BANCO COMERCIAL PORTUGUÊS S.A. (BCP) Q2 2026 Earnings Call Transcript

Good afternoon, Miguel Maia speaking. Welcome to BCP's conference call. As usual, I will begin with the highlights of our performance, being followed by Miguel Barguens and Bernard Colas, who will provide additional details. The first half of this year continued to be shaped by a complex global environment marked by persistent geopolitical tensions and their impacts on energy markets, international trade and inflation. These dynamics have waged on global economic growth, Despite this backdrop, the Portuguese economy has maintained a solid trajectory. The Polish economy continues to grow at a robust pace, and the Mozambican economy also showing clear signs of normalization. Against this challenging context, the group delivered another quarter with a strong set of results. Net income reached 565.8 million euros in the first half, and a 12.7% year-on-year increase. This performance reflects the bank's sustained capacity to generate value and the resilience of our business model as outlined in our strategic plan. In Portugal, we achieved a net income of 470.2 million, an increase of approximately 11%, reinforcing the profitability trajectory of previous quarters. This performance was driven by a strong growth in net interest income, underpinned by the strength of our commercial franchise, disciplined cost management despite continuing investment in digital transformation, and effective balance sheet management involving interest rate environment. Turning to our international operations, net income increased by over 25%, reaching 183.5 This was notably driven by Bank Milan in Poland, which recorded a net income of $167 million, representing a nearly 39% increase compared with the same period last year. For this significant improvement, contributed the nearly 65% reduction in charges associated with the Swiss franc mortgage loan portfolio, which stood at $96.7 million in the first half. The CHF mortgage portfolio continues to run off rapidly, having declined by 47% year-on-year, while accumulated provisions for CHF mortgage risk now represent 173% of the remaining portfolio. While recent developments regarding FX-related litigations have been positive, some uncertainty remains in the broader banking operating environment. Bank Millenium demonstrated a strong commercial momentum, with corporate lending growing by nearly 32%, and customer funds expanding by approximately 70%, carrying out key priorities of our strategic plan for this market. In Moçambique, although Millenium profitability continues to be impacted by provisions associated with sovereign risks, the underlying business performance remained positive. The adjusted net income reached $48 million, an increase of over 18% compared with the same period of the previous year. Customer funds grew by over 10% and lending expanded by nearly 12%, confirming the franchise's strength and its positioning to benefit from the natural gas projects. The bank maintains a robust position with a capital ratio above 40%. The quality of our relationship banking model is evident across all our core markets. On a consolidated basis, customer loans increased by 8.3% year-on-year to $65.2 billion, while total customer funds grew by 9.8% to $116.7 billion. In Portugal, loans grew by 8.6% and customer funds by 7.2%, reflecting the trust that families and business continue to place in millennium. We continue to operate with a very strong capital ratios. Our common equity one stands at 15.1% and total capital ratio at 19.3%, comfortably above regulatory requirements and including just 10% of the first half net income according to the current distribution policy. At some time, balance sheet quality continued to improve, with non-performing exposures declined by 187 million and the NPE ratio falling to 2.2%. The cost of risk remained well contained at 32 basis points, both at the group level and in Parkwell. Turning to our customer base, it continues to expand, underpinned by the quality of our teams and our distinctive digital capabilities. At group level, active customers grew by 4% over the last 12 months, reaching 7.4 million, of which over 2.9% in Portugal. Mobile customers continued to grow at 8% per year, now accounting for 75% of the group's total customer base and 67% in Portugal. These figures confirm that the customers are increasingly choosing Millennium as their preferred bank, and our service continues to be recognized with several important distinctions, including the Consumer Choice Award for the sixth consecutive year and the recognition of the new corporate website as product of the year 2026. Moving on to our mobile platform, it continues to deliver a complete and innovative value proposition with superior user experience, and this is clearly reflected in a consolidated upward trend in both interactions and sales. In the first half, the millennial app recorded 1.7 million logins per day, an 8% increase year-on-year, with customers assessing the app an average of 34 times per month. Sales through the app grew 8%, highlighted by a 32% increase in credit card sales and a 23% rise in personal loans origination. Transactions increased by 9%, with international transfers growing by a remarkable 68%. Our digital penetration rates remain at the industry-leading levels. In Portugal, 95% of stock market transactions, 90% of savings products, and 76% of both investment funds, subscriptions, and personal loans are now conducted through digital channels. In mortgage lending, we continue to redesign and digitize the entire end-to-end process, with 89% of approval letters already signed digitally. 66% of proposals submitted through digital channels and 36% of these appointments booked digitally. Interactions with customers through BCP Group's digital channels allow us to compete on an equal footing with neobanks with the advantage of having a physical network of proximity which allow us to know much better the communities we serve and having a human face available when the clients need. This symbiotic relationship between technology and physical presence, which gives trust to the client in an unpredictable and complex world, doesn't condition the high operational efficiency that we present quarter after quarter. In a challenging environment, we once again delivered a very robust set of results. This performance demonstrates not only the quality of the directions set out in our strategic plan, but also our strong execution capabilities across business performance, operational efficiency, risk management, and disciplined capital management, attributes that the market has increasingly come to recognize in BCP. We remain confident in the strength of the value proposition we offer to our customers and in our ability to continue enhancing it through technology with a particular focus on artificial intelligence. This will allow us to further improve our offering and the quality of the service we provide, while also reinforcing operational efficiency and risk management. Miguel, the floor is yours.

Thank you very much. here in a scientific view of our income statement the more detailed view you can see in the annexes including as per requests by some of you a quarter a quarter by quarter evolution you can see this in the annex what you see is a very healthy pattern of growth in terms of the main items of our income statement the net interest income growing in spite of the fact that in poland in poland the interest rate came down the reference interest rate came down by almost two percent so we were able to to maintain the the nai in poland broadly stable with a very important growth of 11 percent of more than 11 percent of the nai in portugal which is a tribute to our consistency in commercial dynamics and pricing discipline commissions growing growing six percent which is also a very healthy growth in the in the present context mainly taking into consideration the the competition of of neobanks operating costs growing um mid single digit as as commented before and core operating profit because of the growing three percent but i would like here to highlight the positive evolution and the consistency in these dynamics the profit before impairment and then and provisions because of some one-offs linked to recoveries grows slightly more around six percent and and when we convert to the to the profit before before income tax we benefit from the important reduction of the swiss franc charges of more than 60 percent We have guidance to a value that would be, this year, in any case, more than 50%, and we are overachieving this target with a value of more than 60%, which means that at the end of the day, our net income has grown almost 13%. But I would like to comment the consistency of these key metrics that are very much linked to shareholder value creation. So our book value per share and dividend per share growing year on year almost 20%, and our roti and earnings per share growing almost 15%. going forward we see these dynamics continuing and we see some some consistency in these values at least until the end of of of the year our view is that the value by year end most probably will be above these values in terms of rote and in spasher except if something extraordinary happens

in geopolitical terms.

