8 3 5
229
20. OTHER SUBORDINATED LIABILITIES
On 31 December 2006, this item relates solely to Subordinated Cash Bonds of Banif – Banco de Investimento,
S.A., an issue of 15.000 notes of 1.000 euro each. Interest rates on the notes is payable semi-annually in
arrears on 29 June and 29 December. For the first five years the rate shall be equal to the 6.month Euribor on the
second business day prior to the beginning of each interest period plus 0.875%. In case the notes are not called, the
interest rate will from the 11th coupon until maturity be equal to 6-month Euribor plus 1.15%. The notes shall be
redeemed at par on 29 June 2016 although they may, subject to the Bank of Portugal’s approval, be wholly or
partially on the 10th, 12th, 14th, 16th and 18th coupon maturity dates, with no penalties due to the prepaid amount.
Any partial repayment shall be equal to 25% or 50% of the initially issued amount and shall entail a corresponding
reduction in the nominal value of the notes.
On 31 December 2005, the other subordinated liabilities item relates solely to the issue of 7.500.000 Subordinated
Cash Bonds of Banif – Banco de Investimento, S.A., an isue of 7.500.000 notes of one Euro. Interest on these notes is
payable on a 6-monthly basis and in arrears on 29 June and 29 December. For the first coupon, interest was calculated
at the rate of 5,076%. For the first five years, the rate will be equal to the 6-month Euribor on the second business day
prior to the beginning of each interest period plus 0.75%. In case the notes are not called, the interest rate will be from
the 11th coupon (inclusive) and until maturity be equal to 6-month Euribor plus 1.15%. The loan was repaid in advance
on 29 June 2006.
I NDEX
101
21. OTHER LIABILITIES
This section has the following components:
2 0 06
Stock trades to be settled
Exchange transactions to be settled
Charges payable
O t h e r C r e d i t o rs
Other interim accounts
2005
5 ,76 9
508
-
795
1,1 8 9
1,3 1 3
827
1,1 1 5
3 ,7 5 0
4,917
1 1, 53 5
8,648
22. EQUITY TRANSACTIONS
In December the 31st of 2006 and December 31st of 2005, equity items were the following:
2005
2 0 04
3 0 ,0 0 0
3 0 ,0 0 0
R e s e r ve s a n d R e t a i n e d E a r n i n g s
2,4 2 5
1, 6 0 5
N e t I n c o m e f o r t h e Ye a r
4,856
3 ,1 2 0
3 7, 2 8 1
34,725
Capital
In 2006, the company paid out, in respect of 2005, a dividend of € 0,25 per share for a total amount of 1.500 thousand
Euros.
In 2005 the Company increased its capital in ten million euros by issuing two million new shares at a nominal value of
five euros. As of 31 December of 2006, the company’s share capital amounts to thirty million euros, evidenced by six
million shares for a nominal value of five euros a share. The share capital is fully paid up.
In 31 January of 2007 the Board of Administrators approved the proposal for distribution of 2 million Euros of the
results of 2006 to be introduced in the General Meeting of stockholders to be held on 28 March of 2007.
I NDEX
102
23. INTERESTS AND SIMILAR EARNINGS AND INTERESTS AND SIMILAR EXPENSE
I NDEX
103
Report and Acounts
24. INCOME FROM EQUITY INSTRUMENTS
2006
2005
Dividends received from Banif Gestão de Activos, S.A.
1,500
1,000
Antecipated dividends from Banif Gestão de Activos, S.A.
2,000
-
215
56
Other received dividends
3,715
1,056
25. COMISSION - BASED INCOME AND EXPENSE
I NDEX
104
26. GAINS / LOSES ON FINANCIAL TRANSACTIONS
I NDEX
105
Report and Acounts
27. OTHER RESULTS
I NDEX
106
28. PAYROLL COSTS
The company and its employees pay into a contributory pension scheme that confers individual rights.
I NDEX
107
Report and Acounts
29. OVERHEAD COSTS
2006
2005
2,893
2,518
Leases
632
524
Communications
228
228
46
67
Advertising and publications
545
761
Water, energy and fuel
138
115
Travel and expense account
740
728
Other services from third parties
226
750
5,448
5,691
Specialist services
Mayntenance and repair
I NDEX
108
30. EARNINGS PER SHARE
Basic earnings per share:
Description
12-31-2006
12-31-2005
Net income for the year (in euros)
4,855,623
3,120,280
Weighted-average number of ordinary shares outstanding
6,000,000
4,279,452
0.81
0.73
Earning per share (in euros)
31. RISKS FROM FINANCIAL INSTRUMENTS
31.1. Risk management policies
The risks inherent to the activity of the Bank are monitored through permanent identification, measurement and
evaluation processes of its exposition and are object of regulation based on policies of control limits approved by the
Board of Directors.
Group risk policies are issued by the Board of Directors and their implementation and control are the responsibility
of several bodies set up for that purpose at the various operating entities. Policies for the management and control of
risks are generally formulated for the whole Group, although the specific positioning and operations of each entity are
taken into account.
In this context, it is the purpose of the Banks’ Risk Management Board to measure, evaluate and control, autonomously
and independently, the risks of the activity.
Risk control has as its purpose to continuously ensure the identification and evaluation of uncertainty sources
associated to the cash-flows and their results in such a way to allow a management decision based on the duality
risk-profit and to insure the control of accomplishing the planned goals.
Banif Group has been developing a number of projects encompassing credit, market and operational risks on the one
hand to ensure compliance with the Basle Accord and on the other in order to adopt the best market practices in terms
of risk management and control.
I NDEX
109
Report and Acounts
a) Credit Risk
Credit risk derives from the company’s bond portfolio and lending operations. Credit extended to clients is, as a rule,
linked or complementary to investment banking business such as corporate finance, capital markets, brokerage, etc.).
The majority of lending transactions with clients is collateralised either by pledged securities and/or mortgaged property. A software application developed internally allows for the control of the clients’ positions and provides the
necessary alerts for the requirement of additional margins or the granting of the warranties.
During the year of 2006 the work of adaptation to the new Basel Accord, started in 2003, was still underway,
involving changes to the computer systems and to the main databases of business support information as well as the
development of the centralisation process and rationing of the data repositories for information management.
b) Market Risks
The market risk derives from the potential value variation of a financial asset as a result of unanticipated variations
of the market variables like interest and exchange rates, capital bond, precious metals and goods prices.
The main risk types the Bank is subject to are: interest rates risk, exchange risk and stock market price risk.
A prudent policy in the management of market risks was maintained through the management bodies’ revision and
optimisation of their limits. Their activity was based, in this respect, on the issuing of performance and control norms
properly regulated by internal and supervision regulations.
The strategy and policies in regards to the management of these risks are emitted by the Board of Directors. It is the
function of the Risk Management Board to monitor their upholding, to measure and control the exposure generated and
to report, daily, the pertinent information.
During this year, a search was ensued for the selection of an alternative in terms of information technology, which
would provide an answer to the timely identified needs in regards to market risk management. This process was
concluded in the last trimester with the acquisition of a software application which integrates solutions on a front and
back-office platforms level which includes a risk management module. The first software installation work was begun
at the end of the year as well as the first developments in terms of configuration of the acquired system.
c) Structural Balance Sheet Risks
The structural balance sheet risk is evaluated periodically in function of the repricing deadlines for the assets and
liabilities. In the financial year the risk was maintained within the stress limits approved by the management. Interest
rates sensitivity analyses are regularly conducted in order to ascertain likely impacts on both the financial margin and
equity position according to the Bank of International Septlements (BIS) guidelines.
Structural liquidity is adjusted as gaps are identified in the quantitative and term relationship between commitments
and funding. Sound policies have secured stable funding from both clients and the market, which has kept both the
liquidity and cumulative GAPS within the preset bounds for the several periods.
I NDEX
110
d) Operational risk
The Banif Group approved a directory plan which, after considering the several scenarios faced by the approaches
projected, intends to provide this universe with the means and structure necessary to the implementation of an
operational risk management strategy which proves adequate to its size and activity.
This directory plan includes the specification of a work schedule, the identification of the actions and resources to
allocate in order to comply with the demands of the new Basel Accord and the desirable adoption of the best market
practices
Within this scope of the operational risk a governance model was selected for the Group’s operational risk was
already selected. A set of identification instruments for the operational risk were developed and applied to the
pilot areas previously identified. The functional model for collection of operational risk events, either qualitative or
quantitative was initiated.
