INTERNATIONAL ACTIVITY

Transcription

1 INTERNATIONAL ACTIVITY The Eureko Group is one of the major European insurance and asset management groups. Eureko has focused on developing and consolidating the leadership of the Group s operating companies Achmea (Netherlands), Seguros e Pensões (Portugal), Interamerican (Greece), Friends First (Ireland), F&C (United Kingdom) and Union (Slovakia) and on enhancing co-operation with the associate companies within the scope of their business within their respective local markets. Eureko s consolidated business during 2001 was marked by the growth of insurance, with total premiums up by 9% over the previous year, with particular emphasis on life assurance and health insurance premiums, which grew at a rate of 10% and 11% respectively. The poor performance of the financial markets, the impact of which was felt to a greater extent by the investment funds and by the life assurance side of the insurance business, was to be determinant to the performance of profits. Eureko s consolidated net income fell 59.7% compared to the previous year, reflecting the lower yields on investment, the reduction of the asset management and banking business and the nonrecurring costs related to the restructuring implemented by some of the operating companies, the costs incurred by the holding company in financing acquisitions and the increased holdings in strategic investments. management capacity and the involvement of the operating companies, which will lead to greater management responsibility with regard to the global business lines with a view to taking the greater advantage of potential synergies and to preparing for the future challenges in a larger market. Seguros e Pens es Seguros e Pensões, wholly owned by Eureko, is a holding company for the insurance and pension fund management businesses in Portugal under the management of the Banco Comercial Português Group. It operates under a multi-brand, multi-channel and multibranch strategy, and is the market leader in several business areas. During 2001, Seguros e Pensões consolidated its leadership of the market, with a 28.4% share of the total insurance market, 33.0% of the Life branch, 22.5% of the Non-life branch and about 25% of the Pension Fund business. It also has an outstanding position among the larger insurance brokerage groups operating on the domestic market. The year under review was marked chiefly by consolidation in several areas: integration of Seguros e Pensões into the Group Eureko; the strategic, competitive position of the various brands in the diverse market segments and distribution channels traditional insurance channels, banking channel, direct channels (telephone and Internet); restructuring and the new organisational model adopted; and the technical and operational platforms, adopting best practices with a view to making full use of synergies, improving quality and increasing efficiency and profitability. As at December 31 st 2001 the BCP Group s holding in Eureko, B.V., amounted to 24.6%. At the end of the year, Eureko announced changes to its Executive Committee, designed to increase both its The year was a difficult one for the insurance industry around the world, as a result of the impact of the September 11 th events on claims costs, on the value of assets and on reinsurance costs. The performance of 66

2 Detail of Rivoli Teatro Municipal Seguros e Pensões and of the Portuguese insurance industry as a whole in 2001, excluding of direct exposure to the September 11 th claims, was also greatly affected by the situation of the economy, causing a significant deterioration of underwriting and financial profitability. The bad weather early in the year, the worsening underwriting margins in some of the Non-life branches and the poor performance of the financial markets led to a reversal of the upward trend of the profitability indices seen since the beginning of the nineties. The impact of the performance of the capital markets was reflected in the negative underwriting margins on certain capitalisation products and in the inability of the regulatory revaluation reserve and of the contingency fund to offset potential losses. During 2001 the domestic insurance market grew by 12.9% as far as direct insurance premiums are concerned (5.7% the previous year), underpinned especially by the Life branch, which increased 18.3% (0.9% the previous year), while the Non-life branches grew by 6.7%, substantially less than the 2000 figure of 11.8%, although the 2000 figure was influenced by a large extent by the changes seen in workmen s compensation tariffs caused by changes to the legislation and by the good performance of motor insurance. In the field of Non-life insurance attention is also called to Health insurance, which rose 13.1% (16.8% the previous year), better than the overall market average, and to the grew by 5.5% in motor insurance (up 7.8% the previous year), caused by the sharp price competition in the marketplace. The high performance of Life assurance was largely the result of products enjoying tax benefits retirement and education savings plans (PPR/E), which were up by 26.5%. The performance of Seguros e Pensões was slightly above the domestic market, with overall direct premiums up by 10.3%. Non-life premiums rose by just 0.2%, reflecting the performance of the traditional channels (agents and brokers), largely the result of the implementation of more restrictive underwriting policies, particularly in motor insurance where the aim was to improve underwriting returns on the business. The volume of Life assurance premiums grew by 16.6%, reflecting the high performance of the banking channel. This is expected to continue in the coming years, despite the high customer penetration rates that have already been achieved by most of the BCP distribution channels. There is still potential within the SottoMayor network to increase the penetration rate as far as insurance products are concerned. Attention is drawn to the total volume of PPR/E, which provided a market share of 30.2% and clear leadership of the sector. During 2001 Instituto de Seguros de Portugal (Insurance Institute of Portugal) authorised Seguro Directo to deal in Non-life insurance other than motor insurance, namely Personal Accidents, Health and Comprehensive Household, allowing it to become a multi-product company. In parallel, a new version of its website was prepared that now allows motor insurance to be taken out online, in addition to providing simulations. In Health insurance, Médis launched its website in June 2001 that has already attracted a large number of customers and preferred providers. The site has three access areas: general public, customers and health care providers. Among other things, customers can view their statement of account, their appointments and the status of pre-authorisations, while preferred providers can view their health service invoicing and submit applications for pre-authorisation. To perfect its value proposal even further, Médis has provided its customers with a Physician Service, in which a doctor is available at all times to advise the insured/patient on the basis of a solid relationship of proximity and confidence. Stabilisation of the operational platform and reestablishment of adequate levels of service were the central 67