In terms of group profitability, we see here in terms of NII the main item of the income statement, as you know, the growth of 11% with a growth of the net interest margin, and international operations, the possibility of the resilience of the net interest margin in the context of a of a strong reduction of interest rates here i would make a strong tribute here to our commercial dynamics and volume growth so we are growing and this is very important we are growing more than what we had envisaged before we see that in terms of customer funds we are growing in poland as you will see more than 17 around 17 17 17 in portugal around 7% which is also a very important growth rate for Portugal and in credit both in Portugal and in Poland growing credit book around 9% 9% in Portugal 9% in Poland with a different composition in Poland due to our strategy basically growing more than 30% in terms of corporate SME 32% corporate SME and in Portugal more based on the corporate growth more than 10% around 11% so Portugal more mortgages around 11% Poland more corporates as per our strategy around 32% and this growth together with the evolution of interest rates is what explains the evolution of and together of course with pricing discipline is what explains the evolution of our NII. Going forward the guidance that we have given for Portugal was in the beginning of the year we're expecting mid single digit growth. In our last conference call we raised this outlook to high single-digit growth at this moment we think we feel comfortable with a low teens growth aligned with what we are saying here in terms of the first the second quarter of this year fees and commissions also very resilient growing around six percent in consolidated terms of which five percent in portugal and 8.3 percent international operations there is some compensation here, of course, between the margin of the savings and the fees on the investments, of course, when the markets are more volatile and when the retail investors, I would say, less bullish, they tend to invest less in funds and prefer deposits. The reverse happens in other situations. Right now, of course, one part we are benefiting more in terms of deposits, but still growing around 5% in Portugal, aligned with what we said before of a growth of fees and commissions between mid-single digit and a high single digit. We are closer to the mid-single digit here for the reasons I just explained. In terms of other operating income, we had some extraordinaries these years in Portugal. that we explained in the last research presentation linked to assets received in the context of credit recoveries that we have sold, realizing capital gains, the remaining relatively stable. Some growth in terms of mandatory contributions, because as you may recall, last year we benefited in some quarters of a recovery of a previously paid contribution that then the courts have reversed. Operating costs. We are investing. We are investing in AI. We are investing in cyber. We are investing in requalifications. And in the context of this investment, we have been able to grow only 5.4%. As I commented before, our guideline here is to try to maintain a top a top level cost to income ratio trying to be one of the most efficient banks retail banks in Europe with our business model and within this context we have been able to maintain this cost to income of 37% and at the same time continue to invest which which is also attribute to the prudence of our strategy cost of risk stable we are not seeing any yet any relevant signs of the geopolitical turbulence creating credit issues for our corporate and for retail clients up to now of course we cannot be complacent but this is basically what explains these low costs of risk. Of course, I mean, the future isn't certain. I mean, every week we hear a different piece of news of what may go on in Hormuz and in Ukraine and so on. So we cannot guarantee that we will maintain this cost of risk forever. But as far as you see it right now, we are not seeing any additional early warning signals that would lead us to review our guidance in terms of cost of risk and this of course is linked to the reduction in terms of NPEs in spite of the fact that we already have a low level of NPEs the normal NPE loan ratio only loans is already at 1.6 percent in Portugal so it reduced further more from 2 to 1.6 percent and the NPE ratio as calculated by the EBA with securities and with of balance sheet items is already at 1.3%. In the international operations, this is slightly higher, but also in reduction mode. I would highlight here that in Poland, as you know, our business model has much less corporates and has much more consumer loans that typically have a higher NPE loan ratio. Business activity, this is the piece of good news that I had anticipated, or the growth of around 10% in terms of customer funds and I would highlight here that the growth in the international operations of 15% of which around 17% in Poland. Also a consequence of the strength of our franchise and of the fact that we have a really genuine differentiated quality service proposal to our customers. The loan portfolio also growing in a healthy way in spite of the reduction of the NPEs we we have grown the total loan portfolio 8.3 percent in a very balanced way between Portugal and the international operations both of them around eight percent in terms of of capital um the the capital ratio decreasing for from next year because of course we have distributed dividends as you know but stable vis-a-vis last quarter and as you see here in the in in page 22 we we were able to generate before dividends dividend accruals and share by back accruals as you know we are accruing a 90 uh the uh payout um including dividends and share by back so this means that before this 90 payout we are we have been able to to approve 55 uh to generate 55 basis points of capital per quarter as you may remind what i have commented in the last in the last sessions is that the normal organic uh capital generation before distributions should be around between 55 and 60 uh depending on the on the growth in this case we have been growing more so for a good mainly in in poland we also have grown in terms of creating portugal but Most of the growth in Portugal came either from guaranteed loans, mortgages, as you know, or from loans and commercial paper that had already committed lines, so they did not increase materially the RWA's.

Morell position, very, very comfortable.