31.2. Interest rate risk
The following table breaks down financial assets and liabilities by interest rate resetting date:
I NDEX
111
31.3. Credit Risk
Credit risk concentrations:
I NDEX
112
Report and Acounts
31.4. Liquidity risk
Risk concentration by maturity date:
I NDEX
113
32. FAIR VALUE OF FINANCIAL INSTRUMENTS
For loans shorter than one year, the value recorded on the balance sheet was considered to be a reliable
approximation to fair value. This was also the case for indexed loans maturing after one year which are otherwise not
materially relevant.
For deposits maturing in less than one year or with no defined maturity, including those that do not pay interest, it was
considered that the amount due on reporting date was a reliable approximation to fair value.
I NDEX
114
Report and Acounts
33. BALANCES AND TRANSACTIONS WITH AFFILIATES
Description
Affiliates
Cash and deposits at credit institutions
21,771
Deposits at credit institutions
114,105
Funding from companies and consumers
12,022
Commission-based expense
Commission-based income
653
1,773
Transactions with affiliates are treated using the criteria that are applied to comparable transactions under normal
market conditions. In 2005, no specific provisions were made for balances with affiliates.
I NDEX
115
34. EVENTS AFTER BALANCE DATE
Upon the approval of the accounts by the company’s board of directors, no event had ccurred after 31 December 2006
that warranted any adjustments or modifications of the value f any asset or liability.
The Registered Accountant
I NDEX
116
The Board of Directors
Report and Acounts
I NDEX
Notes To The Financial Statements 2006 And 2005
BANIF BANCO DE INVESTIMENTO, S.A. and SUBSIDIARIES
Report and Acounts
(Amounts in Thousand Euros – t€)
2. BASES FOR THE PRESENTATION OF ACCOUNTS AND MAIN ACCOUNTING PRINCIPLES
2.1. Bases for the presentation of accounts
The company’s consolidated accounts were prepared for the first time in accordance with the International Financial
Reporting Standards (IAS/IFRS) as adopted by the European Union in Regulation No. 1606/02. The disclosures
required by IFRS 1 – First-time adoption of International Financial Reporting Standards (IFRS) are presented
in Note 35.
The financial statements were prepared on the basis of historical cost except for the revaluation of property and
financial instruments. The main accounting principles used by the Group are presented below. The International
Financial Reporting Standards as adopted by the European Union differ from the full-sized IAS/IFRS version published
by the International Accounting Standards Board (IASB) regarding hedge accounting as provided in IAS 39 - Financial
instruments: recognition and measurement.
The financial statements were prepared on the basis of historical cost except for the revaluation of financial
instruments. The main accounting principles are presented below.
2.2. Comparable Information
In order to ensure comparability with the 2005 financial statements that were prepared in accordance with CSB,
the Portugues banking system’s accounting plan, conversions to IAS/IFRS are presented on comparable information.
The NCA are based on IAS/IFRS as adopted by the European Union, except for the following areas:
n
Measurement and provisioning of extended credit;
n
Deletion of the fair value option for the valuation of tangible assets
2.3. Consolidation Principles
The consolidated financial statements include the accounts of Banif – Banco de Investimento, S.A. and the entities
it controls, its subsidiaries. Control is considered to exist when an entity has the power to govern the financial and
operating policies of an enterprise so as to obtain benefits from its activities. This usually occurs when the entity holds
at least 50% of the voting rights of the enterprise.
Whenever applicable, the accounts of the subsidiaries are adjusted to reflect the accounting principles used by Banif
– Banco de Investimento, S.A..
All significant balances and transactions between group companies are eliminated in the consolidation process.
The value corresponding to third parties’ equity holdings in the subsidiaries is presented in the Minority interests item
under Shareholders’ equity.
I NDEX
118
2.4. Investments in associates
These are investments in non-subsidiary entities where the Group has significant influence, defined as a situation
where the parent has, directly or indirectly, more than 20% of the voting rights.
Investments in associates are recorded according to the equity method. The investment is initially recorded at
acquisition cost and is increased or decreased by the recognised subsequent changes in the owned share of the
equity. In this way, goodwill from the acquisition is reflected in the value of the investment and is subject to impairment
testing as part of the investment value. Negative goodwill is promptly recognised through profit and loss.
Following the procedure used for the subsidiaries, the accounts of the associates are adjusted, whenever applicable,
to reflect the accounting principles used by the Group.
Investments in associates are recorded at acquisition cost deduced from eventual losses for imparity.
2.5. Cash and Cash Equivalents
For cash flow statement purposes, cash and cash equivalents include cash on hand, demand deposits at central banks
and other domestic and foreign banks, in domestic and foreign currency.
2.6. Transactions in foreign currency
Transactions in foreign currency are recorded on the basis of the exchange rates traded on the date of the transaction.
Monetary assets and liabilities that are expressed in foreign currency are converted to Euros at the exchange rate on
the balance date. Non-monetary items carried at fair value are converted on the basis of the exchange rate on the latest
valuation date. Non-monetary items carried at historical value are converted at the original exchange rate.
Exchange differences are recognised on the income statement as gains or losses for the period, except for those
arising from non- -monetary financial instruments classified as available for sale, which are recorded against an equity
item until they are sold.
I NDEX
119
Report and Acounts
2.7. Use of estimates in the preparation of the Financial Statements
Preparation of the financial statements requires that estimates and assumptions should be made by the company’s
management. These affect the valuation of assets and liabilities, revenue and costs as well as disclosed contingent
liabilities. In the process, management exercised its best judgement and used the information available on the date
of preparation of the financial statements. Consequently, future values might differ from estimated values.
The most significant situations regarding the use of estimates are the following:
Fair Value of financial instruments
When the fair values of the financial instruments cannot be determined through quotation (marked to market) in the
assets market, they are determined by using valuation techniques that include mathematical models (marked to model).
The input data used on these models is, whenever possible, data that can be observed in the market. When this is not
possible, a degree of judgement is required to establish the fair values, namely in terms of liquidity, correlation and
volatility.
Losses for impairment in credits extended to clients
Credits extended to clients in an overdue position and with significant total liabilities are subject to an individual
analysis to evaluate the need of recording impairment losses. The said analysis allows estimating future amount
and term of the flows, and is based in assumptions regarding several factors that may change in the future, altering
the impairment amounts. In addition, a global impairment analysis is also performed by credit segments with similar
features and risks, as well as some losses for impairment based on losses historic behaviour for the same kind
of assets.
Impairment of capital instruments
Financial assets available for sale are considered impaired when a significant and prolonged decline in their fair
value, below cost price, is apparent or when there is another objective evidence of impairment. A level of decline
considered “significant and prolonged” requires judgment. Within this context the Company established as significant and
prolonged a decline in fair value of a capital instrument equal to or over 20% for a 6 months period. Additionally, other
factors are evaluated such as the volatility behavior of assets prices.
I NDEX
120
Assets through deferred taxes
Assets through deferred taxes are recognized for unused tax losses in extend of probable positive tax
results within the future legally established timeframe. For this effect judgments are made to determine the amount of
deferred tax assets that can be recognized based on the level of future expected tax results.
Assets for deferred taxes
Assets for deferred taxes are recognized for unused tax losses, in extend of the probable positive tax
results within the future determined timeframe. For that purpose, considerations are made to determine the amount
of deferred active taxes that may be recognised, based on the future expected tax results.
2.8. Financial instruments
2.8.1. Recognition and initial measurement of financial instruments
The purchase and sale of financial assets implying the delivery of assets within the established timeframe, according
to market regulations or conventions in force, are recognised on the date of trading, that is to say, on the date of the
purchase or sale commitment. Derivative financial instruments are also recognised on the date of trading.
Classification of financial instruments on the date of initial recognition depends on their features and
acquisition intent. All financial instruments are initially measured at fair value plus accrued costs directly attributed to
the purchase or emission, except for the caso of assets and liabilities at fair value through earnings and losses, where
the said costs are directly recognised in the profit and loss.
I NDEX
121
Report and Acounts
2.8.2. Subsequent measurement of financial instruments
Financial assets held for trading
Financial assets held for trading are those acquired for the purpose of being sold on a short-term and generating a
profit from fluctuations in price or dealer’s margin, including derivative financial instruments not classified as hedges;
After initial recognition, gains and losses generated by the subsequent measurement of fair value are reflected in the
year’s profit and loss. Derivatives’ positive fair values are recorded under assets and the negative fair values under
liabilities. Interests’ expenses and dividends are recognised in the respective profit and loss accounts when the right
to its payment or receipt is established.
