Wednesday, January 18, 2017

“The destruction of colossal capital” (except in BPI) – Observer

it often Happens, says Fernando Ulrich. The executive chairman opens the pages of the newspapers, and, above all, it connects to the tv and hear "journalists and, above all, commentators" say that taxpayers have lost fortunes to bail out the banks. So, Ulrich instructed a team within the bank to do a study and convened the journalists of the financial area to try to dismantle this argument. And what are the conclusions?

The first is that, in the opinion of Fernando Ulrich, the taxpayers were "well protected by successive governments" and will have a loss effective between 4.4 billion and a maximum of 6.4 billion — which is not much, compared with other countries. The second conclusion is that since 2001, there was a "destruction and colossal capital," and who suffered, above all, were the shareholders of the banks — but "the banks are not all equal, and Ulrich took the opportunity to defend his lady.

"A reflection on the banking system", the team of BPI prepared only with the use of public information, and assuming as acquired data on recapitalisation in the course (such as the cgd and BCP), the BPI appears as the bank had the largest balance between the capital that has been seeking to market (853 million euros) and dividends distributed (799 million euros). The data, which relate to the period between 2001 and 2017, feature a selection of banks composed by the BES/Novo Banco, Millennium BCP, Caixa Geral de Depósitos, low birth weight, Banif and, of course, the BPI.

BES/Novo Banco – a 13.1 billion in capital injected 1.4 billion in dividends. the A difference, to the disadvantage of the shareholder, 11.7 billion. (the value includes obligations senior who have passed to the New Bank in December of 2015, and other effects)

millennium bcp – 9.4 billion in reinforcements from the capital throughout this period. the A discrepancy, therefore, to 7.6 billion in the bank is to strengthen the capital from large investors but, also, of several tens of thousands of small shareholders who are considering whether or not to pursue the capital increase, or to invest more to maintain the participation.

cgd – 8.5 thousand million in capital, against 2.5 billion in dividends paid. the Six billion "loss" for the shareholder, that is, the State. Already includes, here, the operation in progress.

BPN – 5.8 billion in capital increase, including by the State, and 123 million in dividends. the More than 5.7 billion difference.

Banif – 4.7 billion in capital injected in the bank, including in the resolution the end of 2015, and € 181 million in dividends. the A difference of 4.5 billion.

of 35.5 billion that shareholders have lost in 16 years. In contrast with these numbers, the BIS calculates that reinforced the capital with 853 million euros, and in this extended period comprised between 2001 and 2017, paid 799 million euros in dividends to the shareholders. Only if you have lost, therefore, to 54 million, according to accounts of Fernando Ulrich.

This serves to demonstrate, says the chief executive of the BPI, that "the banks are not all equal". And, says Ulrich, "destinations" different that each database had and the different treatments that each gave to their shareholders to take the president of BPI to think that, possibly, this explains a lot why the many attempts of consolidation (mergers and purchases) in the banking industry have failed. Including those involving the BIS, which was on the table the possibility of joining the Banco Espirito Santo and BCP. "There were differences of agenda great," says Ulrich, who now understand in the light of the numbers presented this Wednesday by the bank.

"There was a destruction of shareholder capital colossal" in this period of 16 years, said Fernando Ulrich, calculating that this equates to 19% of the Gross Domestic Product of Portugal in 2016. And the destruction of capital has not fallen from the sky, discusses practices of banking that, at the time, and provoked, also, a "distortion brutal competition" — by penalizing those who "wanted to have a rigorous management" — and a "distortion brutal in the allocation of resources" in the economy.

This caused a distortion in the brutal competition. There has been an important part of the market that could not afford to destroy shareholder capital and who has had to do more rigorous management had more difficulties."

But when talking about losses in the banking and impairment, Fernando Ulrich reminds him that the money out of the banks in the form of credits "and has not been to the Moon". The money was borrowed and has been applied in the economy. "Who benefited from credit used the money, the money has continued to circulate in the economy," threw Ulrich, challenging economists and academics to study the impact (positive) in the economy that have had these credits that would be bad. It is clear that "the economy would be much better if this money had not been lost and if it had been invested in the business more efficient", but the leading executive of the BPI showed curiosity to know where was the money and what impact it has had on the production.

In the relationship with the State, Fernando Ulrich refuses the idea that this moment in time, one can say that the banks are the cost millions to the taxpayers. In the case of loans in 2012 (BPI, BCP, Box and Banif), the State had, in the accounts of BPI, a positive margin of more than 800 million euros, thanks to the interest amounts that these loans (the coconuts) behaved. Only the BPI has paid the State more than 100 million euros. "It is true that the State had the capital at risk at any given time, but this capital has been repaid, and the risk has been paid," argues the chief executive of the BPI.

Between the interest of the coconuts (820 million), the margin of the State the Resolution Fund (23 million), the commissions with the debt issues guaranteed by the State (643 million) and dividends of the GBD (2.5 billion), the State had a gain gross total of almost four billion euros, says the BPI.

on the other hand, there have been injections of capital in the CGD (nearly eight billion), the costs with the resolution of the Banif ($ 2.6 billion) and the losses with the nationalization of the BPN (almost 5.5 billion, in the calculations of the BIS). the In total, around 16 billion, of which eight to 10 will be irretrievably lost.

that is, will be a net loss between 4.4 billion and 6.4 billion euros, equivalent to 2.4% to 3.5% of GDP in a year, that Fernando Ulrich does not consider an excessive amount of in the light of the strong crisis that was experienced and the comparison with other countries. And a value, above all, that Ulrich does not consider it justified that in the Portuguese society, if you feed the notion that the banks have cost a fortune to taxpayers, and that may cost more. And who says that that is so, why say it? "I Believe that the people are of good faith, they say-in due to lack of information, believe," said the chairman of the BPI, referring, in particular, the "commentators, some of whom even compete with journalists because they also want to give news, but are not bound by the same rules of ethics and professional conduct".

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