We are in the process of executing our plan. As you know, we have issues, 500 million of senior preferred in February and another 500 million of year two in June. So clearly aligned with our plan and comfortably above the minimum ratio. Pension funds, I would say a very cautious ILM management considering the liabilities that are typically fixed rate because our liabilities are basically the pensions that vary with the salaries and which present value also varies with long-term interest rates, so around the 12-year interest rate. So we were able to deliver a 4.2% profitability that compensates part of the liabilities decrease, so that this means that our excess between the pension funds and the pension liability even increased vis-a-vis June of last year at a level of 300 million. I would highlight here that this excess is like a capital buffer. So it is what would have to be consumed before any type of impact on capital would occur. Liquidity, very, very strong liquidity position, and this is important. We would like even to have a slightly weaker liquidity position because this means that we would be growing more in terms of credit. And we are expecting, so to say, to allocate a part of this liquidity to genuine customer business so as to normalize somehow this liquidity position. But in any case, this liquidity position is what enables us to be more comfortable in terms of paying term deposit rates. So, because we don't need funding, we can afford, mainly in terms of these term deposits that are less franchise-driven, both in Poland and in Portugal, we are able to deliver a higher margin of deposits. I will pass the floor here to Bernard, who will focus only on some of the slides. Okay, thanks, Miguel, and good afternoon, ladies and gentlemen.

As I did on the last earnings presentation, I'll briefly go through some of the slides for each geography and I will not follow the full presentation as you already have seen it. So starting on page 27, Portugal delivered a strong set of results in the first half of 2026. Net income increased by almost 11% year-on-year to $470 million, supported by an 11.5% increase in net operating revenues, which reached almost $1.1 billion. and a revenue growth continued to outpace the cost growth with operating costs increasing by a moderate 5%, reflecting ongoing investment while maintaining cost discipline. Impairments and other provisions rose 100 million, mainly driven by a prudent risk management approach. Overall, in this slide, as you can see, the business continues to generate robust profitability and positive operating leverage in Portugal. On page 28, net interest income increased by 11.3% year-on-year, or if you want, more than 74 million euros, reaching 733 million in the first half of 2026, despite the low interest rate environment. Growth was mainly driven by the positive contribution from higher loan volumes, which more than offset the negative impact of lower market rates. Additional support came from improved deposit pricing dynamics and lower wholesale funding costs. It is also important to highlight, as we did in the previous quarters, that this is the seventh quarter with consecutive increase on NII in Portugal. So, having said that, the bank maintained a resilient net interest margin, which improved from 2.12% in the first half of 25 to 2.22% in the first half of 26, reflecting the strength of its commercial franchise and balance sheet management. Moving to page 29, fees and commissions continue to show a solid performance, increasing by 5% year-on-year to 322 million. growth was broad based across the main business lines but more significant variations were recorded in bank assurance asset management and securities operations it is also important to highlight the growth on commissions related with loans and guarantees reflecting the the sustained customer activity and the strength of of the bank's diversified franchise market related fees increased by almost 11 percent supported by higher investment products activity and assets under management net trading income increased from 7 million in the first half of 25 to 41 million in the first half of 26 and this was mainly driven by gains from the disposal of legacy assets steaming from the recovery of non-performing loans in the first quarter of this year Other operating income moved from minus $21.6 million to minus $38.3 million, driven primarily by mandatory contributions, which in the first half of 2025 had benefited from the partial reversal of the solidarity surcharge, and additionally by some effects related to earn-out that occurred in 2025. Going to page 30, operating costs increased by 5.4% year-on-year to $361 million, reflecting continued investment in the business while maintaining a strong focus on efficiency. The increase was mainly driven by higher admin costs and depreciations as staff costs registered an increase of around 2%. Despite this cost growth, as I said before, revenue expansion outpaced expenses, allowing the cost-to-income ratio to stay at 33% at the end of the first half of 26. At the same time, the bank continued to streamline and to modernize its distribution network. The number of employees decreased slightly and are currently below 6,000, and branches also showed a small decrease from the first half of last year. These actions contributed to efficiency gains while preserving the bank's strong commercial presence in service capabilities across Portugal. And as I said, now if you don't mind, let's skip some slides and move straight to page 34 which shows volumes in portugal so on this page 34 regarding volumes the bank continued to deliver strong commercial momentum in portugal with both customer funds and lending recording solid growth total customer funds increased by 7.2 percent year on year to $77.5 billion, meaning an increase of $5 billion year-on-year. This was supported by growth across all major categories in terms of customer funds, including demand deposits, term deposits, and off-balance sheet products. This performance reflects customers' confidence in the bank and sustained success in attracting savings and investments. At the same time, gross loans grew by 8.6%, representing more $3.5 billion year-on-year, driven by strong activity in both the corporate and individual segments. Mortgage lending increased by 10.8%, while corporate lending recorded a healthy growth of 5.4%. All in all, the expansion of both deposits and loans highlights the strength of the bank's franchise and its ability to support customers while delivering sustainable balance sheet growth let's move now to page 37 and here this slide shows the contribution from international operations and it's important to highlight their important contribution to the group's results with earnings attributable to the group increased by 20 by more than 22 percent to 95.6 million in the first half of 26 and this is after deducting minorities this performance was mainly driven by bank millennium in poland whose contribution rose by almost 39 to 170 million reflecting the resilience of its business model in a more challenged interest rate environment the result of mozambique subsidiary remains conditioned by the financial situation of the country as um as the results and now if you don't mind as results of bank millennium were already um widely known i will skip also some slides related with bank millennium and i'll propose to go straight to slide number 41. and in here on page 41 regarding volumes bank millennium continued to deliver strong commercial growth with both customer funds and lending expanding significantly during the period. Customer funds increased by 16.8% year-on-year, representing an increase of more than 5 billion in just one year. This performance reflects the bank's ability to attract new customers and deepen existing relationships with competitive market environments. Gross loans to customers grew by 8.8%, which represents a growth of more than 1.5 billion growth was particularly strong in the corporate segment where lending increased by almost 32 percent while the mortgage portfolio remained stable and continued to represent the large share of total loans overall the continued expansion of both deposits and lending demonstrates the strength of bank millennials franchise and supports its sustainable growth and profitability perspectives. On page 42, regarding FX mortgage portfolio, Bank Millennium continued to make a significant progress in reducing its legacy CHF mortgage exposure. The mortgage portfolio decreased by 47% year-on-year, reaching just $700 million at the end of June 26, and representing only 0.6% of the gross loan portfolio after legal risk provisions. This reflects the combined effect of settlements, court resolutions, and the natural amortization of the portfolio. At the same time, legal risk coverage continued to strengthen, with cumulative provisions reaching 173% of the outstanding CHF mortgage portfolio. The number of individual lawsuits declined by 38% year-on-year, while new inflows of litigation continue to trend lower. As a result, CHF-related costs fell sharply by 65%, from $275 million in the first half of 2025 to just $97 million in the first half of 2026. In conclusion, these trends demonstrate the substantial de-risking of the CHF mortgage portfolio and its progressively lower impact on bank's earnings, on bank millennial earnings. Turning to page 43 about BIM in Mozambique, profitability remained affected by the challenging and operating environment, but if you adjust the net income, I mean, it increased almost 20% year on year, demonstrating the underlying resilience of the business. Net operating revenues grew by 4.5%, while operating costs remain broadly stable. Asset quality remains robust, with the NPE ratio at 5%, and capital above 40%. And I will conclude here my presentation, and before we move to Q&A, I will end the floor to Mr. Miguel Braganza for some final comments about the evolution of the strategic plan on page 48.

