This article first appeared on GuruFocus.
Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Net income increased by 12.7% year-on-year to EUR565.8 million in the first half of 2026, driven by strong net interest income growth and disciplined cost management.
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Bank Millennium in Poland saw net income rise nearly 39% year-on-year, supported by a 65% reduction in Swiss franc mortgage portfolio charges and strong commercial momentum.
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Customer loans grew by 8.3% year-on-year to $65.2 billion, and total customer funds expanded by 9.8% to $116.7 billion, reflecting robust commercial franchise strength.
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Non-performing exposures declined by EUR187 million, with the NPE ratio falling to 2.2%, and cost of risk remained well contained at 32 basis points.
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Common equity Tier 1 ratio stood at 15.1%, comfortably above regulatory requirements, with a 90% payout policy including dividends and share buybacks.
Negative Points
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Geopolitical tensions and persistent inflation continue to weigh on global economic growth, creating an uncertain operating environment.
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Swiss franc mortgage portfolio in Poland, though reduced by 47% year-on-year, still incurred EUR96.7 million in charges in the first half, with some litigation uncertainty remaining.
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Mozambique subsidiary’s profitability remains impacted by sovereign risk provisions, with net income held near break-even due to prudent provisioning.
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Operating costs increased by 5.4% year-on-year, driven by investments in digital transformation, AI, and cybersecurity, which could pressure efficiency if revenue growth slows.
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Fee income growth in Portugal was at the lower end of mid-single-digit guidance, constrained by cautious retail investor appetite and competition from low-fee providers.
Q & A Highlights
Here are the key highlights from the Banco Comercial Portugues SA (BPCGY) Half Year 2026 Earnings Call.
Q: What is the updated guidance for Net Interest Income (NII) growth in Portugal for 2026 and 2027?A: (Miguel Braganza, CFO) We have upgraded our guidance for NII growth in Portugal to “low-teens” for 2026, aligning with the strong performance seen in the first half. Furthermore, based on current market forward rates, we also expect a “low-teens” growth for 2027. This is supported by strong volume growth, disciplined pricing, and the benefit from reinvesting maturing structural hedges at higher current rates.
Q: What is the outlook for the 90% payout ratio, and how should we think about capital generation?A: (Miguel Braganza, CFO) The 90% payout is a consequence of our strategy, not an objective in itself. Our primary goal is shareholder value creation through genuine customer business. If value-enhancing growth opportunities require capital, we will not restrain ourselves to meet a specific payout ratio. We are currently at a “tipping point” between an 80% and 90% payout. Organic capital generation is around 55-60 basis points per quarter, and we are working on a securitization that could add ~20 basis points, but the final payout will depend on portfolio growth.
Q: Can you provide more detail on the drivers of the strong NII growth in Portugal, particularly the quarter-over-quarter increase?A: (Miguel Braganza, CFO) The strong NII growth is a result of several factors. Our assets have a high beta, and we have managed our term deposit pricing very effectively, maintaining a beta of around 50% through sophisticated segmentation. This allows us to offer rates ~20 basis points below the market average without losing clients. Additionally, the reinvestment of maturing structural hedges at higher current rates is a significant tailwind, providing a benefit of around 70 million in 2027 as 5 billion of hedges mature and are reinvested at ~3%.
Q: What is the outlook for fee income in Portugal, and what are the key drivers?A: (Miguel Braganza, CFO) Our guidance for fee income remains mid-to-high single-digit growth. We are currently tracking closer to the mid-single-digit range (5% growth in H1). This is partly due to a more cautious retail investor environment, where clients favor deposits over investment products. The key is to “deserve” more fees by offering superior service and advice, not by charging more. We see potential for growth if market sentiment improves, particularly in asset management and bancassurance.
Q: What is the current status of the Swiss franc mortgage portfolio in Poland, and what are the expectations for future litigation costs?A: (Miguel Braganza, CFO) The CHF mortgage portfolio continues to de-risk rapidly, declining 47% year-on-year to just 700 million. Cumulative provisions now cover 173% of the outstanding portfolio, and related costs fell 65% in H1. While the CHF saga is nearing its end, Poland remains a litigious market. We expect some level of operational risk from litigation to persist. For example, a recent ECJ ruling on consumer loan fees resulted in a one-off cost of ~23 million. However, the high NIM and ROE in Poland are sufficient to absorb these costs.
Q: What is the outlook for the cost of risk, and can you quantify the management overlays that have been built?A: (Miguel Braganza, CFO) The cost of risk remains well-contained at 32 basis points for the group. We are not seeing any early warning signals from our clients despite geopolitical tensions. However, we maintain a prudent approach with management overlays of 130 million in Portugal and 40 million in Poland. These overlays are a buffer against geopolitical uncertainty. While our 2028 plan targets a cost of risk of 45 bps for Portugal, our current guidance for the next 12 months is much closer to the current 32 bps level.
Q: What is the outlook for the Mozambique (BIM) business, and when do you expect it to return to a “steady state” of profitability?A: (Miguel Braganza, CFO) We are structurally bullish on Mozambique due to its large gas reserves. The social unrest is largely resolved, but it has left public finances stressed. As a result, we are taking a prudent approach, keeping the bank’s net income close to breakeven this year. We expect a progression towards a steady state in 2027, with 2028 likely being the year we return to normalized profitability.
Q: What is the bank’s sensitivity to changes in the pension fund discount rate?A: (Miguel Braganza, CFO) A 25 basis point decrease in the discount rate increases pension liabilities by ~86 million. However, we have a significant buffer of ~300 million in excess assets over liabilities. Therefore, the discount rate would need to fall by around 1% before it would begin to have a negative impact on our capital ratios.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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