Financial liabilities for trading also include securities short sales. These operations are included in the balance sheet
at their fair value, with the subsequent fair value variations reflected in the year’s profit and loss under the item Profit
and Loss of the assets and liabilities evaluated at fair value through results.
Financial assets and liabilities at fair value through profit and loss
These items include financial assets and liabilities irrevocably designated at inception as at fair value through profit and
loss, according to the option provided in IAS39; as long as the necessary conditions for their recognition have been
satisfied, namely:
1. The designation eliminates or significantly reduces inconsistencies in the financial assets and liabilities
measurement and recognition of the gains or losses (accounting mismatch);
2. The financial assets and liabilities are part of a group of managed assets or liabilities, or both, being their
performance evaluated on a fair value basis, according to a documented risk management or investment strategy; or
3. The financial instrument contains one or more embedded derivatives, except when the embedded derivatives do
not significantly modify the associated cash flows or when it is clear, with little or no analysis, that separation of the
embedded derivatives inherent to the contract is prohibited.
After initial recognition, gains and losses generated by the subsequent measurement of the financial assets and
liabilities fair value are reflected in the year’s profit and loss under the item Profit and Loss of the assets and liabilities
evaluated at fair value through results.
I NDEX
122
Financial assets available for sale
Financial assets available for sale include those instruments that have not been classified otherwise and that may be
sold in response to or anticipation of liquidity requirements, interest, exchange rate or market price changes.
On initial recognition these assets are subsequently measured at fair value or, in case its fair value can not be
reliably calculated, by maintaining the acquisition costs. The respective gains and losses are reflected under the item
Revaluation Reserves until their sale (or until recognition of losses through impairment), at which point the
accumulated value is transferred from the year’s profit and loss to Profit and losses of financial assets available for
sale.
An analysis is made of the evidence of losses through impairment in financial assets available for sale on each
reference date of the financial statements. Losses through impairment are recognised as profit and loss under the item
Impairment of other financial assets net of reversions and recoveries.
Applications in other Credit Institutions and Credit extended to Clients
These items include applications made with credit institutions as well as credit extended to clients of the Company.
These applications are unlisted financial assets with fixed or determinable payments that are not acquired for sale in
the near term, i.e. held for trading, or otherwise classified on initial recognition, by exercise of the fair value option,
as financial assets at fair value through profit or loss.
On the initial recognition, usually made at the paid value including all the transaction costs and commissions charged,
other than commissions for the provision of services (if any), these assets are measured at their amortised cost, using
the effective tax method, and subject to impairment tests.
The amortised cost is calculated considering the accounting revenues or charges directly linked to the asset
origination to the asset as part of the effective interest rate. Amortisation is recognized under Interest and similar
income. Impairment losses are recognised under Credit impairment net of reversals and recoveries.
Loans or accounts receivable are only written off when there is not a realistic expectation for their recovery, even
through their collaterals.
I NDEX
123
Report and Acounts
Funding from other credit institutions, funding from clients and other borrowers, debt securities
and other subordinated liabilities
The remaining financial liabilities, which primarily include funds borrowed from credit institutions, deposits from
clients or debt issued not designated as financial liabilities at fair value through results, with its contractual terms
resulting on the delivery obligation to the fund or to the financial assets’ owner, are initially valued at fair value,
which usually corresponds to the proceeds net of any direct transaction costs (if any) and subsequently valued at their
amortised cost in accordance with the effective rate method and recognised in the Interest and similar income item.
Repos
Repos are sales of financial assets providing for the repurchase of the sold asset on a future date. The relationship
between the sales proceeds, or funding and the repurchase price of the asset implies an interest rate called the repo
rate. The value of the funding is recorded under the item Funds from other credit institutions and interest expense
is recognised according to the matching principle. The assets remain in the lender’s custody as guarantee for the
funding.
Fair value
Fair value as used in the valuation of financial assets at fair value through profit or loss and financial assets available
for sale is determined according to the following criteria:
n
In the case of instruments traded on active markets, fair value is determined on the basis of the closing price, the
price of the last trade or the value of the last known bid;
n
In the case of assets that are not traded on active markets, fair value is determined by valuation techniques such
as the recent pricing of comparable instruments or valuation methods used by markets such as discounted cash flow
(DCF) and option valuation models;
Variable-income assets such as common stock and derivative instruments whose underlying assets are
variable-income assets, for which reliable valuations are not possible to obtain, are carried at acquisition cost,
adjusted for impairment losses, if any.
I NDEX
124
Impairment
The company performs quarterly tests financial assets to determine impairment evidence in an asset or group of
assets. A financial asset is impaired if, and only if, there is evidence that an event or events will have a measurable
impact on the expected future cash flows from that asset or group of assets. Expected losses as a result of future
events, irrespective of their likelihood, are not recognised. The Company uses the impairment model defined by the
Banif Group.
Impairment evidence for an asset or a group of assets defined by the Group takes into account the following loss
events:
n
Overdue credits for less than 90 days;
n
Restructured credits caused by deterioration of borrowers’ capacity, with the following cumulative features:
i) a payment schedule or conditions differing from the original ones;
ii) the credit being overdue for at least 90 days, on the date of the last change made to the original conditions;
iii) the last change made to the original conditions made for, at least, one year.
The Company performs an individual analysis of credits extended to clients with an objective evidence of impairment,
regarding clients with significant total liabilities.
For losses suffered by the Society for impairment in credits subject to individual analysis, the loss amount
is determined by the difference between the value of the said assets and the current value of their estimated future
cash flows, excluding futures impairment losses not incurred, deducted to the original interest rate of the financial
asset or assets. Assets accounting value is reduced by the use of a profit and losses account for impairment and
recognised under the item Impairment of credit assets net of reversions and recoveries.
For credits with a variable interest rate, the discount rate used to determine any loss for impairment is the current
interest rate determined under the contract.
The remaining credits are covered by the global analysis performed to segments with similar features and risks.
Following the conceptual impairment model used by the Group, the global analysis of financial assets implies
the estimate of future cash flows for that group to be based on its assets contractual flows. Historic data analysis
regarding losses is based in assets with features similar to the ones of the said group of assets.
I NDEX
125
Report and Acounts
Whenever the Group feels necessary, historic data shall be updated base on current observable data in order to reflect
the effect of current conditions.
If, during a subsequent period, there is a decrease on losses for impairment attributed to a determined event, the
amount previously recognised is reverted by adjustment of the losses for impairment account. The reverted amount is
directly recognised on the financial statements under the same item.
These assets interests remain recognised on the deducted amount of the Balance Sheet based on original effective
rate.
Derivatives
In its current activity, the Company uses some derivative financial instruments both to satisfy their clients’ needs
and to manage their own interest rate or other market risks. These instruments involve variable degrees of credit
risk (maximum potential accounting loss due to a possible non-compliance by the counterparts of the respective
contractual obligations) and market risks (maximum potential loss due to value changes of financial instruments
as a result of variations in the interest rates, foreign exchange and NSC).
The national amounts of derivative transactions are used to calculate the flows to be exchanged in contractual terms,
in possibly net terms, and although they constitute the most common volume measurement of these markets, they do
not correspond to any quantification of credit or market risk for the respective transactions. In the caso of interest
and exchange rate derivatives, credit risk is measured according to the replacement cost at current market prices
of the contracts where a potential gaining position is held (positive market value) should one of the parties enter into
default.
Derivatives that are embedded in other financial instruments are separated from the host instrument whenever their
risks and features are not closely related to the host contract and the whole contract is not recorded at fair value
through profit or loss.
Derivative instruments that are used for managing exposure to financial and market risks are accounted for
in accordance with IAS 39 in case they fulfil eligibility criteria, namely such instruments that hedge fair-value items.
On the contrary, derivatives are considered by their fair value as financial negotiable assets or liabilities, depending on
its fair respective positive or negative fair value.
I NDEX
126
In the designation of a hedging operation, the relation between the hedging and the hedged element is formally
documented, namely in what regards:
n
The nature of the underlying risk(s) and the hedging strategy according to the Company’s risk policies;
n
Description of the financial hedging and hedged instruments;
n
Evaluation method of the hedging effectiveness and performance frequency.
