ANNUAL
REPORT
2023
ABBREVIATIONS AND ACRONYMS
ECB
EBD
GSB
European Central Bank
Executive Board of Directors
General and Supervisory Board
DGCOMP
Directorate-General | Competition
ESG
CCA
YTD
YoY
NII
Environment, Sustainability and Governance
Contingent Capital Agreement
Year-to-date – change since the start of the year
Year-on-Year – change on a year earlier
Net Interest Income
RGICSF
Regime Geral das Instituições de Crédito e Sociedades Financeiras
Legal Framework of Credit Institutions and Financial Companies
LCR
€
€mn
€bn
bps
pp
Liquidity Coverage Ratio
euro
million euro
billion euro
basis points
percentage points
Novo Banco, S.A.
Head Office: Av. da Liberdade, n. 195
1250-142 Lisbon - Portugal
Commercial and Tax identification number: 513 204 016
Share Capital of € 6 567 843 862,91, composed of 11.130.841.957 nominative
dematerialised shares with no nominal value
2
CONTENT
4
8
MESSAGE FROM THE CHAIRMAN OF THE GENERAL
AND SUPERVISORY BOARD
CEO TALK WITH MARK BOURKE
14
MANAGEMENT REPORT
118
290
574
576
584
592
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS AND FINAL NOTES
ANNEX
AUDITOR’S REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS
AUDITOR’S REPORT ON THE SEPARATE FINANCIAL
STATEMENTS
REPORT OF THE GENERAL AND SUPERVISORY
BOARD
596
EVALUATION REPORT
This document is the PDF/printed version of the Annual Report
2023 of Novo Banco S.A..
This version has been prepared for ease of use and does not
contain ESEF information as specified in the Regulatory Technical
Standards on ESEF (Delegated Regulation (EU) 2019/815).
The official ESEF reporting package is available on our website at
www.novobanco.pt/grupo-novobanco > Investidores
and CMVM website.
In case of discrepancies between this version and the official
ESEF package, the latter prevails.
3
Annual Report 2023 | novobanco Byron Haynes
Chairman of the General
and Supervisory Board
4
Message from the
Chairman of the General
and Supervisory Board
Dear Stakeholders,
Novobanco delivered strong results with record net
income of €743mn and annual capital generation of
~500bps for the full year 2023, reflecting the continued
growth of our banking businesses and confirming the
sustainability and resilience of our capital accretive
business model.
Novobanco´s business model reflects its “Strategic
Program”, anchored on four pillars: “Customer-Centric
Bank,” “Simple and Efficient Operations,” “Developing
People and Culture” and “Delivering Sustainable
Performance,” geared towards better enabling the
bank “to serve the needs and expectations of our
customers.” During the year, the bank consistently
executed its “Strategic Program” outperforming
and exceeding its 2023 guidance targets and goals,
including increased sustainable profitability, in a context
that continued to prove challenging.
Throughout the year the bank was vigilant and cautious
with respect to managing the many different aspects
of risk. Specifically: the challenging macro-economic
environment with the increased risk of recession, high
inflationary pressures, rising and high interest rates,
rising unemployment levels and the cost-of-living crisis;
the contagion effects of increased financial market
volatility impact from the continuing Russian / Ukraine
conflict, the Israel / Hamas conflict or by the collapse
of Silicon Valley Bank triggering other bank failures in
the United States and as well as the fall of Credit Suisse
in Switzerland; heightened levels of operational risk,
(cyber-attacks and outsourcing); and increased focus on
emerging risks like climate and environmental risk.
Year 2023 financial results reflect an increase in
commercial banking income (+57%), stable net loans
and new client acquisition growth of >45%, particularly
in our Retail and Corporate SME commercial businesses.
Novobanco has continued to make significant
investment (increased IT investment totaling €58mn)
in support of our commercial businesses and our people
(3.3% increase in Group employee training hours),
while maintaining cost discipline despite the on-going
inflationary pressure.
5
Annual Report 2023 | novobanco Improved profitability was accompanied by continued
strengthening of the asset quality of the balance sheet
as demonstrated through the enhanced credit metrics
and the completion of the de-risking of legacy assets
and non-core assets. Risk costs for the year of 48bps are
lower than target. Year-end 2023, net NPL ratio reduced
to 0.7%, in line with peers, with strong NPL coverage
ratios being maintained. In addition, despite challenging
conditions in the real estate market across Europe,
novobanco further reduced its real estate exposure by
€154mn (stock representing 1.1% of total assets) with a
positive net income and capital gain.
The sustainability and resilience of our capital accretive
business model is confirmed with significantly
strengthened 2023 capital ratios with all regulatory
and guidance requirements (Supervisory Review
and Evaluation Process Compliance, “SREP”) being
exceeded. This improvement in the capital position of
the bank has been recognized by the Supervisor with the
SREP Pillar 2 requirement (“P2R”) for novobanco in 2024
being reduced to 2.85%. During the year novobanco
was subject to the 2023 EU-wide stress test conducted
by the European Central Bank (“ECB”) applied to the
balance sheet year-end 2022. This provided input
into the SREP decision and had no negative impact on
novobanco´s capital requirements. The overall year-end
2023 SREP decision and score have improved reflecting
the substantial progress that the bank has made during
the year, highlighting particularly the improvements
made with respect to the Business Model and Capital
Adequacy.
The bank increased its deposit annual market share to
9.7% (+0.4pp), maintained stable funding and liquidity
position and strengthened liquidity ratios throughout
the year. Novobanco repaid €5.4bln TLTRO III during
the year with a remaining small outstanding year-end
balance and is now a net lender to the ECB. The year-
end binding and linear (non-binding) MREL targets
were exceeded. Novobanco´s long-term deposit ratio
is investment grade rated, Baa2, by Moody´s Investors
Service.
Recognizing the bank’s positive trajectory, both
Moody’s and Fitch, have upgraded the bank’s rating.
Moody´s Investors Service upgraded novobanco’s
Baseline Credit Assessment (“BCA”) rating to Ba1
with a positive outlook reflecting the “ongoing
improvements in the bank´s creditworthiness resulting
from enhanced asset risk and capital levels and the
significant improvement in recurrent profitability”.
In February 2024, and ahead of our stated goals, the
bank achieved an investment grade rating, with Fitch
assigning a ‘BBB-’ LT rating to novobanco’s senior
preferred debt.
2023 was also marked by the launching and execution
of key initiatives to support the workstreams “Employee
Value Proposition”, “Talent Development” and “Culture
& Values” that underpin the “Developing People and
Culture” Strategic Program pillar. Good progress is
being made in continuing to build and empower a
diverse workforce and to deliver on our commitments
to diversity, equity, and inclusion, which is expected to
develop on an accelerated basis going forward.
ESG matters have remained a regular topic on the
General and Supervisory Board (“GSB”) agenda in 2023.
We further integrated ESG goals in our performance
appraisal frameworks across all levels of the organization
and reinforced our commitment to contribute to
accelerate the Portuguese economy’s transition to a
low-carbon future by reducing our environmental impact,
6
managing our climate-related risks, mobilizing capital
and, most importantly, working alongside our clients and
partners in this energy transition, supporting companies
of all sizes and sectors with financial solutions that fit
their needs, including lending or specialized services.
In 2023 novobanco surpassed its 2024 green financing
targets as well as its scope 1 and 2 GHG emissions’
reduction targets, more than one year ahead of the
commitments.
On behalf of the GSB, I would like to thank all our
stakeholders, particularly our customers, for their
continued support, trust, and loyalty to novobanco.
Finally, the GSB and I would especially like to thank all
the EBD members and the employees of novobanco
for their hard work, dedication and commitment that
has allowed the bank to exceed its goals and targets
and to better serve the needs and expectations of our
customers.
Byron Haynes
Chairman of the General
and Supervisory Board
During the year, GSB appointed a new member to
the Executive Board of Directors (“EBD”), Benjamin
Dickgiesser (CFO), in the mandate term 2022 to 2025.
Following this appointment, EBD organization roles
and responsibilities were reassessed and realigned with
effect from October 2023. Two new members of the
GSB, Monika Wildner and Evgeniy Kazarez, were also
appointed during the year in the mandate term 2021 to
2024. The GSB now comprises ten members (including
seven independent members) as of year-end 2023.
Throughout year 2023, the GSB and its respective
committees supervised and supported the EBD in
the monitoring and execution of the bank’s strategic
goals and financial targets as set out and agreed in the
medium-term plan.
For year 2024, realistic strategic goals and financial
targets have been set and agreed as part of the updated
medium-term plan focusing on continued execution of
our Strategic Program, while at the same time being
cautious and vigilant in managing risk through this
on-going challenging economic and geo-political
context.
7
Annual Report 2023 | novobanco Mark Bourke,
CEO
8
CEO Talk with Mark Bourke
Mark Bourke, Chairman of Executive Board of Directors,
gives an interview highlighting 2023 achievements and
the prospects for the future of novobanco.
1
In 2023, novobanco established a strong
track record in execution and delivery, further
consolidating its profitability. How would you
characterise 2023?
In 2023 we’ve consolidated our position as a strong,
profitable and independent Portuguese bank.
In a context that continued to be marked by a
challenging macro backdrop and geo-political instability,
we delivered increased profitability, very strong
capital generation, twice outperforming guidance, and
ultimately achieved investment grade rating.
The interest rate environment has impacted us as it
did to the entire industry, but the impressive results
achieved would not have been possible if we hadn’t
remained focused and disciplined on executing and
delivering against our strategy program and putting the
customer at the centre of everything we do.
and working capital needs, with significant growth, in
2023, in short-term loans, especially through factoring
and confirming. This underpinned the continued growth
of the corporate customer base, with high levels of
penetration, with 55% of Portuguese SMEs and 70% of
large companies being novobanco customers.
On the Retail segment, we continued to build out our
omnichannel customer service structure, reshaping our
geographic footprint, changing the digital experience
and deepening long-term relationships with clients.
Currently, more than 265 branches operate under
the new distribution model which offers advanced
transaction management solutions and value adding
client interaction processes.
2
As you said, novobanco delivered an impressive
set of results in 2023. What are the key
achievements worth highlighting?
On the Corporate segment, novobanco continued to
strengthen its commitment to Portuguese companies,
to which we provide a set of solutions for investment
2023 was a year full of remarkable achievements, not
only in terms of our financial performance, but also in
terms of external recognition, with novobanco being
9
Annual Report 2023 | novobanco upgraded by 7 notches in 2 years by Moody’s, and being
awarded investment grade by Fitch, in addition to being
awarded Bank of the Year1 in Portugal by the Financial
Times.
In terms of our financial performance, it is worth to
highlight:
• The Commercial Banking Income of €1,439mn
(+57% YoY), solid Net Interest Income performance,
underpinned by the favorable interest rate
environment and a prudent and targeted management
of interest rates on assets and cost of financing;
• A Commercial Cost to Income ratio of 33% (2022:
49%), beating guidance of ~35%;
• A Cost of Risk of 48bps (including management
overlays), consistent with 2023 guidance of ~50bps;
• The strong capital generation, with FL CET1 ratio
increasing by ~500bps YoY to 18.2%, beating the
already upward revised capital generation guidance of
>400bps.
Whilst we have strengthened our profitability and kept
the cost of risk under control, we have managed to
grow our market share, in an environment marked by a
decreasing credit demand and strong competition for
clients’ savings. The bank has increased its footprint
in the Portuguese market with global market share at
9.8% (Nov/23; +0.2pp YTD). Net Customers loans stood
at €24.5bn (stable YTD), with €3.5bn YTD origination
partially offset by increased amortization and supported
by new client acquisition. Customer deposits totalled
€28.1bn, with novobanco’s deposit market share
growing to 9.7% in Nov/23 (Dec/22: 9.3%).
Novobanco consistent performance allowed the bank
to outperform 2023 financial targets, and enhanced
our ability to remain focused on our customers and well
positioned to meet their financial needs, supported by a
rock-solid balance sheet.
3
You mentioned that you have been focused
on executing and delivering on the strategic
program. Apart from being a customer-centric
domestic bank, what are the key drivers of the
bank’s strategy?
I would start by emphasizing the “customer-centric
domestic bank”. Novobanco, besides having the client
at the centre of its mission and strategy, is a pure
Portuguese player, committed to support Portuguese
families and companies throughout their lifetime.
The customer-centric bank is one of the four pillars of
our strategic program. At each moment, novobanco
seeks to exceed the expectations of its customers and
partners, through a distinctive value proposition that
relies on an omnichannel approach as the key lever of
proximity and experience. The daily routine of our teams
is focused on responding in an exemplary manner to the
needs of our customers, with an improved customer
experience through an omnichannel delivery model on
the retail side and a sectorial approach for SMEs.
To effectively achieve these objectives, novobanco
has been investing in a global transformation. The most
visible facets of this reinvention are, on the one hand,
the branch network, where novobanco has combined
technology, proximity to the customer and openness to
the community, and, on the other, our digital channel,
which has been a determining factor for the accelerated
transformation of the bank.
The second pillar is “Simple and efficient operations”,
under which we accelerate novobanco’s transformation
(1) In Nov/23, novobanco was awarded as “Bank of the Year in Portugal” by The Banker, a publication within the Financial Times Group.
10
into an organisation that provides customers with a
lean and straight through process which allows to attain
increased operating efficiency.
In this area, novobanco has focused on reengineering
the most critical processes for customers, with a view
to simplifying them and thus provide an experience that
stands out in the sector, both through its simplicity and
through the consistent improvement of service levels, in
particular in loan granting processes, which are the most
decisive for companies and families.
To this end, novobanco is implementing a far-reaching
transformation programme of its IT and data governance
functions (focused not only on the infrastructure,
platforms and tools that support the bank’s operation,
but also on the timely availability of data to support
process improvement), optimisation of the models that
support decision-making and, above all, the delivery of
regulatory commitments and requirements to which the
banking sector is subject.
A third pillar is “Developing people and culture”. The
strategic objectives of novobanco contain a high level of
ambition, based on perfect alignment and total clarity
within the organisation about the role and contribution
of each employee to achieving them. This third pillar
of novobanco’s strategy is, therefore, the most critical
dimension.
the achievement of a financial performance that is
characterised by its sustainability, by the robustness
and quality of our balance sheet, by adequate solvency
levels and efficient and effective capital allocation and
management of risk.
It is within this framework that our programme for
embedding ESG (Environmental, Social and Governance)
into our business and organisation is set, which includes
(i) implementing the ESG operating model and training
the organisation, (ii) adapting the offer of products
and services, and (iii) transforming investment and risk
management policies.
The optimised management of the bank’s capital and its
various funding sources and the improvement of the risk
management processes associated with its activity are
vital to the sustainability of novobanco’s performance.
To achieve this goal, novobanco’s strategic plan is
executed through different operational programmes
ensuring the quality of credit decisions, namely by
driving their automation, improving pricing models and
the measurement of risk-adjusted profitability.
Our performance clearly demonstrates the increased
confidence of both our customers and the financial
markets in novobanco, the alignment of our team and,
naturally, the consistency of the strategic path outlined.
Novobanco’s strategy seeks to (i) attract, train and
retain through a compelling value proposition for its
employees, (ii) the development of talent, and (iii) the
promotion of the organisational culture and values.
And finally, the fourth pillar of novobanco’s strategy
- “Delivering sustainable performance” - is driven by
4
On the “Developing people and culture” pillar,
could you please share more insight on the
initiatives novobanco is pursuing?
Delivering on our strategy requires having the whole
organization aligned towards our vision and having the
best talent, which means retaining and attracting the
11
Annual Report 2023 | novobanco right people, whose performance drives our collective
success as a bank. It also means fostering a positive and
inclusive culture and a leadership that nurtures talent
and empower its teams to succeed.
In 2023, we launched and executed several key
initiatives of our “Developing People and Culture”
strategic pillar, advancing our Talent, Leadership and
Mission & Values workstreams.
In the talent stream, we have been working on how
we focus on the experience of working at novobanco
and how we recognise those who contribute to the
bank’s success, with a renewed value proposition for
employees.
On the Leadership front, we have launched development
programmes for our leaders so that they act as role
models and foster the right environment for people to
succeed, with the ultimate goal of us all being able to
better serve our customers.
With regard to Mission & Values, we have been working
on engaging and activating the whole novobanco
organisation around our Mission, which has our clients
at the center, symbolizing how everything we do is in
service of delivering exceptional service that builds and
sustains long-lasting relationships.
5
And on the integration of ESG in the bank’s day-
to-day activities, how is it progressing and what
are the main challenges?
Sustainability and the management of ESG risks and
opportunities is a strategic priority for novobanco, and in
2023 we consolidated our goal of being a ESG “leader”
in the Portuguese financial services by continuing to
deliver significant progress.
Sustainable finance has a pivotal role to play in achieving
national and European climate goals and, for novobanco,
enabling our customers to lower their carbon footprint
is a priority that can only be achieved through major
investment in energy transition and climate action.
Having invested 369M€ in green financing in 2023,
novobanco surpassed its 2024 green financing targets
more than one year ahead of the commitment.
We’ve renewed and reinforced our commitment with
a target of €2bn in green investments for the next 3
years. This reflects our focus on giving customers more
choice and making their transition journey easier. Going
forward we will continue to contribute to accelerate
the pace of the required transition – identifying new
ways of doing business and ensuring speed to market in
supporting our customers with products and services.
In our own operations, we have surpassed the Scope 1
and 2 GHG emissions’ reduction targets set for 2024 and
remain confident we will meet our 50% reduction target
before the committed date of 2030.
I was particularly pleased with the success of our ESG
literacy initiatives, aimed at supporting Portuguese
SMEs understand, discuss, and share experiences, best
practices and challenges surrounding their sustainability
journeys.
A positive social impact in the communities we serve
is also a key concern in the way we do business, both
through our people agenda and through our client and
community programs, promoting social well-being
initiatives and financial and digital literacy programs.
12
To conclude, would you like to leave a final
message to novobanco stakeholders?
6
The remarkable achievements of the past year were
made possible by the collective commitment of
novobanco’s stakeholders. Each milestone reached,
every challenge overcome and all the progress made
stand as a testament of the dedication of our people,
the confidence of our customers and the engagement
of all the governing bodies of the bank. Therefore,
I would like to take this opportunity to thank all our
stakeholders, and particularly to everyone working in
our bank, for their continued support, dedication to, and
confidence in novobanco.
As we embark on another year, I want to reaffirm our
dedication to earning and preserving the trust of all our
stakeholders. Their ongoing support inspires us to strive
for even greater achievements in the future.
Mark Bourke,
CEO
13
Annual Report 2023 | novobanco Management Report
Sustainability Report
Financial Statements
Annex
€3.5bn
loans origination
€28.1bn
deposits
€25.5bn
gross loan book
14
Annual Report 2023 | novobanco
MANAGEMENT
REPORT
16
16
28
36
36
43
51
60
60
63
68
75
77
78
78
80
84
84
85
90
93
101
102
105
105
106
106
109
111
111
1 WHO WE ARE
1.1 novobanco
1.2 Organisation
2 OUR STRATEGY
2.1 Business & Regulatory Environment
2.2 Strategic Pillars
2.3 Risk Management
3 OUR PERFORMANCE
3.1 Highlights
3.2 novobanco Group (Consolidated)
3.3 Business Segments
3.4 novobanco Separate
3.5 Relevant Facts from the Activity and Subsequent Events
4 CAPITAL AND LIQUIDITY
4.1 Capital Ratios
4.2 Liquidity and Funding
5 CORPORATE GOVERNANCE
5.1 Shareholder Structure
5.2 Corporate Bodies: Composition and Functioning
5.3 Control Manuals
5.4 Main Policies
5.5 Credit to Members of the Corporate Bodies
5.6 Remuneration of the Members of the Corporate Bodies
and Identified Staff
5.7 Securities Held by Members of the Management
and Supervisory Bodies
5.8 Non-Material Indirect Investment in Novo Banco
6 CONSOLIDATED FINANCIAL STATEMENTS
AND FINAL NOTES
6.1 Consolidated Financial Statements
6.2 Separate Financial Statements
6.3 Final Notes
6.4 Note of Recognition
112
7 ANNEX – ALTERNATIVE PERFORMANCE MEASURES
15
1 WHO
WE ARE
1.1 novobanco
Novo Banco, S.A. (novobanco or “bank”), together
with its subsidiaries and affiliates, which form the Novo
Banco Group (group or novobanco Group), conducts
its main activity in the Portuguese banking sector, in
the corporate and retail segments, as well as in asset
management. It also has interests in companies working
in venture capital, real estate and leasing.
With one of the most robust capital ratios, the bank
has been strengthening its market share in customer
deposits and resources, which stand at more than
34.9 billion euros, while guaranteeing the financing of
the national economy, with support for families and
companies, in more than 25.5 billion euros of credit
granted.
Novobanco is the 4th largest bank operating in the
national market, with 1.6 million customers, assets of
43.5 billion euros and a 9.8% market share.
Operating through an omnichannel relationship model,
novobanco offers a complete and convenient banking
experience to its customers, including secure digital
channels, complemented by the recent and innovative
proximity distribution model, with more than 290
branches and 20 corporate centres covering the entire
national territory.
With the aim of contributing towards the sustainable
development of the Portuguese economy, families and
businesses throughout all stages of life, novobanco
draws on the professional experience of 4 209
professionals and strategic partners.
16
Management ReportSustainability ReportFinancial StatementsAnnex Mission
To be the trusted bank, supporting
families and companies, throughout
their lifetime.
Values
We put our Clients First
We put ourselves in our clients’ shoes to engage and support their needs, wants, dreams
and desires, and we invest in our people so they can deliver excellence.
We embrace Ethics & Inclusion
We act ethically at all times and do the right thing. We always respect one another
and encourage people to be their true selves.
We act with Trust & Transparency
We are open and honest with one another - giving clear sight of decisions, the reasons
for decisions, when we succeed, and when we fail.
We strive for Simplicity every day
We seek simplicity to bring clarity and efficiency to complex situations.
We Collaborate with each other
We work together seamlessly for shared success and take pride in our team work.
17
Annual Report 2023 | novobanco The Mission and Values guide and underpin everything novobanco does. It enables novobanco to build
long-term value, invest in growth, focus on delivering a social dividend with a positive contribution
to society and drive sustainable yields for shareholders.
A team of committed professionals…
4209
employees of
novobanco Group
19
years average
seniority
169k
training hours
(+3.3%)
to supporting families, and driving Portuguese
companies to innovate, reinvent, export…
1.6 million
clients
>45%
of new clients
vs 2022
66.6%
of active digital
clients (+5pp)
and to turning difficulties into great
opportunities…
€25.5bn
Loans granted
€3.5bn
Loans origination
€28.1bn
Deposits
to give back to community.
€476k
in donations
and patronage
103
works of art lent
to 40 museums
across the country
€369mn
of green investment
originated in 2023
18
Management ReportSustainability ReportFinancial StatementsAnnex Novobanco’s resilience lays the foundations for a new stage of commercial transformation and solid financial performance.
Novobanco’s successful recovery
& restructuring journey
novobanco continues to grow, exceeds expectations and strengthens its position as a
trusted bank, committed to supporting families and businesses throughout their lives.
RESTRUCTURE
2017-2020
Sale of Novo Banco to Lone Star (2017)
Deep operational and balance sheet restructuring
Exit from all international operations
Completion of balance sheet clean-up
TRANSFORM
2021-2022
Return to profitability with 8 profitable quarters
Targeted growth in core business
Significant investment in transformation
Normalised cost of risk <50 bps achieved
Strengthening capital position: CET1 FL 13.1%
RE-LAUNCH
2023 and beyond
Substantial top-line growth
Outstanding capital generation (~500bps) in 2023
Best in class levels of efficiency and profitability
Deep Balance Sheet Restructuring
2017
2020
2023
32.2
2.5
9.9
4.4
0.6
0.5
473
358
290
NPL Ratio1 (%)
RE Exposure (bn€)
Branches (#)
Reached Comfortable CET1 & Profitability
2020
2022
2023
18.2
743
561
13.1
9.5
(1 329)
CET1 FL (%)
Net Income (mn€)
Significant RoTE2 Improvement
(%)
~14% underlying RoTE
19.0
20.4
6.2
2021
2022
2023
(1) NPL ratio defined as the ratio between total non-performing loans and gross customer loans;
(2) Tangible equity based on period average, excludes CCA calls accounted as a receivable but not yet received, and excluded in Capital ratios.
19
Annual Report 2023 | novobanco 1.1.1 Business Model
Novobanco is a Portuguese universal bank that provides
the full spectrum of financial products to individuals,
corporate and institutional clients, serving the entire
national territory, with a strong focus on servicing and
supporting the Portuguese business community.
Novobanco’s business model is based on two main
commercial banking segments: i) corporate; and ii) retail.
In both segments, novobanco seeks to anticipate and
respond to the needs of its clients through its offer of
innovative, effective and transparent banking products
and services, based on high ethical and integrity
standards and customer satisfaction assessment tools.
CORPORATE:
a historical know-how in the sector
RETAIL:
a partner for households, with a wide range of products
INVESTMENT
SOLUTIONS
SHORT-TERM
SOLUTIONS
ACCOUNTS, CARDS &
PAYMENTS
HOUSING
LOANS
Medium and long-term credit
solutions.
Leasing and renting.
Guaranteed credit line with EIB/
EIF and BPF, with competitive
conditions.
EU Funds financing solution.
SECTOR-SPECIFIC
EXPERTISE
Specialized sectoral teams,
providing tailored solutions that
meet the specific needs of each
Client and sector.
Specialized teams in EU Funds
(RRP and PT2030), factoring,
confirming, leasing and trade
finance.
Factoring and Confirming.
Current account and overdrafts.
IFAP credit lines.
EU Funds short-term credit line
to anticipate incentives.
Accounts bundled for different
needs; fully online opening.
Acquisition & maintenance
works.
Strong authentication system;
functionalities incl: contactless,
virtual cards, MB Way (...)
Online loan submission.
Special conditions for young
and non-resident.
EXPORTS
AND IMPORTS
Documentary credit and
remittances.
External financing.
International factoring.
Forfaiting.
SAVINGS AND
INVESTMENT
Deposits & retirement
accounts.
Investment Funds, Unit linked,
structured deposits.
Discretionary mgmt & advisory.
INSURANCE
Life Protection.
Health and Property &
Casuality.
Special solutions for self
employed workers.
PAYMENTS AND CASH
MANAGEMENT
Collection: direct debits; POS,
digital payments gateway.
Payments and transfers.
NB Express Cash to simplify
cash management.
EMPLOYEE
BENEFITS
Meal cards and credit cards.
Car solutions, with leasing and
renting tailored to Customers.
Accidents at work and
multi-risk insurance.
SMALL
BUSINESS
Special small business
accounts.
Cash and payments
management solutions.
Multi-risk business insurance.
CONSUMER
FINANCE
Online simulation and
submission.
Credit insurance option
with unemployment and life
coverage.
POS lending partnership
“Heypay”.
Highlights: Main offerings of products and services.
20
Management ReportSustainability ReportFinancial StatementsAnnex CORPORATE
Corporate segments includes SME’s and large corporates, supported
by Large Corporate business centers and 20 business centres
c. 1.6 MILLION CLIENTS
54%
60%
70%
Loans to corporates
of exporting SMEs in Portugal
are novobanco’s clients
of large corporates are
novobanco’s clients
MARKET SHARES
Mortgage
Loans
9.1%
(stable vs 2022)
Total Loans
10.5%
(stable vs 2022)
Deposits
9.7%
(+0,4pp vs 2022)
Global
Market share
9.8%
(+0,2pp vs 2022)
Corporate
Loans
14.3%
(-0,2pp vs 2022)
Trade Finance
20.1%
(+1,5pp vs 2022)
Data as of November 2023; Sources: novobanco with data from Portuguese Central Bank, APS, APFIPP.
21
Annual Report 2023 | novobanco In addition to novobanco’s branches, corporate and business centres, its business model is supported by the
following subsidiaries:
Novobanco dos Açores is the result of a strategic
alliance between novobanco (57.5%) and Santa Casa
da Misericórdia de Ponta Delgada (30.0%), which was
joined by the Bensaude Group (10.0%) and thirteen
other Santa Casa da Misericórdia units from all the
Azores islands (2.47%).
The regional operations of novobanco dos Açores align
with the Group’s culture and mission of being the trusted
bank that supports Azorean families and companies
throughout their lives. Its strategy is based on decisive
competitive advantages, such as economic and financial
strength, combined with a culture of client service for
the benefit of the population of the Azores, supported
by an extensive experience in the local market and a
strong tradition of close relationship with customers.
The first phase of the physical network renovation
project was completed in 2023, and the second phase
began with the reopening of six branches, including the
head office, and a novobanco dos Açores space.
This new business model, allows novobanco dos Açores
to assert itself as a more contemporary and functional
bank, focused on the customer, fundamentally changing
the dynamics of banking in the region.
The revamping of the branch network will continue
in 2024, covering the remaining branches, with a
total investment of around €5M. Making a decisive
commitment in the dematerialization of processes, with
implementation already in the last month of the year, to
better meet the needs of the Azorean community, and
in offering the services and products of novobanco dos
Açores, through an interconnection of all channels and,
from any channel, with total convenience.
Novobanco dos Açores maintains the important
strategic objective of becoming a reference entity and
partner in ESG in the Azores, thus contributing to the
promotion of sustainable investment practices and the
acceleration of the transition process to a carbon-neutral
economy. To this end, novobanco dos Açores, in line
with the novobanco Group, is developing a sustainability
strategy with a special focus and priority given to the
integration of climate risk into the business and risk
management model.
For detailed information on novobanco dos Açores,
please visit: www.novobancodosacores.pt
22
Management ReportSustainability ReportFinancial StatementsAnnex Banco Best - Banco Eletrónico de Serviço Total, S.A.
is a digital platform that provides the whole range of
products and services of a universal bank and stands out
for its strong technological nature and open architecture
business model, based on national and international
partnerships in the areas of Savings, Asset Management
and Trading.
international partners has been key to assert its position
as a digital Marketplace of investment solutions: the
bank distributes around 6,000 products - Investment
Funds, ETFs, Retirement Solutions, Capitalisation
Insurance, Discretionary Management, Robot Advisor,
etc. - managed by the most prestigious national and
international financial entities.
Banco Best operates in all segments of retail banking,
providing a wide array of services ranging from banking
solutions, savings, investments, credit, and day-to-day
financial management.
Banco Best’s business strategy is especially competitive
when it comes to meeting the investment needs of
a segment of individual clients who seek and value
more innovative financial services, not restricted to the
domestic market, more independent, diversified and
sophisticated.
Technology is part of Banco Best’s DNA. The bank’s
digital channels - App and Website - give clients total
autonomy in their relationship with the bank and a
pleasant and effortless experience. Whether on the
App or the website clients can, among others: open
an account by video call or Digital Mobile Key, access
information on the entire offer and use the different
support tools, monitor market indicators and manage
their portfolio - buy and sell, monitor returns -, perform
multiple operations and fulfil general duties, such as
updating personal data.
Banco Best’s strong bet on innovation and dynamic
management of a wide network of national and
For detailed information on the activity of Banco Best,
please visit: www.bancobest.pt
GNB Gestão de Ativos is one of the country’s most
experienced management companies, and the quality
of the management of its products and services has
been recognised over the years at both national and
international levels. GNB Gestão de Ativos offers
financial products and services, including several
types of funds - mutual funds, real estate funds and
pension funds - as well as discretionary and portfolio
management services. As of December 2023, GNB
Gestão de Ativos had €7.7 billion in assets under
management in Portugal and Luxembourg.
For detailed information on the activities of GNB Gestão
de Ativos, please visit: www.gnbga.pt
23
Annual Report 2023 | novobanco
1.1.2 Main Events
2023
Conclusion of Project Crow - Restructuring Funds
Novo Banco, S.A. informs that the conclusion of Project Crow is expected
to have a positive impact of 2.9 million euro in 2022 income before tax.
JANUARY 10
FEBRUARY 13
DG Comp notification
Novo Banco, SA announces the notification by Directorate General for
Competition (“DG Comp”), to the Minister of Finance, of the successful
completion of novobanco’s Restructuring Period.
MARCH 9
2022 Results and Group activity
Novobanco announces Net income of €560.8mn. Strong strategic focus
delivering a sustainable growth of business with increased revenues and
capital generation.
MARCH 22
Governing Bodies
Novo Banco, S.A. informs the market and the public in general that,
subject to the approval of the competent regulatory authorities (fit
and proper), the General Shareholders’ Meeting approved today the
appointment of Evgeniy Kazarez as a member of the General and
Supervisory Board for the current mandate term (2021-2024).
FEBRUARY 1
New Chief Financial Officer
Novo Banco, S.A. informs that the General and Supervisory Board
approved today, subject to Fit & Proper, Benjamin Dickgiesser as a new
member of the Executive Board of Directors for the current mandate
term until 2025, becoming the next Chief Financial Officer (“CFO”).
FEBRUARY 24
Governing Bodies
Novo Banco, S.A. informs that Benjamin Dickgiesser has resigned as
member of the General and Supervisory Board.
MARCH 22
Share capital increase
Novo Banco, SA informs that, following the General Shareholders
Meeting held today, it was decided to increase its share capital arising
from the conversion of the conversion rights relating to 2018 and 2019
fiscal years. The conversion rights were issued under the special regime
applicable to deferred tax assets approved by Law No. 61/2014, of 26
August, as amended.
MARCH 29
DBRS rating upgrade
APRIL 19
Novo Banco, SA informs that DBRS Ratings GmbH (“DBRS Morningstar”)
upgraded novobanco’s Long-Term Issuer ratings to BB (low) from B (high).
The Trend on all ratings remains at Stable.
Multi-notch rating upgrade by Moody’s
Novo Banco, SA informs that Moody’s Investors Service (“Moody’s”)
upgraded novobanco’s senior unsecured debt and senior unsecured
medium-term note (MTN) programme by 3 notches from B3 to Ba3. The
outlook on the long-term deposit and senior unsecured debt ratings
remains positive.
APRIL 28
1Q 2023 results and Group activity
Novobanco announces Net income of €148.4mn (1Q22: €142.7mn; +4%
YoY), with the continued execution of its strategy delivering sustainable
growth of the business, increased revenues and capital generation.
MAY 24
Issuance of subordinated debt
MAY 31
Novo Banco, SA informs that it has today launched a 10.5NC5.5 Tier 2 bond
in the amount of € 500 million, with maturity on 1 December 2033 and an
early redemption option by the bank at the end of 5 years. The notes were
subscribed at 100% price and have an annual interest rate of 9.875% in
the first 5 years, and 5 years mid-swaps plus a margin thereafter.
Results of the Tier 2 tender offer
Novo Banco, SA informs that it has today launched a 10.5NC5.5 Tier 2 bond
in the amount of € 500 million, with maturity on 1 December 2033 and an
early redemption option by the bank at the end of 5 years. The notes were
subscribed at 100% price and have an annual interest rate of 9.875% in
the first 5 years, and 5 years mid-swaps plus a margin thereafter.
Early redemption option of its Tier 2
JUNE 19
JUNE 1
Novo Banco, SA informs that it has today launched a 10.5NC5.5 Tier 2 bond
in the amount of € 500 million, with maturity on 1 December 2033 and an
early redemption option by the bank at the end of 5 years. The notes were
subscribed at 100% price and have an annual interest rate of 9.875% in
the first 5 years, and 5 years mid-swaps plus a margin thereafter.
Early redemption option of its Senior Preferred Notes due 2024
Novo Banco, SA informs that, following the authorization received from
the Single Resolution Board, it has taken the decision to exercise the
early redemption option of its €300,000,000 3.500% Fixed/Floating
Rate Callable Senior Preferred Notes due 2024 (ISIN: PTNOBIOM0014).
24
Management ReportSustainability ReportFinancial StatementsAnnex Notification by Banco de Portugal of its MREL requirements
Novo Banco, S.A. informs that it has been notified by the Bank of
Portugal of its Minimum Requirement for own funds and Eligible Liabilities
(“MREL”) requirements, on a consolidated basis, as determined by the
Single Resolution Board.
JUNE 22
JUNE 27
Governing Bodies
Novo Banco, S.A. informs that Monika Wildner has joined the current
mandate of the General and Supervisory Board of novobanco,
as an independent member.
1H 2023 Results and Group activity
JULY 30
JULY 28
Novobanco announces Net income of €373.2mn (1Q23: €148.4mn;
2Q23: €224.8mn), demonstrating growth momentum of both business
and revenues, as well as strong capital generation.
OCTOBER 1
Governing Bodies
Novo Banco, S.A. informs that Benjamin Dickgiesser has joined the
Executive Board of Directors of novobanco for the current mandate
2022-2025 as Chief Financial Officer.
NOVEMBER 17
2023 EU-Wide Stress Test Results
Novo Banco, S.A. informs that it was subject to the 2023 EU-wide stress
test conducted by the European Central Bank (ECB). The bank notes the
announcements made by the ECB on the EU-wide stress test and the
outcomes of this exercise.
NOVEMBER 7
Governing Bodies
Novo Banco, S.A. informs that Evgeniy Kazarez has joined the General
Supervisory Board of novobanco for the current mandate 2021-2024.
Banco de Portugal release on residential real estate capital buffer
NOVEMBER 22
Novo Banco S.A. informs that it has been notified by the Bank of Portugal
regarding the decision to implement a sectoral systemic risk reserve.
The implementation of this reserve aims to increase the resilience
of institutions to the materialisation of potential systemic risk in the
residential real estate market in Portugal.
Multi-notch rating upgrade by Moody’s
Novo Banco, SA informs that Moody’s upgraded novobanco’s long-term
deposit and senior unsecured debt ratings by 2 notches, to Baa2 from
Ba1 and to Ba1 from Ba3, respectively. The outlook on the long-term
deposit and senior unsecured debt ratings remains positive.
NOVEMBER 22
NOVEMBER 22
Upgrade of Covered Bonds to Aaa by Moody’s
Novo Banco, SA informs that Moody’s upgraded the rating of novobanco’s
Mortgage Covered Bonds by 2 notches to Aaa, from Aa2.
NOVEMBER 30
Bank of Portugal announcement on Other Systemically
Important Institutions
Novo Banco, S.A. informs s that it has been notified by the Bank of
Portugal of its decision to identify the bank as Other Systemically
Important Institution (“O-SII”), previously only at LSF Nani level.
DECEMBER 13
Multi-notch rating upgrade by DBRS Morningstar
Novo Banco, S.A. informs that DBRS Morningstar upgraded novobanco’s
Long-Term Deposits and Long-Term Issuer Ratings by 2 notches, to BBB
(low) from BB, and to BB (high) from BB (low), respectively. The bank’s
Intrinsic Assessment has also been upgraded to BB (high), with the trend
on all credit ratings remaining Stable.
9M 2023 Results and Group activity
Novobanco announces a Net income of €638.5mn (1Q23: €148.4mn;
2Q23: €224.8mn; 3Q23: €265.3mn), backed by a solid domestic and
simple business model, delivering increased profitability from top line
performance, together with contained costs as a result of efficiency
measures implemented in recent years.
DECEMBER 4
Minimum own funds requirements for 2024
Novo Banco, S.A. informs that it has been notified by the European
Central Bank of its minimum prudential requirements applicable in
2024. The requirements to be observed are based on the results of the
Supervisory Review and Evaluation Process (“SREP”), and calculated
relative to the Total Risk Weighted Assets (“RWA”).
DECEMBER 14
Governing Bodies
Novo Banco, S.A. informs that Donald Quintin has ceased today his
duties as a member of the General and Supervisory Board.
25
Annual Report 2023 | novobanco Management Report
Sustainability Report
Financial Statements
Annex
1.1.3 Awards & Recognitions
NOVOBANCO IS “BANK OF THE YEAR - PORTUGAL 2023”, BY THE BANKER
(FINANCIAL TIMES)
Novobanco was awarded as “Bank of the Year in Portugal” by The Banker, a renowned
publication within the Financial Times Group. This is a recognition of novobanco’s
unwavering dedication to its customers, consistently anticipating their needs and
providing innovative, efficient, and transparent banking products and services, based on
high ethical standards and integrity.
NOVOBANCO’S SYNTHETIC SECURITIZATION HAS BEEN AWARDED
“TRANSACTION OF THE YEAR” BY SCI
Novobanco pioneered Portugal’s first balance sheet synthetic securitisation referencing
corporate exposures executed on an unfunded basis – a groundbreaking transaction,
recognized by SCI SRT awards. This operation marked our return to the synthetic
securitization markets after an extended absence.
NOVOBANCO AWARDED AS RETAIL INNOVATION LEADER IN PORTUGAL,
BY THE INTERNATIONAL BANKER MAGAZINE
Novobanco is recognised by The International Banker magazine as the best bank
in Portugal in the Retail Innovation category. This award distinguishes novobanco’s
commitment to providing its customers with an experience of excellence in the sector,
investing in a comprehensive transformation strategy that encompasses the branch
network and digital presence.
INSTITUTIONAL CAMPAIGN “NOW IS OUR TIME.” WINS “SILVER”
CATEGORY AT THE EFFICACY AWARDS
Novobanco is the winner of the “Silver Award” in the “Financial Services and Insurance”
category of the 2023 Efficacy Awards, with the institutional case study/advertisement
“Now is our time”. The campaign marked a new phase for novobanco, signaling the end
of the bank’s restructuring period, presenting itself as an institution with sustainable
profitability, no strings attached, free to operate in the Portuguese market.
NOVOBANCO ELECTED FOR THE FIFTH YEAR RUNNING BEST TRADE
FINANCE PROVIDER IN PORTUGAL
Novobanco has once again been voted the best bank for Trade Finance in Portugal by
the international magazine “Global Finance”. Based on a number of benchmarks, such
as transaction volume, customer service and innovation, the editors of this prestigious
magazine, as well as sector analysts, company managers and IT specialists, selected
the best service providers in the area of Trade Finance in more than 100 countries and
regions around the world.
26
Annual Report 2023 | novobanco
NOVOBANCO ELECTED BEST DISTRIBUTOR PORTUGAL AT THE SRP
EUROPE AWARDS 2023
Novobanco has once again been awarded the “Best Distributor, Portugal” prize by SRP
(Structured Retail Products), part of the Delinian Group Company, thus seeing both the
solidity and consistency of its Structured Products offer and the work that has been
carried out in this area over the last few years recognised on an international level.
NOVOBANCO ELECTED “BEST ENGAGEMENT AND COMMUNICATION” AT
THE WELLBEING AWARDS 2023
Novobanco was recognized in the first edition of the Wellbeing Awards, an initiative of
Workwell, a pioneering company in the development of corporate wellbeing programmes,
and AGIS, the Association for Healthcare Innovation and Management, is officially
supported by Aon, a personal services company in risk, retirement, health and people.
NOVOBANCO SHORTLISTED FOR THE FINOVATE AWARDS 2023
Novobanco was once again shortlisted for the final stage of the Finovate Awards
2023, the fintech industry innovation awards, in the “Best Data Management Solution”
category, with a solution that allows its customers to update their data conveniently and
independently, choosing the channel that suits them best.
NOVOBANCO RECEIVES AN HONORABLE MENTION IN THE CATEGORY
“BEST USER/CUSTOMER EXPERIENCE INITIATIVE”, AT THE BANKING
TECH AWARDS
Novobanco received an honorable mention in the 2023 edition of the BANKING TECH
AWARDS, in the category of “Best User/Customer Experience Initiative”. This was the
fourth time that novobanco was named a finalist in these awards.
All awards are the sole responsibility of the awarding organisations.
27
1.2 Organization
1.2.1 Governance Model
Novobanco ‘s management relies on a governance
model that is unique and distinct when compared with
systemic banks within the Portuguese financial sector.
As of 18 October 2017, under the new shareholder
structure, the bank changed its governance model
to comprise a General and Supervisory Board (GSB)
and an Executive Board of Directors (EBD), in line with
international best practices.
The governance model was designed to ensure
monitoring of the bank’s activity and the fulfilling of its
strategic objectives:
MONITORING
COMMITTEE
Capital, Assets and
Liabilities Committee
(CALCO)
Risk
Committee
Sub-Committee
Risk Model
Sub-Committee
Operational Risk
Sub-Committee
Non-Performing
Assets (NPA)
Statutory
Auditor
GENERAL
SHAREHOLDERS
MEETING
EXECUTIVE
BOARD OF
DIRECTORS
Company
Secretary
Compliance
and Product
Committee
Internal Control
System
Committee
Transformation
Committee
Credit
Committee
Investment
and Costs
Committee
Enlarged
Impairment
Committee
GENERAL AND
SUPERVISORY
BOARD
Risk
Committee
Financial
Affairs (Audit)
Committee
Remuneration
Committee
Nomination
Committee
Compliance
Committee
28
Management ReportSustainability ReportFinancial StatementsAnnex and its internal regulations, including the supervision of
all matters related to risk management, compliance and
internal audit, as well as approval on relevant matters for
novobanco.
The EBD is responsible for the management of the bank,
for the definition of the general policies and strategic
objectives, and for ensuring the running of the business
in compliance with the rules and good banking practices.
Further information is provided in the Corporate
Governance Report, chapters 5.2.3) General Supervisory
Board and 5.2.4) Executive Board of Directors.
The GSB is responsible for regularly monitoring, advising,
and supervising the bank’s management and the group
entities, as well as for supervising EBD activities with
regard to compliance with the relevant regulatory
requirements. The GSB meets on a monthly basis, and its
Chairman maintains regular communication and dialogue
with the CEO. GSB’s activity is supported by committees
to which it delegates some of its powers: the Financial
Affairs (Audit) Committee, the Risk Committee, the
Compliance Committee, the Nomination Committee
and the Remuneration Committee. The Financial Affairs
(Audit) Committee also has competencies under the
terms of the Commercial Companies Code. These
committees are chaired by independent members of the
GSB and its composition complies with the applicable
legislation regarding the chairmanship and majority of
independent members (when required).
The GSB and its Committees’ responsibilities and powers
are attributed by general law, the Articles of Association
1.2.2 Corporate Bodies
On 31 December 2023, the composition of the Group’s
corporate and statutory bodies was as follows:
BOARD OF THE
GENERAL MEETING
Chairman: Fernando Augusto de Sousa Ferreira Pinto
Vice-Chairwoman: Magdalena Ivanova Ilieva
Secretary: Mário Nuno de Almeida Martins Adegas
MONITORING
COMMITTEE
Chairman: José Bracinha Vieira
Member: Carlos Miguel de Paula Martins Roballo
Member: Pedro Miguel Marques e Pereira
Statutory Auditor
Ernst & Young, Audit & Associados – SROC, S.A., registered in the Portuguese Securities Market Commission
(“CMVM”) under number 20161480 and in the Portuguese Institute of Statutory Auditors (“OROC”) under
number 178, represented by António Filipe Dias da Fonseca Brás, registered in the CMVM under number
20161271 and in the OROC under number 1661, and by João Carlos Miguel Alves, as alternate statutory auditor,
registered in the CMVM under number 20160515 and in the OROC under number 896.
Company Secretary
Mário Nuno de Almeida Martins Adegas
Ana Rita Amaral Tabuada Fidalgo (Alternate Secretary)
29
Annual Report 2023 | novobanco GENERAL AND SUPERVISORY BOARD (GSB)
GSB Committees
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•
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•
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Kambiz Nourbakhsh
Mark Andrew Coker
John Ryan Herbert
Robert Alan Sherman
Carla Antunes da Silva
• William Henry Newton
•
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Monika Wildner
Evgeniy Kazarez
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31-12-2024
18-10-2017
31-12-2024
18-10-2017
31-12-2024
06-06-2018
31-12-2024
29-04-2021
31-12-2024
21-06-2023
31-12-2024
07-11-2023
31-12-2024
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The Board is composed by 10 members, 7 of which are
independent, showing diversity in several dimensions1:
Gender
Female
2
Age
<40
1
>60
3
]40-50]
2
8
Male
4
]50-60]
30
Nationality
Portugal
Germany
1
1
USA
2
2
Austria
United
Kingdom
4
Management ReportSustainability ReportFinancial StatementsAnnex
EXECUTIVE BOARD OF DIRECTORS (EBD)
A Board currently composed by 7 members diverse in several
dimensions, including age2 and nationality:
e
m
a
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n
o
i
t
c
n
u
F
Mark Bourke
Chief
Executive
Officer
Appointed as CEO of novobanco in 2022, after holding the position of CFO
for 3 years.
20+ years of experience as senior executive in financial institutions, namely
as CEO in IFG Group and as CFO in AIB.
t
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M 04-03-2019 31-12-2025
Benjamin
Dickgiesser
Chief
Financial
Officer
Appointed as CFO of novobanco in 2023; Previously member of novobanco’s
GSB since 2017.
+15 years of experience in financial markets, worked in FIG IBD at Citigroup
and at Lone Star (MD for Hudson Advisors Portugal) with non-executive board
roles at novobanco and IKB Deutsche Industriebank.
M 01-10-2023
31-12-2025
Luís Ribeiro
Andrés
Baltar
Chief
Commercial
Officer
(Retalho)
Chief
Commercial
Officer
(Empresas)
Luísa Soares
Da Silva
Chief Legal,
Compliance &
Sustainability
Officer
Appointed as CCOR in 2018.
25+ years of experience in the commercial area with novobanco, having previously
assumed leadership for SMEs.
M 18-09-2018
31-12-2025
Appointed as CCOC in 2020.
20+ years of experience in Corporate Banking at Barclays (was Head of Corporate
Banking in Europe) and novobanco.
M 01-12-2020
31-12-2025
Appointed as CLCO in 2017.
Prior to joining novobanco, Luisa accumulated 25+ years of experience in Law,
especially in the areas of banking and finance, insurance, compliance, and capital
markets.
F
18-10-2017
31-12-2025
Carlos
Brandão
Chief Risk
Officer
Appointed as CRO in 2022.
Solid experience in risk management, both within and outside novobanco,
as he was Risk Director in Santander Totta and Barclays.
M 25-08-2022 31-12-2025
Rui Fontes
Chief Credit
Officer
Appointed as CCO in 2022.
Deep institutional knowledge of novobanco2 and 20+ years of experience
in risk management.
M 18-10-2017
31-12-2025
Gender
Age
Nationality
Female
1
]35-40]
1
]55-60]
3
6
Male
(1) (2) As of 31 December 2023
Portugal
4
3
]50-55]
31
Spain
1
1
Germany
1
Ireland
Annual Report 2023 | novobanco
Novobanco has a Selection and Assessment Policy for
Management and Supervisory Bodies and Key Function
Holders, the purpose of which is to ensure that the
members of these Bodies and Key Function Holders
are suitable, at all times, to carry out their duties and,
therefore, meet the necessary suitability requirements,
as set out in the Policy and in the applicable legal and
regulatory framework.
With regard to the collective assessment of the
Management and Supervisory Bodies (“Bodies” or
“Corporate Bodies”), as collegiate bodies it is important
to assess and ensure that their composition meets
diversity criteria, namely in terms of the qualifications
and professional backgrounds, gender, age and
geographical origin of their members. This diversity
- considered here in its various dimensions - and its
practical application will be ensured by the strategy
defined by novobanco and the implementation of the
measures defined for this purpose, thus guaranteeing
that regulatory requirements and expectations in
this area are met. The primary objective is to ensure a
diversity of perspectives and experiences that fosters
the sharing of opinions and their independence,
allowing for sound and balanced decision-making
by the members of these corporate bodies and the
gradual increase of the under-represented gender in the
corporate bodies concerned.
This Policy is complemented by the Succession Planning
Policy, which incorporates the principles of diversity in
the development of succession plans, and by the Non-
Discrimination and Gender Equality Policy.
The above policies can be consulted on novobanco’s
institutional website at www.novobanco.pt
With regard to gender diversity in the composition of the
General and Supervisory Board and the Executive Board
of Diretors, and in compliance with the relevant legal
requirements, the Selection and Assessment Policy for
Management and Supervisory Bodies and Key Function
Holders has set a target of at least 20% of the
under-represented gender at the next renewal of the
mandate of these bodies.
At the date of this report, the target has been reached
with regard to the composition of the Supervisory Board
in the current term of office (10 members, 2 of whom are
women) and will be exceeded if the new female member
of the General and Supervisory Board, whose fit and
proper process has been submitted in 2023 and whose
appointment will be the subject of a resolution at the
next General Meeting, receives authorisation from the
competent authorities to take up her duties.
With regard to the composition of the Executive Board
of Directors, this target has not yet been achieved.
However, with reference to 2022, globally we note that
the overall gender diversity at GSB and EBD level has
positively increased from 12.5% to 17.6% and will exceed
the 20% target when the fit & proper authorization
is granted, and upon the appointment to GSB of the
new member of female gender, which demonstrates
novobanco’s strong commitment to achieving the
targets it has set in this area.
Considering the objective defined in the Policy, and to
make gender diversity an increasingly fundamental
element of the bank’s culture, the Gender Equality Plan
was approved by novobanco in March 2023, establishing
a set of measures and indicators that reflect: (i) senior
management’s commitment to apply diversity and
equality criteria at the level of novobanco and the Group,
(ii) the definition of management indicators (“KPIs”) to
regularly assess the alignment with the defined strategy,
(iii) the implementation of processes for recruiting new
employees and setting and reviewing salary conditions
that take into account diversity criteria and promote
32
Management ReportSustainability ReportFinancial StatementsAnnex
equal pay; (iv) career development and promotion plans
that foster gender diversity across the Bank. Moreover,
novobanco has incorporated into its governance model,
especially at the level of the Nomination Committee,
processes for monitoring compliance with the Gender
Equality Plan and the individual measures set out
therein.
With the firm resolve of achieving the representation
objectives set out in the Policy, the following indicators
have also been defined:
• at senior management level (Board of Directors and
Coordinating Managers) novobanco exceeded the
25% target set in the Gender Equality Plan for 2023,
having reached 27.3% of women in these positions.
• positive evolution in gender pay gap - equal pay
indicators (equal pay for equal work), from 5.7% to
5.3% in 2023, surpassing the 5.4% target set in the
Gender Equality Plan.
• positive evolution in the unadjusted pay gap indicators
(men’s salaries vs. women’s salaries), from 18.3% to
17.7% in 2023, surpassing the 17.8% target set in the
Gender Equality Plan.
• in addition, the percentage of women in management
positions has increased from 36.6% to 39.1% year-
on-year, which reflects novobanco’s global efforts to
strengthen women’s leadership.1
Women in senior management:
EBD and Coordinating Managers
(%)
25
27.3
Target
2023
2023
Equal pay indicator
(%)
5.7
5.4
5.3
2022
Target
2023
2023
Overall gender diversity: GSB + EBD
(%)
Undajusted pay gap indicator
(%)
12.5
17.6*
18.3
17.8
17.7
2022
2023
* Will overcome 20% with the new member of GSB.
2022
Target
2023
2023
(1) These indicators relate to novobanco and do not include data from other Group companies.
33
Annual Report 2023 | novobanco Women in management positions
(%)
36.6
39.1
2022
2023
The Gender Equality Plan also includes a set of initiatives,
defined and adapted in accordance with the Strategic
Plan in the People and Culture Pillar, which contribute to
the continuous improvement of the above indicators.
The achievement of the Gender Equality Plan’s
objectives ensures that the conditions are in place to
meet or exceed the target set in the policy at GSB level,
and to achieve it at EBD level in the next mandate.
With regard to the targets and indicators defined in the
Gender Equality Plan, these have been met or exceeded
at the novobanco level, with the novobanco Group’s
figures being close to those of the bank.
The issue of gender equality, equal opportunities and
inclusion remains a strategic priority on the novobanco
Group’s agenda, and the bank has developed a
specific plan to reduce inequalities. This plan is being
implemented with the firm intention of consolidating the
foundations for long-term sustainability, with measures
that promote inclusion and equality and a priority focus
on decision-making and management positions.
Employees
Novobanco’s Employees were a fundamental pillar in
the restructuring process of novobanco. Novobanco’s
decision-making processes seek to follow the best
fair-process practices focusing not only on results but
also on sustainability and involving the employees in the
process of seeking results. The bank thus endeavours
to be aware of the needs and difficulties experienced by
employees throughout their life cycle and to meet their
expectations, to contribute to their full development and
allow them to fully unlock their potential and maintain
high levels of motivation.
4209
employees
(+119 vs 2022)
46
average age
(stable vs 2022)
19
average seniority
(stable vs 2022)
54% Female/
46% Male
(stable vs 2022)
Further information is provided in the Management
Report – 2.2) Strategic Pillars – Develop People and
Culture and in the Sustainability Report – 3.4) Our
Employees.
34
Management ReportSustainability ReportFinancial StatementsAnnex (This page was left in blank intentionally)
35
Annual Report 2023 | novobanco 2 OUR
STRATEGY
2.1 Business & Regulatory Environment
2.1.1 Macroeconomic Environment
The global economy and financial markets faced several
headwinds in 2023, namely: (i) the ongoing war in
Ukraine; (ii) early in the year, the collapse of medium-
sized regional American banks as a result of their
excessive exposure to interest rate risk, breeding fears
of financial instability; (iii) persistently high inflation
during most of the year, particularly in services and food;
(iv) the sharp increase in benchmark interest rates by
the major central banks, making financing conditions
more restrictive; and (vi) a new war between Israel
and Hamas, fuelling tensions in the Middle East and
triggering concerns about the potential spread of the
conflict throughout the region. At the same time, the
cooling of global demand for goods and the deceleration
in international trade flows led to a contraction in
manufacturing activity across the main economic areas.
Notwithstanding these adverse factors, activity turned
out to be better than expected, with the global economy
growing by 3,1% in 2023, after expanding by 3.5% in
2022. In the major economies, consumers benefited
from excess savings accumulated during the pandemic,
low unemployment and fiscal support for income and
expenditure. The services sector, in particular, benefited
from the resilience of private consumption. In the US,
GDP rose 2.5% in the full year (2.1% in 2022), driven by
the favourable performance of household consumption
and non-residential investment. The Euro Area, which
was relatively more penalised by the contraction in
manufacturing, the cooling of international trade in
goods and the impact of rising interest rates, saw
annual GDP growth fall from 3.4% in 2022 to 0.5% in
2023 - albeit above initial expectations of a stagnation.
Quarter-on-quarter, activity dipped by 0.1% in the 3rd
quarter and posted 0% growth in the 4th quarter. In
China, GDP expanded by 5.2% in 2023 (+3% in 2022),
buoyed by the removal of most Covid-19 restrictions
and selective monetary and fiscal policy stimuli.
However, the Chinese economy’s performance remained
constrained by problems in the real estate sector and a
still cautious stance on the part of consumers.
Unemployment rates remained low in the US (up from
3.4% to 3.7% of the labour force) as well as in the Euro
36
Management ReportSustainability ReportFinancial StatementsAnnex Area (down from 6.7% to 6.4%). Many companies
continued to report labour shortages and difficulties
in filling vacancies. In this context, wages continued
to rise in both nominal and real terms, albeit slightly
decelerating compared to the previous year (nominal
YoY increases of 5.2% in the US, in December, and 4.7%
in the Eurozone, in the third quarter).
The relatively good performance of the global economy
in 2023 was further shored up by the steep drop in
energy prices, lowering production costs for companies
and bolstering household purchasing power. Despite
rising briefly above USD 95/barrel in the 3rd quarter,
mainly due to the expectation of further production cuts
by OPEC+, the price of oil (Brent) fell by 17% in average
annual terms, closing the year at 77$/barrel. In Europe,
the price of natural gas slumped by 68.8% in average
annual terms, closing the year at €32.4 MW/h.
In this context, year-on-year inflation fell from 6.5% to
3.4% in the US and from 9.2% to 2.9% in the Euro Area.
Besides the fall in energy prices, this trend was also
driven by the gradual normalisation of supply chains, the
cooling of consumer demand for goods and companies’
lower pricing power. Core inflation proved resilient in the
first part of the year, mainly sustained by the services
component, but eventually receded more noticeably in
the last quarter.
In the Euro Area, prices excluding energy and food
slowed from 5.2% to 3.4% YoY. In the US, core inflation
fell from 5.7% to 3.9% YoY.
The persistence of inflation until 3Q23, and in particular
of core inflation, led the major central banks to reaffirm
the need to raise policy rates to levels deemed
“sufficiently restrictive”. The US Federal Reserve raised
the fed funds target rate in four 25 bps moves, to 5.25%-
5.5%, and then halted the cycle of hikes in July. The
ECB raised its key interest rates by a cumulative total of
200 bps, with the last move taking place in September,
thus bringing the main refinancing rate to 4.5% and the
deposit facility rate to 4%. In July 2023, the Euro Area
monetary authority wrapped up its asset purchases
37
Annual Report 2023 | novobanco under the Asset Purchase Programme and reiterated its
commitment to gradually scale back asset purchases
under the PEPP during 2024.
In this context, the 3-month Euribor rose from 2.162%
in January to an annual peak of 4.002% in November,
after which it fell back to 3.909% by the end of the year.
The 12-month Euribor rose from 3.316% at the beginning
of January to an annual high of 4.228% at the end of
September, before falling to 3.513% at the end of the
year. The Euribor’s fall in the final months of 2023 was
the reaction to the ECB’s signalling of the end of the
monetary policy tightening cycle after the September
meeting, also reflecting the market’s expectation of
further cuts in key rates in 2024, due to lower inflation
and signs of slower activity or stagnation in the Euro
Area. In the US, falling inflation and expectations of
subdued growth led the Federal Reserve’s monetary
policy committee to project cumulative cuts of 75 basis
points in its key interest rate in 2024. However, with the
market anticipating a more substantial monetary policy
easing, yields on government bonds experienced sharp
declines in the latter part of the year. After rising from
3.875% to very close to 5% in October, the yield on the
10-year Treasury slid back to 3.879% at the end of the
year. Albeit with fluctuations, the 10-year Bund yield
rose from 2.571% to an annual high of close to 3% in
October, after which it mirrored the Treasury’s trend and
fell back to 2.024% at the end of the year.
The resilience of economic activity, lower inflation in
the context of a soft landing and the anticipation of
lower interest rates bolstered the stock market and
contributed to keeping credit spreads in check. In the US,
the S&P 500 and Nasdaq stock indices surged by 24.2%
and 43.4%, respectively, with the technology sector
experiencing additional gains fuelled by favourable
expectations regarding advancements in artificial
intelligence. In Europe, the Euro Stoxx and DAX were up
by 12.7% and 20.3%. The euro rose by 3.3% against the
dollar, to €/$ 1.1064.
Portuguese Economy
In Portugal, GDP rose 2.3% in 2023, slowing down from
6.8% in 2022, but surpassing initial expectations as
well as the Eurozone average. Economic activity was
particularly strong at the start of the year, growing by
1.5% QoQ and 2.5% YoY in 1Q23. This performance
benefited from the resilience of private consumption
and, even more, by the strong contribution of net
external demand, notably the vigour of services exports,
and in particular those associated with tourism. A cooling
trend in economic activity followed, reflecting less
favourable base effects, the impact of rising interest
rates on domestic demand and the slowdown in external
demand. GDP recorded quarterly changes of 0.1% in
2Q23 and -0.2% in 3Q23, respectively, or 2.6% and 1.9%
YoY. Growth increased again in 4Q23, to 0.8% QoQ and
2.2% YoY.
In 2023 private consumption grew by 1% in real terms,
after expanding by 5.6% in 2022. The main negative
contributions to consumption came from fuel and non-
food items (including durable goods), although spending
on services also slowed down in the second half of
the year. The slowdown in private consumption partly
reflected less favourable base effects (growth in 2022
had been magnified by the 2021 pandemic restrictions).
In addition, household spending in 2023 was constrained
by continued price increases and the rise in interest rates.
The average annual inflation rate fell from 7.8% to 4.3%
in 2023, which is still relatively high. On a year-on-year
basis, price growth slowed from 8.4% to 1.4% between
January and December (averaging 6.1% in the first half
and 2.6% in the second half of the year). This mainly
reflected the fall in energy prices (annual average of
-9% in 2023, after 23.7% in 2022) and the application
of zero VAT to some basic goods, which contributed to
the slowdown in unprocessed food prices, from 12.2% to
9.5%.
38
Management ReportSustainability ReportFinancial StatementsAnnex The implicit interest rate in mortgage loan contracts
under the general regime rose from 1.885% to 4.583%
between December 2022 and December 2023, causing
the corresponding average monthly instalment to
increase from €304 to €414 (or from €536 to €651 for
contracts signed in the previous 3 months, in this case
falling slightly towards the end of the year).
On the other hand, household consumption found
support in a relatively favourable labour market, in the
use of excess savings accumulated during the pandemic
and in fiscal support measures. The average annual rate
of unemployment showed modest growth, rising from
6.1% to 6.5% of the labour force, with unemployment
only increasing towards the end of the year. The strong
performance of the services sector (especially tourism)
contributed to the resilience of the labour market. The
percentage of companies reporting labour shortages as a
constraint on activity remained high in construction and
increased in services and manufacturing. In this context,
wages remained under upward pressure, contributing to
nominal growth in household disposable income of 6.2%,
down from a record 8.2% in 2022.
The household savings rate fell from 6.5% to 5.8% of
disposable income between the 4th quarter of 2022 and
the 2nd quarter of 2023, then recovered in the second
half of the year to 6.6%, on the back of a more cautious
consumer behaviour. As elsewhere in the Euro Area, the
pursuit of higher returns amid a climate of rising interest
rates caused bank deposits in Portugal to shrink at
the start of the year, as investors favoured alternative
savings instruments, particularly saving certificates
(certificados de aforro). This movement slowed down
considerably in the second half of the year.
Except for the transport equipment component, which
benefited from the strong performance of tourism,
investment in fixed assets experienced subdued growth.
This was due to the tightening of financing conditions for
businesses and households, to a more uncertain outlook,
and to the still low execution rate of the Recovery and
Resilience Plan’s funds. Overall, capital expenditure
growth retreated from 3% to 0.9% in real terms. Weaker
private sector investment intentions resulted in YoY
falls in the flow of new mortgage loans and loans to
non-financial corporations. Non-performing loan ratios
remained contained in all segments, reflecting the
context of low unemployment and of rising disposable
income for both companies and households, as well as
the macroprudential measures in force since 2018. In the
3rd quarter of 2023, the NPL ratio stood at 2.9% of total
loans, down from 3.6% a year earlier.
The real estate sector maintained a robust pace of
activity in 2023, although showing some signs of
deceleration. After increasing by 8.7% in the first two
quarters of the year, house prices rose by 7.6% YoY in
the 3rd quarter, with QoQ growth slowing from 3.1% to
1.8%. The number of transactions rose by 1.9% in the
quarter, but fell by 18.9% YoY, in this case mainly due to
the contribution of the domestic segment.
Reflecting the expansion of economic activity and the
observation of surpluses in both public and external
accounts, most rating agencies upgraded Portugal’s
sovereign rating in 2023. DBRS raised its rating in
July, from A(low) to A; Fitch upgraded its rating in
September, from BBB+ to A-; and Moody’s raised it in
November, from Baa2 to A3, even if, in the same month,
the Portuguese Prime Minister formally handed in his
resignation to the President of the Republic, leading to
the fall of the government and the scheduling of early
elections for March 2024. S&P maintained its rating at
BBB+, but improved the outlook from stable to positive.
The spread of the Portuguese 10-year Treasury Bond
yield to the German benchmark narrowed from 102 bps
to 63 bps in the full year.
39
Annual Report 2023 | novobanco on private consumption, should contribute to this
slowdown. Exports of services are also expected to
subside. The decline in GDP growth should be mitigated
by lower inflation, by the impact of fiscal support
measures (e.g., pension increases), by a recovery in
exports of goods following the decline in 2023, and by
the increase in investment, especially in public projects,
linked with the faster pace of execution of the Recovery
and Resilience Plan (RRP) funds. Average annual inflation
is projected to fall in 2024 to around 2.3%, while the
unemployment rate should rise to around 7.2% of
the labour force (annual average), mainly due to the
slowdown in services activity. Companies’ efforts to
retain employees may help alleviate this impact. In the
real estate market, there should be a moderation in
transaction volumes and a deceleration in prices, in line
with the more subdued demand. Supply constraints
are likely to remain a relevant factor, preventing a sharp
correction in prices. The persistence of surpluses in the
external and public accounts should contribute to a
benign assessment of the sovereign rating. The main
risks include the continuation of resilient inflation and
restrictive financial conditions beyond expectations, the
possibility of a global recession, a climate of instability
and uncertainty following the March elections, delays in
the execution of the RRP and a higher-than-expected
increase in unemployment.
Outlook for 2024
2024 should see a slight slowdown in global activity,
with GDP growth receding to around 1.5% in the US
and remaining below 1% in the Euro Area. Contributing
to this soft-landing scenario are the lagged impacts
of restrictive monetary policies and the shrinking of
household excess savings. These factors should be
mitigated by the fall in inflation and key interest rates, as
well as by the increase in investment related to energy
and digital transition programmes. The unemployment
rate is expected to rise only moderately in the US and
the Eurozone. Inflation should continue to fall in 2024,
approaching the 2% target by the end of the year. In
this context, the major central banks are anticipated to
initiate a new cycle of policy interest rate cuts starting
from the end of the second quarter. Cumulative cuts
of 100-125 basis points in the case of the US Federal
Reserve and around 75-100 basis points in the case of
the ECB are anticipated. The main downside risks include
the potential for inflation to persist at higher levels than
anticipated, requiring the continuation of restrictive
monetary policies and exacerbating the adverse impacts
on demand and unemployment. The year 2024 will also
be marked by various (geo)political events and risks,
with possible impacts on the economy. These include the
US presidential elections and, critically, the continuation
of the war in Ukraine and the risk of the Israel-Hamas
war escalating into a wider conflict in the Middle East,
with adverse impacts on supply chains and the price
of commodities. The main upside risks for the global
economy include the possibility of faster than expected
falls in inflation and key interest rates, as well as an early
end to the conflicts in Ukraine and the Middle East.
In Portugal, annual GDP growth is expected to retreat
to just over 1%, still higher than the Euro Area average.
The lagged effects of the ECB’s restrictive monetary
policy and a slight rise in unemployment, with an impact
40
Management ReportSustainability ReportFinancial StatementsAnnex limitation on the use of internal models (output floor), as
well as the increase in credit risk calculation weights.
Reference should also be made to the EU Reform of
the bank crisis management and deposit insurance
framework (“CMDI”), which aims to strengthen
depositor protection (by extending the application of the
legal regime to public entities) in situations of crisis or
financial instability.
Of the various developments in the field of ESG, we
highlight the EC proposal for measures in the area of
sustainable and transition finance, which, by broadening
the scope of the taxonomy, will allow a wider range of
investments to be considered sustainable. In addition,
the creation of a single European access point to publicly
available information relevant to financial services,
capital markets and sustainability, will contribute to
better informed investment decisions.
In terms of digital transformation, there have been
developments on the digital euro and a proposal for a
regulation is already on the table. The conclusions of
the Copenhagen Economics study on the effects of the
digital euro on financial stability and the need for the
ECB to ensure measures to mitigate its negative impact
on the banking sector were also published.
Finally, a note on the developments under PSD3 and the
publication of the PSR proposal in June 2023, to which
most of the PSD2 will be transferred.
2024 should see the start of a phase of in-depth analysis
of the two new Directives on consumer credit and
financial services agreements concluded at a distance
((EU) 2023/2225 and (EU) 2023/2673, respectively),
which member states must transpose and publish by 2025.
Annual GDP growth1
(%)
6.8
3.4
EA
PT
vs 1.8% in
Mar/23
2.3
PT
0.5
EA
2022
2023
Inflation
(%)
below 2023E Euro
Area average
of 5.4%
7.8
4.3
1.4
2017
2022
2023E
2.1.2 Regulatory Environment
Amidst a challenging socio-economic context, 2023 was
marked by a series of regulatory initiatives at European
level aimed at strengthening the resilience of the
banking sector, reinforcing the commitment to climate
transition, and pursuing digital transformation and
technological evolution.
These included the publication of the final proposals
to amend the Capital Requirements Directive and the
Capital Requirements Regulation (CRD VI and CRR III),
with a view to increasing the comparability of banks’
capital ratios. Of particular note is the introduction of a
(1) Source: Bank of Portugal; 2023E PT expectaction from BdP as of Dec/23; European average – ECB (Dec/23).
41
Annual Report 2023 | novobanco Management Report
Sustainability Report
Financial Statements
Annex
New ESG measures
Digital Euro Regulation Proposal
Publication of Copenhagen Economics Study
PSD3 and PSR proposals
CMDI
EU
Regulation (EU) 2023/2859
European single access point
CRD VI and CRR: package approved
by European Council and Parliament
preparatory bodies
Directive
2023/2225
On consumer
credit
Directive
2023/2673
Financial services
contracts concluded
at a distance
2023 April
June
September
October
November
December
2024
New asset
management
regime
Regulation 4/2023
Means of compliance
with issuers’
information obligations
Package of measures for mortgage loans
Regulation 7/2023
Regulates the asset
management regime
(entry into force in
January 2024)
PT
In Portugal
56/2023 and 24/2023, Decree Law 91/2023 and
20-B/2023 and BdP Instruction 24/2023).
In terms of interactions promoted by the CMVM,
Regulation 4/2023 regulates the formats and means
to be used by securities issuers to fulfil information
disclosure duties. In addition, Regulation 7/2023, which
will come into force in January 2024, regulates the new
Asset Management Regime, published in April 2023.
In 2023, significant initiatives were implemented to assist
Portuguese families in mitigating the impact of rising
interest rates on permanent home loan agreements.
These measures aimed to alleviate financial burdens by
securing fixed loan instalments for a two-year period,
increasing temporary interest subsidies, subject
to specific criteria, and imposing restrictions on
commissions charged by financial institutions (Laws
42
Annual Report 2023 | novobanco
2.2 Strategic Pillars
Following the launch of its new brand and the
presentation of its new strategic plan (“Fazer Futuro”)
in 2021, novobanco has been implementing various
initiatives and programmes that support it and, above
all, contribute to the fulfilment of its main objectives. The
results achieved, both in the financial statements and
in the significant strengthening of the bank’s solvency
reflect this fulfilment, despite the challenges of the
macroeconomic context. In 2023, novobanco continued
to grow consistently and exceed expectations, reinforcing
its position as a solid and independent domestic bank,
while maintaining its commitment to supporting families
and businesses throughout their lifetime.
This performance clearly demonstrates the increased
confidence of both customers and the financial markets
in novobanco, the alignment of its team and, naturally,
the consistency of the strategic path outlined.
Novobanco’s strategy is focused on each of its
customers, providing them a simple and efficient
experience, supported by a qualified and close team,
thus contributing to an organisation with robust and
sustainable results.
novobanco’s strategic plan is structured around four
pillars:
STRATEGY PILLARS
1
CUSTOMER-CENTRIC
BANK
2
SIMPLE AND
EFFICIENT
OPERATIONS
3
DEVELOPING
PEOPLE
AND CULTURE
4
DEVELOPING
SUSTAINABLE
PERFORMANCE
Reflecting evolving customer
expectations through distinctive
value propositions.
Simplifying the banking experience,
through superior usage of
technology and data.
Attracting and developing a team
of skilled and fulfilled professionals
that actively live the bank’s values.
Delivering sustainable returns
through disciplined risk, capital and
funding management.
Leveraging digital and omnichannel
approach as drivers of service and
proximity.
Improving internal processes
to upgrade productivity and
efficiency.
Developing a dynamic collaborative
culture in an environment adapted
to the new ways of working.
Strengthening the integration of
ESG across business to support
sustainable growth and key
stakeholders.
SDG ALIGNMENT
43
This strategy is designed to maximise the social impact
of novobanco’s activities. In this regard, the strategic
pillars align with the Sustainable Development Goals
(SDGs), prioritised following the last materiality
assessment.
CUSTOMER-CENTRIC BANK
Novobanco’s daily routine is focused on responding in
an exemplary manner to the needs of its customers,
both individuals and companies, and this purpose
is reflected in the first pillar of its strategy. At each
moment, novobanco seeks to exceed the expectations
of its customers and partners, through a distinctive value
proposition that relies on digital and on the omnichannel
approach as key levers of proximity and experience.
SERVING CUSTOMERS WITH A FULL SPECTRUM OF CHANNELS WITH
COMPLEMENTARY ROLES
OMNICHANNEL
FACE TO FACE
HUMAN REMOTE
DIGITAL
Branches & Corporate Centers
Contact Hub
ROLE
Smaller network of multi-format and
modular branches; Promote retail and
commercial collaboration via shared spaces.
ROLE
Simple servicing, client remote support
to self-served channels and inside
sales/redirection to other channels.
PoS
ROLE
Collect payments and expand
functionalities to enable
value-added services.
Partners
ROLE
Network of partners to promote and
expand client acquisition capabilities.
Remote RM & Mobile AC
ROLE
Increase remote servicing to mass to
industrialize relationship and to affluent
to steer to lower cost-to-serve channels.
A/VTMs
ROLE
Increase speed, convenience &
cost-effectiveness in cash & equivalent
transactions at the branch.
Phygital Solutions
Web and Mobile
ROLE
Enhancing the customer experience through
contract formalization solutions and information
sharing, in both face-to-face and remote scenarios,
cementing the relationship of transparency
and closeness with customers and the bank’s
omnichannel strategy.
ROLE
Speed and convenience for simple
servicing and sales, capture traffic and
cross-fertilize other channels.
44
Management ReportSustainability ReportFinancial StatementsAnnex NEW CHANNELS, SERVICES AND A PERSONALISED CUSTOMER EXPERIENCE
ALLOWED A RAPID RISE IN DIGITAL…
2020
DIGITAL ACCOUNT
OPENING-VIDEOCALL
Launch of the video call
account opening solution.
ONLINE CREDIT FOR
BUSINESS
1st integrated and 100% digital
credit solution for business.
HOMEBUYING
From simulation to deed.
Simple, quick & more
transparent.
Ecologically sustainable.
APP SMARTER
Adaptable, customizable,
inclusive & predictive (based on
data science).
FINANCIAL AGGREGATOR
Business Financial advisor.
Analytic & predictive.
INVESTMENT FUNDS
Subscription of third-party
funds through digital channels
extended.
Morningstar app solution made
available to customers.
2021
2022
2023
LIFE INSURANCE
PERSONAL LOANS
PERSONAL LOANS
Simulation and subscription
of life insurance on digital
channels is made available.
New subscription solution on
digital channels with simulation
comparison feature.
NEW WEBSITE
HOMEBUYING
More customization, SEO and
new features.
API for credit intermediaries:
reduced instalment offer.
Launch of online store for
non-financial products.
CLIENT INFORMATION
UPDATE
INSURANCE
New simulation feature for
home insurance with option to
save simulations.
Client information update via
CMD.
E2E subscription Home
insurance.
PHYGITAL
PHYGITAL
Available across the retail
network, with -40% operations
coverage, saving +13 tons of
paper in 2021.
NOVOBANCO ONLINE
CORPORATE
A new online service to simplify
and support the day-to-day
financial management of
companies.
Increased product depth.
New remote signing solutions.
INVESTMENT SOLUTIONS
New online Investor Profile
Questionnaire.
Increased off balance offer on
digital Channels.
CREDIT CARDS
New online request.
Increased limit request.
Pin by SMS.
DIGITAL CHANNELS
App: New wallet features,
savings widgets and budgeting,
recurring ops.
Online Empresas:
new dashboards and
functionalities (factoring,
confirming).
CLIENT INFORMATION
UPDATE
ID card photo upload on digital
channels.
45
Improved underwriting process.
INVESTMENTS
Extension of the offer available
online.
Improvements to the Investor
Profile Questionnaire (QPI).
Online opening of the
Financial Investment Contract,
integrated in the investment
fund subscription process (CIF).
NON-LIFE INSURANCE
OFFER
Simulation of Car and Health
Insurance in digital channels,
with subscription through the
call centre or branches.
ONLINE OPENING
ACCOUNT
Improvements in the process.
NOVOBANCO APP
New app for corporate clients.
Google Pay / Apple Pay.
Enhanced security in online
shopping payments with 3D
Secure.
New authentication model for
push notification even more
fluid.
NOVOBANCO ONLINE
CORPORATE
Improvements and new
features in the confirming
dashboard.
Factoring and Confirming
Reports.
Participation Management
with simplified membership
(consultation only).
PHYGITAL
Increased product depth.
Extension to the corporate
segment.
Enlargement to novobanco
Açores.
Annual Report 2023 | novobanco …UNLOCKING CURRENT AND FUTURE
POTENTIAL:
Digital Sales
INSURANCE
+107%
YoY
CREDIT
CARDS
+122%
YoY
PERSONAL
LOANS
+27%
YoY
8% of segment
sales
5% of segment
sales
20% of segment
sales
+3pp YoY
+1pp YoY
+5pp YoY
Digitally active clients
(%)
62
(+5pp vs 2022)
67
2022
2023
Self-service transactions
(%)
84
94
>70
Retail
segment
Small Businesses
segment
Corporate
segment
In the Corporate segment, novobanco’s in-depth
knowledge of the Portuguese business sector allows
it to develop specialised approaches, which offer each
sector of the economy, and in particular those that are
key for national economic growth, a set of products and
services suited to their challenges and needs, both for
the domestic activity of companies and to support the
internationalisation of the national economy. Alongside
this vertical vision of the main sectors of our economy,
novobanco is also at the forefront when it comes to
promoting the business sector’s access to the main
programmes aiming to revitalise the European economy.
This in-depth knowledge of the market, of its
opportunities, but also of its expectations and
challenges, positions novobanco as the natural financial
partner for large, medium and small national companies.
In 2023, novobanco also set emission reduction targets
by 2030, aligned with the goals of the Paris Agreement,
in the most relevant segments of its credit portfolio, as
described in the Sustainability Report.
With this in mind, novobanco aims to be the banking
partner of choice for its clients when it comes to
adapting to climate change. In the corporate segment,
this means the provision of financing solutions and
access to specialist partners to help our customers
plan and finance the investment requirements of
the transition challenge. To this end, novobanco has
established a green financing policy with ambitious
medium-term targets (over €2 bn in the next 3 years).
In the Retail segment, which serves families and small
businesses, novobanco develops value propositions
and solutions centred on these customers’ needs at the
most decisive moments of their professional or personal
journeys, whether in consumer credit, mortgages,
management of savings or means of payment, with a
view to accelerating the growth of the customer base
that has novobanco as its main financial partner.
The bank launched specific products to meet the
changing demands of the energy transition, such as
green mortgages, personal loans for the installation of
renewable energy solutions at home and special loan
conditions for electric and hybrid vehicles.
As part of its strategic plan, novobanco has been
implementing an approach based on a principle of
increasing the omnichannel approach, thus providing
customers with a consistent and integrated experience
46
Management ReportSustainability ReportFinancial StatementsAnnex through its multiple channels.
To effectively achieve these objectives, novobanco has
been investing on a global transformation. The most
visible faces of this reinvention are, on the one hand,
the branch network, where novobanco has developed
an innovative concept in the market that combines
technology, proximity to the customer and openness
to the community, and, on the other, digital, which
has been a determining factor for the accelerated
transformation of novobanco.
Finally, novobanco aims to maximise its positive
impact on society - promoting a social responsibility
agenda, acting on issues such as financial inclusion,
financial literacy, the dissemination of ESG knowledge,
sponsoring research into sustainability and driving
multiple inclusion initiatives in the most fragile segments
of the Portuguese society.
More information on products with an ESG impact
is available in the Sustainability Report - 3.3) Our
Customers.
New Distribution Network
(# branches)
(91% of branches)
240
265
116
2021
2022
2023
Evolution of number of clients
(# in thousands)
(>45% client
acquisition growth)
1 482
1 583
2022
2023
Client satisfaction
(Nov-23)
Deposits Market share
(%; Nov-23)
Mortgage
Loans
82%
(+3pp vs Dec-22)
Account
opening
90%
(flat vs Dec-22)
(+0,4pp YoY)
9.3
9.7
2022
2023
Personal
Loans
93%
(flat vs Dec-22)
47
Annual Report 2023 | novobanco Management Report
Sustainability Report
Financial Statements
Annex
SIMPLE AND EFFICIENT
To address the market of today, with its very exacting
clients and the challenges posed by new players, which
spur the sector to evolve its operating model, the
second pillar of novobanco’s strategy is to accelerate
its transformation into an organisation that provides
customers with a lean and straightforward experience,
for which it is necessary to attain increasing levels of
operating efficiency.
In this area, novobanco has focused on reengineering
the most critical processes for customers, with a view
to simplifying them and thus provide an experience that
stands out in the sector, both through its simplicity and
through the consistent improvement of service levels, in
particular in loan granting processes, which are the most
decisive for companies and families.
To this end, novobanco is implementing a far-reaching
transformation programme of its IT and data governance
functions (focused not only on the evolution of the
infrastructure, platforms and tools that support the
bank’s operation, but also on the timely availability of
relevant information to support process improvement),
the scrupulous reformulation of the bank’s operating
model, the permanent optimisation of the models that
support decision-making and, naturally, the regulatory
commitments and requirements to which the banking
sector is subject.
Cost to Income Ratio1
(%)
Reported
Recurring
49
44
33
30
2022
2023
Average Business
Volume per
Employee2
(€k)
+1%
12 583
12 704
Employees3
(#)
4 090
4 209
2022
2023
To increase efficiency and improve its environmental
footprint, the bank has set ambitious targets to
reduce its own greenhouse gas emissions (-28% by
2024 compared to 2021), to reduce the consumption
of resources and to reduce, recycle and recover
waste (-30% by 2024 compared to 2021 for paper
consumption). Novobanco is keen to ensure that its
sustainability standards are met throughout its supply
chain and has established guidelines and a monitoring
framework to ensure compliance by its suppliers.
PEOPLE AND CULTURE
The strategic objectives of novobanco contain a high
level of ambition, based on perfect alignment and
total clarity within the organisation about the role and
contribution of each employee to achieving them. This
third pillar of novobanco’s strategy is, therefore, a critical
dimension and requires a high level of dedication from
the bank’s management.
In this domain, novobanco’s strategy seeks to ensure
a clear distinctiveness (i) in the value proposition for its
employees, (ii) in the development of internal talent and
(iii) in the promotion of the organisational culture and
values. With these dimensions in mind, novobanco seeks
to assert itself as an organisation characterised by:
• A strong capacity to attract, develop and retain the
best talent in the sector;
• A culture that values diversity and champions equity,
including gender equality, and relies on the diversified
profiles and paths of its people;
(1) Defined as Operating Cost divided by Commercial Banking Income; Commercial Banking Income being equal to Net Interest Margin plus Fees and Commissions;
(2) Considers average stock of Net Customer Loans and Deposits, divided by average number employees in the period;
(3) End of period data.
48
• A daily routine supported on working methods aligned
with the best international trends, both in terms of
participation and collaboration practices and in terms
of the working environment;
• The promotion of innovation and the generation of
ideas by the organisation itself, for the benefit of
customers and the national economy;
• The experiencing of values and of an organisational
culture that translates and permanently reinforces
these characteristics;
• A workplace that fosters and promotes employee
well-being and health, building a strong sense of
employee engagement;
• A culture of continued self-improvement and
expertise, by promoting employee training programs in
key topics, including sustainability.
The experience of values and an organisational culture
that translates and permanently reinforces these
characteristics.
Staff Turnover
(%)
(+1.3pp)
6.3
5.0
2022
2023
ESG training hours
(thousands; cumulative)
70.6
(+21k)
96.9
2022
2023
Gender Pay Gap1
(%)
5.7
(-0.3pp)
5.4
2022
2023
(1) Equal Pay indicator (equal pay for equal work). At novobanco stand-alone
level this KPI stands at 5,3%.
More information is available in the Management Report
– 1.2.2 Organizational Structure, and in the Sustainability
Report – 3.4) Our Employees.
SUSTAINABLE PERFORMANCE
The fourth pillar of novobanco’s strategy is driven by
the bank’s resolve that its financial performance be
characterised by its sustainability, by the robustness and
quality of its balance sheet and by adequate solvency
levels.
This provides the framework into which the entire
programme for integrating ESG (Environmental, Social
and Governance) issues into the organisation is set,
which includes (i) implementing the ESG operating model
and training the organisation, (ii) adapting the offer of
products and services, (iii) transforming investment and
risk management policies, among other dimensions.
novobanco considers ESG as an opportunity for the
financial sector to contribute to the important transition
objectives of the world economy, which justifies the
importance it dedicates to this dimension.
The optimised management of the bank’s capital and
its various funding sources and the improvement of
the risk management processes associated with its
activity are also materially relevant for the sustainability
of novobanco’s performance. To achieve this goal,
novobanco’s strategic plan is deployed through different
programmes aimed at strengthening the quality of credit
49
Annual Report 2023 | novobanco decisions, namely by driving their automation, improving
pricing models and the measurement of profitability
adjusted to risk and capital consumption (economic and
regulatory), increasing the sophistication of the warning
systems that monitor the life of credit operations and
continuously improving internal models.
The combination of these dimensions gives novobanco
the confidence that its ambitious medium-term
objectives will continue to be met, thus allowing it to
assert itself as a clear reference in the European financial
sector, in terms of franchise and consistent growth,
based on a robust financial profile that delivers high and
sustainable levels of profitability.
Green investment
(€mn)
CO2 Emissions
(scope 1 e 2)
Eletricity from green
certification:
343
369
-2% emissions
2022
2023
2022
2023
77%
2023
TARGETS EXCEEDED AND ACHIEVING INVESTMENT GRADE RATING EARLIER THAN EXPECTED
2023
Guidance1
2023
Achievements
CET 1 FL
10.1%
13.1%
18.2%
Net Interest Margin
> 2.5%2
2.75%
19.0%
20.4%
Cost to Income
~ 35%
33.3%
RoTE
6.2%
Cost of Risk
~ 50 pb
48 pb
NPL Ratio3
< 4.5%
4.4%
(w/ 84% coverage)
Profit Before Tax4
€700mn
€754mn
Capital Generation
> 400 pb
+500 bp
(CET1: 18,2%)
2021
2022
2023
Rating Actions
Moody’s
(December 2023)
Ba1
(Positive Outlook)
Senior Unsecured Debt
+7 notches in 2 years
Fitch
(February 2024)
BBB-
(Stable Outlook)
Senior Debt
Investment Grade
(1) Considers upward revision of 2023 guidance presented with 1H23 and 9M23 accounts;
(2) Considers average Deposits Facility Rate of 3.3% vs previous 2.7%;
(3) NPL actual calculated as non-performing loans by gross customer loans;
(4) PBT deducted by Special Tax on Banks.
50
Management ReportSustainability ReportFinancial StatementsAnnex 2.3 Risk Management
Main Risks and Uncertainties in 2024
In 2023, novobanco delivered positive financial results.
These results reflect the adoption of a prudent strategy
in the conduct of its business, taking into account the
difficult macroeconomic environment, particularly
in terms of rising interest rates and financial market
volatility, as a result of armed conflicts in Eastern
Europe and the Middle East and the collapse of banking
institutions in Europe and the United States, as well as
the challenges associated with digital transformation,
with the consequent increase of operational risk.
In 2024, the activity of novobanco and the banking
sector in general will be affected by a combination of
different risks and uncertainties, of which the following
stand out:
i. Legal and regulatory risks
The dynamic regulatory environment of the financial
sector in its various areas is quite a challenging
task for institutions to comply with new legal and
regulatory requirements in a timely manner and
to adapt their internal procedures accordingly. In
this context, the following points deserve special
attention due to their growing importance:
• The integration of environmental, social and
governance (ESG) objectives/criteria into business
operations and the related disclosure requirements:
taking into account the current context of
integration of ESG factors into the prudential and
behavioural rules applicable to banking activities and
the aim of institutions to achieve their sustainable
finance objectives, namely by complying with
highly complex disclosure requirements, as well
as the ongoing impasse over the approval by the
European Union of the Directive on Corporate Due
Diligence in Sustainability Matters - which, if not
adopted, will mean the loss of a fundamental pillar
of the European Union’s ESG/sustainability plan,
which is anchored on the Taxonomy-CSRD-CSDDD
triangle - institutions have continued to navigate
a landscape marked by uncertainty regarding the
speed of transition process towards a sustainable
economy, and therefore the rules they must follow.
It is therefore anticipated that the regulatory
agenda of supervisors will remain particularly intense
in this area, which will require an effort on the part
of institutions to assess their resilience to different
scenarios of climate change and energy transition,
to take the necessary measures to mitigate any
risks that may be identified in this context, and
to reposition their strategies to promote ESG
objectives.
• The reinforcement of the legal and regulatory
framework for the prevention, detection and combat
of financial crime, namely through the AML package,
which includes the European Union’s ongoing
review of Directive 2015/849, the regulatory
requirements for due diligence, the implementation
of robust transactional analysis models, Decree-
Law no. 109/2021, among others, the application
of restrictive measures resulting from sanctions
and embargoes, with the consequent impact on
the Bank’s internal processes. On the other hand,
the new European AML/CFT Supervisory Authority
(AMLA) will require close monitoring;
• The Bank’s capital requirements (SREP), the
various On-Site Inspections (OSIs) conducted by
the European Central Bank (ECB), the stress tests
on Liquidity Risk, the Minimum Requirement for
Own Funds and Eligible Liabilities (MREL), as well
as those anticipated in the area of cybersecurity,
and the various guidelines of the European Banking
Authority (EBA) and the ECB on these matters.
51
Annual Report 2023 | novobanco ii. Digital Transformation Risks
Technological innovation and digitalisation initiatives
have become a priority for the banking sector, both for
the benefits they bring to customer service (customer
experience) and for the benefits they bring to internal
efficiency processes.
While the benefits of digitalisation are undeniable,
it also poses significant risks to banks, such as an
increase in cyber-attacks (boosted, for example,
by current geopolitical tensions), the inappropriate
collection of personal data and fraud perpetrated
through digital channels. As a result, banks will have to
maintain operational resilience plans that allow them
to anticipate these situations as far as possible, which
in turn means constantly monitoring technological
developments with the aim of increasing protection
capabilities and mitigating cybersecurity risks.
In addition, 2023 saw a fast rise in the
commercialisation of products based on artificial
intelligence, and this trend is expected to continue
in 2024. Although it is extremely difficult to predict
all of its implications, this could lead to significant
opportunities for efficiency gains and more
sophisticated marketing strategies.
It is thus expected that in 2024 this digital
transformation risk will not only persist, but that
it may even be exacerbated given the many
technological development initiatives underway. Of
particular relevance is the new European legislative
framework - the Digital Operational Resilience Act
(DORA) - which aims to help strengthen the digital
operational resilience of entities operating in the
financial sector by requiring them to develop and
maintain robust ICT to prevent and mitigate cyber
threats in the financial sector that seek to exploit
vulnerabilities in computer systems. This framework
will be applicable in 2025 and will be complemented by
the existing EBA guidelines (EBA/GL/2019/04), which
will certainly be updated and will require institutions to
make additional efforts in 2024 to adapt their internal
processes and procedures.
iii. Outsourcing Risks
Linked to the technological innovation processes
mentioned in the previous point, we should also
highlight the growing importance of outsourcing
services or functions to third parties, which is
expected to continue throughout 2024 and which will
naturally pose challenges for institutions, particularly
in terms of compliance with legal and regulatory
frameworks, reporting obligations, monitoring and
assessing the risk of outsourced services/functions,
and adapting to the expectations already conveyed
by the European Central Bank in its supervisory
activity plan for 2024-2026.
iv. Geopolitical and market risks
• At a global level, there are still concerns that the
geopolitical fragmentation caused by the current
conflicts in the Middle East and Eastern Europe
could have an even more negative impact on trade,
technology and people flows, leading to market
uncertainty and volatility;
• The national macroeconomic situation and
the impact of the outcome of the Portuguese
parliamentary elections in March 2024;
52
Management ReportSustainability ReportFinancial StatementsAnnex • The remaining factors linked to the various types of
risk described in this chapter.
In short, the risks anticipated for 2024 will be
significant, given the context of uncertainty resulting
from the increase of geopolitical tensions, a slowdown
in economic activity and the prospect of interest rates
remaining at higher levels, to which novobanco is
obviously not immune.
novobanco develops its Risk Management function
with the ultimate objective of internalising a risk
culture and pre-empting the materialisation of risks
across all levels of the organisation.
• Delays in the implementation of the Recovery and
Resilience Plan and the resulting impact on the
economy;
• Uncertainty about the impact of persistently high
interest rates and inflation on monetary policy in
the Eurozone, potentially exacerbating the risk
of higher-than-expected unemployment and
generating instability in the commercial real estate
sector;
• The potential impact on the global economy of the
presidential election in the United States of America;
• The credit risk arising from the increase in financing
costs and the deterioration of the macroeconomic
situation are factors that could lead to the
materialisation of this risk for both companies and
individuals.
v. Other Risks
• The Non-Performing Assets (NPAs) portfolio and
the implementation of the NPA plan, particularly as
regards real estate owned (REO);
• Reputational, legal and compliance risks, especially
when leading to litigation, either arising from the
Group’s current activity or from legacy issues;
• Risks arising from the activities of novobanco and
the Group’s entities;
• Broadly, the increase in regulatory reporting
requirements, resulting in greater demands in terms
of data collection, data quality verification and the
safeguarding of data under personal data protection
legislation.
53
Annual Report 2023 | novobanco Risk Management Framework
The Risk Culture at novobanco Group
The definition of a risk management framework with
standards, patterns, objectives and responsibilities
assigned to all areas of novobanco Group, permits to
implement the strategy in compliance of the established
risk appetite.
Risk is inherent to the banking business. As such, the
novobanco Group is naturally exposed to the various
classes of risk arising from external and internal factors,
namely from the nature of the markets in which it
operates and the activities it develops.
Supporting the Board in effective risk management
and in the development of a strong risk culture, this
framework defines:
• the main risks faced by the novobanco Group, as well
as those to which it may be exposed;
• the risk appetite requirements and monitoring;
• the responsibility functions in risk management;
• the governance structures and risk management and
control committees.
1.
GOVERNANCE
Risk management and control committees;
Definition of Policies and roles and responsibilities.
2.
RISK APPETITE STATEMENT
Definition of the level of risk that the Group is willing
to take on.
3.
RISK CULTURE
Risk culture embedded at the verious levels of the
organisation making all employees accountable for
risk management and control.
4.
RISK CATEGORIES
Shared holistic vision of the Credit, Market, Liquidity and
Operational Risk classes as well as of emerging risks.
5.
RISK TOOLS
Stress testing, limits policy, model validation, quantification
and evaluation methodologies.
6.
3 LINES OF DEFENCE
The pillar for effective and seamless risk management
at the various levels of the Group.
The novobanco Group considers that Risk Management
is a key pillar for sustained value creation over time.
The Group’s Risk management and control is therefore
grounded on the following assumptions:
• Universality, through application across novobanco
Group;
• Integrality of the risk culture, through a holistic
and preemptive approach to risk. A holistic vision
encompasses all phases of risk management -
identification, assessment, monitoring and control - as
well as all kinds of financial risks - credit, liquidity and
market, capital - and non-financial risks, including ESG
Risk.
• Independence from the Group’s other units, and in
particular risk-taking units. Following the three lines
of defence model, viewing the adequate detection,
measurement, monitoring and control of all material
risks to which the novobanco Group is exposed. This
model implies that all employees, in their sphere of
activity, are responsible for the management and
control of risk.
A strong risk culture in the organisation is an essential
factor for effective control of the various exposures
to risk. This culture is reflected in the involvement
and performance of all employees in the organisation,
through their diligent, proactive and consistent
compliance with the regulations, code of conduct,
values, and risk appetite defined for all activities,
businesses, segments and risk exposures. To this end,
the timely identification of risk sources as well as
54
Management ReportSustainability ReportFinancial StatementsAnnex risk-based mitigation and control actions are
fundamental. A continuous effort in training, awareness
raising, and communication is equally important to allow
seamless adjustment to any arising situations.
3 LINES OF
DEFENCE
PRINCIPLE
1st
2nd
3rd
line of defence
line of defence
line of defence
NOVO BANCO
GROUP
Business
Areas
Global Risk
Department
Compliance
Department
Internal Audit
Department
FUNCTION
Maximise
return
Control
LIMITATION
Takes risk
according to
Risk Appetite
Does not
take risk
• Accurate and timely
identification of risks;
MISSION
• Make sure that risk remains
within defined limits;
• Measure, monitor, report.
• Independent
review;
• Ensures
adequacy of
policies and
processes;
• Ensures correct
implementation
of policies and
processes.
Risk Management Function
The risk management function is organised in such
a way as to allow effective management of the risks
considered relevant and material by the novobanco
Group - those to which top management pays special
attention and which may impact the achievement of
the objectives defined by the bank -, as well as risks
considered as emerging - those where little is known
about their components, and whose impact may occur
over a longer time horizon.
The risks identified as relevant and material are
quantified within the scope of the Internal Capital
Adequacy Self-Assessment (ICAAP) exercise, the most
relevant being:
i. credit risk, which includes default, counterparty and
concentration risk;
ii. liquidity risk;
iii. market risk in the trading book and banking book,
which includes interest rate risk (IRRBB), equities risk,
credit spread risk, real estate risk and pension fund
risk;
iv. operational risk, which includes operations risk,
information systems risk, compliance risk, and
reputational risk, and
v. business risk.
55
Annual Report 2023 | novobanco The management of risks is considered
vital for novobanco Group
Risk Management, as a vital function for the
development of novobanco Group’s activity, is
centralised in the Risk Management Function, which
comprises the Global Risk Department (GRD) and the
Rating Department (RTD).
It defines holistic principles for risk management and
control, in close coordination with the remaining 2nd line
units of novobanco Group, and with the Internal Audit
Department.
All materially relevant risks are reported to the
Management and Supervisory bodies (as applicable,
EBD, GSB, Risk Committees and specialised
committees), which are responsible for supervising,
monitoring, assessing and defining the Risk Appetite and
control principles implemented.
The Head of novobanco Group’s Risk Management
Function is the Head of the GRD, who reports to the
Chief Risk Officer, a member of the Executive Board
of Directors. To ensure the most effective articulation
with the Risk Management Department, a local Head
of the Risk Function was appointed in each relevant
entity of the novobanco Group, who ensures continuous
monitoring of the financial and non-financial risks to
which these entities are exposed. The GRD acts either
directly or as coordinator, in articulation with the units in
charge of the local Risk Management Function.
The Risk Appetite framework defines:
CONTINUOUS
MONITORING OF
RISK EXPOSURES
Monitoring of risk
exposure in a accordance
with the Governance in
force.
IDENTIFICATION
OF MATERIAL RISKS
Annual risks identification
process at Group level and
of each materially relevant
subsidiary.
ROLES AND
RESPONSIBILITIES IN
RISK MANAGEMENT
Risk Policies defining the
roles and responsibilities
of each stakeholder in risk
management, in compliance
of the 3 lines of defence
principle.
DEFINITION OF
RISK APPETITE
STATEMENTS
A Risk Appetite statement
and respective limits to
be complied with by the
organisation are defined
for each material risk.
This framework aims to ensure that the strategy of
maximising value for the Client – one of the relevant
stakeholders, along with employees, shareholders and
the community - is executed, protecting the strength
of the organisation through rational and solid risk
management.
56
Management ReportSustainability ReportFinancial StatementsAnnex Robust and efficient risk management is also the result
of prospective analysis and ongoing monitoring of risk
exposures, creating a specific risk tolerance framework
that allows the 1st Line of Defence to perform its
activities as risk-taker and relevant participant in risk
management.
The Risk Appetite Statement (RAS) and Risk Appetite
Limits (RAL) defined and approved by the General and
Supervisory Board and the Executive Board of Directors
cover financial and non-financial risks, the various
business lines and regulatory limits. The definition of
these limits is the responsibility of the Risk Management
Function, which liaises with the other relevant
stakeholders in the management and control of specific
risk exposures. The Market Discipline Report provides
further details on RAS and RAL.
Risk appetite is monitored by the Risk Committee
of the Executive Board of Directors and General and
Supervisory Board. Risk management and control is also
supported by various specialised committees. Detailed
information on the committees that support the Risk
Management Framework is described in section 5.2.
Corporate Bodies: Composition and Functioning.
The definition of Risk Appetite statements for the
Group’s relevant exposures and their monitoring through
risk limits are fundamental aspects of risk management
and control. By linking them to the main strategic
metrics, the risk limits are divided into three levels
(according to their materiality), and subject to a specific
escalation process, namely for the metrics with the
highest materiality, that involves timely communication
to the General and Supervisory Board and reporting
to the Executive Board of Directors, as a guarantor of
effective supervision of risk appetite monitoring.
The General and Supervisory Board monitors and
ensures the effectiveness of the management
conducted by the risk function, its action plan and
budget, as well as its reports and relations with external
auditors and supervisory authorities. It also monitors the
current and future global risk appetite, the risk strategy
in place, and the effectiveness of novobanco Group’s
risk management system and internal control system.
Moreover, it is responsible for giving prior consent to
the Executive Board of Directors’ proposals on various
matters, namely the definition of the Risk Appetite
Framework, the Risk Appetite Statements and the
corresponding limits. The Executive Board of Directors is
responsible for approving the Risk Framework, the Risk
Policies and the related methodologies and procedures
for identifying, assessing, monitoring and controlling
risks.
The identification and assessment of the risks to which
the Group is exposed must take into account the
established business strategy and planning. Strategic
planning, capital adequacy and resolution exercises are
therefore carried out with the active participation of the
Risk Management Function.
57
Annual Report 2023 | novobanco MANAGEMENT
RISK APPETITE
FOCUS IN 2024
Determine the size of the liquidity
pool available at any given time and
plan for stable sources of funding
over the medium and long term.
Liquidity
• Solid liquidity position;
• Funding of medium- and
long-term assets through stable
liabilities;
• Withstanding liquidity stresses
for a minimum period of 12
months;
• Compliance at all times with the
limits imposed by the legislation
in force.
• Maintaining and evolving the risk monitoring
and management processes, ensuring the
timely detection of shifts in the risk profile and
the Bank’s alignment with the established risk
appetite;
• Developing and maintaining internal models
and stress testing exercises (Stresstesting
Framework) that allow liquidity risk to be
measured and controlled:
• To be continuously updated on the regulatory
framework.
• Risk appetite with stable
origination criteria.
Credit
• Use of internal risk identification,
assessment and quantification
system;
• Internal processes for rating and
scoring allocation by type of
portfolio;
• Definition of Risk Appetite by
portfolio;
• Credit powers that force the
escalation of riskier operations;
• Ongoing monitoring in specialised
fora.
GRD expert team centralises
the management and control of
the group’s market and interest
rate and credit spread risk on the
banking book (IRRBB/CSRBB), in
line with the regulations and risk
good practices.
• Monitoring of net interest
income, market investments and
balance sheet interest rate risk
through predefined risk appetite
rules.
Market
and
IRRBB
• Contribution to strengthen the Bank’s operational
capacity to manage credit exposures in a
context of persistently high interest rates, high
inflation, instability in the energy and commodity
markets, and disruptions in the distribution
chains. Focus on the early identification of
financial deterioration indicators and definition
of strategies for timely intervention with viable
debtors requiring support measures to maintain
their debt service capabilities;
• Reinforcement of remote service models and
creation and development of automated credit
assessment and decision tools;
• Strengthening the continuous monitoring
processes of the various credit portfolios and
reinforcing the EWS framework with the inclusion
of new indicators.
• Processes for ongoing monitoring of market and
IRRBB/CSRBB risks within the boundaries of the
established risk appetite, allowing to assess the
impact of changes in market factors, such as
volatility and interest rates;
• Development and maintenance of internal
models and stress testing exercises (stresstesting
framework) to measure and control market
and IRRBB/CSRBB risks, as well as calculation
of economic capital within the ICAAP exercise,
calculation of market shock impacts within the
EBA Stresstesting exercise and regulatory capital
reporting (alternative standard approach), within
the Fundamental Review of the Trading Book
(FRTB);
• Keeping updated at all times with regard to the
regulatory framework, and in particular the new
EBA guidelines on IRRBB/CSRBB.
58
Management ReportSustainability ReportFinancial StatementsAnnex MANAGEMENT
RISK APPETITE
FOCUS IN 2024
• Definition of Non-Financial
Risk Management and Control
Framework and Specific Policies;
• Compliance function and
Information Security Office with
a relevant role in the definition of
other specific risk policies.
• The risk appetite encompasses
the various categories of risk
and reflects the infeasibility of
eliminating it from a cost-benefit
perspective;
• Risk appetite aligned with
novobanco Group’s high ethical
and conduct standards, which
implies zero tolerance for
inadequate conduct.
Non
Financial
• Reinforcement of compliance with the risk
appetite defined for the whole Group;
• Reinforcement of a culture of risk, particularly in
the first line of defence, to ensure the alignment
of actions and decisions with the risk strategy
and appetite across the various levels of the
organisation, promoting a more robust control of
risk;
• Continuous strengthening of the Fraud Risk
framework in light of the increased sophistication
of fraud typologies, in particular cyber and
technology risk, by enhancing fraud events
prevention mechanisms;
• Updating of the identification and assessment
methodologies for-non financial risks, to include
ESG risk;
• Keeping continuously updated on the regulatory
framework.
ESG
Undertaken through the joint
approach of specialised teams
from the GRD and GESC, which
define the guidelines to be followed
for any new business and for
monitoring existing positions, in
order to measure and mitigate
novobanco Group’s exposure, in
particular to transition and physical
risks.
In addition, it is supported by
methodologies to assess and
monitor the risk factors, which,
consistently with the applicable
regulations, permit to monitor
the evolution of the risk profile of
balance sheet positions.
• Application of exclusion policies
• Application of the criteria established by the
and minimum safeguards,
namely for activities with higher
ESG (environmental, social and
governance) risk;
• Definition of global goals and
guidelines to steer new credit
production according to ESG
assessment criteria;
• Implementation of global risk
assessment methodologies, at
the level of the credit portfolio,
to identify and monitor the
evolution of the main ESG risks
on the balance sheet;
• Creation of a KRI dashboard
integrated into novobanco
Group’s Risk Appetite.
EU Taxonomy Climate Policy Relevant Sectors
(CPRS) and greenhouse gas emitting sectors to
characterise the Bank’s portfolios;
• Mapping of the physical risk of properties owned
by novobanco or given as loan collateral;
• Increased integration between ESG risk
methodologies and business planning and
execution, namely regarding the implementation
of risk classification methodologies (Scorings /
Ratings & Taxonomy) and respective guidance on
credit risk decision and monitoring;
• Maintaining and improving ESC scorings and
ratings.
More information in chapter 3.2) ESG Risks
of the Sustainability Report
59
Annual Report 2023 | novobanco 3 OUR
PERFORMANCE
3.1 Highlights
CONSISTENT STRATEGY DELIVERING
INCREASED PROFITABILITY
CONTINUED STRONG CAPITAL
GENERATION
• Net income of €743.1mn (2022: €560.8mn),
• FL CET1 ratio increased by ~500bps YoY to 18.2%,
reflecting a solid domestic business model aligned
with our customers’ expectations and the efficiency
measures implemented in recent years.
• In 2023, NIM reached 2.75% (2022: 1.47%), above
2023 guidance (> 2.5%). NII totalled €1,142.6mn
(2022: €625.5mn), as a result of the favorable interest
rate environment, and of the prudent management of
interest rates on assets and the cost of financing.
• Fees totaled €296.1mn, increasing 0.9% YoY
(2022: €293.3mn), with the impact from regulatory
changes that reduced commissions charged on
certain products, partially offsetting the overall strong
underlying trend.
• Commercial Cost to Income ratio of 33% (2022:
49%), beating guidance of ~35%. The ratio reflects the
Commercial Banking Income performance (+56.6%)
versus Operating Costs (+6.9%), which were driven by
continued investment in the business and inflationary
pressures.
beating the already revised capital generation
guidance of >400bps. Total Capital ratio increased
by ~560bps to 21.0% (+165bps QoQ), which also
benefited from the net increase of the Tier 2 by
€100mn, following the issuance of the new €500mn
10.5NC5.5 Tier 2.
• Strong capital generation with tangible shareholder’s
equity increasing €894mn to €4,126mn (+27.7% YoY).
A RESILIENT BUSINESS MODEL WITH
MARKET SHARE MOMENTUM
• Net Customers loans at €24.5bn (stable YTD), with
€3.5bn YTD origination partially offset by increased
amortization and supported by new client acquisition.
The bank has increased its footprint in the Portuguese
market with global market share at 9.8% (Nov/23;
+0.2pp YTD).
• Cost of risk was 48bps (2022: 44bps), for credit and
• Non-performing loans (NPL) present a reduction of
corporate securities (including management overlays),
consistent with 2023 guidance of ~50bps.
17.7% YoY to €1,133mn. Net NPL ratio stood at 0.7%
(Dec/22: 1.3%) and the NPL ratio at 4.4% (Dec/22:
60
Management ReportSustainability ReportFinancial StatementsAnnex 5.4%; in-line with guidance of <4.5%), with a coverage
level of 84.3% (Dec/22: 77.5%).
in 2023; and v) stable funding, along with adequate
liquidity.
In Nov/23, and for the third consecutive time,
novobanco has received a multi-notch rating upgrade
from Moody’s, achieving a remarkable 5-notch rating
increase within a 7-month period, moving senior
unsecured debt rating to Ba1 from B3, while maintaining
a “Positive Outlook”.
• Total customer funds of €34.9bn (Dec/22: €34.8bn;
flat YoY), with customer deposits at €28.1bn. This
performance is reflected in the growth of novobanco
deposit market share to 9.7% in Nov/23 (Dec/22:
9.3%). Loan to Deposits ratio is 81.2% (Dec/22:
83.3%). As of Dec/23, novobanco had a net ECB
funding position of -€4.2bn, post the reimbursement
of €5.4bn from TLTRO III, and a Liquidity buffer of
€13.6bn as of Dec/23 (-€0.1bn YTD). Liquidity
Coverage Ratio (LCR) stood at 163% (vs. 210% in
2022) and Net Stable Funding Ratio increased to 118%
(vs. 113% in 2022).
A REMARKABLE TURNAROUND,
ACHIEVING AN INVESTMENT GRADE
RATING
In Feb/24, Fitch assigned a ‘BBB-’ LT rating to
novobanco’s senior preferred debt. The Investment
Grade rating reflects i) the turnaround of the bank’s
business model; ii) a significant improvement in asset
quality; iii) levels of profitability that compare favorably
to peers; iv) significantly improvement of capital buffers
61
Annual Report 2023 | novobanco Main Highlights
Activity (€mn)
Net Assets
Customer Loans (gross)
Customer Deposits
Equity
Solvency
Common EquityTier I / Risk Weighted Assets
Tier I / Risk Weighted Assets
Total Capital / Risk Weighted Assets
Leverage Ratio
Liquidity (€mn)
European Central Bank Funding (3)
Eligible Assets for Repo Operations (ECB and others), net of haircut
(Total Credit - Credit Provision) / Customer Deposits (2)
Liquidity Coverage Ratio (LCR)
Net Stable Funding Ratio (NSFR)
Asset Quality
Overdue Loans > 90 days / Customer Loans (gross)
Non-Performing Loans (NPL) / Customer Loans
Credit Provision / Overdue Loans > 90 days
Credit Provision / Customer Loans (gross)
Cost of Risk (basis points) (1)
Profitability
Net Income for the Period (mn€)
Income before Taxes and Non-controlling interests / Average Net Assets (2)
Banking Income / Average Net Assets (2)
Income before Taxes and Non-controlling interests / Average Equity (2)
Return on Tangible Equity (RoTE)
Efficiency
Operating Costs / Banking Income (2)
Operating Costs / Commercial Banking Income
Staff Costs / Banking Income (2)
Employees (No.)
Branch Network (No.)
(1) Includes credit, securities and initial fair value;
(2) According to Banco de Portugal Instruction n. 16/2004, in its version in force;
(3) Includes funds from and placements with the ESCB; positive = net borrowing; negative = net lending.
62
31-Dec-23
31-Dec-22
43 501
25 489
28 140
4 422
18.2%
18.2%
21.0%
7.9%
-4 246
14 217
81%
163%
118%
1.3%
4.4%
45 995
25 617
28 412
3 512
13.1%
13.1%
15.4%
5.8%
385
16 917
83%
210%
113%
1.2%
5.4%
282.4%
336.0%
3.7%
48
743.1
1.7%
3.3%
21.2%
20.4%
33.2%
33.3%
17.5%
4 209
290
4.2%
44
560.8
1.2%
2.5%
17.8%
19.0%
39.8%
48.8%
20.7%
4 090
292
Management ReportSustainability ReportFinancial StatementsAnnex 3.2 Novo Banco Group (Consolidated)
3.2.1 Results
In 2023, novobanco Group presents a result of €743.1mn
(+€182.2mn YoY). This reflects the improvement in
banking income (+€315.9mn; +28.0%) and operating
costs (+€30.8mn; +6.9%; +6.2% excluding items of
exceptional nature) and a level of provisioning in-line
with expectations.
Income Statement
(mn€)
Net Interest Income
+ Fees and Commissions
= Commercial Banking Income
+ Capital Markets Results
+ Other Operating Results
= Banking Income
- Operating Costs
= Net Operating Income
- Net Impairments and Provisions
Credit
Securities
Other Assets and Contingencies
= Income before Taxes
- Corporate Income Tax
- Special Tax on Banks
= Income after Taxes
- Non-Controlling Interests
= Net Income for the period
%
82.7%
0.9%
56.6%
-38.5%
...
28.0%
6.9%
42.1%
56.3%
...
-51.8%
...
39.3%
...
3.4%
27.7%
-79.6%
32.5%
31-Dec-23
31-Dec-22
Change
absolute
517.1
2.8
519.9
-9.2
-194.7
315.9
30.8
285.1
62.6
74.9
-35.1
22.8
222.5
59.1
1.1
162.3
-20.0
182.2
1 142.6
296.1
1 438.7
14.7
-11.2
625.5
293.3
918.8
24.0
183.6
1 442.3
1 126.3
448.4
678.0
111.2
34.5
67.6
9.0
566.8
-53.3
34.1
585.9
25.1
560.8
479.2
963.1
173.8
109.4
32.6
31.9
789.3
5.8
35.3
748.2
5.1
743.1
63
Annual Report 2023 | novobanco NET INTEREST INCOME
Net Interest Income was €1,142.6mn (+€517.1mn YoY),
as a result, on the one hand, of the favorable interest rate
environment and, on the other, of the prudent management
of interest rates on assets and the cost of financing.
The rate on assets increased by 237bps, from 1.79% in
2022 to 4.16%, driven mainly by loans to customers rate
which increased to 4.70% (+239bps YoY). The average
balance of interest earning assets was €41.0bn (vs
€41.9bn in Dec/22).
The average balance of customer deposits increased
to €29.0bn, with a remuneration rate of 0.82% (2022:
0.17%), and the balance of money market funding was
€7.3bn, with a rate of 3.23% (2022: -0.09%).
The favourable progression of assets interest rates
(4.16%; 2022: 1.79%), more than offset the increase in
liabilities interest rates (1.40%; 2022: 0.31%), with the
financial margin increasing to 2.75% in the year (vs 2022:
1.47%).
Net Interest Income (NII)
and Net Interest Margin (NIM)
(mn€)
2023
2022
Average
Balance
Average
Rate
Income /
Costs
Average
Balance
Average
Rate
Income /
Costs
Interest Earning Assets
41 046
4.16%
1 731.8
41 914
1.79%
761.3
595.4
135.9
86.4
48.5
-10.0
92.7
Customer Loans
Mortgage Loans
Consumer Loans and Others
1 486
7.00%
25 571
4.70%
1 219.8
25 424
2.31%
10 033
3.85%
391.2
105.5
9 836
1 430
1.36%
5.96%
Corporate Lending
14 052
5.08%
723.1
14 158
2.60%
373.2
Money Market Placements
4 536
3.12%
143.3
6 308
0.20%
12.7
Securities and Other Assets
10 938
3.32%
368.7
10 181
1.48%
153.3
Interest Earning Assets And Other
41 046
4.16%
1 731.8
41 914
1.79%
761.3
Interest Bearing Liabilities
37 649
1.53%
582.4
40 230
0.32%
131.2
Customer Deposits
28 982
0.82%
242.0
28 322
0.17%
Money Market Funding
Other Liabilities
Other Non-Interest Bearing Liabilities
7 265
1 402
3 397
3.23%
238.2
10 455
-0.09%
7.19%
102.2
-
0.0
1 452
1 684
6.30%
-
-
Interest Bearing Liabilities And Other
41 046
1.40%
582.4
41 914
0.31%
131.2
NIM / NII
(without stage 3 impairment adjustment)
Stage 3 impairment
NIM / NII
2.76%
1 149.4
1.48%
630.1
-6.8
-4.7
2.75%
1 142.6
1.47%
625.5
FEES AND COMMISSIONS
Fees and commissions were €296.1mn (stable YoY),
with fees’ overall strong underlying trend partially offset
by impact from regulatory changes in commissions
on loans. Payments Management increased by 9.6%
YoY (+€12.2mn), from higher volume of transactions,
increased clients base, new pricing implemented for
customer accounts and POS usage.
64
Management ReportSustainability ReportFinancial StatementsAnnex Fees and Commissions
(mn€)
31-Dec-23
31-Dec-22
Change
absolute
Payments Management
139.4
127.2
Commissions on Loans, Guarantees and Similar
Asset Management and Bancassurance
Advising, Servicing and Other
Fees and Commissions Total
77.8
62.4
16.6
86.6
66.1
13.5
296.1
293.3
12.2
-8.8
-3.7
3.1
2.8
%
9.6%
-10.2%
-5.6%
22.8%
0.9%
CAPITAL MARKETS AND OTHER
OPERATING RESULTS
The results of capital markets were positive at €14.7mm,
including a net loss of €12mn from losses on the sale of
part of the securities portfolio, offset by one-off gains
on forex and hedging. The fair value reserves of the
securities portfolio increased by €37.9mn during 2023.
Other operating results totalled -€11.2mn (-€194.7mn
YoY), which included in 2022 a gain of €148.6mn from
the sale of real estate assets (headquarters building
and portfolio of logistics properties). Other operating
results in 2023 include the extraordinary cost of
irrevocable commitment payment of Deposit Guarantee
Fund (€56.1mn), the annual contribution to the Single
Resolution Fund (€15.0mn) and to the National
Resolution Fund (€7.1mn), gains from credit recovery
(€30.3mn) and real estate disposal (€35.6mn).
OPERATING COSTS
Operating costs increased 6.9% YoY (+€30.8mn),
reflecting the continued strategic investment in digital
transformation, optimization and simplification of the
organization and, on the other hand, the effects of
inflation. Staff costs were €252.7mn (+€19.0mn; +8.1%),
general administrative expenses totalled €182.9mn
(+€20.7mn; +12.8%) and depreciation rose to €43.6mn
(-€8.9mn; -17.0%).
Excluding items of exceptional nature, costs totalled
€430.8mn, representing an increase of 6.2% compared
to the same period last year.
Commercial Cost to Income stood at 33.3% (2022:
48.8%), equivalent to 29.9% excluding items of
exceptional nature (2022: 44.1%).
Operating Costs
(mn€)
Staff Costs
General and Administrative Costs
Depreciation
Operating Costs Total
31-Dec-23
31-Dec-22
Change
absolute
252.7
182.9
43.6
479.2
233.7
162.2
52.5
448.4
19.0
20.7
- 8.9
30.8
%
8.1%
12.8%
-17.0%
6.9%
As of 31 December 2023, novobanco Group had 4,209
employees (Dec/22: 4,090; +119 YTD) and the number
of branches at 290 (Dec/22: 292), of which more than
265 already aligned with the new distribution model and
236 equipped with VTM (Virtual Teller Machine).
65
Annual Report 2023 | novobanco NET IMPAIRMENTS AND PROVISIONS
In 2023, novobanco Group recorded net impairments and
provisions amounting to €173.8mn, showing an increase
compared to previous year (+€62.6mn; +56.3%).
The cost of risk was 48bps for loans impairments and
corporate bonds (2022: 44bps), consistent with 2023
guidance, despite management overlays built-in.
Net Impairments and Provisions
(mn€)
31-Dec-23
31-Dec-22
Customer Loans
Securities
Other Assets and Contingencies
109.4
32.6
31.9
34.5
67.6
9.0
Net Impairments and Provisions Total
173.8
111.2
Change
absolute
74.9
-35.1
22.8
62.6
%
...
-51.8%
...
56.3%
3.2.2 Balance Sheet and Activity
CUSTOMER LOANS
As a Portuguese universal bank, novobanco mission
is to be the trusted bank, which supports families and
companies throughout their lives, through a robust and
disciplined loan granting policy. This support has been
across all sectors and all companies, with a special focus
on exporting SMEs and companies that incorporate
innovation in their products, services or production
systems, increasingly following a sustainability guideline
(ESG).
Customer Loans
(mn€)
Loans to corporate customers
Loans to Individuals
Residential Mortgage
Other Loans
Customer Loans (gross)
Customer Loans Provisions
Customer Loans (net)
31-Dec-23
31-Dec-22
13 819
11 669
10 058
1 611
25 489
955
24 534
14 244
11 373
9 978
1 395
25 617
1 066
24 551
YTD Change
absolute
- 425
296
80
216
- 129
- 112
- 17
%
-3.0%
2.6%
0.8%
15.5%
-0.5%
-10.5%
-0.1%
Loans to customers (gross) totaled €25.5bn (-0.5%
YTD), of which corporate customers represented 54%
(Dec/22: 56%), Residential Mortgage 40% (Dec/22:
39%) and other loans to individuals 6%. In 2023, loan
origination totaled €3.5bn (2022: €3.9bn), of which
48% corporate, 40% mortgage and 12% consumer and
others.
66
Management ReportSustainability ReportFinancial StatementsAnnex The asset quality indicators of December 2023, and comparison
with previous year, are presented below:
Asset Quality and Coverage Ratios
(mn€)
31-Dec-23
31-Dec-22
Overdue Loans > 90 days
Non-Performing Loans (NPL)
Overdue Loans > 90 days / Customer Loans (gross)
Non-Performing Loans (NPL) Ratio1
Credit provisions / Customer Loans
338
1 133
1.3%
4.4%
3.7%
317
1 376
1.2%
5.4%
4.2%
YtD Change
absolute
21
- 244
%
6.5%
-17.7%
0.1 p.p.
-0.9 p.p.
-0.4 p.p.
Coverage of Overdue Loans > 90 days
282.4%
336.0%
-53.6 p.p.
Coverage of Non-Performing Loans1
Net Non-Performing Loans1
84.3%
0.7%
77.5%
1.3%
6.8 p.p.
-0.5 p.p.
(1) Excludes Deposits and Loans and advances to Banks.
Non-performing loans (NPL) present a reduction of
17.7% YoY to €1,133mn. Net NPL ratio stood at 0.7%
(Dec/22: 1.3%) and the NPL ratio at 4.4% (Dec/22:
5.4%), with a coverage level of 84.3%.
As of December 2023, novobanco exposure to Real
Estate decreased 15% to €460.1mn, representing 1.1%
of novobanco total assets. The YoY decrease reflects
the disposals throughout the year, with gains (€35.6mn)
held in Other Operating Results.
SECURITIES
The securities portfolio, which is the main source of
assets eligible for funding operations with the European
Central Bank (ECB), amounted to around €9.3bn as of 31
December 2023, representing 21.4% of assets, of which
85% was accounted at amortised cost with unrealised
marked to market losses of €105mn (net of hedges and
taxes).
Securities portfolio
(mn€)
Portuguese sovereign debt
Other sovereign debt
Bonds
Other
Securities portfolio Total (net of impairment)
31-Dec-23
31-Dec-22
YTD Change
absolute
981
5 151
4 126
387
- 130
- 891
- 276
- 56
relative
-13.3%
-17.3%
-6.7%
-14.5%
10 646
-1 353
-12.7%
851
4 260
3 850
331
9 292
67
Annual Report 2023 | novobanco FUNDING
Total customer funds of €34.9bn (Dec/22: €34.8bn),
of which deposits represent 80.7%. As of Dec/23,
Customer deposits totalled €28.1bn (Dec/22: €28.4bn),
with performance being reflected in the growth of
novobanco’s deposit market share to 9.7% in Nov/23
(Dec/22: 9.3%).
Total Funds
(mn€)
Deposits
Other Customer Funds(1)
Debt Securities
Subordinated Debt
Sub -Total
Off-Balance Sheet Funds
Total Funds
31-Dec-23
31-Dec-22
YTD change
absolute
28 140
1 844
606
502
31 092
3 770
34 862
28 412
866
1 169
416
30 862
3 933
34 795
- 272
978
- 563
86
230
- 162
67
%
-1.0%
...
-48.1%
20,7%
0.7%
-4.1%
0.2%
(1) Includes checks and pending payment instructions, Repos and other funds.
3.3 Business Segments
novobanco Group activities are centered on the financial
sector targeting corporate, institutional and private
individual customers. Its decision center is in Portugal,
making the domestic territory its main market. The
products and services rendered include deposit taking,
granting of loans to corporate and private customers,
investment fund management, broker and custodian
services and the commercialization of life and non-life
insurance products, among others.
When evaluating performance by business area, the
Group considers the following Operating Segments: (1)
Retail, which essentially includes the activity of private
and small business clients; (2) Corporate, which includes
the activity of other companies and institutions; and
(3) Support Function. Each segment integrates the
novobanco structures that directly relate to it, as well
as the units of the Group whose businesses are mainly
related to the segments. The individual and independent
monitoring of each operating unit of the Group is
complemented, at the Executive Board of Directors of
novobanco level, by the definition of specific strategies
and commercial programs for each unit.
RETAIL
Corresponds to all the activity developed with private
customers and small businesses, along with the
fully consolidated operating subsidiaries novobanco
Açores, BEST and GNBGA. The financial information
of the segment relates, amongst other products and
services, to mortgage loans, consumer credit, small
business financing, deposits, retirement plans and other
insurance products sold to private customers, account
management and electronic payments and placement of
investment funds, brokerage and custodian services.
68
Management ReportSustainability ReportFinancial StatementsAnnex CORPORATE
SUPPORT FUNCTIONS
Includes the activities developed with medium and
large-sized companies, developed through a commercial
structure dedicated to this segment, which includes 20
Corporate Centres. This segment also includes activities
with institutional and municipal customers. The Group
maintains an important presence in this segment, the
result of the support it has lent to the development of
the national business community, focused on companies
with good risk, an innovative nature and an exporter
activity.
This area does not correspond to an operational segment
in the true sense of the concept, it is an aggregation of
transversal corporate structures that ensure the basic
functions of the Group’s global management, including
Treasury and Real Estate assets.
Dec-23
Dec-22
l
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l
a
t
o
T
845
395
643
213
-49
-88
1 439
520
450
430
39
919
€ million
Commercial
Banking Income
Banking Income
847
379
681
232
-86
-295
1 442
315
468
449
209
1126
Operating Costs
318
32
99
8
62
-9
479
31
286
91
71
448
Net Operating
Income
Net Impairments
and Provisions
Income before
Taxes
528
347
582
223
-148
-286
963
285
181
358
138
678
54
44
90
3
30
16
174
63
10
87
14
111
474
303
492
220
-177
-301
789
222
171
272
124
567
Total Assets
14 614
302
13 942
578
14 945
-3 375 43 500
(2 495)
14 312
13 364
18 319
45 995
Customer Loans
(net)
13 425
260
11 092
(293)
17
16
24 534
(17)
13 164
11 385
1
24 551
Net Interest margin
3.02% 1.82 p.p
3.89% 1.36 p.p
-0.40% -0.67 p.p
2.75% 1.28 p.p
1.20% 2.53% 0.27% 1.47%
Commercial Cost
to Income
37.7% -25.9 p.p
15.4% -5.7 p.p
-
-
33.3% -15.5 p.p
63.6% 21.1%
-
48.8%
In 2022, the results of the Support functions include
€148.6mn of gains from the sale of real estate
assets and from the sale of headquarters building
accounted as Other operating results. In 2023, Support
functions include the extraordinary cost of irrevocable
commitment payment of Deposit Guarantee Fund
(€56.1mn).
69
Annual Report 2023 | novobanco
RETAIL BANKING
Since 2021, novobanco’s Retail segment has carried out
a strong adjustment of its customer service structure,
reshaping its geographic presence and deeply changing
the service experience, in a move to deepen long-term
relationships with clients and balancing between the
convenience of the digital channels and the importance
of face-to-face service to clients. Currently, more
than 265 branches operate under the new distribution
model and 236 have a VTM (Virtual Teller Machine;
+46 vs Dec/22), which offers advanced transaction
management solutions and stands out as a tool towards
branch efficiency and customer satisfaction.
New clients acquisition continues to evolve positively
(more than +45% vs 2022), supported by initiatives
such as (i) wage domiciliation; (ii) client loyalty program
aimed at strengthening and deepening the commercial
relationship; and (iii) cross segment program, which
covers around 300,000 employees in more than 25,000
companies, who have a protocol with Novobanco.
This programme gives employees of such companies
access to preferential conditions for some of the bank’s
products and services.
As part of the ongoing digital transformation, a
Contact Hub, that leverages virtual assistants and
AI to efficiently manage remote contacts, has been
deployed, enhancing customer experience by responding
promptly and routing clients to the right channels. The
customer-first approach was also extended to debit
and credit cards, with features like card tokenization,
the introduction of Google Pay and Apple Pay digital
wallets, making global payments convenient, and
new app features were deployed. Furthermore, on the
sustainability front, commercial initiatives included using
100% recycled and biodegradable PVC cards, as well
as recycling expired cards for urban furniture, reducing
environmental impact, and offering a broader range of
financial products, like the 18.25 account, which ensures
zero CO2 emissions.
As of December, Loans to Customers (net) totalled
€13.4bn (+2% YTD; including small business loans),
mainly as the result of solid mortgage origination
(+€1.4bn; +14% YoY) following the successful strategy of
partnerships with Credit Intermediaries, which represent
the bank’s largest channel of distribution of this product.
As of November, novobanco’s mortgage market share
was 9.1% (flat YTD). In the period, the customer base of
the small business increased by 13%, with work accident
insurance, multi-risk insurance and service accounts
increasing by 28%, 28% and 14%, respectively.
The Net Interest Margin increased to 3.02% (+182
bps YoY), which together with higher volumes and
commercial activity resulted in €845mn of Commercial
Banking Income (+88% YoY). Operating costs increased
by 11% YoY, to €318mn, leading to a Commercial Cost to
Income ratio of 37.7% in the period.
All in all, the Retail segment had an Income before
Tax of €474mn (2022: €171mn) driven by the
commercial performance and a favourable interest rates
environment.
CORPORATE BANKING
Positioning as a customer-centric bank offering a
distinctive experience, novobanco has two hubs
dedicated to large corporate customers (Oporto and
Lisbon) and 20 business centres distributed throughout
the country, with specialised teams dedicated to
the medium-sized companies’ segment. On the top
of the physical hubs, there is a new online corporate
bank aiming to simplify the day-to-day of corporate
customers and enhanced functionalities, such a as in
short-term loans and treasury management. Strong
digital engagement among Corporate Customers, with
about 80% actively using digital channels, leading to a
0.8p.p. increase in the satisfaction index for website user
experience.
Novobanco continued to strengthen its commitment
to Portuguese companies, to which it provided a set
of solutions for investment and working capital needs,
with significant growth in short-term loans, especially
through factoring and confirming, driving annual
increases of 8% in cumulative invoicing undertaken and
a market share of 11% in factoring. This underpinned
the continued growth of the corporate customer base,
with high levels of penetration as in the Portuguese
SMEs (55%) and large companies (70%), are novobanco
customers. The bank thus occupies a leading position in
70
Management ReportSustainability ReportFinancial StatementsAnnex terms of support provided to the Portuguese companies,
with market shares of 14.3% in loans (Dec-22: 14.5%)
and 13.9% of deposits from Non-financial Companies
(+1.7pp YTD), reflecting companies’ confidence in
novobanco.
Novobanco maintains a strong presence in the exports
sector, with a wide range of products and specialised
advice for international trade, being about 60% of
national exports made by novobanco clients. The know-
how in this segment is reflected in a 20.1% market share
(+1.5pp YTD) and by being, for the 6th consecutive year,
elected the best Trade Finance bank in Portugal by
Global Finance.
With regards to Payments Solutions, the simplification
and innovation was reflected in a POS (point of sale)
market share to 15.9%.
As a result of the commercial strategy in place, as of
December 2023, Loans to Customers (net) totalled
€11.1bn (-2.6% YoY). Reflecting the interest rates
environment, in the period, Net Interest Margin increased
to 3.89% (+136bps YoY), which resulted in Commercial
Banking Income of €643mn (+50% YoY). Operating
costs increased 9% to €99mn. All in all, Income before
Tax totalled €492mn (+81% YoY; +€220mn).
DIGITAL TRANSFORMATION
As a customer-centric bank, novobanco pursues the
following goals through digital transformation, in both
the Corporate and Retail segments:
• to accelerate front-to-back digitisation to improve
experience and efficiency in the approach to the
customer journeys and the transformation of the
operating model, and
• to transform the digital channels to provide a fully
omnichannel experience and greater personalisation,
leveraging on best-in-class data science.
This strategy drove an increase in active digital
customers, to 66.6% by Dec/23 (+5pp YoY; the number
of digital customers increased by 15% YoY) and annual
growth of 25% in the number of active mobile customers
(56% of customers are mobile vs 48% in Dec/22).
In 2023, more than 70% of the operations in the
individual client’s segment were carried out in self-
service mode, this figure increased to 84% and 94%
in the small businesses and medium-large companies’
segments, respectively. In turn, this underpinned an
increase in the share of digital sales of Insurance (+107%
YTD; 8% of segment sales; +3pp YoY), Credit Cards
(+122% YTD; 5% of sales; +1pp YoY) and Personal Loans
(+27% YTD; 8% of segment sales; +3pp YoY).
Active digital clients penetration rate
Mobile
Total
47.3%
34.0%
53.3%
43.1%
25.6%
61.9%
55.9%
66.6%
Dec. 18
Dec. 20
Dec. 22
Dec. 23
Customer Toutchpoints (Individual Clients)
Mobile
Online
ATM
Branch
3%
41%
22%
34%
2018
1%
29%
15%
55%
2020
1%
24%
10%
65%
1%
20%
8%
71%
2022
2023
In the period, 79% of individual clients’ contacts with
novobanco were made through the digital channels (+4
pp YoY). Reflecting a reinforced focus on a “mobile digital
first” strategy, mobile continues to be the main means of
contact of individual clients, with annual interactions (as
measured by the number of logins) growing by 30%.
71
Annual Report 2023 | novobanco NOVOBANCO DOS AÇORES
In 2023, novobanco dos Açores continued its activity,
paying special attention to close relationships with its
Customers, seeking to support the needs of Azorean
society from all walks of life, in order to contribute to
its prosperity. As a result of the activity carried out and
the proximity maintained to the market, novobanco dos
Açores acquired, in 2023, another 1,505 new customers.
Net Interrest
Income
(€mn)
Customer
Loans
(€mn)
Evolution of
Deposits
(€mn)
+ 127.9%
+ 3.6%
+ 3.1%
352.1
364.7
453.2
467.3
10.6
4.6
2022
2023
2022
2023
2022
2023
The net income of novobanco dos Açores in 2023
registered a positive value of €10.6mn, which represents
an increase of 127.9% compared to 2022. The results
of novobanco dos Açores’ activity show a substantial
increase when compared to 2022, mostly explained by
the strong growth in net interest income, which reached
2.9% in December 2023 and contributed to a 132.0%
increase in the bank’s financial result.
In 2023, novobanco dos Açores’ assets increased by
€28.8mn (+4.5%) to €663mn, as well as customer
loans (net) which increased by €12.6mn (+3.6%) to
€364.7mn. In December 2023, overdue loans totalled
€4.7mn, which translates into a non-performing loan
ratio of just 1.2%.
In December 2023, the overall amount of customer
deposits amounted to €467.3mn, an increase of 3.1%
compared to the same period of the previous year.
BANCO BEST - BANCO ELECTRÓNICO DE
SERVIÇO TOTAL, S.A.
In 2023, the increase in the general level of market
interest rates allowed for a more profitable management
of Best’s available liquidity, resulting in an increase in
net interest income of +217% compared to the previous
year. This strong increase was reflected in an increase
in banking product of +67%, which combined with the
reduction in operating costs due to an active policy
of controlling operating costs (-3% compared to the
previous year), allowed the strong increase in pre-tax
income to €10.4mn.
The ratio of non-performing loans to loans granted is a
very favourable figure of 0.3%, justified by a prudent risk
policy based on the granting of credit collateralised by
financial assets.
Banco Best closed 2023 with a positive net result of
€7.6mn (+€5.9mn vs 2022).
The digital marketing strategy to attract customers in
the different channels resulted in the capture of more
than 5,600 customers, a growth 16% higher than
in 2022 and with 41% of accounts being opened by
videoconference or Digital Mobile Key.
The internal survey carried out on Customer satisfaction
in 2023 revealed that 90% of respondents are satisfied
or very satisfied with Best and a consumer association
elected, for the second consecutive year, Banco Best as
the best bank to invest in.
DIGITAL CHANNELS (APP AND WEBSITE)
App – English version: important improvement in
the experience of foreign customers.
App – traveler’s area: where Customers find a
series of features to help them plan and manage
their trips.
App – shopping cart: through which Customers
enjoy a shopping experience similar to an online
72
Management ReportSustainability ReportFinancial StatementsAnnex store. This feature, along with the integration of QR
Codes on the website to buy in the app, constitute
an unprecedented e-Commerce offer in the
Portuguese market.
App – new homepage: highlighting the platform’s
key tools, offering greater visibility, facilitating
access, maintaining personalization and allowing
each user to adjust the entry according to their
individual preferences.
Website – financial therapy: a new approach to
financial literacy through a concept explainer, with
the aim of fostering and boosting knowledge on
investment topics and instruments.
OFFER
Launch of a global offer of new savings accounts,
as well as the reinforcement of the existing offer,
and a new PPR with Gamalife, a solution with
guaranteed capital and remuneration
Reinforcement of the offer of protection insurance
with the inclusion of Liberty Seguros - Home,
Auto and Personal Accidents, in the alternatives
available to optimize the insurance portfolio and
with the new Extra Health Insurance of Victoria
Seguros, which allows to complement the amount
of coverage of any health insurance. Best’s
partnership with the largest national insurance
broker – MDS – thus has more than 14 insurers in
the offer of insurance to its customers.
Redesign of the investment advisory service,
in order to make it more focused on high-value
Clients, providing them with truly personalized
investment solutions, while ensuring an
improvement in the efficiency and effectiveness of
the service.
New investment themes and strategies for
portfolio diversification: commodities, food &
agriculture, and precious metals.
SUSTAINABILITY
In November 2023, digital channels ensured 99.2%
of the bank’s operations, maintaining the focus on
articulating personal contact and digital execution.
Reinforcement of the Margin Plus Account with the
offer of funds that follow investment criteria based
on sustainability objectives.
Promotion of saving habits through goals, by which
it is possible to define something you want to
achieve and start saving small amounts monthly.
Promotion of financial literacy through the
Financial Therapy project, which provides
an explainer of concepts about investment
instruments on desktop and mobile.
Dissemination of its product and service activities
on social networks, as well as promotion of ESG
principles.
GNB GESTÃO DE ATIVOS
The Asset Management Company concluded the merger
process of its companies and GNB Fundos Mobiliários
incorporated GNB Gestão de Ativos SGPS, GNB Gestão
de Patrimónios and GNB Real Estate, and by changing its
business model in Luxembourg, which culminated in the
closure of its branch in that geography. These changes
aimed to simplify decision-making processes, optimize
strategic planning and approach different market
segments. The incorporating company is now called:
GNB – Asset Management, Collective Investment Schemes
Management Company, S.A., having maintained its stake
in the pension funds management company and expanded
the scope of its activities.
In addition, a project was completed whose purpose is to
develop an investment process of excellence in relation
to the inclusion of sustainability factors and which will
result in the expansion of the offer of ESG products.
73
Annual Report 2023 | novobanco In terms of activity, the return to a high interest rate
environment strongly conditioned the evolution of
the asset management segment. In this context,
government debt instruments, such as saving
certificates and deposits offered by financial institutions,
ended up being preferred by investors. GNB Gestão de
Ativos took advantage of this context to launch two
funds, in March and June, with a maturity of about 3
years, with annual distribution and which were well
received by investors.
In 2023, GNB Gestão de Ativos was once again
recognized through several awards and distinctions:
• Refinitiv Lipper Fund Awards 2023 distinguished the
NB Euro Bond, for the 12th consecutive year, with the
award for Best Euro Bond Fund marketed in Europe for
3, 5 and 10 years;
• NB Euro Bond and the Multireforma Capital Garantido
Pension Fund were distinguished by the Best
Funds Awards of Jornal de Negócios/APFIPP in the
categories of Best Other Bond Funds and Best Pension
Fund with Risk 3;
• GNB Momentum Sustentável received the award for
Best Investment Fund Portugal awarded by Euronext
Lisbon.
In terms of activity, GNB Gestão de Ativos continues
to provide a diversified offer of value-added products
and services aimed at the complete satisfaction of the
different financial needs of its customers.
In the securities funds segment, the Management
Company offers bond funds, including the widely
awarded NB Bonds Europe fund (€99mn of assets
under management), and NB Eurobond (€150mn of
assets under management), equity funds, such as NB
Momentum Sustainable (€160mn of assets under
management) and mixed funds, which include the NB
Conservative, NB Balanced and NB Dynamic profile
funds (€69mn of assets under management).
In terms of the offer of retirement solutions, the
Multireforma family of open pension funds stands out
(4 funds totaling €328mn), 14 closed-end pension
funds associated with corporate plans and 2 retirement
savings products. The management company also
offers a portfolio management service that includes
discretionary management to more than 800 clients.
In the Real Estate segment, the firm manages open-
ended real estate funds, closed-end real estate
funds and real estate portfolios. Total assets under
management at the end of 2023 were €7.7bn, which
corresponds to a growth of 3.5% in the year (adjusted
for the deconsolidation of the Luxembourg funds).
Assets under management
(December 2023)
Real Estate
Funds
10%
Real
Estate
11%
7.7mM€
50%
Asset
Management
Pension
Funds
29%
74
Management ReportSustainability ReportFinancial StatementsAnnex 3.4 Novo Banco Separate
3.4.1 Results
In the 2023 financial year, novobanco posted a positive
result of €800.7mn, which compares with the 2022
result of €453.8mn.
Commercial Banking Income amounted to €1,382.6mn
(+54.5% compared to Dec/22), mainly supported by the
increase in net interest income (+77.1%).
Capital Market Results were positive at €87.8mn,
compared to a negative result of €20.2mn in the same
period of the previous year.
Operating Costs totalled €453.8mn, an increase
compared to the previous year (+7.1%), influenced
by inflation and continued investment in simplifying
the organisation. Operating income was positive at
€977.3mn, and impairments and provisions amounted to
€146.8mn.
31-Dec-23
31-Dec-22
Change
absolute
Income Statement
(mn€)
Net Interest Income
+ Fees and Commissions
= Commercial Banking Income
+ Capital Markets Results
+ Other Operating Results
= Banking Income
- Operating Costs
= Net Operating Income
- Net Impairments and Provisions
Credit
Securities
Other Assets and Contingencies
= Income before Taxes
- Corporate Income Tax
- Special Tax on Banks
= Income after Taxes
= Net Income for the period
482.1
5.5
487.6
108.0
-101.0
494.6
30.1
464.5
62.8
72.6
-34.3
24.6
%
77.1%
2.0%
54.5%
...
...
52.8%
7.1%
90.6%
74.9%
...
-51.2%
...
401.6
93.6%
53.7
1.1
346.8
346.8
92.0%
3.3%
76.4%
76.4%
625.0
270.0
895.0
-20.2
61.7
936.5
423.7
512.8
83.9
36.9
66.9
-19.8
428.9
-58.3
33.4
453.8
453.8
1 107.1
275.5
1 382.6
87.8
-39.4
1 431.1
453.8
977.3
146.8
109.4
32.6
4.7
830.5
-4.7
34.5
800.7
800.7
75
Annual Report 2023 | novobanco 3.4.2 Activity
In 2023, novobanco developed its activity under the
same guidelines referred for novobanco Group.
Activity Evolution
(mn€)
Assets
Customer Loans (gross)
Loans to Individuals
Residential Mortgage
Other Loans
Loans to corporate customers
On Balance Sheet Funds
Deposits
Other Customer Funds(1)
Debt Securities
Subordinated Debt
31-Dec-23
31-Dec-22
Change
absolute
43 146
23 999
10 350
8 836
1 513
13 650
30 279
27 366
1 827
584
502
45 464
-2 318
24 013
9 918
8 632
1 286
14 095
29 982
27 570
855
1 141
416
- 13
432
204
227
- 445
296
- 204
972
- 557
86
%
-5.1%
-0.1%
4.4%
2.4%
17.7%
-3.2%
1.0%
-0.7%
...
-48.8%
20.7%
(1) Includes checks and pending payment instructions, Repos and other funds.
On December 31, 2023, deposits totalled €27.4bn, a
decrease of -€0.2bn compared to Dec/22 (€27.6bn).
This reduction is mainly due to the transfer to Saving
Certificates in the first quarter of 2023, the trend of
which was reversed during the second quarter, when
there was an increase in customer deposits driven
by SME customers and stabilisation of retail deposit
outflows.
Loans to customers (gross) totalled €23,999mn
(stable compared to Dec/2022) reflecting novobanco’s
commitment to Portuguese companies and the
domestic market, reinforcing treasury support products,
provision of support lines with financial guarantee by
the Portuguese Development Bank, financing lines with
EIF/EIB guarantee to support liquidity and investment of
companies, financing lines for specific economic sectors,
among others.
Asset Quality and Coverage Ratios
(mn€)
31-Dec-23
31-Dec-22
Overdue Loans > 90 days
Non-Performing Loans (NPL)(1)
Overdue Loans > 90 days / Customer Loans (gross)
Non-Performing Loans (NPL) Ratio(1)
Credit provisions / Customer Loans
337
1 107
1.4%
4.6%
3.9%
326
1 356
1.4%
5.6%
4.4%
Change
absolute
11
- 249
%
3.3%
-18.3%
0.0 p.p.
1.0 p.p.
-0.5 p.p.
Coverage of Overdue Loans > 90 days
277.7%
324.3%
-46.6 p.p.
Coverage of Non-Performing Loans(1)
84.6%
78.0%
6.5 p.p.
(1) Excludes Deposits and Loans and advances to Banks and Customer Loans.
76
Management ReportSustainability ReportFinancial StatementsAnnex In 2023, non-performing loan inflows remained at
low levels, which, together with recovery activity,
contributed to the continued decrease in the amount
of non-performing loans and, consequently, to the
reduction of the NPL ratio to 4.6% (2022: 5.6%). In
December, NPL coverage ratio stood at 84.6% (+6.5 p.p.
compared to Dec/22).
3.5 Relevant Facts from the Activity
and Subsequent Events
Relevant Facts of 2023 are mentioned in chapter 1.1.3
Main Events of the Management Report.
Subsequent events:
FEBRUARY 1, 2024
FEBRUARY 28, 2024
Novo Banco, S.A. informs of Investment Grade rating
by Fitch.
Novo Banco S.A. informs about issuance of Senior
Preferred debt
Novobanco issued a Senior Preferred debt in the amount
of €500 million, maturing on 8 March 2028, with an
option for early repayment on 8 March 2027.
The notes were subscribed at 99.782% price and have
an annual coupon of 4.25% in the first 3 years, resetting
to 3-month Euribor plus a margin of 130bps thereafter.
The notes are expected to be rated Ba1 by Moodys and
BBB- by Fitch.
Fitch Ratings Ltd (“Fitch”) has assigned novobanco an
Investment Grade rating with a Long-Term Issuer Default
Rating (IDR) of ‘BBB-’ with a Stable Outlook. Fitch has
also assigned a Viability Rating (VR) of ‘bbb-’.
FEBRUARY 21, 2024
Novo Banco, S.A. informs about issuance of European
Covered Bonds (Premium)
Novobanco informs that it has launched a premium
European Covered Bond (“the notes”) in the amount
of € 500 million, with maturity on 1 March 2027 (soft
bullet). The notes, expected to be rated Aaa by Moodys,
have an annual interest rate of 3.25%, equivalent to 3
years mid-swaps plus 45 bps.
77
Annual Report 2023 | novobanco 4 OUR
CAPITAL AND
LIQUIDITY
4.1 Capital Ratios
In the period, the CET 1 fully loaded ratio increased
by around 500bp compared to December 2022 to
18.2%, while the solvency ratio rose by around 560bp
to 21.0% (Dec/22: 13.1% and 15.4% respectively). This
performance shows the capital-generating capacity of
novobanco’s business model and the discipline in capital
allocation. The solvency ratio was also influenced by
the net increase of €100mn in Tier 2 instruments after
the issuance of the new €500mn Subordinated Bond
maturing in 2033.
Capital Ratios (CRD IV/CRR)
(mn€)
Risk Weighted Assets
Own Funds
Common Equity Tier 1
Tier 1
Total Own Funds
Common Equity Tier 1 Ratio
Tier 1 Ratio
Solvency Ratio
Leverage Ratio
(A)
(B)
(C)
(D)
(B/A)
(C/A)
(D/A)
31-Dec-23
(fully loaded)
31-Dec-22
(fully loaded)
20 399
21 233
3 703
3 705
4 280
18.2%
18.2%
21.0%
7.9%
2 787
2 789
3 279
13.1%
13.1%
15.4%
5.8%
78
Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
The calculation of regulatory capital does not include
the amounts unpaid by the Resolution Fund under the
Contingent Capital Agreement. Novobanco considers
the unpaid amounts in respect. Novobanco considers the
amounts not paid by the Resolution Fund for the years
2020 and 2021 under the Contingent Capitalization
Agreement (CCA) as due, having triggered the
contractual mechanisms at its disposal to ensure their
receipt. None of these amounts have yet been paid by
the Resolution Fund and, as such, are not considered in
the calculation of regulatory capital.
In 2023, in the context of the European Central Bank’s
approval of the exemption from the obligation to be
approved as a financial holding company, novobanco was
the entity designated to ensure the Group’s compliance
with prudential requirements on a consolidated basis
under Article 21-A, paragraph 4, of Directive 2013/36/EU
and Article 35-D of the RGICSF.
CET 1
(fully loaded1; %)
+97 bps
+103 bps
13.1
9.5
+165 bps 18.2
+140 bps
+c.500bps
YTD
RE buffer2
0.3
O-SII3
0.5
CCB
2.6
P2R4
1.6
P1
4.5
14.3
15.4
21.0
+c.560bps
YTD
Total Capital
(fully loaded1; %)
RE buffer2
0.3
O-SII3
0.5
CCB
2.0
P2R4
2.9
P1
8.0
Required
CET 1 2024
Dec-22
1Q23
2Q23
3Q23
4Q23
Dec-23
Required Total
Capital 2024
Dec-22
Dec-235
(1) The inclusion of positive results depends on an authorization from the ECB;
(2) Starting on 1-Oct-24, capital requirements will include a buffer on exposures secured by residential real estate, expected to be ~30bps;
(3) Phased regime for the introduction of a 0.5% O-SII reserve as a percentage of RWAs will start on 1-Jul-24 with 50% of the reserve (0.25% of RWAs),
and 100% of the reserve starting on 1st July 2025 (0.50% of RWAs);
(4) P2R in 2024 is 2.85%, which represents a decrease of 15bps;
(5) Total capital ratio also benefited from +€100mn Tier 2 upsize
79
4.2 Liquidity and Funding
HIGHLIGHTS
• Stable funding structure, relying mainly on customer
deposits.
• Wholesale and interbank funding were also important
in 2023, allowing the bank to replace TLTRO III funding
and maintaining liquidity position (including liquidity
ratios and liquidity buffer) above internal risk appetite
limits.
LIQUIDITY MANAGEMENT
Novobanco manages liquidity in accordance with all
the regulatory requirements and its own management
principles, guaranteeing that all responsibilities are
met, whether in normal market conditions or under
stress conditions. These include, among others, the
ECB´s legal reserves, liquidity ratios (LCR and NSFR),
maintenance of adequate levels of liquid assets, the
definition of funding transfer pricing (FTP) framework
and establishment of an offer of financial products that
results in diversification of the funding sources.
Short-term liquidity is monitored through daily mismatch
reports, prepared in accordance with pre-established
guidelines and internally defined metrics, which allows
the bank to make early detection of any signals of
crisis with potential impacts on the bank, namely
through idiosyncratic risk, contagion risk (due to market
tensions) or the risk of repercussions of an economic
crisis on the bank. The report monitors the evolution
of the liquidity position, including eligible assets and
liquidity buffers, main cash inflows and outflows,
deposits’ evolution, medium- and long-term funding,
central banks funding, the evolution of the treasury gap
(net interbank deposits), as well as several early warning
indicators established for the purpose.
This process ensures an ongoing and active role in
liquidity risk management and risk assessment from the
EBD and also allows the bank to take immediate action
if needed. In addition, the liquidity position is also daily
reported to the Joint Supervisory Team.
In terms of structural liquidity, novobanco manages its
activity and funding sources in order to achieve funding
stability and cost optimization avoiding, to the extent
possible, undesirable liquidity risks. The structural
liquidity of the bank is analysed in detail on the Capital
and Asset Liability Committee (“CALCO”), which meets
on a monthly basis. Among others, CALCO analyses and
discusses the bank’s liquidity position, and performs
a comprehensive analysis of the liquidity risk and its
evolution, with a special focus on current liquidity buffers
and generation/maintenance of eligible assets for
rediscount with the ECB and respective impacts on the
liquidity ratios.
The funding policy of Group novobanco is one of
the major components of the bank’s liquidity risk
management, which stresses the diversification
of funding sources by instruments, investors and
maturities. Given the commercial nature of the balance
sheet, novobanco’s strategy has, since its inception,
largely relied on boosting customer deposits as its major
source of funding, which have proven to be quite stable
throughout the years.
Additionally, the bank prepares a monthly liquidity report
(for more details see chapter 2.3. Risk Management),
considering, not only the effective maturity but also
the behavioural maturity of the various products, which
allows for evaluation of the structural mismatches by
time bucket. Based on this information and the bank’s
medium-term plan, the annual activity funding plan is
prepared considering the established budget targets.
This plan, which is regularly reviewed, favours, as much
as possible, stable funding instruments.
The bank also has in place a contingency liquidity plan,
which comprises a set of measures that, if triggered,
80
Management ReportSustainability ReportFinancial StatementsAnnex would allow the bank to manage and/or minimize the
effects of a severe liquidity crisis. These measures aim
to address additional liquidity needs and boost the
resilience of novobanco in a potential stress situation.
Finally, the bank also performs, on an annual basis, an
Internal Liquidity Adequacy Assessment Process or
ILAAP, which evaluates the liquidity position of the
bank in a normal and stressful scenario. The results of
this process, which is approved by the EBD, must be
sent to the regulatory authorities, and concluded that
the bank’s funding and liquidity structure and internal
processes are solid and that the bank could withstand a
stress scenario.
FUNDING STRUCTURE AND LIQUIDITY
IN 2023
Novobanco’s customer deposits at the end of 2023
totalled €28.1bn (€28.4bn bn in 2022), decreasing by
€0.3bn YoY. During the year, after a €0.9bn decrease
in the first quarter mainly due to higher yielding savings
product from the government, customer deposits
recovered and remained mostly stable throughout the
year.