As you know, we are, in every quarter, we present exactly what is our evolution vis-à-vis the target that we have presented to the market around one year and a half ago. As you see, we are clearly progressing very well towards the target. We are clearly overachieving the target. And as I commented and have been commenting also in the last sessions, the guidance that we are giving both today and in the last session already leads us to believe that except if something extraordinary happens, we will clearly overachieve the target that we have presented to the market in 2018 with the consequences that we expect in terms of shareholder value creation. Thank you very much. We'll open the floor to questions.

We will now begin the question and answer session. To ask a question, please press star one one on your telephone and wait for our name to be announced. One moment for our first question. The first question comes from the line of Ignacio Ulagi from PNP Paribas. Please ask your question.

Thanks. Good afternoon, everyone, and thanks very much for taking my questions. I have two questions. The first one is on lending growth. There has been a bit of a slowdown in lending growth in the quarter. I just was wondering, Miguel, when you upgrade the guidance for NIA in Portugal to double digit, I assume it's largely driven by margins, but how should we think about loan growth and loan demand in Portugal and which segments are you seeing a best reward for growth? The second one is about capital and capital generation. How should we think about it in the coming quarters? You were pointing in one cue that there will be some measures taken in the second half to try to improve our value optimization so that you get a bit closer to the 90% payout You just wanted to get a bit of your thoughts on how should we think about the payout and whether you think that 90% is at risk or not, and how should we think about the organic capitalization thank you very much for your your questions lending growth in in Portugal and in Poland in Poland will feel comfortable with the maintenance of

this type of lending growth probably looking forward probably a little bit less in corporate it was really extraordinary thirty percent you're extraordinary and more on mortgages on the other hand in in Portugal What we expect also is probably the lending growth in mortgages to desolate somewhat because 11% is also very high, so we expect it to desolate somewhat. But it is possible that the corporate and SME growth also picks up a little bit. In any case, when I speak about low-teens or low-double-digit NII growth, it is not very sensitive because in the last six months of the year, as you might expect, it will not change a lot my guidance. So when I speak about low teens growing 1% more or 1% less when we are speaking only about six months and the average balance that is generated does not influence the guidance that I'm giving of low teens, by the way, 426. And in principle, if the interest rate behaves according to the forward rates, also for 27. So we are also expecting a low-teams growth in this moment in this scenario of interest rates, also for 27. In terms of capital generation, our main objective is shareholder value creation. And we think that to achieve this shareholder value creation, we have to generate value, generate value through customer business, and we have to be disciplined on capital. But the discipline on capital is not an objective per se. Of course, it is important to be disciplined on capital. What I want to say is that the payout is not an objective per se. the payout is only relevant to the extent that it reflects a discipline in terms of capital and it is associated to shareholder value creation okay so uh when we when we say that and when we have presented our distribution strategy we were very clear on that presenting a table where the um the share buyback would be a function of the ratio before distributions so if we if we increase our rwa's with genuine customer business that create shareholder value and because we are allocating capital to genuine customer value that generates value for our shareholders and so on and if because of this we need capital we i mean this has a consequence then in terms of shareholder distribution on the other hand if we do not need the capital the objective of this distribution we have presented the ratio that somehow commits us to distribute this additional capital so this is the logic so the 90 is not an objective per se the the our objective is to create value for customers and shareholders i think this is important having said that in terms of evolution of our rwa as i commented in terms of our organic path what we are expecting is around 55 to 60 business points per quarter this is the organic part in terms of inorganic part i was commenting that we were working on some securitization that probably we will try to close uh in this quarter but the impact in terms of ratio will only occur next quarter because they are subjects to they are subject to authorizations and so on, that we are expecting something in the order of magnitude of around the 20 basis points. If you do the numbers, if you do the numbers, you will see that we are really very close, depending on the evolution of our portfolio, we are very close to the 90 or to the 80. We are more or less on the tipping point. So it is very difficult for me to commit at this point to say whether it will be 90 or 80 what i can tell you is if there are genuine and value enhancing opportunities to grow our portfolio in our business areas we will not restrain ourselves of doing so just to to distribute 19 instead of 80. so the 90 already is a consequence of our strategy is not an objective per se okay but at this point in time having said it at this point in time it will depend it will depend we'll do our most to generate to generate value we'll do our most to be close to our to our customers and and to grow a healthy credit portfolio and then the consequence the output will be the output okay thank you very much.

Thank you for the questions. Please hold for our next question. The next question today comes from Alvaro Fernandez of UPS. Please ask your question.

Yeah, hi. Good afternoon and thanks for taking my questions. I have one and also one follow-up. So first, on the low teens NII growth for 27, what interest rate assumptions are embedded in that guidance? And also related to this, do you still expect a flat NII in Poland in 26 and what to expect in 27? And second, loans in Portugal are growing at 9%, so above the market, the industry is growing at 8%. Both deposits are growing below 5% versus the industry at 7%. So what's driving the gap? What's your strategy here?