Regular analyses are carried out for hedging derivatives and the actual performance achieved with the hedge relation,
namely by comparing the variation in the fair value of the hedging instrument and the hedged item, caused by hedged
risk.
The results obtained from derivative hedging instruments are recorded in the year’s profit and losses, as well as the
ones of the derivative trading instruments, should the efficiency test results be within the parameters defined in IAS
93 (80%-125%).
Results of the subsequent measurement of fair value are recognised in the year’s profit and loss together with the
measurement results at fair value of the hedged instrument under “Results of assets and liabilities evaluated at fair
value through profit and loss”.
Derivatives have been used by the Company mainly for hedging derivative transactions with clients: OTC derivatives
are contracted (cross currency swap, interest rate swap, equity swap, etc.) with clients whose risk is hedged with
back-to-back transactions with counterparts in the market.
There are no hedging transactions reflected in the financial statements as all the existing derivative instruments were
either classified for trading because they did not meet the IAS 93 hedging accounting requirements or are linked
to liabilities designated to fair value through results. Consequently, all derivatives are registered under assets and
liabilities available for trading.
I NDEX
127
Report and Acounts
2.8.3. Derecognition of financial assets and liabilities
Financial assets
A financial asset (or when applicable, part of a financial asset or part of a group of financial assets) is derecognized
when:
1. the assets cash collection rights expire; or
2. the cash collection rights have been transferred or has been assumed the obligation to make full pay-out, without a
significant delay, to third parties under a a pass-through agreement; and
3. the asset’s risks and benefits were substantially transferred, or when the control over the asset was transferred but
the risks and benefits were not transferred or retained.
Financial Liabilities
Financial liabilities are derecognised when the underlying obligation expires or is cancelled. When an existing financial
liability is replaced by another and is the same debtor in substantially different or altered terms from those initially
agreed, the said replacement or alteration is treated as a derecognition of the original liability and as a recognition of a
new liability, and any difference between the corresponding values is reflected in the annual results.
2.9. Other tangible fixed assets
The Tangible fixed assets item includes the company’ own premises as well as vehicles and other equipment.
Property used by the company for its operations abroad is classified as own premises. These are recorded at historical
value less accumulated depreciation and revalued according to the legal regulations in force.
The remaining tangible fixed assets are recorded at cost less accumulated depreciation. Repair, maintenance and other
costs incurred in the use of these assets are recognised as costs as they occur.
I NDEX
128
Tangible assets are depreciated on a straight-line basis in accordance with the provisions of Aviso no 9/94 as follows:
Property
[ 3-20 ] years
Vehicles
4 years
Other equipment
[ 3-10 ] years
2.10. Intangible assets
Intangible assets, primarily computer software, are recorded at acquisition cost less accumulated depreciation and
impairment losses. The assets are depreciated on a straight-line basis over their estimated economic life, which is
usually 3 years.
Intangible assets may include capitalised internal expenditure, particularly incurred by in-house software development.
For this purpose, expenditure is not capitalised until the requirements of IAS 38 are met, namely those related to the
development stage.
I NDEX
129
Report and Acounts
2.11. Income taxes
Income tax expense equals the sum of current and deferred tax.
Current tax is calculated according to the rates applicable in the jurisdictions where the company operates.
The company also records as deferred-tax liabilities or assets those amounts recognised as tax payable or
recoverable in the future resulting from temporary taxable or deductible differences, namely those related to
(i) provisions that are temporarily not deductible for tax purposes, (ii) the revaluation of securities and derivatives that
are not taxed until they are sold, (iii) the taxation of pension liabilities and other employee benefits and (iv) capital gains
that are not taxable if reinvested.
Deferred-tax assets and liabilities are calculated and valued on an annual basis using tax rates anticipated to be in
force when the temporary differences are expected to be reversed. These shall correspond to the approved rates or
those deemed to be approved on balance date.
Deferred-tax liabilities are always recorded. Deferred-tax assets are recorded only to the extent they are likely to
materialise through the existence of future taxable profits.
Incomes taxes are charged to profit and loss.
2.12. Provisions and contingent liabilities
A provision is recognised when (i) there is a present (legal or constructive) obligation as a result of past events,
(ii) it is probable that an outflow of economic benefits will be required to settle the obligation and (iii) a reliable estimate
can be made of the amount of the obligation at the balance sheet date.
If the future expenditure is unlikely to materialise, the liability is considered to be contingent. Contingent liabilities have
to be disclosed unless there is only a remote probability that they will materialise.
I NDEX
130
2.13. Income and prepayments recognition
In general, income and prepayments are recognised for the period that the transactions are in force in accordance with
the earnings basis accounting principle, that is to say, they are registered as they are generated, irrespective of the
period in which they are received or realised. Income is recognised when it is probable that the economic benefits of
the transaction will be for the Group and the amount retained can be reliably measured.
For financial instruments measured at the amortised cost and for financial instruments classified as “Financial Assets
available for sale”, the interest rates are recognised using the average rate method that corresponds to the rate that
discounts the exact sum of receivables or future cash payments until maturity or until the next repricing date, for the
net amount currently registered of the financial assets or liabilities. When the average interest rate is calculated, future
cash flows are estimated based on the contractual terms and conditions and on the remaining income and costs directly
assigned to the contracts.
2.14. Commissions for the provision of services
The company charges commission to its clients for the provision of a broad range of services either on a continued
basis for which the company charges periodic commissions or on a one-off basis for significant stand-alone
transactions.
Commissions charged for services that are performed for a certain period are recognised along that period.
Commissions that are related to a significant stand-alone transaction are recognised when the transaction occurs.
2.15. Dividends
Dividends obtained are recognised when their right of receipt is established.
Dividends distributed to the stockholders are recognised as liabilities and are deducted on the Capital item when
approved by the stockholders.
Dividends approved by the Board of Directors after the financial statements reference date, are published in the
Financial Statements Notes (Note 23)
I NDEX
131
Report and Acounts
3. SEGMENTED REPORTING
The company’s segmented reporting for 2005 is primarily done by business area. The business areas are: Corporate
Finance, Trading and Sales, Brokerage, Retail banking, Commercial banking, Payments and Septlements, Custody,
Asset Management and Other (the residual item).
Secondarily, reporting is made by geographical area in which the company operates.
3.1. Business Segments
I NDEX
132
3.2. Geographic Segments
I NDEX
133
Report and Acounts
4. CASH AND CASH EQUIVALENTS AT CENTRAL BANKS
5. CASH AND CASH EQUIVALENTS AT OTHER CREDIT INSTITUTIONS
I NDEX
134
6. FINANCIAL ASSETS HELD FOR TRADING
Securities Portfolio
Derivative isntruments with positive value
2006
2005
29,278
23,842
4,391
19,944
53,120
24,335
This item is composed of derivative instruments that have been totally classified as held for trading. The negative fair
value corresponds to the derivative registered in the financial liabilities held for trading (Note 16).
I NDEX
135
Report and Acounts
Derivative Financial Instruments as at 31 de December 2006 and 2005
I NDEX
136
Securities Portfolio on 31 December 2006:
I NDEX
137
Report and Acounts
7. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH RESULTS
I NDEX
138
I NDEX
139
Report and Acounts
Debt instruments are carried on the balance sheet at market value plus accrued interest.
I NDEX
140
8. FINANCIAL INSTRUMENTS AVAILABLE FOR SALE
This item consists of the following on 31 December 2006:
9. INVESTMENTS AT CREDIT INSTITUTIONS
This item consists of the following on 31 December 2006:
I NDEX
141
Report and Acounts
10. CREDIT EXTENDED TO CLIENTS
The residual term of credit extended to clients is presented on note 32.4.
I NDEX
142
11. OTHER TANGIBLE ASSETS
No revaluations were made in 2006.