At the end of 2023, customer deposits remained the
bank’s main funding source, accounting for 65% of its
funding structure (62% at the end of 2022), of which
74% were deposits from the retail segment.
Deposits
ECB and Interbank
Funding
Debt Securities
Other Liabilities
Equity
Funding Structure
(€bn)
46.0
43.5
28.2%
9.7%
1.6%
3.0%
3.5%
28.1%
5.7%
1.1%
4.2%
4.4%
2022
2023
The loan portfolio (gross) decreased by €0.1bn to
€25.5bn as of December 2023 (Dec/22: €25.6bn), and
the commercial activity, including customer business-
related securities, was therefore neutral in terms of
liquidity as of year-end 2023.
Still in terms of asset evolution, in 2023, the securities
portfolio decreased by €1.4bn, to €9.4bn, resulting
mainly from redemptions and sales occurred during the
last quarter of the 2023 in the amortised cost treasury
portfolio. Nevertheless, novobanco’s security portfolio
remained substantially (approximately 70%) composed
of high-quality liquid assets (“HQLAs”), and among
these more than 75% are sovereign debt securities.
Customer Deposits
(€bn)
Loan Book Evolution (Gross)
(€bn)
28.4
27.5
28.2
28.1
28.1
25.6
25.7
25.8
25.7
25.5
Dec/22
Mar/23
Jun/23
Sep/23
Dec/23
Dec/22
Mar/23
Jun/23
Sep/23
Dec/23
81
Annual Report 2023 | novobanco
Other
Bonds
Other Sovereign
Debt
Portuguese
Sovereign Debt
Securities Portfolio
(€bn)
10.9
0.4%
4.1%
5.4%
1%
9.3
0.3%
3.85%
4.26%
0.85%
2022
2023
Regarding market funding, during the second quarter
of 2023 the bank returned to the capital markets
issuing a new €500mn Tier 2 bond, with maturity in
December 2033 and 6-month par-call option starting
on June 2028. The new Tier 2 bond was intended as a
replacement of an existing €400mn Tier 2 issued by
the Bank back in July 2018, which would start losing
regulatory value from 23 July 2023 onwards, the call
date. The positive market backdrop allowed novobanco
upsize its Tier 2 debt to €500mn and reduce the cost, as
the spread of the new bond was 150bps lower that the
spread of the existing Tier 2 - a strong evidence of the
bank’s successful trajectory over the past years.
The transaction was accretive in terms of liquidity,
capital and MREL.
Additionally, during the second and third quarter of 2023
the bank redeemed €1.0bn of market funding, €700mn
through the early redemption on the existing Tier 2 bond
(€400mn) and the senior preferred bond due 2024
(€300mn) and €275mn which reach final maturity in
September 2023. In December 2023, a senior private
placement of €100mn was also extended by 2-years
a 5.5%.
Finally, still in terms of market funding, novobanco
continued its strategy of replacement of the TLTRO
III funding lines, further increasing its repo interbank
funding, which by the end of 2023 increased by €2.6bn
to €5.2bn (Dec/22: €2.6bn).
Benefitting from the increase in own funds and issuance
during the year, Minimum Requirement for own funds
and Eligible Liabilities (MREL) as a percentage of Total
Risk Exposure Amount (TREA) reached 24.7% as of 31
December 2023 (preliminary figures), above the linear
progression of MREL requirements:
MREL REQUIREMENTS:
(BdP notification of June 2023; %)
TREA1
Combined Buffer
O-SII (LSF Nani)
Total
LRE3
Jan/22
14.64%
2.52%
0.50%
Jan/26
23.47%
n.a.2
n.a.2
17.66%
23.47% + Buffers
5.91%
5.91%
(1) TREA - Total Risk Exposure Amount; Jan-26 requirement as announced on
June 2023;
(2) As of Jan-26 applicable requirement;
(3) LRE - Total Leverage Exposure.
On 31 December 2023, gross funding from the ECB
amounted to €1.2bn, of which €1bn correspond to
the final tranche of TLTRO III which will mature in
December 2024, representing a decrease of €5.1bn
YoY (Dec/2022: €6.3bn). Also as of 31 December 2023,
deposits at the ECB totalled €5.4bn (Dec/22: €5.9bn;
-€0.5bn YoY), while net funding from the ECB (funding
taken from the ECB minus deposits with the European
Central Banks) went from €0.4bn on 31 December 2022
to -€4.2nn in 31 December 2023, turning to a net
lending position.
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Management ReportSustainability ReportFinancial StatementsAnnex Liquidity Ratios
(%)
NSFR
113
116
118
LCR1
210
147
163
Dec-22
Jun-23
Dec-23
Reduction
reflecting the
planned TLTRO III
reimbursement
ECB Funding
(€bn)
Gross
Funding
6.3
Cash
at ECB
-5.9
TLTRO III
reimbursements:
Dec-24: €1.0bn
1.7
-2.9
1.2
-5.4
Dec-22
Jun-23
Dec-23
Net
Funding
€0.4bn
-€1.2bn
-€4.2bn
Liquidity Buffer2
(€bn)
Including: retained
covered bonds
6.4
5.4
8.8
(7.0)
Cash & Deposits
in Central Banks
HQLA
Other ECB
eligible assets
Use of
Collateral
-€0.1bn
YTD
13,6
HQLA
67%
Non-HQLA
33%
Liquidity
Buffer
Highest quality: government
bonds and cash & deposits in
central banks
Cash
57%
36% Level 1
7%
Level 2
(1) LCR stands for Liquidity Coverage Ratio; NSFR stands for Net Stable Funding Ratio;
(2) HQLA ECB eligible includes ECB’s valuation haircut; HQLA Non ECB eligible include regulatory valuation haircut.
On 31 December 2023, the eligible assets portfolio
available for use as collateral with the European Central
Bank stood at €14.2bn, a €2.7bn decrease versus 31
December 2022, mainly due to the reduction of the
securities portfolio. The available amount of eligible
assets for rediscount with the ECB totalled €7.3bn (net
of haircuts), an increase of €0.3bn YoY. In addition to
the abovementioned, novobanco has HQLA assets
non-eligible with the ECB and deposits at ECB, which
makes up to a total liquidity buffer of €13.6bn, mostly
composed of high-quality liquid assets.
As a result, in December 2023, novobanco maintained
(i) the liquidity ratios above the regulatory levels, with
LCR standing at 163% (Dec/22: 210%), and the NSFR at
118% (Dec/22: 113%).
83
Annual Report 2023 | novobanco 5 CORPORATE
GOVERNANCE
5.1 Shareholder Structure
5.1.1 Qualified holdings in
novobanco’s share capital
5.1.2 Equity holders with special
rights
There are no shareholders with special rights.
5.1.3 Restrictions on voting rights
Pursuant to Decision SA.49275 (2017/N) of the
European Commission taken in the context of approving
the sale of a 75% shareholding in Novo Banco SA under
European Union rules on state aid, the shareholder
Resolution Fund must refrain from exercising its
non-economic rights, such as the right to vote.
The share capital of Novo Banco SA is €6,567,843,862.91
(six billions, five hundred and sixty-seven million, eight
hundred and forty-three thousand, eight hundred and
sixty-two euros and ninety-one cents) divided into
11,130,841,957 (eleven billion, one hundred and thirty
million, eight hundred and forty-one thousand, nine
hundred and fifty-six) nominative and dematerialised
shares with no nominal value, fully subscribed and paid up.
Qualified holdings in Novo Banco SA’s share capital as at
the date of this report:
Shareholder
Number of shares % of share capital
Nani Holdings S.à.r.l 4
8 348 131 468
75.00%
Resolution Fund
1 451 868 529
13.04%
Directorate General
for the Treasury and
Finance
1 330 841 960
11.96%
(4) On 19 December 2023, Nani Holdings S.G.P.S., S.A. changed its registered
office to the Grand Duchy of Luxembourg as well as its legal form to a
Luxembourg limited liability company (société à responsabilité limitée).
84
Management ReportSustainability ReportFinancial StatementsAnnex 5.2 Corporate Bodies: Composition and Functioning
5.2.2 Amendments to the Articles
of Association
Changes to Novo Banco SA’s Articles of Association are
the responsibility of the General Shareholders Meeting.
In March 2023, Article 4 (Share Capital and Shares) of
Novo Banco SA’s Articles of Association was amended
as follows:
“The share capital of Novo Banco SA is
€6,567,843,862.91 (six billion, five hundred and
sixty-seven million, eight hundred and forty-three
thousand, eight hundred and sixty-two euros and
ninety-one cents) divided into 11,130,841,957
(eleven billion, one hundred and thirty million,
eight hundred and forty-one thousand,
nine hundred and fifty-six) nominative and
dematerialised shares with no nominal value,
fully subscribed and paid up”
5.2.1 Composition and functioning
of the management and supervisory
bodies and changes in the
Company’s Articles of Association
Under the terms of the Company’s Articles of
Association, the corporate and statutory bodies of
novobanco are the General Shareholders Meeting, the
General and Supervisory Board (GSB), the Executive
Board of Directors (EBD), the Monitoring Committee,
the Statutory Auditor, and the Company Secretary. The
members of the corporate bodies are elected for four-
year term of office, and they may be re-elected once or
more than once.
Also, in accordance with the Articles of Association,
the members of the Board of the General Meeting, the
General and Supervisory Board, and the Monitoring
Committee are elected by the General Shareholders
Meeting. The General Shareholders Meeting also
has the powers to appoint and replace the bank’s
Statutory Auditor, acting upon a proposal of the General
and Supervisory Board, based on a proposal of the
Financial Affairs (Audit) Committee. The members of
the Executive Board of Directors are appointed by the
General and Supervisory Board. The Company Secretary
and the Alternate Secretary are appointed by the
Executive Board of Directors, upon consultation with the
General and Supervisory Board.
85
Annual Report 2023 | novobanco 5.2.3 General and Supervisory
Board5 (CGS)
The General and Supervisory Board is the supervisory
body of novobanco and its members are elected by the
General Shareholders Meeting.
In October 2020, the General Shareholders Meeting
of novobanco appointed the General and Supervisory
Board for the 2021-2024 four-year period, which, by
reference to the date of this Report, is composed of 10
(ten) members, 7 (seven) of whom are independent.
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31-12-2024
18-10-2017
31-12-2024
18-10-2017
31-12-2024
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The General and Supervisory Board meets monthly, or
whenever necessary, and has the functions entrusted
by law, the Bank’s Articles of Association and its
internal regulation, including the ultimate and overall
responsibility for supervising the bank and implementing
governance systems that ensure effective and prudent
management, supervising all matters relating to
risk management, compliance and internal audit. Its
main function is to regularly advise and supervise the
Executive Board of Directors in the management of
the bank and the companies of the novobanco Group,
particularly regarding compliance with regulatory
requirements relating to banking activity.
Additionally, the General and Supervisory Board has
specific powers to elect the members of the Executive
Board of Directors and responsibilities for approving
certain matters established in the Articles of Association,
namely with regard to the approval of (i) credit, risk
and accounting policies, (ii) business plan, budget and
activity plan, (iii) change of registered address, and
closure or changes to representation structures abroad,
(iv) capital expenditure, debt or refinancing, disposals
or acquisitions, creation of liens or granting of loans
above certain limits and within certain conditions, (v)
practice or omission of any material act related with
the Contingent Capital Agreement; and (vi) hiring of
employees with annual remuneration above certain
thresholds.
The Chairman of the General and Supervisory Board and
the Chief Executive Officer maintain regular dialogue and
communication between them.
In its activity, the GSB is directly supported by 5 (five)
Committees: Financial Affairs (Audit) Committee,
Risk Committee, Compliance Committee, Nomination
Committee, and Remuneration Committee, which have
their own legally established powers and responsibilities
and others delegated by the General and Supervisory
Board.
These Committees are composed of at least 3 (three)
members of the GSB, the majority of whom must be
independent, including its Chairman. The members of the
Executive Board of Directors that are responsible for the
areas covered by the activities of these Committees can
participate in their meetings.
(5) Changes occurred during 2023:
• Upon conclusion of the Fit & Proper process by the competent regulatory authorities, Monika Wildner joined the GSB as an independent member on 21 June 2023.
• On 24 February 2023, Benjamin Friedrich Dickgiesser presented his resignation as a member of the GSB and, on 1 October 2023, took up the role of CFO and member
of the Executive Board of Directors.
• Evgeniy Kazarez joined the GSB as a non-independent member on 7 November 2023 following the authorisation obtained from the competent regulatory authorities
under the Fit & Proper process.
• Donald John Quintin presented his resignation as a member of the GSB on 14 December 2023.
• On 22 December 2023, the Fit & Proper process was submitted for a new independent member to join the GSB for the current term of office, being the performance
of functions subject to authorisation from the competent regulatory authorities and approval by novobanco’s General Shareholders Meeting
86
Management ReportSustainability ReportFinancial StatementsAnnex
The committees work in close collaboration with each
other and coordinate their activities, maintaining a fluid
and ongoing dialogue with the GSB, to which they report
on their activity and decisions taken.
As at 31 December 2023 the Committees of the GSB had
the following composition:
included in the prudential consolidation perimeter,
the accounting policies and reporting processes, and
monitoring the statutory auditor’s activity. In particular,
it has the powers and duties set out in Article 441(1)
(f) to (o) by virtue of Article 444(2) of the Portuguese
Companies Code.
GSB Committees
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Karl-Gerhard
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• Mark Andrew
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Robert Alan
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•
Carla Antunes
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• William Henry
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• Monika Wildner*
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** Member since 7 November 2023.
In general terms, and among others that may be
delegated to them by the GSB, the Committees have the
following powers and responsibilities:
Risk Committee
The Risk Committee advises and supports the GSB
in monitoring the bank’s current and future global
risk appetite and risk strategy, supervising the
implementation by the bank’s senior management of
the risk prevention model, as well as the effectiveness of
the internal control system and risk management system
of the bank and the financial companies included its
prudential consolidation perimeter.
The Committee also has the powers and duties laid
down by law, the applicable regulations and its internal
regulation, which include, among others, supervising
the implementation of capital and liquidity management
strategies, assessing and approving materially relevant
lending operations, and monitoring compliance with
credit and risk policies.
Compliance Committee
The Compliance Committee advises and supports
the GSB, including with regard to the bank’s financial
subsidiaries, in monitoring the bank’s compliance and
anti-money laundering and terrorist financing matters,
including, but not limited to, compliance by the bank
(including its employees and corporate bodies) with
legal and regulatory requirements as well as its relevant
policies and processes related to those matters, and
its policies on business conduct and ethics, conflicts
of interest, related-party transactions, market abuse,
anti-bribery and anti-corruption, as well as in monitoring
compliance risk.
Financial Affairs (Audit) Committee
Nomination Committee
The Financial Affairs (Audit) Committee advises and
supports the GSB in the fulfilment of its responsibilities
with regard to overseeing the effectiveness of the
bank’s internal control, risk management and internal
audit systems, monitoring and supervising the financial
performance of the bank and other financial entities
The Nomination Committee supports the GSB in
overseeing the Executive Board of Directors in its role of
ensuring that appointment policies are consistent and
well-integrated in the bank and its financial subsidiaries,
namely by identifying and recommending candidates to
fill positions on the GSB and Executive Board of Directors
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and key function holder positions, setting objectives for
the promotion of the under-represented gender as well
as ensuring the means to achieve them, drawing up and
monitoring succession plans, reviewing the selection
and evaluation policy for members of the Management
and Supervisory Bodies and Key Function Holders
and monitoring its application, annually assessing the
knowledge, skills and experience of each member
of the GSB and Executive Board of Directors, among
other duties assigned to it under the terms of the law,
applicable regulations and its internal regulation.
Remuneration Committee
The Remuneration Committee advises and supports the
GSB in defining and establishing appropriate, consistent
and well-integrated remuneration structures for the
bank, including its financial subsidiaries, in monitoring
and implementing remuneration policies, and in defining
variable remuneration on the basis of established
criteria, taking into account the long-term interests of
shareholders, investors and relevant stakeholders.
The company documents and main regulations can be
accessed at www.novobanco.pt > novobanco Group >>
About novobanco > Governance > Company Documents:
https://www.novobanco.pt/english/about-novobanco/
governance/company-documents
5.2.4 Executive Board of Directors
(EBD)
The Executive Board of Directors (EBD) is the corporate
body responsible for managing the bank. Under the
terms of the law and the Articles of Association, and
respecting the powers of the other corporate bodies, it
is responsible for defining the bank’s and the Group’s
general policies and strategic objectives, in compliance
with banking standards and good practices. The EBD
meets whenever necessary and at least once a week.
The EBD has no powers to resolve on capital increases,
or on the issuance of securities convertible into shares
or securities granting subscription rights, such decisions
being the exclusive responsibility of the General
Shareholders Meeting and requiring the prior opinion of
the GSB.
The members of the EBD are appointed by the General
and Supervisory Board, which is also responsible for
appointing the Chief Executive Officer (CEO). As to the
composition of the EBD, at the date of this report, its
members for the 2022-2025 mandate are the following:
• Mark George Bourke
Chief Executive Officer (“CEO”)6
• Benjamin Friedrich Dickgiesser
Chief Financial Officer (“CFO”)
• Luís Miguel Alves Ribeiro
Chief Commercial Officer (Retail) (“CCOR”)
• Andrés Baltar Garcia
Chief Commercial Officer (Corporate) (“CCOC”)
• Luísa Marta Santos Soares da Silva Amaro de Matos
Chief Legal, Compliance & Sustainability Officer (“CLCSO”)
• Carlos Jorge Ferreira Brandão
Chief Risk Officer (“CRO”)
• Rui Miguel Dias Ribeiro Fontes
Chief Credit Officer (“CCO”)
During 2023, the composition of novobanco’s Board of
Directors changed, with Benjamin Friedrich Dickgiesser
taking up office as Chief Financial Officer (“CFO”) of
novobanco from 1 October 2023.
Committees of the Executive Board of
Directors
Under the terms of its internal regulation, the EBD may
approve the establishment of Committees to oversee
certain specific matters of the bank’s activity, define and
approve their powers and duties, appoint their members,
and establish their rules of procedure.
In this context, the EBD has established Committees
to deal with specific matters or areas of activity, with
powers delegated by the EBD to take decisions in
accordance with the defined rules, and Sub-Committees
established under the Committees, with powers
delegated by the respective Committee, with
participants who may or may not be different from those
of the respective Committees, without prejudice to
other internal discussion forums of an advisory and/or
monitoring nature on specific topics.
As at 31 December 2023 the Committees of the EBD had
the following composition:
(6) Mark Bourke acted as interim CFO from 30 December 2023 until 1 October
2023, in addition to his position as CEO.
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MAIN RESPONSIBILITIES
COMPOSITION
Capital,
Assets and
Liabilities
Committee
Responsible for the definition of balance sheet management policies
(capital, pricing, interest rate, liquidity) and for monitoring their
impact at novobanco Group level. The Committee also monitors crisis
indicators (early warning indicators) with regard to the Recovery Plan,
as well as liquidity, proposing mitigation measures, and if necessary,
triggering the recovery plan and/or the liquidity contingency plan.
CHAIRMAN
Benjamin Friedrich Dickgiesser (CFO)
MEMBERS: Mark Bourke (CEO), Rui Fontes (CCO),
Carlos Brandão (CRO), Andrés Baltar (CCOC), Luís
Ribeiro (CCOR)
Risk
Committee
Responsible for issuing an opinion on, approving, under delegation
of powers from the Executive Board of Directors, and monitoring
novobanco Group’s policies and risk levels. In this context, it is
responsible for monitoring the evolution of novobanco Group’s
integrated risk profile, and for analysing and proposing methodologies,
policies, procedures and instruments to assess all types of risk,
namely credit, market, liquidity, IRRBB, non-financial, and ESG.
CHAIRMAN
Carlos Manuel Ferreira Brandão (CRO)
MEMBERS: Mark Bourke (CEO), Benjamin Dickgiesser
(CFO), Rui Fontes (CCO), Andrés Baltar (CCOC), Luís
Ribeiro (CCOR), Luísa Soares da Silva (CLCSO)
Credit
Committee
Responsible for deciding the main credit operations in which the
novobanco Group participates, based on the risk policies defined by
and implemented in novobanco Group.
CHAIRMAN
Rui Miguel Dias Ribeiro Fontes (CCO)
MEMBERS: Carlos Brandão (CRO), Andrés Baltar (CCOC)
Internal
Control
System
Committee
The Committee monitors all issues related to novobanco Group’s
Internal Control System, without prejudice to the responsibilities
attributed in this regard to the EBD, Risk Committee, Operational
Risk Subcommittee and Compliance and Product Committee. This
committee is responsible, among others, for the overall monitoring of
internal control deficiencies, analysing the control environment quality
indicators and proposing improvements, and monitoring Quality
Assurance activities.
Compliance
and Product
Committee
Responsible for the approval, from a compliance perspective, of
products and services to be produced and/or distributed by the Bank,
issuing an opinion on all of them as part of the product “sign-off”
process, as well as monitoring issues relating to compliance control,
regulatory control and the promotion of the fulfilment of legal
obligations, among others.
Transformation
Committee
The Transformation Committee is responsible for developing
novobanco’ strategic objectives for digital transformation, efficiency
and simplification of operations.
CHAIRMAN
Carlos Manuel Ferreira Brandão (CRO)
MEMBERS: Mark Bourke (CEO), Benjamin Dickgiesser
(CFO), Luísa Soares da Silva (CLCSO)
CHAIRWOMAN
Luísa Soares da Silva (CLCSO)
MEMBERS: Mark Bourke (CEO), Carlos Brandão (CRO),
Andrés Baltar (CCOC), Luís Ribeiro (CCOR)
CHAIRMAN
Mark George Bourke (CEO)
MEMBERS: Benjamin Dickgiesser (CFO), Carlos Brandão
(CRO), Andrés Baltar (CCOC), Luís Ribeiro (CCOR), Rui
Fontes (CCO), Luísa Soares da Silva (CLCSO)
Investment
and Costs
Committee
Extended
Impairment
Committee
Responsible for approving the execution of expenses, within the limits
of the powers conferred upon it. Its objectives include the definition of
an annual expenditure plan and the revision of the acquisitions strategy.
CHAIRMAN
Benjamin Friedrich Dickgiesser (CFO)
Responsible for defining the amount of impairment to be allocated to
each Client taking into account novobanco’s exposure to the client or
group of clients.
CHAIRMAN
Carlos Manuel Ferreira Brandão (CRO)
MEMBERS: Benjamin Dickgiesser (CFO), Rui Fontes
(CCO), Andrés Baltar (CCOC)
The EBD has also established three (3) Sub-Committees
– the Non-Performing Assets (NPA) Sub-committee,
the Model Risk Extended Sub-committee and the
Operational Risk Sub-committee – and various Steering
Committees, such as for the areas of Retail, Corporate,
Human Capital, IT and Data, Investment and Activity
Monitoring, and Sustainability (ESG).
Novobanco did not set up an autonomous risk
committee in matters of corporate governance, being
this matter monitored directly by the GSB and the EBD,
within the scope of their respective responsibilities, and
with support from the relevant departments.
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5.2.6 Statutory Auditor
The Statutory Auditor and Alternate Statutory Auditor
are elected and removed by the General Shareholders
Meeting, under a proposal of the GSB, on a proposal from
the Financial Affairs (Audit) Committee, and they have
the powers and responsibilities provided for in the law.
The Monitoring Committee is a statutory advisory
body ruled by the Articles of Association and arising
from the Contingent Capital Agreement (CCA). It is
composed of three members elected by the General
Shareholders Meeting, one of whom acts as Chairman.
The composition of the Monitoring Committee must
respect the following criteria: one of its members
must be independent from the parties to the CCA, and
another shall be a registered charter accountant. Two of
its members are appointed by the Resolution Fund.
The Committee has as main responsibilities to discuss
and issue (non-binding) opinions on any matters
concerning the CCA upon which it is requested to issue
an opinion. The members of the Monitoring Committee
are entitled to attend as observers and speak (but note
vote) at the meetings of the GSB.
5.3 Control Manuals
DEFINITION AND OBJECTIVES
Internal Control is integral to the running of the
organisation, combining strategies, policies, processes,
systems and procedures to ensure the medium- and
long-term sustainability of the institution and the
prudent exercise of its activity.
An efficient and effective internal control system is key
for the organisation to ensure:
• the fulfilment of the objectives set out in strategic
planning, through the efficient execution of
operations, the efficient use of the institution’s
resources and the safeguarding of its assets;
• the proper identification, assessment, monitoring and
control of the risks to which the institution is or may
come to be exposed;
• the existence of comprehensive, relevant, reliable, and
timely financial and non-financial information;
• the adoption of solid accounting principles;
• compliance with the legislation, regulations and
guidelines applicable to the institution’s activity,
issued by the competent authorities, with the
institution’s own internal regulations, and with
professional and ethical standards and practices and
with rules on conduct and relationship with clients.
Internal Control is a responsibility of all the members of
the Institution’s management and supervisory bodies
and employees, who perform their duties in accordance
with internal policies and standards of ethics, integrity
and professionalism, and with the responsibilities
assigned to the structural units and all business areas,
outsourced activities and product distribution channels.
Each employee has a role to play as well as duties and
responsibilities, which contribute to ensure the efficiency
and effectiveness of Internal Control.
The EBD has ultimate and overall responsibility for the
institution, and defines, supervises and is accountable
for the implementation of an adequate Internal Control
System with a clear organisational structure and
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Management ReportSustainability ReportFinancial StatementsAnnex independent risk management, compliance and audit
functions.
For its part, the GSB is responsible, among other duties
listed in the bank’s Articles of Association, for ensuring
that the EBD establishes and maintains adequate,
independent and effective internal control, in compliance
with the law, regulations and internal policies.
are formalised in internal standards, process catalogues,
internal control manuals, presentations supporting
the main committees involved in the management of
risk, information and communication, control function
reports, and the Annual Self-Assessment Report itself.
3 LINES OF DEFENCE MODEL
novobanco Group’s Internal Control System is
consistently implemented across all the financial entities
of the Group over which it exercises management
control, without prejudice to additional requirements of
host territories and specificities of the functions involved
in the System.
The Internal Control System is supported by the 3 lines
of defence model, which clearly defines the levels of
intervention and responsibility in risk management and
control implementation to ensure the overall adequacy
and effectiveness of internal control across the
organisation.
GENERAL PRINCIPLES
GENERAL AND SUPERVISORY BOARD
In order to effectively achieve the defined objectives,
novobanco Group’s Internal Control System (ICS) is
based on the following principles:
EXECUTIVE BOARD OF DIRECTORS
INTERNAL CONTROL SYSTEM
• An appropriate control environment that reflects
the importance attached by NBG to the Internal
Control System, whose organisation is supported
by a three lines of defence model that defines the
levels of responsibility in terms of governance and
risk management for the different functions that
make up each line, including permanent, independent
and effective internal control functions; a robust
risk management system designed to identify,
assess, monitor and control all risks that may affect
the strategy, risk appetite and objectives of the
novobanco Group (as detailed in section 4.3 - Risk
Management);
• Efficient information and communication system that
ensures the timely collection, processing and exchange
of relevant, reliable, complete, comprehensive and
consistent information to enable effective and timely
management and control of the activity and the
inherent risks;
• Effective monitoring process, implemented to ensure
the adequacy and effectiveness of the Internal Control
System over time, ensuring in particular the timely
identification of any deficiencies and opportunities
for improvement allowing to strengthen the ICS, and
triggering corrective action.
Under novobanco Group’s Internal Control System,
policies, processes, procedures, systems and controls
3rd LINE OF DEFENCE
Assessment of the adequacy
and effectivness of control
Audit function
2nd LINE OF DEFENCE
Risk and Control Monitoring
Control function (Risk
and Compliance)
Other functions
1st LINE OF DEFENCE
Risk Management
Business function
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The 1st line of defence is held by the organisational units
that assume and manage the risk of their activities, of
the IT processes and systems they sponsor, and of the
outsourced activities under their responsibility, on a daily
basis and within pre-established limits set by the EBD.
These units are responsible for the identification,
assessment and control of risks in the activities under
their responsibility, on an ongoing basis. It is up to them
to protect the institution against taking risks that
are not duly mitigated. Maintaining effective internal
controls and conducting established control procedures
is also their responsibility.
The mission of the 2nd line of defence is to keep the
bank within its risk limits by controlling, measuring
and monitoring risks and reporting any deviations
from the applicable risk policies. This line of defence
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Annual Report 2023 | novobanco
comprises the “Risk Management” and “Compliance”
Control Functions, the first performed by the Global
Risk Department and the latter by the Compliance
Department, complemented by activities carried out
by other departments of the bank (e.g. Accounting,
Consolidation and Taxation Department, Internal Control
and Data Protection Department, Chief Information
Security Officer).
The 2nd line of defence defines risk management and
control policies, methodologies and tools, monitors the
effectiveness of the 1st Line, controls legal and regulatory
compliance, and reports to the bank’s management and
supervisory bodies as well as to the relevant external
authorities, where applicable.
The 3rd line of defence is held by the Internal Audit
Department, and its mission is to make an independent
and risk-based assessment of the adequacy and
effectiveness of the entity’s organisational culture and
its governance and internal control systems.
To ensure its necessary independence, the internal audit
function:
• reports functionally to the Financial Affairs (Audit)
Committee of the GSB and administratively (i.e., daily
operations) to the Chief Executive Officer (CEO);
• performs its activity in accordance with a pre-
established plan and a risk-based approach. This plan
is approved by the Financial Affairs (Audit) Committee
and notified to the GSB;
• cannot have any kind of responsibility or authority
over the design, implementation and execution of the
control procedures which it audits.
The EBD may request information and opinions from the
internal audit function, namely in matters of risk, internal
control and compliance.
Additionally, and as external intervenient in the defence
of the Internal Control System (4th line of defence):
• the Statutory Auditor acts as an additional line of
defence, given its duties, which are essentially to
supervise the accounts, including the internal control
report;
• the Supervision Authorities (European Central Bank
and Bank of Portugal) act as the last line of defence,
monitoring and promoting compliance with prudential
rules at financial level and at the level of people,
incentives schemes, governance structures, systems
and processes. The intervention of the supervision
authorities does not exempt the institution from
its responsibility of ensuring sound and prudent
management and compliance with the prudential
rules.
This line of defence external to the bank promotes
a strong risk culture as well as a more efficient risk
management within the parameters institutionally
defined for the purpose. In this context, these entities
contribute in the following manner: (i) they provide
guidelines/recommendations and supervise the
governance of the bank, namely through detailed
assessments and regular interaction with the EBD and
senior management; (ii) they request improvements and
remediation measures, when and if necessary.
CONTROL FUNCTIONS INDEPENDENCE
The independence of the control functions is ensured
through implementation of the following mechanisms:
• Internal authority: the control functions are
established at an appropriate hierarchical level and
report hierarchically to the EBD and functionally to the
GSB and respective committees, regularly participating
in the meetings of these bodies;
• Head of function: the person responsible for the
control function does not carry out activities in
business or support areas that are subject to control;
• Human Resources: the employees allocated to these
functions only perform control functions and are
independent from the negotiation and support units
that they supervise and control. However, they are not
isolated from them, and are familiar with their activity.
The control functions have an adequate number of
qualified staff (both in the bank and in its branches and
subsidiaries);
• Remuneration: the remuneration of employees in
control functions is not linked to the results of the
activities they supervise and control, nor does it
otherwise compromise their objectivity;
• Technical resources and organisation: the functions
have adequate technical resources at their disposal
and are organisationally independent from each other;
• Scope: the bank’s supervisory functions supervise and
liaise with the supervisory functions of its branches
and subsidiaries.
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Management ReportSustainability ReportFinancial StatementsAnnex 5.4 Main policies
For novobanco Group, the legal framework that
regulates its activities is decisive for its actions, but so
is the assumption of a framework of values, principles
and good practices that steer its actions and define
the standards that shape the manner in which the
Group does business and carries out its activities.
For this reason, the existence and application of the
Code of Conduct, the Conflicts of Interest Policy,
the Whistleblowing Policy and the Anti-Bribery
and Corruption Policy are of particular importance
throughout the novobanco Group.
Additionally, but no less important, the scrutiny and
transparency requirements of the Related-Party
Transactions Policy, the strict application of the
Law and Policies on the Prevention, Detection and
Combat of Financial Crime, the care and transparency
towards clients and investors derived from the Investor
Protection and Market Transparency Policies, and
the sound and prudent management ensured by
the Remuneration Policies for the Management and
Supervisory Bodies and for the Employees, altogether
provide evidence of the importance that novobanco
attaches to a culture of compliance.
The novobanco Group’s commitment focuses on the
prevention, detection, reporting and management of
situations involving risks of conduct or irregular conduct,
based on principles of integrity, honesty, diligence,
competence, transparency and fairness.
Code of Conduct
novobanco Group’s Code of Conduct, which entered
into force in 2015, applies to the members of the GSB
and EBD, to the employees of novobanco and to the
novobanco Group entities, and also to all third parties
which have signed up to the Code at the bank’s
request. The Code of Conduct promotes a set of rules
and good practices to be observed by employees in
their relationship with clients and with the bank itself
and aims to make everyone aware of the ethical and
professional principles and standards that should
guide their actions and the need and importance to
follow them, respecting the interests of shareholders,
employees and customers.
The Code of Conduct is available at novobanco’s
website, in Portuguese and English, at novobanco>
About novobanco > Governance > Compliance
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
The Compliance Department, in coordination with
the Human Resources Department, is responsible for
monitoring the application of the Code of Conduct at
novobanco and clarifying its content and application to
employees.
In 2023, the Group sanctioned 7 (seven) employees for
failure to comply with internal rules in the performance
of their duties, namely: 2 (two) dismissals without any
indemnity or compensation; 1 (one) sanction of days’
suspension without pay and loss of seniority; and 4
(four) written reprimands.
Conflicts of Interest Policy
The Conflicts of Interest Policy establishes the rules for
identifying, managing and monitoring potential conflicts
of interest in the various activities of novobanco and
the novobanco Group, as well as its corporate bodies
and employees and, to the extent possible, its suppliers
and subcontractors. It ensures compliance with the
applicable legal and regulatory provisions, and seeks to
ensure that the Group, the bank and its agents identify,
assess and, where appropriate, mitigate, or at least
abstain from, any potential conflict of interest situation.
The Conflicts of Interest Policy is available at
novobanco’s website, in Portuguese and English,
at novobanco> About novobanco > Governance >
Compliance > Related-Party Transactions Policy.
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
Related-Party Transactions Policy
novobanco’s Related-Party Transactions Policy sets
down rules aimed at identifying transactions concluded
between novobanco and its Related Parties and at
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Annual Report 2023 | novobanco ensuring that the bank complies with the applicable
legal provisions and regulations, namely Bank of
Portugal’s Notice no. 3/2020, the European Banking
Authority (EBA) Guidelines, and Articles 85 and 109 of
the Legal Framework of Credit Institutions and Financial
Companies (“RGICSF”).
In this context, the control system implemented
identifies the parties involved in transactions contracted
with the bank, in strict compliance with the applicable
legislation. The process of identification, analysis
and validation is described in the internal regulations.
Certain assessments and approvals are mandatory
prior to the conclusion of transactions (loan granting,
placement or subscription of securities, real estate
operations, acquisition or disposal of equity holdings or
other contractual relationships). Specifically, proposals
for related-party transactions must be submitted for
analysis and opinion to the Global Risk Department
and the Compliance Department and to the opinion of
the Compliance Committee of the GSB, for subsequent
approval by the EBD and subsequent ratification by the
GSB (or in accordance with the rules of the GSB).
The Related-Party Transactions Policy is available
at novobanco’s website, in Portuguese and English,
at novobanco > About novobanco > Governance >
Compliance.
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
During 2023, 16 (sixteen) credit transactions, provision
of services and other contracts with related parties were
approved, in which the credit transactions, including
extensions and renewals of limits, with persons and
entities that were related parties of novobanco on 31
December 2023, totalled €470.2 million.
Article 85 of the RGICSF states that credit institutions
may not grant credit in any form or by any means,
including the provision of guarantees, to members of
their management or supervisory bodies, to members
of their families, or to companies or other legal entities
directly or indirectly controlled by them. However, Article
85(8) allows credit to be granted to companies or other
legal entities, other than those referred to in paragraph
1, of which they are managers or in which they hold
qualifying holdings. In this context, the Compliance
Department issued favourable opinions on 4 credit
transactions under Article 85(8) of the RGICSF, which
subsequently received the favourable opinion and
consent of the Compliance Committee of the GSB, the
approval of the Executive Board of Directors, and finally,
ratification by the GSB.
In addition, under Article 109 of the RGICSF, lending to
qualifying shareholders, or entities directly or indirectly
controlled or in a group relationship with them is allowed,
subject to certain limits. During 2023 novobanco did
not conclude any credit transactions with qualifying
shareholders under this legal provision.
Whistleblowing Policy
novobanco remains firmly committed to promoting a
culture of compliance, which includes the communication
and reporting of improper conduct and behaviour that
violates the law, regulations, good practices and the
bank’s internal policies.
The Whistleblowing Policy regulates, through specific,
independent and autonomous means, the reporting of
irregularities by the bank’s employees, service providers
or any third parties, and aims to preserve the bank’s
reputation, effectively protect its assets and those of
its clients, and prevent or detect early irregularities at an
early stage.
This Policy also aims to ensure compliance with the
provisions of the RGICSF, Bank of Portugal Notice No.
3/2020, the Portuguese Securities Code, Law No.
83/2017 of 18 August establishing measures to combat
money laundering and terrorist financing (the “LBCFT”),
and Law no. 93/2021 of 20 December establishing the
general regime for the protection of whistleblowers, in its
current version.
Whistleblowing communications are submitted through
the following channels:
• Reports of irregularities from employees and members
of the corporate bodies are submitted through the
“Somos novobanco” intranet platform.
• Other reports of irregularities will be submitted
through the following channels, at the choice of the
whistleblower:
a. Letter addressed to the Compliance Officer at Avenida da
Liberdade, 195, 10th floor, 1250-142 Lisbon;
b. Form available at www.novobanco.pt;
c. E-mail to: irregularidades@novobanco.pt;
d. Orally, in a meeting scheduled through the above channels.
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form may freely chose to do it anonymously, or else to
sign it / identify him/herself, in which case he/she may
request that his/her anonymity be maintained.
The Compliance Department is the structural unit that,
in coordination with the Compliance Committee of the
GSB, is responsible for monitoring the implementation
of this Policy and for ensuring that the procedure
for analysing and handling whistleblowing reports is
properly implemented and that the measures deemed
appropriate are effectively adopted.
In 2023, 10 (ten) reports of irregularities were received,
of which 7 (seven) had been analysed by 31 December
2023 and 2 (two) were found to be substantiated.
The Whistleblowing Policy is available at novobanco’s
website, in Portuguese and English, at novobanco
> About novobanco > Governance > Compliance >
whistleblowing Policy.
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
Bribery and corruption Policy
Bribery and corruption are among the greatest
challenges facing modern societies, and preventing,
detecting and combating them requires the combined
efforts of all sectors of society, including the banking
sector, which has an important role to play in promoting
a culture of public integrity. Preventing, detecting
and combating bribery and corruption has become
everyone’s responsibility, requiring the development
of a new set of preventive duties and methodologies
across organisations and public and private entities.
The Anti-Bribery and Corruption Policy, approved by the
Compliance Committee of the GSB and the EBD, aims to
prevent and mitigate the risk of bribery and corruption
and related practices, reaffirming novobanco’s
commitment to building a more integrity-driven society.
In 2023, and to ensure the exercise of its activity in
accordance with legal frameworks, always with the
underlying goal of combating corruption, the novobanco
Group made approximately 570 communications to
judicial entities, also collaborating with over 1.3 thousand
responses to these entities.
The Anti-Bribery and Anti-Corruption Policy is available
at novobanco’s website, in Portuguese and English, at
About novobanco > Governance > Compliance > Anti-
bribery and Anti-corruption Policy.
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
Policy on the Prevention of Money
Laundering and Terrorism Financing
A bank’s ability to prevent, detect and combat activities
that may constitute money laundering derives directly
from its knowledge of its counterparties and their
transactions.
The novobanco Group, through its Compliance
Department, has a line of action that creates the
conditions for the bank to prevent, detect and combat,
through the implementation of appropriate policies,
procedures and controls, the possibility of the bank and
the novobanco Group being used as a vehicle for money
laundering or terrorist financing activities, bearing in
mind the significant prevalence of these risks in the
financial system.
Aware of the challenge posed by this control and
preventive action, the novobanco Group maintains
an ongoing reassessment of the risks it incurs due
to its business, operations and geographic areas of
operation, endeavouring to identify weaknesses and
areas of greater exposure, in order to ensure it has
in place adequate methods to control and mitigate
risks of money laundering or terrorist financing. The
ability to prevent and, if possible, detect and combat
activities capable of constituting such crimes is directly
linked to the bank’s knowledge about its clients, their
counterparties and the transactions they engage in,
particularly at the following moments:
• opening of a contract or changing the ownership of an
existing contract through what is known as KYC (know
your customer), i.e., verifiable identification of owners,
agents and beneficial owners;
• monitoring contract transactions - KYT (Know Your
Transactions), namely spotting unusual situations,
either beforehand or by contacting the client after the
situation was detected;
• analysis of counterparty risk in investment and
divestment transactions, and of transaction and
source of funds circuits, under the terms of the Law.
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Annual Report 2023 | novobanco To that end, novobanco Group, using IT tools
with recognised results at international level that
complement the experience of its human capital, has
created and developed assessment models that ensure
that enhanced scrutiny is applied where it is most
needed.
In order to comply with its regulatory obligations,
novobanco Group conducts training sessions on the
prevention of money laundering and terrorist financing
for all its employees (commercial and central structures,
including senior management and members of
management and supervisory bodies). Training can be
remote or face-to-face, the latter being mainly aimed
at new employees, to provide them with the skills to
work with the control functions to mitigate the risks
associated with the performance of their duties.
In 2023, novobanco maintained its training in the
prevention of money laundering and terrorist financing,
providing 12,968 hours of online training (including 1,107
hours of training for senior managers).
Training is a fundamental tool for employees to correctly
identify potential money laundering and terrorist
financing situations, and is also critical to the proper
fulfilment of the bank’s legal and regulatory obligations.
The prevention of money laundering and terrorist
financing is one of the foundations of trust in the
financial system and will continue to deserve special and
ongoing operational and strategic attention.
The bank’s Policies on the Prevention of Money
Laundering and Terrorist Financing are available at
novobanco’s website, in Portuguese and English, at
About novobanco > Governance > Compliance > Policies
on the Prevention of Money Laundering and Terrorist
Financing.
https://www.novobanco.pt/english/about-novobanco/
governance/compliance
Policy on the Investor Protection
and Market Transparen
Directive on Markets in Financial Instruments no.
2014/65/EU, of 15 May 2014 (“MiFID II), and related
regulations, which came into force in January 2018,
aim to reinforce investor protection and increase
the transparency and quality of the financial market
operation and services provided, covering all persons
and entities operating in the markets in financial
instruments. In addition, national legislation on financial
intermediation activities (in particular the Portuguese
Securities Code) and insurance mediation (in particular
Law 7/2019 of 16 January) provides the basic reference
framework for fair and transparent action by operators
in the financial markets and, as such, for the novobanco
Group.
Given the international trend towards strengthening
the obligations of financial intermediaries in terms of
transparency, lawfulness, completeness of information,
due diligence and investor protection, and to address
the changes in the rules on the marketing of financial
instruments, novobanco has adopted the best practices
in terms of product and service governance, ensuring
the prior assessment and subsequent monitoring of its
offer, with the Compliance Department having broad
responsibilities in this area.
In compliance with the legal framework, novobanco has
approved its standards and policies arising from these
regulations and discloses them in a dedicated area of its
website, at novobanco > Investimento > Temas úteis >
Informação ao Investidor.
https://www.novobanco.pt/particulares/investimento/
informacao-investidor
The most relevant aspects of these standards and
policies are summarised below:
Recording and registration of communications.
novobanco is obliged to keep recordings and registers
of all communications with Clients and potential Clients
regarding all services, activities and operations it carries
out.
Customer classification.
novobanco classifies its customers for the purpose of
transactions in financial instruments into one of three
categories: non-professional, professional and eligible
counterparty. These classifications have implications on
the level of protection afforded to the investor. The lower
the knowledge and experience of the customer about
markets and financial instruments the greater the level
of protection.
Assessment of suitability.
In order to ensure the suitability of the financial
instruments or investment services offered by
novobanco to the client’s investment profile, novobanco
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Management ReportSustainability ReportFinancial StatementsAnnex asks its Clients and potential Clients to complete
investor profile questionnaires in order to obtain a more
complete and detailed understanding of, among other
things, their experience and knowledge in investment
matters, their financial situation, their investment
objectives (including their capacity to bear losses)
and their risk tolerance. This sharing of information
and knowledge permits to assess whether a given
investment product or service is suitable to the specific
situation of the investor client.
Safeguard of Customer Assets.
The Portuguese Securities Code stipulates that the
financial intermediary must adopt procedures and
take measures to ensure that, in all the transactions it
carries out, as well as in the accounting and transaction
records, a clear distinction is made between the assets
belonging to it and those belonging to each of its clients,
so that the opening of insolvency proceedings, the
reorganisation of the company or the reorganisation
of the financial intermediary does not affect the
transactions carried out by the financial intermediary
on behalf of its clients. The financial intermediary may
not, in its own interest or in the interest of third parties,
use its clients’ financial instruments or exercise the
rights attached to them without the consent of the
holders. novobanco has in place procedures that ensure
compliance with these rules.
Offer screening process.
novobanco has established procedures that govern
the design, approval, distribution and monitoring of the
products and services offered. These procedures include
the screening of new offers, incentive schemes, internal
campaigns and advertising of products and services, as
well as the monitoring of existing offers.
Remuneration Policies for the
Management and Supervisory Bodies
and Staff Members
Novobanco’s Remuneration Policies were drawn up
in accordance with the legislation in force at the time,
in particular with the Legal Framework, Notice No
3/2020 of Banco de Portugal and the EBA Guidelines
2021/04 on sound Remuneration Policies and other
related legislation, reflect the guiding principles of
meritocracy and transparency and take into account (i)
the objectives, long-term strategy and interests, (ii) the
corporate nature and structure, (iii) the corporate culture
and values, (iv) the risk strategy and culture (including
environmental, social and governance risk factors), (v)
the long-term interests of shareholders; and (vi) the
avoidance of conflicts of interest and the bank’s failure
to assume excessive risks.
Pursuant to and for the purposes of the Legal
Framework, Notice No 3/2020 of Banco de Portugal,
and in order to comply with the disclosure duties
relating to the remuneration policies set out therein,
the Remuneration Committee carried out an annual
assessment of the implementation of the remuneration
policies and remuneration practices and processes.
The Remuneration Committee did not identify any
deficiencies, during the period under review.
The Remuneration Committee and the relevant
departments for this exercise (e.g. Human Capital, Legal
Affairs, Compliance and Risk) reviewed the remuneration
policies of the Management and Supervisory Bodies
and of the Employees, ensuring full alignment of the
established practices with the applicable regulatory
requirements.
As a result of this assessment, slight adjustments
were made to the Remuneration Policies, namely
the elimination of the chapter on the limitations of
remuneration resulting from the commitments made
by the State Portuguese to the European Commission,
in the context of the State aid granted (State Aid no.
SA.49275 (2017 / N)) and the inclusion of the deferral
rule in situations where the variable component of
remuneration is particularly high.
The Regulation on Remuneration Units has also been
revised to ensure consistency and alignment with the
Remuneration Policies.
The Remuneration Committee understands that the
Remuneration Policies are appropriate to novobanco’s
current situation and considers that the incentives
defined for the members of the Executive Board of
Directors and for the different categories of Employees,
as well as the structure of these incentives, are in line
with the long-term objectives of the institution and the
various stakeholders.
The report prepared by the Remuneration Committee
shall be submitted to the General and Supervisory
Board, the General Shareholders’ Meeting and the
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Annual Report 2023 | novobanco
Executive Board of Directors, which shall ensure the
implementation of any measures identified.
The following rules must be observed in the process of
awarding variable remuneration:
i) Description of the Remuneration Policy of the
Management and Supervisory Bodies
Competencies for Policy Approval.
The approval of the Remuneration Policy of the
Management and Supervisory Bodies is the
responsibility of the General Shareholders’ Meeting,
upon proposal of the Remuneration Committee of the
General and Supervisory Board, which is also among
other responsibilities responsible for:
• Prepare decisions on the remuneration to be awarded
to the members of the Executive Board of Directors, as
well as the definition of their KPIs;
• Define and approve the budget for the total variable
remuneration of employees, based on the bank’s
results, both in financial terms and in terms of their
sustainability;
• Verify that existing remuneration policies are up-to-
date and, if necessary, propose appropriate changes;
• Assess the mechanisms and systems put in place to
ensure that remuneration systems are consistent
with sound and effective risk management and assess
the criteria used to define remuneration and risk
adjustments (Clawback or Malus).
General and Supervisory Board.
Only the independent members of the General
and Supervisory Board receive remuneration from
novobanco, approved by the General Shareholders’
Meeting, which has only a fixed component and is paid
12 times a year.
Executive Board of Directors.
The remuneration of the Executive Board of Directors
has a fixed component and a variable component.
Fixed compensation is established according to the
complexity, level of responsibility and skills required
for the role, and is paid 14 times a year. The variable
component of remuneration is discretionary and is
based on an individual and collective assessment of
performance, taking into account quantitative and
qualitative criteria. These criteria shall be defined
and evaluated by the Remuneration Committee and
communicated to the members of the Executive Board
of Directors in due course.
• It may only be allocated if it does not jeopardise the
bank’s ability to maintain a sound capital base, the
bank has achieved a positive operational performance
and provided that the allocation (and its disbursement,
including deferred instalments) is consistent with
sound and effective risk management practices;
• It may not exceed 100% of the fixed annual
remuneration, and the approval of a higher ratio, and
up to a maximum limit of 200%, is subject to the
approval of the General Shareholders’ Meeting;
• It is deferred over a period of 5 years from the
reference year, with 50% being paid in the year of
allocation and the remaining 50% being acquired and
paid on a pro rata basis in the four years following the
allocation. In situations where the variable component
of the remuneration exceeds one million euros, the
amount to be deferred will be 60%, paid pro rata in the
four years following the award;
• 50% of the variable remuneration amounts awarded
will be in the form of “Remuneration Units”, whose
terms and conditions of attribution, acquisition and
payment are defined in the Remuneration Units
Regulations. The value of each Remuneration Unit
is determined by the Remuneration Committee, in
accordance with the bank’s financial indicators, prior to
the settlement of any of these deferred amounts.
Apart from any commitment agreed in the contracting
process in the form of a signature bonus, no other type
of variable remuneration can be guaranteed.
All amounts paid or deferred, regardless of whether they
constitute acquired rights, are subject to the application
of risk-based adjustment mechanisms, i.e. Clawback
and/or Malus.
With regard to other benefits, such as Health Insurance
or Mobile Phone, the bank’s internal policies defined for
this purpose apply.
ii) Description of the Remuneration Policy
for Employees
Competencies for Policy Approval.
The approval of the Employee Remuneration Policy is
the responsibility of the Executive Board of Directors, on
a proposal from the Remuneration Committee.
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Management ReportSustainability ReportFinancial StatementsAnnex Identified Collaborators
Selection of Identified Collaborators.
The bank’s Employee Remuneration Policy foresees the
regime applicable to employees who have or may have
a significant impact on novobanco’s risk profile, and are
classified as Identified Employees, in accordance with
the provisions of the Policy.
The list of Identified Employees is reviewed annually and
reported at the same frequency to Banco de Portugal,
pursuant to Instruction No 18/2020 of Banco de
Portugal.
Compensation Components.
Fixed remuneration should reflect the competence,
experience and responsibility inherent in the role
performed, and should not be dependent on
performance. The allocation of variable remuneration to
the Identified Employees, as well as its amount, depends
on the decision of the Remuneration Committee and
the Executive Board of Directors. If there is a variable
remuneration, it is calculated according to an individual
and collective performance evaluation, and must
consider the following principles:
• 50% of the Variable Remuneration assigned will be in
the form of “Remuneration Units”, whose terms and
conditions of attribution, acquisition and payment are
defined in the Remuneration Units Regulations. The
value of each Remuneration Unit is determined by
the Remuneration Committee, in accordance with the
bank’s financial indicators, prior to the settlement of
any deferred amount;
• Retention Plans for Identified Employees may be
defined, which may result in a variable remuneration
exceeding 100% of the fixed annual remuneration,
subject to the approval of the General Shareholders’
Meeting and the conditions contained in the
respective regulations;
• Apart from any commitments agreed in the hiring
process in the form of a signature bonus or retention
bonus under a retention program, no other form of
variable remuneration is guaranteed;
• All amounts of variable remuneration paid or deferred,
regardless of whether they constitute vested
rights, are subject to the risk, Clawback and/or
Malus adjustment mechanisms, as described in the
Remuneration Policy.
Performance should be evaluated considering
quantitative and qualitative criteria and through financial
and non-financial variables:
iii) Disclosure of Remuneration
Refer to point 5.6 Remuneration of the Members of the
Corporate Bodies and Identified Staff.
• The period of performance evaluation and attribution
of variable remuneration must be multi-year, which
implies that a substantial part of the amount awarded
is deferred to take into account economic cycles, risk
management and promote the retention of Identified
Employees;
• The variable remuneration must be deferred over
a period of 5 years, assuming a payment of 60% in
the year of the assignment, with the remaining 40%
acquired and paid on a pro rata basis in the four years
following the assignment;
• The variable remuneration of the Identified Employees
may be excluded from deferral if the amount of the
variable remuneration to be awarded is less than
€50,000 and represents less than one third of the
employee’s total annual remuneration;
• The amount of the variable remuneration may not
exceed 100% of the fixed annual remuneration,
and the approval of a higher ratio, and up to a limit
of 200%, is subject to the approval of the General
Shareholders’ Meeting;
Policy for Selection and Assessment of
the Management and Supervisory Bodies
and Key Function Holders
novobanco has a Policy for the Selection and Evaluation
of Management and Supervisory Bodies and Key
Function Holders (“Selection and Evaluation Policy”),
thus complying with the existing legal and regulatory
framework and ensuring the application of the standards
required in terms of internal governance for significant
financial institutions. This Selection and Evaluation
Policy was approved by the Nomination Committee of
the General and Supervisory Board, the General and
Supervisory Board, the Executive Board of Directors and
the General Shareholders’ Meeting.
The Selection and Evaluation Policy aims to ensure that
the holders of Administration, Supervision and Essential
Functions positions (namely the holders of Risk, Audit,
Compliance, Branch Directors, General Directors of
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Annual Report 2023 | novobanco The Policy applies to the selection, appointment, and
assessment of novobanco’s Statutory Auditor and
aims to ensure that the Statutory Auditor fulfils the
necessary requirements of suitability (“fit and proper”),
professional experience, independence and availability,
taking into account the nature, scope and complexity
of novobanco and its financial subsidiaries’ activity and
the responsibilities inherent to the specific tasks to be
performed.
To achieve its purpose, the Policy defines the
assessment criteria, stipulates an obligation to monitor
the Statutory Auditor’s activity and establishes the
internal responsibilities and the procedures that must be
followed in this regard.
In addition, the policy sets out the criteria and
procedures to be followed when engaging the Statutory
Auditor to perform non-audit services and defines which
services are permitted and which are prohibited.
The activity of novobanco’ Statutory Auditor in 2022
was assessed in 2023, in accordance with this Policy.
branches and other directors that the bank identifies as
having functions that involve the assumption of risks,
currently those responsible for Treasury, Marketing and
Prevention of Money Laundering) meet all the adequacy
criteria, either at the time of their appointment or during
their term of office or performance of duties.
This adequacy essentially translates into the ability to
constantly ensure the sound and prudent management
of the institution, taking into account the safeguarding
of the financial system and the interests of customers,
depositors, investors, creditors and other interested
parties, with the following requirements being assessed:
i) experience; (ii) reputation; (iii) absence of conflicts of
interest and independence; iv) availability, v) collective
adequacy, and (vi) adherence to the bank’s ethical
standards.
Policy for the Selection and Evaluation of
Novo Banco’ Statutory Auditor and the
Contracting of Non-prohibited Non-audit
services
novobanco approved in 2018 and revised in 2023 its
Policy for the Selection and Evaluation of Novo Banco’
Statutory Auditor and the Contracting of Non-prohibited
Non-audit services, in compliance of the applicable
regulations. This Policy was reviewed and approved
by the GSB’s Financial Affairs (Audit) Committee, the
General and Supervisory Board and novobanco’s General
Shareholders Meeting.
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Management ReportSustainability ReportFinancial StatementsAnnex 5.5 Credit to Members of the Corporate Bodies
At 31 December 2023 the outstanding amount of
loans granted to persons and entities falling under the
provisions of article 85 of the RGICSF is presented below:
Name
Position
Amount (in euros)
Members of the Corporate Bodies at 31 December 2023
Executive Board of Directors
Luís Miguel Alves Ribeiro
Closely related persons
Member of the Executive Board of Directors
Carlos Jorge Ferreira Brandão
Member of the Executive Board of Directors
General and Supervisory Board
Carla Alexandra Severino Antunes da Silva
Member of the General and Supervisory Board
Closely related persons
Entity where a member of the Executive Board of Directors holds a management position
APB – Associação Portuguesa de Bancos
LOCARENT - Companhia Portuguesa Aluguer Viaturas S.A.
novobanco dos AÇORES
SIBS - SGPS SA
UNICRE - Instituição Financeira de Crédito S.A.
121 669.15
72 950.71
241 352.68
508.88
137 721 811.85
12 294 560.00
9 375 000.00
15 000 000
The amount of credit granted to a person closely related
to a member of the Executive Board of Directors refers
to a mortgage loan. The amount owed by Carlos Jorge
Ferreira Brandão relates to types of consumer credit
contracted prior to his appointment. The amount of
credit granted to persons closely related to a member
of the General and Supervisory Board concerns to
corporate loans. Any existing credit card balances are not
considered, providing they are payable at 100% and do
not exceed the gross monthly salary.
The amounts of the credit to entities in which members
of the Executive Board of Directors hold a management
position refer to corporate loans and bank guarantees,
also including the subscription of senior (non-preferred)
debt securities issued by novobanco dos Açores.
For the disclosure purposes of article 109 (7) of the
RGICSF, as at 31 December 2023 there were no
outstanding loans to direct or indirect holders of
qualifying holdings.
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5.6 Remuneration of the Members of the Corporate
Bodies and Identified Staff
i) Corporate Bodies
a. Total Remuneration earned in 2023
Fixed and Variable Remuneration earned in 2023
Role
Salary
Other post-
Employment
benefits4
Other
Allowances5
Variable
Remuneration
20226
Total Paid
Executive Board of Directors
2 545 147
35 838
252 500
810 000
3 643 484
Mark Georges Bourke
CEO
Benjamin Dickgiesser 1
Member EBD
600 000
125 147
-
-
210 000
195 000
1 005 000
42 500
-
167 647
Luis Miguel Alves Ribeiro
Member EBD
375 000
21 089
Andres Baltar Gracia
Member EBD
375 000
Luisa Marta Santos Soares
da Silva Amaro de Matos
Member EBD
375 000
Carlos Jorge Ferreira Brandão
Member EBD
320 000
-
-
-
Rui Miguel Dias Ribeiro Fontes
Member EBD
375 000
14 749
General and Supervisory Board
1 297 500
Byron James Macbean Haynes
Chairman GSB
468 000
Karl - Gerhard Eick
Vice-Chairman GSB
328 000
Kambiz Nourbakhsh
Member GSB
Mark Andrew Coker
Member GSB
John Ryan Herbert
Member GSB
Robert Alan Sherman
Member GSB
-
-
102 000
102 000
Carla Alexandra Severino
Antunes da Silva
Member GSB
81 000
Willian Henry Newton
Member GSB
176 000
Monika Wildner 2
Member GSB
40 500
Evgeniy Kazarez 3
Member GSB
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
147 500
543 588
130 000
505 000
132 500
507 500
72 500
392 500
132 500
522 249
-
-
-
-
-
-
-
-
-
-
-
1 297 500
468 000
328 000
-
-
102 000
102 000
81 000
176 000
40 500
-
(1) Member of EBD since October 2023. In addittion to the remuneration in the table above, a sign-on bonus of 150.000€ was paid.
(2) Member of GSB since July 2023. In the period from January to June, she received 40.500€ under a consultancy agreement.
(3) Member of GSB since November 2023.
(4) Annual Contribution for the Defined Contribution Scheme was reinstated in 2023. A total contribution of 66.678€ was made to the elegible
EBD members regarding previous years.
(5) Other Allowances (expat and healthcare).
(6) 50% of 2022 Variable Remuneration Award.
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Management ReportSustainability ReportFinancial StatementsAnnex and based on the Bank’s financial position, the
Remuneration Committee evaluated the Remuneration
Units at 1€ each, and no event was identified that
justified the application of any risk adjustment
mechanisms.
In 2023, there were no amounts paid to the members
of the Corporate Bodies of novobanco by other group
companies.
Following the termination of the Restructuring Period
by the European Commission in the context of the State
Aid granted following the sale process of novobanco,
remuneration limitations of the members of the
Management and Supervisory Bodies were no longer
applicable, which resulted in additional payments to
existing EBD and GSB members in 2023 of 382.948€ of
previously deferred salaries and other allowances and
2.663.167€ of previously awarded, deferred and vested
variable remuneration. Prior to making these payments
b. 2023 Variable Remuneration
For the year 2023, the Remuneration Committee
awarded Variable Remuneration to the Executive Board
of Director members as follows:
2023 Variable Remuneration
Role
Total
Awarded
Total
in Cash
Total in
Remunerations
Units
Total Deferred
Remuneration
pending2
Executive Board of Directors
1 877 647
938 824
938 824
2 362 816
Mark Georges Bourke
CEO
390 000
195 000
195 000
565 000
Benjamin Dickgiesser
Member EBD
82 647
41 324
41 324
41 324
Luis Miguel Alves Ribeiro
Member EBD
305 000
152 500
152 500
406 667
Andres Baltar Gracia
Member EBD
275 000
137 500
137 500
347 500
Luisa Marta Santos Soares da Silva
Amaro de Matos
Member EBD
275 000
137 500
137 500
375 833
Carlos Jorge Ferreira Brandão1
Member EBD
275 000
137 500
137 500
246 492
Rui Miguel Dias Ribeiro Fontes
Member EBD
275 000
137 500
137 500
380 000
(1) Includes 75.000€ awarded in September 2023 in advance of the 2023 Bonus award.
(2) Variable Remuneration deferred from awards of 2020, 2021, 2022 and 2023.
As stated in the Remuneration Policy for Management
and Supervisory Bodies, Variable Remuneration awards
are limited to 100% of Annual Fixed Remuneration of
each EBD member with 50% of the award in cash and
50% of the award in Remuneration Units. According
to the Remuneration Policy, 50% of awarded Variable
Remuneration is deferred over a period of 5 years (2024-
2028).
The value of the Remuneration Units at the date of the
award is 1 (one) Euro and their value is then reassessed,
by the Remuneration Committee, at the time of
payment. According to the “Regulation of Remuneration
Units”, at the time of payment, the value of the
Remuneration Units can only be adjusted downwards
when compared to that defined at the time of award.
These amounts are also subject to risk adjustment
mechanisms (Malus and Clawback).
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Annual Report 2023 | novobanco Plans for the attribution of shares or stock options.
Nothing to report.
Other benefits and compensation and non-cash
benefits.
Nothing to report.
Compensation paid or due to former members of the
Executive Board of Directors in relation to early contract
termination in the reporting year.
Nothing to report.
ii) Identified Staff
Following the annual self-assessment procedure
stated in the Remuneration Policy, the Identified Staff
list was updated by the Executive Board of Directors
and reviewed and approved by the Remuneration
Committee. A group of 55 employees was classified as
Identified Staff and the table below indicates their Fixed
and Variable Remuneration awarded for 2023, of which
50% is awarded in cash and 50% in remuneration units.
# Identified Staff
Total
Comercial
Control Functions
Support
55
7
4
44
Fixed and Variable Remuneration earned in 2023
Salary
Other post-
Employment benefits 1
Variable
Remuneration 2022 2
Total Paid
7 718 517
231 608
2 240 046
10 190 170
918 683
660 894
59 285
2 499
303 407
173 451
1 281 375
836 844
6 138 940
169 824
1 763 188
8 071 951
(1) Annual Contribution for the Defined Contribution Scheme was reinstated in 2023. A total contribution of 384.925€ was made to the elegible Identified Staff
regarding previous years.
(2) 2022 Variable Remuneration awarded that was not deferred.
The 2023 Variable Remuneration will be paid and subject
to deferral in accordance with the Remuneration Policy.
These amounts may be subject to future adjustments
in accordance with the conditions set out in the
Remuneration Policy. Regarding the deferral exception
included in the Remuneration Policy for Staff, it applies
to a total of 23 members of the Identified Staff that have
an individual variable remuneration award lower than
50,000€ and it represents less than 1/3 of their total
annual remuneration.
# Identified Staff
Total
Comercial
Control Functions
Support
2023 Variable Remuneration
Total
Awarded
Total
in Cash
Total in
Remunerations
Units
Total Deferred
Remuneration
pending 1
55
7
4
44
4 442 547
2 221 273
2 221 273
3 496 212
573 842
327 000
286 921
163 500
286 921
163 500
501 665
274 349
3 541 705
1 770 853
1 770 853
2 720 198
(1) Variable Remuneration deferred from awards of 2021, 2022 and 2023.
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Management ReportSustainability ReportFinancial StatementsAnnex Regarding deferred payments in 2023, a total of
1.616.218€ have been paid to Identified Staff from
variable remuneration awards of previous years.
During 2023, three members of Identified Staff in 2022
have left the Bank and received severance payments of
a total of 1.000.000€.
5.7 Securities Held by Members of the Management and
Supervisory Bodies
As at 31 December 2023 and in financial year 2023, the
members of the Corporate Bodies of novobanco did not
hold any securities issued by novobanco or by companies
in a control or group relationship with novobanco.
Additionally, no acquisitions, disposals or transmissions
of securities issued by novobanco or by companies in
a control or group relationship with novobanco were
carried out in this period by members of the Corporate
Bodies.
5.8 Non-Material Indirect Investment in novobanco
All current members of the EBD and certain members
of the GSB acquired, using their own funds, shares in
an indirect investment structure in novobanco, which
had been set up (and is controlled) by LSF Nani GP, LLP,
which owns indirectly a 75% interest in novobanco. This
indirect investment represents a stake of significantly
less than 1% in novobanco and has no financial impact on
the bank, or in the exercise of the functions, suitability
and independence of the aforesaid members, taking
into account the reduced weight of the investment
as a percentage of the share capital, and also for each
individual concerned. Non-material indirect investments
in novobanco have been disclosed in previous annual
financial statements of novobanco and reported to
the relevant supervisory authorities and to the Chief
Compliance Officer of novobanco. In addition, certain
staff members also had the opportunity to make a non-
material indirect investment in novobanco using their
own funds, under the same terms referred to above.
105
Annual Report 2023 | novobanco 6 CONSOLIDATED
FINANCIAL
STATEMENTS
AND FINAL NOTES
6.1 Consolidated Financial Statements
106
Management ReportSustainability ReportFinancial StatementsAnnex NOVO BANCO, S.A.
CONSOLIDATED INCOME STATEMENT
AS AT 31 DECEMBER 2023 AND 2022
(thousands of Euros)
Interest Income
Interest Expenses
Net Interest Income
Dividend income
Fees and commissions income
Fees and commissions expenses
Gains or losses on derecognition of financial assets and liabilities not measured at fair value through
profit or loss
31.12.2023
31.12.2022
1 955 662
834 679
( 813 078)
( 209 204)
1 142 584
625 475
2 133
5 035
339 061
337 335
( 44 746)
( 47 155)
( 58 055)
( 88 255)
Gains or losses on financial assets and liabilities held for trading
4 418
149 212
Gains or losses on financial assets mandatorily at fair value through profit or loss
26 633
( 40 493)
Gains or losses on financial assets and liabilities designated at fair value through profit and loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses
Operating Income
Administrative expenses
Staff expenses
Other administrative expenses
Cash contributions to resolution funds and deposit guarantee schemes
Depreciation
Provisions or reversal of provisions
Commitments and guarantees given
Other provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit
or loss
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Share of the profit or loss of investments in subsidiaries, joint ventures and associates accounted
for using the equity method
Profit or loss before tax from continuing operations
Tax expense or income related to profit or loss from continuing operations
Current tax
Deferred tax
Profit or loss after tax from continuing operations
Profit or loss from discontinued operations
Profit or loss for the period
Attributable to Shareholders of the parent
Attributable to non-controlling interests
79
32 112
24 369
27 901
116
( 1 713)
6 789
83 289
106 231
214 005
( 124 054)
( 118 357)
1 478 666
1 125 283
( 435 577)
( 395 870)
( 252 704)
( 233 707)
( 182 873)
( 162 163)
( 78 481)
( 43 588)
( 45 699)
( 41 155)
( 52 493)
( 39 245)
628
2 685
( 46 327)
( 41 930)
( 141 893)
( 101 882)
7 406
6 351
7 215
21 546
8 375
8 354
754 400
532 913
( 5 769)
53 301
( 15 134)
( 10 048)
9 365
63 349
748 631
586 214
( 412)
( 270)
748 219
585 944
743 088
560 842
5 131
25 102
748 219
585 944
O Contabilista Certificado
O Conselho de Administração Executivo
107
Annual Report 2023 | novobanco NOVO BANCO, S.A.
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022
(thousands of Euros)
ASSETS
31.12.2023
31.12.2022
Cash, cash balances at central banks and other demand deposits
5 867 189
6 599 078
Financial assets held for trading
Financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Securities
Loans and advances to banks
Loans and advances to customers
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets
Tangible fixed assets
Investment properties
Intangible assets
Tax assets
Current Tax Assets
Deferred Tax Assets
Other assets
Non-current assets and disposal groups classified as held for sale
Total Assets
LIABILITIES
Financial liabilities held for trading
Financial liabilities measured at amortised cost
Deposits from central banks and other banks
(of which: repos)
Due to customers
(of which: repos)
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
Other financial liabilities
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Provisions
Tax liabilities
Current Tax liabilities
Deferred Tax liabilities
Other liabilities
Liabilities included in disposal groups classified as held for sale
Total Liabilities
EQUITY
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent
Minority interests (Non-controlling interests)
Total Equity
Total Liabilities And Equity
O Contabilista Certificado
108
436 148
264 912
-
171 810
313 702
13
838 523
2 331 099
32 452 537
32 559 148
7 870 536
47 940
7 964 664
43 548
24 534 061
24 550 936
683 063
( 83 498)
59 511
757 549
363 754
393 795
86 748
931 036
29 376
901 660
1 117 258
89 814
562 845
( 165 144)
119 744
798 831
299 264
499 567
69 832
956 000
32 570
923 430
1 618 484
59 587
43 500 790
45 995 029
100 639
99 386
37 330 355
40 987 177
5 745 326
3 867 053
9 705 154
2 150 824
29 984 273
29 277 858
1 366 382
1 107 585
493 171
124 729
62 049
430 829
10 808
10 808
-
1 005 846
13 107
450 906
1 628 897
375 268
119 578
-
413 432
8 427
7 582
845
839 919
15 492
39 078 362
42 483 411
6 567 844
(1 070 125)
(8 577 074)
6 736 004
743 088
22 691
6 304 661
(1 234 573)
(8 577 074)
6 439 418
560 842
18 344
4 422 428
3 511 618
43 500 790
45 995 029
O Conselho de Administração Executivo
Management ReportSustainability ReportFinancial StatementsAnnex 6.2 Separate Financial Statements
NOVO BANCO, S.A.
CONSOLIDATED INCOME STATEMENT AS AT 31 DECEMBER 2023 AND 2022
(thousands of Euros)
Interest Income
Interest Expenses
Net Interest Income
Dividend income
Fees and commissions income
Fees and commissions expenses
Gains or losses on derecognition of financial assets and liabilities not measured at fair value through
profit or loss
Gains or losses on financial assets and liabilities held for trading
Gains or losses on financial assets mandatorily at fair value through profit or loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses
Operating Income
Administrative expenses
Staff expenses
Other administrative expenses
Cash contributions to resolution funds and deposit guarantee schemes
Depreciation
Provisions or reversal of provisions
Commitments and guarantees given
Other provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit
or loss
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Profit or loss before tax from continuing operations
Tax expense or income related to profit or loss from continuing operations
Current tax
Deferred tax
Profit or loss after tax from continuing operations
Profit or loss from discontinued operations
Profit or loss for the period
31.12.2023
31.12.2022
1 940 462
838 291
( 833 352)
( 213 295)
1 107 110
624 996
32 444
306 859
( 37 563)
17 452
302 126
( 39 816)
( 58 055)
( 88 444)
3 144
71 766
31 468
23 989
27 608
45 120
146 715
( 95 948)
( 535)
7 305
82 159
56 579
( 78 681)
( 68 778)
1 475 209
943 811
( 407 920)
( 369 730)
( 234 729)
( 216 821)
( 173 191)
( 152 909)
( 77 528)
( 45 878)
( 23 305)
( 40 717)
( 53 961)
( 10 894)
434
2 555
( 23 739)
( 13 449)
( 142 022)
( 103 265)
12 216
6 353
16 166
14 081
797 125
395 491
4 656
( 5 386)
10 042
58 339
( 4 611)
62 950
801 781
453 830
( 1 121)
-
800 660
453 830
O Contabilista Certificado
O Conselho de Administração Executivo
109
Annual Report 2023 | novobanco NOVO BANCO, S.A.
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022
(thousands of Euros)
ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Securities
Loans and advances to banks
Loans and advances to customers
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets
Tangible fixed assets
Intangible assets
Tax assets
Current Tax Assets
Deferred Tax Assets
Other assets
Non-current assets and disposal groups classified as held for sale
Total Assets
LIABILITIES
Financial liabilities held for trading
Financial liabilities measured at amortised cost
Deposits from central banks and other banks
(of which: repos)
Due to customers
(of which: repos)
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
Other financial liabilities
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Provisions
Tax liabilities
Current Tax liabilities
Other liabilities
Total Liabilities
EQUITY
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent
Total Equity
Total Liabilities And Equity
O Contabilista Certificado
110
31.12.2023
31.12.2022
5 742 599
436 345
1 434 690
-
6 387 295
170 847
1 537 670
13
741 446
2 183 034
31 389 894
31 500 944
8 200 570
125 817
8 400 233
145 464
23 063 507
22 955 247
683 074
( 83 763)
263 675
300 242
300 242
86 427
923 641
26 260
897 381
1 211 512
16 482
562 886
( 164 388)
251 457
258 963
258 963
69 640
947 500
30 298
917 202
1 713 116
45 071
43 146 264
45 464 048
100 607
37 392 300
6 623 884
3 867 053
99 317
40 904 697
10 506 509
2 150 824
29 193 007
28 425 223
1 366 382
1 085 659
489 750
124 957
62 049
420 543
4 191
4 191
450 906
1 601 454
371 511
120 612
-
423 190
4 505
4 505
1 012 395
844 779
39 117 042
42 397 100
6 567 844
( 993 658)
(8 577 074)
6 231 450
800 660
6 304 661
(1 155 271)
(8 577 074)
6 040 802
453 830
4 029 222
3 066 948
43 146 264
45 464 048
O Conselho de Administração Executivo
Management ReportSustainability ReportFinancial StatementsAnnex 6.3 Final Notes
6.3.1 Declaration of Conformity
with the Financial Information
Reported
In accordance with Article 29-G of the Portuguese
Securities Code (“Código dos Valores Mobiliários”), the
members of the EBD of Novo Banco, S.A., named below,
state that:
i. the separate and consolidated financial statements of
novobanco, for the year ended on 31 December 2023
were prepared in accordance with the International
Financial Reporting Standards (IFRS) as adopted in the
European Union;
ii. to the best of their knowledge the financial
statements referred to in (i) provide a true and fair
view of the assets and liabilities, equity and earnings
of novobanco and of novobanco Group, in accordance
with the referred standards;
iii. the management report describes accurately the
evolution of the businesses, the performance and the
financial position of novobanco and of novobanco
Group in 2023 and includes a description of the main
risks and uncertainties faced.
The management report and the individual and
consolidated financial statements have been approved
at the meeting of the EBD held on 29 February, 2024.
6.4 Note of Recognition
The General and Supervisory Board and the Executive
Board of Directors hereby express their recognition for
the loyalty, trust and involvement with the bank of its
clients and employees, as well as for the collaboration
of the Governmental, Supervision and Resolution
Authorities and the European Commission.
Lisbon, 29 February, 2024
6.3.2 Proposal for the distribution
of novobanco results
Under the terms of article 66(5)(f) and for the purposes
of article 376(1)(b), both of the Portuguese Companies
Code, and pursuant to Article 29 of the Bank’s Articles
of Association, the Executive Board of Directors of
novobanco proposes, for approval by the General
Meeting, that the net profit reported in the separate
accounts for fiscal year 2023, in the amount of €800
659 999.51, be allocated as follows: €80 065 999.95
to the Legal reserve, pursuant to article 97 of the
Legal Framework of Credit Institutions and Financial
Companies, and €720 593 999.56 to Other reserves and
retained earnings, to cover losses from previous years.
EXECUTIVE BOARD OF DIRECTORS
Mark George Bourke
Benjamin Dickgiesser
Luís Miguel Alves Ribeiro
Andrés Baltar Garcia
Luísa Marta Santos Soares da Silva Amaro de Matos
Carlos Jorge Ferreira Brandão
Rui Miguel Dias Ribeiro Fontes
111
Annual Report 2023 | novobanco 7 ANNEX –
ALTERNATIVE
PERFORMANCE
MEASURES
I – Reconciliation of the Income
Statement
Reconciliation between the Official Consolidated Income
Statement and the Management Consolidated Income
Statement used by novobanco’s management as a work
tool in the analysis of the Group’s performance:
The European Securities and Markets Authority
(ESMA) issued on 5 October 2015 a set of guidelines
on the disclosure of Alternative Performance Measures
(APM) by issuers of securities (ESMA/2015/1415), of
compulsory application from 03 July 2016.
The novobanco Group uses a set of indicators in
the analysis of its financial performance that can be
classified as Alternative Performance Measures, in
accordance with the referred ESMA guidelines.
In compliance with the ESMA guidelines, we present
hereunder (i) the reconciliation of the Consolidated
Income Statement and (ii) the Alternative Performance
Measures:
112
Management ReportSustainability ReportFinancial StatementsAnnex OFFICIAL
INCOME
STATEMENT
(thousands of Euros)
e
m
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3
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1
Interest Income
1 955 662 1 955 662
Interest Expenses
( 813 078) ( 813 078)
Net Interest Income
Dividend income
1 142 584
2 133
Fee and comission income
339 061
339 061
Fee and comission expenses
( 44 746)
( 44 746)
MANAGEMENT INCOME STATEMENT
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(
Gains or losses on derecognition of financial
assets and liabilities not measured at fair value
through profit or loss
Gains or losses on financial assets and liabilities
held for trading
Gains or losses on financial assets mandatorily
at fair value through profit or loss
Gains or losses on financial assets and liabilities
designated at fair value through profit and loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-
financial assets
( 58 055)
( 64 593)
6 538
4 418
26 633
79
32 112
24 369
27 901
4 418
26 633
79
32 112
24 369
27 901
Other operating income
106 231
1 788
566 103 877
Other operating expenses
Operating Income
Administrative expenses
Staff expenses
Other administrative expenses
Contributions to resolution funds and deposit
guarantee schemes
Depreciation
Provisions or reversal of provisions
Commitments and guarantees given
Other provisions
Impairment or reversal of impairment on
financial assets not measured at fair value
through profit or loss
Impairment or reversal of impairment of
investment in subsidiaries, joint ventures and
associates
Impairment or reversal of impairment on non-
financial assets
Share of the profit or loss of investments in
subsidiaries, joint ventures and associates
accounted for using the equity method
Profit or loss before tax from continuing
operations
Tax expense or income related to profit or loss
from continuing operations
Current tax
Deferred tax
Profit or loss after tax from continuing
operations
( 124 054)
1 478 666
-
( 252 704)
( 182 873)
( 78 481)
( 43 588)
-
628
( 46 327)
( 141 893)
7 406
6 351
7 215
754 400
-
( 15 134)
9 365
748 631
( 10 980)
( 77 794)
( 35 280)
( 252 704)
( 182 873)
( 43 588)
( 78 481)
7 215
628
( 46 327)
( 109 389)
( 32 566)
62
7 406
6 351
( 15 134)
9 365
Profit or loss from discontinued operations
( 412)
( 412)
Profit or loss for the period
748 219
Attributable to Shareholders of the parent
743 088
Attributable to non-controlling interests
5 131
748 219
113
Annual Report 2023 | novobanco
II – Alternative performance measures
Information on the Alternative Performance Measures
(definition, calculation method and scope).
INCOME STATEMENT
Designation Definition / Usage
Calculation Basis
Conciliation with the
Financial Statements7
Fees and
Commissions
Indicator of results of financial activity
directly related to services provided to
clients.
Indicator of historical financial
performance.
Commercial
banking income
Indicator of the results of commercial
activity most directly related to
customers.
Indicator of historical financial
performance.
Fee and commission income less fee
and commission expenses.
(IS): Fee and commission income and Fee and
commission expenses.
Financial margin + Customer services.
Capital markets
results
Indicator of other diverse results,
not directly related to activity with
customers and markets.
Indicator of historical financial
performance.
Results from trading hedging
operations, assets at fair value through
other comprehensive income and at
amortized cost.
(IS): Dividend income, gains or losses on the
derecognition of financial assets and liabilities
not measured at fair value through profit or
loss, gains or losses on financial assets and
liabilities held for trading, gains or losses on
financial assets that must be accounted for at
fair value through profit or loss, gains or losses
on financial assets and liabilities accounted
for at fair value through profit or loss, gains or
losses from hedge accounting and exchange
differences.
Other operating
results
Indicator of other diverse results,
not directly related to activity with
customers and markets.
Indicator of historical financial
performance.
Gains or losses on the derecognition of
non-financial assets + Other operating
income + Other operating expenses
+ Proportion of profits or losses from
investments in subsidiaries and joint
ventures and associates accounted for
using the equity method.
(IS): Gains or losses on the derecognition
of non-financial assets, other operating
income, other operating expenses, proportion
of profits or losses from investments in
subsidiaries and joint ventures and associates
accounted for using the equivalence method.
Banking Income
Financial activity results indicator.
Indicator of historical financial
performance.
Net interest income + Fees and
commissions + Capital markets results +
Other operating results.
Operating costs
Operational result
Indicator of structural costs that
support commercial activity and whose
analysis allows to assess the trajectory
of progression of costs.
Indicator of historical financial
performance.
Indicator of results of financial activity
less costs and before impairment.
Measures the extent to which the
income generated covers / exceeds
operating costs.
Indicator of historical financial
performance.
Provisions, net
of replacement /
Impairments
Indicator of net reinforcements of
impairments made in the year.
Indicator of historical financial
performance.
(7) IS: Income Statement Item; BS: Balance Sheet Item
Personnel expenses + Other
administrative expenses + Depreciation.
(IS): Personnel expenses, Other administrative
expenses and Depreciation.
Banking income - Operating costs.
Provisions or reversal of provisions
+ Impairment or reversal of financial
assets not measured at fair value
through profit or loss + Impairment or
reversal of impairment of investments
in subsidiaries, joint ventures and
associates + Impairment or reversal of
impairment of non-financial assets.
(IS): Provisions or reversal of provisions,
Impairment or reversal of impairment of
financial assets not measured at fair value
through profit or loss, Impairment or reversal
of impairment of investments in subsidiaries,
joint ventures and associates and Impairment
or reversal of impairment of non-assets
financial.
114
Management ReportSustainability ReportFinancial StatementsAnnex BALANCE SHEET/LIQUIDITY
Designation Definition
Calculation Basis
Conciliation with the
Financial Statements8
Assets eligible
for rediscount
transactions with
the ECB
Trading financial securities or other types of
assets, such as non- marketable assets or
cash, accepted as collateral by the ECB in
financing operations. Indicator of historical
financial performance.
n.a.
n.a.
Securities portfolio
Customer deposits
Instruction
No 16/2004
of Banco de Portugal
Net financing from
the ECB
Indicator of the size of funds invested in
trading assets, at fair value through profit
or loss, at fair value through profit or loss
mandatory, at fair value through other
comprehensive income and at amortized
cost. Historical financial performance
indicator.
Indicator of the asset’s financing capacity.
Historical financial performance indicator.
Securities (bonds, shares and other
variable income securities) recorded in
trading portfolios, at fair value through
profit or loss, at fair value through
mandatory income, at fair value
through equity and amortized cost.
Set of amounts entered in the
following general ledges accounting
items: [#400 - #34120 + #52020 +
#53100]
(BS): Securities held for trading
and Securities portfolio.
(BS): Customer resources.
Indicator that reflects the net amount that
was obtained from the ECB to finance the
activity.
Historical financial performance indicator.
Difference between the amount of
financing obtained from the ECB and
investments in the ECB.
(BS): Applications at the ECB and
Resources from the ECB.
Customer funds
Indicator of the asset’s financing capacity.
Historical financial performance indicator.
Deposits + Other customer funds +
Debt securities placed on customers.
(BS): Customer funds, Debt
securities issued, subordinated
liabilities and Liabilities
associated with transferred
assets.
Off-balance funds
Indicator of off-balance sheet customer
funds.
Historical financial performance indicator.
Off-balance sheet resources managed
by Group companies, which include real
estate and investment funds, pension
funds, banking insurance, portfolio
management and discretionary
management.
Total customer
funds
Indicator of customer resources registered
on the balance sheet and off balance sheet.
Historical financial performance indicator.
Deposits + Other customer resources +
Issued bonds + Subordinated liabilities
+ Disintermediation resources.
(BS): Customer resources,
Liabilities represented by
securities, subordinated liabilities
and Liabilities associated with
transferred assets.
Commercial gap
Indicator that measures the need / excess
of financing in absolute value of the
commercial area.
Historical financial performance indicator.
Difference between customer deposits
and net credit.
(BS): Net customer loans and
customer deposits.
Liquidity gap
Indicator that allows assessing the need /
excess liquidity accumulated up to 1 year, in
each cumulative scale of residual maturity.
Historical financial performance indicator.
Difference between
[(Net assets - volatile liabilities)]
Loans to Deposit
Ratio
Instruction
No 16/2004
of Banco de Portugal
Indicator of the relationship between the
financing of the activity and the funds raised
from customers.
Historical financial performance indicator.
Ratio between [(total credit -
accumulated impairment for credit)
and deposits customer]
(BS): Net customer loans and
customer deposits.
(8) IS: Income Statement Item; BS: Balance Sheet Item
115
Annual Report 2023 | novobanco ASSET QUALITY AND COVERAGE RATIOS
Designation Definition
Calculation Basis
Overdue loans ratio
Loans quality indicator, showing the
proportion of the gross loan portfolio that
is in default.
Indicator of historical financial performance.
Ratio between overdue loans and total
loans.
Ratio of loans
overdue for more
than 90 days
Loans quality indicator, reflects the
proportion of the gross loan portfolio that
has been in default for more than 90 days.
Indicator of historical financial performance.
Ratio between loans overdue for more
than 90 days and total loans.
Non-performing
loans ratio
Loans portfolio quality indicator, reflects
the proportion of the gross loans portfolio
that are in a non-performing situation.
Indicator of historical financial performance.
Forborne ratio
Instruction
No 32/2013
of Banco de Portugal
Loans quality indicator, reflects the
proportion of the gross loan portfolio that
was restructured.
Indicator of historical financial performance.
Ratio between the total balance of
loans agreements with customers
identified as: (i) being in default (internal
definition in line with Article 178 of
the Capital Requirements Regulation,
that is, contracts with higher material
defaults) 90 days and contracts
identified as unlikely to pay, according to
qualitative criteria; and (ii) having specific
impairment and total loans.
Ratio between forborne and total loans.
Conciliation with the
Financial Statements9
(BS): Overdue loans, that is,
loans with installments of capital
and interest in default and loans
to customers, gross.
(BS): Loans overdue for more
than 90 days, that is, loans
with installments of capital and
interest in default for more than
90 days and loans to customers,
gross.
(BS). Loans identified as non-
productive loans and Gross
customer loans.
(BS). Loans identified as
restructured due to financial
difficulties of the customer and
loans to customers gross.
Overdue loans
coverage
Indicator of the ability to absorb potential
losses related to loans default.
Indicator of historical financial performance.
Ratio between balance sheet
impairments for loans to customers and
the amount of overdue loans.
(BS): Provisions for loans and
overdue loans to customers.
Coverage of loans
overdue for more
than 90 days
Indicator of the ability to absorb potential
losses related to loans default for more than
90 days.
Indicator of historical financial performance.
Ratio between balance sheet
impairments for loans to customers and
loans overdue for more than 90 days.
(BS): Provisions for loans and
loans to customers overdue by
more than 90 days.
Non-performing
loans coverage
Indicator of the capacity to absorb potential
losses related to non- performing loans
default.
Indicator of historical financial performance.
Ratio between balance sheet
impairments for loans to customers and
non-performing loans.
(BS): Provisions for loans and
non-performing loans.
Coverage of loans to
customers
Indicator of the ability to absorb potential
losses related to the customer loan
portfolio.
Indicator of historical financial performance.
Ratio between balance sheet loan
impairments and gross loans to
customers.
(BS): Provisions for loans and
gross loans to customers.
Cost of Risk Measure of the cost recognised in the year
to cover the risk default in the customer
loans book and corporate bonds.
Ratio between impairment charges
recorded in the period for loans risk and
corporate bonds, and the balance of
loans to customers gross and corporate
bonds portfolio.
(IS): Reinforcement of provisions
for loans and corporate bonds,
in the year.
(BS): Gross customer loans and
corporate bonds portfolio.
(9) IS: Income Statement Item; BS: Balance Sheet Item
116
Management ReportSustainability ReportFinancial StatementsAnnex EFFICIENCY AND PROFITABILITY RATIO
Designation Definition
Calculation Basis
Conciliation with the
Financial Statements10
Ratio between staff expenses
and banking income.
(IS): Staff expenses.
Ratio between [administrative
expenses and depreciation] and
banking income.
(IS): Operating costs include Staff
expenses, Other administrative expenses
and Depreciation.
Efficiency I
Instruction
No 16/2004
of Banco de Portugal
It expresses the proportion of income
necessary to cover the staff costs
incurred. The lower the value of the
indicator, the higher the level of efficiency
of the organization’s human resources.
Historical financial performance indicator.
Efficiency II
Instruction
No 16/2004
of Banco de Portugal
Expresses the proportion of income
necessary to cover operating costs
incurred. The lower the value of the
indicator, the greater the level of
efficiency of the organization. Historical
income financial performance indicator.
Cost to Income
It expresses the proportion of income
necessary to face the operating costs
incurred and allows to measure the
progression of efficiency levels. The lower
the value of the indicator, the greater the
level of efficiency of the organization.
Historical financial performance indicator.
Profitability
Instruction
No 16/2004
of Banco de Portuga
Expresses the banking income (in%)
generated by the asset, in the period and
provides an analysis of the capacity to
generate income per unit of assets used.
Indicator of historical financial
performance.
Ratio between operating costs
and banking income.
Ratio between banking income
and average net assets.
Return on average
net assets
Instruction
No 16/2004
of Banco de Portugal
Expresses the income (in%) generated
by the asset, in the period and provides
an analysis of the capacity to generate
results per unit of assets used.
Indicator of historical financial
performance.
Ratio between profits or losses
of continuing operations before
taxes and average net assets.
Return on average
equity
Instruction
No 16/2004
of Banco de Portugal
Expresses the income (in%) generated
by equity in the period and provides
information on the efficiency with which
capital is used to generate results.
Indicator of historical financial
performance.
Ratio between profits or losses
of continuing operations before
taxes and average equity.
Return on Tangible
Equity (RoTE)
Expresses the return (in %) generated
by tangible equity over the period and
provides information on the efficiency
with which capital is used to generate
results.
Ratio between net income
and average equity, excluding
intangible assets and the amount
receivable from the contingent
capitalization agreement (CCA).
(10) IS: Income Statement Item; BS: Balance Sheet Item
117
(BS): Active; the calculation of the
average net asset includes, in addition to
the values at the ends of the period under
analysis, the values recorded in each of
the months in the interval considered.
(IS): Profit or loss from continuing
operations before taxes.
(BS): Assets; the calculation of the
average net asset includes, in addition to
the values at the ends of the period under
analysis, the values recorded in each of
the months in the interval considered.
(IS): Profit or loss from continuing
operations before taxes.
(BS): Equity; the calculation of average
equity includes, in addition to the values
at the ends of the period under analysis,
the values recorded in each of the months
in the interval considered.
(IS): Results attributable to the parent
company’s shareholders.
(BS): Equity; the calculation of average
equity includes, besides the values at
the ends of the period under review, the
values recorded in each of the months
within the considered interval. Intangible
assets and the amount receivable from
the CCA are excluded.
Annual Report 2023 | novobanco Management Report
Sustainability Report
Financial Statements
Annex
€713.2mn
of green investment
39%
of women in
management positions
-36.8%
of CO2 emissions
(scope 1 and 2 vs 2021)
118
Annual Report 2023 | novobanco
SUSTAINABILITY
REPORT
1. 2023 ESG HIGHLIGHTS
1.1 Messages from the executive management
1.2 Highlights
1.3 Our ESG journey
2. SUSTAINABILITY STRATEGY
2.1 Stakeholders Engagement
2.2 Materiality Analysus and ESG Approach
2.3 Our Strategic Pillars
2.4 Risks and Opportunities
2.5 novobanco's Path towards Transition
2.6 novobanco's Commitments
2.7 Our Performance
2.8 Our Partners
3. CUSTOMER AND SOCIETY CENTRIC BANK
3.1 Supporting our Corporate Clients' ESG Transition
and Journey
3.2 Sustainability for our Retail Clients
3.3 Asset Management
3.4 The Customer's Voice
3.5 Wellbeing, Inclusion and Financial Security
3.6 Social Welfare
3.7 Cultural Patronage
4. SIMPLE AND EFFICIENT OPERATIONS
4.1 Environmental Footprint
4.2 Suppliers
4.3 Cybersecurity and Data Privacy
5. DEVELOPMENT OF PEOPLE AND CULTURE
5.1 The People and Culture strategic pillar
5.2 Talent Development
5.3 Value proposition for employees
5.4 Volunteer Programme
6. DEVELOPING SUSTAINABLE PERFORMANCE
6.1 Sustainability governance
6.2 ESG Risks
7. ESG PERFORMANCE INDICATORS
7.1 Environmental Indicators
7.2 Social Indicators
7.3 Governance Indicators
8. ABOUT THIS REPORT
8.1 Methodological Notes
8.2 GRI Table
8.3 Independent Limited Assurance Report
120
126
140
164
176
196
242
256
119
1 2023 ESG
HIGHLIGHTS
1.1 Messages from the
executive management
120
Management ReportSustainability ReportFinancial StatementsAnnex Sustainability and the management of ESG risks and
opportunities is a core strategic priority for novobanco,
and in 2023 we consolidated our goal of being an
ESG champion in the Portuguese financial services by
continuing to deliver significant progress.
I was particularly pleased with the success of our
ESG literacy initiatives, specially aimed at supporting
Portuguese SMEs understand, discuss, and share
experiences, best practices and challenges surrounding
their sustainability journeys.
Sustainable finance has a pivotal role to play in achieving
national and European climate goals and, for novobanco,
enabling our customers to lower their carbon footprint
is a priority that can only be achieved through major
investment in energy transition and climate action.
Having invested 369M€ in green financing in 2023,
novobanco surpassed its 2024 green financing targets
more than one year ahead of the commitment. We’ve
renewed and reinforced our commitment, with a target
of 2B€ in Green investments for the next 3 years.
This reflects our focus on giving customers more choice
and making their transition journey easier. Going forward
we will continue to contribute to accelerate the pace of
the required transition – identifying new ways of doing
business and ensuring speed to market in supporting our
customers with products and services.
In our own operations, we have similarly already well
surpassed the Scope 1 and 2 GHG emissions’ reduction
targets set for 2024 and remain confident we will meet
our 50% reduction target before the committed date
of 2030.
Amplifying our positive social impact in the communities
we serve is also a key concern in the way we do
business, both through our people agenda and through
our client and community programs, promoting social
well-being initiatives and financial and digital literacy
programs.
In 2023 we launched and executed several key initiatives
of our “Developing People and Culture” strategic
pillar, advancing employee value proposition, talent
development and culture & values programs that are key
to empowering a diverse team and deliver on our equity
and inclusion commitments. Our female representation
in management roles as risen 2,5 p.p. to 38,7% in 2023,
from 2022.
Mark Bourke
Chief Executive Officer
121
Annual Report 2023 | novobanco In 2023, we strengthened our contribution to making
the Portuguese financial market and its ecosystem more
sustainable, deepening the integration of ESG concerns
and principles into our different business areas. Not only
have we far exceeded our green investment and scope
1 and 2 GHG emissions reduction targets, but we have
strengthened ESG governance, impact monitoring,
and training and awareness for our colleagues and
customers.
the diversity of its team as a strategic lever, the new
novobanco campus, to be inaugurated in 2024, was
developed with strict well-being criteria for our people.
The financial well-being of the communities we serve
has remained a priority area of action, not only through
an inclusive financial offer that guarantees a fair value
exchange with the customer, but also through financial
support and volunteering initiatives for social causes in
the community.
In 2023, we focused our work, first and foremost, on
supporting our clients' transition journeys, through
sustainable financing solutions and incorporating ESG
risks and opportunities into the offer of products and
services. We have also prioritized the evolution of our
risk management systems and frameworks to enable the
integration of ESG risks structurally into the business.
At the same time, incorporating social criteria into the
way we run our business was also a priority in 2023.
In addition to the initiatives of the people and culture
strategic pillar, which have allowed significant advances
in the promotion of an organizational culture that has
Luísa Soares da Silva
Chief Legal, Compliance & Sustainability Officer
122
Management ReportSustainability ReportFinancial StatementsAnnex 1.2 Highlights
2023 was both a year of continuity and reinforcement of
the measures and programmes already underway, and a
year of transformation:
• Continued focus on developing the ESG risk
management framework, strengthening of the product
and service offering to support client transition and
implementing measures to minimise the footprint of
our own operations;
• Designing and launching the bank’s strategic cultural
transformation programme, rewriting novobanco's
mission and values, reviewing ESG strategic priorities
and strengthening the bank's transition plan.
Main highlights in 2023
1
CUSTOMER-CENTRIC
BANK
2
SIMPLE AND EFFICIENT
OPERATIONS EFICIENTES
3
DEVELOPING PEOPLE
AND CULTURE
€369m investment in green
projects, an yoy increase of +7%.
Significant improvement in the
customer recommendation index,
with an increase of 17 points in the
NPS (Net Promoter Score) vs. 2022.
€500,000 investment in the
community, including support for
projects aimed at the integration
and empowerment of young
people and adults.
Reinforcement of the offer of
investment products with ESG
considerations or objectives (Art.
8 or 9, SFDR): €814M invested by
clients in December 2023.
The footprint of novobanco's own
operations continues to shrink:
-3% vs. 2022, with a cumulative
reduction of 37% vs. 2021.
Maintenance of a policy of open-
ended employment contracts, with
96% of employees on permanent
contracts.
4.4 tons of PVC saved by issuing
bank cards made of recycled PVC
and sending 1.7 tonnes of bank
cards for recycling.
Increase in the share of electric or
hybrid vehicles in the car fleet to
25% (+22 p.p. vs. 2022).
Integration of sustainability
assessment into the supplier
selection process: 76% of suppliers
with sustainability assessment.
0.3 p.p. reduction in gender pay
gap vs. 2022, to 5.4%.
€828,4 thousand in social benefits
for active and retired employees.
Reinforcement of 5+ programme to
promote staff health and wellbeing,
involving 1,870 employees in more
than 50 initiatives in 2023.
4
DEVELOPING SUSTAINABLE
PERFORMANCE
Increase in the proportion of
women in management positions
to 39%, a 2 p.p. increase vs. 2022.
Management team focus on ESG
issues: we held 11 ESG steering
meetings and completed 43
strategic initiatives under the ESG
programme.
21,000 hours of ESG training
delivered to all employees in 2023.
Increased inclusion of ESG criteria
in the performance assessment
model for the management team
and the various departments.
+7%
green
Investment
76%
suppliers with
Sustainability
score
+17pts
NPS of Retail
clients*
39%
women in
management
positions
-3%
GHG Emissions
scope 1 & 2
21 th
hours
ESG training
*Source: BASEF Banca 2023 / Marktest. Period from September to December 2023 versus September to December 2022 109 Report and Accounts 2023 |
novobanco
123
Annual Report 2023 | novobanco 1.3 Our ESG journey
2020
2021
2022
2023
Distribution of ESG/ ECO
structured products, promoting
investment with environmental
and social concerns.
Inauguration of the 1st "new
distribution model" branch,
remodeled taking into account
social and environmental
concerns.
Launch of the ESG Program
with multidisciplinary
workgroups, redesigning
the bank's ESG strategy.
Commitment to reducing
greenhouse gas emissions in
own operations by 50% by
2030 and achieving up to 100%
of electricity consumption from
renewable sources by 2024.
Establishment of Sustainability
Steering to accelerate
implementation of priority ESG
initiatives.
Disclosure of targets for the
promotion of gender equality in
senior management positions.
ECO Residential Mortgage offer,
with preferential conditions to
high energy efficiency homes.
Publication of Sustainability
Policy.
Association of the support
to social, cultural and
environmental causes to
the bundle account offer
Launch of Car Loans with bonus
on the acquisition of hybrid/
electric vehicles.
Creation of ESG Office and
reinforcement of governance of
ESG topics and environmental
and climate risks.
Reinforcement of Exclusions
and Safeguards Principles in the
financing of industry sectors
and projects with negative
environmental and social
impact.
Launch of 2022 Sustainability
Credit Line to support
companies in the transition
to a more sustainable and
low-carbon economy.
Launch of questionnaire on
sustainability preferences
to assess and incorporate
customer preferences into their
investment portfolio.
Reformulation of sustainability
scoring for suppliers.
Organisation of ESG Talks, a
cycle of conferences dedicated
to ESG issues.
Participation in the climate
stress tests carried out by the
European Central Bank.
Setting the first financed
emissions (scope 3) reduction
targets for three industry
sectors (Power Generation,
Cement Manufacturing and
Commercial Mortgages), a
key element of the Bank's
transition plan.
Strengthening of multi-annual
green investment targets,
more than tripling the annual
commitment
Revision of the ESG strategic
priorities based on the double
materiality matrix resulting from
stakeholder consultation.
Strengthening of ESG risk
assessment, monitoring
and information gathering
processes at client, transaction
and collateral’s level.
Publication of the first Task
Force on Climate-Related
Financial Disclosures (TCFD)
Report .
Organisation of second edition
of the ESG Talks, a cycle of
conferences dedicated to ESG
issues.
Organisation of Sustainability
Programme for SMEs’ cycle
of conferences, podcasts and
webinars to promote ESG
literacy in SMEs.
Strengthening of Green
Financing/Investment
Classification Policy.
Launch of new Sustainability
page on the novobanco
website, improving
communication tools with
stakeholders.
124
Management ReportSustainability ReportFinancial StatementsAnnex 2024 will be a year of continuity and consolidation of
the various initiatives already underway, leading to an
increasing integration of ESG factors into the Bank's
way of doing business.
Hence, with regard to climate and environmental risks,
we plan to i) obtain validation from the Science-Based
Targets initiative (SBTi) for the financed GHG emission
reduction commitments we have submitted; ii) expand
the definition of financed emission reduction targets
to new sectors with significant transition challenges;
iii) strengthen the methodologies and broaden the
integration and application of ESG risk criteria in
customers’ credit risk assessment; iv) expand the range
of products and services offered to better address the
different transition challenges faced by corporate and
individual clients.
With regard to novobanco's social impact on the
communities it serves, we plan to: i) conclude the
implementation of the cultural transformation
programme launched in 2023; ii) inaugurate the new
campus for the Group's central services, following best
practices in terms of employee well-being and the
building’s energy efficiency; iii) strengthen initiatives
to promote inclusion, diversity and gender equality in
the workforce, and iv) strengthen initiatives to empower
companies and individuals through financial, digital
or sustainability literacy programmes.
125
Annual Report 2023 | novobanco 2 SUSTAINABILITY
STRATEGY
2.1 Stakeholders
Engagement
To build and maintain a constant relationship
with stakeholders and integrate their concerns
andexpectations, the bank offers a wide range
of communication channels.
Defining novobanco Group business strategy is
intrinsically linked to a collaborative and proactive
approach with all its stakeholders, with a special
focus on the seven main ones: customers, employees,
regulators, investors, suppliers, media, and the
community. The group also regularly assesses the
materiality of ESG themes.
novobanco's mission is to be the trusted banking partner
that supports families and companies throughout their
lifetime. Given the emphasis placed on the customer
and society, relying solely on a financial perspective to
identify the most material topics for the bank would be
insufficient for novobanco.
Aware of the role it plays in the fight against climate
change, novobanco has taken steps towards the
adoption of a structured, ambitious and effective
approach to the environmental, social and governance
challenges of the transition to a sustainable and
low-carbon economy and the development of an
inclusive and fair society.
novobanco's current strategy integrates its ambitions
in all these dimensions, and therefore its ESG vision
permeates all the pillars of the bank's business model,
namely: (i) its relationship with clients and society, in
the context of supporting the transition and promoting
socio-economic development; (ii) on the environmental
and social efficiency of its own operations; (iii) on its
practices concerning the development, inclusion and
promotion of the wellbeing of all its employees; and
(iv) in a sustainability strategy that fosters an effective
governance model and the proper economic integration
of all risks, including climate and environmental risks.
126
Management ReportSustainability ReportFinancial StatementsAnnex 2
EMPLOYEES
SUPPLIERS
Contacts established through a specific website
(Grupo novobanco Supplier Portal), coordinating
the exchange of information via e-mail, telephone
and in person.
MEDIA
Information provided in-person, by phone and
online;
Press conferences;
Quarterly results presentation;
Sharing of specialized knowledge through
social networks and media (radio, newspapers,
televisions).
COMMUNITY
Continuous in-person, telephone and online
dialogue with Associations, Private Social Solidarity
Institutions, social and environmental NGOs;
Corporate Social Responsibility Initiatives;
Participation in conferences;
Social networks (novobanco Cultura, novobanco
Facebook and Linkedin).
Request for in-person feedback via questionnaires
and meetings;
Intranet (Somos novobanco, Yammer and Human
Resources Portal);
Thematics Mailboxes Email (including CEO Office
and "Ask the Chairman" address");
HCD manager for active and retired employees;
Human Resources Business Partner;
Executive leadership visits to the commercial
network;
Whistleblower line;
Workshops and Lectures;
Annual Meeting and other thematic meetings,
workshops, clarification sessions and webinars;
Workers Committee, Union Secretariat and
Information and Consultation Procedure.
CLIENTS
Request by phone, online and in person;
Formal system for filing complaints;
Branch Network, Corporate Centres and Regional
Divisions;
Social networks (novobanco Cultura, novobanco;
Facebook and Linkedin);
Events, such as novobanco Summit.
REGULATORS
Provision of mandatory and voluntary information;
Request for feedback by phone, online and in
person;
Investor Relations team;
Regular meetings with investors;
Quarterly results presentation, Investors website.
127
Annual Report 2023 | novobanco 2.2 Materiality Analysis
and ESG Approach
In 2023, novobanco updated its materiality matrix,
with the aim of bringing it closer to the concept of
dual materiality to come into force in fiscal year 2024
resulting from the new obligations of the Corporate
Sustainability Reporting Directive.
The identification and prioritisation of issues and
impacts on the organisation was based on a process
that included trend analysis and consultation with the
stakeholder groups identified through questionnaires
and discussion workshops.
Given that the business strategy of the novobanco
Group is inextricably linked to a collaborative and
proactive approach to all its stakeholders, an extensive
stakeholder consultation exercise was carried out for
the new materiality analysis.
Based on this process, 13 issues of greater relevance
to novobanco were identified from a double materiality
perspective, which we have aggregated into three
typologies: Environmental (E), Social (S) and
Governance (G).
To this end, relevant stakeholders for novobanco were
considered as all the groups or individuals that the Group
affects through its activities, products and services and
that, in turn, may also affect the Group's ability
to achieve its objectives.
128
Management ReportSustainability ReportFinancial StatementsAnnex 2023 Materiality Matrix
E2
G4
G1
G2
E1
S3
G6
G7
S2
G8
G3
G5
S1
E
S G
IMPACT IN NOVOBANCO VALUE CREATION CAPACITY
Cybersecurity, privacy and information protection
S1
Human Capital
Ethics, conduct, transparency and compliance
S2
Diversity, equity and inclusion
Anti-corruption, bribery and money laundering
S3 Respect for human rights
O
C
N
A
B
O
V
O
N
F
O
T
C
A
P
M
I
G1
G2
G3
G4
Corporate Governance
G5
G6
Risk management (including ESG)
Customer satisfaction and experience
G7
Economic performance
G8
Innovation, research and technology
E1
E2
Sustainable products and services
Sustainable finance and investing
129
Annual Report 2023 | novobanco
In light of this analysis and the identification of the most
material issues for novobanco, an additional weighting was
considered for the selection of Sustainable Development
Goals (SDGs) that the bank should adopt as priorities in
order to define its operating strategy, as per the analysis
presented.
Cross-referencing of the 2023 Materiality Matrix and the SDGs
G1 Cybersecurity, privacy and info protection
G2 Ethics, conduct, transparency and compliance
G3 Anti-corruption, bribery and money laundering
G4 Corporate Governance
G5 Risk management (including ESG)
G6 Customer satisfaction & experience
G7 Economic performance
G8 Innovation, research and technology
S1 Human Capital
S2 Diversity, equity and inclusion
S3 Respect for human rights
E1 Sustainable products and services
E2 Sustainable finance and investing
SDG targets relevance
130
Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
novobanco cross-referenced its priority material issues
with each of the SDG’s targets, to identify the relative
relevance of each SDG to be bank. This analysis allowed
novobanco to check, within each SDG, what specific
target were linked to its priority issues (for instance
– how the “Diversity, Equity and Inclusion” key topic
related with targets within Quality Education, Economic
Growth and Stronger Institutions).
Most relevant targets in SDGs
Ensure inclusive and
equitable quality
education and promote
lifelong learning
opportunities for all
4.3
Ensure equal access for all
women and men to affordable
and quality technical, vocational
and tertiary education, including
university.
4.4
Substantially increase the
number (…) who have relevant
skills, including technical and
vocational skills, for employment, decent
jobs and entrepreneurship.
Ensure access to
affordable, reliable,
sustainable and modern
energy for all
7.2
By 2030, increase substantially
the share of renewable energy in
the global energy mix.
7.3
By 2030, double the global
rate of improvement in energy
efficiency.
Promote sustained,
inclusive and sustainable
economic growth, full &
productive employment
and decent work for all
8.2
(…) higher
economic
productivity
through diversification,
technological upgrading
and innovation (…)
8.5
achieve full (…)
employment and
decent work for all
women and men, (…) and
equal pay (…)
8.0
(…) encourage and
expand access to
banking, insurance
and financial services for all.
Reduce Inequality
within and among
countries
10.2
(…) promote the social, economic
and political inclusion of all,
irrespective of age, sex, disability,
race, ethnicity, origin, religion or economic
or other status.
10.5
Improve the regulation and
monitoring of global financial
markets and institutions and
strengthen the implementation of such
regulations
Take urgent action to
combat climate change
and its impacts
13.1
Strengthen resilience and
adaptive capacity to climate
-related hazards and natural
disasters in all countries.
13.2
Integrate climate change
measures into national policies,
strategies and planning.
Promote peaceful and
inclusive societies for
sustainable development,
provide access to justice
for all and build effective,
accountable and inclusive
institutions at all levels
16.4
reduce illicit
financial and
arms flows, (…)
recovery of stolen assets
and combat all forms of
organized crime.
16.5
Substantially
reduce corruption
and bribery in all
their forms.
16.6
Develop effective,
accountable
and transparent
institutions at all levels.
131
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Sustainability Report
Financial Statements
Annex
2.3 Our Strategic Pillars
novobanco's strategic approach is based on four pillars
that underpin its competitive positioning. As part of the
new materiality analysis, the integration between the
bank's strategy and its actions at the environmental,
social and governance levels was reinforced.
Each of the bank's strategic pillars is aligned with its ESG
vision and priority SDGs;
• To elevate the bank's customer-centric approach
through differentiated value propositions, leveraging
a digital and omnichannel approach and reinforcing
its role in supporting its customers' energy transition
needs;
• To provide simple and efficient operations that
enhance the banking experience and ensure a more
sustainable environmental and social footprint;
• To develop people and culture, attracting and actively
nurturing a team of skilled professionals who stand
as a reference for our bank's core values, including its
goals of inclusion, diversity and enhancement of the
wellbeing of all employees.
• To ensure sustainable performance in terms of
risk management and deeper integration of ESG
components, including climate and environmental risk,
into the business.
STRATEGIC PILLARS
CUSTOMER-CENTRIC
BANK
SIMPLE AND EFFICIENT
OPERATIONS
DEVELOPMENT OF PEOPLE
AND CULTURE
DEVELOPING SUSTAINABLE
PERFORMANCE
Support our clients transition
and maximize positive impact on
society and environment
Improve efficiency, enable own
transition, ensure systems
readiness for ESG
Strengthen capabilities,
inclusiveness, diversity and the
engagement of our people
Build a robust ESG governance &
risk management framework
• To improve the environmental
efficiency of novobanco's
operations.
• To promote diversity and a
culture of inclusiveness among
novobanco's employees.
• To implement the bank's future
ESG management operating model,
building a robust governance model
• To reinforce employee learning
and development actions.
• To promote initiatives to reinforce
employee culture, engagement and
wellbeing
• To continue to implement the ESG
risk management structure, namely
in climate and environmental risk
management, and its application to
critical processes such as credit and
customer onboarding
• To reduce scope 1 and 2 own
emissions (and scope 3, excluding
financed emissions, whose
objectives are set under the
"Customer-centric bank" pillar).
• To strengthen suppliers' ESG
performance.
• To adapt IT and information
management systems to ESG
requirements.
• To develop an energy transition-
linked business strategy in the
Corporate and Retail segments,
namely by enhancing green
investment policies and targets,
as well as products and services.
• To implement and monitor plans
to reduce scope 3 financed GHG
emissions through sector-specific
targets to reduce emissions
intensity, in line with the Paris
Agreement targets.
• To continue to develop the ESG
offering in the investment and
financial advisory strategy for
clients.
To promote stakeholder
engagement and the Bank's
corporate social responsibility
strategy.
132
2.4 Risks and Opportunities
S
Short-term
Medium-term
Long term
To ensure the robustness of the current strategy, an analysis
was carried out of the main risks and opportunities
associated with climate and environmental risks, in the
field of physical and transition risks.
This permitted to identify mitigation measures, which
are integrated into the bank's priority and strategic
objectives and action plans, as referenced below.
FIELD
NATURE
RISKS FOR NOVOBANCO
MITIGATION MEASURES
PHYSICAL
Acute
typology
S
Business disruption for clients and counterparties due to
damage to production assets or limitations in the value chain.
To reinforce methodologies for assessing physical risks,
managing covenants and financing conditions.
Potential devaluation of collaterals on loans granted by the
Bank.
To reinforce novobanco's business continuity and operational
contingency plan.
Possible costs arising from damage to the Bank's physical
assets, including business disruption.
Pillar 2 - Simple and efficient operations.
Pillar 4 – Achieving sustainable performance.
TRANSITION
Chronic
typology
S
Policies and
legal
framework
S
Technology
S
Market
S
Possible increased absenteeism among the Bank's employees.
Decrease in productivity and/or increase in operational and
production costs in exposed sectors, impacting the financial
performance of customers and counterparties or projects
financed by the Bank.
To ensure the regular collection of information from companies
and counterparties to calculate climate and environmental risks.
To integrate climate and environmental risk assessment into
lending and pricing decision processes.
Pillar 4 – Achieving sustainable performance.
Changes to the governance and organisational model to
ensure a dedicated monitoring of ESG issues.
To reinforce novobanco’s governance model to ensure
monitoring of ESG issues.
Increased interaction with companies and counterparties, for
a better insight into their transition and business adjustment
challenges.
Development of products and services with structuring
conditions and rationale aligned with our customers’ transition
needs.
To ensure the regular collection of information from companies
and counterparties to calculate climate and environmental risks.
To reinforce novobanco’s portfolio of products and services to
support the transition needs of its customers.
Pillar 1 – Customer-centric bank.
Pillar 4 – Achieving sustainable performance.
Inability of the Bank’s corporate clients and counterparties to
adapt, due to limited investment capacity or restricted access
to financing.
To ensure the regular collection of information from companies
and counterparties in order to understand their challenges and
prepare the most suitable commercial offer.
Unavailability of the most suitable technologies (at a
reasonable cost) required to meet the new standards of
business operations.
Business transformation and conversion costs, with an impact
on the financial performance of customers and counterparties.
To develop partnerships with organisations in order to enhance
the bank’s range of solutions to support its customers.
Pillar 1 – Customer-centric bank.
Pillar 4 – Achieving sustainable performance.
Changes in supply and demand for ESG-oriented banking
products and services, with an impact on the Bank’s
commercial competitiveness.
To ensure the regular collection of information from companies
and counterparties in order to understand their challenges and
prepare the most suitable commercial offer.
General increase in market prices of technology and production
factors with an impact on the competitiveness and financial
performance of companies.
Limitations on the growth of companies and sectors exhibiting
greater misalignment with efficiency and decarbonisation
standards, resulting in reduced demand for their goods and
services.
To develop partnerships with organisations in order to enhance
the bank’s range of solutions to support its customers.
To develop plans to ensure the bank’s response to climate
risks, particularly when it comes to reducing financed GHG
emissions.
Pillar 1 – Customer-centric bank.
Pillar 4 - Achieving sustainable performance.
Reputational
Risk of failing to meet stakeholders' expectations regarding
the Bank's performance on critical climate change issues.
To ensure a rigorous methodology and robust monitoring of
financed GHG emission mitigation plans.
S
Constraints on investors’ and stakeholders’ perception of the
Bank's brand image.
The Bank's involvement in instances of non-compliance
with new ESG requirements, with an impact on its image and
reputation.
Association of the Bank with clients, counterparties, suppliers
and other third parties with sensitive ESG profiles.
To ensure rigour in communication with the market.
To implement controls against potential ESG risks in the
selection and monitoring of suppliers.
To ensure the inclusion of reputational risk analysis in ESG risk
assessments.
Pillar 1 - Customer-centric bank.
Pillar 4 - Achieving sustainable performance.
Economic
wellbeing and
Social rights
Risk of some economic sectors losing competitiveness
as a result of the transition.
To develop solutions and products to support the transition of
the economic sectors with the greatest impact.
Risk of employee skills becoming inadequate as a result
of transition changes.
Risk of loss of social rights associated with the
deterioration of the competitiveness of certain economic
sectors or regions.
To ensure recurrent risk analysis by economic sector to identify
and proactively manage exposures in the sectors with the
greatest impact.
To provide in-house training on ESG issues and support the
retraining of employees impacted by the transition.
To ensure the inclusion of reputational and social risk analysis
in ESG risk assessments.
Pillar 1 - Customer-centric bank
Pillar 3 – Developing people and culture
Pillar 4 - Achieving sustainable performance
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Annual Report 2023 | novobanco
In addition to climate and environmental risks, social and
governance risks were also analysed:
Financial inclusion and wellbeing:
• Increased risk of default in case of reduction of the
purchasing power of the communities served, and
consequently of clients’ purchasing power.
- Promoting financial inclusion and literacy
initiatives, as well as providing products and
services tailored to diverse customer needs, makes
it possible to contribute to economic and social
progress and thereby to mitigate the risk of loss of
profitability.
• Risk of inability to meet employee needs in terms
of i) flexible working models, ii) value proposition
for employees, iii) culture of diversity and inclusion,
including gender equality issues.
- Loss of talent and reduced levels of employee
engagement, thus increasing the risk of lower
productivity and business profitability, the difficulty
of defining succession plans and spreading
knowledge and expertise, as well as reducing the
ability to attract new business and new clients.
• Increased reputational and operational risk due to
non-compliance with international principles and
agreements on human and labour rights throughout
the value chain, comprising clients, suppliers or other
bank partners.
- The definition and implementation of models to
analyse, assess and monitor the social risks and
the performance of clients and suppliers makes it
possible to mitigate these risks and their impact on
novobanco’s reputation and activity.
Good governance and responsible
management
• The ability to seamlessly adapt the business to an
ever-changing market and competitive environment is
only possible with a robust governance model capable
of incorporating long-term objectives, resolving
conflicts of interest, ensuring data security and
adequately managing the risks of corruption, bribery,
money laundering and terrorist financing.
The incorporation of environmental,
climate and ESG issues into the
Bank's strategy creates a number of
opportunities that novobanco is intent
on exploiting, in line with our Shaping the
Future strategy:
Brand and Reputation: Strengthening novobanco's
position alongside companies (Pillar 1)
S
• Strengthening our position as "Bank for businesses"
by accompanying, challenging and supporting corporate
clients in their energy transition and reinforcing our
relationship as a partner of these clients.
• Setting the bank apart from its competitors through
the quality, rigour and innovation of its approach to ESG.
Commercial offer: Offering the best solutions for
companies (Pillar 1)
S
• Development of financial products and services to
support the transition - structured finance catering
to the needs of clients and meeting robust technical
criteria.
• Implementation of external partnerships to strengthen
the offer and deliver a comprehensive solution to our
clients.
Commercial positioning: Communicating and interacting
with the clients (Pillar 1)
S
• Promoting information and awareness actions among
customers - conferences, events.
• Adapting the engagement models - from large to small
companies.
• Establishing partnerships and programmes with
business and sector partners, reinforcing proximity to
corporate clients.
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Management ReportSustainability ReportFinancial StatementsAnnex Investment offer: Reinforcing the investment offer
(Pillar 1)
2.5 novobanco's Path
towards Transition
• Adoption of investment policies that integrate climate
risk management considerations.
• Implementation of ESG classification matrix for
transactions.
• Establishment of controls and procedures aligned with
regulatory requirements in the design and provision of
sustainable investment products.
Efficiency of operations: Improving the sustainability
and efficiency of operations (Pillars 2 and 3)
• Moving to new, energy-efficient premises (novobanco
campus).
• Strengthening resource-use efficiency (in the use of
paper, water, electricity, other consumables).
• Promoting the efficiency of business travel to reduce
energy costs.
• Improving the carbon footprint of novobanco's
employees through green solutions in terms of
transport and services on novobanco's premises, and
increasing the green fleet integration.
Resilience: Promoting the resilience of our processes and
people (Pillars 2, 3 and 4)
novobanco wants to play an active role in supporting
the energy transition of the Portuguese economy and
society. The bank has therefore undertaken an extensive
exercise to define greenhouse gas emission reduction
targets that are compatible with the Paris Agreement.
The bank thus commits to aligning its financing and
investment portfolio for a reduction of the resulting
carbon footprint, developing a business strategy aimed
at enabling effective credit and investment orientation
to achieve the objectives to which we have committed
ourselves. Key actions will focus in particular on the most
GHG-intensive sectors to which the bank has the largest
credit exposure, and to this end we intend to:
• Strengthen dialogue with clients, particularly in the
most affected sectors, and increase collection of
ESG data (e.g. GHG emissions from their operations,
Energy Performance Certificates (EPCs) for collateral,
Transition Plans, decarbonisation commitments);
• Promote green finance by increasing the range of
products and external partnerships that can help our
clients achieve energy transition;
• Develop differentiated pricing models;
• Continue to develop monitoring tools to enable
effective portfolio orientation;
• Implementing assessment and acceptance models for
• Continue to promote ESG literacy within the
suppliers and other third parties.
Portuguese business community.
• Developing new routines and information reports to
monitor climate risk.
• Training our employees to foster a mature
management of climate risks.
• Strengthening staff involvement and commitment to
the energy transition path through in-house initiatives
to spread novobanco's commitments and raise
environmental awareness.
135
Annual Report 2023 | novobanco In October 2019, novobanco signed the SBTi - Business
Ambition for 1.5ºC commitment to limit the global
temperature increase to 1.5ºC above pre-industrial
levels. With this commitment, novobanco submitted
its objectives in a transition/decarbonisation plan for
its portfolio, which is currently being validated by SBTi.
The following sectoral commitments, applicable to
exposures to large corporates and to medium and
long-term financing or investments, stand out:
- Electricity generation:
novobanco commits to reducing GHG emissions of the
electricity generation sector in its corporate financing
and investment portfolio by 74% per KWh until 2030,
compared to the baseline year of 2021.
The scope considered was the Long and Medium-Term
exposure to Large companies in 2021 with CAE codes
(classification of economic activity) related to electricity
generation: 35111, 35112, 35113.
- Cement Manufacturing
novobanco commits to reducing GHG emissions of the
cement sector in its corporate financing and investment
portfolio by 23% per ton of cement until 2030,
compared to the baseline year of 2021.
The scope considered was the Long and Medium-Term
exposure to Large companies in 2021 with CAE code
23510, related to electricity generation.
- Commercial Mortgages
novobanco commits to reducing GHG emissions of the
commercial mortgages sector in its corporate financing
and investment portfolio by 68% per sqm until 2030,
compared to the baseline year of 2021.
For this analysis the bank reviewed real estate collaterals
for financing and real estate investments where the
property is used for commercial purposes, such as
retail, hotels, offices, industrial purposes or large rental
properties, where the building owner or investor sells or
rents the property to tenants for income.
GHG EMISSIONS SCOPE
METRIC / METHODOLOGY
TARGET 2030
Power Generation
(Loan tape, Project Finance, Own
portfolio)
Relative reduction
(SBTi1.5, PCAF, Energy SDA)
-74%
tonCO2eq/MWh
Cement
(Loan tape, Own portfolio)
Relative reduction
(SBTi1.5, PCAF, Cement SDA)
-23%
tonCO2eq/ton cimento
CRE
(Loan tape)
Relative reduction
(SBTi1.5, PCAF, RE SDA)
-68%
tonCO2eq/m²
2.6 novobanco's
Commitments
Based on this integrated vision of the ESG policy and
the pillars for strategic action, novobanco proposes to
review its current commitments and set new targets for
its environmental, social and governance performance
for 2026 and 2030.
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Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
Customer-centric bank
Under this pillar, novobanco intends to continue
strengthening the centrality of the customer in its
operations. To this end, the bank has set itself two
objectives: to increase its green investment ambitions
from a three-year target of €600 million, which has
already been more than achieved, to a total green
investment commitment of €2,000 million by 2026.
In terms of its offer of investment products, novobanco
also commits to integrate more than 60% of products
with ESG characteristics, in accordance with Articles 8
or 9 of the SFDR.
Simple and efficient operations
Under this pillar, novobanco commits to ensuring the
simplicity and efficiency of its operations. In terms of
the environment, this means increasing the target for
reducing its own emissions (scope 1 and 2) from 28% by
2024 to 50% by 2030, compared to the same baseline
year of 2021. To achieve this, the bank also commits to
ensuring that by 2026 all electricity used in its premises
comes from renewable sources.
Development of people and culture
novobanco wants to ensure the development of its most
important asset, its people, by guaranteeing a robust
and inclusive organisational culture. To this end, the
bank is committed to continuing the planned reduction
of the gender pay gap by function (equal pay indicator),
bringing it to below 5% by 2026. In terms of employee
engagement, novobanco aims to achieve a positive
response rate of at least 65%.
Developing sustainable performance
novobanco aims to achieve sustainable performance for
all its stakeholders. To this end, the bank is committed
to reducing the intensity of greenhouse gas emissions
in its main climate-impacting activities, in line with the
objectives of the Paris Agreement. It also intends to
ensure the representation of women in management
positions within the Bank, with the aim of achieving
40% female representation in management positions
by 2026.
novobanco commitments
1
CUSTOMER-CENTRIC
BANK
2
SIMPLE AND
EFFICIENT OPERATIONS
3
DEVELOPING
PEOPLE AND CULTURE
4
DEVELOPING
SUSTAINABLE PERFORMANCE
Green production
Own emissions (Scopes 1 and 2)
Equal pay1
Target 2026
2.000 MEUR by 2026
Target 2030
-50% vs 2021
Target 2024
200 MEUR p/a até 2024
369
Target 2024
-28% vs 2021
-36%
Target 2026
Below 5%
Target 2024
Below 5%
GHG emissions reduction
targets
Target 2030
100% Target by sector2
5,3%
NEW
Produtos de investimento
com características ESG
Renewables share
Employee engagement
Women in management5
Target 2026
60% of invest. products3
Target 2026
100%4
Target 2024
60%
63%
NEW
Target 2026
At least 65%
Target 2024
65%
Target 2026
At least 40%
57%
NEW
Current target achieved
xx%
Performance in 2023
1) Equal pay gap calculated per function.
2) Power generation; Cement; CRE.
3) % of investment products (investment funds, financial insurances, structured notes or deposits) with ESG characteristics/ concerns – Art.8 and 9.
4) Net renewables share of 100% by 2026 (Azores, Madeira, Group facilities and branches with no direct contract need to be addressed).
5) Previously Sr Leadership .
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Sustainability Report
Financial Statements
Annex
2.7 Our Performance
In the past, novobanco presented a social dividend plan
based on 15 indicators, for which it set targets until 2024.
resulting from the new double materiality exercise
carried out this year.
In 2023, as a result of the review of its strategic
priorities, the bank revised and redefined new indicators
and targets for 2026 and 2030, focusing its attention
on 8 indicators that it considers to be the key indicators
for monitoring progress in the strategic areas. However,
novobanco intends to continue to ensure visibility for
its performance in all 15 indicators for which targets for
2024 were set.
The table below shows the Bank's results for these
indicators at the end of 2023, with the indicators aligned
with the priority SDGs, and the strategic alignment
Regarding 2023, we highlight the following facts: (i)
the Bank has already exceeded the green investment
target of €600 million set for 2024 (€713 million at the
end of 2023); (ii) significant improvement in the NPS
indicator compared to 2021 - 17 pts at year-end (annual
average 3.8 pts, as per the dividend); and (iii) the bank
has already exceeded the target for reducing its own
emissions compared to 2021 (-36% compared to an
initially planned reduction target of -28% by 2024).
1
CUSTOMER-CENTRIC
BANK
2
SIMPLE AND
EFFICIENT OPERATIONS
3
DEVELOPING
PEOPLE AND CULTURE
4
DEVELOPING
SUSTAINABLE PERFORMANCE
Support our clients transition
and maximize positive impact
on society and environment
Improve efficiency, enable
own transition, ensure
systems readiness for ESG
Strengthen capabilities,
inclusiveness, diversity and
the engagement of our people
Build a robust ESG governance
& risk management
framework
€713M
€600M
of Green investment
vs 20211
63%
60%
of investment
products with ESG
characteristics2
3,8
10
3
4
in client NPS
indicator vs 20213
partners. to promote
people with disabilities
employment4
Results
Target
-36%
-28%
+11%
-30%
76%
90%
of tCO2 emissions
from own operations
vs 20205
of tonnes of paper
consumption
vs 20216
of suppliers with
sustainability score7
27,3%
30%
94.403
96.861
€0M
€0M
of women in senior
leadership positions13
ESG training hours
to employees
of financing to
excluded sectors14
5,3%
5,0%
47%
40%
57%
65%
+792
9.594
-5%
+3%
in gender
pay gap8
employees benefitting
from social well being
program9
in employee
engagement level vs
202110
growth in hours of
employ. voluntary
service vs 202111
Employ. with
psychosocial risk
assessment as
healthy12
1. Origination of own portfolio financing of or investment in companies primarily engaged in activities eligible to the European Taxonomy, and origination of own
portfolio financing or investment where the funds used by the borrower or projects are directed towards economic activities eligible to the European Taxonomy or
at investments in energy transition or the transition of the company's business model towards green activities; 2. Mutual Funds, Financial Insurance and Structured
Products; 3. Net Promoter Score calculated for Individual Clients - BASEF; 4. Number of organisations with active partnerships with the Bank; 5. Scope 1 and 2
Greenhouse Gas Emissions; 6. Reduction of photocopy paper consumption through the implementation of the Phygital programme in the commercial network (started
in 2019) and the dematerialisation of processes in the central services; 7. Suppliers with a continuous relationship with novobanco and annual turnover of over 10
thousand euros; 8. Gender pay gap weighted by the representativeness of each Function (equal pay); 9. Percentage of employees who attended at least 2 programme
initiatives to promote a balance between personal and professional life, mental and physical health, a healthy style, etc per year.; 10. Assessment of the level of
employee involvement through the Pulse survey (average % of employee involvement); 11. Promotion of voluntary service actions in strategic areas of social impact
of the Bank. Each employee is entitled to 1 day's leave per year for voluntary work; 12. Annual psychosocial risk assessment study of novobanco's employee base; 13.
First-line senior leadership and Executive Board of Directors; 14. Economic sectors not financed by novobanco: Arms, Prostitution, Pornography, Coal (mining and energy
production) and Trade in wildlife and endangered species.
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2.8 Our Partners
SIGNATORY
ASSOCIATE
Corporate citizenship initiative which had
its origin, in 2000, in a proposal by the
then UN Secretary-General, Kofi Annan.
It is based on ten fundamental Principles,
in the areas of human rights, labour
practices, environmental protection and
anti-corruption, and aims to promote
businesses’ public and voluntary
commitment to endorse these principles.
MEMBERS
Non-profit association that brings
together and represents more than 90
leading companies in Portugal, which are
actively committed to the transition to
sustainability.
Organisations for Equality Forum, created
in 2013, comprises 69 organisations
committed to reinforcing and highlighting
their organisational culture of social
responsibility, incorporating, in their
strategies and management models,
the principles of equality between
women and men at work.
Global Compact accelerator programme,
which supports companies in setting
ambitious targets for women's
representation and leadership in senior
management.
The Inclusive Community Forum (ICF) is
a Nova SBE initiative dedicated to the
lives of people with disabilities and the
promotion of a more inclusive community.
Non-profit business association, which
works in the areas of Social Responsibility
and Sustainability. It is part of the
European network of CSR Europe, a
leader in sustainability and corporate
responsibility, supporting industrial sectors
and companies at a global level in the
transformation and search for solutions
for sustainable growth.
Main entity representing the Portuguese
banking sector, it was created in 1984
to strengthen the financial system and
contribute to the development of a more
solid banking sector.
Portuguese Association of Investment and
Pension Funds and Asset Management
Firms, which represents the interests of
Mutual Funds management, Real Estate
Funds management, Pension Funds
Management and Asset Management,
viewing a more efficient defence of
these activities.
The Portuguese Quality Association is a
non-profit organisation, founded in 1969,
that aims to promote and disseminate
theoretical and practical knowledge in the
field of Quality and Excellence in Portugal.
National Customer Satisfaction Index is a
system for measuring the quality of goods
and services available in the national
market, through customer satisfaction
surveys.
Association that promotes a corporate
culture that places the mental health
of employees as a strategic priority for
companies in Portugal, through raising
awareness and training their leaders.
SUBSCRIBER
Document presented by the United
Nations Global Compact, which has as
its main objective to achieve the transition
to a low-carbon economy and to avoid
the overheating of the atmosphere.
Letter of Commitment to Sustainable
Finance in Portugal, which aims to
contribute to the promotion of
sustainable investment practices.
139
3 CUSTOMER
AND SOCIETY
CENTRIC BANK
140
Management ReportSustainability ReportFinancial StatementsAnnex novobanco's day-to-day activities are focused on
responding in an exemplary manner to the needs of its
customers at all moments of their lives, and this purpose
is the first pillar of its strategy.
novobanco is aware that financial institutions play a
key role when addressing their customers’ needs on a
daily basis. And because customers are not all the same,
the Bank takes a differentiated approach that aims to
deliver the best experience and the most appropriate
products and services to each of them, thus reinforcing
the trust they have placed in the Bank. In the current
context, three issues deserved particular attention
from novobanco in 2023: i) supporting customers in
their transition to a low-carbon economy; ii) supporting
customers with high levels of debt; and iii) providing
savings solutions for all types of budgets.
In addition to its role with its customers, novobanco
also actively contributes to the development of the
community in which it operates, through its own
investments or through partnerships with social
economy or environmental organisations.
“Being aware of the environmental and social
impacts of our financial products and services is
one of our commitments. That´s why we evaluate
the business opportunities in line with client´s
expectations”
3.1 Supporting our
Corporate Clients' ESG
Transition and Journey
With the firm resolve of contributing to the promotion
of sustainable investment practices in the country and
accelerating the transition to a carbon-neutral economy
by 2050, novobanco Group offers its clients sustainable
financial solutions that comply with ESG policies
and principles, and its products not only follow
environmental criteria, supporting clients in their
transition to acarbon-neutral economy, but also social
and governance criteria.
3.1.1 Sustainability in our Offer for
Corporate and Commercial clients
novobanco plays a leading role in supporting the
Portuguese economy, with a large market share and
a specialised sectoral and functional offer (for more
information see chapter 3.3 of the Management Report).
Supporting its customers in their energy transition
and sustainability journey is an integral part of this
specialised sectoral and functional approach. To this
end, novobanco has invested heavily in understanding
and assessing the challenges of the climate and energy
transition for Portuguese companies, in order to:
• Enhance and adjust the offer of products and services
to the specific transition or conversion needs of each
company; and
• Identify the potential impact of these challenges on
each company's finances.
“Paying attention to climate change is no longer
just a commitment. We act and reinforce our offer
to be our client´s partner in a low carbon economy.”
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Annual Report 2023 | novobanco In this context, the Bank has bolstered its offer with
environmental criteria aimed at the corporate segment.
SUSTAINABILITY LINE
DECARBONISATION AND THE
CIRCULAR ECONOMY LINE
LINE FOR IMPROVING
TOURISM OFFER
This line aims to support companies in their
energy transition to a low-carbon economy
and/or Taxonomy-eligible companies under
Regulation (EU) 2020/852 of the European
Parliament and of the Council.
Line promoted by Turismo de Portugal, this
line aims to encourage investment in low-
density regions, and its eligibility criteria are
also aligned with ESG objectives, namely
energy efficiency, water management and
accessibility.
This line aims to facilitate access to funding
for the implementation of sustainable
projects. Eligible investments include, among
others: i) modern and efficient equipment;
ii) investment in renewable energy sources
for self-consumption in the production
process or in circular strategies for any stage
of the product/service life cycle; and iii)
implementation of monitoring, control and
action devices that optimise the conditions
of use, energy consumption and raw material
consumption.
€26.7m
€3.2m
€746.2th
1.20% of the total offer
0.03% of the total offer
SME Advisory Services
Green Investment
novobanco also offers its corporate customers an
advisory service to support them in the energy transition
process. To this end, it has established ESG partnerships
with a number of companies specialising in different
areas, such as the diagnosis and calculation of carbon
footprints, the definition of sustainability strategies,
decarbonisation solutions, certification projects,
among others.
“We stand with our clients in their transition to
a more sustainable economy, wich is why we
provide a range of financial products and services
especially aimed at structuring and carrying out
the necessary investments.”
Cumulative green investment since 2021 reached
€713m, surpassing the established target and thus
proving right the strong bet made in this area.
The concept of "Green Investment" is based on
demanding criteria where the purpose of the financing
or the activities involved are checked against the
European Taxonomy. novobanco considers "Green
Investment" (as defined in the Green Financing and
Investment Classification Policy, available at www.
novobanco.pt/sustainability/sustainable-business/
our-approach - and presented in Chapter 6 of this report)
as financing of or investment in companies or projects that:
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Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
• Operate in one or more of the eight sectors of activity
(NACE codes for classification of economic activity)
whose alignment with the European taxonomy is by
default very high due to the characteristics of their
main activity;
• Where the use of proceeds of the specific operation to
be financed or invested in is aligned with the European
Taxonomy objectives (Project Finance operations,
Green or Sustainability Bonds/Loans,
• Commercial Paper and Sustainability-Linked Bonds/
Loans. Where the eligibility of the activity and the
contribution of the financing to the client's energy
transition in accordance with the Taxonomy criteria is
checked;
• Financing of real estate with level A energy certificate
or BREEAM excellent or LEED gold.
Production of Green Financing/Investment in
2023 by sector of activity
(%)
Agriculture,
forestry
Waste
treatment
Others
71
7
Real State
17
32
Transport
and Storage
18
18
Industry
Renewable
energy
Green Investment
(M€)/year
344
369
71
2021
2022
2023
Value for 2022 has been recalculated
Social Sector Financing Line
Within the framework of the social economy,
novobanco, in partnership with Banco Português
de Fomento, also offers a Social Sector Financing
Line designed to support the funding needs of social
economy entities - private social solidarity institutions
or similar non-profit organisations - either as support to
investment or to working capital.
Credit Recovery Strategy
In line with its culture, novobanco fosters and maintains
a close relationship with its corporate clients, being a
partner even in times of greatest difficulty and when
the resolution of possible credit difficulties is necessary.
Recovery solutions and strategies are based on several
indicators, namely customer cooperation, financial
viability, guarantees and sustainability of the solution to
be proposed to the customer, always in strict compliance
with the laws and regulations in force, based on high
ethical standards, cordiality and rigorous analysis of the
financial situation of the companies under management.
143
3.1.2 Business Community
Awareness and Capacity Building
novobanco is an active agent in the ecosystem to which
it belongs, where it puts a particular focus on reviving
the economy and supporting the communities it serves.
In this context, it annually organises and participates in
various initiatives to promote sustainability, including
sectoral and/or regional initiatives, in a joint search for
solutions and strategy that improve social and financial
wellbeing, responsible growth, job creation, people
capacity-building and respect for the environment.
In 2023, in order to strengthen its position as a reference
financial partner for Portuguese SMEs, as well as
a promoter of economic, environmental and social
sustainability, novobanco signed two protocols with the
Nova School of Business and Economics (Nova SBE):
• novobanco Chair in ESG - a chair that will focus on
research and training in the field of finance, with a
strong emphasis on ESG issues, including research
on the impact of sustainable investment on reducing
pollution.
• Founding member of the Voice Leadership Programme
- a programme that aims to modernise and make
Portuguese SMEs more competitive by empowering
their decision-makers. By 2026, this programme will
equip managers and decision-makers from around
5,000 companies with management tools and
routines to improve their competitiveness and future
growth, combining innovative theoretical and practical
management training with personalised mentoring.
This partnership underlines novobanco's commitment
to addressing the challenges facing business, from
sustainability and environmental responsibility to
leadership and innovation.
Two other programmes in the area of sustainability also
deserve a note:
1. "Sustainability for SMEs", a programme launched in
2023 in partnership with the Portuguese Chamber of
Commerce and Industry (CCIP), which aims to raise
awareness among companies about sustainability.
With media partners TSF and Dinheiro Vivo, the
programme began with the broadcast of 9 radio
programmes interviewing experts on various
sustainability topics, and two webinars to support
the transformation of SMEs: "Sustainability for SMEs
- what you really need to know" and "Learn about the
benefits of sustainable finance".
WHAT YOU CAN LEARN ABOUT SUSTAINABILITY ON THE RADIO
1.
Is ESG the same as sustainability?
2. What is energy transition in an SME and what support and funding is available?
3. Can sustainability change the way SMEs interact with banks?
4. What are the main challenges of new working models in SME management?
5. What is greenwashing?
6. Taxonomy! What does it mean? How can you help SMEs to redirect their investments?
7. How can sustainability be leveraged in the company's value chain?
8. What are the easiest ways to reduce your company's CO2 emissions?
9. 9elationship between large companies and SME suppliers
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Management ReportSustainability ReportFinancial StatementsAnnex 1.
2. Second edition of the ESG Talks, a cycle of novobanco
conferences dedicated to sustainability, held with the
strategic partners Nova SBE and PwC Portugal and the
media partners VISÃO and EXAME.
This cycle consisted of four conferences that
addressed the key issues in the ESG universe through
presentations, reflections, panel discussions and other
interventions. All the conferences were attended by
renowned entrepreneurs, political decision-makers
and academics.
ESG Talks 2023 Conference Themes
HOW DOES ESG AFFECT
MY BUSINESS?
CLIMATE CHANGE,
BUSINESS RISK AND
SUSTAINABLE FINANCE
NEW WAYS OF
ORGANISING WORK,
EQUALITY AND INCLUSION
The criteria used to assess
the social, environmental
and governance impact
of companies and how
these affect the business
of SMEs.
The increased risk of
climate change to
companies' businesses
and how this can be
addressed through the
options available for energy
transition.
How to design an equality
and inclusion strategy in
companies, the challenges
of the 4-day week and
whether diversity is good
for business.
CORPORATE
GOVERNANCE,
SUSTAINABILITY AND
GREENWASHING
The importance of a
company's organisational
structure having a robust
governance for professional
business management.
Photos: Marco Borga
Photos: José Carvalho
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Annual Report 2023 | novobanco 3.2 Sustainability
for our Retail Clients
Recognising the need to accelerate efforts to achieve
carbon neutrality by 2050, the Group aims to be close
to its clients, by responding to their financing needs, by
reinforcing its offer of green or transition financing, and
by enabling them to invest with sustainability objectives,
through the provision of investment products and
services with ESG criteria.
NOVOBANCO ECO RESIDENTIAL
MORTGAGE LOANS
Offer with an environmental bias that
allows customers to benefit from a bonus
on the spread when purchasing a property
with an A+, A and B energy certification.
Achieved in 2023:
€51.9m
359 Clients
1.1% of total mortgage loans production in the year
FINANCING
PERSONAL LOANS - HYBRID AND
ELECTRIC VEHICLES
Car loans (new and used) for the
purchase of green mobility vehicles
(plug-in, electric hybrids and non-electric
hybrids), with a 1% bonus under the
Personal Credit Line pricing strategy.
€3.4th
9.9% of total car loans production
RENEWABLE ENERGY LOANS
Offer with an environmental bias that allows customers to
purchase any renewable energy generation product at a more
attractive rate.
18.25 AND 26.31 CARBON NEUTRAL ACCOUNTS
We neutralise CO2 emissions, even those resulting from usage
by our clients of, among others, computers, ATM enquiries,
and cards.
The neutralisation of these accounts is equivalent to:
• CO₂ emissions resulting from 2549 round-trip journeys by
medium-sized car, from Lisbon to Porto.
• CO₂ emissions equivalent to the consumption of 683 barrels
of oil;
• Enough gas to fill 59 hot air balloons;
• CO₂ emissions resulting from the average electricity
consumption of 457 Portuguese families
The first fully carbon neutral bank account in Portugal - (e)
mission neutral certified®. Adapted to the needs of young
people and designed to have a lower environmental impact,
these accounts have low carbon emissions because they are
online and because their emissions are neutralised, according to
the PAS 2050:2008 methodology, which analyses the life cycle
of products and services. The emissions that cannot be avoided
are neutralised through the support provided to Tamil Nadu,
a project to install a photovoltaic solar farm to replace energy
produced by coal-fired power stations. This project not only
reduces carbon emissions, but also brings social and economic
benefits to local communities, creating 285 jobs for people in
villages near the solar farm.
167.6 thousand novobanco accounts – €256.5m
12% of total service accounts of individuals and small
businesses with in novobanco
4.3 thousand accounts novobanco do Açores – €5.9m
16% % of total service accounts of individuals and small
businesses with in novobanco dos Açores.
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Advisory Service
The advisory model offered by novobanco to its
individual clients has been enriched with the new ESG
and sustainability dimensions, based on the revised
asset selection model, including, in addition to ESG
risk analysis, an analysis of the investment exclusions
or safeguards of each fund. These new attributes are
therefore taken into account when researching the most
appropriate financial products for each client, in order
to meet the preferences expressed in the Sustainability
Preferences Questionnaire.
In the current state of the industry, it is already
possible to find investment funds with ESG features
or sustainability objectives. Therefore, customers
who express their preferences in terms of standards
to classify financial products that have sustainability
objectives or promote environmental or social
characteristics (SFDR), will always find a proposal from
novobanco that suits such preferences.
ECO or ESG Structured Products
The novobanco Group has continued to market ESG and
ECO structured products to its clients. These product's
remuneration is linked to the share performance of
companies that stand out for their ability to lead social
and governance change subject to environmental and
social criteria, or to financial assets that aggregate
shares of companies with the same characteristics
(e.g. ETFs, indices, etc.).
The criteria for the selection of the assets to be included
in these products are subject to a valuation model based
on quantitative and qualitative data. The analysis is
based on publicly available information, combined with
the company's strategy and its inclusion in ESG indices.
PERFORMANCE 2023 – novobanco
PERFORMANCE 2023 – novobanco dos Açores
€12.9m subscribed in 2023 in ESG/ ECO products, out of a
cumulative total of €45.5m on customers’ portfolios at the
end of 2023.
€411th invested in 2023 in ESG/ ECO products, out of a
cumulative total of €1m on customers’ portfolios at the
end of 2023.
20% of the total portfolio of structured products
61% of the total portfolio of structured products
147
Annual Report 2023 | novobanco ESG Funds
In 2023 the Group offered more than 1.500 ESG funds
with investment made by its clients. In line with the
European Sustainable Finance Directive, the Group
classifies these funds into two categories:
• Article 9 SFDR (Sustainable Finance Disclosure
Regulation) - funds whose objective is sustainable
investment with environmental, social and governance
considerations.
• Article 8 SFRD (Sustainable Finance Disclosure
Regulation) - funds that invest in companies with
environmental, social and governance considerations;
In 2023, clients' investments in these funds had the
following performance:
PERFORMANCE 2023
ARTICLE 8
ARTICLE 9
novobanco
77 funds with an investment of €431.4m
5 funds with an investment of €10.4m
36% of the total portfolio of distributed funds
1% of the total portfolio of distributed funds
BANCO BEST
1375 funds with an investment of €351.2m
91 funds with an investment of €18.1m
60% of the total portfolio of distributed funds
3% of the total portfolio of distributed funds
43 ETF with an investment of €2.9m
3 ETF with an investment of €20th
novobanco dos AÇORES
1 fund with an investment of €52.9th
-
4% of the total portfolio of distributed funds
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The adaptation of products to the needs of customers
also involves the integration of social concerns.
novobanco adjusts its products to the new realities of
customers, focusing on savings, which are tailored to
each family's budget.
Micro Saving
Based on this positioning, the Bank offers a package of
Micro Saving solutions comprising three products:
SAVINGS
DESCRIPTION
PERFORMANCE 2023
PLANNED SAVING
MICRO SAVING
novobanco APP
TARGETED SAVINGS
BEST BANK APP
TARGETED SAVINGS
Permits to build up savings from as low as 10 euros per
month through the subscription of a monthly plan in which
the clients set the amount and the time of month of
deposits, thus adjusting savings to the family budget.
€91.4m
in savings 19.9 thousand
subscribing clients
Allows any client to start saving money by small amounts
through the rounding up of debits of day-to-day expenses
(such as residential mortgage loan instalments or personal
loan repayments, insurance premiums, or direct debits),
which are transferred to a saving account.
€7.3m
39.0 thousand subscriber
clients
Exclusive products for clients who have installed the
novobanco or Banco Best apps: once the client has defined
his/her saving objectives (how much and for how long he/
she wants to save) the app traces the path to reach this
objective.
€33.0m
24.0 thousand subscriber
clients
€286.5th
186 clients
In 2023, the micro-savings of novobanco's clients totalled €131.6m.
149
Annual Report 2023 | novobanco MINIMUM BANKING SERVICES ACCOUNT
This account provides a wider coverage of financial services
provision and therefore wider social inclusion. It gives clients a
current account and a debit card and the possibility to use the
account through ATMs in the European Union, direct channels
and the Bank's branches.
Its annual maintenance fee cannot exceed the equivalent of
1% of the social support reference rate at any given time. This
product is designed for:
• Individuals who hold no other current account in any other
institution, or who hold only one current account which is
converted into a minimum banking services account.
• Individuals who hold other current accounts, but wish to
open a minimum banking services account where one of the
holders is over 65 years old or is dependent on others.
novobanco held 13,500 Minimum Banking Services Accounts.
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Management ReportSustainability ReportFinancial StatementsAnnex Support to Families
Re-PVC (recycled PVC) cards
In 2023, novobanco began to gradually replace all
traditional PVC bank cards with re-PVC cards, which
are made from recycled plastic from regionally collected
industrial waste.
Recycled PVC (re-PVC) cards contribute to the
conservation of natural resources, as they avoid the
production of new PVC and reduce the amount of PVC
deposited in landfills.
With this initiative, novobanco avoided the production
of more than 880,000 plastic cards in 2023, or 4.4
tonnes of traditional PVC.
For a future with less environmental impact, novobanco
continued to recycle its expired bank cards for future
use in the manufacture of street furniture. In 2023, 1.7
tonnes of credit and debit cards were sent for recycling
and reused in the production of street furniture, thus
promoting the circular economy.
More information about recycling in chapter 4
of this Report.
In a year marked by a sharp rise in interest rates, the
number of customers in financial difficulty and at risk
of defaulting on their loan agreements increased.
For novobanco, supporting its clients also means
developing measures to prevent and regularise
situations of late payment on loans and designing an
action plan for the risk of default, focusing on finding,
together with the clients, the most appropriate solutions
for these situations.
In order to regularise default situations, customers are
offered a range of options, both short and medium term,
which include different strategies and approaches, from
the implementation of payment agreements to the
renegotiation of debts.
From the first warning signs of financial difficulties,
customers can use the Bank's face-to-face, digital and
telephone channels to clarify their doubts and ask for
the Bank's help.
Customers with loans at risk of defaulting or who are in
arrears with their instalments can also obtain additional
information on the rules applying to defaults on loan
agreements at the bank's customer portal (http://
clientebancario.bportugal.pt), at the "Todos Contam"
portal (www.todoscontam.pt), as well as free advice
and monitoring from RACE (www.consumidor.gov.pt).
novobanco also maintains a communication channel
with the Portuguese Association for the Defence
of Consumers (Associação Portuguesa de Defesa
do Consumidores - DECO) to receive requests for
assistance from the bank's customers.
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Annual Report 2023 | novobanco 3.3 Asset Management
Responsible investment recognises the importance
of environmental, social and governance factors for
investment success and long-term stability. Under this
premise, the novobanco Group offers ESG investment
funds not only through GNBGA but also through
entities outside the Group, which are diversified both
geographically and in terms of investment strategies.
Through GNBGA, the Group offers three funds with
ESG criteria. These funds promote sustainability
characteristics and are classified under article 8
of the SFDR regulation.
Considering the scope and growing importance that
the market as a whole, i.e., clients, banks, management
companies and regulators, afford to the issue of
sustainability, GNB Gestão de Ativos intends to
continue expanding its range of products that promote
sustainability criteria in 2024.
NOVOBANCO SUSTAINABLE
MOMENTUM FUND
OPEN PENSION FUND
MULTIREFORMA
PPR PENSION FUNDE VINTAGE
SUSTAINABLE
With a diversified portfolio of assets
of companies that adopt the best
practices in terms of ESG criteria, the
fund aims at consistent long-term value
increase based on the three pillars of
Sustainability. At least 75% of the fund's
direct investment component must be
invested in companies with an Eikon
ESG rating above 50 points (rating B-
or higher) and the Fund may not invest
directly in companies with an Eikon
ESG rating below 10 points. The Fund
will invest at least 85% of its net asset
value in shares and other securities
convertible into shares or giving the
right to subscribe shares.
With a diversified portfolio of assets
of companies that adopt the best
practices in terms of ESG criteria, the
fund aims at consistent long-term value
increase based on the three pillars of
Sustainability. At least 75% of the fund's
direct investment component must be
invested in companies with an Eikon ESG
rating above 50 points (rating B-
or higher) and the Fund may not invest
directly in companies with an Eikon ESG
rating below 10 points. The Fund will
invest more than 75% of its assets in
shares of companies listed on regulated
markets and in equities collective
investment undertakings (including
ETFs), with a benchmark (direct or
indirect) investment allocation of
100% in equities.
With a diversified portfolio of assets
of companies that adopt the best
practices in terms of ESG criteria, the
fund aims at consistent long-term value
increase based on the three pillars of
Sustainability. At least 75% of the fund's
direct investment component must be
invested in companies with an Eikon
ESG rating above 50 points (rating B-
or higher) and the Fund may not invest
directly in companies with an Eikon ESG
rating below 10 points. The Fund may
invest a maximum of 15% of its assets in
shares of companies listed on regulated
markets, with a benchmark of 7.5%,
and a minimum of 50% of its assets in
bonds, with a benchmark of 55% for
fixed-rate bonds and 37.5% for
variable-rate bonds.
The Fund's assets are worth €160.5m.
The Fund represented 21.9% of all the
Securities Funds domiciled in Portugal
managed by GNB Gestão de Ativos.
At year-end the Fund's assets were
worth €15.0m.
At year-end the Fund's assets were
worth €59.4m.
The Fund represented 3.7% of all the
Open-end Pension Funds managed by
GNB Gestão de Ativos.
The Fund represented 14.5% of all the
Open-end Pension Funds managed by
GNB Gestão de Ativos Portugal.
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Management ReportSustainability ReportFinancial StatementsAnnex 3.4 The Customer's Voice
To deliver the best experience to its clients, the Voice
of the Customer Diagnostic model is based on several
pillars that aim to bring the voice of the customer into
the organisation, enabling a better understanding
of customer needs and satisfaction throughout the
customer lifecycle and identifying opportunities for
improvement.
Voice of the Client (VoC) Diagnostic Model
The information obtained through this consultation and
monitoring model is shared with the Group's commercial
structures and with the central areas, enabling a set of
actions to be taken to improve the clients’ experience
of the Group in its various dimensions and to design
an adequate offer of products and services.
SERVICE QUALITY
EXTERNAL SURVEYS
Experience monitoring surveys of customers with
the service provided in all commercial structures
of the bank and all the segments.
In 2023 we will start installing feedback from
customers 24 hours after visiting a branch.
Benchmark NPS* monthly monitoring of private
customers (BASEF Banca and CSI developed by
Marktest) and from clients company (Financial
Services Barometer developed by DATA E).
MOMENTS OF TRUTH
RELATIONAL STUDY
Continuous monitoring of customer experience,
immediately following key moments in the
banking relationship, aiming to identify
opportunities for improvement that meet
customer expectations and needs
Survey carried out with all private clients with the
aim of measuring their loyalty based on all the
experiences lived throughout its life cycle.
The results identified key drivers of satisfaction
and their root causes, enabling prioritized
improvement actions.
DIGITAL CHANNELS
Study of customer satisfaction with digital
channels across various dimensions (available
features, ease of use, security, and visual appeal)
and a comparison with competitors. In 2023 the
bank implemented real-time customer feedback
collection on its digital channels and website.
QUALITY INDICATOR
Quality Indicator for commercial areas which
reflects the quality of service and other elements
that impact the customer experience.
MYSTERY CLIENT
Customized program with the aim of identify
service weaknesses and need for training.
Performed annually depending on the critical
themes and needs of the time.
AD HOC SURVEYS
Specific studies using different methodologies,
depending on the themes critics of the moment.