What would trigger a new start becoming basically more competitive on on the deposit front thanks okay in terms of of our we make our projections and we give our guidance based on the latest market implicit forward rates so what I what I was saying is based on our latest projections and all it is projections are based on the on the market implicit forward rates if you the calculations you will you will get exactly what is the assumption behind it having said that we are not too sensitive so our nii is not too sensitive to to uh to interest rate movements of course if we have a 200 basis point movement as it happens in poland it is relevant but the 25 basis points movement is not it's not so relevant as i commented typically in our in a in a in In Portugal and in Poland, the sensitivity of our NII to a 1% change in interest rates is typically between 2% and 3% of the NII. So it is a low sensitivity, and the 1% change in market interest rates is a lot. So a 25 basis point change, you can do the numbers, will have 50 basis points impact in terms of evolution of the NII. So we run a very, very conservative balance sheet from an interest rate perspective. So having said that, we feel quite comfortable with these low teens, except, of course, if we enter in a broad recession in Europe and if interest rate goes down 1%, of course, this will have the impact of around 2% less of an AI. Of course, this is not our scenario, and this is not the scenario that is implicit in the market movement. In terms of the evolution of deposits and the evolution of credits in Portugal and so on. So we are in such a situation in Portugal of excess deposits over credit that really i'm not envisaging any any scenario in the next two or three years that will drive us to pay more because of necessity or in terms of balance sheet so this is not the logic so it is not because and and more so uh if you take a look at the the total customer funds the total customer funds are growing very much aligned with the loans and one of the reasons is that on the margin I would say some of the most rate sensitive customers are investing probably a little bit more in money market funds or in bond funds so that the total customer funds are more aligned and we are I would say so comfortable from a liquidity standpoint that this will not be uh the trigger of course our trigger is really to be to to have a good offer to our clients to make sure that we we serve our clients of course in a segmented way uh being being uh comfortable that we are what we offer to our clients our best-in-class offers our best-in-class products making sure that we also differentiate between of course private banking clients and mass market clients and so on because this is part of our business but this is the key issue so if you ask me what could trigger us paying more is much more the market dynamics as a whole and if somehow the market dynamics change then we needing of funding because of the of the dynamics of the gap so yeah what is clear for us is that if the market starts paying much more we will have to start paying much more that it is it is life we are in a

competitive market and that's life thanks thank you for the questions please hope for the next questions the next questions today comes from Maxime mission from JB capital please go ahead hi good afternoon thank you very much for the presentation and taking our questions to from me please one on the fee revenues I was just wondering if you could update us on the guidance for portugal now that we leave the second quarter behind and the other question is on other provisions this line has increased compared to last year i remember that 2025 was abnormally good should we assume 13 million a new run rate and also what is the rationale to keep increasing

np coverage given it is above 100 already thank you okay okay um in terms of fee coverage i mean As I commented, as you've seen, a large part of our fee comes from asset management products or investment products, including unique links and bank assurance products and so on. And these products are substitutes to some extent, mainly on the low risk part of these products, are substitutes to some extent for deposits, so to say. And the evolution is also, to some extent, also linked to the degree of risk appetite of the retail business, so to say. So if the markets become much more bullish, the retail market will tend to invest more in equity funds. As you know well, it's also your business, to some extent. If the market becomes more conservative, they tend to invest more in deposits. So that's the way. On the other hand, what we all see is that the business model of banks is also being challenged, I would say, by low fee providers in the market. So we cannot, I mean, there are risks to the franchise if we increase prices without giving genuine value to our customers. so that we have to be very careful in terms of having a strategy where we really offer genuine value for our customers. Taking all of this into consideration, the guidance that I gave was a mid to high single digit, with a lower guidance in terms of NII. I think that also the guidance that I would like to maintain is the same, mid to high single digit, but it's an interval. So, if you ask me right now, probably we will overachieve more in terms of NAI, and in terms of fees, we will be closer to the mid-single digit, but of course, it will depend on the market movement and on the risk appetite of the clients. In terms of the other provisions, the other provisions are a little bit like trading games. The other provisions have a degree of volatility on a quarter per quarter basis that are difficult to anticipate. A provision may be a provision for a litigation or a provision for a tax issue. So to say, there are a lot of small events that contribute to this. So it is difficult, in the same way that I cannot, I mean, give you some type of comfort in terms of the evolution of trading gains, for me it's difficult to give you a fixed value that will be always the same on a quarter-by-quarter basis. However, expecting these values between 10 and 15 million per quarter, on average, but with some volatility as with trading gains, is reasonable. If you take a look at what happened in the past, it's something that's reasonable. In terms of the impairment models, I mean, the impairment models, we are having some overlays in our impairment models because of the situation that we are seeing in geopolitical terms. So we do think that right now the environment is uncertain. And as long as we are with this cost of risk in Portugal slightly above 30 basis points, we don't see, I would say, we think it's prudent to maintain a degree of overlays because in spite of the fact that we are not seeing any early warning signal, any relevant early warning signals linked to the geopolitical risk, I mean, we cannot be complacent. So for the moment, we think that it is not necessarily in the best interest of the bank and of its shareholders to go below these low 30s cost of risk. Thank you very much. If then they prove, if after our move is solved and if after, I mean, the tragedy in your country is solved, we come to the conclusion that they are not necessary. Of course, they will not be necessary. And we'll reverse it.

Thank you for the questions. Our next question comes from the line of Sophie Pettersens from Goldman Sachs. Please ask your question.

Yeah, hi. This is Sophie from Goldman Sachs. Thanks a lot for taking my questions. So one follow-up question on And on capital, could you also just remind me if you have any capital deal or headwinds that we should be mindful of going forward and also what the sensitivities to a change in the pension discount rate. And then I was also wondering, there have been some press articles around for soon, but potentially considering selling the stake in BCP. How do you think about M&A opportunities and what would it potentially mean for BCP if Fasun was to sell the stake? And then maybe just a final one on Mozambique provisions. How should we think about this going forward? Thank you.

