Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Banco Comercial Portugues SA / Equity Bottom-Up

<h2>BCP: Value-Quality trends are benign</h2>Banco Comercial Português, S.A. is the largest private bank in Portugal, having acquired the previously largest entity, ("Atlântico"), back in 1995. BCP is also particularly active in Africa, in Mozambique and in Angola, and in Poland via Bank Millenium. The bank has an operation in Macau. With 2.4mm clients, Portugal accounts for 71% of total Group Assets and 69% of Loans, respectively. Market share of Loans and Deposits in Portugal stands at 17.5% and 18.1%, respectively. Overall, the Group has 5.7mm customers, of which 1.2mm relate to Africa. Market share of Loans and Deposits in Mozambique stands at 16.8% and 24.2%, respectively. Millennium bim in Mozambique is a highly capitalized deposit-rich franchise with a strong brand and a deep electronic banking penetration. Banco Millennium Angola, SA and Banco Privado Atlântico, SA merged in 2016. With its multichannel infrastructure covering 2.4mm clients, Bank Millenium in Poland commands a 6.1% share of the credit market and 5.1% of Deposits in Poland. Over the years, prodded by the government and ECB, the Group has exited varied non-core operations such as in Romania and in Greece and has disposed of insurance units in order to reinforce its capital base and fortify its Luso proposition. As part of the deep reorganization involving employee and branch rationalistion, Banco de Investimento Imobiliário S.A and Eurobank SA were integrated into BCP. Restructuring has resulted in a 40% drop in OPEX within Portugal since 2011 and a 70% decline in non-performing exposures since 2013 (from €13.7mm to €3.3mm euros in 2020). Group credit is balanced between low risk mortgages with an average LTV of 60% and corporates. The shareholders structure is centred on investors from Portugal (33.8% of total), from China (29.9%) and from Africa (19.6%).<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/208/889/original/image_76396793621621928173285.jpg?1621928173" class="editor-image img-responsive" data-smartkarma-image-id="208889"></figure>The PH Score™ of BCP is favorable given forceful amelioration in Profitability, in NIM/Spread, in Efficiency, in Liquidity, and in Asset Quality. There was though some softer Provisioning, and erosion in some Capital Ratios. In fact relative to closely matched counterparts by size*, BCP commands, a fairly robust NIM, a better than median CIR, better Liquidity, and superior Revenue diversification as measured by Non-Interest income/Operating Revenues.<div class="content-highlight">A FV of 4%, a PBV of 0.43x, and an Earnings Yield of 12.47% are not unattractive. The bank commands strong fundamental momentum -and a technical tailwind- and is a preferred financial entity in Europe.  Shares should be considered on any weakness given the high PH Score™.</div>*Alpha Services &amp; Holdings, Bper Banca, National Bank of Greece, Mediobanca, Jyske Bank, Banco Espiritu Santo, Turkiye Is Bankasi, Liberbank, Bankinter, PKO.

BCP: Value-Quality trends are benignBanco Comercial Português, S.A. is the largest private bank in Portugal, having acquired the previously largest entity, ("Atlântico"), back in 1995. BCP is also particularly active in Africa, in Mozambique and in Angola, and in Poland via Bank Millenium. The bank has an operation in Macau. With 2.4mm clients, Portugal accounts for 71% of total Group Assets and 69% of Loans, respectively. Market share of Loans and Deposits in Portugal stands at 17.5% and 18.1%, respectively. Overall, the Group has 5.7mm customers, of which 1.2mm relate to Africa. Market share of Loans and Deposits in Mozambique stands at 16.8% and 24.2%, respectively. Millennium bim in Mozambique is a highly capitalized deposit-rich franchise with a strong brand and a deep electronic banking penetration. Banco Millennium Angola, SA and Banco Privado Atlântico, SA merged in 2016. With its multichannel infrastructure covering 2.4mm clients, Bank Millenium in Poland commands a 6.1% share of the credit market and 5.1% of Deposits in Poland. Over the years, prodded by the government and ECB, the Group has exited varied non-core operations such as in Romania and in Greece and has disposed of insurance units in order to reinforce its capital base and fortify its Luso proposition. As part of the deep reorganization involving employee and branch rationalistion, Banco de Investimento Imobiliário S.A and Eurobank SA were integrated into BCP. Restructuring has resulted in a 40% drop in OPEX within Portugal since 2011 and a 70% decline in non-performing exposures since 2013 (from €13.7mm to €3.3mm euros in 2020). Group credit is balanced between low risk mortgages with an average LTV of 60% and corporates. The shareholders structure is centred on investors from Portugal (33.8% of total), from China (29.9%) and from Africa (19.6%).The PH Score™ of BCP is favorable given forceful amelioration in Profitability, in NIM/Spread, in Efficiency, in Liquidity, and in Asset Quality. There was though some softer Provisioning, and erosion in some Capital Ratios. In fact relative to closely matched counterparts by size*, BCP commands, a fairly robust NIM, a better than median CIR, better Liquidity, and superior Revenue diversification as measured by Non-Interest income/Operating Revenues.A FV of 4%, a PBV of 0.43x, and an Earnings Yield of 12.47% are not unattractive. The bank commands strong fundamental momentum -and a technical tailwind- and is a preferred financial entity in Europe.  Shares should be considered on any weakness given the high PH Score™.*Alpha Services &amp; Holdings, Bper Banca, National Bank of Greece, Mediobanca, Jyske Bank, Banco Espiritu Santo, Turkiye Is Bankasi, Liberbank, Bankinter, PKO.

Banco Comercial Portugues SA

BCP: Value-Quality Trends Are Benign