3 factors of Auto Gere s activity during In this connection, a start was made to restructuring, involving the negotiation of the outsourcing of the processing of all the documentation, including reception of correspondence, opening claims processes within the IT system, the creation of specific areas for payments and for the analysis of responsibility for the accidents, as well as for making damage inspection appointments. At the same time, special attention was given to claims management, which involved redimensioning the teams and undertaking specific training courses for the staff as a whole, while a new claims management computer system was installed. A new company was set up in 2001, ICI Companhia de Seguros de Comércio e Indústria, S.A., a wholly-owned subsidiary of Seguros e Pensões. The company is a specialised insurer operating solely in the large company segment. It is underpinned by a dedicated operating platform and by a complete range of risk management services and innovative products. The Império Bonança and Ocidental insurance companies now focus their entire activity on the individual and small and medium enterprise segments. As far as the agents channel is concerned, Império Bonança, in the wake of its new strategic stance, has actively promoted a new product Império Reforma and Bonança Reforma involving a major change as far as the commercial activity of the Brokerage network is concerned, centred as it is on an integrated vision of customer requirements, a structural aspect of the BCP Group culture. Within the framework of the adoption of a new model of commercial activity for BCP s retail network, the conception and marketing of Ocidental s protection products are now monitored by the Bancassurance Product Unit, while investment products (e.g., unit-linked, retirement and education savings plans and capitalisation products) are monitored by the Investment Product Unit. Seguradora Internacional de Moçambique into IMPAR Mozambique. The new incorporating company, called Seguradora Internacional de Moçambique, S.A.R.L., is now the biggest private insurer operating on the Mozambican market. In Macao, Companhia de Seguros de Macau continues to successfully develop its bancassurance strategy in conjunction with Banco Comercial de Macau. In this area the focus is also on the integration of Império Assurance et Capitalization (France) into the Eureko structure. In a market in which the general solvency of the industry was affected by the reduction of the value of assets, the financial soundness of the Seguros e Pensões Group was once again recognised by Standard & Poor s and Fitch, the renowned international rating agencies, which confirmed their notations of AA- ( Very Strong Financial Security and Excellent Security, respectively) awarded in 2000, emphasising both the management capacity and the financial soundness of Seguros e Pensões. Attention is also drawn to the start to the rating process in respect of Companhia de Seguros de Macau by the international agency A.M. Best, which gave it an A notation, equal to Standard & Poor s AA- notation D % Total Assets 8,480 7, % Premium income 2,374 2, % Technical margin % Technical margin net of operating costs Net income % Market share Non-life 22.5% 24.0% Life 33.0% 33.5% Total 28.4% 29.1% Number of employees % (EUR Million) HIGHLIHTS OF SEGUROS E PENSÕES Within the scope of the international business, emphasis is given to the merger by incorporation of SIM 68