12. OTHER INTANGIBLE ASSETS
I NDEX
143
Report and Acounts
13. INVESTMENTS IN SUBSIDIARIES, AFFILIATES AND JOINT VENTURES
14. INCOME TAXES
14.1. Deferred taxes – changes in the period
I NDEX
144
14.2. Current tax assets
15. OTHER ASSETS
I NDEX
145
Report and Acounts
16. FINANCIAL LIABILITIES HELD FOR TRADING
Short sales as of 31 December 2006 are detailed as follows:
I NDEX
146
17. FUNDING FROM OTHER CREDIT INSTITUTIONS
18. FUNDING FROM CLIENTS AND OTHER BORROWERS
I NDEX
147
Report and Acounts
19. DEBT SECURITIES
On 31 December 2006, this item consists solely of Cash Bonds Banif – Banco de Investimento, S.A. – Euros Brasil
Capital Protegido, 2003/2008, an issue of 15.000.000 notes. Interest on the notes is payable semi-annually in
arrears on 30 April and 31 October of each year. The gross nominal interest is equal to 6-month Euribor of the second
business day prior to the beginning of each interest period plus 1.5%. The base rate (6-month Euribor) is capped at 3.5%
provided a credit event does not occur. The notes were redeemed earlier, at the company’s choice, on 30/04/2006.
20. IMAPAIRMENT
The movements in this item in 2006 were the following:
On 1 January 2006, the “IAS/IFRS” value adjustment shown on the impairment movements table corresponds to
the difference between the provisions on credit value, according to Banco de Portugal notification no. 3/95 and the
impairment value of credit granted.
I NDEX
148
21. OTHER SUBORDINATED LIABILITIES
On 31 December 2006, this item relates solely to Subordinated Cash Bonds of Banif – Banco de Investimento,
S.A., variable rate 2006/2016, an issue of 15.000 notes of 1.000 euro each. Interest rates on the notes is payable
semi-annually in arrears on 29 June and 29 December. For the first five years the rate shall be equal to the 6.month
Euribor on the second business day prior to the beginning of each interest period plus 0.875%. In case the notes are
not called, the interest rate will from the 11th coupon until maturity be equal to 6-month Euribor plus 1.15%. The notes
shall be redeemed at par on 29 June 2016 although they may, subject to the Bank of Portugal’s approval, be wholly
or partially on the 10th, 12th, 14th, 16th and 18th coupon maturity dates, with no penalties due to the prepaid amount.
Any partial repayment shall be equal to 25% or 50% of the initially issued amount and shall entail a corresponding
reduction in the nominal value of the notes.
On 31 December 2005, the other subordinated liabilities item relates solely to the an issue of 7.500.000 Subordinated
Cash Bonds of Banif – Banco de Investimento, S.A., variable rate 2001/2011 – 1st Issue, an issue of 7.500.000 notes of
one Euro. Interest on these notes is payable on a 6-monthly basis and in arrears on 29 June and 29 December. For the
first coupon, interest was calculated at the rate of 5,076%. For the first five years, the rate will be equal to the 6-month
Euribor on the second business day prior to the beginning of each interest period plus 0.75%. In case the notes are not
called, the interest rate will be from the 11th coupon (inclusive) and until maturity being equal to 6-month Euribor plus
1.15%. The loan was repaid in advance on 29 June 2006.
22. OTHER LIABILITIES
This section has the following components:
I NDEX
149
Report and Acounts
23. EQUITY TRANSACTIONS
In December the 31st of 2006 and December 31st of 2005, equity items were the following:
In 2006, the company paid out, in respect of 2005, a dividend of 0,3(3) per share for a total of 2.000 thousand Euros.
Banif Gestão de Activos, S.A. distributed dividends, in respect of 2005, of € 3,75 a share for a total of 1.500 thousand
Euros.
In 2005 the Company increased its capital in ten million euros by issuing two million new shares at a nominal value of
five euros. As of 31 December of 2006, the company’s share capital amounts to thirty million euros, evidenced by six
million shares for a nominal value of five euros a share. The share capital is fully paid up.
In 31 January of 2007 the Board of Administrators approved the proposal for distribution of 2 million Euros of the
results of 2006 to be introduced in the General Meeting of stockholders to be held on 28 March of 2007.
In 31 December of 2006 and 31 December of 2005 the item of Minority Interests had the following composition:
I NDEX
150
In 31 December of 2006 and 31 December of 2005, the contribution of each Company for the net income
was the following:
I NDEX
151
Report and Acounts
24. INTERESTS AND SIMILAR EARNINGS AND INTERESTS AND SIMILAR EXPENSE
25. INCOME FROM EQUITY INSTRUMENTS
I NDEX
152
26. COMMISSION - BASED INCOME AND EXPENSE
27. GAINS / LOSES ON FINANCIAL TRANSACTIONS
I NDEX
153
Report and Acounts
28. OTHER RESULTS
I NDEX
154
29. PAYROLL COSTS
The company and its employees pay into a contributory pension scheme that confers individual rights.
I NDEX
155
Report and Acounts
30. OVERHEAD COSTS
31. EARNINGS PER SHARE
Basic earnings per share:
I NDEX
156
32. RISKS FROM FINANCIAL INSTRUMENTS
32.1. Risk management policies
The risks inherent to the activity of the Bank are monitored through permanent identification, measurement and
evaluation processes of its exposition and are object of regulation based on policies of control limits approved by the
Board of Directors.
Group risk policies are issued by the Board of Directors and their implementation and control are the responsibility of
several bodies set up for that purpose at the various operating entities.
Policies for the management and control of risks are generally formulated for the whole Group, although the specific
positioning and operations of each entity are taken into account.
In this context, it is the purpose of the Banks’ Risk Management Board to measure, evaluate and control, autonomously
and independently, the risks of the activity.
Risk control has as its purpose to continuously ensure the identification and evaluation of uncertainty sources
associated to the cash-flows and their results in such a way to allow a management decision based on the duality
risk-profit and to insure the control of accomplishing the planned goals.
Banif Group has been developing a number of projects encompassing credit, market and operational risks on the one
hand to ensure compliance with the Basle Accord and on the other in order to adopt the best market practices in terms
of risk management and control.
a) Credit Risk
Credit risk derives from the company’s bond portfolio and lending operations. Credit extended to clients is, as a rule,
linked or complementary to investment banking business such as corporate finance, capital markets, brokerage, etc.).
The majority of lending transactions with clients is collateralised either by pledged securities and/or mortgaged
property. A software application developed internally allows for the control of the clients’ positions and provides the
necessary alerts for the requirement of additional margins or the granting of the warranties.
During the year of 2006 the work of adaptation to the new Basel Accord, started in 2003, was still underway,
involving changes to the computer systems and to the main databases of business support information as well as the
development of the centralisation process and rationing of the data repositories for information management.
I NDEX
157
Report and Acounts
b) Market Risks
The market risk derives from the potential value variation of a financial asset as a result of unanticipated variations of
the market variables like interest and exchange rates, capital bond, precious metals and goods prices.
The main risk types the Bank is subject to are: interest rates risk, exchange risk and stock market price risk.
A prudent policy in the management of market risks was maintained through the management bodies’ revision and
optimisation of their limits. Their activity was based, in this respect, on the issuing of performance and control norms
properly regulated by internal and supervision regulations.
The strategy and policies in regards to the management of these risks are emitted by the Board of Directors. It is the
function of the Risk Management Board to monitor their upholding, to measure and control the exposure generated and
to report, daily, the pertinent information.
During this year, a search was ensued for the selection of an alternative in terms of information technology, which
would provide an answer to the timely identified needs in regards to market risk management. This process was
concluded in the last trimester with the acquisition of a software application which integrates solutions on a front and
back-office platforms level which includes a risk management module. The first software installation work was begun
at the end of the year as well as the first developments in terms of configuration of the acquired system.
c) Structural Balance Sheet Risks
The structural balance sheet risk is evaluated periodically in function of the repricing deadlines for the assets and
liabilities. In the financial year the risk was maintained within the stress limits approved by the management. Interest
rates sensitivity analyses are regularly conducted in order to ascertain likely impacts on both the financial margin and
equity position according to the Bank of International Septlements (BIS) guidelines.
Structural liquidity is adjusted as gaps are identified in the quantitative and term relationship between commitments
and funding. Sound policies have secured stable funding from both clients and the market, which has kept both the
liquidity and cumulative GAPS within the preset bounds for the several periods.
I NDEX
158
d) Operational Risk
The Banif Group approved a directory plan which, after considering the several scenarios faced by the approaches
projected, intends to provide this universe with the means and structure necessary to the implementation of an
operational risk management strategy which proves adequate to its size and activity.
This directory plan includes the specification of a work schedule, the identification of the actions and resources to
allocate in order to comply with the demands of the new Basel Accord and the desirable adoption of the best market
practices
Within this scope of the operational risk a governance model was selected for the Group’s operational risk was already
selected. A set of identification instruments for the operational risk were developed and applied to the pilot areas
previously identified. The functional model for collection of operational risk events, either qualitative or quantitative
was initiated.