IMPROVEMENT
Sharing the information resulting from the VoC Model with the bank's commercial structures and improvement teams, allowing
trigger a set of actions that aim to improve customers’ experience with the bank in its various aspects.
* NPS (Net Promoter Score) - Loyalty metric, based on the probability of the customer recommending the bank to friends and family/business partners based on the
experiences they have had during their customer lifecycle.
153
Annual Report 2023 | novobanco The bank collected approximately 62,900 satisfaction
questionnaire responses from individual and corporate
clients in 2023, representing a 19% increase compared
to 2022.
One of the main pillars of the bank strategic positioning
is to be a bank that focuses on its customers and their
needs, constantly seeking to understand their needs
at the different stages of their lives, actively listening
to what they have to say through the various channels
available, and thus continuing to offer a range of
products and services that best meet their expectations.
To this end, the Bank created the Customer Experience
and Satisfaction Office, which represents the voice of
the customer inside the novobanco Group and ensures
the strategic alignment of the entire organisation
to design the best service experience and customer
satisfaction for the profitable growth of the business.
The individual clients segment continues on its path
of innovation, progressively developing and promoting
the omni-channel capabilities of its Contact Hub, largely
based on digital transformation, whereby it seeks to
provide customers with maximum convenience, in
a context of trust and relationship, whenever this is
relevant.
Retail Clients
Around 59.2 questionnaires were returned in 2023
in the retail clients segment. Approximately 85.2%
of novobanco's clients and 93.1% of novobanco dos
Açores’ clients are very satisfied with the quality of the
service provided, up by 2.2 p.p. and 1.6 p.p., respectively,
on the 2022 results.
In 2023 novobanco also collected the opinion of more
than 5.3 thousand clients about their experience in the
main moments of truth in their relationship with the
bank, namely account opening, mortgage loans, and
personal loans.
Always taking into account i) the adequacy of products
and services to customer needs, which is a direct result
of the consultation process carried out on a regular basis,
ii) new market trends, and iii) regulatory requirements,
the novobanco Group has been reshaping its offer
in order to strengthen it and increasingly respond to
environmental, social and ethical considerations. The Net
Promoter Score (an index that calculates the intention
to recommend the Bank) stood at 17 points in December
2023 (average of the last 4 months), an improvement of
17 points compared to the last 4 months of 2022*.
This improvement follows a year of frankly positive
financial results, recognised by the market not only in
terms of the significant improvement in novobanco's
credit rating, but also through the "Bank of the Year
in Portugal" award from The Banker, a prestigious
publication of the Financial Times Group. This award
recognises novobanco's unparalleled commitment to
its customers, consistently anticipating their needs and
providing innovative, efficient and transparent banking
products and services, based on high standards
of ethics and integrity.
The Net Promoter Score in Corporate segment stands at 45 points in 2023,
an improvement of 7 points on 2022*.
Very Satisfied Clients I Retail Banking
(%)
novobanco dos Açores
novobanco
92.5
87.0
90.9
84.8
93.1
85.2
2021
2022
2023
Moments of truth I satisfaction
with the process
(%)
2021
92.7
93.1
86.8
81.0
79.5
83.6
2021
2023
92.2
92.8
92.9
Account openning
Mortage Loans
Personal Loans
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Management ReportSustainability ReportFinancial StatementsAnnex Corporate Clients
Creating a value proposition for the Corporate segment
that is innovative, competitive and profitable, and
bolsters novobanco's role as the reference bank for
companies in Portugal, remains one of the Group's
key priorities, and the customers’ voice gives a crucial
contribution to attaining this goal.
In 2023, corporate banking collected approximately
1.7 thousand replies to customer service satisfaction
surveys. The results show that 92.6% of medium-sized
corporate clients and 87.1% of large corporate clients are
very satisfied with the service, representing increases
of 7.3 p.p. for Medium-Sized Companies and 4.5 p.p.
for Large Companies compared to 2022.
Very satisfied clients I Companies
(%)
Large companies
SMEs
89.9
84.4
87.7 88.9
92.2
92.6
2021
2022
2023
Channels for submitting complaints
The Net Promoter Score in Corporate segment stands at 45
points in 2023, an improvement of 7 points on 2022*.
The segment's frankly positive evolution shows that the
bank's actions are aligned with its needs.
Customer experience is at the centre of our
omni-channel banking strategy. We place great
emphasis on continuously improving our customer
satisfaction framework, bringing the Voice of
the Customer into the organisation. Through this
continuous system of learning and improving our
customers' journeys, we aim to stand among the
market leaders in both CSAT (% of very satisfied
customers) and relational NPS.
In this consultation process, customers have several
channels available to submit their complaints, which
the Bank endeavours to solve upon the customer's
first contact. A frank and continuous contact with this
group of stakeholders requires fast and efficient replies
to their comments or complaints, and helps maintain
and develop a relationship of trust. At novobanco and
novobanco dos Açores, the complaints index in 2023
was 0.38 and 0.15 per thousand active customers,
respectively, in line with these figures in 2022.
* Source: BASEF Banca 2023 / Marktest. Period from September to December
2023 versus September to December 2022 for companies with a turnover
greater than 5 M euros
Online
Direct line
Branches and
Corporate Centers
E-mail
Online forms
By letter
155
Annual Report 2023 | novobanco 3.5 Wellbeing, Inclusion and Financial Security
Ensuring the development of financial skills and
contributing to a generation of informed consumers with
greater capacity for analysis and decision-making, as
well as providing access to financial services in a safe and
simple way, are the premises on which the Bank bases its
operations.
With a focus on the wellbeing of the population and the
stability of the financial system, the Bank's performance
is thus based on three pillars:
SECURITY
Protecting customers and fighting
cybercrime
ACCESSIBILITY
Making the banking system simpler and
more accessible
FINANCIAL AND DIGITAL LITERACY
Increasing financial and digital
knowledge
Security
Digital banking has enabled greater and faster access
to financial services and products. The bank's customers
are increasingly using the novobanco website and app
for their financial transactions, which translates into
1.5 M access per day. To manage its customers' daily
financial life, novobanco ensures that the bank is always
available, convenient and secure. To this end, it provides
both its customers and its employees with a wide range
of tools and information to make online banking safe
and secure at all times.
This accessibility requires a high level of information
security, which is why the Group operates in accordance
with best market practices and in compliance with legal
and regulatory requirements to ensure privacy and the
correct processing of personal data. To this end, it has
developed a set of internal procedures and regulations,
as well as a detailed Privacy Policy on the processing of
personal data, which is available on its website, in order
to guarantee the confidentiality, integrity and availability
of information.
Information security means confidentiality, integrity,
availability and authenticity.
WE ARE ALWAYS VIGILANT
WE USE STATE-OF-THE-ART
TECHNOLOGY
WE HAVE DOUBLE SECURITY AND
DISPOSABLE CODES
24 hours a day to monitor all
transactions and identify suspicious
activity.
We use SHA256RSA SSL technology to
encrypt information/communications.
Online banking and credit card
transactions have exclusive guarantees
to protect you from fraud, giving you
peace of mind.
156
Management ReportSustainability ReportFinancial StatementsAnnex Accessibility
Accessibility, or the lack of it, is perhaps one of the main
factors leading to social and financial exclusion. In order
to be always present, the Bank has taken every step to
ensure that its customers can access financial services
when digital is not an option.
To this end, and for those who find it more difficult to get
around, as part of its social welfare programme and with
the aim of developing a set of practices aimed at building
a more inclusive society, the Bank has restructured the
branches of its New Distribution Model (NDM) network
and equipped them with ramps and stair lifts wherever
possible. The majority of the NDM's branch network
is accessible to people with reduced mobility.
To ensure financial inclusion and accessibility to financial
services for all its customers, the bank has 299 branches,
51 of which are located in sparsely populated areas
“Preventing, detecting, and responding to new
cyber threats are the goals that underlie the
increased attention and strengthening of our
technical controls.”
Financial and Digital Literacy
In order to respond to the rapid digitalisation of society
and the need to develop financial literacy, novobanco's
priority is not only to guarantee a complete and
innovative offer of digital financial services, but also
to promote and educate for the correct use of these
channels in everyday financial management.
With a particular focus on customers and the people
who use digital channels to interact with financial
services on a daily basis, novobanco continued its
financial education programme based on two pillars:
Digital Literacy and Savings and Personal Finance.
The aim of novobanco is not only to promote greater
financial stability, but also to make the financial system
simpler and easier to understand.
“We help make the banking system more
accessible. Online financial transactions are simple,
safe and easy.”
DIGITAL LITERACY
DIGITAL WELLBEING
FINANCIAL LITERACY
WELLBEING BASED ON FINANCIAL HEALTH
Digital security is one of our priorities, and to improve the digital
skills of people using financial services on a daily basis, we
developed a digital literacy programme with the Portuguese
Banking Association (APB) and its members. This programme
enabled 600 participants to acquire basic digital skills from
a user perspective, contributing to the safe use of digital
channels. At the same time, we share basic rules for the safe
use of our digital channels.
Balancing and planning your personal finances depends not
only on your income and savings, but also on how you organise
your personal budget. To help customers make informed key
decisions for the present and the future, we have prepared a
series of tips and simplified financial concepts to make it easier
to manage personal finances.
157
Annual Report 2023 | novobanco With the aim of improving people's digital literacy, the
Bank joined the Financial Education Project - Digital
Literacy Programme of the Portuguese Banking
Association (APB).
"All you need to know about online banking".
With this programme, the Bank aims to:
• Develop a set of basic digital skills from a user
perspective
• Raise awareness to the importance of adopting more
informed and safer financial behaviours
• Help train the target audience to use digital channels
• Promote higher levels of Digital and Financial Literacy
in Portugal
In 2023, the Bank once again joined forces with the
Portuguese Banking Association (APB), this time with
the financial education project "O Banco da Minha
Escola" (At my School Bench), which aims to create
more informed generations capable of making informed
decisions in the future. This initiative, which includes
members of the APB, involves schools from the north
to the south of the country and is aimed at students in
the 3rd cycle and secondary education schools during
the 2023/2024 school year. It is estimated that the APB
and the employees of its 14 member banks will organise
around 200 sessions in more than 50 schools, reaching
more than 3,800 students.
novobanco employees organise financial education
sessions at the General Serpa Pinto Primary School in
Cinfães, the Padre José Augusto da Fonseca School
Group in Aguiar da Beira and the Miramar School in Mafra.
TOPICS COVERED IN THE SESSIONS
1st term
Planning and Managing the Family Budget
Understanding what income and expenditure are, how
to make a budget and how to manage a budget balance.
2nd Term
Financial System - Banking Products and Services
Gaining a deeper understanding of how the financial
system works and learning about some basic banking
products such as loans, deposits, payments and insurance.
3rd Term
Online Security
Identifying the different types of online fraud and adopting
the most appropriate and safe behaviours to prevent them.
Braille Vision
Also in the context of integration, novobanco supports
Visão Braille, published under a non-profit social
responsibility and solidarity project and distributed
free of charge by the TIN (Trust In News) Group. Issued
monthly and containing a selection of articles, this
magazine provides access to information for blind people
who, despite all the technological innovations that have
facilitated access to information, still prefer paper.
158
Management ReportSustainability ReportFinancial StatementsAnnex 3.6 Social Welfare
3.6.1 Diversity, Equity
and Inclusion
To be integrated into society is to be part of it and to
work towards developing initiatives that contribute to
overcoming social, emotional, and cultural deficiencies,
regardless of their cause. novobanco's contribution
to the social wellbeing of the community in which it
operates, aiming to reduce inequalities and respond to
new opportunities for progress, is an integral part of the
challenge undertaken by the bank in its corporate social
responsibility strategy.
In line with its sustainable approach aimed at supporting
the creation of solutions for important issues in the
community where it operates, in 2023 the novobanco
Group donated 475 thousand euros to various
organisations, broken down as follows:
Supporting organisations working in areas such as
the promotion of diversity, equality and inclusion
(DEI), combating poverty and social exclusion, among
others, is the aim of novobanco's positive social impact
programme. This approach is developed through various
actions and initiatives, often involving the bank's
employees.
Bank Accounts
The first edition of “Contas com Gestos que Contam”
("Accounts with Gestures that Count”) ended in 2022.
These service accounts of novobanco and novobanco
dos Açores were associated with social responsibility
causes of a social, cultural or environmental nature. In
2023, this initiative was continued with the campaign
"For everyone, sustainability is our cause", in which
the package accounts (100% and Conta 360º) are
associated with a cause from the Bank’s corporate
social responsibility programme, following on from
two projects already supported in 2021/2022.
Donations by area
(%)
Trainning
17
Social
wellbeing
30
32
Human
Relief
Environment
4
17
Arts &
Culture
Donation by motivation
(%)
Charitable
gift
43
Commercial
Initiative
22
35
Community
Investment
159
Annual Report 2023 | novobanco BECAUSE OF EVERYONE, SUSTAINABILITY IS OUR CAUSE
SEMEAR ACADEMY
WHAT CAN AN IMAGE TELL US
ECOETHICS PROJECT
Together with SEMEAR Academy, we
support the training and professional
integration of 14 young people with
intellectual and developmental
disabilities and in socio-economic need,
who otherwise would not be able to
afford the tuition fees of the social
integration programme.
Together with MEF (Photographic
Expression Movement), we support
and accompany the lives of 60 young
people in 3 educational centres during
their school career. The "What can
an image tell us” Project aims to
demonstrate the impact that the
analysis of photo and video images can
have on the development of young
people's personalities, in a context of
imprisonment.
Together with AMI, we support the
Ecoethics project, which aims to
rehabilitate and replant areas severely
affected by forest fires, in particular in
the Leiria pine forest. novobanco joined
this project with a donation for the
planting of 5,000 trees, with the help
of customers and employees.
Leaders Gang Project
As a partner of Mentes Empreendedoras
(Entrepreneurial Minds), the bank supports the Leaders
Gang project, which aims to develop essential life skills in
young adults and provides real moments of training and
inspiration.
The 2023 pilot, supported by novobanco, involved 100
young people, of whom 65% were women and 18%
came from rural and sometimes disadvantaged social
and economic backgrounds. The participants organised
and led three workshops for secondary school students
in 43 municipalities and met seven inspiring leaders,
including Catarina Furtado, Admiral Gouveia e Melo,
Carlos Moreira da Silva and others.
They also took part in a Bootcamp involving formative
and inspiring experiences. In addition, they visited
novobanco, where they had the opportunity to learn
about the professional development of one of its
executive directors and several managers, as well as to
ask questions and share their visions, ideas and fears.
The programme ended with a visit to the European
Parliament, where they were welcomed by five
Portuguese MEPs.
LEADERS GANG
Participants testimonials
The project is a talent and skills accelerator, aiming to celebrate
and promote the social mobility of young people who have
excelled throughout secondary school.
"The programme has shown me that I can achieve all my goals...
"It has made me more confident when speaking in public and
dealing with an audience. These are skills that will help me in my
professional future".
"I have learned to listen and understand other ways of thinking."
"I realised that I had to step out of my comfort zone. It gave me
the push to venture out."
160
Management ReportSustainability ReportFinancial StatementsAnnex APCEF Associação para a Educação,
Cultura e Formação
Associação Cais – Reflex
Photography Award
The partnership established with APCEF (Association for
Education, Culture, and Training) supports the awarding
of scholarships to children from the S. José de Beja
School in Beja and the Laura Vicuña School in Vendas
Novas, both areas of low population density and low
income, who would otherwise not be able to continue
their education.
In 2023, through the 16th edition of the REFLEX - CAIS
| novobanco Photography Award, novobanco continued
its long-standing partnership with Associação CAIS,
an association that promotes the social integration of
people experiencing poverty and/or social exclusion,
through capacity-building methodologies to facilitate
their approach to or return to the labour market.
This year's theme, "Water, the source of life", aims
to spotlight the importance of this natural resource
and to raise awareness to it, namely among the new
generations. The aim is to use photography to help bring
about a significant change in behaviours, particularly
among political decision-makers, economic operators
and civil society in general, and to raise citizens'
awareness to the important challenge of preserving
this resource. This year's edition saw a doubling in the
number of participants, reflecting the growing concern
for the environment, especially regarding water. In an
initiative that aims to awaken consciences and have a
positive impact on society, creativity, art and culture are
the main tools of this project, which aims to highlight
the value of photography as an artistic expression of
excellence in Portugal and to raise awareness through
images linked to socially relevant issues.
Humanitarian Relief
The earthquakes in Turkey, Syria and Morocco, and the
floods in Libya, which have left millions homeless and
displaced and claimed many victims, once again brought
humanitarian aid to the fore. The Bank could not remain
indifferent to these events and made donations to the
organisations helping the victims: the Unicef Emergency
Fund, the Red Cross, AMI and Care.
Quality of Life Action
As a patron of the Salvador Association, an IPSS working
in the field of motor disabilities, the bank once again
joined the project to promote the social inclusion of
people with motor disabilities. The Bank focused its
support on the training and employment category,
reinforcing its work in the area of diversity, equality and
inclusion. The 16th edition, with a budget of 130,000
euros, supported 28 people with reduced mobility.
Christmas Action 2023 - This year we
chose Acreditar
Christmas celebrations at the novobanco Group begin
with the usual selection of a solidarity initiative by its
employees. This year's chosen cause was Acreditar's
new home in Lisbon, which has just been expanded from
12 to 32 rooms, thus tripling the number of families that
it can accommodate free of charge. These families come
from far away with their children for cancer treatment in
Lisbon. Donations from staff and the Bank have made
it possible to purchase more equipment than originally
planned. This year, for the first time, the Christmas
campaign had an external aspect: the bank's followers
on social media were able to contribute through their
reactions. For every "like", the Bank donated €1. This
was another action in favour of equal opportunities
and inclusion.
161
Annual Report 2023 | novobanco 3.7 Cultural Patronage
novobanco Cultura brings together, under a single
concept, all its Collections and its mission reflects a
commitment to preserving, promoting and sharing
our relevant cultural and artistic heritage. This
facilitates access to the diverse collections for artistic
communities, students, researchers, and the general
public, both domestically and internationally.
novobanco Photography Collection
Numismatics Collection
The collection comprises around 1,000 works by over
300 artists from 38 countries, encompassing renowned
figures from both the national and international art
scene. Recognized as one of the world's most significant
photography collections, it is also highly awarded and
stands out prominently within the global art landscape,
ranking among the top 80 corporate collections
worldwide.
One of the largest and most complete numismatic
collections in Portugal. Comprising approximately 13
thousand coins, all minted in territory that is or was
Portuguese, from the period before Portugal was a
nation up to the establishment of the Republic, the
collection traces, through money, our development
as a people, culture and nation over a period of more
than 2,000 years.
The collection's works are frequently featured in
national and international exhibitions. Notably, in 2023,
the "Horizonte Y Limite. Visions of Paisaje" exhibition
in Spain showcased contemporary photography from
novobanco, furthering its international promotion.
novobanco Paintings Collection
Made up of Portuguese and European paintings from
the 16th to the 20th centuries, 100 works from this
collection are on permanent display in 39 museums
across the country, representing important moments
in the history of European art over six centuries.
Library of Humanistic Studies
It contains approximately 1,100 Old Books, including
8 incunabula, 90 works printed by the humanist Aldo
Manuzio and his successors, and 600 titles printed in the
16th century. The remaining bibliography of about 8,600
titles serves as support to the study of the classical
texts and their themes. The library is on deposit at the
Faculty of Humanities of the Lisbon University (FLUL).
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Management ReportSustainability ReportFinancial StatementsAnnex (This page was left in blank intentionally)
163
Annual Report 2023 | novobanco 4 SIMPLE
AND EFFICIENT
OPERATIONS
One of novobanco's strategic pillars is the aim of ensuring
simple and efficient operations for its clients, providing
a better banking experience and ensuring ever greater
sustainability in its environmental and social footprint.
The bank intends to continue strengthening these
objectives, having set new, even more ambitious targets
for reducing emissions and adopting renewable energy
solutions in all locations where they are available.
To this end, as already mentioned, the bank has made
several commitments in the past, such as to significantly
reduce its own emissions by 2024 (-28% vs 2021),
a target which has already been exceeded (-36%
emissions in 2023 vs 2021).
164
Management ReportSustainability ReportFinancial StatementsAnnex 4.1 Environmental Footprint
Climate change is one of the greatest challenges of our
time, giving rise to a huge variety of potential risks, such
as floods, forest fires, storms and other extreme events.
In this context, the Bank gives prime focus in all its
activity to the minimisation of its environmental impact,
structuring its climate pathway around 3 axes:
REDUCTION OF INDIRECT IMPACT
ON THE ENVIRONMENT
REDUCTION OF DIRECT IMPACT ON
THE ENVIRONMENT
AWARENESS-RAISING AND
TRAINING FOR EMPLOYEES
Resulting from financing granted and
investments made:
Resulting from its own operations within
the scope of its activity:
• Financing to Companies
• Financing to Individuals Staff
Investment Products with
•
environmental criteria
• Other
• CO2 emissions
• Electricity Consumption
• Paper Consumption
• Water Consumption
• Other resources
• Consumption of resources at work.
• ESG training to support the clients in
their journey towards sustainability
The National Roadmap for Carbon Neutrality and
compliance with the Paris objectives call for a profound
transformation of business models.
The novobanco Group's operations directly impact
the environment. For this reason, one of the strategic
concerns of its environmental management is to find
solutions that allow an adequate and rational use of the
resources required to develop its activity.
The pandemic showed that it is possible to carry on
the business while reducing the consumption of some
resources. Hence, although the return of the employees
to the premises after two years in home office may
increase consumption, the Group has prepared this
return by creating scenarios focused on strengthening
dematerialisation initiatives at the business level and in
terms of raising employee awareness, thus seeking to
maintain or reduce consumption, mainly of paper and
electricity.
165
Annual Report 2023 | novobanco Paper
Despite the dematerialisation of a significant part of
the business processes and the adoption of the digital
signature to formalise acts in the commercial network,
which contributed to further a "paperless" culture and
environment, there was a significant increase in the
consumption of paper in 2023, of +16.6%, or 24.6 tonnes
more than in 2022.
The novobanco Group carried out a detailed analysis
to understand the causes of this significant increase in
consumption and to reverse the negative trend observed
in 2023:
• A significant increase in commercial and operational
activity
- Strong growth in the opening of new accounts and
saving products: despite the fact that the process
is already fairly digitalised, there are still cases
that require it and clients who prefer to sign paper
documents (more common among older clients);
- A sharp increase in the formalisation of credit
operations, both for retail and corporate clients.
- Requests for instalment support: the increase in
requests for instalment support resulted in more
documents being printed to respond to these requests;
- Paper-consuming execution of deeds at the
branches.
• Return of employees to face-to-face work
- In the central services the impact is significant,
with face-to-face work having increased by 25.8 p.p.
compared to 2022.
novobanco has already launched a new campaign
to raise awareness to the need to reduce paper
consumption, recalling behaviours and habits that
help achieve this goal, and will continue to invest in
programmes to dematerialise internal processes, and
in the digitalisation and phygitalisation of customer
relations, giving priority, whenever possible and
appropriate to customer preferences, to formalising
documents by digital means.
Paper consumption
(ton)
155.2
148.2
172.8
• New regulatory requirements
2021
2022
2023
- Change in spacing and font size in documents for
delivery to individual clients, resulting in an increase in
the number of printed sheets (Law No. 32/2021);
- Increased issuance of duplicates of documents at the
customer's request (Law No. 24/2023 prohibited the
charging of commissions for duplicate requests, which
led to an increase in customer requests).
166
Management ReportSustainability ReportFinancial StatementsAnnex Electricity consumption
(kwh M)
16.30
13.18
13.82
2021
2022
2023
Electricity
Following the decision taken by the novobanco Group
(novobanco, GNBGA and Banco Best) in November
2021 to use green energy (from renewable sources)
in its facilities, which is currently available in around
77% of the facilities, some additional measures were
implemented in 2023 to reduce consumption.
The teleworking scheme adopted since the beginning
of the pandemic contributed significantly to reducing
electricity consumption, but the return of staff from
central services in 2023 led to a slight increase in
consumption.
A number of other measures were implemented in 2023
to reduce electricity consumption:
Commercial Network - with the consolidation of
interventions under the New Distribution Model and in
the number of branches, control of lighting, ventilation
and air conditioning was increased. With modern
new equipment in place, the process of preventive
maintenance and monitoring and control of anomalies
and alarms was optimised. The timer for the installed
presence/movement sensors was also regulated, and
the air conditioning set points and external signage
hours of operation were adjusted.
Central Buildings - the policy of timed operation, both in
terms of the lighting schedule - between 6am and 10pm,
depending on the functional/departmental area - and
in terms of the operating hours of the ventilation and air
conditioning system, which is programmed to operate
only on working days between 7am and 9pm, was
maintained. In addition, incandescent lamps continued
to be replaced by LED technology.
167
Annual Report 2023 | novobanco CO2 Emissions
The goal set for 2030 is to reduce Scope 1 and 2 CO2
emissions by 50%, an ambitious commitment for
which the Bank will continue to make efforts to achieve
reductions in different types of consumption.
These targets have already led to an improvement in the
composition of novobanco’s fleet in 2023, with electric
and hybrid vehicles rising from 3% of the total fleet at
the start of the year to 25% at the end of the year.
To this end, in 2022, the novobanco Group defined
a new Vehicle Policy to regulate and standardise
fleet management, clarifying eligibility rules and
responsibilities for using this benefit. The ESG
commitments assumed by the Group were reflected in
the policy, promoting and boosting the choice of vehicles
with green motorisation (electric or plug-in hybrid),
through the following measures:
• Price caps for electric or plug-in hybrid vehicles 10%
higher than for combustion vehicles;
• Predominance of electric and plug-in hybrid options in
the list of approved vehicles.
The improvement in the composition of novobanco’s
fleet is the main factor in the reduction of Scope 1
emissions. novobanco's home office policy and the
improvement of green mobility solutions for staff have
prevented an increase in Scope 3 CO2 emissions during
the return to normality following the pandemic.
The increase in Scope 2 CO2 emissions is temporary
and mainly due to the fact that for some of novobanco's
premises it has not yet been possible to find solid and
permanent green energy solutions.
Environmental Indicators
C02 Emissions* (ton)
2023
2022
2021
23 vs 22
Direct emissions (Scope 1)
3 675.3
4 158.1
4 696.1
-11.6%
Indirect emissions (Scope 2)**
1 146.3
811.3
2 937.5
41.3%
Indirect emissions (Scope 3)***
4 234.4
6 103.6
4 184.2
-30.6%
C1 - Goods and services purchased
C4 – Business Travel (plane)
91.5
520.8
81.6
357.4
87.2
149.4
12.1%
45.7%
C5 – Emissions from employees’ home/ work daily trips
3 608.9
5 650,5
3 909.8
-36.1%
C7 – Waste generated in operations
13.2
14.1
3.9
Indirect Emissions (Scope 3 - Financed Emissions)
2 592 458.0
1 699 109.0
-6.4%
52.6%
Total (Scopes 1, 2 and 3)
Excludes indirect emissions financed
9 056.0
11 072.0
11 817.8
-18.2%
Total (Scopes 1, 2 and 3) per employee
2.2
2.7
2.7
-20.5
*See methodological notes.
**Scope 2 is calculated under the market-based approach.
*** Includes the following categories of emissions: air travel, employees' commuting, waste, life cycle of paper consumed, paper recycling process,
water consumption and wastewater treatment.
**** Includes financed emissions in the credit portfolio and in PCAF-based investments.
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Management ReportSustainability ReportFinancial StatementsAnnex
Recycling and Circular Economy
novobanco is aware that waste management is an
essential process for the environment, bearing directly
on the conservation of natural resources.
In this context, it has continued its recycling processes,
especially of expired or unused bank cards, paper,
cardboard, batteries and toners.
The amount of paper and cardboard sent for recycling
has increased significantly compared to 2022 (+59% and
+19% respectively), due not only to the increase in paper
used in current activities, but also to the preparation of
central services for the move to the new campus, which
required a significant reduction in the existing paper
archive that was no longer needed.
In 2022, the Bank started the process of recycling its
bank cards. The card treatment process involves the
collection and destruction of clients’ expired bank cards,
which are sent to Extruplás for recycling. Extruplás
uses them to manufacture street furniture, significantly
reducing the environmental impact of this waste if
it were treated differently. In 2023 the Bank sent to
Extruplás approximately 1.7 tonnes of bank cards for
recycling, thus giving a new life to plastic.
CIRCULAR ECONOMY
PAPER
BANK CARDS
CARDBOARD
157.4 tonnes of paper made it possible
to create new products, avoiding the
extraction of more resources from
nature.
1.7 tonnes of cards sent for recycling,
giving plastic a new lease of life in the
production of street furniture.
61.8 tonnes of cardboard reused in the
production of new corrugated cardboard
boxes or cardboard packaging.
169
Annual Report 2023 | novobanco In 2023, novobanco began to gradually replace all the old
bank cards in PVC by re-PVC cards, which are made from
recycled plastic from regionally collected industrial waste
More information on the re-PVC cards can be found in
Chapter 3 of this report.
As part of the Bank's move to its new headquarters,
which will take place in the second half of 2024, a pilot
of the new working model has already been launched.
The employees of the pilot department were given
the chance to buy the old office furniture at a symbolic
price, and the money raised was donated to charities
of their choice. This reduced the environmental impact
of destroying this material and encouraged its reuse for
private use.
To reduce its direct impact on the environment, the
Group also continued its practice of not using single-
use plastics, providing its employees with alternatives
made from paper, recyclable wood or other compostable
materials.
Water
Despite the return of staff to the central buildings,
the Group maintained a downward trend in water
consumption, which was reduced by 12.2%, to 8m3
per employee.
This reduction resulted from the installation of new
equipment in the branches under the New Distribution
Model (NMD), namely flow reducers and dual flush
cisterns.
Water consumption
(m m³)
41.4
39.9
35.0
2021
2022
2023
We send expired bank cards for recycling to be
used in the production of urban furniture.
We stopped providing single-use disposable
plastic cups, packaging, cutlery and straws, using
instead paper cups and cutlery made from recycled
and/or biodegradable materials.
170
Management ReportSustainability ReportFinancial StatementsAnnex 4.2 Suppliers
The novobanco Group recognises the importance of
sustainable business management covering the entire
value chain, with suppliers playing an essential role in its
ESG journey. The Group has therefore set in place a set
of tools that ensure that the relationship with this group
of stakeholders is based on environmental, social and
governance criteria.
As a major buyer in the market, the novobanco Group
has adopted a relationship model with its suppliers based
on commitments to good practices and internationally
recognised principles, recognising the importance of the
economic, environmental and social impact generated
by this group of stakeholders. The model is structured
around two main axes:
• Code of Conduct, which determines that the process
of supplier evaluation and selection is strict and carried
out in accordance with the highest standards of
transparency and ethics;
• The Supplier Relationship Principles are aligned with
the OECD guidelines for multinational companies,
the United Nations Global Compact, the Universal
Declaration of Human Rights and the Fundamental
Principles and Rights at Work of the International
Labour Organisation. These principles set the
minimum requirements, not only for suppliers but
also for the Bank, with regard to business practices,
health and safety at work, ethics and environmental
management. Supplier selection principles are based on:
- Impartiality: Equal treatment, without privileges or
favouritism, and seeking to avoid conflicts of interest;
- Transparency: Adequate reporting of information;
- Quality and Efficiency: Selection of the best suppliers
based on quality and efficiency standards.
novobanco Group's suppliers are invited to subscribe
to these principles, undertaking to adopt rigorous
behaviour, especially with regard to the environment,
employment conditions and ethics.
In this context, the Supplier Relationship Principles,
which were revised and strengthened in 2022 with the
introduction of novobanco Group's Sustainability Policy,
remain in force, with the expectation that all suppliers
will follow and act in accordance with the guidance
provided in both documents.
A responsible, coherent, and consistent attitude
towards the selection of suppliers starts with total
availability to receive all presentations from the most
varied entities that intend to provide services or supply
goods to the Group. To this end, any current or potential
supplier may present itself and register in the Supplier
Portal (https://fornecedores.novobanco.pt). In 2023
there were 3.2 thousand suppliers registered in the
portal. In addition to providing the prime sourcing basis
for market consultation processes, the database of
registered entities also allows for an easier and more
effective detection, assessment and comparison of the
suppliers' characteristics, technical skills and commercial
propositions.
The quality of this information permits to select the best
propositions, i.e., the suppliers best capable of meeting
the Group's needs and requirements in terms of the
acquisition of goods and services. At 31 December 2023,
the degree of coverage of suppliers with annual invoicing
above €10 thousand and with registration completed or
in the process of registration (pre-registered) was 94%.
171
Annual Report 2023 | novobanco Main industry sectors of novobanco
Group’s suppliers
(%)
IT services
Consulting and auditing
Electronic payment system
Communications and dispatch
Maintenance and repairs
Legal expenses
Advertising and publications
Other
2023
25.2%
23.9%
8.1%
4.9%
4.4%
5.5%
3.2%
24.9%
For a more rigorous selection of this group of
stakeholders and based on the information provided,
the novobanco Group calculates the “sustainability
scoring”, which takes into account ethical, labour,
hygiene and safety at work, and environmental aspects.
New certifications (ISO 45001, ISO 2700, ISO 50001)
and aspects related to suppliers' sustainability and
environmental policies also contribute to the calculation
of this "sustainability score". This scoring is included
in the assessment of suppliers in market consultation
processes.
Additionally, this scoring is also included in the technical
assessment of suppliers carried out by the Group's
procurement structures and is one of the criteria/
elements considered and weighted in the overall rating.
As at 31 December 2023, suppliers that had completed
their registration and sustainability assessment in the
Supplier Portal represented around €206 million, or 76%
of the amount invoiced to the novobanco Group, with
the following industry sectors standing out:
In 2023, 12.9% of the Group's registered suppliers had
a score of Excellent. The decrease compared to the
previous year (-4.8p.p.) is explained by the introduction
of new criteria in the calculation of the "sustainability
score", which made the evaluation stricter and more
robust. All in all, around 80% of the suppliers have a
positive score (fair, good or excellent).
Sustainability scoring
(%)
33.3
24.5
24.8
Excellent
Good
Acceptable
To improve
Bad
33.3
33.0
33.6
33.2
17.7
14.2
3.2
11.7
12.9
4.3
14.9
5.4
2021
2022
2023
172
Management ReportSustainability ReportFinancial StatementsAnnex In 2023, the Bank concluded the roll out of the New
Distribution Model project. The aim was to change
and innovate, offering clients a totally differentiating
and unique experience in the financial sector, and
transforming the branch network into spaces where the
financial experience becomes more than a simple visit to
the bank. At the end of the year novobanco had 247 fully
revamped branches, in which:
• National products were privileged, with the large
majority of suppliers contracted being Portuguese
companies with 100% national capital;
• The suppliers selected were those that could
attest that they developed their business based
on sustainability criteria, proven by environmental
certifications, and which presented sustainability
scores of good or excellent.
Maintaining a professional relationship with suppliers
also implies responsible action, namely guaranteeing
payment periods of 30 days, in line and in compliance
with good market practices. This includes giving
suppliers access to their current account, free of charge
and at all times, simply by logging into the supplier's
account on the Portal. In 2023, the payment period
was 20 days, compared to 29 days in 2022.
The majority (92.1%) of novobanco Group's suppliers is
Portuguese. The group's five largest foreign suppliers are
from the United States, Spain, Belgium and Germany.
In 2023, the Bank adhered to the Code of Ethics of
APCADEC - Associação Portuguesa de Compras
e Aprovisionamento (Portuguese Purchasing and
Procurement Association), a member of IFPSM -
International Federation of Purchasing and Supply
Management (www.ifpsm.org), which summarises the
values and behaviours that the association aims to
promote among its members, their organisations and
the entire purchasing community in Portugal. This Code
of Ethics bolsters the professionalism and transparency
of our business structure, leading to a reduction in
the financial, operational and reputational risks of
organisations, and among them the Bank.
173
Annual Report 2023 | novobanco 4.3 Cybersecurity
and Data Privacy
The Information Security Policy follows the principles set
out in the European Banking Authority (EBA) guidelines
and is aligned with the main international security
standards and frameworks (e.g. ISO27000 series, NIST
CSF, CIS Critical Security Controls).
With the aim of reinforcing the fundamental role played
by all employees in the prevention of cybersecurity risks,
in 2023 the annual mandatory training covered various
topics that can be applied in both professional and
personal contexts, thus contributing to greater overall
security and resilience in the cyberspace.
In 2023, novobanco strengthened its means of
detecting and responding to cybercrime with the aim of
reducing fraud rates, particularly in digital channels, and
contributing to a safer cyberspace.
novobanco has also taken out insurance to cover cyber
risks in the event of a cyber-incident.
At novobanco, the privacy and protection of the
personal data of its clients and other data subjects are
fundamental. To this end, we guarantee the following
principles in the management of personal data:
In order to increase customer awareness of digital
channels, online security awareness campaigns have
been carried out. novobanco maintains permanent
security and fraud alerts on its digital channels.
Security systems and processes are subject to regular
audits and risk assessments in order to strengthen
controls and increase resilience in a logic of continuous
improvement.
novobanco's Security Operating Centre (SOC) operates
on a continuous 24x7x365 basis. novobanco Group's
information systems are regularly tested by companies
specialising in cybersecurity.
novobanco also uses cybersecurity rating tools to
evaluate its suppliers and business-critical partners.
novobanco has been a member of the national computer
security incident response network (CSIRT) for several
years, and regularly takes part in cyber-incident crisis
management exercises involving public and private
organisations.
• Lawfulness: personal data is processed to the extent
that at least one of the conditions laid down for
lawful processing is met: (i) when consent is given
by the data subject, (ii) within the framework of the
contractual relationship, (iii) for the fulfilment of legal
obligations, and (iv) in pursuit of the legitimate interest
of novobanco or a third party;
• Minimisation and limitation of storage: only personal
data that is suitable for the purposes of processing will
be processed, and only kept for the time necessary for
those purposes;
• Transparency: data subjects will be informed in a
transparent manner about the main characteristics
and measures of personal data protection, namely the
processing purposes and possible transmission to third
parties;
• Need for access: only employees, collaborators and
partners whose duties require it will have access to the
personal data processed by novobanco
174
Management ReportSustainability ReportFinancial StatementsAnnex novobanco is committed to respecting the fundamental
principles of personal data protection and complying
with the legislation applicable to the processing
of personal data. For this reason, novobanco has
implemented several technical and organisational
measures to ensure an adequate level of protection
of personal data, based on international best practices,
which include a set of principles that are fundamental to
all areas of information security, such as confidentiality,
integrity, availability, authenticity, non-repudiation and
privacy.
novobanco has a privacy policy, available at www.
novobanco.pt, and a document with detailed information
on the use and protection of personal data, the reason
for processing it, the rights of the data subjects and
how they can exercise these rights with novobanco.
Throughout 2023, novobanco carried out various
awareness-raising and training activities for its
employees in the area of personal data protection
175
Annual Report 2023 | novobanco 5
DEVELOPMENT
OF PEOPLE AND
CULTURE
The novobanco Group knows that taking care of its
business also means taking care of its employees
and that is why it promotes a relationship based on
a strategy of equal opportunities, with a focus on
performance and continuous improvement
176
Management ReportSustainability ReportFinancial StatementsAnnex 5.1 The People and
Culture strategic pillar
The development of its employees and fostering an
inclusive and collaborative culture is one of the four
pillars of novobanco's strategy.
This pillar is based on three main priorities - developing
a values-based inclusive culture, developing a value
proposition for the employees, and developing talent.
Each of the priorities of this strategic pillar is aimed
at retaining and attracting the best and fostering an
inclusive culture that allows employees to reach their
full potential.
The novobanco Group is aware that good results come
from an organisational culture that promotes and
values diversity as a strategic lever for transformation,
innovation and growth. By fostering an inclusive
environment, the novobanco Group enables its
employees to reach their full potential, which is why
the "People and Culture" pillar is one of the cornerstones
of the Bank's strategic plan, which is based on sound
governance policies and guiding principles.
In order to implement its human capital strategy,
the bank has sought to follow best practices in its
decision-making process, focusing not only on results,
but also involving a fair process based on strong
employee motivation to achieve results. To this end, it
endeavours to understand the needs and difficulties
of employees throughout their life cycle and to meet
their expectations in order to contribute to their full
development, enable them to reach their full potential
and maintain their motivation.
Women
54.2%
45.8%
Men
4209
employees
1926
Men
2283
Women
177
Annual Report 2023 | novobanco
5.1.1 Culture and Values
Journey of cultural transformation: mission, values
and behaviour
Once the restructuring phase was over, novobanco
embarked in a phase of cultural transformation in which
it aims to create an inclusive culture where all employees
can learn, grow and realise their potential.
In this context of cultural transformation, novobanco
has developed a project with a multidisciplinary team,
deployed in three phases:
1. Assessment of the current cultural state and
dissemination of the strategy
2. Defining the future and drawing up a detailed plan to
achieve it
3. Implementation and presentation of the Mission and
Values, involving the entire organisation
For novobanco, listening to all voices is essential to
creating and maintaining a culture that is inclusive and
open to dialogue. All employees have something to
say and all contributions are important in moving the
organisation forward.
In 2023, novobanco reinforced its openness to dialogue
and its internal culture of transparency with the
"Your VOICE Counts" concept, which encourages all
employees to feel comfortable expressing their opinions
freely or reporting inappropriate behaviour. To this end,
the channels for promoting a culture of ethics have
been renewed and participation can be anonymous or
identified:
• whispli platform, to safely report inappropriate
behaviour and situations or activities that are not in
line with novobanco's guiding values
• "Your voice counts" form, to give voice to suggestions
for improvement, ideas or comments from employees,
with the aim of improving communication and
collaboration between teams, projects or processes
178
Management ReportSustainability ReportFinancial StatementsAnnex novobanco's mission:
"To be the trusted bank that
supports families and businesses
throughout their lives"
is aimed at building a lasting relationship of trust.
novobanco affirmed its mission and values through an
internal campaign with the message "It's now", in which
employees voluntarily participated as protagonists and
which was launched at a hybrid event attended by over
3,000 employees.
• Promoting Simplicity every day:
We seek simplicity as a way of ensuring clarity and
efficiency when dealing with complex situations.
• Cooperating with each other:
We work together harmoniously for collective
success and take pride in our teamwork.
Mission
novobanco's mission and values have been developed
by actively listening to its employees, guiding their
decisions and behaviour on a daily basis, and ensuring
sustainable growth and positive performance.
Values
• Putting customers first:
We are dedicated to supporting their needs, wills,
dreams and desires and we invest in our people so
that they put excellence into everything they do.
• Embracing Ethics and Inclusion:
We always act ethically and do the right thing. We
always respect each other and encourage everyone
to be themselves.
• Acting with Trust and Transparency:
We are open and honest. We give a clear view of
decisions, the reasons for those decisions, either
when we succeed or when we fail.
179
Annual Report 2023 | novobanco 5.1.2 How we convey the message
During 2023, novobanco continued to invest in its
communication through live events broadcast via Teams,
or in hybrid format, holding Quarterly Fora, which permit
to reach all the bank's employees, at the same time, and
anywhere in the country.
The Quarterly Fora are events organised by the Board
of Directors and, in particular, by the CEO, at which the
bank's strategy is shared, periodic results are presented,
relevant strategic projects are discussed and employees
have the opportunity to participate and have their
questions answered, thus reinforcing transparency,
clarity and two-way communication and bringing
management closer to all employees.
To help convey the message and the culture and
values of novobanco, a meeting was organised in a
hybrid format which was attended by more than 3,000
employees, and a network of employees - Shapers - was
also created to promote and influence the bank's cultural
transformation. The Shapers come from different parts
of the Bank, are of different ages and levels of seniority,
but have one thing in common: they embrace change
and have a mobilising spirit.
Using a visual, dynamic, participatory and informal
methodology (Learning Map), they are committed to
telling the story of novobanco, explaining the reasons
for this cultural change and novobanco's strategy for
the future, based on its mission and values. In 2023,
during the soft launch phase, 54 sessions were held by
53 shapers, involving 567 employees. The objective for
2024 is to involve all the employees of the novobanco
Group in this dynamic, with the expectation that all
the Bank's employees will be covered by the end of
March 2024.
With the aim of simplifying and optimising processes
and tasks, saving time, and obtaining gains and better
results, novobanco is relaunching an internal area for
sharing knowledge and experience - the "Knowing
Well, Doing Well" team meetings. Informal 30-minute
sessions, open to all employees of the bank, creating
moments for teams to come together and find synergies
in the sharing of knowledge.
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Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
5.1.3 How we measure
An Engagement Survey - Pulse, one of the Bank's
main tools for analysing the organisational climate, is
carried out every six months. The participation rate at
novobanco was around 86% and the favourability rate
for employee engagement was 57%, in line with the
figure observed in 2022.
At novobanco dos Açores, the favourability rate for
employee engagement increased by 5 p.p. compared to
the survey conducted in September 2022, reflecting the
results of the various initiatives developed in different
areas, which have made employees feel that novobanco
dos Açores is their second home.
At Banco Best the favourability rate for employee
engagement was 65%, up by 4 p.p. on the results of
the survey conducted in September 2022.
Engagement Survey
(%)
23
31
46
19
28
53
Favourable
% Neutral
% Unfavourable
9
30
61
15
29
56
18
26
56
11
19
70
16
27
57
Would I stay at
novobanco even if
they offered me the
same salary and/or
benefits at any other
company
Would
I recommend
novobanco as a
good company
to work for?
I am proud
to work at
novobanco
Globally, at the
moment, how
would you rate your
level of satisfaction
with novobanco?
Every day I feel
motivated to
come to work
Engagement
I am motivated
and available to
go beyond what
is expected of
me, to help drive
novobanco's
success
181
5.2 Talent
Development
5.2.1 Attracting and retaining talent
Attracting and retaining talent continues to be one
of our major challenges. Several initiatives have been
put in place to promote the personal and professional
development of all potential and current employees,
from when they are spotted and captured in the market
to their retention as employees of novobanco.
To this end, the following 4-step model has been
implemented:
1. CAPTURING TALENT
Responding to the Bank's need to recruit and rejuvenate
its staff, while providing young students with new skills
to enrich their CVs and expand their network of contacts:
• Talent attracts talent: in 2023, several young
graduates were recruited for a 9-month professional
internship programme, spread across different
departments. In November 2023, 9 of these young
people were integrated into the bank's workforce.
• novobanco UP: a programme for young university
students with the duration of one month. In the
2023 edition, held between July and September, a
total of 84 participants attended this programme,
taking the opportunity to have an approach to
active life and paid professional experience during
the summer holidays.
2. INTERNAL MOBILITY
Stimulating the career development of each employee
throughout his or her professional path. One of the
instruments to achieve this is a programme that
enhances the Group’s human capital and enables
its employees to embrace new challenges and
opportunities for individual development and progress.
• In 2023, 23 employees changed roles, thus enabling
and contributing to the development of a more
motivating work environment that promotes talent
retention.
3. PERFORMANCE ASSESSMENT
Assessing the performance of the employees through
a cross-cutting system (“My Portal”), which includes
a personal development programme where each
employee can define his or her objectives for continuous
improvement in the performance of their functions.
The Performance Assessment is conducted annually
and focuses on two sides: objectives and skills,
which are linked to a set of observable behaviours.
Performance assessment is an important tool for
aligning organisational strategy with team and individual
performance, supporting constructive and ongoing
feedback between each employee and their line
manager.
• "My Portal" is also available on the AppRH (human
resources App), a new intuitive mobile tool that
facilitates and speeds up access to the employees
through their smartphone.
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Management ReportSustainability ReportFinancial StatementsAnnex 4.TRAINING
Promoting continuous development to ensure the
necessary skills to achieve the objectives that the Group
has set out to reach. We provide training solutions that
enhance the contribution of the employees, continuing
to invest consistently in the design and adoption
of distinctive and motivating training, enabling the
improvement of performances and the development
and evolution of novobanco's employees. Employee
development justifies increasing the investment in their
continuous training. This ensures the acquisition and
updating of the necessary skills to achieve the best
professional performance. In order to ensure adequate
training, the Group organised a total of 169,400 hours
of training, or 40.3 hours per employee, in the following
areas of knowledge:
• Leadership Training Programme - As part of its
Leadership Academy, novobanco continued to
invest in a 50-hour leadership programme for all
its 1st and 2nd lines (more than 200 managers
participated). This programme, designed in
partnership with Nova SBE, makes a precursory
approach to the reality of the Bank and its current
challenges. In its construction, there was a concern
to promote the alignment of key skills for a modern
leadership, which integrates the knowledge and
tools necessary to manage new work models, to
lead diverse teams and to deal in the best way
with the new challenges facing the banking sector.
Through the implementation of this programme,
novobanco aims to strengthen a collaborative spirit
among leaders, as well as to foster the continuous
development of an agile, cooperative and effective
organisational culture that provides a positive work
space for all. The programme combines different
methodologies and practical approaches, promoting
curiosity, innovation and a synergic vision of the
topics discussed.
• ESG Training - In 2023, due to the strategic
importance of the topic, it was decided to renew
the investment in ESG-related training for all the
Group's employees. This training initiative focused
on the importance of this issue in transforming
business models across the economy through the
incorporation of ESG criteria, with a particular focus
on the financial sector, which is subject to a strict
regulatory framework.
• Mandatory Training - Provides the indispensable
knowledge that all our professionals, each in their
different jobs, must have in order to perform their
functions correctly. These training initiatives focused
mainly on the Markets in Financial Instruments
Directive, the Insurance and Reinsurance
Distribution Act, the Mortgage Credit Marketing
Directive, the Prevention of Money Laundering and
Terrorist Financing, Conflicts of Interest, Related
Parties, Pari & Persi (Action Plan for Default Risk &
Out-of-Court Procedure for the Regularisation of
Defaults) and Information Security.
183
Annual Report 2023 | novobanco 5.2.2 Gender Equality, Equal
Opportunities and Inclusion
5.2.2 Gender Equality, Equal Opportunities and Inclusion
The issue of gender equality, equal opportunities and
inclusion remains a strategic priority on the novobanco
Group's agenda, and the bank has developed a specific
plan to reduce inequalities. The Group continues to
consolidate the foundations for long-term sustainability,
taking measures to promote inclusion and equality, with
a priority focus on decision-making and management
positions.
Gender parity is a reality at novobanco Group, with
women representing 54.2% of the workforce. There
is a positive trend in the representation of women in
management, with the number of women in managerial
positions increasing from 36.2% in 2022 to 38.7% in
2023, but there is still a need to strengthen the gender
balance in top management, where representation has
increased to 17.6%, but is still below the 20% target set
in the Selection Policy for Management and Supervisory
Bodies. With regard to the indicator that assesses the
representation of the under-represented gender in Board
of Directors and first line senior leadership positions, the
share of women is 27.3%.
There were also positive developments in the equal pay
indicator (equal pay for equal work), which fell to 5.4%,
in line with the target, and in the unadjusted pay gap
indicator, which fell to 18%.
novobanco maintains an active participation in the
community, namely taking part in the iGen Forum for
Gender Equality and the UN Global Compact, and is
developing a gender strategy for 2024.
Diversity in the novobanco Group is also revealed by
the integration in its workforce of employees with a
level of disability of more than 60%, as provided in Law
no. 4/2019. The bank's internship programme already
includes a quota for people with disabilities. This action
is part of other social wellbeing and diversity initiatives,
including the Salvador Association's Quality of Life
Award and support for Visão Braile magazine, both
of which are supported by the bank.
More information can be found in Chapter 7 (Social
Indicators) and Chapter 3 (Social wellbeing) of this
report.
Under-respresented gender
(%)
How we embrace equal opportunities
and gender equality
36.2
25.5
5.9
2021
36.2
27.5
5.7
2022
38.7
27.3
5.4
2023
Senior
Leadership
and leadership
Under represented gender
in board of directors and
1st line senior leadership
(includes subsidiaries)*
Equal pay
indicator
*Scope of the Novobanco Group includes: Boar of Directors of novobanco
Group companies (novobanco + novobanco dos Açores Banco Best GNBGA)
+ novobanco first line senior management.
Defining a
policy of non-
discrimination,
gender equality and
equal opportunities
Definition of
gender equality
and gender pay gap
reduction targets
Convergence
towards
balanced gender
distribution
in senior
management
Implementing
practices to
reconcile personal,
family and
professional life
Hiring the under-
represented gender
184
Management ReportSustainability ReportFinancial StatementsAnnex
This new model also brings with it new working routines.
- Trips to the office take on a new meaning, bringing
teams closer to each other and to the culture
of novobanco. Individual, more demanding and
concentrated tasks are left for non-face-to-face work,
always guaranteeing the confidentiality of information.
- Team meetings also serve a purpose. Their timing,
nature, participants and ideal frequency are now well
defined, as are their objectives, which must be clear and
pre-defined.
- And finally, new tools and suitable spaces that
guarantee the same level of exposure, participation and
involvement for everyone, whether they are physically
present or work remotely.
Aware of the need for these new tools, as well as the
need to simplify processes and streamline the activities
of its employees, novobanco has launched a series of
initiatives to provide its constantly evolving services
with greater online freedom and flexibility for
day-to-day tasks:
i) replacement of landlines with mobile phones, with
improved data packages for all employees;
ii) allocation of new headsets with better communication
and usage conditions for daily use;
iii) replacement of laptops and provision of new, more
advanced and higher capacity monitors to ensure quality
of work for employees;
iv) meeting rooms equipped with new audiovisual
systems to enable hybrid meetings and increase
team productivity.
5.2.3 New Working Methods
and Tools
In anticipation of the move to the new headquarters on
novobanco Campus, the Bank established a new working
culture in 2023, based on a hybrid working model and
team agreements that allow the implementation of new
ways of working:
+ COLLABORATIVE - encouraging social interaction
among People and teams, discussion of ideas and co-
creation. Encouraging greater proximity to management.
+ FLEXIBLE - making interpersonal relationships,
workspaces and clothing even more informal. And
encouraging people to work where it's most convenient.
+ SUSTAINABLE - encouraging more sustainable and
ecological behaviour, with a positive impact on the
Community.
+ FOCUSED ON PEOPLE'S WELLBEING - giving them
more freedom and confidence and helping them to
balance their personal and professional lives.
These new ways of working, implemented in the central
teams, are based on:
- a hybrid and flexible working model that aims to
promote a balance between face-to-face and remote
work, while guaranteeing the importance of interaction
between teams in a face-to-face environment through
a minimum presence in the office of 8 days per month.
- the ability to make entry and exit times more flexible
within the context of the team, or on the adoption of an
interspersed schedule of face-to-face and non-face-to-
face work.
- and also on the flexibility of the workplace, which no
longer necessarily has to be the employee's home, but
can be another location agreed between the employee
and the bank.
185
Annual Report 2023 | novobanco 5.2.4 Innovation
and Ideas Lab
The Talent and Innovation Laboratory returned in 2023
with a new edition (LTI 2.0), as a token of novobanco's
commitment to innovation. LTI 2.0 seeks innovative
responses to specific challenges.
• Silver Economy Ecosystem: how can novobanco
help senior clients make smarter decisions, going
beyond financial services to create an ecosystem of
partnerships to better serve them?
• Payments: how can novobanco create new forms
of payment with differentiated user experiences?
What value-added services can it offer customers,
using information about payments?
• Embedded finance: how can novobanco distribute
its financial services through non-financial partners?
how can it embed its services in other digital
journeys and take advantage of the subscription
economy?
• Micro and SME ecosystem: how can novobanco
create a truly integrated and digital experience for
our corporate clients? what complementary services
can novobanco add to meet the overall needs of
micro businesses?
• +1 Open challenge: beyond all the proposed
challenges, how is novobanco preparing for the
future and for a new reality in financial services? how
does it turn new regulatory requirements, such as on
ESG, into opportunities?
In 2023, LTI 2.0 had 113 applications, of which 66 with
ideas. 68 employees were involved in developing the
ideas since Pitch Day, and 3 ideas went through the
proof-of-concept phase and are currently in the pilot
phase at novobanco.
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Management ReportSustainability ReportFinancial StatementsAnnex 1.PHYSICAL WELLBEING
Promoted through occupational safety, preventive
medicine, curative medicine, novobanco's food services,
physical exercise and literacy activities that enable
Employees to make informed and responsible choices.
Employees, both active and retired, have three canteens
at their disposal where they can have low-cost,
nutritionally balanced meals for lunch, with nutritional
information (nutritional traffic lights) provided for each
dish (3 to 4 options). As well as providing lunch, the
aim was to encourage employees to make healthier
food choices. Awareness-raising activities and food
workshops are also held in these privileged dining areas.
In 2023, allergen information was added to the menus.
Information on the presence of the most common food
allergens is thus clearly and visibly displayed on all food
products.
With this information, employees can make appropriate
and informed choices.
5.3 Value proposition
for employees
5.3.1 Reconciling personal and
professional life and focus on wellbeing
Each one of novobanco's employees is an essential
element in creating sustainable value for the bank
and the community. novobanco thus actively seeks to
improve the wellbeing of its employees on a day-to-day
basis and has a specific area dedicated to this:
the Wellbeing and Employee Experience area.
Wellbeing is understood as a set of areas that,
depending on the individual and the context in which
they live, represent a state of complete physical,
mental and social wellbeing. In order to provide the
best employee experience and achieve this objective,
novobanco develops and promotes innovative initiatives,
measures and projects aimed at achieving the best
levels of wellbeing, from a holistic perspective that goes
far beyond the "professional" experience, promoting
a complete and balanced experience in the different
aspects of life.
This value proposition also includes a range of benefits
that contribute to boost life quality in a broader sense.
These benefits include various measures to promote
reconciliation of work, personal and family life, social
responsibility, financial balance, healthy lifestyle,
promotion of knowledge and socialisation.
In defining its wellbeing policy, novobanco adopted the
eight dimensions detailed below, which it considers to
be the closest to the socio-demographic characteristics
of its human capital and the most appropriate for
reconciling personal and professional contexts:
187
Annual Report 2023 | novobanco In 2023, a total of €702,148 was allocated to support
the education of children (Early Childhood, Children and
Young People with Special Needs or Disabilities, and
Scholarships) of 745 employees.
The amount of support for children and young people
with disabilities or special needs was also increased this
year, by €120/employee/year.
From a socio-economic point of view, 2023 was a
particularly difficult year, marked by the continued rise
in interest rates, rising inflation, social instability and
the war scenario in Europe. In this context, and with a
view to promoting the financial wellbeing of its staff,
novobanco maintained the support measures introduced
at the end of 2022 to mitigate the impact on family
budgets:
• 410 employees benefited from an extension up to
the age of 75 of the repayment period for mortgage
loans under the CHPP-ACT (permanent mortage
loan under the collective wage agreement) scheme
(maximum tenor of 45 years).
• 305 employees transferred their permanent home
loans (HPP) from the general scheme to the CHPP-
ACT (maximum amount €50,000), benefiting from
the subsidised rate, for a total amount of €7.6
million.
• 148 employees requested their Christmas bonus to
be brought forward, starting from January 2023.
2. MENTAL WELLBEING
Provided through free psychiatric and psychological
consultations, as well as a strong investment in mental
health literacy and tools to support prevention and
the promotion of healthy habits in both personal and
professional contexts.
One of the tools provided was the Basic Mental Health
Kit, an online mini-course that brings together the
essential information to look after your own mental
health and that of those around you.
3. EMOTIONAL WELLBEING
Promoted through the teaching, practice and
dissemination of good practice such as mindfulness
and self-care.
4. SOCIAL WELLBEING
Promoted through events/experiences aimed at
socialising and developing skills in this area. The
novobanco volunteer programme also promotes
this dimension of well-being.
5. FINANCIAL WELLBEING
Evident in the benefits that novobanco provides to
its employees, whether in the form of specific banking
services and credit solutions, or in the form of support
for children's education and for coping with adverse
contexts (such as the rise in inflation and interest rates
this year).
Education support for
children of active employees
Support for retirees
Special conditions on bank
commercial offer
Specific support to fight
inflation and increase
of interest rates
Christmas hamper
Christmas presents for
employees and their children
and dependent stepchildren
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Management ReportSustainability ReportFinancial StatementsAnnex
7. INTELLECTUAL WELLBEING
Promoting initiatives aimed at the intellectual
development of staff, namely through novobanco's
Wellbeing Programme, the 5+ Programme, which
focuses on the personal sphere, and the Academy, which
focuses on providing technical and behavioural skills in
the professional sphere. The Bank also actively promotes
Culture across various fields, such as Art, Photography
and Museums, and offers its staff access to these on
favourable terms.
8. PROFESSIONAL WELLBEING
Developed through human resources practices based on
flexible ways of working suited to the different functions
and tasks, fostering the most appropriate working
environment for each employee, and healthy working
relationships that drive professional success.
A new offer of individual credit solutions for employees
was also launched, with more favourable conditions
adapted to the associated purposes:
• Standard Line: for the purchase of a car, home
improvements, purchase of goods and equipment
for current use and other goods of a non-sumptuary
nature.
• Green Line: for the purchase of electric cars and
bicycles, solar panels and other environmental
purposes.
• Care Line: intended for health and education
expenses of the employee's household.
• Social Line: applicable only to situations of
financial difficulty/expenses of an unforeseen and
unavoidable nature.
6. FAMILY WELLBEING
fostered through the work-life balance programme,
which includes the following measures:
To improve the work-life balance, in 2023 the Bank
granted an additional 1 day's leave in recognition of the
team effort to implement the Bank's restructuring plan
and 2 days' leave during the Christmas period, for a total
of 28 days' leave (including 25 days' leave provided for in
the - Collective Wage Agreement - ACT).
Work and life balance measures
Leave on special dates
(Employee's birthday; birthday
of children; 1st day of school of children)
Purchase of vacation days
Early Friday or Late Monday
Takeaway meals
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Annual Report 2023 | novobanco 5+ Programme
5+, novobanco's wellbeing programme, was launched on
22 June 2022, and was consolidated in 2023. Promoting
the health and wellbeing of employees is the mission of
this programme, which focuses on 5 objectives:
The 5+ programme includes several initiatives designed
for the enjoyment of the employees, which can be
dedicated to a "central theme" to be developed during
the year, or specific themes for each month of the year.
These initiatives offer employees moments of relaxation,
the opportunity to deepen their knowledge with
specialists, or simply to get to know different realities,
new themes and activities that can lead to experiences
and/or the adoption of behaviours that promote
wellbeing in its various dimensions.
The theme of the month is the subject of a monthly
lecture - Lecture 5+ - broadcast live for everyone in
the Bank and delivered by an expert in the field. This
session is usually moderated by a member of the Human
Capital department, and, to make it a better experience,
everyone can participate by asking questions of the
expert speaker.
Tips on the topic of the month (5+ Tips) are
published every month in the form of suggestions or
recommendations. The aim of these quick-read tips is to
provide practical information certified by experts in the
matters in question that foster the adoption of healthy
behaviours and the capacity for self-care.
The 5+ Experiences are workshops, webinars,
ateliers, awareness-raising activities of a practical
and educational nature in different areas of extra-
professional life: Food, Health, Physical Activity, Family
and Home, Culture and Leisure, Emotional Management,
Socialising, among others.
This programme also develops and launches
5+ Measures, consisting of actions of an organisational
nature, which seek to promote a healthier and
more productive working environment and improve
interpersonal relations between all functional and
hierarchical levels of the organisation.
Self-care, Prevention, Change, Work-Life Balance, the
(new) challenges of Nutrition, Socialisation and Mental
Health were some of the monthly themes developed in
the 5+ programme in 2023.
5+ programme
+ physical wellbeing
+ mental health
+ wellbeing
+ balance
+ happiness
Some figures for the 5+ programme in 2023
80
experiences
(webinars / workshops /
screenings)
10
5+ talks
52
5+ tips
5,578
participations
1,870
employees
involved
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Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
novobanco's work in this area was recognised with the
award for "Best Engagement and Communication" at the
Wellbeing Awards 2023. This initiative, which recognises
cases of excellence in the field of health and wellbeing
in organisations intended to care for and value their
human capital, has reinforced novobanco's positioning,
which focuses on promoting the holistic well-being of
employees through ongoing internal programmes and
initiatives.
191
5.3.2 novobanco Campus
More than just a new office, the novobanco Campus
will be the Group's new headquarters and a space for
the future. Since 2021, novobanco has been preparing
for this change, which represents the way it wants to
position itself in the market and among its stakeholders.
It has been designed to meet the needs
and expectations of all employees, with
workspaces that combine technology,
innovation and design with new ways
of working.
THE NOVOBANCO CAMPUS SERVES
THREE MAIN OBJECTIVES:
1. To be a more flexible space
• based on hybrid working models,
• with different work areas,
• with more efficient and collaborative technological
means and tools,
• where the dress code is more suited to everyday
work.
192
Management ReportSustainability ReportFinancial StatementsAnnex This change is also taking place alongside novobanco's
employees. A network of 80 ambassadors has been
set up to encourage change in their teams, and
communicate and gather the feedback needed to make
decisions. It's a network of employees who give their
teams a voice and take part in joint discussions where
they share ideas, opinions and questions from their
colleagues. The Campus ambassadors are much more
than the face of this period of transition and growth
in the Bank; they are the voice of our teams.
2. To be a more collaborative space
• a horizontal structure that promotes informal
meetings,
• in an open space concept with no physical barriers to
promote transparency,
• with different collaborative spaces that meet the
need for privacy, confidentiality and collaboration.
3. To be a more sustainable space
• reborn from an existing structure,
• with green areas, less pollution and outdoor
activities,
• where the aim is to adopt more efficient and cost-
effective paperless and/or with no printing work
processes,
• where the spaces, furniture, ergonomic equipment
and support services are designed for the comfort of
employees and mobility conditions are aligned with
environmental concerns.
~55000m2
novobanco campus
dimensions
1730
workplaces
102
meeting rooms
~1600
daily users
1000
parking places
~650
collaborative work
spaces
~1400
daily meals
~100
charging posts
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Annual Report 2023 | novobanco 5.4 Volunteer
Programme
The Volunteer Programme aims to develop and
encourage the involvement of employees in community
support actions that contribute to addressing socio-
economic and environmental issues in the community.
All the employees who wish to take part in these
activities are given one day off per year, which can be
divided into two periods (1/2 day for each activity),
to dedicate to a cause. This programme also fosters a
culture of empathy, generates learning opportunities
through the sharing of knowledge and experiences, and
the development of innovative solutions and ideas by
promoting collaborative and team work. Through the
actions developed under this programme, initiated in
2022, the Bank strengthened the sense of belonging of
its employees, consequently increasing their wellbeing.
A total of 406 hours were worked in 2023 in the various
voluntary service activities, grouped into 4 sets:
REFORESTATION OF THE
LEIRIA PINE FOREST
FOOD BANKS AGAINST
HUNGER
DONATED GOODS
BANK
ENTRAJUDA
Through its 100% and
360° accounts, novobanco
supported AMI's Ecoethics
project, which rehabilitates
and reforests areas severely
affected by forest fires. It
brought together customers
and employees in Pinhal de
Leiria, planting 5 thousand
trees.
The employees participated in
Food Banks Against Hunger
in Faro, Lisbon, Porto and
Viseu, supporting a solidarity
ecosystem that distributes
2 million meals a day to private
social solidarity institutions
across the country.
The employees sorted and
organised non-food items
received by the Donated
Goods Bank to be distributed
to social organisations, and
through these, to help people
in need.
The employees participated
in the CONHECER project, a
knowledge programme on
the correct distribution of
goods and services donated,
designed for the institutions
supported by Entrajuda and
the Food Banks, helping them
to help the most needy.
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195
Annual Report 2023 | novobanco 6 DEVELOPING
SUSTAINABLE
PERFORMANCE
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Management ReportSustainability ReportFinancial StatementsAnnex 6.1. Sustainability
governance
To the novobanco Group it is essential to conduct
its activity with the firm resolve to give a positive
contribution to the entire ecosystem within which
it operates. This course of action requires a robust
governance model, sustained by policies and principles
of ethics and transparency that ensure effective and
prudent management.
6.1.1 Governance Model
An effective governance structure is fundamental
to ensure the good execution of the strategy.
Climate-related issues are managed by novobanco in
line with our Sustainability Governance Model, which
establishes clearly defined roles for the identification
and analysis of the associated risks and opportunities
and guarantees an effective response to climate
challenges.
The novobanco Group recognises that progress in
terms of sustainability requires solid governance and an
organisational model that guarantees the success of its
implementation, ensuring accountability, mobilisation
and alignment at all levels of the organisation. Under
this premise, and to ensure adequate coordination of
this issue, in 2022 the Group revised its sustainability
governance structure, which comprises the following
bodies:
• Executive Board of Directors
The Executive Board of Directors (EBD) takes direct
responsibility for managing climate risks, actively
engaging in strategy formulation and action planning.
Oversight of these activities is provided by the General
and Supervisory Board (GSB).
• The Sustainability Steering, created in 2021,
prepares the background for effective management
decision-making on sustainability-related issues.
The Sustainability Steering brings together the
various companies of the novobanco Group and the
departments responsible for integrating ESG into
the bank's various activities, being supported by a
dedicated team that coordinates novobanco Group's
ESG approach, by the ESG Office and by the Global Risk
Department. This Steering meets on a monthly basis and
includes the four executive directors responsible for the
ESG, Risk, Credit and Corporate Segment areas. The CEO
and a member of the General Supervisory Board also
attend its meetings on a quarterly basis.
In 2023, the ESG Steering met 11 times during the year
to ensure that ESG issues were integrated across all
business lines and activities.
Given the high pace of transformation in all matters of Sustainability, ESG and Climate and Environmental Risks, this
monthly forum promotes efficient decision-making and the preparation of management and supervisory decisions on all
sustainability-related issues, thus adding the environmental, social and governance element to the traditional economic
dimension, to ensure:
• The definition of the strategy, positioning and action plans related to sustainability issues and their alignment with the
action plans of the group's different operations and business areas;
SUSTAINABILITY
STEERING
• The integration of ESG issues in all business lines and activities, with delegated decision-making and approval powers
on matters included in the ESG and Climate and Environmental risk implementation plans;
• The monitoring of the development and implementation of the action plan and initiatives defined;
• The coordination of the teams appointed to support the implementation of the ESG action plan;
• The assessment of the initiatives' impact and main indicators' performance against the defined ambition;
• The coordination of the liaison with all relevant stakeholders and the reporting on performance through the different
internal and external communication channels.
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Annual Report 2023 | novobanco
• ESG Office - Structure dedicated exclusively to the
ESG issues of the novobanco Group, whose mission is
to promote the integration of sustainability principles
into the Group's organisation, strategy and activities.
At the same time, it supports the Bank's business
and risk management, collaborating both in the
development of commercial products and initiatives
and in the development of risk methodologies and
controls. The ESG Office is responsible for overall
coordination of the Bank's ESG strategy, including
the implementation of various internal initiatives.
It also provides guidance to the management and
supervisory bodies on all ESG-related matters.
The Risk Management Function (Global Risk
Department) is responsible for the overall risk processes,
which include risk monitoring and assessment, as well
as the development of the policies, methodologies and
data required for this purpose.
We have also created a PMO - the ESG Project
Management Team - to support the ESG Office
and all the departments and teams involved in the
transformation phase of the strategic plan, with the aim
of increasing the capacity and pace of delivery during the
transformation period and broadening the organisational
commitment.
The governance and organisational model for
integrating ESG issues into the business and managing
climate, environmental, social and governance risks is
cross-functional within the organisation and based on
two fundamental principles:
• To identify all existing or planned activities that are
affected or changed by the ESG programme;
• To formally establish an operating model leveraged on
the existing structures, with roles and responsibilities
allocated to the different Group structures across their
ESG journey.
GENERAL SUPERVISORY BOARD
Supervises strategy, positioning and plans for the Global
Sustainability Framework.
EXECUTIVE BOARD OF DIRECTORS
Involved in decision-making processes related to the
implementation of the Global Sustainability framework.
SUSTAINABILITY STEERING
RISK COMMITTEE
OTHER COMMITTEES
Defines strategy. positioning and
guidelines, discusses and approves
matters related to the ESG and C&E risks,
monitors risks and implementation plan.
Discusses and approves risk management
framework, policies, monitoring metrics
and analysis.
Product and services offer, Data
requirements and architecture, among
others.
ESG OFFICE
RISK MANAGEMENT FUNCTION
OTHER FUNCTIONS
Coordinates strategy, positioning and
implementation plans to integrate ESG
principles in the bank's organization
and activity.
Develops C&E risks assessment
and management frameworks and
methodologies.
Marketing, Operational, Data, ...
ESG PMO
Supports ESG Office and remaining Teams
in accelerating transformation.
BLOCK LEADERS & TEAMS
Implement ESG and C&E risks related initiatives.
D
R
A
O
B
T
N
E
M
E
G
A
N
A
M
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Management ReportSustainability ReportFinancial StatementsAnnex
6.1.2 Our ESG Policies
Compliance with the ESG strategy and objectives
defined by the novobanco Group can be achieved
through business management based on behaviours
that everyone values, believes in and practices.
Therefore, the ESG commitments are underpinned by
various policies and principles that define the Group's
culture and describe the principles and steps to achieve
the defined purposes.
In 2023, we highlight the publication of two new policies
focusing on financing:
Green Financing and Investment
Classification Policy
One of novobanco's commitments to sustainability is
"green" financing and investment, which involves the
financing of our customers' transition.
To achieve a sustainable performance, it is necessary
to increasingly embed ESG into the business. This is
why direct and active support to clients in their energy
transition and their journey towards low-carbon and
more sustainable business models is a strategic priority.
Financing and investments intended to support business
activities that contribute to environmental sustainability
and the Sustainable Development Goals, and which
contribute significantly to at least one of the objectives
of the European Taxonomy, namely climate change
mitigation or adaptation, are considered eligible for
classification as green financing by novobanco.
These are some of the activities that may be
concerned in this respect:
ACTIVITY
DESCRIPTION
SDG's
AGRICULTURE, FORESTRY,
FISHERIES AND LIVESTOCK
• Sustainable agriculture
• Forestry and nature conservation
• Sustainable Livestock and Aquaculture
ENERGY
• Production of energy from renewable sources
• Energy production through cogeneration
• Renewable energy storage and distribution
WATER, WASTE TREATMENT
• Sustainable waste management and recycling
• Sustainable water supply and sanitation
INDUSTRY
REAL ESTATE
• Manufacture of renewable energy technologies
• Products and services that enable energy savings in industrial
processes
• Manufacture of energy efficient equipment for buildings
• Construction, acquisition of green buildings
• Improvement works to green buildings
• Sustainable equipment, such as energy efficient heating
and air conditioning
TRANSPORTATION
• Sustainable land transport
• Sustainable water transport
• Sustainable transport infrastructures
INFORMATION AND
COMMUNICATION
TECHNOLOGIES
OTHER CLIMATE CHANGE
MITIGATION AND
ADAPTATION ACTIVITIES
• Solutions to reduce CO2 emissions
• Energy saving technology and software
• Reduction, prevention and sequestration of CO2 emissions
• Biodiversity projects
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Annual Report 2023 | novobanco These are summarised below:
B) FINANCING TO INDIVIDUALS
A) FINANCING TO COMPANIES
• Residential Mortgage Loans
• "Green Corridor" for commercial transactions
considered to be aligned with the European Taxonomy
Transactions for which it is not necessary to define
the specific purpose of the financing, with companies
whose activity is classified in the CAE (Classification
of Economic Activities) or BICS (Bloomberg Industry
Classification System), such activity, according to
an internal analysis, being strongly aligned with the
European Taxonomy.
Mortgage loans for the acquisition, construction or
renovation of properties that have obtained (or will
obtain through the construction or renovation project)
an energy certification level of B or higher, will be
considered.
• Personal loans
Car loans for the purchase of electric or hybrid vehicles
are considered, as are personal loans for the purchase
of renewable energy generation equipment.
• Financing with a specific purpose
Transactions in the form of Project Finance, Green
Bonds/Loans, and Sustainability Bonds will be
considered. Their conditions are assessed on a case-
by-case basis, based on the collection of technical
information supporting the transaction, namely Green
or Sustainability Bond Frameworks and Second Party
Opinions (SPO).
The analysis of the information (concerning with the
product and with the credit) and the decision to consider
a loan as green is independent of the origination/
business area. The model and criteria for classifying
green financing and investments at novobanco are
approved by EBD . The Sustainability Steering also
monitors the amount of new green operations on
a monthly basis (and other information like price).
• Financing with no specific purpose
Operations in the form of Commercial Paper,
Sustainability-Linked Bonds (SLB) and Sustainability-
Linked Loans (SLL) of companies or projects whose
activity can be considered sustainable according to
the European Taxonomy will be considered.
If the financing does not have one of the above
classifications, but the company is mature on ESG and
aligned with the European Taxonomy, the financing
or a percentage of it will be considered green, and
its conditions are assessed on a case-by-case basis,
based on the collection of technical information
supporting the transaction
• Real Estate Financing
Financing operations for the construction, renovation
or acquisition of real estate that has obtained (or will
obtain through the construction or renovation project)
an energy certification level of A or higher, will be
considered. Internationally recognised BREEAM and
LEED classifications will also be taken into account,
as they ensure compatibility with at least energy
certification level A.
Financing Principles – Exclusions and
minimum safeguards
Considering sustainable development to be a
fundamental element in sound economic management,
as set out in the Group's Sustainability Policy, and
intending to develop its activities in accordance with
the taxonomy defined by the European Union for the
financial sector and in alignment with the principles of
the United Nations (UN) Global Compact, the Universal
Declaration of Human Rights, the Organisation for
Economic Cooperation and Development (OECD)
Guidelines for Multinational Enterprises and the main
International Labour Organisation (ILO) Conventions,
novobanco, in its financing and investment activity,
excludes and imposes conditions on certain sectors and
projects. Exclusions and limits are set out in the internal
Risk Appetite and Credit Risk policies.
200
Management ReportSustainability ReportFinancial StatementsAnnex • Production and marketing of chemical products and
substances: Restrictions on customers and production
projects for dangerous chemical substances restricted
by national legislation and international conventions.
• Crude oil and gas extraction: Restrictions on
operations arising from oil and gas extraction projects
or project extensions under the following conditions:
- Extraction from unconventional sources;
- Located in World Heritage Sites and IUCN
(International Union for Conservation of Nature)
Category I to IV Protected Areas.
• Production of nuclear energy: Restrictions on
operations and projects related to nuclear energy
production that do not comply with the Convention on
Nuclear Safety;
• Extraction of metals and minerals with high
environmental and social impacts: Restrictions on
operations or projects related to the extraction,
processing and marketing of minerals:
- Extraction in conflict-affected and high-risk areas;
- Rough diamonds from producing countries that
are involved in conflict and do not have
a Kimberley certification (licence to import and
export rough diamonds);
• Timber harvesting and marketing: Restrictions on
operations or projects for the extraction and marketing
of timber from tropical and native forests that have a
negative impact on the environment:
- Illegally harvested timber;
- Timber from forests converted to plantations or
non-forestry uses;
- Timber from forests where high conservation
values are threatened by deforestation;
- Forest-sourced products of categories considered
unacceptable by the Forest Stewardship
Council (FSC).
These policies aim to:
• Promote ethical and transparent business conduct
aimed at long-term value creation;
• Integrate environmental, social and governance
principles into the business, based on the definition
of material issues and SDGs identified through
stakeholder consultation;
• Apply the commitments made by integrating them
into the marketing of its financial products or corporate
bonds as sustainable investments.
We consider the following to be excluded from financing:
• Companies that in any way carry out their activities
using behaviours rejected by the novobanco Group or
that do not comply with the Fundamental Principles
and Rights at Work established by the International
Labour Organisation and the International Bill of
Human Rights, including forced labour, child labour or
any form of inhuman treatment or threat thereof.
• Coal mining and energy production projects;
• Projects for the production or sale of arms and
ammunition (unless related to national defence);
• Production or marketing of chemical, nuclear, and
biological weapons or weapons of mass destruction;
• Activities related to prostitution or whose business
model is based on pornography;
• Projects for the extraction of and international trade in
wild species of threatened or endangered exotic fauna
and flora;
• Any piracy-related activity.
To mitigate adverse environmental and social
consequences stemming indirectly from its operations
and to actively foster a sustainable economy, the
novobanco Group commits to conditioning its financing
and investments. Specifically, projects within sectors
prone to significant negative impacts will undergo
thorough evaluation to assess potential repercussions,
as follows:
• Production and commercialization of military
equipment: Restrictions on the production and sale of
military equipment to companies and countries with
controversial or autocratic political regimes and limited
by national legislation and international conventions;
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FINANCING PRINCIPLES – SECTORS
AND ACTIVITIES_EXCLUSIONS AND
MINIMUM SAFEGUARDS
GREEN FINANCING AND INVESTMENT
CLASSIFICATION POLICY
OF NOVOBANCO
Principles that establish that the bank does
not finance or invest in companies that comply
with the ILO Principles and Rights, the sectors
and activities that are excluded from financing
(excluded from the Risk Appetite and Credit Risk
Policies).
https://www.novobanco.pt/content/dam/
novobancopublicsites/sustentabilidade/Financing%20
Principles_Sectors%20and%20activities_
exclusions%20and%20minimum%20safeguards%20.
pdf.coredownload.inline.pdf
Principles that establish classification for
funding and investments that are intended to
support commercial activities that contribute
significantly to at least one of the objectives
of the European Taxonomy.
https://www.novobanco.pt/content/dam/novobanco-
publicsites/docs/pdfs/sustentabilidade/Green%20Fi-
nancing%20and%20Investment%20Classification%20
Policy_novobanco.pdf.coredownload.inline.pdf
SUSTAINABILITY POLICY
Guiding principles of the Group's ESG actions and
commitments to integrate sustainability into the
business model.
https://www.novobanco.pt/content/dam/novobanco-
publicsites/sustentabilidade/docs/SUSTAINABILITY%20
POLICY%202022.pdf.coredownload.inline.pdf
CODE OF CONDUCT
Principles that steer the Group's activity,
promoting ethical conduct, respect for
and compliance with all applicable laws
and regulations, supported by transparent
relationships with all stakeholders.
https://www.novobanco.pt/content/dam/novoban-
copublicsites/sustentabilidade/docs/Code%20of%20
Conduct.pdf.coredownload.inline.pdf
NON-DISCRIMINATION AND GENDER
EQUALITY POLICY
Principles of non-discrimination and promotion
of equality, namely prohibiting discriminatory
practices on the grounds of gender, race, colour,
creed, socio-economic conditions or sexual
orientation.
https://www.novobanco.pt/content/dam/novoban-
copublicsites/sustentabilidade/docs/pol%20de%20
igualdade%20de%20oportunidades%20UK.pdf.
coredownload.inline.pdf
GUIDING PRINCIPLES OF THE
VOLUNTEER PROGRAMME
Establish preferential areas for action aligned
with the sustainability strategy, with conditions
to stimulate participation in the programme.
https://www.novobanco.pt/content/dam/novobanco-
publicsites/sustentabilidade/docs/Voluntariado%20
novobanco%20site%20uk.pdf.coredownload.inline.pdf
REMUNERATION POLICY OF
NOVOBANCO EMPLOYEES
https://www.novobanco.pt/content/dam/novobanco-
publicsites/sustentabilidade/docs/Remuneration%20
Policy%20for%20Staff%20Members.pdf.coredownload.
inline.pdf
ANTI-BRIBERY AND
ANTI-CORRUPTION POLICY
https://www.novobanco.pt/content/dam/novobanco-
publicsites/docs/pdfs/compliance/ingles/Politica%20
PSC_site_ENG.pdf.coredownload.inline.pdf
REMUNERATION POLICY OF THE
MANAGEMENT AND SUPERVISORY
BODIES
https://www.novobanco.pt/content/dam/novobanco-
publicsites/sustentabilidade/docs/Remuneration%20
Policy%20for%20Management%20and%20Superviso-
ry%20Bodies.pdf.coredownload.inline.pdf
CONFLICTS OF INTEREST
POLICY
https://www.novobanco.pt/content/dam/novoban-
copublicsites/docs/pdfs/compliance/PCI_NB_ENG.pdf.
coredownload.inline.pdf
SUPPLIER RELATIONSHIP
PRINCIPLES
Establish the minimum requirements, set not
only to suppliers but also to the Group, with
regard to business practices, health and safety
at work, ethics and environmental management.
https://www.novobanco.pt/content/dam/novoban-
copublicsites/sustentabilidade/docs/Principios%20
Relacionamento%20com%20Fornecedores_ENG.pdf.
coredownload.inline.pdf
HUMAN RIGHTS POLICY
Principles of respect for human rights and
procedures to deal with any transgression
of these rights.
https://www.novobanco.pt/content/dam/novobanco-
publicsites/sustentabilidade/docs/Pol%20Direitos%20
Humanos%20UK.pdf.coredownload.inline.pdf
ENVIRONMENTAL STATEMENT
https://www.novobanco.pt/content/dam/novo-
bancopublicsites/docs/pdfs/sustentabilidade/
declara%C3%A7%C3%A3o%20impacto%20ambien-
tal%20uk.pdf.coredownload.inline.pdf
STATEMENT OF POSITIVE
SOCIAL IMPACT
Commitments to environmental and social
sustainability, which go beyond legal obligations
and embody the positive impact sought by the
Group in its relationship with all stakeholders.
https://www.novobanco.pt/content/dam/novo-
bancopublicsites/docs/pdfs/sustentabilidade/
Declara%C3%A7%C3%A3o%20Impacto%20so-
cial%20positivo%20uk.pdf.coredownload.inline.pdf
WHISTLEBLOWING POLICY
https://www.novobanco.pt/content/dam/novobanco-
publicsites/docs/pdfs/compliance/ingles/Whistleblow-
ing%20Policy.pdf.coredownload.inline.pdf
POLICY ON HANDLING COMPLAINTS
https://www.novobanco.pt/content/dam/novobanco-
publicsites/docs/pdfs/compliance/Pol%C3%ADtica%20
Tratamento%20de%20Reclama%C3%A7%C3%B5es.
pdf.coredownload.inline.pdf
RELATED-PARTY TRANSACTIONS POLICY
https://www.novobanco.pt/content/dam/novoban-
copublicsites/docs/pdfs/compliance/ingles/PTPR_
NB_24052021_VF%20Eng.pdf.coredownload.inline.pdf
For more information on ESG policies please see:
Novobanco > Sustainability > Our aproach and policies
Novobanco > About novobanco > Governance > Company Documents
202
Management ReportSustainability ReportFinancial StatementsAnnex 6.2. ESG Risks
6.2.1 Approach to ESG risks
ESG risk management is integrated in novobanco
Group's global sustainability framework, which
comprises the following elements:
• The group-wide sustainability strategy, which sets
the objectives, targets, and actions for the business
areas, the internal governance, the internal control
and risk management of internal activities (e.g., own
operations) and for internal and external reporting.
• A public positioning, embodied in the ESG policies and
principles that guide the bank's activities, but also in
the commitments it has made, in which novobanco
discloses its sustainability objectives and main
practices, with emphasis on:
a) reducing direct or financed GEE emissions, in line
with the global objectives of the Paris Agreement;
b) increasing the use of "sustainable finance"
instruments, namely through its commercial offer
and investment policies, channelling direct financial
support for the transition of the Portuguese economy;
and
c) properly managing the risks of the climate transition
by systematically identifying and controlling its main
drivers;
• A governance and operational structure specifically
adapted to this strategy, ensuring that the internal
teams have the necessary expertise and approaches
/ work plans to ensure the fulfilment of novobanco's
objectives.
Developments in the ESG risk component of the risk
management system address three primary objectives:
• Compliance with regulatory requirements, namely
those concerning the disclosure of non-financial
information on the sustainability strategy and ESG
risk management, with a special focus on climate and
environmental risks;
• Effective alignment with regulatory and supervisory
expectations in this area, and in particular,
implementation of the European Central Bank (ECB)’s
Guide on climate-related and environmental risks
(C&E);
• Implementation of enhanced ESG risk management
procedures adjusted to novobanco Group's activity,
including:
a) assessment and quantification of the materiality of
these risks;
b) routines for global monitoring of exposure to ESG
risks;
c) integration of specific controls for ESG risk factors
into the business, steering risk exposure origination
and monitoring - including the processes required to
operationalise the European Taxonomy for sustainable
activities; and
d) implementation of risk assessment practices, using
sensitivity analysis or scenarisation methodologies.
203
Annual Report 2023 | novobanco 6.2.3 Strategy of alignment with
the Paris Agreement objectives
The novobanco Group recognises the business
opportunities inherent to the financing of an economy
with lower levels of GHG emissions while simultaneously
establishing enhanced controls for the more challenging
exposures in terms of transition. Accordingly, it
establishes business (and risk control) objectives based
on the main variables of the financing of a less carbon-
intensive economy, including:
• Adoption of sectoral policies (including exclusions and
minimum safeguards) for those sectors with a special
impact on the fulfilment of the Paris Agreement
objectives;
• Establishment of general objectives for new green
production to guide commercial and financial action,
supported by a stronger structuring of green or
sustainability-related products (including elements
relating to guarantees or real estate collateral in the
credit offer);
• Implementation of metrics for regular monitoring
of the alignment of the Group's business portfolios,
including quantification of financed GHG emissions
(i.e., scope 3) and the use of estimates of alignment
with the European Taxonomy for sustainable activities;
• Setting sectoral targets based on the SBTI
methodology.
In this way, the novobanco Group has set itself the goal
of gradually aligning its balance sheet with the general
carbon emission reduction targets while at the same
time limiting its exposure to transition risk.
6.2.2 ESG risk profile
The definition of ESG risks focuses on the potential
negative impacts deriving from the current or future
effects of risk factors in clients and counterparties or in
the Bank's assets and liabilities. Since 2020, these risks
have been part of novobanco Group's internal taxonomy,
focusing on the climate change component (and
respective impacts on the traditional risk categories).
The following risk components are assessed:
• A climate and environment component (C&E
risk): relating to the quality and functioning of the
environment and natural systems, including elements
relating to climate change, biodiversity, pollution,
and waste management, to the extent that these
elements may affect the performance or financial
value of novobanco Group's counterparties, clients and
assets.
• A social component: relating to social rights, wellbeing
and the general interest of society and communities,
including factors such as equality, health, inclusion,
labour relations, health and safety at work, human
capital and the community development.
• A governance component: relating to aspects of
internal governance, including the management and
supervisory bodies, internal organisation, remuneration
policies, internal control, tax practices, conduct and
transparency.
Each of these components is individually recognised
and assessed for its impact on the other risk categories,
with the main focus being on factors with an external
origin, inasmuch as internal factors are already currently
recognised and controlled by established processes
(examples: internal factors relating to social aspects
are managed and controlled by the reputational
risk management policy; internal factors relating to
governance aspects are controlled by the compliance
policy; and internal factors relating to physical risk are
recognised and controlled by business continuity policies
and practices).
204
Management ReportSustainability ReportFinancial StatementsAnnex 6.2.4 Application of the European
Taxonomy for Sustainable Activities
The novobanco Group recognises the centrality of the
European Taxonomy for the integration of sustainability
objectives into its business and, simultaneously,
for improving the assessment and management
of its clients' transition risk factors. Hence the risk
management and control approaches are steered
by the global aim of ensuring alignment with the
Taxonomy criteria, promoting consistency between
internal management procedures and the regulatory and
prudential framework for sustainable banking activity.
EU Taxonomy Information
Disclosure Principles
The EU taxonomy is a system for classifying activities
that make a substantial contribution to the environment
and sustainability. Article 3 of the EU Taxonomy
Regulation 2020/852 sets out the criteria that an
economic activity must meet in order to be considered
environmentally sustainable. These criteria include:
a) making a substantial contribution to one or more
of the EU's six environmental objectives; b) without
causing significant harm (DNSH - Do No Significant
Harm) to the EU's other five environmental objectives,
and c) simultaneously complying with minimum social
and governance safeguards, and complying with the
technical selection criteria for the EU's environmental
objectives.
novobanco has been developing its internal procedures
for the purposes of complying with the obligations,
application and reporting, of the Taxonomy criteria,
which include:
• Collection of information, throughout the credit
granting processes, on the characteristics of
customers, their activities and the guarantees
received;
• Participation in national solutions with the aim of
increasing the effectiveness of data collection with
the quality and detail required for the purposes of the
Taxonomy Regulation;
• Conducting internal analyses and applying
methodologies that allow, on the one hand, to achieve
the classification of sustainable and, on the other
hand, to allow the Bank's management to monitor
(on a monthly basis) the (sustainable) performance of
customers and the guarantees received.
For this purpose, the provisions of that Regulation,
its Delegated Acts and subsequent interpretations
published by the European Commission (and/or Platform
on Sustainable Finance) are taken into account, and all
currently regulated environmental objectives are:
- climate change mitigation;
- climate change adaptation;
- sustainable use and protection of water and marine
resources;
- transition to a circular economy;
- pollution prevention and control;
- protection and restoration of biodiversity and
ecosystems.
In the following sections, novobanco Group complies
with the disclosure obligations of the Taxonomy
Regulation, based on the requirements of the Delegated
Act - which complements Article 8 of the Taxonomy
Regulation - Delegated Act 2021/2178, consolidated
version on 1 January 2024.
The preparation of the taxonomy reports we present
is based on the prudential perimeter of novobanco
Group, which complies with the reporting for
supervisory purposes of financial institutions, as defined
in Regulation (EU) No. 575/2013 of the European
Parliament and of the Council and Commission
Implementing Regulation (EU) 2021/451 (FINREP).
In addition, the preparation and disclosure of information
is based on the Delegated Act supplementing Article 8
of the Taxonomy Regulation (Delegated Act 2021/2178,
consolidated version as of 1 January 2024).
205
Annual Report 2023 | novobanco
Substantial contribution to EU environmental
objectives
novobanco supports a range of activities that make
a substantial contribution to the EU's environmental
objectives, namely by financing large companies that
are subject to the Non-Financial Reporting Directive
(NFRD) and already public presented their information
in line with the taxonomy. The bank also contributes to
this alignment by financing energy-efficient housing
(aquisition or renovation) and low-carbon emission
cars that meet the applicable criteria in terms of their
contribution to climate change mitigation or adaptation.
DNSH - Do No Significant Harm
Counterparties with economically sustainable activities
cannot significantly harm any of the six objectives
(DNSH criterion). Fulfilment of this requirement is
assessed on the basis of the taxonomy reports published
by the companies themselves.
In the case of car financing, the limited data available
on the recyclability of vehicles and their performance
in terms of air and noise emissions does not allow an
analysis of the alignment for this segment.
Minimum Social Safeguards
A requirement in the assessment of the environmental
sustainability of economic activities is compliance with
the minimum safeguards set out in Article 18 of the EU
Taxonomy Regulation (Regulation EU 2020/852.
The purpose of the minimum safeguards established in
the EU Taxonomy Regulation is that economic activities
defined as and considered sustainable must a) respect
human rights, including labour rights, b) not engage in
corrupt practices and not commit tax offences.
novobanco includes a specific clause in its loan
agreements with companies whereby these undertake
to conduct their business and carry out their activities
in accordance with sound and prudent management
criteria and in compliance with the laws, regulations
and standards applicable to their sector of activity,
including the Fundamental Principles and Rights at Work
established by the International Labour Organisation
and the International Bill of Human Rights, without
resorting to forced or child labour or any form of inhuman
treatment or threat thereof.
With regard to mortgages and car loans, and taking into
account the guidelines for assessing the alignment of
these activities, compliance with the minimum social
safeguards depends on information from third parties,
namely the producers and/or suppliers of the products
and/or services contracted by the direct counterparty;
in this sense, and in the absence of the necessary
information, it is not possible to confirm compliance with
these criteria and, consequently, the alignment of the
activities with the Taxonomy Regulation.
Description of the compliance with
Regulation (EU) 2020/852 in the financial
undertaking’s business strategy, product
design processes and engagement with
clients and counterparties
As described in the previous chapters, the novobanco
Group has been implementing a group-wide
sustainability strategy, which comprises the operational
implementation of the European Taxonomy, focusing on
the following elements:
• Adoption of the Taxonomy, based on estimates, to
ensure regular monitoring of the evolution trend of
novobanco Group's balance sheet and portfolios;
• Definition of an internal concept of 'green investment',
which is used to validate the technical conditions (of
the operation and/or of the customer's activity) based
on European Taxonomy criteria in order to determine
the eligibility of the new business in terms of
compliance with the minimum annual green production
values (which already guide commercial action);
• Consideration of the objectives and criteria of the
European Taxonomy in the design of new products and
financing solutions;
206
Management ReportSustainability ReportFinancial StatementsAnnex the EPC, namely in older credit operations (i.e., carried
out at a stage when the mechanisms for the collection
and digital characterization of EPCs were not yet
implemented).
Taxonomy KPIs
Total Green Assets Ratio (GAR) = Taxonomy-aligned
activities as a percentage of total assets.
The numerator includes financial assets of financial
and non-financial companies subject to non-financial
reporting requirements (NFRD).
The denominator includes the same exposures as the
numerator plus other asset classes required by the
Taxonomy Regulation (exposures to companies not
covered by the NFRD, sovereign debt, central banks and
the trading book).
The following tables are presented in accordance with
Annex VI and Annex XII of the Delegated Acts:
• Definition of operational requirements for the
implementation of the Taxonomy in lending and
investment processes, including: a) establishment
of client and transaction segmentation principles,
to enhance the definition of the information to be
collected; b) controls on the information provided
by the clients; and c) adaptation of the information
system for the collection and maintenance of the
Taxonomy indicators;
• Development of methodologies for the adoption of
processes to assess the climate & environmental risks
of the Bank's customers and counterparties, which rely
on information collected from customers;
• Application of the European Taxonomy requirements
in the characterisation of the (real estate) guarantees
received on loans granted;
• Setting in place practises to keep track and pass
on legal and regulatory changes to allow for the
adoption of any expected developments regarding the
European Taxonomy.
Data Limitations
Public information or information provided directly by
counterparties is required to assess the alignment and
eligibility of activities to the taxonomy. However, due
to the limited number of companies required to disclose
non-financial information, the amount of information
available is limited and that which is available mainly
relates to data prior to the reference date of this report
(2023). The alignment ratios used are based on publicly
disclosed information from counterparties, provided by
an external information provider.
At the same time, the lack of robust evidence to verify
the alignment of loans with specific purposes, and
in particular to validate the DNSH (do no significant
harm) criteria and minimum social safeguards, makes it
impossible to fully verify the alignment of the relevant
loans with the Taxonomy.
In terms of the energy certification of real estate
collateral, i.e. the Energy Performance Certificates (EPC),
the Bank has several initiatives underway to obtain
207
Annual Report 2023 | novobanco 0. Summary of KPIs to be disclosed by credit institutions under Article 8 of the Taxonomy Regulation
(mn€)
Main KPI
Green asset ratio (GAR)
stock - Turnover
Total environmentally
sustainable assets****
KPI Turnover
KPI CAPEX
% coverage (over
total assets) ***
155
0.39%
0.44%
0.35%
Total environmentally
sustainable activities
KPI Turnover
KPI CAPEX
% coverage (over
total assets)***
15
3
0.10%
0.10%
0.10%
0.83%
5.50%
Additional KPIs
GAR (flow)
Trading book*
Financial guarantees
Assets under management
Fees and commissions income**
* For credit institutions that do not comply with the conditions laid down in Article 94(1) of the CRR or the conditions laid down in Article 325a(1) of the CRR;
** Fee and commission income from services other than lending and asset management;
*** % of assets covered by the KPI in relation to the bank's total assets;
**** Total environmentally sustainable assets KPI based on CAPEX is 177Mn€.
208
Management ReportSustainability ReportFinancial StatementsAnnex 1. |Assets for the calculation of the GAR (Green Asset Ratio) based on Turnover
Climate Change Mitigation
(CCM)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Climate Change
Adaptation (CCA)
Of which towards taxonomy relevant
sectors (Taxonomy-eligible)
Total gross
carrying
amount
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable
(Taxonomy-aligned)
TOTAL (CCM + CCA)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
g
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150
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(mn€)
GAR - Covered assets in both numerator and denominator
Loans and advances, debt securities and equity instruments
not HfT eligible for GAR calculation
Financial corporations
Credit institutions
Loans and advances
Debt securities, including UoP
Equity instruments
Other financial corporations
of which investment firms
Loans and advances
Debt securities, including UoP
Equity instruments
of which management companies
Loans and advances
Debt securities, including UoP
Equity instruments
of which insurance undertakings
Loans and advances
Debt securities, including UoP
Equity instruments
Non-financial corporations
NFCs subject to NFRD disclosure obligations
Loans and advances
Debt securities, including UoP
Equity instruments
Households
of which loans collateralised by residential immovable
property
of which building renovation loans
of which motor vehicle loans
Local governments financing
Housing financing
Other local government financing
Collateral obtained by taking possession: residential and
commercial immovable properties
Other assets excluded from the numerator for GAR calculation
(covered in the denominator)
Non-financial corporations
SMEs and NFCs (other than SMEs) not subject to NFRD
disclosure obligations
Loans and advances
of which loans collateralised by commercial immovable
property
of which building renovation loans
Debt securities
Equity instruments
Non-EU country counterparties not subject to NFRD
disclosure obligations
Loans and advances
Debt securities
Equity instruments
Derivatives
On demand interbank loans
Cash and cash-related assets
21 161
21 161
2 921
420
24
393
3
2 501
0
0
0
0
0
0
0
0
0
0
0
0
1 748
1 748
1 025
722
1
11 669
9 939
0
58
4 722
0
4 722
101
17 479
14 033
13 145
12 212
2 630
0
870
63
888
192
696
0
600
314
179
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1
1
0
0
0
0
0
0
0
0
0
0
0
Other assets (e.g. Goodwill, commodities etc.)
2 353
Total GAR assets
38 640
150
150
0
5
1
0
0
0
0
150
150
0
5
1
Other assets not covered for GAR calculation
Sovereigns
Central banks exposure
Trading book
Total assets
Off-balance sheet exposures - Corporates subject to NFRD
disclosure obligations
Financial guarantees
Assets under management
Of which debt securities
Of which equity instruments
6 182
372
5 375
436
44 822
150
150
348
3 770
0
0
3
0
0
0
3
0
0
0
0
0
0
0
0
5
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
150
150
3
0
0
0
3
0
0
0
0
0
0
0
0
5
0
0
0
0
1
0
0
0
0
209
Annual Report 2023 | novobanco
1. |Assets for the calculation of the GAR (Green Asset Ratio) based on CAPEX
Climate Change Mitigation
(CCM)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Climate Change
Adaptation (CCA)
Of which towards taxonomy relevant
sectors (Taxonomy-eligible)
Total gross
carrying
amount
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally
sustainable
(Taxonomy-aligned)
TOTAL (CCM + CCA)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which environmentally sustainable
(Taxonomy-aligned)
g
n
i
l
b
a
n
e
i
h
c
h
w
f
O
171
171
171
171
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
171
171
166
171
171
166
5
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
l
/
a
n
o
i
t
i
s
n
a
r
t
n
o
i
t
a
t
p
a
d
a
i
h
c
h
w
f
O
i
h
c
h
w
f
O
i
g
n
d
n
e
l
d
e
s
i
l
i
a
c
e
p
s
g
n
i
l
b
a
n
e
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
d
e
s
i
l
i
a
c
e
p
s
l
a
n
o
i
t
i
s
n
a
r
t
i
h
c
h
w
f
O
i
h
c
h
w
f
O
i
g
n
d
n
e
l
g
n
i
l
b
a
n
e
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
d
e
s
i
l
i
a
c
e
p
s
i
h
c
h
w
f
O
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
i
g
n
d
n
e
l
i
h
c
h
w
f
O
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
i
h
c
h
w
f
O
171
171
171
171
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
171
171
166
171
171
166
5
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0
0
0
0
0
0
0
(mn€)
GAR - Covered assets in both numerator and denominator
Loans and advances, debt securities and equity instruments
not HfT eligible for GAR calculation
Financial corporations
Credit institutions
Loans and advances
Debt securities, including UoP
Equity instruments
Other financial corporations
of which investment firms
Loans and advances
Debt securities, including UoP
Equity instruments
of which management companies
Loans and advances
Debt securities, including UoP
Equity instruments
of which insurance undertakings
Loans and advances
Debt securities, including UoP
Equity instruments
Non-financial corporations
NFCs subject to NFRD disclosure obligations
Loans and advances
Debt securities, including UoP
Equity instruments
Households
of which loans collateralised by residential immovable
property
of which building renovation loans
of which motor vehicle loans
Local governments financing
Housing financing
Other local government financing
Collateral obtained by taking possession: residential and
commercial immovable properties
Other assets excluded from the numerator for GAR calculation
(covered in the denominator)
Non-financial corporations
SMEs and NFCs (other than SMEs) not subject to NFRD
disclosure obligations
Loans and advances
of which loans collateralised by commercial immovable
property
of which building renovation loans
Debt securities
Equity instruments
Non-EU country counterparties not subject to NFRD
disclosure obligations
Loans and advances
Debt securities
Equity instruments
Derivatives
On demand interbank loans
Cash and cash-related assets
21 161
21 161
2 921
420
24
393
3
2 501
0
0
0
0
0
0
0
0
0
0
0
0
1 748
1 748
1 025
722
1
11 669
9 939
0
58
4 722
0
4 722
101
17 479
14 033
13 145
12 212
2 630
0
870
63
888
192
696
0
600
314
179
Other assets (e.g. Goodwill, commodities etc.)
2 353
Total GAR assets
38 640
171
171
0
0
0
0
0
0
0
171
171
0
0
0
Other assets not covered for GAR calculation
Sovereigns
Central banks exposure
Trading book
Total assets
Off-balance sheet exposures - Corporates subject to NFRD
disclosure obligations
Financial guarantees
Assets under management
Of which debt securities
Of which equity instruments
6 182
372
5 375
436
44 822
171
171
348
3 770
0
0
19
19
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
171
171
19
19
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
210
Management ReportSustainability ReportFinancial StatementsAnnex
Climate Change
Mitigation (CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
l
)
A
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
)
l
M
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
15
7
41
8
13
104
15
68
2
5
20
8
108
1
120
0
20
218
4
77
20
10
27
1
45
19
5
48
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
l
)
A
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
15
7
41
8
13
104
15
68
2
5
20
8
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
)
A
C
C
+
M
C
C
(
e
b
a
n
a
t
s
u
s
l
i
R
U
E
n
M
)
A
C
C
+
M
C
C
(
e
b
a
n
a
t
s
u
s
i
l
4
0
3
0
0
0
4
3
0
1
0
1
108
106
1
120
0
1
0
0
20
11
218
4
77
20
10
27
1
45
19
5
48
0
0
0
1
3
0
0
4
1
5
0
2. GAR by sector, based on Turnover
Breakdown by sector - NACE 4 digits
level (code and label)
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
)
l
M
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
4
0
3
0
0
0
4
3
0
1
0
1
0729 - Mining and preparation of other non-ferrous metal ores
1629 - Manufacture of other products of wood; manufacture of articles of
straw and plaiting materials; cork industry
1711 - Manufacture of pulp
1712 - Manufacture of paper and paperboard (excluding corrugated)
1721 - Manufacture of corrugated paper and paperboard and of containers
of paper and paperboard
R
U
E
n
M
15
7
41
8
13
1920 - Manufacture of refined petroleum products and fuels briquettes
104
2211 - Manufacture of rubber tyres and tubes; retreading and rebuilding of
rubber tyres
2351 - Manufacture of cement
2711 - Manufacture of pulp
2892 - Manufacture of machinery for mining, quarrying and construction
2910 - Manufacture of motor vehicles
3020 - Manufacture of railway locomotives and rolling stock
15
68
2
5
20
8
3511 - Production of electricity
3514 - Trade of electricity
4110 - Development of building projects
4120 - Construction of residential and non-residential buildings
108
106
1
120
0
1
0
0
4222 - Construction of networks for transmission and distribution of
electricity and telecommunications networks
20
11
4299 - Construction of other civil engineering projects n.e.c.
218
4676 - Wholesale of other intermediate products
4711 - Retail sale in non-specialised stores with food, beverages
or tobacco predominating
5020 - Sea and coastal freight water transport
5320 - Other postal and courier activities
5920 - Sound recording and music publishing activities
6499 - Other financial services activities n. e, except insurance
and pension funds
6820 - Renting of own or leased real estate
7010 - Activities of head offices
7112 - Engineering activities and related technical consultancy
9609 - Other personal service activities n.e.c.
4
77
20
10
27
1
45
19
5
48
0
0
0
1
3
0
0
4
1
5
0
211
Annual Report 2023 | novobanco
2. GAR by sector, based on CAPEX
Breakdown by sector - NACE 4 digits
level (code and label)
Climate Change
Mitigation (CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Non-Financial
corporates
(Subject to
NFRD)
SMEs and other
NFC not subject
to NFRD
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
Gross carrying
amount
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
R
U
E
n
M
)
l
M
C
C
(
e
b
a
n
a
t
s
u
s
i
1
21
25
8
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
)
A
C
C
+
M
C
C
(
e
b
a
n
a
t
s
u
s
i
l
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
l
)
A
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
)
l
M
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
7
41
74
50
103
1
120
0
1
218
4
4
4
29
11
11
19
70
5
18
17
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
l
)
A
C
C
(
e
b
a
n
a
t
s
u
s
i
R
U
E
n
M
7
41
74
50
y
l
l
a
t
n
e
m
n
o
r
i
v
n
e
h
c
h
w
i
f
O
R
U
E
n
M
)
A
C
C
+
M
C
C
(
e
b
a
n
a
t
s
u
s
i
l
1
21
25
8
103
99
1
120
0
1
218
4
4
4
29
11
11
19
70
5
18
17
1
0
0
1
0
0
0
0
1
2
0
2
1
5
3
1
1629 - Manufacture of other products of wood; manufacture of articles of
straw and plaiting materials; cork industry
1711 - Manufacture of pulp
1920 - Manufacture of refined petroleum products and fuels brique
2351 - Manufacture of cement
R
U
E
n
M
7
41
74
50
3511 - Production of electricity
103
99
3514 - Trade of electricity
4110 - Development of building projects
4120 - Construction of residential and non-residential buildings
4222 - Construction of networks for transmission and distribution of
electricity and telecommunications networks
4299 - Construction of other civil engineering projects n.e.c.
4511 - Sale of cars and light motor vehicles
4649 - Wholesale of other household goods
4676 - Wholesale of other intermediate products
4711 - Retail sale in non-specialised stores with food, beverages
or tobacco predominating
6020 - Television activities
6820 - Renting of own or leased real estate
7010 - Activities of head offices
7022 - Other business and management consultancy activities
7112 - Engineering activities and related technical consultancy
8211 - Combined office administrative service activities
8299 - Other business support service activities n.e.c.
1
120
0
1
218
4
4
4
29
11
11
19
70
5
18
17
1
0
0
1
0
0
0
0
1
2
0
2
1
5
3
1
212
Management ReportSustainability ReportFinancial StatementsAnnex
3. GAR KPI stock based on Turnover
2023
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-eligible)
Proportion of total
covered assets funding
taxonomy relevant
sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
% (compared to total covered
assets in the denominator)
GAR - Covered assets in both numerator
and denominator
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
d
e
s
i
l
i
a
c
e
p
s
h
c
h
w
i
f
O
l
a
n
o
i
t
i
s
n
a
r
t
i
h
c
h
w
f
O
i
g
n
d
n
e
l
g
n
i
l
b
a
n
e
h
c
h
w
i
d
e
s
i
l
i
a
c
e
p
s
h
c
h
w
i
f
O
f
O
i
g
n
d
n
e
l
g
n
i
l
b
a
n
e
h
c
h
w
i
d
e
s
i
l
i
a
c
e
p
s
h
c
h
w
i
f
O
f
O
g
n
i
l
b
a
n
e
h
c
h
w
i
f
O
l
a
n
o
i
t
i
s
n
a
r
t
i
h
c
h
w
f
O
i
g
n
d
n
e
l
0.7% 0.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.7% 0.7% 0.0% 0.0% 0.0%
54.8%
Financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Credit institutions
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Other financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which investment firms
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which management companies
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which insurance undertakings
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Non-financial corporations
8.6% 8.6% 0.0% 0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 8.6% 8.6% 0.0% 0.3% 0.1%
7.6%
1.1%
0.1%
1.0%
0.0%
6.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4.5%
NFCs subject to NFRD disclosure
obligations
8.6% 8.6% 0.0% 0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 8.6% 8.6% 0.0% 0.3% 0.1%
4.5%
Loans and advances
10.7% 10.7% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 10.7% 10.7% 0.0% 0.0% 0.1%
Debt securities, including UoP
5.5% 5.5% 0.0% 0.7% 0.0% 0.0% 0.0% 0.0% 0.0% 5.5% 5.5% 0.0% 0.7% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
2.7%
1.9%
0.0%
Households
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
30.2%
of which loans collateralised by
residential immovable property
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
25.7%
of which building renovation loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which motor vehicle loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.2%
Local governments financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
12.2%
Housing financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
Other local government financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
12.2%
Collateral obtained by taking possession:
residential and commercial immovable
properties
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.3%
Total GAR assets
0.4% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.4% 0.0% 0.0% 0.0%
54.8%
213
Annual Report 2023 | novobanco
3. GAR KPI stock, based on CAPEX
2023
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-eligible)
Proportion of total
covered assets funding
taxonomy relevant
sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
% (compared to total covered
assets in the denominator)
GAR - Covered assets in both numerator
and denominator
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
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0.8% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.8% 0.0% 0.0% 0.0%
54.8%
Financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Credit institutions
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Other financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which investment firms
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which management companies
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which insurance undertakings
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Non-financial corporations
9.8% 9.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.8% 9.8% 0.0% 0.0% 0.0%
7.6%
1.1%
0.1%
1.0%
0.0%
6.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4.5%
NFCs subject to NFRD disclosure
obligations
9.8% 9.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.8% 9.8% 0.0% 0.0% 0.0%
4.5%
Loans and advances
16.2% 16.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 16.2% 16.2% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.7% 0.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.7% 0.7% 0.0% 0.0% 0.0%
Equity instruments
4.0% 4.0%
0.0% 0.0% 0.0% 0.0%
0.0% 4.0% 4.0%
0.0% 0.0%
2.7%
1.9%
0.0%
Households
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
30.2%
of which loans collateralised by
residential immovable property
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
25.7%
of which building renovation loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which motor vehicle loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.2%
Local governments financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
12.2%
Housing financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
Other local government financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
12.2%
Collateral obtained by taking possession:
residential and commercial immovable
properties
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.3%
Total GAR assets
0.4% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.4% 0.0% 0.0% 0.0%
54.8%
214
Management ReportSustainability ReportFinancial StatementsAnnex
4. GAR KPI flow, based on Turnover
2023
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-eligible)
Proportion of total
covered assets funding
taxonomy relevant
sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion
of total
new assets
covered
% (compared to flow of total
eligible assets)
GAR - Covered assets in both numerator
and denominator
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
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9.6% 9.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.6% 9.6% 0.0% 0.0% 0.0%
0.1%
Financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Credit institutions
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Other financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which investment firms
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which management companies
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which insurance undertakings
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Non-financial corporations
9.6% 9.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.6% 9.6% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.1%
NFCs subject to NFRD disclosure
obligations
9.6% 9.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.6% 9.6% 0.0% 0.0% 0.0%
0.1%
Loans and advances
9.5% 9.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.5% 9.5% 0.0% 0.0% 0.0%
0.1%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Households
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
of which loans collateralised by
residential immovable property
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
of which building renovation loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which motor vehicle loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Local governments financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Housing financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other local government financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Collateral obtained by taking possession:
residential and commercial immovable
properties
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
Total GAR assets
0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.0% 0.0% 0.0%
0.1%
215
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4. GAR KPI flow, based on CAPEX
2023
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-eligible)
Proportion of total
covered assets funding
taxonomy relevant
sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion
of total
new assets
covered
% (compared to flow of total eligible
assets)
GAR - Covered assets in both numerator
and denominator
Loans and advances, debt securities and
equity instruments not HfT eligible for GAR
calculation
d
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9.4% 9.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.4% 9.4% 0.0% 0.0% 0.0%
0.1%
Financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Credit institutions
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Other financial corporations
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which investment firms
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which management companies
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
of which insurance undertakings
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Loans and advances
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Non-financial corporations
9.4% 9.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.4% 9.4% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.1%
NFCs subject to NFRD disclosure
obligations
9.4% 9.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.4% 9.4% 0.0% 0.0% 0.0%
0.1%
Loans and advances
9.4% 9.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.4% 9.4% 0.0% 0.0% 0.0%
0.1%
Debt securities, including UoP
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity instruments
0.0% 0.0%
0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
0.0% 0.0%
Households
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
of which loans collateralised by
residential immovable property
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
of which building renovation loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
of which motor vehicle loans
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Local governments financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Housing financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other local government financing
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Collateral obtained by taking possession:
residential and commercial immovable
properties
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0%
Total GAR assets
0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.0% 0.0% 0.0%
0.1%
216
Management ReportSustainability ReportFinancial StatementsAnnex
5. KPI off-balance sheet exposures based on Turnover
2023
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors
(Taxonomy-aligned)
% (compared to total
eligible off-balance
sheet assets)
Financial guarantees
(FinGuar KPI)
Assets under
management (AuM KPI)
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c
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w
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O
0.85% 0.82% 0.00% 0.00% 0.06% 0.00% 0.00% 0.00% 0.00% 0.85% 0.82% 0.00% 0.00% 0.06%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
5. KPI off-balance sheet exposures based on CAPEX
2023
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
TOTAL (CCM + CCA)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors
(Taxonomy-aligned)
% (compared to total
eligible off-balance
sheet assets)
Financial guarantees
(FinGuar KPI)
Assets under
management (AuM KPI)
d
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5.50% 5.50% 0.00% 0.01% 0.01% 0.00% 0.00% 0.00% 0.00% 5.50% 5.50% 0.00% 0.01% 0.01%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
217
Annual Report 2023 | novobanco
Disclosures according to Annex XII - nuclear energy and fossil-gas related activities
1. Nuclear energy and fossil-gas related activities
NUCLEAR ENERGY RELATED ACTIVITIES
1
2
3
4
5
6
The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative
electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to
produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen
production, as well as their safety upgrades, using best available technologies.
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce
electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production
from nuclear energy, as well as their safety upgrades.
FOSSIL GAS RELATED ACTIVITIES
The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that
produce electricity using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool
and power generation facilities using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation
facilities that produce heat/cool using fossil gaseous fuels.
No
No
Yes*
Yes**
Yes**
No
* Based on residual exposure to companies that, despite having related activity, have not reported, to date, alignment and eligibility ratios.
** The figures underlying this entry refer solely to the only company that has disclosed the ratios publicly.
218
Management ReportSustainability ReportFinancial StatementsAnnex 2. Economic activities aligned with the Taxonomy (denominator) based on Turnover.
Row
Economic activities based on KPI Turnover
(mn€)
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of other Taxonomy-aligned economic
activities not referred to in rows 1 to 6 above in the denominator
of the applicable KPI.
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
149.6
100.0%
149.6
100.0%
0.0
0.0%
Total green asset ratio, Turnover
149.6
0.4%
149.6
0.4%
0.0
0.0%
2. Taxonomy-aligned economic activities (denominator) based on CAPEX.
Row
Economic activities based on KPI CAPEX
(mn€)
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI.
Amount and proportion of other Taxonomy-aligned economic
activities not referred to in rows 1 to 6 above in the denominator
of the applicable KPI.
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
170.9
100.0%
170.9
100.0%
0.0
0.0%
Total green asset ratio, CAPEX.
170.9
0.4%
170.9
0.4%
0.0
0.0%
219
1
2
3
4
5
6
7
8
1
2
3
4
5
6
7
8
Annual Report 2023 | novobanco 3. Economic activities aligned with the Taxonomy (numerator) based on Turnover.
Row
Economic activities based on KPI Turnover
(mn€)
1
2
3
4
5
6
7
8
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KP.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of other Taxonomy-aligned economic
activities not referred to in rows 1 to 6 above in the numerator
of the applicable KPI.
Total amount and proportion of Taxonomy-aligned economic
activities in the numerator of the total green asset ratio
based on turnover.
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
149.6
100.0%
149.6
100.0%
0.0
100.0%
149.6
100.0%
149.6
100.0%
0.0
0.0%
3. Taxonomy-aligned economic activities (numerator) based on CAPEX
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
170.9
100.0%
170.9
100.0%
0.0
0.0%
170.9
100.0%
170.9
100.0%
0.0
0.0%
Row
Economic activities based on KPI CAPEX
(mn€)
1
2
3
4
5
6
7
8
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of Taxonomy-aligned economic activity
referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI.
Amount and proportion of other Taxonomy-aligned economic
activities not referred to in rows 1 to 6 above in the numerator
of the applicable KPI.
Total amount and proportion of Taxonomy-aligned economic
activities in the numerator of the total green asset ratio
based on CAPEX.
220
Management ReportSustainability ReportFinancial StatementsAnnex 4. Economic activities that are eligible, but not aligned with the Taxonomy - Turnover.
Row
Economic activities based on KPI Turnover
(mn€)
1
2
3
4
5
6
7
8
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.26 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.27 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.28 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.29 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.30 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.31 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of other Taxonomy-eligible but not
Taxonomy-aligned economic activities not referred to in rows
1 to 6 above in the denominator of the applicable KPI.
Total amount and proportion of Taxonomy-eligible but not
Taxonomy-aligned economic activities in the denominator of
the eligible ratio based on turnover.
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.2
0.1%
0.2
0,0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
149.6
99.9%
149.6
99.9%
0.0
0.0%
149.8
100.0%
149.8
100.0%
0.0
0.0%
4. Economic activities eligible but not aligned with the Taxonomy - CAPEX
Row
Economic activities based on KPI CAPEX
(mn€)
1
2
3
4
5
6
7
8
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.26 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.27 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.28 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.29 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.30 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of Taxonomy-eligible but not Taxonomy-aligned
economic activity referred to in Section 4.31 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the
applicable KPI.
Amount and proportion of other Taxonomy-eligible but not
Taxonomy-aligned economic activities not referred to in rows
1 to 6 above in the denominator of the applicable KPI.
Total amount and proportion of Taxonomy-eligible but not
Taxonomy-aligned economic activities in the denominator
of the eligible ratio based on CAPEX.
221
Amount and proportion
(the information is to be presented in monetary amounts
and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Amount
%
Amount
%
Amount
%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
0.0
0.0%
0.0
0.0
0.0
0.0%
170.9
100.0%
170.9
100%
0.0
0.0%
170.9
100.0%
170.9
100.0%
0.0
0.0%
Annual Report 2023 | novobanco 1
2
3
4
5
6
7
8
1
2
3
4
5
6
7
8
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
1.2
0.0%
0.0
0.0%
0.0
0.0%
Amount
%
0.0
0.0%
0.0
0.0%
0.0
0.0%
1.3
0.0%
0.0
0.0%
0.0
0.0%
5. Economic activities not eligible with the Taxonomy based on Turnover.
Row
Economic activities based on KPI Turnover
(mn€)
Amount and proportion of economic activity referred to in row 1 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 2 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 3 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 4 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 5 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 6 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of other Taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the
denominator of the applicable KPI.
38 483.7
100.0%
Total amount and proportion of Taxonomy-non-eligible economic activities in the denominator of the
applicable KPI (non-eligible ratio turnover).
38 484.8
99.6%
5. Non-eligible economic activities with CAPEX-based Taxonomy.
Row
Economic activities based on KPI CAPEX
(mn€)
Amount and proportion of economic activity referred to in row 1 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 2 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 3 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 4 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 5 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of economic activity referred to in row 6 of Template 1 that is Taxonomy-non-eligible in accordance
with Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI.
Amount and proportion of other Taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the
denominator of the applicable KPI.
38 467.5
100.0%
Total amount and proportion of Taxonomy-non-eligible economic activities in the denominator of the
applicable KPI (non-eligible ratio turnover).
38 468.8
99.6%
222
Management ReportSustainability ReportFinancial StatementsAnnex Voluntary disclosures under Regulation (EU)
2020/852
As described in the previous sections, novobanco used
only actual information, published by its counterparties,
for the purposes of determining the level of alignment
of its financing and investments with the Taxonomy
criteria.
Nevertheless, it is considered that exposure to the
mortgage portfolio may, on a voluntary basis, have
a representation of its potential alignment with the
European Taxonomy using the best available (and real)
information relating to novobanco's real estate collateral
(and for which the Bank collects, records and maintains
its information).
In these terms, and for better transparency in the
provision of information to the market, novobanco has
determined the following potential alignment of its
mortgage portfolio:
Million Euros
Retail exposures
Of which, mortgages
Eligible exposure
Aligned exposure
Not Elegible
31 december 2023
11,669 million €
9,939 million €
3,625 million € (36.5%)
45 million € (0.4%)
6,314 million € (63.5%)
The potential alignment values presented above allow us
to increase novobanco's consolidated GAR% (presented
in the previous sections) by 0.12% (i.e., corresponding to
a potential GAR% of 0.52% in the case of the Turnover
view, and potential GAR% of 0.56% in the case of
CAPEX).
To calculate the above estimate, the following
methodology was used:
• Verification of substantial contribution: the
substantial contribution to the objective of climate
change mitigation was measured based on the year
of construction of the building and its EPC level
(according to the technical criteria of activity 7.7).
For buildings constructed before 31 December 2020,
only those with an EPC higher than A (inclusive) were
considered; For buildings built after this date, it was
not possible to guarantee their alignment, given the
information needs inherent to the fulfilment of the
technical criteria of activity 7.1.
223
• Verification of DNSH criteria: Compliance with the
DNSH criteria for climate change adaptation has
been assessed on the basis of an assessment of the
exposure of immovable collateral to physical climate
risks, selected from those covered in the risk matrix in
Section 2 of Appendix A to the Taxonomy Regulation.
This analysis only considered the exposure of collateral
to acute physical risks (specifically, fires, floods and
landslides), if relevant in the respective territory;
Chronic risks were not considered as their impact on
the integrity of real estate collateral is neither direct
nor immediate, and it is not possible to conclude on the
materiality of these risks for this type of infrastructure.
The alignment estimate was informed by the risk level
of each collateral, i.e., properties with a high or severe
exposure to at least one of the risks considered, were
excluded (classified as non-aligned).
6.2.5 Assessment of Climate
Materiality
In 2015, the Financial Stability Board (FSB) established
the Task Force on Climate-related Financial Disclosures
(TCFD) to address concerns around insufficient
disclosure of climate-related risks and opportunities. In
June 2017, the TCFD released its final recommendations,
which aim to support companies and organisations
to disclose climate-related risks and opportunities
effectively and clearly, promoting transparency for
investors and the public.
We are aware of the importance of using this
approach and believe that following these reporting
recommendations will make climate information clearer
and easier to compare and contribute to promote more
sustainable business strategies. An added benefit is
that we approach climate-related issues not only as
risks but also as opportunities and consider these two
aspects in our business strategy. This year we integrated
this approach in the report rather than in a separate
document.
Annual Report 2023 | novobanco In the table below we briefly disclose our approach on
the four TCFD theme areas: governance, strategy, risk
management, and metrics and targets.
THEME AREA
NOVOBANCO APPROACH
(summary)
STATED IN THE
DOCUMENT
GOVERNANCE
novobanco's governance
around climate-related risks
and opportunities.
Climate-related issues are managed in accordance with the Sustainability Governance
model, led directly by the Executive Board of Directors and overseen by the General and
Supervisory Board. Every month we hold a Sustainability Steering, with the participation
of Executive Board members and multidisciplinary teams, responsible for coordinating the
ESG approach at novobanco.
a. Describe management's oversight of climate-related risks and opportunities.
b. Describe management's role in assessing and managing climate-related risks and
Chapter 6.1
Chapters 6.1; 6.2.3; 6.2.5
opportunities.
STRATEGY
To analyse the actual and
potential impacts of climate-
related risks and opportunities
on novobanco’s business,
strategy and financial planning
novobanco develops its activities with the firm objective of making a positive
contribution to the entire ecosystem in which it operates. Based on the Sustainability
Policy, novobanco assumes a clear position of developing a sustainable business that
wants to contribute to the transition to a low-carbon economy. To this end, we have
subscribed to the "Business Ambition for 1.5ºC" initiative, which aims to define scientific
targets for reducing novobanco's GHG emissions.
We also signed the "Letter of Commitment for Sustainable Finance in Portugal", which
aims to contribute to the promotion of sustainable investment practices in the country.
The SBTI Platform is in the process of assessing the Science Based Targets submission
for commitments to reduce the portfolio's carbon footprint.
The Sustainability Governance model allows novobanco to integrate physical and
transition climate risks into its risk management models, as well as to leverage
opportunities associated with climate change.
a. Describe the climate-related risks and opportunities the organisation has identified
Chapter 6.2.5.1
over the short, medium and long term.
b. Describe the impact of climate-related risks and opportunities on the organisation’s
Chapter 6.2.5.1
businesses, strategy and financial planning.
c. Describe the resilience of the Organisation’s strategy, taking into consideration
Chapter 6.2.5.1.2
different climate-related scenarios, including a 2°C or lower scenario.
RISK MANAGEMENT
The processes used by
novobanco to identify, assess
and manage climate-related
risks
The Bank has been gradually incorporating environmental and climate risks into its
business model in order to effectively meet regulatory and supervisory requirements and
reduce the negative impact arising from its activity. The Risk Management framework
is centralised in the Risk Management Function and is composed of the Global Risk
Department and the Rating Department.
a. Describe the organisation’s processes for identifying and assessing climate-related
Chapter 6.2.5.1.3
risks .
b. Describe the organisation’s processes for managing climate-related risks.
c. Describe how processes for identifying, assessing, and managing climate-related risks
Chapter 6.2.5.1.4
Chapter 6.2.5.1.4
are integrated into the organisation’s overall risk management.
METRICS AND TARGETS
Metrics and targets used to
assess and manage relevant
climate-related risks and
opportunities
A set of climate-related metrics and targets established in novobanco's ESG strategy
are defined and are disclosed. The Bank has endorsed the Science Based Target Initiative
(SBTi) with the objective of reducing its own as well as financed GHG emissions and
contributing to a low-carbon economy in the long-term.
The metrics and progress made are disclosed on a semi-annual basis.
a. Disclose the metrics used by the organisation to assess climate-related risks and
Chapters 2.4; 2.5.; 2.6
opportunities in line with its strategy and risk management process.
b. Disclose GHG emissions (Scopes 1, 2, and 3) and the related risks.
c. Describe the targets used by the organisation to manage climate-related risks and
opportunities and performance against targets.
Chapters 4.1; 6.2.5.1.3
Chapters 2.4; 2.6; 2.7;
6.2.5.2.4
224
Management ReportSustainability ReportFinancial StatementsAnnex 6.2.5.1 Climate-Related Risks
Climate change, which can have significant impacts on
business models and the economy as a whole, is one of
the greatest threats currently faced by society. When
considering the impact of climate on the activities of
financial institutions, a dual materiality perspective
is commonly adopted:
a) on the one hand, there are impacts arising from
a financial and indirect logic - in other words, the
materialisation of climate-related risks in the
performance of our clients and counterparties; and
b) on the other hand, there are environmental and social
impacts that arise directly from the Bank's activities.
novobanco has a dedicated strategy for its approach to
environmental and social materiality, which is presented
in section 2 of this report.
Climate risks in financial materiality
The risks stemming from climate change mainly
encompass physical risks, such as extreme weather
phenomena (storms, droughts, floods), and transition
risks, which arise from the effort to adapt economic
activities to more circular models with lower carbon
footprints.
Generally speaking, these risks affect financial
institutions primarily through their impact on the
activity of their clients and counterparties: physical risks
can cause damage to companies' production assets,
disruption of operations or even loss of revenue due to
disruption of supply chains. Transition risks can affect
the value of financial assets directly (e.g., assets related
to fossil fuel energy) or indirectly, through the effort and
cost of the adaptation required from companies.
At the same time, climate change-related opportunities
can be relevant. For instance, supporting the transition
of companies or the development of infrastructures that
are more resilient to physical risks can give rise to new
products and services or even lead to increased turnover.
While we know we are only at the beginning of this
journey, we aim to support our clients in managing their
own climate-related risks and opportunities by providing
them sustainable financial solutions and the necessary
guidance on the path to a low-carbon and more circular
economy.
Annual Report 2023 | novobanco
novobanco seeks to understand and manage
climate-related risks and opportunities through their
identification and the assessment of their impact on its
loan and investment portfolio.
From a strategic discussion perspective, the bank adopts
a systematic vision (as shown in the table below and
described in the next section) of climate risks, which
allows discussing their implications for business strategy
and planning the best response to them. On the other
hand, we have adopted a more granular approach to
the management and control of these risks, using more
detailed definitions (e.g., internal taxonomy) that allow
for a comprehensive assessment of climate risk factors
in the other financial and non-financial risk categories.
TYPOLOGIES OF PHYSICAL RISK
HORIZON
Acute risks
Caused by one-off events such as droughts,
floods and storms.
Chronic risks
Risks caused by gradual changes in climate
patterns such as rising temperature and sea levels,
increased pressure on water resources, loss of
biodiversity, or changes in land use.
S
S
TYPOLOGIES OF TRANSITION RISK
HORIZON
Public policy, legislation and regulation
The bank's obligation to integrate sustainability
criteria into its products and services faces
mounting pressure from regulatory requirements.
Technological
The need to incorporate new technologies
into production processes may affect
competitiveness and production costs.
Market
Shifts in supply and demand for products and
services as the effects of climate change become
increasingly mainstream.
Reputational
Perception by clients, stakeholders and society
at large of the Bank's approach to ESG factors
and their integration into the business.
S
S
S
S
S
Short-term
Medium-term
Long-term
225
Strategic analysis of main climate risks
The table below describes how we analysed the main
climate risks in terms of their potential impact on the
Bank's strategy, business and activity, and the most
significant measures we have adopted (or are in the
process of adopting) in order to prevent or mitigate
the risks and challenges identified.
RISKS
POTENTIAL IMPACT ON THE BANK'S
STRATEGY AND BUSINESS
OUR MITIGATION MEASURES
Physical risks
• Possible costs arising from damage to the Bank's physical
• Business continuity planning that ensures an adequate
Acute
typology
assets, including business disruption.
• Possible increased absenteeism of the Bank's employees.
• Business disruption for clients and counterparties due to
damage to production assets or limitations in the value chain
• Potential devaluation of collaterals on loans granted by the
Bank.
assessment of physical risks to the Bank's main assets and
activities and the establishment of the necessary contingency
measures.
• Based on the reinforcement of physical risk assessment
and quantification methodologies: a) adoption of a
collateral acceptance policy that encompasses additional or
differentiated requirements for formalising insurance policies
on received collateral; and b) establishment of covenants and
conditions for acceptance of financing that allow the inclusion
of aspects pertaining to the continuity of the businesses being
financed.
Physical risks
Chronic
typology
• Decrease in productivity and/or increase in operational and
production costs in exposed sectors, impacting the financial
performance of customers and counterparties or projects
financed by the Bank.
• Development of risk assessment methodologies, including
strengthening contact/engagement with clients (and
gathering information on their activity and projects).
• Integration of climate risk assessment into loan and pricing
decision processes.
Transition
risks
Policies
and legal
framework
• Limitations on the development of business strategies,
• Changes to the governance and organisational model to
increase in the Bank's compliance costs (or process inefficiency
costs) as a result of inadequate implementation of legal and
regulatory requirements, especially those of a prudential
nature.
• Increased operating costs for exposed sectors and companies.
• Inability to invest (due to restrictions on access to financing)
with an impact on the commercial activity of companies/
counterparties.
ensure a dedicated monitoring of ESG issues.
• Increased interaction with companies and counterparties, for
a better insight into their transition and business adjustment
challenges.
• Development of products and services with structuring
conditions and rationale aligned with our customers' transition
needs.
226
Management ReportSustainability ReportFinancial StatementsAnnex RISKS
POTENTIAL IMPACT ON THE BANK'S
STRATEGY AND BUSINESS
OUR MITIGATION MEASURES
Transition
risks
Technology
• Inability of the Bank's corporate clients and counterparties to
adapt, due to limited investment capacity or restricted access
to financing.
• Increased interaction with companies and counterparties, for
a better insight into their transition and business adjustment
challenges.
• Unavailability of the most suitable technologies (at a
• Development of products and services with structuring
reasonable cost) necessary to meet the new standards of
business operations.
conditions and rationale aligned with our customers' transition
needs.
• Business transformation and conversion costs, with an impact
on the financial performance of customers and counterparties.
• Establishment of partnerships that allow keeping abreast of
market developments and offerings of solutions/ technology.
Transition
risks
Market
• Changes in supply and demand for ESG-oriented banking
products and services, with an impact on the Bank's
commercial competitiveness.
• Promotion of awareness initiatives for the Bank's customers
and counterparties, encouraging them to proactively address
transition challenges.
• General increase in market prices of technology and production
factors with an impact on the competitiveness and financial
performance of companies.
• Development of risk assessment methodologies, including
strengthening contact/engagement with clients (and
gathering information on their activity and projects).
• Limitations on the growth of companies and sectors exhibiting
greater misalignment with efficiency and decarbonisation
standards, resulting in reduced demand for their goods and
services
• Increased interaction with companies and counterparties, for
a better insight into their transition and business adjustment
challenges.
• Development of products and services with structuring
conditions and rationale aligned with our customers' transition
needs.
Transition
risks
• Risk of failing to meet stakeholders' expectations regarding the
• Development, implementation and ongoing monitoring of a
Bank's performance on critical climate change issues.
Reputational
• Constraints on investors’ and stakeholders’ perception of the
Bank's brand image.
• The Bank's involvement in instances of non-compliance
with new ESG requirements, with an impact on its image and
reputation.
strategic ESG plan aimed at enhancing the Bank's readiness to
effectively respond to the challenges posed by climate risks.
• Adoption of conservative policies and criteria to ensure the
highest level of rigour and compliance in the Bank's decisions
and results.
• Rigorous communication with the market.
• Association of the Bank with clients, counterparties, suppliers
• Implementation of supplier selection and monitoring controls.
and other third parties with sensitive ESG profiles
• Reputational risks identification and assessment exercise.
227
Annual Report 2023 | novobanco 6.2.5.2 Risk identification and assessment
• Social risks: relate to social rights and the general
ESG risks represent the potential negative impacts
deriving from the current or future effects of possible
ESG risk factors implicit in clients and counterparties or in
the Bank's assets and liabilities. The impacts of ESG risks
are usually transmitted through ´traditional’ financial and
non-financial risk categories.
The integration of ESG risks within the taxonomy
means that this category of risk, consistently with the
other risks, is subject to processes of identification
and materiality assessment. Once the materiality of
these risks has been established, the standard formal
management and monitoring processes are applied. The
internal taxonomy comprises the following components
where ESG risk factors are described as follows:
• Climate and environmental risks: the main component
of ESG risk, it concerns the quality and functioning of
the environment and natural systems, including factors
relating to climate change, biodiversity, pollution and
waste management.
wellbeing and interests of society and communities,
and include factors such as equality, health, inclusion,
labour relations, health and safety at work, human
capital and communities’ development.
• Governance risks: relate to aspects of internal
governance, including the management and
supervisory bodies, internal organisation, remuneration
policies, internal control, tax practices, conduct and
transparency.
Each of these components is individually recognised and
assessed as to its impacts on the other risk categories,
with a particular focus on a) factors with an external
origin; and b) climate and environmental-related factors.
The internal impacts of risk factors are largely recognised
and controlled under the risk management framework
already established for the other risk categories: e.g.,
factors relating to the Bank's governance risks are
managed under novobanco's governance and internal
control model and compliance management, and the
impacts of physical risk factors on the Bank's activity
and facilities are managed under the business continuity
management framework.
OUR ESG RISK TAXONOMY
Transition risk
factors
Physical risk
factors
Factors associated with the challenges, and respective impacts, resulting from the transition to a low GHG emission
economy, including the effort required to change the energy mix (i.e., change to renewable sources) and the
adoption of more circular business models.
Factors arising from the physical manifestation of climate change and environmental degradation, analysed under
two categories: a) acute - which result from climatic and meteorological events with immediate negative impacts;
or b) chronic - which are determined by gradual changes in climatic and meteorological conditions, leading to
progressive ecosystem degradation.
Biodiversity
factors
Factors that relate to the quality and normal functioning of natural systems, including climatic factors, loss of
biodiversity (impact rationale) or consumption of physical and energy resources (dependency rationale).
Social risk
factors
Factors that relate to the basic components of wellbeing, security and the evolution of society and the economy.
Governance
factors
Factors pertaining to the good governance of institutions and companies, which should ensure good management
and control principles, including recognition of ESG challenges.
Greenwashing
factors
These factors cross-cut all the other risk factors, and are related to the possible misalignment between the
announced and the actual objectives and purpose of a given counterparty, issuer or instrument, with regard to ESG
issues.
Climate and environmental risks
Other environmental risks
Other ESG risks
228
Management ReportSustainability ReportFinancial StatementsAnnex 6.2.5.2.1 Climate Scenarios
novobanco recognises that the characteristics of climate
and environmental risks advise that their assessment,
management, and monitoring take into consideration
the potential scenarios for the evolution of their factors
and the timeframe for their materialisation.
The impact dynamics of transition and physical
risk factors is dependent on the success of the
implementation of policies and legislative proposals
currently under execution (or still under discussion): for
example, their success may lead to higher transition
risk (due to economic activity adaptation or conversion
efforts) and lower physical risk (through the ability to
control the increase in global temperature).
Scenarios serve as a reference point for risk approaches
by providing insights into the evolution of climate change
and the associated impacts. In other words, depending
on the scenario being considered, different assumptions
are considered for climate risk management strategies,
methodologies, and procedures.
Therefore, at the proposal of novobanco's sustainability
and risk management functions, the bank adopts annual
scenarios (along with the corresponding timelines) for
the evolution of climate risk. These scenarios encompass
the following:
• The design of the scenario (e.g., the main variables and
underpinning narrative); and
• Each scenario's probability of occurrence.
Acknowledging that our understanding, assessment,
and management of climate risks are still in their early
stages, in 2023 we embraced the scenarios outlined by
the NGFS. These scenarios were attributed equal value,
assuming an equal probability of occurrence for each, as
indicated in the matrix presented further down.
Each of the represented scenarios is further elaborated
through complementary scenarios that expand their
narratives, where novobanco considered:
• Orderly transition - net-zero 2050 scenario: global
warming is limited at up to 1.5º C through stringent
climate policies, allowing to reach net-zero status in
2050.
• Disorderly transition - disorderly scenario: Nationally
Determined Contributions (NDCs) are maintained until
2030 and transition efforts are accelerated from them
onwards. The level of global warming stays at 2°C.
• Warmer world – current policies: this scenario
simulates the greatest impacts from physical risks,
assuming that only currently known policies are
implemented.
Based on the chosen scenarios, novobanco assesses
different timeframes for the materialisation of risks, in a
forward-looking perspective: by utilising projections of
risk variables and metrics outlined in the scenarios, the
bank assesses the evolving dynamics of risks over time.
The year 2030 was selected as the reference year for
the assessment of the materiality of the risks.
The year 2030 was selected for the materiality
assessment for the following reasons:
• It is a public policy milestone at European level;
• It provides a sufficiently long time horizon to assess
the manifestation of risks but is still close enough to
determine management measures with predictable
effects and, to that extent, normally included in the
Bank's planning and management processes; and
• The year 2030 will be the timeframe considered for
the establishment of plans and metrics for the Bank's
balance sheet alignment/ transition.
Use of climate scenarios by type of risk
As far as possible, the assessment of ESG risks (and in
particular of climate and environmental risks), adopts
a forward-looking approach that acknowledges the
dynamic nature of risk factors and consequently the
varying resulting risk assessments.
In the identification and assessment of the materiality
of risks, novobanco considers climate scenarios for the
components of a) transition risk; b) phisical risk and
c) social risk.
The Transition Risk assessment is underpinned by a
sectoral approach that takes into account the expected
impact of carbon prices, energy price volatility and
technology investments - driven by energy transition
efforts - on the profit margin of companies in each
sector.
The transition score covers a total of 79 sectors across
agriculture, extractive industries, manufacturing
and services, and considers the expected impact of
upcoming carbon, energy and investment costs on a
company's profit margin - the climate shock - taking
into account the following component risk factors:
229
Annual Report 2023 | novobanco • Portfolio GHG intensity - carbon shock: The carbon
shock component represents the carbon price cost
based on the Scope 1 GHG emission-intensity of the
activities covered by the ETS, namely electricity and
heat production, energy-intensive industrial sectors
including oil refineries, steel, iron, aluminium, metals,
cement, lime, glass, ceramics, pulp, paper, cardboard,
acids and bulk organic chemicals production, and the
aviation sector; it reflects the portfolio's GHG intensity
risk.
• Portfolio energy intensity - energy shock: The energy
shock component represents the cost of energy prices
based on the intensity of energy consumption (by
type of energy: electricity, coal, natural gas, crude oil
and oil derivatives); it reflects the portfolio’s energy
intensity risk.
• Green investments in the portfolio - investment shock:
The investment shock component represents the
cost of green investments (CAPEX) based on the total
distance to the Taxonomy requirements; it reflects the
risk of portfolio misalignment with the Taxonomy.
The Physical Risk model is based on the integration of
4 components:
• Risk, Exposure, Vulnerabilities and Future Scenarios.
The Risk component represents the intensity and/or
frequency of each climatic hazard in a specific location,
and was calculated for seven different types: Floods
(river, urban and coastal), Extreme Heat, Landslides,
Earthquake, Tsunami, Water Scarcity and Wildfires.
• The Exposure component represents the location of
the client's headquarters, specifically its municipality;
• The Vulnerability component represents the inherent
susceptibility of a specific location and sectoral land
use (agroforestry, industry, urban areas and tourism) to
the consequences of a climate hazard;
• The Future Scenarios component represents how the
Exposure may change according to three different
climate scenarios for 2050 (NetZero 2050, Delayed
Transition and Current Policies).
The methodology for social risk places a strong
emphasis on labour-related issues and is divided into six
main topics, namely:
• Freedom of association - the right of individuals
to join or form groups, including trade unions and
organisations, without interference or coercion. It
allows people to collectively pursue common interests
and protect their rights.
RISK COMPONENTS SCENARISATION MATRIX - TIMEFRAMES CONSIDERED AND MAIN VARIABLES ASSESSED
2025
2030
2035
2040
2045
2050
2025
2030
2035
2040
2045
2050
2025
2030
2035
2040
2045
2050
2025
2030
2035
2040
2045
2050
2025
2030
2035
2040
2045
2050
2025
2030
2035
2040
2045
2050
Point-
in-time
(hist.)
Evolution of GHG emissions, carbon prices,
green CAPEX estimates.
Point-
in-time
(hist.)
Time and space evolution of each risk
factor (e.g. floods, forest fires, drought and
extreme heat).
Point-
in-time
(hist.)
No scenarisation - point-in-time assessment
based on exposure characteristics at the
reference date.
Point-
in-time
(hist.)
No scenarisation - point-in-time assessment
based on exposure characteristics at the
reference date.
Point-
in-time
(hist.)
No scenarisation - point-in-time assessment
based on exposure characteristics at the
reference date.
Pontual
(hist.
No scenarisation - point-in-time assessment
based on exposure characteristics at the
reference date.
Transition
Physical
Biodiversity
Social
Governance
Greenwashing
230
Management ReportSustainability ReportFinancial StatementsAnnex • Forced labour - any work or service that is not
• To justify, in a qualitative manner, the material (or
performed voluntarily and is required of an individual
under threat of violence or punishment.
• Discrimination - unfair or prejudicial treatment of
individuals or groups based on certain characteristics
such as race, gender, age, religion, disability or other
factors.
• Child labour - the employment of children below the
minimum age for employment as defined in the ILO
Minimum Age Convention, 1973 (No. 138) and the ILO
Worst Forms of Child Labour Convention, 1999 (No.
182).
• Occupational Health and Safety - the necessary
processes and measures to address workers’ safety
and health.
• Armed Conflicts - conflicts divided into six types
of events (battles, explosions/remote violence,
violence against civilians, riots, protests and strategic
developments).
6.2.5.2.2 Risks materiality
novobanco conducts its risk identification and
assessment exercise on an annual basis. In this
exercise, all the relevant risks for banking activity are
analysed and their materiality is assessed through
specific methodologies (considering the probability of
occurrence and the significance of their impacts), with
the following objectives:
• To determine the relationship/integration rationale
between ESG risks and the Bank's other risk
categories;
immaterial) impact of ESG risk factors, informing, for
example, the ICAAP; and
• To identify which risk categories and factors should be
specifically managed and controlled in the framework
of risk appetite and strategy.
Those risks which prove to be material are subsequently
subject to formal quantification, management/control
and regular monitoring procedures.
ESG risks are integrated in this exercise through
recognition that their factors impact 'traditional' risk
categories, using the following approach:
• Matrices of ESG risk factors and metrics: the metrics
are based on the components and factors previously
described, and, whenever possible, adjusted according
to business area and/or portfolio. The metrics permit
to make an objective assessment of the relevance
of the Bank's exposure and, when applicable, to
determine the scenario for the respective risk factor.
• Cross-cutting mapping of ESG risk factors and metrics
for traditional risk categories: ESG risks are recognised
as having the potential to materialise through the
impact (or increase in risk) revealed in financial and
non-financial risk categories.
• Risk materiality assessment scale, integrated into the
(traditional) risk categories, to rank the potential for
materialisation (present and long-term) of the risk
factors.
This integration can be visualised in the table to the right,
where ESG risk factors are correlated with traditional risk
categories.
DESCRIPTION OF TRADITIONAL RISK CATEGORY
Credit risk
Losses of capital (or remuneration) on banking book operations due the
inability of a counterparty to meet its obligations. Includes sovereign
and concentration risks.
Liquidity and
funding risk
Interest rate risk
on the banking
book
Market risk
Losses arising from the Bank's present or future inability to settle its
liabilities as they mature.
Losses in the Bank's financial results or economic value due to
unfavourable changes in market interest rates.
Impacts from fluctuations in market prices or prices of factors that
influence the valuation of instruments measured at fair value (e.g.
credit spread, interest rate, exchange rate).
Operational risk
Financial impacts resulting from inadequacy or failures in processes,
information systems or human conduct. Includes compliance,
reputational and information systems risks.
Pension fund risk Impacts resulting from the revaluation of Pension Fund's assets or
liabilities that lead to liabilities exceeding the value of assets.
Strategy risk
Current or future impacts arising from changes in the Bank's strategy
or restraints on its execution, or related to adverse impacts of business
decisions.
231
Annual Report 2023 | novobanco
Materiality assessment results
novobanco conducted for the first time a comprehensive
assessment of the materiality of the impact of ESG risks
on its risk profile and activity with reference date of 31
December 2022. This exercise, reviewed in 2023 and
whose results are summarised here, now incorporates
risk management and control methodologies. For
instance, the materiality assessment for credit risk
within the credit segmentation model (ESG) determines
the prioritisation of customers for information gathering
and additional risk analysis.
Due to the impact of transition and physical risk factors,
ESG risks particularly affect credit and strategy risk:
The adaptation effort of some industry sectors to
which the Bank is exposed is reckoned to be particularly
significant in the medium and long term, impacting the
creditworthiness of these companies. On the other hand,
the impact of physical risks on companies' activities
(impact on business continuity) may be relevant due
to the lack of mitigation measures.
For the same reasons and given the weight of the most
exposed sectors in the Bank's results, it was concluded
that ESG risks have a relevant impact on strategy risk.
CATEGORIES
MAIN RISK FACTORS AND METRICS
MAIN MITIGATION MEASURES
ASSESSMENT
Credit risk
• GHG emissions intensity, carbon prices.
• Insurance policies/collateral coverage
• Energy intensity, energy costs.
• Green CAPEX financial effort.
• Disruption in value chains (social risk) .
• Physical risk in real estate collateral and (location) of business
activity.
• Energy performance of real estate collateral.
• Country risk variables (physical, transition, social & governance).
• Sectoral approaches and policies
• Sectoral diversification
Liquidity and
funding risk
Interest rate
risk on the
banking book
Market risk
• Profile of main counterparties (physical risk, reputational risk).
• Limited exposure to financial counterparties,
• Location of depositors (physical risk).
• Employment sectors of depositors (transition risk).
namely insurance sector entities.
• Geographical diversification of depositors.
• Approach similar to that adopted for liquidity risk, including
• Limited exposure to financial counterparties.
assessment of possible impacts on contingent lines/
commitments.
• Geographical diversification of depositors.
• Replication of the analyses for credit risk.
• Risk profile of issuer and counterparties.
• Reputational profile of main counterparties .
• Limited exposure to ESG-labelled
• Robustness of ESG-labelled instruments - greenwashing risk.
instruments.
Operational
risk
• Location of the Bank's main facilities - physical risk
• ESG profile (reputational rationale) of novobanco's main
suppliers and counterparties.
• Risk profile of issuers and counterparties.
• Limited exposure to ESG-labelled
instruments.
• Low weight of real estate assets.
Pension fund
risk
Strategy risk
• Replication of market risk analysis.
• Perfil de risco dos emitentes e contrapartes.
• Energy performance of real estate assets.
• Limitada exposição a instrumentos com
• Location of real estate assets.
etiqueta ESG.
• Baixo peso de ativos imobiliários.
• Level of income (e.g. net interest income and fees and
• Management controls and regular
commissions) dependent on sectors exposed to high transition
risks.
streamlining of the Bank's business plans
and budget.
• New products and approach to clients
(transition finance).
232
Management ReportSustainability ReportFinancial StatementsAnnex 6.2.5.2.3 Analysis of Risks
Transition risk and financed emissions
novobanco acknowledges the direct correlation
between the GHG emissions level of its counterparties
and their transition risk: all else being equal, companies
with higher GHG emission intensity tend to have
greater adaptation or transition needs. Hence, without
disregarding other methodologies for assessing
transition risk, we monitor the emissions from the
portfolio of companies that we finance (i.e., our scope
3 emissions, category 15 - investments). Whenever
feasible, we try to obtain information reported by our
clients. Where not available, we adopt estimation-based
approaches.
The methodology we employ for measuring emissions
is based on the "Partnership for Carbon Accounting
Financials" (PCAF) global standard for the accounting
and disclosure of GHG emissions financed through loans
and investments.
To calculate emissions, we apply an allocation factor
to the GHG emission values of counterparties (actual
or estimated) in order to determine the share that
novobanco must report due to its financing of the
company's activity.
In summary: novobanco GHG emissions = company GHG
emissions x allocation factor.
We have adopted the following PCAF data
quality hierarchy to calculate the emissions of our
counterparties (scopes 1, 2, 3, where available):
• Score 2: counterparty emissions calculated on the
basis of emissions reported by the counterparties,
incorporating financial information obtained from
the IES (Simplified Business Information) and the
companies' annual reports.
• Score 4: this score incorporates financial information
from the companies, to which sectoral carbon intensity
ratios (tCO2/M€ revenues) are subsequently applied
at the level of the company's Economic Activity Class
(80 sectoral divisions applied).
• Score 5: lowest data quality level, with sectoral carbon
intensity ratios applied at the level of the company's
Economic Activity Class (80 sectoral divisions applied).
We estimate that our emissions related to loans to
companies amounted in 2023 to 2.6 million tonnes
of CO2 equivalent, covering approximately 99.8% of
novobanco's corporate loans portfolio (exposure value,
excluding financial activities and public administration).
The carbon intensity of novobanco's financing portfolio is
therefore around 199/tCO2 e per million euros financed.
Both the total emissions financed and the carbon
intensity of novobanco's corporate loans portfolio have
therefore increased significantly. More than 85% of
this increase can be explained by the increase in scope
3 real information available and the remainder by the
significant increase in scope 1 emissions related to an
exposure that was previously based on sector averages
(PCAF score 4 or 5) and is now based on real data (PCAF
score 2).
Financed emissions
(loan portfolio)
2023
2022
Oustanding amount in scope
(mn €)
13 052
13 014
Total emissions S1 (tCO2)
1 521 809
1 393 901
Total emissions S2 (tCO2)
148 275
155 125
Total emissions S3 (tCO2)
922 372
150 083
Total emissions (tCO2)
2 592 456
1699 109
Carbon Intensity (tCO2/M€)
199
131
It was only possible to use real emissions information
reported by companies for 6% of the loan portfolio
analysed (scope 1). However, the real emissions data
reported represent 43% of the total emissions financed,
which can be explained by the concentration in larger
companies and in sectors that are particularly relevant
for climate policy.
Notwithstanding the foregoing, novobanco recognises
the significant improvement in the availability and
quality of GHG emissions information reported by
companies and believes that this improvement will
continue to accelerate in the coming years, not only as a
result of legal and/or regulatory reporting requirements
applicable to an increasing number of companies, but
above all as a result of the development and evolution
of transition plans and monitoring practices by an
increasing number of companies operating in the market.
233
Annual Report 2023 | novobanco
novobanco thus reinforces its commitment to the
ongoing monitoring and disclosure of data on the
emissions it finances, as well as to the continuous
improvement of the quality and comprehensiveness
of the data collected, which is essential for further
analysis and monitoring of impacts, and for expanding
the implementation plans of its own transition plan and
strategy.
The portfolio's financed emissions are heavily
concentrated in three carbon-intensive sectors, which
account for 80% of total emissions but only 32% of the
portfolio's outstanding amount:
• C - Manufacturing;
• H - Transportation and storage; and
• E - Water collection, treatment and distribution,
sanitation and waste management.
Transition risk additional methodologies
As a complement to the analysis of GHG emissions, we
use additional classifications of our corporate loan book
and monitor KRIs in our Sustainability Steering, namely:
- the Climate Policy Relevant Sectors (CPRS) is used
by novobanco to better assess and monitor transition
risk, focusing on sectors negatively affected or on
which the impact is uncertain. This methodology takes
into account the following factors: direct and indirect
contribution to GHG emissions (such as the production
and distribution of fossil fuels or renewable energy);
relevance for climate policy (such as the cost structure
sensitivity to regulatory or tax changes based on GHG
emissions); and importance in the energy value chain
(production, use, consumption). Taking into account the
sectors with "negative" and "uncertain" impact and the
classification of sectors included in the "Annual Report
on the Banking Sector's Exposure to Climate Risk"
(July 2023, BP), the exposure of novobanco's loan and
investment portfolio to these CPRS sectors in December
2023 was 47% (better than the average for the banking
sector in 2021 of 59%, as per this report, having declined
from 48% in December 2022.
Breakdown of sectoral contribution to carbon footprint (loan portfolio)
2022
2023
Other
Technical Activities
Mining and quarrying
Human health and social
Accommodation and food activities
Electricity, gas, water
Construction
Wholesale and retail
Agriculture, forestry and fishing
Water collection , treatment
Transportation and storage
Manufacturing industry
2.6 M
tCo2e
Loan portfolio financed
emissions (tCo2e), 2023
+53%
Var. 22/23
199
Carbon intensity (tCo2e)
per €1 million
+52%
Var. 22/23
0%
10%
20%
30%
40%
50%
(1) Calculation based on a best effort approach, excluding companies in the sectors "Financial and insurance activities" and "Public administration and defence;
Obligatory Social Security”.
234
Management ReportSustainability ReportFinancial StatementsAnnex We analyse the bank's exposure to CPRS on a monthly
basis in terms of both this exposure’s share of the
volume of loans and investments, and its share of
income from the loan component.