4 banking and insurance products within the scope of commercial co-operation with the Group s insurers operating in Macao, designed to provide an integrated financial offer as a factor of differentiation in the marketplace. The slowdown of the growth of the global economy, largely driven by the deterioration of the fundamentals of the USA economy, was clearly reflected in the economies of Southeast Asia, highly dependant as they are on exports. In this connection, the foreign trade of the Macao Special Administrative Region suffered a sharp downturn, partly offset by the quite reasonable performance of tourism, which, underpinned particularly by gambling, continued to play an important role in local macroeconomic terms. The economy of Macao continued to be dominated by a lack of any major investment plans able to instil greater dynamism in the local financial sector and by apathy in the real estate market, notwithstanding the falling interest rates over the year, particularly as from September, and the public incentives to home purchases. Operating conditions therefore worsened for the financial institutions in this market, characterised by little demand. Such as there was inconsistent and this contributed to a sharp upturn of the liquidity of the system and to a consequent increase of competition in bidding for scarce business opportunities. Against a background of global economic crisis, scarce investment and inconsistent domestic consumption that has had a negative effect on the business of most of the financial institutions, as a result of worsening asset quality or of difficulties experienced in increasing market shares, BCM s strategy was centred on three fundamental areas: more dynamic commercial activity, preservation of financial soundness and technological innovation. In the commercial area, a systematic set of measures was implemented, largely directed at the retail segment, with a focus on consumer credit products particularly personal loans and credit cards, the issue of which grew at a substantial rate and mortgage loans. These campaigns were conceived from a cross selling standpoint, linking Protection of financial soundness through preservation of asset quality was another of BCM s strategic priorities. It was based on stricter, more consistent risk evaluation underpinned by in-depth management information, on a par with systematic monitoring of those customers more vulnerable to the changes to the economic cycle. Greater strategic importance was given to the technological aspect, both as a factor of internal motivation and as an instrument designed to improve operating and commercial efficiency in response to the constant changes of the market, to the satisfaction of the customers financial requirements and to the improvement of quality, in keeping with the overall guidelines established by the BCP Group for its branches and associate companies abroad. In this connection, emphasis is given to the start-up of a technological platform directed at the understanding and management of customer comportment in their financial affairs and their relations with the Bank, in line with the best practices of customer base retention and management. BCM s performance during 2001 was marked by a continuation of a satisfactory level of business, particularly as far as fund taking is concerned, and by the growth and diversification of the range of services provided, leading to an increase of commissions in the income structure. Total assets as at December 31 st 2001 amounted to 946 million euros, up 6.4%. The loan portfolio was down 2.9% at 339 million euros, with a quite reasonable performance in consumer credit and in financing foreign trade, in which the Bank has a major competitive advantage. Customer deposits performed well, to stand at 855 million euros at the year-end, an increase of 13.6%. The greater volume of funds taken was accompanied by an increase of money market operations, increasing their weight as a proportion of funds placed. 69

5 Net interest income fell 13.3% to 21.0 million euros, reflecting, on the one hand, the huge pressure on interest rates on loans and, on the other, the growing placement of liquidity surpluses in lower risk, lower yield assets, particularly money market placements. Offsetting this, other income performed very well, up 11.7%, benefiting from the growth and diversification of commission-generating services. Operating costs were down 3.5% as a result of very strict cost control directed at maximising efficiency gains, without prejudice to implementation of the investment programme directed at modernisation of the support structure. Net income for 2001 amounted to 8.4 million euros, 18.5% below the previous year s figure, generating a return on assets (RoA) of 1.0% and a return on equity (RoE) of 11.5% D % Total Assets % Loans and advances % Customers' deposits % Net interest income % Net interest margin % Other income (net) % Operating costs % Net income % Number of employees % (EUR Million) HIGHLIGHTS OF BANCO COMERCIAL DE MACAU and services conceived to satisfy all the financial needs and expectations of the various segments of the market. The persistent political instability in Mozambique in recent years, the natural disasters that devastated parts of the country and the sharp depreciation of the metical were the main constraints to the economic and social life of the country in To sum up, the upturn of energy prices meant that the 7% inflation growth target established for 2001 could not be met, the metical depreciated by more than the previous year s figure, further worsened though moderately by the terrorist attacks in the USA, and the trade deficit was bigger than expected. Agaisnt this background, the intervention of the Mozambican central bank was centred on monetary policy measures designed to restrict monetary growth and to control both inflation and the depreciation of the metical. These measures included: reduction of the mandatory reserve calculation and constitution period; increase of the Interbank Money Market interest rates; extension of the Treasury Bill market to other operators, on a par with stimulating the Secondary Treasury Bill Market; the adoption of a new stance involving daily intervention on the money market; changes to its role on the Interbank Currency Market involving a system of currency and exchange rate auctions; and modernisation of the payment system, with the introduction of electronic clearing between financial institutions. The strategic priority of the BIM Group during 2001continued to be centred on consolidation of its value proposal based on innovation and quality. This made a decisive contribution to the development of the Mozambican financial system and economy as a result of the marketing of innovative financial products The merge by incorporation of BIM-Banco Internacional de Moçambique into BCM-Banco Comercial de Moçambique gave rise to a new company, Banco Internacional de Moçambique, S.A. (BIM). This was not only an important step taken to strengthen BIM s competitive position on the domestic market but also an opportunity to create shareholder value, underpinned by taking advantage of significant operating synergies and of the greater commercial effectiveness in the banking, insurance and specialised businesses, in addition to 70