Thank you very much, Sophie. I will start probably with the latest question regarding Mozambique. Mozambique is one of the countries in the world with the largest gas reserves. As we all know, the gas does not need to flow through the Red Sea or through our moors. It's becoming more and more important in geopolitical terms. There have been many new announcements in the country. It's a large country, both in terms of geography and in terms of population. So we are structurally bullish in terms of the country. i think i think this is the first point that i would like to highlight the country due to issues that we know faced some social unrest around two years ago this social unrest is broadly solved but it left issues to be addressed in terms of government debt and in terms of public finances stress okay um so um this means that we had to to reclassify the debt in in stage two we only hold domestic debt but we also think that also from a prudency standpoint what makes sense for us is last year and this year to have a net income that is close to break even so slightly positive but we think it makes sense for us in spite of the fact that we do not hold any foreign denominator debt we think it makes sense for us in spite of the fact that at the end of the day probably local government debt will not face a difficulty in being paid because I mean the central bank is local, they have their own currency we think it is in the interest of the bank to keep the funds there and to have a prudent approach to provisioning. And so last year, this year, we are close to break-even. Looking at next year, 27, we don't think that it will be already in a steady state, but it will be a progress towards the steady state. And what we would expect is 28 to be very close to a steady state. So that's the way. So we will provide this year something to maintain the bank slightly above break-even, as we are seeing here. next year will be a progression towards a steady state and 28 we think in principle will be the steady state of course with all the uncertainty that we are living in the world right now with all the caveats that that we have to say there in terms of um in terms of uh for zoom i mean we are in the market for zoom behaves a lot like a professional institutional investor as some of your clients also behave the relationship that we have with for zoom is a relationship where we speak about financial issues where we speak about roe where we speak about shareholder value creation much in the same way as we the way we speak with with other investors i mean we we know that they are satisfied with their investment in bcp we know that also that there are they don't hold a controlling stake so it's not an M&A issue they hold a 20% stake so we know also that there would be other investors fortunately because of the of the story that we have of the equity story that we have here some institutional investors that probably would would be available also to to to invest in bcp we see a lot of interest in in bcp security so we see that for zoom continues to be interested in bcp we see that they are satisfied with the investment bcp however our job is to generate shareholder value and to make sure that we are an attractive equity story for everybody and if for whatever reason for their personal for their idiosyncratic reasons if they want for to invest elsewhere instead of bcp we have to make sure that we deliver value and we are an attractive equity story for for other investors that we think are available, by the way. So we don't see this as an M&A catalyst. In terms of the sensitivity to the discount rate, so if the discount rate goes down by 25 basis points, and this is more or less linear, the impact on the liabilities of the pension fund is around 86 million okay and and the reverse occurs if it goes up um but i would like to highlight that we have uh an excess of around 300 million so the first 300 million do not have any impact in terms of capital so broadly speaking i mean the interest rate would have to go down by around one percent i'm only speaking about the discount rate then there is some ilm on the would have to go down by around one percent for it to start to have an impact in terms of capital okay because the first part is basically a consumption of the excess between the the assets that are already in the in the pension fund and the liabilities of the pension fund so the first one percent do not have any impact after the first one percent the impact on capital is a is broadly 86 million for each 25 business point i mean broadly speaking and assuming that this is not compensated by the by the uh by the portfolio which which it is part because we do some asset management and a large part of the evolution is

compensated in the portfolio so i would it's not i would say it is not a material risk to our equity right now I would say that's very clear thank you thank you for the question please hold for our next question our next question today comes from Miruna Kiria from Jefferies please go ahead well afternoon and thank you very much for taking my questions I had a follow-up on on Portugal if I'm looking at the year-on-year growth rate in your corporate loans in June versus March this has slowed down, going from 5.7% in June versus 7.6% in March. Whereas at the system level, we haven't really seen a slowdown. So just wondering what's going on there. And then the second one was, I just wanted to have a clarification on Poland. Have you taken any provision this quarter related to consumer loans post the ECG ruling? And if so, what are your expectations for this type of provisions going forward?

Starting with the last question. As I believe I've commented here often, we are reaching the end of the Swiss franc saga. But I would say the litigation risk, the operational risk linked to litigation risk, of course at another level, will be a part of doing business in Poland. So we have to prepare ourselves. We don't know exactly what the amount will be. We don't know exactly what will pop up. But the way we see the Polish macro environment is that it is a market very prone to litigation and to litigation risk. And there will be always, I think, at least for the foreseeable future, some files, some elements of risk that will pop up that will generate here the need to assume costs and to provide them. I think this is the first point that I would like here to highlight. Exactly what will pop up, I mean, it's difficult to anticipate, but what I can be sure is that something will pop up because there are a lot of litigation lawyers focused on this business and they will try to do it. The good part of it, I would say, is that the system realizes it, the system realizes it, and make sure that the NIM of Poland above 3% and the ROE of Poland before litigation is good enough to cope with this additional operational risk and this operational cost. So I think this is what has to be said here. In terms of this very specific issue, effectively, Miruna, as you correctly point out, there was a decision, by the way, applicable to all of Europe, so it's not a decision applicable to Poland, by the ECJ, saying that banks should not finance upfront commissions and upfront costs in the context of consumer loans. So it is normal in some geographies that when you contract a consumer loan, you pay, I don't know, a 1-2% organization fee. And it's normal because when people ask for a consumer loan, typically they don't have the funds that gets incorporated into the capital and gets financed. By the way, we're not doing this in Portugal, I think. But in some geographies, it's normal to have it. And what the ECJ said is that it is not consistent with European law to do this, okay? And it's applicable to, I mean, to several geographies. In the specific case of Poland, it's difficult to anticipate what the consequence of this will be because ECJ did not tell what the consequence is. Whether the consequences, for instance, just giving back to the customers the interest on these upfront costs or whether a special penalty would apply as it happens in Poland. In any case, we have a simplified methodology for it, and in this simplified methodology, this made a register, a one-off cost of around 8 million euros in terms of the Polish NII, and around 15 million euros in terms of provision, which reflects, I would say, the data that we have until now. so to say the claims that we have until now and the court cases that we have until now that's that's what i i i can tell in terms of um in terms of um the corporate the corporate credit what what can i tell you that is important uh effectively more than a slowdown what we see is that in the first quarter of the year in the first quarter of the year um in portugal we were in the corporate loans we were basically stable so that was basically what happened and in the second quarter of the year that on the quarter on court so the quarter and quarter growth was relevant so we grew 2.8 percent so it is basically the first quarter of the year that for several reasons that had to do with some delays in projects and so on and some more granular issues that probably explains why we were a little bit left behind or we lost a little bit of market share in the first quarter of the year that we then more than recovered in the second quarter of the year. And this is exactly this influence that explains the dynamics that we are commenting. The good part of it is that apparently we are now with the new dynamics and we are going.