- Carbon-intensive sectors - we analyse the loan
and investment portfolios’ percentage of exposure
to these sectors and its evolution. In December 2023
this percentage was 11% (considering the loan and
investment portfolios’ exposure to "high" and "very high"
intensity sectors).
- Exposure to sectors excluded from the benchmarks
aligned with the Paris Agreement - we analyse the
loan and investment portfolios’ percentage of exposure
to these sectors and its evolution. In December 2023
this percentage was 11% (considering the loan and
investment portfolios’ exposure to "high" and "very high"
intensity sectors).
Transition risk in real estate collateral
As the economy transitions to a low carbon economy,
market policies and trends may indirectly impact the
financial value of real estate - demand for properties
with lower energy efficiency levels may diminish and
these may also become less competitive due to the
development of more energy-efficient alternatives
(to which the legislative changes under discussion
contribute). Therefore, the transition risk is also
assessed with regard to the real estate collateral
on the Bank's credit operations.
The energy classification of properties will also affect
the alignment of novobanco's loan portfolio with its
commitments to reduce its carbon footprint.
During 2023, the Bank made a strong effort to collect
and register the energy certification levels of its real
estate collateral. Currently, 36% of the collateral
is registered based on the actual level of energy
certification, and if we consider residential properties
with loans granted after 2013, this coverage rises to
55%, and for commercial properties to 46%. In terms
of actual EPC data, 34% of properties currently have
a B- or higher certification.
We have introduced new procedures for lending against
property, requiring customers to provide an energy
performance certificate.
Exposure by sector (loan portfolio)
Distribution by GHG emissions intensity
56%
25%
8%
6%
4%
Low
Medium
High
Very High
Other
Other
B - Mining and quarrying
S - Other services
E - Water collecttion, treatment
A - Agriculture, forestry and fishing
Q - Human health and social
D - Electricity, gas, water
M - Technical activities
I - Accomodation and food activities
H - Transports and storage
F - Construction
G - Wholesale and retail
C - Industry
0%
5%
10%
15%
20%
25%
30%
235
Annual Report 2023 | novobanco Various computer developments are also underway
that will permit to generate information on the energy
performance of properties financed in the past. At
present, it is mandatory to obtain the energy certificate
for new loans secured by property.
It is worth noting that novobanco proactively manages
the energy efficiency of collaterals and has long offered
financing solutions with favourable terms for properties
with better energy performance levels.
Assessment of physical risks
In addition to transition risk, novobanco also devotes
special attention to monitoring physical risks. To this end,
the Bank uses methodologies based on the classification
of risks by geographical location, following regulatory
recommendations.
The methodology used to calculate the results reported
here is based on public information - ThinkHazard! -
which is prepared by an initiative led by the World Bank.
Of the various physical risk typologies available, we
use those with the greatest impact on the structure
of the properties financed, i.e., a) floods, b) fire, and c)
landslides, as shown by the colours in the maps below.
The maps are used individually, to showcase a specific
risk typology, or together, for a global understanding
of the exposure to risk. It should be noted that this
is a conservative approach, insofar as a district's
classification represents the most severe classification
within its municipalities.
Property collateral by energy class
% of number of properties (residential class)
2023,2022
A
B
C
D
E
F
G
2023
2022
7%
6%
22%
20%
46%
47%
19%
22%
4%
2%
1%
3%
1%
1%
236
Management ReportSustainability ReportFinancial StatementsAnnex Exposure to physical risks
The exposure to physical risks results from the aggregate
assessment of the typologies of a) floods; b) fires; and c)
landslides. The risk level is depicted by the colour of the
district, while novobanco’s risk exposure is indicated as
the percentage of concentration of real estate collateral
(residential and commercial). This concentration is
measured by the number of properties serving as real
estate collateral as of 31 December 2023.
Overall, the following results are to be considered:
Due to demographic factors, financed real estate tends
to concentrate in major urban areas, which, given the
nature of the national territory, are predominantly
situated along the coast, and therefore exposed to
specific risks such as flooding and landslides.
Fire risks are more pronounced in the central and interior
areas of the country, where there is no significant
concentration of properties financed by the Bank.
The assessment presented here takes a conservative
approach by representing a district's level of risk based
on the most severe classification among its
municipalities. Nevertheless, the exposure to physical
risks may be relevant, given the characteristics of
the national territory. The Bank's insurance policies
and requirements therefore play an important role in
protecting the value of collaterals.
Concentration of real estate collaterals
% of number of properties
High
Medium
Low
Residual
Concentration level
of the Bank’s lending
<5%
<10%
<15%
<20%
<25%
≥25%
V. do
Castelo
< 5%
Braga
< 10%
Vila Real
< 5%
Bragança
< 5%
< 20%
Porto
Viseu
< 5%
Aveiro
< 10%
Guarda
< 5%
Castelo Branco
< 5%
Portalegre
< 5%
Portalegre
Coimbra
< 5%
Leiria
< 5%
Santarém
< 5%
Lisboa
25%
> 5%
Açores
Madeira
Aggregate risk
classification:
flood, fire and landslide
< 5%
Setúbal
< 15%
Évora
< 5%
Beja
< 5%
Faro
< 5%
Maps of physical risk in Portugal – external information
High
Medium
Low
Residual
Risk of flood1
Risk of fire
Risk of landslide
1 Urban, river and coastal flood
237
Annual Report 2023 | novobanco 4.2.5.2.4 Integration of Risks
Our transition finance model
Our climate risk management strategy assumes that
we will maintain business and lending relationships
with sectors and companies facing relevant transition
challenges. novobanco has consistently shown a leading
role in supporting the Portuguese business community.
Therefore, our approach is centred on providing direct
support to facilitate our clients' transition. To this
end, we consider it essential to know and assess the
challenges that climate and energy transition will pose
to the companies we finance. On the basis of this
assessment, we intend to: a) strengthen our offer of
products and services by adapting them to the specific
transition or conversion needs of each company; b)
Identify the potential impact of these challenges on
each company's finances; c) partner with specialists in
the different areas of sustainability that can help our
clients make the necessary investments to integrate
sustainability into their strategy.
We anticipate that the companies that better prepare for
their transition will demonstrate enhanced capabilities
for operational and financial performance. This should be
acknowledged in terms of their access to financing and
the associated conditions. novobanco intends to reward
this reduction in uncertainty and better performance
through the access conditions to finance, and has
already introduced price advantages for some products
linked to sustainability. Conversely, the identification
of ESG challenges that are not compatible with the
evaluation of the viability and financial capability of the
company and the Bank's clients, may lead to decisions
to restrict financing or to increase prices.
In this way, novobanco embraces a balance sheet
transition/ alignment strategy based on the transition
trend observed among its customers, which will be
promoted, whenever possible, by the offer of products
and services.
Methodologies for balance sheet alignment
As part of its strategic planning, novobanco has been
developing methodologies since the end of 2021 that
will allow it to set objectives to progressively align its
balance sheet.
Firstly, we recognised the need for methodologies
that would provide us with an encompassing view of
climate and ESG risks within our portfolios, such as
through the scoring model. Next, we proceeded with
the development of methodologies that would allow
us to conduct an effective risk assessment based
on information collected from our clients and the
specific characteristics of each company (including its
performance and strategic planning) - the ESG corridor.
Finally, the implementation of this approach should
allow us to identify priority clients and operations for
our transition finance model: that is, clients with good
financial capability and viability but facing, now or in the
future, relevant transition challenges.
The implementation of these components follows the
structure outlined below, which is driven by: a) the
alignment targets to be adopted (such as emissions or
other factors pertaining to risk reduction or mitigation);
b) sectoral financing policies and strategies; and c) the
Bank's strategic priorities (commercial and internal
organisation).
Alignment guidelines, requirements and targets
ESG Scoring
Sectoral policies
Business leads
ESG-adjusted segmentation matrix
Exemption corridor
ESG corridor
ESG covenants
Design of products & services
novobanco transition plan
First phase of developments (2022-2023): ESG scoring,
segmentation model and design of ESG risk assessment
methodologies (v.g., ratings).
3
2
0
2
-
1
2
0
2
4
2
0
2
In this phase, an ESG risk scoring assessment was
conducted for all customers in the non-financial corporate
segment, providing a comprehensive overview of
the portfolio's overall risk profile. Subsequently, the
segmentation criteria were revised to facilitate the
operationalisation of the different methodologies, including
initiating customer contacts for risk assessment purposes.
In the final phase (2023 and 2024), the methodologies
operate at a regular pace, enabling the assessment
of customers and operations, with the results being
incorporated into the decision-making processes related to
risk and/or pricing.
238
Management ReportSustainability ReportFinancial StatementsAnnex The integrated operation of the model
Monitoring of climate risks
The ESG segmentation matrix is calibrated based on
balance sheet alignment objectives and risk appetite
- all corporate clients are subject to ESG scoring,
The Bank has made progress in integrating ESG risk
assessment and quantification into credit management:
a) ESG scoring ratings;
b) ESG information collected from clients;
c) minimum safeguards in place for financing.
During 2023, novobanco revised the action plan for
integrating ESG risk into loan granting, with the aim
of prioritising the integration of ESG risk assessment
into credit risk assessment for the most important
transactions and in sectors with the highest ESG risk
("high" and "severe" risk according to our sectoral ESG
scoring), guaranteeing the inclusion of an ESG risk
assessment in the credit analysis of all transactions
that meet these criteria. The analyst's assessment
will be supported by sector guidelines and client ESG
data (public data and consultation with clients, where
appropriate) and will be implemented in the first half of
2024.
novobanco is also accelerating the collection of data
for disclosure and portfolio risk management purposes,
in order to maximise coverage of the largest exposures
in the sectors most exposed to ESG risk ("high" and
"severe" risk). This data collection effort will leverage
publicly available data as well as client engagement, and
should allow for an increase in the weight of real data in
the 2024 disclosures and upcoming stress tests.
It should also be noted that the Portuguese banking
ecosystem is seeking to create a common platform for
collecting ESG risk data from commercial clients. The
platform is due to be launched in 2024 and should allow
banks to significantly speed up data collection, both for
risk management and for credit decisions. This platform
should be highly beneficial to our data collection efforts
and we intend to gradually integrate it into our C&E risk
analysis and disclosure processes as an alternative to
novobanco's proprietary questionnaires.
novobanco designed its Risk Appetite and Credit Risk
strategy based on a medium and long-term perspective,
while ensuring that short-term effects are anticipated
and mitigated.
This strategy and the indicators that support it are
incorporated in the Bank's RAF-RAS.
The analysis of the main climate risks related metrics
is reported on a monthly basis to novobanco's
management bodies.
KRIs that monitor various risk indices are also presented
on a monthly basis in the Sustainability Steering, such as:
• Exposure to climate-sensitive sectors;
• Exposure to the most carbon-intensive sectors,
• Exposures collateralised by residential and commercial
properties with the worst energy performance
certificates (EPC);
• Production of green finance and investments;
• Alignment with the taxonomy.
It should also be said that both the risk strategy and the
risk appetite serve as guidance for the Bank's incentives
system and remuneration policies, ensuring alignment
with key risk metrics and corresponding objectives.
Currently, the remuneration policy of novobanco's
management body includes assessment metrics for
the Bank's ESG performance.
MONTHLY MONITORING
Green production (financing, investment)
No exposure to excluded sectors
Operations with Minimum Safeguards
Exposure to taxonomy eligibility
Exposure to climate-exposed sectors
Sectoral exposure by carbon intensity
Exposure to physical risk
239
Annual Report 2023 | novobanco 6.2.6 Our next goals in climate and
environmental risk management
Our ESG strategy includes the following key activities by
thematic area:
A) Business Strategy
Strategic guidelines:
• To understand the short, medium and long term
impact of climate and environmental risks on the
business environment in which we operate, so that we
can make informed, consistent and strategic decisions;
• To strengthen the integration of climate and
environmental risks affecting the business
environment in the short, medium or long term.
Challenges ahead:
• To strengthen the application of the policy on
exclusions and minimum safeguards for financing
and investment in certain sectors and activities,
transposed to the risk appetite policy, and establish
robust control and implementation processes;
• To enhance the integration of climate and
environmental KRIs within the risk appetite policy
(RAF/RAS);
• To continue to develop appropriate key risk indicators
and to set appropriate limits to effectively manage
climate and environmental risks;
• To ensure effective monitoring of exposures and
responses to climate and environmental risks;
• To collect data and assess the Bank's portfolio in light
of the taxonomy.
C) Risk management
Challenges ahead:
• To assess and monitor the business environment in
which we operate, particularly in terms of products and
services, and strengthen the Bank's offer tailored to
support our client's journey towards climate transition;
Strategic guidelines:
• To incorporate climate and environmental risks into
risk management, with the objective of monitoring
and mitigating these risks over a sufficiently long
timeframe;
• To identify the risks arising from climate change and
environmental degradation in key industry sectors,
geographic areas and related products and services,
reinforcing our sectoral policies;
• To define and monitor key performance indicators
(KPIs) at the level of business lines (cascading down);
• To determine which climate and environmental risks
affect business strategy in the short, medium and long
term, e.g., using scenario analyses and stress testing.
B) Risk governance and risk appetite
Strategic guidelines:
• To consider climate and environmental risks when
developing the business strategy and objectives;
• To improve the climate risk management model;
• To define the Appetite for climate risk.
• To continuously monitor the effect of climate
change and environmental factors on current market
exposures.
Challenges ahead:
• To further enhance our risk materiality assessment,
adopting a holistic and well-documented approach to
evaluate the impact of climate and environmental risks
on the existing risk categories;
• To implement an enhanced approach to risk
identification/assessment and to the development
of risk methodologies, including methodological
definitions and customer ESG scoring results
(segmentation model);
• To strengthen mitigation measures for C&E risks;
• To adopt a strategic approach to measure and mitigate
climate and environmental risks in accordance with the
risk appetite strategy, and accordingly adapt policies
and procedures, risk limits and risk control.
240
Management ReportSustainability ReportFinancial StatementsAnnex F) Quantification methodologies
and stress testing
Strategic guidelines:
• To enhance stress testing approaches;
• To develop methodologies for quantifying climate
risks.
Challenges ahead:
• To develop stress testing models focusing on climate
risks;
• To improve methodologies for quantifying climate risks
as the depth of historical data increases.
D) Management of credit risk
Strategic guidelines:
• To consider climate and environmental risks at all
stages of the credit granting process and portfolio risk
monitoring.
Challenges ahead:
• Full integration of C&E risks into the financing
origination framework;
• This phase corresponds to the development of risk
methodologies that will provide the foundation for
adjusting integration procedures and the decision-
making framework to incorporate climate and
environmental risks;
• To define and apply sectoral guidelines to credit
origination processes enabling a more detailed ESG risk
analysis of larger loans;
• To design methodologies to provide integrated
assessment of client/transaction risk profile and EU
Taxonomy rating (alignment);
• To consider climate-related risks in the assessment of
collateral and in particular of real estate collateral.
E) Management of operational risk
Strategic guidelines:
• To consider the possible adverse impacts of climatic
and environmental events on business continuity and
also on reputational risks;
Challenges ahead:
• To assess the impact of physical risks on all operations,
including the ability to recover quickly and continue to
provide services;
• To ensure that remuneration policies and practices
encourage behaviour aligned with our climate and
environmental approach (risk), as well as with the
voluntary commitments undertaken by the institution;
• To preemptively identify future sources of climate-
related risks and/or litigation related to its own
activities, to undertake an assessment of these
risks and to adopt mitigation measures for the risks
identified.
241
Annual Report 2023 | novobanco 7 ESG
PERFORMANCE
INDICATORS
242
Management ReportSustainability ReportFinancial StatementsAnnex 7.1 Environmental Indicators
Environmental Indicators - Materials
consumed
White paper
Internal use (tonnes)
Paper for Internal use (Kg/employee)
IT and electronic consumables
2023
2022
2021
23 vs 22
172.8
41.1
148.2
36.2
155.2
37.0
16.6%
13.3%
Toner (units)1
2 482.0
2 856.0
-
-13.1%
Environmental Indicators - Energy
Electricity
Electricity consumption (kWh)
13 822 891.5
13 183 802.0
16 296 473.1
Total electricity consumption (GJ)
49 762.4
47 461.7
58 667.3
Electricity consumption (kWh/employee)
3 284.1
3 223.4
3 886.6
Diesel
Generator diesel consumption (litres)2
Generator diesel consumption (GJ)2
4 549.5
164.0
3 610.8
130.2
504.2
18.2
Vehicles diesel consumption (litros)
1 352 296.1
1 563 746.0
1 620 056.6
Vehicles diesel consumption (GJ)
48 617.7
56 219.8
58 244.3
Gasoline
Vehicles gasoline consumption (litres)
Vehicles gasoline consumption (GJ)
35 035.3
1 148.5
1 680.0
55.1
840.0
27.5
Total energy consumption (GJ)
99 962.7
103 866.8
116 957.3
Total energy consumption per employee (GJ)
23.7
25.4
27.9
4.8%
4.8%
1.9%
26.0%
26.0%
-13.5%
-13.5%
1 985.4%
1 985.4%
-3.8%
-6.5%
Trips
Number of vehicles
Number of flights
958
1 275
922
783
957
517
3.9%
62.8%
1) The value of 2022 toners has been recalculated due to new ordering procedures.The value of 2022 toners has been recalculated due to new ordering
procedures.
2) Diesel consumption is an estimate based on the number of hours generators were operating novobanco, Banco Best and GNBGA
243
Annual Report 2023 | novobanco
Environmental Indicators - Emissions
(tCO2e)*
2023
2022
2021
23 vs 22
Direct emissions (Scope 1)
Emissions from trips in company cars
Emissions from emergency generators
Emissions from leaks of fluorinated gases
Indirect emissions (Scope 2)**
Emissions from the production of electricity purchased
(market-based method)
Emissions from the production of electricity purchased
(Location based method)
3 675.3
3 583.6
12.8
78.9
1 146.3
1 146.3
4 158.1
3 999.2
10.2
148.7
811.3
811.3
4 696.1
4 311.8
1.3
382.9
2 937.5
-11.6%
-10.4%
25.5%
-46.9%
41.3%
2 937.5
41.3%
1 534.8
2 013.3
2 386.5
-23.8%
Total (Scopes 1 and 2)
4 821.6
4 969.4
7 633.6
-3.0%
Indirect emissions (Scope 3)
4 234.4
6 102.6
4 184.2
-30.6%
Emissions from Employees’ business trips, including
flights
Emissions from employees’ home/ work daily trips***
Emissions over the life cycle of the paper consumed
Emissions from the paper recycling process
Emissions from water consumption
Emissions from wastewater treatment
520.8
357.4
149.4
3 608.9
82.2
3.7
9.3
9.5
5 649.5
3 909.8
71.0
3.2
10.6
10.8
76.6
3.9
11.0
-
Total (Scopes 1, 2 and 3)
9 056.0
11 072.0
11 817.8
45.7%
-36.1%
15.8%
15.6%
-12.3%
-12.4%
-18.2%
Total (Scopes 1, 2 and 3) per employee
2.2
2.7
2.8
-20.5%
Financed Emissions
2 592 458.0
1 699 109.0
Total (Scopes 1, 2 and 3 with financed emissions)
2 609 423.7
1 720 441.6
-
-
52.6%
51.7%
**See methodological notes
**Scope 2 calculation by location-based method since 2018 only. The Total (S1+S2) was calculated using the Market-Based approach
*** Scope novobanco
244
Management ReportSustainability ReportFinancial StatementsAnnex
Environmental Indicators
Water consumption
2023
2022
2021
23 vs 22
Water consumption from public supply network (m3)
35 010.2
39 870.2
41 355.1
-12.2%
Water consumption per employee (m3/employee
8.3
9.8
9.9
-15.1%
Environmental Indicators
Waste management
Paper sent for recycling (tonnes)
Cardboard sent for recycling (tonnes)
Other papers
Plastic Bank Cards sent for recycling (tons)
Toner sent for recycling (units)
2023
2022
2021
23 vs 22
157.4
61.8
4.1
1.7
na
99.0
51.9
-
1.4
117.4
66.3
-
0
2 950
5 944
59.0%
19.1%
-
21.4%
-
245
Annual Report 2023 | novobanco 7.2 Social Indicators
Employees
Total
Men (#)
Men (%)
Women (#)
Women (%)
2023
4 209
1 926
45.8%
2 283
54.2%
2022
4 090
1 880
46.0%
2 210
54.0%
2021
23 vs 22
4 193
1 944
46.4%
2 249
53.6%
2.9%
2.4%
-0,2 p.p.
3.3%
2 p.p.
Employment contract
Total permanent workforce
Men (#)
Men (%)
Women (#)
Women (%)
Total Fixed-term Employees
Men (#)
Men (%)
Women (#)
Women (%)
2022
4 026
1 857
46.1%
2 169
53.9%
64
23
35.9%
41
64.1%
2021
23 vs 22
4 153
1 929
46.4%
2 224
53.6%
40
15
37.5%
25
62.5%
0.5%
0.1%
-0.2 p.p.
0.9%
0.2 p.p.
154.7%
195.7%
5.8 p.p.
131.7%
-5.8 p.p.
2023
4 046
1 858
45.9%
2 188
54.1%
163
68
41.7%
95
58.3%
246
Management ReportSustainability ReportFinancial StatementsAnnex Trainees and independent
professionals*
2023
2022
2021
23 vs 22
Trainees
Men (#)
Women (#)
Temporary work
Men (#)
Women (#)
Provision of service
Men (#)
Women (#)
Total (#)
10
5
5
13
5
8
1
1
0
24
10
4
6
42
10
32
2
0
2
54
14
5
9
30
7
23
4
2
2
48
0.0%
25.0%
-16.7%
-69.0%
-50.0%
-75.0%
-50.0%
100.0%
-
-55.6%
* Not included in the total number of the Grupo novobanco employees. These are self-employed professionals who carry out their activity
on the premises of Group companies, to whom the companies are responsible for their general safety in the work environment.
Employess Academic
Qualifications
University Education
Men (#)
Men (%)
Women (#)
Women (%)
High school/Basic Education
Men (#)
Men (%)
Women (#)
Women (%)
2023
2022
2021
23 vs 22
3 117
1 356
33.2%
1 761
43.1%
973
524
12.8%
449
11.0%
3 100
1 357
32.4%
1 743
41.6%
1 093
587
14.0%
506
12.1%
4.1%
4.3%
0.4 p.p.
4.0%
0.4. p.p.
-0.9%
-2.3%
-0.6 p.p.
0.7%
-0.3 p.p.
3 245
1 414
33.6%
1 831
43.5%
964
512
12.2%
452
10.7%
247
Annual Report 2023 | novobanco Employee distribution by gender and
professional category
2023
2022
2021
23 vs 22
Senior leadership
Total
Men (#)
Men (%)
Women (#)
Women (%)
< 30 years old
30 to 50 years old
> 50 years old
Leadership
Total
Men (#)
Men (%)
Women (#)
Women (%)
< 30 years old
30 to 50 years old
> 50 years old
Technical
Total
Men (#)
Men (%)
Women (#)
Women (%)
< 30 years old
30 to 50 years old
> 50 years old
Administrative
Total
Men (#)
Men (%)
Women (#)
Women (%)
< 30 years old
30 to 50 years old
> 50 years old
Assistance
Total
Men (#)
Men (%)
Women (#)
Women (%)
< 30 years old
30 to 50 years old
> 50 years old
481
295
7.0%
186
4.4%
1
242
238
373
205
4.9%
168
4.0%
0
244
129
2 265
1 003
23.8%
1 262
30.0%
145
1 456
664
1 083
416
9.9%
667
15.8%
143
562
378
7
7
481
307
7.5%
174
4.3%
1
265
215
388
218
5.3%
170
4.2%
0
272
116
2 170
955
23.3%
1 215
29.7%
101
1 524
545
1 044
393
9.6%
651
15.9%
84
639
321
7
7
472
301
7.2%
171
4.1%
2
292
178
461
257
6.1%
204
4.9%
0
346
115
1 973
891
21.2%
1 082
25.8%
111
1 459
403
1 279
487
11.6%
792
18.9%
61
831
387
8
8
0.2%
0.2%
0.2%
0
-
0
4
3
0
-
0
4
4
0
-
0
4
3
248
0.0%
-3.9%
-0.5 p.p.
6.9%
1 p.p.
0.0%
-8.7%
10.7%
-3.9%
-6.0%
-0.4 p.p.
-1.2%
-0.2 p.p.
-
-10.3%
11.2%
4.4%
5.0%
0.5 p.p.
3.9%
0.3 p.p.
43.6%
-4.5%
21.8%
3.7%
5.9%
0.3 p.p.
2.5%
-0.1 p.p.
70.2%
-12.1%
17.8%
0.0%
0.0%
-
-
-
-
0.00%
0.0%
Management ReportSustainability ReportFinancial StatementsAnnex Annual Report 2023 | novobanco
2023
2022
2021
23 vs 22
A
D
A
D
326
207
159
262
155
171
180
121
25
109
98
48
83
76
77
82
83
68
8
141
121
49
85
128
A
66
39
27
27
34
5
D
455
254
201
68
156
231
2021
6.2%
3.5%
2.7%
1.1%
2.3%
2.8%
A
D
105.0% -21.0%
101.3% -22.7%
108.5% -19.0%
116.9%
-2.0%
77.9%
-2.4%
212.5% -40.6%
23 vs 22
1.3 p.p.
0.5 p.p.
0.8 p.p.
1.1 p.p.
0.6 p.p.
-0.4 p.p.
Staff turnover (%)
2023
20222
6.3%
3.1%
3.2%
2.7%
2.4%
1.2%
5.0%
2.6%
2.4%
1.6%
1.8%
1.6%
2023
2022
2021
23 vs 22
A
D
R
A
D
R
E
S
R
370
277
3.3%
218
314
6.4%
168
126
1.5%
92
155
3.0%
202
151
1.8%
126
159
3.4%
211
102
1.2%
124
132
27
97
78
1.1%
0.9%
84
10
88
97
2.6%
2.2%
129
1.7%
-
-
-
-
-
-
-
-
69.7%
-11.8% -3.1 p.p.
82.6%
-18.7% -1.5 p.p.
60.3%
-5.0% -1.6 p.p.
70.2%
15.9% -1.4 p.p.
57.1%
0.0% -1.1 p.p.
170.0%
-39.5% - 0.8 p.p.
249
Admissions
and departures
Total
Gender
Men
Women
< 30 years old
30 to 50 years old
> 50 years old
A - Admissions; D - Departures
Total
Gender
Men
Women
Age bracket
< 30 years old
30 to 50 years old
> 50 years old
Staff turnover
including trainnees,
temporary work
and provision of
services (%)
Total
Gender
Men
Women
Age bracket
< 30 years old
30 to 50 years old
> 50 years old
A - Admissions; D - Departures
Performance
evaluation
2023
2022
2021
23 vs 22
M
F
T
M
F
T
M
F
T
M
F
T
Employees (#)
1 671
1 966
3 637
1 884
2 173
4 057
2 074
2 318
4 392
-11.3%
-9.5%
-10.4%
Senior Leadership
(#)
Senior Leadership
(%)
Leadership (#)
Leadership (%)
Technical (#)
Technical (%)
261
160
421
286
166
452
294
168
462
-8.7%
-3.6%
-6.9%
85.0
92.0
_
-
-
-
-
-
-
-
-
-
200
163
363
254
199
453
285
220
505
-21.3% -18.1%
-19.9%
91,7
95.9
-
-
-
-
-
-
-
-
-
-
864
1 104
1 968
860
1 041
1 901
951
1 152
2 103
0.5%
6.1%
3.5%
90.5
90.9
-
-
-
-
-
-
-
-
-
-
Administrative (#)
339
539
878
476
767
1 243
536
778
1 314
-28.8% -29.7%
-29.4%
Administrative (%)
86.3
82.8
Assistance (#)
Assistance (%)
7
100
0
-
-
7
-
-
8
-
-
0
-
-
8
-
-
8
-
-
0
-
-
8
-
-
-12.5%
-
-
-
-
-
-12.5%
-
The performance evaluation ends in May of each year.
The values presented refer to the evaluation received in the year, but referring to year n-1
M - Male; F – Female; T - Total
Promotion
Function change (#)
Merit (#)
Total (#)
2023
303
1 038
1 341
2022
283
1 002
1 285
2021
23 vs 22
251
811
1 062
7.1%
3.6%
4.4%
250
Management ReportSustainability ReportFinancial StatementsAnnex
Training hours /
employee
Total
Gender
Men
Women
77 610.3
91 822.9
Professional category
Senior Leadership
19 568.4
Men
Women
Leadership
Men
Women
Technical
Men
Women
Administrative
Men
Women
Assistance
Men
Women
T - Total; A - Average
11 856.9
7 711.5
16 099.7
9 087.7
7 012.0
77 498.1
33 917.4
43 580.7
56 238.1
22 719.3
33 518.8
29.0
29.0
0.0
2023
2022
2021
23 vs 22
T
A
T
A
T
A
T
A
169 433.2
40.3
164 052.3
40.1
179 294.0
42.8
3.3%
0.4%
40.3
40.2
40.7
40.2
41.5
43.2
44.3
41.7
34.2
33.8
34.5
51.9
54,6
50.3
4.1
4.1
0.0
75 368.4
88 683.9
18 270.2
12 021.8
6 248.3
18 287.6
10 288.9
7 998.7
79 284.4
34 207.6
45 076.9
48 191.1
18 831.1
29 360.0
19.0
19.0
0.0
40.1
40.1
38.0
39.2
35.9
47.1
47.2
47.1
36.5
35.8
37.1
46.2
47.9
45.1
2.7
2.7
0.0
41.2
44.2
19.9
19.4
20.7
21.5
21.2
22.0
48.1
48.3
47.9
50.9
52.7
49.8
79 999.0
99 295.0
9 372.0
5 838.0
3 534.0
9 914.0
5 436.0
4 478.0
94 958.0
43 078.0
51 880.0
65 049.0
25 647.0
39 403.0
0.0
0.0
0.0
3.0%
3.6%
7.1%
-1.4%
0.5%
0.2%
7.1%
2.5%
23.4%
15.5%
-12.0%
-8.4%
-11.7%
-6.1%
-12.3%
-11.4%
-2.3%
-6.3%
-0.8%
-5.5%
-3.3%
-6,9%
16.7%
12.4%
20.6%
14.0%
14.2%
11.4%
52.6%
53.4%
52.6%
53.4%
-
-
Parental Leave
2023
2022
2021
22 vs 21
Employees who took parental leave
63.0
83.0
58.0
107.0
M
F
M
F
62.0
55.0
58.0
58.0
M
39
39
F
88
50
M
F
8.62%
-22.4%
6.90%
-5.2%
Employees who returned to work
after parental leave ended
Employees who returned to
work after parental leave ended
and remained in service after
12 months
-
-
51
103
36
80
-
-
Return to work rate
98.4% 66.3%
100%
54.2%
100.00%
56.8%
-1.6 p.p.
12.1 p.p.
Retention rate after 12 months
of work
M - Men; F - Femal
-
-
87.9%
96.3%
92.3%
90.0%
-
-
251
Annual Report 2023 | novobanco Health Services
2023
2022
2021
23 vs 22
Occupational Health - Occupational Medicine
Medical exams
General Practice Consultations
Curative Medicine consultations and prescriptions
Consultations in other medical specialities
Mental health consultations (psychology and psychiatry)
Nutrition Consultations
Nursing
Total procedures (treatments, vaccination, medication,
ECG)
Risk Prevention and Control Programmes
Cardiovascular screening
Cancer screening
Vision screening
Executive Check-up (for senior executives)
3 210
7 104
-
1 396
467
2 493
7 038
583
1 057
457
3 007
7 597
11 952
928
383
28.8%
0.9%
-
32.1%
2.2%
2 400.0
4 337.0
6 772.0
-44.7%
2 920
1 016
2 645
354
2 091
659
1 875
510
2 408
724
2 674
186
39.6%
54.2%
41.1%
-30.6%
252
Management ReportSustainability ReportFinancial StatementsAnnex Health and Safety Indicators
2023
2022
2021
23 vs 22
Work related accidents
Men
Women
Occupational diseases
Men
Women
Deaths
Men
Women
Accident rate
Men
Women
Lost day rate
Men
Women
Absenteeism rate
Men
Women
Health and safety trainning
Health training hours (#)
Safety training hours (#)
Hours of health awareness promotion (#)
Total (#)
Safety audits to the premises (#)
Ergonomic assessments (#)
Expert identifications and risk assessment of activities
(IPAR) (#)
Thermal environment assessments (#)
Indoor air quality assessments (#)
Lighting assessments (#)
Investigation of Causes of Work Injuries (#)
Evaluation of conformity with COVID-19 requirements (#)
Investigation of Causes of Occupational Illnesses (#)
Elaboration/Follow-up of Integrated Action Plan (#)
Risk Assessment and List of Work Equipment (#)
27
10
17
-
-
-
0
0
0
3.8%
3.0%
4.6%
0.0%
0.0%
0,0%
3.2%
2.3%
3.9%
29.0
520.5
2 938.0
3 487.5
107
2
150
1
0
0
6
-
-
-
-
31.0%
-63.6%
88.8%
-
-
-
-
-
-
1.1 p.p.
0.2 p.p.
-
-
0.1 p.p.
0.0 p.p.
-0.3 p.p.
-0.3 p.p.
-0.3 p.p.
-78.3%
-69.6%
10.8%
-38.0%
-7.9%
18.8%
-9.5%
-100.0%
-
100.0%
27.3%
-
-33.33%
-13%
-7.9%
38
4
34
9
3
6
0
0
0
5.0%
1.1%
8.3%
0.1%
0.0%
0.1%
2.4%
1.6%
3.1%
29
11
18
-
-
-
0
0
0
3.9%
3.2%
4.6%
0.1%
0.1%
0.1%
2.7%
1.9%
3.4%
836.0
1 341.0
6 665.0
8 842.0
3 844.0
4 409.0
6 013.0
14 266.0
178
16
168
2
0
0
11
3
15
184
164
164
19
152
0
0
144
14
-
10
161
151
253
Annual Report 2023 | novobanco Associativism
Employees covered by Collective Bargaining
Agreements (#)
Employees covered by Collective Bargaining
Agreements (%)
Unionized employees (#)
Unionized employees (%)
2023
4 113
97.7%
3 931
93.4%
2022
3 964
96.5%
3 786
92.6%
2021
23 vs 22
4 032
96.2%
3 901
93.0%
3.8%
1.2 p.p.
3.8%
0.8 p.p.
Employee Benefits
Education support (thousand €)
Early childhood benefits (#)
Early childhood benefits (thousand €)
School grants (#)
School grants (thousand €)
Support to children and youths with special needs (#)
Support to children and youths with special needs
(thousand €)
Support to retired employees (thousand €)
Expenses with senior residences, day-care centres,
home, support, medicines and other basic
necessities (#)
Support for active and retired employees (thousand €)
Christmas gift (#)
Christmas gift (thousand €)
Under the ACT (Collective wage agreement)
(thousand €)
2023
702.2
280
380.5
360
218.1
105
103.6
126.2
66
828.4
3 032
121.8
2022
706.5
367
423.4
268
196.5
94
86.6
87.7
67
794.2
3 160
126.4
30 782.9
17 904.8
33 645.2
Residential mortgage loans (thousand €)
22 653.1
16 345.2
31 611.9
Acquisition of consumer goods (thousand €)
Social support
In portofolio
2 129.8
6 000.0
1 559.6
2 033.4
0.0
0.0
100.0%
274 141.5
257 487.2
271 856.0
Residential mortgage loans (thousand €)
265 530.0
247 930.6
260 419.1
Acquisition of consumer goods (thousand €)
8 611.5
9 556.6
11 436.9
254
2021
705.9
398
454.4
224
164.1
91
87.4
124.7
23 vs 22
-0.6%
-23.7%
-10.1%
34.3%
11.0%
11.7%
19.6%
43.9%
68
-1,5%
830.6
3 171
126.8
4,3%
-4.1%
-3.6%
71.9%
38.6%
36.6%
6.5%
7.1%
-9.9%
Management ReportSustainability ReportFinancial StatementsAnnex Employees with
disability more than 60%
(Law No. 4/2019)
Senior leadsership (#)
Leadsership (#)
Technical (#)
Adminsitative (#)
Assistance (#)
Total (#)
2023
2022
2021
23 vs 22
M
3
4
21
17
1
46
F
6
3
44
22
0
75
T
9
7
65
39
1
121
M
3
4
16
14
1
38
F
5
4
42
22
0
73
T
8
8
58
36
1
111
T
-
-
-
-
-
-
T
-12.5%
-12.5%
-12.5%
-8.3%
0%
159
7.3 Governance Indicators
Gender Equality
(under-represented gender)
Board of Directors and 1st line Sennior Leadership
(underrepresented gender)
Senior leadership and leadership
Equal pay indicator
Ratio of women's total remuneration to men's total
remuneration per employee category
Senior leadsership
Leadsership
Technical
Adminsitative
Assistance
Total
2023
2022
2021
23 vs 22
27.3%
38.7%
5.4%
0.87
0.96
0.90
0.92
-
0.81
27.5%
36.2%
5.7%
0.90
0.97
0.90
0.91
-
0.81
25.5%
-0.2 p.p.
36.7%
5.9%
2.5 p.p.
-0.3 p.p.
0.88
0.97
0.90
0.90
-
0.76
-0.03 p.p.
-0.01 p.p.
0.00 p.p.
0.01 p.p.
-
0.00 p.p.
Scope of the Novobanco Group includes: Board of Directores of the Group's companies (novobanco + novobanco dos Açores Banco Best GNBGA) +
senior leadership of novobanco
Suppliers that endorsed novobanco
Group’s relationship principles and
have a sustainability scoring (%)
2023
2022
2021
23 vs 22
75.7%
61.1%
52.0%
14.6 p.p.
255
Annual Report 2023 | novobanco
8 ABOUT
THIS REPORT
The 2023 Sustainability Report complements and details
the information contained in the 2023 Annual Report,
providing evidence that sustainability is an integral part
of the Bank’s strategy.
In order to continue to progress and improve its
performance, NOVO BANCO takes into account the
concerns and suggestions of its stakeholders. To this
end, any questions, comments or suggestions may
be sent to the following email address:
sustentabilidade@novobanco.pt
This report describes the manner in which the
novobanco Group approaches sustainability in the
management of its activity, in its involvement with
employees and clients, in carrying out sustainable
business and in ensuring responsible conduct. It also
details the Group’s sustainability performance in the
last two years.
This report was drawn up in accordance with the Global
Reporting Initiative (GRI) model, standard option. The
GRI table is available in the Bank’s website, at: NOVO
BANCO/Institutional/Sustainability/ Sustainability
Report. This report, which under the terms of Article
508-G of the Commercial Companies Code constitutes
the Non-Financial Statement of the novobanco Group, is
also drawn up for compliance with the legal requirements
introduced by Decree-Law no. 89/2017, of 28 July.
Ernst & Young, Audit & Associados, SROC, SA has
provided independent assurance to this sustainability
performance, considering that the relevant indicators
were reported in accordance with the GRI sustainability
reporting standards and with Decree-Law no. 89/2017,
as can be seen on pages 288 and 289.
256
Management ReportSustainability ReportFinancial StatementsAnnex 8.1 Methodological Notes
Social
Staff Turnover
New hires rate
Accident Rate
Absenteeism Rate
Retention Rate
Return to Work Rate
Average training hours per gender
Average training hours per professional category
Branches located in low density areas
Senior leadership
Leadership
Technical
Administrative
Assistance
((Number of admissions + departures)/2) / total employees) and
((Number of entries + exits / 2) total employees)2 with interns, temporary
work and Service Provision
New hires in 2022/total number of employees in 2023
Number of accidents at work/Hours worked*1000000
Number of absences (without maternity / paternity leave)/Possible working
hours*100
Total number of employees retained in 12 months after returning to work fol-
lowing parental leave/Number of employees who returned from parental leave
in the previous year * 100, by gender
Ratio between the number of employees who remain employed 12 months
after returning to work from maternity/paternity leave and the number of
employees who returned from maternity/paternity leave in the previous year.
Total number of training hours per gender/Total number of employees in each
gender
Total number of training hours per professional category/Total number of
employees in each category
Number of branches located in the 165 low-density municipalities identified
by Deliberation 55/2015 of the Interministerial Commission for Coordination,
Portugal 2020
Department and team management and coordination, with responsibilities
and activities at the most strategic level, directly linked with top management.
Function that operates at the level of planning, managing, supervising, and
monitoring the business objectives. Defines and monitors the execution
of an annual budget and decides over measures to mitigate deviations.
Defines and delegates objectives to lower levels and monitors their achievement.
Works in the planning, coordination and execution of the team's daily
activities and projects. Guarantees the implementation of decisions made
by management. Manages work teams and ensures good and efficient
interpersonal relationships.
Operationalizes technical knowledge in an area of expertise. Has a breadth
of knowledge about their area of professional activity and adjacent functional
activities. Supervises activities of a more technical and operational nature, as
well as verifying the correct execution of related tasks performed by others.
Performs tasks related to the Bank's general business hours. Processes and
archives information, respecting archive rules and procedures. Completes and
checks documentation to support the Bank's operational and daily activities,
as well as assisting and directing, by telephone or in person, internal and
external people to the company, depending on the type of information or
service required.
Participates in the preparation of daily tasks of a very operational nature,
carrying out the necessary activities, under guidance. Performs routine
operations and checks the general condition of facilities and equipment,
ensuring their maintenance and conservation.
257
Annual Report 2023 | novobanco Environment
Water
Electricity
Generators diesel
Energia
PCI diesel (road)
PCI petrol (road)
Density of diesel (generators)
Density of diesel (generators)
CO2 Emissions Scope 1
CO2 Emissions Scope 2
Estimate based on real water consumption in 100% of the central buildings
and 48% of the branches.
Amount calculated directly from EDP records and billing and remaining suppliers.
Diesel consumption in 2021 is an estimate based on the number of hours
generators were operating.
To calculate direct energy consumption (fuel consumption) in GJ, the following
formula was used: Fuel consumption (l) * PCIX * Density X / 1000, using the
following conversion factors:
42.8 GJ/t (Source: Order No. 17313/2008 (SGCIE)
0.84 kg/l (Source: DGEG 2017, data on 9/21/2019)
44.3 GJ/t (Source: Order No. 17313/2008 (SGCIE)
0.74 kg/l (Source: DGEG 2017, data on 09/21/2019)
When calculating emissions from energy consumption, the following
formula was used:
Emission = Consumption X * Emission factor (FE)X
It also includes the following emission factors and parameters used to
calculate Greenhouse Gas (GHG) emissions:
- Diesel (generators): 0.078 ton CO2eq/GJ
• Light car, gasoline, engine capacity < 1,400 cm3 - 0.164 kg CO2e/km
(Source: APA – NIR 2023)
• Light car, gasoline, engine capacity ≥ 1,400 and < 2,000 cm3 - 0.195 kg
CO2e/km (Source: APA – NIR 2023)
• Light car, gasoline, engine capacity ≥ 2000 cm3 - 0.228 kg CO2e/km
(Source: APA – NIR 2023)
• Light car, diesel, engine capacity < 2,000 cm3 - 0.172 kg CO2e/km
(Source: APA – NIR 2023)
• Light car, diesel, engine capacity ≥ 2,000 cm3 - 0.172 kg CO2e/km
(Source: APA – NIR 2023)
• Hybrid Car - 0.142 kg CO2e/km (Source: APA – NIR 2023)
When calculating emissions from energy consumption, the following
formula was used:
Emission = Consumption X * Emission factor (FE)X
It also includes the following emission factors and parameters used in
calculating GHG emissions:
• Mainland electricity production – market based method - 0.217 kg CO2e/
kWh (Source: 2023 supply mix – EDP Business Customers)
• Mainland electricity production – location based method - 0.137 kg CO2e/
kWh (Source: APREN, energy mix 2022)
• Electricity production on the island of Madeira – location and market
method - 0.518 kg CO2e/kWh (Source: EE Madeira 2022)
• Electricity production on the island of the Azores – location and market
method - 0.446 kg CO2e/kWh (Source: EDA, Report and Accounts 2022)
258
Management ReportSustainability ReportFinancial StatementsAnnex Environment
CO2 Emissions Scope 3
The calculation includes emissions resulting from the movements
ofemployees at work, Home/Work/Home (CTC) travel,
using the following formula: Emission = Trip (km)
It also includes the following emission factors and parameters used
when calculating GHG emissions:
• Diesel Car - 0.210 kg CO2e/km (Source: APA - NIR 2021)
• Gasoline car - 0.208 kg CO2e/km (Source: APA - NIR 2021)
• LPG car - 0.193 kg CO2e/km (Source: APA - NIR 2021)
• Hybrid Car - 0.144 kg CO2e/km (Source: APA - NIR 2021)
• Electric car - 0.018 kg CO2e/km (consumption of 13.3 kW/100 km)
(Source: APREN 2021)
• Bus - 0.131 kg CO2e/km (Source: DEFRA 2020); 1,420 kg CO2e/km
(Source: STCP 2011) and 0.189 kg CO2e/km (Source: Carris 2020)
• Metropolitan - 0.06 kg CO2e (Source: Metro Lisboa 2016) and km,
0.040 kg CO2e/km (Source: Metro do Porto 2018)
• Train - 0.024 kg CO2e/km (Source: CP 2019) and 0.021 kg CO2e/km
(Source: Fertagus 2013/2014)
• Boat - 0.190 CO2e/km (Source: Transtejo+Soflusa, 2014)
• Motorcycle (gasoline) - 0.132 kg CO2e/km (Source: APA - NIR 2021)
• Motorcycle (electric) - 0.012 kg CO2e/km (Consumption of 9 kW/100 km)
(Source: APREN 2021)
• Motorcycle (diesel) – 0.134 kg CO2e/km (Source: APA - NIR 2021)
• Airplane Emission = Travel (Km) X * FEX * Take-off Factor * RFI2
• It also includes the following emission factors and parameters used
when calculating GHG emissions:
• Airplane, Domestic Flight FE CO2 - 0.17147 kg CO2e/km (Source: GHG
Protocol: Emission Factors from Cross-Sector Tools 2017)
• Airplane, Short Course Flight FE CO2 - 0.09700 kg CO2e/km (Source: GHG
Protocol: Emission Factors from Cross-Sector Tools 2017)
• Airplane, Long Haul Flight FE CO2 - 0.11319 kg CO2e/km (Source: GHG
Protocol: Emission Factors from Cross-Sector Tools 2017)
• Airplane, Domestic Flight FE CH4 - 0.0001 kg CO2e/km (Source: DEFRA 2021)
• Airplane, Short Course Flight FE CH4 - 0.00001 kg CO2e/km (Source: DEFRA
2021)
• Airplane, Long Haul Flight FE CH4 - 0.00001 kg CO2e/km (Source: DEFRA 2021)
• Airplane, Domestic Flight FE N2O - 0.00122 kg CO2e/km (Source: DEFRA 2021)
• Airplane, Short Course Flight FE N2O - 0.00076 kg CO2e/km (Source: DEFRA
2021)
• Airplane, Long Haul Flight FE N2O - 0.00096 kg CO2e/km (Source: DEFRA 2021)
• Takeoff Factor - 109% (Source: DEFRA/IPCC 1999)
• RFI - 1.9% (Source: DEFRA/IPCC 1999
It also includes the following emission factors and parameters used
in thecalculation of GHG emissions from wastewater treatment:
0.0019 kgCH4/per day (the day corresponded to 8 hours and were
considered
the days of in-person work of employees in 2021), with the
following factors:
• Global Warming Potential (GWP)/(GWP) CO2 – 1
• GWP (GWP) CH4 – 28
• GWP (GWP) N2O - 265
It also includes the following emission factors for calculating emissions
associated with paper consumption, treatment of paper sent to
recycling and water consumption:
• Paper life cycle - 0.3 t CO2e/t paper consumed (Source: CEPI - Key
Statistics 2020)
• Paper recycling - 0.0213 kg CO2e/kg of paper sent for recycling
(Source: DEFRA 2021)
• Water consumption - 0.265 kg CO2e/m3 of water collected (Source: EPAL 2017)
• Water treatment – 0.272 kg CO2e/m3 of treated water
APA – Agência Portuguesa do Ambiente (Portuguese Environment Agency)
259
Annual Report 2023 | novobanco Governance
Remuneration Ratio
Sustainability Scoring
Clients
Customer service
Global satisfaction
Confidence
Net Promoter Score
Very Satisfied Clients
Complaint rate per 1000 active clients
Branches located in low density areas
Ratio of total pay between women and men, by function category - (women
pay / men pay)*100
Calculated based on information collected through the registration form
completed by suppliers on the Novobanco Group's Supplier Portal, based on a
set of criteria in the following dimensions and with the respective weighting:
Labour and Governance – 40%; Occupational health and safety– 30% and
Environment – 30%
The weight of customers very satisfied with the service is measured by the
% of responses of 8 to 10 on a scale of 1 to 10
The weight of very satisfied customers with the Bank corresponds to the
% of responses from 8 to 10 on a scale of 1 to 10.
The confidence index corresponds to the average of responses on a scale
of 0 to 10, with the average being converted into an index of 0 to 100
The Net Promoter Score is calculated based on the recommendation intention,
as the difference between the % of promoters and the % of detractors
The weight of very satisfied clients is measured by the % of responses
of 8 to 10 on a scale of 1 to 10
Number of existing complaints divided by the number of active clients,
with active clients considered as those that used the Bank's service in
the last 3 months.
Number of branches located in the 165 low-density municipalities identified
by Deliberation 55/2015 of the Interministerial Commission for Coordination,
Portugal 2020
260
Management ReportSustainability ReportFinancial StatementsAnnex 8.2 GRI Table
SR – Sustainability Report
MG- Mangement Report
FD – Financial Demonstrations
novobanco Group
novobanco Group
(novobanco, novobanco dos Açores,
Banco Best e GNBGA
novobanco
DECLARATION OF USE
novobanco reported in accordance with the GRI Standards for the period
from January 1 to December 31, 2023
VERSION
GRI: Foundation 2021
GRI STANDARDS APPLICABLE
SECTORS
N.A. on the date of publication of this Report
GRI 2: GENERAL
DISCLOSURES 2021
Page in the Report
SDG
GC
Principles
Omissions
Scope
ORGANISATIONAL PROFILE
2-1 Organizational details
2-2 Entities included in the
organization’s sustainability
reporting
AR- Novo Banco, S.A.
MR – Av. da Liberdade, nº 195,
1250-142 Lisboa
SR – pages 25-126;132.
The 2023 Sustainability Report covers
the novobanco Group – novobanco,
novobanco dos Açores, Banco Best
and GNBGA.
MR – pages 16-23; 28-34; 68-75.
FS – page 298, note 1.
The 2023 Sustainability Report covers
the novobanco Group – novobanco,
novobanco dos Açores, Banco Best and
GNBGA. The information on employees
reported in this report has the same
scope as the Annual Report, i.e., it
covers permanent employees, fixed-
term contracts and employees on loan.
2-3 Reporting period, frequency
and contact point
Reporting period: 1 January to 31
December 2023
2-4 Restatements
of information
Frequency: yearly
Sustainability points of contacts:
sustentabilidade@novobanco.pt
The 2023 Sustainability Report covers the novobanco
Group scope (novobanco, novobanco dos Açores, Banco
Best and novobanco Gestão de Ativos Group).
Significant changes occurred during the period covered
by the report:
Benjamin Dickgiesser joined the Executive Board of
Directors (“CAE”) of novobanco in the current mandate
(2022-2025), in the role of Chief Financial Officer.
Appointment of Evgeniy Kazarez as Board Member
General and Supervision (“CGS”) for the current term
(2021-2024).
261
Annual Report 2023 | novobanco GRI 2: GENERAL
DISCLOSURES 2021
Page in the Report
SDG
GC
Principles
Omissions
Scope
Increase in the Bank's share capital
to the amount of 6 567 843 862.91
Euros.
Nani Holdings S.G.P.S., S.A – 75.00%
Fundo de Resolução (Resolution Fund)
– 13.04% Directorate General for the
Treasury and Finance – 11.96%
SR – pages 124-125.
MR – pages 124-125.
2-5 External assurance
SR – pages 288-289.
ACTIVITIES, VALUE CHAIN
AND OTHER BUSINESS
RELATIONSHIPS
2-6 Activities, value chain and
other business relationships
SR – pages 123; 140- 152; 171-
173;177-191; 203-207;225-230;
MR – pages 19; 20-25;68-73
FS – page 298, note 1
Sustainability website> Sustainable
Business
The 2023 Sustainability Report
covers the novobanco Group scope
(novobanco, novobanco dos Açores,
Banco Best and novobanco Gestão
de Ativos Group).
The information on employees
reported in this report has the same
scope as the Annual Report, i.e.,
it covers permanent employees, fixed-
term contracts and employees on loan.
The employees with the remaining
employment contracts - interns,
temporary workers and service
providers - totalling 24 (11 men and
13 women) in 2023 it represent
0,56% of the group's total workforce.
Links
Labor
Trainees
Temporary
workers
Service
providers
Total
M
W
Variation
2023/2022
5
5
1
5
8
0
0%
-69.0%
-50.0%
11
13
-55.6%
262
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Page in the Report
SDG
GC
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Omissions
Scope
2-7 Employees
2-8 Workers who are
not employees
GOVERNANCE OF THE
ORGANIZATION
2-9 Governance structure
and composition
2-10 Nomination and selection
of the highest governance body
2-11 Chair of the highest
governance body
2-12 Role of the highest
governance body in overseeing
the management of impacts
Please see note 2-4.
SR – pages 121; 176-195;246-255.
SR – pages 121; 176-195;246-255.
MR – pages 48-49.
SR – pages 247; 249.
8
8
6
6
5,
16
5,
16
16
16
SR – pages 197-199.
MR – pages 84-111; 28-32.
Novobanco Group website >
About novobanco > Governance
SR – pages 127-130.
MR – pages 2-30, 75-96.
Novobanco Group website >
About novobanco > Company
Documents > Articles of association
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website >
About novobanco > Company
Documents > articles of association
The Chairman of the Executive Board
of Directors and remaining members
of the Executive Board of Directors and
General and Supervisory Board who
are part of the Sustainability Steering
Committee, control and approve
sustainability management on a
monthly basis, based on the objectives
defined for 2024 and 2030.
These objectives are monitored
through an action plan and the
coordination of teams appointed to
implement both the E - pillar (ESG
pillar) of the bank's strategy, and the
Social Dividend model, with objectives
defined for 2021, quarterly assessed.
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SDG
GC
Principles
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2-13 Delegation of
responsibility for managing
impacts
2-14 Role of the highest
governance body in
sustainability reporting
2-15 Conflicts of interest
2-16 Communication
of critical concerns
2-17 Collective knowledge
of the highest governance body
2-18 Evaluation of the
performance of the highest
governance body
The social dividend aims to give back
to the bank's employees and the
community in general what the bank
generates with its activity. These
models and respective procedures
ensure the alignment of sustainability
performance across the Bank's various
operations, through coordination of the
initiatives with the officers appointed in
each operation.
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website >About
novobanco > Governance
16
Board Of Directors, Committees, Sustainability Steering.
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website >
About novobanco > Governance
The Annual Report and the Sustainability
Report are approved by the Executive
Board of Directors and the General and
Supervisory Board.
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website > About
novobanco > Governance > Conflict
of interests policy
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website >
About novobanco > Governance >
Whistleblowing Policy
SR – pages 197-199.
MR – pages 28-32; 84-111.
Novobanco Group website >
About novobanco > Governance
16
4
The performance evaluation of CAE members was carried
out annually considering the performance and defined
objectives. The attribution of annual variable remuneration
is defined based on compliance with financial and
non-financial, individual and key performance indicators
(KPI).corporate, agreed with each member of the
Executive Board of Directors.
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2-19 Remuneration policies
2-20 Process to determine
remuneration
2-21 Annual total
compensation ratio
KPIs are definitions based on a
combination of the Bank's overall
financial performance, areas of
member's individual responsibility
(including the development of
employees reportingdirect and the
compliance with ESG factors). For more
information consult Remuneration
Policy for Management and Supervisory
Bodies available on the institutional
website, Novobanco Group > About Us
> Governance > Corporate Documents
and Main Regulations
SR – pages 197-199.
MR – pages 27-30, 75-96.
SR – pages 127-130.
MR – pages 27-30; 89-92.
Novobanco Group website > About
novobanco > Governance > Company
documents
SR – pages 197-199.
AR – pages 28-32; 99-105.
Novobanco Group website >
About novobanco > Governance >
Company documents
Median annual total compensation
for all employees (excluding the
highest-paid individual); €42 447,60
CEO total annual remuneration:
€ 990 000,00
Change in CEO remuneration: 155.7%
Ratio of the CEO total annual
compensation to the median annual
total compensation for all employees
(excluding the highest-paid individual)
23.32
In 2023 and within the scope of the
Collective Bargaining Agreement, there
was a salary increase of 4.50%.
Average Remuneration: 6.2%
STRATEGY, POLICIES AND
PRACTICES
2-22 Statement on
sustainable development
strategy
AR – CEO Talk com Mark Bourke
pages 3-9.
SR – pages 121-123.
265
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GC
Principles
Omissions
Scope
16
10
16
10
16
10
16
10
16
8
GRI 2: GENERAL
DISCLOSURES 2021
2-23 Policy commitments
2-24 Embedding policy
commitments
2-25 Processes to remediate
negative impacts
SR – pages 171-178; 180;185;
204-206.
MR – 93-100.
novobanco Group website > About
novobanco > Company Documents
SR – pages 171-178; 180;185;
204-206.
MR – 93-100.
novobanco Group website > About
novobanco > Company Documents
SR – pages 171-177; 180;185,
204-206.
MR – pages 93-100.
2-26 Mechanisms for seeking
advice and raising concerns
SR – pages 126,178.
MR – page 94.
2-27 Compliance with laws
and regulations
2-28 Membership associations
STAKEHOLDER ENGAGEMENT
During 2023, the Group will notwas
aware of cases of non-compliance
with laws and regulations
SR – pages 139; 144; 157-162; 173.
Sustainability website > Sustainable
business > Our approach and policies
2-29 Approach to stakeholder
engagement
SR – 113;115;139;144-145,
157-163; 171;173.
2-30 Collective bargaining
agreements
SR – page 254.
4
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MATERIAL TOPICS 2023
3-1 Process to determine
material topics
Page in the Report
SDG
GC
Principles
Omissions
Scope
SR – pages 128-131.
3-2 List of material topics
SR – pages 128-131.
ECONOMIC INDICATORS
TOPIC: ECONOMIC
PERFORMANCE
3-3 Explanation of the material
topic and its Boundary
The Strategic Plan defined for the 2024-2026 three-year
period aims to provide the novobanco Group with the
necessary conditions to fulfill its mission of being the
trusted bank that supports families and companies
throughout their lives. This mission guides and underpins
everything that novobanco does and allows it to build
long-term value, invest for growth, focused on delivering
a social dividend with a positive contribution to society
and driving sustainable returns for shareholders.
novobanco's business model is based on 2 segments of
commercial banking: companies and individuals. In both,
it seeks to anticipate and respond to the needs of its
customers, offering innovative, effective and transparent
banking products and services, based on high ethical and
integrity standards, and based on quality and satisfaction
assessment mechanisms.
novobanco's strategic approach is based on four pillars,
which support its competitive positioning. During the current
year, integration was reinforced between the bank's strategy
and its actions in terms of environmental, social and
governance strengthening actions.
Each of the bank's strategic pillars is aligned with its ESG
vision and priority SDGs;
• Elevate the bank's customer-centric approach, with
differentiated value propositions, leveraging a digital and
omnichannel approach. reinforcing its role in supporting the
needs arising from the energy transition of its customers;
• Provide simple and efficient operations, which improve
the banking experience, and ensure a more sustainable
environmental and social footprint;
• Develop people and culture, attracting and actively
cultivating a team of qualified professionals who are a
reference to our bank's fundamental values, including
the objectives of inclusion, diversity and strengthening
the well-being of all employees.
• Ensure sustainable performance, in terms of risk
management and strengthening the integration of ESG
components into the business, including climate and
environmental risk.
The Group monitors indicators defined within the scope of
the strategic plan associated with this topic on a monthly
basis.
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GC
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Omissions
Scope
201-1 Direct economic value
generated and distributed
Banking Income: €1 438.7M
MR – page 63.
Banking Income: €1 438.7M
MR – page 63.
General and administrative expenses:
€182.9 million
MR - Page 65.
Staff Costs: €252.7 million
MR - page 65.
Payments to providers of Capital -
Shareholders - There was no
distribution of dividends
Taxes: €15.1M million
FS – page 373, note 28
Community Investments:
€0,474 million in donations
SR – pages 159-161.
Economic Value Distributed: €451.1M
Economic Value Retained €987.6M
2,
5,
8,
9
201-2 Financial implications
and other risks and opportunities
due to climate change
SR – pages 141-16; 223-241.
MR – pages 51-59.
13
201-3 Defined benefit
plan obligations and other
retirement plans
201-4 Financial assistance
received from governance
TOPIC: MARKET PRESENCE
3-3 Explanation of the material
topic and its Boundary
SR – pages 156-162;176-195;252.
FS – page 388, note 35.
See Indicator 3-3 Aspect: Economic Performance of this table.
Additionally, novobanco has participated over the years in
several sustainable financing initiatives in partnership with its
competitors. In 2019 he signed the “Commitment Letter for
Sustainable Financing in Portugal", which aims to
contribute to the promotion of sustainable investment
practices in the country, with the purpose of accelerating the
process of a carbon neutral economy by 2050 in full
partnership with its peers. It also participates in two more
working groups underlying the theme of Sustainable
Financing, namely the Portuguese Association of Banks and
the Portuguese Association of Investment Funds, Pensions
and Assets. Integrated into its new strategic plan, one of the
priorities is the pillar of partnerships that try to find added
value and new relevant partners for the development of value
propositions in the financial sector, trying to provide a global
ecosystem response to customers by finding value in
partners.The Group is part of several working groups that
aim to create methodologies and tools to respond to
sustainability challenges for both individuals and companies.
The Bank monitors indicators associated with this topic and
reports them in the Report & Accounts, on the institutional
website and in the Sustainability Report.
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202-1 Ratios of standard entry
level wage by gender compared
to local minimum wage
202-2 Proportion of senior
management hired from the
local community
TOPIC: INDIRECT
ECONOMIC IMPACTS
3-3 Explanation of the
material topic and its
Boundary
For the professional categories that
are representative of its workforce,
novobanco pays a minimum salary that
is higher than the national minimum
wage (the lowest salary paid by
novobanco is 1.51 times higher than
the national minimum wage).
The group develops most of its activity
in Portugal. Local hiring is an integral
part of the Bank's hiring practices.
Priority is always given to local
employees, so as to build a sustained
and competent workforce, with
possibilities for career advancement,
moving on to leadership positions.
Consequently, management positions
are mostly held by local employees and
non-local employees are few.
For positions on the Executive Board
of Directors, please see:
MR – pages 30-31.
5,
7,
8
6
8
6
The novobanco Group has promoted
several initiatives with indirect
economic impacts over the years.
The novobanco Group monitors
indicators associated with this topic
and reports them both in the Annual
Report, on the website and in the
Sustainability Report.
203-1 The management
approach and its components
SR – pages 141-152.
MR – pages 68-73.
203-2 Evaluation of the
management approach
SR – pages 128-131: 140-155.
MR – pages 6-43; 68-73.
2,
5,
7,
9,
11
1,
2,
3,
8,
10,
17
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TOPIC: PROCUREMENT
PRACTICES
3-3 Explanation of the material
topic and its Boundary
204-1 Percentage of the
procurement budget used for
significant locations of operation
that is spent on suppliers local
to that operation
TOPICS: ANTI-CORRUTION
3-3 Explanation of the material
topic and its Boundary
205-1 Total number and
percentage of operations
assessed for risks related
to corruption
Page in the Report
SDG
GC
Principles
Omissions
Scope
The novobanco Group has promoted
several initiatives in this area over
the years by creating a sustainability
score in the process of registering
its suppliers on the Suppliers portal.
The novobanco Group monitors
indicators associated with this topic
and reports them both in the Annual
Report, on the website and in the
Sustainability Report.
SR – pages 128-131; 139-140;
171-173;241.
The novobanco Group acquires its
regular consumption products, such as
stationery, equipment and specialised
services for mainland Portugal and
the Islands, from national companies.
Around 92.1% of the expenses refer
to national suppliers vs 7.9% of
international suppliers.
SR – pages 171-177;255.
12
The novobanco Group focuses on the
prevention, detection, reporting and
management of situations involving
risks of conduct or irregular conducts,
based on principles of integrity,
honesty, diligence, competence,
transparency and fairness.
The novobanco Group monitors
indicators pertaining to this topic and
reports the results in its Annual Report,
institutional website and Sustainability
Report.
The 2023 Sustainability Report covers
the novobanco Group – novobanco,
novobanco dos Açores, Banco Best and
GNBGA.
Financial crime management
Communications to judicial entities
Answers to requests from judicial
entities
Total number of reported cases of
corruption and related offenses
(Decree-Law 109-E/2021)
571
1349
0
MR – page 95.
270
16
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205-2 Total number and
percentage of employees
trained in the organization's
anti-corruption policies
and practices
205-3 Medidas tomadas em
resposta a casos de corrupção
TOPICS: ANTI COMPETITIVE
BEHAVIOUR
3-3 Explanation of the material
topic and its Boundary
206-1 Number of legal actions
pending or completed during
the reporting period regarding
anti-competitive behaviour and
violations of anti-trust and
monopoly legislation in which
the organisation has been
identified as a participant
ENVIRONMENTAL INDICATORS
TOPIC: MATERIAL
3-3 Explanation of the
material topic and its
Boundary
MR – page 95.
Please see indicator 2-27.
16
10
The group carries out its activity in strict
compliance with the law and regulations
applicable to its activity and in
accordance with a set of standards,
principles and values, in an ethical
manner, respecting and responding
to all stakeholders. With this purpose,
it guides and sustains its operations,
which allows it to build long-term value,
invest for growth, focused on delivering
a dividend with a positive contribution
to society and driving a sustainable
return for shareholders.
There is no record of any legal action
regarding anti-competitive behaviour
and violations of anti-trust and
monopoly legislation involving the
Bank in 2023.
16
The novobanco Group has over the
years promoted several initiatives aimed
at reducing its direct environmental
impact. Some of these measures are
included it is Environmental programme,
which is integrated in its Social Dividend
model.
The novobanco Group monitors
indicators pertaining to this topic and
reports the results in its Sustainability
Report and sustainability website>
Sustainable business>Our approach and
policies
301-1 Materials used
by weight or volume
SR – pages 123; 164-170 ; 243;245.
8,
12
7,
8
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GC
Principles
Omissions
Scope
TOPIC: ENERGY WATER AND
CO2 EMISSIONS
3-3 Explanation of the material
topic and its Boundary
Over the years, the novobanco Group has promoted
various initiatives aimed at reducing its direct environmental
impact, some of which are included in its Environment
programme, which is integrated into its Social Dividend
model. novobanco has promoted several initiatives that
allow the reduction of energy consumption, mainly in
terms of electricity consumption. In most of its buildings,
energy consumption comes from renewable sources.
It carries out its annual inventory of CO2 emissions, in
2021 for the first time carried out within the scope of the
novobanco Group. In 2019, and within the scope of the
commitment to reduce CO2 emissions, the bank signed
the letter “Business Ambition for 1.5ºC”, a document
recently presented by the United Nations Global Compact,
with this signature, the bank assumes the commitment to
preserve the planet and limiting temperature increases to
1.5ºC by 2050, committing to present a scientific project
to reduce CO2 emissions resulting from its activity.
The Group has also promoted initiatives that aim to reduce
its direct environmental impact in terms of its water
consumption in view of the scarcity of this resource.
The novobanco Group monitors indicators associated with
this topic and reports them in the Sustainability Report
and on the Sustainability website> Sustainable
website>We are taking care of the environment
302-1 Energy consumption
within the organisation
SR – pages 167;243.
302-3 Energy intensity
SR – pages 167;243.
302-4 Reduction
of energy consumption
SR – pages 167;243.
302-5 Reductions in energy
requirements of products and
services
SR – pages pages 167;243.
303-3 Water catchment
SR – page 245.
305-1 Direct (Scope 1) GHG
emissions
SR –pages 168;244.
7,8
8
8,9
8,9
7,8
7,8
12
13
7,8
12
13
7,8
12
13
7,8
12
13
7
3
12
13
14
15
272
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GC
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305-2 Energy indirect (Scope 2)
GHG emissions
RS –páginas 168;244.
305-3 Energy indirect (Scope 3)
GHG emissions
SR –pages 168;244.
305-4 GHG emissions intensity
SR –pages 168;244.
305-5 Reduction of GHG
emissions
SR –pages 168;244.
305-6 Emissions of
ozone-depleting substances
(ODS)
305-7 Nitrogen oxides (NOx),
sulphur oxides (SOx), and other
significant air emissions
There have been no recharges of
gases with the potential to destroy
the ozone layer since 2015, as these
are prohibited under Regulation (EC)
No. 1005/2009, on substances that
deplete the ozone layer. Moreover,
novobanco had been gradually
replacing equipment that emit
ozone-depleting gases, when such
still exist.
SOx and NOx emissions linked to the
group's activity result from combustion
associated with transportation,
emergency generators and boilers.
However, due to the reduced
expression of these activities within
the group's typical activity, these
emissions are immaterial and therefore
are not accounted for.
3
12
13
14
15
3
12
13
14
15
13
14
15
13
14
15
7,8
7,8
8
8,9
3
12
7,8
3
12
14
15
7,8
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GC
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Omissions
Scope
TOPIC: SUPPLIERS
ENVIRONMENTAL ASSESSMENT
3-3 Explanation of the material
topic and its Boundary
308-1 New suppliers
that were screened using
environmental criteria
308-2 Negative environmental
impacts in the supply chain
and actions taken
TOPIC: EMPLOYMENT
3-3 Explanation of the material
topic and its Boundary
The novobanco Group has over the years promoted
several initiatives to ensure a judicious selection of its
suppliers, based on the information provided. The group
calculates the suppliers’ ‘sustainability scoring’, which
takes into account environmental, ethical, labour, hygiene
and safety in the workplace aspects of its suppliers.
The novobanco Group monitors indicators pertaining
to this topic and reports the results in its Sustainability
Report and institutional website.
SR – pages 171-173.
SR – pages 171-173.
8
8
The Development of Culture and People is one of the
strategic pillars of the novobanco Group. Over the years,
the Group has promoted several initiatives that allow the
development of programs that guarantee human capital
management aimed at attracting and retaining talent,
using the diversity of its employee base and a culture of
inclusion and equal opportunities as levers. growth and
value generation strategies, rejuvenating teams and
developing the potential of the most experienced
employees, using methodologies and programs that aim
to enhance individual development and contribute to the
balance between professional and personal life, as well as
creating a circle of knowledge and sharing. The information
regarding employees reported in this report has the same
scope as the Report and Accounts, that is, it includes
permanent employees, fixed-term contracts and
seconded employees. Employees with other employment
contracts – interns, temporary workers and service
providers totaling 24 (11 men and 13 women) in 2023)
represent only 0.56% of the Group's total employees.
The novobanco Group monitors indicators pertaining
to this topic and reports the results in its Sustainability
Report and institutional website.
Links
Labor
Trainees
Temporary workers
Service providers
Total
M
5
5
1
W
5
8
0
11
13
Variation
203/2022
0%
-69.0%
-50.0%
-55.6%
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Page in the Report
SDG
GC
Principles
Omissions
Scope
401-1 Total number and rate
of new employee hires during the
reporting period, by age group,
gender and region.
401-2 Benefits provided to
full-time employees that are
not provided to temporary
or part-time employees
SR – page 249.
5
8
6
The novobanco Group informs its
employees of any relevant facts
pertaining to their career management
in accordance with the established
notice periods, seeking compliance
with clause 27 of the Collective Wage
Agreement, which stipulates that
workplace transfers are subject to an
advance notice of at least 30 days.
401-3 Total number of
employees that were entitled
to parental leave, by gender
and return to work and retention
rates of employees that took
parental leave, by gender
TOPIC: LABOUR/MANAGEMENT
RELATIONS
3-3 Explanation of the material
topic and its Boundary
Trainees and temporary workers do not
have access to all the benefits granted
to other employees, with the exception
of health insurance, special conditions
on housing and individual credit and
other benefits that are included in the
Collective Labor Agreement.
SR – page 251.
8
6
8
6
The Development of Culture and People is one of the strategic pillars
of the novobanco Group. Over the years, the Group has promoted
several initiatives that allow the development of programs that
guarantee human capital management aimed at attracting and
retaining talent, rejuvenating teams and developing the potential
of more experienced employees, using methodologies and programs
that aim to individual appreciation and the contribution to the balance
between professional and personal life, as well as the creation of a
circle of knowledge and sharing.
The Group monitors indicators associated with this topic and reports
them in the Sustainability Report and institutional website.
275
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Page in the Report
SDG
GC
Principles
Omissions
Scope
402-1 Minimum notice periods
regarding operational changes
and whether the notice period
and provisions for consultation
and negotiation are specified in
collective agreements
TOPIC: OCCUPATIONAL HEALTH
AND SAFETY
3-3 Explanation of the material
topic and its Boundary
403-1 Percentage of workers
whose work, or workplace, is
controlled by the organisation,
that are represented by formal
joint management-worker health
and safety committees.
403-2 Types of injury and rates
of injury, occupational diseases,
lost days, and absenteeism, and
number of work-related fatalities
by gender
The novobanco Group informs its
employees of any relevant facts
pertaining to their career management
in accordance with the established
notice periods, seeking compliance
with clause 27 of the Collective Wage
Agreement, which stipulates that
workplace transfers are subject to an
advance notice of at least 30 days.
5
3
The physical, mental and social
well-being of employees is essential
for the Group, and is ensured through
a health and well-being policy based
on eight lines of action:
1. Physical Well-Being
2. Mental Wellbeing
3. Emotional Well-being
4. Social Welfare
5. Financial Wellbeing
6. Family Wellbeing
7. Intellectual Well-being
8. Professional Wellbeing
The novobanco Group monitors
indicators associated with this topic
and reports them in the Sustainability
Report and Sustainability website >
Sustainable business > Employees.
novobanco group has no formal safety
committees, however it engages its
employees in the definition and
implementation of safety practices
and the prevention of occupational
hazards. The national legislation
requires a minimum guarantee of
hygiene, health and safety conditions.
The group goes beyond the
requirements of the law, annually
reporting its practices and results in
the management of hygiene, health
and safety of all its employees.
SR – page 253.
8
8
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MATERIAL TOPICS 2023
403-3 Workers with high
incidence or high risk of
diseases related to their
occupation
403-4 Health and safety
topics covered in formal
agreements with trade unions
The novobanco Group is not aware
of a high incidence or high risk of
work-related diseases amongst its
employees.
SR - pages 150-152;172.
novobanco has entered into
Company-level Agreements with all
the trade unions represented in the
institution, which enshrine the
obligations of Occupational Medicine
and hygiene and safety in the
workplace. In addition to the legally
mandatory consultations and exams,
the Bank has in place other measures.
SR – page 253.
403-9 Work accidents
SR – page 253.
403-10 Professional diseases
SR – page 253.
TOPIC: TRAINING AND
EDUCATION
3-3 Explanation of the material
topic and its Boundary
404-1 Average hours of
training that the organisation’s
employees have undertaken
during the reporting period, by
gender and employee category
404-2 Programmes for
upgrading employee skills
and transitionassistance
programmes
404-3 Percentage of employees
receiving regular performance
and career development reviews
The Group has over the years promoted
several initiatives and programmes
to ensure that human capital
management is focused on talent
attraction and retention.
The novobanco Group monitors
indicators pertaining to this topic and
reports the results in its Sustainability
Report.
SR – pages 182-183;251.
SR – pages 182-183;251.
SR – pages 182-183;250.
277
8
8
8
8
4,
5,
8
8
5,
8
6
6
Annual Report 2023 | novobanco GRI 3: DISCLOSURES ON
MATERIAL TOPICS 2023
Page in the Report
SDG
GC
Principles
Omissions
Scope
TOPIC: DIVERSITY AND EQUAL
OPPORTUNITIES
3-3 Explanation of the material
topic and its Boundary
405-1 Percentage of
individuals within the
organisation's governance
bodies in each of the following
diversity categories: Gender,
Age group, Other indicators of
diversity where relevant (such
as minority or vulnerable groups).
405-2 Ratio of basic salary and
remuneration of women to men
for each employee category
TOPIC: NON-DISCRIMINATION
3-3 Explanation of the material
topic and its Boundary
Novobanco Group has over the years
promoted several initiatives within
its Responsible Banking programme,
which monitors three indicators and
aims to develop a fair and gender-equal
model, having for the purpose defined
specific objectives for 2024.
The group monitors indicators
pertaining to this topic and annually
reports the results in its website and
Sustainability Report.
SR - 184;254-255.
MR – pages 30-31.
SR – 248.
SR – page 254.
The novobanco Group calculates the
ratio based on total rather than base
remuneration as the latter is linked to
a level defined by the collective labour
agreement (ACT).
Novobanco has promoted several
initiatives over the years that aim to
reduce negative impacts in terms of
discrimination through its strategic
pillar People and Culture Development,
which is integrated into its Social
Dividend model.
Over the years, novobanco has
promoted several initiatives in its
Responsible Banking program that aim
to monitor and create a fairer and more
gender-equal Bank, having, for this
purpose, defined concrete objectives
until 2024.
5,
8
5,
8,
10
6
6
406-1 Total number of incidents
of discrimination and corrective
actions taken,
In 2023 no incidents or lawsuits came
to the attention of the novobanco
Group concerning discrimination on
grounds of race, colour, gender, religion,
public opinion or social background.
5,
8,
10
6
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MATERIAL TOPICS 2023
TOPIC: FREEDOM OF
ASSOCIATION AND
COLLECTIVE BARGAINING
3-3 Explanation of the material
topic and its Boundary
Page in the Report
SDG
GC
Principles
Omissions
Scope
The novobanco group complies with the legislation, rules
and regulations in force and develops its activity in full
compliance with its Equality and Non-Discrimination Policy
and Human Rights Policy, defined based on:
• the United Nations Global Compact Principles;
• the Universal Declaration of Human Rights;
• The Guidelines of the Organization for Economic
Cooperation and Development (OECD) for Multinational
Enterprises;
• the Core Conventions of the International Labour
Organization (ILO).
novobanco's Human Rights Policy reflects its endorsement
of and commitment to the Global Compact Principles.
The compliance and audit functions and the mechanisms
in place for the anonymous reporting of irregularities
minimise the risk of any such occurrences within the
Group's operations and in connection to its employees.
The novobanco Group monitors indicators pertaining
to this topic and reports the results in its Sustainability
Report and and Sustainability website
408-1
409-1 Operations and suppliers
at significant risk for incidents
of child labour
During 2023 no instances came to
the attention of novobanco Group
concerning operations and suppliers
where the risk of child labour or forced
or compulsory labour had been identified.
8,
16
5
TOPIC: SECURITY PRACTICES
3-3 Explanation of the material
topic and its Boundary
Within the scope of the Strategic Pillar “Development
of Culture and People”, the Group has promoted several
initiatives on this topic over the years. The Group
operates in full compliance with current legislation, has
a Human Rights policy and a Code of Conduct, by which
all employees are governed, and on which it carries out
periodic training for employees, and conducts its activity
in accordance with the principles of ethics, inclusion,
trust and transparency. The Group monitors indicators
associated with this topic and reports them in the
Sustainability Report.
279
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MATERIAL TOPICS 2023
Page in the Report
SDG
GC
Principles
Omissions
Scope
TOPIC: RIGHTS OF INDIGENOUS
PEOPLES
3-3 Explanation of the material
topic and its Boundary
411-1 Total number of identified
incidents of violations involving
the rights of indigenous peoples
during the reporting period and
remediation action taken
TOPIC: HUMAN RIGHTS
ASSESSMENT
3-3 Explanation of the material
topic and its Boundary
412-1 Total number and
percentage of operations
that have been subject to
human rights reviews or
impact assessments
412-2 Employee training
on human rights policies
or procedures
412-3 Significant investment
agreements and contracts that
include human rights clauses or
that underwent human rights
screening
The group does not promote initiatives
in this regard as its activity is
developed in urban or urbanised areas.
The group's operations are located
in urban or urbanised areas, therefore
there are no instances of violation
of the rights of indigenous people.
2
1
The Development of Culture and People is one of the
strategic pillars of the novobanco Group . Over the years,
the Group has promoted various initiatives aimed at
reducing the negative impact on issues related to Human
Rights, more precisely through the #Bancasponsible
program which is integrated into its Social Dividend model.
One of the standards of excellence of the novobanco
Group is the development of a culture of respect for
human beings: respect for employees, respect in the
way we work with customers, suppliers and other
stakeholders, respect in the relationships established with
the communities in which the group operates. The Group
has a Human Rights policy that can be consulted on its
institutional website.
The novobanco Group monitors indicators associated with
this topic and reports them in the Sustainability Report
and Sustainability website.
Not applicable
1
1
2
This was one of the topics addressed in
the ESG training.
All novobanco Group's suppliers are
covered by its Principles for Suppliers,
which require compliance with Human
Rights obligations. These criteria are
included in the agreements entered
into with all suppliers (100%).
The certification of suppliers requires
answering mandatory response
questions concerning human rights
policies and practices.
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Page in the Report
SDG
GC
Principles
Omissions
Scope
The Bank visits all its material suppliers
to check their supply capabilities
and their compliance with the
requirements of the Principles for
Suppliers. In 2023 the group found
no instance of non-compliance with
these principles by its material
Suppliers, namely through its regular
visits to their facilities. Should any
cases of violation of human rights
occur, the group undertakes to
investigate them and reserves the right
to terminate the agreement with the
Supplier in question if it finds evidence
of non-compliance with Human Rights
obligations.
novobanco Group has over the years
promoted several initiatives under
its Corporate Social Responsibility
programme, which aims to contribute
devise solutions for important issues
within the community in which the Bank
operates. This programme is deployed
based on three pillars, namely: culture,
financial literacy and solidarity. Some of
the initiatives under these pillars are an
integral part of the Financial and social
wellbeing programme, included within
novobanco's Social Dividend Model.
The novobanco Group monitors
indicators pertaining to this topic and
reports the results in its Sustainability
Report and Sustainability website >
Sustainable attitude.
SR – pages 157-162
The novobanco Group is not aware
of any operations having negative
impacts on local communities.
1,
2
2
1
1
281
TOPIC: LOCAL COMMUNITIES
3-3 Explanation of the material
topic and its Boundary
413-1 Operations with local
community engagement, impact
assessments, and development
programmes
413-2 Operações com
impactes Operations with
significant actual and potential
negative impacts on local
communities
Annual Report 2023 | novobanco GRI 3: DISCLOSURES ON
MATERIAL TOPICS 2023
TOPIC: SUPPLIERS SOCIAL
ASSESSMENT
3-3 Explanation of the material
topic and its Boundary
Page in the Report
SDG
GC
Principles
Omissions
Scope
Within the scope of the strategic pillar “Simple and
Efficient Operations”, the novobanco Group aims to
ensure the integration of ESG criteria also upstream
in its value chain, increasingly integrating ESG criteria
and concerns in the selection and management of the
relationship with its suppliers, also acting as a model
for the national business fabric. The Group has been
promoting several
414-1 New suppliers that were
screened using social criteria
SR – pages 171-173.
In 2023 novobanco was not aware
of any negative impacts at this level.
5,
16
5,
16
2
2
414-2 Negative social impacts
in the supply chain and actions
taken
TOPIC: PUBLIC POLICY
3-3 Explanation of the material
topic and its Boundary
415-1 Political contributions
TOPIC: CUSTOMER HEALTH
AND SAFETY
3-3 Explanation of the material
topic and its Boundary
The novobanco Group manages its activity in full
compliance with the legislation in force.
Novobanco monitors indicators pertaining to this topic
and reports the results in its Sustainability Report.
Political contributions by companies
are not permitted under Decree
Law No. 19/2003, of 20 June, and
novobanco Group complies with these
provisions.
16
10
Within the scope of the Customer-Centric Bank strategic
pillar, as well as the Simple and Efficient Operations pillar,
the Group ensures throughout its activity that the highest
levels of attention and investment are maintained in the
themes underlying customer security, including their
safety. physical security, the security of the operations
that are carried out, as well as the safeguarding of your
personal data and that of other data subjects.
The novobanco Group monitors indicators associated with
this topic and reports them in the Sustainability Report.
282
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MATERIAL TOPICS 2023
416-1 Assessment of the
health and safety impacts
of product and service
categories
Page in the Report
SDG
GC
Principles
Omissions
Scope
The group's facilities comply with all existing rules for
secure and private customer service. The group conducts
its relationship with clients in accordance with the new
General Data Protection Regulation, guaranteeing privacy
and security in the treatment of customer data. Maximum
attention is paid to security and customer experience in
the development of your remote customer interaction
platforms, as well as all your IT systems.More information
may be found in Indicator 418-1.
416-2 Total number of incidents
of non-compliance concerning
the health and safety impacts
of products and services
In 2023, there were no sanctions and/
or fines imposed on novobanco Group
in connection to the General Data
Protection Regulation (GDPR).
5,
16
2
TOPIC: LABELLING OF
PRODUCTS AND SERVICES
3-3 Explanation of the material
topic and its Boundary
417-1 Requirements for
product and service information
and labelling and percentage
of significant product or service
categories covered by and
assessed for compliance with
such procedures.
Customer-Centered Banking is one of the Group's
strategic pillars. In this context, over the years, it has
promoted several initiatives to provide clear and
transparent information about its products and services
to its customers. The design of products, including their
labeling and nomenclature, follows a careful and robust
internal approval process with the participation of risk,
compliance and legal functions, among others, which is
enshrined in internal standards and which takes ethical
concerns into account , transparency and customer
protection. External communication of products is subject
to prior approval by the competent supervisory entity.
The Group monitors indicators associated with this topic
and reports them in the Sustainability Report and
Sustainability website > Sustainable business >
Sustainable offer.
The group provides clear information
about each product or service offered,
including about their characteristics
and specific conditions. This information
and underlying processes are subject
to strict internal controls in terms of
the Bank's internal audit and quality
control, as well as strict external
controls, through the supervision
conducted by the Bank of Portugal,
the CMVM and the external audits
to the Bank's processes.
12,
16
283
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MATERIAL TOPICS 2023
Page in the Report
SDG
GC
Principles
Omissions
Scope
417-2 Total number of
incidents of non-compliance
with regulations and/or
voluntary codes concerning
product and service information
and labelling, by type of result
In 2023 no incidents of
non-compliance with voluntary
procedures and voluntary codes
concerning product and service
information or labelling of novobanco
Group were identified.
16
417-3 Total number of
incidents of non-compliance
with regulations and/or
voluntary codes concerning
marketing communications,
including advertising, promotion,
and sponsorship, by type
of result
TOPIC: CUSTOMER PRIVACY
3-3 Explanation of the material
topic and its Boundary
418-1 Total number of
substantiated complaints
received concerning breaches
of customer privacy
In 2023 no incidents of
non-compliance with voluntary
procedures and voluntary codes
on marketing communications,
including advertising, promotion,
and sponsorship by novobanco Group,
were identified.
Within the scope of the
“Customer-Centered Banking”
strategic pillar, the Group’s priority is to
ensure the privacy of all its customers’
data. In this context, it develops the
necessary and appropriate initiatives
to carry out the activity in accordance
with best market practices and legal
and regulatory requirements. The Bank
ensures the confidentiality, integrity
and availability of information.
The novobanco Group monitors
indicators associated with this topic
and reports them in the Sustainability
Report.
The Group received 2 complaints,
originating from the National Data
Protection Commission (CNPD) and
no direct complaints from customers,
there is, however, no additional
information about their status.
12
284
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MATERIAL TOPICS 2023
FINANCIAL SUPPLEMENT
INDICATORS
TOPIC: SOCIOECONOMIC
COMPLIANCE
3-3 Explanation of the material
topic and its Boundary
Page in the Report
SDG
GC
Principles
Omissions
Scope
Customer-Centered Banking is one of the Group's
strategic pillars. In this context, it has reinforced its
customer experience monitoring model with the aim of
offering the best experience to its customers. Knowledge
of their expectations throughout their life cycle, close
monitoring of market trends and a strong commitment
to innovation allow us to identify opportunities for
improvement, based on a robust customer experience
monitoring model based on several pillars of action.
It has also reinforced its offer and services based on
environmental and social criteria. The Group monitors
indicators associated with this topic and reports
them in the Sustainability Report and Sustainability
website > Sustainable business > Suppliers.
Management Approach
Policies with specific
environmental and social
components applied
to business lines.
Procedures for assessing and
screening environmental and
social risks in business lines.
Processes for monitoring
clients’ implementation of and
compliance with environmental
and social requirements included
in agreements or transactions.
Process(es) for improving staff
competency to implement the
environmental and social policies
and procedures as applied to
business lines
Interactions with clients/invest-
ees/business partners regarding
environmental and social risks
and opportunities
SR – pages 171-173;199.
MR – pages 93-100.
SR – pages 126-137.
The novobanco Group has in place
several mechanisms to regulate
customer monitoring. In cases which
may be considered more sensitive,
prevention and monitoring plans are
negotiated, and the situations are
monitored, resorting, when necessary,
to external experts.
The novobanco Group provides
adequate training to its employees
on the marketing of products with
environmental and social concerns.
SR – pages 123-133;139;
144-145;137;156-162;173.
10
10
16
10
10
285
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MATERIAL TOPICS 2023
Page in the Report
SDG
GC
Principles
Omissions
Scope
FS6 Percentage of the portfolio
for business lines by specific
region, size (e.g., micro/SME/
large) and by sector
FS7 Monetary value of products
and services designed to deliver
a specific social benefit for each
business line broken down by
purpose
FS8 Monetary value of products
and services designed to deliver
a specific social benefit for each
business line broken down by
purpose
TOPIC: AUDIT
FS9 Coverage and
frequency of audits to
assess implementation
of environmental and social
policies and risk assessment
procedures
ASPECTO: PROPRIEDADE ATIVA
FS10 Percentage and
number of companies held in
the institution’s portfolio with
which the reporting organisation
has interacted on environmental
or social issues
FS11 Percentage of assets
subject to positive and negative
environmental or social screening
FS12 Voting policy(ies)
applied to environmental or
social issues for shares over
which the reporting organisation
holds the right to vote shares or
advises on voting
1,
8,
9
1,
8,
9.
10,
11
10
10
10
SR – pages 141-151.
MR – pages 68-75;200-201.
SR – pages 141-151.
MR – pages 68-75;200-201.
SR – pages 141-151.
MR – pages 68-75;200-201.
No audits strictly dedicated to the
implementation of environmental
and social policies are carried out.
The group annually assesses the
practices implemented and the
quantitative data through an external
independent verification of its AR and
Sustainability Report.
SR – pages 145;174;177-196;
200-201.
SR – pages 145;174;177-196;
200-201;208-242.
novobanco Group's equity holdings
in other companies are always aimed at
obtaining profitability in the long term.
Having said that, the Bank's stance
as a shareholder takes into account
the relevant principles to ensure
consistent ethical, social and
environmental management.
286
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Page in the Report
SDG
GC
Principles
Omissions
Scope
TOPIC: LOCAL COMMUNITIES
FS13 Access points in
low-populated or economically
disadvantaged areas by type
FS14 Initiatives to improve
access to financial services
for disadvantaged people
TOPIC: LABELLING OF
PRODUCTS AND SERVICES
FS15 Policies for the fair design
and sale of financial products
and services
FS16 Initiatives to enhance
financial literacy by type of
beneficiary
Despite the downsizing carried out,
the group still has a large network of
branches across the country. The group
has been investing in the digitisation
of its services, which has permitted
greater coverage and easier contact
with its clients, wherever they may be.
SR – pages 123;157.
Under its new distribution model, the
group has been increasing the number
of access ramps and lifting platforms
in its branch network. It also provides
lowered ATMs with Braille keyboards.
his equipment is being installed if
and when necessary, as the branch
network is refurbished. The aim is
to gradually extend these access
improvements to all novobanco's
branches and services.
SR – pages 156-158.
Customer-centric banking is
one of the Strategic Pillars of the
novobanco Group. In this context,
all financial products and services
are formulated in compliance with the
requirements imposed by legislation,
regulatory guidelines and the
institution's policies, namely the
standard for design, approval,
distribution and monitoring of
products, already referred to in
indicator 417-1 of this table.
The novobanco Group regularly reports
to its respective regulators evidence
that proves respect and agreement
with external and internal policies and
conduct. The internal and external
audit of the group's procedures verifies
the compliance of the procedures with
the requirements formulated by the
Bank of Portugal and the Insurance
Institute of Portugal.
SR – pages 156-158.
1,
10
1,
10
10
1,8,
10
287
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Sustainability Report
Financial Statements
Annex
8.3 Independent Limited Assurance Report
288
Annual Report 2023 | novobanco
289
Management Report
Sustainability Report
Financial Statements
Annex
122
Annual Report 2023 | novobanco
CONSOLIDATED
FINANCIAL
STATEMENTS
OF NOVOBANCO
GROUP
123
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
novobanco GROUP
CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022
Interest Income
Interest Expenses
Net Interest Income
Dividend income
Fees and comission income
Fees and comission expenses
Gains or losses on derecognition of financial assets and liabilities not measured at fair value through profit or loss
Gains or losses on financial assets and liabilities held for trading
Gains or losses on financial assets mandatorily at fair value through profit or loss
Gains or losses on financial assets and liabilities designated at fair value through profit and loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses
Operating Income
Administrative expenses
Staff expenses
Other administrative expenses
Contributions to resolution funds and deposit guarantee
Depreciation
Provisions or reversal of provisions
Commitments and guarantees given
Other provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Share of the profit or loss of investments in subsidiaries, joint ventures and associates accounted for using the
equity method
Profit or loss before tax from continuing operations
Tax expense or income related to profit or loss from continuing operations
Current tax
Deferred tax
Profit or loss after tax from continuing operations
Profit or loss before tax from discontinued operations
Profit or loss for the year
Attributable to Shareholders of the parent
Attributable to non-controlling interests
Weighted average number of ordinary shares outstanding (thousands)
Basic earnings per share (in Euros)
Diluted earnings per share (in Euros)
Basic earnings per share of continuing activities (in Euros)
Diluted earnings per share of continuing activities (in Euros)
Notes
10
10
12
11
11
12
12
12
12
12
12
13
14
14
15
17
18
25, 27
19
19
19
19
24
30
35
(in thousands of Euros)
2023
1 955 662
( 813 078)
1 142 584
2 133
339 061
( 44 746)
( 58 055)
4 418
26 633
79
32 112
24 369
27 901
106 231
( 124 054)
1 478 666
( 435 577)
( 252 704)
( 182 873)
( 78 481)
( 43 588)
( 45 699)
628
( 46 327)
( 141 893)
7 406
6 351
7 215
754 400
( 5 769)
( 15 134)
9 365
748 631
( 412)
748 219
743 088
5 131
748 219
2022
834 679
( 209 204)
625 475
5 035
337 335
( 47 155)
( 88 255)
149 212
( 40 493)
116
( 1 713)
6 789
83 289
214 005
( 118 357)
1 125 283
( 395 870)
( 233 707)
( 162 163)
( 41 155)
( 52 493)
( 39 245)
2 685
( 41 930)
( 101 882)
21 546
8 375
8 354
532 913
53 301
( 10 048)
63 349
586 214
( 270)
585 944
560 842
25 102
585 944
10 948 426
0,07
0,07
10 034 965
0,06
0,06
0,07
0,07
0,06
0,06
The accompanying explanatory notes are an integral part of these consolidated financial statements
292
Annual Report 2023 | novobanco
novobanco GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022
Net profit / (loss) for the exercise
Other comprehensive income/(loss)
Items that will not be reclassified to results
Actuarial gains / (losses) on defined benefit plans
Other comprehensive income from associates accounted for using the equity method
Fair value changes of equity instruments measured at fair value through other comprehensive
income
Items that may be reclassified to results
Foreign exchange differences
Cash flow hedging
Financial assets at fair value through other comprehensive income
Total other comprehensive income/(loss) for the exercise
Attributable to non-controlling interest
Attributable to Shareholders of the Parent
a) See Statement of Changes in the Consolidated Equity
Notes
a)
a)
a)
a)
a)
The accompanying explanatory notes are an integral part of these consolidated financial statements
2023
748 219
( 51 592)
( 27 294)
( 583)
( 23 715)
216 040
( 45)
192 974
23 111
912 667
5 131
907 536
(in thousands of Euros)
2022
585 944
116 903
101 726
332
14 845
( 305 988)
( 892)
( 100 418)
( 204 678)
396 859
25 102
371 757
293
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
novobanco GROUP
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023 AND 2022
Assets
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Securities
Loans and advances to banks
Loans and advances to customers
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets
Tangible fixed assets
Investment properties
Intangible assets
Tax assets
Current Tax Assets
Deferred Tax Assets
Other assets
Non-current assets and disposal groups classified as held for sale
Liabilities
Financial liabilities held for trading
Financial liabilities measured at amortised cost
Deposits from banks
(of which, Repurchase Agreement)
Due to customers
(of which, Repurchase Agreement)
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
Other financial liabilities
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Provisions
Tax liabilities
Current Tax liabilities
Deferred Tax Liabilities
Other liabilities
Liabilities included in disposal groups classified as held for sale
Equity
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent
Minority interests (Non-controlling interests)
Total Liabilities and Equity
Notes
2023
20
21
22
22
22
22
23
23
24
25
26
27
28
29
30
21
31
23
23
32
28
33
30
34
35
35
35
35
43 500 790
5 867 189
436 148
264 912
-
838 523
32 452 537
7 870 536
47 940
24 534 061
683 063
( 83 498)
59 511
757 549
363 754
393 795
86 748
931 036
29 376
901 660
1 117 258
89 814
39 078 362
100 639
37 330 355
5 745 326
3 867 053
29 984 273
1 366 382
1 107 585
493 171
124 729
62 049
430 829
10 808
10 808
-
1 005 846
13 107
4 422 428
6 567 844
(1 070 125)
(8 577 074)
6 736 004
743 088
22 691
43 500 790
(in thousands of Euros)
2022
45 995 029
6 599 078
171 810
313 702
13
2 331 099
32 559 148
7 964 664
43 548
24 550 936
562 845
( 165 144)
119 744
798 831
299 264
499 567
69 832
956 000
32 570
923 430
1 618 484
59 587
42 483 411
99 386
40 987 177
9 705 154
2 150 824
29 277 858
450 906
1 628 897
375 268
119 578
-
413 432
8 427
7 582
845
839 919
15 492
3 511 618
6 304 661
(1 234 573)
(8 577 074)
6 439 418
560 842
18 344
45 995 029
The accompanying explanatory notes are an integral part of these consolidated financial statements
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novobanco GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022
Notes
Capital
Other
Comprehensive
Income
Retained
earnings
Other
reserves
Net
profit/(loss)
for the exercise
attributable to
shareholders of
the Bank
Non-controlling interests
(in thousands of Euros)
Other
Comprehensive
Income
Other
Total
Balance as at 31 December 2021
6 054 907
( 1 045 489)
( 8 576 860)
6 501 374
184 504
( 35 301)
66 336
3 149 471
Capital increase by incorporation of special reserve for deferred taxes
34
249 754
Other Increase / (Decrease) in Equity
Appropriation to retained earnings of net profit / (loss) of the previous year
Other movements
Total comprehensive income for the exercise
Changes in fair value, net of tax
Foreign exchange differences, net of tax
Remeasurement of defined benefit plans, net of tax
Other comprehensive income appropriated from affiliates
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
35
16
35
35
Cash flow hedge reserves
Net income of the exercise
Balance as at 31 December 2022
Other increase / (Decrease) in Equity
Appropriation to retained earnings of net profit / (loss) of the previous year
Other movements
Total comprehensive income for the year
Changes in fair value, net of tax
Foreign exchange differences, net of tax
Remeasurement of defined benefit plans, net of tax
Other comprehensive income appropriated from affiliates
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
35
16
35
35
Cash flow hedge reserves
Net income of the exercise
Balance as at 31 December 2023
6 304 661
( 1 234 573)
( 8 577 074)
6 439 418
560 842
( 10 199)
28 543
3 511 618
-
1
-
1
-
( 249 754)
-
( 214)
187 798
( 184 504)
-
184 504
( 214)
3 294
-
-
-
-
-
-
-
-
( 37 793)
-
( 37 793)
( 34 712)
-
( 34 712)
( 189 085)
( 185 616)
( 892)
101 726
332
( 3 052)
( 1 165)
( 100 418)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
560 842
25 102
-
-
-
-
-
-
-
-
-
-
-
-
-
-
560 842
25 102
-
-
-
-
-
-
-
-
-
396 859
( 185 616)
( 892)
101 726
332
( 3 052)
( 1 165)
( 100 418)
585 944
-
-
-
-
164 448
283 614
( 45)
( 27 294)
( 583)
( 421)
( 283 797)
192 974
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 263 183)
-
559 769
( 560 842)
560 842
( 560 842)
( 1 073)
-
-
-
-
-
-
( 784)
-
( 784)
-
-
-
-
-
-
-
-
-
743 088
5 131
-
-
-
-
-
-
-
-
-
-
-
-
-
-
743 088
5 131
-
-
-
-
-
-
-
-
-
-
( 1 857)
-
( 1 857)
912 667
283 614
( 45)
( 27 294)
( 583)
( 421)
( 283 797)
192 974
748 219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6 567 844
( 1 070 125)
( 8 577 074)
6 736 004
743 088
( 5 068)
27 759
4 422 428
Capital increase by incorporation of special reserve for deferred taxes
34
263 183
The accompanying explanatory notes are an integral part of these consolidated financial statements
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novobanco GROUP
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022
Cash flows from operating activities
Interest received
Interest paid
Fees and commissions received
Fees and commissions paid
Recoveries on loans previously written off
Contributions to the pension fund
Contributions to resolution funds and deposit guarantee
Cash payments to employees and suppliers
Changes in operating assets and liabilities:
Deposits with / from Central Banks
Financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Debt securities
Loans and advances to banks
Loans and advances to customers
Financial liabilities at amortised cost
Deposits from banks
Due to customers
Derivatives - Hedge accounting
Other operating assets and liabilities
Net cash from operating activities before corporate income tax
Corporate income taxes paid
Net cash from operating activities
Cash flows from investing activities
Sale of investments in subsidiaries and associated companies
Dividends received
Acquisition of investment properties
Sale of investment properties
Acquisition of tangible fixed assets
Sale of tangible fixed assets
Acquisition of intangible assets
Sale of intangible assets
Net cash from investing activities
Cash flows from financing activities
Issuance of bonds and other securitized liabilities
Repayment of bonds and other liabilities
Issue of subordinated debt
Reimbursement of subordinated debt
Net cash from financing activities
Notes
2023
1 145 231
1 995 630
( 696 029)
339 061
( 44 764)
32 512
-
( 78 481)
( 402 698)
(5 228 153)
140 610
( 226 476)
1 831 667
219 383
259 862
( 4 157)
( 36 322)
1 865 439
1 226 408
639 031
( 415 258)
383 202
( 284 355)
( 33 035)
( 317 390)
-
2 133
( 611)
183 309
( 88 091)
980
( 30 345)
-
67 375
-
( 582 980)
500 000
( 400 000)
( 482 980)
(in thousands of Euros)
2022
577 845
862 685
( 211 860)
337 335
( 47 155)
40 423
( 249)
( 41 155)
( 362 179)
(1 702 869)
361 790
146 801
4 463 594
(6 738 365)
(5 831 051)
7 342
( 914 656)
2 343 653
635 597
1 708 056
( 53 738)
960 322
359 033
( 44 800)
314 233
( 1 560)
5 035
( 16 464)
367 213
( 137 533)
107 261
( 25 306)
4
298 650
106 000
( 14 285)
-
-
91 715
Net changes in cash and cash equivalents
( 732 995)
704 598
Cash and cash equivalents at the beginning of the period
Net changes in cash and cash equivalents
Cash and cash equivalents at the end of the period
Cash and cash equivalents include:
Cash
Deposits with Central Banks
(of which, Restricted balances)
Deposits with banks
Total
6 311 181
( 732 995)
5 578 186
179 229
5 374 612
( 289 003)
313 348
5 578 186
20
20
20
5 606 583
704 598
6 311 181
182 895
5 942 498
( 287 897)
473 685
6 311 181
The accompanying explanatory notes are an integral part of these consolidated financial statements
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(This page was left in blank intentionally)
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Annex
novobanco Group
Explanatory notes to the consolidated
financial statements as of December 31,
2023
(Amounts expressed in thousands of euros, except where indicated)
Note 1 - Activity and Structure of the Group
Novo Banco, S.A. is the main entity of the financial novobanco Group focused on the banking activity, having been
incorporated on the 3rd of August 2014 per deliberation of the Board of Directors of Bank of Portugal (the Central Bank
of Portugal) dated 3rd of August 2014 (8 p.m.), under No. 5 of article 145-G of the General Law on Credit Institutions and
Financial Companies (“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF))1, approved by
Decree-Law No. 298/92, of 31 December, following the resolution measure applied by Bank of Portugal to Banco
Espírito Santo, S.A. (BES), under the terms of paragraphs 1 and 3-c) of article 145-C of the RGICSF, from which resulted
the transfer of certain assets, liabilities and off-balance sheet elements as well as assets under management of BES to
novobanco (novobanco or Bank). As a result of the resolution measure applied, Fundo de Resolução (“Resolution Fund”)
became the sole owner of the share capital of novobanco, in the amount of Euro 4,900 million.
As at 18 October 2017, the sale process was concluded, following the acquisition of the majority (75%) of its share
capital by Nani Holdings, SGPS, SA, a company belonging to the North American group Lone Star, through two share
capital increases in the amount of Euro 750 million and Euro 250 million, in October and December, respectively.
Since 18 October 2017, the financial statements of novobanco are consolidated by Nani Holdings SGPS, S.A., with
registered office at Avenida D. João II, No. 46, 4A, Lisbon. On December 19, 2023, the company became Nani Holdings
S.à.r.l, with its headquarters at Rue des Mérovingiens 7A, Bertrange, Luxembourg. LSF Nani Investments S.à.r.l.,
headquartered in Luxembourg, is the parent company of the Group.
NOVO BANCO, S.A. has its registered office in Lisbon, at Avenida da Liberdade, No. 195.
novobanco Group (hereinafter also designated as Group or novobanco Group) has a retail network comprising 290
branches in Portugal and abroad (31 December 2022: 292 branches), including branch in Luxembourg, and two
representative offices: one in Switzerland and one in Spain (31 December 2022: 2 representative offices in Switzerland).
Group companies in which the Bank has a direct or indirect holding higher or equal to 20%, over which the Bank exercises
control or significant influence, and that were included in the consolidation perimeter, are presented below. 1
1 The references made to the RGICSF refer to the version in force on the date of the resolution measure. The current version of the
RGICSF has undergone changes, notably in article 145 by virtue of Law 23-A 2015, of March 26, which came into effect the day after its
publication.
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NOVO BANCO, SA
2014
-
Portugal
Novo Banco dos Açores, SA (novobanco Açores)
2002
2002
Portugal
Year
incorporated
Year
acquired
Registered
office
Activity
Banking
Banking
Share-
holding %
Consolidation
method
57,53%
Full consolidation
BEST - Banco Electrónico de Serviço Total, SA (BEST)
2001
2001
Portugal
electronic banking
100,00%
Full consolidation
NB África, SGPS, SA
2009
2009
Portugal
Management of social participations
100,00%
Full consolidation
GNB - Gestão de Ativos, SGOIC, S.A. (GNB GA)
GNB - Sociedade Gestora de Fundos de Pensões, SA
GNB - International Management, SA
1987
1989
1995
1987
Portugal
Management of social participations
100,00%
Full consolidation
1989
Portugal
Investment fund management
100,00%
Full consolidation
1995
Luxemburgo
Investment fund management
100,00%
Full consolidation
ES Tech Ventures, S.G.P.S., SA (ESTV)
2000
2000
Portugal
Management of social participations
100,00%
Full consolidation
Yunit Serviços, SA
2000
2000
Portugal
Internet portal management
33,33%
equity method
NB Finance, Ltd. (NB FINANCE)
2015
2015
Ilhas Caimão
Issuance and placement of securities
100,00%
Full consolidation
GNB Concessões, SGPS, SA (GNB CONCESSÕES)
2002
2003
Portugal
Management of social participations
100,00%
Full consolidation
Espírito Santo Representações, Ltda. (ESREP)
1996
1996
Brasil
Representation services
99,99%
Full consolidation
Aroleri, SLU
Righthour, SA
Fundo de Gestão de Património Imobiliário - FUNGEPI - Novo Banco
ImoInvestimento – Fundo Especial de Investimento Imobiliário Fechado
2021
2013
1997
2012
2021
Espanha
Real estate promotion
100,00%
Full consolidation
2013
Portugal
Service provision
100,00%
Full consolidation
2012
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
2012
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
Prediloc Capital – Fundo Especial de Investimento Imobiliário Fechado
2006
2012
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
Imogestão – Fundo de Investimento Imobiliário Fechado
2006
2013
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
NB Património - Fundo de Investimento Imobiliário Aberto
1992
2014
Portugal
Real Estate Investment Fund
96,34%
Full consolidation
NB Arrendamento - Fundo de Investimento Imobiliário Fechado para Arrendamento
Habitacional
2009
2012
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
Fimes Oriente - Fundo de Investimento Imobiliário Fechado
2004
2012
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
Fundo de Investimento Imobiliário Fechado Amoreiras
2006
2015
Portugal
Real Estate Investment Fund
95,24%
Full consolidation
NB Branches - Fundo Especial de Investimento Imobiliário Fechado
2006
2019
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
JCN - IP - Investimentos Imobiliários e Participações, SA
Greenwoods Ecoresorts empreendimentos imobiliários, SA
Herdade da Boina - Sociedade Imobiliária
Benagil - Promoção Imobiliária, SA
1995
2012
1999
1970
2012
Portugal
Real estate promotion
100,00%
Full consolidation
2012
Portugal
Real estate promotion
100,00%
Full consolidation
2012
Portugal
Real estate promotion
100,00%
Full consolidation
2012
Portugal
Real estate promotion
100,00%
Full consolidation
Promofundo - Fundo Especial de Investimento Imobiliário Fechado
2008
2018
Portugal
Real Estate Investment Fund
100,00%
Full consolidation
Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA (LOCARENT)
2003
2003
Portugal
Renting
50,00% b)
equity method
UNICRE - Instituição Financeira de Crédito, SA
Edenred Portugal, SA
Multipessoal Recursos Humanos - SGPS, S.A
Lusitano Mortgages No.6 plc c)
Lusitano Mortgages No.7 plc c)
1974
1984
1993
2010
Portugal
Credit finance company
17,5% a)
equity method
2013
Portugal
Provision of various services
50,00% b)
equity method
1993
Portugal
Management of social participations
22,52%
equity method
2007
2007
Irlanda
Special Purpose Entity
100%
Full consolidation
2008
2008
Irlanda
Special Purpose Entity
100%
Full consolidation
a) The percentage presented above reflects the Group's economic interest. These entities were included in the consolidated balance sheet via the equity method as the Group exercises significant influence over
their activities
b) Entities consolidated by the equity method due to the respective decomposition of voting rights not giving control to novobanco
c) Entities established under securitization operations, recorded in the consolidated financial statements in accordance with the Group's ongoing involvement in these operations, determined based on the
percentage held of equity pieces of the respective vehicles (see Note 39)
During 2023, the main changes in novobanco Group’s structure were as follows:
•
•
•
•
•
•
In March 2023, Novobanco's branch in Spain was closed;
In June 2023, the FCR NB Capital Growth Fund was liquidated, with the assets and liabilities of this Fund being
transferred to novobanco;
In June 2023, the merger of Fungepi II into Fungepi was carried out;
In October 2023, novobanco redeemed Fungepi participation units, worth 66,280 thousand euros;
In December 2023, the Invesfundo VII, Febagri, and Imalgarve were liquidated;
In December 2023, as part of the internal reorganization of the GNB GA subgroup, GNB – Gestão de Ativos,
SGPS, GNB Real Estate – SGOIC and GNB – Sociedade Gestora de Patrimónios were merged by incorporation
into GNB Fundos Mobiliários. SGOIC, the latter having changed its corporate name to GNB – Gestão de Ativos,
SGOIC, S.A..
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The most significant changes in the Novobanco Group structure during the fiscal year 2022 were as follows:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
In January 2022, the NB Pension Fund redeemed participation units in Fungere, changing the Novobanco
Group's stake to 98.22%. In March 2022, Novobanco redeemed 12,688,194 participation units from Fungere,
amounting to 15,051 thousand euros, changing the Group's stake to 97.87%. In September 2022, Fungere was
merged into Fungepi. After this merger, Novobanco redeemed participation units from Fungepi amounting to
39,964 thousand euros;
In February 2022, the Five Stars Fund changed its name to NB Branches and increased its capital by 43 million
euros in November 2022;
In March 2022, the stake held in Autodril was sold, with a negative impact of 591 thousand euros;
In May 2022, the FCR PME NB Fund proceeded with the capital reimbursement, with Novobanco receiving
3,174 thousand euros;
In June 2022, Novobanco redeemed participation units in the Imogestão Fund, amounting to 38,000 thousand
euros;
In August 2022, the Imoinvestmento Fund sold the companies Várzea da Lagoa and Quinta D. Manuel I, for
2,592 thousand euros and 1,107 thousand euros, respectively. These sales generated a capital gain of 88
thousand euros for the Novobanco Group;
In September 2022, Novobanco redeemed participation units from Fungepi II worth 4,068 thousand euros;
In September 2022, the Novobanco Pension Fund redeemed all the participation units it held in NB Património,
with Novobanco now holding 96.24% of the Fund;
In September 2022, Fundes was liquidated;
In December 2022, Quinta da Ribeira, Novimove, and NB Logistics Real Estate Funds, as well as the FCR PME
NB were liquidated. The latter sold all the stakes it held (M N Ramos Ferreira, Epedal, Cristalmax, Nexxpro, and
Ach Brito) during the fiscal year 2022;
In December 2022, the stake in Ribagolfe was sold, with a positive impact of 270 thousand euros;
In December 2022, the stake in the Arrábida Fund was sold, with a positive impact of 999 thousand euros;
In December 2022, the stake in Herdade da Vargem Fresca VI was sold, with a positive impact of 136 thousand
euros;
In December 2022, Espírito Santo International Management was liquidated.
novobanco holds in its balance mandatory convertible securities (VMOC) from two entities, obtained through credit
recovery, measured at the fair value which was estimated to be nill. The extension of the conversion of these VMOC into
shares ended during the month of December 2021. The Group contests this conversion, having addressed to the issuers,
letters of formal notice for payment of the payable amounts.
During 2023 and 2022, the movements relating to acquisitions, sales and other investments and repayments in
subsidiary and associated companies are detailed as follows:
Aquisition
Value
Acquisitions
Others
investments
(a)
2023
Total
Sale Value
(thousands of Euros)
Reductions
Others
Refunds
(a)
Total
More /
(losses) in
sales /
settlements
-
-
-
-
-
-
-
-
-
135
135
135
135
-
-
-
-
-
-
-
-
-
-
-
-
135
135
-
-
-
-
-
-
-
-
-
( 133 675)
( 133 675)
-
-
( 12 412)
( 12 412)
( 25 150)
( 25 150)
( 3 847)
( 3 847)
( 11 764)
( 11 764)
( 14 222)
( 14 222)
( 66 280)
( 66 280)
( 133 675)
( 133 675)
-
-
-
-
-
-
-
-
-
Subsidiaries companies
Benagil
Febagri
Imoinvestimento
FCR NB Growth
Imalgarve
Invesfundo VII
Fungepi
a) Increases / decreases in capital, supplementary provisions, supplies, financial instrument exchange operations and company formations
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Acquisitions
Others
investments
(a)
Acqusition
value
2022
Reductions
(thousands de euros)
Total
Sale Value
Others
Refunds (a)
Total
Gains/ (losses) in
sales/
settlements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43 000
43 000
32 373
( 100 258)
( 67 885)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43 000
43 000
-
-
-
-
-
-
-
-
-
-
-
-
504
-
504
-
-
( 15 051)
( 15 051)
( 3 174)
( 3 174)
2 592
1 107
-
-
2 592
1 107
-
-
( 4 068)
( 4 068)
( 39 965)
( 39 965)
20 057
500
-
-
7 613
7 506
1 709
2 790
2 667
340
-
-
20 057
500
( 38 000)
( 38 000)
-
-
-
-
-
-
-
-
7 613
7 506
1 709
2 790
2 667
340
902
( 591)
-
-
66
22
-
-
999
136
-
-
270
67
67
-
-
-
43 000
43 000
39 879
( 100 258)
( 60 379)
969
Subsidiaries companies
Autodril
Fungere
FCR PME NB
Várzea da Lagoa
Quinta D. Manuel I
Fungepi II
Fungepi
Arrábida
H. Vargem Fresca VI
Imogestão
NB Branches
Ribagolfe
Associated companies
Epedal
Nexxpro
Cristalmax
M N Ramos Ferreira
a) Increases / decreases in capital, supplementary provisions, supplies, financial instrument exchange operations and company formations
The subsidiaries classified under IFRS 5 as non-current assets held for sale and discontinued operations, are detailed in
Note 30.
Note 2 – Basis of Presentation
The consolidated financial statements of novobanco are presented as of 31 December 2023, expressed in thousands of
euros, rounded to the nearest thousand. The accounting policies used by the Group in the preparation are consistent
with those used in the preparation of the financial statements as of 31 December 2022. The changes to the most
relevant accounting policies are described in Note 5.
The consolidated financial statements of novobanco have been prepared under the assumption of continuity of
operations from the accounting records and following the historical cost convention, except for the assets and liabilities
accounted at fair value, namely derivative financial instruments, financial assets and liabilities at fair value through profit
or loss, financial assets at fair value through other comprehensive income, investment properties and hedged assets and
liabilities, in respect of their hedged component.
The consolidated financial statements and the Management Report of 31 December 2023 were approved at the
Executive Board of Directors’ meeting held on 29 February 2024 and will be submitted to the General Assembly of
Shareholders, which has the power to justifiably decide to change them. However, it is Executive Board of Directors
conviction that these consolidated financial statements will be approved without changes.
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Note 3 –Statement of Compliance
The consolidated financial statements of novobanco have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted in the European Union in force on January 1, 2023, under Regulation (EC) nº
1606/2002 of the European Parliament and of the Council, of 19 July 2002, and Notice nº 5/2015 of Bank of Portugal.
IFRS comprise accounting standards issued by the International Accounting Standards Board (IASB) and interpretations
issued by the International Financial Reporting Interpretation Committee (IFRIC) and its predecessor body the Standing
Interpretations Committee (SIC).
Note 4 – Presentation of Financial Statements
The Group presents its statement of financial position in order of liquidity based on the Group’s intention and perceived
ability to recover/settle the majority of assets/liabilities of the corresponding financial statement line caption.
An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12
months after the reporting date (noncurrent) is presented throughout the different balance sheet notes.
Note 5 – Changes in Accounting Policies
In the preparation of its financial statements with reference to 31 December 2023, the Group did not early adopt any
new standard, interpretation or amendment issued, but not yet in force. The changes to the standards adopted by the
Group are as follows:
Standards, interpretations, amendments and revisions that came into effect in the financial year
The following standards, interpretations, amendments and revisions endorsed by the European Union are mandatorily
applied for the first time in the financial year beginning on January 1, 2023:
Standard / Interpretation
Description
IFRS 17 – Insurance Contracts
IFRS 17 replaces IFRS 4 and applies to all insurance contracts (i.e., life, non-life, direct insurance,
and reinsurance), regardless of the type of entities that issue them, as well as to some
warranties and some financial instruments with discretionary participation features. In general
terms, IFRS 17 provides a more useful and more consistent accounting model for insurance
contracts. Contrasting with the requirements of IFRS 4, which are based on previously adopted
local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts,
covering all relevant accounting aspects.
Amendments to IFRS 17 – Insurance
Contracts – Initial application of IFRS 17
and IFRS 9 – Comparative information
This amendment to IFRS 17 pertains to the presentation of comparative information of financial
assets upon the initial application of IFRS 17.
Amendments to IAS 1 - Disclosure of
Accounting Policies
The amendment adds a transition option that allows an entity to apply an 'overlay' to the
classification of a financial asset in the comparative period(s) presented upon the initial
application of IFRS 17. The 'overlay' allows all financial assets, including those held in relation to
activities not related to contracts within the scope of IFRS 17, to be classified, instrument by
instrument, in the comparative period(s) in line with how the entity expects these assets to be
classified upon the initial application of IFRS 9.
These changes aim to assist an entity in disclosing 'material' accounting policies, previously
referred to as 'significant' policies. However, due to the absence of this concept in IFRS
standards, it was decided to replace it with the concept of "materiality", a concept already
known by the users of financial statements.
When assessing the materiality of accounting policies, the entity must consider not only the size
of the transactions but also other events or conditions and their nature.
Amendments to IAS 8 - Definition of
Accounting Estimates
The amendment aims to clarify the distinction between changes in accounting estimates,
changes in accounting policies, and the correction of errors. Additionally, it clarifies how an entity
uses measurement techniques and inputs to develop accounting estimates.
Amendments to IAS 12 - Deferred tax
related to assets and liabilities arising
from a single transaction
IAS 12 now requires an entity to recognise deferred tax when its initial recognition gives rise to
equal amounts of taxable temporary differences and deductible temporary differences.
However, it is a matter of professional judgment whether such deductions are attributable to
the liability that is recognised in the financial statements or to the related asset. This fact is
particularly important in determining the existence of temporary differences in the initial
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recognition of the asset or liability, insofar as the initial recognition exception is not applicable to
transactions that originated equal taxable and deductible temporary differences.
Among the applicable transactions are the registration of (i) assets under right of use and lease
liabilities; (ii) provisions for dismantling, restoration, or similar liabilities, and the corresponding
amounts recognised as part of the cost of the related asset, when at the date of initial
recognition they do not apply for tax purposes.
This amendment is retrospectively applicable.
These changes arise in the context of implementing the Global Anti-Base Erosion ("Globe") rules
of the OECD, which may have significant impacts on the determination of deferred taxes that
are difficult to estimate as of the date of issuance of these changes.
These changes introduce a temporary exception to the accounting for deferred taxes arising
from the application of the OECD's second pillar model rules, and additionally establish new
specific disclosure requirements for affected entities.
Amendments to IAS 12 - International
Tax Reform - Second Pillar Model Rules
These standards and changes had no material impact on the Group's financial statements.
Note 6 - Principles of Consolidation
These consolidated financial statements comprise the assets, liabilities, income, expenses, other comprehensive
income, and cash flows of novobanco and of its subsidiaries (Group or novobanco Group) and the results attributable to
the Group relating to shareholdings in associated companies.
These accounting policies have been consistently applied to all the Group companies during the financial years covered
by these consolidated financial statements.
Subsidiaries
Subsidiaries are entities (including investment funds and securitization vehicles) over which the Group exercises control.
The Group controls an entity when it is exposed, or has rights, to the variability of the return deriving from its
involvement with that entity and may take possession of same by way of the power it has over the entity (facto
control) and could affect these variable returns through the power it held over the relevant activities of the entity. As
provided in IFRS 10, the Group analyses the objective and the structuring of how an entity’s operations are developed
when assessing its control over such entity. Subsidiaries are fully consolidated from the date on which control over their
activities is transferred to the Group and until the date that control ceases. Holdings of third parties in these entities are
presented in the caption non-controlling interests, except for open investment funds in which these values are
presented in the caption Other liabilities, due to the high probability of their redemption or the limited duration that
requires the delivery of values to the remaining participants.
The accumulated losses of a subsidiary are attributed proportionally to non-controlling interests even if this results in
the recognition of non-controlling interests of a negative value.
Gains or losses arising from the dilution or sale of a portion of the financial interest in a subsidiary, with loss of control, are
recognised by the Group in the income statement.
When control is obtained in a business combination achieved in stages (step acquisition) the Group remeasures its
previously held non-controlling interest in the entity at its fair value and recognises the resulting gain or loss in the
income statement upon determining the respective goodwill. When a partial sale occurs, resulting in the loss of control
of a subsidiary, any remaining non-controlling interest retained is remeasured to its fair value at the date the control is
lost, and the resulting gain or loss is recognised in the income statement.
The entity identified as acquirer or incorporator integrates the results of the entity/business acquired as from the date
of its acquisition, that is, from the date of the takeover of control.
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Associated companies
Associated companies are those entities which the Group has significant influence over the company’s financial and
operating policies, but not its control. Generally, when the Group owns more than 20% of the voting rights but less than
50%, it is presumed to have a significant influence. Even if the Group owns less than 20% of the voting rights, it can still
have a significant influence through its participation in the management of the associated company or its representation
in its executive Management bodies.
Investments in associated companies are recorded in the consolidated financial statements of the Bank using the equity
method of accounting from the date on which significant influence is attained by the Group until the date that significant
influence ceases. The carrying value of the investments in associated companies includes the value of the respective
goodwill determined at the acquisition date and is presented net of impairment losses. The Group carries out impairment
tests on its investments in associated companies, whenever there are any indications of impairment. Impairment losses
recognised in prior years may be reversed, up to the limit of the accumulated losses.
In a step acquisition that results in the Group obtaining significant influence over an entity, any previously held stake in
that entity is remeasured to its fair value through the income statement when the equity method is first applied
When the Group’s share of losses of an associated company equals or exceeds its interest in the associated company,
including any medium and long-term interest, the Group discontinues the application of the equity method, except when
it has a legal or constructive obligation to cover those losses or has made payments on behalf of the associated
company.
Gains or losses on disposals of shares in associated companies are recognised in the income statement even if those
disposals do not result in the loss of significant influence. Dividends attributed by associated companies reduce the
balance sheet value recognised by the Group.
Structured Entities (SE)
The Group consolidates using the full consolidation method, certain special purpose entities, created specifically to
accomplish a narrow and well-defined objective, when the substance of the relationship with those entities indicates
that they are controlled by the Group, irrespective of the percentage of the equity held.
The evaluation of the existence of control is made based on the established by IFRS 10 – Consolidated Financial
Statements, according to which a SE is controlled if (i) the Group is exposed or has rights to its results; and (ii) the Group
has the power to affect the SE’s results through the control it exercises over them.
Investment funds managed by the Group
As part of its asset management activity, the Group manages investment funds on behalf of the holders of the
participation units. The financial statements of these funds are not consolidated by the Group except in the cases where
control is exercised over their activity, according to the criteria established by IFRS 10.
Goodwill
Goodwill represents the difference between the acquisition cost and the fair value of the Group’s share of identifiable
net assets, liabilities and contingent liabilities acquired.
Business combinations occurring after 31 December 2009 were accounted for using the purchase method. The
acquisition cost includes the fair values: i) of the assets transferred, ii) of the liabilities assumed by the acquirer before
the previous shareholders of the acquired, and iii) of the equity instruments issued.
In accordance with IFRS 3, the Group measures goodwill as the difference between the fair value of the consideration
transferred including the fair value of any non-controlling interest previously held, and the fair value attributable to the
assets acquired and the liabilities assumed, and any equity instruments issued. The fair values are determined at the
acquisition date. The costs directly attributable to the acquisition are added to the acquisition amount.
As of the acquisition date, the non-controlling interests are measured at their proportional interest in the fair value of
the net identifiable assets acquired and liabilities assumed, without their respective portion of goodwill. As a result, the
goodwill recognised in these consolidated financial statements corresponds solely to the portion attributable to the
shareholders of the Bank.
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In accordance with IFRS 3 – Business Combinations, positive goodwill is recognised as an asset at its cost and is not
amortised. Goodwill relating to the acquisition of associated companies is included in the carrying book value of the
investments in those associated companies, determined using the equity method. Negative goodwill is recognised
directly in the income statement, the period the business combination occurs.
For business combinations that are not completed at the end of the reporting period, the Group estimates the
provisional amounts of assets and liabilities to be included in the consolidated financial statements, including the related
goodwill. During the measurement period, which does not exceed one year from the acquisition date, the provisional
amounts recognised will be retrospectively adjusted to reflect new information obtained, including the recognition of
additional assets or liabilities.
Goodwill is tested for impairment annually and whenever circumstances indicate that its book value may be impaired.
Any impairment losses determined are recognised in the income statement. The recoverable amount is determined by
assessing each cash-generating unit (or group of cash-generating units) to which the goodwill refers. When a cash-
generating unit has a recoverable value that is less than its carrying amount, an impairment loss is recognised.
Impairment losses related to goodwill from subsidiaries cannot be reversed in future periods.
Transactions with non-controlling interests
Acquisitions of non-controlling interests that do not result in a change in control over a subsidiary are accounted for as
transactions with shareholders and, therefore, no additional goodwill is recognised as a result of such transactions. Any
difference between the acquisition cost and the carrying book value of the non-controlling interest acquired is
recognised directly in reserves. Similarly, gains or losses arising from sale of non-controlling interests that do not result in
a loss of control over a subsidiary, are always recorded against reserves.
The non-controlling component of Open Real Estate Funds controlled by the Group is recorded under Other Liabilities in
the consolidated accounts.
Balances and transactions eliminated with consolidation
Intercompany balances and transactions, including any unrealised gains and losses on transactions between Group
companies, are eliminated in preparing the consolidated financial statements unless the unrealised losses provide
evidence of an impairment loss that should be recognised in the consolidated financial statements.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the
Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transactions reveal
evidence of impairment. The accounting policies of subsidiaries and associated companies are changed, whenever
necessary, to ensure that the same are applied consistently throughout the Group.
Note 7 – Material information about the accounting policy
7.1. Foreign currency operations
7.1.1 Functional and presentational currency
The financial statements of each of the Group’s subsidiaries and associated companies are prepared using their
functional currency, which is defined as the currency of the primary economic environment in which that entity operates.
The Group’s consolidated financial statements are prepared in Euro, which is novobanco functional currency.
7.1.2. Transactions and balances
Transactions conducted in foreign currency are converted into euros at the exchange rate effective on the date of the
transaction.
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Monetary assets and liabilities expressed in foreign currency are converted to euros using the exchange rate effective
on the balance sheet date. The exchange differences resulting from this conversion are recognised in profits and are
presented in the income statement.
Non-monetary assets and liabilities denominated in foreign currency and valued at historical cost are converted to euros
using the exchange rate applied on the transaction date. Those that are valued at fair value use the exchange rate in
effect on the date the fair value was determined. The resulting exchange differences are recognised in profits except for
differences related to shares classified as financial assets at fair value through other comprehensive income, which are
recorded in comprehensive income and presented on the comprehensive income statement.
In the case of effective cash flow hedging relationships or net investments in foreign operations, the exchange
differences of the effective component are recognised in other comprehensive income.
7.2. Recognition of interest income/expense
Interest income and expense is recognised in the income statement under interest and similar income and interest
expense and similar charges for all financial instruments measured at amortised cost and for all financial assets at fair
value through other comprehensive income, using the effective interest rate method. Interest arising on financial assets
and liabilities at fair value through profit or loss is also included under interest and similar income or interest expense and
similar charges, as appropriate.
The effective interest rate is the rate that discounts the estimated future cash payments or receipts throughout the
expected life of the financial instrument or, when appropriate, a shorter period to the net book value of the financial
asset or liability. The effective interest rate is calculated at inception and is not subsequently revised, except in respect
of financial assets and liabilities with a variable interest rate. In this case, the effective interest rate is periodically
revised, taking into consideration the impact of the change in the interest rate of reference on the estimated future cash
flows.
When calculating the effective interest rate, the Group estimates the cash flows considering all the contractual terms of
the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation
includes all the commissions that are an integral part of the effective interest rate, transaction costs and all other related
premiums or discounts.
Interest and similar income include interest from financial assets for which were recognised impairment. The interest
from financial assets classified as Stage 3 are determined based on the effective interest rate method applied to the net
book value. When the asset is no longer classified as Stage 3, the interest is calculated based on the gross book value.
For derivative financial instruments, the interest component in the change in fair value of derivative financial
instruments classified as fair value hedge and fair value option is recognised under interest income or interest expense.
For other derivatives, the interest component inherent in the fair value change will not be separated and will be classified
under the income statement of assets and liabilities held for trading (see note 7.5).
7.3. Fee and commission income recognition
Fees and commissions income is recognised as revenue from customer contracts to the extent that performance
obligations are met:
•
•
•
Fees and commissions that are earned on the execution of a significant act, such as loan syndication fees, are
recognised as income when the significant act has been completed;
Fees and commissions earned over the period during which the services are provided are recognised as income
in the financial year in which the services are provided;
Fees and commissions that are an integral part of the effective interest rate of a financial instrument are
recognised as income using the effective interest rate method, as described in note 7.2.
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7.4. Financial instruments - Classification and initial measurement
7.4.1. Date of recognition
Financial assets and liabilities, with the exception of loans and advances to customers and amounts owed to customers,
are initially recognised on the trade date, that is, the date on which the Group becomes party to the contractual
provisions of the instrument. This includes regular trades, that is, purchases or sales of financial assets that require
delivery of assets within the time period generally established by regulation or convention in the market. Loans and
advances to customers are recognised when funds are transferred to the customers' accounts. The Group recognises
amounts owed to customers when funds are transferred to the Group.
7.4.2. Initial recognition of financial instruments
The classification of financial instruments upon initial recognition depends on their contractual terms and the business
model for managing the instruments, as described in note 7.6. Financial instruments are initially measured at their fair
value plus or minus transaction costs (as defined in Note 7.5), except in the case of financial assets and liabilities
measured at fair value through results, for which transaction costs are directly recognised in results. Amounts receivable
from customers are measured at the transaction price. When the fair value of financial instruments upon initial
recognition differs from the transaction price, the Group recognises Day 1 profits, as described below.
7.4.3. Day one profit
When the transaction price of the instrument differs from the fair value at origin and the fair value is based on a valuation
technique using only data observable in market transactions, the Group recognises the difference between the
transaction price and the fair value in net trading income. In cases where the fair value is based on models for which
some of the data are not observable, the difference between the transaction price and fair value is deferred and only
recognised in the result when the data become observable, or when the instrument is derecognized.
The Group recognises in results the earnings from the intermediation margin (day one profit), mainly generated in the
intermediation of derivative and foreign exchange financial products, since the fair value of these instruments, on the
date of their initial recognition and subsequently, is determined only based on variables observable in the market and
reflects the Group's access to the wholesale financial market.
7.4.4. Measurement categories of financial assets and liabilities
The Group classifies all of its financial assets based on the business model for managing the assets and the contractual
terms of the asset, measured at:
• Amortised cost, as explained in note 7.6.1;
•
•
• Mandatory measured at fair value through profit or loss, as explained in note 7.6.4.
Fair value through other comprehensive income, as explained in notes 7.6.1, 7.6.2 and 7.6.3;
Fair value through profit or loss, as explained in note 7.6.4.
The Group classifies and measures its trading derivatives portfolio in the trading portfolio, as explained in Note 7.6.5. The
Group may designate financial instruments in this portfolio, if this eliminates or significantly reduces measurement or
recognition inconsistencies, as explained in Note 7.6.6.
Financial liabilities are measured at amortised cost, except for loan commitments and financial guarantees or trading
portfolio liabilities which are measured at fair value.
7.5. Fair value of financial assets and liabilities
The fair value of quoted financial assets is determined based on the closing quote (bid-price), the price of the last
transaction executed, or the value of the last known quote (bid). In the absence of a quote, the Group estimates the fair
value using (i) valuation methodologies, such as using prices from recent transactions, similar and carried out in market
conditions, discounted cash flow techniques and custom option valuation models to reflect the peculiarities and
circumstances of the instrument and (ii) valuation assumptions based on market information.
For assets included in level 3 of the fair value hierarchy whose quotation is provided by a third party using unobservable
market parameters, the Group proceeds, when applicable, to a detailed analysis of the historical performance and
liquidity of these assets. Following this analysis, as well as additional internal or external evaluations, adjustments may
be made to the provided quotation to determine the fair value of these assets.
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Following is a brief description of the type of assets and liabilities included in each level of the hierarchy and the
corresponding method of valuation:
Quoted market prices (level 1)
This category includes Financial Instruments with quotations available in official markets and those for which there are
entities that regularly disclose transaction prices for these instruments traded in liquid markets.
Priority in the prices used is given to those observed in official markets, in cases where there is more than one official
market the option falls on the main market where these financial instruments are traded.
The Group considers the prices disclosed by independent entities as market prices, assuming as an assumption that
they act in their own economic interest and that such prices are representative of the active market, always using,
where possible, prices provided by more than one entity (for a particular asset and/or liability). In the revaluation process
of Financial Instruments, the Group analyses the different prices in order to select the one that appears most
representative for the instrument under analysis. Additionally, prices from recent transactions on similar financial
instruments are used as inputs, where they exist, and are subsequently compared with those provided by the
aforementioned entities in order to better substantiate the Group's choice for a given price.
This category includes, among others, the following financial instruments:
(i) Derivatives traded on an organised market;
(ii) Shares quoted on a stock exchange;
(iii) Open investment funds quoted on a stock exchange;
(iv) Closed investment funds whose subjacent assets are solely financial instruments listed on a stock exchange;
(v) Bonds with observable market valuations;
(vi) Financial instruments with market offer even if not available from normal information sources (e.g. securities
trading based on the recovery rate).
Valuation models based on observable market parameters / prices (level 2)
In this category, financial instruments valued using internal models are considered, particularly models of discounted
cash flows and option valuations, which involve the use of estimates and require judgements that vary according to the
complexity of the products being valued. Nevertheless, the Group uses variables provided by the market as inputs in its
models, such as interest rate curves, credit spreads, volatility and indices on quotes. It also includes instruments whose
valuation is obtained through quotes disclosed by independent entities, but whose markets have lower liquidity.
Additionally, the Group also uses as observable market variables those resulting from transactions on similar
instruments and that are observed with a certain recurrence in the market.
This category includes, among others, the following financial instruments:
(i) Bonds without observable valuations in the market valued using observable market inputs; and
(ii) Derivatives (OTC) over-the-counter market valued with observable market inputs; and
(iii) Unlisted shares valued with internal models using observable market inputs
Valuation models based on unobservable market parameters (level 3)
This level includes valuations determined using internal valuation models or quotes provided by third parties, but whose
parameters used are not observable in the market. The bases and assumptions for calculating fair value are in
accordance with the principles of IFRS 13.
In this category, among others, the following financial instruments are included:
(i) Debt securities valued using inputs not observable in the market;
(ii) Unquoted shares;
(iii) Closed real estate funds;
(iv) Hedge Funds;
(v) Private equities;
(vi) Restructuring Funds; and
(vii) Derivatives (OTC) over-the-counter with prices provided by third parties.
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7.6. Financial Assets and Liabilities
The Group classifies financial assets at the time of their acquisition based on the considered business model and the
characteristics of the contractual cash flows of these assets. This classification determines how the asset is measured
after its initial recognition:
• Amortised cost: if it is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows that are solely payments of principal and interest (SPPI - solely payments of principal
and interest);
• Fair value through other comprehensive income: if it is held within a business model, the objective of which is
achieved by both collecting contractual cash flows and selling financial assets and the contractual cash flows
fall under the scope of SPPI. In addition, upon initial recognition, the Group may choose to classify irrevocably
equity instruments in the fair value through other comprehensive income portfolio being the changes in the fair
value recognised in equity;
• Mandatorily measured at fair value through profit or loss: all cases not within the scope of SPPI;
• Measured at fair value through profit or loss: other financial instruments not included in the business models
described above. If these assets are acquired for the purpose of trading in the short term, they are classified as
held for trading.
7.6.1. Financial assets at amortised cost
For a financial asset to be classified and measured at amortised cost or at fair value through other comprehensive
income, it is required that:
(i) the contractual clauses must give rise to cash flows that correspond only to payments of principal and interest
on the amount owed (SPPI – Solely Payments of Principal and Interest). For the purposes of the SPPI test, the
principal is the fair value of the financial asset at the time of initial recognition. Contractual flows that are SPPI
are consistent with a basic loan agreement. Initial contractual clauses that introduce exposure to risks or
volatility of contractual cash flows that are not related to a basic loan agreement, such as exposure to changes
in equity prices or commodity prices, do not give rise to contractual cash flows that are only repayments
relating to principal and interest calculated on the amount of principal owed. In these cases, financial assets
must be measured at fair value mandatorily through profit or loss;
(ii) The business model of the financial asset is to receive only the contractual cash flows until maturity (asset at
amortised cost). The evaluation of the financial asset's business models is crucial for its classification. The
Group determines the business models by groups of financial assets according to how they are managed to
achieve a certain business objective. The Group's business models determine whether cash flows will be
generated through the receipt of only contractual cash flows, the sale of financial assets or both. At the initial
recognition of a financial asset, the Group determines whether it forms part of an existing business model or
whether it reflects a new business model. The Group reassesses its business models in each reporting period, in
order to determine whether changes have occurred in the business models since the last reporting period.
The above requirements do not apply to lease receivables, which meet the criteria set out in IFRS 16 - Leases.
Financial assets that are subsequently measured at amortised cost are subject to impairment calculation, as explained in
note 7.12.
Financial assets at amortised cost are initially recorded at acquisition value, subsequently they are measured at
amortised cost based on the effective interest rate. The interest, calculated at the effective interest rate, is recognized
in the income statement.
7.6.2. Debt instruments with fair value changes in other comprehensive income
The Group classifies debt instruments with fair value changes in other comprehensive income when the following
conditions are met:
•
•
The financial asset is held within a business model which objective is achieved through the receipt of
contractual cash flows and the sale of financial assets; and
The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely principal
repayments and interest payments on the amount of capital owed.
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Debt instruments thus classified are subsequently measured at fair value, with gains and losses arising from changes in
fair value recognised in other comprehensive income until the assets are derecognised, at which point the accumulated
amount of potential gains and losses recorded in reserves is transferred to profit or loss under the heading of gains or
losses on financial assets and liabilities measured at fair value through profit or loss. Interest income and foreign
exchange gains and losses are recognised in profit or loss in the same way as for financial assets measured at amortised
cost as explained in Note 7.2.
The expected credit loss calculation is explained in Note 7.12. When the Group holds more than one investment in the
same security, they are deemed to be disposed of on a first–in first–out basis.
7.6.3. Equity instruments with fair value changes in other comprehensive income
initial recognition, the Group
After
in other
irrevocably classifies financial equity
comprehensive income when they are classified as equity instruments according to IAS 32 and are not held for trading.
This designation is determined on a case-by-case basis.
instruments with variations
Profits and losses on these financial instruments are never recycled to results. Dividends are recognized in profit or loss
as dividend income when the right to payment has been established, except when the Group benefits from such income
as a recovery of part of the cost of the instrument, in which case these gains are recorded in other comprehensive
income.
Equity instruments with fair value changes in other comprehensive income are not subject to impairment.
7.6.4. Financial assets recorded at fair value through profit or loss
An asset recorded at fair value through profit or loss has the following characteristics:
•
•
•
the contractual cash flows are not SPPI (mandatory at fair value through profit or loss); and/or
it is held in a business model that does not aim solely to obtain contractual cash flows or to obtain contractual
cash flows and sale; or,
it is designated at fair value through profit or loss, as a result of the application of the fair value option.
7.6.5. Assets and Liabilities Held for Trading
The Group classifies financial assets or financial liabilities as held for trading when they have been acquired or issued
mainly for the purpose of making a short-term profit through trading activities or are part of a portfolio of jointly
managed financial assets for which there is recent evidence of realization of short-term profits.
Assets and liabilities held for trading are recorded and evaluated on the balance sheet at fair value. Changes in fair value
are recognized in financial operations results. Interest income or expense and dividends are recorded in the same line
item according to the terms of the contract or when the right to payment has been established.
Included in this portfolio are debt securities, shares, short positions, and loans to customers that have been primarily
acquired for the purpose of sale or repurchase in the short term.
7.6.6. Derivative Financial Instruments and Hedge Accounting
Classification
The Group classifies its derivatives portfolio into (i) hedging derivatives and (ii) trading derivatives, which include, in
addition to the derivatives contracted for the purpose of making profits, the derivatives contracted for the purpose of
economically hedging certain assets and liabilities designated at fair value through profit or loss, but which have not
been classified as hedging (fair value option).
Recognition and Measurement
Derivative financial instruments are recognized on their trading date (trade date), at their fair value. Subsequently, the
fair value of derivative financial instruments is reassessed on a regular basis, with the gains or losses resulting from such
revaluation recorded directly in the results of the year, except for hedging derivatives. The recognition of fair value
changes of hedging derivatives depends on the nature of the risk covered and the hedging model used.
Derivatives traded on organized markets, namely futures and some options contracts, are recorded as trading and are
revalued at the expense of results. Margin accounts are recorded in Other assets and Other liabilities (see Notes 29 and
33) and include the minimum collateral required for open positions.
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The fair value of other derivative financial instruments corresponds to their market value, when available, or is
determined based on valuation techniques including discounted cash flow models and option valuation models, as
appropriate.
Hedge Accounting
• Classification Criteria
The derivative financial instruments used for hedging purposes can be classified for accounting purposes as hedging
instruments as long as they cumulatively fulfill the following conditions:
(i) The hedging instruments and the hedged items are eligible for hedging;
(ii) At the date of the commencement of the transaction, the hedging relationship is identified and formally
documented, including the identification of the hedged item, the hedging instrument, the nature of the hedged
risk, and the evaluation of hedge effectiveness;
(iii) There is an economic relationship between the hedged item and the hedging instrument;
(iv) The effect of the credit risk does not dominate the changes in value that result from this economic relationship;
(v) The effectiveness of the hedge can be reliably measured both at the inception of the transaction and
throughout its life.
In cases where the Group uses macro hedging, the accounting is carried out according to IAS 39, using the option
provided for in IFRS 9, with the Group performing prospective tests at the start date of the hedging relationship, where
applicable, and retrospective tests used to confirm, at each balance sheet date, the effectiveness of hedging
relationships, demonstrating that changes in the fair value of the hedging instrument are covered by changes in the fair
value of the hedged item in the portion attributed to the hedged risk. Any identified ineffectiveness is recognized in
results as it occurs, in gains or losses of hedge accounting. In the specific case of fair value hedging of interest rate risk
for the deposit portfolio, the IAS 39 carve-out exception was adopted for the application of macro hedging to core
deposits.
The use of derivatives is in line with the Group's risk management strategy and objectives.
• Fair Value Hedging
In a fair value hedging operation of an asset or liability, the balance sheet value of that asset or liability is adjusted to
reflect changes in its fair value attributable to the covered risk. Changes in the fair value of the hedging derivatives are
recognized in results, along with changes in the fair value of the hedged assets or liabilities, attributable to the hedged
risk. In cases where the hedged item is an equity instrument designated at fair value through other comprehensive
income, changes in the fair value of the hedging instruments are also recognized in other comprehensive income.
If the hedge no longer meets the effectiveness requirement, but the risk management objective remains, the Group may
adjust the hedge to meet eligibility criteria (rebalancing).
If the hedge no longer meets the criteria required for hedge accounting (if the hedging instrument expires, is sold, has
terminated or is exercised, without having been replaced according to the entity’s documented risk management
objective), the derivative financial instrument is transferred to the trading portfolio, and hedge accounting is
discontinued prospectively. If the hedged asset or liability corresponds to a fixed-income instrument, the revaluation
adjustment is amortized in results until maturity by the effective interest rate method.
• Cash Flow Hedge
In a hedge operation of the exposure to variability of highly probable future cash flows (cash flow hedge), the effective
portion of changes in the fair value of the hedging derivative is recognized in the cash flow hedge reserve. The value of
this reserve is transferred to the results in the periods in which the expected cash flows of the hedged item affect
results. The ineffective portion of the hedge is recorded in results.
When a hedging instrument expires or is sold, or when the hedge no longer meets the criteria required for hedge
accounting, the changes in the fair value of the derivative accumulated in reserves are recognized in results when the
hedged operation also affects results. If it is foreseeable that the hedged operation will not be carried out, the amounts
still recorded in equity are immediately recognized in results, and the hedging instrument is transferred to the trading
portfolio.
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Embedded Derivatives
If a hybrid contract includes a base contract that is a financial asset within the scope of IFRS 9, the Group classifies the
whole contract according to the policy referred to in Note 7.5.
If a hybrid contract includes a base contract that is not an asset under IFRS 9, an embedded derivative must be
separated from the base contract and accounted for as a derivative under this Standard if, and only if:
(i) The economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the base contract;
(ii) A separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and
(iii) The hybrid contract is not measured at fair value with changes in fair value recognized in the income (i.e., a
derivative embedded in a financial liability at fair value through income is not separated).
These embedded derivatives are recorded at fair value with changes recognized in the income statement.
7.6.7. Financial Liabilities
An instrument is classified as a financial liability when there is a contractual obligation for its settlement to be made by
the delivery of cash or another financial asset, regardless of its legal form. Financial liabilities are derecognized when the
underlying obligation is settled, expires, or is canceled.
Non-derivative financial liabilities include resources from credit institutions and clients, loans, liabilities represented by
securities, other subordinated liabilities, and short sales.
These financial liabilities are recorded (i) initially at their fair value minus the transaction costs incurred and (ii)
subsequently at amortized cost, based on the effective interest method, with the exception of short sales and financial
liabilities designated at fair value through profit or loss, which are recorded at fair value.
The Group designates certain financial liabilities at fair value through profit or loss at their initial recognition when:
• such a designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise;
• the financial liability is part of a group of financial assets or liabilities or both, which is managed and assessed on a
fair value basis, according to the Group's risk management or investment strategy; or
• such financial liabilities contain embedded derivatives, and IFRS 9 allows the entire hybrid contract to be
designated at fair value through profit or loss.
Reclassifications are not allowed between liability categories.
The structured products issued by the Group – with the exception of the structured products in which the embedded
derivatives were bifurcated and recorded separately and revalued at fair value – always fall under one of the above
situations and follow the valuation method of financial liabilities at fair value through profit or loss.
The fair value of listed financial liabilities is their current market bid prices. In the absence of a quoted price, the Group
establishes the fair value by using valuation techniques based on market information, including the Group issuer’s own
credit risk.
These liabilities are measured at fair value, and the respective gains or losses in the revaluation are recognized in results
except for changes resulting from the change in the Group's own risk, the “Debt Valuation Adjustment” (DVA), which is
recognized in other comprehensive income. The new bank Group does not register any gain associated with its own
credit risk.
The gains or losses resulting from the revaluation of liabilities at fair value are recorded in results. However, the fair value
change attributable to changes in credit risk is recognized in other comprehensive income. At the time of derecognition
of the liability, the value recorded in other comprehensive income related to changes in credit risk is not transferred to
results.
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If the Group repurchases debt securities issued, these are derecognised from the balance sheet and the difference
between the carrying book value of the liability and its acquisition cost is recognised in the income statement.
7.6.8. Financial guarantees and performance guarantees
Financial Guarantees
Financial guarantees are considered to be contracts that require the issuer to make payments to compensate the holder
for losses incurred from defaults on the contractual terms of debt instruments, namely the payment of the respective
capital and/or interest.
Issued financial guarantees are initially recognized at their fair value. Subsequently, these guarantees are measured at
the greater of (i) the fair value initially recognized and (ii) the amount of any obligation arising from the guarantee
contract, measured at the balance sheet date. Any variation in the value of the obligation associated with issued
financial guarantees is recognized in results.
Financial guarantees issued by the Group usually have a defined maturity and a periodic fee charged in advance, which
varies depending on counterparty risk, amount and contract period. On this basis, the fair value of the guarantees on the
date of initial recognition is approximately equivalent to the value of the initial commission received, considering that
the agreed conditions are market-based. Thus, the value recognized at the date of contracting equals the amount of the
initial commission received, which is recognized in results in the period to which it refers. Subsequent commissions are
recognized in results in the period to which they refer.
Performance Guarantees
Performance guarantees are contracts that result in compensation of a party if the if there is non-compliance with the
defined contractual obligation. Performance guarantees are initially recognized at fair value, which is normally evidenced
by the value of commissions received during the contract's duration. If the defined contractual obligation is not fulfilled,
the Group has the right of recourse against the main debtor of the guarantee, with the amounts recognized in Loans to
customers after payment of compensation to the beneficiary of the guarantee. As the right of return is embedded in the
performance guarantee, and therefore part of the same unit of account, the Group understands that it does not assume
insurance risk, but only financial (credit) risk on the main debtor, and, in this sense, treats these guarantees as financial
instruments.
7.7. Reclassification of Financial Assets and Liabilities
If the Group changes a business model, the financial assets included in that model are reclassified and the classification
and measurement requirements for the new category are applied prospectively as from that date.
7.8. Modification of Financial Assets and Liabilities
The activity of commercial renegotiation of financial assets is one of the tools that the Group has available and that it
regularly uses in the management and recovery of these instruments. Therefore, the Group understands that the
assessment to determine whether these renegotiations result in the derecognition of financial assets should be
exceptional and case-by-case, taking into account the identification of the operations in question by professional
judgment and the materiality of the same.
In these situations, the Group carries out an assessment to determine whether modifications result in the derecognition
of that financial asset. For financial assets, this assessment is based on qualitative factors. When assessing whether or
not to derecognize a loan to a customer, the Group considers, among others, the following factors:
• Change in the currency of the loan;
• Introduction of a capital feature;
• Change in the counterparty;
• The modification is such that the instrument does not pass the SPPI test.
If the modification does not result in substantially different cash flows, as defined below, it will not result in
derecognition. Based on the change in cash flows discounted at the original effective interest rate, the Group records a
modification gain or loss, to the extent that a loss for impairment has not yet been recorded. The Group's accounting
policy regarding past due loans is presented in Note 7.10.
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When the modification of the terms of an existing financial liability is not classified as substantial and therefore does not
result in derecognition, the amortized cost of the financial liability is recalculated by calculating the present value of the
estimated future contractual cash flows that are discounted based on the original effective interest rate of the financial
liability. Any resulting difference is recognized immediately in the result. The Group accounts for the substantial
modification of the terms of an existing liability or part thereof as an extinction of the original financial liability and the
recognition of a new liability. It is assumed that the terms are substantially different if the present value of the cash
flows according to the new terms, including any fee paid net of any fees received, and discounted using the original
effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the
original financial liability. The difference between the balance sheet value of the original liability and the value of the new
liability is recorded in income statement.
7.9. Derecognition
Financial assets are derecognized from the balance sheet when (i) the Group's contractual rights to their respective cash
flows have expired, (ii) the Group has transferred substantially all the risks and benefits associated with their holding, or
(iii) notwithstanding that the Group has retained some, but not substantially all the risks and benefits associated with
their holding, control over the assets has been transferred. When a transaction measured at fair value through other
comprehensive income is derecognized, the previously recognized accumulated gain or loss in other comprehensive
income is reclassified to results. Specifically, for equity instruments, the previously recognized accumulated gain or loss
in other equity is not reclassified to results, being transferred between equity items.
Specifically for customer loans, at the time of sale the difference between the sale price and the balance sheet value
should be 100% provisioned, with the derecognition of the sold credit being made by counterpart of the funds/assets
received and consequent use of balance sheet impairment.
7.10. Forborne modified loans
In the context of credit recovery, the Group makes modifications to the original terms of contracts in response to the
borrower's financial difficulties, rather than taking possession or otherwise demanding the collection of collateral. The
Group considers a loan to be restructured when such modifications occur as a result of the customer’s current or
expected financial difficulties, and the Group would not have agreed to them if the borrower were financially sound.
Indicators of financial difficulty include contractual defaults or other warning signs identified by the Global Risk
Department. Changes may involve extending payment agreements and/or agreeing to new loan conditions. If the
modifications are substantial, the loan is derecognized, as explained in Note 7.8. Once the terms have been renegotiated
without resulting in derecognition of the loan, any reduction in the recoverable amount is measured using the original
effective interest rate calculated before the modification of the terms. Additionally, the Group reassesses whether
there has been a significant increase in credit risk, as demonstrated in Note 42, and whether the assets should be
classified as Stage 3.
Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If
these procedures identify a loss in relation to a loan, it is classified as a Stage 3 restructured asset with impairment. Once
an asset has been classified as restructured, it will remain restructured for a minimum period of 24 months. For the loan
to cease being reclassified in this category, the customer must comply with the following criteria:
• All its financing must be considered performing;
• The two-year curing period has occurred and the loan is now considered performing;
• Regular payments of more than an insignificant amount of capital or interest have been made for at least half the
curing period;
• The customer has no contract that is more than 30 days overdue.
Net loss on derecognition of financial assets measured at amortised cost includes loss (or income) recognised on sale or
derecognition of financial assets measured at amortised cost calculated as the difference between the net book value
(including impairment until the recoverable amount) and the proceeds received.
7.11. Offseting of Financial Instruments
Financial assets and liabilities are presented on the balance sheet at their net value when there is an enforceable legal
right to offset the recognized amounts and there is an intention to settle them at their net value or realize the asset and
settle the liability simultaneously. The enforceable legal right cannot be contingent on future events and must be
enforceable during the normal course of the Group Novobanco's business as well as in the event of default, bankruptcy
or insolvency of the Group or the counterparty.
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7.12. Impairment of Financial Assets
Impairment principles
The Group recognizes impairment for expected credit losses for the following debt instruments:
• Loans and Advances to Customers;
• Financial and performance guarantees;
• Import Documentary Credit;
• Confirmed Export Documentary Credit;
• Undrawn loan commitments;
• Money Market exposures;
• Securities Portfolio.
Equity instruments are not subject to impairment according to IFRS 9.
Debt instruments classified in amortized cost or fair value through other comprehensive income are considered within
the scope of impairment calculations.
Identified impairment losses are recorded against results and are subsequently reversed by results if, in a subsequent
period, the amount of the estimated loss decreases.
Impairment is based on expected credit losses for 12 months provided there is no significant deterioration in credit risk
since origination. In the event of a significant increase in credit risk since origination, expected credit losses consider the
remaining life of the asset, that is, they consider the remaining maturity of this asset.
Expected credit losses for 12 months represent the portion of expected credit losses up to the maturity of the asset
resulting from default events on an instrument occurring within the 12 months following the balance sheet date.
Expected credit losses can be calculated individually or collectively, depending on the nature of the underlying portfolio
of financial instruments.
The Group has established a policy to assess, at the end of each reporting period, whether the credit risk of a financial
instrument has increased significantly since initial recognition, considering the change in the risk of default that occurs
over the remaining life of the financial asset.
Based on the above process, the Group aggregates exposures by stage as described below:
• Stage 1: includes all exposures without any indication of significant credit risk deterioration and without active
default status. For these exposures, impairment is recognized as a 12-month expected loss;
• Stage 2: includes all exposures where at least one indication of significant credit risk deterioration was identified.
For these exposures, impairment is recognized at the current value of expected losses accrued until maturity. This
universe also includes exposures in the quarantine period, that is, exposures that have recently ceased to have (1)
indications of significant credit risk deterioration and/or (2) default classification;
• Stage 3: includes all exposures classified as default - according to the internal definition of the Group which is
aligned with the regulatory definition. This definition includes, cumulatively:
• Exposures with substantial default for more than 90 consecutive days; or
• Exposures that, not having a substantial default for more than 90 consecutive days, are classified as "Unlikely to
pay".