6 exploring new business opportunities, with their expected impact on profitability. In organisational terms, the Bank suited its structure to the new situation caused by the creation of the new BIM Group during 2001, including unification and rationalisation of structures and the reorganisation and stimulation of the commercial networks. To take full advantage of and to capitalise on the brand awareness achieved in the marketplace, a Communication and Institutional Image Office was set up, the Bank s operating capacity was increased involving restructuring the IT area and the Customer Attendance Centre was created, reflecting the growing focus on the provision of high quality services. As far as stimulating commercial activity is concerned, BIM provided new products and services, and entered into partnerships directed at the development of businesses considered strategic on the Mozambican market. The BIM Group s integrated offer was further extended as a result of the products and services provided by CrédiCar, a company involved in auto financing for the individual and corporate segments of the market. household savings and the Under26 Package, an integrated scheme designed with the younger segment in mind. As at December 31 st 2001, following the merger of Banco Internacional de Moçambique and Banco Comercial de Moçambique during the year, customer funds stood at 526 million euros and loans and advances to customers at 257 million euros. Consolidated net income amounted to 10.2 million euros Total Assets 681 Loans and advances 257 Customers' funds 526 Net interest margin 47 Other income (net) 28 Operating costs 55 Net income 10 Number of employees 1,550 Number of branches 88 (EUR Millions) HIGHLIGHTS OF BANCO INTERNACIONAL DE MOÇAMBIQUE Seeking to consolidate its innovation and technological leadership in conceiving products and services suited to the needs of the various segments of the market in which it operates, BIM developed a set of innovative initiatives for the Mozambican market. It led the first public offering on the Mozambican capital market, involving the shares of Cervejas de Moçambique and it was also the first financial institution to provide mortgage loans on the market. The Bank provided a platform that is unique in the Mozambican financial system, involving an integrated software solution that manages all the card, ATM and POS business (integration of the MultiBIM and BCM Cash networks into MultiRede). As far as product innovation is concerned, it overhauled the Monthly Income Account and launched the Savings Account for During 2001 the BIG Bank GDANSKI Group implemented a profound restructuring and business growth plan involving heavy investment in the modernisation of its technological resources, on a par with segmentation of its commercial approach. Here, the emphasis was on the enlargement of its retail network and on establishing an innovative value proposal for the business and corporate segments. These efforts were underpinned by the implementation towards the end of the year of a programme to increase its shareholders equity to provide the Group with the financial resources required to pursue and develop new initiatives and to consolidate its competitive position on the Polish market. 71