32.2. Interest rate risk
The following table breaks down financial assets and liabilities by interest rate resetting date:
I NDEX
159
Report and Acounts
32.3. Credit Risk
Credit risk concentrations:
I NDEX
160
32.4. Liquidity risk
Risk concentration by maturity date:
I NDEX
161
Report and Acounts
33. FAIR VALUE OF FINANCIAL INSTRUMENTS
For loans shorter than one year, the value recorded on the balance sheet was considered to be a reliable
approximation to fair value. This was also the case for indexed loans maturing after one year which are otherwise not
materially relevant.
For deposits maturing in less than one year or with no defined maturity, including those that do not pay interest, it was
considered that the amount due on reporting date was a reliable approximation to fair value.
I NDEX
162
34. BALANCES AND TRANSACTIONS WITH AFFILIATES
Transactions with affiliates are treated using the criteria that are applied to comparable transactions under normal
market conditions.
In 2005, no specific provisions were made for balances with affiliates.
35. RECONCILIATION OF PROFIT AND LOSS AND EQUITY BETWEEN IAS/IFRS AND PCSB,
THE BANKING SYSTEM’S ACCOUNT PLAN
In compliance with the rules of IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRS),
reconciliations are presented between equity as prepared according to PCSB and equity after the introduction
of IAS/IFRS. The applicable dates are the following:
n
31 de December 2005
n
31 de December 2006
The impact of IAS/IFRS adoption are displayed on the number 2 of this note.
I NDEX
163
Report and Acounts
The evaluation of imparity in client credit activities is performed according to the criteria predicted in IAS 39 –
“Financial Instruments – recognition and measuring”, in reference to the transition date, the Company recognised an
adjustment of 327m€ related to the portfolio of granted credit (note 20).
In the company’s financial accounts that were prepared in accordance to the NCA, the provisions pertaining to the
credit item were calculates according to the dispositions of Aviso nº 3/95 of the Bank of Portugal of 30th of June, with
the changes introduced by the Aviso nº 8/2003 of 30th of January. The provisions provided for credit risk obeyed the
following criteria:
a) Provisions for overdue credit and interest: determining the provision related to benefits overdue and unpaid in
credit granted was performed according to a percentage derived from the age of the overdue and the existence of
warranty;
b) Provisions for general credit risks: Provision of 1%, performed to face risks from unfulfilment of credit granted and
in warranties and vouches given. Its calculated through the application of the following percentages over the total of
unfulfilled credit (including warranties and vouches given)
c) Provisions for credit of doubtful collection: Provision constituted over overdue credit in credit operations which
present overdue and unpaid benefits or referring to clients which present other overdue responsibilities, according to
the following conditions:
Provisions for Country risk: Constituted over credit activities provided to residents in countries considered of risk by
the Bank of Portugal.
36. EVENTS AFTER BALANCE DATE
Upon the approval of these accounts by the company’s board of directors, no event had occurred after 31 December
2006 that warranted any adjustments or modifications of the value of any asset or liability.
The Registered Accountant
I NDEX
The Board of Directors
164
Report and Acounts
I NDEX
107
ANNEX
INFORMATION IN THE TERMS OF ART.º 447 OF THE COMPANIES’ CODE
Information on the moving of stocks and yields produced by the Members of the Board of Directors and the
Audit Board during the financial year of 2006, in accordance to the dispositions of Art.º 447 of the Companies’ Code.
BOARD OF DIRECTORS
Was, at the end of the financial year of 2006, the owner of more than half of the share capital of Rentipar Financeira, SGPS,
S.A., which held more than half of the share capital of Renticapital - Investimentos Financeiras, S.A. and Vestiban - Gestão
e Investimentos, SA.
In the scope of the Banif SGPS, SA capital share growth, subscribed 15.582 new shares for the nominal value of € 14,00,
having been attributed another such amount of stocks for reserve merging. In 31.12.2006, after renominalisation of the stocks
representing the capital share, held, directly, 779.100 stocks from Banif – SGPS, SA.
Rentipar Financeira – SGPS, SA subscribed, within the scope of the referred capital increase, 3.016.488 new stocks
at a nominal price of € 14,00, having been attributed, by reserve incorporation, 2.900.201 new stocks. In 31.12.2006,
after renominalisation of the stocks representing the capital share, held, directly, 779.100 stocks from Banif – SGPS, SA.
He also held 100.000 yelds from Banif SGPS, SA. referent to 2003/2008. Between 7 and 22.12.2006, Rentipar Financeira
SGPS, SA acquired 146.425 stocks from Vestiban – Gestão e Investimentos, SA, which represent 58,57% of its capital
share and related rights to vote, now occupying a dominance position in that company. After this operation, Rentipar
Financeira SGPS, SA now owned, direct and indirectly, 179.195.185 Banif SGPS, SA stocks representing 71,68% of the Bank’s
capital.
Rentipar Financeira – SGPS, SA subscribed, within the scope of the referred capital increase, 503,321 new stocks
at a nominal price of € 14,00, having been attributed, by reserve incorporation, 498,749 new stocks. In 31.12.2006, after
renominalisation of the stocks representing the capital share, held, individually, 24.960.340 stocks from Banif – SGPS, SA.
Vestiban – Gestão e Investimentos, SA. was, in 31.12.2006, the owner of 8.643.325 Banif SGPS, SA. stocks.
Espaço Dec - Sociedade Imobiliária, Lda., a company of which he owns the majority of the capital, received, within the scope
of the capital increase, 6.875 new stocks through reserve incorporation. In 31.12.2006, after renominalisation of the stocks
representing the capital share, held, individually, 276,875 stocks from Banif – SGPS, SA.
He owned in 31.12.2006, one share from Banif – Banco Internacional do Funchal (Brasil), SA, one share from Banif - Banco
de Investimento (Brasil), SA and one share of Banif Correctora de Valores e Câmbio, SA (all preferred non-voting shares).
In the current year, in a communication on the 16.02.2007, Mr. Comendador Horácio Roque informed that Rentipar Financeira
SGPS, SA had sold in 14.02.2007, 25.000.000 shares from the Banif SGPS, SA, corresponding to 10% of its capital share
at a price of € 5,30 per share.
I NDEX
166
Report and Acounts
Owned in 31.12.06, 100 shares from Banif SGPS, SA., after producing the following transactions:
He owned, also, one share from Banif – Banco Internacional do Funchal (Brasil), SA, one share from Banif - Banco
de Investimento (Brasil), SA and one share of Banif Correctora de Valores e Câmbio, SA (all preferred non-voting
shares).
He owned, in 31.12.06, one share from Banif – Banco Internacional do Funchal (Brasil), SA, one share from Banif Banco de Investimento (Brasil), SA and one share of Banif Correctora de Valores e Câmbio, SA and one share from
Econofinance, SA (all preferred nominative and non-voting shares).
He didn’t hold or transacted in the year of 2006 any other shares or other securities of any company in the Banif
Group.
I NDEX
167
In 31.12.05 held 6.666 shares from Banif, SGPS, SA., and produced in the year of 2006 the following transactions of
shares and/or securities of that Company:
He also held on 31.12.06, 12.500 Banif SGPS, SA shares resulting from the renominalisation of the 2.500 shares owned
on 23.10.06.
On 31.12.06 held, also, 4.150 shares from Vestiban – Gestão e Investimentos, SA, after the sale, in 19.12.06 of 2.100
shares from that Company.
He also owned in 31.12.06, one share from Banif Banco de Investimento (Brasil), SA and one share from Banif
Correctora de Valores e Câmbio, SA, all preferred nominativ and non-voting shares.
He didn’t hold or transacted in the year of 2006 any other shares or other securities of any company in the Banif Group
other than the ones mentioned.
I NDEX
168
Report and Acounts
He held in 31.12.06 one share from Banif Banco de Investimento (Brasil), SA, one share from Banif Correctora
de Valores e Câmbio, SA, both preferred shares, nominative and non-voting and one ordinary nominative and voting
share from Beta Securitizadora, SA.
Group.
On 31.12.06 held 4.150 shares from Vestiban – Gestão e Investimentos, SA, after the sale, in 19.12.06 of 2.100 shares
from that Company. Vestiban – Gestão de Investimentos, SA held, by its turn, in 31.12.06, considering the shares
included by decree of the nr. 1 of artº. 20th of the Code of Real Estate Values, 8.643.325 shares from Banif SGPS, SA.,
corresponding to 3.457% of that Company’s capital.