Financial assets purchased or originated with impairment (POCI), that is, for which impairment was identified at initial
recognition, can be classified in stage 2 or stage 3.
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The calculation of collective impairment
For the determination of impairment on a collective basis, exposures are segmented based on similar credit risk
characteristics according to the risk assessment defined by the Group. For each of these homogeneous risk segments,
risk factors are estimated that are applied in the context of the impairment calculation.
For the purposes of determining collective impairment, the risk factors considered in each risk segment must reflect, in
accordance with IFRS regulation, prospective information. Additionally, the impairment calculation must also reflect the
consideration of multiple scenarios, with the final impairment resulting from the sum of the amounts determined in each
scenario, weighted by the respective associated probability.
The calculation of the expected loss always involves the consideration of:
• Probability of default (PD) - this risk factor is an estimate of the probability of default within a certain time period.
The default can only occur at a certain point in the period evaluated, if the credit line has not previously been
derecognized and is still on the balance sheet;
• Severity (LGD) - this risk factor is an estimate of the loss that arises if the default happens at a certain moment. It
is based on the difference between contractual cash flows and those that the Group estimates to receive, including
the execution of collaterals or other contractual changes that become an integral part of the loan and do not meet
the criteria to be recognized separately.
• Exposure – it represents the notional amount of exposure on the reporting date and this amount is considered for
the purposes of the basis of incidence for the calculation of collective impairment. In the case of off-balance sheet
exposures, a credit conversion factor (CCF) is applied to the notional amount of the exposure. This factor
represents the probability of off-balance sheet exposures converting into on-balance sheet exposures.
When an exposure is classified in stage 2, it is considered, for impairment calculation purposes, that the exposure
evolves according to the contracted capital and interest repayment schedule, or in the absence of this information, that
the disbursement occurs at maturity.
The details of the impairment calculation are presented as follows:
• Stage 1: this calculation applies to productive exposures that show no active indication of significant credit risk
deterioration compared to origination. Impairment represents the expected loss resulting from default events on a
financial instrument that may occur within a term of 12 months after the balance sheet date. Risk factors - PD and
LGD – consider the 12-month horizon and are applied to the value of the exposure. This calculation is carried out by
the scenario, since each considered scenario has specific risk factors - PD and LGD;
• Stage 2: this calculation applies to productive exposures that show an indication of a significant increase in credit
risk since origination. Impairment represents the current value of the sum of expected losses until the maturity of
the exposure. Expected losses are calculated on the projected exposure at each moment of the debt amortization,
according to the exposure amortization plan, and these expected losses are discounted at the original effective
rate of the contract to obtain their current value, as of the reporting date. As mentioned above, this determination
is done by scenario since different risk factors are considered for each scenario;
• Stage 3: this calculation applies to non-productive exposures, where impairment corresponds to the difference
between the amount outstanding and the current value of the expected recoveries for this exposure, given its
characteristics. To determine the current value of the expected recoveries, the original effective rate of the
contract is also used;
• As previously mentioned, POCI are financial assets originated or purchased with impairment at initial recognition.
Exposures in this situation cannot be classified in stage 1;
• Irrevocable commitments and letters of credit: as previously mentioned, given the off-balance sheet nature of
irrevocable commitments, the Group estimates on these contracts the respective amount that it expects to be
converted into an on-balance sheet amount (credit). In this way, the estimated conversion factor for this type of
exposure is applied to its notional value and the respective result is taken into account as the basis for incidence for
the calculation of collective impairment;
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• For credit cards and revolving lines that include an irrevocable commitment, the impairment is calculated and
deducted from the asset. For irrevocable commitments and letters of credit, the impairment is recognized in
Provisions in liabilities.
Impairment for debt instruments measured at fair value through other comprehensive income does not reduce the
balance sheet value of these financial assets, which remains at fair value. In this way, an amount equal to the provision
that would arise if the assets were measured at amortized cost is recognized in other comprehensive income as an
accumulated reduction in recoverable value, with a corresponding debit to the result. The accumulated loss recognized
in other comprehensive income is recycled to results upon derecognition of the assets.
Process of analysis of individual impairment
The Individual Credit Analysis comprises a staging analysis and an analysis of quantification of individual impairment. The
staging analysis is carried out for borrowers previously classified in stage 1 and stage 2 and aims to assess the adequacy
of the stage assigned with additional information obtained on an individual basis. The analysis of quantification of
individual impairment aims to determine the most appropriate impairment rate for each credit customer, regardless of
the amount resulting from the Collective Impairment Model. Customers who have been targeted for Individual Analysis,
but for whom an objective impairment loss has not been considered, are once again included in the Collective
Impairment Model. The Individual Analysis of selected customers is carried out based on information provided by the
Commercial Structures regarding the classification of the customer/Group, historical and forecast cash flows (when
available) and existing collateral.
7.13. Valuation of collateral and financial guarantees
To mitigate its credit risks on financial assets, the Group seeks to use collateral, where possible. The collateral comes in
various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-
financial assets and credit enhancements such as netting agreements. Collateral, unless repossessed, is not recorded on
the Group’s statement of financial position. Collateral is generally assessed, at a minimum, at inception and re-assessed
on a quarterly basis. However, some collateral, for example, cash or securities relating to margining requirements, is
valued daily. To the extent possible, the Group uses active market data for valuing financial assets held as collateral.
Other financial assets which do not have readily determinable market values are valued using models. Non-financial
collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers or based on
housing price indexes.
7.14. Foreclosed properties and non current assets held for sale
In the scope of its loan granting activity, the Group incurs in the risk of the borrower failing to repay all the amounts due.
In case of loans and advances with mortgage collateral, the Group executes these and receives real estate properties
resulting from foreclosure. Due to the provisions of the General Law on Credit Institutions and Financial Companies
(“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF)), banks are prevented, unless authorised
by Bank of Portugal, from acquiring real estate property that is not essential to their installation and daily operations and
the pursuit of their object (No. 1 of article 112 of RGICSF), being able to acquire, however, real estate property in
exchange for loans granted by same. This real estate property must be sold within 2 years, period which may, based on
reasonable grounds, be extended by Bank of Portugal, on the conditions to be determined by this Authority (article 114
of RGICSF).
Although the Group aims to sell all properties received in lieu of payment or through the execution of guarantees
immediately, during 2016 the Group changed the classification of these properties from Non-current assets held for sale
to Other assets (and to Investment properties, in the case of assets held by investment funds or leased properties), due
to their stay in the portfolio being longer than 12 months. However, the accounting method did not change, and they are
initially recognized at the lower of their fair value less expected sale costs and the balance of the granted credit object of
recovery. Subsequently, these assets are measured at the lower of the initial recognition value and fair value less sales
costs and are not amortized. For the properties registered in the balance sheet of Novo Banco and the other credit
institutions that make up the Group's consolidation perimeter, the immediate sale value is considered as its fair value.
For properties held by investment funds, in accordance with Law no. 16/2015, of February 24, its fair value is considered
as the simple arithmetic average of two appraisals performed by independent experts, determined in accordance with
the best price that could be obtained if it were put up for sale, under normal market conditions, at the time of the
appraisals, which is reviewed with a minimum annual periodicity or, in the case of open collective investment organisms,
with the redemption frequency if less than that, and whenever there are acquisitions or sales or significant changes in
the value of the property. The market value of the properties for which a purchase and sale promise contract has been
signed corresponds to the value of this contract.
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The valuations of real estate received for credit recovery are performed using one of the following methodologies,
applied according to the specific situation of the asset:
(i) The Market Method
(ii)
The Market Method references transaction values of similar properties comparable to the property being
studied obtained through market prospecting in the area.
Income Method
This method aims to estimate the value of the property from the capitalization of its net income, updated for
the present time, using the discounted cash flow method.
(iii) Cost Method
The Cost Method aims to reflect the amount currently required to replace the asset in present conditions,
breaking down the property value into its fundamental components: Value of Urban Land and Urbanity;
Construction Value; and Value of Indirect Costs.
Valuations carried out are performed by independent entities specialised in these services. The valuation reports are
analysed internally, namely comparing the sales values with the revalued amounts of the assets so as to assess the
parameters and process adequacy with the market evolution.
Additionally, since these are assets whose fair value level in the hierarchy of IFRS 13 mostly corresponds to level 3, given
the subjectivity of some assumptions used in the valuations and the fact that there are external indications with
alternative values, the Group proceeds to analysis on the assumptions used, which may imply additional adjustments to
their fair value, supported by additional internal or external valuations.
For assets of greater relevance, the challenge of the appraisals that serve as a basis for the valuation of the real estate
assets is carried out by a specialised area of the Group that is independent of this valuation process, in accordance with
an annual work plan previously approved by the Executive Board of Directors.
Non-current assets or disposal groups (groups of assets to be disposed of together and the related liabilities that
include at least one non-current asset) are classified as held for sale when their carrying values will be recovered mainly
through a sale transaction (including those acquired exclusively with a view to their subsequent disposal), the assets or
disposal groups are available for immediate sale and the sale is highly probable (within the period of one year).
Immediately before the initial classification as held for sale, the measurement of the non-current assets (or of all the
assets and liabilities in a disposal group) is brought up to date in accordance with the applicable IFRS. Subsequently,
these assets or disposal groups are remeasured at the lower of their carrying value and fair value less costs to sell.
Where the carrying value of non-current assets corresponds to fair value less costs to sell, the fair value level of the IFRS
13 hierarchy corresponds mostly to Level 3.
Assets / liabilities of subsidiaries acquired for resale purposes reflect, essentially, assets and liabilities of subsidiaries
acquired by the Group in the scope of loan restructuring operations, for which the Group's objective is their subsequent
disposal within one year. Since these acquisitions arise from loan restructuring operations, they are recognised at their
fair value, and any differences between their fair values and those of the extinguished loans following the acquisitions,
are recognised as impairment losses on loans and advances. On the acquisition of an entity meeting the subsidiary
criteria and for which the Group's objective is its resale, it is consolidated in accordance with the applicable procedures
adopted by the Group and its assets and liabilities are measured at fair value at the acquisition date. However, in these
specific cases, the assets are classified as non-current assets held for sale and the liabilities are classified as non-current
liabilities held for sale. Consequently, and at the first consolidation date, the net value of the assets and liabilities of the
subsidiary reflects their fair value determined at the acquisition date (which results from the loan restructuring
operation).
These subsidiaries are consolidated until their effective sale. At each balance sheet date, the net carrying book value of
their assets and liabilities is compared with their fair value, less costs to sell, and impairment losses are recognised when
necessary. Assets and liabilities relating to discontinued operations are recorded in accordance with the valuation
policies applicable to each category of assets and liabilities, as set down in IFRS 5, according to the IAS/IFRS applicable
to the respective assets and liabilities.
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For purposes of determining the fair value of subsidiaries held for resale, the Group adopts the following methodologies:
•
•
for subsidiaries which assets comprise fundamentally real estate, their fair value is determined with reference
to the value of those assets, which is based on valuations performed by independent specialised entities;
for the remaining entities, their fair value is determined based on the discounted cash flow methodology, using
assumptions consistent with the business risks of each of the subsidiaries under valuation. If these subsidiaries
cease to comply with the conditions necessary to be recorded as non-current assets held for sale in
accordance with IFRS 5, their assets and liabilities are fully consolidated in the respective asset and liability
captions, in accordance with that provided for in Note 30.
7.15. Investment properties
The Group classifies as investment properties those properties held for rental or capital appreciation or both. Investment
properties are initially recognized at acquisition cost, including directly related transaction costs, and subsequently at
their fair value. Changes in fair value determined at each balance sheet date are recognized in results, in the headings of
Other operating income or Other operating expenses, based on periodic evaluations carried out by independent entities
specialized in this type of service. Investment properties are not subject to amortization.
Given that these are assets whose fair value level in the IFRS 13 hierarchy corresponds mostly to level 3, the subjectivity
of some assumptions used in evaluations, and the fact that there are external indications with alternative values, the
Group conducts internal analysis on the assumptions used in the evaluations of these assets which may imply additional
adjustments to their fair value, supported by additional internal or external evaluations.
Transfers to and from the heading Investment properties can occur whenever there is a change in the use of the
property. When transferring investment properties to own-use properties, the estimated cost, for accounting
recognition, is the fair value at the date of the change of use. If an own-use property is classified as an investment
property, the Group records this asset in accordance with the policy applicable to own-use properties, until the date of
its transfer to investment properties and at fair value subsequently, with the difference in valuation determined at the
date of transfer recognized in revaluation reserves. If a property is transferred from Other assets to Investment
properties, any difference between the fair value of the asset on that date and the previously recorded amount is
recognized as a result of the year.
Subsequent related expenditures are capitalized when it is likely that the Group will obtain future economic benefits in
excess of the level of performance initially estimated.
The capital gains and losses determined on the disposal of investment properties resulting from the difference between
the realization value and the carrying amount are recognized in results for the year under the headings of Other
operating income or Other operating expenses. All costs and income generated with investment properties are also
recognized in the results for the year under the headings of Other operating income or Other operating expenses, in
addition to the changes in fair value previously mentioned.
The Investment Properties recorded result only from non-banking activities (Investment Funds and Real Estate
Companies).
7.16. Write-offs
A write-off is defined as the derecognition of a financial asset from the Group's balance sheet, which should only occur
when cumulatively:
(i) The due date of the part of the loan to be written off (total or partial) would have been required, i.e. the loans
must be registered (total or partial)
in overdue credit. Exceptions to this requirement are (i) debt
restructurings/forgiveness carried out within the scope of extrajudicial agreements, PER and Insolvencies, in
which part of the
loan may remain alive and the remainder of the debt may be written off by
judicial/extrajudicial decision and (ii) situations in which despite the contract not being overdue in its entirety,
the Group believes it is facing a scenario of total or partial loss;
(ii) Collection efforts considered adequate would have been developed (and relevant and adequate evidence
gathered);
(iii) The expectations of loan recovery are very low, and it is necessary that the amount to be written off (whether
it is a total or partial write-off of the debt) is fully covered by impairment and under the management of the
central credit recovery application. It is necessary to ensure that the value to be written off the asset is fully
covered by impairment (constituted at least in the month prior to the write-off).
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Subsequent payments received after the write-off must be recognised as subsequent write-off recoveries at other
operating income.
7.17. Cash and Cash Equivalents
For the purposes of the cash flow statement, cash and its equivalents include the amounts recorded in the balance
sheet with a maturity of less than three months from the date of acquisition/contract, and whose risk of value variation
is immaterial, including cash, cash balances at central banks and other sight deposits. Cash and cash equivalents exclude
mandatory deposits made with Central Banks.
7.18. Assets sold with repurchase agreements, securities loaned and short sales
Securities sold with a repurchase agreement (repos) at a fixed price or at a price that equals the sale price plus an
interest inherent in the term of the operation are not derecognized from the balance sheet. The corresponding liability is
accounted for in amounts payable to other credit institutions or customers, as appropriate. The difference between the
sale price and the repurchase price is treated as an interest and is deferred during the life of the agreement, through the
effective rate method.
Securities purchased with a resale agreement (reverse repos) at a fixed price or a price that equals the purchase price
plus an interest inherent in the term of the operation are not recognized in the balance sheet, with the purchase price
being recorded as loans to other credit institutions or customers, as appropriate. The difference between the purchase
price and the resale price is treated as an interest and is deferred during the life of the agreement, through the effective
rate method.
Securities transferred through loan agreements are not derecognized from the balance sheet, being classified and
valued in accordance with the accounting policy referred to in Note 7.10. Securities received through loan agreements
are not recognized in the balance sheet.
Short sales represent securities sold that are not part of the Group's assets. They are recorded as a financial trading
liability at the fair value of the assets that are to be returned under the resale agreement. The gains and losses resulting
from the change in their fair value are directly recognized in results in the line of Gains or losses on financial assets and
liabilities held for trading.
7.19. Property, plant and equipment
The Group's tangible fixed assets are valued at cost less accumulated depreciation and impairment losses. The cost
includes expenses that are directly attributable to the acquisition of the goods.
Subsequent costs for tangible fixed assets are recognized only if they are likely to result in future economic benefits for
the Group. All maintenance and repair expenses are recognized as cost, in accordance with the accrual basis principle.
Land is not depreciated. Depreciation of tangible fixed assets is calculated using the straight-line method, at the
following depreciation rates that reflect the expected useful life of the goods:
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Own-use properties
Improvements in rented buildings
Computer equipment
Furniture and fixtures
Interior installations
Security equipment
Machines and tools
Transportation material
Other equipment
Number of years
35 a 50
10
4 a 5
4 a 10
5 a 10
4 a 10
4 a 10
4
5
The useful lives and residual values of property, plant and equipment are reviewed at each reporting date.
When there is an indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated, and
an impairment loss should be recognized whenever the net value of an asset exceeds its recoverable amount.
Impairment losses are recognized in the income statement and are reversed in subsequent reporting periods when the
reasons that led to their initial recognition cease to exist. For this purpose, the new depreciated amount will not exceed
the one that would have been accounted for if no impairment losses had been attributed to the asset, considering the
depreciations that it would have suffered.
The recoverable amount is determined as the lower one between its fair value less the costs of sale and its value in use,
and this is calculated based on the current value of estimated future cash flows expected to be obtained from the
continued use of the asset and its disposal at the end of its lifespan.
On the date of derecognition of a tangible asset, the gain or loss calculated by the difference between the fair value less
the costs of sale and the book net value is recognized in results in the heading Other operating income or Other
operating expenses.
7.20. Leases
Lease definition
The Group evaluates whether a contract is or contains a lease based on the definition of a lease, which focuses on the
right to use an identified asset for a certain period of time, in exchange for a fee.
As lessee
As a lessee, the Group rents various assets, including real estate, vehicles, and computer equipment. The Group
recognizes an asset for the right to use the leased asset and a lease liability for the obligation to pay rents.
The Group does not recognize right-of-use assets and lease liabilities for short-term leases, whose lease term is 12
months or less, and leases of low-value assets (e.g. computer equipment), with a new value less than 5 thousand euros.
The Group recognizes lease payments associated with these leases as expenses on a straight-line basis over the lease
term, under "Other administrative expenses - Rents and leases".
The Group presents right-of-use assets that do not fit the definition of investment property in "tangible fixed assets", in
the same line of items where it presents the underlying assets of the same nature that it owns. Right-of-use assets that
fit the definition of investment property are presented as investment property. These assets are measured at cost less
accumulated depreciation and impairment, and are amortized on a straight-line basis over the lesser of the lease term or
the life of the asset. The cost corresponds to the value of the recognized lease liability, incurred direct costs, and less
any incentive received for the lease.
The Group presents lease liabilities in "Other liabilities" in the financial position statement. The lease liability is
determined by the present value of the rents to be paid during the lease term. Rents include fixed amounts, variable
amounts that depend on an interest rate, amounts to be paid regarding guarantees on the residual value of the asset.
Any options are also included if they are reasonably expected to be exercised.
Variable amounts that do not depend on a rate are recognized as a cost in the period to which they relate. During the
lease period, the lease liability increases by the interest count and decreases by the rent payment. The value of the lease
liability is changed if the lease terms change (such as the term or the value of the index) or if the assessment of the
exercise of the purchase option of the
asset changes.
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As lessor
Finance leases
Operations in which the risks and benefits inherent to the ownership of an asset are substantially transferred to the
lessee are classified as finance leases. Lease finance contracts are recorded in the balance sheet as credits granted for
the equivalent value of the net investment made in the leased assets, along with any estimated unguaranteed residual
value. Interest included in the rents charged to customers is recorded as income while capital amortizations, also
included in the rents, are deducted from the value of credit granted to customers. The recognition of interests reflects a
constant periodic return rate on the remaining net investment of the lessor.
Operating leases
All lease operations that do not fit the definition of finance lease are classified as operating leases. Receipts related to
these contracts are recognized on a straight-line basis over the lease term and recorded in "Other operating income."
7.21. Intangible Assets
The costs incurred with the acquisition, production and development of software are capitalised, as are additional costs
incurred by the Group to implement said software. These costs are amortised on a straight-line basis over their
expected useful lives, which usually range between 3 and 6 years. Exceptionally, these may be extended whenever it is
verified that the useful life of the asset is demonstrably longer.
Costs directly related to the development of computer applications, from which it is expected to generate future
economic benefits beyond one year, are recognized and recorded as intangible assets.
All remaining costs associated with information technology services are recognised as an expense as incurred.
7.22. Impairment of Non-Financial Assets
The Group assesses at each reporting date whether there is an indication of an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less
costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the
carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions
can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately
for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future
cash flows beyond the fifth year (perpetuity).
Impairment losses of continuing operations are recognized in the income statement in expense categories consistent
with the function of the impaired asset, except for assets previously revalued with other comprehensive income. For
such assets, the impairment is recognized in other comprehensive income up to the amount of any previous revaluation.
For assets, excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the
Group estimates the asset’s or cash-generating unit’s recoverable amount. An impairment loss earlier recognized is
reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since
the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of
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profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation
increase.
The Group assesses where climate risks may have a significant impact, such as the introduction of emission reduction
legislation that may increase production costs. These risks in relation to climate-related issues are included as key
assumptions when they materially affect the measurement of the recoverable amount. These assumptions have been
included in the cash flow forecasts in the assessment of use values.
Intangible assets with indefinite lives are annually subjected to impairment testing at the cash-generating unit level, as
appropriate, and when circumstances indicate the carrying value may be impaired.
7.23. Employee Benefits
Pensions
Resulting from the signing of the Collective Labor Agreement (ACT) and subsequent changes resulting from the 3
tripartite agreements, as referred to in Note 16, pension funds and other mechanisms have been established in order to
ensure the coverage of responsibilities assumed for old-age pensions, disability, survival and also for medical care.
The coverage of responsibilities is ensured, for the majority of the Group's companies, through pension funds managed
by GNB - Sociedade Gestora de Fundos de Pensões, SA, a subsidiary of the Group.
The pension plans existing in the Group correspond to defined benefit plans, because they define the criteria for
determining the value of the pension that an employee will receive during retirement, usually depending on one or more
factors such as age, years of service and remuneration.
The retirement pension liabilities are calculated semi-annually, on 31 December and 30 June of each year, for each plan
individually, using the Projected Unit Credit Method, being annually reviewed by qualified independent actuaries. The
discount rate used in this calculation is determined with reference to market rates associated with high-quality
corporate bonds, denominated in the currency in which the benefits will be paid out and with a maturity similar to the
expiry date of the plan’s liabilities.
The Group determines the net interest income / expense for the period incurred with the pension plan by multiplying the
plan’s net assets / liabilities (liabilities net of the fair value of the fund’s assets) by the discount rate used to measure the
retirement pension liabilities referred to above. On that basis, the net interest income / expense was determined based
on the interest cost on the retirement pension liabilities net of the expected return on the funds’ assets, both calculated
using the discount rate applied in the determination of the retirement pension liabilities.
Re-measurement gains and losses, namely (i) actuarial gains and losses arising due to differences between actuarial
assumptions used and real values verified (experience adjustments) and changes in actuarial assumptions and (ii) gains
and losses arising due to the difference between the expected return on the fund’s assets and the actual investment
returns, are recognised in equity under the caption other comprehensive income.
The Group recognizes as a cost in the income statement a net total amount that includes (i) current service costs, (ii) net
interest income / expense with the pension fund, (iii) the effect of early retirement, (iv) past service costs, and (v) the
effect of settlements or curtailments occurring during the period. The net interest income / expense with the pension
plan is recognised as interest income or interest expense, depending on its nature. Early retirement costs correspond to
increases in liabilities due to employees retiring before turning 65 (normal retirement age foreseen in the ACTV) and
which forms the basis of the actuarial calculation of pension fund liabilities. Whenever the possibility of the early
retirement provided for in the pension fund regulation is invoked, the responsibilities of same must be incremented by
the value of the actuarial calculation of the liabilities corresponding to the period between the early retirement and the
employee turning 65. The Group makes payments to the fund to ensure its solvency, with the minimum levels set by the
Bank of Portugal as follows: (i) full financing at the end of each year of actuarial responsibilities for pensions in payment
and (ii) financing at a minimum level of 95% of the actuarial value of past service responsibilities of active personnel.
The Group assesses the recoverability of any excess of the fund in relation to pension liabilities, based on the
expectation of reduction in future necessary contributions.
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Health-care Benefits
The Group provides to its banking employees health-care benefits through a specific Social-Medical Assistance Service.
This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union.
SAMS provides
its beneficiaries services and/or contributions with medical assistance expenses, diagnostics,
medication, hospitalization, and surgeries, in accordance with its funding availability and internal regulations.
Arising from the signature of the new Collective Labour Agreement (ACT) on 5 July 2016, published in Labour Bulletin
(Boletim do Trabalho) No. 29, of 8 August 2016, the Group’s contributions to SAMS, correspond to a monthly fixed
amount (as per Annex VI of the new ACT) for each employee, 14 times a year, recorded on a monthly basis in personnel
costs, while the component to be paid by the employee is discounted monthly in the processing of salary, against the
caption Amounts payable (SAMS).
The calculation and recognition of the Group’s liability with post-retirement health-care benefits is similar to the
calculation and recognition of the pension liability described above. These benefits are covered by the Pension Fund,
which presently covers all liabilities with pensions and health-care benefits (defined benefit plan).
Career Bonus
The ACT provides for the payment by the Group of a career bonus, due at the time immediately prior to the employee's
retirement if he retires at the Group's service, corresponding to 1.5 of his salary at the time of payment.
These long-term service bonuses were accounted for by the Group in accordance with IAS 19, as other long-term
employee benefits. The Group’s liability with these long-term service bonuses were periodically estimated by the Group
using the Projected Unit Credit Method. The actuarial assumptions used were based on expectations as to future salary
increases and mortality tables. The discount rate used in this calculation was determined using the methodology
described for retirement pensions. In each period, the increase in the liability for long-term service bonuses, including
actuarial gains and losses and past service costs, was charged to the income statement, in Personnel Expenses.
Employees’ variable remuneration and other obligations
The Group recognises under costs the short-term benefits paid to employees who were at its services in the respective
accounting period.
Profit-sharing and bonus plans
•
The Group recognises the cost expected with profit-sharing pay-outs and bonuses when it has a present, legal or
constructive, obligation to make such payments as a result of past events and can make a reliable estimate of the
obligation.
Obligations with holidays, holiday subsidy and Christmas subsidy
•
In accordance with the legislation in force in Portugal, employees are annually entitled to one month of holidays and one
month of holiday subsidy, this being a right acquired in the year prior to their payment. In addition, employees are
annually entitled to one month of Christmas subsidy, which right is acquired throughout the year and settled during the
month of December of each calendar year. Hence, these liabilities are recorded in the period in which the employees
acquire the right to same, regardless of the date of their respective payment.
7.24. Provisions and Contingent Liabilities
Provisions are recognised when: (i) the Group has a current legal or constructive obligation, (ii) it is probable that its
settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.
Provisions related to legal cases opposing the Group to third parties, are constituted according to internal risk
assessments made by Management, with the support and advice of its internal or external legal advisors.
When the effect of the passage of time (discounting) is material, the provision corresponds to the net present value of
the expected future payments, discounted at an appropriate rate considering the risk associated with the obligation. In
these cases, the increase in the provision due to the passage of time is recognised in financial expenses.
Restructuring provisions are recognised when the Group has approved a formal, detailed restructuring plan and such
restructuring has either commenced or has been publicly announced.
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A provision for onerous contracts is recognised when the benefits expected to be derived by the Group from a contract
are lower than the unavoidable costs of meeting its obligation under the contract. This provision is measured at the
present value of the lower of the estimated cost of terminating the contract and the estimated net costs of continuing
the contract.
If a future outflow of funds is not probable, this situation reflects a contingent liability. Contingent liabilities are always
disclosed, except when the likelihood of their occurrence is remote.
7.25. Contingent Assets
Contingent assets are not recognized in the financial statements but are disclosed when it is probable that there will be
a future economic inflow of resources.
7.26. Income taxes
novobanco and its subsidiaries are subject to the tax regime consigned in the Código do Imposto sobre o Rendimento
das Pessoas Coletivas (IRC Code), to the Special Regime applicable to Deferred Tax Assets (approved by Law No.
61/2014, of August 26), and to other legislation.
Corporate income tax comprises current tax and deferred tax.
Corporate income tax is recognised in the income statement except to the extent that it relates to captions recognised
directly in equity, in which case it is recognised under equity. Corporate income tax recognised directly in equity relating
to fair value remeasurement of financial assets at fair value through other comprehensive income and cash flow hedges
is subsequently recognised in the income statement when the gains or losses giving rise to said income tax are also
recognised in the income statement.
Current taxes
Current tax is the tax expected to be paid on the taxable profit for the year, calculated using tax rules and tax rates
enacted or substantively enacted in each jurisdiction and any adjustments to prior period taxes. The tax is recognised in
each financial reporting period based on management estimates as regards the average effective tax rate foreseen for
the entire fiscal exercise.
Current tax is calculated based on taxable income for the period, which differs from the accounting result due to
adjustments resulting from expenses or income not relevant for tax purposes or which will only be considered in
subsequent exercises.
Deferred taxes
Deferred tax is calculated on timing differences arising between the carrying book values of assets and liabilities for
financial reporting purposes and their respective tax base and is calculated using the tax rates enacted or substantively
enacted at the balance sheet date in each jurisdiction and that are expected to apply when the timing differences are
reversed.
Deferred tax liabilities are recognised for all taxable timing differences except for: i) goodwill non-deductible for tax
purposes; ii) differences arising on the initial recognition of assets and liabilities that neither affect the accounting nor
taxable profit; iii) that do not result from a business combination, and iv) differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future and the Group does not control
the timing of the reversal of the timing differences. Deferred tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which the deductible timing differences can be offset. Deferred tax
liabilities are always accounted for, regardless of the performance of the Group.
The taxable profit or tax loss determined by the Group can be adjusted by the Portuguese Tax Authorities within a
period of four years, except in the case of any deduction or use of tax credit, in which the expiry period is the exercise of
that right. The Executive Board of Directors considers that any corrections, resulting mainly from differences in the
interpretation of tax legislation, will not have a materially relevant effect on the financial statements.
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Following the changes set forth in Law no. 27-A/2020, of July 24, within the scope of the Supplementary Budget for
2020, the deadline for carrying forward tax losses is now 14 years for tax losses generated in 2014, 2015 and 2016 and 7
years for tax losses generated in 2017, 2018 and 2019. Tax losses generated in 2020 and 2021 have a limit of 12 years
and can be deducted until 2032 and 2033, respectively. The limit for tax losses is increased from 70% to 80%, applicable
only to tax losses generated in 2020 and 2021.
Law 24-D/2022, of December 30 (State Budget Law for 2023) introduced changes in terms of the carry forward of tax
losses. A period for carrying forward tax losses is no longer foreseen. On the other hand, the annual limit of the deduction
to taxable income is reduced to 65% (currently 70%). This change applies to the deduction of losses from taxable profits
in taxable periods beginning on or after 1 January 2023, as well as to tax losses assessed in taxable periods prior to 1
January 2023.
The elimination of the time limitation on tax losses does not apply to those ascertained in tax periods prior to 1 January
2023, in which one of the situations provided for in No 1 of the Article 6 of the Special Regime applicable to Deferred Tax
Assets (REAID), approved as an annex to Law No. 61/2014, of August 26 (conversion of deferred tax assets into tax
credits), applying to tax losses ascertained in these tax periods the deduction period in force on 31 December 2023.
This change does not affect the application of paragraph 2 of article 11 of Law 27-A/2020, of July 24 (which allows an
increase of 10 percentage points in the deduction of taxable income when dealing with tax losses ascertained in 2020
and 2021).
The Group, as established in IAS 12, paragraph 74, offsets deferred tax assets and liabilities whenever (i) it has the legally
enforceable right to offset current tax assets and current tax liabilities; and (ii) they relate to corporate income taxes
levied by the same Taxation Authority, on the same tax entity or different taxable entities that intent to settle current
tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future
period in which the deferred tax liabilities or assets are expected to be settled or recovered.
The Group complies with the guidelines of IFRIC 23 - Uncertainty on the Treatment of Income Tax regarding the
determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of
uncertainty regarding the treatment of income tax, with no material impact on its financial statements resulting from its
application.
DAC6
The obligation to report to the Tax and Customs Authority ("AT") internal or cross-border mechanisms of tax relevance
has emerged in the context of Law no. 26/2020, of July 21 ("Law no. 26/2020"), which transposes Council Directive (EU)
2018/822 of May 25, 2018 ("DAC6") into Portuguese law. The DAC6 aims to discourage the use of potentially aggressive
tax planning mechanisms by imposing reporting obligations to the Tax Authorities of the different Member States of the
European Union. In addition, it aims to provide tax administrations and national legislators with information that will help
combat aggressive tax planning.
Novobanco, with the collaboration of tax consultants, has implemented measures that allow for the identification of
operations subject to reporting to tax authorities. These measures focus mainly on a primary analysis conducted by
business areas and a second-line analysis conducted by novobanco's tax area. The Bank's own operations are analyzed
by novobanco's tax area and validated by the Compliance Department.
BEPS - Pilar II
In October 2021, as part of the Erosion of the Tax Base and Profit Shifting project ("BEPS 2.0 - Base Erosion and Profit
Shifting 2.0") of the Organization for Economic Cooperation and Development ("OECD"), about 137 members of the
OECD/G20, representing 90% of the world's GDP, reached an agreement for a reform of the international tax system,
through which a general framework for a commonly designated "Pillar II" global minimum tax regime was approved.
In this regard, Pillar II of BEPS 2.0, enshrined in Council Directive (EU) 2022/2523 of December 15, 2022, established a
global minimum tax level of 15% for major multinational companies and large domestic groups, which could result in the
payment of an additional tax.
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Novobanco has been identifying the potential impacts associated with the implementation of Pillar II rules, having found
that it should meet the eligibility criteria for the application of the Pillar II rules, namely by presenting consolidated annual
incomes exceeding 750 million euros in two out of the last four financial years.
However, both the Directive and the preliminary draft establish an exclusion rule for the application of the Income
Inclusion Rule ("IIR") and the Undertaxed Payments Rule ("UTPR") for large national groups and multinational enterprise
groups in the initial stage of international activity.
Notwithstanding, that special rule stipulates that the additional tax due is zero in the reference jurisdiction for large
national groups and multinational enterprise groups that are in an initial stage of their international activity, which
implies (in the case of multinational enterprise groups) that, in each tax year: (i) they include constituent entities located
in no more than six jurisdictions and (ii) the sum of the net book value of tangible assets of all their constituent entities,
excluding those located in the reference jurisdiction, does not exceed 50 million euros.
Additionally, said standard provides for the possibility of applying the exclusion rule for five years after the start of the
first fiscal year in which the group comes under the Pillar II rules. However, it must be ascertained annually whether the
above requirements are met.
In this regard, according to the analysis carried out, Novobanco Group should meet the requirements for the application
of the exclusion rule for multinational enterprise groups in the initial stage of their international activity, not foreseeing
material impacts during the period when such exclusion rule is applied.
7.27. Recently issued accounting standards and interpretations
The recently issued accounting standards and interpretations, which have not yet come into force and which the Group
has not yet applied in the preparation of its financial statements, can be analyzed as follows:
Standards, interpretations, amendments and revisions that come into force in future exercises
The following standards, interpretations, amendments and revisions, with mandatory application in future exercises, had
been adopted ("endorsed") by the European Union as of the approval date of these financial statements:
Standard / Interpretation
Amendments to IAS 1 - Presentation
of Financial Statements -
Classification of Current and Non-
Current Liabilities
Applicable in the
European Union for
exercises beginning in
or after
1-jan-2024
Amendments to IFRS 16 - Leasing
liabilities in sale and leaseback
transactions
1-jan-2024
Description
This amendment aims to clarify the classification of liabilities as current or non-
current balances based on the rights that an entity has to defer its payment at
the end of each reporting period.
The classification of liabilities is not affected by the entity's expectations (the
evaluation should determine whether a right exists but should not consider
whether the entity will or will not exercise such right), or by events occurring
after the reporting date, such as non-compliance with a "covenant".
However, if the right to defer settlement for at least twelve months is subject
to the fulfilment of certain conditions after the balance sheet date, these
criteria do not affect the right to defer settlement whose purpose is to classify a
liability as current or non-current.
This amendment also includes a new definition of "settlement" of a liability and
is retroactively applicable.
This amendment to IFRS 16 introduces guidance regarding the subsequent
measurement of leasing liabilities, related to sale and leaseback transactions
("sale & leaseback") that qualify as "sale" according to the principles of IFRS 15,
with greater impact when some or all of the lease payments are variable lease
payments that do not depend on an index or a rate.
When subsequently measuring leasing liabilities, the seller-lessees should
determine the "lease payments" and "revised lease payments" in such a way
that they do not recognize gains/(losses) in relation to the right of use they
retain.
This amendment is retroactively applicable.
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The Group has not proceeded with the early application of any of these standards in the financial statements for the
fiscal year ended December 31, 2023. No significant impacts are estimated on the financial statements as a result of
their adoption.
Standards, interpretations, amendments and revisions not yet adopted by the European Union
The following standards, interpretations, amendments and revisions, with mandatory application in future exercises, had
not been adopted ("endorsed") by the European Union as of the approval date of these financial statements:
Standard / Interpretation
Amendments to IAS 7 and IFRS 7 -
Disclosures: Supplier Financing
Arrangements
Amendments to IAS 21 - The Effects of
Changes in Foreign Exchange Rates: Lack
of Exchangeability
Description
These amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures,
aim to clarify the characteristics of a supplier financing arrangement and introduce additional
disclosure requirements when such arrangements exist.
The disclosure requirements are intended to help users of the financial statements understand the
effects of supplier financing arrangements on the entity's liabilities, cash flows and liquidity risk
exposure.
The amendments take effect in the period beginning on or after January 1, 2024. Early adoption is
permitted, however it should be disclosed.
.
This amendment aims to clarify how to assess the exchangeability of a currency, and how the
exchange rate should be determined when it is not exchangeable for a long period.
The amendment specifies that a currency should be considered exchangeable when an entity is able
to obtain the other currency within a period that allows for normal administrative management, and
through an exchange mechanism or market in which an exchange transaction creates enforceable
rights and obligations.
If a currency cannot be exchanged for another currency, an entity should estimate the exchange rate
on the measurement date of the transaction. The goal will be to determine the exchange rate that
would be applicable, on the measurement date, for a similar transaction between market
participants. The amendments also state that an entity may use an observable exchange rate
without making any adjustments.
The amendments take effect in the period beginning on or after January 1, 2025. Early adoption is
permitted, however the transition requirements applied must be disclosed.
These standards have not yet been adopted ("endorsed") by the European Union and, as such, have not been applied by
the Group for the year ended on December 31, 2023. No significant impacts are estimated on the financial statements as
a result of their adoption.
Note 8 - Main Accounting Estimates and Judgements Used in The Preparation of The
Financial Statements
Considering that the current accounting framework requires applying judgements and calculating estimates involving
some degree of subjectivity, the use of different parameters or judgements based on different evidence may result in
different estimates. The main accounting estimates and judgments used in applying the accounting principles by the
Group are discussed in this Note in order to improve the understanding of how their application affects the reported
results of the Group and its disclosure.
The relevant judgments made by management in the application of the Group's accounting policies and the main sources
of uncertainty in the estimates were the same as those described in the last reporting of the Financial Statements.
8.1. Impairment of financial assets at amortised cost and at fair value through other comprehensive income
The critical judgements with greater impact on the recognised impairment values for the financial assets at amortised
cost and at fair value through other comprehensive income are the following:
• Assessment of the business model: the measurement and classification of financial assets depends on the
results of SPPI test and on the business model setting. The Group determines its business model based on how it
manages the financial assets and its business objectives. The Group monitors if the business model classification is
appropriate based on the analysis on the anticipated derecognition of the assets at amortised cost or at fair value
through other comprehensive income, assessing if it is necessary to prospectively apply any changes;
• Significant increase on the credit risk: as mentioned on the Note 7.12 – Other financial assets investments in
credit institutions, customer loans and securities, the determination of the transfer of an asset from stage 1 to
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stage 2 with the purpose of determining the respective impairment is made based on the judgement that, in
accordance to the Group management, constitutes a significant increase on credit risk;
• Classification of default: Grupo novobanco’s internal definition of exposure in default is broadly in line with the
regulatory definition in Article 178 of CRR/CRD IV. This regulation defines qualitative criteria for assessing the
default classification – unlikely to pay -, which are replicated in the internal definition implemented by Grupo
novobanco and which result in performing judgements when assessing the high probability that the borrower does
not fulfil its obligations within the conditions agreed with Grupo novobanco. This concept is covered in more detail
below;
• Definition of groups of financial assets with similar credit risk characteristics: when the expected credit losses are
measured through collective model, the financial
instruments are aggregated based on the same risk
characteristics. The Group monitors the credit risk characteristics in order to assure the correct reclassification of
the assets, in cases of changes on the credit risk characteristics;
• Models and assumptions: The Group uses several models and assumptions on the measurement of the expected
credit losses. The judgement is applied on the identification of the more appropriate model for each type of asset as
well as in the determination of the assumptions used in these models, including the assumptions related to the
main credit risk drivers. In addition, in compliance with the IFRS9 regulation that clarifies the need for the
impairment result to consider multiple scenarios, a methodology for incorporating different scenarios into the risk
parameters was implemented. Thus, the calculation of collective impairment considers several scenarios with a
specific weighting, based on the internal methodology defined about scenarios - definition of multiple perspectives
of macroeconomic evolution, with probability of relevant occurrence.
8.2. Fair value of derivative financial instruments and other financial assets and financial liabilities at fair value
Fair value is based on listed market prices when available; otherwise, fair value is determined based on similar recent
arm’s length transaction prices or using valuation methodologies, based on the net present value of estimated future
cash flows taking into consideration market conditions, the time value, the yield curve and volatility factors, in
accordance with IFRS 13 - Fair Value Measurement. The Group uses several models and assumption in measuring the fair
value of financial assets. Judgement is applied on the identification of the more appropriate model for each type of asset
as well as in the determination of the assumptions used in these models, including the assumptions related with the
main credit risk drivers.
Consequently, the use of a different methodology or different assumptions or judgements in applying a particular model
could have produced different financial results, summarised in Note 40.
8.3. Corporate income taxes
The Group is subject to corporate income tax in numerous jurisdictions. Certain interpretations and estimates are
required in determining the overall corporate income tax amount. Different interpretations and estimates could result in
a different level of income tax, current and deferred, being recognised in the period and evidenced in Note 28.
This aspect assumes additional relevance for effects of the analysis of the recoverability of deferred taxes, while the
Group considers forecasts of futures taxable profits based on a group of assumptions, including the estimate of income
before taxes, adjustments to the taxable income and its interpretation of fiscal legislation. This way, the recoverability
of deferred taxes depends on the concretization of the strategy of the Executive Board of Directors, namely in the
capacity to generate the estimated taxable results and its interpretation of fiscal legislation.
The Tax Authorities are charged with reviewing the calculation of the tax base made by the Group during a period of four
or twelve years, in the event of reportable tax losses. Thus, it is possible that there are corrections to the tax base,
resulting mainly from differences in the interpretation of tax legislation. However, the novobanco's Executive Board of
Directors believes that there will be no significant corrections to taxes on profits recorded in the financial statements.
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8.4. Pensions and other employee benefits
The determination of the retirement pension liabilities presented in Note 16 requires the use of assumptions and
estimates, including the use of actuarial tables, assumptions regarding the growth of pensions, salaries and discounts
rates (which are determined based on the market rates associated with high quality corporate bond, denominated in the
same currency in which the benefits will be paid and with a maturity similar to the expiry date of the plan's obligations).
These assumptions are based on the expectations of the novobanco Group for the period during which the liabilities will
be settled as well as other factors that may impact the costs and liabilities of the pension plan.
Changes in these assumptions could materially affect the amounts determined.
8.5. Provisions and Contingent liabilities
The recognition of provisions involves a significant degree of complex judgment, namely identifying whether there is a
present obligation and estimating the probability and timing, as well as quantifying the outflows that may arise from
past events. When events are at an early stage, judgments and estimates can be difficult to quantify due to the high
degree of uncertainty involved.
Executive Board of Directors monitors these matters as they develop to regularly reassess whether the provisions
should be recognised. However, it is often not feasible to make estimates, even when events are already at a more
advanced stage, due to existing uncertainties.
Complexity of such issues often requires expert professional advice in determining estimates, particularly in terms of
legal and regulatory issues. The amount of recognised provisions may also be sensitive to the assumptions used, which
may result in a variety of potential results that require judgment in order to determine a level of provision that is
considered appropriate in view of the event in question.
8.6. Investment properties, Foreclosed assets and Non-current assets held for sale
Investment properties are initially recognised at cost, including directly related transaction costs and subsequently at
fair value. Foreclosed assets and Non-current assets held for sale are measured at the lower of the net book value and
the fair value less costs to sell.
The fair value of these assets is determined based on valuations conducted by independent entities specialised in this
type of service, using the market, income or cost methods, as defined in Notes 7.14 and 7.15. The valuation reports are
analysed internally, namely comparing the sales values with the revalued values of the properties, to keep the valuation
parameters and processes updated to the market evolution.
The use of alternative methodologies and different assumptions may result in a different level of fair value with
respective impact on the recognised balance sheet value.
8.7. Entities included in the consolidation perimeter
For the determination of the entities to be included in the consolidation perimeter, the Group evaluates the extent to
which (i) it is exposed, or has rights, to the variability of the return from its involvement with this entity, and (ii) it can
seize that return through of its power. In this analysis, the Group also considers shareholder agreements that may exist
and that result in the power to take decisions that impact the management of the entity's activity. The decision that an
entity should be consolidated by the Group requires the use of judgments to determine to what extent the Group is
exposed to the variability of an entity's return and has the power to seize that return. In using this judgment, the Group
analyses assumptions and estimates. Thus, other assumptions and estimates could lead to a different consolidation
perimeter, with a direct impact on the balance sheet.
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8.8. Lease Contract Term
The Group has applied judgment to determine the lease term of certain agreements, in which it acts as lessee, and which
include renewal and termination options. The Group determines the lease term as the non-cancellable lease term,
together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any
periods covered by an option to terminate the lease, if reasonably certain not to be exercised. This assessment will have
an impact on the lease term, which will significantly affect the amount of the lease liabilities and recognised right-of-use
assets.
The Group has the option, namely in real estate lease agreements, to lease assets for additional periods from 1 month to
20 years. The Group applies judgment in assessing whether it is reasonably right to exercise the renewal option. That is,
it considers all the relevant factors that create an economic incentive for renewal.
Note 9 – Segment Reporting
Novobanco Group activities are centered on the financial sector targeting corporate, institutional and private individual
customers. Its decision center is in Portugal, making the domestic territory its main market.
The products and services rendered include deposit taking, granting of loans to corporate and private customers,
investment fund management, broker and custodian services and the commercialization of life and non-life insurance
products. Additionally, the Group makes short-, medium- and long-term investments in the financial and currency
exchange markets with the objective of taking advantage of price changes or to get returns on its available financial
resources.
For this purpose, as of 31 December 2023, the Group has novobanco as its main operating unit - with 272 branches in
Portugal (31 December 2022: 273 branches), with branches in Luxembourg and 2 representation offices – with
novobanco Açores (12 branches), Banco BEST (5 branches), GNB GA, amongst other companies.
When evaluating performance by business area, the Group considers the following Operating Segments: (1) Domestic
Commercial Banking, including Retail and Corporate (2) International Commercial Banking; (3) Asset Management; (4)
Markets; and (5) Corporate Centre. Each segment integrates the novobanco structures that directly relate to it, as well
as the units of the Group whose businesses are mainly related to the segments. The individual and independent
monitoring of each operating unit of the Group is complemented, at the Executive Board of Directors of novobanco
level, by the definition of specific strategies and commercial programs for each unit.
9.1. Description of the operating segments
Each of the operating segments includes the following activities, products, customers and Group structures, aggregated
by criteria of risk, market / geography and nature of the products and services:
Retail
This Segment includes retail banking with individual customers and small businesses developed on a national territory
based on the branch distribution network, investment centers and other channels. The financial information of the
segment relates to, among other products and services, home loans, consumer credit, small business financing,
deposits, insurance products for individuals and companies, account and payment means management and the
placement services of investment funds, retirement plans and other savings products and services, including the buying
and selling of securities and their custody.
Corporate
This segment includes activities with medium and large companies, through a commercial structure dedicated to this
segment made up of 20 Business Centers. It also includes business with domestic and foreign institutional investors.
The Group holds a significant presence in this segment, as a result of its know-how in supporting the development of the
national business fabric, focused on companies of good risk, with an innovative nature and export orientation.
Corporate Structure and Support Units
This area does not correspond to an operational segment in the true sense of the concept, it is an aggregation of
transversal corporate structures, which ensure the basic functions of global management of the Group, such as those
related to the Administration and Supervision bodies, Treasury, Compliance, Planning, Accounting, Risk Control,
Communication, Internal Audit, Human Resources, among others. Strategic decisions with cross-sectional impact
throughout the Group are recognized in this segment.
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9.2. Criteria for the allocation of activities and results to the operating segments
The financial information presented for each segment was prepared in accordance with the criteria followed in the
preparation of the internal information that is analysed by the Executive Board of Directors of the Group, as required by
IFRS.
The accounting policies applied in the preparation of the financial information related to the operating segments are
consistent with those used in the preparation of these consolidated financial statements, which are described in Note 7,
with the adoption of the following additional principles:
Measurement of the profit or loss of the segments
The Group uses net income / (loss) before taxes as the measure of the profit or loss for purposes of evaluating the
performance of each operating segment.
Autonomous operating units
As mentioned above, each autonomous operating unit (foreign branches, subsidiaries and associated companies) is
evaluated separately, as each of these units is considered an investment centre. Additionally, based on the
characteristics of the primary business developed by these units, they are fully integrated into one of the Operating
Segments, i.e. their assets, liabilities, income and expenses.
Novobanco’s structures dedicated to the Segment
Novobanco’s activity, given its characteristics, can be allocated to most of its operating segments and is, therefore,
accordingly disaggregated.
For purposes of allocating the financial information, the following principles are used: (i) the origin of the operation, i.e.
the operation is allocated to the same segment that the commercial structure that originated it integrates, even if, in a
subsequent phase, the Group, strategically, decides to securitize some of the assets; (ii) the allocation of a commercial
margin to mass-products, defined at top management level when the products are launched; (iii) for non-mass products,
the allocation of a margin directly negotiated by the commercial structures with customers; (iv) the allocation of the
direct costs of commercial and central structures dedicated to the segment; (v) the allocation of indirect costs (central
support and IT services) determined based on specific drivers; (vi) the allocation of credit risk determined in accordance
with the impairment model; and (vii) the allocation of novobanco ‘s total equity to the Markets segment.
The transactions between the legally autonomous units of the Group are made at market prices; the price for services
rendered between the structures of each unit, namely the price established for internal funding between units, is
determined using the margins process referred to above (which varies in accordance with the strategic relevance of the
product and the equilibrium of the structures’ funding and lending functions); the remaining internal transactions are
allocated to the segments, without any margin for the supplier; the strategic decisions and/or of an exceptional nature
are analysed on a case-by-case basis, with the income and/or costs being generally allocated to the Markets segment.
The interest rate risk, currency risk, liquidity risk and others, excluding credit risk, are included in the Financial
Department, which mission it is to undertake the Group’s financial management, and which activity and results are
included in the Markets segment.
Interest and similar income/expense
Since the Group’s activities are exclusively carried out in the financial sector, the income reflects, fundamentally, the
difference between interest received on assets and interest paid on liabilities. This situation and the fact that the
segment evaluation is based on margins previously negotiated or determined for each product, leads to the
presentation of the results from the intermediation activity, as permitted by IFRS 8, paragraph 23, at the net value of
interest, under the designation “Net interest income/expense”.
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Investments presented using the equity method
Investments in associated companies presented under the equity method are included in the Markets segment, in the
case of novobanco’s associated companies. For other associated companies of the Group, these entities are included in
the segment to which they relate.
Non-current assets
Non-current assets, according to IFRS 8, include Tangible fixed assets, Intangible assets and Non-current assets held for
sale. novobanco includes these assets in the Markets segment, with the non-current assets held by the remaining
subsidiaries being allocated to the segment in which these subsidiaries primarily develop their business.
Corporate income tax
Corporate income tax is part of the Group’s net income that, for purposes of monitoring the performance of the
Operating Segments, by the Executive Board of Directors, does not affect the evaluation of most of the Operating
Segments. In the tables presented below the deferred tax recognised in net income for the year are included in the
Corporate Centre. Deferred tax assets and liabilities are included in the Markets segment.
Domestic and International Areas
In presenting the financial information by geographical areas, the operating units that make up the International Area are
the branches of novobanco in Spain and Luxembourg, the units located outside of GNB GA and Ijar Leasing Algérie as
discontinued operations.
The financial and economic elements related to the international area are those consistent with the financial statements
of such units, with the respective consolidation adjustments and eliminations.
The segment reporting is presented as follows:
Net interest income
Net fees and comissions
Commercial banking income
Other operating results (excluding banking sector contribution and solidarity additional)
Contributions to resolution and deposit guarantee funds
Operating expenses
Provisions / Impairment
Net gains / (losses) from investments in subsidiaries, joint ventures and associated companies
registered by the equity method
Profits or losses from continuing operational units before taxes and interests that are not
controlling (excluding banking sector contribution and solidarity additional)
2023
(in thousands of Euros)
Retail
SMEs and
corporate
Support
functions
648 466
196 355
844 821
2 012
-
318 415
54 137
-
550 156
92 544
642 700
37 983
-
98 980
89 995
-
( 56 038)
5 416
( 50 622)
37 052
78 481
61 770
29 703
7 215
Total
1 142 584
294 315
1 436 899
77 047
78 481
479 165
173 835
7 215
474 281
491 708
( 176 309)
789 680
Banking sector contribution and solidarity additional
-
-
35 280
35 280
Profit / (loss) from continued operations before taxes and non-controlling interests
474 281
491 708
( 211 589)
754 400
Expenses or revenues with taxes
Profit / (loss) of discontinued operations
Net Profit / (loss) for the period attributable to non-controlling interests
Net Profit / (loss) for the period attributable to Shareholders of the parent
Intersegment operating income (1)
Total Net Assets
Loans to customers
Total Liabilities
Investments in associated companies
Investments in tangible fixed assets
Investments in intangible assets
Investments in investment properties
Investments in other assets - real estate properties
(1) Intersegment operating income refers essentially to interest (net interest income)
1 395
-
4 488
468 398
21 704
14 613 687
13 424 547
21 239 578
-
4 632
168
-
134
150
-
-
491 558
( 52 673)
13 941 951
11 092 049
7 542 180
-
280
-
-
-
4 224
( 412)
643
( 216 868)
38 483
5 769
( 412)
5 131
743 088
7 514
14 945 152
43 500 790
17 465
10 296 604
59 511
83 164
30 195
611
8 898
24 534 061
39 078 362
59 511
88 076
30 363
611
9 032
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Net interest income
Net fees and comissions
Commercial banking income
Other operating results (excluding banking sector contribution and solidarity additional)
Contributions to resolution and deposit guarantee funds
Operating expenses
Provisions / Impairment
Net gains / (losses) from investments in subsidiaries, joint ventures and associated companies
registered by the equity method
Profits or losses from continuing operational units before taxes and interests that are not
controlling (excluding banking sector contribution and solidarity additional)
2022
(in thousands of Euros)
Retail
SMEs and
corporate
Support
functions
Total
247 868
202 434
450 302
17 501
-
286 483
10 420
-
338 274
88 316
426 590
63 957
-
90 722
86 739
-
39 333
( 570)
38 763
625 475
290 180
915 655
162 302
243 760
41 155
71 158
14 047
8 354
41 155
448 363
111 206
8 354
170 900
313 086
83 059
567 045
Banking sector contribution and solidarity additional
722
-
33 410
34 132
Profit / (loss) from continued operations before taxes and non-controlling interests
170 178
313 086
49 649
532 913
Expenses or revenues with taxes
Profit / (loss) of discontinued operations
Net Profit / (loss) for the period attributable to non-controlling interests
Net Profit / (loss) for the period attributable to Shareholders of the parent
Intersegment operating income (1)
Total Net Assets
Loans to customers
Total Liabilities
Investments in associated companies
Investments in tangible fixed assets
Investments in intangible assets
Investments in investment properties
Investments in other assets - real estate properties
(1) Intersegment operating income refers essentially to interest (net interest income)
2 450
-
1 941
165 787
4 232
14 311 696
13 164 282
21 287 734
-
615
146
-
758
956
-
23 161
288 969
36 871
( 56 707)
( 270)
-
106 086
( 34 077)
( 53 301)
( 270)
25 102
560 842
7 026
13 363 952
18 319 381
45 995 029
11 385 481
7 842 800
-
-
-
-
829
1 191
13 352 877
119 744
136 918
25 160
16 464
15 587
24 550 954
42 483 411
119 744
137 533
25 306
16 464
17 174
The geographical information of the different business units of the Group is as follows:
Net profit / (loss) for the period attributable to Shareholders of the parent
(of which: rel. to discontinued units)
Total income
Intersegment operating income
Net assets
(of which: rel. to discontinued units)
Investments in associated companies
Investments in tangible fixed assets
Investments in intangible assets
Investments in investment properties
Investments in other assets - real estate properties
Profits / (losses) of continuing operating units before taxes and non-
controlling interests
Turnover (a) (b)
Number of employees (a)
Public subvencions received (a)
(a) Financial information presented according to art. 2 of DL no. 157/2014
Portugal
Spain
2023
Luxembourg
Brazil
Other
Total
(in thousands of Euros)
706 173
( 1 218)
6 275 487
60 187
40 455 077
83 501
59 511
87 796
30 363
611
9 032
440
-
677
-
5 655
36 854
-
277 488
( 52 673)
3 033 036
-
-
-
-
-
-
-
-
280
-
-
-
( 379)
806
806
-
1 987
1 987
-
-
-
-
-
717 485
440
36 854
( 379)
2 283 202
677
182 825
806
4 113
-
3
-
13
-
-
-
-
-
-
-
5 035
4 326
-
-
-
-
-
-
-
3
-
743 088
( 412)
6 554 458
7 514
43 500 790
89 814
59 511
88 076
30 363
611
9 032
754 400
2 467 510
4 132
-
(b) Turnover corresponds to the sum of the following items in the consolidated operating account: interest income, dividend income, fee and commission income, gains or losses on derecognition of
financial assets and liabilities not measured at fair value through profit or loss on financial assets and liabilities held for trading, gains or losses on financial assets mandatorily at fair value through
profit or loss, gains or losses on financial assets and liabilities carried at fair value through profit or loss hedge accounting losses, exchange differences, gains or losses on derecognition of non-
financial assets, other operating operating income and proportion of profits or losses on investments in subsidiaries, joint ventures and associates accounted for under the equity method.
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Net profit / (loss) for the period attributable to Shareholders of the parent
(of which: rel. to discontinued units)
Total income
Intersegment operating income
Net assets
(of which: rel. to discontinued units)
Investments in associated companies
Investments in tangible fixed assets
Investments in intangible assets
Investments in other assets - real estate properties
Profits / (losses) of continuing operating units before taxes and non-controlling
interests
Turnover (a) (b)
Number of employees (a)
Public subvencions received (a)
(a) Financial information presented according to art. 2 of DL no. 157/2014
Portugal
Spain
Luxembourg
Brazil
Other
Total
2022
(in thousands of Euros)
533 282
( 270)
6 933 076
( 29 845)
43 490 936
51 650
119 744
137 533
25 306
16 345
( 5 568)
-
30 893
-
463
226 885
-
47 959
36 871
2 448 197
-
-
-
-
829
-
-
-
-
-
494 784
( 5 568)
41 462
1 406 239
4 071
-
352
6
-
97 712
10
-
2 235
-
2 235
-
2 747
2 747
-
-
-
-
2 235
2 235
-
-
-
-
-
-
5 190
5 190
-
-
-
-
-
-
3
-
560 842
( 270)
7 162 659
7 026
45 995 029
59 587
119 744
137 533
25 306
17 174
532 913
1 506 538
4 090
-
(b) Turnover corresponds to the sum of the following items in the consolidated operating account: interest income, dividend income, fee and commission income, gains or losses on
derecognition of financial assets and liabilities not measured at fair value through profit or loss on financial assets and liabilities held for trading, gains or losses on financial assets mandatorily at
fair value through profit or loss, gains or losses on financial assets and liabilities carried at fair value through profit or loss hedge accounting losses, exchange differences, gains or losses on
derecognition of non-financial assets, other operating operating income and proportion of profits or losses on investments in subsidiaries, joint ventures and associates accounted for under the
equity method.
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Note 10 – Net Interest Income
The breakdown of this caption as of 31 December 2023 and 2022 is as follows:
Interest Income
Amortised cost (*)
Interest from loans and advances
(of which, financial leasing operations)
(of which, repurchase agreement)
Interest from deposits with and loans and advances to banks
(of which, repurchase agreement)
Interest from securities
Other interest and similar income
From assets / liabilities at fair value through other comprehensive income (*)
Interest from securities
Income/expenses from negative interest rates (*)
Interest from deposits with and loans and advances to banks
Interest from derivatives
Fair value through profit or loss
Interest from loans and advances
Interest from securities
Interest from derivatives
Interest Expenses
Amortised cost (*)
Interest on debt securities issued
Interest on amounts due to customers
(of which, repurchase agreement)
Interest on deposits from Central Banks and other banks
(of which, repurchase agreement)
Interest on subordinated liabilities
Other interest and similar expenses
From negative interest rates (*)
Interest on deposits from Central Banks and other banks
Interest on derivatives
Other interest and similar expenses
From assets / liabilities at fair value through profit or loss
Interest on derivatives
*Calculated by the effective interest method
(thousands of Euros)
2023
2022
1 955 662
834 679
1 595 275
735 159
1 224 643
596 394
35 550
30 046
8
-
143 547
24 958
47
160
217 259
112 981
9 826
40 253
40 253
1 862
9
1 853
826
38 850
38 850
40 142
38 413
1 729
318 272
20 528
611
10 763
18
1 453
306 898
19 057
813 078
209 204
595 494
167 604
57 420
208 104
33 880
272 119
116 938
44 779
13 072
305
222
83
-
217 279
217 279
58 520
45 050
3 397
22 268
4 859
34 178
7 588
19 737
12 306
6 850
581
21 863
21 863
1 142 584
625 475
Average rates of financial assets and liabilities
The table below presents the average interest rates for the major categories of the Group's financial assets and
liabilities, as of December 31, 2023 and 2022, as well as their respective average balances and the interest of the fiscal
year:
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2023
2022
(in thousands of Euros)
Average balance
for the year
Year
interest
Average
interest rate
Average balance
for the year
Year
interest
Average
interest rate
Money market - assets
Loans to customers
Securities and others
Differential applications
4 536 215
143 325
25 571 497
1 213 069
10 938 065
368 603
-
-
Financial and Differential assets
41 045 777
1 724 997
Money market - liabilities
7 265 138
238 230
Due to customers
Debt issued and others
Differential liabilities
28 981 803
241 984
1 402 137
102 199
3,12%
4,68%
3,32%
-
4,15%
3,23%
0,82%
7,19%
6 308 062
12 654
25 424 392
590 751
10 181 113
153 284
-
-
41 913 567
756 689
10 455 407
( 19 542)
28 321 910
48 466
1 452 268
92 698
3 396 699
-
-
1 683 982
9 592
Financial and Differential liabilities
41 045 777
582 413
Net interest margin
1 142 584
1,40%
2,75%
41 913 567
131 214
625 475
Note 11 – Fee and Commission Income and Fee and Commission Expenses
The breakdown of this caption is as follows:
0,20%
2,29%
1,48%
-
1,78%
-0,18%
0,17%
6,30%
-
0,31%
1,47%
Fees and commissions income
From banking services
Cards
Means of Payment
Asset Management
Credit Operations
From guarantees provided
From transaction of securities
From commitments to third parties
Bancassurance
Other fee and commission income
Fees and commissions expenses
(in thousands of Euros)
2023
2022
339 061
337 335
248 624
46 884
115 328
35 715
50 697
31 054
11 867
6 871
29 356
11 289
44 746
250 119
42 336
109 290
38 256
60 237
32 202
10 968
6 601
30 294
7 151
47 155
With banking services rendered by third parties
De ativos financeiros obrigatoriamente contabilizados pelo justo valor através dos resultados
30 902
15 026
28 212
13 513
9 438
9 319
Cards
Means of Payment
Asset Management
Credit Operations
With guarantees received
With transaction of securities
Other fee and commission income
Ações
2 723
2 488
2 657
1 313
5 277
9 944
3 950
1 903
5 147
9 203
294 315
290 180
Euronext NV
Visa Inc CL C
337
Outros
Unidades de participação
Explorer III B
Ações
ESA ENERGIA-AM
SIBS SGPS
RAMADA INV.
Outros
De ativos financeiros contabilizados pelo justo valor através de outro rendimento integral
31.12.2022
31.12.2021
102
-
98
4
164
164
2 561
238
1 866
2
455
2 826
2 162
1 801
226
135
7 604
7 604
1 330
-
785
275
270
11 096
Management Report
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Consolidated Financial Statements
Annex
Note 12 – Results of financial operations
The breakdown of this caption is as follows:
Dividend income
From financial assets mandatorily measured at fair value through profit or loss
Shares
Participation units
From financial assets measured at fair value through other comprehensive income
Shares
(in thousands of Euros)
2023
2 133
185
77
108
1 948
1 948
2022
5 035
1 276
113
1 164
3 759
3 759
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss
( 58 055)
( 88 255)
From financial assets at fair value through other comprehensive income
Bonds and other fixed income securities - Issued by government and public entities
Bonds and other fixed income securities - Issued by other entities
From financial assets and liabilities at amortized cost
5 090
5 090
( 82 802)
( 30 768)
-
( 52 034)
( 63 145)
( 5 453)
Bonds and other fixed income securities - Issued by government and public entities
( 387)
2
Bonds and other fixed income securities - Issued by other entities
( 69 296)
( 6 496)
Loans to customers
Gains or losses on financial assets and liabilities held for trading
Bonds and other fixed income securities - Issued by government and public entities
Bonds and other fixed income securities - Issued by other entities
Financial Derivatives
Foreign exchange rate contracts
Interest rate contracts
Equity / Index contracts
Credit default contracts
Other
6 538
4 418
205
106
4 107
( 1 302)
938
4 306
( 2)
167
1 041
149 212
( 23 620)
39
172 793
5 385
163 685
1 216
187
2 320
Gains or losses on financial assets mandatorily measured at fair value through profit or loss
26 633
( 40 493)
Bonds and other fixed income securities - Issued by other entities
Shares
Other variable income securities
Loans to customers
Gains or losses on financial assets and liabilities designated at fair value through profit and loss
Other variable income securities
Gains or losses from hedge accounting
Fair value changes of hedging instruments
Foreign exchange rate contracts
Fair value changes of hedging item attributable to hedged risk
Foreign exchange revaluation
13 329
1 280
6 639
5 385
79
79
( 408)
14 074
( 22 962)
( 31 197)
116
116
32 112
( 1 713)
( 153 359)
439 936
185 471
( 441 649)
24 369
31 689
6 789
30 691
As of December 31, 2023, profits from the intermediation margin (day one profit) recognized in the results, are
essentially related to foreign exchange operations, amounted to approximately 3,684 thousand euros (December 31,
2022: 3,693 thousand euros).
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Gains or losses from hedge accounting
Gains or losses from hedge accounting include fair value variations of the hedging instrument (derivative) and fair value
variations of the hedged item attributable to the hedged risk. In the event that hedging operations are prematurely
terminated, a compensation payment/receipt may occur, which is recorded in Other operating expenses/Other
operating income. On December 31, 2023, there were no compensations (December 31, 2022: 89 thousand euros).
Note 13 – Gains or Losses on Derecognition of Non-Financial Assets
The breakdown of this caption is as follows:
Real estate properties
Equipment
Others
(in thousands of Euros)
2023
27 343
526
31
27 901
2022
86 516
( 5 790)
2 563
83 289
The caption of gains or losses on derecognition of non-financial assets - real estate includes, as of December 31, 2022,
the gain of 66,797 thousand euros from the sale of the novobanco headquarters building, as detailed in note 25.
Note 14 – Other Operating Income and Other Operating Expenses
The breakdown of this caption is as follows:
Other operating income
Gains / (losses) on recoveries of loans
Non-recurring advisory services
Income of Funds and real estate companies
Gains on repurchase of Group debt securities (see Note 31)
Gains on investment properties revaluation (see Note 26)
Other income
Other operating expenses
Losses on repurchase of Group debt securities (see Note 31)
Direct and indirect taxes
Contribution on the banking sector
Solidarity additional
Membership fees and donations
Expenses of Funds and real estate companies
Charges to supervisory entities
Losses on investments properties revaluation (see Note 26)
Other expenses
Other operating income / (expenses)
(in thousands of Euros)
2023
2022
106 231
214 005
32 512
331
19 470
-
45 091
8 827
40 423
334
35 461
13
118 433
19 341
( 124 054)
( 118 357)
( 1 432)
( 4 727)
-
( 5 275)
( 29 853)
( 28 881)
( 5 427)
( 1 460)
( 7 639)
( 2 228)
( 5 251)
( 2 490)
( 7 465)
( 2 254)
( 28 565)
( 27 300)
( 42 723)
( 17 823)
( 39 441)
95 648
As at 31 December 2023, there was no receipt related to compensation for interruption of hedge operations, included in
other income (December 31, 2022: 89 thousand euros) (see Note 12).
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Note 15 – Staff Expenses
The breakdown of this caption is as follows:
Wages and salaries
Remuneration
Long-term service / Career bonuses (see Note 16)
Mandatory social charges
Costs with post-employment benefits (see Note 16)
Other costs
(thousands of Euros)
2022
179 909
179 905
4
47 216
301
6 281
2023
192 712
191 465
1 247
49 632
316
10 044
252 704
233 707
The provisions and costs related to the restructuring process are presented in Note 32.
As of 31 December 2023 and 2022, the number of Novobanco Group employees breaks down as follows:
novobanco Employees
Employees of the Group's subsidiaries
Total employees of the Group
By professional category, the number of Novobanco Group employees breakdowns as follows:
Senior management functions
Middle management positions
Specific positions
Administrative and other functions
Note 16 – Employee Benefits
2023
3 939
270
4 209
2023
481
373
2 265
1 090
4 209
2022
3 817
273
4 090
2022
481
388
2 170
1 051
4 090
Pension and health-care benefits
As mentioned in accounting policy 7.23, the Group has undertaken to provide its employees, or their families, with cash
benefits for old-age retirement, disability and survivors' pensions and other liabilities such as a Serviço de Assistência
Médico-Social (SAMS), managed by the Union.
For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions
consecrated under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension
fund, managed by GNB – Sociedade Gestora de Fundos de Pensões, S.A.
Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the General
Social Security Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all banking employees
who were beneficiaries of “CAFEB – Caixa de Abono de Família dos Empregados Bancários” were integrated in the
General Social Security Regime as from 1 January 2011.
Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.
Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the 2nd
tripartite agreement continue to be calculated in accordance with the provisions of the ACT and other conventions;
however, banking employees are entitled to receive a pension under the General Regime that considers the number of
years of contributions under that regime. The Banks are responsible for the difference between the pension determined
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Annual Report 2023 | novobanco
in accordance with the provisions of the ACT and that which the banking employees are entitled to receive from the
General Social Security Regime.
The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de
Abono de Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change,
pension entitlements of active employees are to be covered on the terms defined under the General Social Security
Regime, for the length of their employment between 1 January 2011 and their retirement date. The differential required
to make up the pension guaranteed under the ACT is paid by the Banks.
At the end of financial exercise 2011 and pursuant to the 3rd tripartite agreement, it was decided to transfer, definitively
and irreversibly, to the General Social Security Regime all the banks’ liabilities with pensions in payment to retirees and
pensioners that were in that condition as of 31 December 2011 at constant values (0% discount rate) for the component
foreseen in the “Instrumento de Regulação Coletiva de Trabalho” (IRCT) applicable to banking employees, including the
eventualities of death, disability and survival. The liabilities relating to the updating of pension amounts, pension
benefits other than those to be borne by Social Security, health-care contributions to SAMS, death allowances and
deferred survivor’s pensions will remain under the banks’ responsibility, with the corresponding funding being met
through the respective pension funds.
The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to
the satisfaction responsibilities for those pensions, be transferred to the State.
According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering the
resolution by the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained in the
deliberation of the Board of Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES
responsibilities not transferred to novobanco relate to the retirement and survival pensions and complementary
retirement and survival pensions of the Directors of BES who had been members of its Executive Committee, as defined
in BES’s Articles of Association and BES’s General Assembly Regulations to which the Articles of Association refer, not
having, therefore, been transferred to novobanco, without prejudice to the transfer of the responsibilities relating
exclusively to the employment contracts with BES.
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to
novobanco. Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive
Committee Plan were split, with a part (described above) remaining in BES, with the other part being transferred to
novobanco, together with the Pension Fund’s liabilities relating to the Base Plan and the Complementary Plan.
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES,
following the decision of Bank of Portugal of 11 February 2015, from those that were transferred to novobanco, the
assets existing on 3 August 2014 were split in proportion to the liabilities calculated on the same date, allocated to each
of the groups of former participants and beneficiaries allocated to each of the entities. The split performed on these
terms will result, on 3 August 2014, in a level of funding of the Complementary Plan of the Executive Commission that is
equal for each of the associates of the Fund (novobanco and BES).
The assets of the undivided party are not allocated to any liability of novobanco or BES until the final decision of the
court (limit of article 402º), and the amount of 8.8 million euros of net liabilities of the value of the fund's assets related
to the undivided part is recorded under the heading Provisions of the Group's liabilities.
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary
plan became a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19, this
plan´s responsibilities and assets are net of the amounts presented for the defined benefit plans. On 31 December 2023,
the amount of Euro 629 thousand was recorded in Personnel Costs related to the defined contribution plan (31
December 2022: Euro 548 thousand).
During 2021, two changes were made to the Pension Fund:
• Inclusion of Social Security Pension – Pensioners
Until 2020, the methodology applied considered pensions in payment by the Pension Fund for the calculation of
liabilities with pensioners. In 2021, this methodology was changed for pensioners who started a pension after 2011, and
do not have a Social Security pension. For this group of pensioners with age below the normal retirement age of the
General Social Security Regime (RGSS), the liability arising from a Social Security pension, to be paid from the normal
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retirement age of the RGSS, was deducted. As for pensioners over the normal retirement age of the RGSS, the liability
arising from a Social Security pension, to be paid from the moment of assessment, was deducted.
• Inclusion of acquired rights (Clause 98 ACT)
In 2021, liabilities with former employees who left novobanco Group after 2011, and who can claim rights to the Pension
Fund under Clause 98 of the ACT, were included.
The responsibilities and coverage levels of the Group, calculated according to the accounting policy defined in Note 7.23
- Employee Benefits, reportable as of December 31, 2023 and 2022, are analysed as follows:
342
Liabilitities
Liabilitities in the beginning of the exercise
Current service cost
Interest cost
Plan participants' contribution
Contributions from other entities
Actuarial (gains) / losses in the period:
- Changes in financial assumptions
- Experience adjustments (gains) / losses
Pensions paid by the fund / transfers and one-off bonuses
Early retirement
Foreign exchange differences and other
Liabilities at end of exercise
Of which:
Pensioners
Assets
Pension Funds
Fair value of fund assets at beginning of exercise
Net return from the fund
- Share of the net interest on the assets
- Return on assets excluding net interest
Group contributions
Plan participants’ contributions
Pensions paid by the fund / transfers and one-off bonuses
Foreign exchange differences and other
Fair value of fund assets at the end of the exercise
Assets / (liabilities) recognized in the balance sheet (see notes 29 and 33)
In the beggining of the exercise
Cost of the exercise
Actuarial (gains) / losses recognized in other comprehensive income
Contributions made in the exercise
Other
In the end of the exercise
Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
1 418 647
1 929 188
116
54 974
2 700
214
( 26)
25 469
2 601
206
103 329
( 527 073)
93 981
52 113
( 88 597)
( 81 459)
11 444
2
19 473
( 1 845)
1 596 810
1 418 647
1 195 361
401 449
1 075 292
343 355
1 478 263
1 907 928
222 774
( 348 984)
53 494
23 153
169 280
( 372 137)
-
2 700
( 88 597)
374
249
2 601
( 81 459)
( 2 072)
1 615 514
1 478 263
59 616
( 1 797)
( 27 294)
-
( 11 821)
18 704
( 21 260)
( 2 617)
101 726
249
( 18 482)
59 616
Accumulated actuarial losses recognized in other comprehensive income
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the exercise
697 326
799 052
Actuarial (gains) / losses in the period:
- Changes in assumptions
- Financial assumptions
- Plan assets return (excluding net interest)
Period's amortization
Other
103 329
( 527 073)
( 75 299)
424 250
( 545)
1 097
Accumulated actuarial losses recognized in other comprehensive income at the end of the exercise
724 811
697 326
Participants in Pension Plan
Assets
Retirees and survivors
Participants under the clausule 98
12 311
4 143
7 074
1 094
12 108
3 958
7 066
1 084
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The pension funds’ assets can be analysed as follows:
Equity instruments
Debt instruments
Investment funds
Structured debt
Real estate properties
Cash and cash equivalents
2023
2022
(in thousands of Euros)
Quoted
Unquoted
Total
Quoted
Unquoted
Total
-
125 736
125 736
-
63 411
63 411
1 034 102
-
1 034 102
127 841
56 200
184 041
20
-
-
-
20
228 483
228 483
43 132
43 132
947 801
155 923
60
-
-
-
947 801
55 794
211 717
15
75
181 960
181 960
73 299
73 299
Total
1 161 963
453 551
1 615 514
1 103 784
374 479
1 478 263
The assets of the pension funds used by the Group or representing securities issued by entities of the Group are detailed
as follows:
Cash and cash equivalents
Real estate
Total
(in thousands of Euros)
2023
2022
21 408
39 965
63 802
39 056
61 373
102 858
The main actuarial assumptions used in the calculation of pension and health benefit liabilities are the same and are
presented as follows:
Actuarial Assumptions
Projected rate of return on plan assets
Discount rate
Pension increase rate
Salary increase rate
Mortality table men
Mortality table women
2023
2022
Assumptions
Actual
Assumptions
Actual
3,45%
3,45%
0,75%
1,00%
15,87%
-
4,36%
5,71%
TV 88/90
TV 88/90-3 years
4,00%
4,00%
0,75%
1,00%
-18,92%
-
1,41%
2,54%
TV 88/90
TV 88/90-3 years
Disability decrements are not considered in the calculation of liabilities. The determination of the discount rate as of
December 31, 2023 and 2022 was based on: (i) the evolution in the main indexes related to high quality corporate bonds
and (ii) the duration of the liabilities.
As of December 31, 2023 and 2022, the sensitivity analysis to a variation of 0.25% in the rate of assumptions used and a
year in the mortality table results in the following variations in the present value of the liabilities for past services:
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Assumptions
Change in the amount of liabilities due to the change:
(in thousands of Euros)
2023
2022
of +0.25% in the
rate used
of -0.25% in the
rate used
of +0.25% in the
rate used
of -0.25% in the
rate used
( 47 893)
9 665
47 559
50 439
( 9 349)
( 45 481)
( 41 764)
6 893
44 420
43 959
( 6 658)
( 42 463)
+1 year
-1 year
+1 year
-1 year
Discount rate
Salary increase rate
Pension increase rate
Mortality table
( 49 967)
49 683
( 41 178)
40 787
The costs of retirement pensions and health benefits for the years as of December 31, 2023 and 2022 may be applied as
follows:
Current service cost (a)
Net interest
Early retirements (a)
Post-employment benefits costs
(a) recorded in Staff expenses (see Note 15)
(in thousand of Euros)
2023
116
1 481
200
1 797
2022
( 26)
2 316
327
2 617
In 2023, the value of early retirements was 11.4 million euros (December 31, 2022: 19.4 million euros), of which 11.2 million
euros fall within the Group's restructuring process (December 31, 2022: 19.1 million euros) and, as such, were recognised
in counterparty to the use of the provision for restructuring (see Note 32).
The average duration of the defined benefit plan liabilities is approximately 13 years (December 31, 2022: approximately
13 years).
Career Bonus
As of December 31, 2023, the liabilities assumed by the Group amount to 6,602 thousand euros, corresponding to the
past service liabilities of the career premium, as described in Note 7.23 - Employee Benefits (December 31, 2022: 5,621
thousand euros) (see Note 33).
As of December 31, 2023, a cost of 1,247 thousand euros was recorded for career premiums (December 31, 2022: 4
thousand euros) (see Note 15).
Note 17 - Other Administrative Expenses
The breakdown of this caption is as follows:
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Rentals
Advertising
Communication
Maintenance and repairs expenses
Travelling and representation
Transportation of valuables
Insurance
IT services
Independent work
Temporary work
Electronic payment systems
Legal costs
Consultancy and audit fees
Water, energy and fuel
Consumables
Other costs
(in thousands of Euros)
2023
4 909
6 055
10 616
7 735
2 652
2 889
5 056
2022
4 250
5 513
11 600
8 206
2 211
2 711
6 190
46 372
43 983
2 616
716
15 089
7 777
42 435
1 521
1 683
2 470
1 284
12 395
6 781
28 066
2 826
1 586
24 752
22 091
182 873
162 163
The 'Other costs' item includes, among others, specialised services for security and surveillance, information, training
costs and various external supplies.
The 'Rents and leases' item includes, as of December 31, 2023 an amount of 683 thousand euros related to short-term
operating lease contracts (December 31, 2022: 704 thousand euros), as described in note 7.20.
The fees billed during the exercises 2023 and 2022 by the Official Accounting Reviewers' Society, in accordance with the
provisions of art. 508-F in the Commercial Companies Code, are detailed as follows:
Statutory audit of annual accounts
Other reliability assurance services
Total value of billable services
Note 18 - Contributions to Resolution and Deposit Guarantee Schemes
As of 31 December 2023 and 2022, this caption is analysed as follows:
Contribution to the Single Resolution Fund
Contribution to the National Resolution Fund
Contribution to the Deposit Guarantee Fund
(milhares de euros)
2023
1 689
2 005
3 694
2022
1 445
1 264
2 709
(In thousands of Euros)
2023
14 977
7 101
56 403
78 481
2022
24 492
16 364
299
41 155
As part of the annual periodic contributions to the Deposit Guarantee Fund (DGF), Novobanco and the other Banks of
the Group have assumed irrevocable commitments, under the terms of paragraph 4 of article 161 of the General Regime
of Credit Institutions and Financial Companies ("RGICSF"), relating to part of these contributions, with the commitment
to make the respective payment when the DGF requested it. At the end of 2023, and at the indication of this institution,
the Group proceeded to pay the total value of the commitments assumed, amounting to 56,147 thousand euros, having
recognised this amount as a cost of the year.
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Additionally, the Group has irrevocable commitments amounting to 20,143 thousand euros related with contributions to
the Single Resolution Fund, resulting from the option to make part of the annual contributions through a collateral
deposit.
Note 19 – Impairment
Provisions or reversal of provisions (see Note 32)
Provisions for guarantees and commitments
Other provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit or
loss (see Note 22)
Securities at fair value through other comprehensive income
Securities at amortised cost
Loans and advances to banks
Loans and advances to customers
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates (see
Note 24)
Impairment or reversal of impairment on non-financial assets
Non-current assets and disposal groups classified as held for sale (see Note 30)
Tangible fixed assets (see Note 25)
Intangible fixed assets (see Note 27)
Other assets (see Note 29)
(in thousands of Euros)
2023
2022
Total
Total
45 699
( 628)
46 327
39 245
( 2 685)
41 930
141 893
101 882
( 394)
( 433)
32 960
68 067
( 62)
109 389
( 287)
34 535
( 7 406)
( 21 546)
( 6 351)
( 8 375)
14 486
( 996)
18
( 664)
( 1 776)
-
( 19 859)
( 5 935)
173 835
111 206
Note 20 - Cash, Cash Balances at Central Banks and Other Demand Deposits
This caption as of December 31, 2023 and 2022 is analysed as follows:
Cash
Demand deposits with Central Banks
Bank of Portugal
Other Central Banks
Deposits in other domestic credit institutions
Repayable on demand
Uncollected checks
Deposits with banks abroad
Repayable on demand
Other deposits
(in thousands of Euros)
2023
2022
179 229
182 895
5 374 612
5 942 498
5 365 346
5 936 637
9 266
5 861
89 559
222 866
9 167
62 900
80 392
159 966
223 789
250 819
193 526
213 506
30 263
37 313
5 867 189
6 599 078
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The item Demand Deposits at the Bank of Portugal includes mandatory deposits in the amount of 289.0 million euros
(December 31, 2022: 287.9 million euros) aimed at satisfying the legal requirements for the establishment of minimum
cash availabilities. In accordance with Regulation (CE) No. 1358/2011 of the European Central Bank of December 14, 2011,
the mandatory minimum availabilities in demand deposits at the Bank of Portugal are remunerated and correspond to
1% of deposits and debt securities with a term of less than 2 years, excluding from these the deposits of institutions
subject to the minimum reserve regime of the European System of Central Banks. On December 31, 2023, the average
interest rate for these deposits was null, and on December 31, 2022, it was 2%.
The fulfilment of the mandatory minimum availabilities, for a given observation period, is determined based on the
average value of deposit balances with the Bank of Portugal during that period. The balance of the account with the
Bank of Portugal on December 31, 2023 was included in the observation period from December 20, 2023 to January 30,
2024.
Cheques to be collected from credit institutions in the country and abroad were sent for collection on the first business
days following the reference dates.
Note 21 - Financial Assets and Liabilities Held for Trading
This item as of December 31, 2023 and 2022 is analysed as follows:
Financial assets held for trading
Bonds and other fixed income securities - Issued by government and public entities
Derivatives held for trading with positive fair value
Financial liabilities held for trading
Derivatives held for trading with negative fair value
Securities held for trading
The details of securities held for trading by fair value hierarchy are presented in Note 40.
Derivatives
Derivatives as of December 31, 2023 and 2022 are analysed as follows:
(thousands of Euros)
2023
2022
436 148
318 528
171 810
36 428
117 620
135 382
100 639
100 639
99 386
99 386
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2023
2022
Notional
Fair value
Notional
Fair value
Buy
Sell
Asset
Liability
Buy
Sell
Asset
Liability
(thousands of Euros)
TRADING DERIVATIVES
Exchange rate contracts
117 620
100 639
11 227
11 413
135 382
99 386
23 141
22 069
Forward
484 603
484 586
7 848
8 215
664 046
662 467
13 976
13 326
Currency Swaps
Currency Options
Interest rate contracts
692 915
692 574
86 152
76 649
2 161
1 218
1 980
715 504
713 759
2 559
2 137
1 218
293 418
293 419
6 606
6 606
101 085
83 897
103 673
74 413
Interest Rate Swaps
3 040 734
3 040 734
90 160
73 772
3 071 249
3 071 249
98 468
70 120
Swaption - Interest Rate
Options
-
-
-
-
-
-
-
-
Interest Rate Caps & Floors
337 730
414 502
10 925
10 125
142 992
233 310
5 205
4 293
Equity / Index contracts
4 345
4 393
8 279
2 695
Equity / Index Options
266 706
266 706
4 345
4 393
423 960
423 956
8 279
2 695
Contracts on risk of default
Credit Default Swaps
-
45 249
Commodities Contracts
Commodities Swaps
29 082
29 082
-
-
963
963
104
104
832
-
-
832
15 759
15 759
-
-
-
-
289
289
209
209
a) Derivatives traded on organised markets, whose market value is settled daily against the margin account (see Notes 29 and 33)
In the fiscal year 2023, the Group recognised a gain of 228 thousand euros related to the CVA of derivative instruments
(December 31, 2022: loss of 1,820 thousand euros). The method of determining the CVA is explained in note 40.
Note 22 - Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss, at
Fair Value Through Other Comprehensive Income and at Amortised Cost
These items as of December 31, 2023 and 2022 are analysed as follows:
2023
(thousands of Euros)
Mandatorily at
fair value
through profit
and loss
Fair value
through profit
and loss
Fair value
through other
comprehensive
income
Amortised
cost1
Fair value
changes 2
Total
838 523
7 870 536
47 940
-
-
24 534 061
( 83 498)
24 450 563
838 523
32 452 537
( 83 498)
33 472 474
-
-
8 973 971
47 940
Securities
Loans and advances to banks
Loans and advances to customers
264 912
-
-
264 912
-
-
-
-
1 Includes fair value adjustments resulting from micro-hedging of interest rate risk (see Note 23)
2 Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)
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2022
(thousands of Euros)
Mandatorily at
fair value
through profit
and loss
Fair value
through profit
and loss
Fair value
through other
comprehensive
income
Amortised
cost1
Fair value
changes 2
Total
-
-
10 609 460
43 548
Securities
313 684
13
2 331 099
7 964 664
Loans and advances to banks
Loans and advances to customers
-
18
-
-
-
-
43 548
24 550 936
( 165 144)
24 385 810
313 702
13
2 331 099
32 559 148
( 165 144)
35 038 818
1 Includes fair value adjustments resulting from micro-hedging of interest rate risk (see Note 23)
2 Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)
22.1. Securities
The detail of the Securities portfolio as of December 31, 2023 and 2022 is detailed as follows:
Securities mandatorily measured at fair value through profit or loss
Bonds and other fixed income securities - From other issuers
Shares
Other securities with variable income
Securities at fair value through results
Bonds and other fixed income securities - From other issuers
Securities at fair value through other comprehensive income
Bonds and other fixed income securities - From public issuers
Bonds and other fixed income securities - From other issuers
Shares
Securities at amortised cost
Bonds and other fixed income securities - From public issuers
Bonds and other fixed income securities - From other issuers
Impairment
(thousands of Euros)
2023
2022
264 912
313 684
11 418
142 282
13 473
141 119
111 212
159 092
-
-
13
13
838 523
2 331 099
371 675
1 764 578
389 194
479 406
77 654
87 115
7 870 536
7 964 664
4 421 480
4 423 089
3 773 368
3 833 106
( 324 312)
( 291 531)
8 973 971
10 609 460
On December 29, 2022, the Crow Project was completed, entered into between Novobanco, Banco Comercial
Português, S.A., Caixa Geral de Depósitos, S.A., Banco Santander Totta, S.A. and Oitante, S.A. (the sellers) and Davidson
Kempner (the buyer), relating to the process of sale of the units of participation held by these banks in the restructuring
Funds. From this operation resulted: (i) the transfer of the units of participation held in the FRT, together with the assets
directly and indirectly held by the fund to the buyer; (ii) the transfer of shares in the FLIT together with the assets
directly and indirectly held by the fund to the buyer; (iii) certain hotel assets indirectly held by the Recovery Fund, FCR
were indirectly acquired by the FLIT; and (iv) certain assets indirectly held by the FLIT and FRT were transferred to the
Sellers. As a result of this operation, in fiscal year 2022 Novobanco received, net of costs, 224 million euros, proceeded
to the derecognition of 267 million euros of units of participation and acquired assets registered as non-current assets in
the amount of 48 million euros, with a positive impact on results of 4.8 million euros.
The remaining participations in restructuring funds remaining on the Group's balance sheet are accounted for in shares
and other variable income securities mandatorily accounted for at fair value through profit or loss, according to the
accounting policy described in Note 7.6.4, based on net book value reported by the Management Companies, adjusted
relative to information, analyses or independent valuations considered necessary to determine its fair value, responding
to guidelines from the Central Bank of Europe. Being "level 3" assets according to the IFRS 13 fair value hierarchy (quotes
provided by third parties whose parameters used are mostly not observable in the market), the detail of the valuation
methodology is described in Note 40.
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During this year, the Bank decided, on an exceptional basis, to fully sell a portfolio of supranational debt recorded at
amortized cost whose yield was significantly below those observed in the market, within the scope of interest rate risk
management, and in line with the Bank's strategy of protecting financial margin in a scenario of falling interest rates as
early as 2024. Given the exceptionality and non-repeatable nature of the operation, we understand that it is part of the
adopted business model. This portfolio consisted of eighteen securities with a duration of around 5 years (not
considering call options), which represented around 9.4% (in nominal value) of the total securities portfolio recorded at
amortized cost. With this operation, the Bank recognized a loss in the line Gains or losses of financial assets and liabilities
not measured at fair value of 70,982 thousand euros in the 2023 financial year, which corresponds to the realization of
potential losses on these securities, for the benefit of gains in future margin.
The detail of the securities at fair value through other comprehensive income as of December 31, 2023 and 2022 is as
follows:
Cost (1)
Fair value reserve
Positive
Negative
Fair value
reserve
transferred
to Results
(2)
(thousands of Euros)
Book value
Impairment
reserves
378 488
1 757
( 9 332)
762
371 675
70 492
307 996
10
1 747
( 8 722)
( 610)
-
61 780
762
309 895
( 49)
( 28)
( 21)
421 252
775
( 27 052)
( 5 781)
389 194
( 190)
Bonds and other fixed income securities - From
public issuers
Residents
Non residents
Bonds and other fixed income securities - From
other issuers
Shares
147 220
42 517
( 112 083)
Other securities with variable income
3
-
( 3)
-
-
77 654
-
-
-
Balance as at 31 December 2023
(1) Acquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
(2) In the context of fair value hedge operations (see Note 23)
946 963
45 049
( 148 470)
( 5 019)
838 523
( 239)
Cost (1)
Fair value reserve
Positive
Negative
Fair value
reserve
transferred to
Results (2)
Book value
Impairment
reserves
(thousands of Euros)
Bonds and other fixed income securities - From
public issuers
1 783 420
321
( 19 163)
Residents
Non residents
349 818
1 433 602
10
311
( 13 271)
( 5 892)
-
-
-
1 764 578
( 453)
336 557
1 428 021
( 115)
( 338)
Bonds and other fixed income securities - From
other issuers
541 022
-
( 49 628)
( 11 988)
479 406
( 207)
Shares
445 229
41 222
( 399 336)
Other securities with variable income
3
-
( 3)
-
-
87 115
-
-
-
Balance as at 31 December 2022
(1) Acquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
(2) In the context of fair value hedge operations (see Note 23)
2 769 674
41 543
( 468 130)
( 11 988)
2 331 099
( 660)
During the fiscal year 2023, the Group sold 1,243.4 million euros of financial instruments classified at fair value through
other comprehensive income (December 31, 2022: 5,921.9 million euros), with a gain of 5.1 million euros (December 31,
2022: loss of 82.8 million euros), recorded in results, from the sale of debt instruments and a loss of 283.8 million euros
that were transferred from revaluation reserves to sales-associated reserves (December 31, 2022: loss of 1.2 million
euros), from the sale of capital instruments.
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Annex
The transfers between stages occurred in the portfolio of securities at fair value through other comprehensive income
and amortised cost during the exercises 2023 and 2022 are presented as follows:
2023
(thousands of Euros)
Transfers between Stage 1
and 2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
Bonds and other fixed income securities - Capitals
From other issuers
86 586
86 586
25 549
25 549
29 648
29 648
-
-
-
-
-
-
2022
(thousands of Euros)
Transfers between Stage 1
and 2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
Bonds and other fixed income securities - Capitals
From other issuers
18 523
18 523
1 405
1 405
-
-
-
-
29 263
29 263
-
-
The movements occurred in the impairment reserves in the securities at fair value through other comprehensive income
are presented as follows:
Balance as at 31 December 2021
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write-off
Other movements
Balance as at 31 December 2022
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write-off
Other movements
Balance as at 31 December 2023
Impairment movement of securities at fair value
through other comprehensive income
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
3 716
( 20)
2 339
( 2 752)
( 2 654)
30
659
416
( 810)
( 22)
( 5)
238
-
-
-
-
-
-
-
-
-
-
-
-
20
-
( 20)
-
1
1
-
-
-
-
1
3 716
-
2 339
( 2 772)
( 2 654)
31
660
416
( 810)
( 22)
( 5)
239
The movements occurred in the impairment losses in the securities at amortised cost are presented as follows:
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Annual Report 2023 | novobanco
Impairment movement of securities at amortised cost
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
5 471
76
( 61)
( 6 357)
15 463
38 283
203 243
246 997
( 76)
61
-
-
-
6 357
-
-
-
173 771
1 687 706
1 876 940
( 9 262)
( 208 666)
( 1 590 945)
( 1 808 873)
( 41)
58
5 347
1 883
( 1 784)
-
-
( 25 237)
( 25 278)
1 687
1 745
3 373
282 811
291 531
( 1 883)
1 784
-
-
-
( 1 654)
1 654
-
-
-
8 913
11 020
1 631 947
1 651 880
( 12 248)
( 9 201)
( 1 597 471)
( 1 618 920)
( 153)
1 749
3 707
( 23)
( 3 402)
( 5)
1 655
( 181)
2
14
320 591
324 312
Balance as at 31 December 2021
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write-off
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write-off
Other movements
Balance as at 31 December 2023
In accordance with the accounting policy described in Note 7.12, the Group regularly assesses whether there is objective
evidence of impairment in its portfolio of financial assets at fair value through other comprehensive income following the
judgement criteria described in Note 8.1.
The detail of the securities portfolio by fair value hierarchy is presented in Note 40.
The securities in the portfolio given as collateral by the Group are analysed in Note 36.
22.2. Loans and advances to Banks
The detail of Loans and advances to Banks as of December 31, 2023 and 2022 is detailed as follows:
Loans and advances to banks in Portugal
Deposits
Loans
Loans and advances to banks abroad
Deposits
Impairment losses
All loans and advances to Banks are accounted under amortised cost portfolio.
Changes in impairment losses on loans and advances to banks are presented as follows:
(Thousands of Euros)
2023
2022
44 938
39 232
24 761
20 177
3 716
3 716
48 654
( 714)
47 940
4
39 228
5 096
5 096
44 328
( 780)
43 548
353
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Balance as at 31 December 2021
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2022
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2023
22.3. Loans and advances to customers
Loans and advances to Banks
Stage 1
Stage 2
Stage 3
Total
(thousands Euros)
217
371
( 413)
25
200
302
474
391
( 636)
( 75)
154
517
( 446)
( 435)
51
107
( 56)
180
422
-
-
4
426
-
-
1
427
1 113
762
( 1 049)
( 46)
780
819
( 881)
( 4)
714
The detail of the Loans and advance to customers as of December 31, 2023 and 2022 is detailed as follows:
Loans and advances – Corporate
Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances
Loans and advances – Individuals
Residential Mortgage loans
Consumer credit and other loans
Overdue loans and advances and interests
Under 90 days
Over 90 days
Impairment losses
Fair value adjustments of interest rate hedges (See Note 23)
Corporate – Loans
Individual - Mortgage loans
(thousands of Euros)
2023
2022
13 494 029
13 949 104
1 388 599
1 171 800
10 523 888
11 116 414
73 167
87 371
817 655
700 708
13 674
46 709
656 291
796 661
20 755
29 441
11 629 113
11 337 636
10 050 449
9 966 380
1 578 664
1 371 256
365 444
330 606
27 461
13 267
337 983
317 339
25 488 586
25 617 346
( 954 525)
(1 066 392)
24 534 061
24 550 954
( 83 498)
( 165 144)
-
( 16 805)
( 83 498)
( 148 339)
24 450 563
24 385 810
As of December 31, 2023, there are operations mandatorily registered at fair value through profit or loss, with a nominal
value of 13,090 thousand euros and a fair value of 0 thousand euros (December 31, 2022: 31,197 thousand euros and 18
thousand euros, respectively), the impact of which was recorded in the line Gains or losses on financial assets
mandatorily accounted at fair value through profit or loss on the income statement (see Note 12).
As of December 31, 2023, the value of customer loans (net of impairment) includes the amount of 1,008.7 million euros
(December 31, 2022: 1,127.6 million euros), related to securitization operations that, according to the accounting policy
mentioned in Note 6, are consolidated by the Group (See Notes 1 and 39). The liabilities associated with these
securitisation operations were recognised as Liabilities represented by securities (see Note 31).
354
Annual Report 2023 | novobanco
As of December 31, 2023, the item customer loans includes 7,442.1 million euros of mortgage credit related to the
issuance of mortgage bonds (December 31, 2022: 6,078.4 million euros) (see Note 31).
As of December 31, 2023, the value of interest and fees recorded in the balance sheet for credit operations amounts to
97,082 thousand euros (December 31, 2022: 37,310 thousand euros).
The movements occurred in the capital amounts of credit are presented as follows:
Balance at 31 December 2021
New production
Scheduled refunds
Unscheduled refunds
Write off
Other movements
Balance at 31 December 2022
New production
Scheduled refunds
Unscheduled refunds
Write off
Other movements
Movement in loans and advances to customers
Corporate loans
Mortgage loans
Other loans to
Individuals
Total
(thousand of Euros)
13 714 025
1 791 033
( 1 515 841)
( 706 394)
( 133 479)
1 095 132
14 244 477
2 290 752
( 1 852 664)
( 1 131 526)
( 133 479)
401 850
9 812 013
1 241 684
( 259 060)
( 703 526)
( 52 200)
( 61 189)
9 977 722
1 429 897
( 304 718)
( 885 942)
( 52 200)
( 106 728)
1 406 415
246 522
( 126 299)
( 61 167)
( 31 051)
( 39 273)
1 395 147
433 695
( 163 119)
( 184 498)
( 31 051)
160 971
24 932 453
3 279 239
( 1 901 199)
( 1 471 087)
( 216 730)
994 671
25 617 346
4 154 344
( 2 320 501)
( 2 201 966)
( 216 730)
456 093
Balance at 31 December 2023
13 819 410
10 058 031
1 611 145
25 488 586
The transfers between stages that occurred in credit during the exercises 2023 and 2022 are presented as follows:
2023
(thousands of Euros)
Transfers between Stage 1
and 2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1 from
Stage 2
To Stage 3 from
Stage 2
To Stage 2 from
Stage 3
To Stage 3 from
Stage 1
To Stage 1
from Stage 3
Loans - Capitals
Corporate loans
924 486
738 400
172 165
104 580
Loans to individuals
509 329
281 917
53 510
30 955
1 433 815
1 020 317
225 675
135 535
70 868
25 747
96 615
314
5 603
5 917
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Management Report
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Consolidated Financial Statements
Annex
2022
(thousands of Euros)
Transfers between Stage 1
and 2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1 from
Stage 2
To Stage 3 from
Stage 2
To Stage 2 from
Stage 3
To Stage 3 from
Stage 1
To Stage 1 from
Stage 3
Loans - Capitals
Corporate Loans
Loans to individuals
555 353
393 129
514 595
317 341
81 989
35 718
948 482
831 936
117 707
40 423
41 354
81 777
29 605
8 668
38 273
2 250
22 856
25 106
The movements occurred in the impairment losses of credit are presented as follows:
Impairment movements of loans and advances to customers
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
Decreases due to changes in credit risk
( 94 166)
( 41 063)
( 45 050)
( 180 279)
Balance as at 31 December 2021
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Financial assets derecognised
Increases due to changes in credit risk
Write-off
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Financial assets derecognised
322 194
862 148
1 247 917
( 73 627)
-
( 19 094)
47 974
( 28 880)
( 18 699)
18 948
-
( 26 847)
( 26 851)
64 166
130 905
214 814
63 575
73 627
( 249)
( 4)
19 743
-
( 38)
( 198 740)
( 198 778)
18 842
62 274
( 300)
( 8 973)
9 569
300 607
703 511
1 066 392
145 919
( 145 918)
( 1)
( 48 035)
86 820
( 38 785)
( 379)
( 123)
( 34 291)
34 670
( 188)
( 75 114)
( 75 425)
-
-
-
-
-
-
Increases due to changes in credit risk
12 485
171 190
128 336
312 011
Decreases due to changes in credit risk
( 114 471)
( 39 941)
( 48 210)
( 202 622)
Write-off
Other movements
( 31)
( 155 306)
( 155 337)
5 740
( 3 618)
7 384
9 506
Balance as at 31 December 2023
63 410
334 630
556 485
954 525
The distribution of credit by type of rate is as follows:
Fixed rate
Variable rate
The lease loans, by residual terms, is presented as follows:
(thousands of Euros)
2023
2022
3 494 865
2 802 871
21 910 223
22 649 331
25 405 088
25 452 202
356
Gross investment in finance leases receivable
Up to 1 year
1 to 5 years
More than 5 years
Interest due from finance leases
Up to 1 year
1 to 5 years
More than 5 years
Capital due
Up to 1 year
1 to 5 years
More than 5 years
Impairment
Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
768 608
228 441
418 850
121 317
100 061
31 620
52 892
15 549
668 547
196 821
365 958
105 768
915 702
216 621
496 962
202 119
97 481
26 238
54 097
17 146
818 221
190 383
442 865
184 973
( 66 291)
( 84 922)
602 256
733 299
As of December 31, 2023 and 2022, the detail of the gross exposure value of credit and individually and collectively
assessed impairment, by segment was as follows:
Individual Evaluation(1)
Collective Evaluation(2)
Total
Exposure
Impairment
Impairment
Exposure
Impairment
Exposure
Impairment
2023
(thousands of Euros)
Corporate
871 878
419 296
12 947 533
343 662
13 819 411
762 958
Stage 1
Stage 2
Stage 3
-
-
-
-
10 243 033
42 688
10 243 033
42 688
2 651 010
272 035
2 651 010
272 035
871 878
419 296
53 490
28 939
925 368
448 235
Mortgage loans
274
120
9 974 259
Stage 1
Stage 2
Stage 3
-
-
-
-
274
120
9 102 417
775 655
96 187
Other Credit to Individuals
52 005
49 058
1 559 139
Stage 1
Stage 2
Stage 3
-
-
-
-
1 178 276
321 709
52 005
49 058
59 154
71 121
3 896
37 565
29 660
71 268
13 879
27 422
29 967
Total
(1) Loans whose final impairment has been determined and approved by the Impairment Committee
(2) Loans whose final impairment has been determined in accordance with the calculation rules of the collective impairment model
24 480 931
468 474
486 051
924 157
9 974 533
9 102 417
775 655
71 241
3 896
37 565
96 461
29 780
1 611 144
120 326
1 178 276
321 709
111 159
13 879
27 422
79 025
25 405 088
954 525
357
Management Report
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Annex
Individual Evaluation(1)
Collective Evaluation(2)
Total
Exposure
Impairment
Impairment
Exposure
Exposure
Impairment
2022
(thousands of Euros)
Corporate
1 093 692
542 602
13 133 980
333 908
14 227 672
876 510
Stage 1
Stage 2
Stage 3
-
1 587
-
10 187 063
43 504
392
2 898 148
260 974
1 092 105
542 210
48 769
Mortgage loans
3 626
395
9 825 757
Stage 1
Stage 2
Stage 3
Other Credit to Individuals
Stage 1
Stage 2
Stage 3
-
-
3 626
80 441
-
-
-
-
395
8 939 605
781 080
105 072
74 467
1 314 706
-
-
1 090 919
177 390
46 397
80 441
74 467
Total
(1) Loans whose final impairment has been determined and approved by the Impairment Committee
(2) Loans whose final impairment has been determined in accordance with the calculation rules of the collective impairment model
24 274 443
1 177 759
448 928
617 464
29 430
54 440
3 595
20 958
29 887
60 580
14 912
18 448
27 220
10 187 063
2 899 735
1 140 874
9 829 383
8 939 605
781 080
108 698
43 504
261 366
571 640
54 835
3 595
20 958
30 282
1 395 147
135 047
1 090 919
177 390
126 838
14 912
18 448
101 687
25 452 202
1 066 392
In the case of credits analysed by the Impairment Committee for which the impairment determined automatically by the
Impairment Model was not changed, they are included and presented in the "Collective assessment".
As of December 31, 2023 and 2022, the detail of the gross exposure value of credit and individually and collectively
assessed impairment, by geography was as follows:
2023
(thousand of Euros)
Individual evaluation*
Collective Evaluation**
Total
Exposure
Impairment
Exposure
Impairment
Exposure
Impairment
799 080
406 166
20 575 238
437 184
21 374 318
843 350
-
-
-
-
-
-
-
-
-
-
1 101 455
432 690
391 402
243 967
337 211
15 191
6 314
3 669
2 482
1 418
1 101 455
432 690
391 402
243 967
337 211
15 191
6 314
3 669
2 482
1 418
125 077
62 308
1 398 968
19 793
1 524 045
82 101
924 157
468 474
24 480 931
486 051
25 405 088
954 525
Portugal
Spain
United Kingdom
France
Switzerland
Luxembourg
Others
Total
* Credits whose impairment results from individual analysis (defined and approved by the Impairment Committee)
** Credits whose impairment was evaluated collectively and determined automatically by the Impairment Model.
As of December 31, 2023 and 2022, the detail of the gross exposure value of credit and impairment constituted by
segment was as follows:
358
Corporate
Mortgage loans
Annual Report 2023 | novobanco
Segment
Performing
Delay > 30 days
Total
Performing or
Delay
< 30 days
(thousand of Euros)
2023
Non-Performing
Days late
<= 90 days
> 90 days
Total
Total
Gross Value
24 171 609
100 827
24 272 436
648 744
483 908
1 132 652
25 405 088
12 859 810
34 569
12 894 379
547 879
377 153
925 032
13 819 411
Other loans to Individuals
1 486 648
11 690
1 498 338
9 825 151
54 568
9 879 719
46 948
53 917
47 866
58 889
94 814
9 974 533
112 806
1 611 144
Impairment
Corporate
Mortgage loans
Other Loans to Individuals
392 487
314 329
44 741
33 417
5 556
730
2 729
2 097
398 043
293 640
262 842
556 482
954 525
315 059
237 750
210 149
447 899
762 958
47 470
35 514
11 954
43 936
11 817
40 876
23 771
84 812
71 241
120 326
Net Value
23 779 122
95 271
23 874 393
355 104
221 066
576 170
24 450 563
Segment
Performing
Delay > 30 days
Total
Performing or
Delay
< 30 days
(thousand of Euros)
2022
Non-Performing
Days late
<= 90 days
> 90 days
Total
Total
Gross Value
23 998 856
76 954
24 075 810
834 125
542 267
1 376 392
25 452 202
Corporate
Mortgage Loans
Other loansto Individuals
Impairment
Corporate
Mortgage loans
Other loans to Individuals
13 053 682
33 134
13 086 816
724 413
416 443
1 140 856
14 227 672
9 689 291
35 682
9 724 973
1 264 021
55 744
53 968
48 666
104 410
9 829 383
77 158
131 126
1 395 147
1 255 883
329 627
274 903
27 858
26 866
8 138
7 100
3 632
1 881
1 587
336 727
381 142
348 523
729 665
1 066 392
278 535
324 410
273 565
597 975
29 739
28 453
13 308
43 424
11 788
63 170
25 096
106 594
876 510
54 835
135 047
Net Value
23 669 229
69 854
23 739 083
452 983
193 744
646 727
24 385 810
As of December 31, 2023 and 2022, the detail of the credit portfolio by segment and by reference year was as follows:
359
2004 and
previous
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
2004 and
previous
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Corporate
Mortgage
Other Loans to Individuals
Total
2023
(thousand of Euros)
Reference
year
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
861 106
251 696
8 094
50 883
854 736
9 750
220 535
53 430
3 534
1 132 524
1 159 862
21 378
749
863
1 165
1 081
833
873
1 573
1 274
1 910
2 231
3 975
5 155
25 788
7 145
6 902
251 529
1 543
16 453
7 329
104 772
9 880
11 593
479 751
2 986
19 595
7 263
178 320
29 798
17 124
714 002
4 739
28 748
11 007
315 201
11 073
11 439
504 010
3 177
21 880
10 309
282
362
602
336
24 104
284 646
8 970
32 051
591 786
13 228
47 037
903 329
35 139
34 400
829 520
14 586
107 798
10 453
7 199
340 525
2 371
15 629
17 827
9 273
23 661
466 150
22 097
104 891
13 570
6 897
354 314
2 561
23 967
20 904
1 090
74 858
8 294
3 468
154 708
820
27 431
14 607
1 409
136 269
24 948
1 674
62 978
589
32 797
12 060
262 964
35 300
2 133
101 765
1 108
29 628
10 783
131 331
29 270
1 411
73 298
584
28 260
13 469
604
339
415
569
837
31 737
480 109
16 735
31 989
244 173
9 453
35 880
211 307
25 952
33 334
375 512
36 977
30 945
218 098
30 691
433 904
55 972
2 237
127 748
580
32 062
26 591
14 764
36 209
588 243
71 316
351 925
39 052
4 668
288 543
1 619
46 239
49 972
20 818
53 138
690 440
61 489
484 885
33 148
7 094
511 638
3 142
48 376
47 271
5 759
59 445
1 043 794
42 049
787 112
64 961
7 968
674 503
2 894
56 608
71 534
4 177
69 731
1 533 149
72 032
7 594
1 237 808
98 414
8 199
738 314
3 761
64 944
122 530
8 128
80 737
2 098 652
110 303
9 763
1 381 935
40 676
6 138
581 242
3 307
44 573
112 278
5 024
60 474
2 075 455
49 007
7 051
1 641 874
24 129
7 058
759 030
4 330
66 233
185 841
9 675
80 342
2 586 745
38 134
10 939
3 307 172
115 057
8 980
1 105 734
4 074
102 987
323 930
16 834
122 906
4 736 836
135 965
16 235
2 498 908
103 724
10 204
1 296 165
17 306
150 644
492 209
17 994
177 083
4 287 282
139 024
936 869
13 819 411
762 958
183 269
9 974 533
71 241
1 077 589
1 611 144
120 326
2 197 727
25 405 088
954 525
Corporate
Mortgage
Other loans to Individuals
Total
2022
(thousand of Euros)
Reference
year
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
3 823
201 587
18 281
58 261
987 666
8 872
739 976
12 245
12 765
802 060
1 201 498
39 918
31 474
3 122
153 885
31 646
7 553
12 611
285 777
538 293
2 126
3 735
206 228
41 288
18 686
803 616
5 964
349 863
14 284
12 704
570 092
717
890
1 129
1 031
761
818
867
1 057
1 422
1 426
2 048
2 778
4 922
133 985
13 975
119 542
15 204
98 217
14 951
161 198
30 331
324 476
208 148
57 217
52 871
503 622
74 436
464 764
53 392
661 124
46 925
6 237
1 035 429
82 184
8 594
1 811 417
149 236
8 133
7 666
3 974
2 118
2 547
1 608
2 483
5 133
7 897
9 037
9 290
390 247
408 947
177 536
76 338
4 103
2 582
3 112
955
803
116 007
1 342
83 848
145 657
331 037
595 054
790 378
869 666
658
739
1 477
3 115
3 541
3 412
9 649
11 937
18 474
17 723
10 428
16 191
18 495
23 971
22 980
20 653
23 505
37 488
41 169
50 261
56 631
6 746
7 053
9 560
7 470
16 487
20 681
13 517
12 122
11 558
17 850
236
325
561
263
17 919
323 997
5 484
25 438
699 231
35 706
38 289
1 019 404
47 813
31 458
927 425
18 650
8 835
19 322
540 719
25 392
603
279
418
580
768
24 675
549 170
23 336
289 270
27 146
249 658
18 919
16 185
31 552
26 949
452 041
59 139
23 687
309 846
54 297
55 135
38 538
28 036
704 414
113 713
61 110
19 313
45 399
856 911
66 104
100 228
167 640
247 761
6 137
5 409
10 116
6 205
8 744
74 182
56 177
91 134
53 988
1 322 282
65 535
1 926 035
74 515
2 848 723
162 764
55 274
2 725 166
67 693
70 232
3 226 351
50 619
415 431
14 952
103 249
5 280 061
97 055
10 301
1 910 110
58 482
6 879
668 607
3 006
38 094
146 449
7 477
2 152 348
38 054
15 028
3 700 255
80 631
7 574
9 119
826 242
1 164 375
3 821
1 472
55 181
79 102
71 326
14 227 672
876 510
193 273
9 829 383
54 835
1 291 908
1 395 147
135 047
1 556 507
25 452 202
1 066 392
Collaterals
In order to mitigate credit risk, credit operations have associated guarantees, namely mortgages or pledges. The fair
value of these guarantees is determined at the time of granting the credit, being revaluated periodically. The gross value
of the credits and the respective fair value of the collaterals, limited to the value of the associated credit, is presented
below:
360
Annual Report 2023 | novobanco
2023
2022
(thousand of Euros)
Amount of
loans
Impairment
Net Value
Fair value of
collateral
Amount of
loans
Impairment
Net Value
Fair value of
collateral
9 974 533
( 71 241)
9 903 292
9 963 237
9 829 383
( 54 835)
9 774 548
9 726 694
8 686 828
( 3 317)
8 683 511
8 770 123
8 636 253
( 3 391)
8 632 862
8 636 253
347 969
67 620
( 103)
( 476)
347 866
341 448
67 144
-
221 446
81 906
( 74)
( 130)
221 372
213 902
81 776
-
( 19 470)
693 727
713 197
46 859
15 599
( 940)
( 17 155)
91 484
( 24 411)
2 792
2 185
( 997)
( 4 372)
45 919
( 1 556)
67 073
1 795
( 2 187)
712 156
45 759
-
91 114
2 637
-
752 170
( 18 919)
733 251
750 649
22 138
6 772
( 722)
( 1 317)
21 416
5 455
20 561
-
105 800
( 28 744)
77 056
105 296
33
( 12)
2 865
( 1 526)
21
1 339
33
-
9 491 509
( 47 198)
9 444 311
9 573 393
9 494 223
( 51 054)
9 443 169
9 492 198
397 620
( 2 040)
395 580
389 844
243 617
( 808)
242 809
234 496
Mortgage loans
Stage 1
Mortgages
Pledges
Not collateralized
Stage 2
Mortgages
Pledges
Not collateralized
Stage 3
Mortgages
Pledges
Not collateralized
Total
Mortgages
Pledges
Not collateralized
85 404
( 22 003)
63 401
-
91 543
( 2 973)
88 570
-
Other Loans to individuals
1 611 144
( 120 326)
1 490 818
582 074
1 395 147
( 135 047)
1 260 100
448 673
Stage 1
Mortgages
Pledges
304 186
139 185
( 195)
( 850)
303 991
303 940
138 335
136 637
248 227
134 587
( 345)
( 1 171)
247 882
247 789
133 416
131 725
Not collateralized
734 905
( 12 834)
722 071
-
708 105
( 13 396)
694 709
-
Stage 2
Mortgages
Pledges
111 574
11 686
( 3 329)
108 245
( 783)
Not collateralized
198 449
( 23 310)
Stage 3
Mortgages
Pledges
7 289
( 2 574)
39 082
( 36 940)
Not collateralized
64 788
( 39 511)
25 277
10 903
175 139
4 715
2 142
111 342
11 520
44 899
5 145
( 1 118)
( 243)
43 781
4 902
-
127 346
( 17 087)
110 259
6 780
11 855
-
6 529
67 318
( 2 521)
( 62 162)
52 991
( 37 004)
4 008
5 156
15 987
44 543
4 930
-
5 975
13 711
-
Total
Mortgages
Pledges
423 049
( 6 098)
416 951
422 062
299 655
( 3 984)
295 671
298 307
189 953
( 38 573)
151 380
160 012
207 050
( 63 576)
143 474
150 366
Not collateralized
998 142
( 75 655)
922 487
-
888 442
( 67 487)
820 955
-
Corporate loans
Stage 1
Mortgages
Pledges
13 819 411
( 762 958)
13 056 453
4 625 416
14 227 672
( 876 510)
13 351 162
4 160 524
2 630 228
( 11 226)
2 619 002
2 448 230
2 075 009
( 12 988)
2 062 021
1 857 873
1 703 697
( 5 305)
1 698 392
791 694
1 704 798
( 5 945)
1 698 853
713 852
Not collateralized
5 909 108
( 26 157)
5 882 951
-
6 407 256
( 24 571)
6 382 685
-
Stage 2
Mortgages
Pledges
837 045
( 75 561)
761 484
741 278
901 315
( 89 074)
812 241
811 303
540 518
( 75 003)
465 515
238 995
585 543
( 93 760)
491 783
305 654
Not collateralized
1 273 447
( 121 471)
1 151 976
-
1 412 877
( 78 532)
1 334 345
-
Stage 3
Mortgages
Pledges
374 053
( 152 507)
221 546
332 916
467 644
( 225 737)
241 907
372 476
152 614
( 80 923)
71 691
72 303
192 799
( 84 122)
108 677
99 366
Not collateralized
398 701
( 214 805)
183 896
-
480 431
( 261 781)
218 650
-
Total
Mortgages
Pledges
3 841 326
( 239 294)
3 602 032
3 522 424
3 443 968
( 327 799)
3 116 169
3 041 652
2 396 829
( 161 231)
2 235 598
1 102 992
2 483 140
( 183 827)
2 299 313
1 118 872
Not collateralized
7 581 256
( 362 433)
7 218 823
-
8 300 564
( 364 884)
7 935 680
-
Total
25 405 088
( 954 525)
24 450 563
15 170 727
25 452 202
( 1 066 392)
24 385 810
14 335 891
361
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
The difference between the value of the credit and the fair value of the collateral represents the total credit exposure
that exceeds the value of the collateral, with this value not being impacted by collaterals with a fair value higher than the
credit to which they are associated.
The detail of the collaterals – mortgages is presented as follows:
2023
(thousand of Euros)
Collateral ranges a)
Mortgage loans
Other loans to individuals
Corporate loans
Total
Number
Amount
Number
Amount
Number
Amount
Number
Amount
less than 0.5M€
175 442
9 168 900
10 644
403 242
8 988
453 606
195 074
10 025 748
greater than 0.5M€ and less than 1.0M€
448
283 743
greater than 1.0M€ and less than 5.0M€
80
120 750
greater than 5.0M€ and less than 10.0M€
greater than 10.0M€ and less than 20.0M€
greater than 20.0M€ and less than 50.0M€
greater than 50M€
-
-
-
-
-
-
-
-
18
5
-
-
-
-
10 460
8 360
-
-
-
-
2 320
237 508
6 006
737 310
1 354
685 934
1 474
717 152
4 128
476 884
1 609
214 030
2 786
6 091
1 354
1 474
4 128
1 609
531 711
866 420
685 934
717 152
476 884
214 030
175 970
9 573 393
10 667
422 062
25 879
3 522 424
212 516
13 517 879
a) The allocation by intervals was carried out based on the total value of collateral per credit contract.
2022
(thousand of Euros)
Collateral ranges a)
Mortgage loans
Other loans to individuals
Corporate loans
Total
Number
Amount
Number
Amount
Number
Amount
Number
Amount
less than 0.5M€
187 451
9 170 509
6 846
281 122
19 163
466 692
213 460
9 918 323
greater than 0.5M€ and less than 1.0M€
367
228 517
greater than 1.0M€ and less than 5.0M€
65
93 172
greater than 5.0M€ and less than 10.0M€
greater than 10.0M€ and less than
20.0M€
greater than 20.0M€ and less than
50.0M€
greater than 50M€
-
-
-
-
-
-
-
-
13
4
-
-
-
-
8 659
8 526
-
-
-
-
2 393
241 638
9 833
722 959
1 904
539 832
2 773
9 902
1 904
478 814
824 657
539 832
134
399 451
134
399 451
5 717
401 813
1 567
269 267
5 717
1 567
401 813
269 267
187 883
9 492 198
6 863
298 307
40 711
3 041 652
235 457
12 832 157
a) The allocation by intervals was carried out based on the total value of collateral per credit contract.
The values of collaterals - mortgages, presented above, represent the maximum coverage value of the covered assets,
that is, they compete up to the gross value of the individual covered credits.
In assessing the risk of an operation or set of operations, the elements of credit risk mitigation associated with them are
taken into account, in accordance with internal rules and procedures.
Relevant collateral is essentially the following:
• Real estate, where the value considered is the corresponding to the last available assessment;
• Financial pledges, where the value considered corresponds to the quotation of the last day of the month, if it is a
listed security, or the value of the pledge, if it is cash.
Accepting collateral as security for credit operations refers to the need to define and implement techniques to mitigate
the risks to which said collateral is exposed. Thus, and as an approach to this matter, the Group has established a set of
procedures applicable to collateral (particularly financial and real estate), which cover, among others, the volatility of the
collateral value, its liquidity and an indication of the recovery rates associated with each type of collateral.
The internal credit power rules thus have a specific chapter on this point, "Acceptance of collateral - techniques to
mitigate the risks to which collateral is exposed, namely liquidity and volatility risks".
362
Annual Report 2023 | novobanco
The revaluation process of real estate is carried out by appraisers registered with the CMVM, based on the valuation
methods described in Note 8.6.
Restructured Credit
The Group proceeds to the identification and marking of restructured credit contracts due to the customer's financial
difficulties whenever there are changes to the terms and conditions of a contract in which the customer has defaulted,
that is, it is foreseeable that it will default, with a financial obligation. It is considered that there is a change to the terms
and conditions of the contract when:
(i) there are contractual changes in favour of the client, such as extension of term, introduction of grace periods,
reduction of rate or partial debt forgiveness;
(ii) there is the contracting of a new credit operation to settle the existing debt (total or partial); or
(iii) the new terms of the contract are more favourable than those applied to other clients with the same risk
profile.
Unmarking of a restructured credit due to the customer's financial difficulties can only occur after a minimum period of
two years from the date of restructuring, provided that the following conditions are cumulatively verified:
regular payment of principal and interest;
(i)
(ii) the customer has no matured principal or interest; and
(iii) there has been no debt restructuring mechanisms by the client during this period.
The values of credit restructured due to the client's financial difficulties on December 31, 2023 and 2022 are the
following:
Corporate Loans
Mortgage Loans
Other Loans to Individuals
Total
(thousand of Euros)
2023
2022
1 052 727
177 851
57 273
1 179 166
184 859
82 298
1 287 851
1 446 323
Loans marked as restructured due to financial difficulties include loans that are currently performing, classified in stage
2, and that are in the curing period.
The detail of the restructuring measures applied to restructured credits on December 31, 2023 and 2022 is presented
below:
Performing
2023
Non Performing
(thousand of Euros)
Total
Issue
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
Forgiveness of capital or interest
Assets received for partial credit settlement
Interest capitalization
39
22
15
9 441
1 027
5 010
471
164
824
52
7
73 130
46 122
6 450
5 184
91
29
82 571
46 593
7 477
5 348
112
48 582
32 057
127
53 592
32 881
New credit for total or partial settlement of existing debt
1 158
191 527
15 457
577
134 001
69 788
1 735
325 528
85 245
Extension of repayment term
1 399
225 266
35 487
444
253 541
107 043
1 843
478 807
142 530
Introduction of grace period for capital or interest
913
138 625
13 303
116
38 770
21 040
1 029
177 395
34 343
Reduction of interest rates
Change of lease payment plan
414
105
13 554
69 762
4 571
Change in the periodicity of interest payments
6
1 840
87
63
3
22 966
5 829
388
9 186
2 533
243
501
92 728
13 757
168
19 383
2 992
9
2 228
Others
Total
459
257
790
500
3 471
1 429
40 593
289
7 549
2 681
1 718
48 142
5 500
696 645
71 783
1 750
591 206
295 877
7 250
1 287 851
367 660
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Management Report
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Annex
Performing
2022
Non Performing
(thousand of Euros)
Total
Issue
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
Forgiveness of capital or interest
Assets received for partial credit settlement
Interest capitalization
41
23
16
13 990
1 068
4 965
901
164
923
64
100 870
57 886
105
114 860
58 787
8
87
146
129
31
1 214
293
52 218
29 659
103
57 183
30 582
New credit for total or partial settlement of existing debt
1 056
192 245
14 193
528
179 421
80 151
1 584
371 666
94 344
Extension of repayment term
1 374
262 543
50 340
635
236 658
150 998
2 009
499 201
201 338
Introduction of grace period for capital or interest
818
115 453
6 867
172
71 851
27 533
990
187 304
34 400
Reduction of interest rates
482
40 604
461
Change of lease payment plan
120
16 763
1 639
Change in the periodicity of interest payments
6
2 014
1 513
52 391
207
1 323
40
62
3
76 768
29 642
522
117 372
30 103
12 183
6 139
182
28 946
674
198
9
2 688
7 778
405
431
13 498
5 343
1 944
65 889
6 666
5 449
702 036
77 018
2 030
744 287
387 678
7 479
1 446 323
464 696
Others
Total
The movement of restructured credits during the exercises 2023 and 2022 was as follows:
Opening balance
Restructured loans in the period
Reclassified loans to "normal"
Written off loans
Others
Closing balance
(thousand of Euros)
2023
2022
1 446 323
1 561 788
444 618
374 775
( 62 023)
( 38 668)
( 108 249)
( 127 276)
( 432 818)
( 324 296)
1 287 851
1 446 323
Note 23 – Derivatives - Hedge Accounting and Fair Value Variation of Hedged Items
As of December 31, 2023, and 2022, the fair value of hedging derivatives on the balance sheet is analysed as follows:
Hedging derivatives
Assets
Liabilities
Fair value component of the assets and liabilities hedged for interest rate risk
Financial assets at amortised cost
Securities
Loans and advances to customers
Financial assets at fair value through other comprehensive income
Securities (*)
Financial Liabilities
Due to customers
* Amount recorded in fair value reserves transferred to results
(thousand of Euros)
2023
2022
558 334
683 063
443 267
562 845
( 124 729)
( 119 578)
( 86 052)
( 395 677)
( 143 082)
( 383 689)
( 59 584)
( 218 545)
( 83 498)
( 165 144)
( 5 019)
( 5 019)
62 049
62 049
( 11 988)
( 11 988)
-
-
The fair value changes associated with the above-described assets and liabilities and their respective derivatives are
recorded in the financial year's results under the Gains or losses from hedge accounting line (see Note 12).
364
Annual Report 2023 | novobanco
The Group proceeds with the calculation of the "Credit Valuation Adjustment" (CVA) for derivative instruments
according to the methodology described in Note 40 - Fair value of financial assets and liabilities.
Fair value hedging
The fair value hedge operations on December 31, 2023, and 2022 can be analysed as follows:
Derivative
Hedged item
Hedged risk
Notional
2023
(thousand of Euros)
Fair value of
derivatives (2)
Change in
fair value of
derivative in
period
Fair value
component
of
hedged item
(1)
Change in
fair
value
component
of
hedged
item
in period (1)
Interest Rate Swap
Securities at amortized cost
Interest rate
3 572 250
256 814
( 153 096)
( 59 584)
158 961
Interest Rate Swap/ CIRS
Loans and advances to
customers
Interest rate and
exchange rate
1 733 053
96 273
( 75 240)
( 83 498)
81 590
Interest Rate Swap
Securities at fair value through
other comprehensive income
Interest rate
130 000
12 480
( 6 537)
( 5 019)
6 969
Interest Rate Swap
Due to customers
Interest rate
1 500 000
56 920
59 482
62 049
( 62 049)
6 935 303
422 487
( 175 391)
( 86 052)
185 471
1) Attributable to the covered risk. The component of the securities at the amortized cost is recorded together with the balance sheet value of the securities
(2) Includes accrued interest
Derivative
Hedged item
Hedged risk
Notional
2022
(thousand of Euros)
Fair value of
derivatives
(2)
Change in
fair value of
derivative in
period
Fair value
component
of
hedged item
(1)
Change in
fair
value
component
of
hedged item
in period (1)
Interest Rate Swap
Securities at amortized cost
Interest rate
2 278 250
359 089
214 274
( 218 545)
( 215 410)
Interest Rate Swap/ CIRS
Loans and advances to customers
Interest rate and exchange rate
1 650 352
166 110
192 999
( 165 144)
( 198 940)
Interest Rate Swap
Securities at fair value through
other comprehensive income
Interest rate
100 000
19 140
27 272
( 11 988)
( 27 299)
4 478 602
544 339
434 545
( 395 677)
( 441 649)
1) Attributable to the covered risk. The component of the securities at the amortized cost is recorded together with the balance sheet value of the securities
(2) Includes accrued interest
As of December 31, 2023, the ineffective portion of fair value hedge operations, which resulted in a gain of 10.1 million
euros, was recorded by offsetting the results (December 31, 2022: cost of 7.1 million euros). The Group periodically
carries out effectiveness tests of existing hedge relationships.
Cash flow hedging
Hedged item
Asset book
value
Notional
Derivative
book value
Cash flow
hedge reserve
2023
(thousands of euros)
Ineffectiveness
value -
accounted in net
income
Loans to individuals
6 732 000
6 732 000
135 847
6 732 000
6 732 000
135 847
92 557
92 557
10 269
10 269
365
Management Report
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Consolidated Financial Statements
Annex
Hedged item
Asset book
value
Notional
Derivative
book value
Cash flow
hedge reserve
2022
Loans to individuals
4 732 583
4 732 000
( 101 072)
( 100 418)
4 732 583
4 732 000
( 101 072)
( 100 418)
Note 24 - Investments in Subsidiaries, Joint Ventures and Associates
Investments in subsidiaries, joint ventures and associates are presented as follows:
Acquisition cost
Economic interest
(b)
Gross Book Value
Impairment
Net Book Value
(thousands of euros)
Ineffectiveness
value -
accounted in net
income
( 881)
( 881)
(thousands of Euros)
Profit / (losses)
attributable to
the Group
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
LOCARENT
2 967
2 967
50,00%
50,00%
24 283
23 231
LINEAS a)
EDENRED
UNICRE b)
Outras
-
146 769
-
40,00%
-
68 438
4 984
4 984
50,00%
50,00%
3 851
2 932
11 497
11 497
17,50%
17,50%
30 313
31 506
2 119
2 119
21 567
168 336
1 064
1 043
59 511
127 150
-
-
-
-
-
-
-
24 283
23 231
1 814
1 326
( 7 406)
-
61 032
-
-
-
-
-
3 851
2 932
1 673
967
30 313
31 506
3 639
4 660
1 064
1 043
89
1 401
( 7 406)
59 511
119 744
7 215
8 354
a) Reclassified to discontinued operations (See Note 30)
b) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence over its activities.
The financial data related to the most relevant associate companies are presented in the following table:
Assets
Liabilities
Equity
Income
(thousands of Euros)
Profit / (loss) for the
exercise
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
LOCARENT
LINEAS a)
EDENRED
UNICRE b)
339 602
302 057
291 651
256 207
47 951
45 850
37 602
35 080
3 628
2 651
-
165 608
-
77 396
-
88 212
-
52 870
-
51 869
110 315
88 605
96 391
76 520
13 924
12 085
9 310
7 528
3 345
1 934
506 267
452 219
333 049
272 185
173 218
180 034
188 696
206 048
20 796
26 631
Note: Data adjusted for consolidation purposes
a) Reclassified to discontinued operations (See Note 30)
b) Although the Group's economic interest is less than 20%, this entity was included in the balance sheet consolidated by the equity method as the Group has a significant influence on its activities.
The movement verified in this line item for the exercises ended December 31, 2023 and 2022 is as follows:
Balance at the beginning of the exercise
Share of profits / (losses) of associated companies
Impairment in associated companies
Fair value reserves of investments in associated companies
Dividends received
Foreign exchange differences and other a)
(thousands of
Euros)
2022
2023
119 744
94 590
7 215
7 406
270
( 15 299)
( 59 825)
8 353
21 546
332
( 4 679)
( 398)
Balance at the end of the exercise
a) As at 31 December 2023, includes 59,190 thousand euros relating to the reclassification of Lineas for discontinued operations
59 511
119 744
366
The movements in impairment losses for investments in associates are presented as follows:
Annual Report 2023 | novobanco
(thousands of
Euros)
2022
41 751
( 9 939)
( 21 546)
( 2 860)
7 406
2023
7 406
-
( 7 406)
-
-
(thousand of Euros)
2023
2022
276 994
261 231
191 116
85 878
227 463
126 440
25 928
51 497
13 604
9 360
583
51
84 626
61 982
22 644
63 067
9 493
53 282
47
245
175 117
86 114
236 555
118 739
34 571
56 890
17 471
8 215
583
86
70 656
58 898
11 758
62 130
32 004
29 827
22
277
652 150
( 10 449)
630 572
( 11 445)
( 277 947)
( 319 863)
363 754
299 264
Balance at the beginning of the exercise
Write-off
Reversals
Foreign exchange differences
Balance at the end of the exercise
Note 25 – Property, Plant and Equipment
This line item on December 31, 2023, and 2022 is analyzed as follows:
Real estate properties
For own use
Improvement in leasehold properties
Equipment
Computer equipment
Fixtures
Furniture
Security equipment
Transport equipment
Right of use assets
Other
Assets under right of use
Real estate properties
Equipment
Work in progress
Improvements in leasehold properties
Real estate properties
Equipment
Others
Accumulated impairment
Accumulated depreciation
The movement in this line item was as follows:
367
Management Report
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Consolidated Financial Statements
Annex
-
-
-
(thousand of Euros)
Real Estate
Properties
Equipment
Right of Use
Assets
Work in
Progress
Total
Acquisition Cost
Balance at 31 December 2021
Acquisitions
Disposals/write-offs (b)
Transfers (a)
Foreign exchange differences and other
Balance at 31 December 2022
Acquisitions
Disposals/write-offs
Transfers
Foreign exchange differences and other
366 788
249 762
42 414
24 138
65 812
19 699
( 37 050)
( 14 855)
( 146 117)
( 1 848)
( 6)
( 310)
15
261 231
236 555
4 250
15 197
( 42 056)
( 24 291)
45 145
8 424
( 1)
3
-
-
70 656
20 815
( 6 844)
-
( 1)
11 185
51 282
( 15)
( 322)
-
62 130
47 814
-
( 46 870)
( 7)
693 547
137 533
( 198 037)
( 2 480)
9
630 572
88 076
( 73 191)
( 1 726)
8 419
Balance at 31 December 2023
276 994
227 463
84 626
63 067
652 150
Depreciation
Balance at 31 December 2021
Depreciation
Disposals/write-offs (b)
Transfers (a)
Foreign exchange differences and other
Balance at 31 December 2022
Depreciation
Disposals/write-offs
Transfers
Foreign exchange differences and other
204 112
208 392
5 348
13 045
( 107 935)
( 36 589)
( 771)
2 106
( 309)
86
102 860
184 625
6 006
12 811
( 42 061)
( 24 287)
( 879)
1 038
( 1)
197
Balance at 31 December 2023
66 964
173 345
Impairment
Balance at 31 December 2021
Impairment loss
Reversal of impairment losses
Balance at 31 December 2022
Reversal of impairment losses
Balance at 31 December 2023
13 221
46
( 1 822)
11 445
( 996)
10 449
-
-
-
-
-
-
28 877
10 639
( 7 138)
-
-
32 378
11 343
( 5 868)
-
( 215)
37 638
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
441 381
29 032
( 151 662)
( 1 080)
2 192
319 863
30 160
( 72 216)
( 880)
1 020
277 947
13 221
46
( 1 822)
11 445
( 996)
10 449
Net book value at 31 December 2023
Net book value at 31 December 2022
199 581
146 926
54 118
51 930
46 988
38 278
63 067
62 130
363 754
299 264
(a) includes 3,471 thousand euros of fixed assets (real estate and equipment) and 1,650 thousand euros of accumulated depreciation sums for discontinued counters
that have been transferred at net value to the appropriate balance sheet items.
(c) Includes 106,395 thousand euros of fixed assets (real estate and equipment) and 68,164 thousand euros of accumulated depreciation stemming from the Head
Office building that was sold in 2022.
In September 2022, the sale of the headquarters building was finalized for the amount of 112.2 million euros, the gross
book value was 106.4 million euros (38.2 million euros net of accumulated depreciations) resulting in a capital gain of 67
million euros, net of costs related to the sale process. Until the completion of the construction of the new headquarters,
the Bank will continue to use the building, having signed a lease agreement for this purpose.
Real Estate in progress in progress include the value of 46,848 euros relating to the construction project of the new
building for the Bank's headquarters. Construction is expected to be completed and use of this asset will begin in 2024.
368
Note 26 - Investment Properties
The movement in the investment properties line item is presented as follows:
Balance at the beginning of the exercise
Acquisitions
Disposals
Improvements
Changes in fair value
Other
Balance at the end of the exercise
Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
499 567
625 187
611
16 464
( 115 049)
( 242 068)
2 707
16 526
( 10 567)
10 139
91 133
( 1 288)
393 795
499 567
According to the accounting policy described in Note 7.15, the carrying value of investment properties corresponds to
their fair value as determined by a registered and independent appraiser with recognized professional qualifications and
experience in the respective category and location of the property. For determining the fair value of these assets,
generally accepted criteria and methodologies are used, including analyses by the income method and the market
method, corresponding to level 3 of the fair value hierarchy (see Note 40).
Investment properties are a group of assets held by Real Estate Funds and Companies and include commercial
properties leased to third parties to generate income or properties for capital appreciation. Most of the rental contracts
do not have a specific term, allowing the tenant to cancel them at any time. However, for a small portion of these
commercial properties leased to third parties, there is a non-cancellation clause of approximately 10 years initially.
Subsequent rents are negotiated with the tenant.
During 2023, the increase in the fair value of investment properties, amounting to 16.5 million euros (December 31, 2022:
increase of 91.1 million euros) (see Note 14), and the rents registered in the lease of investment properties, amounting to
14.4 million euros (December 31, 2022: 17.1 million euros), are recorded in Other operating income and expenses.
Note 27 - Intangible Assets
This line item on December 31, 2023, and 2022 is analysed as follows:
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Management Report
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Consolidated Financial Statements
Annex
Net Goodwill
Goodwill
Impairment losses
Other intangible assets
Internally developed
Software - Automatic data processing system
Other
Acquired from third parties
Software - Automatic data processing system
Work in progress
Impairment losses
Accumulated amortization
The movement in this item was as follows:
(thousands of Euros)
2022
-
13 907
( 13 907)
69 832
69 512
69 511
1
374 108
374 108
31 986
-
2023
-
13 907
( 13 907)
86 748
69 512
69 511
1
412 162
412 162
18 140
( 18)
( 413 048)
( 405 774)
86 748
69 832
370
Annual Report 2023 | novobanco
Goodwill
Software
Work in
progress
Total
(thousands of Euros)
13 907
456 870
13 455
484 232
-
-
-
-
6 560
18 746
( 20 030)
216
4
( 216)
1
25 306
( 20 030)
-
5
13 907
443 620
31 986
489 513
-
-
-
663
( 6 155)
43 546
-
-
-
-
-
-
-
-
13 907
13 907
-
13 907
402 339
23 461
( 20 026)
405 774
13 428
( 6 155)
1
413 048
-
-
18
18
29 700
-
( 43 546)
18 140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
68 608
37 846
18 140
31 986
30 363
( 6 155)
-
513 721
402 339
23 461
( 20 026)
405 774
13 428
( 6 155)
1
413 048
13 907
13 907
18
13 925
86 748
69 832
Acquisition cost
Balance as at 31 December 2021
Acquisitions
Acquired from third parties
Disposals / write-offs
Transfers
Exchange variation and other movements
Balance as at 31 December 2022
Acquisitions
Acquired from third parties
Disposals / write-offs
Transfers
Amortizations
Balance as at 31 December 2021
Amortization for the period
Disposals / write-offs
Balance as at 31 December 2022
Amortization for the period
Disposals / write-offs
Exchange variation and other movements
Balance as at 31 December 2023
Impairment
Balance as at 31 December 2021
Balance as at 31 December 2022
Impairment losses
Balance as at 31 December 2023
Net balance at 31 December 2023
Net balance at 31 December 2022
Balance as at 31 December 2023
13 907
481 674
Goodwill is recorded in accordance with the accounting policy described in Note 6, and is analysed as follows:
Subsidiaries
Righthour
GNB Concessões
Impairment losses
Righthour
GNB Concessões
371
(thousands of Euros)
2022
13 907
13 526
381
(13 907)
(13 526)
( 381)
-
2023
13 907
13 526
381
(13 907)
(13 526)
( 381)
-
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Note 28 – Taxes
The tax assets and liabilities recognized in the balance sheet on December 31, 2023, and 2022 can be analyzed as
follows:
Current tax
Corporate tax recoverable
Other
Deferred tax
2023
(thousands of Euros)
2022
Assets
Liabilities
Assets
Liabilities
29 376
4 327
25 049
901 660
931 036
10 808
10 657
151
-
10 808
32 570
1 793
30 777
923 430
956 000
7 582
7 248
334
845
8 427
The deferred tax assets and liabilities recognized in balance as of December 31, 2023 and 2022 are detailed as follows:
Assets
Liabilities
Net
2023
2022
2023
2022
2023
2022
(thousands of Euros)
Financial instruments
96 519
94 830
( 53 817)
( 14 637)
42 702
80 193
Credit impairment (not covered by the special regime)
Credit impairment (covered by the special regime)
280 414
331 523
296 986
295 310
-
-
-
-
280 414
331 523
296 986
295 310
Other tangible assets
Provisions
Pensions
Longevity premiums
Others
Reportable tax losses
-
-
( 14)
( 76)
( 14)
( 76)
102 239
100 914
44 932
51 049
85
810
20
991
133 506
63 506
-
-
-
-
-
-
-
-
( 845)
-
102 239
100 914
44 932
51 049
85
810
20
146
133 506
63 506
Deferred tax asset / (liability)
955 491
938 143
( 53 831)
( 15 558)
901 660
922 585
Asset / liability set-off for deferred tax purposes
( 53 831)
( 14 713)
53 831
14 713
-
-
Net Deferred tax asset / (liability)
901 660
923 430
-
( 845)
901 660
922 585
As of December 31, 2023, the deferred tax related to the majority of temporary differences was calculated based on an
aggregate rate of 31%, resulting from the sum of the general IRC rate (21%), the Municipal Tax rate of 1.5% and an
average State Tax rate of 8.5%.
On September 4, 2019, Law No. 98/2019 was published, which amended the IRC Code in terms of the tax treatment of
impairments of credit institutions, creating rules applicable to impairment losses recorded in the tax periods that began
prior to January 1, 2019, which are not yet fiscally accepted. This law established a period of adaptation for the
aforementioned tax regime, which allows taxpayers in the five tax periods starting on or after January 1, 2019, to
continue applying the tax regime in force before the publication of this law, except if they exercise "opt in" by the end of
October of each tax period of the adaptation regime. Therefore, as of December 31, 2023, the Group continued to apply
the Regulatory Decree No. 13/2018, of December 28, which aims to extend, for tax purposes, the tax framework
resulting from Notice No. 3/95 of the Bank of Portugal.
As of December 31, 2023, and 2022, the Novobanco Group maintains registered deferred tax assets associated with
impairments not fiscally accepted for credit operations, which have already been deducted from the asset, taking into
account the expectation that they will contribute to the formation of taxable profit in the tax periods in which the
conditions required for their tax deductibility are met. As of December 31, 2023, the amounts maintained by the
Novobanco Group referring to this situation amount to about 55 million euros (December 31, 2022: 57 million euros).
372
The movements in the balance sheet's deferred tax items had the following counterparts:
Balance at the beginning of the exercise
Recognised in net income
Recognised in Fair value reserves
Conversion of Deferred taxes into Tax credits
Foreign exchange differences and other
Annual Report 2023 | novobanco
(thousands of Euros)
2022
2023
922 585
741 204
9 365
( 38 658)
7 746
622
63 349
81 804
33 640
2 588
Balance at the end of the exercise (Assets / (Liabilities))
901 660
922 585
The tax recognized in profits and reserves for the exercises ended in 2023 and 2022 had the following origins:
Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Provisions
Pensions
Others
Tax losses carried forward
Deferred taxes
Current taxes
Total tax recognised (income) / (expense)
2023
2022
(thousands of Euros)
Recognised in
net income
Recognised in
reserves
Recognised in
net income
Recognised in
reserves
( 1 330)
57 179
( 62)
( 1 320)
6 053
115
( 70 000)
( 9 365)
15 134
5 769
38 658
-
-
-
-
-
-
38 658
-
15 777
13 170
( 7 953)
( 18 673)
( 2 048)
( 867)
( 62 755)
( 63 349)
10 048
( 81 804)
-
-
-
-
-
-
( 81 804)
-
38 658
( 53 301)
( 81 804)
The reconciliation of the tax rate, regarding the amount recognized in results, can be analysed as follows:
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Income before tax
Tax rate of novobanco
Income tax calculated based on the tax rate of novobanco
Tax-exempt dividends
Impairment on investments in subsidiaries or associated companies subject to
Participation Exemption
Rate differential on the generation / reversal of timing differences
Profits / losses in units with a more favorable tax regime
Taxes of Bank Branches and tax withheld abroad
Impairments and provisions for loans
Impairment and fair value adjustments on securities
Provisions for other risks, costs and contingencies
Employees long term benefits
Deferred tax assets not recognized under tax losses for the exercise
Contribution and Solidarity additional contribution over the Banking Sector
Deferred taxes on tax losses from previous years
Capital gains/losses on asset sales
Other
Total income recognised
(thousands of Euros)
2023
2022
%
Amount
%
Amount
753 988
532 643
21,0
158 337
(0,9)
( 6 502)
0,1
0,6
464
4 526
(0,9)
( 6 899)
0,0
5,5
(0,4)
(1,0)
0,5
-
1,0
147
41 215
( 2 665)
( 7 306)
4 070
-
7 409
(9,3)
( 69 755)
(11,6)
( 87 449)
(4,0)
( 29 823)
21,0
(0,2)
(0,7)
2,2
(1,2)
0,2
(4,2)
1,6
(2,0)
(0,4)
7,7
1,3
(11,8)
(19,1)
(4,4)
0,8
5 769
(10,0)
111 855
( 1 248)
( 3 525)
11 949
( 6 518)
956
( 22 476)
8 648
( 10 519)
( 2 163)
40 811
7 168
( 62 755)
( 101 924)
( 23 560)
( 53 301)
Recoverability analysis of deferred tax assets
Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be used. The Group assessed the recoverability of its deferred taxes on the
balance sheet based on the expectation of future taxable profits until 2028, considering that 5 years is a reasonable
period for projecting future results. The recovery of deferred tax assets covered by the Special Regime applicable to
Deferred Tax Assets is not dependent on the generation of future taxable profits.
The evaluation of the recoverability of deferred tax assets is done annually. As of December 31, 2023, the exercise was
carried out based on the average of the provisional version of the medium-term plan ("MTP") prepared for the 2024-
2026 period and a stress scenario exercise, preliminarily appreciated by the General Supervisory Board in December
2023 and which, after including the final 2023 accounts, will be definitively approved.
In evaluating the expected generation of future taxable results in Portugal for the purposes of the recovery exercise
above, the following effects were taken into account:
• In addition to detailed estimates until 2026, pre-tax results from 2026 are maintained;
• Interest rate benchmarks aligned with the macroeconomic outlook for the three-year period 2024-2026 and the
ECB's monetary policy decisions;
• Evolution of the commercial banking product based on the expected evolution of interest rate references,
combined with the prospect of growth in commercial volumes, as well as the development of new projects in terms
of commission generated with means of payment and asset management;
• Maintenance of operating costs, despite the expected increase in inflation, based on the specific cost reduction
plan and the implementation of a new distribution model and, generally, the simplification and increase in efficiency
of processes, in particular the focus on the component digital; It is
line with the evolution of the Bank's activity and supported by
• Provisions for credit
macroeconomic projections, taking into account in particular the effort made in recent years in provisioning the
credit portfolio and the progressive convergence towards gradually normalized risk costs.
impairments
in
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Depending on the analysis mentioned above, as of December 31, 2023, the Group has recognised deferred tax assets
associated with tax losses in the balance sheet in the amount of 133 million euros (31 December 2022: 63 million euros).
Based on the above analysis, the amount of unrecognized deferred taxes related to tax losses, by year of expiry, is as
follows:
No expiry date
With expiry date
2025
2026
2029
2032
31.12.2023
(thousands of Euros)
31.12.2022
921 359
439 651
92 332
135 422
170 236
41 661
933 178
478 545
91 728
135 508
170 236
81 073
1 361 010
1 411 723
Additionally, the Group became aware of the tax authority's position regarding adjustments arising from the application
of fair value to units in real estate investment funds and venture capital. These adjustments resulting from the
application of the fair value model to units in real estate investment funds and venture capital funds do not contribute to
the formation of taxable profit in the tax period in which they are recognized in the accounts, only having tax relevance
at the time of their realisation, namely in the transmission of units or liquidation of funds. The total amount of deferred
tax assets relating to these temporary differences, not recognized in the balance sheet, as of December 31, 2023
amounts to 176 million euros (December 31, 2022: 229 million euros).
Special Regime applicable to deferred tax assets
In 2014, novoBanco and certain Group entities joined the special regime applicable to deferred tax assets, after approval
by the Shareholders' General Meeting.
The Special Regime applicable to deferred tax assets, approved by Law No. 61/2014, of August 26, covers deferred tax
assets that resulted from the non-deduction of expenses and negative asset variations related to impairment losses on
credits and post-employment or long-term worker benefits.
The amendments to the above-mentioned regime, introduced by Law No. 23/2016, of August 19, limited the temporal
application of the above-mentioned expenses and negative asset changes, accounted for in tax periods that start on or
after January 1, 2016, as well as the deferred taxes associated with them. Thus, the deferred taxes covered by this
special regime correspond only to the expenses and negative asset changes determined until December 31, 2015.
The deferred tax assets covered by the above-mentioned regime are convertible into tax credits when the taxpayer
registers a negative net result in the respective tax period, or in case of liquidation by voluntary dissolution or insolvency
declared by court judgment.
Upon conversion into a tax credit (which is not due to liquidation or insolvency), a special reserve should be created by
the value of the respective tax credit increased by 10%. The exercise of conversion rights results in an increase in the
taxpayer's capital by incorporating the special reserve and issuing new ordinary shares. This special reserve cannot be
distributed.
Following the determination of a negative net result in the 2020 financial year, the converted deferred tax assets,
taking as a reference the eligible deferred tax assets at the closing date of that financial year, amount to 116,975
thousand euros. This amount has already been validated by the Tax Authorities
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As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into tax credits and the creation of
the special reserve must be certified by an official auditor and confirmed by the Tax and Customs Authority, within the
procedures for reviewing the determination of the taxable amount relating to the relevant tax periods.
Note 29 – Other Assets
The item of Other Assets as of December 31, 2023, and 2022, is analyzed as follows:
Escrow accounts
Derivative products
Collateral CLEARNET and VISA
Collateral deposits relating to reinsurance operations
Other collateral deposits b)
Recoverable government subsidies on mortgage loans
Public sector
Contingent Capital Agreement
Other debtors
Shareholder loans and supplementary capital contributions
Sale of non-performing loans
Sale of real estate
Sale of restructuring funds
Others
Income receivable
Deferred costs
Retirement pensions and health benefits (see Note 16)
Precious metals, numismatics, medal collection and other liquid assets
Real estate properties a)
Equipment a)
Stock exchange transactions pending settlement
Other assets
Impairment losses
Real estate properties a)
Equipment a)
Other debtors - Shareholder loans, supplementary capital contributions
Other
a) Real estate properties and equipment received in settlement of loans and discontinued
b) Includes the amount of 4.5 million euros in the escrow account related to the sale of the Headquarter building
(thousands of Euros)
2023
221 467
92 648
38 942
61 067
4 551
21 216
222 522
198 180
424 682
64 178
2 170
42 646
20 881
2022
251 225
133 864
41 423
71 387
4 552
18 714
498 349
198 180
328 366
64 178
2 173
710
20 881
294 807
240 424
32 711
14 566
18 704
10 551
114 379
1 795
-
18 124
127 771
13 984
59 616
10 440
237 243
3 013
4 463
122 153
1 298 897
1 873 517
( 181 639)
( 255 033)
( 48 067)
( 123 008)
( 1 039)
( 68 005)
( 64 528)
1 117 258
( 2 195)
( 76 968)
( 52 862)
1 618 484
The escrow accounts item includes, among others, the deposits made by the Group as a surety to contract derivative
products in an organized market (margin accounts) and over-the-counter market (Credit Support Annex – CSA). The
CSAs take the form of a collateral agreement established between two parties that negotiate over-the-counter
derivatives among themselves, with the main objective to provide protection against credit risk, establishing a set of
rules regarding collateral. Derivative transactions are regulated by the International Swaps and Derivatives Association
(ISDA) and have a minimum risk margin that can change according to the parties' ratings.
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The decrease seen during the 2023 fiscal year in the Administrative Public Sector heading includes about 249.8 million
euros related to the capital conversion of rights resulting from the Special Regime Applicable to Deferred Tax Assets (on
December 31, 2022: 272.9 million euros), as detailed in Note 34.
Securities transactions to be regularized reflect transactions conducted with securities, registered on the trade date, as
per the accounting policy described in Note 7.6, and awaiting settlement.
The item property and equipment refer to assets received by credit recovery and discontinued facilities, for which the
Group aims for immediate sale.
The Group has implemented a plan aimed at the immediate sale of real estate registered in other assets, continuing to
develop all efforts to carry out the established disposal program, highlighted by
(i) the existence of a website specifically dedicated to the sale of properties;
(ii) the development and participation in real estate events both in the country and abroad;
(iii) the signing of protocols with various real estate intermediaries; and
(iv) the promotion of regular auctions. Please note that the Group, despite maintaining the intention to sell these
properties, regularly requests the Bank of Portugal under Article 114 of RGICSF, the extension of the property
holding period acquired in reimbursement of its own credit.
During the 2023 fiscal year, there was registered a recovery of impairment of 25.0 million euros for the properties in the
portfolio (December 31, 2022: recovery of impairment of 12.8 million euros).
Movements occurred in impairment losses are presented as follows:
Balance at the beginning of the exercise
Dotation for the exercise
Write off
Write-back for the exercise
Foreign exchange differences and other (a)
Balance at the end of the exercise
(a) In 2022 includes EUR 122,291 thousand of Fungere assets due to the merger in Fungepi.
The movements of the properties were as follows:
Balance at the beginning of the exercise
Additions
Disposals
Other movements (a)
Balance at the end of the exercise
(thousands of Euros)
2023
255 033
22 756
( 54 222)
( 42 615)
2022
575 441
18 458
( 165 464)
( 24 393)
687
( 149 009)
181 639
255 033
2023
237 243
9 032
( 131 146)
( 750)
114 379
(thousands of Euros)
2022
589 390
17 174
( 194 033)
( 175 288)
237 243
(a) Includes 156,489 thousand euros of Fungere's assets which, with the merger in Fungepi, were transferred to Investment Properties during the financial year 2022.
As of December 31, 2023, the value of discontinued facilities included in the Property item amounts to 10,922 thousand
euros (December 31, 2022: 9,970 thousand euros), with the Group having recorded an impairment for these assets in
the total amount of 3,359 thousand euros (December 31, 2022: 2,954 thousand euros).