7 BIG Bank GDANSKI carried on its business in framework of an economy marked by slowing production and by a downturn of domestic demand caused by falling investment. In parallel, inflation and interest rates were down, while the zloty remained strong. Allied to the lower tax revenue, this helped to increase the public deficit, largely financed by domestic financial resources, and this contributed to stagnation of demand for domestic credit. investments required to implement the migration of its customers from the old, decentralised IT platforms used by BBG and BIG Bank to the centralised ICBS system. This process involved the upgrade of the central system in the middle of the year and an exhaustive survey of the customers and products to be migrated to the new platform with a view to minimising problems and to preserving the quality of the service and the business with the customers. The restructuring of the BIG Bank GDANSKI Group in various areas profoundly marked the year. The goal was to meet the Group s commercial, operational, management and share capital requirements in a process that began in January 2001 with the merger of the BBG and Big Bank banks the latter controlled by BBG which was BCP s Millennium joint venture partner for the retail market. This merger united under a single legal entity the entire banking business of the BBG Group, allowing the implementation of a set of measures designed to increase the efficiency of the commercial management of the Group s customer base and to rationalise the ancillary structures. As far as the new commercial approach is concerned, the proven, recognised concept of the Millennium network was extended to the entire BBG operation in the retail market and, at the same time, two new commercial networks were launched. These provided a specific value proposal for distinct market segments: the Millennium Prestige Bank a network targeting the affluent individual segment, providing a full range of products and services with a focus on investment products, capitalising on the special links with the BBG Group s broker (DM BBG), so dimensioned as to make its mark in the major cities of the country; and Millennium Business a network addressing small commerce, taking advantage of the capillarity of the Millennium network to establish the Account Managers of this new commercial network. As part of the restructuring of its operational platforms, BBG made a start to its programme of In its approach to the company market, BBG opted to set up two specialised networks: the Middle Corporate based on 22 Corporate Retail Centres providing national coverage, involving Relationship Managers to service this type of customer; and the Large Corporate in which customer management is provided from the Strategic Customer Centres in Warsaw and Gdansk, where Customer Managers are specialised in the provision of services to this segment of the market. Several initiatives were implemented to foster the commercial side and to enhance relations with the customer base. For their future impact on turnover, attention is drawn in this connection to the following: the creation of a unit specialised in mortgage loans designed to stimulate the marketing of this product through the BBG networks and through its own network of agents and property developers; the implementation of mechanisms to increase the sale of the products of associate companies (leasing, factoring, brokerage and investment banking), including a start to the cross selling of PZU insurance through BBG s individual customer networks; and the incorporation of an investment fund management company (TFI) wholly owned by the Group, which will market investment fund units as from Several measures were introduced within the scope of the restructuring and rationalisation of the business support areas, including: concentration of customer file management, clearing, foreign transactions, transaction control, physical treasury and banking card production 72

8 and management functions into a central back office unit; the creation of a central Procurement unit designed to take advantage of synergies provided by BBG s bargaining power as a very large customer; and the complete overhaul of the credit decision process involving centralising decision at a central department in Warsaw and the adoption of specific models to assess the credit risk of the retail business (credit scoring), of the small businesses (expert model) and of the companies (rating based on a new Balance Sheet Centre). The programme designed to increase BBG s financial structure was also of particular importance. The share capital was doubled and subordinated debt issued to provide the Group with the resources required to pursue its expansion plan and to set aside credit risks provisions in keeping with best international practice. Following the share capital increase, the Banco Comercial Português shareholding rose to 44.13% in the wake of the authorisation given by the National Bank of Poland to increase BCP s holding up to 50%. The total assets of the BBG Group stood at 5,545 million euros as at December 31 st 2001, with loans and advances to customers totalling 2,132 million euros and customer deposits amounting to 3,875 million euros. Notwithstanding the increase of provisions within the scope of a more conservative provision policy and the restructuring costs, the net income for the year amounted to 18.2 million euros, an increase of 13.9% over the figure for the previous year (*) D % Total Assets 5,545 5, % Loans and advances 2,132 1, % Customers' deposits 3,875 3, % Net interest margin % Operating costs % Net income % (*) Account year of 2000: from October 1 st,1999 to December 31 st,2000. (EUR Million; change 1 euro=3,5250 zlotys) HIGHLIGHTS OF BIG BANK GDANSKI NovaBank completed its first full business year in 2001, confirming the expectations surrounding this new financial institution. The Bank has a new concept of retail banking adapted to the specific nature of the Greek market, with a special focus on the medium-to highincome individual segment. A very convenient, high quality service is provided to these customers. Benefiting from very considerable domestic demand basically driven by investments related to the use of the structural funds provided by the European Union and by the modernisation of the infrastructures involved in the 2004 Olympic Games, the Greek GDP growth was very robust. In view of the predicted stabilisation of the inflation rate and of the continuation of the policy directed at cutting taxes, the Greek economy is set to continue to grow at a rate higher than the European Union average. By presenting a service of excellence very different from that of the competition, based on the provision of innovative products and services underpinned by a fairly aggressive marketing strategy, by a multi-channel distribution platform provided with the most advanced technology, branches with small, though very effective teams of employees, and with their modern, welcoming layout that transmits an image of innovation, speed and transparency NovaBank quickly achieved a brand awareness on the Greek market standing at some 96% in Athens, an awareness usually achieved only by the bigger of the local financial institutions. Branches continued to be opened apace during 2001 and the year closed with a total of 71 points of sale, mostly located in the two principal Greek cities, Athens 73