In 12.05.06 he sold, by a nominal value of €30.08, the 76 shares from Banif – SGPS, SA., acquired in 19.06.02
by a nominal value of € 5.30.
He also owned in 31.12.06, one share from Banif Banco de Investimento (Brasil), SA and one share from Banif
Correctora de Valores e Câmbio, SA, all preferred nominative and non-voting shares.
He didn’t hold or transacted in the year of 2006 any other shares or other securities of any company in the Banif Group
other than the ones mentioned.
He didn’t hold, in 31.12.06 or transacted in the year of 2006 any shares or securities from the Company or any other
company in the Banif Group.
He owned in 31.12.06, one share from Banif Banco de Investimento (Brasil), SA, one share from Banif Correctora de
Valores e Câmbio, SA, and one share from Econofinance, SA (all preferred nominative and non-voting shares).
Group.
I NDEX
169
Group.
In 31.12.2005 held 3.000 shares from Banif SGPS, SA. In reserve incorporation, within the scope of the increase
of capital transaction reserved to share holders, was given, gratuitously, 375 shares. In the sequence of the
renominalisation of the shares representative of the Banif SGPS, SA capital, the 3.375 shares of a nominal value of
€ 5,00, were transformed into 16.875 shares with a nominal value of € 1,00.
He held in 31.12.06 one share from Banif Banco de Investimento (Brasil), SA, one share from Banif Correctora de
Valores e Câmbio, SA, both preferred shares, nominative and non-voting and one ordinary nominative and voting
share from the following companies: Beta Securitizadora, SA, Lindencorp Desenvolvimento Imobiliário, S.A. and
Montgomery Participações, S.A.. He also held one quota in the value of R$1 in Banif Primus Asset Management, Ltda.
Group.
I NDEX
170
Report and Acounts
AUDIT BOARD
He didn’t own, on 31.12.2005, any shares from Banif SGPS, SA nor transacted in 2006 any shares or other securities
emitted by Banif SGPS, SA. In 31.12.2005 there were 25.715 Banif SGPS, SA shares registered in the name
of the family company Quinta do Sourinho – Agricultura e Turismo, Lda. owned by him and his family. During the
year of 2006 the company mentioned above acquired at the nominal price of € 14,00 per share, 3.214 Banif SGPS,
SA shares in the capital increase transaction reserved to share holders and another such amount, gratuitously, by
reserve incorporation. In the sequence of the renominalisation of the shares representative of Banif SGPS, SA capital,
the 32.143 shares of a nominal value of € 5,00, were transformed into 160.715 shares with a nominal value of € 1,00.
Ernst & Young Audit & Associados, SROC, S.A.
The company, its associates, their families and under aged descendants, did not hold in 31.12.06, or transacted during
the year of 2006 any shares or securities from Banif – Banco de Investimento, SA or any other companies bound to it
in a dominance relationship or group.
Sold, in 18.05.06, the 800 shares from Banif SGPS, SA which he held in 31.12.05 at the nominal price of € 27,05.
Acquired, in 19.06.06, 1.600 incorporation rights from Banif SGPS, SA at a nominal value of € 2,68 which allowed
him to subscribe 200 Banif SGPS, SA shares at a nominal value of € 14,00 per share. In the sequence of the
renominalisation of the shares representative of Banif SGPS, SA capital, the 200 shares of a nominal value of € 5,00,
were transformed into 1.000 shares with a nominal value of € 1,00.
Group.
I NDEX
171
Information is given below on the ownership and trading in 2006 of shares and bonds in Grupo Banif companies by
other group companies:
I NDEX
172
(in Euros, unless different currency is indicated)
Report and Acounts
I NDEX
173
I NDEX
174
Report and Acounts
I NDEX
175
I NDEX
176
Report and Acounts
I NDEX
177
I NDEX
178
Report and Acounts
I NDEX
179
I NDEX
180
Report and Acounts
I NDEX
181
I NDEX
182
Report and Acounts
I NDEX
183
I NDEX
184
Report and Acounts
I NDEX
185
I NDEX
186
Report and Acounts
I NDEX
187
I NDEX
188
Report and Acounts
I NDEX
189
I NDEX
190
Report and Acounts
I NDEX
191
I NDEX
192
Report and Acounts
I NDEX
193
I NDEX
194
Report and Acounts
I NDEX
195
I NDEX
196
Report and Acounts
I NDEX
197
I NDEX
198
Report and Acounts
I NDEX
199
I NDEX
200
Report and Acounts
I NDEX
201
I NDEX
202
Report and Acounts
I NDEX
203
I NDEX
204
Report and Acounts
I NDEX
205
I NDEX
206
Report and Acounts
Shareholdings among the companies that are part of the Banif Group are shown in the document “Banif Group –
Shareholdings Diagram”, attached in this annex.
Positions held in 31/12/06 by the company’s directors in other companies:
Chairman of the Board of Directors
Rentipar Financeira SGPS, S.A.
Banif SGPS, S.A.
Banif Comercial SGPS, S.A.
Banif – Banco Internacional do Funchal, S.A.
Banco Comercial dos Açores, S.A.
Banif – Banco Internacional do Funchal (Brasil), S.A.
Banif – Banco de Investimento (Brasil), S.A.
Banif Corretora de Valores e Câmbio, S.A.
Banif – (Açores) - SGPS, S.A.
Banif Investimentos, SGPS, S.A.
Banif International Holdings, Ltd.
Companhia de Seguros Açoreana, S.A.
Renticapital – Investimentos Financeiros, S.A.
Rentipar Investimentos SGPS, S.A.
Rentipar Industria SGPS, S.A.
Rentiglobo SGPS, S.A.
SIET – Sociedade Imobiliária de Empreendimentos Turísticos Savoi, S.A.
Soil, SGPS, S.A.
Rentimundi - Investimentos Imobiliários, S.A.
Investaçor Hoteis, S.A. (ex-Tivil - Sociedade Imobiliária, Lda.)
Vice-Chairman of the Board of Directors
EMT – Empresa Madeirense de Tabacos, S.A.
VITECAF - Fábrica de Rações da Madeira, S.A
RAMA - Rações para Animais, S.A
AVIATLÂNTICO – Avicultura, SA
I NDEX
207
Member of the Board of Directors
Fomentinvest – SGPS, S.A.
Manager
Ronardo – Gestão de Empresas, Lda.
President of the General Assembly Board
Banif Leasing, S.A. (in representation of Rentipar Financeira, SGPS, S.A.)
Banif Crédito – Sociedade Financeira para Aquisições a Crédito, S.A. (in representation of Rentipar Financeira, SGPS, S.A.)
Banif Rent, SA (in representation of Rentipar Financeira, SGPS, S.A.)
Banif - Banco de Investimento (Brasil), S.A.
Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, SA (in representation of Rentipar Financeira,
SGPS, S.A.)
Banif Capital – Sociedade de Capital de Risco, SA (in representation of Rentipar Financeira, SGPS, S.A.)
Banif Imobiliária, S.A. (in representation of Rentipar Financeira, SGPS, S.A.)
SIP – Sociedade Imobiliária Piedade, S.A. (in representation of Rentipar Financeira - SGPS, S.A.)
Investaçor SGPS, S.A.
Gamma – Sociedade de Titularização de Créditos, S.A. (in representation of Rentipar Financeira, SGPS, S.A.)
Rentipar Seguros SGPS, S.A.
Genius – Mediação de Seguros, S.A.
Rentimedis - Mediação de Seguros, S.A.
Mundiglobo – Habitação e Investimentos, S.A.
Habiprede – Sociedade de Construções, S.A.
Ms Mundi – Serviços Técnicos de Gestão e Consultoria, S.A.
EMT - Empresa Madeirense de Tabacos, S.A.
VITECAF - Fábrica de Rações da Madeira, S.A.
RAMA - Rações para Animais, S.A.
Vice-President of the Board of Directors
SIET - Sociedade Imobiliária de Empreendimentos Turísticos Savoi, S.A.
I NDEX
208
Report and Acounts
President of the Board of Directors
Banif Financial Services Inc.
Banif Mortgage Company
Econofinance, SA
Banif Forfaiting Company, Ltd
Banif Forfaiting (USA) Inc. Ltd
Banif Trading, Inc.