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Note 30 – Non-current Assets and Groups Held for Sale and Liabilities Included in Groups
Held for Sale
The detail of Non-current Assets and Liabilities classified as held for sale as of December 31, 2023, and 2022, net of
consolidation adjustments, is as follows:
Non-current assets and liabilities disposal groups classified as held for
sale
International Investment Bank, S.A. (former BICV)
Banco Well Link (former NB Ásia)
Económico FI
Greendraive
Barrosinha/Compagris
Solago
Lineas
Ijar Leasing
Imbassaí
Impairment losses
Barrosinha/Compagris
Económico FI
Greendraive
Ijar Leasing
(thousands of Euros)
2023
2022
Assets
Liabilities
Net
Income
Assets Liabilities
Net
Income
53 627
13 107
( 412)
68 104
15 492 ( 270)
1 300
-
3 060
-
-
-
-
-
-
1 300
2 175
3 060
-
-
-
-
-
-
793
1 213
( 97)
1 596
2 028
( 270)
37 436
11 397
-
30 788
5 749
-
59 190
9 051
-
-
-
( 1 121)
17 387
6 882
-
-
-
9 051
-
-
1 987
497
806
2 747
833
( 23 003)
( 14 425)
( 3 060)
( 793)
( 4 725)
-
-
-
-
-
-
-
-
-
-
( 8 517)
-
( 2 196)
( 1 596)
( 4 725)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
89 814
13 107
( 412)
59 587
15 492 ( 270)
The impairment movement for Non-current Assets and Liabilities held for sale classified as held for sale is presented as
follows:
Balance at the beginning of the exercise
Charges / (Write-backs)
Write-off
Foreign exchange differences and other
Balance at the end of the exercise
(thousands of Euros)
2023
8 517
14 486
-
-
23 003
2022
8 475
( 664)
( 3 837)
4 543
8 517
Compagris, Barrosinha and Solago
In December 2022, following the completion of the Restructuring Funds sale process, novobanco acquired 100% of the
share capital of Compagris and Barrosinha and 84.16% of Solago's capital. Since the Group plans to sell these assets,
they were classified as discontinued operations. In December 2023 the Group proceeded with the disposal of Solago,
recognizing a loss of 1.2 million euros.
Lineas
In December 2023, following the signing of purchase and sale agreement for Lineas, this investment was reclassified
from investments in associates to discontinued operations.
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Note 31 – Financial Liabilities at amortised cost
This item as of December 31, 2023 and 2022, is analyzed as follows:
2023
2022
(thousands of Euros)
Measured at
amortised cost
Fair value
changes *
Total
Measured at
amortised cost
Fair value
changes *
Total
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities
associated to transferred assets
Other financial liabilities
5 745 326
-
5 745 326
9 705 154
29 984 273
62 049
30 046 322
29 277 858
1 107 585
493 171
-
-
1 107 585
1 628 897
493 171
375 268
37 330 355
62 049
37 392 404
40 987 177
-
-
-
-
-
9 705 154
29 277 858
1 628 897
375 268
40 987 177
* Variation in the fair value of the items covered by the interest rate hedging portfolio
31.1. Resources from central Banks and other credit institutions
The balance of the item Resources from Central Banks and other credit institutions is composed, as to its nature, as
follows:
Deposits from Central Banks
From the European System of Central Banks
Deposits
Other funds
Deposits from Other credit institutions
Domestic
Deposits
Other funds
Foreign
Deposits
Loans
Operations with repurchase agreements
Other resources
(thousands of Euros)
2023
2022
1 128 807
6 327 198
1 128 807
6 327 198
178 807
950 000
4 616 519
198
6 327 000
3 377 956
173 734
248 879
165 922
209 663
7 812
39 216
4 442 785
3 129 077
131 721
459 328
375 610
479 880
3 867 053
2 150 824
68 401
39 045
5 745 326
9 705 154
As of December 31, 2023, the balance of the item Resources from the European System of Central Banks includes 950
million euros collateralized by the Group's financial assets, within the framework of the third series of extended term
refinancing operations of the European Central Bank (TLTRO III), which will mature in December 2024.
In 2023, 5.4 billion euros of TLTRO III were repaid. To cope with the maturity of these lines, novobanco adopted, among
others, the strategy of exiting TLTRO III through reducing the size of the balance sheet and increasing other stable
financing instruments, mainly interbank operations collateralized by retained covered bonds. As a result, medium-term
repurchase agreement collateralized financing increased by 2.6 billion euros in 2023, which added to the figure of 2.6
billion euros recorded in 2022 for this type of funding, to mitigate the impact of shortening the term and/or maturity of
TLTRO III, totals 5.2 billion euros (including 1.4 billion euros from operations classified under Due to Customers in Note
31.2).
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The balance of the repurchase agreement operations item corresponds to securities sale operations with repurchase
agreement (repos), recorded according to the accounting policy described in Note 7.18.
31.2. Due to customers
The balance of Due to customers is composed, as to its nature, as follows:
Demand deposits
Corporate and other entities
Individuals
Time deposits
Corporate and other entities
Individuals
Other funds
Repurchase agreement
Other
Value adjustments for interest rate risk hedging (see Note 23)
(thousands of Euros)
2023
2022
10 906 642
13 169 335
5 641 369
7 101 102
5 265 273
6 068 233
17 233 415
15 242 710
6 419 641
5 076 475
10 813 774
10 166 235
1 844 216
865 813
1 366 382
450 906
477 834
414 907
29 984 273
29 277 858
62 049
-
30 046 322
29 277 858
31.3. Debt securities issued, Subordinated Liabilities and Financial Liabilities associated with transferred assets
This item breakdowns as follows:
Debt securities issued
Euro Medium Term Notes (EMTN)
Bonds
Subordinated debt
Euro Medium Term Notes (EMTN)
Bonds
Financial liabilities associated to transferred assets
Asset lending Operations
The key features of these liabilities as of December 31, 2023, and 2022, are as follows:
(thousands of Euros)
2023
2022
606 085
1 168 874
586 254
563 517
19 831
605 357
501 500
415 572
501 500
-
-
-
-
415 572
44 451
44 451
1 107 585
1 628 897
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Entity
ISIN
Description
Currency
Issue
date
Unit
price (€)
Maturity
Interest rate
Market
(thousands of Euros)
Carrying Book value
2023
2022
Bonds
Lusitano Mortgage nº 6
XS0312981649
Lusitano Mortgage nr 6- Classe A
Lusitano Mortgage nº 6
XS0312982290
Lusitano Mortgage nr 6- Classe B
novobanco
novobanco
PTNOBIOM0014
NB 3,5% 23/07/23
PTNOBJOM0005
NB 4,25% 09/23
Euro Medium Term Notes
novobanco
PTNOBKOM0002
NB 5.5% 30/12/24
novobanco Luxemburgo
XS0869315241
BES Luxembourg 3.5% 02/01/43
novobanco Luxemburgo
XS0877741479
BES Luxembourg 3.5% 23/01/43
novobanco Luxemburgo
XS0888530911
novobanco Luxemburgo
XS0897950878
BES Luxembourg 3.5%
19/02/2043
BES Luxembourg 3.5%
18/03/2043
novobanco Luxemburgo
XS0972653132
BES Luxembourg ZC
novobanco Luxemburgo
XS1031115014
Banco Esp San Lux ZC 12/02/49
novobanco Luxemburgo
XS1034421419
Banco Esp San Lux ZC 19/02/49
novobanco Luxemburgo
XS1038896426
Banco Esp San Lux ZC 27/02/51
novobanco Luxemburgo
XS1042343308
BES Luxembourg ZC 06/03/2051
novobanco Luxemburgo
XS1053939978
BES Luxembourg ZC 03/04/48
novobanco Luxemburgo
XS1055501974
BES Luxembourg ZC 09/04/52
novobanco Luxemburgo
XS1058257905
BES Luxembourg ZC 16/04/46
NB Finance
XS0439764191
EMTN 57
Subordinated debt
novobanco
novobanco
a) Date of the next call option
PTNOBFOM0017
NB 06/07/2023
PTNOBLOM0001
NB 9.875% 01/12/33
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
2007
2007
2021
2021
0,07
1,00
-
-
2022
100,00
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2009
2018
2023
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
-
100,00
2025
a)
Euribor 3m + 0,40%
XDUB
18 328
23 989
2035
a)
Euribor 3m + 0,60%
XDUB
1 503
1 502
2023
2023
2026
2043
2043
2043
2043
2048
2049
2049
2051
2051
2048
2052
2046
2044
2023
2033
Fixed rate 3,5%
XDUB
Euribor 3M + 4,25%
XDUB
-
-
303 992
275 874
Fixed rate 5,5%
XDUB
105 475
99 989
Fixed rate 3,5%
Fixed rate 3,5%
Fixed rate 3,5%
XLUX
XLUX
XLUX
43 958
43 363
100 110
99 065
65 655
64 774
Fixed rate 3,5%
XLUX
48 260
47 641
Zero coupon
Zero coupon
Zero coupon
Zero coupon
Zero coupon
Zero coupon
Zero coupon
Zero coupon
Zero coupon
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
37 934
35 711
46 650
43 694
12 977
12 146
17 822
16 672
12 538
11 729
43 072
40 180
41 444
38 891
8 264
7 710
2 095
1 952
8,50%
9,875%
XDUB
-
415 572
XDUB
501 500
-
1 107 585
1 584 446
The movement occurred in the 2023 and 2022 exercises in liabilities represented by securities, subordinated liabilities
and financial liabilities associated with transferred assets was as follows:
Responsabilidades representadas por
títulos
Subordinated Liabilities
Euro
Medium
Term
Notes
(EMTN)
Bonds
Total
Euro
Medium
Term
Notes
(EMTN)
Bonds
Total
(thousands of Euros)
Financial
liabilities
associated
to
transferred
assets
Asset
lending
operations
TOTAL
Balance as at 31 December 2021
447 453
606 855
1 054 308
Issues
Reimbursements
Net purchases
100 000
6 000
106 000
-
-
-
( 500)
( 13 798)
( 14 298)
Other movements a)
16 564
6 300
22 864
Balance as at 31 December 2022
563 517
605 357
1 168 874
-
-
-
-
-
-
415 394
415 394
44 451
1 514 153
-
-
-
-
-
-
178
178
-
-
-
-
106 000
-
( 14 298)
23 042
415 572
415 572
44 451
1 628 897
Issues
Reimbursements
Net purchases
Other movements
-
-
-
500 000
-
500 000
- ( 575 000)
( 575 000)
( 527)
( 5 677)
( 6 204)
-
-
( 400
000)
-
( 400
000)
-
-
-
-
500 000
( 975 000)
( 6 204)
23 264
( 4 849)
18 415
1 500
( 15 572)
( 14 072)
( 44 451)
( 40 108)
Balance as at 31 December 2023
586 254
19 831
606 085
501 500
-
501 500
-
1 107 585
a) The other movements include accrued interest on the balance sheet, corrections for hedging operations, corrections of fair value and exchange rate variations.
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In terms of medium-term financing, in June 2023, the Bank issued a new Tier 2 bond of 500 million euros, maturing on
December 1, 2033, with a purchase option 6 months from June 1, 2028, with the aim of replacing the existing Tier 2 bond
with a lower spread by 150bps. Through the public offering, the Bank managed to repurchase 206 million euros of the
existing Tier 2. The remaining amount was repaid on the call date, which only occurred on July 6, 2023.
The Group did not present any defaults of capital or interest concerning its issued debt in 2023 and 2022 exercises.
Under the Mortgage Bonds Issuance Program, whose maximum amount is 10,000 million euros, the Group has
proceeded with issues that as of December 31, 2023, total 5,500 million euros (December 31, 2022: 5,500 million euros),
with these issues fully repurchased by the Group. The characteristics of the live issues as of December 31, 2023, and
2022, are as follows:
Designation
Issue date
Maturity
date
NB 2015 SR.1 07/10/2015
07/10/2025
NB 2015 SR.2 07/10/2015
07/10/2024
NB 2015 SR.3 07/10/2015
07/10/2027
NB 2015 SR.4 07/10/2015
07/10/2028
NB 2015 SR.5 22/12/2016
22/12/2028
NB 2019 SR.6
10/12/2019
10/06/2029
NB 2019 SR.7
10/12/2019
10/12/2024
Interest payment
Interest Rate
Market
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
XDUB
XDUB
XDUB
XDUB
XDUB
Euribor 3 Months + 0,25%
XMSM
Euribor 3 Months + 0,25%
XMSM
Rating
Moody's DBRS
Aaa
Aaa
Aaa
Aaa
Aaa
Aaa
Aaa
NR
NR
NR
NR
NR
NR
NR
Nominal
amount
1 000 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000
5 500 000
(thousand of Euros)
Book Value
2023
2022
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
These bonds are secured by a set of housing loans and other assets that are segregated as autonomous property in the
accounts of the novobanco Group, thus conferring special credit privileges to the holders of these securities over any
other creditors. The conditions of these issues fall within Decree-Law No. 59/2006, Notices No. 5, 6 and 8 of 2006 and
Instruction No. 13/2006 of the Bank of Portugal. The value of the credits which counter-guarantee these issues amount
to 7,442.1 million euros as of December 31, 2023 (December 31, 2022: 6,078.4 million euros) (see Note 22).
Note 32 – Provisions
As of December 31, 2023, and 2022, the Provisions item presents the following movements:
(thousands of Euros)
Restructuring
provision
Provision for
guarantees
and
commitments
Other
Provisions
Total
Balance as at 31 December 2021
46 686
92 336
303 812
442 834
Charges / (Write-backs)
Write-off
Exchange differences and others
Balance as at 31 December 2022
Charges / (Write-backs)
Write-off
Exchange differences and others
Balance as at 31 December 2023
1 332
( 2 685)
40 598
39 245
( 28 870)
-
( 37 618)
( 66 488)
-
246
( 2 405)
( 2 159)
19 148
6 325
( 18 697)
89 897
304 387
413 432
( 628)
40 002
45 699
-
( 10 144)
( 28 841)
-
( 5 289)
5 828
539
6 776
83 980
340 073
430 829
To meet the financial needs of its customers, the Group assumes various irrevocable commitments and contingent
liabilities, which consist of financial guarantees, letters of credit and other credit commitments, which may imply
payment by the Group, on behalf of the customers, in the event of specific contractual events. Despite these
commitments not being recorded in assets, they carry credit risk and are, therefore, part of the Group's overall risk
exposure.
382
Regarding provisions for guarantees and commitments, the provision movement is detailed as follows:
Annual Report 2023 | novobanco
Balance as at 31 December 2021
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2023
(thousands of Euros)
Stage 1
Stage 2
Stage 3
Total
8 019
2 255
( 1 139)
( 13)
2 047
11 148
( 2 255)
1 255
( 1 207)
73 169
92 336
-
( 116)
1 220
-
-
-
2 525
22 308
26 880
( 4 979)
( 4 154)
( 20 432)
( 29 565)
11
36
199
246
6 201
7 348
76 348
89 897
5 454
( 5 454)
( 3 782)
( 23)
6 000
4 390
( 19)
4 768
( 6 828)
( 3 776)
1
( 18)
( 608)
42
7 219
( 8 011)
( 5 272)
-
-
-
17 987
( 18 615)
( 5 289)
7 023
7 239
69 718
83 980
The transfers between stages that occurred in guarantees and commitments during the exercises of 2023 and 2022 are
presented as follows:
2023
Capitals
(thousands of Euros)
Transfers between Stage 1
and Stage 2
Transfers between Stage 2
Transfers between Stage 1
and Stage 3
and Stage 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
Commitments and financial guarantees given
109 201
217 142
1 756
6 528
410
203
2022
Capitals
(thousands of Euros)
Transfers between Stage 1
and Stage 2
Transfers between Stage 2
Transfers between Stage 1
and Stage 3
and Stage 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
Commitments and financial guarantees given
44 418
40 470
45 480
2 234
1 775
181
The restructuring provisions were established within the framework of the commitments made to the European
Commission arising from the sale and restructuring process of the Group. During the 2022 and 2023 exercises, a net
increase of 1.3 million euros and 6.3 million euros was made, respectively, having used 28.9 million euros and 18.7 million
euros, respectively.
The Other provisions, which amount to 340.1 million euros (December 31, 2022: 304.4 million euros), aim to cover certain
identified contingencies, arising from the Group's activity, the most relevant of which are as follows:
• Contingencies associated with ongoing processes related to tax matters, for which the Group maintains
provisions of 25.1 million euros (December 31, 2022: 27.4 million euros);
• Contingencies associated with legal procedures amounting to 8.3 million euros (December 31, 2022: 8.5 million
euros);
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• Contingencies associated with sales processes in the amount of 7.1 million euros (December 31, 2022: 7.1 million
euros);
• Contingencies related to the undivided part of the Executive Commission's Pension Plan, in the amount of 8.8
million euros (December 31, 2022: 19.2 million euros), transferred from the headings of net liabilities of the Pension
Fund assets' value (see Note 16);
• The State Budget Law for 2021 ("LOE 21"), amended the rules of the Property Transfer Tax ("IMT") and the
Municipal Property Tax ("IMI"), with the broadening of the incidence scope of the increased IMI and IMT rate, and
loss of exemptions, for properties held by taxpayers who are directly or indirectly controlled by an entity subject to
a more beneficial tax regime, listed in an order approved by the Minister of Finance. As of this date, the calculation
of the application of the increased IMI rates to all properties in the direct and indirect ownership of the novobanco
Group amounts to approximately 203.3 million euros as of December 31, 2023 (December 31, 2022: 173.1 million
euros);
• The remaining value of 60.5 million euros (December 31, 2022: 69.1 million euros), is intended to cover losses
arising from the Group's activity, such as fraud, theft and robbery and ongoing legal procedures for contingencies
related to asset sale processes, among others.
Note 33 – Other liabilities
The item Other liabilities as of December 31, 2023, and 2022 is analyzed as follows:
Public sector
Creditors for supply of goods
Margin Accounts Derivative instruments
Other creditors
Non-controlling interests of open Investment Funds (see Note 35)
Career bonuses (see Note 16)
Other accrued expenses
Deferred income
Foreign exchange transactions pending settlement
Other transactions to be settled
(thousand of Euros)
2023
40 420
74 257
2022
35 034
71 102
562 047
478 750
134 410
16 437
6 602
103 693
1 715
611
115 147
14 417
5 621
83 275
1 950
-
65 654
34 623
1 005 846
839 919
As of December 31, 2023, the item Creditors for supply of goods includes 49,863 thousand euros related to creditors of
assets by right of use, under IFRS 16 (December 31, 2022: 44,474 thousand euros), whose maturity terms are presented
as follows:
Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
(thousand of Euros)
2023
179
2 981
18 264
28 439
49 863
2022
262
4 613
15 950
23 649
44 474
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Note 34 – Share Capital
34.1. Ordinary shares
As of December 31, 2023, the share capital of the Bank, amounting to 6,567,843,862.91 euros, is represented by
11,130,841,957 registered shares with no par value and is fully subscribed and paid up by the following shareholders
(December 31, 2022: share capital of 6,304,660,637.69 euros, is represented by 10,391,043,938 registered shares):
Nani Holdings, S.à.r.l.
Resolution Fund (1)
Directorate General for the Treasury and Finance
% Capital
2023
75,00%
13,04%
11,96%
2022
75,00%
19,31%
5,69%
100,00%
100,00%
(1) Under the commitments made between the Portuguese State and the European Commission, the Resolution Fund is inhibited from exercising its voting rights.
During the 2017 fiscal year and following the acquisition of 75% of the share capital of novobanco by Lone Star, two
capital increases were made in the amount of 750 million euros and 250 million euros, in October and December,
respectively.
In December 2021, a capital increase was made in the amount of 154,907 thousand euros through the conversion of
conversion rights (resulting from the Special Regime Applicable to Deferred Tax Assets) for the 2015 fiscal year, which
conferred a 1.56% stake of the State in novobanco, and which resulted in the issuance of 154,907,314 new ordinary
shares (see Note 35).
In November 2022, a capital increase was made in the amount of 249,753 thousand euros through the conversion of
conversion rights (resulting from the Special Regime Applicable to Deferred Tax Assets) for the 2016 and 2017 exercises,
which conferred an additional 4.13% stake of the State in novobanco, and which resulted in the issuance of 436,136,627
new ordinary shares (see Note 35).
In April 2023, a capital increase was carried out in the amount of 263,183 thousand euros through the conversion of
conversion rights (resulting from the Special Regime Applicable to Deferred Tax Assets) for the 2018 and 2019 exercises,
which conferred a 6.27% stake of the State in novobanco, and which resulted in the issuance of 739,798,019 new
ordinary shares (see Note 35).
As mentioned in Note 28, novobanco adhered to the Special Regime Applicable to Deferred Tax Assets approved by
Law No. 61/2014, of August 26. This regime applies to deferred tax assets resulting from the non-deduction, for
Corporate Income Tax purposes, of expenses and negative net worth changes that were recorded up to December 31,
2015 with impairment losses on credits and post-employment benefits or long-term employee benefits. The mentioned
regime provides that deferred tax assets may be converted into tax credits when the taxpayer records a negative
annual net result.
The conversion of eligible deferred tax assets into tax credits is made according to the proportion between the amount
of that net result and the total equity at an individual level. The special reserve is established in the same amount as the
approved tax credit, increased by 10%. This special reserve is constituted in counterpart of the originating reserve and is
intended to be incorporated into the share capital.
The conversion rights are securities that give the State the right to demand from novobanco the respective increase of
the share capital, through the incorporation of the amount of the special reserve and consequent issuance and free
delivery of ordinary shares representing 3.64% of the capital (with reference to the 2020 financial year), which will only
dilute, in accordance with the sale contract, the Resolution Fund's participation, if the shareholders do not exercise their
potestative right to acquire the conversion rights.
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Note 35 – Other Comprehensive Income Accumulated, Retained Earnings, Other
Reserves and Non-controlling Interests
The other comprehensive accumulated income, retained earnings, and other reserves of the Group are detailed as
follows as of December 31, 2023, and 2022:
Accumulated other comprehensive income
Retained earnings
Other reserves
35.1. Accumulated other Comprehensive Income
The movements in accumulated other comprehensive income were as follows:
(thousands of Euros)
2023
2022
( 1 070 125)
( 8 577 074)
( 1 234 573)
( 8 577 074)
6 736 004
6 439 418
( 2 911 195)
( 3 372 229)
Accumulated other comprehensive income
(thousands of Euros)
Impairment
reserves
Credit
risk
reserves
Sales
reserves
Fair value
reserves
Cash flow
hedging
reserves
Balance as at 31 December 2021
3 707
9 214
( 43 296)
( 201 263)
Actuarial deviations
Fair value changes, net of taxes
Foreign exchange differences
-
-
-
Impairment reserves of securities at fair
value through other comprehensive income
( 3 052)
Reserves of sales of securities at fair value
through other comprehensive income
Other comprehensive income of associated
companies
Cash flow hedging
Other movements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 1 165)
-
-
-
-
( 185 616)
-
-
-
332
-
-
-
-
-
-
-
-
-
( 100 418)
-
Other
variations of
other
comprehensive
income
Actuarial
deviations
(net of
taxes)
Total
( 14 799)
( 799 052)
(1 045 489)
-
-
( 892)
-
-
-
-
1
101 726
-
-
-
-
-
-
-
101 726
( 185 616)
( 892)
( 3 052)
( 1 165)
332
( 100 418)
1
Balance as at 31 December 2022
655
9 214
( 44 461)
( 386 547)
( 100 418)
( 15 690)
( 697 326)
(1 234 573)
Actuarial deviations
Fair value changes, net of taxes
Foreign exchange differences
Impairment reserves of securities at fair
value through other comprehensive income
Reserves of sales of securities at fair value
through other comprehensive income
Other comprehensive income of associated
companies
Cash flow hedging
-
-
-
( 421)
-
-
-
-
-
-
-
-
-
-
-
-
( 283 797)
-
-
-
-
-
283 614
-
-
-
( 583)
-
-
-
-
-
-
-
192 974
-
-
( 45)
-
-
-
-
( 27 294)
-
-
-
-
-
-
( 27 294)
283 614
( 45)
( 421)
( 283 797)
( 583)
192 974
Balance as at 31 December 2023
234
9 214 ( 328 258)
( 103 516)
92 556
( 15 735)
( 724 620)
(1 070 125)
Fair Value Reserves
The fair value reserves represent the potential gains and losses relative to the portfolio of financial assets at fair value
through other comprehensive income, net of impairment. The value of this reserve is presented net of deferred tax and
non-controlling interests.
The movement of the fair value reserves net of deferred taxes and impairment reserves can be analyzed as follows:
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2023
Fair value reserves
(thousands of Euros)
2022
Fair value reserves
Financial assets
at fair value
through other
comprehensive
income
Deferred
tax reserves
Total fair
value
reserves
Financial
assets at fair
value through
other
comprehensive
income
Deferred
tax reserves
Total fair
value
reserves
Balance at the beginning of the exercise
( 424 998)
38 451
( 386 547)
( 157 910)
( 43 353)
( 201 263)
Changes in fair value
Foreign exchange differences
Disposals in the exercise
Impairment in the exercise
Deferred taxes recognized in the
exercise in reserves
Balance at the end of the exercise
14 384
( 5 524)
312 830
-
-
-
-
-
-
14 384
( 5 524)
312 830
-
( 331 887)
2 006
43 394
19 399
-
-
-
-
( 331 887)
2 006
43 394
19 399
( 38 659)
( 38 659)
-
81 804
81 804
( 103 308)
( 208)
( 103 516)
( 424 998)
38 451
( 386 547)
The fair value reserve can be explained as follows:
Amortised cost of financial assets at fair value through other comprehensive income
Market value of financial assets at fair value through other comprehensive income
Unrealised gains / (losses) recognized in fair value reserve
Fair value reserve transferred to net income (1)
Potential gains / (losses) recognized in the fair value reserve
Fair value reserves from equity method
Non-controlling Interests
Total fair value reserve
Deferred Taxes
Fair value reserve attributable to shareholders of the Bank
(1) In the context of fair value hedge operations (see Note 23)
The movement in cash flow hedge reserves is presented as follows:
Balance at the beginning of the exercise
Change in the fair value of the covered item recognized in other comprehensive income
Reclassification of other comprehensive income for results
Balance at the end of the exercise
35.2. Other reserves and retained earnings
(thousands of Euros)
2023
2022
946 963
838 523
2 769 674
2 331 099
( 108 440)
( 438 575)
( 5 019)
( 11 988)
( 103 421)
( 426 587)
414
( 301)
997
592
( 103 308)
( 424 998)
( 208)
38 451
( 103 516)
( 386 547)
(thousands of Euros)
2023
( 100 418)
2022
-
203 243
( 101 299)
( 10 269)
881
92 556
( 100 418)
Legal reserve
The legal reserve can only be used to cover accumulated losses or to increase capital. Portuguese legislation applicable
to the banking sector (Article 97 of Decree-Law No. 298/92, of December 31st) requires that the legal reserve be
credited annually with at least 10% of the net profit, up to a (cid:0)limit equal to the value of share capital or the sum of free
reserves and retained earnings, whichever is higher.
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Special reserve
As referred to in Note 28, the special reserve was established as a result of novobanco's adherence to the Special
Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of August 26, which implied the conversion of
eligible deferred tax assets into tax credits and the simultaneous constitution of a special reserve.
Following the determination of a negative net result for the financial years 2015 to 2020, with reference to the eligible
deferred tax assets at the closing dates of these years, as a result of the application of the aforementioned special
regime applicable to deferred tax assets, novobanco registered a special reserve, in the same amount as the determined
tax credit, increased by 10%, which is broken down as follows:(
2019 (net loss of 2018)
2020 (net loss of 2019)
2021 (net loss of 2020)
2023
-
-
128 673
128 673
(thousands of Euros)
2022
146 367
116 817
137 193
400 377
Contingent Capitalization Mechanism
Following the conditions agreed upon in the novobanco sale process, a Contingent Capitalization Mechanism was
created according to which, if capital ratios fall below a certain level and, cumulatively, losses are registered in a defined
portfolio of assets, the Resolution Fund makes a payment equivalent to the lesser value between the recorded losses
and the amount necessary to restore the capital ratios to the relevant level, up to a maximum limit of 3,890 million euros
(see Note 36 – Contingent liabilities and commitments). The capital corresponds to a pre-defined asset perimeter, with
an initial book value (June 2016) of about 7.9 billion euros. As of December 31, 2023, these assets had a net value of 0.9
billion euros, essentially as a result of collections and recoveries and the registration of losses (December 31, 2022: net
value of 1.1 billion euros).
Given the losses presented by novobanco on December 31, 2020, 2019, 2018, and 2017, the conditions were met for the
Resolution Fund to pay 429,013 thousand euros, 1,035,016 thousand euros, 1,149,295 thousand euros, and 791,695
thousand euros in 2021, 2020, 2019, and 2018, respectively.
The value related to the Contingent Capitalization Mechanism recorded in 2020, as receivable from the Resolution Fund
(598,312 thousand euros), differs from the paid value due to disagreements between novobanco and the Resolution
Fund regarding (i) the provision for discontinued operations in Spain and (ii) the valuation of participation units, leading
to a limitation to the immediate access to this amount, which, despite being recorded as receivable, the Bank deducted,
as of 31 December 2023 and 2022, from the regulatory capital calculation (165,442 thousand euros). Additionally, the
amount of variable remuneration of the Executive Board of Directors for the 2019 and 2020 exercises was also
deducted (3,857 thousand euros).
In 2021 a value was recorded as receivable from the Resolution Fund of 209,220 thousand euros related to the
Contingent Capitalization Mechanism, accounted for in Other Reserves and which results, at each balance sheet date,
from the losses incurred and the regulatory ratios in force at the time of its determination. Consequently, as mentioned
above and in line with regulatory guidelines, on December 31, 2023, and 2022, this value was also deducted from the
calculation of regulatory capital.
Novobanco considers this value as due under the Contingent Capitalization Mechanism, and is triggering the legal and
contractual mechanisms at its disposal to ensure its receipt (see Note 36).
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35.3. Non-controlling Interests
The details of the Non-controlling Interests for each subsidiary are as follows:
Balance sheet
2023
Income
statement
-
23 861
-
( 1 170)
22 691
108
4 488
545
( 10)
5 131
% Non-
controlling
interests
3,66%
42,47%
4,76%
(thousands of Euros)
2022
Balance sheet
Income
statement
-
20 104
21 975
-
( 3 631)
18 344
1 941
332
2 725
25 102
% Non-
controlling
interests
3,75%
42,47%
4,76%
NB Património a)
novobanco Açores
Amoreiras
Other
a) Non-controlling interests relating to open real estate investment funds are recorded as Other liabilities (see Note 33)
The movement of non-controlling interests can be analyzed as follows:
Non-controlling interests at the beginning of the exercise
Changes in consolidation perimeter and control percentages
Dividends paid
Changes in fair value reserves
Others
Net profit / (loss) for the exercise
Non-controlling interests at the end of the exercise
(thousands of Euros)
2023
18 344
2 469
( 2 891)
674
( 1 036)
5 131
22 691
2022
31 035
( 7 935)
-
( 1 364)
( 28 494)
25 102
18 344
Note 36 – Contingent Liabilities and Commitments
In addition to derivative financial instruments, as of December 31, 2023, and 2022, the following off-balance-sheet
balances existed:
Contingent liabilities
Guarantees and endorsements
Financial assets pledged as collateral
Open documentary credits
Others
Commitments
Revocable commitments
Irrevocable commitments
(thousands of Euros)
2023
2022
11 107 879
14 469 198
2 354 035
2 269 796
8 456 619
11 949 619
187 024
110 201
169 410
80 373
5 983 312
5 965 223
5 328 531
5 405 228
654 781
559 995
The guarantees and endorsements made are banking operations that do not result in a mobilization of funds by the
Group.
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As of December 31, 2023, the item financial assets given as collateral includes:
• The Market value of financial assets at the European Central Bank collateral pool, to be used as collateral to
obtain funding in the context of liquidity lending operations, amounting to 7.9 billion euros (December 31, 2022:11.2
billion euros), of which 2.1 billion euros is encumbered (December 31, 2022: 9.3 billion euros);
• Securities given as collateral to the Securities Market Commission, in the context of the Investor Compensation
System, amounting to 10.5 million euros (December 31, 2022: 8.0 million euros);
• Securities given as collateral to the Deposit Guarantee Fund amounting to 65.6 million euros as of December 31,
2022. As of December 31, 2023, following the full payment of the commitments assumed to the Deposit Guarantee
Fund, as mentioned in Note 18, there are no securities given as collateral;
• Securities given as collateral to the European Investment Bank amounting to 468.5 million euros (December 31,
2022: 648.1 million euros);
• Securities delivered as collateral in the context of derivatives trading with a central counterparty amounting to
74.0 million euros (December 31, 2022: 110.0 million euros);
• Deposits provided as collateral to guarantee the responsibilities assumed by issuing guarantees in the amount of
18.9 million euros (31 December 2022: 29.7 million euros).
These financial assets given as collateral are recorded in various asset categories on the Group's balance sheet and can
be executed in case of non-compliance with the contractual obligations assumed by the Group, under the terms and
conditions of the contracts signed. The increase in the value of securities given as collateral to the European Investment
Bank is due to an increase in collateral due to a change in the minimum value requirements.
Documentary credits are irrevocable commitments of the Group, on behalf of its customers, to pay / order the payment
of a fixed amount to the supplier of a given commodity or service, within a stipulated period of time, against the
presentation of documents referring to the shipment of the goods or provision of the service. The irrevocable condition
consists of the fact that its cancellation or alteration is not viable without the express agreement of all parties involved.
The commitments, revocable and irrevocable, represent contractual agreements to provide credit to the Group's clients
(e.g. unused credit lines) which, generally, are contracted for fixed terms or with other expiration requirements and
usually require the payment of a fee. Substantially all credit commitments in force require that clients maintain certain
requirements verified at the time of their contracting.
Despite the particularities of these contingent liabilities and commitments, the assessment of these operations obeys
the same basic principles of any other commercial operation, namely the solvency of both the client and the business
that underlies them, with the Group requiring that these operations be properly collateralized when necessary. Since it is
expected that most of them will expire without having been used, the amounts indicated do not necessarily represent
future cash needs.
Additionally, the responsibilities evidenced in off-balance-sheet accounts related to the provision of banking services
are as follows:
Deposit and custody of securities and other items
Amounts received for subsequent collection
Securitized loans under management (servicing)
Other responsibilities related with banking services
(thousands of Euros)
2023
2022
35 067 578
30 936 968
192 196
206 387
469 370
932 756
544 136
372 762
36 661 900
32 060 253
Under the terms of the resolution measure applied to BES by the decision of the Bank of Portugal on August 3, 2014
(item 1., paragraph b), subparagraph (vii) of Annex 2), as amended by the decision of the Bank of Portugal of August 11,
2014, part of the "excluded liabilities" of transfer to Novobanco include "any obligations, guarantees, liabilities, or
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contingencies assumed in the marketing, financial intermediation, and distribution of debt instruments issued by entities
that are part of the Espírito Santo Group (...)".
Under the above item and subparagraph and subpoint (v), also part of the excluded liabilities are "any liabilities or
contingencies, namely those resulting from fraud or violation of regulatory, penal, or administrative provisions".
On December 29, 2015, the Bank of Portugal adopted a new decision on "Clarification and transmission of
responsibilities and contingencies defined as excluded liabilities in subparagraphs (v) to (vii) of paragraph (b) of item 1 of
Annex 2 to the Decision of the Bank of Portugal of August 3, 2014 (20:00), as amended by the Decision of the Bank of
Portugal of August 11, 2014 (17:00)". In terms of this decision, the Bank of Portugal came:
(i) Clarify the treatment as liabilities excluded from BES's contingent and unknown liabilities (including litigious
liabilities related to pending litigation and liabilities or contingencies resulting from fraud or the violation of
regulatory, criminal or administrative offenses or provisions), regardless of their nature ( tax, Labour, civil or
other) and whether or not they are registered in BES's accounts, under the terms of sub-paragraph (v) of
paragraph (b) of paragraph 1 of Exhibit 2 of the Resolution of 3 August; and
(ii) Clarify that the following BES liabilities have not been transferred from BES to novobanco:
a. All credits relating to preferred shares issued by vehicle companies established by BES and sold by BES;
b. All credits, compensations, and expenses related to real estate assets that were transferred to Novobanco;
c. All compensations related to breach of contracts (purchase and sale of real estate assets and others) signed
and concluded before 8p.m. on August 3, 2014;
d. All compensations related to life insurance contracts in which the insurer was BES - Companhia de Seguros de
Vida, S.A.;
e. All credits and compensations related to the alleged annulment of certain loan contract clauses in which BES
was the lender;
f. All compensations and credits resulting from the annulment of operations carried out by BES as a provider of
financial and investment services; and
g. Any responsibility that is the subject of any of the processes described in Annex I to that deliberation.
(iii) To the extent that, despite the clarifications made above, it turns out that any liabilities of BES that, under the
terms of any of those paragraphs and the Resolution of August 3, were effectively transferred to novobanco
legal liabilities, these liabilities will be retransmitted from novobanco to BES, with effect from 8:00 pm on
August 3, 2014.
In the preparation of its consolidated financial statements for 31 December 2023 (as well as in the previous financial
statements), novobanco incorporated the determinations resulting from the resolution measure, as amended, with
regard to the perimeter of transfer of assets, liabilities, off-balance sheet captions and assets under BES management,
as well as the decisions of Bank of Portugal of 29 December 2015, in particular, regarding the clarification of the non-
transmission to novobanco of contingent and unknown liabilities and clarifications relating to the liabilities contained in
paragraph (ii) above, including the lawsuits listed in that resolution.
Additionally, also by resolution of Bank of Portugal of 29 December 2015, it was decided that the Resolution Fund is
responsible for neutralising, at the level of novobanco, the effects of decisions that are legally binding, outside the will of
novobanco and for the which it has not contributed and that, simultaneously, translate into the materialization of
responsibilities and contingencies that, according to the transfer perimeter to novobanco, as defined by Bank of
Portugal, should remain within the sphere of BES or give rise to the establishment compensation in the context of the
execution of annulments of decisions adopted by Bank of Portugal.
Considering that the creation of the Bank results from the application of a resolution measure to BES, which had
significant impacts on the equity of third parties, and without prejudice to the decisions of Bank of Portugal of 29
December 2015, there are still relevant litigation risks , although mitigated, namely, regarding the various litigations
related to the loan made by Oak Finance to BES, the commercialization by BES of debt instruments and those related to
the issue of senior bonds relayed to BES, as well as the risk of non-recognition and / or application of the various
decisions of Bank of Portugal by Portuguese or foreign courts (as in the case of courts in Spain) in disputes related to the
perimeter of assets, liabilities, off-balance sheet captions and assets under BES management transferred to novobanco.
These disputes include the two lawsuits brought at the end of January 2016, before the Supreme Court of Justice of
Venezuela, by the Banco de Desarrollo Económico y Social de Venezuela and the Fondo de Desarrollo Nacional against
BES and novobanco, relating to the sale of debt instruments issued by entities belonging to the Espírito Santo Group, in
the amount of 37 million U.S. Dollars and 335 million U.S. Dollars, respectively, and in which reimbursement of the amount
invested is requested, plus interest, indemnity for the inflation value and costs (in the global value estimated by the
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respective authors of 96 milion U.S. Dollars and 871 million U.S. Dollars, respectively). These main actions are still pending
before the Supreme Court of Justice of Venezuela.
In the preparation of novobanco 's individual and consolidated financial statements of 31 December 2023 (as well as in
the previous financial statements), the Executive Board of Directors reflected the Resolution Measure and related
decisions taken by Bank of Portugal, in particular the decisions of 29 December 2015. In this context, these financial
statements, namely regarding provisions for contingencies arising from lawsuits, reflect the exact perimeter of assets,
liabilities, off-balance sheet captions and assets under BES management and liabilities transferred to novobanco, as
determined by Bank of Portugal and with reference to the current legal bases and the information available at the
present date.
Additionally, within the scope of the novobanco sale operation, concluded on 18 October 2017, the respective
contractual documents contain specific provisions that produce effects equivalent to the resolution of the Board of
Directors of Bank of Portugal, of December 29, 2015, regarding the neutralization, at the level of novobanco, of the
effects of unfavorable decisions that are legally binding, although, now, with contractual origin, thus maintaining the
framework of contingent responsibilities of the Resolution Fund.
36.1. Relevant litigation
For the purposes of contingent liabilities, and notwithstanding the information contained in these notes to the
accounts, particularly regarding the compliance of the provisions policy with the resolution measure and subsequent
decisions by the Bank of Portugal (and criteria for the apportioning of responsibilities and contingencies arising
therefrom), the following lawsuits should be identified, the effects or impacts on the financial statements of Group
Novobanco being, at present date, unable to determine or quantify:
(i) Lawsuit filed by Partran, SGPS, S.A., the Insolvent Estate of Espírito Santo Financial Group, S.A. and the
Insolvent Estate of Espírito Santo Financial (Portugal), S.A. against Novobanco and Calm Eagle Holdings,
S.A.R.L. in which it is sought the declaration of nullity of the pledge constituted over the shares of Companhia
de Seguros Tranquilidade, S.A. and, alternatively, the annulment of the pledge or the declaration of its
inefficacy, in which only appears as plaintiff the Insolvent Estate of ESF (Portugal) following the withdrawal of
the others;
(ii) Lawsuits filed following the signing of the contract for the purchase and sale of the share capital of Novobanco,
signed between the Resolution Fund and Lone Star on March 31, 2017, related to the conditions of the sale,
notably the administrative action filed by Banco Comercial Português, S.A. against the Resolution Fund, of
which Novobanco is not part and, within the framework of which, according to the public disclosure of
privileged information made by BCP on the CMVM website on September 1, 2017, it is requested the legal
appreciation of the contingent capitalization obligation assumed by the Resolution Fund within the framework
of the Contingent Capitalization Mechanism.
With respect to the amount requested from the Resolution Fund, for the 2020 financial year, divergences remain
between novobanco and the Resolution Fund, regarding (i) the provision for discontinued operations in Spain and (ii)
valuation of participation units, which are the subject of ongoing arbitration. novobanco considers these amounts (165
million euros) as due under the Contingent Capitalization Mechanism and has initiated an arbitration action to claim
payment of these amounts. There is also another disagreement regarding the application, by novobanco, at the end of
2020, of the dynamic option of the IFRS 9 transitional regime, which is also under consideration in the same arbitration
action. Additionally, the Resolution Fund did not pay the amount requested for the 2021 financial year. novobanco
considers the amounts claimed and not paid as due under the Contingent Capitalization Mechanism, having triggered
the legal and contractual mechanisms at its disposal in order to ensure the receipt of the same, which are recorded as
amounts receivable and are subject to favorable arbitration decisions.
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Resolution Fund
The Resolution Fund is a public legal person with administrative and financial autonomy, created by Decree-Law no. 31-
A / 2012, of 10 February, which is governed by the RGICSF and its regulations and whose mission is provide financial
support to the resolution measures applied by Bank of Portugal, as the national resolution authority, and to perform all
other functions conferred by law in the scope of the execution of such measures.
The Bank, like most financial institutions operating in Portugal, is one of the institutions participating in the Resolution
Fund, making contributions that result from the application of a rate defined annually by Bank of Portugal based
essentially on the amount of its liabilities. As of 31 December 2023, the Group's periodic contribution amounted to 7,101
thousand euros (31 December 2022: 16,364 thousand euros).
Within the scope of its responsibility as a supervisory and resolution authority, Bank of Portugal, on August 3, 2014,
decided to apply a resolution measure to BES, pursuant to paragraph 5 of article 145-G of the General Regime of
Institutions Credit and Financial Companies (RGICSF), which consisted of transferring most of its activity to novobanco,
created especially for this purpose, with the capitalization being ensured by the Resolution Fund.
For the realization of novobanco's share capital, the Resolution Fund made available 4,900 million euros, of which 365
million euros corresponded to its own financial resources. A loan from a banking syndicate was also granted to the
Resolution Fund, in the amount of 635 million euros, with the participation of each credit institution being weighted
according to several factors, including the respective size. The remaining amount (3,900 million euros) originated from a
loan granted by the Portuguese State.
In December 2015, the national authorities decided to sell most of the assets and liabilities associated with the activity
of Banif - Banco Internacional do Funchal, SA (BANIF) to Banco Santander Totta, SA (Santander Totta), for 150 million
euros, also within the framework of the application of a resolution measure. In the context of this resolution measure,
Banif's assets identified as problematic were transferred to an asset management vehicle, created for this purpose -
Oitante, S.A. This operation involved public support estimated at 2,255 million euros, which aimed at covering future
contingencies, financed at 489 million euros by the Resolution Fund and 1,766 million euros directly by the Portuguese
State.
The situation of serious financial imbalance in which BES was in 2014 and BANIF in 2015, which justified the application of
resolution measures, created uncertainties related to the risk of litigation involving the Resolution Fund, which is
significant, as well as with the risk of an eventual insufficiency of resources to ensure the fulfilment of the liabilities, in
particular the short-term repayment of the borrowings.
It was in this context that, in the second half of 2016, the Portuguese Government reached an agreement with the
European Commission to change the financing conditions granted by the Portuguese State and by the banks
participating in the Resolution Fund, in order to preserve financial stability. through the promotion of conditions that
provide predictability and stability to the contributory effort for the Resolution Fund. To this end, an amendment to the
financing contracts to the Resolution Fund was formalised, which introduced a set of changes on the repayment plans,
the remuneration rates and other terms and conditions associated with these loans in order to adjust them. the
Resolution Fund's ability to fully meet its obligations based on its regular revenues, that is, without the need to be
charged, to the banks participating in the Resolution Fund, special contributions or any other type of extraordinary
contribution.
According to the statement of the Resolution Fund of March 21, 2017, issued following an earlier statement of
September 28, 2016 and the statement of the Ministry of Finance issued on the same date, the revision of the
conditions of financing granted by the State Portuguese and participating banks aimed to ensure the sustainability and
financial balance of the Resolution Fund, based on a stable, predictable and affordable charge for the banking sector.
Based on this review, the Resolution Fund assumed that the full payment of its liabilities is ensured, as well as the
respective remuneration, without the need for recourse to special contributions or any other type of extraordinary
contributions by the banking sector.
On March 31, 2017, Bank of Portugal announced that it had selected the Lone Star Fund for the purchase of novobanco,
which was completed on October 18, 2017, through the injection, by the new shareholder, of 750 million euros, which
was followed by a new a capital contribution of 250 million euros, made on December 21, 2017. The Lone Star Fund now
holds 75% of novobanco 's share capital and the Resolution Fund the remaining 25%. Additionally, the approved
conditions include:
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• A contingent capitalization mechanism, under which the Resolution Fund may be called upon to make
payments in the event of certain cumulative conditions materialising, related to: (i) the performance of a
restricted set of assets of novobanco and (ii) the evolution of the Bank's capitalization levels. Any payments to
be made under this contingent mechanism are subject to an absolute ceiling of 3,890 million euros;
• An indemnity mechanism to novobanco, if certain conditions are met, it will be sentenced to pay any liability, by
a final judicial decision that does not recognize or is contrary to the resolution measure applied by Bank of
Portugal, or to the perimeter novobanco's assets and liabilities.
Notwithstanding the possibility provided for in the applicable legislation for the collection of special contributions, in
view of the renegotiation of the conditions for loans granted to the Resolution Fund by the Portuguese State and a
banking union, and to public notices issued by the Resolution Fund and the Office of the Minister of Finance. Finances
that state that this possibility will not be used, these financial statements reflect the expectation of the Executive
Board of Directors that the Bank will not be required to make special contributions or any other type of extraordinary
contributions to finance the resolution measures applied to BES and BANIF, as well as the contingent capitalization
mechanism and the indemnity mechanism referred to in the preceding paragraphs.
Any changes regarding this matter and the application of these mechanisms may have relevant implications for the
Group's financial statements.
Note 37 – Disintermediation
According to the current legislation, the managing companies, together with the depositary bank, are jointly liable to the
fund's participants for non-compliance with the obligations undertaken under the law and the rules of the managed
funds.
As of December 31, 2023, and 2022, the value of disintermediated resources managed by the Group's companies is
analyzed as follows:
Investment funds
Real estate investment funds
Pension funds
Discretionary management
(thousands of Euros)
2023
2022
732 604
1 095 611
41 147
40 124
2 320 443
2 180 753
676 152
616 060
3 770 346
3 932 547
The values included in these items are valued at fair value determined on the balance sheet date.
Note 38 –Related Parties Balances and Transaction
The group of entities considered to be related parties by novobanco in accordance with the IAS 24 definitions, are (i) key
management personnel (members of the Executive Board of Directors and members of the General Supervisory Board
of novobanco); (ii) people or entities with a family, legal or business relationship with key management personnel; (iii)
people or entities with a family, legal or business relationship with shareholders; (iv) shareholders holding direct or
indirect stakes equal to or exceeding 2% of the share capital or voting rights of novobanco; (v) subsidiaries consolidated
for accounting purposes under the full consolidation method; (vi) associated companies, that is, companies over which
novobanco Group has significantly influence on the company’s financial and operational polices, despite not having
control; and (vii) entities under joint control of novobanco (joint ventures).
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During 2023, the following transactions were carried out with the Related Parties identified on December 31, 2023
(credit and other transactions):
(i) Credit Operations:
Entities / Individuals
Category
Operation
Amount (euros)
APB - Associação Portuguesa de Bancos
Entities for which there is a relationship of
economic interdependence
Credit Card Limits (raise)
1 500
EDENRED - Portugal S.A.
Entities for which there is a relationship of
economic interdependence
Members of theExecutive Board of
Directors and Supervisory bodies and
related persons
Members of theExecutive Board of Directors
and Supervisory bodies and related persons (1.)
Direct Debits Limits (RCE) (renewal)
1 000 000
Credit Card Limits (renewal)
Credit Card Limits (raise)
Credit Card Limits (renewal)
24 000
22 500
10 000
Current-Account Loan Account (renewal)
2 500 000
LOCARENT - Companhia Portuguesa
Aluguer Viaturas S.A.
Entities for which there is a relationship of
economic interdependence
Entity dominated by members of the
Administration / Supervision
Trading Room Operations (RCE)
3 000 000
Direct Debits Limits (RCE) (renewal)
4 000 000
NACIONAL CONTA – Contabilidade,
Consultadoria e Administração, Lda.
Entity dominated by members of the
Administration / Supervision
Novobanco dos Açores
Novo Banco Group
(BEST, NB Açores e NB Finance)
Entities for which there is a relationship of
economic interdependence
Entity dominated by members of the
Administration / Supervision
Entities for which there is a relationship of
economic interdependence
Entity dominated by members of the
Administration / Supervision
Leasing (renewal with changes)
68 250 000
Commercial Paper (renewal with change)
25 000 000
Current-Account Loan Account (renewal)
100 000
Credit Card Limits (renewal)
1 000
Extension of the maturity of the Senior Debt Securities
(non-preferential) of novobanco dos Açores until
Dec/2026
5 000 000
• Interbank Limits (Trading Room Operations)
• Commercial Limits
317 900 000
Pedro Santos Reis
Persons or entities whose relationship with the
institution potentially influences their
management
Housing Credit
360 000
Unicre - Cartão Internacional de Crédito
S.A.
Entities for which there is a relationship of
economic interdependence
Entity dominated by members of the
Administration / Supervision
1. Notice 3/2020, artº33 - 3 b) and Notice 3/2020, artº33 - 3 c)
(ii) Services rendered and other signed contracts:
Current-Account Loan Account
15 000 000
Entities / Individuals
Category
Operation
BEST Banco Electrónico de Serviço Total SA
Entities for which there is a relationship of
economic interdependence
Lease Agreement
Novobanco dos Açores
Entities for which there is a relationship of
economic interdependence
Entity dominated by members of the
Administration / Supervision
Amendment to the Distribution Agreement
NANI Holdings S.à R.L. / LSF NANI
Investments S.à R.L.
Shareholder and/or Entities related to the
Shareholder
Service Providing Contract
Amount
(euros)
na
na
na
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The Group's balance sheet balances with related parties as of December 31, 2023 and 2022, as well as the respective
recognized costs and revenues, are summarized as follows:
Shareholders
NANI HOLDINGS
FUNDO DE RESOLUÇÃO
Associated companies
LINEAS
LOCARENT
ESEGUR
UNICRE
MULTIPESSOAL
EDENRED
YUNIT
Other
HUDSON ADVISORS PORTUGAL
NACIONAL CONTA LDA
2023
(thousands of Euros)
2022
Assets
Liabilities
Guarantees
Income Expenses
Assets
Liabilities
Guarantees
Income Expenses
198 180
-
106 129
271
198 180
105 858
-
-
-
416
416
-
155 123
114 112
335
4 322
-
137 886
-
15 220
2 010
3 027
1 987
-
29
32
7
109 036
-
241
-
241
1
4
-
4
-
-
-
-
43
-
-
273
1 641
-
62
2 638
-
-
-
-
-
-
-
-
7 101
-
7 101
4 789
15
3 426
-
-
-
1 348
-
4 726
4 726
-
198 180
-
198 180
54 253
152
54 101
-
-
-
389
389
-
179 676
106 222
335
4 614
-
139 286
-
38 365
2 023
3 176
3 218
-
76
35
-
-
-
-
273
-
1 727
-
919
-
2
99 716
62
1 968
-
324
-
324
1
5
-
5
-
-
-
-
-
-
-
-
16 364
-
16 364
3 204
-
3 163
-
-
-
41
-
4 638
4 638
-
The value of assets to be received from the Resolution Fund corresponds to the amount of activation of the Contingent
Capitalisation Mechanism for the 2021 financial year. The liability corresponds to the value to be delivered to the
Resolution Fund resulting from an addendum made in May 2021 to the contract for the Contingent Capitalisation
Mechanism.
In June 2018, a contract was signed between NANI HOLDINGS, SGPS, S.A. (currently Nani Holdings S.à.r.l.), LSF NANI
INVESTMENTS S.à.r.l. and Novobanco, for the provision of support services to the preparation of consolidated
information and regulatory reports.
The balance sheet assets related to associate companies included in the table above mainly refer to credit granted,
supplies, or debt securities acquired in the context of the Group's activity. The liabilities essentially refer to bank
deposits taken.
The guarantees related to associated companies included in the above table essentially refer to guarantees provided.
Transactions with Related Parties were carried out under market conditions (at arm's lenght), in similar terms and
conditions when compared to others signed with unrelated parties, and when this has not occurred, such exceptions
were justified in terms of the Bank's Policy on Transactions with Related Parties. Every year, novobanco, together with
consultants, analyses and prepares the Transfer Pricing Dossier, which contains information that shows that
transactions with related parties respect the principle of Full Competition, which is delivered to the Tax and Customs
Authority within the legal deadline.
All credits granted to related entities are included in the impairment model and are subject to determination of
impairment in the same way as commercial credits granted by the Group. The assets applied with related entities accrue
interest at rates varying between 0% and 9.60% (the rates indicated correspond to the rates applied according to the
original currency of the asset).
The costs of remuneration and other benefits awarded to the Key Management Personnel of novobanco in 2023 and
2022 are presented as follows:
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Executive
Board of
Directors
2023
General and
Supervisory
Board
Total
Executive
Board of
Directors
(thousands of Euros)
2022
General and
Supervisory
Board
Total
Short-term employment benefits
3 557
1 494
5 051
Post-employment benefits
Other long-term benefits
2
27
-
3
2
30
3 586
1 497
5 083
3 092
2
197
3 291
1 257
4 349
-
2
38
235
1 295
4 586
In 2023 and 2022, the value of variable remunerations for the Management Bodies amounted to 1,878 thousand and
1,931 thousand euros, respectively, which constitutes remunerations that are not vested rights of the members until
after the end of the restructuring period, its payment is subject to deferment and verification of certain conditions.
Additionally, in the financial year of 2023, costs of 150 thousand euros were registered as sign-on bonuses resulting
from the appointment of a new Executive Director (2022: costs of 260 thousand euros were registered as sign-on
bonuses resulting from the appointment of two new Executive Directors and compensation for termination of mandates
of two Executive Directors were registered amounting to 460 thousand euros).
On December 31, 2023 and 2022, the value of credit granted and deposits of members of novobanco's Key
Management Personnel were as follows:
Loans granted
(i) to members of the Executive Administration Board and their direct relatives was 195 thousand euros
(December 31, 2022: 351 thousand euros); and
(ii) the members of the General and Supervisory Board and their direct relatives had no credit liabilities (December
31, 2022: no exposure).
Deposits
(i) of members of the Executive Administration Board and their direct relatives was 2,552 thousand euros
(December 31, 2022: 1,138 thousand euros); and
(ii) of members of the General and Supervisory Board and their direct relatives was 820 thousand euros
(December 31, 2022: 1,544 thousand euros).
Note 39 – Securitisation of Assets
As at 31 December 2023 and 2022, the outstanding securisation transactions made by the Group were as follows:
Issue
Start Date
Original Amount
Current amount
2023
2022
(thousand od Euros)
Securitized Asset
Lusitano Mortgages No.4 plc
September 2005
1 200 000
183 022
214 061
Mortgage Loans (general regime)
Lusitano Mortgages No.5 plc
September 2006
1 400 000
286 348
330 075
Mortgage Loans (general regime)
Lusitano Mortgages No.6 plc
July 2007
1 100 000
280 627
317 612
Mortgage Loans (general regime)
Lusitano Mortgages No.7 plc
September 2008
1 900 000
733 445
817 287
Mortgage Loans (general regime)
According to the consolidation rules established in IFRS 10, Lusitano Mortgages No.6 plc and Lusitano Mortgages No. 7
plc have been fully consolidated from the date of their formation (see Note 1). We present below the main impacts of
the consolidation of these entities on the Group's accounts:
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Cash, cash balances at Central Banks and other demand deposits
Customer Loans (net of impairment)
Liabilities represented by securities (a)
(a) see Note 31
(milhares de euros)
2023
2022
99 666
124 031
1 008 663
1 127 628
19 831
25 491
Additionally, Lusitano Mortgages No. 4 plc and Lusitano Mortgages No. 5 plc are not consolidated as they do not fall
within the rules defined by IFRS 10, mainly because the Group's retained interest is residual.
The main characteristics of these operations, referring to December 31, 2023 and 2022, can be analysed as follows:
Issue
Lusitano Mortgages No.4 plc
Lusitano Mortgages No.5 plc
Lusitano Mortgages No.6 plc
Lusitano Mortgages No.7 plc
Bonds
issued
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class F
Class A
Class B
Class C
Class D
2023
(thousand of Euros)
Initial nominal value
Current
nominal value
Interest held
by Group
(Nominal value)
Interest held
by Group
(Book value)
Maturity date
Initial rating of the bonds
Current rating of the bonds
Fitch Moody's
S&P
DBRS
Fitch Moody's
S&P DBRS
December 2048
AAA
Aaa
AAA
December 2048
AA
Aa2
December 2048
A+
A1
AA
A+
-
-
-
AA-
Aa2
A-
A1
AA+
AA+
BB+
Baa3
AA
December 2048
BBB+
Baa1
BBB-
-
B+
B2
BB+
1 134 000
139 110
22 800
9 208
19 200
24 000
10 200
7 754
9 693
5 100
1 323 000
212 384
26 600
17 384
22 400
14 639
28 000
18 299
11 900
5 950
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
December 2048
NA
-
NA
December 2059
AAA
Aaa
AAA
December 2059
AA
Aa2
December 2059
A
A1
AA
A
December 2059
BBB+
Baa2
BBB
December 2059
N/A
-
N/A
943 250
116 039
97 882
94 913
March 2060
AAA
Aaa
AAA
65 450
65 450
63 950
58 568
March 2060
AA
Aa3
41 800
41 800
41 800
34 496
March 2060
A
A3
AA
A
17 600
17 600
17 600
13 356
March 2060
BBB
Baa3
BBB
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AA+
Aa2
A+
A3
BBB+
Ba1
CCC
Caa2
-
-
AA+
Aa2
AA+
Aa2
BBB
A1
AA+
AA+
BBB
B
-
A
A
A
CCC
Ba3
BB
-
-
-
-
-
-
-
-
-
-
-
-
BB
-
AAA
AAA
BBB-
-
-
-
-
-
CC
-
-
-
-
-
-
-
-
-
-
-
D
-
AA+
AAA
AA+
-
-
-
-
-
31 900
31 900
31 900
21 291
March 2060
BB
22 000
22 000
22 000
-
March 2060
1 425 000
260 940
260 939
247 653
October 2064
294 500
294 500
294 500
260 109
October 2064
180 500
180 500
180 500
65 973
October 2064
57 000
57 000
57 000
-
October 2064
-
-
-
-
-
-
-
-
-
-
-
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Annual Report 2023 | novobanco
2022
(thousand of Euros)
Issue
Bonds
issued
Initial nominal
value
Current nominal
value
Interest held
by Group
(Nominal
value)
Interest held
by Group
(Book value)
Maturity date
Initial rating of the bonds
Current rating of the bonds
Fitch
Moody'
s
S&P
DBR
S
Fitch
Moody'
s
S&
P
DBR
S
Lusitano Mortgages No.4 plc
Lusitano Mortgages No.5 plc
Lusitano Mortgages No.6 plc
Lusitano Mortgages No.7 plc
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class F
Class A
Class B
Class C
Class D
1 134 000
163 785
22 800
19 200
24 000
10 200
10 842
9 130
11 412
5 100
1 323 000
245 724
26 600
22 400
28 000
11 900
20 113
16 937
21 172
11 301
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
December 2048
AAA
Aaa
AAA
December 2048
AA
Aa2
December 2048
December 2048
December 2048
A+
BBB
+
NA
A1
Baa1
-
AA
A+
BBB
-
NA
December 2059
AAA
Aaa
AAA
December 2059
AA
Aa2
December 2059
December 2059
December 2059
A
BBB
+
N/A
A1
Baa2
-
AA
A
BBB
N/A
943 250
152 014
128 051
124 100
March 2060
AAA
Aaa
AAA
65 450
65 450
63 950
55 286
March 2060
AA
Aa3
41 800
17 600
31 900
41 800
41 800
31 303
March 2060
A
A3
17 600
17 600
12 414
March 2060
BBB
Baa3
BBB
31 900
31 900
20 017
March 2060
BB
22 000
22 000
22 000
-
March 2060
1 425 000
345 770
345 770
326 254
October 2064
294 500
294 500
294 500
242 031
October 2064
180 500
180 500
180 500
59 141
October 2064
57 000
57 000
57 000
-
October 2064
-
-
-
-
-
AA
A
BB
-
AAA
AAA
BBB
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AA-
Aa2
A-
A2
BB+
Baa3
CCC
Caa1
-
-
A+
Aa2
BBB
+
B+
Baa2
Ba3
CC
Caa3
-
-
AA+
Aa2
AA
Aa2
BB+
A3
CCC
B3
CC
-
-
-
-
-
-
-
-
-
-
-
AA+
AA-
A-
B-
-
AA+
AA+
BBB
B
-
A-
A-
A-
B
D
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AA+
AAA
AA+
-
-
-
-
-
In December 2022, Novobanco entered into a transaction to transfer part of the credit risk of a portfolio of loans to
companies worth around one billion euros through a synthetic securitisation, with a maturity date of February 2031 (and
the possibility of a call option in September 2025). Given the nature of this operation, there was no derecognition of
loans in the balance sheet, and the received guarantee was recorded, which will be updated according to the activation
triggers defined in the contract.
Note 40 - Fair Value of Financial Assets and Liabilities
The governance model for valuing the Group's financial instruments is defined in internal rules, which establish the
policies and procedures to be followed in identifying and valuing financial instruments, control procedures, and defining
the responsibilities of the participants in this process.
40.1. Assets and liabilities at fair value
The fair value of quoted financial assets is determined based on the closing quote (bid-price), the price of the last
transaction carried out, or the value of the last known quote (bid). In the absence of a quote, the Group estimates fair
value using
(i) valuation methodologies, such as using prices for recent transactions, which are similar and carried out under
market conditions, techniques for discounted cash flows and customised option valuation models to reflect the
peculiarities and circumstances of the instrument, and
(ii) valuation assumptions based on market information.
For assets included in fair value hierarchy 3, whose quote is provided by a third party using parameters not observable in
the market, the Group proceeds, where applicable, to a detailed analysis of the historical performance and liquidity of
these assets. This may imply an additional adjustment to their fair value, as well as from additional internal or external
evaluations.
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The valuation models used by the type of instrument are presented below:
Money market operations and loans advance to customers: fair value is determined by the discounted cash flow
method, with the future cash flow discounted considering the yield curve of the currency plus the credit risk of the entity
that will contractually settle this flow.
Commercial paper and loans to customers: their fair value is determined by discounting future cash flows to the yield
curve of the currency plus the credit risk of the issuer determined in the programme of the issue.
Debt instruments (bonds) with liquidity: the 'Best Price' valuation selection methodology is used based on observations
available on Bloomberg, where all available valuations are requested, but only inputs from previously validated sources
are considered as input, with the model also considers the exclusion of prices due to age and outliers. Specifically for
Portuguese public debt, and resulting from the market-making activity and materiality of the Group's positions, the
valuations of the CBBT source are always considered (the CBBT is a composite of valuations prepared by Bloomberg,
which considers the average of executable prices and highly liquid).
Debt instruments (bonds) with low liquidity: the models considered for the valuation of bonds with low liquidity without
observable market valuations are determined considering the information available about the issuer and instrument. The
following models can be considered: (i) discounted cash flows - the cash flows are discounted considering the interest
rate risk, credit risk of the issuer and any other risks underlying the instrument; or (ii) valuations provided by external
counterparts. These are considered in the impossibility of determining the fair value of the instrument. Reliable sources
with reputed credibility in the market and impartiality in the valuation of the instruments under analysis are always
selected.
Convertible bonds: the cash flows are discounted taking into account the interest rate risk, the credit risk of the issuer
and any other risks that may be associated with the instrument, plus the net present value (NPV) of the convertibility
options embedded in the instrument.
Quoted shares and funds: for listed capital products, the quote presented by the respective stock exchange is
considered.
Unlisted shares: the valuation is carried out through external valuations made to the companies where the shareholding
position is held. If there is no justification for requesting an external valuation due to the immateriality of the holding in
the balance sheet, the holding is revalued considering the book value of the entity.
Unlisted funds: the valuation provided by the fund manager is considered, which takes into account assumptions not
observable in the market. In case of capital calls after the reference date of the last valuation provided, the valuation is
recalculated considering the capital calls subsequent to the reference date to the value that they have been made, until
a new valuation is provided by the manager that incorporates the capital calls made. It should be noted that although
the valuations provided by the fund managers are accepted, whenever it applies according to the fund regulations, the
Bank requests the legal certification of accounts issued by independent auditors, in order to obtain the necessary
additional comfort to the information provided by the manager. In addition, and for the major assets held by real estate
investment funds, and according to an annual work plan previously approved by the Executive Administration Board, a
challenge process is carried out to the valuations of these assets, which consists of a detailed technical analysis of the
key assumptions considered in the valuations. This process may result that new valuations may be necessary and
adjusts the fair value of these assets.
In the specific case of Restructuring Funds (“Valued Assets”), they were the subject of a detailed valuation carried out
during the exercise of 2022 by an independent external international entity (“Valuator”), which hired renowned real
estate valuation companies to determine the fair value of real estate assets that represent a significant part of the
funds' portfolio.
The estimated fair value of the Evaluated Assets requires a multistage approach, taking into consideration the following:
(i) the fair value of the assets invested by each fund (the “Underlying Assets”); (ii) the nature of the respective Fund's
interest in each of the Underlying Assets; (iii) other assets and liabilities in the Fund's balances; (iv) the nature of
novobanco's interest in each of the funds; and (v) the consideration of any applicable discounts or premiums. The fair
value of the Underlying Assets was estimated using the three valuation approaches (market, income, and cost),
depending, among other things, on the specific nature of each asset, its development status, available information, and
the date of the initial investment. The other assets and liabilities on the fund's balance sheet would usually be valued
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Annual Report 2023 | novobanco
using the cost approach, with potential market-based adjustments, and the consideration of discounts and premiums,
usually assessed using market data and benchmarks.
Underlying Assets are mainly divided into Non-Real Estate Assets and Real Estate Assets (which can, in turn, be
subdivided into Hotels and Other Real Estate Assets). For Non-Real Estate Assets, the Valuator considered the market
approach based essentially on Market Multiples for comparable assets and considering the historical performance of
each asset. For real estate assets, the valuator used the market approach or the income approach, depending on the
status of each asset. In the case of hotels, the main value-determining assumptions considered were the average room
rate, occupancy rate, GOP margin, EBITDA margin, Capex needs, and discount rate. Regarding Other Real Estate Assets,
the main value determining assumptions were the sale prices, construction costs, timeline (both in development and in
sales), and Discount Rates. Each of the assumptions described above, used in the valuation of real estate assets, were
determined on an asset-by-asset basis (total of 80 large assets subdivided into a total of more than 500 assets),
depending on the status of the asset, historical performance of the asset, location and market competitors.
Regarding the information on quantitative indicators underlying the fair value measurements of the Restructuring
Funds, the following is presented:
Assumption
Hotels
Real Estate under
development
Real Estate
Shopping Centers
Agriculture properties
Min Average Max
Min Average Max
Min Average Max
Min Average Max
Min Average Max
Bedroom average
rate (€)
55
197
650
133
177
207
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Occupancy rate %
40%
62%
80%
60%
70%
75%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
€/m2
€/Ha
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
30
n.a.
1 518
3 150
800
2 594
6 750
960
1 085
1 180
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2 800
13 270 20 200
Discount rate
8.5%
9.4%
10.1%
8.0%
12.3%
16.0%
4.5%
6.4%
10.0%
10.0%
10.3%
10.8%
n.a.
n.a.
n.a.
Valuation
methodology
Market approach
Income approach
Market approach
Income approach
Market approach
Income approach
Market approach
Income approach
Market approach
Income approach
Notes:
(i) All the above assumptions were calculated based on the averages of the values considered by external evaluators per valued
property
(ii) The average presented was calculated at the property-weighted average in the sum of the value of the underlying assets by
category presented
(iii) Hotel - Includes hotels and aparthotels currently in operation (Hotels in development or project are incorporated in Real
Estate in Development together with their respective property)
(iv) €/m2 considering the gross construction area
In addition, the additional assumptions considered in the fair value measurement of the financial holdings held in the
restructuring funds are presented below.
Type of Fund
Discount based on P/BV observable market data
Real estate and Tourism
Real estate and Tourism/Other
Other
16.6%
15.3%
12.0%
Derivative instruments: if they are traded on organized markets, valuations are observable in the market; otherwise,
they are valued using standard models with observable market variables, highlighting:
• Foreign exchange options: these are valued through the front office system, which considers models such as
Garman-Kohlhagen, Binomial, Black&Scholes, Levy, or Vanna-Volga;
• Interest rate swaps and foreign exchange swaps: these instruments are valued through the front office system,
where the cash flows from the fixed leg of the instrument are discounted from the yield curve of the respective
currency, and the cash flows from the variable leg are projected considering the forward curve and discounted also
considering both the discount factors and forward rates from the yield curve of the respective currency;
• Credit Default Swaps (CDS): both legs of the CDS are composed of cash flows contingent on the credit risk of the
underlying asset and are therefore valued using market credit spreads;
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• Futures and Options: the Group trades these products on an organised market, but also has the possibility to
trade them on the OTC market. For futures and options traded on an organised market, the valuations are
observable in the market, with the valuation being received daily through the broker selected for these products.
For futures and options traded on the OTC market and depending on the type of product and the underlying asset
type, discrete time (binominal) or continuous time (Black & Scholes) models may be used.
The Group calculates the "Credit Valuation Adjustment" (CVA) for derivative instruments according to the following
methodology:
(i) Portfolio perspective - the calculation of the CVA results from the application, to the aggregated exposure of
each counterparty, of an expected loss and a recovery rate, considering the estimated average duration for
each exposure;
Individual perspective - it is based on the calculation of the exposure using stochastic methods (Expected
Positive Exposure) that translates into the calculation of the expected fair value exposure that each derivative
should assume in the remaining lifetime. Subsequently, an expected loss and a recovery rate are applied to the
determined exposure.
(ii)
The Group chooses not to register the "Debt Valuation Adjustment" (DVA), which represents the market value of the
Group's own credit risk of a specific negative exposure to a counterparty, reflecting a prudent view of applying this
regulation. It should be noted that the potential exposure subject to DVA is controlled monthly and has assumed
immaterial values.
Investment properties: their fair value is determined based on periodic evaluations carried out by independent entities
specializing in this type of service, however, given the subjectivity of some assumptions used in the evaluations, the
Group performs internal analyses on the assumptions used which could imply additional adjustments to its fair value,
supported by additional internal or external evaluations (see accounting policy in Note 7.15). The market value of the
properties for which a purchase and sale promise contract has been signed corresponds to the value of that contract.
The validation of the valuation of financial instruments is carried out by an independent area, which validates the models
used and the prices attributed. More specifically, this area is responsible for carrying out the independent verification of
prices for market price valuations (mark-to-market), for model-based valuations (mark-to-model) it validates the
models used and changes to them, whenever they exist. For prices provided by external entities, the validation consists
of confirming the use of correct prices.
The balance sheet value of the financial assets and liabilities and non-financial assets (investment properties) measured
at fair value of the Group is as follows:
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Annual Report 2023 | novobanco
(thousands of Euros)
At Fair Value
Valuation
models
based on
observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
Quoted
market
prices
(Level 1)
(Level 2)
(Level 3)
Total Fair
Value
318 528
117 620
318 528
-
-
-
-
-
117 620
11 227
101 085
5 308
-
-
-
-
-
-
436 148
318 528
117 620
11 227
101 085
5 308
31 December 2023
Financial assets held for trading
Securities held for trading - Bonds issued by public entities
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Others
Financial assets mandatorily at fair value through profit or loss - securities
18 021
20 913
225 978
264 912
Bonds issued by other entities
Shares
Other variable income securities
11 368
6 626
50
-
-
11 418
135 656
142 282
27
20 863
90 322
111 212
Financial assets at fair value through other comprehensive income
741 384
28 380
68 759
838 523
Bonds issued by public entities
Bonds issued by other entities
Shares
Derivatives - Hedge Accounting - interest rates contracts
Investment properties
Assets at fair value
Financial liabilities held for trading - Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Credit
Other
Derivatives - Hedge Accounting - Interest rate contracts
Liabilities at fair value
371 675
-
368 610
20 584
-
-
371 675
389 194
1 099
7 796
68 759
77 654
-
-
683 063
-
683 063
-
393 795
393 795
1 077 933
849 976
688 532
2 616 441
-
-
-
-
-
-
-
98 989
11 413
82 247
104
5 225
124 729
223 718
1 650
100 639
-
11 413
1 650
83 897
-
-
-
104
5 225
124 729
1 650
225 368
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Annex
(thousands of Euros)
At Fair Value
Quoted
market
prices
Valuation
models
based on
observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
Total Fair
Value
(Level 1)
(Level 2)
(Level 3)
36 428
135 382
36 428
-
-
-
-
-
135 382
23 141
103 673
8 568
-
-
-
-
-
-
171 810
36 428
135 382
23 141
103 673
8 568
31 December 2022
Financial assets held for trading
Securities held for trading - Bonds issued by public entities
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Others
Financial assets mandatorily at fair value through profit or loss
16 566
21 730
275 406
313 702
Bonds issued by other entities
Shares
Other variable income securities
Loans to customers
Financial assets at fair value through profit or loss - Bonds from other issuers
11 045
5 464
50
-
2 378
13 473
135 655
141 119
57
21 680
137 355
159 092
-
-
-
-
18
13
18
13
Financial assets at fair value through other comprehensive income
2 229 304
30 528
71 267
2 331 099
Bonds issued by public entities
Bonds issued by other entities
Shares
Derivatives - Hedge Accounting - interest rates contracts
Investment properties
Assets at fair value
Financial liabilities held for trading - Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Other
Derivatives - Hedge Accounting - Interest rate contracts
Liabilities at fair value
1 764 578
-
458 913
20 493
-
-
1 764 578
479 406
5 813
10 035
71 267
87 115
-
-
562 845
-
562 845
-
499 567
499 567
2 282 298
750 485
846 253
3 879 036
-
-
-
-
-
-
96 780
22 069
71 807
2 904
119 578
216 358
2 606
99 386
-
22 069
2 606
74 413
-
-
2 904
119 578
2 606
218 964
The movement of financial assets and liabilities valued using methods with parameters not observable in the market
(level 3 of the fair value hierarchy) during the exercises of 2023 and 2022, can be analyzed as follows:
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Annual Report 2023 | novobanco
2023
Financial assets
mandatorily at fair
value through profit or
loss
Securities
Loans to
customers
Financial
assets at
fair value
through
profit or
loss
Financial
assets at fair
value through
other
comprehensive
income
Investment
properties
Total
assets
(thousands of Euros)
Financial
liabilities
held for
trading
Derivatives
held for
trading
Total
liabilities
Balance as at 31 December 2022
275 388
18
13
71 267
499 567
846 253
2 606
2 606
Acquisitions
Maturity
Settlements
Disposals
Changes in fair value
Other movements
338
( 13 189)
( 24 717)
-
-
-
-
-
-
-
-
-
1 086
611
2 035
-
( 9 867)
-
-
( 13 189)
( 34 584)
-
( 131 897)
( 131 897)
-
-
-
-
-
-
-
-
( 11 842)
( 18)
( 13)
6 273
19 233
13 633
( 956)
( 956)
Balance as at 31 December 2023
225 978
-
-
-
-
-
-
6 281
6 281
-
-
68 759
393 795
688 532
1 650
1 650
2022
Financial assets
mandatorily at fair value
through profit or loss
Securities
Loans to
customers
Financial
assets at
fair value
through
profit or
loss
Financial
assets at fair
value through
other
comprehensive
income
Investment
properties
Total
assets
(thousands of Euros)
Financial
liabilities
held for
trading
Derivatives
held for
trading
Total
liabilities
Balance as at 31 December 2021
Acquisitions
Maturity
Settlements
Disposals
Changes in fair value
Other movements
586 450
45 390
( 177 720)
( 115 754)
-
( 62 978)
-
Balance as at 31 December 2022
275 388
-
-
-
-
-
18
-
18
-
-
-
-
-
13
-
13
43 224
625 187
1 254 861
1 950
1 950
3 520
16 464
65 374
-
( 762)
-
-
( 177 720)
( 116 516)
-
( 242 068)
( 242 068)
-
-
-
-
-
-
-
-
25 285
101 237
63 575
656
656
-
( 1 253)
( 1 253)
-
-
71 267
499 567
846 253
2 606
2 606
In the exercises of 2023 and 2022, there were no significant transfers of value between the different levels of the fair
value hierarchy.
The potential gains and losses of financial instruments and investment properties classified at level 3 of the fair value
hierarchy are recorded in income for the year or revaluation reserves, according to the respective accounting policy of
the assets. The amounts determined as of December 31, 2023 and 2022 were as follows:
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Annex
Recognised in
reserves
2023
Recognised
in the
income
statement
Total
Recognised
in reserves
(thousands of Euros)
2022
Recognised
in the
income
statement
Total
Trading derivatives
Financial assets mandatorily at fair value through profit or loss
-
-
Financial assets mandatorily at fair value through profit or loss
55 904
955
955
-
-
-
-
-
( 655)
( 655)
( 58 545)
( 58 545)
55 904
25 584
-
25 584
Investment properties
-
16 526
16 526
-
91 133
91 133
55 904
17 481
73 385
25 584
31 933
57 517
The following table presents, for financial assets included in level 3 of the fair value hierarchy, the main valuation
methods used and the impact of the change in the main variables used in their valuation, when applicable:
Assets classified under level 3
Valuation Model
Variable
analysed
Carrying
book
value
Unfavorable
scenario
Favorable scenario
Change
Impact
Change
Impact
2023
(millions of Euros)
-
-
-
-
-
-
0,1
0,1
0,1
-
0,1
Financial assets mandatorily at fair value through profit or
loss
Shares
Discounted cash flow
model
(b)
226,0
135,7
135,7
90,3
Other variable income securities
Financial assets at fair value through other comprehensive
income
Valuation of the
management company
(adjusted)
Valuation of the
management company
(b)
76,3
(c)
14,0
-
-
-
-
-
-
68,8
68,8
( 3,0)
( 3,0)
16,6
( 3,0)
Renewable
Energy
Tariff
Shares
Discounted cash flows
Total
Others
(a)
52,2
294,7
-
( 3,0)
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(b) Given that the Restructuring Funds were not revalued in 2023, a sensitivity analysis was also not carried out on them
(c) In the specific case of units valued according to the quotation provided by the respective management company, it is not reasonable to analyze the impact of the change in variables
underlying the determination of the quotation by that entity
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2022
(millions of Euros)
Assets classified under level 3
Valuation Model
Variable
analysed
Carrying
book
value
Unfavorable
scenario
Favorable scenario
Change
Impact
Change
Impact
Financial assets mandatorily at fair value through profit or
loss
275,4
( 2,4)
10,8
Bonds issued by other entities
Discounted cash flow
model
Specific
Impairment
2,4
-50%
( 2,4)
+50%
10,8
Shares
Other variable income securities
Valuation of the
management company
(adjusted)
Valuation of the
management company
(adjusted)
Valuation of the
management company
(adjusted)
135,7
(b)
135,7
137,4
(b)
117,6
(c)
19,8
-
-
-
-
-
Financial assets at fair value through other comprehensive
income
Shares
Discounted cash flows
71,3
71,3
( 2,9)
( 2,9)
16,2
( 2,9)
Renewable
Energy
Tariff
Total
346,7
( 5,3)
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
Others
(a)
55,1
-
-
-
-
-
-
0,1
0,1
0,1
-
10,9
(b) For the sensitivity analysis carried out on the valuation of the Restructuring Funds, taking into account the valuation methodologies applied and considering that real estate assets represent
about 90% of the underlying assets of the Funds, a variation of +10% and -10% was considered in the fair value of the main real estate assets of each Fund, which leads to an impact of +5.2%
and -5.2% in the fair value of the restructuring funds.
(c) In the specific case of units valued according to the quotation provided by the respective management company, it is not reasonable to analyze the impact of the change in variables
underlying the determination of the quotation by that entity
The main parameters used, on December 31, 2023 and 2022, in the valuation models were as follows:
Interest Rate Curves
The short term rates presented reflect the indicative values practiced in the money market, and for the long term, the
values presented represent the quotes for interest rate swaps for the respective terms:
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EUR
2023
USD
GBP
EUR
2022
USD
(%)
GBP
4,0325
3,8450
3,9090
3,8610
3,6870
3,5130
2,5665
2,4360
2,4420
2,4940
2,5580
2,5150
2,4120
2,3260
5,3650
5,4200
5,5300
5,5000
5,4100
5,0470
4,0319
3,8117
3,7571
3,7541
3,7785
3,7585
3,6768
3,5910
5,0850
5,2900
5,5000
5,3500
5,2750
4,9670
3,9400
3,6544
3,5548
3,5682
3,6300
3,6570
3,6470
3,6403
1,9501
1,8840
2,1320
2,6930
2,9920
3,2910
3,3005
3,2390
3,2020
3,2020
3,1410
2,9310
2,7150
2,5320
4,3650
4,4200
4,7700
5,1500
5,2350
5,1130
4,3010
4,0110
3,8780
3,8220
3,7970
3,7260
3,6170
3,4720
3,5750
3,6500
3,8000
4,3350
4,5250
4,6768
4,6088
4,3280
4,1350
3,9920
3,9377
3,8647
3,7967
3,7257
Overnight
1 month
3 months
6 months
9 months
1 year
3 years
5 years
7 years
10 years
15 years
20 years
25 years
30 years
Credit Spreads
The credit spreads used by the Group in the evaluation of credit derivatives are disclosed daily by Markit, representing
observations comprised of about 85 renowned international financial institutions. The evolution of the main indices,
which is considered representative of the behavior of credit spreads in the market throughout the year, is presented
next:
Index
Series
1 year
3 years
5 years
7 years
10 years
(basis points)
31 December 2023
CDX USD Main
iTraxx Eur Main
iTraxx Eur Senior Financial
31 December 2022
CDX USD Main
iTraxx Eur Main
iTraxx Eur Senior Financial
41
40
40
39
38
38
-
14,64
-
-
35,05
-
33,64
33,08
-
56,87
66,40
-
56,70
58,21
67,02
82,02
90,60
99,29
78,74
78,97
-
101,74
106,87
-
98,19
98,68
-
117,73
122,66
-
Interest Rate Volatilities
The values presented below refer to the implied volatilities (at the money) that served as a basis for the valuation of
interest rate options:
EUR
99,28
124,23
124,77
121,60
115,66
107,02
2022
USD
23,33
38,10
40,72
39,38
35,95
-
(%)
GBP
55,24
49,59
47,00
45,73
42,81
-
EUR
87,29
110,08
105,67
101,82
97,50
91,56
2023
USD
94,80
125,00
121,30
116,10
108,90
99,00
1 year
3 years
5 years
7 years
10 years
15 years
GBP
99,70
142,10
140,10
134,00
124,60
113,10
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Foreign Exchange Rates and Volatilities
The following are the exchange rates (European Central Bank) at the balance sheet date and the implied volatilities (at
the money) for the main currency pairs, used in the valuation of derivatives:
Foreign exchange rate
2023
2022
1 month
3 months
6 months
9 months
1 year
Volatility (%)
EUR/USD
EUR/GBP
EUR/CHF
EUR/NOK
EUR/PLN
EUR/RUB
USD/BRL a)
USD/TRY b)
1,1050
0,8691
0,9260
1,0666
0,8869
0,9847
11,2405
10,5138
4,3395
4,6808
6,98
4,96
6,76
9,81
6,99
117,2010
117,2010
29,28
4,8523
5,2865
29,5503
18,7183
12,71
8,47
6,64
5,14
6,13
9,54
7,04
31,71
13,09
13,41
6,57
5,50
5,99
9,56
7,13
34,65
13,60
17,98
6,54
5,75
5,94
9,60
7,19
36,12
13,95
21,13
6,70
5,95
5,91
9,61
7,24
32,92
14,29
23,43
a) Calculated on the basis of the EUR/USD and EUR/BRL exchange rates
b) Calculated on the basis of the EUR/USD and EUR/TRY exchange rates
Regarding exchange rates, the Group uses the spot rate observed in the market at the time of valuation in its valuation
models.
Quotation Indexes
The following table summarizes the evolution of the main quotation indices and their volatilities used in the valuations of
equity derivatives:
DJ Euro Stoxx 50
PSI 20
IBEX 35
FTSE 100
DAX
S&P 500
BOVESPA
Quotation
Historical volatility
2023
2022
% Change
1 month
3 months
Implied
Volatility
4 522
6 396
10 102
7 733
16 752
4 770
3 794
5 726
8 229
7 452
13 924
3 840
134 185
109 735
19%
12%
23%
4%
20%
24%
22%
13,65
12,29
12,13
10,97
12,94
11,61
15,90
15,89
13,99
17,15
13,37
15,16
13,75
18,48
11,00
-
-
9,28
11,03
10,93
19,74
40.2. Assets and liabilities at Amortized Cost
Cash and deposits with Central Banks, Deposits with banks and Loans and advances to credit institutions and Deposits
from Central Banks.
Considering the short-term nature of these financial instruments, their carrying book value is a reasonable estimate of
their fair value.
Securities at amortized cost
The fair value of securities recorded at amortized cost is estimated according to the methodologies used to value the
securities that are recorded at fair value, as described at the beginning of this Note.
Customer loans
The fair value of customer loans is estimated based on the updating of expected capital and interest cash flows,
assuming that the installments are paid on the dates contractually defined. The future expected cash flows of
homogeneous credit portfolios, such as mortgages, are estimated on a portfolio basis. The discount rates used are the
current rates practiced for loans with similar characteristics.
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Resources from Central Banks and other credit institutions
The fair value of resources from central banks and other credit institutions is estimated based on the updating of
expected capital and interest cash flows.
Due to Customers
The fair value of these financial instruments is estimated based on the updating of expected capital and interest cash
flows. The discount rate used is the one that reflects the rates practiced for deposits with similar characteristics at the
balance sheet date. Considering that the applicable interest rates are renewed for periods of less than one year, there
are no materially relevant differences in their fair value.
Liabilities represented by securities, Subordinated Liabilities, and Liabilities associated with transferred assets
The fair value of these instruments is based on market quotations when available; if not, it is estimated based on the
updating of expected future cash flows of capital and interest for these instruments.
Other financial liabilities
These liabilities are short-term, so the balance value is a reasonable estimate of their fair value.
The fair value of financial assets and liabilities recorded on the balance sheet at amortized cost is analyzed as follows,
having been estimated based on the main methodologies and assumptions described above:
Assets /
liabilities
recorded at
amortised
cost
Quoted
market
prices
Fair Value
Valuation
models based
on observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
(thousand of Euros)
Total fair
value
(Level 1)
(Level 2)
(Level 3)
31 December 2023
Cash, cash balances at central bank and other demand deposits
5 867 189
-
5 867 189
-
5 867 189
Financial assets at amortised cost
Debt securities
Loans and advances to banks
Loans and advances to customers
Financial assets
7 870 536
6 340 702
47 940
24 534 061
-
-
216 753
47 940
1 160 823
7 718 278
-
47 940
-
24 892 480
24 892 480
38 319 726
6 340 702
6 131 882
26 053 303
38 525 887
Financial liabilities measured at amortised cost
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to
transferred assets
Other financial liabilities
Financial liabilities
5 745 326
29 984 273
-
-
1 107 585
1 240 258
493 171
-
5 745 326
-
5 745 326
-
-
-
29 984 273
29 984 273
12 136
1 252 394
493 171
493 171
37 330 355
1 240 258
5 745 326
30 489 580
37 475 164
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Assets /
liabilities
recorded at
amortised
cost
Quoted
market
prices
Fair Value
Valuation
models based
on observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
(thousand of Euros)
Total fair
value
(Level 1)
(Level 2)
(Level 3)
31 December 2022
Cash, cash balances at central bank and other demand deposits
6 599 078
-
6 599 078
-
6 599 078
Financial assets at amortised cost
Debt securities
Loans and advances to banks
Loans and advances to customers
Financial assets
7 964 664
6 322 522
43 548
24 550 936
-
-
270 317
43 548
1 002 725
7 595 564
-
43 548
-
25 072 152
25 072 152
39 158 226
6 322 522
6 912 943
26 275 167
39 510 632
Financial liabilities measured at amortised cost
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to
transferred assets
Other financial liabilities
Financial liabilities
9 705 154
29 277 858
-
-
1 628 897
1 696 133
375 268
-
9 696 251
-
9 696 251
-
-
-
29 277 858
29 277 858
68 964
1 765 097
375 268
375 268
40 987 177
1 696 133
9 696 251
29 722 090
41 114 474
Note 41 - Transfer of Assets
In the context of the restructuring process of the Portuguese real estate sector, several initiatives were launched to
create financial, operational, and management conditions that could revitalize that sector. In this regard, the
Government, in close connection with companies and the financial sector, including the former BES, encouraged the
integrated
creation of societies and specialized funds that, through concentration, aggregation, merger, and
management operations, would allow the attainment of the synergies needed for the recovery of the companies. With
these objectives in mind, companies (parent companies) were established, with a minority participation of the
Originating Bank, which in turn came to hold almost all of the capital of certain subsidiaries (subsidiaries of these parent
companies) with the aim of acquiring certain real estate bank loans.
A set of operations for the transfer of financial assets (namely customer credit) to those last entities (subsidiaries of the
parent companies) was carried out. These entities are responsible for managing the assets received as collateral that,
after the transfer of credits, aim to implement a plan to enhance them. Almost all of the financial assets transferred in
these operations were derecognized from the Group's balance sheet, as the substantial share of the risks and benefits
associated with them, as well as their control, was transferred to the aforementioned third-party entities.
The aforementioned acquiring entities have a specific management structure, completely autonomous from the lending
banks, which is selected at the time of their constitution and has the main responsibilities of:
• defining the purpose of the entity;
• manage and exclusively and independently manage the acquired assets, determine the objectives and
investment policy and the manner of conduct of the management and business of the entity.
The acquiring entities are financed, predominantly, through the issuance of senior capital instruments that are fully
subscribed by the parent companies. The value of the capital represented by senior securities equals the fair value of the
transferred asset, determined by a negotiation process based on evaluations made by both parties. These securities are
remunerated at an interest rate that reflects the risk of the company holding the assets. Additionally, financing can be
supplemented by banks subscribing to junior capital instruments by the difference between the book value of the
transferred credits and the fair value that was based on the valuation of the senior security. These junior instruments,
when subscribed by the Group, will entitle to a contingent positive value, if the value of the transferred assets exceeds
the amount of senior installments plus their remuneration, and is usually limited to a maximum of 25% of the total value
resulting from senior securities and junior securities issued.
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Considering that these junior securities reflect a differential valuation of the transferred assets, based on evaluations
made by independent entities and a negotiation process between the parties, they are fully provisioned in the Group's
balance sheet.
Thus, following the asset transfer operations, the Group subscribed:
• capital-senior instruments, representing the capital of the parent companies in which the cash flows that will
allow their recovery come from a wide range of assets transferred by the various Banks. These securities are
recorded in the portfolios of financial assets necessarily at fair value through the results being evaluated at market,
with valuation regularly disclosed by the mentioned companies whose accounts are audited at the end of each
year;
• junior instruments, issued by the companies that acquire the credits that are being fully provisioned as they
reflect the best estimate of the impairment of the transferred financial assets.
From these subscriptions by the novobanco Group resulted a clearly minority position in the capital of the mentioned
entities.
In this context, not having control but remaining with some risk and benefit, the Group novobanco, under the terms of
IFRS 9 3.2.7, conducted an analysis of the exposure to variability of risks and benefits in the transferred assets, before
and after the operation, concluding that it did not retain a substantial part of the risks and benefits. Additionally, and
considering that it also does not have control, it proceeded under the terms of IFRS 9 3.2.6c, (i) to the derecognition of
the transferred assets and (ii) to the recognition of the assets received as consideration, as shown in the following table:
Amounts at transfer date
(thousand of Euros)
Amounts of the assets transferred
Securities subscribed
Net assets
transferred
Transfer
amount
Result of the
transfer
Shares
(Senior
securities)
Junior
securities
Total
Impairment
Carrying
book value
Fundo Recuperação Turismo, FCR
293 187
293 187
-
256 892
34 906
291 798
(34 906)
256 892
FLIT SICAV
336 896
337 981
1 085
325 527
23 247
348 773
(23 247)
325 527
Discovery Portugal Real Estate Fund
227 155
218 609
(8 546)
211 780
-
211 780
-
211 780
Fundo Vallis Construction Sector
98 981
98 981
-
98 349
25 181
123 529
(25 181)
98 349
Fundo Recuperação, FCR
200 019
204 317
4 299
164 078
36 182
200 261
(23 000)
177 261
Fundo Reestruturação Empresarial
73 225
73 225
-
Fundo Aquarius
144 830
143 770
(1 060)
103 481
145 435
-
-
103 481
145 435
-
-
103 481
145 435
1 374 292
1 370 070
( 4 222)
1 305 541
119 516
1 425 057
( 106 333)
1 318 724
During 2022, as part of the Crow project, the Group proceeded to sell all the participation units of the Tourism Recovery
Fund and the FLIT SICAV, and to partially sell the participation units of the Recovery Fund FCR (see note 13), so as of
December 31, 2023, the Group's total exposure in securities related to credit transfer operations amounted to a value of
220.9 million euros (December 31, 2022: 253.2 million euros). The details are as follows:
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Securities
2022
Securities
Participation
units
subscribed
(no.)
Book value
NAV
Unrealised
Subscribed
Capital
Participation
units
subscribed
(no.)
Book value
NAV
FLIT SICAV
-
-
-
-
25 000
-
-
Discovery Portugal Real Estate Fund
259 527
135 655
267 043
3 950
259 527
135 655
269 119
Fundo Recuperação, FCR
171 846
19 172
39 795
5 209
186 602
21 567
51 836
Fundo Reestruturação Empresarial
-
-
-
-
80 719
21 798
29 337
Fundo Aquarius
147 148
57 099
152 654
18 502
166 861
74 202
133 629
Fundo Turismo Algarve
47 188
9 000
46 101
944
47 188
9 773
46 232
625 709
220 926
505 593
28 605
765 897
262 995
530 153
(thousand of
Euros)
Unrealised
Subscribed
Capital
-
3 950
17 569
5 680
20 980
-
48 179
* quote as at 30 June 2023
Note 42 - Risk Management
The "Institutional" area of Novo Banco, S.A.'s website presents information for the investor, particularly the Market
Discipline Report of Novo Banco, S.A., which aims to comply with the obligation to publicly disclose information as set
out in Part VIII of Regulation No. 575/2013 of the European Parliament and the Council of 26 June 2013 (CRR) and the
guidelines issued by the EBA, incorporated into the Portuguese regulatory framework through Banco de Portugal's
Instruction 5/2018.
In cases where the information from this Annual Report supports the information in the Market Discipline Report, this
information is identified through references to this Report, systematized in Annex VI of the Market Discipline Report.
42.1. Framework
Risk is implicit in banking business and, as such, the novobanco Group is naturally exposed to various categories of risks
that arise from external and internal factors, and which emerge depending on the characteristics of the markets in which
the Bank operates and the activities it carries out.
Therefore, the risk management and control of the novobanco Group is based on the following premises:
• Independence from other group units, particularly risk-taking units;
• Universality by application throughout novobanco Group;
• Integrity of risk culture, through a holistic view and anticipation of its materialization;
• 3 Lines of Defense Model, with the aim of adequately detecting, measuring, monitoring, and controlling the
materially relevant risks to which novobanco Group is subject. This Model implies that all employees, in their sphere
of action, are responsible for managing and controlling risks.
42.2. Governance and Risk management structure
Risk Management, being vital for the development of novobanco Group's activity, is centralized in the Risk Management
Function, assumed by the Global Risk Department (DRG), which defines in a holistic way the principles of risk
management and control, in close coordination with the other 2nd line units of the novobanco Group, as well as with the
Internal Audit Department.
All materially relevant risks are reported to the respective Management and Supervisory Bodies (EBD, GSB and both
Risk Committees and specialized Committees), which assume the responsibility to supervise, monitor, evaluate and
define the Risk Appetite and the control principles implemented.
The person responsible for the Risk Management Function of the novobanco Group is the head of the DRG. In order to
guarantee greater efficiency in coordination with the DRG, a local Risk Function Manager was appointed for each
relevant entity of the novobanco Group. The intervention of the DRG is direct or of coordination in alignment with the
units that assume the local Risk Management Function.
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Risks identified as relevant and material are quantified through the Internal Capital Adequacy Assessment Process
(ICAAP), with the most relevant being:
• credit risk that includes default, counterparty and concentration
• market risk;
• liquidity risk;
• information and communication and Security, compliance risk, and reputational risk, and
• business risk.
We highlight ESG (Environmental, Social and Governance) risk - particularly the subcategories of climate and
environmental risk and other environmental risks - as risks of increasing relevance, and whose impact is estimated to be
materialized in the medium and long term (that is, over a horizon longer than the other risk categories).
ESG risk is part of the Group's risk management framework, in close coordination between the DRG and the ESG Office,
which contributes with specific knowledge for the identification of climate and environmental risk factors and social risk
factors.
Thus, it is formally defined in novobanco's risk taxonomy as exposure to adverse events resulting from inadequacies or
failures in procedures, systems or policies related to the environment (adaptation or mitigation of climate change,
sustainable use and protection of water or marine resources, transition to a circular economy, waste prevention and
recycling, pollution control and protection of ecosystems) and natural resources (Biodiversity), Social (equality, social
cohesion, social integration, labor relations) and Governance (adequate management structures, labor relations,
employee remuneration and tax obligations compliance).
The assessment of the materiality of its impacts is analysed cross-sectionally, as ESG factors are intrinsically present in
the other risk categories provided for in the Group's risk taxonomy.
In this regard, we highlight the factors that have received greater specialization from the Group, in terms of its risk
assessment and control methodologies and their integration into business processes:
• Climate transition risks: defined as the impacts associated with the transition to a low-carbon economy. In other
words, these risks are caused by legislation/regulation, technology, and market changes resulting from the
requirements associated with climate change. Depending on each economic sector's (and each company's)
response to the need for transition, different scenarios (and severities of transition risk factors) can be envisioned,
and as a result, different risks and risk levels can be identified and assessed.
• Physical risks: defined as the impacts associated with the physical effects of climate change. These risks can
result from factors that arise based on an extreme event - acute risk - or through a medium or long-term factor -
chronic risk (for example, the negative effect that global warming, resulting from the continuous increase in
temperatures, can have on the productive cycles of some sectors). Physical risks can have as a consequence
internal financial impacts (damage to own assets) or external financial impacts (disruption of the productive cycles
of customers/counterparts or the impact on the Group's real estate collaterals).
Next are the main guidelines for managing the risks identified above:
• Credit risk: the management and control of this type of risk are supported by the use of an internal system for
identifying, assessing and quantifying risks, as well as internal rating and scoring processes for the portfolios and
their continuous monitoring in specific decision-making forums;
• Market risk: there is a specialized team that centralizes the management and control of market risk and the
Group's balance sheet interest rate risk (IRRBB), aligned with regulation and good risk practices;
• Liquidity risk: based on the measurement of liquidity outflows from contractual and contingent positions in
normal or in stress situations, the management and control of this risk consists, on the one hand, in determining the
size of the liquidity pool available at any given time, and on the other hand in planning, in the medium and long term,
stable financing sources;
• non-financial risks: the management of this risk is based on the definition of a framework for the management
and control of non-financial risks and specific policies; and on the compliance function and the Information Security
Office playing a relevant role in the definition of other specific risk policies.
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42.3. Credit risk
Credit risk arises from the possibility of financial loss due to customer or counterparty defaults on contractual
obligations established with the Group as part of its credit activity. Credit risk is primarily present in traditional banking
products - loans, guarantees, and other contingent liabilities and derivatives. In credit default swaps (CDS), the net
exposure between selling and buying protection positions on each entity underlying the operations constitutes credit
risk for the novobanco Group. CDSs are recorded at their fair value as per the accounting policy described in Note 7.6.6.
Continuous management of credit portfolios is carried out, favouring interaction between the various teams involved in
risk management throughout the successive phases of the credit process. This approach is complemented by
introducing continuous improvements in both risk assessment and control methodologies and tools, as well as decision-
making procedures and circuits.
Monitoring the Group's credit risk profile, particularly in terms of the evolution of credit exposures and monitoring of
credit losses, is carried out on a regular basis in the Risk Committees of the Executive Board and the General and
Supervisory Board.
Main events in 2023 exercise
During 2023, we highlight below the main events related to impairment, namely:
(i) Constitution of impairments for contingencies resulting from adverse market conditions;
(ii)
(iii) Update of macroeconomic scenarios.
Introduction of new triggers to stage 2 related to exposures without a risk rating;
Regarding the impairment boosts mentioned in points 1. above, taking into account the current economic context of
high interest rates, with the prospect of maintenance during 2024, to face contingencies of these adverse market
conditions, a sensitivity analysis was carried out on the corporate and housing portfolio.
Therefore, novobanco estimated and accounted for these portfolios, in an appropriate and timely manner, more than 40
million euros in unallocated impairment in addition to the cost of risk observed in its portfolio.
Regarding the introduction of new triggers to stage 2, in this case, all exposures with a persistent situation of not having
a valid risk rating are now considered in stage 2. The introduction of this measure in the collective impairment calculation
model had no impact in 2023 as novobanco had already taken precautions.
In relation to point (iii) above, the impact of updating the macroeconomic scenarios underlying novobanco's impairment
calculation model was estimated slightly below 30 million euros of impairment, an amount also recorded as unallocated
impairment.
The climate and environmental risk component
The ESG risk materiality analysis seeks to identify the impact that this risk will have on other risks, particularly credit risk,
since it is the main risk faced by novobanco. In order to monitor the portfolio's credit risk from an ESG perspective,
various metrics (KRI) were created which are monitored on a monthly basis, seeking to analyze the evolution of the
portfolio's risk and anticipate any adverse impacts on credit risk resulting from factors associated with climate and
environmental risk.
From a portfolio perspective, the assessment of credit risk in sectors relevant to climate risk policy is used by the
novobanco to prioritize, assess and monitor transition risk, with a focus on negatively affected sectors or those with an
uncertain impact. This methodology takes into account the following factors: direct and indirect contribution to GHG
emissions (greenhouse gas, such as the production and distribution of fossil fuels or renewable energies), relevance to
climate policy (such as the sensitivity of the cost structure to regulatory or fiscal changes based on GHG emissions) and
importance in the energy value chain (production, use, consumption).
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In this respect, novobanco is developing its transition plan with the aim of reducing its indirect carbon footprint, reducing
the risk of its portfolio and contributing to meeting the Paris objectives. In 2023 it took a major step forward, approving
targets for reducing financed GHG emissions for 3 business sectors (Electricity Generation, Concrete and Commercial
Mortgages). These targets were calculated based on scientific methodologies recommended by sector by the Science
Based Targets Initiative (SBTi).
In order to allow for a top-down analysis, novobanco has developed an ESG sectoral scoring system that allows for the
identification of clients who will be the target of credit risk analysis from an ESG perspective, by prioritizing the sectors
with the greatest concerns in terms of climate risk, namely the sectors classified in the ESG scoring with high and severe
risk. Novobanco is developing specific guidelines adapted to the risks that each relevant sector faces or will face.
To ensure that novobanco has access to its clients' ESG information, new contractual provisions have been introduced
in credit agreements regarding the provision of non-financial information by clients, minimum social and governance
safeguards, as well as sectoral provisions for sectors subject to minimum financing safeguards, where applicable. For
reference, the sectors subject to exclusion or minimum safeguards are described in the novobanco's Financing Principles
- Sector/activity exclusions and minimum safeguards.
During 2023, special emphasis was also placed on obtaining Energy Performance Certificates (EPC) for real estate
guarantees already in the bank's portfolio. For new operations, regardless of the purpose and type of property, the
energy certificate is mandatory.
Finally, novobanco was selected to take part in the Fit-for-55 Climate Stress Test, a regulatory exercise that seeks to
identify the resilience of financial institutions to meet climate objectives. The exercise began in 2023 and will conclude in
2024. This exercise will enable a benchmark to be made between the various institutions and will allow the regulator to
identify market best practices.
42.3.1. Exposure to credit risk
Next, the information related to the novobanco Group's maximum exposure to credit risk is presented:
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2023
2022
(thousand of Euros)
Gross value
Impairment
Net Value
Gross value
Impairment Net Value
Deposits with and loans and advances to banks
362 002
( 714)
361 288
518 014
( 780)
517 234
Derivatives for trading and fair value option derivatives
Securities held for trading
Securities at fair value through profit/loss
Securities at fair value through profit/loss - mandatory
117 620
318 528
-
11 418
-
-
-
-
117 620
318 528
-
11 418
135 382
36 428
13
13 473
-
-
-
-
135 382
36 428
13
13 473
Securities at fair value through other comprehensive income
760 869
( 239)
760 630
2 243 984
( 660)
2 243 324
Securities at amortised cost
8 194 848
( 324 312)
7 870 536
8 256 195
( 291 531)
7 964 664
Loans and advances to customers
25 405 088
( 954 525)
24 450 563
25 452 202
(1 066 392)
24 385 810
Derivatives - hedge accounting
683 063
-
683 063
562 845
-
562 845
Other assets
523 511
( 132 533)
390 978
551 797
( 129 830)
421 967
Guarantees and standby letters provided
2 354 035
( 74 686)
2 279 349
2 397 867
( 82 547)
2 315 320
Documentary credits
187 024
-
187 024
169 410
-
169 410
Revocable and irrevocable commitments
5 983 312
9 294
5 992 606
6 206 048
7 350
6 213 398
Credit risk associated with the reference entities of credit
derivatives
-
-
-
-
-
-
44 901 318
(1 477 715)
43 423 603
46 543 658
(1 564 390) 44 979 268
For financial assets recognized in the Balance Sheet, the maximum exposure to credit risk is represented by the net book
value of impairment. For off-balance-sheet items, the maximum exposure of guarantees is the maximum amount the
Group would have to pay if the guarantees were executed, and for loan commitments and other irrevocable credit-
related commitments, it is the total amount of commitments assumed.
Impairment is calculated on a collective or individual basis according to the accounting policy defined in Note 7.12. In
cases where the value of collateral, after applying haircuts (differentiated by collateral type), equals or exceeds
exposure, individual impairment may be null. Thus, the novobanco Group has no overdue financial assets for which it has
not performed an analysis regarding its recovery and subsequent recognition of the respective impairment when
verified.
42.3.2. Scenarization in impairment models
As prescribed in IFRS 9 regulation, the Group's impairment calculation reflects different macroeconomic evolution
expectations, that is, it incorporates multiple scenarios. To incorporate the effects of future macroeconomic behavior on
loss estimates, macroeconomic forward-looking estimates are included in some of the risk parameters used for
impairment calculation. Accordingly, different possible scenarios are considered, which result in the same number of
impairment outcomes.
In this context, the process of defining macroeconomic scenarios considers the following principles:
• Representative scenarios that capture existing nonlinearities (e.g., a base scenario, a scenario with more
favorable macroeconomic prospects, and a scenario with less favorable macroeconomic prospects);
• The base scenario is consistent with the inputs used in other exercises in the Group, as it uses the same
methodology that the Group uses in internal and regulatory planning exercises for impairment calculation purposes;
• Alternative scenarios to the base scenario incorporate a favorable and an adverse scenario;
• The correlation between projected variables is realistic with the economic reality (e.g., if GDP is increasing, it is
expected that unemployment is decreasing).
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The exercise of constructing central and alternative macroeconomic scenarios for the Portuguese economy is based on
a combination of econometric forecasts, information on forecasts from other external institutions, and the exercise of
subjective expert judgement.
In the first component, GDP growth is estimated through estimates for the growth of expenditure components,
reaching GDP through the identity GDP = Consumption + Investment + Exports - Imports. The chosen econometric
specifications are those that, after testing different alternatives, generate the best result.
The econometric estimates thus obtained are then weighted with forecasts from external institutions, according to the
principle that the combination of different projections tends to be more accurate than a single forecast (the risk of errors
and biases associated with specific methods and variables is minimized).
Forecasts for prices (consumption and real estate) and unemployment follow a similar methodology: own forecasts from
an estimated model, weighted with forecasts from external institutions, if these are available. In a base scenario, the
projections for interest rates start from market expectations (provided by Bloomberg), with possible adjustments
according to the principles defined above, if considered appropriate (weighting by expert judgment and forecasts from
external institutions). The alternative scenarios are based on the historical observation of deviations from the trend in
the behaviour of GDP (expansion and contraction cycles), the reference of EBA recommendations for extreme adverse
scenarios, the stylized facts of economic cycles, with regard to expenditure components, prices, unemployment, etc.,
and estimates.
Thus, when revising/updating the scenarios, the respective probabilities are also reviewed. Once the scenarios are
updated, the values of the risk parameters are updated for later consideration in the context of the Impairment
calculation. The eventual final impairment will result from the sum of the impairment value of each scenario, weighted by
its respective probability of execution.
Currently, 3 scenarios are considered for the calculation of collective impairment: central, less favourable (or adverse)
and more favourable. The considered scenarios and the evolution of the main macroeconomic variables are described in
the tables below:
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A – Base Scenario, with a relative weight of 72,5%
Unit
2023
2024
2025
2026
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Unemployment
Euribor (average)
3-months
End of the period
6-months
End of the period
12-months
End of the period
Sovereign Yields (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
% workforce
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
1,4
0,8
1,2
4,7
2,0
3,4
1,6
2,9
0,2
0,1
0,0
6,7
3,58
3,19
3,52
3,11
3,40
3,03
2,81
2,81
3,71
3,78
2,89
2,79
90
97
82
99
2,0
1,3
1,3
5,1
3,9
4,0
2,0
2,2
1,5
0,6
0,0
6,9
3,02
2,85
2,99
2,87
2,97
2,90
2,87
2,92
3,89
4,00
2,92
3,05
103
108
97
95
2,2
1,7
1,4
4,2
6,4
6,3
2,2
2,0
3,3
1,6
0,0
6,8
2,84
2,83
2,87
2,86
2,91
2,92
<
3,04
4,11
4,21
3,18
3,31
113
117
93
90
2,2
1,7
1,4
4,2
6,4
6,3
2,2
2,0
3,3
1,6
0,0
6,8
2,84
2,83
2,87
2,86
2,91
2,92
2,98
3,04
4,11
4,21
3,18
3,31
113
117
93
90
After GDP growth of 6.8% in 2022, the base scenario assumes a slowdown in activity in 2023, to growth of around
2.1%, supported by net external demand, given the strong growth in exports at the beginning of the year (in particular
from tourism), and the resilience of private consumption. The decline in GDP growth is explained by the adverse impact
on domestic demand of high inflation and rising interest rates. For 2024, it is assumed that GDP growth will decline to
1.4%, with additional lagged impacts from a restrictive monetary policy (increase in debt service), a slight rise in
unemployment and a slowdown in exports. The decline in growth is mitigated by the decline in inflation, budgetary
support and an acceleration of investment (mainly public investment) within the scope of the Recovery and Resilience
Plan. In 2025-26, GDP growth is assumed to converge to trend (annual growth around 2%-2.2%).
After reaching a peak of 7.8% in 2022, average annual inflation remains high in 2023, at around 4.6% (mainly with the
contribution of services). A more visible slowdown in consumer prices is assumed for 2024-26, towards the 2% target.
In any case, persistent inflation in 2022-24 supports the scenario of higher key interest rates. In the base scenario, these
reach their peak in the 4th quarter of 2023. The annual average Euribor in months is seen to increase from 0.35% in 2022
to 3.43% in 2023 and to 3.58% in 2024, before to gradually decrease to 2.84% in 2026 (the rate is expected to peak at
around 4% in the 4th quarter of 2023). The PGB-Bund spread is expected to remain contained, below or around 100
basis points in 2024 and 2025.
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The household savings rate is expected to increase from 6.5% in 2022 to 7.3% in 2025 and 2026, as private
consumption slows, following the post-Covid boom and with the effects of higher interest rates and more restrictive
financing conditions. The unemployment rate remains contained, at around 6.5%-6.8% of the active population.
B – Less favourable / adverse scenario, with a relative weight of 17,5%
Unit
2023
2024
2025
2026
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Unemployment
Euribor (average)
3-months
End of the period
6-months
End of the period
12-months
End of the period
Sovereign Yields (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
% workforce
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
-3,2
-3,9
0,1
1,2
-3,2
-0,3
-2,3
4,7
-10,1
-15,2
-50,0
8,9
4,37
3,98
4,66
3,87
4,65
3,75
2,93
2,21
4,31
3,78
3,69
2,99
138
157
62
79
-1,5
-2,6
0,1
1,0
0,4
0,5
-1,4
1,9
-4,8
-6,5
-45,0
13,1
2,96
2,45
2,84
2,33
2,72
2,21
1,98
1,75
3,48
3,17
2,68
2,36
150
142
80
81
1,6
1,4
0,8
3,7
6,3
6,5
1,8
1,8
0,8
0,4
1,6
1,4
0,8
3,7
6,3
6,5
1,8
1,8
0,8
0,4
-35,0
10,6
-35,0
10,6
2,25
2,05
2,15
1,96
2,08
1,94
1,80
1,85
3,08
2,99
2,24
2,11
128
114
85
88
2,25
2,05
2,15
1,96
2,08
1,94
1,80
1,85
3,08
2,99
2,24
2,11
128
114
85
88
The adverse scenario is based on the assumption that inflation will become more persistent than expected. This could be
due to an energy shock, with new impacts from the wars in Ukraine and the Middle East. The ECB responds by further
increasing policy rates in late 2023 and 2024. This leads to sharply restrictive financial conditions and a recession in
2024-2025.
In the Portuguese economy, GDP growth falls by 3.2% in 2024 and 1.5% in 2025, mainly as a result of a significant
contraction in private consumption, which is negatively impacted by the increase in interest rates, the fall in purchasing
power purchase and a significant increase in unemployment. Private investment by families and non-financial
corporations also falls in real terms. However, total investment still increases, as a result of the public component,
reflecting the implementation of the Recovery and Resilience Plan funds. It is assumed that net external demand will
have a negative contribution to growth (decrease in exports, including services).
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Average annual inflation is expected to remain well above the target in 2024 (around 4.7% in Portugal). But tighter
financial conditions, with higher policy and market interest rates, contribute to the recession in 2024-25, which is
assumed to be disinflationary in nature. Inflation falls quickly to levels below 2% in 2025-26, leading the ECB to cut key
rates in that period, which translates into a fall in market interest rates, to levels below those observed in the base
scenario.
The unemployment rate rises to 8.9% in 2024 and to 13.1% in 2025. The fall in private consumption and the need to
compensate for the erosion caused by inflation result in an increase in the household savings rate, to 9. 9% of disposable
income in 2025, above pre-Covid levels.
C – More favorable scenario, with a relative weight of 10%
Unit
2023
2024
2025
2026
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Unemployment
Euribor (average)
3-months
End of the period
6-months
End of the period
12-months
End of the period
Sovereign Yields (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
% workforce
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
2,3
1,3
1,2
1,5
4,2
1,3
1,3
4,6
7,5
2,5
2,0
6,4
3,44
3,96
3,70
3,92
3,88
3,77
2,53
2,85
3,33
3,64
2,96
2,99
80
79
37
65
2,1
1,8
1,2
5,5
3,1
4,6
2,4
3,0
1,8
0,6
15,0
6,5
3,83
3,69
3,76
3,60
3,65
3,52
2,87
2,88
3,65
3,66
2,91
2,83
79
78
74
83
2,4
2,4
1,5
6,1
4,7
5,9
3,0
2,4
2,5
0,8
20,0
6,4
3,52
3,35
3,42
3,24
3,33
3,13
3,05
3,21
3,76
3,86
2,92
3,01
72
65
84
85
3,1
3,5
1,4
5,0
6,9
7,7
3,5
2,1
3,7
1,2
25,0
5,9
3,17
2,99
3,11
2,97
3,04
2,95
3,28
3,35
3,91
3,96
3,00
2,99
63
61
91
97
The favorable scenario assumes that the increase in inflation in 2023 proves to be transitory. After recording 4.6%, price
growth converges, in the remaining projection horizon, to values close to 2%. This development could be associated
with a rapid resolution of conflicts in Ukraine and/or the Middle East and a strong reduction in energy and food prices.
Short-term market interest rates decline in 2025-2026 but remain clearly above pre-Covid levels. Long-term interest
rates rise throughout the projection horizon, but with the 10-year PGB-Bund spread retreating and evolving at low
levels. In this context, it is assumed that economic activity will expand at an above-trend pace for most of the projection
horizon and accelerating until 2026. GDP growth benefits from positive
investment performance (with the
implementation of funds from the PRR), private consumption and exports. Strong external demand and favorable
financing conditions support house price growth, albeit in single digits. The unemployment rate is seen falling to close to
5% of the active population.
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42.3.3. Impairment models
42.3.3.1. Individual Credit Analysis
The Individual Impairment Analysis aims to determine the most appropriate impairment rate for individually significant
clients, regardless of the value resulting from the Collective Impairment Model. The identification of individually
significant customers is carried out based on the criteria defined in the standard.
The Individual Analysis of individually significant clients is carried out based on the information provided by the
Commercial Structures and DRCE (Corporate Credit Recovery Department) regarding the client/Group framework,
historical cash flows (wherever possible, at least 3 years) and forecasts (when available) and existing collateral.
In the analysis of quantifying impairment on an individual basis, possible scenarios are established for credit recovery,
either through the continuity of the client's business, through the giving/execution of collateral or through the sale of
the credit, weighted by the respective probability of occurrence. If the analysis results in no specific impairment being
necessary, the impairment will be determined by collective analysis, that is, by the collective impairment model.
The scheme below illustrates the individual credit analysis to be carried out to conclude on the classification in terms of
staging of debtors:
Selection Criteria
The Group considers as the target of an Individual Analysis process (staging analysis and, when applicable, individual
impairment quantification), customers who:
• Register exposure in stage 3 and liability equal to or greater than 1 million euros (or equal to or greater than 250
thousand euros if they are DRCE clients);
• Are identified by the Committee itself based on another justified criterion (e.g. sector of activity);
•
•
In the past, they have been assigned specific impairment;
In the event of any new evidence that may have repercussions on the calculation of impairment, they are
proposed for analysis by one of the participants of the Impairment Committee or by another Body/Forum,
namely GARC (e.g.: Reclassification in stage 3 within the scope of GARC).
The identification of customers targeted for Individual Analysis will be updated monthly, in order to take into account
any changes that may occur throughout the year.
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Quantification of Impairment on an Individual Basis
The impairment calculation on an individual basis may take into account different recovery strategies, which must
include different possible scenarios, weighted by the respective probability of occurrence, and they must include
information on past and current events and forecasts of future economic conditions (forward scenarios -looking).
It is understood that there are two methods of estimating the amount to be recovered by the Bank:
• Going Concern approach (“business continuity” method): estimation of cash flows through the client’s activity;
• Gone Concern approach (“cessation of activity” method): presupposes the cessation of the Client’s activity,
whereby the recoverable value is determined based on scenarios of execution/granting of guarantees
provided, the Client’s liquidation/insolvency and/or of the respective guarantors/guarantors, and/or the sale of
credits to third parties.
Going Concern
This scenario involves a situation of recovery of outstanding amounts through the cash flows generated by the client's
business.
The going concern scenario is considered to be applicable when:
• There is updated and reliable financial information about the debtor so that it is possible to reliably estimate the
future cash flows that will be channeled to fulfill the debt service (e.g.: financial information aged less than or
equal to 1 year and/or reports audits that do not recurrently present reservations);
• The available information suggests that the debtor will have the capacity to generate cash flows from its
operational activities.
This analysis can be carried out using the following approaches:
•
•
•
“Discounted Cash Flow” approach supported by a reliable business plan and adjusted to the expectations of
the evolution of the debtor's activity;
“Twostep Discounted Cash Flow” - approach supported by a Discounted Cash Flow (Step 1), complemented
with a Terminal value (Step 2);
“Steady state” in the absence of a reliable business plan, the latest available financial statements may be used,
and the Group must make any adjustments it deems necessary to determine the operational cashflow that will
be generated to cover debt service.
Gone Concern
In the gone concern approach, the recovery of amounts owed will be materialized through a scenario of payment in kind
and/or the execution of collateral allocated to the credit granted. This approach therefore considers the scenario of
cessation of the company's activity and the preparation of estimates of the flows that result from the execution and
sale of collateral allocated to credit.
The consideration of a scenario of donation or execution of collateral must, in a first phase, take into account the
eligibility of the collateral for recovery of the amounts owed, i.e., the verification that the asset meets the necessary
conditions to be considered for consideration. effects of calculating the recoverable value (e.g.: registration of
mortgages, lack of seizure of assets, among others). By way of example, if another creditor has a preferential mortgage
on the collateral that is greater than the recoverable value of the asset, then the Group should not consider any amount
recoverable from that collateral.
Subsequently, the recoverable value must be determined in accordance with the rules described in Circular Letter no.
CC/2018/0000006, particularly with regard to the deadlines for receiving collateral, sales costs, maintenance costs,
haircuts to be applied in accordance with the age of the evaluation, among others.
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42.3.3.2. Collective analysis adjustments to the automatic result of the model
After processing the calculation of collective impairment and validating the consistency of the results obtained, all
situations that may require an adjustment to the calculated impairment value are evaluated. These adjustments are
reflected, where possible, directly in the exposures and are assigned a specific validity period. At the end of this period,
the necessity for adjustment is re-evaluated and its renewal, alteration and/or extinction are decided.
When this is not possible, the determined impairment value is accounted for without being allocated to specific
exposures. For this purpose, each amount must have associated the stage and type of credit to which it refers.
Considering the temporary nature of the impairment constituted without allocation as a principle, the impairment
amounts constituted in this way will, as soon as conditions allow, be fully distributed among the exposures in which their
allocation is determined.
In terms of governance model, both the adjustments in specific exposures and the impairment amounts constituted in
non-allocated form must be validated and supported by an approval from a competent body - the Expanded Impairment
Committee.
42.3.4. Credit risk monitoring
42.3.4.1. Internal rating models for corporate, institutional and equity portfolios
Regarding rating models for corporate portfolios, different approaches are adopted depending on the size and sector of
activity of the clients. Specific models adapted to project finance, acquisition finance, object finance, commodity finance
and construction financing operations are also used.
A synthesis table is presented below pertaining to the types of risk models adopted in the internal assignment of risk
ratings:
The Bank's Rating Department has a Rating Model for the following segments: Start-ups; Sole Proprietors (ENIs); Small
Businesses; Medium Businesses; Large Businesses; Real Estate and Rental Real Estate; Large Business Holding;
Financial Institutions; Municipalities and Institutions; Countries; Project Finance; Object Finance, Commodity and
Acquisition Finance; Financial Holding.
The segments for which rating assignment models are not available are:
• Insurance and Pension Funds;
• Churches, political parties and non-profit associations with turnover less than 500,000 euros.
Institutions,
large companies, Financial
Regarding the credit portfolios of
Institutions, Local and Regional
Administrations and Specialized Loans - namely Project Finance; Object Finance, Commodity and Acquisition Finance -
the risk ratings are assigned by the Group novobanco's Rating Desk. This structure consists of 7 multisectoral teams
comprising a team leader and several specialized technical analysts. The assignment of internal risk ratings by this team
to these risk segments, classified as low default portfolios, is based on the use of "expert-based" rating models
(templates) that are based on qualitative and quantitative variables, closely correlated with the sector or sectors of
activity in which the customers under analysis operate. With the exception of rating assignment to specialized loans,
the methodology used by the Rating Desk is also governed by a risk analysis at the level of the maximum consolidation
perimeter and by the identification of the status of each company participating in the respective economic group. The
internal risk ratings are validated daily in a Rating Committee composed of members of the Rating Department's
Directorate and the various specialized teams.
For the medium business segment, statistical rating models are used, combining financial data with qualitative and
behavioural information. The publication of risk ratings, however, requires the execution of a prior validation process that
is carried out by a technical team of risk analysts, who also take into account behavioural variables. In addition to rating
assignment, these teams also monitor the credit portfolio of novobanco Group clients through the preparation of risk
analysis reports, provided for in internal regulations, according to the current responsibilities/rating client binomial, which
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Annual Report 2023 | novobanco
may include specific recommendations on the credit relationship with a particular client, as well as technical opinions on
investment support operations, restructuring, or other operations subject to credit risk.
For the business segment, statistical scoring models are also used, which have, in addition to financial and qualitative
information, behavioral variables of the companies and the partner(s) in the calculation of risk ratings.
Scoring models specifically aimed at quantifying the risk of start-ups (companies established less than 2 years ago) and
sole proprietors (ENI) are also implemented. These clients, along with small-sized businesses, depending on the
exposure value, are included in the regulatory retail portfolios.
Finally, for companies in the real estate sector (companies dedicated to real estate promotion and investment activity,
in particular small and medium-sized companies), given their specificities, their respective ratings are assigned by a
specialized central team, relying on the use of specific models that combine the use of quantitative and technical
variables (real estate valuations carried out by specialized offices), as well as qualitative and behavioral variables.
As for the risk positions equivalent to equities held by the novobanco Group, directly or indirectly through the holding of
investment funds, as well as advances and accessory benefits, all included in the equity risk class for the purpose of
calculating risk-weighted assets, are classified in various risk segments according to the characteristics of their issuers
or borrowers, following the segmentation criteria presented earlier. These segmentation criteria determine the type of
rating model to be applied to the issuers of the stocks (or borrowers of the advances / accessory benefits) and,
therefore, to them.
42.3.4.2 - Relationships between internal and external ratings
The assignment of internal rating to entities with an assigned external rating is done using the Market Template
available in the Rating Calculation application. The Market Template gathers the external ratings that have been
assigned to a particular entity by rating agencies Standard & Poor’s (S&P), Moody’s and Fitch.
Specifically, the S&P's external rating provision feature - XpressFeed, feeds the External Ratings application daily, which
in turn allows the external ratings published by these agencies for a specific entity to be filled in the Market Template.
External ratings assigned by Moody’s and Fitch are not automatically obtained, and must be manually entered in the
Market Template, after consulting the respective websites.
The internal rating results, in the vast majority of cases, from the equivalent S&P external rating and, in rare cases, from
the equivalent S&P external rating plus an internal adjustment, which must always be accompanied by explanatory
comments drafted by the analyst.
Note that the equivalent S&P external rating is obtained by correlating the available external ratings with the rating
scales of the aforementioned financial rating agencies. The internal ratings produced by the Market Template and that
have had adjustments have to be approved and validated in the Rating Committee.
The following table shows the correspondence between the external ratings S&P, Moody’s and Fitch and the equivalent
S&P external rating:
425
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
S&P
AAA
AA+
AA
AA-
A+
A
A-
fBBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
SD
D
Moody's
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
B2
B3
Caa1
Caa2
Caa3
Ca
C
Fitch
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
RD/D
Equivalent External
Rating S&P
Rating agreggating classes*
Prime Grade
High grade
Upper medium grade
Lower medium grade
Non investment grade
speculative
Highly speculative
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
Lower than CCC
Others
* for explanatory notes disclosure information purposes
42.3.4.3 - Internal scoring models for individuals' portfolios
Regarding scoring models for individuals' portfolios, the novobanco Group has origination/concession and behavioral
scoring models (applied to operations with a seniority greater than 6 months).
These models are automatic, based on statistical models developed with
information, considering
sociodemographic information, loan characteristics, behavioral information and automatic penalties (in case there are
warning signs). In the case of behavioral models, information about the rest of the loans of the contract holders is also
considered.
internal
The Group is authorized by the Bank of Portugal to use internal models in calculating regulatory capital requirements for
the main individual portfolios: Mortgage and Individual Credit. Additionally, it has origination and behavioral scorings for
Credit Card products, Overdrafts and Loan Accounts, which it uses for the purpose of design and monitoring of credit
quality although these are not IRB portfolios.
42.3.4.4. Other specific disclosures
Forward Looking Models
Collective impairment models incorporate forward looking information through macroeconomic models, which estimate
the evolution of risk parameters through the evolution of macroeconomic variables.
Regarding the PD model, the forward looking adjustment is carried out for the segments of Large and Medium-sized
Companies, Small Companies and Start-ups, Home Credit and Other Consumer Credit. For LGD models, there is a
specific macroeconomic adjustment for the Housing, Consumer and Corporate Credit segments.
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The aforementioned models are based on the historical series of defaults and, on the other hand by the historical series
of the main macroeconomic variables (GDP, inflation, interest rate, unemployment rate and property prices), having
been used quarterly historical data since 2010. The definition of the final models depends on the economic sense and
their statistical performance.
42.3.5. Delinquency
The following table shows the assets that are impaired, overdue but not impaired, and neither overdue nor impaired:
Deposits with and loans and advances to banks
Securities held for trading
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at fair value through profit/loss
Bonds issued by government
Bonds issued by other entities
Securities at fair value through profit/loss - mandatory
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at fair value through other comprehensive
income
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at amortised cost
Neither
overdue nor
impaired
362 002
318 528
318 528
-
-
-
-
11 418
-
11 418
740 285
371 675
368 610
7 754 579
Bonds issued by government and other public entities
4 421 480
Bonds issued by other entities
3 333 099
2023
(thousands of euros)
Overdue but
not impaired
Impaired
Total
exposure
Impairment
Net exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
362 002
( 714)
361 288
318 528
318 528
-
-
-
-
11 418
-
11 418
-
-
-
-
-
-
-
-
-
318 528
318 528
-
-
-
-
11 418
-
11 418
20 584
760 869
( 239)
760 630
-
371 675
20 584
389 194
( 49)
( 190)
371 626
389 004
440 269
8 194 848
( 324 312)
7 870 536
-
4 421 480
( 588)
4 420 892
440 269
3 773 368
( 323 724)
3 449 644
Loans and advances to customers
24 256 771
15 665
1 132 652
25 405 088
( 954 525)
24 450 563
Deposits with and loans and advances to banks
Securities held for trading
Bonds issued by government and other public entities
Securities at fair value through profit/loss
Bonds issued by other entities
Securities at fair value through profit/loss - mandatory
Bonds issued by other entities
Securities at fair value through other comprehensive
income
Neither
overdue nor
impaired
518 014
36 428
36 428
13
13
13 473
13 473
2 218 736
Bonds issued by government and other public entities
1 764 578
Bonds issued by other entities
Securities at amortised cost
454 158
7 846 101
Bonds issued by government and other public entities
4 610 412
Bonds issued by other entities
3 235 689
2022
(thousands of euros)
Overdue but
not impaired
Impaired
Total
exposure
Impairment
Net exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
518 014
36 428
36 428
13
13
13 473
13 473
( 780)
517 234
-
-
-
-
-
-
36 428
36 428
13
13
13 473
13 473
25 248
2 243 984
( 660)
2 243 324
-
1 764 578
25 248
479 406
( 453)
( 207)
1 764 125
479 199
410 094
8 256 195
( 291 531)
7 964 664
-
4 610 412
( 1 722)
4 608 690
410 094
3 645 783
( 289 809)
3 355 974
Loans and advances to customers
24 070 168
5 625
1 376 409
25 452 202
(1 066 392)
24 385 810
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Management Report
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Consolidated Financial Statements
Annex
Impaired exposures correspond to (i) exposures with objective evidence of loss ("Exposure in default", according to the
internal definition of default - which corresponds to Stage 3); and (ii) exposures classified as having specific impairment
after individual impairment assessment.
Exposures classified as not impaired refer to (i) all exposures that show no signs of significant deterioration in credit risk -
exposures classified in Stage 1; (ii) exposures that, showing signs of significant deterioration in credit risk, have no
objective evidence of loss nor specific impairment after individual impairment assessment.
The following table presents assets that are impaired or overdue but not impaired, disaggregated by their maturity or
age (if they are overdue):
2023
(thousands of euros)
Securities Portfolio - debt
instruments
Deposits with and loans and
advances to banks
Loans and advances to customers
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
Overdue
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
Due
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
-
-
-
-
-
-
-
-
-
-
-
-
-
102 968
-
-
-
1 746
101 222
357 885
13 510
344 284
-
91
-
460 853
-
-
-
-
-
-
-
-
-
-
-
-
-
2022
-
-
-
-
-
-
-
-
-
-
-
-
-
15 665
12 539
1 303
1 073
711
39
-
-
-
-
-
-
349 779
13 329
122 304
127 565
17 854
68 727
782 873
56 622
112 464
89 705
189 162
334 920
15 665
1 132 652
(thousands of euros)
Securities Portfolio - debt
instruments
Deposits with and loans and
advances to banks
Loans and advances to customers
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
Overdue
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
Due
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
-
-
-
-
-
-
-
-
-
-
-
-
-
102 968
-
-
-
6 696
96 272
332 374
327 619
-
-
4 755
-
435 342
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 625
3 258
1 467
824
55
21
-
-
-
-
-
-
324 981
15 607
102 758
78 713
38 988
88 915
1 051 428
49 933
176 350
228 510
83 834
512 801
5 625
1 376 409
428
Annual Report 2023 | novobanco
The following table presents the assets that are impaired or overdue, but not impaired, disaggregated by their
respective impairment Stage:
2023
2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
Deposits with and loans and advances to banks
Securities at fair value through other comprehensive income
Securities at amortised cost
-
-
-
-
-
-
-
-
20 584
20 584
440 269
440 269
Loans and advances to customers
11 273
4 392
1 132 652
1 148 317
11 273
4 392
1 593 505
1 609 170
-
-
-
911
911
-
-
-
-
-
25 248
25 248
410 094
410 094
4 714
1 376 409
1 382 034
4 714
1 811 751
1 817 376
Distribution of credit risk by rating level
Regarding assets that are neither overdue nor impaired, the distribution by rating level is presented below. For debt
instruments, the rating assigned by the Rating Agencies is considered, for customer credit and availabilities and
applications in credit institutions, internal rating and scoring models are used, with which a risk rating is assigned, which
is reviewed periodically. For the purposes of presenting the information, the ratings have been aggregated into five
major risk groups, with "others" including exposures without a rating.
Prime +High
grade
Upper Medium
Grade
Lower Medium
grade
(thousand of Euros)
Others
Total
2023
Non Investment
Grade
Speculative +
Highly
speculative
Deposits with and loans and advances to banks
3
3 088
6 408
19 830
332 673
362 002
Securities held for trading
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at fair value through results
Debt instruments from other public entities
Debt instruments - other issuers
Securities at fair value through profit/loss - mandatory
Bonds issued by government and other public entities
Bonds issued by other entities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securities at fair value through other comprehensive income
166 210
257 287
262 421
Bonds issued by government and other public entities
166 210
133 694
71 771
Bonds issued by other entities
-
123 593
190 650
-
-
-
-
-
-
-
-
-
-
-
-
318 528
318 528
318 528
318 528
-
-
-
-
11 418
-
11 418
54 367
-
54 367
-
-
-
-
11 418
-
11 418
740 285
371 675
368 610
Securities at amortised cost
2 270 897
1 833 359
1 577 272
551 373
1 521 678
7 754 579
Bonds issued by government and other public entities
2 236 452
1 375 992
520 538
-
288 498
4 421 480
Bonds issued by other entities
34 445
457 367
1 056 734
551 373
1 233 180
3 333 099
Loans and advances to customers
6 292 784
6 543 851
2 676 788
7 785 787
957 560
24 256 771
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Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Prime +High
grade
Upper Medium
Grade
Lower Medium
grade
(thousand of Euros)
Others
Total
2022
Non Investment
Grade
Speculative +
Highly
speculative
Deposits with and loans and advances to banks
3
4 967
41 908
39 031
432 105
518 014
36 428
36 428
-
13
-
13
13 473
-
13 473
2 218 736
1 764 578
Securities held for trading
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at fair value through results
Debt instruments from other public entities
Debt instruments - other issuers
Securities at fair value through profit/loss - mandatory
Bonds issued by government and other public entities
Bonds issued by other entities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securities at fair value through other comprehensive income
718 692
721 320
729 815
Bonds issued by government and other public entities
704 803
687 433
372 342
Bonds issued by other entities
13 889
33 887
357 473
-
-
-
-
-
-
-
-
-
-
-
-
36 428
36 428
-
13
-
13
13 473
-
13 473
48 909
-
48 909
454 158
Securities at amortised cost
2 935 513
2 037 825
1 068 575
553 872
1 250 316
7 846 101
Bonds issued by government and other public entities
2 252 149
1 668 779
355 594
-
333 890
4 610 412
Bonds issued by other entities
683 364
369 046
712 981
553 872
916 426
3 235 689
Loans and advances to customers
6 583 527
6 391 723
2 597 044
7 744 731
753 143
24 070 168
42.3.6. Concentration of credit risk
The breakdown by business sectors at December 31, 2023, and 2022 is presented as follows:
Loans to customers
Gross Value
Impairment
Securities
held for
trading
Derivatives
held for
trading and
economic
hedging
Securities at
fair value
through
profit or loss
Securities
mandatorily
at fair value
through
profit or loss
2023
Derivatives -
Hedge
accounting
Securities at fair value through
other comprehensive income
Securities at amortized cost
Guarantees and
endorsements provided
Gross Value
Impairment
Gross Value
Impairment
Gross Value
Impairment
(thousand of Euros)
Agriculture, Forestry, and Fishing
325 205
( 6 657)
Extractive Industries
57 469
( 3 269)
Food, Beverage and Tobacco Industries
478 545
( 9 525)
Textiles and Clothing
Tanneries and Footwear
Wood and Cork
Paper and Graphic Industries
Oil Refining
Chemical and Rubber Product
Non-Metallic Mineral Products
340 946
( 11 489)
58 155
( 1 197)
106 711
( 819)
86 567
( 4 216)
15 448
( 4 747)
331 954
( 7 431)
210 249
( 3 305)
Basic Metallurgical Industries and metal products
341 000
( 14 121)
Manufacture of Machines, Equipment and Electrical Appliances
182 346
( 3 380)
Manufacture of Transport Materials
156 165
( 9 988)
Other Manufacturing Industries
Electricity, Gas and Water
143 745
( 4 871)
352 627
( 1 598)
Construction and Public Works
1 279 767
( 127 703)
Wholesale and Retail Trade
Tourism
1 480 191
( 49 279)
1 134 499
( 50 882)
Transport and Communications
881 127
( 29 187)
Financial Activities
Real Estate Activities
1 015 087
( 80 028)
1 805 272
( 140 473)
Services Provided to Companies
1 989 561
( 141 837)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Administration and Public Services
458 559
( 25 595)
318 528
Other collective service activities
406 725
( 21 243)
10 058 031
( 71 241)
1 611 145
( 120 326)
97 992
( 10 118)
-
-
-
-
Mortgage Loans
Loans to Individuals
Others
TOTAL
-
-
1 084
106
-
256
325
-
116
9
804
384
-
-
5 329
14 485
3 714
738
12 088
72 148
4 672
1 359
-
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36 493
( 18)
212 288
8 363
14 764
19 620
-
-
-
-
-
( 7)
( 6)
-
-
-
-
13 429
( 2)
-
-
184
-
-
-
-
-
-
12 710
18 032
145
34 582
-
-
-
( 33)
( 9)
-
( 6)
( 21)
( 77)
( 7)
( 49)
( 4)
-
-
-
5 766
18 697
( 6)
( 5)
7 664
( 107)
9 518
( 304)
108 794
( 304)
33 720
( 83)
7 103
5 024
42 486
29 181
60 341
258 791
123 274
( 77)
-
( 410)
( 138)
( 11)
( 127)
( 63)
88 643
( 346)
101 074
20 378
( 49)
( 78)
( 16)
6 089
( 2 140)
1 445
( 115)
9 527
( 245)
5 066
11 910
( 17)
( 2)
9 246
( 383)
13 298
41 467
( 164)
( 374)
19 816
( 3 974)
12 410
( 39)
15 123
( 2 045)
243 643
( 243)
35 802
( 31)
214 382
( 137 557)
780 992
( 40 872)
106 859
( 77)
183 350
( 3 482)
-
-
44 871
( 646)
340 776
740 573
( 234)
( 579)
428 881
( 1 416)
184 579
( 77)
178 027
( 86 951)
82 207
( 4 121)
704 318
( 95 482)
338 845
( 12 886)
4 438 660
( 600)
21 098
( 84)
145 770
( 959)
40 879
( 788)
-
-
-
-
-
-
-
-
-
-
16 232
( 291)
264 707
683 063
162 744
-
205
-
-
-
-
-
-
-
-
-
-
-
-
34 258
86 796
371 675
24 728
-
-
-
25 405 088
( 954 525)
318 528
117 620
264 912
683 063
838 523
( 239)
8 194 848
( 324 312)
2 354 035
( 74 686)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
430
Loans to customers
Gross Value
Impairment
Securities
held for
trading
Derivatives
held for
trading and
economic
hedging
Securities at
fair value
through
profit or
loss
Securities
mandatorily
at fair value
through
profit or
loss
Derivatives
- Hedge
accounting
Securities at fair value
through other comprehensive
income
Gross Value
Impairment
2023
Annual Report 2023 | novobanco
(thousand of Euros)
Securities at amortized cost
Guarantees and endorsements
provided
Gross
Value
5 788
18 445
Impairment
( 15)
( 8)
Gross
Value
11 893
8 983
113 036
( 188)
35 923
9 690
5 522
53 959
28 906
61 925
221 901
96 002
48 658
59 963
39 244
( 9)
( 1)
( 114)
( 139)
( 16)
( 186)
( 105)
( 75)
( 64)
( 65)
( 22)
7 026
1 518
7 563
5 780
2 264
15 775
35 523
34 232
21 848
12 856
18 174
Impairment
( 5 902)
( 361)
( 260)
( 958)
( 117)
( 255)
( 22)
-
( 135)
( 174)
( 390)
( 3 559)
( 290)
( 2 452)
( 94)
173 789
( 2 675)
34 245
229 922
( 117 563)
841 796
( 45 720)
89 653
( 58)
181 761
-
-
48 625
228 236
( 304)
398 424
1 196 010
( 446)
150 889
151 982
( 73 610)
90 391
( 3 301)
( 1 056)
( 1 773)
( 128)
( 3 537)
694 125
( 93 479)
354 904
( 10 737)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8 616
14 277
19 152
-
-
-
-
13 718
-
14 839
433
-
( 7)
( 9)
-
-
-
-
( 2)
-
( 5)
-
-
-
6 435
14 533
17 373
124
46 531
29 699
89 798
-
-
-
( 6)
( 10)
-
( 20)
( 92)
( 11)
( 11)
41 511
( 25)
193 710
311 177
562 845
210 520
-
13
129
-
-
-
-
-
-
2 378
-
-
-
-
-
-
-
-
-
-
1 764 802
( 453)
4 610 412
( 1 722)
21 623
24 849
( 9)
93 600
( 663)
38 047
-
-
13 889
-
-
-
-
-
-
-
-
-
50 262
( 4)
17 804
( 258)
( 110)
( 958)
-
-
Agriculture, Forestry, and Fishing
336 749
( 6 673)
Extractive Industries
65 487
( 5 033)
Food, Beverage and Tobacco Industries
455 764
( 11 179)
Textiles and Clothing
Tanneries and Footwear
Wood and Cork
Paper and Graphic Industries
Oil Refining
Chemical and Rubber Product
Non-Metallic Mineral Products
407 303
( 21 411)
71 976
( 1 253)
136 226
( 2 493)
95 930
( 5 905)
16 314
( 114)
289 130
( 7 071)
187 993
( 2 763)
Basic Metallurgical Industries and metal products
390 928
( 16 069)
Manufacture of Machines, Equipment and Electrical Appliances
229 425
( 10 750)
Manufacture of Transport Materials
176 541
( 4 941)
Other Manufacturing Industries
Electricity, Gas and Water
Construction and Public Works
Wholesale and Retail Trade
Tourism
Transport and Communications
Financial Activities
Real Estate Activities
146 243
( 4 877)
238 741
( 3 466)
1 408 447
( 133 850)
1 491 507
( 48 880)
1 186 040
( 84 091)
916 930
( 28 617)
702 846
( 65 729)
1 750 110
( 162 449)
Services Provided to Companies
2 272 827
( 148 975)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Administration and Public Services
421 680
( 25 288)
36 428
Other collective service activities
429 360
( 42 418)
9 829 383
( 54 835)
1 395 147
( 135 047)
403 175
( 32 215)
-
-
-
-
Mortgage Loans
Loans to Individuals
Others
TOTAL
42.4. Market risk
-
-
4 302
298
-
609
629
1
357
4
145
42
-
-
4 916
16 597
7 371
-
7 345
91 076
1 428
98
-
145
-
-
19
25 452 202
( 1 066 392)
36 428
135 382
13
313 684
562 845
2 331 099
( 660)
8 474 740
( 291 531)
2 397 867
( 82 547)
Market Risk generally represents potential losses resulting from an adverse change in the value of a financial instrument
as a result of variations in interest rates, exchange rates, stock prices, commodity prices, volatility, and credit spread.
Market risk management is integrated with balance sheet management through the CALCO (Capital Asset and Liability
Committee) structure established at the highest level of the institution. This body is responsible for defining balance
sheet allocation and structuring policies as well as controlling exposure to interest rate, exchange rate, and liquidity
risks.
In terms of market risk, the main element of risk measurement consists of estimating potential losses under adverse
market conditions, for which the Value at Risk (VaR) methodology is used. The novobanco Group uses a VaR using
Monte Carlo simulation, with a 99% confidence interval and an investment period of 10 days. Volatilities and correlations
are historical based on a one-year observation period. Validation of the suitability of the VaR model is carried out daily
through the backtesting process (theoretical and real). Additionally, on a monthly basis, market risk monitoring includes
the reporting of additional metrics within the scope of the stress testing framework, namely Stressed VaR (SVaR),
historical stress scenarios and sensitivity analyzes to the main risk factors. Additionally, the market risk control
framework incorporates a monthly process of monitoring portfolio positions within the scope of controlling the
boundary between the trading book and the banking book, as well as independent validation (2nd line of defense) of the
valuation of financial instruments at fair value.
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Annex
2023
December
Annual
average
Maximum Minimum
December
(thousand of Euros)
2022
Annual
average
Maximum Minimum
Exchange risk
763
653
1 358
Interest rate risk
1 096
1 752
4 707
Shares and commodities
Volatility
Credit spread
0
0
21
60
250
312
317
607
2 271
Diversification effect
( 1 058)
( 821)
( 1 989)
Total
1 118
2 273
6 910
411
422
0
0
234
( 95)
972
340
586
0
1
415
1 375
4 379
7 445
47 720
0
348
934
3
2 117
2 386
340
586
-
1
229
( 444)
( 1 941)
( 7 819)
( 259)
898
8 162
48 787
898
Novobanco Group presents a value at risk (VaR) of 1,118 thousand euros (December 31, 2022: 898 thousand euros) for
its trading positions.
42.4.1. Interest rate risk
Following the recommendations of the European Banking Authority explained in the set of guidelines published in 2022
(EBA/GL/2022/14, EBA/RTS/2022/09 and EBA/RTS/2022/10) novobanco Group calculates its exposure to risk
balance sheet interest rate based on prescribed shocks, classifying notional and interest amounts by repricing or key
rate duration brackets, of all asset, liability and off-balance sheet items sensitive to interest rates, which do not belong
to the trading portfolio . The calculation of balance sheet interest rate risk is also measured through internal shocks
defined by the bank, namely through VaR metrics.
In this context, novobanco Group has implemented a stress testing approach to interest rate risk based on three pillars:
interest rate shock scenarios, sensitivity analyzes and reverse stress testing.
The interest rate risk control framework allows novobanco Group to monitor and measure the impact of different
interest rate scenarios, both from an economic value perspective and from a financial margin perspective, changing and
adapting its risk profile in in line with the defined risk management strategy. Given the recent scenario of a significant
increase in interest rates starting in the second half of 2022, this monitoring and control has become even more
relevant, in order to guarantee the protection of economic value and financial margin in the face of interest rate
volatility.
As a result of novobanco Group's risk profile, with variable rate assets predominating and an essentially fixed rate
liability structure, the rise in interest rates translated into a significant increase in financial margin, as a result of the
favorable interest rate environment and the careful management of asset interest rates and financing costs. In addition,
and taking into account the EBA's new regulatory shock on net interest income, whose regulatory limit is 5% of Tier 1 (on
December 31, 2023 this limit was still indicative), the Bank adopted management measures in order to be able to fit the
sensitivity of net interest income in a scenario of falling interest rates within the (indicative) limit established.
Following the recommendations of Basel II (Pilar 2) and Instruction No. 19/2005, of the Bank of Portugal, novobanco
Group calculates its exposure to balance sheet interest rate risk based on the Bank of International Settlements (BIS)
methodology. classifying all asset, liability and off-balance sheet items, which do not belong to the trading portfolio, by
repricing levels.
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Annual Report 2023 | novobanco
Eligible
amounts
Up to 3
months
3 to 6 months
6 months to 1
year
1 to 5 years
More than 5
years
2023
(thousand of Euros)
Assets
21 230 624
5 635 071
3 048 590
5 954 460
4 244 381
Loans to and deposits with banks
5 886 886
5 884 215
-
2 629
42
-
Loans and advances to customers
24 796 365
14 376 568
4 804 194
2 853 022
1 888 823
873 757
Securities
Other assets
Liabilities
Deposits from banks
Due to customers
Debt securities issued
Other liabilities
9 251 816
178 059
791 782
178 059
830 877
192 939
4 065 595
3 370 624
-
-
-
-
18 723 202
3 915 699
4 369 915
7 350 962
4 628 883
5 680 440
5 436 226
4 252
14 962
225 000
-
30 126 590
12 487 953
3 859 934
4 274 711
6 449 899
3 054 093
2 209 018
972 613
23 895
775 128
11 418
40 095
( 736)
80 977
599 651
1 574 790
76 412
-
Balance sheet GAP (Assets - Liabilities)
1 124 465
2 507 422
1 719 372
(1 321 325)
(1 396 503)
( 384 501)
Off-Balance sheet
Structural GAP
Accumulated GAP
0
(3 437 842)
( 154 125)
( 141 096)
4 051 530
( 318 467)
1 124 465
( 930 420)
1 565 247
(1 462 421)
2 655 027
( 702 968)
( 930 420)
634 827
( 827 594)
1 827 433
1 124 465
Eligible
amounts
Up to 3
months
3 to 6 months
6 months to 1
year
1 to 5 years
More than 5
years
2022
(thousand of Euros)
Assets
21 997 489
5 502 398
5 132 116
4 788 815
5 158 137
Loans to and deposits with banks
6 604 336
6 599 797
0
4 502
18
20
Loans and advances to customers
24 913 126
14 553 860
4 715 044
2 975 173
1 767 460
901 589
Securities
Other assets
Liabilities
Deposits from banks
Due to customers
Debt securities issued
Other liabilities
10 927 447
134 045
709 787
134 045
787 353
2 152 441
3 021 337
4 256 529
-
-
-
-
29 061 277
2 793 033
4 227 676
3 413 575
3 134 049
9 695 523
9 279 092
36 913
89 518
-
290 000
29 460 793
18 739 506
2 743 146
3 828 237
3 286 384
863 520
2 681 999
301 876
791 294
740 803
6 000
6 974
299 964
9 957
99 788
27 402
1 974 371
6 158
Balance sheet GAP (Assets - Liabilities)
( 50 656)
(7 063 788)
2 709 364
904 440
1 375 240
2 024 088
Off-Balance sheet
Structural GAP
Accumulated GAP
1 045
(1 295 901)
1 306 840
( 590 245)
807 031
( 226 679)
( 49 611)
(8 359 689)
4 016 204
314 194
2 182 271
1 797 409
(8 359 689)
(4 343 486)
(4 029 291)
(1 847 020)
( 49 611)
Sensitivity analyses are carried out for the interest rate risk of the banking portfolio based on an approximation to the
duration model, with various scenarios of shift of the yield curve being carried out in all interest rate brackets.
433
Management Report
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Annex
2023
(thousand of Euros)
Parallel
increase of
200 pb
Parallel
decrease of
200 pb
Short Rate
Shock Up
Short Rate
Shock Down
Steepener
shock
Flattener shock
( 219 057)
147 303
( 119 451)
( 162 778)
70 207
( 106 756)
65 416
59 039
7 766
18 799
( 49 405)
( 63 603)
44 560
209 961
( 13 794)
135 003
40 358
( 20 429)
( 380 019)
( 152 580)
( 247 596)
8 691
419
( 144 031)
2022
(thousand of Euros)
Parallel
increase of
200 pb
Parallel
decrease of
200 pb
Short Rate
Shock Up
Short Rate
Shock Down
Steepener
shock
Flattener shock
( 361 341)
195 808
( 241 571)
( 25 294)
( 96 866)
( 106 585)
70 179
195 808
( 68 229)
( 361 341)
( 263 636)
( 241 571)
131 255
70 159
131 255
43 154
39 850
( 144 912)
72 455
( 138 995)
105 417
( 78 024)
30 496
( 170 498)
As at 31 December
Exercise average
Exercise maximum
Exercise minimum
As at 31 December
Exercise average
Exercise maximum
Exercise minimum
42.4.2. Foreign exchange risk
Regarding currency risk, the distribution of assets and liabilities, as at December 31, 2023 and 2022 by currency, is
analyzed as follows:
2023
2022
Spot
Forward
Other
elements
Net
exposure
Spot
Forward
Other
elements
Net
exposure
(thousand of Euros)
UNITED STATES DOLLAR
( 497 127)
506 031
( 18)
( 635 256)
634 533
91
USD
GBP
BRL
JPY
CHF
SEK
NOK
CAD
ZAR
AUD
VEB
PLN
GREAT BRITISH POUND
( 46 256)
48 788
BRAZILIAN REAL
MOP
MACAO PATACA
JAPANESE YEN
SWISS FRANC
SWEDISH KRONE
908
109
( 1 377)
( 1 950)
( 5 000)
-
-
1 521
4 590
5 795
NORWEGIAN KRONE
48 681
( 47 178)
CANADIAN DOLLAR
( 19 149)
22 060
SOUTH AFRICAN RAND
( 516)
757
AUSTRALIAN DOLLAR
8 407
( 7 317)
VENEZUELAN BOLIVAR
3
-
ZLOTY
3 086
( 2 507)
MAD
MOROCCAN DIRHAN
( 1 350)
2 064
MXN
AOA
CVE
HKD
CZK
DZD
CNY
MEXICAN PESO
ANGOLAN KWANZA
CAPE VERDEAN ESCUDOS
HONG-KONG DOLAR
CZECH KORUNA
ALGERIAN DINAR
60
( 13)
( 160)
( 1 273)
225
7 593
YUAN REN-MIN-BI
4
Others
( 7 370)
( 91)
-
-
1 112
( 425)
-
( 255)
9 545
8 886
2 532
908
109
146
2 640
795
1 503
2 911
241
1 090
3
579
714
( 31)
( 13)
( 160)
( 161)
( 200)
7 593
( 251)
2 175
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 48 068)
47 867
866
2 409
( 2 326)
( 9 289)
-
-
2 318
9 769
17 593
( 17 578)
53 291
( 53 059)
( 16 710)
19 003
( 10)
( 530)
9 613
( 9 463)
2
( 2 995)
( 2 558)
( 6)
( 23)
( 137)
( 706)
6
7 638
333
( 2 957)
-
3 010
2 256
-
-
-
595
( 114)
-
( 347)
4 057
Note: asset / (liability)
( 512 465)
544 490
( 16)
32 009
( 629 290)
642 317
434
( 632)
( 201)
866
2 409
( 8)
480
15
232
2 293
( 540)
150
2
15
( 302)
( 6)
( 23)
( 137)
( 111)
( 108)
7 638
( 14)
1 101
13 119
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
91
Annual Report 2023 | novobanco
42.5. Liquidity risk
Liquidity risk is the current or future risk that arises from an institution's inability to meet its obligations as they fall due,
without incurring substantial losses.
Liquidity risk can be subdivided into two types:
• Asset liquidity (market liquidity risk) - consists in the impossibility of selling a certain type of asset due to a lack of
liquidity in the market, which results in the widening of the bid/offer spread or the application of a haircut to the
market value;
• Funding (funding liquidity risk) - consists in the impossibility of financing assets in the market and/or refinancing
maturing debt, within the desired terms and currency. This impossibility can be reflected through a sharp increase in
financing costs or the requirement of collateral to obtain funds. The difficulty of (re)financing can lead to the sale of
assets, even if incurring significant losses. The risk of (re)financing should be minimized through appropriate
diversification of financing sources and maturities.
Banks are subject to liquidity risk inherent in their maturity transformation business (long-term lenders and short-term
depositors), making prudent liquidity risk management crucial.
As at December 31, 2023, and 2022, the main liquidity indicators is as follows:
Gross funding from the ECB
Net funding from the ECB (1)
Eligible Assets for repo operations (ECB) net of haircut
Used collateral
Liquidity Buffer(2)
Transformation Ratio (3)
Liquidity Coverage Ratio (LCR) (4)
Net Stable Funding Ratio (NSFR) (4)
(thousand of Euros)
2023
1 129
( 4 246)
2022
6 323
385
14 217
16 917
6 957
13 582
81,2%
163%
118%
9 971
13 736
83,3%
210%
113%
(1) Includes ESCB financing and investments; a positive value corresponds to a resource; a negative value corresponds to an investment
(2) Corresponds to eligible assets portfolio adding HQLA securities non eligible for ECB, deducted of the used collateral
(3) (Total Loans - Accumulated Impairment on Loans)/ Customer Deposits
(4) Preliminary
The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) are included in regulatory legislation, and
the LCR aims to promote the resilience of Banks to short-term liquidity risk, ensuring that they hold high quality liquid
assets, sufficient to survive a severe stress scenario, for a period of 30 days, while the NSFR aims to ensure that Banks
maintain stable funding for their assets and off-balance sheet operations, for a period of one year. In accordance with
current regulatory legislation, the novobanco Group is required to comply with a minimum regulatory limit of 100% in
both ratios (LCR and NSFR).