Thank you for the questions, Miruna. Please hold for the next questions. Our next question comes from the line of Carlos Peixoto from Kaisa Bank BPI. Please ask your question.

Good afternoon. A couple of questions from my side as well. So the first one would actually still be on the Fees Outlook. Because just basically, even if we sit on the low end of the mid-single-digit growth in 2026, it does feel that this is still a bit of a challenging environment or challenging I was just wondering if you see any levers in the second half that could give an extra boost, perhaps performance fees, or just to have some additional usability on that. And still within fees. In the second queue, there was a bit of a decline. If you look at the second Q standalone in credit card fees, I was just wondering whether this is the reflection of some kind of changes in pricing or whether there is any specific related to this. Then on another topic, on the cost side, I was wondering what is your guidance or whether you keep your guidance for cost growth in 2026 and whether that guidance is including or excluding last year's specific items, namely some retirement costs, if I remember correctly. And just a final question. On an effective tax rate in Portugal, how do you see it evolving and what are your expectations for the full year? Thank you very much.

In terms of effective tax rate, of course, it depends exactly on the items. but what you would say for the full year value a value between 24 and 26 makes sense for us but of course it depends it depends on on what we are seeing in terms of fees I mean there are no miracles in terms of fees what we try to do is there is a part of it that has to do with asset management fees and with that and with the bank assurance fee that you know as well as we do and this part of the fees is linked to the market perception and also to us being able to offer good advice to our clients, have a good platform and so on, and we think there's still some room to go if the market behaves well, so to say. I think this is a part. In terms of credit card fees, it is well noticed what you commented. In terms of full year, we are expecting a growth. There are sometimes some incentive fees from the Visa and from MasterCard that in different years may occur in different months, but sometimes the comparison with the same month or with the same quarter of last year is a little bit misleading, but in terms of the full year, we are expecting the credit card fees to grow aligned with credit card transactions and with the credit card create and debit card volume so to say which are evolving well then its clients clients clients i mean we i mean it is this is not the sprint this is a marathon so what we try to do on a daily basis to try to to do to give the best service to be able to to acquire new clients and to the acquisition of new clients and cross-selling to to deserve more fees it's not to charge more fees to deserve more fees from the from the clients and that's what we do when when we say mid to high single digit we are actually on the mid single digits where we are growing five percent so it is we are delivering what we said within the interval that we said that we feel comfortable with it so it is a lot of work as you've seen in the first pages presented by Miguel Maia we are acquiring clients we are acquiring we the clients are satisfied with our app are satisfied with our service if we deserve through better service more loyalty from the clients we will have more fees but more and more it has to be deserved it is not a charge it's not a bullet a silver bullet in terms of costs i mean right now we are in a moment of transformation of the banking sector and it's very difficult to to anticipate which which investments and some of these investments flow through the cost line are exaggerated or are worthwhile. Mainly when we speak about AI and cyber. It is very difficult to really say, should I invest 5 million or 2 million in an additional cyber security? It's very, very difficult. So what we try to do is, as a rule of thumb, And if in doubt, of course, if it's a clear cut business case, both in terms of risk and in terms of revenues, of course, we do it. But if in doubt, what we try to maintain is a cost to income that is best in class. We think that this is a discipline, this is something that we want to focus on. So as long as we are with a cost to income that is broadly best in class, we will tend to be more prone to invest in AI and to invest in cyber, or to invest in transformation. situation to go beyond that either i mean having a higher cost to income or starting cutting even more in terms of cost to income there have to be very good arguments for it when we speak about cost to income we don't include the extraordinaries linked to early retirements and so on but in any case i mean we have not designed any early retirement plan this year it's not something that we have decided yet. Let's see by year end whether it makes sense or not, but this is not a decision that we have taken yet.

Thank you for the questions. Please hold for our next question. Our next questions come from the line of Hugo Cruz from KBW. Please ask your question.

Hi, thank you for the time. So on the topic, I have three questions, but on the topic of costs, the first question, so the press, some Portuguese press has talked about your discussion discussions with the labor unions, and the discussions seem a bit challenging. Could this have an impact in your cost trend for next year, just on the staff side specifically? Then two questions on the cost of risk. Earlier in the call, you mentioned that you've been creating some overlays for geopolitical I was wondering if you could quantify those overlays, what's been built so far, in Euromillions. And then finally, when I look at your business plan that goes to 28, you have cost of risk targets of 50 for the group, 45 for Portugal. I think cost of risk has been a bit probably better than expected over the last year or so. So I was wondering if there's room to revise those targets and if you think the cost of risk could be lower. Thank you.

Okay. when when we presented the 28th i would say plan it is an uh it is an ambition but what i said is that every quarter we will be updating the guidance so to say and what i said at the end of my presentation is right now that we are clearly over delivering and the guidance that we are giving is better than the target so we said one year and a half ago that we thought that for portugal the cost of risk should be somewhat below 45 basis points we are now having around 32 basis points i would say it's difficult to anticipate what will occur two years from now mainly in terms of cost of risk but at least for the next 12 months i would say that the the cost of risk that we are expecting is much more aligned to the cost of risk that we have now then with the cost of risk that we had projected for 28 so uh the guidance that we are the 28 is just here or just to remember what we said one year and a half ago but it's not a guidance the guidance is what we comment in these uh in these presentations um in terms of the overlays the quantification of the overlays and i believe they they they will they are public information they will be in our uh in of report. In Portugal, we have 130 million euros of overlays. And in Poland, we have 40 million euros of overlays. In terms of the labor unions, the labor unions, I mean, are, I mean, it's part of doing business. The negotiation with the labor unions is part of management, I would say.

So it's part of our job to do the negotiation of person the it's it's a normal process so I would not I like anything special thank you questions please hold for our next question the next question comes from the line how do we spread us from autonomous please ask your question good afternoon everyone thanks for taking my questions my first one is on deposit competition I wanted to ask you whether have you seen any impact in deposit outflows or higher repricing from the new attractive treasury certificates launched by the by the government and looking ahead if the portuguese government also introduces a tax-free investment account similar to the isa account here in the uk would you see this as a risk to deposit growth for deposit cost going forward Then my second question is on the, you know, there was this recent favorable decision to the banking sector regarding the resolution fund contribution. Could you please quantify the potential P&L upside for BCP?