9 and Salonika, which together account for around half the Greek population and about 60% of NovaBank s target market. Complementing this, the capacity of the remote channels Internet, telephone banking and ATMs was increased, allowing the customers to undertake over 70% of their transactions during the year via the alternative channels. In keeping with the specific nature of the target market and with the focus on the provision of a personalised service, an ample range of products was conceived and provided, with emphasis on the following: in the placement of savings, investment with partial allocation of the sums invested to capital guaranteed investment funds; the offer of competitive, flexible mortgage loan solutions, an area in which NovaBank accounted for about 6% of all the new transactions contracted by the sector as a whole; and, in the services area, the launch of the Electron, Visa and MasterCard cards linked to excellent financial solutions with a view to their promotions on the market and to their subscription by customers. NovaBank has taken the excellence of its service and the continued improvement of Quality as its competitive, differentiating factor. For the purpose it has developed systematic measurement systems to assess the satisfaction of external and internal customers and employees in a project that received very large response. The information received has been very helpful to the pursuit of the strategic objective. In parallel, crucial importance was given to claims received and to their control and fast reply, with a view to ensuring a large degree of customer loyalty and recommendation. The levels of awareness and business that have already been achieved provide good prospects for the growth of the business in a market of recognised potential, supported by optimisation of the back-office structures, the integration of the information systems into a common platform and the advantage taken of new business opportunities. In this connection, projects have been concluded involving preparing the value proposal for an approach to the Private Banking and the Small and Medium Enterprise segments. The outlook is also one of greater activity in the insurance business, in partnership with Interamerican, the goal being to foster cross selling and to secure a high rate of penetration of customer assets. Following the acquisition of Sitebank, a small bank in Turkey, NovaBank is now set to develop cross-border business in this country. In financial indicator terms, NovaBank s total assets stood at 1,332 million euros as at December 31 st 2001, up 79.5% from the previous year s figure. Loans and advances to customers amounted to 211 million euros, while total customer funds rose to 1,082 million euros D % Total Assets 1, % Loans and advances % Customers' funds 1, % Number of employees % Number of branches (EUR Million) HIGHLIGHTS OF NOVABANK Launched last year, BPA Bank N.A., completed its first full year of business with a total of five branches located in the Newark and Elizabeth areas of influence. These branches are remarkable for their comfort and functionality and their modern image, and they stand out in the marketplace for their innovative approach and for the distinct value proposal, reflected in the notable brand awareness that has been achieved among local 74

10 residents, with a predominant community of Portuguese origin. BPA Bank s commercial strategy is based on the provision of a full range of financial products and services and on innovative technological platforms. It also relies on the support of the BCP branch in New York, particularly in setting up operations and in implementing the more complex, specialised transactions, particularly in the field of extending credit. Turnover exceeded initial expectations, growing at a rate higher than budgeted for the year. Over eight thousand accounts were opened and total assets exceed 163 million euros. This has led to recognition by and interest of both the supervisory authorities that have already examined BPA Bank in the light of criteria used in respect of the bigger banks and of the local analysts that usually monitor the evolution of the business of recently created banks. Comercial (split), Banco Mello and Banco Pinto & Sotto Mayor implied a major restructuring and strategic redefinition programme. This involved redimensioning the staff, rationalisation of the ancillary structures, the migration of customers bases and information systems to a single IT platform, harmonisation of internal procedures and a new commercial approach, all of which conditioned the business of Banque BCP on the French market. During 2001 the French economy clearly slowed, returning a growth rate of less than 2% and an unemployment rate of over 9%. Notwithstanding the reduction of the inflation rate to below 2%, the generally adverse economic situation was reflected in the confidence rating of consumers and of the economic agents in general. This led to an immediate downturn of demand for loans, the effects of which were felt particularly in the industry and construction areas, with evident effects on the banking industry D % Total Assets % Loans and advances Customers' funds % Number of employees % Number of branches (EUR Million) HIGHLIGHTS OF BPABANK Of the initiatives included in the restructuring and strategic redefinition of Banque BCP in France, emphasis is given to the transfer of a part of the administrative functions carried out at the branches to the central back-office services, the centralisation of the credit analysis and decision procedures, the opening of new branches and the overhaul of the layout of the entire branch network, the migration of part of the transactions to alternative channels ATMs, Call Centre and Internet and segmentation of the customer base. Banque BCP (France) Integration of the structures and business of the institutions that gave rise to the incorporation of Banque BCP (France) in 2001 Banco Popular In the field of its commercial activity, Banque BCP developed and intensified its cross selling activity, with special focus on the sale of savings and investment products, insurance and payment cards and on monetary transfers made by emigrants to accounts with other BCP Group brands in Portugal. The goal was to increase customer loyalty, in addition to increasing the 75