In the novobanco Group, liquidity is managed in a centralized manner at the Headquarters for the prudential consolidated
group, with analysis and decision-making based on reports that allow not only to identify negative mismatches but to
perform dynamic coverage of them. In accordance with the rules of the ITS (Implementing Technical Standards), the
calculation of the net contractual deficit and the rebalancing capacity (counterbalancing capacity) is made for the end of
2023 and 2022:
435
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
OUTPUT
Liabilities from emited transferable securities (if they're not treated as
retail deposits)
Liabilities from guaranteed lending operations and operations
associated to financial markets
Behavioral output from deposits
Exchange swaps and derivatives
Other output
Total Output
INPUT
Total
Up to 7
days
7 days to 1
month
1 to 3
months
3 to 6
months
2023
(thousands of Euros)
6 months
to 1
year
More than 1 year
650 268
7 747
4 593
6 104
479
6 722
624 623
6 939 455
-
1 150 391
526 714
-
2 891 083
2 371 267
29 829 454
541 358
217 829
155 606
113 667
233 746
28 567 248
531 444
10 482
30 744
265 440
85 943
52 548
743 368
1 026
-
-
20 143
49 386
86 287
672 813
38 693 989
560 613
1 403 557
953 864
220 232
3 233 485
32 322 238
Secured lending operations and operations associated to financial
markets
-
-
-
-
-
-
-
Behavioral inputs from loans and advances
28 169 581
102 428
58 929
162 573
235 714
471 921
27 138 016
Exchange swaps and derivatives
570 605
9 232
31 410
264 407
83 230
52 108
Own portfolio securities maturing and other entries
9 167 468
80 063
326 086
405 235
242 770
341 604
130 218
7 771 710
Total Input
Net contractual deficit
37 907 654
191 723
416 425
832 215
561 714
865 633
35 039 944
( 786 336)
( 368 890)
( 987 134)
( 121 649)
341 482
(2 367 852)
2 717 707
Accumulated net contractual deficit
( 368 890)
(1 356 022)
(1 477 671)
(1 136 189)
(3 504 041)
( 786 335)
CAPACITY TO READJUSTMENT
Cash
Deployable reserves from the central bank
Negotiable and non-negotiable assets eligible for the central bank
Total
Up to 7
days
7 days to 1
month
1 to 3
months
3 to 6
months
6 months
to 1
year
More than 1 year
179 229
-
5 082 915
6 856 277
-
- -
-
-
-
-
-
-
-
-
-
1 095 910
39 532
( 150 627)
246 919
(8 088 011)
Authorized facilities and not utilized received
2 698 448
( 16 140)
( 71 111)
( 185 312)
( 297 069)
717 916
(2 846 732)
Net variation of capacity to adjustment
-
( 16 140)
1 024 799
( 145 780)
( 447 696)
964 835
(10 934 743)
Accumulated capacity to readjustment
14 816 869
14 800 729
15 825 528
15 679 748
15 232 052
16 196 887
5 262 144
436
Annual Report 2023 | novobanco
OUTPUT
Liabilities from emited transferable securities (if they're not treated as
retail deposits)
Liabilities from guaranteed lending operations and operations
associated to financial markets
Behavioral output from deposits
Exchange swaps and derivatives
Other output
Total Output
INPUT
Total
Up to 7
days
7 days to 1
month
1 to 3
months
3 to 6
months
2022
(thousands of Euros)
6 months
to 1
year
More than 1 year
1 480 787
2 247
4 593
10 700
5 986
297 637
1 159 624
10 059 656
57 154
66 513
1 732 249
3 341 048
739 188
4 123 504
30 194 492
573 588
41 352
133 529
149 284
414 200
28 882 540
751 818
623 245
5 224
4 477
52 647
385 288
82 861
65 007
-
-
15 824
34 000
160 791
568 944
43 109 997
642 690
165 104
2 261 766
3 595 003
1 550 031
34 895 403
Secured lending operations and operations associated to financial
markets
-
-
-
-
-
-
-
Behavioral inputs from loans and advances
38 461 333
5 838 109
68 447
183 143
273 970
548 609
31 549 055
Exchange swaps and derivatives
753 169
6 049
53 146
386 808
83 515
63 026
160 625
Own portfolio securities maturing and other entries
10 550 649
49 284
163 514
265 079
222 462
2 144 302
7 706 009
Total Input
Net contractual deficit
49 765 151
5 893 442
285 107
835 029
579 947
2 755 937
39 415 689
6 655 155
5 250 752
120 003
(1 426 737)
(3 015 056)
1 205 906
Accumulated net contractual deficit
5 250 752
5 370 755
3 944 018
928 962
2 134 868
4 520 287
6 655 155
CAPACITY TO READJUSTMENT
Cash
Total
182 895
Up to 7
days
7 days to 1
month
1 to 3
months
3 to 6
months
6 months
to 1
year
More than 1 year
Deployable reserves from the central bank
5 653 802
(5 653 802)
Negotiable and non-negotiable assets eligible for the central bank
7 924 420
56 109
62 178
( 116 348)
( 131 290)
(1 924 380)
(5 866 209)
Authorized facilities and not utilized received
-
( 23 829)
( 77 909)
1 378 676
2 739 531
( 84 317)
(3 932 151)
Net variation of capacity to adjustment
(5 621 523)
( 15 731)
1 262 328
2 608 241
(2 008 697)
(9 798 361)
Accumulated capacity to readjustment
13 761 118
8 139 595
8 123 864
9 386 192
11 994 433
9 985 736
187 375
At the end of 2022, there was a net contractual surplus accumulated over one year of 2,135 million euros, having
changed on December 31, 2023 to a net contractual deficit accumulated over one year of 3,504 million euros. Despite
this variation, the liquidity position remained stable, given that this increase of 5,639 million euros is essentially due to a
change in regulatory reporting criteria, given that last year the deposits at the ECB, totaling 5 654 million euros were
considered as a cash inflow and this year this item is included in the rebalancing capacity.
The counterbalancing capacity for 1 year at the end of 2023 was 16,197 million euros, 6,211 million euros higher than the
value recorded at the end of 2022 (9,986 million euros). This increase is essentially due to the change in regulatory
criteria referred to in the previous point (+5,083 million euros) and the increase in secured funding, which partially offset
the reimbursement of borrowings from the ECB.
In order to anticipate possible negative impacts, internal liquidity stress scenarios are created that represent the types
of crisis that may occur, based on idiosyncratic scenarios (characterized by a loss of confidence in the Bank) and market
scenarios.
Despite the repayment of 5,377 million euros in financing to the ECB, the Novobanco Group's liquidity ratios remained at
comfortable values, with the average LCR in the 12 months of 2023 being 169%, which compares to 190% in 2022. The
NSFR in turn stood at 118% on December 31, 2023, 5pp more than at the end of the previous year, due to the increase in
stable financing, essentially resulting from the increase in capital and collateralized financing exceeding 6 months and 1
year. In accordance with current regulatory legislation, the novobanco Group is required to comply with a minimum
regulatory limit of 100% in both ratios (LCR and NSFR).
437
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Assets and Liabilities - Tiering by maturity dates
As at December 31, 2023, and 2022, the tiering of assets and liabilities by maturity dates is as follows:
Financial Assets
Financial Assets and Liabilities held for trading
Securities
Trading derivatives
Financial assets mandatorily measured at fair value through
profit or loss - securities
Financial assets mandatorily measured at fair value through
other comprehensive income - securities
Up to 3
months
From 3
months to
one year
From one to
five years
More than
five years
2023
(thousands of Euros)
Indefinite
duration /
Past due
credit
Total
2 601 364
100 834
96 068
4 766
2 498 407
231 721
222 460
9 261
11 332 243
15 805
-
15 805
18 742 630
87 788
-
87 788
696 592
-
-
-
35 871 236
436 148
318 528
117 620
-
112
50
11 256
253 494
264 912
154 305
87 676
320 907
197 981
77 654
838 523
Financial assets mandatorily measured at amortized cost
2 345 693
2 163 711
10 660 476
18 113 266
365 444
33 648 590
Securities
Applications in credit institutions
Loans to Customers
Derivatives - Hedge Accounting
Financial Liabilities
Financial Liabilities held for trading
Financial liabilities measured at amortised cost
Due from central banks
Due from other credit institucions
(of which: Operations with repurchase agreement)
Due to Customers
(of which: Operations with repurchase agreement)
Liabilities represented by securities
Subordinated liabilities
Derivatives - Hedge Accounting
Notional
Trading derivatives
Notional Purchase
Notional Sale
Derivatives - Hedge Accounting
Notional Purchase
Notional Sale
706 444
24 345
1 614 904
532
21 860 215
6 267
21 853 909
178 807
1 180 249
854 275
20 494 853
813 660
-
-
39
2 175 569
2 122 569
1 045 911
1 076 658
53 000
26 500
26 500
439 051
6 001
1 718 659
15 187
10 984 087
8 685
10 974 926
950 000
1 500 343
1 452 461
8 524 583
302 564
-
-
476
2 440 569
1 119 863
559 993
559 870
1 320 706
660 353
660 353
4 154 426
15 220
6 490 830
335 005
3 137 444
15 248
3 019 681
-
1 935 927
1 560 317
959 951
250 158
123 803
-
102 515
20 812 846
2 058 376
1 021 440
1 036 936
18 754 470
9 377 235
9 377 235
2 894 927
3 088
15 215 251
332 339
1 142 855
70 439
1 050 717
-
-
-
66 935
-
482 282
501 500
21 699
11 893 626
4 687 196
2 310 578
2 376 618
7 206 430
3 603 215
3 603 215
-
-
365 444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8 194 848
48 654
25 405 088
683 063
37 124 601
100 639
36 899 233
1 128 807
4 616 519
3 867 053
30 046 322
1 366 382
606 085
501 500
124 729
37 322 610
9 988 004
4 937 922
5 050 082
27 334 606
13 667 303
13 667 303
438
Annual Report 2023 | novobanco
Financial Assets
Financial Assets and Liabilities held for trading
Securities
Trading derivatives
Financial assets mandatorily measured at fair value through
profit or loss - securities
Financial assets measured at fair value through profit or loss
- securities
Financial assets mandatorily measured at fair value through
other comprehensive income - securities
2022
Up to 3
months
From 3
months to
one year
From one to
five years
More than
five years
2 296 820
13 476
-
13 476
3 748 010
16 821
4 911
11 910
9 592 265
33 344
10 055
23 289
20 777 149
108 169
21 462
86 707
Indefinite
duration /
Past due
credit
717 932
-
-
-
-
2 469
11 004
300 211
-
-
(thousands of Euros)
Total
37 132 176
171 810
36 428
135 382
313 684
13
-
-
-
13
142 588
1 655 714
285 809
159 873
87 115
2 331 099
Financial assets mandatorily measured at amortized cost
2 140 748
2 075 079
9 131 698 20 074 594
330 606
Securities
Applications in credit institutions
Loans to Customers
Derivatives - Hedge Accounting
Financial Liabilities
Financial Liabilities held for trading
Financial liabilities measured at amortised cost
Due from central banks
Due from other credit institucions
(of which: Operations with repurchase agreement)
Due to Customers
(of which: Operations with repurchase agreement)
Liabilities represented by securities
Subordinated liabilities
Financial liabilities associated with transferred assets
Derivatives - Hedge Accounting
Notional
Trading derivatives
Notional Purchase
Notional Sale
Derivatives - Hedge Accounting
Notional Purchase
Notional Sale
785 649
320
1 354 779
8
24 372 537
8 144
24 372 534
1 627 198
574 838
123 620
22 170 498
450 906
-
-
-
3
545 902
666
1 528 511
383
9 936 945
11 063
9 936 365
3 750 000
296 221
-
5 614 270
-
275 874
-
-
580
2 832 097
38 365
6 261 236
138 945
5 559 945
18 705
5 501 590
950 000
2 214 958
2 027 204
1 493 090
-
427 970
415 572
-
58 355
4 092 547
4 977
15 977 070
423 509
817 609
61 474
756 969
-
291 939
-
-
-
465 030
-
-
60 640
1 342 255
1 340 594
735 763
735 132
963 226
983 950
2 285 684
2 354 243
3 020
3 020
63 678
63 678
4 629 088
4 629 088
4 514 816
4 514 816
-
-
330 606
-
44 451
-
44 451
-
-
-
-
-
-
-
44 451
-
-
-
-
-
33 752 725
8 256 195
44 328
25 452 202
562 845
40 731 487
99 386
40 611 909
6 327 198
3 377 956
2 150 824
29 277 858
450 906
1 168 874
415 572
44 451
119 578
5 326 928
5 413 919
9 210 602
9 210 602
42.6. Encumbered and unencumbered assets
The following is information on encumbered and unencumbered assets, as defined by Instruction No. 28/2014 from the
Bank of Portugal (we underline that this information is prepared in a prudential perspective, the consolidation perimeter
of which differs from the consolidation perimeter of the financial statements presented):
Assets
Equity instruments
Debt securities
Other assets
Assets of the institution
2023
(thousands of Euros)
Carrying book
value
of encumbered
assets
Fair value of
encumbered
assets
Carrying book
value
of
unencumbered
assets
Fair value of
unencumbered
assets
-
2 173 152
6 633 169
8 806 321
-
1 048 005
1 048 005
2 173 152
6 788 198
6 788 198
n/a
n/a
27 081 452
34 917 655
n/a
n/a
439
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Assets
Equity instruments
Debt securities
Other assets
Assets of the institution
Collateral received
Collateral received
Equity instruments
Debt securities
Other collateral received
Own debt securities issued other than own covered bonds or
ABS
Encumbered assets, encumbered collateral received and
associated liabilities
2022
(thousands of Euros)
Carrying book
value
of encumbered
assets
Fair value of
encumbered
assets
Carrying book
value
of
unencumbered
assets
Fair value of
unencumbered
assets
-
1 475 265
12 019 977
13 495 242
-
1 475 265
n/a
n/a
1 203 595
9 001 842
22 515 329
32 720 766
1 203 595
9 001 842
n/a
n/a
2023
(thousands of Euros)
2022
Fair value of
encumbered
collateral
received or of
own debt
securities issued
Fair value of
collateral
received or of
own debt
securities issued
and
encumberable
Fair value of
encumbered
collateral
received or of
own debt
securities issued
Fair value of
collateral
received or of
own debt
securities issued
and
encumberable
-
-
-
-
-
-
-
-
-
-
2023
-
-
-
-
-
-
-
-
-
-
(thousands of Euros)
2022
Associated
liabilities,
contingent
liabilities and
securities
loaned
Assets, collateral
received and own
debt securities
issued other than
encumbered own
covered bonds or
ABS
Associated
liabilities,
contingent
liabilities and
securities
loaned
Assets,
collateral
received and
own debt
securities issued
other than
encumbered
own covered
bonds or ABS
Carrying book value of the selected financial liabilities
6 803 634
8 806 322
9 968 346
13 495 242
Encumbered assets are primarily represented by loans and securities used in financing operations with the ECB, repo
operations, mortgage bond issues, and securitizations. There are also assets given as collateral to cover the Bank's
counterparty risk in derivative operations.
440
Annual Report 2023 | novobanco
42.7. Operational risk
Operational risk generally refers to the probability of occurrence of events with negative impacts, on results or capital,
arising from the inadequacy or deficiency of procedures and information systems, the behavior of people, or triggered by
external events, including legal risks. Therefore, operational risk is understood as the sum of the following risks:
operational, information systems, compliance, and reputation risks.
For operational risk management, a system was developed and implemented aimed at ensuring the standardization,
systematization, and recurrence of activities of identification, monitoring, control, and mitigation of this risk. This system
is supported by an organizational structure, integrated into the Global Risk Department exclusively dedicated to this
task, as well as by Operational Risk Management Representatives appointed by each of the departments, branches, and
subsidiaries considered relevant, who are responsible for compliance with the established procedures and the daily
management of this risk in their areas of competence.
42.8. Capital Management and Solvency Ratio
The main objective of capital management is to ensure compliance with the strategic objectives of the novobanco
Group in terms of capital adequacy, complying with and enforcing the rules for calculating risk-weighted assets and own
funds and ensuring compliance with the solvency and leverage levels defined by the supervisory authorities, namely by
the European Central Bank (ECB) - the entity directly responsible for the supervision of the novobanco Group - and the
Bank of Portugal, and the risk appetite set internally for capital metrics.
The Executive Board of Directors is responsible for defining the strategy to be adopted in terms of capital management,
which is integrated into the global objective definition of the novobanco Group.
The capital ratios of the novobanco Group are calculated based on the rules set out in Directive 2013/36/EU and
Regulation (EU) No 575/2013 (CRR), which define the criteria for access to credit institutions and investment firms and
determine the prudential requirements to be observed by these entities, particularly with regard to the calculation of the
aforementioned ratios.
The novobanco Group is authorized to use the approach based on the use of internal models in the determination of risk-
weighted credit assets (Internal Ratings Based or IRB method). More specifically, the IRB method is applied to the
institution, company, and retail risk classes of the novobanco Group. The equity risk class, securitization positions,
positions in the form of investment fund shares, and non-credit obligations are always treated by the IRB method
regardless of the entities of the novobanco Group in which the respective risk positions are registered. The standard
method is used in the calculation of risk-weighted market and operational assets.
The regulatory capital elements considered in the determination of solvency ratios are divided into Tier 1 common equity
(or Common Equity Tier I or CET I), additional Tier 1 capital (or Additional Tier I) which, when added to CET I, constitutes
Tier 1 funds, and Tier 2 funds (or Tier II) which, when added to Tier I, constitute total own funds.
The novobanco Group's total own funds consist of CET I elements and Tier II elements.
Complementary information on the evolution and composition of the novobanco Group's capital ratios can be found in
the Group's Market Discipline Document (point 3. Capital Adequacy)
The following table presents a summary of own funds, risk-weighted assets, and capital ratios of novobanco for
December 31, 2023 and 2022:
441
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Realised ordinary share capital, issue premiums and own shares
Reserves and Retained earnings
Net income for the year attributable to shareholders of the Bank
Non-controlling interests (minorities)
A - Equity (prudential perspective)
Net result of the financial year attributable to the Bank's shareholders not eligible
Non-controlling interests (minorities)
Adjustments of additional valuation
Transitional period to IFRS9
Goodwill and other intangibles
Insufficiency of provisions given the expected losses
Pension fund assets with defined benefits
Deferred tax assets and shareholdings in financial companies
Other (1)
B - Regulatory adjustments to equity
C - Own principal funds level 1 - CET I (A+B)
Eligible capital instruments for additional Tier I
Other eligible instruments for additional Tier 1
D - Additional own funds Level 1 - Additional Tier 1
E - Level 1 own funds - Tier I (C+D)
Subordinated liabilities eligible for Tier II
Other elements eligible for Tier II
Regulatory adjustments to Tier II
F - Level 2 own funds - Tier II
G - Eligible own funds (E+F)
Credit risk
Market risk
Operational risk
H - Risk Weighted Assets
Solvability ratio
CET I ratio
Tier I ratio
Solvability ratio
Leverage ratio (2)
(milhões de euros)
2023
2023
2022
(fully loaded) (3)
(phased.in)
6 568
6 568
6 305
( 2 931)
( 2 931)
( 3 388)
746
23
746
23
556
18
4 406
4 406
3 491
-
( 14)
( 3)
-
( 45)
-
( 19)
( 215)
( 415)
( 703)
3 703
-
2
2
3 705
497
77
-
574
4 279
18 334
100
1 965
-
( 14)
( 3)
81
( 45)
-
-
( 10)
( 4)
126
( 73)
-
( 19)
( 60)
( 215)
( 296)
( 399)
( 614)
( 249)
( 565)
3 792
2 926
-
2
2
-
2
2
3 794
2 928
497
399
77
-
91
-
574
490
4 368
3 418
18 394
19 608
100
78
1 965
1 670
20 399
20 459
21 355
18,2%
18,2%
21,0%
7,9%
18,5%
18,5%
21,4%
8,1%
13,7%
13,7%
16,0%
6,1%
(1) It includes adjustments to the CCA to be received, reflected at the level of reserves, and not received from the Resolution Fund as well as the amount relating to
the backstop.
(2) The leverage ratio results from dividing Tier 1 by the exposure measure calculated under the CRR.
(3) Capital and leverage ratios not considering effects related with transitional period
Note 43 – NPL Disclosures
Following the recommendations of the European Banking Authority as set out in the document EBA/GL/2018/10, credit
institutions with a Non-Performing Loans (NPL) ratio above 5% must publish a set of information related to Non-
Performing Exposures (NPE), restructured loans, and assets received in lieu, according to a standardized format, which is
presented below (it is underlined that this information is prepared from a prudential perspective, the consolidation
perimeter of which differs from the consolidation perimeter of the condensed interim financial statements presented):
43.1. Credit quality of forborne exposures
442
Annual Report 2023 | novobanco
Gross carrying amount/nominal amount of exposures with
forbearance measures
Non-performing forborne
Performing
forborne
Total
Of which
defaulted
Of which
subject to
impairment
Accumulated impairment,
accumulated negative
changes
in fair value due to credit risk
and provisions
On performing
forborne
exposures
On non-
performing
forborne
exposures
(thousand of Euros)
Collateral received and financial
guarantees received on forborne
exposures
Of which collateral
and financial
guarantees received
on nonperforming
exposures with
forbearance measures
Loans and advances
696 645
591 206
591 206
591 206
( 71 783)
( 295 877)
675 078
242 564
Central banks
General governments
Credit institutions
Other financial corporations
-
-
-
-
-
-
-
-
-
-
-
-
-
161 999
161 999
161 999
-
-
-
-
-
-
-
-
-
-
( 39 004)
115 356
Non-financial corporations
525 345
365 383
365 383
365 383
( 68 859)
( 210 602)
383 214
Households
Debt securities
Loan commitments given
171 300
63 824
63 824
63 824
( 2 924)
( 46 270)
176 508
-
2 710
-
821
-
821
-
821
-
-
-
-
-
-
-
-
-
115 356
111 796
15 412
-
-
Total
699 355
592 027
592 027
592 027
( 71 783)
( 295 877)
675 078
242 564
43.2. Credit quality of performing and non-performing exposures by days past due
Performing exposures
Non-performing exposures
Gross carrying amount/nominal amount
Total
Not past due
or past due <
=30 days
Past due > 30
days <=90
days
Total
Unlikely to
pay that are
not past due
or are past
due <=90
days
Past due > 90
days <=180
days
Past due >
180 days <=1
year
Past due > 1
year <= 2
years
Past due > 2
years >=5
years
Past due > 5
years >=7
years
Past due > 7
years
Of which
defaulted
(thousand of Euros)
Cash in Central Banks
5 688 156
5 688 156
-
-
-
-
-
-
-
-
-
-
Loans and advances
24 379 831
24 279 004
100 827
1 132 652
648 744
75 426
123 341
113 323
99 196
18 835
53 786
1 132 652
Central banks
-
-
-
General governments
315 287
314 506
780
Credit institutions
23 896
23 896
-
-
-
-
-
-
-
768 596
743 426
25 170
219 975
193 146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
2
19 449
1 155
6 216
219 975
11 810 496
11 801 877
8 619
705 057
354 733
53 663
95 479
76 821
65 988
16 919
41 452
705 057
Of which SMEs
6 873 599
6 865 242
8 357
541 510
230 375
53 180
67 742
76 044
60 495
13 031
40 643
541 510
Households
11 461 556
11 395 297
66 258
207 620
100 865
21 763
27 855
36 500
13 758
761
6 118
207 620
Debt securities
8 506 408
8 506 408
Central banks
-
-
General governments
4 778 128
4 778 128
Credit institutions
393 321
393 321
Other financial
corporations
Non-financial
corporations
528 111
528 111
2 806 848
2 806 848
-
-
-
-
-
-
Off-balance-sheet exposures
8 219 034
Central banks
-
General governments
264 576
Credit institutions
539 622
Other financial
corporations
Non-financial
corporations
Households
81 750
6 090 705
1 242 381
460 965
357 997
-
-
-
-
-
-
20 584
91
440 381
357 906
418 374
-
-
-
7 425
405 688
5 261
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 746
101 222
460 965
-
-
-
-
-
-
-
-
-
1 746
18 747
20 584
-
82 475
440 381
418 374
-
-
-
7 425
405 688
5 261
Total
46 793 429
38 473 568
100 827
2 011 991
1 006 741
75 426
123 341
113 323
99 196
20 581
155 008
2 011 991
443
Other financial
corporations
Non-financial
corporations
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Productive and non-productive exposures and respective provisions
Gross carrying amount/nominal amount
Accumulated impairment, accumulated negative changes in fair value due to credit risk and
provisions
Performing exposures
Non-performing exposures
Performing exposures – accumulated
impairment and provisions
Non-performing exposures – accumulated
impairment, accumulated negative changes in
fair value due to credit risk and provisions
Accumulated
partial
write-off
Total
Of which
stage 1
Of which
stage 2
Total
Of which
stage 2
Of which
stage 3
Total
Of which,
Stage 1
Of which,
Stage 2
Total
Of which,
Stage 2
Of which,
Stage 3
(thousand of Euros)
Collateral and financial
guarantees received
On
performing
exposures
On non-
performing
exposures
Cash in Central Banks
5 688 156
5 688 156
-
-
Loans and advances
24 379 831
20 626 688
3 753 143
1 132 652
Central banks
-
-
-
General governments
315 287
299 791
15 496
Credit institutions
23 896
19 127
4 769
-
-
-
Other financial corporations
768 596
631 701
136 895
219 975
Non-financial corporations
11 810 496
9 311 877
2 498 619
705 057
Of which SMEs
6 873 599
5 404 368
1 469 230
541 510
Households
11 461 556
10 364 192
1 097 364
207 620
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 132 652
( 398 756)
( 61 577)
( 337 179)
( 556 483)
-
-
-
-
-
-
( 751)
( 495)
( 256)
( 714)
( 556)
( 158)
-
-
-
219 975
( 21 033)
( 3 492)
( 17 541)
( 57 254)
705 057
( 293 275)
( 39 037)
( 254 238)
( 390 645)
541 510
( 104 305)
( 21 833)
( 82 472)
( 293 703)
207 620
( 82 983)
( 17 997)
( 64 986)
( 108 584)
Debt securities
8 506 408
8 442 222
64 186
460 965
112
460 853
( 5 614)
( 3 847)
( 1 767)
( 318 937)
Central banks
-
-
General governments
4 778 128
4 778 128
Credit institutions
393 321
393 321
Other financial corporations
528 111
528 111
-
-
-
-
-
-
-
20 584
-
-
-
-
-
-
-
-
-
( 636)
( 636)
( 123)
( 123)
20 584
( 530)
( 530)
-
-
-
-
-
-
-
-
Non-financial corporations
2 806 848
2 742 662
64 186
440 381
112
440 269
( 4 325)
( 2 558)
( 1 767)
( 318 937)
Off-balance-sheet exposures
8 219 034
7 096 903
1 122 131
418 374
Central banks
-
-
-
General governments
264 576
264 111
466
Credit institutions
539 622
430 147
109 475
-
-
-
Other financial corporations
81 750
79 046
2 704
7 425
Non-financial corporations
6 090 705
5 236 837
853 868
405 688
Households
1 242 381
1 086 762
155 619
5 261
-
-
-
-
-
-
-
418 374
( 14 080)
( 6 412)
( 7 668)
( 71 322)
-
-
-
-
-
-
( 18)
( 12)
( 6)
( 644)
( 10)
( 634)
-
-
-
7 425
( 67)
( 21)
( 46)
( 38)
405 688
( 8 518)
( 2 048)
( 6 471)
( 71 172)
5 261
( 4 833)
( 4 322)
( 511)
( 111)
Total
46 793 429
41 853 969
4 939 460
2 011 991
112
2 011 879
( 418 450)
( 71 836)
( 346 614)
( 946 742)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 556 483)
( 486 931)
15 046 921
422 768
-
-
-
-
-
( 4)
30 676
-
-
-
-
-
( 57 254)
( 193 603)
171 422
127 937
( 390 645)
( 204 339)
4 464 391
219 431
( 293 703)
( 136 822)
3 201 769
167 669
( 108 584)
( 88 986)
10 380 432
75 401
( 318 937)
-
-
-
-
( 318 937)
( 71 322)
-
-
-
( 38)
( 71 172)
( 111)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
193 750
11 044
-
2 804
48 227
9 767
-
-
-
-
122 248
10 983
10 704
61
( 946 742)
( 486 931)
15 240 672
433 812
Quality of non-performing exposures by geography
Gross carrying amount/nominal amount
Of which non-performing
Total
Of which
defaulted
Of which
subject to
impairment
Accumulated
impairment
(thousand of Euros)
Provisions on
off-balance-
sheet
commitments
and financial
guarantees
given
Accumulated
negative
changes in fair
value due to
credit risk on
non-performing
exposures
On-balance-sheet exposures
34 479 856
1 593 617
1 593 617
34 468 439
( 1 279 790)
Portugal
24 027 073
1 421 492
1 421 492
24 015 768
( 1 153 954)
Other countries
10 452 783
172 125
172 125
10 452 671
( 125 836)
Off-balance-sheet exposures
8 637 408
418 374
418 374
Portugal
8 266 884
415 935
415 935
Other countries
370 524
2 439
2 439
83 983
82 290
1 693
Total
43 117 264
2 011 991
2 011 991
34 468 439
( 1 279 790)
83 983
-
-
-
-
444
Annual Report 2023 | novobanco
Credit quality of loans and advances by sector of activity
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air conditioning supply
Water supply
Construction
Wholesale and retail trade
Transport and storage
Total
Gross carrying amount
Of which non-performing
Of which
defaulted
Of which loans
and advances
subject to
impairment
Accumulated
impairment
335 094
58 186
3 249
6 189
3 249
335 094
( 9 595)
6 189
58 186
( 4 766)
2 582 525
113 710
113 710
2 582 525
( 100 733)
291 441
182 665
613
98
613
291 441
( 2 249)
98
182 665
( 4 296)
1 267 392
77 793
77 793
1 267 392
( 58 211)
1 560 036
810 411
78 889
28 633
78 889
1 560 036
( 68 304)
28 633
810 411
( 42 241)
Accommodation and food service activities
1 110 904
77 808
77 808
1 110 904
( 71 700)
Information and communication
155 785
5 901
5 901
155 785
( 6 867)
Financial and insurance activities
385 391
29 663
29 663
385 391
( 48 949)
Real estate activities
1 633 516
161 289
161 289
1 633 516
( 111 611)
Professional, scientific and technical activities
Administrative and support service activities
Public administration and defence, compulsory social
security
1 107 396
339 426
43 011
7 719
43 011
1 107 396
( 28 865)
7 719
339 426
( 21 314)
1 593
-
-
1 593
Education
52 554
708
708
52 554
( 16)
( 761)
Human health services and social work activities
316 916
32 494
32 494
316 916
( 24 157)
Arts, entertainment and recreation
129 256
23 553
23 553
129 256
( 18 822)
Other services
Total
195 066
13 734
13 734
195 066
( 60 465)
12 515 554
705 057
705 057
12 515 554
( 683 920)
Assessment of collateral - loans and advances
(thousand of Euros)
Accumulated
negative
changes in fair
value due to
credit risk on
non-performing
exposures
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Performing
Non-performing
Loans and advances
Total -
Performing
Not overdue
or overdue
< =30 days
Of which
past due >
30 days
<=90 days
Total - Non
Performing
Unlikely to
pay that are
not past due
or are past
due <= 90
days
Total past
due > 90
days
Of which
past due
>90 days <=
180 days
Of which:
past due >
180 days <=
1 year
Of which:
past due > 1
years <= 2
years
Of which:
past due > 2
years <= 5
years
Of which:
past due > 5
years £<=7
years
Of which:
past due > 7
years
Of which, past due > 90 days
(thousand of Euros)
Gross carrying amount
Of which secured
25 512 483
24 379 831
100 827
1 132 652
648 744
483 908
75 426
123 341
113 323
99 196
18 835
53 786
17 351 290
16 558 781
60 598
792 509
464 376
328 133
40 636
68 445
76 312
83 068
14 166
45 506
Of which secured with immovable property
14 097 340
13 532 214
58 410
565 126
295 681
269 445
39 196
56 659
43 698
76 564
10 850
42 479
Of which instruments with LTV higher than 60% and lower or equal to 80%
2 270 404
2 083 698
186 706
124 456
62 250
Of which instruments with LTV higher than 80% and lower or equal to 100%
508 942
447 769
61 173
43 994
17 180
Of which instruments with LTV higher than 100%
841 217
633 274
207 943
61 039
146 905
Accumulated impairment for secured assets
( 542 821)
( 206 830)
( 3 261)
( 335 991)
( 175 042)
( 160 949)
( 15 903)
( 28 193)
( 44 760)
( 41 251)
( 6 405)
( 24 436)
Collateral
Of which value capped at the value of exposure
15 428 309
15 011 097
57 199
417 212
264 773
152 439
14 670
39 476
29 760
39 702
7 761
21 070
Of which immovable property
13 399 886
13 074 293
55 234
325 593
198 369
127 224
14 327
32 727
23 773
34 218
2 336
19 843
Of which value above the cap
38 535 746
37 240 152
77 081
1 295 594
638 233
657 361
46 791
50 229
257 922
82 771
79 023
140 625
Of which immovable property
28 045 182
27 495 182
73 212
550 000
345 999
204 001
32 420
39 747
28 705
54 548
3 190
45 392
Financial guarantees received
Accumulated partial write-off
41 381
35 825
59
5 556
4 246
1 310
511
745
54
-
-
-
( 486 931)
( 1 717)
( 1 717)
( 485 214)
( 4 317)
( 480 898)
( 7 295)
( 477)
( 86 463)
( 46 114)
( 59 107)
( 281 441)
445
Management Report
Sustainability Report
Consolidated Financial Statements
Annex
Changes in the stock of non-performing loans and advances
Initial stock of non-performing loans and advances
Inflows to non-performing portfolios
Outflows from non-performing portfolios
Outflow to performing portfolio
Outflow due to loan repayment, partial or total
Outflow due to collateral liquidation
Outflow due to taking possession of collateral
Outflow due to sale of instruments
Outflow due to risk transfer
Outflow due to write-off
Outflow due to other situations
Outflow due to reclassification as held for sale
Final stock of non-performing loans and advances
Collateral obtained by taking possession and execution processes
Property, plant and equipment (PP&E)
Other than PP&E
Residential immovable property
Commercial Immovable property
Movable property (auto, shipping, etc.)
Equity and debt instruments
Other
Total
(thousand of Euros)
Gross carrying
amount
1 391 459
411 465
( 670 273)
( 154 882)
( 188 695)
-
( 1 934)
( 144 521)
-
( 158 048)
( 18 156)
-
1 132 652
(thousand of Euros)
Collateral obtained by taking possession
Value at initial
recognition
Accumulated
negative changes
-
170 960
45 137
55 995
1 795
40 640
27 394
-
( 55 463)
( 11 085)
( 28 353)
( 1 039)
( 8 860)
( 6 127)
170 960
( 55 463)
Collateral obtained by taking possession and execution processes – distribution by age
Total collateral obtained by taking possession
Foreclosed <=2 years
Foreclosed > 2 years <=5
years
Foreclosed > 5 years
Of which non-current
assets held-for-sale
(thousand of Euros)
Value at initial
recognition
Accumulated
negative
changes
Value at initial
recognition
Accumulated
negative
changes
Value at initial
recognition
Accumulated
negative
changes
Value at initial
recognition
Accumulated
negative
changes
Value at initial
recognition
Accumulated
negative
changes
Collateral obtained by taking possession
classified as PP&E
Collateral obtained by taking possession
other than that classified as PP&E
-
-
170 960
( 55 463)
6 886
( 341)
41 828
( 17 844)
122 247
( 37 278)
Residential immovable property
45 137
( 11 085)
1 484
( 60)
7 671
( 1 398)
35 983
( 9 628)
Commercial immovable property
55 995
( 28 353)
5 294
( 219)
4 353
( 1 266)
46 348
( 26 867)
Movable property (auto, shipping, etc.)
1 795
( 1 039)
108
( 62)
846
( 194)
840
( 783)
Equity and debt instruments
40 640
( 8 860)
27 394
( 6 127)
-
-
-
-
1 564
( 8 860)
39 076
27 394
( 6 127)
-
-
-
Other
Total
170 960
( 55 463)
6 886
( 341)
41 828
( 17 844)
122 247
( 37 278)
446
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual Report 2023 | novobanco
Note 44 – Provision of Insurance or Reinsurance Mediation Service
As of December 31, 2023 and 2022, the remunerations resulting from the provision of insurance or reinsurance
mediation service have the following composition:
Life Insurance
Unit Link and other life commissions
Credit protection insurance (life)
Traditional Products
Non-Life Insurance
Personal lines insurance
Corporate insurance
Credit protection insurance (non-life)
Note: the amounts shown are net of accruals
(thousands of Euros)
2023
2022
17 065
20 223
945
791
15 329
12 291
10 878
177
1 236
1 795
881
17 547
10 071
8 464
177
1 430
29 356
30 294
The Group does not collect insurance premiums on behalf of Insurers, nor does it move funds related to insurance
contracts. Therefore, there are no other assets, liabilities, income, or expenses to report, related to the insurance
mediation activity carried out by the Group, in addition to those already disclosed.
Note 45 – Subsequent Events
• On February 1, 2024, novobanco announced that on that date, Fitch assigned a BBB- rating to novobanco's long-
term preferred senior debt. The Investment Grade rating reflects i) the Bank's current business model; ii) a
significant improvement in asset quality; iii) profitability levels that compare favorably with peers; iv) significant
improvement in capital buffers in 2023; and v) stable financing, along with adequate liquidity;
• On February 21, 2024, novobanco announced the issue of Covered Bonds in the amount of 500 million euros,
maturing on March 1, 2027 (soft bullet). The expected rating of the issue is Aaa by Moodys. The bonds have an
annual interest rate of 3.25%, equivalent to 3-year mid-swaps plus 45bp;
• On February 28, 2024, novobanco issued Senior Preferred debt in the amount of 500 million euros, maturing on
March 8, 2028 and with an early repayment option on March 8, 2027. The bonds were issued with an annual coupon
rate of 4.25%.
447
Management Report
Sustainability Report
Financial Statements
Annex
124
Annual Report 2023 | novobanco
SEPARATE
FINANCIAL
STATEMENTS
OF NOVOBANCO
125
Management Report
Sustainability Report
Separate Financial Statements
Annex
novobanco
SEPARATE INCOME STATEMENT FOR THE YEARS
ENDEND 31 DECEMBER 2023 AND 2022
Interest Income
Interest Expenses
Net Interest Income
Dividend income
Fee and comission income
Fee and comission expenses
Gains or losses on derecognition of financial assets and liabilities not measured at fair value through
profit or loss
Gains or losses on financial assets and liabilities held for trading
Gains or losses on non-trading financial assets mandatorily at fair value through profit or loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses
Operating Income
Administrative expenses
Staff expenses
Other administrative expenses
Cash contributions to resolution funds and deposit guarantee schemes
Depreciation
Provisions or reversal of provisions
Commitments and guarantees given
Other provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit or
loss
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Profit or loss before tax from continuing operations
Tax expense or income related to profit or loss from continuing operations
Current tax
Deferred tax
Profit or loss after tax from continuing operations
Profit or loss before tax from discontinued operations
Profit or loss for the exercise
Weighted average number of ordinary shares in circulation (thousands)
Basic earnings per share (in euros)
Diluted earnings per share (in euros
Basic earnings per share from continuing operations (in euros)
Diluted earnings per share from continuing operations (in euros)
Notes
8
8
10
9
9
10
10
10
10
10
11
12
12
13
15
16
23, 24
17
17
17
17
25
27
The accompanying explanatory notes are an integral part of these separate financial statements
2023
1 940 462
( 833 352)
1 107 110
32 444
306 859
( 37 563)
( 58 055)
3 144
71 766
31 468
23 989
27 608
45 120
( 78 681)
1 475 209
( 407 920)
( 234 729)
( 173 191)
( 77 528)
( 45 878)
( 23 305)
434
( 23 739)
(thousands of Euros)
2022
838 291
( 213 295)
624 996
17 452
302 126
( 39 816)
( 88 444)
146 715
( 95 948)
( 535)
7 305
82 159
56 579
( 68 778)
943 811
( 369 730)
( 216 821)
( 152 909)
( 40 717)
( 53 961)
( 10 894)
2 555
( 13 449)
( 142 022)
( 103 265)
12 216
6 353
797 125
4 656
( 5 386)
10 042
801 781
( 1 121)
800 660
10 034 965
0,08
0,08
0,08
0,08
16 166
14 081
395 491
58 339
( 4 611)
62 950
453 830
-
453 830
10 034 965
0,05
0,05
0,05
0,05
450
Annual Report 2023 | novobanco
novobanco
SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED
31 DECEMBER 2023 AND 2022
Net profit / (loss) for the exercise
Other comprehensive income / (loss)
Items that will not be classified to results
Actuarial gains / (losses) on defined benefits plans
Fair value changes of equity instruments measured at fair value through other comprehensive
income
Items that may be reclassified to results
Cash flow hedging
Financial assets at fair value through other comprehensive income
Total other comprehensive income/(loss) for the exercise
a) See Statement of Changes in Equity
Notes
a)
a)
a)
(thousands of Euros)
2023
800 660
2022
453 830
( 51 531)
( 27 285)
( 24 246)
213 144
192 974
20 170
962 273
110 205
96 485
13 720
( 296 489)
( 100 418)
( 196 071)
267 546
The accompanying explanatory notes are an integral part of these separate financial statements
451
Management Report
Sustainability Report
Separate Financial Statements
Annex
novobanco
SEPARATE BALANCE SHEET
AS AT 31 DECEMBER 2023 AND 2022
ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Debt securities
Loans and advances
Loans and advances
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets
Other tangible assets
Intangible assets
Tax assets
Current Tax Assets
Deferred Tax Assets
Other assets
Non-current assets and disposal groups classified as held for sale
LIABILITIES
Financial liabilities held for trading
Financial liabilities measured at amortised cost
Deposits from banks
(Of which, Repurchase Agreement)
Due to customers
(Of which, Repurchase Agreement)
Debt securities issued and Subordinated debt
Other financial liabilities
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Provisions
Tax liabilities
Current Tax liabilities
Other liabilities
EQUITY
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Owners of the parent
TOTAL LIABILITIES AND EQUITY
(thousands of Euros)
Notes
2023
2022
43 146 264
45 464 048
18
19
20
20
20
20
21
21
22
23
24
25
26
27
19
28
21
21
29
25
30
31
32
32
32
5 742 599
436 345
1 434 690
-
741 446
31 389 894
8 200 570
125 817
23 063 507
683 074
( 83 763)
263 675
300 242
300 242
86 427
923 641
26 260
897 381
1 211 512
16 482
39 117 042
100 607
37 392 300
6 685 933
3 867 053
29 130 958
1 366 382
1 085 659
489 750
124 957
62 049
420 543
4 191
4 191
1 012 395
4 029 222
6 567 844
( 993 658)
(8 577 074)
6 231 450
800 660
6 387 295
170 847
1 537 670
13
2 183 034
31 500 944
8 400 233
145 464
22 955 247
562 886
( 164 388)
251 457
258 963
258 963
69 640
947 500
30 298
917 202
1 713 116
45 071
42 397 100
99 317
40 904 697
10 506 509
2 150 824
28 425 223
450 906
1 601 454
371 511
120 612
-
423 190
4 505
4 505
844 779
3 066 948
6 304 661
(1 155 271)
(8 577 074)
6 040 802
453 830
43 146 264
45 464 048
The accompanying explanatory notes are an integral part of these separate financial statements
452
Annual Report 2023 | novobanco
novobanco
SEPARATE STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2023 AND 2022
Balance as at 31 December 2021
6 054 907
( 968 987)
( 8 576 860)
6 064 434
225 908
2 799 402
Notes
Share Capital
Other
Comprehensive
Income
Retained
earnings
Other reserves
Net
profit/(loss)
for the year
Total
(thousands of Euros)
Capital increase by incorporation of special reserve for deferred taxes
249 754
Other Increase / (Decrease) in Equity
Appropriation to retained earnings of net profit / (loss) of the previous year
Other movements
Total comprehensive income for the year
Changes in fair value, net of tax
Remeasurement of defined benefit plans, net of tax
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
Net profit / (loss) for the year
Balance as at 31 December 2022
Other Increase / (Decrease) in Equity
Appropriation to retained earnings of net profit / (loss) of the previous year
Other movements
Total comprehensive income for the year
Changes in fair value, net of tax
Remeasurement of defined benefit plans, net of tax
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
Cash flow hedging reserves
Net profit / (loss) for the year
Balance as at 31 December 2023
-
-
-
-
-
-
-
-
-
32
14
32
32
-
-
-
-
-
-
-
-
-
-
32
14
32
32
-
-
-
-
-
( 249 754)
-
( 214)
226 122
( 225 908)
-
225 908
( 225 908)
( 214)
214
-
( 186 284)
( 178 410)
96 485
( 3 079)
( 862)
( 100 418)
-
-
-
-
-
-
-
-
-
-
-
-
453 830
-
-
-
-
453 830
-
-
-
-
267 546
( 178 410)
96 485
( 3 079)
( 862)
353 412
-
-
-
-
161 613
255 122
( 27 285)
( 378)
( 258 820)
192 974
-
-
-
-
-
-
-
-
-
-
-
-
( 263 183)
-
453 831
( 453 830)
453 830
( 453 830)
1
-
-
-
-
-
-
-
-
800 660
-
-
-
-
-
800 660
-
1
-
1
962 273
255 122
( 27 285)
( 378)
( 258 820)
192 974
800 660
6 304 661
( 1 155 271)
( 8 577 074)
6 040 802
453 830
3 066 948
6 567 844
( 993 658)
( 8 577 074)
6 231 450
800 660
4 029 222
Capital increase by incorporation of special reserve for deferred taxes
31
263 183
The accompanying explanatory notes are an integral part of these separate financial statements
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CASH FLOW STATEMENT
FOR THE YEARS ENDED ON 2023 AND 2022
Notes
Cash flows from operatings activities
Interest received
Interest paid
Fees and commissions received
Fees and commissions paid
Recoveries on loans previously written off
Cash contributions to resolution funds and deposit guarantee schemes
Cash payments to employees and suppliers
Changes in operating assets and liabilities:
Deposits with / from Central Banks
Financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Securities
Loans and advances to banks
Loans and advances to customers
Financial liabilities at amortised cost
Deposits from banks
Due to customers
Derivatives - Hedge accounting
Other operating assets and liabilities
Net cash from operating activities before corporate income tax
Corporate income taxes paid
Net cash from operating activities
Cash flows from investing activities
Sale of investments in subsidiaries and associated companies
Dividends received
Acquisition of tangible fixed assets
Sale of tangible fixed assets
Acquisition of intangible assets
Net cash from investing activities
Cash flows from financing activities
Reimbursement of bonds and other debt securities
Issue of subordinated debt
Reimbursement of subordinated debt
Net cash from financing activities
2023
1 199 892
1 985 442
( 715 474)
306 859
( 37 581)
31 994
( 77 528)
( 293 820)
(4 622 226)
225 187
( 229 596)
1 772 803
153 086
373 792
20 890
( 241 596)
1 825 336
1 122 185
703 151
( 415 013)
26 563
( 63 968)
( 25 709)
( 89 677)
-
32 444
( 82 368)
1 279
( 30 177)
( 78 822)
( 577 303)
500 000
( 400 000)
( 477 303)
(thousands of Euros)
2022
586 720
855 033
( 207 797)
302 126
( 39 816)
39 741
( 40 717)
( 321 850)
(1 702 869)
558 483
146 847
4 535 561
(6 732 655)
(5 699 590)
41 890
(1 074 955)
2 121 448
682 009
1 439 439
( 54 864)
1 171 677
630 348
( 35 231)
595 117
1 867
17 452
( 105 881)
107 072
( 25 160)
( 4 650)
100 000
( 575)
99 425
Net changes in cash and cash equivalents
( 645 802)
689 892
Cash and cash equivalents at the beginning of the exercise
Net changes in cash and cash equivalents
Cash and cash equivalents at the end of the exercise
Cash and cash equivalents include:
Cash
Deposits with Central Banks
(of which, Restricted balances)
Deposits with banks
Total
6 099 398
( 645 802)
5 453 596
171 006
5 374 612
( 289 003)
196 981
5 453 596
5 409 506
689 892
6 099 398
176 797
5 942 501
( 287 897)
267 997
6 099 398
18
18
18
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Notes to the Separate Financial Statements
as of 31 December 2023
(Amounts expressed in thousands of euros, except when otherwise indicated)
Note 1 – Activity
Novo Banco, S.A. is the main entity of the financial novobanco Group focused on the banking activity, having been
incorporated on the 3rd of August 2014 per deliberation of the Board of Directors of Bank of Portugal (the Central Bank of
Portugal) dated 3rd of August 2014 (8 p.m.), under No. 5 of article 145-G of the General Law on Credit Institutions and
Financial Companies (“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF)) , approved by Decree-
Law No. 298/92, of 31 December, following the resolution measure applied by Bank of Portugal to Banco Espírito Santo,
S.A. (BES), under the terms of paragraphs 1 and 3-c) of article 145-C of the RGICSF, from which resulted the transfer of
certain assets, liabilities and off-balance sheet elements as well as assets under management of BES to novobanco
(novobanco or Bank). As a result of the resolution measure applied, Fundo de Resolução (“Resolution Fund”) became the
sole owner of the share capital of novobanco, in the amount of Euro 4,900 million.
As at 18 October 2017, the sale process was concluded, following the acquisition of the majority (75%) of its share capital
by Nani Holdings, SGPS, SA, a company belonging to the North American group Lone Star, through two share capital
increases in the amount of Euro 750 million and Euro 250 million, in October and December, respectively.
Since 18 October 2017, the financial statements of novobanco are consolidated by Nani Holdings SGPS, S.A., with
registered office at Avenida D. João II, No. 46, 4A, Lisbon. On December 19, 2023, the company became Nani Holdings S.à.r.l,
with its headquarters at Rue des Mérovingiens 7A, Bertrange, Luxembourg. LSF Nani Investments S.à.r.l., headquartered in
Luxembourg, is the parent company of the Group.
Novo Banco, S.A. has its registered office in Lisbon, at Avenida da Liberdade, No. 195.
Novobanco has a retail network comprising 273 branches in Portugal and abroad (31 December 2022: 274 branches),
including branches in Luxembourg, and 2 representative offices, one in Switzerland and one in Spain (31 December 2022: 2
representative offices in Switzerland).
Note 2 –Basis of presentation
The separate financial statements of novobanco are presented as at 31 December 2023, expressed in thousands of euros,
rounded to the nearest thousand. The accounting policies used by the Bank in the preparation are consistent with those
used in the preparation of the financial statements as of 31 December 2022. The changes to the most relevant accounting
policies are described in Note 5.
The separate financial statements of novobanco have been prepared under the assumption of continuity of operations
from the accounting records and following the historical cost convention, except for the assets and liabilities accounted at
fair value, namely derivative financial instruments, financial assets and liabilities at fair value through profit or loss, financial
assets at fair value through other comprehensive income, investment properties and hedged assets and liabilities, in
respect of their hedged component.
The separate financial statements and the Management Report of 31 December 2023 were approved at the Executive
Board of Directors’ meeting held on 29 February 2024 and will be submitted to the General Assembly of Shareholders,
which has the power to justifiably decide to change them. However, it is Executive Board of Directors’ conviction that
these financial statements will be approved without changes.
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Note 3 – Statement of compliance
The separate financial statements of novobanco have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted in the European Union in force on 1 January 2023, under Regulation (EC) nº 1606/2002 of the
European Parliament and of the Council, of 19 July 2002, and Notice nº 5/2015 of Bank of Portugal.
IFRS comprise accounting standards issued by the International Accounting Standards Board (IASB) and interpretations
issued by the International Financial Reporting Interpretation Committee (IFRIC) and its predecessor body the Standing
Interpretations Committee (SIC).
Note 4 –Presentation of financial statements
The Bank presents its statement of financial position in order of liquidity based on the Bank’s intention and perceived ability
to recover/settle the majority of assets/liabilities of the corresponding financial statement line caption.
An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months
after the reporting date (noncurrent) is presented throughout the different balance sheet notes.
Note 5 – Changes in Accounting Policies
In the preparation of its financial statements with reference to 31 December 2023, the Bank did not early adopt any new
standard, interpretation or amendment issued, but not yet in force. The changes to the standards adopted by the Bank are
as follows:
Norms, interpretations, amendments, and revisions that came into force in the financial year
The following norms, interpretations, amendments, and revisions adopted ("endorsed") by the European Union have
mandatory application for the first time in the exercise beginning 1 January 2023:
Standards/Interpretation
Description
IFRS 17 – Insurance Contracts
IFRS 17 replaces IFRS 4 and applies to all insurance contracts (i.e., life, non-life, direct insurance,
and reinsurance), regardless of the type of entities that issue them, as well as to some warranties
and some financial instruments with discretionary participation features. In general terms, IFRS 17
provides a more useful and more consistent accounting model for
insurance contracts.
Contrasting with the requirements of IFRS 4, which are based on previously adopted local
accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all
relevant accounting aspects.
Amendments to IFRS 17 – Insurance
Contracts – Initial application of IFRS 17
and IFRS 9 – Comparative information
Amendments to IAS 1 - Disclosure of
Accounting Policies
This amendment to IFRS 17 pertains to the presentation of comparative information of financial
assets upon the initial application of IFRS 17.
The amendment adds a transition option that allows an entity to apply an 'overlay' to the
classification of a financial asset in the comparative period(s) presented upon the initial
application of IFRS 17. The 'overlay' allows all financial assets, including those held in relation to
activities not related to contracts within the scope of IFRS 17, to be classified, instrument by
instrument, in the comparative period(s) in line with how the entity expects these assets to be
classified upon the initial application of IFRS 9.
These changes aim to assist an entity in disclosing 'material' accounting policies, previously
referred to as 'significant' policies. However, due to the absence of this concept in IFRS standards,
it was decided to replace it with the concept of "materiality", a concept already known by the
users of financial statements.
When assessing the materiality of accounting policies, the entity must consider not only the size
of the transactions but also other events or conditions and their nature.
Amendments to IAS 8 - Definition of
Accounting Estimates
The amendment aims to clarify the distinction between changes in accounting estimates,
changes in accounting policies, and the correction of errors. Additionally, it clarifies how an entity
uses measurement techniques and inputs to develop accounting estimates.
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Amendments to IAS 12 - Deferred tax
related to assets and liabilities arising
from a single transaction
Amendments to IAS 12 - International
Tax Reform - Second Pillar Model Rules
IAS 12 now requires an entity to recognise deferred tax when its initial recognition gives rise to
equal amounts of taxable temporary differences and deductible temporary differences.
However, it is a matter of professional judgment whether such deductions are attributable to the
liability that is recognised in the financial statements or to the related asset. This fact is
particularly important in determining the existence of temporary differences in the initial
recognition of the asset or liability, insofar as the initial recognition exception is not applicable to
transactions that originated equal taxable and deductible temporary differences.
Among the applicable transactions are the registration of (i) assets under right of use and lease
liabilities; (ii) provisions for dismantling, restoration, or similar liabilities, and the corresponding
amounts recognised as part of the cost of the related asset, when at the date of initial recognition
they do not apply for tax purposes.
This amendment is retrospectively applicable.
These changes arise in the context of implementing the Global Anti-Base Erosion ("Globe") rules
of the OECD, which may have significant impacts on the determination of deferred taxes that are
difficult to estimate as of the date of issuance of these changes.
These changes introduce a temporary exception to the accounting for deferred taxes arising from
the application of the OECD's second pillar model rules, and additionally establish new specific
disclosure requirements for affected entities.
These standards and changes had no material impact on the Bank’s financial statements
Note 6 –Main Accounting polices
6.1. Foreign currency transactions
6.1.1 Functional and presentational currency
The Bank’s separate financial statements are prepared in Euro, which is novobanco‘s functional currency.
6.1.2. Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rate prevailing at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into Euro at the foreign exchange rates
ruling at the balance sheet date. Foreign exchange differences arising from this translation are recognised in the income
statement.
Non-monetary assets and liabilities recorded at historical cost, denominated in foreign currency, are translated using the
exchange rate prevailing at the transaction date. Non-monetary assets and liabilities, denominated in foreign currency,
that are stated at fair value are translated into Euro at the foreign exchange rates ruling at the dates the fair value was
determined. The resulting exchange differences are accounted for in the income statement, except if related to equity
instruments classified as financial assets at fair value through other comprehensive income, which are recorded in
comprehensive income.
Foreign exchange differences relating to cash flow hedges and the hedging of the net investment in foreign operational
units, when they exist, are recognised in other comprehensive income.
6.2. Recognition of interest income/expense
Interest income and expense is recognised in the income statement under interest and similar income and interest expense
and similar charges for all financial instruments measured at amortised cost and for all financial assets at fair value through
other comprehensive income, using the effective interest rate method. Interest arising on financial assets and liabilities at
fair value through profit or loss is also included under interest and similar income or interest expense and similar charges, as
appropriate.
The effective interest rate is the rate that discounts the estimated future cash payments or receipts throughout the
expected life of the financial instrument or, when appropriate, a shorter period to the net book value of the financial asset
or liability. The effective interest rate is calculated at inception and is not subsequently revised, except in respect of
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financial assets and liabilities with a variable interest rate. In this case, the effective interest rate is periodically revised,
taking into consideration the impact of the change in the interest rate of reference on the estimated future cash flows.
When calculating the effective interest rate, the Bank estimates the cash flows considering all the contractual terms of
the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation
includes all the commissions that are an integral part of the effective interest rate, transaction costs and all other related
premiums or discounts.
Interest and similar income include interest from financial assets for which were recognised impairment. The interest from
financial assets classified as Stage 3 are determined based on the effective interest rate method applied to the net book
value. When the asset is no longer classified as Stage 3, the interest is calculated based on the gross book value.
For derivative financial instruments, the interest component in the change in fair value of derivative financial instruments
classified as fair value hedge and fair value option is recognised under interest income or interest expense. For other
derivatives, the interest component inherent in the fair value change will not be separated and will be classified under the
income statement of assets and liabilities held for trading (see Note 6.5).
6.3. Fee and commission income recognition
Fees and commissions income are recognised as revenue from customer contracts to the extent that performance
obligations are met:
• Fees and commissions that are earned on the execution of a significant act, such as loan syndication fees, are recognised
as income when the significant act has been completed;
• Fees and commissions earned over the period during which the services are provided are recognised as income in the
financial year in which the services are provided;
• Fees and commissions that are an integral part of the effective interest rate of a financial instrument are recognised as
income using the effective interest rate method, as described in note 6.2.
6.4. instruments - Classification and initial measurement
6.4.1. Date of recognition
Financial assets and liabilities, with the exception of loans and advances to customers and balances due to customers, are
initially recognised on the trade date, i.e., the date on which the Bank becomes a party to the contractual provisions of the
instrument. This includes regular way trades, i.e., purchases or sales of financial assets that require delivery of assets within
the time frame generally established by regulation or convention in the marketplace. Loans and advances to customers
are recognised when funds are transferred to the customers’ accounts. The Bank recognises balances due to customers
when funds are transferred to the Bank.
6.4.2. Initial measurement of financial instruments
The classification of financial instruments at initial recognition depends on their contractual terms and the business model
for managing the instruments, as described in 6.6. Financial instruments are initially measured at their fair value (as defined
in Note 6.5), except in the case of financial assets and financial liabilities recorded at FVPL, transaction costs are added to,
or subtracted from, this amount. Trade receivables are measured at the transaction price. When the fair value of financial
instruments at initial recognition differs from the transaction price, the Bank accounts for the Day 1 profit or loss, as
described below.
6.4.3. Day one profit
When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a
valuation technique using only inputs observable in market transactions, the Bank recognises the difference between the
transaction price and fair value in net trading income. In those cases where fair value is based on models for which some of
the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only
recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.
The Bank recognises in its income statement the gains arising from the intermediation fee (day one profit), which is
generated, primarily, through currency and derivative financial product intermediation, given that the fair value of these
instruments, both at inception and subsequently, is determined based solely on observable market data and reflects the
Bank’s access to the (wholesale market).
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6.4.4. Measurement categories for financial assets and liabilities
The Bank classifies all of its financial assets based on the business model for managing the assets and the asset’s
contractual terms, measured at either:
• Amortised cost, as explained in Note 6.6.1;
• Fair Value of through Other Comprehensive Income, as explained in Notes 6.6.1, 6.6.2 and 6.6.3;
• Fair Value Through Profit or Loss, as set out in Note 6.6.4;
• Mandatorily measured at fair value through profit or loss, as set out in Note 6.6.4.
The Bank classifies and measures its derivative and trading portfolio at FVPL, as explained in Note 6.6.5. The Bank may
designate financial instruments at FVPL, if so doing eliminates or significantly reduces measurement or recognition
inconsistencies, as explained in Note 6.6.6.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL
when they are held for trading and derivative.
6.5. Fair value of Financial Assets and Liabilities
The fair value of listed financial assets is determined based on the closing price (bid-price), the price of the last transaction
made or the value of the last known price (bid). In the absence of quotation, the Bank estimates fair value using (i) valuation
methodologies, such as the use of prices for recent transactions, similar and carried out under market conditions,
discounted cash flow techniques and customised option valuation models in order to reflect the particularities and
circumstances of the instrument and (ii) valuation assumptions based on market information.
For the assets included in the level 3 of fair value hierarchy, whose quotation is provided by a third-party using parameters
not observable in the market, the Bank proceeds, when applicable, to a detailed analysis of the historical and liquidity
performance of these assets, which may imply an additional adjustment to its fair value, as well as a result of additional
internal or external valuations.
The following is a brief description of the type of assets and liabilities included in each level of the hierarchy and the
corresponding form of valuation:
Quoted market prices (level 1)
This category includes financial instruments with market prices quoted on official markets and those with dealer price
quotations provided by entities that usually disclose transaction prices for these instruments traded on active markets.
The priority in terms of which price is used is given to those observed on official markets; where there is more than one
official market the choice falls on the main market on which those instruments are traded.
The Bank considers market prices those disclosed by independent entities, assuming that these act for their own economic
benefit and that such prices are representative of the active market, using, whenever possible, prices supplied by more
than one entity (for a specific asset and/or liability). For the process of re-evaluating financial instruments, the Bank
analyses the various prices in order to select the one it considers most representative for the instrument under analysis.
Additionally, when they exist, prices relating to recent transactions with similar financial instruments are used as inputs,
being subsequently compared to those supplied by said entities to better justify the option taken by the Bank in favour of
a specific price.
This category includes, amongst others, the following financial instruments:
(i) Derivatives traded on an organised market;
(ii) Shares quoted on a stock exchange;
(iii) Open investment funds quoted on a stock exchange;
(iv) Closed investment funds whose subjacent assets are solely financial instruments listed on a stock exchange;
(v) Bonds with observable market quotes;
(vi) Financial instruments with market offers even if these are not available at the normal information sources (e.g.,
securities traded based on recovery rate).
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Valuation models based on observable market parameters / prices (level 2)
In this category, the financial instruments are valued using internal valuation techniques, namely discounted cash flow
models and option pricing models which imply the use of estimates and require judgments that vary in accordance with the
complexity of the financial instruments. Notwithstanding, the Bank uses as inputs in its models, observable market data
such as interest rate curves, credit spreads, volatility and market indexes. This category also includes instruments with
dealer price quotations, but which markets have a lower liquidity. Additionally, the Bank also uses as observable market
variables, those that result from transactions with similar instruments and that are observed with a certain regularity on
the market.
This category includes, amongst others, the following financial instruments:
(i) Bonds without observable market valuations valued using observable market inputs; and
(ii) Derivatives (OTC) over-the-counter valued using observable market inputs; and
(iii) Unlisted shares valued using internal models using observable market inputs.
Valuation models based on unobservable market parameters (level 3)
This level uses models relying on internal valuation techniques or quotations provided by third parties, but which imply the
use of non-observable market information. The bases and assumptions for the calculation of fair value are in accordance
with IFRS 13.
This category includes, amongst others, the following financial instruments:
(i) Debt securities valued using non-observable market inputs;
(ii) Unquoted shares;
(iii) Closed real estate funds;
(iv) Hedge funds;
(v) Private equities;
(vi) Restructuring funds; and
(vii) Over the counter (OTC) derivatives with prices provided by third parties.
6.6. Financial Assets and Liabilities
The Bank initially classifies all of its financial assets based on the business model for managing the assets and the asset’s
contractual terms. This classification determines how the asset is measured after its initial recognition:
• Amortised cost: if it is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows that are solely payments of principal and interest (SPPI - solely payments of principal and interest);
• Fair value through other comprehensive income: if it is held within a business model, the objective of which is achieved
by both collecting contractual cash flows and selling financial assets and the contractual cash flows fall under the scope of
SPPI. In addition, upon initial recognition, the Bank may choose to classify irrevocably equity instruments in the fair value
through other comprehensive income portfolio being the changes in the fair value recognised in equity;
• Mandatorily measured at fair value through profit or loss: all cases not within the scope of SPPI;
• Measured at fair value through profit or loss: other financial instruments not included in the business models described
above. If these assets are acquired for the purpose of trading in the short term, they are classified as held for trading.
6.6.1. Financial assets at amortised cost
In accordance with IFRS 9 - Financial Instruments, for a financial asset to be classified and measured at amortised cost or
at fair value through other comprehensive income, it is necessary that:
(i) The contractual terms of the financial asset give rise to cash flows that are solely payments of principal and
interest (SPPI - solely payments of principal and interest) on the principal amount outstanding. Principal, for the
purposes of this test is defined as the fair value of the financial asset at initial recognition. The contractual terms
that are SPPI are consistent with a basic lending arrangement. Contractual terms that introduce exposure to risks
or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to
changes in stocks or commodity prices, do not give rise to contractual cash flows that are solely payments of
principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at
fair value through profit or loss;
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(ii) The financial asset is held within a business model with the objective to hold financial assets to maturity to collect
contractual cash flows (financial assets at amortised cost) or to collect the contractual cash flows until maturity
and selling the financial asset (financial assets at fair value through other comprehensive income). The
assessment of the business models of the financial asset is fundamental for its classification. The Bank determines
the business models by financial asset groups according to how they are managed to achieve a particular business
objective. The Bank’s business models determine whether cash flows will be generated by obtaining only
contractual cash flows, from selling the financial assets or both. At initial recognition of a financial asset, the Bank
determines whether it is part of an existing business model or if it reflects a new business model. The Bank
reassesses its business models in each reporting period in order to determine whether there have been changes
in business models since the last reporting period.
The above requirements do not apply to lease receivables, which meet the criteria defined in IFRS 16 – Leases.
Financial assets that are subsequently measured at amortised cost or at fair value through other comprehensive income
are subject to impairment calculation, as explained in Note 6.12..
At initial recognition, financial assets at amortised cost are recorded at acquisition cost, and subsequently measured at
amortised cost based on the effective interest rate. Interest, calculated at the effective interest rate, and dividends are
recognised in profit or loss.
6.6.2. Debt instruments with fair value changes in other comprehensive income
The Bank classifies debt instruments with fair value changes in other comprehensive income when both of the following
conditions are met:
• The financial asset is held within a business model, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets; and
• The contractual terms of the financial asset give rise to, on specific dates, cash flows that are solely payments of principal
and interests on the principal amount outstanding.
Debt instruments thus classified are subsequently measured at fair value, with gains and losses arising from changes in fair
value recognised in other comprehensive income until the assets are derecognised, at which point the accumulated amount
of potential gains and losses recorded in reserves is transferred to profit or loss under the heading of gains or losses on
financial assets and liabilities measured at fair value through profit or loss. Interest income and foreign exchange gains and
losses are recognised in profit or loss in the same way as for financial assets measured at amortised cost as explained in Note
6.2.
The expected credit loss calculation is explained in Note 6.12. When the Bank holds more than one investment in the same
security, they are deemed to be disposed of on a first–in first–out basis.
6.6.3. Equity instruments at Fair Value through Other Comprehensive Income
Upon initial recognition, the Bank occasionally elects to classify irrevocably some of its equity investments as equity
instruments at fair value through other comprehensive income when they meet the definition of equity under IAS 32 and
are not held for trading. Such classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to profit. Dividends are recognised in profit or loss as other
operating income when the right of the payment has been established, except when the Bank benefits from such proceeds
as a recovery of part of the cost of the instrument, in which case, such gains are recorded in other comprehensive income.
Equity instruments measured at fair value through other comprehensive income are not subject to an impairment
assessment.
6.6.4. Financial assets at fair value through profit or loss
Financial assets measured at fair value through profit or loss present the following characteristics:
• contractual cash flows are not SPPI (mandatorily measured at fair value through profit or loss); and/or
• it is held within a business model which objective is neither to obtain only contractual cash flows or to obtain contractual
cash flows and sale; or
• it is designated at fair value through profit or loss as a result of applying the fair value option
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6.6.5. Assets and liabilities held for trading
The Bank classifies financial assets or financial liabilities as held for trading when they have been purchased or issued
primarily for short-term profit-making through trading activities or form part of a portfolio of financial instruments that are
managed together, for which there is evidence of a recent pattern of short-term profit taking.
Held-for-trading assets and liabilities are recorded and measured in the statement of financial position at fair value.
Changes in fair value are recognised in net trading income. Interest and dividend income or expense is recorded in net
trading income according to the terms of the contract, or when the right to payment has been established.
Included in this classification are debt securities, equities, short positions and customer loans that have been acquired
principally for the purpose of selling or repurchasing in the near term.
6.6.6. Derivative financial instruments and hedge accounting
Classification
The Bank classifies its derivative portfolio into (i) fair value hedge and (ii) trading derivatives, which include, in addition to
the trading book, other derivatives contracted for the purpose of hedging certain assets and liabilities designated at fair
value through profit or loss but not classified as hedging (fair value option).
Recognition and measurement
Derivative financial instruments are initially recognised at their fair value on the date the derivative contract is entered into
(trade date). Subsequent to initial recognition, the fair value of derivative financial instruments is remeasured on a regular
basis and the resulting gains or losses on remeasurement are recognised directly in the income statement, except for
derivatives designated as hedging instruments. The recognition of the resulting gains or losses arising on the derivatives
designated as hedging instruments depends on the nature of the risk being hedged and the hedge model used.
Derivatives traded on organised markets, namely futures and some options contracts, are recorded as trading derivatives
and their fair value changes are recorded against the income statement. The margin accounts are included under other
assets and other liabilities (see Notes 26 and 30) and comprise the minimum collateral mandatory for open positions.
The fair value of the remaining derivative financial instruments corresponds to their market value, if available, or is
determined using valuation techniques, including discounted cash flow models and options pricing models, as appropriate.
Hedge accounting
• Classification criteria
Derivative financial instruments used for hedging purposes may be classified in the accounts as hedging instruments
provided the following criteria are cumulatively met:
(i) Hedging instruments and hedged captions are eligible for the hedge relationship;
(ii) At the inception of the hedge, the hedge relationship is identified and documented, including identification of the
hedged caption and hedging instrument and evaluation of the effectiveness of the hedge;
(iii) There is an economic relationship between the hedged caption and the hedging instrument;
(iv) The effect of credit risk does not dominate the changes in value that result from this economic relationship;
(v) The effectiveness of the hedge can be reliably measured, both at the inception of the hedge and on an ongoing
basis.
For the cases in which the Bank uses macro hedging, accounting is performed in accordance with IAS 39 (using the policy
choice permitted under IFRS 9), with the Bank carrying out prospective tests on the hedge relationship start date, when
applicable, and retrospective tests in order to confirm, on each balance sheet date, the effectiveness of hedging
relationships, demonstrating that changes in the fair value of the hedging instrument are covered by changes in the fair
value of the hedged caption in the portion attributed to the hedged risk. Any ineffectiveness found is recognised in the
income statement when it occurs in gains or losses of hedge accounting. In the specific case of fair value hedging of interest
rate risk for the deposit portfolio, the IAS 39 carve-out exception was adopted for the application of macro hedging to core
deposits.
The use of derivatives is framed in the Bank’s risk management strategy and objectives.
• Fair Value Hedge
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In a fair value hedging operation, the carrying value of the hedged asset or liability, determined in accordance with the
respective accounting policy, is adjusted to reflect the changes in its fair value attributable to the risk being hedged.
Changes in the fair value of the derivatives that are designated as hedging instruments are recorded in the income
statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the risk
hedged. In cases where the hedging instrument covers an equity instrument designated at fair value through other
comprehensive income, changes in fair value are also recognised in other comprehensive income.
If the hedge no longer meets the effectiveness requirement, but the objective of risk management stays the same, the
Bank may adjust the hedging operation in order to meet the eligibility criteria (rebalancing).
If the hedge no longer meets the criteria for hedge accounting (if the hedging instrument expires, is sold, terminated or
exercised, without having been replaced in accordance with the entity's documented risk management objective), the
derivative financial instrument is transferred to the trading portfolio and hedge accounting is discontinued prospectively.
The cumulative adjustment to the carrying book value of a hedged asset or liability corresponding to a fixed income
instrument, is amortised via the income statement over the period to its maturity, using the effective interest rate method.
• Cash flow hedge
In a hedge operation of the exposure to variability of highly probable future cash flows (cash flow hedge), the effective
portion of changes in the fair value of the hedging derivative is recognized in the cash flow hedge reserve. The value of this
reserve is transferred to the results in the periods in which the expected cash flows of the hedged item affect results. The
ineffective portion of the hedge is recorded in results.
When a hedging instrument expires or is sold, or when the hedge no longer meets the criteria required for hedge accounting,
the changes in the fair value of the derivative accumulated in reserves are recognized in results when the hedged operation
also affects results. If it is foreseeable that the hedged operation will not be carried out, the amounts still recorded in equity
are immediately recognized in results, and the hedging instrument is transferred to the trading portfolio.
Embedded derivatives
If a hybrid contract includes a host contract that is a financial asset under IFRS 9, the Bank classifies the entire contract in
accordance with the policy outlined in Note 6.5.
If a hybrid contract includes a host contract that is not an asset under IFRS 9, an embedded derivative shall be separated
from the host contract and accounted for as a derivative under this Standard if, and only if:
(i) The economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract;
(ii) A separate financial instrument with the same terms as the embedded derivative satisfies the definition of a
derivative; and
(iii) The hybrid contract is not measured at fair value and changes in fair value are recognised in profit or loss (a
derivative that is embedded in a financial liability at fair value through profit or loss is not separated).
These embedded derivatives are recorded at fair value with changes recognized in income statement.
6.6.7. Financial Liabilities
An instrument is classified as a financial liability when it contains a contractual obligation to transfer cash or another
financial asset, regardless of its legal form. Financial liabilities are derecognised when the underlying obligation is liquidated,
expires or is cancelled.
Non-derivatives financial liabilities include deposits from banks and customers, loans, debt securities, subordinated debt
and short sales.
These financial liabilities are recognised (i) initially, at fair value less transaction costs and (ii) subsequently, at amortised
cost, using the effective interest rate method, except for short sales and financial liabilities designated at fair value through
profit or loss, which are measured at fair value.
The Bank designates, at inception, certain financial liabilities at fair value through profit or loss when:
• It eliminates or significantly reduces, a measurement or recognition inconsistency (accounting mismatch) that would
otherwise occur;
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• The financial liability it’s part of a portfolio of financial assets or financial liabilities or both, managed and evaluated on a
fair value basis, according with the Bank’s risk management or investment strategy; or
• These financial liabilities contain embedded derivatives and IFRS 9 allows to designate the entire hybrid contract at fair
value through profit and loss.
Reclassifications between categories of liabilities are not allowed.
The structured products issued by the Bank – except for the structured products for which the embedded derivatives were
separated, recorded separately, and revalued at fair value - are classified under the fair value through profit or loss category
because they always meet one of the above-mentioned conditions.
The fair value of listed financial liabilities is their current market bid prices. In the absence of a quoted price, the Bank
establishes the fair value by using valuation techniques based on market information, including the Bank issuer’s own credit
risk.
Profits or losses arising from the revaluation of liabilities at fair value are recorded in the income statement. However, the
change in fair value attributable to changes in credit risk is recognised in other comprehensive income. At the time of
derecognition of the liability, the amount recorded in other comprehensive income attributable to changes in credit risk is
not transferred to the income statement.
These liabilities are measured at fair value, and the respective gains or losses on revaluation are recognised in profit or loss
except for changes resulting from changes in the Bank's own risk, the Debt Valuation Adjustment (DVA), which is
recognised in other comprehensive income. novobanco does not record any gain associated with own credit risk.
If the Bank repurchases debt securities issued, these are derecognised from the balance sheet and the difference between
the carrying book value of the liability and its acquisition cost is recognised in the income statement.
6.6.8. Financial and performance guarantees
Financial guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for
a loss due to non-compliance with the contractual terms of a debt instrument, namely the payment of principal and/or
interest.
Financial guarantees are initially recognised in the financial statements at fair value. Financial guarantees are subsequently
measured at the higher of (i) the fair value recognised on initial recognition and (ii) the amount of any financial obligation
arising as a result of guarantee contracts, measured at the balance sheet date. Any change in the amount of the liability
relating to guarantees is taken to the income statement.
Financial guarantee contracts issued by the Bank normally have a stated maturity date and a periodic fee, usually paid in
advance, which varies in function of the counterpart risk, the amount and the time period of the contract. Consequently,
the fair value of the financial guarantee contracts issued by the Bank, at the inception date, is approximately equal to the
initial fee received, considering that the conditions agreed to are market conditions. Hence, the amount recognised at the
contract date is equal to the amount of the commission initially received, which is recognised in the income statement over
the period to which it relates. Subsequent fees are recognised in the income statement in the period to which they relate.
Performance guarantees
Performance guarantees are contracts that result in compensation of a party if the if there is non-compliance with the
defined contractual obligation. Performance guarantees are initially recognized at fair value, which is normally evidenced
by the value of commissions received during the contract's duration. If the defined contractual obligation is not fulfilled, the
Group has the right of recourse against the main debtor of the guarantee, with the amounts recognized in Loans to
customers after payment of compensation to the beneficiary of the guarantee. As the right of return is embedded in the
performance guarantee, and therefore part of the same unit of account, the Group understands that it does not assume
insurance risk, but only financial (credit) risk on the main debtor, and, in this sense, treats these guarantees as financial
instruments.
6.7 Reclassifications of financial assets and liabilities
If the Bank changes a business model, the financial assets included in that model are reclassified and the classification and
measurement requirements for the new category are applied prospectively as from that date.
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6.8. Modification of financial assets and liabilities
The activity of commercial renegotiation of financial assets is one of the tools that the Bank has available and regularly
uses in the management and recovery of these instruments. Accordingly, the Bank believes that the assessment of
whether these renegotiations result in the derecognition of financial assets should be exceptional and case-by-case,
taking into account the identification of the transactions in question by professional judgment and their materiality.
In these cases, when the contractual cash flows of a financial asset are renegotiated or otherwise modified as a result of
commercial restructuring activity rather than due to credit risk and impairment considerations, the Bank performs an
assessment to determine whether the modifications result in the derecognition of that financial asset. For financial assets,
this assessment is based on qualitative factors. When assessing whether or not to derecognise a loan to a customer,
amongst others, the Bank considers the following factors:
• Change in loan currency;
• Introduction of an equity feature;
• Change in counterparty;
• Whether the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, as set out below, then it does not result in
derecognition. Based on the change in cash flows discounted at the original effective interest rate, the Bank records a
modification gain or loss, to the extent that an impairment loss has not already been recorded. The Bank’s accounting policy
in respect of forborne loans is set out in note 6.10.
When the modification of the terms of an existing financial liability is not judged to be substantial and, consequently, does
not result in derecognition, the amortised cost of the financial liability is recalculated by computing the present value of
estimated future contractual cash flows that are discounted at the financial liability’s original effective interest rate. Any
resulting difference is recognised immediately in the income statement. The Bank accounts for a substantial modification
of the terms of an existing liability or part thereof as an extinguishment of the original financial liability and the recognition
of a new liability. The terms are assumed to be substantially different if the present value of the cash flows under the new
terms, including any fees paid net of any fees received, and discounted using the original effective interest rate is at least
10% different from the discounted present value of the remaining cash flows of the original financial liability. The difference
between the carrying value of the original liability and the value of the new liability is recorded in income statement.
6.9. Derecognition
Financial assets are derecognised from the balance sheet when (i) the Bank’s contractual rights relating to the respective
cash flows have expired, (ii) the Bank has substantially transferred all the risks and benefits associated with its ownership,
or (iii) despite the Bank having withholding part, but not substantially all of the risks and benefits associated with its
ownership, control over the assets has been transferred. When an operation measured at fair value through other
comprehensive income is derecognised, the accumulated gain or loss previously recognised in other comprehensive
income is reclassified to results. In the specific case of equity instruments, the accumulated gain or loss previously
recognised in other equity is not reclassified to profit or loss, being transferred between equity captions.
In the specific case of loans to customers, at the time of sale, the difference between the sale value and the book value
must be 100% provisioned, and at the time of the sale, the credit sold will be derecognised against the funds / assets
received. and consequent use of impairment on the balance sheet.
6.10. Forborne modified loans
The Bank sometimes makes concessions or modifications to the original terms of loans as a response to the borrower’s
financial difficulties, rather than taking possession or to otherwise enforce collection of collateral. The Bank considers a
loan forborne when such concessions or modifications are provided as a result of the borrower’s present or expected
financial difficulties and the Bank would not have agreed to them if the borrower had been financially healthy. Indicators of
financial difficulties include defaults on covenants, or significant concerns raised by the Global Risk Department.
Forbearance may involve extending the payment arrangements and/or the agreement of new loan conditions. If
modifications are substantial, the loan is derecognised, as explained in Note 6.8. Once the terms have been renegotiated
without this resulting in the derecognition of the loan, any impairment is measured using the original effective interest rate
as calculated before the modification of terms. The Bank also reassesses whether there has been a significant increase in
credit risk, as set out in Note 37 and whether the assets should be classified as Stage 3.
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Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If these
procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired Stage 3 forborne asset. Once an
asset has been classified as forborne, it will remain forborne for a minimum 24-month probation period. In order for the loan
to be reclassified out of the forborne category, the customer has to meet all of the following criteria:
• All of its facilities have to be considered performing;
• The probation period of two years has passed from the date the forborne contract was considered performing;
• Regular payments of more than an insignificant amount of principal or interest have been made during at least half of
the probation period;
• The customer does not have any contracts that are more than 30 days past due.
6.11. Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset
and settle the liability simultaneously. The legally enforceable right may not be contingent on future events and must be
enforceable in the course of the normal activity of novobanco, as well as in the event of default, bankruptcy or insolvency
of the Bank or the counterparty.
6.12. Impairment of financial assets
Impairment principles
The Bank record impairment allowance for expected credit losses ("ECLs") for the following debt instruments
• Loans and advances to customers;
• Financial and performance guarantees;
• Import documentary credits;
• Confirmed export documentary credits;
• Undrawn loan commitments;
• Money market exposures;
• Securities portfolio.
Equity instruments are not subject to impairment under IFRS 9.
Debt instruments at amortised cost or at fair value through other comprehensive income are in the scope of the impairment
calculation.
Impairment losses identified are recognised in the income statement and are subsequently reversed through the income
statement if, in a subsequent period, the amount of impairment losses decreases.
Impairment is based on the credit losses expected to arise over the life of the asset (LTECL), unless there has been no
significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit
losses.
The 12m ECL is the portion of LTECL that represent the ECL that result from default events on a financial instrument that
are possible within the 12 months after the reporting date. Both LTECL and 12m ECL are calculated on either an individual
basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments.
The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default
occurring over the remaining life of the financial instrument.
Based on the above process, the Bank aggregates its loans by stage as described below:
• Stage 1: includes all exposures without any indication of significant deterioration in credit risk and without an active
default status. For these exposures the impairment is recognised as a 12-month expected loss;
• Stage 2: includes all exposures where at least one indication of significant deterioration of credit risk has been identified.
For these exposures, impairment is recognised at the present value of the expected losses accumulated until maturity. This
universe also includes exposures in a quarantine period, that is, exposures that have recently ceased to have (1) indications
of significant deterioration of credit risk and/or (2) default classification;
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• Stage 3: includes all exposures classified in default - according to the Bank's internal definition which is aligned with the
regulatory definition . This definition includes, cumulatively:
•
•
Exposures that have materially defaulted for more than 90 consecutive days; or
Exposures that, not having material default for more than 90 consecutive days, are classified as "Unlikely to pay".
Purchased or originated impaired financial assets (POCI), that is, for which impairment was identified upon initial
recognition, can be classified as stage 2 or stage 3.
The calculation of collective impairment
For the calculation of impairment on a collective basis, exposures are segmented based on similar credit risk characteristics
according to the risk assessment defined by the Bank. For each of these homogeneous risk segments, risk factors are
estimated and applied as part of the impairment calculation.
To determining collective impairment, the risk factors considered in each risk segment must, in accordance with IFRS
regulations, reflect forward-looking information. In addition, the calculation of impairment should also reflect consideration
of multiple scenarios, whereby the final impairment is the result of the sum of the amounts calculated in each scenario,
weighted by the respective associated probability.
The calculation of the expected loss always involves the consideration of:
• Probability of default (PD) - this risk factor is an estimate of the probability of default over a given period. Default
can only occur at a given point in time in the evaluation period if the credit line has not been previously derecognised
and is still on balance sheet;
• Severity (LGD) - this risk factor is an estimate of the loss that arises if the default occurs at a given time. It is based
on the difference between the contractual cash flows and those that the Bank estimates it will receive, including the
execution of collateral or other contractual changes that become an integral part of the loan and do not meet the
criteria to be recognised separately.
• Exposure - represents the nominal value of the exposure at the reporting date and it is this amount that is
considered for the basis of the collective impairment calculation. In the case of off-balance sheet exposures, a credit
conversion factor (CCF) is applied to the nominal value of the exposure. This factor represents the probability that
the off-balance sheet exposures will convert into on-balance sheet exposures.
When an exposure is classified in stage 2, it is considered for impairment calculation purposes that the exposure evolves
according to the contracted principal and interest repayment plan, or in the absence of this information, that the
disbursement occurs at maturity.
The details of the impairment calculation are presented as follows:
• Stage 1: this calculation applies to productive exposures that show no active indication of significant credit risk
deterioration compared to origination. Impairment represents the expected loss resulting from default events on a financial
instrument that may occur within a term of 12 months after the balance sheet date. Risk factors - PD and LGD - consider
the 12-month horizon and are applied to the value of the exposure. This calculation is carried out by the scenario, since
each considered scenario has specific risk factors - PD and LGD;
• Stage 2: this calculation applies to productive exposures that show an indication of a significant increase in credit risk
since origination. Impairment represents the current value of the sum of expected losses until the maturity of the exposure.
Expected losses are calculated on the projected exposure at each moment of the debt amortization, according to the
exposure amortization plan, and these expected losses are discounted at the original effective rate of the contract to
obtain their current value, as of the reporting date. As mentioned above, this determination is done by scenario since
different risk factors are considered for each scenario;
• Stage 3: this calculation applies to non-productive exposures, where impairment corresponds to the difference between
the amount outstanding and the current value of the expected recoveries for this exposure, given its characteristics. To
determine the current value of the expected recoveries, the original effective rate of the contract is also used;
• POCI are financial assets with impairment at initial recognition. Exposures in this situation cannot be classified as stage
1;
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• Irrevocable commitments and letters of credit: as detailed above, given the off-balance sheet nature of irrevocable
commitments, the Bank estimates for these contracts the respective amount that it expects to be converted into an on-
balance sheet amount (credit). Accordingly, the estimated conversion factor for this type of exposure is applied to its
nominal value and the respective result is taken into account as the basis for calculating collective impairment;
• Impairment is calculated and deducted from assets for credit cards and revolving lines that include an irrevocable
commitment. For irrevocable commitments and letters of credit, impairment is recognised in Provisions on the liabilities
side.
Impairment for debt instruments measured at fair value through other comprehensive income does not reduce the carrying
amount of those financial assets, which remains at fair value. Accordingly, an amount equal to the provision that would
arise if the assets were measured at amortised cost is recognised in other comprehensive income as an accumulated
impairment charge, with a corresponding charge to profit or loss. The cumulative loss recognised in other comprehensive
income is recycled to profit or loss on derecognition of the assets.
Individual impairment analysis process
The Individual Credit Analysis comprises a staging analysis and an individual impairment quantification analysis. The staging
analysis is performed for debtors previously classified as stage 1 and stage 2, with the purpose of evaluating the adequacy
of the assigned stage with additional information obtained on an individual basis. The individual impairment quantification
analysis aims to determine the most appropriate impairment rate for each credit customer, regardless of the amount
resulting from the Collective Impairment Model. Clients that have been subject to Individual Analysis, but for which an
objective impairment loss was not considered, are again included in the Collective Impairment Model. The Individual
Analysis of the selected clients is carried out based on the information provided by the Commercial Structures regarding
the client / Bank’s framework, historical and forecast cash flows (when available) and existing collateral.
6.13. Collateral and financial guarantees valuation
To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in
various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-
financial assets and credit enhancements such as netting agreements. Collateral, unless repossessed, is not recorded on
the Bank’s statement of financial position. Collateral is generally assessed, at a minimum, at inception and re-assessed on
a quarterly basis. However, some collateral, for example, cash or securities relating to margining requirements, is valued
daily. To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial
assets which do not have readily determinable market values are valued using models. Non-financial collateral, such as real
estate, is valued based on data provided by third parties such as mortgage brokers or based on housing price indexes.
6.14. Foreclosed properties and non-current assets held for sale
In the scope of its loan granting activity, the Bank incurs in the risk of the borrower failing to repay all the amounts due. In
case of loans and advances with mortgage collateral, the Bank executes these and receives real estate properties resulting
from foreclosure. Due to the provisions of the General Law on Credit Institutions and Financial Companies (“Regime Geral
das Instituições de Crédito e Sociedades Financeiras” (RGICSF)), banks are prevented, unless authorised by Bank of
Portugal, from acquiring real estate property that is not essential to their installation and daily operations and the pursuit
of their object (No. 1 of article 112 of RGICSF), being able to acquire, however, real estate property in exchange for loans
granted by same. This real estate property must be sold within 2 years, period which may, based on reasonable grounds,
be extended by Bank of Portugal, on the conditions to be determined by this Authority (article 114 of RGICSF).
Although the Bank’s objective is to immediately dispose of all real estate property acquired as payment in kind for loans or
through foreclosure, during exercise 2016 the Bank changed the classification of this real estate properties from Non-
current assets held for sale to Other assets due to the permanence of same in the portfolio exceeding 12 months. However,
the accounting method has not changed, these being initially recognised at the lower of their fair value less costs to sell
and the carrying amount of the subjacent loans. Subsequently, these real estate properties are measured at the lower of
its initial carrying amount and the corresponding fair value less costs to sell and it is not depreciated. For real estate
properties recorded in the balance sheet of novobanco, the immediate sale value is considered to be the respective fair
value. The market value of property for which a promissory contract of sale and purchase has been signed corresponds to
the value of that contract.
The valuation of the real estate properties received for credit recovery is performed in accordance with one of the following
methodologies, applied in accordance with the specific situation of the asset:
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(i) Market Method
The Market Comparison Criteria takes as a reference transaction values of similar and comparable real estate
properties to the real estate property under valuation, obtained through market prospection carried out in the
zone.
Income Method
Under this method, the real estate property is valued based on the capitalization of its net income, discounted to
the present using the discounted cash-flow method.
(ii)
(iii) Cost Method
This method aims to reflect the current amount that would be required to substitute the asset in its present
condition, separating the value of the real estate property into its fundamental components: Urban Ground Value
and Urbanity Value; Construction Value; and Indirect Costs Value.
Valuations carried out are performed by independent entities specialised in these services. The valuation reports are
analysed internally, namely comparing the sales values with the revalued amounts of the assets so as to assess the
parameters and process adequacy with the market evolution.
Additionally, since these are assets whose fair value level in the hierarchy of IFRS 13 mostly corresponds to level 3, given
the subjectivity of some assumptions used in the valuations and the fact that there are external indications with
alternative values, the Bank proceeds to analysis on the assumptions used, which may imply additional adjustments to
their fair value, supported by additional internal or external valuations.
For assets of greater relevance, the challenge of the appraisals that serve as a basis for the valuation of the real estate
assets is carried out by a specialised area of the Bank that is independent of this valuation process, in accordance with an
annual work plan previously approved by the Executive Board of Directors.
Non-current assets or disposal groups (groups of assets to be disposed of together and the related liabilities that include
at least one non-current asset) are classified as held for sale when their carrying values will be recovered mainly through a
sale transaction (including those acquired exclusively with a view to their subsequent disposal), the assets or disposal
groups are available for immediate sale and the sale is highly probable (within the period of one year).
Immediately before the initial classification as held for sale, the measurement of the non-current assets (or of all the assets
and liabilities in a disposal group) is brought up to date in accordance with the applicable IFRS. Subsequently, these assets
or disposal groups are remeasured at the lower of their carrying value and fair value less costs to sell. Where the carrying
value of non-current assets corresponds to fair value less costs to sell, the fair value level of the IFRS 13 hierarchy
corresponds mostly to Level 3.
6.15. Write-offs
Write-off is defined as the derecognition of a financial asset from the Bank’s balance sheet, which should only occur when
cumulatively:
(i) The total amount of the credit has been demanded, that is, the credit must be fully recognised as overdue credit.
Exemptions from this requirement are (i) extra-judicial agreements, PER and Insolvency, where part of the credit
may remain due and the remaining debt is written off by judicial/ extra-judicial decision, and (ii) situations in which,
despite the contract not being fully matured, the Bank understands that it is facing a scenario of total or partial
loss;
(ii) All the recovery efforts, considered appropriate, have been developed (and the relevant evidence gathered);
(iii) The credit recovery expectations are very low, leading to an extreme scenario of total impairment– 100%
impairment. This rule is only applicable for contracts without real estate collateral and if the whole contract is
classified as overdue. In all other cases, it is necessary to ensure that the amount to be written off is fully impaired
(at least in the month prior to the month of the write-off).
Subsequent payments received after the write-off must be recognised as subsequent write-off recoveries at other
operating income.
6.16. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with a maturity of less than
three month from the date of acquisition / contracting and whose risk of change in value is immaterial, including cash,
deposits with Central Banks and deposits with other credit institutions. Cash and cash equivalents exclude restricted
balances with Central Banks.
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6.17. Assets sold with repurchase agreements, securities loaned and short sales
Securities sold subject to repurchase agreements (repos) at a fixed price or at a price that corresponds to the sales price
plus a lender’s return are not derecognised from the balance sheet. The corresponding liability is included under amounts
due to banks or to customers, as appropriate. The difference between the sale and repurchase price is treated as interest
and deferred over the life of the agreement, using the effective interest rate method.
Securities purchased under agreements to resell (reverse repos) at a fixed price or at a price that corresponds to the
purchase price plus a lender’s return are not recognised in the balance sheet, the purchase price paid being recorded as
loans and advances to banks or customers, as appropriate. The difference between the purchase and resale price is treated
as interest and deferred over the life of the agreement, using the effective interest rate method.
Securities ceded under loan agreements are not derecognised in the balance sheet, being classified and measured in
accordance with the accounting policy described in Note 6.10. Securities received under borrowing agreements are not
recognised in the balance sheet.
Short sales correspond to securities sold that are not included in the Bank’s assets. They are recorded as financial liabilities
held for trade, at the fair value of the assets to be returned in the scope of the repurchase agreement. Gains and losses
resulting from the change in their respective fair value are recognised directly in the income statement in Gains or Losses
from financial assets and liabilities held for trading.
6.18. Property, plant and equipment
The Bank’s tangible fixed assets are measured at cost less accumulated depreciation and impairment losses. The cost
includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent costs with tangible fixed assets are only recognised when it is probable that future economic benefits
associated with them will flow to the Bank. All repair and maintenance costs are charged to the income statement during
the exercise in which they are incurred, on the accrual basis.
Land is not depreciated. The depreciation of tangible fixed assets is calculated using the straight-line method, at the
following depreciation rates that reflect their estimated useful lives:
Self-Service Buildings
Leasehold improvements
IT equipment
Furniture and fixtures
Interior installations
Security equipment
Machines and tools
Transport equipment
Other equipment
Number of years
35 to 50
10
4 to 5
4 to 10
5 to 10
4 to 10
4 to 10
4
5
The useful lives and residual values of the tangible fixed assets are reviewed at each reporting date.
When there is an indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and an
impairment loss recognised when the book value of the asset exceeds its recoverable amount. Impairment losses are
recognised in the income statement, being reversed in subsequent periods, when the reasons that led to their initial
recognition cease to exist. For this purpose, the new depreciated amount shall not exceed that which would be recorded
had the impairment losses not been imputed to the asset but considering the normal depreciation the asset would have
been subject to.
The recoverable amount is determined as the lower of its net selling price and its value in use, which is based on the net
present value of the estimated future cash flows arising from the continued use and ultimate disposal of the asset at the
end of its useful life.
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On the date of the derecognition of a tangible fixed asset, the gain or loss determined as the difference between the net
selling price and the net carrying book value is recognised under the caption Other operating income or Other operating
expenses.
6.19. Leases
Lease Definition
The Bank assesses at contract inception whether a contract is, or contains a lease. That is, if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration.
As lessee
As a lessee, the Bank leases various assets, including real estate, vehicles and IT equipment. The Bank recognises lease
liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
As previously mentioned, the Bank has opted not to recognise assets under the right of use and liabilities for short-term
leases, with a lease term of 12 months or less, and low value asset leases (e.g. IT equipment) with a new value of less than
Euro 5 thousand. The Bank recognises the lease payments associated with these leases as expenses on a straight-line
basis over the lease term in the income statement as “Other administrative expenses – rents and rentals”.
The Bank presents assets under right of use that do not fit the definition of investment property as "tangible fixed assets",
in the same line as the underlying assets of the same nature that they own. Right-of-use assets that fall under the
definition of investment property are presented as an investment property. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and less any lease
incentives received.
The Bank presents the lease liabilities under "Other liabilities" in the statement of financial position. The lease liability
corresponds to the present value of the future cash flows to be paid during the lease contract. The lease rents include fixed
amounts, variable amounts that depend on an interest rate, and amounts to be payable relating to guarantees on the
residual value of the asset. Any options are also included if they are reasonably expected to be exercised.
Variable amounts that do not depend on interest rate are recognised as costs in the period to which they relate. During the
lease period, the lease liability increases by the interest accrual and decreases by the lease rents payment. The value of the
lease liability changes if the terms of the lease (such as the term or the value of the index) change or if the valuation of the
exercise of the option to acquire the asset changes.
As Lessor
Financial leases
Transactions in which the risks and benefits inherent in the ownership of an asset are substantially transferred to the lessee
are classified as finance leases. Financial leasing contracts are recorded in the balance sheet as credits granted for an
amount equivalent to the net investment made in the leased assets, together with any estimated non-guaranteed residual
value. Interest included in rents charged to customers is recorded as income while capital amortizations, also included in
rents, are deducted from the amount of credit granted to customers. The recognition of interest reflects a constant
periodic rate of return on the lessor's remaining net investment.
Operating leases
All lease transactions that do not fall under the definition of finance lease are classified as operating leases. Revenues
relating to these contracts are recognised on a straight-line basis over the lease term and recorded in “Other operating
income”.
6.20. Intangible assets
The costs incurred with the acquisition, production and development of software are capitalised, as are additional costs
incurred by the Bank to implement said software. These costs are amortised on a straight-line basis over their expected
useful lives, which usually range between 3 and 6 years. Exceptionally, these may be extended whenever it is verified that
the useful life of the asset is demonstrably longer.
Costs that are directly associated with the development of specific software applications, that will probably generate
economic benefits beyond one exercise, are recognised and recorded as intangible assets.
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All remaining costs associated with information technology services are recognised as an expense as incurred.
6.21. Impairment of non-financial assets
The Bank assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Bank estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asse or cash generating unit fair value less costs of disposal and its value in
use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or cash
generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining
fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified,
an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.
The Bank bases its impairment calculation on most recent budgets and forecast calculations, which are prepared
separately for each of the Bank’s cash generating units to which the individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project
future cash flows after the fifth year (perpetuity).
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories
consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to
OCI. For such properties, the impairment is recognised in other comprehensive income up to the amount of any previous
revaluation.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication
that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Bank
estimates the assets or cash generating unit recoverable amount. A previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment
loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior exercises. Such reversal is recognised in the statement of profit or loss unless the
asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
The Bank assesses where climate risks may have a significant impact, such as the introduction of emissions reduction
legislation that may increase production costs. These risks in relation to climate-related issues are included as key
assumptions when they materially affect the impairment measurement. These assumptions have been included in the cash
flow forecasts in the value in use assessment.
Intangible assets with indefinite useful lives are tested for impairment annually at the cash generating unit level, as
appropriate, and when circumstances indicate that the carrying value may be impaired.
6.22. Employee benefits
Pensions
Pursuant to the signature of the Collective Labour Agreement (“Acordo Coletivo de Trabalho” (ACT)) for the banking sector
and its subsequent amendments resulting from the 3 tripartite agreements described in Note 15, pension funds and other
mechanisms were set up to cover liabilities assumed with pensions on retirement, disability, survival and health-care
benefits.
The liabilities’ coverage is assured by pension funds managed by GNB - Sociedade Gestora de Fundos de Pensões, SA,
subsidiary of the novobanco Group.
The pension plans of the Bank are defined benefit plans, as they establish the criteria to determine the pension benefit to
be received by employees during retirement, usually dependent on one or more factors such as age, years of service and
salary level.
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The retirement pension liabilities are calculated semi-annually, in 31 December and 30 June of each year, for each plan
individually, using the Projected Unit Credit Method, being annually reviewed by qualified independent actuaries. The
discount rate used in this calculation is determined with reference to market rates associated with high-quality corporate
bonds, denominated in the currency in which the benefits will be paid out and with a maturity similar to the expiry date of
the plan’s liabilities.
The Bank determines the net interest income/expense for the period incurred with the pension plan by multiplying the
plan’s net assets / liabilities (liabilities net of the fair value of the fund’s assets) by the discount rate used to measure the
retirement pension liabilities referred to above. On that basis, the net interest income/expense was determined based on
the interest cost on the retirement pension liabilities net of the expected return on the funds’ assets, both calculated using
the discount rate applied in the determination of the retirement pension liabilities.
Re-measurement gains and losses, namely (i) actuarial gains and losses arising due to differences between actuarial
assumptions used and real values verified (experience adjustments) and changes in actuarial assumptions and (ii) gains and
losses arising due to the difference between the expected return on the fund’s assets and the actual investment returns,
are recognised in equity under the caption other comprehensive income.
The Bank recognises as a cost in the income statement a net total amount that includes (i) current service costs, (ii) net
interest income / expense with the pension fund, (iii) the effect of early retirement, (iv) past service costs, and (v) the
effect of settlements or curtailments occurring during the period. The net interest income / expense with the pension plan
is recognised as interest income or interest expense, depending on its nature. Early retirement costs correspond to
increases in liabilities due to employees retiring before turning 65 (normal retirement age foreseen in the ACTV) and which
forms the basis of the actuarial calculation of pension fund liabilities. Whenever the possibility of the early retirement
provided for in the pension fund regulation is invoked, the responsibilities of same must be incremented by the value of the
actuarial calculation of the liabilities corresponding to the period between the early retirement and the employee turning
65.
The Bank makes payments to the funds to assure their solvency, the minimum levels set by Bank of Portugal being: (i) the
liability with pensioners must be totally funded at the end of each exercise, and (ii) the liability relating to past service costs
for active employees must be funded at a minimum level of 95%.
The Bank assesses the recoverability of any excess in a fund regarding the retirement pension liabilities, based on the
expectation of reductions in future contributions.
Health-care benefits
The Bank provides to its banking employees health-care benefits through a specific Social-Medical Assistance Service.
This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union. SAMS
provides its beneficiaries with services and/or contributions on medical assistance expenses, auxiliary diagnostic means,
medication, hospital admissions and surgical interventions, in accordance with its financial resources and internal
regulations.
Arising from the signature of the new Collective Labour Agreement (ACT) on 5 July 2016, published in Labour Bulletin
(Boletim do Trabalho) No. 29, of 8 August 2016, the Bank’s contributions to SAMS, correspond to a monthly fixed amount
(as per Annex VI of the new ACT) for each employee, 14 times a year, recorded on a monthly basis in staff costs, while the
component to be paid by the employee is discounted monthly in the processing of salary, against the caption Amounts
payable (SAMS).
The calculation and recognition of the Bank’s liability with post-retirement health-care benefits is similar to the calculation
and recognition of the pension liability described above. These benefits are covered by the Pension Fund, which presently
covers all liabilities with pensions and health-care benefits (defined benefit plan).
Career bonus
The ACT provides for the payment by the Bank of a career bonus, due at the time immediately prior to the employee's
retirement if he retires at the Bank's service, corresponding to 1.5 of his salary at the time of payment.
These long-term service bonuses were accounted for by the Bank in accordance with IAS 19, as other long-term employee
benefits. The Bank’s liability with these long-term service bonuses were periodically estimated by the Bank using the
Projected Unit Credit Method. The actuarial assumptions used were based on expectations as to future salary increases
and mortality tables. The discount rate used in this calculation was determined using the methodology described for
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retirement pensions. In each period, the increase in the liability for long-term service bonuses, including actuarial gains and
losses and past service costs, was charged to the income statement, in Staff Expenses.
Employees’ variable remuneration and other obligations
The Bank recognises under costs the short-term benefits paid to employees who were at its services in the respective
accounting period.
• Profit-sharing and bonus plans
The Bank recognises the cost expected with profit-sharing pay-outs and bonuses when it has a present, legal or
constructive, obligation to make such payments as a result of past events and can make a reliable estimate of the
obligation.
• Obligations with holidays, holiday subsidy and Christmas subsidy
In accordance with the legislation in force in Portugal, employees are annually entitled to one month of holidays and one
month of holiday subsidy, this being a right acquired in the year prior to their payment. In addition, employees are annually
entitled to one month of Christmas subsidy, which right is acquired throughout the year and settled during the month of
December of each exercise. Hence, these liabilities are recorded in the period in which the employees acquire the right to
same, regardless of the date of their respective payment
6.23. Provisions and Contingent Liabilities
Provisions are recognised when: (i) the Bank has a current legal or constructive obligation, (ii) it is probable that its
settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.
Provisions related to legal cases opposing the Bank to third parties, are constituted according to internal risk assessments
made by Management, with the support and advice of its legal advisors, both internal and external.
When the effect the discounting is material, the provision corresponds to the net present value of the expected future
payments, discounted at an appropriate rate considering the risk associated with the obligation. In these cases, the
increase in the provision due to the passage of time is recognised in financial expenses.
Restructuring provisions are recognised when the Bank has approved a formal, detailed restructuring plan and such
restructuring has either commenced or has been publicly announced.
A provision for onerous contracts is recognised when the benefits expected to be derived by the Bank from a contract are
lower than the unavoidable costs of meeting its obligation under the contract. This provision is measured at the present
value of the lower of the estimated cost of terminating the contract and the estimated net costs of continuing the
contract.
If a future outflow of funds is not probable, this situation reflects a contingent liability. Contingent liabilities are always
disclosed, except when the likelihood of their occurrence is remote.
6.24. Contingent assets
Contingent assets are not recognised in the financial statements, being disclosed when it is probable that there will be a
future economic inflow of resources.
6.25. Income taxes
novobanco is subject to the tax regime consigned in the Código do Imposto sobre o Rendimento das Pessoas Coletivas
(IRC Code).
Corporate income tax comprises current tax and deferred tax.
Corporate income tax is recognised in the income statement except to the extent that it relates to captions recognised
directly in equity, in which case it is recognised under equity. Corporate income tax recognised directly in equity relating to
fair value remeasurement of financial assets at fair value through other comprehensive income and cash flow hedges is
subsequently recognised in the income statement when the gains or losses giving rise to said income tax are also
recognised in the income statement.
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Current tax
Current tax is the tax expected to be paid on the taxable profit for the year, calculated using tax rules and tax rates enacted
or substantively enacted in each jurisdiction and any adjustments to prior period taxes. The tax is recognised in each
financial reporting period based on management estimates as regards the average effective tax rate foreseen for the entire
exercise.
Current tax is calculated based on taxable income for the period, which differs from the accounting result due to
adjustments resulting from expenses or income not relevant for tax purposes or which will only be considered in
subsequent exercises.
Deferred tax
Deferred tax is calculated on timing differences arising between the carrying book values of assets and liabilities for
financial reporting purposes and their respective tax basis and is calculated using the tax rates enacted or substantively
enacted at the balance sheet date in each jurisdiction and that are expected to apply when the timing differences are
reversed.
Deferred tax liabilities are recognised for all taxable timing differences except for: i) goodwill non-deductible for tax
purposes; ii) differences arising on the initial recognition of assets and liabilities that neither affect the accounting nor
taxable profit; iii) that do not result from a business combination, and iv) differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable future and the Bank does not control the timing of the
reversal of the timing differences. Deferred tax assets are recognised to the extent that it is probable that future taxable
profits will be available against which the deductible timing differences can be offset. Deferred tax liabilities are always
accounted for, regardless of the performance of the Bank.
The taxable profit or tax loss determined by the Bank can be adjusted by the Portuguese Tax Authorities within a period of
four years, except in the case of any deduction or use of tax credit, in which the expiry period is the exercise of that right.
The Executive Board of Directors considers that any corrections, resulting mainly from differences in the interpretation of
tax legislation, will not have a materially relevant effect on the financial statements.
Following the changes set forth in Law no. 27-A/2020, of July 24, within the scope of the Supplementary Budget for 2020,
the deadline for carrying forward tax losses is now 14 years for tax losses generated in 2014, 2015 and 2016 and 7 years for
tax losses generated in 2017, 2018 and 2019. Tax losses generated in 2020 and 2021 have a limit of 12 years and can be
deducted until 2032 and 2033, respectively. The limit for tax losses is increased from 70% to 80%, applicable only to tax
losses generated in 2020 and 2021.
Law 24-D/2022, of December 30 (State Budget Law for 2023) introduced changes in terms of the carry forward of tax
losses. A period for carrying forward tax losses is no longer foreseen. On the other hand, the annual limit of the deduction
to taxable income is reduced to 65% (currently 70%). This change applies to the deduction of losses from taxable profits
in taxable periods beginning on or after 1 January 2023, as well as to tax losses assessed in taxable periods prior to 1 January
2023.
The elimination of the time limitation on tax losses does not apply to those ascertained in tax periods prior to 1 January
2023, in which one of the situations provided for in No 1 of the Article 6 of the Special Regime applicable to Deferred Tax
Assets (REAID), approved as an annexe to Law No. 61/2014, of August 26 (conversion of deferred tax assets into tax
credits), applying to tax losses ascertained in these tax periods the deduction period in force on 31 December 2023.
This change does not affect the application of paragraph 2 of article 11 of Law 27-A/2020, of July 24 (which allows an
increase of 10 percentage points in the deduction of taxable income when dealing with tax losses ascertained in 2020 and
2021).
The Bank, as established in IAS 12, paragraph 74, offsets deferred tax assets and liabilities whenever (i) it has the legally
enforceable right to offset current tax assets and current tax liabilities; and (ii) they relate to corporate income taxes levied
by the same Taxation Authority, on the same tax entity or different taxable entities that intent to settle current tax
liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in
which the deferred tax liabilities or assets are expected to be settled or recovered.
The Bank complies with the guidelines of IFRIC 23 - Uncertainty on the Treatment of Income Tax regarding the
determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of
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uncertainty regarding the treatment of income tax, with no material impact on its financial statements resulting from its
application.
DAC6
The obligation to report to the Tax and Customs Authority ("AT") internal or cross-border mechanisms of tax relevance has
emerged in the context of Law no. 26/2020, of July 21 ("Law no. 26/2020"), which transposes Council Directive (EU)
2018/822 of May 25, 2018 ("DAC6") into Portuguese law. The DAC6 aims to discourage the use of potentially aggressive
tax planning mechanisms by imposing reporting obligations to the Tax Authorities of the different Member States of the
European Union. In addition, it aims to provide tax administrations and national legislators with information that will help
combat aggressive tax planning.
Novobanco, with the collaboration of tax consultants, has implemented measures that allow for the identification of
operations subject to reporting to tax authorities. These measures focus mainly on a primary analysis conducted by
business areas and a second-line analysis conducted by Novobanco's tax area. The Bank's own operations are analyzed by
Novobanco's tax area and validated by the Compliance Department.
BEPS - Pilar II
In October 2021, as part of the Erosion of the Tax Base and Profit Shifting project ("BEPS 2.0 - Base Erosion and Profit
Shifting 2.0") of the Organization for Economic Cooperation and Development ("OECD"), about 137 members of the
OECD/G20, representing 90% of the world's GDP, reached an agreement for a reform of the international tax system,
through which a general framework for a commonly designated "Pillar II" global minimum tax regime was approved.
In this regard, Pillar II of BEPS 2.0, enshrined in Council Directive (EU) 2022/2523 of December 15, 2022, established a global
minimum tax level of 15% for major multinational companies and large domestic groups, which could result in the payment
of an additional tax.
Novobanco has been identifying the potential impacts associated with the implementation of Pillar II rules, having found
that it should meet the eligibility criteria for the application of the Pillar II rules, namely by presenting consolidated annual
incomes exceeding 750 million euros in two out of the last four financial years.
However, both the Directive and the preliminary draft establish an exclusion rule for the application of the Income Inclusion
Rule ("IIR") and the Undertaxed Payments Rule ("UTPR") for large national groups and multinational enterprise groups in the
initial stage of international activity.
Notwithstanding, that special rule stipulates that the additional tax due is zero in the reference jurisdiction for large national
groups and multinational enterprise groups that are in an initial stage of their international activity, which implies (in the
case of multinational enterprise groups) that, in each tax year: (i) they include constituent entities located in no more than
six jurisdictions and (ii) the sum of the net book value of tangible assets of all their constituent entities, excluding those
located in the reference jurisdiction, does not exceed 50 million euros.
Additionally, said norm provides for the possibility of applying the exclusion rule for five years after the start of the first
fiscal year in which the group comes under the Pillar II rules. However, it must be ascertained annually whether the above
requirements are met.
In this regard, according to the analysis carried out, Novobanco Group should meet the requirements for the application of
the exclusion rule for multinational enterprise groups in the initial stage of their international activity, not foreseeing
material impacts during the period when such exclusion rule is applied.
6.26. Recently issued accounting standards and interpretations
The recently issued accounting standards and interpretations, which have not yet come into force and which the Group
has not yet applied in the preparation of its financial statements, can be analyzed as follows:
Standards, interpretations, amendments and revisions that come into force in future fiscal years
The following standards, interpretations, amendments and revisions, with mandatory application in future fiscal years, had
been adopted ("endorsed") by the European Union as of the approval date of these financial statements
Standard/ Interpretation
Applicable in the
European Union for
Description
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fiscal years beginning
in or after
1-jan-2024
Amendments to IAS 1 -
Presentation of Financial
Statements - Classification of
Current and Non-Current
Liabilities
Amendments to IFRS 16 -
Leasing liabilities in sale and
leaseback transactions
1-jan-2024
This amendment aims to clarify the classification of liabilities as current or non-
current balances based on the rights that an entity has to defer its payment at
the end of each reporting period.
The classification of liabilities is not affected by the entity's expectations (the
evaluation should determine whether a right exists but should not consider
whether the entity will or will not exercise such right), or by events occurring
after the reporting date, such as non-compliance with a "covenant".
However, if the right to defer settlement for at least twelve months is subject
to the fulfilment of certain conditions after the balance sheet date, these
criteria do not affect the right to defer settlement whose purpose is to classify
a liability as current or non-current.
This amendment also includes a new definition of "settlement" of a liability and
is retroactively applicable.
This amendment to IFRS 16 introduces guidance regarding the subsequent
measurement of leasing liabilities, related to sale and leaseback transactions
("sale & leaseback") that qualify as "sale" according to the principles of IFRS 15,
with greater impact when some or all of the lease payments are variable lease
payments that do not depend on an index or a rate.
When subsequently measuring leasing liabilities, the seller-lessees should
determine the "lease payments" and "revised lease payments" in such a way
that they do not recognize gains/(losses) in relation to the right of use they
retain.
This amendment is retroactively applicable.
The Bank has not proceeded with the early application of any of these standards in the financial statements for the fiscal
year ended December 31, 2023. No significant impacts are estimated on the financial statements as a result of their
adoption.
Standards, interpretations, amendments and revisions not yet adopted by the European Union
The following standards, interpretations, amendments and revisions, with mandatory application in future fiscal years, had
not been adopted ("endorsed") by the European Union as of the approval date of these financial statements:
Standard/ Interpret
Description
Amendments to IAS 7 and IFRS 7 -
Disclosures: Supplier Financing
Arrangements
These amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures, aim to clarify the characteristics of a supplier financing arrangement and introduce
additional disclosure requirements when such arrangements exist.
Amendments to IAS 21 - The Effects of
Changes in Foreign Exchange Rates:
Lack of Exchangeability
The disclosure requirements are intended to help users of the financial statements understand the
effects of supplier financing arrangements on the entity's liabilities, cash flows and liquidity risk
exposure.
The amendments take effect in the period beginning on or after January 1, 2024. Early adoption is
permitted, however it should be disclosed..
This amendment aims to clarify how to assess the exchangeability of a currency, and how the
exchange rate should be determined when it is not exchangeable for a long period.
The amendment specifies that a currency should be considered exchangeable when an entity is able
to obtain the other currency within a period that allows for normal administrative management, and
through an exchange mechanism or market in which an exchange transaction creates enforceable
rights and obligations.
If a currency cannot be exchanged for another currency, an entity should estimate the exchange
rate on the measurement date of the transaction. The goal will be to determine the exchange rate
that would be applicable, on the measurement date, for a similar transaction between market
participants. The amendments also state that an entity may use an observable exchange rate
without making any adjustments.
The amendments take effect in the period beginning on or after January 1, 2025. Early adoption is
permitted, however the transition requirements applied must be disclosed.
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These standards have not yet been adopted ("endorsed") by the European Union and, as such, have not been applied by
the Group for the year ended on December 31, 2023. No significant impacts are estimated on the financial statements as a
result of their adoption.
Note 7 – Main Accounting Estimates and Judgements Used in The Preparation of The
Financial Statements
Considering that the current accounting framework requires applying judgements and calculating estimates involving some
degree of subjectivity, the use of different parameters or judgements based on different evidence may result in different
estimates. The main accounting estimates and judgments used in applying the accounting principles by the Bank are
discussed in this Note in order to improve the understanding of how their application affects the reported results of the Bank
and its disclosure.
The relevant judgments made by management in the application of the Bank's accounting policies and the main sources of
uncertainty in the estimates were the same as those described in the last reporting of the Financial Statements.
7.1. Impairment of financial assets at amortised cost and at fair value through other comprehensive income
The critical judgements with greater impact on the recognised impairment values for the financial assets at amortised cost
and at fair value through other comprehensive income are the following:
• Assessment of the business model: the measurement and classification of financial assets depends on the results of
SPPI test and on the business model setting. The Bank determines its business model based on how it manages the
financial assets and its business objectives. The Bank monitors if the business model classification is appropriate based on
the analysis on the anticipated derecognition of the assets at amortised cost or at fair value through other comprehensive
income, assessing if it is necessary to prospectively apply any changes;
• Significant increase on the credit risk: as mentioned on the Note 6.12 – Other financial assets investments in credit
institutions, customer loans and securities, the determination of the transfer of an asset from stage 1 to stage 2 with the
purpose of determining the respective impairment is made based on the judgement that, in accordance to the Bank
management, constitutes a significant increase on credit risk;
• Classification of default: Grupo novobanco’s internal definition of exposure in default is broadly in line with the regulatory
definition in Article 178 of CRR/CRD IV. This regulation defines qualitative criteria for assessing the default classification –
unlikely to pay -, which are replicated in the internal definition implemented by Grupo novobanco and which result in
performing judgements when assessing the high probability that the borrower does not fulfil its obligations within the
conditions agreed with Grupo novobanco. This concept is covered in more detail below;
• Definition of groups of financial assets with similar credit risk characteristics: when the expected credit losses are
measured through collective model, the financial instruments are aggregated based on the same risk characteristics. The
Group monitors the credit risk characteristics in order to assure the correct reclassification of the assets, in cases of
changes on the credit risk characteristics;
• Models and assumptions: The Bank uses several models and assumptions on the measurement of the expected credit
losses. The judgement is applied on the identification of the more appropriate model for each type of asset as well as in the
determination of the assumptions used in these models, including the assumptions related to the main credit risk drivers.
In addition, in compliance with the IFRS9 regulation that clarifies the need for the impairment result to consider multiple
scenarios, a methodology for incorporating different scenarios into the risk parameters was implemented. Thus, the
calculation of collective impairment considers several scenarios with a specific weighting, based on the internal
methodology defined about scenarios - definition of multiple perspectives of macroeconomic evolution, with probability
of relevant occurrence.
7.2. Fair value of derivative financial instruments and other financial assets and financial liabilities at fair value
Fair value is based on listed market prices when available; otherwise, fair value is determined based on similar recent arm’s
length transaction prices or using valuation methodologies, based on the net present value of estimated future cash flows
taking into consideration market conditions, the time value, the yield curve and volatility factors, in accordance with IFRS
13 - Fair Value Measurement. The Bank uses several models and assumption in measuring the fair value of financial assets.
Judgement is applied on the identification of the more appropriate model for each type of asset as well as in the
determination of the assumptions used in these models, including the assumptions related with the main credit risk drivers.
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Consequently, the use of a different methodology or different assumptions or judgements in applying a particular model
could have produced different financial results, summarised in Note 36.
7.3. Income taxes
The Bank is subject to corporate income tax in numerous jurisdictions. Certain interpretations and estimates are required
in determining the overall corporate income tax amount. Different interpretations and estimates could result in a different
level of income tax, current and deferred, being recognised in the period and evidenced in Note 25.
This aspect assumes additional relevance for effects of the analysis of the recoverability of deferred taxes, while the Group
considers forecasts of futures taxable profits based on a group of assumptions, including the estimate of income before
taxes, adjustments to the taxable income and its interpretation of fiscal legislation. This way, the recoverability of deferred
taxes depends on the concretization of the strategy of the Executive Board of Directors, namely in the capacity to
generate the estimated taxable results and its interpretation of fiscal legislation.
The Tax Authorities are charged with reviewing the calculation of the tax base made by the Bank during a period of four or
twelve years, in the event of reportable tax losses. Thus, it is possible that there are corrections to the tax base, resulting
mainly from differences in the interpretation of tax legislation. However, the novobanco's Executive Board of Directors
believes that there will be no significant corrections to taxes on profits recorded in the financial statements.
7.4. Pensions and other employee benefits
The determination of the retirement pension liabilities presented in Note 16 requires the use of assumptions and estimates,
including the use of actuarial tables, assumptions regarding the growth of pensions, salaries and discounts rates (which are
determined based on the market rates associated with high quality corporate bond, denominated in the same currency in
which the benefits will be paid and with a maturity similar to the expiry date of the plan's obligations). These assumptions
are based on the expectations of the novobanco Group for the period during which the liabilities will be settled as well as
other factors that may impact the costs and liabilities of the pension plan.
Changes in these assumptions could materially affect the amounts determined.
7.5. Provisions and Contingent liabilities
The recognition of provisions involves a significant degree of complex judgment, namely identifying whether there is a
present obligation and estimating the probability and timing, as well as quantifying the outflows that may arise from past
events. When events are at an early stage, judgments and estimates can be difficult to quantify due to the high degree of
uncertainty involved. The Executive Board of Directors monitors these matters as they develop to regularly reassess
whether the provisions should be recognised. However, it is often not feasible to make estimates, even when events are
already at a more advanced stage, due to existing uncertainties.
Complexity of such issues often requires expert professional advice in determining estimates, particularly in terms of legal
and regulatory issues. The amount of recognised provisions may also be sensitive to the assumptions used, which may
result in a variety of potential results that require judgment in order to determine a level of provision that is considered
appropriate in view of the event in question.
7.6. Investment properties, Foreclosed assets and Non-current assets held for sale
Investment properties are initially recognised at cost, including directly related transaction costs and subsequently at fair
value. Foreclosed assets and Non-current assets held for sale are measured at the lower of the net book value and the fair
value less costs to sell.
The fair value of these assets is determined based on valuations conducted by independent entities specialised in this type
of service, using the market, income or cost methods, as defined in Notes 7.14 and 7.15. The valuation reports are analysed
internally, namely comparing the sales values with the revalued values of the properties, to keep the valuation parameters
and processes updated to the market evolution.
The use of alternative methodologies and different assumptions may result in a different level of fair value with respective
impact on the recognised balance sheet value.
7.7. Lease Contract Term
The Bank has applied judgment to determine the lease term of certain agreements, in which it acts as lessee, and which
include renewal and termination options. The Bank determines the lease term as the non-cancellable lease term, together
with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered
by an option to terminate the lease, if reasonably certain not to be exercised. This assessment will have an impact on the
lease term, which will significantly affect the amount of the lease liabilities and recognised right-of-use assets.
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The Bank has the option, namely in real estate lease agreements, to lease assets for additional periods from 1 month to 20
years. The Bank applies judgment in assessing whether it is reasonably right to exercise the renewal option. That is, it
considers all the relevant factors that create an economic incentive for renewal.
Note 8 – Net Interest Income
The breakdown of this caption as at 31 December 2023 and 2022 is as follows:
(thousands of Euros)
2023
2022
1 940 462
838 291
1 552 253
727 880
1 161 336
576 835
35 550
30 046
8
-
142 196
25 692
47
160
238 945
124 887
9 776
38 129
38 129
466
38 162
38 162
1 862
40 006
9
38 253
1 853
1 753
348 218
32 243
611
40 873
306 734
18
13 053
19 172
833 352
213 295
615 510
171 667
56 449
203 320
33 880
297 969
116 938
44 779
12 993
305
222
83
-
217 537
217 537
58 252
44 224
3 397
27 733
4 859
34 178
7 280
19 707
12 306
6 850
551
21 921
21 921
1 107 110
624 996
Interest Income
From assets / liabilities at amortised cost
Interest from loans and advances
(of which, financial leasing operations)
(of which, repurchase agreement)
Interest from deposits with and loans and advances to banks
(of which, repurchase agreement)
Interest from securities
Other interest and similar income
From assets / liabilities at fair value through other comprehensive income (*)
Interest from securities
Income/expenses from negative interest rates (*)
Interest from deposits with and loans and advances to banks
Interest from derivatives
Fair value through profit or loss
Interest from loans and advances
Interest from securities
Interest from derivatives
Interest Expenses
From assets / liabilities at amortised cost (*)
Interest on debt securities issued
Interest on amounts due to customers
(of which, repurchase agreement)
Interest on deposits from Central Banks and other banks
(of which, repurchase agreement)
Interest on subordinated liabilities
Other interest and similar expenses
Income/expenses from negative interest rates (*)
Interest on deposits from Central Banks and other banks
Interest on derivatives
Other interest and similar expenses
From assets / liabilities at fair value through profit or loss
Interest on derivatives
*Calculated by the effective interest method
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Average rates of financial assets and liabilities
The following table presents the average interest rates for the main categories of the Bank's financial assets and liabilities,
as at December 31, 2023 and 2022, as well as the respective average balance and interest for the year:
(thousands of Euros)
2023
2022
Average
balance for
the year
Year interest
Average
interest rate
Average
balance for
the year
Year interest
Average
interest rate
40 122 574
1 709 618
4,26%
43 213 580
764 946
4 478 339
141 974
24 034 005
1 149 835
11 610 230
417 809
40 122 574
602 508
8 065 174
264 080
28 212 754
237 200
1 377 123
101 228
3,17%
4,78%
3,60%
1,50%
3,27%
0,84%
7,35%
7 703 743
13 385
23 922 921
571 255
11 586 916
180 306
43 213 580
139 950
11 314 546
( 13 917)
27 911 300
47 622
1 429 109
106 245
1,77%
0,17%
2,39%
1,56%
0,32%
-0,12%
0,17%
7,43%
2 467 523
-
-
2 558 625
-
-
1 107 110
2,76%
624 996
1,45%
Financial assets
Monetary assets
Loans to customers
Securities and others
Financial liabilities
Monetary Liabilities
Due to customers
Other resources
Differential Liabilities
Net Interest margin
Note 9 – Fees and Commissions Income and Expenses
The breakdown of this caption is as follows:
(thousands of Euros)
2023
2022
306 859
302 126
220 544
220 269
45 149
112 759
13 094
49 542
30 717
10 102
6 870
28 138
10 488
37 563
24 823
9 019
13 144
16
2 644
1 313
4 710
6 717
40 697
106 866
13 887
58 819
31 879
8 235
6 599
29 043
6 101
39 816
27 729
9 122
14 645
17
3 945
1 903
4 389
5 795
269 296
262 310
Fees and commissions income
From banking services
Cards
Management of Means of Payment
Asset Management
Credit operations
From guarantees provided
From transaction of securities
From commitments to third parties
Bancassurance
Other fee and commission income
Fees and commissions expenses
With banking services rendered by third parties
Cards
Management of Means of Payment
Asset Management
Credit operations
With guarantees provided
With transaction of securities
Other fee and commission income
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Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
32 444
17 452
176
68
108
1 705
1 705
9 242
107
9 135
3 406
3 406
4 804
Note 10 – Results of Financial Operations
The breakdown of this caption is as follows:
Dividend income
From financial assets at fair value through other comprehensive income
Shares
Participation units
From financial assets at fair value through other comprehensive income
Shares
Investments in associates accounted for using a method other than the equivalence method
30 563
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss
( 58 055)
( 88 444)
From financial assets at fair value through other comprehensive income
Bonds and other fixed income securities - issued by government and public entities
Bonds and other fixed income securities - issued by other entities
From financial assets and liabilities at amortized cost
Bonds and other fixed income securities - issued by government and public entities
Bonds and other fixed income securities - issued by other entities
Credit
Gains or losses on financial assets and liabilities held for trading
Bonds and other fixed income securities - issued by government and public entities
Bonds and other fixed income securities - issued by other entities
Financial Derivatives
Foreign exchange rate contracts
Interest rate contracts
Equity / Index contracts
Credit default contracts
Other
Gains or losses on financial assets mandatorily
Bonds and other fixed income securities - issued by other entities
Shares
Other variable yield securities
Credit to customers
Gains or losses from hedge accounting
Fair value changes of hedging instruments
Foreign exchange rate contracts
Fair value changes of hedging item attributable to hedged risk
Foreign exchange revaluation
5 090
5 090
( 83 194)
( 31 160)
-
( 52 034)
( 63 145)
( 5 250)
( 387)
2
( 69 296)
( 6 293)
6 538
3 144
131
106
2 907
( 1 136)
( 407)
4 285
( 2)
167
71 766
37 987
1 111
27 283
5 385
31 468
1 041
146 715
( 23 620)
39
170 296
5 174
161 650
965
187
2 320
( 95 948)
( 93 648)
14 119
14 778
( 31 197)
( 535)
( 152 982)
438 484
184 450
( 439 019)
23 989
7 305
72 312
( 30 907)
As at December 31, 2023, gains recognized in results from the brokerage margin (day one profit), which are essentially
related to foreign exchange transactions, amounted to approximately 3,602 thousand euros (December 31, 2022: 3,597
thousand euros).
Gains or losses on hedge accounting
Gains or losses on hedge accounting include changes in fair value of the hedging instrument (derivative) and changes in fair
value of the hedged caption attributable to the hedged risk. In the case where the hedge operations are interrupted early,
here may occur the payment/receipt of compensation, which is recorded in Other operating expenses/ Other operating
income. As at December 31, 2023, there were no compensations (December 31, 2022: 89 thousand euros).
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Note 11 – Gain or Losses on Derecognition of Non-Financial Assets
The breakdown of this caption is as follows:
Real estate properties
Equipment
Others
(thousands of Euros)
2023
26 896
526
185
27 608
2022
85 386
( 5 790)
2 563
82 159
The caption gains or losses on derecognition of non-financial assets - buildings includes, as at December 31, 2022, the gain
of 66,797 thousand euros on the sale of novobanco headquarters building, as detailed in note 23.
Note 12 – Other Operating Income and Other Operating Expenses
The breakdown of this caption is as follows:
Other operating income
Gains / (losses) on recoveries of loans
Non-recurring advisory services
Other income
Other operating expenses
Losses on the acquisition of debt issued by the Bank (see Note 28)
Direct and indirect taxes
Contribution to the Banking Sector
Additional solidarity
Membership subscriptions and donations
Charges with Supervisory entities
Other expenses
Other operating income / (expenses)
(thousands of Euros)
2023
45 120
31 994
331
12 795
2022
56 579
39 741
334
16 504
( 78 681)
( 68 778)
( 1 436)
( 3 610)
-
( 2 748)
( 29 207)
( 28 270)
( 5 310)
( 1 404)
( 2 228)
( 5 140)
( 1 643)
( 2 254)
( 35 486)
( 28 723)
( 33 561)
( 12 199)
As at December 31, 2023, there are no received amounts related to compensation for interruption of hedge operations,
included in other income (December 31, 2023: 89 thousand euros) (see Note 10).
Note 13 – Staff Expenses
The breakdown of this caption is as follows:
Wages and salaries
Remuneration
Long-term service / Career bonuses (see Note 14)
Mandatory social charges
Costs with post-employment benefits (see Note 14)
Other costs
The provisions and costs related to the restructuring process are presented in Note 29.
484
2023
178 588
177 357
1 231
46 493
89
9 559
(thousands of Euros)
2022
166 593
166 593
-
43 972
263
5 993
234 729
216 821
As of 31 December 2023 and 2022, the number of employees of the Bank, considering the staff and the term contracted,
presents the following breakdown by professional category:
Annual Report 2023 | novobanco
Senior management functions
Middle Management functions
Specific functions
Administrative and other functions
Note 14 –Employee Benefits
2023
428
353
2 114
1 044
3 939
2022
408
365
2 058
986
3 817
Pension and health-care benefits
As mentioned in accounting policy 6.22, the Bank has undertaken to provide its employees, or their families, with cash
benefits for old-age retirement, disability and survivors’ pensions and other liabilities such as a Serviço de Assistência
Médico-Social (SAMS), managed by the Union.
For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions
consecrated under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension fund,
managed by GNB – Sociedade Gestora de Fundos de Pensões, S.A..
Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the General
Social Security Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all banking employees
who were beneficiaries of “CAFEB – Caixa de Abono de Família dos Empregados Bancários” were integrated in the General
Social Security Regime as from 1 January 2011.
Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.
Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the 2nd
tripartite agreement continue to be calculated in accordance with the provisions of the ACT and other conventions;
however, banking employees are entitled to receive a pension under the General Regime that considers the number of
years of contributions under that regime. The Banks are responsible for the difference between the pension determined in
accordance with the provisions of the ACT and that which the banking employees are entitled to receive from the
Collective Bargaining Agreement.
The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de Abono
de Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change, pension
entitlements of active employees are to be covered on the terms defined under the General Social Security Regime, for the
length of their employment between 1 January 2011 and their retirement date. The differential required to make up the
pension guaranteed under the ACT is paid by the Banks, being now responsible for the difference required for the pension
guaranteed under the terms of the Collective Labor Agreement.
At the end of exercise 2011 and pursuant to the 3rd tripartite agreement, it was decided to transfer, definitively and
irreversibly, to the General Social Security Regime all the banks’ liabilities with pensions in payment to retirees and
pensioners that were in that condition as of 31 December 2011 at constant values (0% discount rate) for the component
foreseen in the “Instrumento de Regulação Coletiva de Trabalho” (IRCT) applicable to banking employees, including the
eventualities of death, disability and survival. The liabilities relating to the updating of pension amounts, pension benefits
other than those to be borne by Social Security, health-care contributions to SAMS, death allowances and deferred
survivor’s pensions will remain under the banks’ responsibility, with the corresponding funding being met through the
respective pension funds.
The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to the
satisfaction responsibilities for those pensions, be transferred to the State.
According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering the
resolution by the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained in the
deliberation of the Board of Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES responsibilities
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not transferred to novobanco relate to the retirement and survival pensions and complementary retirement and survival
pensions of the Directors of BES who had been members of its Executive Committee, as defined in BES’s Articles of
Association and BES’s General Assembly Regulations to which the Articles of Association refer, not having, therefore, been
transferred to novobanco, without prejudice to the transfer of the responsibilities relating exclusively to the employment
contracts with BES.
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to
novobanco. Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive
Committee Plan were split, with a part (described above) remaining in BES, with the other part being transferred to
novobanco, together with the Pension Fund’s liabilities relating to the Base Plan and the Complementary Plan.
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES,
following the decision of Bank of Portugal of 11 February 2015, from those that were transferred to novobanco, the assets
existing on 3 August 2014 were split in proportion to the liabilities calculated on the same date, allocated to each of the
groups of former participants and beneficiaries allocated to each of the entities. The split performed on these terms will
result, on 3 August 2014, in a level of funding of the Complementary Plan of the Executive Commission that is equal for
each of the associates of the Fund (novobanco and BES).
The assets of the undivided part are not allocated to any liabilities of Novobanco or BES until the final decision of the court
(under Article 402), with the amount of 8.8 million euros of net liabilities of the fund's assets related to the undivided part
being recorded under the Provisions item of novobanco's liabilities.
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary
plan became a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19, this
plan´s responsibilities and assets are net of the amounts presented for the defined benefit plans. On 31 December 2023,
the amount of Euro 617 thousand was recorded in Staff Costs related to the defined contribution plan (31 December
2022: Euro 548 thousand).
During 2021, two changes were made to the Pension Fund:
• Inclusion of Social Security Pension – Pensioners
Until 2020, the methodology applied considered pensions in payment by the Pension Fund for the calculation of liabilities
with pensioners. In 2021, this methodology was changed for pensioners who started a pension after 2011, and do not
have a Social Security pension. For this group of pensioners with age below the normal retirement age of the General
Social Security Regime (RGSS), the liability arising from a Social Security pension, to be paid from the normal retirement
age of the RGSS, was deducted. As for pensioners over the normal retirement age of the RGSS, the liability arising from a
Social Security pension, to be paid from the moment of assessment, was deducted.
• Inclusion of acquired rights (Clause 98 ACT)
In 2021, liabilities with former employees who left novobanco after 2011, and who can claim rights to the Pension Fund
under Clause 98 of the ACT, were included.
The Bank's liabilities and coverage levels, calculated in accordance with the accounting policy defined in Note 6.22 -
Employee benefits, reportable as of 31 December 2023 and 2022 are analysed as follows:
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Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
1 389 421
1 887 967
89
53 833
2 665
209
101 041
93 989
( 87 198)
11 245
( 1)
-
24 946
2 568
201
( 515 423)
50 016
( 80 263)
19 409
-
1 565 293
1 389 421
1 178 544
386 749
1 057 119
332 302
1 441 442
1 865 405
220 558
( 346 268)
52 813
167 745
2 665
22 654
( 368 922)
2 568
( 87 198)
( 80 263)
( 1)
-
1 577 466
1 441 442
52 021
( 1 109)
( 27 285)
( 11 454)
12 173
684 759
101 041
( 73 756)
712 044
12 047
3 983
6 994
1 070
( 22 562)
( 2 555)
96 485
( 19 347)
52 021
781 244
( 515 423)
418 938
684 759
11 914
3 861
6 993
1 060
Liabilities
Liabilities in the beginning of the exercise
Current service cost
Interest cost
Plan participants' contribution
Contributions from other entities
Actuarial (gains) / losses in the period:
- Changes in financial assumptions
- Experience adjustments (gains) / losses
Pensions paid by the fund / transfers and one-off bonuses
Early retirement
Foreign exchange differences and other
Liabilities at end of exercise
Of which:
Pensioners
Assets
Pension Funds
Fair value of fund assets at beginning of exercise
Net return from the fund
- Share of the net interest on the assets
- Return on assets excluding net interest
Plan participants’ contributions
Pensions paid by the fund / transfers and one-off bonuses
Foreign exchange differences and other
Fund balance at the end of the exercise
Assets / (liabilities) recognized in the balance sheet
In the beginning of the exercise
Cost of the exercise
Actuarial (gains) / losses recognized in other comprehensive income
Other
In the end of the exercise
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Actuarial (gains) / losses in the period:
- Changes in assumptions
- Financial assumptions
- Plan assets return (excluding net interest)
Accumulated actuarial losses recognized in other comprehensive income at the end of the exercise
Participants in Pension Plan
Assets
Retirees and survivors
Participants under the Clause 98
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Pension fund assets can be analysed as follows:
Equity instruments
Debt instruments
Investment funds
Real estate properties
Cash and cash equivalents
2023
2022
(thousands of Euros)
Quoted
Unquoted
Total
Quoted
Unquoted
Total
-
125 736
125 736
-
63 411
63 411
1 016 302
-
1 016 302
113 019
51 737
164 756
-
-
228 483
228 483
42 189
42 189
933 370
137 105
-
-
-
933 370
53 434
190 539
181 960
181 960
72 162
72 162
Total
1 129 321
448 145
1 577 466
1 070 475
370 967
1 441 442
Pension fund assets used by the Bank or representative of securities issued by the Bank are detailed as follows:
Cash and Cash Equivalents
Real estate properties
Total
(thousands of Euros)
2023
21 408
39 965
61 373
2022
63 802
39 056
102 858
The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as
follows:
Actuarial Assumptions
Projected rate of return on plan assets
Discount rate
Pension increase rate
Salary increase rate
Mortality table men
Mortality table women
2023
2022
Assumptions
Actual
Actual
Verified
3,45%
3,45%
0,75%
1,00%
15,87%
-
4,36%
5,71%
4,00%
4,00%
0,75%
1,00%
-18,92%
-
1,41%
2,54%
TV 88/90
TV 88/90-3 years
TV 88/90
TV 88/90-3 years
Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as of 31
December 2023 and 2022 was based on: (i) the evolution of the main indices for high quality corporate bonds and (ii) the
duration of the liabilities.
As of 31 December 2023 and 2022, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year
in the mortality table results in the following changes in the current value of liabilities determined for past services:
Assumptions
Change in the amount of liabilities due to the change:
2023
2022
of +0.25% in the
rate used
of -0.25% in the
rate used
of +0.25% in the
rate used
of -0.25% in the
rate used
( 47 335)
9 569
46 928
49 852
( 9 256)
( 44 874)
( 41 268)
6 809
43 853
43 438
( 6 577)
( 41 917)
+1 year
-1 year
+1 year
-1 year
Discount rate
Salary increase rate
Pension increase rate
Mortality table
( 49 394)
49 118
( 40 699)
40 314
The costs of retirement pensions and health benefits for the exercises ended 31 December 2022 and 2021 can be analysed
as follows:
488
Current service cost (a)
Net interest
Early retirement (a)
Post-employment benefit costs
(a) recognised in Staff expenses (see Note 14)
Annual Report 2023 | novobanco
(thousands of Euros)
2023
89
1 020
-
1 109
2022
-
2 292
263
2 555
In 2023, the value of early retirements amounted to Euro 11.2 million (31 December 2022: Euro 19.4 million), which Euro 11.2
million are part of the Bank's restructuring process and, as such, they were recognised against the use of the provision for
restructuring (see Note 29).
The average duration of the defined benefit plan liabilities is approximately 13 years (as of 31 December 2022:
approximately 13 years).
Career Bonuses
As of 31 December 2023, the liabilities assumed by the Bank amounted to Euro 6,474 thousand, corresponding to the
liabilities for past services subjacent to the career bonuses, as described in Note 6.22 – Employee benefits (31 December
2022: Euro 5,506 thousand) (see Note 30).
As of December 31, 2023, costs of Euro 1,231 thousand euros were recognized for career premiums (on December 31, 2022,
no costs for career premiums were recognized) (see Note 13).
Note 15 – Other Administrative Expenses
The breakdown of this caption is as follows:
Rentals
Advertising
Communication
Maintenance and repairs expenses
Travelling and representation
Transportation of valuables
Insurance
IT services
Independent work
Temporary work
Electronic payment systems
Legal costs
Consultancy and audit fees
Water, energy and fuel
Consumables
Other costs
(thousands of Euros)
2023
7 088
5 471
7 836
7 577
2 421
2 663
4 885
2022
5 896
4 884
8 782
7 918
2 050
2 630
5 955
43 563
41 606
2 252
703
13 937
7 392
41 316
1 393
1 570
2 147
1 271
11 359
6 447
26 998
2 712
1 484
23 124
20 770
173 191
152 909
The caption Other costs includes, amongst others, specialized service costs incurred with security and surveillance,
information services, training and sundry external supplies.
As of December 31, 2023, rental costs include an amount of Euro 683 thousand related to short-term operating lease
contracts (December 31, 2022: Euro 704 thousand), as described in note 6.19.
The fees invoiced during the exercises 2023 and 2022 by the Statutory Audit Firm, according to that laid down in article
508-F of the Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
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Statutory Audit of annual accounts
Other reliability assurance services
Total value of billable services
(thousands of Euros)
2023
1 500
1 884
3 384
2022
1 326
1 177
2 503
Note 16 - Contributions to resolution funds and deposit guarantee schemes
As of 31 December 2023 and 2022, this caption is analysed as follows:
Contribution to the Single Resolution Fund
Contribution to the National Resolution Fund
Contribution to the Deposit Guarantee Fund
(thousands of Euros)
2023
14 877
6 947
55 704
77 528
2022
24 416
16 017
284
40 717
In the context of annual periodic contributions to the Deposit Guarantee Fund (DGF), novobanco undertook irrevocable
commitments, according to article 161, nº4, of the General Regime of Credit Institutions and Financial Companies
("RGICSF"), related to part of these contributions, with the commitment to make the respective payment when the DGF
requested it. At the end of the 2023 financial year, and at the indication of this institution, the Bank proceeded to pay the
entire value of the commitments assumed, amounting to 55,462 thousand euros, and recognized this amount as costs of
the year.
Additionally, the Bank has irrevocable commitments amounting to 20,143 thousand euros related with contributions to the
single Resolution Fund, resulting from the option to make part of the annual contributions through a collateral deposit.
Note 17 – Impairment
As of 31 December 2023 and 2022, this caption is analysed as follows:
Provisions net of cancellations (see Note 29)
Provisions for guarantees and for commitments
Other provisions
Impairments or reversal of impairments on financial assets not measured at fair value through profit or loss
(see Note 20)
Securities at fair value through other comprehensive income
Securities at amortized cost
Loans and advances to banks
Loans and advances to customers
Impairments or reversal of impairments for investments in subsidiaries, joint ventures and associates (see
Note 22)
Impairments or reversal of impairments on non-financial assets
Non-current assets held for sale and Discontinued operations (see Note 27)
Tangible fixed assets (see Note 23)
Other assets (see Note 26)
(thousands of Euros)
2023
2022
23 305
10 894
( 434)
( 2 555)
23 739
13 449
142 022
103 265
( 352)
( 457)
32 956
67 324
( 6)
( 471)
109 424
36 869
( 12 216)
( 16 166)
( 6 353)
( 14 081)
14 425
( 623)
( 1 014)
( 1 696)
( 19 764)
( 11 762)
146 758
83 912
490
Annual Report 2023 | novobanco
Note 18 – Cash, Cash Balances at Central Banks and Other Demand Deposits
As of 31 December 2023 and 2022, this caption is analysed as follows:
Cash
Demand Deposits in central banks
Bank of Portugal
Other Central Banks
Deposits in other domestic credit institutions
Repayable on demand
Uncollected checks
Deposits with banks abroad
Repayable on demand
(thousands of Euros)
2023
2022
171 006
176 797
5 374 612
5 942 501
5 365 346
5 936 640
9 266
5 861
107 563
179 460
27 720
20 331
79 843
159 129
89 418
88 537
89 418
88 537
5 742 599
6 387 295
The caption Demand Deposits with Bank of Portugal includes mandatory deposits to comply with the minimum legal cash
reserve requirements in an amount of Euro 277.6 million (31 December 2022: Euro 275.7 million), which aim to satisfy the
legal requirements regarding the constitution of minimum cash balances. According to the European Central Bank
Regulation (EU) No. 1358/2011, of 14 December 2011, minimum cash requirements of demand deposits with Bank of
Portugal are interest-bearing and correspond to 1% of the deposits and debt certificates maturing in less than 2 years, after
excluding from these the deposits of institutions subject to the European System of Central Banks minimum reserve
requirements. As of 31 December, 2022 and 2023, the average interest rate on these deposits was 0% and 2.00%,
respectively.
Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the average
amount of the deposits with Bank of Portugal over said period. The balance of the account with Bank of Portugal as of 31
December 2023 was included in the observation period running from 20 December 2023 to 30 January 2024.
Checks to be collected on credit institutions at home and abroad were sent for collection within the first business days
following the reference dates.
Note 19 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
This item as of December 31, 2023 and 2022 is analysed as follows:
Financial assets held for trading
Bonds and other fixed income securities - Issued by government and public entities
Derivatives held for trading with positive fair value
Financial liabilities held for trading
Derivatives held for trading with negative fair value
Securities held for trading
The detail of the securities held for trading by fair value hierarchy is described in Note 36.
(thousands of Euros)
2023
2022
436 345
170 847
318 528
36 428
117 817
134 419
100 607
99 317
100 607
99 317
491
Management Report
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Annex
Derivatives
As of 31 December 2023 and 2022, this caption is analysed as follows:
2023
2022
Notional
Fair value
Notional
Fair value
Buy
Sell
Asset
Liability
Buy
Sell
Asset
Liability
(thousands of Euros)
Trading derivatives
Exchange rate contracts
117 817
100 607
11 441
11 414
134 419
99 317
23 145
22 024
Forward
458 622
458 482
7 738
Currency Swaps
718 899
718 684
2 485
7 903
2 293
618 333
616 911
13 563
12 896
760 315
758 406
2 976
Currency Options
86 152
76 649
1 218
1 218
293 418
293 419
6 606
Interest rate contracts
101 098
83 897
102 729
74 413
Interest Rate Swaps
2 771 025
2 771 025
90 173
73 772
2 766 363
2 766 363
97 524
70 120
Interest Rate Caps &
Floors
Equity / index contracts
337 730
414 502
10 925
10 125
142 992
233 310
5 205
4 293
4 315
4 360
8 256
Equity / Index Options
265 640
265 640
4 315
4 360
422 894
422 894
8 256
Contracts on risk of default
Credit Default Swaps
-
45 249
Commodities contracts
Commodities Swaps
29 082
29 082
-
-
963
963
104
104
832
832
-
-
15 759
15 759
-
-
289
289
a) Derivatives traded on organized markets, whose market value is settled daily against the margin account (see Note 26)
2 522
6 606
2 671
2 671
-
-
209
209
Economic hedge derivatives include instruments intended to manage the risk associated with certain financial assets and
liabilities designated at fair value through results, in accordance with the accounting policy described in Notes 6.6.6 and
6.6.7, and which the Bank has not designated for hedge accounting.
In the exercise of 2023, the Bank recognised a loss of Euro 228 thousand related to the CVA of derivative instruments (31
December 2022: loss of Euro 1 820 thousand). The way of determining the CVA is explained in Note 36.
Note 20 – Financial Assets Mandatorily at Fair Value through Profit or Loss, Designated at
Fair Value through Profit or Loss, at Fair Value through Other Comprehensive Income and
at Amortised Cost
As of 31 December 2023 and 2022, this caption is analysed as follows:
2023
(thousands of Euros)
Mandatorily at
fair value
through profit
and loss
Fair value
through profit
and loss
Fair value
through other
comprehensive
income
Amortised
cost1
Fair value
changes 2
Total
741 446
8 200 570
125 817
-
-
23 063 507
( 83 763)
22 979 744
741 446
31 389 894
( 83 763)
33 482 267
-
-
10 376 706
125 817
Securities
1 434 690
Loans and advances to banks
Loans and advances to customers
-
-
1 434 690
-
-
-
-
1 Includes fair value adjustments resulting from micro-hedging of interest rate risk (see Note 21)
2 Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 21)
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Annual Report 2023 | novobanco
2022
(thousands of Euros)
Mandatorily at
fair value
through profit
and loss
Fair value
through profit
and loss
Fair value
through other
comprehensive
income
Amortised
cost1
Fair value
changes 2
Total
-
-
12 120 932
145 464
Securities
1 537 652
13
2 183 034
8 400 233
Loans and advances to banks
Loans and advances to customers
-
18
-
-
-
-
145 464
22 955 247
( 164 388)
22 790 877
1 Includes fair value adjustments resulting from micro-hedging of interest rate risk (see Note 21)
2 Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 21)
1 537 670
13
2 183 034
31 500 944
( 164 388)
35 057 273
20.1 Securities
As of 31 December 2023 and 31 December 2022, the detail of securities portfolio is as follows:
Securities mandatorily accounted for at fair value through profit or loss
Bonds and other fixed income securities - From other issuers
Shares
Other securities with variable income
Securities at fair value through profit and loss
Bonds and other fixed income securities - From other issuers
Securities at fair value through other comprehensive income
Bonds and other fixed income securities - From public issuers
Bonds and other fixed income securities - From other issuers
Shares
Securities at amortised cost
Bonds and other fixed income securities - From public issuers
Bonds and other fixed income securities - From other issuers
Impairment
(thousands of Euros)
2023
2022
1 434 690
1 537 652
465 211
141 460
433 665
140 442
828 019
963 545
-
-
13
13
741 446
2 183 034
285 852
1 629 639
389 194
479 406
66 400
73 989
8 200 570
8 400 233
4 402 729
4 403 137
4 122 185
4 288 663
( 324 344)
( 291 567)
10 376 706
12 120 932
On December 29, 2022, the Crow Project was concluded, between novobanco, Banco Comercial Português, S.A., Caixa
Geral de Depósitos, S.A., Banco Santander Totta, S.A. and Oitante, S.A. (the sellers) and Davidson Kempner (the buyer),
regarding the sale process of the participation units held by these banks in the restructuring funds. This transaction resulted
in: (i) the transfer of the units held in FRT together with the assets directly and indirectly held by the fund to the buyer; (ii)
the transfer of the shares in FLIT together with the assets directly and indirectly held by the fund to the buyer; (iii) certain
hotel assets indirectly held by the Recovery Fund, FCR were indirectly acquired by FLIT; and (iv) certain assets indirectly
held by FLIT and FRT were transferred to the Sellers. As a result of this transaction, novobanco received, in net terms, Euro
224 million, derecognised Euro 267 million of participating units and acquired assets recorded as non-current assets in the
amount of Euro 48 million, with a positive impact on results of Euro 4.8 million.
The remaining participations in restructuring funds that remained in the Bank's balance sheet are accounted for as shares
and other variable income securities mandatorily measured at fair value through profit or loss, in accordance with the
accounting policy described in Note 6.6.4, based on the net book value disclosed by the Management Companies, adjusted
based on independent information, analyses or valuations deemed necessary to determine their fair value, in response to
guidance from the European Central Bank. As these are "level 3" assets in accordance with the IFRS 13 fair value hierarchy
(quotations supplied by third parties whose parameters used are mostly not observable in the market), details of the
valuation methodology are described in Note 36.
During this year, the Bank decided, on an exceptional basis, to fully sell a portfolio of supranational debt recorded at
amortized cost whose yield was significantly below those observed in the market, within the scope of interest rate risk
management, and in line with the Bank's strategy of protecting financial margin in a scenario of falling interest rates as early
493
Management Report
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Separate Financial Statements
Annex
as 2024. Given the exceptionality and non-repeatable nature of the operation, we understand that it is part of the adopted
business model. This portfolio consisted of eighteen securities with a duration of around 5 years (not considering call
options), which represented around 9.4% (in nominal value) of the total securities portfolio recorded at amortized cost.
With this operation, the Bank recognized a loss in the line Gains or losses of financial assets and liabilities not measured at
fair value of 70,982 thousand euros in the 2023 financial year, which corresponds to the realization of potential losses on
these securities, for the benefit of gains in future margin.
As of 31 December 2023 and 2022, the detail of the fair value securities through other comprehensive income is as follows:
Cost (1)
Fair value reserve
Positive
Negative
Fair value
reserve
transferred to
Results (2)
Balance
sheet value
Impairment
reserves
(thousands of Euros)
Bonds and other fixed income securities - From
public issuers
284 159
1 747
( 54)
Residents
Non residents
-
284 159
-
1 747
-
( 54)
-
-
-
285 852
-
285 852
( 21)
-
( 21)
Bonds and other fixed income securities - From
other issuers
420 490
775
( 27 052)
( 5 019)
389 194
( 190)
Shares
130 095
37 168
( 100 863)
Other securities with variable income
3
-
( 3)
-
-
66 400
-
-
-
Balance as at 31 December 2023
834 747
39 690
( 127 972)
( 5 019)
741 446
( 211)
(1) Acquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
(2) In the context of fair value hedge operations (see Note 21)
Cost (1)
Fair value reserve
Positive
Negative
Fair value
reserve
transferred to
Results (2)
Balance
sheet value
Impairment
reserves
(thousands of Euros)
Bonds and other fixed income securities - From
public issuers
Residents
Non residents
1 634 375
224 013
1 410 362
311
-
311
( 5 047)
( 486)
( 4 561)
-
-
-
1 629 639
( 382)
223 527
1 406 112
( 52)
( 330)
Bonds and other fixed income securities - From
other issuers
541 022
-
( 49 628)
( 11 988)
479 406
( 207)
Shares
400 636
34 763
( 361 410)
Other securities with variable income
3
-
( 3)
-
-
73 989
-
-
-
Balance as at 31 December 2022
2 576 036
35 074
( 416 088)
( 11 988)
2 183 034
( 589)
(1) Acquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
(2) In the context of fair value hedge operations (see Note 21)
During 2023, the Bank sold Euro 1,1152.9 million of financial instruments classified at fair value through other comprehensive
income (31 December 2022: Euro 5,909.2 million), with a gain of Euro 5,1 million (31 December 2022: loss of Euro 83,2
million), recorded in the income statement, from the sale of debt instruments and a loss of Euro 258.8 million that were
transferred from revaluation reserves to sales-related reserves (31 December 2022: loss of Euro 0.9 million), from the sale
of equity instruments.