And what's the expected timeline before any recovered could be recognized in earnings? uh and then just a very quick follow-up could you please provide the tailwinds and headwinds in terms of capital srt's or maybe like the higher capital requirements at poland thank you okay um in terms of um in terms of the decision from the court it is a specific case of uh where that will be discussed the amount that was being discussed in this specific case was 30 million it has not been it is not final the decision because in theory the the tax authorities may still actually the the resolution authorities may still ask for a review of the decision i would say that this it will the decision the final decision probably will occur first quarter of next year but it's we are speaking here about 30 million okay in terms of the the competition from the government we are seeing some some outflows as we had seen in the past there is some fluctuation is helpful so when we had the also more more competitive but in any case in any case I would say nothing dramatic so to say. Our approach to our clients is I would say it's a special approach so we are not a monoliner so we are really specialists in the daily banking relationship and in this relationship and in the full banking relationship so typically we don't have customers that only have a term deposit with us so we have a customer that typically has its current account with us, has the nominal deposit with us, has a day-to-day relationship with us, and then on top of the day-to-day, may have then a consumer credit, may have the mortgage, may have the investments and so on, which creates, so to say, a relationship that's much more than monoproduct. So this, of course, immunizes us a lot from, I would say, more opportunistic, so to say, offers that always appear in the market in terms of of tailings of of capital what I would like you tie here to highlight as I commented is the secretization that we are working on around 20 basis points and the organic capital generation then of course other things may may occur but I mean it is the experience here to participate in it may go either way thank you for the

question the wish one moment for our next question the next question comes from the line of Bohar Ramirez from CT please ask your question hello a good morning a good afternoon thank you very much for taking my questions.

I have two questions on NII, please. Firstly, so in Portugal, the NII growth was very strong, around 5% quarter over quarter. This is actually more than if I just for the day count and the volume growth that is in Portugal. So maybe I would like to ask if you could please provide more details on the drivers of the NII growth quarter-by-quarter, which was very, very strong and also following a very strong Q1. And then my second question would be on the NII guidance of meetings for 2026 and 2027.

I understand that's driven by volume growth a little bit by rates and then the reinvestment of the structural hedge I would like to ask if you could please provide a bit more color on the yields of maturing hedges Thank you Starting with the last question in terms of the yields of the maturing hedges what what if they are here in the page I think in annex I think in page just check here what is the page page 56 of the presentation I don't know whether we can let me just check here what I can here okay I want you all right okay what you see here I mean is this is basically the hatch that we have and the average rate that we have in our in our in our maturing edges these maturing averages have to cover broadly speaking our current accounts and around 50% of the of the term deposits broadly speaking so as they mature as they mature we reinvest them and as i mean as a rule of thumb um it's good to assume that we can invest them on uh at five year rates that probably right now are around three percent so in um in 27 you can assume that the difference that we see here between the the stock of the hedges of 32.5 billion and 27.7 billion so these uh five five billion will be uh will mature at around 2.3 because the average rate does not change and will be reinvested at around three so effectively we will have here a benefit to our margin of around 70 basis points and effectively this is one of the reasons why we feel comfortable with the with the guidance of of the low teams for 27 and as you see here for 28 there will be an additional if the interest rates of the 5g interest rates continue to continue to be as high you see there will be an additional benefit intent in 28 of almost 9 billion invested at 70 70 basis points in terms of the um the evolution in the quarter uh of them of the margin i would say we have If we, a large part of this, I would say, has to do with the fact that our assets have, a large part of our assets have a beta of almost one, so to say, and in the term deposits, our beta is around, in retail term deposits, is around 50%, so I would say. And it is in this management, together with the investments in reinvestments of the structural hedges, that explain this evolution. The beta of 50% on the term deposits comes from a very, I would say, sophisticated management of the segmentation and of the pricing. So what we see is that we are able to gain slightly market share, whereas if you compare, for instance, our average term deposits rate with the term deposits rate of the market, you see that we are around 20 basis points below in terms of term deposits. So this means that if we are not losing the client, it means that we have to calibrate very well what type of interest rate we offer in each type of situation to each type of client. And at this point, I would not comment much more than this. Okay.

Thank you for the question. One moment for our next question. We have the last questions coming from the line of Cetilia Romero from Barclays. Please ask your question.

Thank you very much for taking my questions. Most of my questions have already been taken, so just two quick follow-ups from my side. On mid-term targets, thank you for the regular updates to this year's guidance, which we appreciate, obviously. I was under the impression that there will be also an update on the 2028 targets at some point this year. Is that still the plan? And just one follow-up on Poland, if I may. I will touch upon this earlier, but I'm not sure whether it was fully addressed. You have previously indicated a relatively stable NII in Poland for this year. Do you still see that as achievable, or do you see any risk to this target?

The guidance for NII in Poland is stability. As you see right now, it is decreasing somewhat. So the guidance that we are giving is stability. Stability may be plus or minus two. So its stability is not necessarily zero. So it is a value around zero, but with an interval around it. In terms of updating, the targets are the targets. So we have a medium-term plan. We do not approve a medium-term plan every year. So we approve the strategic plan every four years. So the targets are the targets. What we can do, and we have to decide whether we will do it or not, there are some banks that do it, others that don't do it, what we can do is to be more formal in terms of the updating of the outlooks, maybe for 27, maybe for 28, and what I commented is that in the context of the results of Q3, we will analyze whether we will do it or not. So it's a decision that the board has not taken yet. There are some banks that do it. Then we have to decide whether we'll do it for 27 or for 28. But it is possible that we do it. So we have not decided it yet. But we will not change the plan. But we may change the outlook, which is a little bit different.

Thank you very much. That's very clear.

That concludes the Q&A session. I'll now hand over to Mr. Miguel Braganza for our final remarks.

Okay, thank you very much. I think this quarter shows very clearly the robustness and the consistency of our results. Results that are based on customer business, results that are based on commercial activity, and results that are based on a very disciplined management of the margin, which we expect to continue going forward. thank you very much for following us and we are of course available for them one-to-one sessions if you have additional doubts thank you very much