11 relative weight of commissions in the income structure. At the same time, appealing campaigns were launched within the scope of loans to individuals, mortgage loans and consumer credit in particular. Banque BCP s 2001 results were conditioned by several factors: the adverse situation of the economy, reflected in lower net interest income, though partially offset by the increase of commissions that accounted for 32% of total income; the option to increase loanloss provisions within the framework of a prudent policy of full risk cover, which episodically and materially affected the year s results; and by the costs inherent in the restructuring programme, particularly staff downsizing, refurbishing the branch network and the significant investments in the IT area and in the remote channels. Total assets of Banque BCP (France) amounted to 1,212 million euros as at December 31 st Net interest income totalled 35 million euros, while net income was returned in the sum of 561,000 euros Total Assets 1,212 Loans anad advances 523 Customers' funds 1,035 Net interest margin 35 Operating costs 47 Net income 0.56 Number of employees 583 Number of branches 61 (EUR Million) HIGHLIGHTS OF BANQUE BCP (FRANCE) Banque BCP (Luxembourg) The restructuring and strategic redefinition process, focused on retail banking business among the community of Portuguese and Portuguese-descendants resident in Luxembourg involving incisive commercial activity and the provision of a range of competitive products and services, was the major priority of Banque BCP (Luxembourg), a bank created as a result of the transformation of Banco Mello Luxembourg, a bank particularly involved in international business. With a network of five strategically located branches, Banque BCP is the largest subsidiary of a Portuguese bank in Luxembourg, operating in a competitive market marked by growing aggressiveness of the local banks, the main competitors of Banque BCP in Luxembourg, directed at the Portuguese community resident in the country. The restructuring undertaken by Banque BCP during 2001 included the following: restructuring and redefining the role of the ancillary structures; centralising back-office tasks, allied to a strengthening of the commercial teams; projects in the IT area designed to automate procedures, to improve the service and to migrate the accounts, the customer base and the accounts processing to the single currency; employee participation in integration training courses in Portugal with a view to acquiring an overview of and closer identification with the Group culture; and changes to the image of the Bank and of the layout of the branches. Increased co-operation with Império Bonança Companhia de Seguros, which is also located in Luxembourg, allowed the range of products and services to be extended and cross selling to be increased, particularly life assurance linked to mortgage and personal loans, and capitalisation insurance. In retail banking, Banque BCP focused in the individual segment, providing a full range of products and services. This was reflected in the loan portfolio, which stood at million euros and in customer funds at 91.2 million euros. 76

12 The total assets of Banque BCP (Luxembourg) amounted to 218 million euros as at December 31 st 2001, an increase of 14.3% on a like basis (as at Banco Mello Luxembourg) compared to the previous year. Net interest income performed well at 3.3 million euros, largely the result of the growth of loans and advances, contributing to the net income in the sum of 148,000 euros. HIGHLIGHTS OF BANQUE BCP (LUXEMBOURG) 2001 Total Assets 218 Loans and advances 115 Customers' funds 91 Net interest margin 3 Operating costs 6 Net income 0.15 Number of employees 61 Number of branches 5 (EUR Million) Detail of Almeida Garrett and Edifício da Câmara Municipal do Porto 77