“Increased capital needs are not expected at Banco Montepio this year,” Virgílio Lima, president of Associação Mutualista Montepio Geral, said at the press conference in Lisbon.
The president of Mutualista admits, however, that in the future there may be needs to reinforce the bank's capital, but recalled that the capital ratio may improve, not only through the core capital (common equity tier 1), but also through the issuance of debt that relates to capital. The bank recently issued 50 million subordinated debt subscribed by the Association.
The president of Mutualista Montepio Geral also admitted that the current minority shareholders in the social economy can “make capital strengthening solutions feasible”, possibly through debt underwriting.
Regarding capital needs as well, Virgílio Lima recalled that the bank was complying with Pillar 2 of the ratio (capital required by the regulator according to the specific risk of its asset portfolio) and that it consisted of a 3,25% cushion (of the most high in the market).
This pillow was made more flexible in the current context of the pandemic, but the president of Mutualista is not afraid of the future when, in the post-pandemic, the pillow is again required by the banking regulator, because he believes that the reduction of unproductive assets will be recognized by the supervisor and that the pillar of the so-called Pillar 2 will be lower at that time. The president of Mutualista also recalled the bank's generic provisions of 15 million set up to face the crisis arising from Covid-19.
Virgílio Lima also said that Banco Montepio's capital ratio may improve by reducing risk-weighted assets. In this context, he recalled that the bank has 2 billion unproductive assets (1,4 billion euros of NPE and 500 million real estate) to sell, and that they will have to be placed on the market taking into account the impairments already constituted. That is, without generating more capital losses through results.
It is also recognized that the current moment is not conducive to maximizing cash flow through the sale of assets, but Virgílio Lima admits the use of asset securitization.
The reduction in activity is already reflected in the reduction of the bank's assets, which went from 20 billion to 17 billion, between December 2017 and March 2020.
The sale of the bank's assets can be made, keeping the group servicing the activity, he said.
Banco Montepio's restructuring plan will lead to a framework of cost rationing (for example, through the expected closure of 31 branches), which the institution expects to help capital through results.
If Banco Montepio needs capital in the future, the president of the credit institution's shareholder admits the use of the capital market (debt issuance), but there is no provision for listing on the stock exchange.
The future debt issue had a recent setback. Fitch lowered the bank's rating and this will increase the interest on the bank's subordinated debt issues, which are already high.
Despite excluding the bank, Virgílio Lima admits the use of stock exchange quotation for other subsidiaries, such as insurance companies, “in the context of possible partnerships in the future”.
Banco Montepio is not for sale and is strategic for Associação Mutualista “due to the product distribution function of the mutualist and the status of the client associate,” the Association's leader repeatedly said. On the way, he spoke of the withdrawal of mutual savings in the face of situations of reputational attacks, but recalled that until yesterday the net growth (between exits and inflows) amounts to 60 million euros. This despite having won 79 million euros of savings products.
With regard to Montepio Seguros, Virgílio Lima admitted partnerships "that will be advantageous for the associates and provided that the distribution capacity of Associação Mutualista's products is guaranteed".
Recalling the 180 years of Associação Mutualista, Virgílio Lima assured that Banco Montepio is essential for the function of social economy, since 50% of the clients are associated with Mutualista Montepio Geral. Mutualista's 600 clients are clients of the Bank led by Pedro Leitão and Carlos Tavares. And the bank's “200 thousand best customers are associated with Mutualista”. The status of member-clients makes it a strategic bank for the Association, whose capital belongs to members.
The president of Mutualista also spoke of the statutes that are to be approved by the Ministry of Labor and Social Security, saying that “they wait at all times for the document approved by the Government”. Mutualista hopes that by the end of this year, a general meeting may be held to elect the Assembly of Representatives, which will replace the current General Council.
The Directorate-General for Social Security has already approved the new statutes of the Associação Mutualista Montepio Geral but with a “provisional character”, said
“The statutes are essentially approved,” said Virgílio Lima, president of the Associação Mutualista Montepio Geral, this Wednesday at a meeting with journalists at the institution's headquarters in Lisbon. "We await confirmation and effective registration with this provisional character", he added.
Why provisional? "There are no major issues at stake", are questions related to the benefits that are in the regulations and that Mutualista wants them to be in the statutes, he explained.
Associação Mutualista recorded losses of 408,8 million euros in 2019, mainly due to the reinforcement of impairments for the bank. The result compares with a profit of 1,6 million euros in 2018.
There is still no date for approval of the consolidated accounts.