Banif SGPS, S.A.
Banif Securities, Inc.
Banif Comercial – SGPS, S.A.
Banif – Banco Internacional do Funchal (Cayman), Ltd.
Banif – Investimentos – SGPS, S.A.
Banif (Açores) – SGPS, S.A.
BanifServ – Empresa de Serviços, Sistemas e Tecnologias de Informação, ACE
Banif Finance, Ltd.
I NDEX
209
President of the Board of Directors
Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, S.A.
Banif Açor Pensões – Sociedade Gestora de Fundos de Pensões, S.A.
Banif Capital, Sociedade de Capital de Risco, S.A.
Gamma – Sociedade de Titularização de Créditos, S.A.
Banif Multifund, Ltd.
Banif International Asset Management, Ltd.
Banif Securities Holdings, Ltd.
Centro Venture – Sociedade de Capital de Risco, S.A.
Banif SGPS, S.A.
Banif Investimentos – SGPS, S.A.
Banif - Banco Internacional do Funchal (Brasil), S.A.
Banif Serv – Empresa de Serviços, Sistemas e Tecnologias de Informação, ACE
Banif Financial Services Inc.
Econofinance, S.A.
Fomentinvest – SGPS, S.A.
Aplicação Urbana XIII – Investimento Imobiliário, S.A.
GCC Lisboa – Gestão de Centros Comerciais, S.A.
GED SUR Capital, S.A. – SGECR
I NDEX
210
Report and Acounts
Vestiban – Gestão e Investimentos, S.A. (which held on 31.12.06, considering the actions included by force of the nr. 1
of artº 20º of the Securities Code, 8.643.325 shares of Banif SGPS, S.A., corresponding to 3,457% of this company’s
capital).
Beta Securitizadora, S.A.
I NDEX
211
Ponta do Oeste, S.A.
Banif Primus Asset Management, Ltda.
Portuvinus SGPS, S.A.
Econofinance, S.A.
I NDEX
212
Report and Acounts
Doesn’t fill any other position.
Beta Securitizadora, S.A.
Banif Primus Asset Management, Ltda.
Lindencorp Desenvolvimento Imobiliário, S.A.
Montgomery Participações, S.A.
I NDEX
213
Positions held in 31.12.06 by the company’s Audit Board members in other companies:
President of the Audit Board
Banif SGPS, S.A.
TV TEL Grande Porto, Comunicações, SA
I NDEX
214
Report and Acounts
Alfredo Guilherme da Silva Gândara
Associate of ERNST & YOUNG AUDIT & ASSOCIADOS – SROC, S.A. is, in representation of that Company,
a member of the Audit Boards or Single Auditor of the following companies:
Rentipar Financeira SGPS, S.A.
Renticapital - Investimentos Financeiros, S.A.
Banif SGPS, S.A.
Banif Comercial SGPS, SA
Banif – Investimentos – SGPS, S.A.
Banif (Açores) SGPS, S.A.
Banif Leasing, S.A.
Banif Crédito – Sociedade Financeira para Aquisições a Crédito, S.A.
Banif Rent, S.A.
BanifServ – Empresa de Serviços, Sistemas e Tecnologias de Informação, ACE
APARBELAS – Investimentos Hoteleiros
BENIGESTE - Sociedade Imobiliária
BENIM - Sociedade Imobiliária
GPMG - Gestão e Participações
MAGUE SGPS
IMO MAGUE - Sociedade Imobiliária
Member of the Audit Board
Banif Leasing, S.A.
Banif Crédito – Sociedade Financeira para Aquisições a Crédito, S.A.
Banif (Açores) SGPS, S.A.
I NDEX
215
BANIF GROUP CORPORATE STRUCTURE
as of 12-31-2006
I NDEX
216
Report and Acounts
I NDEX
217
Information in the terms of art.º 448 of the Companies’ code
At the closing date of the 2006 financial year, the following entities held significant equity stakes in the company:
Entity
% of Share Capital
Banif Investimentos – Sociedade Gestora de Participações Sociais, S.A.
100%
The company had no treasury stock at the end of 2006 nor traded in its own shares during the year.
See Banif Group Corporate Structure Diagram in this appendix.
I NDEX
218
Organisation Chart
I NDEX
219
Report and Acounts
MANAGEMENT
General Managers
Deputy Managers
Carla Sofia Pereira Dias Rebelo
António Cohen Serra
Carlos Alberto R. B. Amaral Firme
Filipe Antunes de Paula Cardoso
Carlos Cruz Ferreira
Joaquim Miguel S. Correia da Silva
Fátima Carlos D. Frazão
Jorge Manuel Macedo Lopes de Carvalho
Luís Filipe Saramago Carita
José Fernando Resende Gomes
Manuel Jorge Raminhos Pereira
Luís Fernão de Moura Torres Souto
Nuno da Rocha Hermida Baeta Correia
Maria Cristina Garcia Gil
Pedro Luís Duarte Silva Serzedelo de Almeida
Mário Alexandre Bagarrão Baptista
Pedro Manuel M. C. Dias Correia
Senior Managers
Pedro Miguel Oliveira Silva Lau
Rui da Silva Pires
Rui Manuel Santos Correia
Ângela Simões Cardoso Lourenço
Rui Manuel Sequeira Vieira
António José de Caires Andrade
António Manuel Guerra Coito
António Maria D. e L. Ribeiro Filipe
Bernardina Maria Leite Machado Lima Álvares Ribeiro
David Alberto M. Sousa Ribeiro
João Maria Magalhães F. Da Gama Lourenço
João Nuno Alves Moreira e Meneres
José Carlos Vila Peixoto
José Joaquim Paulino Afonso
Luis Miguel Fialho Teles
Marta Dourado F. Moura Rangel
Miguel Nuno André Raposo Alves
Miguel Salgado Valadão do Vale
Pedro Brandão de Melo e Castro
I NDEX
220
Banif
I NDEX
108
Report and Acounts
Shareholders,
In accordance with the provisions of the law and the articles of association, we are pleased to submit
for
your
consideration
Consolidated
Financial
our
Report
Statements
and
for
Opinion
the
on
financial
the
year
Directors’
ended
31
Report
and
December
Individual
2006,
and
submitted
by the Board of Directors of Banif - Banco de Investimento, S.A.
In the course of its duties, the Audit Board received at all times the information and collaboration needed for our
work from the Directors and the staff of the Bank.
The valuation criteria used are set out in the Notes to the Financial Statements and correspond to a correct
valuation of the company’s assets.
We believe that the Directors’ Report gives an accurate picture of the company’s affairs and the prospects for
the Bank’s business in 2007.
We have examined the Legal Accounts Certificate for the Individual and Consolidated Financial
Statements, and we are fully in agreement with this document, which is herein deemed reproduced in full.
In view of the above, and having examined the financial statements, we believe they present a true and fair
view
of
the
state
of
affairs
of
Banif
Banco
de
Investimento,
S.A.,
and
we
recommend
that
you approve:
1. The Directors’ Report, the Individual and Consolidated Financial Statements and the respective
Notes, for the financial year ended 31 December 2006; and
2. The proposal for allocation of profits as set out in the Directors’ Report.
Lisbon, 12 March 2007
The Audit Board
Fernando Mário Teixeira Almeida – Chairman
Alfredo Guilherme da Silva Gândara
Representing
Ernst & Young Audit & Associados – SROC, S.A.
Official Auditors
I NDEX
222
Legal Certification of the Individual Accounts
I NDEX
223
Report and Acounts
I NDEX
224
Legal Certification of the Consolidated Accounts
I NDEX
225
Report and Acounts
I NDEX
226
I NDEX
227
Technical Credits
Design and Pagination
Euro-M | www.euro-m.pt
www.banifinvestimento.pt
Registered Office: Rua Tierno Galvan, Torre 3, 14° Piso 1070-274 Lisboa
Share Capital: 30.000.000 Euros | Tax Identification number 502 261 722 | Registered under Nr 1060 at the Lisbon Companies Registry
I NDEX

Report and Accounts - Banif Investment Bank

Transcription

Similar documents

Bank Macro Name CHange

Business Analytics

Business premises for sale in Javea 40,000 € Ref: L-1293

Relevant Information

Rocket iCluster Banco Lafise Customer Story

to the PDF file.

BTS

a company tailored for a new information technology era

catalogue - Escuela de Negocios Afundación