The transfers between stages that occurred in the portfolio of securities at fair value through other comprehensive income
and amortised cost during the 2023 and 2022 financial years are presented as follows:
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Annual Report 2023 | novobanco
Transfers between Stage 1 and 2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
2023
(thousands of Euros)
Bonds and other fixed income securities –
Capitals
To Stage 2 from
Stage 1
To Stage 1 from
Stage 2
To Stage 3 from
Stage 2
To Stage 2 from
Stage 3
To Stage 3 from
Stage 1
To Stage 2 from
Stage 1
From other issuers
86 586
25 549
29 648
86 586
25 549
29 648
-
-
-
-
-
-
2022
(thousands of Euros)
Transfers between Stage 1 and
2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 2
form Stage 1
18 523
18 523
1 405
1 405
-
-
-
-
5 622
5 622
-
-
Bonds and other fixed income
securities – Capitals
From other issuers
Movements occurring in impairment reserves in securities at fair value through other comprehensive income are presented
as follows:
Balance as at 31 December 2021
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write off
Other movements
Balance as at 31 December 2022
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write off
Other movements
Balance as at 31 December 2023
(thousands of Euros)
Impairment movement of securities at fair value
through other comprehensive income
Stage 1
Stage 2
Stage 3
Total
3 668
( 20)
2 278
( 2 715)
( 2 654)
32
589
390
( 742)
( 22)
( 4)
211
-
-
-
-
-
-
-
-
-
-
-
-
-
20
-
( 20)
-
-
-
-
-
-
-
-
3 668
-
2 278
( 2 735)
( 2 654)
32
589
390
( 742)
( 22)
( 4)
211
495
Management Report
Sustainability Report
Separate Financial Statements
Annex
Changes in impairment losses on amortised cost securities are as follows:
Balance as at 31 December 2021
6 246
38 283
203 243
247 772
Impairment movement of securities at amortised cost
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write off
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Write off
Other movements
Balance as at 31 December 2023
( 40)
61
5 383
1 883
( 1 784)
76
( 61)
( 6 357)
15 451
( 76)
61
-
-
-
6 357
-
-
-
173 771
1 687 706
1 876 928
( 9 993)
( 208 666)
( 1 590 945)
( 1 809 604)
-
-
( 25 237)
( 25 277)
1 687
1 748
3 373
282 811
291 567
( 1 883)
1 784
-
-
-
( 1 654)
1 654
-
-
-
8 915
11 020
1 631 947
1 651 882
( 12 254)
( 9 201)
( 1 597 471)
( 1 618 926)
( 153)
1 650
3 640
( 23)
( 1 649)
( 5)
1
( 181)
2
1 767
318 937
324 344
In accordance with the accounting policy mentioned on Note 6.12, the Bank regularly evaluate if there is any objective
evidence of impairment in its securities portfolio at a fair value through other comprehensive income based on the
judgement criteria mentioned on Note 7.1.
The detail of the securities portfolio by fair value hierarchy is presented in Note 36.
The securities portfolio pledged by the bank are analysed in Note 33.
20.2 Loans and advances to Banks
As of 31 December 2023 and 2022, the applications in Loans and advances to Banks are detailed as follows:
Loans and advances to banks in Portugal
Deposits
Loans
Loans and advances to banks abroad
Deposits
Impairment losses
(Thousands of Euros)
2023
2022
123 268
103 091
20 177
3 216
3 216
141 042
101 814
39 228
5 096
5 096
126 484
146 138
( 667)
( 674)
125 817
145 464
The applications in credit institutions are all recorded in the amortised cost portfolio.
The movements that occurred with impairment losses on loans and applications in credit institutions are presented as
follows:
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Annual Report 2023 | novobanco
Loans and advances to Banks
Stage 1
Stage 2
Stage 3
Total
(thousands Euros)
284
167
( 318)
( 42)
91
84
( 30)
236
( 322)
1
60
474
391
( 711)
-
154
( 84)
30
518
( 438)
-
180
425
-
-
4
429
-
-
-
-
( 2)
427
1 183
558
( 1 029)
( 38)
674
-
-
754
( 760)
( 1)
667
Balance as at 31 December 2021
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2023
20.3 Loans and advances to customers
As of 31 December 2023 and 2022, the detail of loans to customers is presented as follows:
Loans and advances - Corporate
Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances
Loans and advances - Individuals
Residential Mortgage loans
Consumer credit and other loans
Overdue loans and advances and interests
Under 90 days
Over 90 days
Impairment losses
Fair value adjustments of interest rate hedges (See Note 21)
Corporate - Loans
Individual - Residential Mortgage loans
(thousands of Euros)
2023
2022
13 323 794
13 788 661
1 337 068
1 127 247
10 407 895
11 002 049
71 736
86 552
816 137
699 780
13 671
46 698
656 298
796 669
20 989
29 666
10 311 600
9 886 021
8 829 426
8 622 198
1 482 174
1 263 823
364 104
338 150
27 108
11 943
336 996
326 207
23 999 498
24 012 832
( 935 991)
(1 057 567)
23 063 507
22 955 265
( 83 763)
( 164 388)
-
( 16 805)
( 83 763)
( 147 583)
22 979 744
22 790 877
As of December 31, 2023, there are transactions mandatorily recorded at fair value through results, with a nominal value of
Euro 13,090 thousand and a fair value of Euro 0 thousand (December 31, 2022: 31,197 thousand euros and 18 thousand
euros, respectively), the impact of which was recorded in the line Gains or losses with financial assets mandatorily
accounted for at fair value through results of the income statement (see Note 10).
As of December 31, 2023, the caption of loans to customers includes Euro 7,442.1 million (December 31, 2022: Euro 6,078.4
million) of mortgage credit affecting the issue of mortgage bonds (see Note 28).
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Annex
As of December 31, 2023, the value of the interest and fees recorded in the balance sheet related to credit operations
amounts to 92,071 thousand euros (December 31, 2022: Euro 36,145 thousand).
As of 31 December 2023 and 2022, the transfers between stages that occurred in credit is as follows:
Transfers between Stage 1 and 2
2023
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
(thousands of Euros)
To Stage 2 from
Stage 1
To Stage 1 from
Stage 2
To Stage 3 from
Stage 2
To Stage 2 from
Stage 3
To Stage 3 from
Stage 1
To Stage 2
from Stage 1
Loans – Capitals
Corporate loans
914 537
725 009
171 692
104 562
Loans to individuals
467 522
248 122
49 455
26 866
1 382 059
973 131
221 147
131 428
70 630
24 685
95 315
314
4 434
4 748
(thousands of Euros)
Transfers between Stage 1 and
2
Transfers between
Stage 2 and 3
Transfers between
Stage 1 and 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 2
from Stage 1
2022
Loans – Capitals
Corporate loans
548 205
510 364
Loans to individuals
386 142
306 701
81 931
35 570
40 297
40 507
29 605
8 638
934 347
817 065
117 501
80 804
38 243
2 250
22 636
24 886
Changes in credit impairment losses are presented as follows:
Impairment movements of loans and advances to customers
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
Balance as at 31 December 2021
62 056
317 271
856 430
1 235 757
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
72 212
( 72 212)
-
( 18 735)
47 083
( 28 348)
( 248)
( 18 534)
18 782
-
-
-
Financial assets derecognised
( 4)
-
( 26 847)
( 26 851)
Increases due to changes in credit risk
19 465
62 244
128 065
209 774
Decreases due to changes in credit risk
( 90 575)
( 38 332)
( 43 998)
( 172 905)
Write off
Other movements
-
( 38)
( 197 122)
( 197 160)
16 853
( 786)
( 7 115)
8 952
Balance as at 31 December 2022
61 024
296 696
699 847
1 057 567
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Financial assets derecognised
143 939
( 143 939)
-
( 46 756)
85 304
( 38 548)
( 33 502)
33 685
( 183)
( 123)
( 188)
( 75 114)
( 75 425)
-
-
-
Increases due to changes in credit risk
11 891
167 453
124 784
304 128
Decreases due to changes in credit risk
( 110 032)
( 39 202)
( 45 470)
( 194 704)
Write off
Other movements
-
( 31)
( 154 738)
( 154 769)
2 366
( 2 376)
( 796)
( 806)
Balance as at 31 December 2023
62 126
330 215
543 650
935 991
Loans to customers distribution by type of rate is as follows
498
Fixed rate
Variable rate
An analysis of finance lease loans, by residual maturity period, is presented as follows:
Gross investment in finance leases receivable
Up to 1 year
1 to 5 years
More than 5 years
Interest due from finance leases
Up to 1 year
1 to 5 years
More than 5 years
Capital due
Up to 1 year
1 to 5 years
More than 5 years
Impairment
Annual Report 2023 | novobanco
(thousand of Euros)
2023
2022
3 407 936
2 710 318
20 507 799
21 138 126
23 915 735
23 848 444
(thousand of Euros)
2023
2022
768 608
915 702
228 441
216 621
418 850
496 962
121 317
202 119
100 061
31 620
52 892
15 549
97 481
26 238
54 097
17 146
668 547
818 221
196 821
190 383
365 958
442 865
105 768
184 973
( 66 291)
( 84 922)
602 256
733 299
As of December 31, 2023 and 2022, the detail of the gross credit exposure value and impairment assessed individually and
collectively, by segment, was as follows:
2023
(thousands of Euros)
Segment
Individual Evaluation(1)
Collective Evaluation (2)
Total
Exposure
Impairment
Exposure
Impairment
Exposure
Impairment
Corporate
861 977
412 884
12 787 971
341 207
13 649 948
754 091
Stage 1
Stage 2
Stage 3
-
-
-
-
10 125 185
2 610 902
42 852
10 125 185
42 852
270 423
2 610 902
270 423
861 977
412 884
51 884
27 932
913 861
440 816
Mortgage loans
274
120
8 752 072
63 443
8 752 346
63 563
Stage 1
Stage 2
Stage 3
-
-
-
-
7 985 953
682 770
3 467
7 985 953
35 209
682 770
274
120
83 349
24 767
83 623
3 467
35 209
24 887
Other Credit to Individuals
52 005
49 058
1 461 436
69 279
1 513 441
118 337
Stage 1
Stage 2
Stage 3
-
-
-
-
1 091 116
312 597
14 590
1 091 116
26 970
312 597
52 005
49 058
57 723
27 719
109 728
14 590
26 970
76 777
Total
914 256
462 062
23 001 479
473 929
23 915 735
935 991
(1) Loans whose final impairment has been determined and approved by the Impairment Committee
(2) Loans whose final impairment was determined in accordance with the calculation rules of the collective impairment model
499
Management Report
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Separate Financial Statements
Annex
Segment
Individual Evaluation(1)
Collective Evaluation (2)
Total
Exposure
Impairment
Exposure
Impairment
Exposure
Impairment
1 095 291
549 032
12 983 009
330 599
14 078 300
879 631
2022
(thousands of Euros)
-
1 587
-
10 082 118
43 347
10 082 118
392
2 854 536
259 527
2 856 123
1 093 704
548 640
46 355
27 725
1 140 059
Mortgage loans
3 443
385
8 480 691
44 504
8 484 134
43 347
259 919
576 365
44 889
3 213
18 826
22 850
-
-
3 443
80 441
-
-
-
-
7 714 906
679 096
385
86 689
3 213
7 714 906
18 826
22 465
679 096
90 132
74 467
1 205 569
58 580
1 286 010
133 047
-
-
987 539
173 264
44 766
14 462
18 134
25 984
987 539
173 264
125 207
14 462
18 134
100 451
80 441
74 467
1 179 175
623 884
22 669 269
433 683
23 848 444
1 057 567
Corporate
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Other Credit to Individuals
Stage 1
Stage 2
Stage 3
Total
(1) Loans whose final impairment has been determined and approved by the Impairment Committee
(2) Loans whose final impairment was determined in accordance with the calculation rules of the collective impairment model
In the case of credits analysed by the Impairment Committee for which the impairment determined automatically by the
Impairment Model was not changed, they are included and presented in the "Collective Assessment”.
As of December 31, 2023 and 2022, the detail of the gross credit exposure value and impairment assessed individually and
collectively, by geography, was as follows:
2023
(thousand of Euros)
Country
Individual evaluation*
Collective Evaluation**
Total
Portugal
Spain
United Kingdom
France
Switzerland
Luxembourg
Others
Total
Exposure
Impairment
Exposure
Impairment
Exposure
Impairment
789 180
399 754
19 140 526
424 999
19 929 706
824 753
-
-
-
-
-
-
-
-
-
-
1 099 284
424 101
385 583
234 451
334 695
15 187
6 292
3 626
2 418
1 383
1 099 284
424 101
385 583
234 451
334 695
15 187
6 292
3 626
2 418
1 383
125 077
62 308
1 382 839
20 025
1 507 916
82 333
914 257
462 062
23 001 479
473 930
23 915 736
935 992
* Credits whose impairment results from individual analysis (defined and approved by the Impairment Committee)
** Credits whose impairment was evaluated collectively and determined automatically by the Impairment Model.
2022
(thousand of Euros)
Country
Individual evaluation*
Collective Evaluation**
Total
Portugal
Spain
United Kingdom
France
Switzerland
Luxembourg
Others
Total
Exposure
Impairment
Exposure
Impairment
Exposure
Impairment
1 091 599
570 194
19 319 288
381 306
20 410 887
951 500
2
-
-
-
-
1
-
-
-
-
943 137
380 798
360 053
237 023
280 338
12 445
13 933
4 258
2 167
1 973
943 139
380 798
360 053
237 023
280 338
87 574
53 689
1 148 632
17 601
1 236 206
12 446
13 933
4 258
2 167
1 973
71 290
1 179 175
623 884
22 669 269
433 683
23 848 444
1 057 567
* Credits whose impairment results from individual analysis (defined and approved by the Impairment Committee)
** Credits whose impairment was evaluated collectively and determined automatically by the Impairment Model.
500
Annual Report 2023 | novobanco
As of December 31, 2023 and 2022, the detail of the gross credit exposure value and impairment by segment was as
follows:
Segment
Perfoming
With Delay
> 30 days
Total
Performing
or with
Delay
< 30 days
(thousands of Euros)
2023
Non-Perfoming
Days late
<= 90 days
> 90 days
Total
Total
Gross Value
Corporate
22 713 779
94 744 22 808 523
632 481
474 731
1 107 212
23 915 735
12 701 866
34 221
12 736 087
538 009
375 852
913 861
13 649 948
Mortgage Loans
8 620 185
48 928
8 669 113
40 727
42 506
83 233
8 752 346
Other loans to Individuals
1 391 728
11 595
1 403 323
53 745
56 373
110 118
1 513 441
Impairment
Corporate
387 086
5 255
392 341
284 475
259 175
543 650
935 991
312 566
709
313 275
230 434
210 382
440 816
754 091
Mortgage Loans
Other loans to Individuals
40 700
33 820
2 466
2 080
43 166
35 900
10 204
10 193
20 397
43 837
38 600
82 437
63 563
118 337
Net Value
22 326 693
89 489
22 416 182
348 006
215 556
563 562
22 979 744
Segment
Performing or
With Delay
< 30 days
Performing
With Delay
> 30 days
Total
2022
Non-Performing
Days late
<= 90 days
> 90 days
(thousand of Euros)
Total of Credit
Total
Gross Value
Corporate
22 423 330
69 734
22 493 064
814 923
540 457
1 355 380
23 848 444
12 906 116
32 143
12 938 259
714 541
425 500
1 140 041
14 078 300
Mortgage Loans
8 367 083
29 490
8 396 573
46 635
40 926
87 561
8 484 134
Other loans to Individuals
Impairment
Corporate
Mortgage Loans
Other loans to Individuals
1 150 131
351 119
299 681
23 506
27 932
8 101
6 782
3 585
1 617
1 580
1 158 232
53 747
74 031
127 778
1 286 010
357 901
372 302
327 364
699 666
1 057 567
303 266
318 183
258 182
576 365
25 123
29 512
10 845
8 921
19 766
43 274
60 261
103 535
879 631
44 889
133 047
Net Value
22 072 211
62 952
22 135 163
442 621
213 093
655 714
22 790 877
As of December 31, 2023 and 2022, the detail of the credit portfolio by segment and by reference year was as follows:
501
Management Report
Sustainability Report
Separate Financial Statements
Annex
Corporate
Mortgage
Other Loans to Individuals
Total
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
2023
(thousands of Euros)
3 870
268 211
9 863
45 544
676 845
8 202
1 024 738
61 502
2 377
1 074 152
1 006 558
20 442
653
21 592
7 029
4 105
139 297
1 061
15 649
6 781
717
96 083
7 629
5 995
226 840
1 466
18 605
6 411
922
167 897
29 533
9 049
342 107
2 342
27 719
9 458
986
310 485
10 889
8 631
368 690
2 016
20 719
9 712
258
287
432
315
20 407
167 670
8 348
25 317
329 334
9 382
37 690
519 462
32 307
30 336
688 887
13 220
815
107 450
10 444
6 641
310 392
2 260
14 721
16 739
9 168
22 177
434 581
21 872
836
103 616
15 136
6 474
329 400
2 466
22 230
18 925
1 071
74 602
8 287
3 329
147 677
1 371
135 766
24 773
1 624
61 201
794
562
1 501
260 143
35 122
2 072
99 546
1 081
27 639
9 113
1 178
120 403
28 819
1 374
71 625
1 825
423 201
51 185
2 168
124 210
583
561
24 788
12 747
315
322
29 540
451 941
17 917
29 188
235 026
9 403
30 927
10 653
400
33 922
207 620
25 735
26 772
8 196
498
622
31 212
368 802
36 701
29 324
200 224
30 024
30 876
23 409
14 752
34 869
570 820
66 498
2 138
347 782
38 943
4 577
283 108
1 616
45 235
44 819
20 767
51 950
675 709
61 326
3 842
476 168
32 939
6 956
501 783
3 122
47 209
37 902
5 718
100 343
1 015 853
41 779
4 962
779 567
64 798
7 762
660 931
2 870
55 222
65 923
4 133
67 946
1 506 421
71 801
7 363
1 222 815
98 181
8 049
727 546
3 743
63 278
114 668
7 994
78 690
2 065 029
109 918
9 363
1 361 378
40 517
5 954
567 666
3 254
42 970
94 219
4 889
58 287
2 023 263
48 660
6 779
1 621 416
23 937
6 867
741 982
4 301
64 336
174 835
9 507
77 982
2 538 233
37 745
10 732
3 276 316
114 536
8 796
1 089 910
4 020
100 946
315 221
16 686
120 474
4 681 447
135 242
15 896
2 475 057
101 531
10 046
1 281 590
17 243
148 443
472 208
18 897
174 385
4 228 855
137 671
76 820
13 649 948
754 091
156 013
8 752 346
63 563
1 853 022
1 513 441
118 337
2 128 191
23 915 735
935 991
Corporate
Mortgage
Other Loans to Individuals
Total
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
Number of
operations
Amount
Impairment
2022
(thousands of Euros)
3 627
227 417
31 575
52 397
787 292
6 745
698 312
10 982
( 173)
754 336
1 025 691
38 147
621
26 979
2 914
4 520
159 082
1 077
9 163
6 341
242
14 304
192 402
4 233
733
147 139
31 412
6 552
255 933
1 719
11 333
6 491
260
18 618
409 563
33 391
866
194 270
40 847
9 981
389 134
3 375
17 891
8 467
930
343 977
14 122
9 695
421 363
2 819
17 016
6 983
399
274
28 738
591 871
44 621
27 641
772 323
17 215
740
133 329
12 768
7 532
356 920
2 479
9 919
15 327
9 765
18 191
505 576
25 012
781
127 631
26 623
7 197
380 456
2 685
15 158
18 510
375
23 136
526 597
29 683
846
98 075
14 913
3 825
169 886
888
17 214
11 834
298
21 885
279 795
16 099
1 024
158 404
29 806
2 063
74 162
785
23 003
10 125
1 362
322 549
58 136
2 480
113 585
1 318
21 984
9 324
455
564
642
26 090
242 691
31 046
25 826
445 458
60 018
22 718
297 854
53 557
1 331
204 112
52 263
1 566
81 895
1 962
492 473
67 776
2 412
141 877
652
727
19 821
11 847
22 760
50 177
40 867
27 134
684 527
109 370
2 680
459 603
50 837
5 029
323 792
1 470
36 742
53 456
21 727
44 451
836 851
74 034
4 765
650 642
45 917
7 735
583 437
3 073
40 314
54 312
6 862
100 343
1 288 391
55 852
6 031
1 023 117
79 664
8 813
775 037
3 498
49 232
93 553
6 032
64 076
1 891 707
89 194
8 384
1 794 181
147 647
9 121
857 142
3 385
55 414
157 754
11 238
72 919
2 809 077
162 270
9 879
1 881 547
57 468
6 681
653 994
2 948
36 886
126 459
6 844
53 446
2 662 000
67 260
7 187
2 126 034
36 636
7 373
809 229
3 782
53 793
230 688
9 669
68 353
3 165 951
50 087
14 671
3 666 821
78 307
8 940
1 149 918
1 464
77 519
403 380
16 707
68 420
14 078 300
879 631
163 912
8 484 134
44 889
1 233 474
1 286 010
133 047
1 412 205
18 628 325
961 089
Reference
year
2004 and
previous
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
Reference
year
2004 and
previous
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total
The values presented include, in addition to all new operations for the reference year, renewals, interventions, and
restructurings of operations originated in previous years, including the period prior to the establishment of novobanco.
In order to mitigate credit risk, credit operations have associated guarantees, namely mortgages or pledges. The fair value
of these guarantees is determined at the time of granting the credit and is periodically re-evaluated. The following is the
gross value of credits and their respective fair value of collaterals, limited to the value of the associated credit:
502
Annual Report 2023 | novobanco
2023
(thousands of Euros)
2022
Loan Value
Impairment
Net Value
Fair value of
collateral
Loan Value
Impairment
Net Value
Fair value of
collateral
8 752 346
( 63 563)
8 688 783
8 753 664
8 484 134
( 44 889)
8 439 245
8 383 312
7 603 115
( 2 908)
7 600 207
7 695 522
7 429 201
( 3 017)
7 426 184
7 429 201
323 439
59 399
( 93)
( 466)
323 346
317 885
58 933
-
210 610
75 095
( 71)
( 125)
210 539
203 912
74 970
-
622 063
( 17 304)
604 759
621 258
644 671
( 16 762)
627 909
643 353
38 945
21 762
( 788)
( 17 117)
38 157
4 645
38 039
-
21 188
13 237
( 699)
( 1 365)
20 489
11 872
19 797
-
79 262
( 20 467)
58 795
78 926
87 312
( 22 346)
64 966
87 016
2 189
2 172
( 796)
( 3 624)
1 393
( 1 452)
2 034
-
33
2 787
( 12)
( 492)
21
2 295
33
-
8 304 440
( 40 679)
8 263 761
8 395 706
8 161 184
( 42 125)
8 119 059
8 159 570
364 573
( 1 677)
362 896
357 958
231 831
( 782)
231 049
223 742
Mortgage loans
Stage 1
Mortgages
Pledges
Not collateralized
Stage 2
Mortgages
Pledges
Not collateralized
Stage 3
Mortgages
Pledges
Not collateralized
Total
Mortgages
Pledges
Not collateralized
83 333
( 21 207)
62 126
-
91 119
( 1 982)
89 137
-
Other Loans to individuals
1 513 441
( 118 337)
1 395 104
536 474
1 286 010
( 133 047)
1 152 963
399 870
Stage 1
Mortgages
Pledges
297 223
101 516
( 190)
( 743)
297 033
297 049
100 773
100 629
241 787
91 867
( 330)
( 1 081)
241 457
241 434
90 786
91 047
Not collateralized
692 377
( 13 657)
678 720
-
653 885
( 13 051)
640 834
-
Stage 2
Mortgages
Pledges
109 566
( 3 274)
106 292
109 338
11 490
( 783)
10 707
11 324
44 122
4 821
( 1 109)
( 239)
43 013
4 582
Not collateralized
191 541
( 22 913)
168 628
-
124 321
( 16 786)
107 535
Stage 3
Mortgages
Pledges
6 935
( 2 243)
38 776
( 36 641)
4 692
2 135
6 545
11 589
5 994
( 2 035)
66 953
( 61 799)
3 959
5 154
Not collateralized
64 017
( 37 893)
26 124
-
52 260
( 36 617)
15 643
43 769
4 630
-
5 562
13 428
-
Total
Mortgages
Pledges
413 724
( 5 707)
408 017
412 932
291 903
( 3 474)
288 429
290 765
151 782
( 38 167)
113 615
123 542
163 641
( 63 119)
100 522
109 105
Not collateralized
947 935
( 74 463)
873 472
-
830 466
( 66 454)
764 012
-
Corporate loans
Stage 1
Mortgages
Pledges
13 649 948
( 754 091)
12 895 857
4 563 562
14 078 300
( 879 631)
13 198 669
4 100 011
2 607 201
( 11 136)
2 596 065
2 432 250
2 053 125
( 12 881)
2 040 244
1 839 860
1 680 498
( 5 183)
1 675 315
769 949
1 691 145
( 5 851)
1 685 294
701 387
Not collateralized
5 837 486
( 26 533)
5 810 953
-
6 337 848
( 24 615)
6 313 233
-
Stage 2
Mortgages
Pledges
829 829
( 75 018)
754 811
734 720
890 069
( 88 368)
801 701
800 854
530 063
( 74 841)
455 222
229 090
573 690
( 93 599)
480 091
294 167
Not collateralized
1 251 010
( 120 564)
1 130 446
-
1 392 364
( 77 952)
1 314 412
-
Stage 3
Mortgages
Pledges
365 360
( 147 620)
217 740
327 322
457 887
( 220 793)
237 094
366 273
149 078
( 78 345)
70 733
70 231
190 047
( 82 518)
107 529
97 470
Not collateralized
399 423
( 214 851)
184 572
-
492 125
( 273 054)
219 071
-
Total
Mortgages
Pledges
3 802 390
( 233 774)
3 568 616
3 494 292
3 401 081
( 322 042)
3 079 039
3 006 987
2 359 639
( 158 369)
2 201 270
1 069 270
2 454 882
( 181 968)
2 272 914
1 093 024
Not collateralized
7 487 919
( 361 948)
7 125 971
-
8 222 337
( 375 621)
7 846 716
-
Total
23 915 735
( 935 991)
22 979 744
13 853 700
23 848 444
( 1 057 567)
22 790 877
12 883 193
503
Management Report
Sustainability Report
Separate Financial Statements
Annex
The difference between the credit value and the fair value of the collateral represents the total credit exposure that exceeds
the value of the collateral; this value is not impacted by collaterals with a fair value higher than the credit they are associated
with.
The detail of the collaterals - mortgages is presented as follows:
2023
(thousands of Euros)
Collateral ranges a)
Mortgage loans
Other loans to individuals
Corporate loans
Total
Number
Amount
Number
Amount
Number
Amount
Number
Amount
less than 0.5M€
148 382
7 991 213
10 408
394 112
8 718
435 465
167 508
8 820 790
greater than 0.5M€ and less than
1.0M€
greater than 1.0M€ and less than
5.0M€
greater than 5.0M€ and less than
10.0M€
greater than 10.0M€ and less than
20.0M€
greater than 20.0M€ and less than
50.0M€
greater than 50M€
448
283 743
18
10 460
2 307
233 075
2 773
527 278
80
120 750
5
8 360
5 980
731 752
6 065
860 862
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 354
685 934
1 354
685 934
1 474
717 152
1 474
717 152
4 128
476 884
4 128
476 884
1 609
214 030
1 609
214 030
148 910
8 395 706
10 431
412 932
25 570
3 494 292
184 911
12 302 930
a) The allocation by intervals was carried out based on the total value of collateral per credit contract.
2022
(thousands of Euros)
Collateral ranges a)
Mortgage loans
Other loans to individuals
Corporate loans
Total
Number
Amount
Number
Amount
Number
Amount
Number
Amount
less than 0.5M€
157 859
7 837 881
6 635
273 580
18 414
440 729
182 908
8 552 190
greater than 0.5M€ and less than
1.0M€
greater than 1.0M€ and less than
5.0M€
greater than 5.0M€ and less than
10.0M€
greater than 10.0M€ and less than
20.0M€
greater than 20.0M€ and less than
50.0M€
greater than 50M€
367
228 517
65
93 172
-
-
-
-
-
-
-
-
13
4
-
-
-
-
8 659
2 364
238 296
2 744
475 472
8 526
9 816
717 599
9 885
819 297
-
-
-
-
1 904
539 832
1 904
539 832
134
399 451
134
399 451
5 717
401 813
5 717
401 813
1 567
269 267
1 567
269 267
158 291
8 159 570
6 652
290 765
39 916
3 006 987
204 859
11 457 322
a) The allocation by intervals was carried out based on the total value of collateral per credit contract.
The collaterals values - mortgages, presented above, represent the maximum coverage value of the covered assets, that is,
their contribution up to the gross value of the individual credits covered.
In assessing the risk of an operation or set of operations, the elements of credit risk mitigation associated with them are
taken into account, in accordance with internal rules and procedures.
The relevant collaterals are essentially the following:
• Real estate, where the value considered corresponds to the last available appraisal;
• Financial pledges, where the value considered corresponds to the quotation on the last day of the month, in the case of
a listed security, or the value of the pledge, in the case of being cash.
The acceptance of collaterals as a guarantee for credit operations refers to the need to define and implement techniques to
mitigate the risks to which these collaterals are exposed. Thus, as an approach to this matter, the Group has stipulated a set
of procedures applicable to collaterals (particularly financial and real estate), which cover, among others, the volatility of the
collateral value, its liquidity and an indication as to the recovery rates associated with each type of collateral.
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Annual Report 2023 | novobanco
The internal norms of credit powers thus have a specific chapter on this point, "Acceptance of collaterals - techniques for
mitigating the risks to which collaterals are exposed, namely liquidity and volatility risks.".
The process of re-evaluating real estate is carried out by appraisers registered with the CMVM, based on the evaluation
methods described in Note 7.6.
Restructured credit
The Bank identifies and marks restructured credit contracts due to financial difficulties of the client whenever there are
changes to the terms and conditions of a contract in which the client has defaulted, i.e., it is foreseeable that they will default,
on a financial obligation. It is considered that there is a change in the terms and conditions of the contract when:
(i) there are contractual changes that benefit the client, such as extension of the deadline, introduction of grace
periods, rate reduction or partial debt forgiveness;
(ii) there is a new credit operation contracted to settle the existing debt (total or partial). or
(iii) the new terms of the contract are more favorable than those applied to other clients with the same risk profile.
The remarking of a credit restructured due to financial difficulties of the client can only occur after a minimum period of two
years from the date of restructuring, provided that the following conditions are cumulatively met:
(i)
regular payment of principal and interest;
(ii) the client has no due principal or interest; and
(iii) there have been no debt restructuring mechanisms by the client during that period.
As of 31 December 2023 and 2022, the values of credit restructured due to the client's financial difficulties is as follows:
Corporate Loans
Mortgage Loans
Other Loans to Individuals
Total
(thousands of Euros)
2023
2022
1 044 134
1 180 626
157 699
56 308
162 891
81 378
1 258 141
1 424 895
Loans marked as restructured due to financial difficulties include loans that are currently performing, classified in stage 2,
and that are in the curing period for deselection.
The detail of the restructuring measures applied to the restructured credits as of 31 December 2023 and 2022 is analysed as
follows:
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Separate Financial Statements
Annex
2023
(thousands of Euros)
Issue
Performing
Non - Performing
Total
Number of
operations
Exposure
Impairment
Number of
operations
Expossure
Impairment
Number of
operations
Exposure
Impairment
Forgiveness of capital or interest
Assets received for partial credit
settlement
Interest capitalization
New credit for total or partial
settlement of existing debt
39
22
15
9 441
1 027
471
164
49
67 406
41 693
88
76 847
42 164
6
3 780
3 044
28
4 807
3 208
5 010
824
112
48 582
32 057
127
53 592
32 881
1 112
191 072
15 436
557
131 945
69 422
1 669
323 017
84 858
Extension of repayment term
1 390
225 031
35 481
438
254 671
108 304
1 828
479 702
143 785
Introduction of grace period for
capital or interest
903
138 141
13 300
113
38 607
20 906
1 016
176 748
34 206
Reduction of interest rates
414
69 762
4 571
85
22 888
9 130
499
92 650
13 701
Change of lease payment plan
103
13 509
458
61
5 797
2 522
164
19 306
2 980
Change in the periodicity of
interest payments
Others
Total
5
1 837
1 408
21 936
257
478
3
388
243
8
2 225
500
281
7 311
2 459
1 689
29 247
2 937
5 411
676 766
71 440
1 705
581 375
289 780
7 116
1 258 141
361 220
Measure
Performing
Non - Performing
Total
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
Number of
operations
Exposure
Impairment
2022
(thousands of Euros)
Forgiveness of capital or interest
41
13 990
Assets received for partial credit
settlement
Interest capitalization
23
16
1 068
901
164
61
95 035
53 859
102
109 025
54 760
8
146
129
31
1 214
293
4 965
923
87
52 218
29 659
103
57 183
30 582
New credit for total or partial
settlement of existing debt
1 028
191 512
14 132
506
177 111
79 690
1 534
368 623
93 822
Extension of repayment term
1 366
262 295
50 333
631
246 792
162 833
1 997
509 087
213 166
Introduction of grace period for
capital or interest
809
114 982
6 864
169
71 619
27 336
978
186 601
34 200
Reduction of interest rates
481
40 574
461
Change of lease payment plan
118
16 714
1 637
Change in the periodicity of
interest payments
5
2 011
207
39
59
3
76 714
29 588
520
117 288
30 049
9 389
4 517
177
26 103
6 154
674
198
8
2 685
405
Others
Total
1 491
34 137
1 035
423
12 949
4 814
1 914
47 086
5 849
5 378
682 248
76 657
1 986
742 647
392 623
7 364
1 424 895
469 280
Note 21 – Derivatives – Hedge Accounting and Fair Value Changes of the Hedged Captions
As of 31 December 2023, and 2022, the fair value of the hedging derivatives in the balance sheet is analyzed as follows:
Hedging derivatives
Assets
Liabilities
Fair value component of the assets and liabilities hedged for interest rate risk
Financial assets at amortised cost
Securities
Loans and advances to customers
Financial assets at fair value through other comprehensive income
Securities (*)
Financial Liabilities
Due to customers
* Amount recorded in fair value reserves transferred to results
506
(milhares de euros)
2023
2022
558 117
442 274
683 074
562 886
( 124 957)
( 120 612)
( 86 317)
( 394 921)
( 143 347)
( 382 933)
( 59 584)
( 218 545)
( 83 763)
( 164 388)
( 5 019)
( 5 019)
62 049
62 049
( 11 988)
( 11 988)
-
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Annual Report 2023 | novobanco
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives
are recognised in the income statement in the caption Gains and losses from hedge accounting (see Note 10).
The Bank calculates the “Credit Valuation Adjustment” (CVA) for derivative instruments in accordance with the
methodology described in Note 36 - Financial assets and liabilities held for trading.
Fair value hedging
As of 31 December 2023 and 2022, fair value hedging operations may be analysed as follows:
2023
(thousands of euros)
Derivative
Hedged item
Hedged risk
Notional
Fair value of
derivatives (1)
Change in
fair value of
derivative in
period
Fair value
component of
hedged item(2)
Change in fair
value
component of
hedged item
in period (2)
Interest Rate Swap/CIRS
Loans and advances to customers
Interest rate and exchange
rate
1 737 884
96 055
( 74 442)
( 83 763)
Interest Rate Swap
Securities at amortized cost
Interest rate
3 572 250
256 814
( 153 096)
( 59 584)
Interest Rate Swap
Securities at fair value through other
comprehensive income
Interest rate
130 000
12 480
( 6 537)
( 5 019)
Interest Rate Swap
Due to customers
Interest rate
1 500 000
56 921
59 482
62 049
6 940 134
422 270
( 174 593)
( 86 317)
80 569
158 961
6 969
( 62 049)
184 450
(1) Includes accrued interest
(2) Attributable to the hedged risk
Derivative
Hedged item
Hedged risk
Notional
2022
(thousands of euros)
Fair value
of
derivatives
(1)
Change in
fair value
of
derivative
in
period
Fair value
component
of
hedged
item(2)
Change in fair
value
component of
hedged item
in period (2)
Interest Rate
Swap/CIRS
Loans and advances to customers
Interest Rate Swap
Securities at amortized cost
Interest Rate Swap
Securities at fair value through other comprehensive
income
Interest rate and
exchange rate
Interest rate
1 659 552
165 117
191 565
( 164 388)
( 196 310)
2 728
250
359 089
214 274
( 218 545)
( 215 410)
Interest rate
100 000
19 140
27 272
( 11 988)
( 27 298)
4 487
802
543 346
433 111
( 394 921)
( 439 018)
(1) Includes accrued interest
(2) Attributable to the hedged risk
As of December 31, 2023, the ineffective part of the fair value hedging operations, which resulted in a gain of 9.9 million
euros, was recorded by offsetting income (31 December 2022: cost of 5.9 million euros). The Bank periodically conducts
tests of the effectiveness of existing hedging relationships.
Cash flow hedging
As of 31 December 2023 and 2022, the cash flow hedging operations can be analysed as follows:
Covered asset
Asset book
value
Notional
Derivate book
value
2023
(thousands of euros)
Cash flow
hedge
reserve
Ineffectiveness
value - recorded
in results
Loans to customers
6 732 000
6 732 000
135 847
92 557
6 732 000
6 732 000
135 847
92 557
10 269
10 269
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Separate Financial Statements
Annex
2022
Covered asset
Asset book
value
Notional
Derivate book
value
(thousands of euros)
Cash flow
hedge
reserve
Ineffectiveness
value - recorded
in results
Loans to customers
4 732 583
4 732 000
( 101 072)
( 100 418)
4 732 583
4 732 000
( 101 072)
( 100 418)
( 881)
( 881)
Note 22 – Investments in Subsidiaries, Joint Ventures and Associates
Investments in subsidiaries, joint ventures and associates are presented as follows:
2023
2022
(thousands of Euros)
Nº of shares
Direct
participation
in capital
Nominal
value
(euros)
Acquisition
Cost
Impairment
Net Book
value
Nº of shares
Direct
participation
of capital
Nominal
value
(euros)
Acquisition
Cost
Impairment
Net Book
value
novobanco dos
Açores
2 144 404
57,53%
5,00
10 308
NB Finance
100 000
100,00%
1,00
1 700
-
-
10 308
2 144 404
57,53%
5,00
10 308
1 700
100 000
100,00%
1,00
1 700
-
-
10 308
1 700
BEST
62 999 800
100,00%
1,00
100 418
( 13 453)
86 965
62 999 700
100,00%
1,00
100 418
( 20 755)
79 663
ES Tech Ventures
71 500 000
100,00%
1,00
71 500
( 44 558)
26 942
71 500 000
100,00%
1,00
71 500
( 44 559)
26 941
GNB GA
2 350 000
100,00%
5,00
86 720
GNB Concessões
942 306
98,97%
5,00
20 602
-
-
86 720
2 350 000
100,00%
5,00
86 720
-
86 720
20 602
942 306
98,96%
5,00
20 602
( 4 915)
15 687
ES Representações
49 995
99,99%
0,18
9
( 9)
-
49 995
99,99%
0,18
9
( 9)
-
Locarent
NB África
Unicre
525 000
50,00%
5,00
2 967
-
2 967
525 000
50,00%
5,00
2 967
-
2 967
13 300 000
100,00%
5,00
66 500
( 55 514)
10 986
13 300 000
100,00%
5,00
66 500
( 55 514)
10 986
350 029
17,50%
5,00
11 497
Edenred Portugal
101 477 601
50,00%
0,01
4 984
-
-
11 497
350 029
17,50%
5,00
11 497
4 984
101 477 601
50,00%
0,01
4 984
-
-
11 497
4 984
Multipessoal
20 000
22,52%
5,00
100
( 100)
Aroleri
Righthour
3 500
100,00%
1,00
10 000
100,00%
1,00
4
-
-
-
-
4
-
20 000
22,52%
5,00
100
( 100)
3 500
100,00%
1,00
-
-
-
4
-
-
-
-
4
-
377 309
( 113 634)
263 675
377 309
( 125 852)
251 457
The changes in impairment losses for investments in associates are presented as follows:
Balance at the beginning of the exercise
Increases
Decreases
Foreign exchange differences
Balance at the end of the exercise
(thousands of Euros)
2023
2022
125 852
146 478
-
( 12 216)
( 2)
3 255
( 19 421)
( 4 460)
113 634
125 852
508
Note 23 – Property, Plant and Equipment
This caption as of 31 December 2023 and 2022 is analysed as follows:
Real estate properties
For own use
Improvements in leasehold properties
Equipment
Computer equipment
Fixtures
Furniture
Security equipment
Office equipment
Transport equipment
Other
Assets under right of use
Real estate properties
Equipment
Work in progress
Improvements in leasehold properties
Real estate properties
Equipment
Others
Accumulated impairment
Accumulated depreciation
The changes in this caption were as follows:
Annual Report 2023 | novobanco
(thousands of Euros)
2023
2022
160 215
164 915
68 898
91 317
209 208
120 883
18 686
47 256
13 047
8 724
562
50
134 083
112 905
21 178
54 971
7 831
46 854
41
245
558 477
( 9 361)
79 501
85 414
219 365
113 428
27 503
53 173
16 915
7 702
562
82
122 133
111 518
10 615
57 177
31 376
25 508
16
277
563 590
( 10 375)
( 248 874)
( 294 252)
300 242
258 963
509
Management Report
Sustainability Report
Separate Financial Statements
Annex
Acquisition cost
Balance at 31 December 2021
Acquisitions
Disposals / write-offs (a)
Transfers (b)
Foreign exchange differences and other movements
Balance at 31 December 2022
Acquisitions
Disposals / write-offs (c)
Transfers (d)
Foreign exchange differences and other movements
Real estate
properties
Equipment
Right-of-Use
Assets
Work in
progress
Total
(thousand of Euros)
299 602
232 349
116 041
11 483
23 811
19 526
( 145 389)
( 36 693)
( 13 434)
( 781)
-
( 101)
( 1)
-
-
164 915
219 365
122 133
2 504
14 146
21 047
6 452
51 061
( 15)
( 322)
1
57 177
44 671
654 444
105 881
( 195 531)
( 1 204)
-
563 590
82 368
( 52 349)
( 24 288)
( 9 097)
-
( 85 734)
45 145
-
( 1)
( 14)
-
-
( 46 870)
( 7)
( 1 726)
(21)
Balance at 31 December 2023
160 215
209 208
134 083
54 971
558 477
Depreciation
Balance at 31 December 2021
Depreciation
Disposals / write-offs (a)
Transfers (b)
Foreign exchange differences and other movements
Balance at 31 December 2022
Depreciation
Disposals / write-offs (c)
Transfers (d)
Foreign exchange differences and other movements
180 880
192 397
4 307
12 386
37 677
14 230
( 107 557)
( 36 242)
( 5 546)
( 390)
2 125
( 101)
86
79 365
168 526
4 748
12 415
( 45 819)
( 24 284)
( 879)
840
( 1)
117
-
-
46 361
15 307
( 7 822)
-
-
Balance at 31 December 2023
38 255
156 773
53 846
Impairment
Balance at 31 December 2021
Reversion of impairment losses
Balance at 31 December 2022
Reversion of impairment losses
Balance at 31 December 2023
12 071
( 1 696)
10 375
( 1 014)
9 361
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
410 954
30 923
( 149 345)
( 491)
2 211
294 252
32 470
( 77 925)
( 880)
957
248 874
12 071
( 1 696)
10 375
( 1 014)
9 361
Net book value at 31 December 2023
Net book value at 31 December 2022
112 599
75 175
52 435
50 839
80 237
75 772
54 971
57 177
300 242
258 963
(a) Includes 106 395 thousand of euros of fixed assets (real estate and equipment) and 68 164 thousands of euros of accumulated depreciation referring to the
Headquarters Building that was sold in 2022
b) Includes 1 203 thousand of euros of fixed assets (real estate and equipment) and 490 thousands of euros of accumulated depreciation referring to discontinued
counters that were transferred at net value to the appropriate balance sheet items.'
(c) Includes 10 293 thousand of euros of fixed assets (real estate and equipment) and 3 748 thousands of euros accumulated depreciation relating to assets sold to the
entity NB Branches.
(d) Includes 1.726 thousand of euros of fixed assets (real estate and equipment and 880 thousands of euros accumulated depreciation relating to discontinued branches
which were transferred to the appropriate balance sheet items at net value.
In 2022 the Head Office building was sold for Euro 112.2 million, the gross book value was Euro 106.4 million (Euro 38.2
million net of accumulated depreciation) resulting in a gain of Euro 67 million, net of costs related to the sale process. Until
construction of the new headquarters is concluded, the Bank will continue to use the building, having signed a lease contract
for this purpose.
510
Note 24 –Intangible Assets
This caption as of 31 December 2023 and 2022, is analysed as follows:
Internally developed
Software - Automatic data processing system
Acquired from third parties
Software - Automatic data processing system
Work in progress
Accumulated amortization
Annual Report 2023 | novobanco
(thousands of
Euros)
2022
65 373
65 373
2023
65 373
65 373
404 407
366 444
404 407
366 444
17 958
31 881
( 401 311)
( 394 058)
86 427
69 640
Internally generated intangible assets include expenses incurred by the Bank's units specialising in the implementation of
IT solutions that will bring future economic benefits (see Note 6.20).
The changes in this caption were as follows:
Acquisition cost
Balance as at 31 December 2021
Acquisitions
Acquired from third parties
Disposals/Write-offs
Transfers
Foreign exchange differences and other
Balance as at 31 December 2022
Acquisitions
Acquired from third parties
Disposals/Write-offs
Transfers
Balance as at 31 December 2023
Amortizations
Balance as at 31 December 2021
Amortization for the period
Disposals/Write-offs
Foreign exchange differences and other
Balance as at 31 December 2022
Amortization for the period
Disposals/Write-offs
Balance as at 31 December 2023
Net balance at 31 December 2023
Net balance at 31 December 2022
Automatic data
processing
system
(thousands of Euros)
Work in
progress
Total
445 152
13 410
458 562
6 474
18 686
25 160
( 20 026)
-
( 20 026)
216
1
( 216)
1
-
2
431 817
31 881
463 698
572
( 6 155)
43 546
29 623
-
( 43 546)
30 195
( 6 155)
-
469 780
17 958
487 738
391 047
23 038
( 20 026)
( 1)
394 058
13 408
( 6 155)
401 311
-
-
-
-
-
-
-
-
391 047
23 038
( 20 026)
( 1)
394 058
13 408
( 6 155)
401 311
68 469
37 759
17 958
31 881
86 427
69 640
511
Management Report
Sustainability Report
Separate Financial Statements
Annex
Note 25 – Taxes
The deferred tax assets and liabilities recognised in the balance sheet as of 31 December 2023 and 2022 may be analysed
as follow:
Current tax
Corporate tax recoverable
Others
Deferred tax
2023
(thousands of Euros)
2022
Assets
Liabilities
Assets
Liabilities
26 260
1 260
25 000
897 381
923 641
4 191
4 044
147
-
4 191
30 298
-
30 298
917 202
947 500
4 505
4 174
331
-
4 505
The deferred tax assets and liabilities recognised in the balance sheet as of 31 December 2023 and 2022 are as follows:
Assets
Liabilities
Net
2023
2022
2023
2022
2023
2022
(thousands of Euros)
Financial instruments
94 166
91 249
(52 508)
(13 369)
41 658
77 880
Credit impairment (not covered by the special regime)
279 514
330 072
Credit impairment (covered by the special regime)
296 818
295 119
-
-
-
-
279 514
330 072
296 818
295 119
Other tangible assets
-
-
( 14)
( 76)
( 14)
( 76)
Provisions
Pensions
Reportable tax losses
101 819
100 583
44 586
50 624
133 000
63 000
-
-
-
-
-
-
101 819
100 583
44 586
50 624
133 000
63 000
Deferred tax asset / (liability)
949 903
930 647
( 52 522)
( 13 445)
897 381
917 202
Asset / liability set-off for deferred tax purposes
( 52 522)
( 13 445)
52 522
13 445
-
-
Net Deferred tax asset / (liability)
897 381
917 202
-
-
897 381
917 202
As of 31 December 2023, the deferred tax related to temporary differences was determined based on an aggregate rate of
31% resulting from the sum of the general IRC rate (21%), the Municipal Surcharge of 1.5% and an average rate of State
Surcharge of 8.5%.
On 4 September 2019, Law No. 98/2019 was published, which amended the IRC Code on the tax treatment of credit
institutions' impairments, creating rules applicable to impairment losses recorded in the tax periods beginning before 1st
January 2019, not yet accepted for tax purposes. This Law established a transition period for the aforementioned tax
regime, which allows taxpayers in the five tax periods beginning on or after January 1, 2019, to continue to apply the tax
regime in force before publication of this law, except if they perform the exercise of opt in until the end of October of each
tax period of the adaptation regime. Therefore, on 31 December 2023, the Bank continued to apply Regulatory Decree no.
13/2018, of December 28, which aims to extend, for tax purposes, the tax framework that derives from Notice nº 3/95 of
the Bank of Portugal.
As of 31 December 2023 and 2022, the Bank recorded deferred tax assets associated with impairments not accepted for
tax purposes for credit operations, which have already been written off, considering the expectation that these will
contribute to a taxable profit in the periods taxation in which the conditions required for tax deductibility are met. As of 31
December 2023, the amounts held by novobanco referring to this situation amount to approximately Euro 55 million (31
December 2022: Euro 57 million).
The changes occurred in the deferred tax captions are as follows:
(milhares de euros)
512
Balance at the beginning of the exercise
Recognised in income statement
Recognised in Fair value reserves
Conversion of Deferred taxes into Tax credits
Annual Report 2023 | novobanco
2023
917 202
10 042
( 37 610)
7 747
2022
741 321
62 950
79 291
33 640
Balance at the end of the exercise (Assets / (Liabilities))
897 381
917 202
The current and deferred taxes recognised in the income statement and in reserves, in 2023 and 2022, had the following
origins:
Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Provisions
Pensions
Tax losses carried forward
Deferred taxes
Current taxes
2023
(thousands of Euros)
2022
Recognised in
the income
statement
Recognised in
reserves
Recognised in
the income
statement
( 1 388)
56 606
( 62)
( 1 236)
6 038
( 70 000)
( 10 042)
5 386
37 610
-
-
-
-
-
37 610
-
15 825
12 759
( 7 953)
( 18 491)
( 2 090)
( 63 000)
( 62 950)
4 611
Recognised in
reserves
( 79 291)
-
-
-
-
-
( 79 291)
-
Total tax recognised (income) / (expense)
( 4 656)
37 610
( 58 339)
( 79 291)
The reconciliation of the corporate income tax rate, for the portion recognised in the income statement, may be analysed
as follows:
Income before tax
Tax rate of novobanco
Income tax calculated based on the tax rate of novobanco
Tax-exempt dividends
Impairment on investments in subsidiaries or associated companies not subject to
Participation Exemption
Branch Tax and Tax Withheld Abroad
Rate differential in the generation / reversal of temporary differences
Impairments and provisions for credit
Impairments and fair value adjustments of securities
Provisions for other risks and charges and contingencies
Deferred tax asset not recognized on tax loss for the year
Employees long term benefits
Extraordinary Contribution and Additional Solidarity over the Banking Sector
Deferred taxes on tax losses from previous years
Capital gains/losses on asset sales
Others
Total tax recognized
(thousands of Euros)
2023
2022
%
Value
%
Value
796 004
395 491
21,0
(0,8)
0,1
0,0
0,6
5,2
(0,3)
(0,9)
-
0,5
0,9
(8,8)
(17,9)
(0,0)
(0,6)
167 161
( 6 502)
464
147
4 526
41 215
( 2 665)
( 7 306)
-
4 070
7 249
( 70 000)
( 142 623)
( 392)
21,0
(0,3)
(0,9)
0,2
3,0
(5,7)
2,2
(2,7)
10,3
(0,5)
1,8
(15,9)
(25,8)
(1,5)
83 053
( 1 248)
( 3 525)
956
11 949
( 22 476)
8 648
( 10 519)
40 811
( 2 163)
7 016
( 63 000)
( 101 924)
( 5 917)
( 4 656)
(14,8)
( 58 339)
513
Management Report
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Annex
Deferred tax assets recoverability analysis
Deferred tax assets are recognised to the extent they are expected to be recovered with future taxable income. The Bank
has evaluated the recoverability of the deferred tax assets considering its expectations of future taxable profits until 2028,
considering that 5 years is a reasonable period for projecting future results. The recoverability of deferred tax assets
covered by the Special Regime applicable to Deferred Tax Assets is not dependent on the generation of future taxable
income.
The assessment of the recoverability of the deferred tax assets is made annually. With reference to 31 December 2023,
this exercise was made based on the latest draft version of the business plan (“MTP”) for the period of 2024-2026 and a
stress scenario exercise, preliminarily considered by the General Supervisory Board in December 2023 and which, upon
inclusion of the end of 2023 accounts will be definitively approved.
In the evaluation of the expectation of future taxable income generation in Portugal for the purposes of the above recovery
exercise, the following assumptions were also considered:
• In addition to the detailed estimates up to 2026, it is assumed, thereafter an increase in pre-tax results from 2026;
• Interest rate benchmarks aligned with macroeconomic outlooks for the 2024-2026 triennium and BCE monetary policy
decisions;
• Development of the commercial banking product anchored in the expected evolution of the interest rate benchmarks,
combined with the prospect of growth in commercial volumes, as well as the development of new projects at the level
of commissioning generated with payment methods and asset management;
• Maintenance of operating costs, despite the expected increase in inflation, anchored in the specific cost reduction plan
and the implementation of a new distribution model and, generally, the simplification and increase in efficiency of the
processes, particularly focusing on the digital component; and
• Provisions for credit impairments in line with the evolution of the Bank's activity and supported by macroeconomic
projections, taking into account the effort made in recent exercises in the provisioning of the credit portfolio and the
progressive convergence to gradually normalized risk costs.
Depending on the analysis mentioned above, as of 31 December 2023, the Bank has recognized deferred tax assets
associated with tax losses in the balance sheet amounting to Euro 133 million (December 31, 2022: Euro 63 million).
Additionally, the amount of unrecognized deferred taxes related to tax losses, by year of expiry, is as follows:
No expiry period
With expiry period
2025
2026
2029
2033
(thousands of Euros)
2023
921 359
439 651
92 332
135 422
170 236
41 661
2022
933 178
478 489
91 728
135 452
170 236
81 073
1 361 010
1 411 667
In addition, regarding adjustments resulting from the application of the fair value model to units of real estate investment
funds and venture capital funds, which do not contribute to the formation of taxable profit in the taxation period in which
they are recognized for accounting purposes, they only have tax relevance at the time of their realization, particularly in
the onerous transfer of participation units or liquidation of the funds. The total amount of deferred tax assets related to
these temporary differences, not recognized in the balance sheet, as of 31 December, 2023, amounts to Euro 176 million
(31 December, 2022: Euro 229 million).
514
Annual Report 2023 | novobanco
Special Regime applicable to Deferred Tax Assets
During 2014, novobanco adhered to the Special Regime applicable to deferred tax assets, after a favourable decision of the
Shareholders General Meeting.
The Special Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, covers deferred tax
assets resulting from non-deduction of expenses and negative equity changes related to impairment losses on credit and
with post-employment or long-term employee benefits.
The changes to the mentioned above regime, introduced by Law No. 23/2016, of August 19, limited the temporal
application of the above-mentioned negative expenses and equity variations, accounted for in the tax periods beginning
on or after 1January 2016, as well as the associated deferred taxes. Thus, the deferred taxes covered by this special regime
correspond only to expenses and negative equity variations calculated up to 31 December 2015.
Deferred tax assets covered by the above-mentioned regime are convertible into tax credits when the taxpayer records a
negative net result in the respective tax period, or in case of liquidation by voluntary dissolution or insolvency decreed by
court decision.
To convert to a tax credit (other than by liquidation or insolvency), a special reserve should be created for the amount of
the respective tax credit increased by 10%. The exercise of conversion rights results in the capital increase of the taxable
person by incorporation of the special reserve and issuance of new common shares. This special reserve may not be
distributed.
Following the determination of a negative net income in the 2020 fiscal year, the converted deferred tax assets, referring
to the eligible deferred tax assets as of the closing date of that fiscal year, amount to 116,975 thousand euros. This amount
has already been validated by the Tax and Customs Authority.
As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution of
the special reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and Customs
Authority, within the scope of the review procedures for the assessment of the taxable income for the relevant tax periods.
515
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Note 26 – Other Assets
As of 31 December 2023 and 2022, the caption other assets is analysed as follows:
Escrow accounts
Derivative products
Collateral CLEARNET and VISA
Collateral deposits relating to reinsurance operations
Other collateral deposits
Recoverable government subsidies on mortgage loans
Public sector
Contingent Capital Agreement (See Note 32.2)
Other debtors
(thousands of
Euros)
2022
2023
272 713
251 225
177 866
133 864
38 940
51 407
4 499
20 658
206 419
198 180
489 155
41 423
71 387
4 551
18 304
481 198
198 180
440 912
Shareholder loans and supplementary capital contributions
234 211
229 930
Sale of non-performing loans
Sale of real estate
Sale of restructuring funds
Others
Income receivable
Deferred costs
Retirement pensions and health benefits (see Note 14)
Precious metals, numismatics, medal collection and other liquid assets
Real estate properties a)
Equipment a)
Stock exchange transactions pending settlement
Other assets
Impairment losses
Real estate properties a)
Equipment a)
Other debtors - Shareholder loans, supplementary capital contributions
Other
a) Real estate properties and equipment received in settlement of loans and discontinued
2 170
42 646
20 881
189 247
33 405
13 025
12 173
10 506
2 173
710
20 881
187 218
131 814
13 184
52 021
10 395
102 090
221 097
1 795
-
3 013
4 465
15 687
119 948
1 375 806
1 945 756
( 164 294)
( 232 640)
( 40 058)
( 112 855)
( 1 039)
( 75 343)
( 47 854)
( 2 195)
( 74 164)
( 43 426)
1 211 512
1 713 116
The caption Collateral deposits placed includes, amongst others, deposits made by the Bank as collateral in order to
celebrate certain derivative contracts on organised markets (margin accounts) and on over the counter markets (Credit
Support Annex – CSA). The CSAs take the form of collateral agreements established between two parties negotiating
Over-the-Counter derivatives with each other, with the main objective of providing protection against credit risk, defining
for that purpose rules regarding collateral. Derivative transactions are regulated by the International Swaps and
Derivatives Association (ISDA) and have minimum risk margin that may change according to the ratings of the parties.
The decrease observed during 2023 in the Public Sector Administration item includes approximately Euro 249.8 million
related to the conversion into capital of the rights resulting from the Special Regime Applicable to Deferred Tax Assets, as
detailed in Note 31 (31 December, 2022: Euro 272.9 million).
Operations on securities to be regularized reflect operations carried out with securities, registered on the trade date, which
were awaiting settlement, according to the accounting policy described in Note 6.6.
The items of properties and equipment refer to assets received for credit recovery and discontinued facilities, for which the
Bank aims to sell them immediately.
516
Annual Report 2023 | novobanco
The bank implemented a plan aiming at the immediate sale of all real estate property recorded in Other assets, continuing
its efforts to meet the sales program established, of which we highlight the following (i) the existence of a web site
specifically aimed at the sale of real estate properties; (ii) the development and participation in real estate events both in
Portugal and abroad; (iii) the establishment of protocols with several real estate agents; and (iv) the regular sponsorship of
auctions. Despite its intention to sell these assets, the bank regularly requests the Bank of Portugal’s authorization, under
article 114 of RGICSF, to extend the holding period for properties acquired on repayment of own credit.
During 2023, an impairment reversal of Euro 23.7 million was recorded for the properties in the portfolio (31 December 2022:
charge of Euro 12.9 million).
The changes occurred in impairment losses are presented as follows:
Balance at the beginning of the exercise
Increases
Write off
Reversals
Foreign exchange differences and other
Balance at the end of the exercise
The changes occurred in the real estate properties were as follows:
Balance at the beginning of the exercise
Additions
Sales
Other movements
Balance at the end of the exercise
2023
232 640
20 587
( 51 580)
( 40 351)
2 998
(thousands of
Euros)
2022
360 425
16 070
( 114 484)
( 27 832)
( 1 539)
164 294
232 640
(thousands of
Euros)
2022
2023
221 097
357 644
8 898
15 510
( 127 764)
( 151 092)
( 141)
( 965)
102 090
221 097
As of 31 December 2023, the amount related to discontinued facilities included in the caption Real estate properties
amounts to Euro 10,922 thousand (31 December 2022: Euro 9,970 thousand), having the Bank recorded impairment losses
for these assets in the total amount of Euro 3,359 thousand (31 December 2022: Euro 2,954thousand).
Note 27 – Non-Current Assets and Disposal Groups for Sale Classified as Held for Sale and
Liabilities Included in Disposal Groups Classified as Held for Sale
This caption on 31 December 2023 and 2022, is analysed as follows:
Non-current Assets/liabilities held for sale
Banco Well Link (former NB Asia)
Compagris
Barrosinha
Solago
Ijar Leasing Algerie
Others
Impairment losses
Compagris
Ijar Leasing Algerie
Others
517
(thousands of Euros)
2023
2022
38 992
-
18 437
7 473
-
13 032
50
( 22 510)
( 14 425)
( 8 035)
( 50)
16 482
53 156
2 175
17 437
7 473
12 875
13 146
50
( 8 085)
-
( 8 035)
( 50)
45 071
Management Report
Sustainability Report
Separate Financial Statements
Annex
In March 2023, the stake held in Well Link Bank was sold, since the put options on the position that the Group still held in
this financial institution were exercised.
Other non-current assets held for sale include shareholdings and respective shareholder loans, which were reclassified to
this caption under IFRS 5.
The impairment movement for non-current Assets for disposal classified as held for sale is as follow:
Balance at the beginning of the exercise
Increases / (decreases) for the exercise
Write offs
Transfers
Balance at the end of the exercise
(thousands of Euros)
2023
8 085
14 425
-
-
22 510
2022
8 085
( 623)
( 3 837)
4 460
8 085
Compagris, Barrosinha and Solago
In December 2022, as a result of the conclusion of the sale process of the Restructuring Funds, novobanco acquired 100%
of the share capital of Compagris and Barrosinha and 84.16% of the share capital of Solago. As the Bank intends to sell
these assets, they were classified as discontinued operations. In December 2023, the Bank proceeded to sell Solago,
recognizing a capital loss of Euro 1.1 million.
Note 28 – Financial Liabilities Measured at Amortised Cost
This caption as of 31 December 2023 and 2022 is analysed as follows:
2023
2022
(thousands of euros)
Measured at
amortised cost
Fair value
variation *
Total
Measured at
amortised cost
Fair value
variation *
Total
Deposits from Banks
Due to customers
6 623 884
-
6 623 884
10 506 509
29 193 007
62 049
29 255 056
28 425 223
Debt securities issued, subordinated debt and
liabilities associated to transferred assets
Other financial liabilities
1 085 659
489 750
-
-
1 085 659
1 601 454
489 750
371 511
37 392 300
62 049
37 454 349
40 904 697
* Variation in the fair value of the items covered by the interest rate hedging portfolio
-
-
-
-
-
10 506 509
28 425 223
1 601 454
371 511
40 904 697
28.1 Deposits from Central Banks and other credit institutions
The balance of Deposits from Central Banks and other credit institutions is composed, as to its nature, as follows:
Deposits from Central Banks
From the European System of Central Banks
Deposits
Other funds
Deposits from Other credit institutions
Domestic
Deposits
Other funds
Foreign
Deposits
Loans
Very short-term funds
Operations with repurchase agreements
518
(thousands of Euros)
2023
2022
1 128 807
6 327 198
1 128 807
6 327 198
178 807
198
950 000
6 327 000
5 495 077
4 179 311
1 073 669
1 110 465
1 065 854
1 071 278
7 815
39 187
4 421 408
3 068 846
136 087
375 610
430 487
479 880
3 867 053
2 150 824
42 658
6 623 884
7 655
10 506 509
Annual Report 2023 | novobanco
As of December 31, 2023, the balance of the European System of Central Banks Resources item includes 950 million euros
collateralized by the Bank's financial assets, as part of the third series of longer-term refinancing operations of the
European Central Bank (TLTRO III), which will mature in December 2024.
In 2023, Euro 5.4 billion of the TLTRO III were repaid. To deal with the maturity of these lines, Novobanco adopted as an
exit strategy from the TLTRO III, among others, the reduction of the balance sheet's size and an increase in other stable
financing instruments, mainly interbank operations collateralized by retained covered bonds. As a result, collateralized
financing through medium-term repurchase agreements increased by Euro 2.6 billion in 2023, which added to the amount
of Euro 2.6 billion recorded in 2022 for this type of financing, to mitigate the impact of shortening the term and/or maturity
of the TLTRO III, totals Euro 5.2 billion (including Euro 1.4 billion of operations classified in Due to customers).
Repurchase agreements operations corresponds to the sale of securities with purchasing agreement (repos), recorded in
accordance with the accounting policy mentioned in Note 6.17.
28.2 Due to customers
The balance of Deposits due to costumers is composed, as to its nature, as follows:
Demand deposits
Companies and other entities
Private companies
Time deposits
Corporate and other entities
Private companies
Other funds
Repurchase agreement
Other
Value adjustments for hedging interest rate risk *
* See Note 21
(thousands of Euros)
2023
2022
10 556 457
12 644 222
5 739 882
7 190 941
4 816 575
5 453 281
16 809 219
14 925 851
6 461 277
5 063 842
10 347 942
9 862 009
1 827 331
855 150
1 366 382
450 906
460 949
404 244
29 193 007
28 425 223
62 049
29 255 056
28 425 223
28.3 Debt Securities issued, Subordinated Debt and Financial liabilities associated to transferred assets
This caption breaks down as follows:
Debt securities issued
Euro Medium Term Notes (EMTN)
Bonds
Subordinated debt
Euro Medium Term Notes (EMTN)
Bonds
Financial liabilities associated to transferred assets
Asset lending operations
(thousands of Euros)
2023
2022
584 159
1 141 431
584 159
-
501 500
501 500
-
-
-
561 565
579 866
415 572
-
415 572
44 451
44 451
1 085 659
1 601 454
The movement occurred in the 2023 and 2022 fiscal years in liabilities represented by securities, subordinated liabilities,
and financial liabilities associated with transferred assets was as follows:
519
Management Report
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Annex
Debt securities issued
Subordinated Liabilities
Euro
Medium
Term Notes
(EMTN)
Bonds
Total
Euro
Medium
Term Notes
(EMTN)
Bonds
Total
(thousands of Euros)
Financial
liabilities
associated
to
transferred
assets
Asset
lending
operations
TOTAL
Balance as at 31 December 2021
445 633
573 588
1 019 221
Issues
Net purchases
Other movements (a)
100 000
( 500)
16 432
-
-
100 000
( 500)
6 278
22 710
Balance as at 31 December 2022
561 565
579 866
1 141 431
-
-
-
-
-
415 394
415 394
44 451
1 479 066
-
-
-
-
178
178
-
-
-
100 000
( 500)
22 888
415 572
415 572
44 451
1 601 454
Issues
Reimbursements
Net purchases
-
-
-
-
500 000
-
500 000
( 575 000)
( 575 000)
( 527)
-
( 527)
-
-
( 400 000)
( 400 000)
-
-
-
-
-
500 000
( 975 000)
( 527)
Other movements (a)
23 121
( 4 866)
18 255
1 500
( 15 572)
( 14 072)
( 44 451)
( 40 268)
Balance as at 31 December 2023
a) The other movements include accrued interest on the balance sheet, corrections for hedging operations, corrections of fair value and exchange rate variations.
501 500
584 159
584 159
-
-
501 500
The main characteristics of the outstanding issues as of 31 December 2023 and 2022 are as follows:
Entity
ISIN
Description
Currency
Issue
date
Unit price
(€)
Maturity
Interest rate
Market
-
1 085 659
(thousands of Euros)
Book value
2023
2022
Bonds
novobanco
novobanco
Euro Medium Term Notes
PTNOBIOM0014
NB 3,5% 23/07/23
PTNOBJOM0005
NB 4,25% 09/23
EUR
EUR
2021
2021
-
-
2023
2023
Taxa Fixa 3,5%
XDUB
Euribor 3M + 4,25%
XDUB
-
-
303 992
275 874
novobanco
PTNOBKOM0002
NB 5.5% 30/12/24
EUR
2022
100,00
2026
Fixed rate 5,5%
XDUB
105 475
99 989
novobanco Luxemburgo
XS0869315241
BES Luxembourg 3.5% 02/01/43
EUR
2013
1,00
2043
Fixed rate 3,5%
XLUX
43 958
43 363
novobanco Luxemburgo
XS0877741479
BES Luxembourg 3.5% 23/01/43
EUR
2013
1,00
2043
Fixed rate 3,5%
XLUX
100 110
99 065
novobanco Luxemburgo
XS0888530911
novobanco Luxemburgo
XS0897950878
BES Luxembourg 3.5%
19/02/2043
BES Luxembourg 3.5%
18/03/2043
novobanco Luxemburgo
XS0972653132
BES Luxembourg ZC
novobanco Luxemburgo
XS1031115014
Banco Esp San Lux ZC 12/02/49
novobanco Luxemburgo
XS1034421419
Banco Esp San Lux ZC 19/02/49
novobanco Luxemburgo
XS1038896426
Banco Esp San Lux ZC 27/02/51
EUR
EUR
EUR
EUR
EUR
EUR
2013
2013
2013
2014
2014
2014
novobanco Luxemburgo
XS1042343308
BES Luxembourg ZC 06/03/2051
EUR
2014
1,00
2043
Fixed rate 3,5%
XLUX
65 655
64 774
1,00
2043
Fixed rate 3,5%
XLUX
48 260
47 641
1,00
2048
Zero voucher
XLUX
37 934
35 711
1,00
2049
Zero voucher
XLUX
46 650
43 694
1,00
2049
Zero voucher
XLUX
12 977
12 146
1,00
1,00
2051
2051
Zero voucher
XLUX
17 822
16 672
Zero voucher
XLUX
12 538
11 729
novobanco Luxemburgo
XS1053939978
BES Luxembourg ZC 03/04/48
novobanco Luxemburgo
XS1055501974
BES Luxembourg ZC 09/04/52
novobanco Luxemburgo
XS1058257905
BES Luxembourg ZC 16/04/46
Subordinated debts
novobanco
novobanco
a) Date of the next call option
PTNOBFOM0017
NB 06/07/2023
PTNOBLOM0001
NB 9.875% 01/12/33
EUR
EUR
EUR
EUR
EUR
2014
2014
2014
1,00
2048
Zero voucher
XLUX
43 072
40 180
1,00
2052
Zero voucher
XLUX
41 444
38 891
1,00
2046
Zero voucher
XLUX
8 264
7 710
2018
-
2023
a)
8,50%
XDUB
-
415 572
2023
100,00
2033
9,875%
XDUB
501 500
-
1 085 659
1 557 003
In terms of medium-term financing, in June 2023, the Bank issued a new Tier 2 bond of Euro 500 million, maturing on 1
December , 2033, with a purchase option 6 months from 1 June, 2028, aiming to replace the existing Tier 2 bond with a
spread lower by 150bps. Through the public offer, the Bank managed to repurchase Euro 206 million of the existing Tier 2
bond. The remaining amount was reimbursed on the call date, which only occurred on 6 July, 2023.
The Bank didn’t have any defaults on capital or interest regarding its issued debt during the 2023 and 2022.
520
Annual Report 2023 | novobanco
Under the Mortgage Bond Issuance Program, which has a maximum amount of Euro 10,000 million, the Bank made
issuances totaling Euro 5,500 million (31 December, 2022: Euro 5,500 million), and these issuances were fully repurchased
by the Bank. The characteristics of the live issuances as of 31 December, 2023 and 2022 are as follows:
Designation
Issue date
Maturity
date
Interest
payment
Interest Rate
Market
Rating
Moody'
s
DBR
S
NB 2015 SR.1 07/10/2015
07/10/2025
Quarterly
NB 2015 SR.2 07/10/2015
07/10/2024
Quarterly
NB 2015 SR.3 07/10/2015
07/10/2027
Quarterly
NB 2015 SR.4 07/10/2015
07/10/2028
Quarterly
NB 2015 SR.5 22/12/2016
22/12/2028
Quarterly
NB 2019 SR.6
10/12/2019
10/06/2029
Quarterly
NB 2019 SR.7
10/12/2019
10/12/2024
Quarterly
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
Euribor 3 Months +
0,25%
XDUB
XDUB
XDUB
XDUB
XDUB
Aaa
Aaa
Aaa
Aaa
Aaa
XMSM
Aaa
XMSM
Aaa
NR
NR
NR
NR
NR
NR
NR
(thousand of Euros)
Balance Value
2023
2022
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Nominal
Value
1 000 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000
5 500 000
These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in
novobanco Bank’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities
have a special creditor privilege. The conditions of the covered debt securities issues are framed in Decree-Law No.
59/2006, and in Notices No. 5, 6 and 8 and Instruction nº 13/2006 of Bank of Portugal. As of 31 December 2023, the assets
that collateralize these covered debt securities amount to Euro 7,442.1 million (31 December 2022: Euro 6,078.4 million)
(see Note 20).
Note 29 – Provisions
As of 31 December 2023 and 2022, the caption Provisions presents the following changes:
Provision for
restructuring
Provision for
guarantees and
commitments
Other
Provisions
Total
(thousands of Euros)
Balance as at 31 December 2021
46 686
91 775
339 709
478 170
Increases / (decreases)
1 332
( 2 555)
12 117
10 894
Write offs
Transfers
Exchange differences and others
Balance as at 31 December 2022
Increases / (decreases)
Write offs
Exchange differences and others
Balance as at 31 December 2023
( 28 870)
-
-
19 148
6 325
( 18 697)
-
6 776
-
-
238
( 37 617)
( 66 487)
-
375
-
613
89 458
314 584
423 190
( 434)
-
( 5 291)
83 733
17 414
( 7 216)
5 252
23 305
( 25 913)
( 39)
330 034
420 543
In order to meet the financial needs of its customers, the Bank assumes several irrevocable commitments and contingent
liabilities, consisting of financial guarantees, letters of credit and other credit commitments, which may require the
payment by the Bank, on behalf of its customers, in the event of specific, contractually prescribed events. Although these
commitments are not recorded on the balance sheet, they carry credit risk and, therefore, are part of the Bank's overall risk
exposure.
The changes in the caption provisions for guarantees are detailed as follows:
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Balance as at 31 December 2021
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
7 800
2 199
( 1 115)
( 13)
1 981
10 959
( 2 199)
1 226
( 1 203)
2 467
73 016
91 775
-
( 111)
1 216
-
-
-
22 289
26 737
Decreases due to changes in credit risk
( 4 865)
( 4 079)
( 20 348)
( 29 292)
Other movements
Balance as at 31 December 2022
Transfers to stage 1
Transfers to stage 2
Transfers to stage 3
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements
Balance as at 31 December 2023
3
5 990
5 373
( 3 684)
( 23)
5 838
( 6 608)
( 1)
6 885
36
7 207
( 5 373)
4 292
( 18)
4 710
( 3 691)
( 19)
7 108
199
76 261
-
( 608)
41
7 310
( 7 993)
( 5 271)
69 740
238
89 458
-
-
-
17 858
( 18 292)
( 5 291)
83 733
The transfers between stages that occurred in guarantees and commitments are detailed as follows:
2023
(thousands of Euros)
Transfers between Stage 1 and
Stage 2
Transfers between Stage 2
and Stage 3
Transfers between Stage 1 and
Stage 3
To Stage 2
from Stage 1
To Stage 1 from
Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3 from
Stage 1
To Stage 1 from
Stage 3
Commitments and financial guarantees given
107 570
216 563
1 558
6 528
410
203
2022
(milhares de euros)
Transfers between Stage 1
and Stage 2
Transfers between Stage
2 and Stage 3
Transfers between Stage 1
and Stage 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage
2
To Stage 2
from Stage
3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
43 164
40 385
45 450
2 234
1 775
181
Commitments and financial guarantees
given
As of December 31, 2023, the value of the provision for restructuring in the balance sheet is 6.8 million euros, and during
the years 2022 and 2023, a net reinforcement of 1.3 million euros and 6.3 million euros, with 28.9 million euros and 18.7
million euros being used, respectively.
Other provisions amounting to Euro 330.0 million (31 December 2022: Euro 314.6 million), are intended to cover certain
identified contingencies related to the Bank’s activities, the most relevant being:
• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Bank maintains
provisions of Euro 21.6 million (31 December 2022: Euro 24.2 million);
• Contingencies associated with legal proceedings amounting to Euro 2.8 million (31 December 2022: Euro 4.0
million);
• Contingencies associated with sales processes in the amount of Euro 7.1 million (31 December 2022: Euro 7.1
million);
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• Contingencies related to the undivided part of the Executive Committee's pension plan, in the amount of Euro 8.8
million (31 December 2022: Euro 19.2 million), transferred from the liability captions net of the value of the assets
of the Pension Fund (see Note 14);
•
The State Budget Law for 2021 ("LOE 21"), amended the rules of the Property Transfer Tax ("IMT") and the
Municipal Property Tax ("IMI"), with the broadening of the incidence scope of the increased IMI and IMT rate, and
loss of exemptions, for properties held by taxpayers who are directly or indirectly controlled by an entity subject
to a more beneficial tax regime, listed in an order approved by the Minister of Finance. As of this date, the
calculation of the application of the increased IMI rates to all properties in the direct and indirect ownership of the
novobanco Group amounts to approximately 202.1 million euros as of December 31, 2023 (December 31, 2022:
192.1 million euros);
•
The remaining amount, of approximately Euro 87.6 million (31 December, 2022: Euro 88.0 million), is intended to
cover losses arising from the Bank's activity, such as fraud, theft, and robberies, and ongoing legal proceedings for
contingencies related to asset sales processes, among others.
Note 30 – Other Liabilities
As of 31 December 2023 and 2022, the caption other liabilities are analysed as follows:
Public sector
Creditors for supply of goods
Margin Accounts Derivative instruments
Other creditors
Career bonuses (see Note 14)
Other accrued expenses
Deferred income
Foreign exchange transactions to be settled
Other transactions pending settled
(thousands of Euros)
2023
2022
38 883
109 446
562 047
214 782
6 474
95 149
1 065
611
60 846
1 012 395
32 830
105 063
478 750
113 244
5 506
81 501
1 111
-
26 774
844 779
As of December 31, 2023, the caption Suppliers of Goods Payable includes Euro 83,461 thousand related to creditors of
assets under the right of use, within the framework of IFRS 16 (31 December, 2022: Euro 82,088 thousand), whose maturity
terms are presented as follows:
Up to 3 months
From 3 months to one year
From one to five years
More than five years
Note 31 – Share Capital
32.1 Ordinary Shares
(thousands of Euros)
2023
185
3 216
20 942
59 118
83 461
2022
255
6 016
18 490
57 327
82 088
As of 31 December 2023, the Bank's share capital of Euro 6,567,843,862.91 is represented by 11,130,841,957 registered
shares with no par value and is fully subscribed and paid up by the following shareholders (31 December 2022: share capital
of Euro 6,304,660,637.69 represented by 10,391,043,938 registered shares):
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Nani Holdings, S.à.r.l
Resolution Fund (1)
Directorate-General for Treasury and Finance
% Capital
2023
75,00%
13,04%
11,96%
2022
75,00%
19,31%
5,69%
100,00%
100,00%
(1) Under the commitments made between the Portuguese State and the European Commission, the Resolution Fund
is inhibited from exercising its voting rights.
During 2017, following the acquisition of 75% of the share capital of novobanco by Lone Star, two capital increases of Euro
750 million and Euro 250 million were made in October and December, respectively.
In December 2021, a capital increase of Euro 154,907 thousand was carried out through the conversion of the conversion
rights (resulting from the Special Regime Applicable to Deferred Tax Assets) for the exercise 2015, which gave the State a
1.56% stake in the novobanco, and which resulted in the issuance of 154,907,314 new ordinary shares (see Note 32).
In November 2022, a capital increase of Euro 249,753 thousand was carried out through the conversion of the conversion
rights (resulting from the Special Regime Applicable to Deferred Tax Assets) for the exercises 2016 and 2017, which gave
the State a 4,13 % stake in the novobanco, and which resulted in the issuance of 436,136,627 new ordinary shares (see
Note 32).
In April 2023, a capital increase was completed amounting to 263,183 thousand euros through the conversion of conversion
rights (resulting from the Special Regime Applicable to Deferred Tax Assets) related to the 2018 and 2019 fiscal years,
which granted the State an additional 6.27% stake in Novobanco, and from which 739,798,019 new ordinary shares were
issued (see Note 32).
As mentioned in Note 25, novobanco adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by
Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate
income tax purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on
loans and advances to customers and with employee post-employment or long-term benefits. Said regime foresees that
those assets can be converted into tax credits when the taxable entity reports an annual net loss.
The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of
said net loss to total equity at the individual company level. A special reserve was established with an amount identical to
the tax credit approved, increased by 10%. This special reserve was established using the originating reserve and is to be
incorporated in the share capital.
The conversion rights are securities that give the State the right to demand from novobanco the respective increase of the
share capital, through the incorporation of the amount of the special reserve and consequent issuance and free delivery of
ordinary shares representing 3.64% of the capital (with reference to the 2020 financial year), which will only dilute, in
accordance with the sale contract, the Resolution Fund's participation, if the shareholders do not exercise their potestative
right to acquire the conversion rights.
Note 32 – Other Accumulated Comprehensive Income, Retained Earnings and Other
Reserves
As at 31 December 2023 and 2022, the accumulated other comprehensive income, retained earnings and other reserves
present the following detail:
Other accumulated comprehensive income
Retained earnings
Other reserves
524
(thousands of Euros)
2023
2022
( 993 658)
( 1 155 271)
( 8 577 074)
( 8 577 074)
6 231 450
6 040 802
( 3 339 282)
( 3 691 543)
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32.1 Other accumulated comprehensive income
The changes in Other accumulated comprehensive income were as follows:
Other accumulated comprehensive income
(thousands of Euros)
Impairment
reserves
Credit risk
reserves
Sales
reserves
Fair value
reserves
Cash flow
hedging
reserves
Actuarial
deviations
(net of
taxes)
Total
Balance as at 31 December 2021
3 668
9 214
( 34 306)
( 166 319)
Actuarial deviations
Fair value changes, net of taxes
-
-
Impairment reserves of securities at fair value through other
comprehensive income
( 3 079)
Reserves of sales of securities at fair value through other
comprehensive income
Cash flow hedging
-
-
-
-
-
-
-
-
-
-
( 862)
-
-
( 178 410)
-
-
-
-
-
-
-
-
( 100 418)
( 781 244)
( 968 987)
96 485
-
-
-
-
96 485
( 178 410)
( 3 079)
( 862)
( 100 418)
Balance as at 31 December 2022
589
9 214
( 35 168)
( 344 729)
( 100 418)
( 684 759)
(1 155 271)
Actuarial deviations
Fair value changes, net of taxes
Impairment reserves of securities at fair value through other
comprehensive income
Reserves of sales of securities at fair value through other
comprehensive income
Cash flow hedging
-
-
( 378)
-
-
-
-
-
-
-
-
-
-
( 258 820)
-
-
255 122
-
-
-
-
-
-
-
192 974
( 27 285)
-
-
-
-
( 27 285)
255 122
( 378)
( 258 820)
192 974
Balance as at 31 December 2023
211
9 214
( 293 988)
( 89 607)
92 556
( 712 044)
( 993 658)
Fair value reserve
The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio
classified as at a fair value through other comprehensive income, net of impairment losses. The amount of this reserve is
shown net of deferred taxes.
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analysed as follows:
2023
Fair value reserves
Financial
assets at fair
value through
other
comprehensive
income
Deferred
tax reserves
Total fair
value
reserves
(thousands of Euros)
2022
Fair value reserves
Financial
assets at fair
value through
other
comprehensive
income
Deferred
tax reserves
Total fair
value
reserves
Balance at the beginning of the exercise
( 381 014)
36 285
( 344 729)
( 123 313)
( 43 006)
( 166 319)
Changes in fair value
Foreign exchange differences
Disposals in the exercise
Deferred taxes recognized in the exercise
in reserves
4 599
( 5 524)
293 657
-
-
-
4 599
( 325 981)
( 5 524)
293 657
2 006
66 274
-
-
-
( 325 981)
2 006
66 274
-
( 37 610)
( 37 610)
-
79 291
79 291
Balance at the end of the exercise
( 88 282)
( 1 325)
( 89 607)
( 381 014)
36 285
( 344 729)
The fair value reserves are analysed as follows:
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Amortised cost of financial assets at fair value through other comprehensive income
834 747
2 576 036
Market value of financial assets at fair value through other comprehensive income
741 446
2 183 034
(thousands of Euros)
2023
2022
Unrealised gains / (losses) recognized in fair value reserve
Fair value reserve transferred to Results (1)
Potential gains / (losses) recognized in the fair value reserve
Deferred Taxes
Fair value reserve attributable to shareholders of the Bank
(1) In the context of fair value hedge operations (see Note 21)
The movements in cash flow hedging reserves are presented as follows:
Balance at the beginning of the exercise
( 93 301)
( 393 002)
( 5 019)
( 11 988)
( 88 282)
( 381 014)
( 1 325)
36 285
( 89 607)
( 344 729)
(thousands of Euros)
2023
( 100 418)
2022
-
Change in the fair value of the hedged item recognized in other comprehensive income
203 243
( 101 299)
Reclassification from other comprehensive income to results
Balance at the end of the exercise
( 10 269)
881
92 556
( 100 418)
32.2. Others Reserves
Legal Reserve
The legal reserve can only be used to cover accumulated losses or to increase capital. The Portuguese legislation applicable
to the banking sector (Article 97 of Decree-Law 298/92, 31 December) requires that the legal reserve be credited annually
with at least 10% of the annual net income, up to a limit equal to the value of the share capital or the sum of the free
reserves constituted, and the results carried over, if higher.
Special reserve
As mentioned in Note 25, the special reserve was created as a result of the adhesion of novobanco to the Special Regime
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible
deferred tax assets into tax credits and the simultaneous establishment of a special reserve.
Following the clearance of a negative net result in the exercises between 2015 and 2020, with reference to deferred tax
assets eligible at the date of closures of those exercises, the application of that special regime applicable to deferred tax
assets, novobanco recorded a special reserve, in the same amount of the tax credit calculated, increased by 10%, which
has the following decomposition:
2019 (net loss 2018)
2020 (net loss 2019)
2021 (net loss 2020)
Contingent capitalization mechanism
(thousands of Euros)
2023
2022
-
-
128 673
128 673
146 367
116 817
137 193
400 377
Following the conditions agreed in the novobanco’s sale process, a Contingent Capital Agreement was created. In this
context, if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset
portfolio, the Resolution Fund makes a payment corresponding to the lower of the losses recorded and the amount
necessary to restore the ratios to the defined threshold, of up to a maximum of Euro 3,890 million (see Note 33 –
Contingent liabilities and commitments). The capital corresponds to a previously defined asset perimeter, with an initial net
book value (June 2016) of around Euro 7.9 billion. As of 31 December 2023, these assets had a net value of Euro 0.9 billion,
mainly as a result of losses recorded as well as payments and recoveries (31 December 2022: net value of Euro 1.1 billion).
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Taking into consideration the losses presented by novobanco on 31 December 2020, 2019, 2018 and 2017, the conditions
were met that determined the payment by the Resolution Fund of Euro 429,013 thousand, Euro 1,035,016 thousand, Euro
1,149,295 thousand and Euro 791,695 thousand in 2021, 2020, 2019 and 2018, respectively.
The value related to the Contingent Capitalization Mechanism recorded in 2020, as receivable from the Resolution Fund
(598,312 thousand euros), differs from the paid value due to disagreements between novobanco and the Resolution Fund
regarding (i) the provision for discontinued operations in Spain and (ii) the valuation of participation units, leading to a
limitation to the immediate access to this amount, which, despite being recorded as receivable, the Bank deducted, as of
31 December 2023 and 2022, from the regulatory capital calculation (165,442 thousand euros). Additionally, the amount of
variable remuneration of the Executive Board of Directors for the 2019 and 2020 exercises was also deducted (3,857
thousand euros).
In 2021 a value was recorded as receivable from the Resolution Fund of 209,220 thousand euros related to the Contingent
Capitalization Mechanism, accounted for in Other Reserves and which results, at each balance sheet date, from the losses
incurred and the regulatory ratios in force at the time of its determination. Consequently, as mentioned above and in line
with regulatory guidelines, on December 31, 2023, and 2022, this value was also deducted from the calculation of
regulatory capital.
Novobanco considers this amount as due under the Contingent Capitalization Mechanism and is triggering the legal and
contractual mechanisms at its disposal to ensure its receipt.
Note 33 – Contingent Liabilities and Commitments
In addition to the derivative financial instruments, the balances relating to off-balance accounts as of 31 December 2023
and 2022 are the following:
Contingent liabilities
Guarantees and endorsements
Financial assets pledged as collateral
Open documentary credits
Others
Commitments
Revocable commitments
Irrevocable commitments
(thousands of Euros)
2023
2022
11 187 432
14 548 395
2 347 433
2 262 092
8 542 774
12 036 520
187 024
169 410
110 201
80 373
5 996 626
5 955 096
5 343 467
5 397 330
653 159
557 766
Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the Bank.
As of 31 December 2022, the caption financial assets pledged as collateral includes:
•
•
•
The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity
facility, in the amount of Euro 7.9 billion (31 December 2022: Euro 11.2 billion), of which 2.1 billion euros are
encumbered (31 December 2022: 9.3 billion euros);
Securities pledged as collateral to the Portuguese Securities and Exchange Commission (“Comissão do Mercado
de Valores Mobiliários” (CMVM)) in the scope of the Investors Indemnity System (“Sistema de Indemnização aos
Investidores”), in the amount of Euro 9.2 million (31 December 2022: Euro 6.8 million);
Securities pledged as collateral to the Deposits’ Guarantee Fund (“Fundo de Garantia de Depósitos”), in the
amount of Euro 64.6 million as of 31 December 2022. As of December 31, 2023, following the payment of the total
amount of commitments assumed to the Deposit Guarantee Fund, as mentioned in Note 16, there are no
securities given as collateral;
•
Securities pledged as collateral to the European Investment Bank, in the amount of Euro 468.5 million (31
December 2022: Euro 578.3 million);
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•
Securities delivered as collateral in connection with derivatives trading with a central counterparty in the amount
of 74.0 million euro (31 December 2022: 110.0 million);
• Deposits provided as collateral to guarantee the responsibilities assumed by issuing guarantees in the amount of
18.9 million euros (31 December 2022: 29.7 million euros).
The above-mentioned financial assets pledged as collateral are recorded in the various asset categories of the Bank’s
balance sheet and may be executed in the event the Bank does not fulfil its obligations under the terms and conditions of
the contracts celebrated. The increase in the value of securities pledged as collateral to the European Investment Bank is
related to the reinforcement of the collateral due to changes in the minimum required amounts.
Documentary credits are irrevocable commitments made by the Bank, on behalf of its customers, to pay or order to pay a
certain amount to a supplier of goods or services, within a determined period, upon the presentation of documentation of
the expedition of the goods or rendering of the services. The condition of “irrevocable” derives from the fact that they may
not be cancelled neither changed without the agreement of all involved parties.
Revocable and irrevocable commitments represent contractual agreements to extend credit to customers of the Bank
(e.g., undrawn credit lines), which are, generally, contracted for fixed periods of time or with other expiration conditions
and, usually, require the payment of a fee. Almost all credit commitments in force require that customers continue meeting
certain conditions that were verified at the time the credit was contracted.
Despite the characteristics of these contingent liabilities and commitments, these operations require a previous rigorous
risk assessment of the solvency of the customer and of its business, similarly to any other commercial operation. When
necessary, the Bank requires the collateralization of these transactions. Since it is expected that the majority of these
operations will mature without any funds having been drawn, these amounts do not necessarily represent future cash out-
flows.
Additionally, liabilities recorded in off-balance sheet captions related to banking services provided are as follows:
Deposit and custody of securities and other items
Amounts received for subsequent collection
Securitized loans under management (servicing)
Other responsibilities related with banking services
(thousand of Euros)
2023
2022
35 162 112
31 031 260
192 382
207 006
1 497 960
1 697 076
824 098
723 197
37 676 552
33 658 539
Pursuant to the resolution measure applied to BES by resolution of Bank of Portugal of 3 August 2014 (point 1., point b),
subparagraph (vii) of Annex 2), as amended by the decision of Bank of Portugal of 11 August 2014, the “excluded liabilities”
in the
of transfer to novobanco
commercialization, financial intermediation and distribution of debt instruments issued by entities that are part of the
Espírito Santo Group (…) ”.
include “any obligations, guarantees,
liabilities or contingencies assumed
Pursuant to point and subparagraph above and subpoint (v), liabilities excluded also include “any liabilities or contingencies,
namely those arising from fraud or violation of regulatory, criminal or administrative offenses or provisions”.
On December 29, 2015, Bank of Portugal adopted a new resolution on “Clarification and retransmission of responsibilities
and contingencies defined as liabilities excluded in subparagraphs (v) to (vii) of paragraph 2 (b) of nº1, Annex 2 to the
Resolution of Bank of Portugal of 3 August 2014 (20 hours), as amended by the Resolution of Bank of Portugal of 11 August
2014 (17 hours) ”. Under the terms of this resolution, Bank of Portugal came:
(i)
Clarified the treatment as excluded liabilities of the contingent and unknown liabilities of BES (including
litigation liabilities related to pending litigation and liabilities or contingencies arising from fraud or violation
of rules or regulatory, criminal or administrative offence decisions), regardless of their nature (tax, labour,
civil or other) and whether or not these are recorded in the accounts of BES, in accordance with
subparagraph (v) of paragraph (b) of No. 1 of Appendix 2 of the Deliberation of 3 August; and
(ii)
Clarified that the following liabilities had not been transferred from BES to novobanco:
a. All the liabilities relating to Preference Shares issued by vehicle companies established by BES and sold
by BES.
b. All liabilities, damages and expenses related to real estate assets that were transferred to novobanco;
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c. All indemnities related to breach of contracts (purchase and sale of real estate assets and others) signed
and celebrated before 8 p.m. on 3 August 2014.
d. All indemnities related to life insurance contracts, in which the insurer was BES - Companhia de Seguros
de Vida, S.A.
e. All liabilities and indemnities related to the alleged annulment of certain clauses in loan agreements in
which BES was the lender.
f. All the indemnities and liabilities arising from the cancellation of operations carried out by BES whilst
financial and investment service provider; and
g. Any liability that is the object of any of the processes described in Appendix I of said deliberation.
(iii)
To the extent that, despite the clarifications made above, it is found that there has been an effective
transfer of any liabilities from BES to novobanco which, in terms of any of those paragraphs and the
Deliberation of 3 August, should have remained in BES’s legal sphere, said liabilities will be retransmitted
from novobanco to BES, with effect as at 8 p.m. of 3 August 2014.
In the preparation of its separate and consolidated financial statements as of 31 December 2023 (as well as in the previous
financial statements), novobanco incorporated the decisions resulting from the referred resolution measure regarding the
transfer of the assets, liabilities, off-balance sheet captions and assets under management of BES, as well as from the
deliberation of 29 December 2015 of Bank of Portugal, in particular, with regards to the clarification of the non-transmission
to novobanco of contingent and unknown liabilities as well as the clarifications relating to the liabilities listed in paragraph
(ii) above, herein also including the lawsuits listed in said resolution.
In addition, also by the deliberation of Bank of Portugal of 29 December 2015, it was decided that it is the responsibility of
Resolution Fund to neutralise, at the Bank level, the effects of decisions that are legally binding, beyond the control of
novobanco and to which it did not contribute and that, simultaneously, translate into the materialization of liabilities and
contingencies which, according to the perimeter of the transfer to novobanco as defined by Bank of Portugal, should
remain in BES’s scope or give rise to the setting of indemnities in the scope of the implementation of court sentences
annulling decisions adopted by Bank of Portugal.
Considering that the establishment of the Bank results from the application of a resolution measure to BES, which had a
significant impact on the net worth of third parties, and notwithstanding the deliberations of Bank of Portugal of 29
December 2015, there are still relevant litigation risks, although mitigated, namely regarding the various disputes relating
to the loan made by Oak Finance to BES and regarding the senior bond issues retransmitted to BES, as well as the risk of
the non-recognition and/or non-implementation of the various decisions of Bank of Portugal by Portuguese or foreign
courts (as it is the case of the courts in Spain) in disputes related to the perimeter of the assets, liabilities, off-balance sheet
captions and assets under management transferred to novobanco. These disputes include the two lawsuits of late January
2016, with the Supreme Court of Justice of Venezuela, Banco de Desarrollo Económico y Social de Venezuela and the Fondo
de Desarrollo Nacional against BES and novobanco, relating to the sale of debt instruments issued by entities belonging to
the Espírito Santo Group, in the amount of 37 million dollars and 335 million dollars, respectively, and which requests the
reimbursement of the amount invested, plus interest, compensation for the value of inflation and costs (in a total
estimated amount by the claimants of 96 and 871 million dollars, respectively). In accordance with resolution measure,
these responsibilities were not transferred to novobanco and the main actions and precautionary seizure procedures are
still pending before the Supreme Court of Venezuela.
In the preparation of the separate and consolidated financial statements of the Bank as of 31 December 2023 (as well as in
the previous financial statements), the Executive Board of Directors reflected the Resolution Deliberation and related
decisions made by Bank of Portugal, in particular the decisions of 29 December 2015. In this context, the present financial
statements, namely in what regards the provisions for contingencies arising from lawsuits, reflect the exact perimeter of
the assets, liabilities, off-balance sheet elements and assets under management and liabilities transferred from BES to
novobanco, as determined by Bank of Portugal and taking as reference the current legal bases and the information
available at the present date.
Additionally, within the scope of the novobanco sale operation, concluded on 18 October 2017, the respective contractual
documents contain specific provisions that produce effects equivalent to the resolution of the Board of Directors of Bank
of Portugal, of 29 December 2015, regarding the neutralization, at the level of novobanco, of the effects of unfavorable
decisions that are legally binding, although, now, with contractual origin, thus maintaining the framework of contingent
responsibilities of the Resolution Fund.
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33.1 Relevant disputes
For the purposes of contingent liabilities, and without prejudice to the information contained in these notes to the
accounts, namely with regard to the conformity of the policy of setting up provisions with the resolution measure and
subsequent decisions of Bank of Portugal (and criteria for the allocation of responsibilities and contingencies arising
therefrom), it is also necessary to identify the following disputes whose effects or impacts on the financial statements of
novobanco are, at the present date, insusceptible to determine or quantify:
(i)
(ii)
Ação judicial intentada pela Partran, SGPS, S.A., Massa Insolvente da Espírito Santo Financial Group, S.A. e
Massa Insolvente da Espírito Santo Financial (Portugal), S.A. contra o novobanco e a Calm Eagle Holdings,
S.A.R.L. através da qual se pretende a declaração de nulidade do penhor constituído sobre as ações da
Companhia de Seguros Tranquilidade, S.A. e, subsidiariamente, a anulação do penhor ou a declaração da sua
ineficácia, na qual apenas figura como autora a Massa Insolvente da ESF (Portugal) na sequência da
desistência das restantes;
Ações judiciais intentadas na sequência da celebração do contrato de compra e venda do capital social do
novobanco, assinado entre o Fundo de Resolução e a Lone Star em 31 de março de 2017, relacionadas com
as condições da venda, nomeadamente a ação administrativa intentada pelo Banco Comercial Português,
S.A. contra o Fundo de Resolução, da qual o novobanco não é parte e, no âmbito da qual, segundo a
divulgação pública de informação privilegiada efetuada pelo BCP no site da CMVM em 1 de setembro de
2017, é solicitada a apreciação jurídica da obrigação de capitalização contingente assumida pelo Fundo de
Resolução no âmbito do Mecanismo de Capitalização Contingente.
With respect to the amount requested from the Resolution Fund, for the 2020 financial year, divergences remain between
novobanco and the Resolution Fund, regarding (i) the provision for discontinued operations in Spain and (ii) valuation of
participation units, which are the subject of ongoing arbitration. novobanco considers these amounts (165 million euros) as
due under the Contingent Capitalization Mechanism and has initiated an arbitration action to claim payment of these
amounts. There is also another disagreement regarding the application, by novobanco, at the end of 2020, of the dynamic
option of the IFRS 9 transitional regime, which is also under consideration in the same arbitration action. Additionally, the
Resolution Fund did not pay the amount requested for the 2021 financial year. novobanco considers the amounts claimed
and not paid as due under the Contingent Capitalization Mechanism, having triggered the legal and contractual mechanisms
at its disposal in order to ensure the receipt of the same, which are recorded as amounts receivable and are subject to
favorable arbitration decisions.
Resolution Fund
Resolution Fund is a public legal entity with administrative and financial autonomy, created by Decree-Law No. 31-A/2012,
of 10 February, which is governed by the RGICSF and by its internal regulation, having as its mission to provide financial
support for the resolution measures implemented by Bank of Portugal, whilst national resolution authority, and to carry
out all the other functions conferred by law in the scope of the execution of such measures.
The Bank, as with the generality of the financial institutions operating in Portugal, is one of the institutions participating in
Resolution Fund, making contributions that result from the application of a rate defined annually by Bank of Portugal,
based, essentially, on the amount of its liabilities. As of 31 December 2023, the periodic contribution made by the Bank
amounted to Euro 6,947 thousand (31 December 2022: Euro 16,017 thousand).
Within the scope of its responsibility as a supervisory and resolution authority, Bank of Portugal, on August 3, 2014, decided
to apply a resolution measure to BES, pursuant to nº 5 of article 145-G of the General Regime of Institutions Credit and
Financial Companies (RGICSF), which consisted of transferring most of its activity to novobanco, created especially for this
purpose, with the capitalization being ensured by the Resolution Fund.
For the realization of novobanco’s share capital, the Resolution Fund made available Euro 4,900 million, of which Euro 365
million corresponded to its own financial resources. A loan from a banking syndicate was also granted to the Resolution
Fund, in the amount of Euro 635 million, with the participation of each credit institution being weighted according to several
factors, including the respective size. The remaining amount (Euro 3,900 million) originated from a loan granted by the
Portuguese State.
In December 2015, national authorities decided to sell most of the assets and liabilities associated with the activity of Banif
- Banco Internacional do Funchal, SA (BANIF) to Banco Santander Totta, S.A. (Santander Totta), for Euro 150 million, also
in the scope of the application of a resolution measure. In the context of this resolution measure, the assets of Banif
identified as problematic were transferred to an asset management vehicle, created for the purpose – Oitante, S.A.. This
operation involved public support estimated at Euro 2,255 million, which aimed to cover future contingencies, financed at
Euro 489 million by the Resolution Fund and Euro 1,766 million directly by the Portuguese State.
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The situation of serious financial imbalance in which BES was in 2014 and BANIF in 2015, which justified the application of
resolution measures, created uncertainties related to the risk of litigation involving the Resolution Fund, which is
significant, as well as with the risk of an eventual insufficiency of resources to ensure the fulfilment of the liabilities, in
particular the short-term repayment of the borrowings.
It was in this context that, in the second half of 2016, the Portuguese Government reached an agreement with the
European Commission to change the terms of the financing granted by the Portuguese State and by the banks
participating in Resolution Fund to preserve its financial stability, through the promotion of conditions that endow
predictability and stability of the contributory efforts to Resolution Fund. To this end, an addendum to the financing
agreements with Resolution Fund was formalised, which introduced a number of changes to the repayment schedule,
remuneration rates and other terms and conditions associated with said loans such that these are adjusted to Resolution
Fund’s ability to fully meet its obligations based on its regular revenues, that is, without the need to charge the banks
participating in Resolution Fund for special contributions or any other extraordinary contribution.
According to the statement of the Resolution Fund of March 21, 2017, issued following an earlier statement of September
28, 2016 and the statement of the Ministry of Finance issued on the same date, the revision of the conditions of financing
granted by the State Portuguese and participating banks aimed to ensure the sustainability and financial balance of the
Resolution Fund, based on a stable, predictable and affordable charge for the banking sector. Based on this review, the
Resolution Fund assumed that the full payment of its liabilities is ensured, as well as the respective remuneration, without
the need for recourse to special contributions or any other type of extraordinary contributions by the banking sector.
On 31 March 2017, Bank of Portugal announced that it had selected the Lone Star Fund for the purchase of novobanco,
which was completed on 18 October 2017, through the injection, by the new shareholder, of Euro 750 million, which was
followed by a new a capital contribution of Euro 250 million, made on 21 December 2017. The Lone Star Fund now holds
75% of NOVO BANCO's share capital and the Resolution Fund the remaining 25%. Additionally, the approved conditions
include:
• A contingent capitalization mechanism, under which the Resolution Fund may be called upon to make
payments in the event of certain cumulative conditions materialising, related to: (i) the performance of a
restricted set of assets of novobanco and (ii) the evolution of the Bank's capitalization levels. Any payments
to be made under this contingent mechanism are subject to an absolute ceiling of EUR 3,890 million.
• An indemnity mechanism to novobanco, if certain conditions are met, it will be sentenced to pay any liability,
by a final judicial decision that does not recognise or is contrary to the resolution measure applied by Bank of
Portugal, or to the perimeter novobanco’s assets and liabilities.
Notwithstanding the possibility under the applicable legislation for the collection of special contributions, in light of the
renegotiation of the conditions of the loans granted to Resolution Fund by the Portuguese State and by a syndicate of
banks, and of the public press releases made by the Resolution Fund and the Office of the Finance Minister stating that
this possibility is not to be used, the present financial statements reflect the expectation of the Board of Directors that
the Bank will not be required to make special contributions or any other type of extraordinary contributions to finance the
resolution measures applied to BES and BANIF, as well as the Contingent Capital Agreement and the Compensation
Mechanism referred to in the previous paragraphs.
Any changes in this regard and the application of these mechanisms may have relevant implications in the Bank’s financial
statements.
Note 34 – Related Parties Balances and Transactions
The group of entities considered to be related parties by novobanco in accordance with the IAS 24 definitions, are (i) key
management personnel (members of the Executive Board of Directors and members of the General Supervisory Board of
novobanco); (ii) people or entities with a family, legal or business relationship with key management personnel; (iii) people
or entities with a family, legal or business relationship with shareholders; (iv) shareholders holding direct or indirect stakes
equal to or exceeding 2% of the share capital or voting rights of novobanco; (v) subsidiaries consolidated for accounting
purposes under the full consolidation method; (vi) associated companies, that is, companies over which novobanco has
significantly influence on the company’s financial and operational polices, despite not having control; and (vii) entities under
joint control of novobanco (joint ventures).
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During 2023, the following transactions with Related Parties identified on 31 December 2023 (credit and other types) were
carried out:
(i)
Credit Operations
Entities / Individuals
Justification
Operation
Amount (euros)
APB - Associação Portuguesa de Bancos
Entities for which there is a relationship of
economic interdependence
Credit Card Limits (raise)
1 500
EDENRED - Portugal S.A.
Entities for which there is a relationship of
economic interdependence
Members of the Administration and
Supervision bodies and related persons
Members of the Administration and
Supervision bodies and related persons (1.)
LOCARENT - Companhia Portuguesa
Aluguer Viaturas S.A.
Entities for which there is a relationship of
economic interdependence
NACIONAL CONTA – Contabilidade,
Consultadoria e Administração, Lda.
Entity dominated by members of the
Administration / Supervision
Direct Debits Limits (RCE) (renewal and raise)
1 000 000
Credit Card Limits (renewal)
Credit Card Limits (raise)
Credit Card Limits (renewal)
Current-Account Loan Account (renewal)
Trading Room Operations (RCE)
Direct Debits Limits (RCE) (renewal)
24 000
22 500
10 000
2 500 000
3 000 000
4 000 000
Leasing (renewal with changes)
68 250 000
Commercial Paper (renewal with change)
25 000 000
Current-Account Loan Account (renewal)
Credit Card Limits (renewal)
100 000
1 000
Novo Banco Group
(BEST, NB Açores e NB Finance)
Entity dominated by members of the
Administration / Supervision
• Interbank Limits (Trading Room Operations)
• Commercial Limits
2 437 100 000
Pedro Santos Reis
Persons or entities whose relationship with
the institution potentially influences their
management
Housing Credit
360 000
Unicre - Cartão Internacional de Crédito
S.A.
Entities for which there is a relationship of
economic interdependence
Current-Account Loan Account
15 000 000
1. Notice 3/2020, artº33 - 3 b) and Notice 3/2020, artº33 - 3 c)
(ii)
Services rendered and other signed contracts
Entities / Individuals
Justification
Operation
BEST Banco Electrónico de Serviço Total
SA
Entities for which there is a relationship of
economic interdependence
Lease Agreement
Novobanco dos Açores
Entities for which there is a relationship of
economic interdependence. Entity dominated
by members of Administration / Supervision
Amendment to the Distribution Agreement
NANI Holdings S.à R.L. / LSF NANI
Investments S.à R.L.
Shareholder and/or Entities related to the
Shareholder
Service Contract
Amount
(euros)
na
na
na
The Bank balances with related parties as of 31 December 2022 and 2021, as well as the respective profit and losses, can
be summarised as follows:
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Annual Report 2023 | novobanco
Assets
Liabilities Guarantees
Income
Expenses
Assets
Liabilities Guarantees
Income
Expenses
2023
2022
(thousands of Euros)
Shareholders
198 180
106 129
NANI HOLDINGS
-
271
FUNDO DE RESOLUÇÃO
198 180
105 858
-
-
-
416
6 947
198 180
54 253
416
-
-
152
-
6 947
198 180
54 101
-
-
-
389
16 017
389
-
-
16 017
Subsidiary companies
1 085 533
1 320 006
10 394
18 166
38 356
1 158 034 1 218 195
10 322
19 621
16 001
GNB CONCESSÕES
83 473
51 525
-
-
GNB GA
3 435
54 422
4 025
3 262
ES TECH VENTURES
46 732
75 073
-
-
-
-
-
83 473
39 189
-
-
3 552
14 752
4 025
6 303
46 732
74 426
-
-
-
-
BEST
5 052
673 245
37
8 208
21 574
2 610
647 221
7 878
5 900
-
37
novobanco AÇORES
130 302
228 807
1 295
4 071
6 793
124 017
216 280
1 295
1 369
2 898
SPE-LM6
SPE-LM7
FCR NB CAPITAL GROWTH
NB ÁFRICA
FUNGEPI
FUNGEPI II
FUNGERE
IMOINVESTIMENTO
PREDILOC
IMOGESTÃO
ARRABIDA
INVESFUNDO VII
NB LOGÍSTICA
NB PATRIMÓNIO
FUNDES
AMOREIRAS
FIMES ORIENTE
NB ARRENDAMENTO
NB FINANCE
FEBAGRI
GREENWOODS
HERDADE DA BOINA
BENAGIL
PROMOFUNDO
GREENDRAIVE
FIVE STARS
AROLERI
IMALGARVE
RIGHTHOUR
222 877
911
575 842
1 586
-
-
-
-
-
8 648
56 463
2 449
-
-
675
3 105
561
-
-
-
-
-
-
-
-
-
-
-
97 755
387
-
30 811
13 181
1 111
7 171
-
7 474
1
78
1 367
-
-
-
-
2 095
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
299
838
-
-
56
11
-
20
-
3
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 050
198
-
28
30
-
-
23
-
2 581
-
-
96
8
156
-
-
-
-
2
-
243 371
1 915
628 541
3 000
15 015
3 547
7 166
-
-
-
-
338
932
-
-
40 180
2 414
44
23 742
35
2 692
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 561
3 938
478
-
980
-
-
-
-
-
-
-
-
46 022
387
-
30 671
16
13 551
-
-
-
-
-
-
-
6 445
897
7 067
1 150
7 483
-
21
65
20
-
-
-
-
1 952
71
-
-
-
-
106
-
-
-
-
-
-
-
-
446
513
1
-
-
1
1
-
1
4 199
1
-
10
-
145
-
-
-
-
-
-
1 885
-
-
-
13
20
-
28
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6 526
-
106
-
6 036
4 262
-
7 032
-
-
-
-
-
-
-
1 394
5 817
-
17 986
-
-
-
-
-
-
4 262
-
-
-
10 887
-
Associated Companies
155 123
92 584
273
4 322
4 316
179 676
95 106
273
4 614
3 190
LINEAS
LOCARENT
UNICRE
MULTIPESSOAL
Others
Other related entities
HUDSON ADVISORS
PORTUGAL
NACIONAL CONTA LDA
-
137 886
15 220
2 010
3 027
1 987
29
32
7
87 509
241
-
241
4
-
4
-
-
-
273
-
-
-
-
-
15
-
3 176
43
3 422
139 286
3 218
1 641
-
-
-
38 365
2 023
76
35
2 638
879
2
88 601
-
-
-
4 726
4 726
-
324
-
324
5
-
5
-
-
-
273
-
-
-
-
-
-
1 727
3 161
919
-
-
-
1 968
29
-
-
-
4 638
4 638
-
The amount of assets receivable from the Resolution Fund corresponds to the amount of the triggering of the Contingent
Capital Agreement regarding the financial exercise 2021. The liability corresponds to the amount to be delivered to the
Resolution Fund arising from an addendum made in May 2021 to the Contingent Capitalization Mechanism contract.
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In June 2018, a contract was signed between NANI HOLDINGS, SGPS, S.A. (currently Nani Holdings S.à.r.l.), LSF NANI
INVESTMENTS S.à.r.l. and Novobanco, for the provision of support services to the preparation of consolidated information
and regulatory reports.
The assets on the balance sheet related to associated companies included in the table above refer mainly to loans and
advances, and shareholder loans granted or debt securities acquired in the scope of the Bank’s activity. The liabilities relate
mainly to bank deposits taken.
The guarantees relating to associated undertakings included in the table above mainly refer to guarantees provided.
Related party transactions were carried out at arm's length, under similar terms and conditions, when compared with others
carried out with unrelated parties, and when these conditions were not verified, those exceptions were substantiated in
accordance with the Bank’s Related Party Transactions Policy. Every year, novobanco, together with consultants,
analyses and prepares the Transfer Pricing Dossier, which contains information that shows that transactions with related
parties respect the principle of Full Competition, which is delivered to the Tax and Customs Authority within the legal
deadline.
All the loans granted to related parties are included in the impairment model, being subject to the determination of
impairment in the same manner as the commercial loans and advances granted by the Bank in the scope of its activity. All
assets placed with related parties earn interest between 0% and 11,94% (the rates correspond to the rates applied
according to the original currency of the asset).
The costs with remunerations and other benefits granted to Key Management Personnel of novobanco in 2023 and 2022,
are as follows:
2023
2022
Executive
Board of
Directors
General and
Supervisory
Board
Total
Executive
Board of
Directors
General and
Supervisory
Board
Total
(thousands of Euros)
Short-term employment benefits
3 557
1 494
5 051
3 092
1 257
Post-employment benefits
Other long-term benefits
2
27
-
3
2
30
2
197
-
38
3 586
1 497
5 083
3 291
1 295
4 349
2
235
4 586
In 2023 and 2022, the value of variable remunerations for the Management Bodies amounted to 1,878 thousand and 1,931
thousand euros, respectively, which constitutes remunerations that are not vested rights of the members until after the
end of the restructuring period, its payment is subject to deferment and verification of certain conditions. Additionally, in
the financial year of 2023, costs of 150 thousand euros were registered as sign-on bonuses resulting from the appointment
of a new Executive Director (2022: costs of 260 thousand euros were registered as sign-on bonuses resulting from the
appointment of two new Executive Directors and compensation for termination of mandates of two Executive Directors
were registered amounting to 460 thousand euros).
As of 31 December 2023 and 2022, the value of loans and deposits of members of the Key Management Personnel of the
novobanco was as follows:
Credit granted
(i)
to members of the Executive Board of Directors and their direct relatives was Euro 195 thousand (31 December
2022: Euro 351 thousand); and
(ii) members of the General and Supervisory Board and their direct relatives had no credit liabilities (31 December
2022: no exposure).
Deposits
(i) of members of the Executive Board of Directors and their direct relatives was Euro 2,552 thousand (31 December
2021: Euro 1,138 thousand); and
(ii)
members of the General and Supervisory Board and their direct relatives was Euro 820 thousand (31
December 2022: Euro 1,544 thousand).
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Annual Report 2023 | novobanco
Note 35 –Securitisation of Assets
As of 31 December 2023 and 2022, the outstanding securitisation transactions made by the Bank were as follows:
Issue
Start date
Original
amount
Current amount of credit
2023
2022
(milhares de euros)
Asset securitized
Lusitano Mortgages No.4 plc
September 2005
1 200 000
183 022
Lusitano Mortgages No.5 plc
September 2006
1 400 000
286 348
Lusitano Mortgages No.6 plc
July 2007
1 100 000
280 627
214 061 Mortgage loans (general regime)
330 075 Mortgage loans (general regime)
Mortgage loans (general regime)
317 612
Lusitano Mortgages No.7 plc
September 2008
1 900 000
733 445
817 287
Mortgage loans (general regime)
The main characteristics of these operations, as of 31 December 2023 and 2022, may be analysed as follows:
Issue
Bonds
issued
Initial nominal
value
Current
nominal value
2023
Interest
held by
Group
(Book
value)
Interest held
by Group
(Nominal
value)
Initial rating of the bonds
Current rating of the bonds
Maturity date
Fitch Moody's
S&P
DBR
S
Fitch Moody's
S&
P
DBR
S
Lusitano Mortgages No.4 plc
Lusitano Mortgages No.5 plc
Lusitano Mortgages No.6 plc
Lusitano Mortgages No.7 plc
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class F
Class A
Class B
Class C
Class D
1 134 000
139 110
22 800
19 200
24 000
10 200
1 323 000
26 600
22 400
28 000
11 900
943 250
65 450
41 800
17 600
31 900
22 000
9 208
7 754
9 693
5 100
212 384
17 384
14 639
18 299
5 950
116 039
65 450
41 800
17 600
31 900
22 000
-
-
-
-
-
-
-
-
-
-
97 882
63 950
41 800
17 600
31 900
-
-
-
-
-
-
-
-
-
-
-
94 913
58 568
34 496
13 356
21 291
December 2048
AAA
Aaa
AAA
December 2048
December 2048
December 2048
December 2048
AA
A+
BBB
+
NA
Aa2
A1
Baa1
-
December 2059
AAA
Aaa
December 2059
AA
Aa2
AA
A+
BBB
-
NA
AAA
AA
December 2059
December 2059
A
BBB
+
Baa2
A1
A
December 2059
N/A
-
March 2060
March 2060
March 2060
AAA
AA
A
Aaa
Aa3
A3
BBB
N/A
AAA
AA
A
1 425 000
260 940
260 939
247 653
October 2064
294 500
180 500
57 000
294 500
294 500
260 109
October 2064
180 500
180 500
65 973
October 2064
57 000
-
-
October 2064
March 2060
BBB
Baa3
BBB
March 2060
BB
-
March 2060
-
-
-
-
-
-
BB
-
AAA
BBB
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AAA
-
-
-
AA-
Aa2
A-
A1
BB+
Baa3
B+
-
B2
-
AA+
Aa2
A+
BBB
+
A3
Ba1
CCC
Caa2
-
-
AA+
AA+
BBB
CCC
CC
-
-
-
-
-
Aa2
Aa2
A1
Ba3
-
-
-
-
-
-
AA+
AA+
AA
BB+
-
AA+
AA+
BBB
B
-
A
A
A
BB
D
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AA+
AAA
AA+
-
-
-
-
-
Issue
Bonds
issued
Initial nominal
value
Current nominal
value
2022
Interest
held by
Group
(Book
value)
Interest held
by Group
(Nominal
value)
Maturity date
Initial rating of the bonds
Current rating of the bonds
Fitch Moody's
S&P
DBR
S
Fitch Moody's
S&
P
DBR
S
Lusitano Mortgages No.4 plc
Lusitano Mortgages No.5 plc
Lusitano Mortgages No.6 plc
Lusitano Mortgages No.7 plc
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class A
Class B
Class C
Class D
Class E
Class F
Class A
Class B
Class C
Class D
1 134 000
22 800
19 200
24 000
10 200
163 785
10 842
9 130
11 412
5 100
1 323 000
245 724
26 600
22 400
28 000
11 900
943 250
65 450
41 800
17 600
31 900
22 000
20 113
16 937
21 172
11 301
65 450
41 800
17 600
31 900
22 000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
December 2048
AAA
Aaa
AAA
December 2048
December 2048
December 2048
December 2048
AA
A+
BBB
+
NA
Aa2
A1
Baa1
-
AA
A+
BBB
-
NA
December 2059
AAA
Aaa
AAA
December 2059
December 2059
December 2059
AA
A
BBB
+
Aa2
A1
Baa2
December 2059
N/A
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AAA
-
-
-
AA-
Aa2
A-
A2
BB+
Baa3
CCC
Caa1
-
-
A+
Aa2
BBB
+
B+
CC
-
AA+
AA
BB+
CCC
CC
-
-
-
-
-
Baa2
Ba3
Caa3
-
Aa2
Aa2
A3
B3
-
-
-
-
-
-
AA+
AA-
A-
B-
-
AA+
AA+
BBB
B
-
A-
A-
A-
B
D
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AA+
AAA
AA+
-
-
-
-
-
AA
A
BBB
N/A
AAA
AA
A
AAA
AA
A
Aaa
Aa3
A3
-
-
-
-
-
-
BB
-
AAA
BBB
-
-
-
-
-
-
-
-
152 014
128 051
124 100
March 2060
63 950
55 286
March 2060
March 2060
41 800
17 600
31 900
-
31 303
12 414
20 017
March 2060
BB
-
March 2060
March 2060
BBB
Baa3
BBB
1 425 000
345 770
345 770
326 254
October 2064
294 500
180 500
57 000
294 500
294 500
242 031
October 2064
180 500
180 500
59 141
October 2064
57 000
-
-
October 2064
535
Management Report
Sustainability Report
Separate Financial Statements
Annex
In December 2022 novobanco contracted a loan risk transfer operation from a credit portfolio to companies worth around
Euro 1 billion through synthetic securitisation, due to a maturity date of February 2031 (and the possibility of call option in
September 2025). Given the nature of this transaction, there was no derecognition of the balance sheet claims, and the
guarantee received was recorded, which will be updated according to activation triggers defined in the contract.
Note 36 – Fair Value of Financial Assets and Liabilities
The governance model of the valuation of the Bank's financial instruments is defined in internal regulations, which establish
the policies and procedures to be followed in the identification and valuation of financial instruments, the control
procedures, and the definition of the responsibilities of the parties involved in this process.
36.1. Assets and Liabilities at Fair Value
The fair value of listed financial assets is determined based on the closing price (bid-price), the price of the last transaction
made or the value of the last known price (bid). In the absence of a quotation, the Bank estimates fair value using:
(i) valuation methodologies, such as the use of recent transaction prices, similar and carried out under market
conditions, discounted cash flow techniques and customised option valuation models in order to reflect the
particularities and circumstances of the instrument and
(ii) valuation assumptions based on market information.
For assets included in the fair value hierarchy 3, whose quotation is provided by a third-party using parameters that are not
observable in the market, the Bank proceeds, when applicable, to a detailed analysis of the historical and liquidity
performance of these assets, which may imply an additional adjustment to its fair value, as well because of additional
internal or external valuations.
The valuation models used by type of instrument are as follows:
Money market operations and loans and advances to customers: fair value is determined by the discounted cash flows
method, with future cash flow being discounted considering the currency yield curve plus the credit risk of the entity
contractually liquidating that flow.
Commercial paper and loans to customers: its fair value is determined by discounting future cash flows considering the
currency yield curve plus the credit risk of the issuer determined in the issuance program.
Debt instruments (bonds) with liquidity: the selective independent valuation methodology is used based on observations
available on Bloomberg, designated as 'Best Price', where all the valuations available are requested, but only previously
validated sources considered as input, with the model excluding prices due to seniority and outlier prices. In the specific
case of the Portuguese sovereign debt, and due to the market making activity and the materiality of the Bank's positions,
the CBBT source valuations are always considered (the CBBT is a composite of valuations prepared by Bloomberg, which
considers the average of executable prices with high liquidity).
Debt instruments (bonds) with reduced liquidity: the models considered for the valuation of low liquidity bonds without
observable market valuations are determined taking into account the information available on the issuer and the
instrument, with the following models being considered: (i) discounted cash flows - cash flows are discounted considering
the interest rate risk, credit risk of the issuer and any other risks subjacent to the instrument; or (ii) valuations made
available by external counterparties, when it is impossible to determine the fair value of the instrument, with the selection
always falling on reliable sources with reputed credibility in the market and impartiality in the valuation of the instruments
being analysed.
Convertible bonds: the cash flows are discounted considering the interest rate risk, the issuer's credit risk and any other
risks that may be associated with the instrument, increased by the net present value (NPV) of the convertibility options
embedded in the instrument.
Shares and quoted funds: for quoted market products, the quotation on the respective stock exchange is considered.
Unlisted Shares: the valuation is carried out using external valuations made of the companies in which the shareholding is
held. In the event the request for an external valuation is not justified due to the immateriality of this position in the balance
sheet, the position is revalued considering the book value of the entity.
536
Annual Report 2023 | novobanco
Unlisted funds: the valuation considered is that provided by the fund's management company. In the event there are calls
for capital after the reference date of the last available valuation, the valuation is recalculated considering the capital calls
after the reference date at the amount at which these were made, until a new valuation is made available by the
management company, already considering the capital calls realised. It should be noted that, although it accepts the
valuations provided by the management companies, when applicable in accordance with the funds' regulations, the Bank
requests the legal certification of accounts issued by independent auditors to obtain additional assurance about the
information provided by the management company. Additionally, and for the major assets held by the real estate
investment funds, and according to an annual work plan previously approved by the Executive Board of Directors, a process
of challenge to their valuations is carried out, consisting of a detailed technical analysis of the main assumptions considered
in the valuations. This process may lead to the need of new valuations as well as to adjustments to the fair value of those
assets.
In the specific case of the Restructuring Funds (“Assessed Assets”), their assessment was carried out during the exercise
2022 by an independent external international entity (“Appraiser”), which engaged renowned real estate appraisal
companies to determine the fair value of real estate assets, which represent a significant part of the funds' portfolio.
The fair vale estimation Assessed Assets requires a multi-step approach, considering the following (i) The fair value of the
assets invested by each fund (the “Underlying Assets”); (ii) The nature of the participation of the respective Fund in each
of the Underlying Assets; (iii) The other assets and liabilities on the Fund's balance; (iv) The nature of novobanco
investment in each of the funds; and (v) Consideration of any applicable discounts or premiums. The fair value of the
Underlying Assets was estimated using three valuation approaches (market, income and cost) depending, among other
things, on the specific nature of each asset, its state of development, the information available and the date of the initial
investment. The other assets and liabilities in the fund's balances would normally be valued using the cost approach, with
potential adjustments based on the market, and the consideration of discounts and premiums, normally assessed using
market data and benchmarks.
Underlying assets are mainly divided into Non-Real Estate assets and Real Estate assets (which can be subdivided into
Hotels and Other Real Estate assets). For Non-Real Estate Assets, the Appraiser considered the Market approach based
essentially on Market Multiples for comparable assets and considering the historical performance of each asset. For Real
Estate Assets, the appraiser considered either the market approach or the income approach, depending on the state of
each asset. In the case of hotels, the main value-based assumptions considered were the average room rate, the
occupancy rate, the GOP margin, the EBITDA margin, the Capex needs and the discount rate. In relation to Other Real
Estate Assets, the main assumptions of value were sales prices, construction costs, timeline (both to development and
sale) and Discount Rates. Each of the assumptions described above considered in the valuation of real estate assets was
determined from asset to asset (total of 80 major assets subdivided into a total of more than 500 assets), depending on
the status of the asset, the asset's historical performance, location and market competitors.
With regards to information on quantitative indicators underlying the fair value measurements of the Restructuring Funds,
the following is presented:
Hotels
Real Estate in
Development
Real Estate
Shopping Center
Agricultural Properties
Min Average Max
Min Average Max
Min Average Max
Min
Averag
e
Max
Min
Assumption
Bedroom average Rate
(€)
Occupancy Rate %
40%
62%
80%
60%
70%
75%
55
197
650
133
177
207
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
€/m2
€/Ha
Discount Rate
n.a.
n.a.
8,5
%
n.a.
n.a.
30
1 518
3 150
800
2 594
6 750
960
1 085
1 180
n.a.
n.a.
9,4%
10,1%
n.a.
8,0
%
n.a.
n.a.
12,3%
16,0
%
n.a.
4,5
%
n.a.
n.a.
6,4%
10,0
%
n.a.
10,0
%
n.a.
n.a.
10,3%
10,8
%
Averag
e
Max
n.a.
n.a.
n.a.
n.a.
13 270
n.a.
n.a.
n.a.
20
200
n.a.
n.a.
n.a.
n.a.
2
800
n.a.
Valuation Methodology
Income Market
Income Market
Income Market
Income Market
Income Market
Notes:
(i) All the above assumptions were calculated based on the average of the values considered by the external evaluators per
property assessed.
(ii) The average presented was calculated on the property-weighted average in the sum of the value of the underlying assets per
category presented.
(iii) Hotel - Includes hotels and aparthotels currently in operation (Hotels under development or projects are included under Real
Estate under Development together with their respective property).
(iv) €/m2 consider the gross construction area.
537
Management Report
Sustainability Report
Separate Financial Statements
Annex
In addition, additional assumptions considered in the fair value measurement of the financial investments held in the
restructuring funds are presented below:
Fund Typology
Discount based on p/BV observed on the market
Real Estate and Tourism
Real Estate and Tourism / Other
Others
16,60%
15,30%
12,00%
Derivative instruments: if these are traded on organised markets, the valuations are observable in the market, otherwise
these are valued using standard models and relying on observable variables in the market, namely:
•
•
Foreign currency options: are valued through the front office system, which considers models such as Garman-
Kohlhagen, Binomial, Black & Scholes, Levy or Vanna-Volga;
Interest rate swaps and foreign currency swaps: the valuation of these instruments is done through the front office
system, where the fixed leg cash flows of the instrument are discounted based on the yield curve of the respective
currency, and the cash flows of the variable leg are projected considering the forward curve and discounted, also
considering discount factors and forward rates based on the yield curve of the respective currency.
• Credit Default Swaps (CDS): both legs of the CDS are composed of cash flows contingent on the credit risk of the
•
underlying asset and are therefore valued using market credit spreads.
Futures and Options: The Bank trades these products on an organised market, but also has the possibility to trade
them on the OTC market. For futures and options traded on an organised market, the valuations are observable in
the market, with the valuation being received daily through the broker selected for these products. For futures and
options traded on the OTC market and depending on the type of product and the underlying asset type, discrete
time (binominal) or continuous time (Black & Scholes) models may be used.
The Bank calculates the Credit Valuation Adjustment (CVA) for derivative instruments in accordance with the following
methodology:
(i) Portfolio basis – the calculation of the CVA corresponds to the application, to the aggregate exposure of each
counterpart, of an expected loss and a recovery rate, considering the average duration period estimated for each
exposure;
Individual basis – the calculation of the CVA on an individual basis is based on the determination of the exposure
using stochastic methods (Expected Positive Exposure) which translates into the calculation of the expected fair
value exposure that each derivative is likely to assume over its remaining life. Subsequently, are applied to the
exposure determined, an expected loss and a recovery rate.
(ii)
The Bank chooses not to register "Debt Valuation Adjustment" (DVA), which represents the market value of own credit
risk of the group of a certain negative exposure to a counterparty, reflecting a prudent perspective of application of this
regulation. It should be noted that the exposure potentially subject to DVA is controlled on a monthly basis and has
assumed immaterial values.
The validation of the valuation of financial instruments is performed by an independent area, which validates the models
used and the prices assigned. More specifically, this area is responsible for carrying out independent verification of the
prices for mark-to-market valuations, and for mark-to-model valuations, it validates the models used and any changes
thereto, whenever they exist. For prices provided by external entities, the validation performed consists in confirming the
use of correct prices.
The fair value of the financial assets and liabilities and non-financial assets of the Bank measured at fair value is as
follows:
538
Annual Report 2023 | novobanco
(thousand of Euros)
At Fair Value
Valuation
models
based on
observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
Quoted
market
prices
(Level 1)
(Level 2)
(Level 3)
Total Fair
Value
318 528
117 817
318 528
-
-
-
-
-
117 817
11 441
101 098
5 278
-
-
-
-
-
-
436 345
318 528
117 817
11 441
101 098
5 278
31 December 2023
Securities held for trading
Bonds issued by public entities - Bonds issued by other entities
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Others
Financial assets mandatorily at fair value through profit or loss - Securities
17 172
20 913
1 396 605
1 434 690
Bonds issued by other entities
Shares
Other variable income securities
11 368
5 804
50
-
453 793
465 211
135 656
141 460
-
20 863
807 156
828 019
Financial assets at fair value through other comprehensive income
655 561
26 968
58 917
741 446
Bonds issued by public entities
Bonds issued by other entities
Shares
285 852
-
368 610
20 584
-
-
285 852
389 194
1 099
6 384
58 917
66 400
Derivatives - Hedge Accounting - Interest rate contracts
-
683 074
-
683 074
Assets at fair value
991 261
848 772
1 455 522
3 295 555
Financial liabilities held for trading – Derivatives
Exchange rate contracts
Interest rate contracts
Loans
Others
Derivatives - Hedge Accounting
Liabilities at fair value
-
-
-
-
-
-
-
98 957
11 414
82 247
104
5 192
124 957
223 914
1 650
100 607
-
11 414
1 650
83 897
-
-
-
104
5 192
124 957
1 650
225 564
539
Management Report
Sustainability Report
Separate Financial Statements
Annex
(thousands of Euros)
Quoted
market
prices
At Fair Value
Valuation
models
based on
observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
(Level 1)
(Level 2)
(Level 3)
Total Fair
Value
36 428
134 419
36 428
-
-
-
-
-
134 419
23 145
102 729
8 545
-
-
-
-
-
-
170 847
36 428
134 419
23 145
102 729
8 545
31 December 2022
Financial assets held for trading
Bonds issued by public entities
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Other
Financial assets mandatorily at fair value through profit or loss - Securities
15 832
21 409
1 500 429
1 537 670
Bonds issued by other entities
Shares
Other variable income securities
Loans
Financial assets mandatorily at fair value through profit or loss
Bonds issued by other entities
11 045
4 787
50
422 570
433 665
-
135 655
140 442
-
-
-
-
21 359
942 186
963 545
-
-
-
18
13
13
18
13
13
Financial assets at fair value through other comprehensive income
2 094 365
27 124
61 545
2 183 034
Bonds issued by public entities
Bonds issued by other entities
Shares
1 629 639
-
458 913
20 493
-
-
1 629 639
479 406
5 813
6 631
61 545
73 989
Derivatives - Hedge Accounting - Interest rate contracts
-
562 886
-
562 886
Assets at fair value
2 146 625
745 838
1 561 987
4 454 450
Financial liabilities held for trading - Derivatives
Exchange rate contracts
Interest rate contracts
Others
Derivatives - Hedge Accounting - Interest rate contracts
Liabilities at fair value
-
-
-
-
-
-
96 711
22 024
71 807
2 880
120 612
217 323
2 606
99 317
-
22 024
2 606
74 413
-
-
2 880
120 612
2 606
219 929
The changes occurred in financial assets and financial liabilities valued based on non-observable market information (level
3 of the fair value hierarchy) during the exercises 2023 and 2022, can be analysed as follows:
Financial assets mandatorily
at fair value through profit or
loss
Securities
Credit
Financial
assets at fair
value through
profit or loss
2023
Financial
assets at fair
value through
other
comprehensive
income
(thousands of euros)
Total
assets
Financial
liabilities held
for trading
Derivatives
held for
trading
Total
liabilities
Balance as at 31 December 2022
1 500 411
18
13
61 545
1 561 987
2 606
2 606
Acquisitions
Attainment of maturity
Settlements
Changes in value
Balance as at 31 December 2023
92 009
( 214 463)
( 24 176)
42 824
1 396 605
-
-
-
( 18)
-
-
-
-
1 073
93 082
-
( 214 463)
( 9 818)
( 33 994)
-
-
-
-
-
-
( 13)
6 117
48 910
( 956)
( 956)
-
58 917
1 455 522
1 650
1 650
540
Annual Report 2023 | novobanco
Financial assets mandatorily
at fair value through profit or
loss
Securities
Credit
Financial
assets at fair
value through
profit or loss
2022
Financial
assets at fair
value through
other
comprehensive
income
(thousands of euros)
Total
assets
Financial
liabilities held
for trading
Derivatives
held for
trading
Total
liabilities
Balance as at 31 December 2021
2 036 378
Acquisitions
Attainment of maturity
Settlements
Changes in value
Balance as at 31 December 2022
236 516
( 533 151)
( 131 465)
( 107 867)
1 500 411
-
-
-
-
18
18
-
-
-
-
13
13
35 725
2 072 103
1 950
1 950
3 477
239 993
-
( 533 151)
( 707)
( 132 172)
-
-
-
-
-
-
23 050
( 84 786)
656
656
61 545
1 561 987
2 606
2 606
In the exercises 2023 and 2022 there were no significant transfers of value between the different levels of the fair value
hierarchy.
Potential gains and losses on financial instruments and investment property classified at level 3 of the fair value hierarchy
are recorded in profit or loss or revaluation reserves in accordance with the respective asset accounting policy. The
amounts calculated on 31 December 2023 and 2022 were as follows:
Derivatives held for trading
Financial assets at fair value through profit or loss
Financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive
income
Recognised in
reserves
2023
Recognised in
the income
statement
Total
Recognised
in reserves
-
-
-
955
955
( 19 100)
( 19 100)
34 223
34 223
-
-
-
(thousands of euros)
2022
Recognised
in the income
statement
Total
( 655)
( 655)
-
-
( 117 028)
( 117 028)
( 279)
-
( 279)
23 350
-
23 350
( 279)
16 078
15 799
23 350
( 117 683)
( 94 333)
The following table presents, for financial assets included in level 3 of the fair value hierarchy, the main valuation methods
used and the impact of changing the main variables used in their valuation, when applicable:
541
Management Report
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Annex
Assets classified under level 3
Valuation Model
Financial assets mandatorily at fair value through profit or
loss
2023
Variable
analysed
Carrying
book
value
1 396,6
453,8
(millions of Euros)
Unfavourable scenario
Favourable
scenario
Change
Impact
Change
Impact
Bonds issued by other entities
Shares
Discounted cash flow
model
Discount rate
453,8 (-) 100 bps
( 37,1)
(+) 100
bps
Valuation of the
management company
(adjusted)
135,7
(b)
135,7
Other variable income securities
Financial assets at fair value through other
comprehensive income
Valuation of the
management company
Valuation of the
management company
(b)
(c)
807,2
76,3
730,9
58,9
58,9
( 37,1)
( 37,1)
-
-
-
-
-
( 0,6)
( 0,6)
25,7
25,7
25,7
-
-
-
-
-
0,3
0,3
0,3
-
26,0
Shares
Total
Discounted cash flows
Renewable
Energy Tariff
9,9
( 0,6)
Others
(a)
49,1
1 455,5
-
( 37,8)
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(b) Given that the Restructuring Funds were not revalued in 2023, a sensitivity analysis was not carried out on them.
(c) In the specific case of units valued according to the quotation provided by the respective management company, it is not reasonable to analyse the impact of the change in variables underlying the
determination of the quotation by that entity
Assets classified under level 3
Valuation Model
Financial assets mandatorily at fair value through profit
or loss
(millions of Euros)
2022
Variable
analysed
Carrying
book
value
1 500,4
422,6
Unfavourable
scenario
Favourable scenario
Change
Impact
Change
Impact
( 43,3)
( 43,3)
54,5
54,5
Bonds issued by other entities
Discounted cash flow
model
Specific
Impairment
2,4
-50%
( 2,4)
+50%
10,8
Shares
Other variable income securities
Financial assets at fair value through other
comprehensive income
Shares
Total
Discounted cash flow
model
Discount rate
420,2
(-) 100
bps
( 40,9)
(+) 100
bps
43,7
Valuation of the
management company
(adjusted)
Valuation of the
management company
(adjusted)
Valuation of the
management company
135,7
(b)
137,7
942,2
(b)
117,6
(c)
824,6
-
-
-
-
61,5
61,5
( 1,7)
( 1,7)
Discounted cash flows
Renewable
Energy Tariff
9,6
( 1,7)
Others
(a)
51,9
1 562,0
-
( 45,0)
-
-
-
-
0,1
0,1
0,1
-
54,6
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(b) For the sensitivity analysis carried out on the valuation of the Restructuring Funds, taking into account the valuation methodologies applied and considering that real estate assets represent
about 90% of the underlying assets of the Funds, a variation of +10% and -10% was considered in the fair value of the main real estate assets of each Fund, which leads to an impact of +5.2% and -
5.2% in the fair value of the restructuring funds.
(c) In the specific case of units valued according to the quotation provided by the respective management company, it is not reasonable to analyse the impact of the change in variables underlying
the determination of the quotation by that entity
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The main parameters used, on 31 December 2023 and 2022, in the valuation models were as follows:
Interest rate curves
The short-term rates presented reflect benchmark interest rates for the money market, whilst those presented for the
long-term represent the interest rate swap quotations for the respective periods:
Overnight
1 month
3 months
6 months
9 months
1 year
3 years
5 years
7 years
10 years
15 years
20 years
25 years
30 years
EUR
2023
USD
GBP
EUR
2022
USD
GBP
4,0325
3,8450
3,9090
3,8610
3,6870
3,5130
2,5665
2,4360
2,4420
2,4940
2,5580
2,5150
2,4120
2,3260
5,3650
5,4200
5,5300
5,5000
5,4100
5,0470
4,0319
3,8117
3,7571
3,7541
3,7785
3,7585
3,6768
3,5910
5,0850
5,2900
5,5000
5,3500
5,2750
4,9670
3,9400
3,6544
3,5548
3,5682
3,6300
3,6570
3,6470
3,6403
1,9501
1,8840
2,1320
2,6930
2,9920
3,2910
3,3005
3,2390
3,2020
3,2020
3,1410
2,9310
2,7150
2,5320
4,3650
4,4200
4,7700
5,1500
5,2350
5,1130
4,3010
4,0110
3,8780
3,8220
3,7970
3,7260
3,6170
3,4720
3,5750
3,6500
3,8000
4,3350
4,5250
4,6768
4,6088
4,3280
4,1350
3,9920
3,9377
3,8647
3,7967
3,7257
Credit Spreads
The credit spreads used by the Bank in the valuation of credit derivatives are those disclosed on a daily basis by Markit,
representing observations pertaining to around 85 renowned international financial entities. The evolution of the main
indexes, understood as being representative of the credit spread behavior in the market during the year, is presented as
follows:
Index
Serie
1 year
3 years
5 years
7 years
10 years
(basis points)
31 december 2023
CDX USD Main
iTraxx Eur Main
iTraxx Eur Senior Financial
31 de dezembro de 2022
CDX USD Main
iTraxx Eur Main
iTraxx Eur Senior Financial
41
40
40
39
38
38
-
14,64
-
-
35,05
-
33,64
33,08
-
56,87
66,40
-
56,70
58,21
67,02
82,02
90,60
99,29
78,74
78,97
-
101,74
106,87
-
98,19
98,68
-
117,73
122,66
-
Interest rate volatility
The values presented below represent the implicit volatilities (at the money) used for the valuation of interest rate options:
EUR
87,29
110,08
105,67
101,82
97,50
91,56
2023
USD
94,80
125,00
121,30
116,10
108,90
99,00
1 year
3 years
5 years
7 years
10 years
15 years
GBP
99,70
142,10
140,10
134,00
124,60
113,10
543
EUR
99,28
124,23
124,77
121,60
115,66
107,02
2022
USD
23,33
38,10
40,72
39,38
35,95
-
(%)
GBP
55,24
49,59
47,00
45,73
42,81
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Foreign exchange rates and volatility
Presented below, are the foreign exchange rates (European Central Bank) at the balance sheet date and the implicit
volatilities (at the money) for the main currencies used in the derivatives’ valuation:
Foreign exchange rate
2023
2022
1 month
3 months
6 months
9 months
1 year
Volatility (%)
EUR/USD
EUR/GBP
EUR/CHF
EUR/NOK
EUR/PLN
EUR/RUB
USD/BRL a)
USD/TRY b)
1,1050
0,8691
0,9260
11,2405
4,3395
1,0666
0,8869
0,9847
10,5138
4,6808
117,2010
117,2010
4,8523
29,5503
5,2865
18,7183
6,98
4,96
6,76
9,81
6,99
29,28
12,71
8,47
6,64
5,14
6,13
9,54
7,04
31,71
13,09
13,41
6,57
5,50
5,99
9,56
7,13
34,65
13,60
17,98
6,54
5,75
5,94
9,60
7,19
36,12
13,95
21,13
6,70
5,95
5,91
9,61
7,24
32,92
14,29
23,43
a) Calculated based on EUR / USD and EUR / BRL exchange rates.
b) Calculated based on EUR / USD and EUR / TRY exchange rates.
Regarding foreign exchange rates, the Bank uses in its valuation models the spot rate observed in the market at the
moment of the valuation.
Quotation indexes
The table below presents the evolution of the main market equity indexes and their respective volatilities, used in the
valuation of equity derivatives:
DJ Euro Stoxx 50
PSI 20
IBEX 35
FTSE 100
DAX
S&P 500
BOVESPA
Quotation
Historical volatility
2023
2022
Change %
1 month
3 months
Implied
Volatility
4 399
5 920
9 593
7 532
16 148
4 450
3 794
5 726
8 229
7 452
13 924
3 840
118 087
109 735
15,96%
3,39%
16,57%
1,07%
15,98%
15,91%
7,61%
13,65
12,29
12,13
10,97
12,94
11,61
15,90
15,89
13,99
17,15
13,37
15,16
13,75
18,48
11,00
-
-
9,28
11,03
10,93
19,74
36.2. Assets and liabilities at Amortized Cost
Cash and deposits with Central Banks, Deposits with banks and Loans and advances to credit institutions and Deposits
from Central Banks
Considering the short-term nature of these financial instruments, their carrying book value is a reasonable estimate of their
fair value.
Securities at amortised cost
The fair value of securities recorded at fair value is estimated according to the methodologies used for the valuation of
securities recorded at fair value, as described at the beginning of the current Note.
Loans and advances to customers
The fair value of loans and advances to customers is estimated based on the discounted expected future cash flows of
principal and interest, assuming that the instalments are paid on the dates contractually defined. The expected future cash
flows from portfolios of loans with similar credit risk characteristics, such as residential mortgage loans, are estimated
collectively on a portfolio basis. The discount rates used by the Bank are the current interest rates used for loans with
similar characteristics.
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Deposits from credit institutions
The fair value of deposits from Central Banks and Deposits from credit institutions is estimated based on the discounted
expected future cash flows of principal and interest.
Due to customers
The fair value of these financial instruments is estimated based on the discounted expected future cash flows of principal
and interest. The discount rate used by the Bank is that which reflects the current interest rates applicable to deposits with
similar characteristics at the balance sheet date. Given that the interest rates applicable to these instruments are renewed
for periods under one year, there are no material relevant differences in their fair value.
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
The fair value of these instruments is based on quoted market prices, when available. When not available, the Bank
estimates their fair value by discounting their expected future cash flows of principal and interest.
Other financial liabilities
These liabilities are short-term and therefore the book value is a reasonable estimate of their fair value.
The fair value of financial assets and liabilities recorded in the balance sheet at amortized cost is analyzed as follows, having
been estimated based on the main methodologies and assumptions described below:
(thousands of Euros)
Assets /
liabilities
recorded at
amortised
cost
Quoted
market prices
Fair value
Valuation
models based
on observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
(Level 1)
(Level 2)
(Level 3)
Total fair
value
31 December 2023
Cash, cash balances at central bank and other demand deposits
5 742 599
-
5 742 599
-
5 742 599
Financial assets at amortised cost
Debt securities
Loans and advances to banks
Loans and advances to customers
Financial assets
8 200 570
6 315 707
228 200
1 515 592
8 059 499
125 817
23 063 507
-
-
125 817
-
125 817
-
23 379 919
23 379 919
37 132 493
6 315 707
6 096 616
24 895 511
37 307 834
Financial liabilities measured at amortised cost
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to
transferred assets
Other financial liabilities
Financial liabilities
6 685 933
29 193 007
-
-
1 085 659
1 237 424
489 750
-
6 623 884
-
6 623 884
-
-
-
29 193 007
29 193 007
-
1 237 424
489 750
489 750
37 454 349
1 237 424
6 623 884
29 682 757
37 544 065
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(thousands of Euros)
Assets /
liabilities
recorded at
amortised
cost
Quoted
market prices
Fair value
Valuation
models based
on observable
market
parameters
Valuation
models based
on
unobservable
market
parameters
(Stage 1)
(Stage 2)
(Stage 3)
Total fair
value
31 December 2022
Cash, cash balances at central bank and other demand deposits
6 387 295
-
6 387 295
-
6 387 295
Financial assets at amortised cost
Debt securities
Loans and advances to banks
Loans and advances to customers
Financial assets
8 400 233
6 296 968
145 464
22 955 247
-
-
281 254
145 464
1 461 985
8 040 207
-
145 464
-
23 450 103
23 450 103
37 888 239
6 296 968
6 814 013
24 912 088
38 023 069
Financial liabilities measured at amortised cost
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to
transferred assets
Other financial liabilities
Financial liabilities
10 506 509
28 425 223
-
-
1 601 454
1 693 216
371 511
-
10 497 606
-
10 497 606
-
-
-
28 425 223
28 425 223
44 451
1 737 667
371 511
371 511
40 904 697
1 693 216
10 497 606
28 841 185
41 032 007
Note 37 –Risk Management
The institutional area of the Novo Banco, S.A.’s website (www.novobanco.pt) presents the information directed to
investors, namely, Novo Banco, S.A., Market Discipline Report 2022 which addresses the public disclosure obligations as
defined in Part VIII of the Regulation n.º 575/2013 of the European Parliament and the Council at 26 of July 2013 (CRR) and
EBA guidelines transposed to the Portuguese legislation through the Instruction n.º 5/2018 the Bank of Portugal.
In the case where the information of the present annual report supports the information in the Market Discipline report,
this information is identified through references to this report as systematised in the Annex X of the Market Discipline
Report.
37.1 - Framework
Risk is implicit in the banking business and as such novobanco is naturally exposed to several categories of risks arising
from external and internal factors, and which arise according to the characteristics of the markets in which the Bank
operates and the activities it undertakes.
Thus, the novobanco risk management and control is based on the following premises:
• Universality by application throughout novobanco;
•
•
•
Integrality of the risk culture, through a holistic vision and anticipation of its materialization;
Independence from the other units of the group, in particular from the risk-taking units;
3 Lines of defense model, with the objective of adequately detecting, measuring, monitoring and controlling the
materially relevant risks to which novobanco is subject. This model implies that all employees, in their sphere of
activity, are responsible for risk management and control.
37.2 - Governance and risk management structure
Risk Management, being vital for the development of novobanco Group's activity, is centralized in the Risk Management
Function, assumed by the Global Risk Department (DRG), which defines in a holistic way the principles of risk management
and control, in close coordination with the other 2nd line units of the novobanco Group, as well as with the Internal Audit
Department.
All materially relevant risks are reported to the respective Management and Supervisory Bodies (EBD, GSB and both Risk
Committees and specialised Committees), which assume responsibility for supervising, monitoring, assessing, and defining
the Risk Appetite and the control principles implemented.
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The person responsible for the Risk Management Function of the novobanco Group is the head of the DRG. In order to
guarantee greater efficiency in coordination with the DRG, a local Risk Function Manager was appointed for each relevant
entity of the novobanco Group. The intervention of the DRG is direct or of coordination in alignment with the units that
assume the local Risk Management Function.
The risks identified as relevant and material are quantified as part of the Internal Capital Adequacy Self-Assessment
(ICAAP) exercise, the most relevant of which are:
• Credit risk.
• Market risk.
•
•
• Business risk.
Liquidity risk.
Information and communication and Security, compliance risk, and reputational risk, and
We highlight ESG (Environmental, Social and Governance) risk - particularly the subcategories of climate and
environmental risk and other environmental risks - as risks of increasing relevance, and whose impact is estimated to be
materialized in the medium and long term (that is, over a horizon longer than the other risk categories).
ESG risk is part of the Bank’s risk management framework, in close articulation between the DRG and the ESG Office, which
contributes specific knowledge to the identification of climate and environmental risk factors and social risk factors.
Thus, it is formally defined in the taxonomy of risks of novobanco as the exposure to unfavorable events resulting from
inadequacy or failures in procedures, systems or policies related to the environment (adaptation to or mitigation of
climate change, sustainable use and protection of water or marine resources, transition to the circular economy, waste
prevention and recycling, pollution control and ecosystem protection) and natural resources (Biodiversity), Social
(equality, social cohesion, social integration, labor relations) and Governance (adequate management structures, labor
relations, employee compensation and tax compliance).
The assessment of the materiality of its impacts is analysed cross-sectionally, as ESG factors are intrinsically present in
the other risk categories provided for in the Group's risk taxonomy.
In this regard, we highlight the factors that have received greater specialization from the Group, in terms of its risk
assessment and control methodologies and their integration into business processes:
• Climate transition risks: defined as the impacts associated with the transition to a low-carbon economy. In other
words, these risks are caused by legislation/regulation, technology and market changes resulting from the
requirements associated with climate change. Depending on the response of each economic sector (and each
company in particular) to the need for transition, different scenarios (and severities of transition risk factors) can
be projected and, as a result, different risks and risk levels can be identified and assessed.
• Physical risks: defined as the impacts associated with the physical effects of climate change. These risks may
result from factors arising from an extreme event - severe risk - or through a medium or long-term factor - chronic
risk (for example, the negative effect that global warming, resulting from the continuous rise in temperatures, may
have on the production cycles of some sectors). Physical risks may result in internal financial impacts (damage to
own assets) or external financial impacts (disruption of the production cycles of clients/counterparties or the
impact on the Bank’s real estate collateral).
Next are the main guidelines for managing the risks identified above:
•
•
•
•
credit risk: the management and control of this type of risk is supported using an internal system of risk
identification, assessment and quantification, as well as internal processes for attributing ratings and scorings
to portfolios and their continuous monitoring in specific decision forums
market risk: existence of a specialised team that centralises the management and control of market risk and
balance sheet interest rate risk (IRRBB) of the Bank, in line with the regulations and good risk practices;
liquidity risk: based on the measurement of liquidity outflows from contractual and contingent positions in
normal or stressed situations, the management and control of this risk consists, on the one hand, in
determining the size of the pool of liquidity available at each moment, and on the other hand, in planning for
medium and long term stable financing sources;
non-financial risks: the management of this risk is based on the definition of a framework for the management
and control of non-financial risks and specific policies; and on the compliance function and the Information
Security Office playing a relevant role in the definition of other specific risk policies.
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37.3 Credit Risk
Credit risk results from the possibility of financial losses arising from the default of the client or counterparty in relation to
the contractual obligations established with the Bank within the scope of its credit activity. Credit risk is essentially present
in traditional banking products - loans, guarantees and other contingent liabilities and derivatives. In credit default swaps
(CDS), the net exposure between protection seller and buyer positions on each entity underlying the transactions,
constitutes credit risk for novobanco Bank. CDS are recorded at their fair value in accordance with the accounting policy
described in Note 7.6.6.
A permanent management of credit portfolios is carried out, which privileges the interaction between the various teams
involved in risk management throughout the successive stages of the life of the credit process. This approach is
complemented by the introduction of continuous improvements both in the level of methodologies and tools for risk
assessment and control, as well as in the level of decision-making procedures and circuits.
The monitoring of the Bank's credit risk profile, regarding the evolution of credit exposures and monitoring of credit losses,
is carried out regularly on the Risk Committees of the Executive Board of Directors and the General and Supervisory Board.
Main events in the fiscal year 2023
During 2023, we highlight below the main events related to impairment, namely:
(i)
(ii)
(iii)
Constitution of impairments for contingencies resulting from adverse market conditions;
Introduction of new triggers to stage 2 related to exposures without a risk rating;
Update of macroeconomic scenarios.
Regarding the impairment boosts mentioned in points 1. above, taking into account the current economic context of high
interest rates, with the prospect of maintenance during 2024, to face contingencies of these adverse market conditions, a
sensitivity analysis was carried out on the corporate and housing portfolio.
Therefore, novobanco estimated and accounted for these portfolios, in an appropriate and timely manner, more than 40
million euros in unallocated impairment in addition to the cost of risk observed in its portfolio.
Regarding the introduction of new triggers to stage 2, in this case, all exposures with a persistent situation of not having a
valid risk rating are now considered in stage 2. The introduction of this measure in the collective impairment calculation
model had no impact in 2023 as novobanco had already taken precautions.
In relation to point (iii) above, the impact of updating the macroeconomic scenarios underlying novobanco's impairment
calculation model was estimated slightly below 30 million euros of impairment, an amount also recorded as unallocated
impairment.
The climate and environmental risk component
The ESG risk materiality analysis seeks to identify the impact that this risk will have on other risks, particularly credit risk,
since it is the main risk faced by novobanco. In order to monitor the portfolio's credit risk from an ESG perspective, various
metrics (KRI) were created which are monitored on a monthly basis, seeking to analyze the evolution of the portfolio's risk
and anticipate any adverse impacts on credit risk resulting from factors associated with climate and environmental risk.
From a portfolio perspective, the assessment of credit risk in sectors relevant to climate risk policy is used by the
novobanco to prioritize, assess and monitor transition risk, with a focus on negatively affected sectors or those with an
uncertain impact. This methodology takes into account the following factors: direct and indirect contribution to GHG
emissions (greenhouse gas, such as the production and distribution of fossil fuels or renewable energies), relevance to
climate policy (such as the sensitivity of the cost structure to regulatory or fiscal changes based on GHG emissions) and
importance in the energy value chain (production, use, consumption).
In this respect, novobanco is developing its transition plan with the aim of reducing its indirect carbon footprint, reducing
the risk of its portfolio and contributing to meeting the Paris objectives. In 2023 it took a major step forward, approving
targets for reducing financed GHG emissions for 3 business sectors (Electricity Generation, Concrete and Commercial
Mortgages). These targets were calculated based on scientific methodologies recommended by sector by the Science
Based Targets Initiative (SBTi).
In order to allow for a top-down analysis, novobanco has developed an ESG sectoral scoring system that allows for the
identification of clients who will be the target of credit risk analysis from an ESG perspective, by prioritizing the sectors with
the greatest concerns in terms of climate risk, namely the sectors classified in the ESG scoring with high and severe risk.
Novobanco is developing specific guidelines adapted to the risks that each relevant sector faces or will face.
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To ensure that novobanco has access to its clients' ESG information, new contractual provisions have been introduced in
credit agreements regarding the provision of non-financial information by clients, minimum social and governance
safeguards, as well as sectoral provisions for sectors subject to minimum financing safeguards, where applicable. For
reference, the sectors subject to exclusion or minimum safeguards are described in the novobanco's Financing Principles -
Sector/activity exclusions and minimum safeguards.
During 2023, special emphasis was also placed on obtaining Energy Performance Certificates (EPC) for real estate
guarantees already in the bank's portfolio. For new operations, regardless of the purpose and type of property, the energy
certificate is mandatory.
Finally, novobanco was selected to take part in the Fit-for-55 Climate Stress Test, a regulatory exercise that seeks to
identify the resilience of financial institutions to meet climate objectives. The exercise began in 2023 and will conclude in
2024. This exercise will enable a benchmark to be made between the various institutions and will allow the regulator to
identify market best practices.
37.3.1 - Credit risk exposure
novobanco maximum credit risk exposure is analysed as follows:
2023
2022
Gross value
Impairment
Net
Exposure
Gross value
Impairment
Net
Exposure
(thousands of Euros)
Deposits with and loans and advances to banks
323 465
( 667)
322 798
Derivatives for trading and fair value option derivatives
117 817
Securities held for trading
Securities at fair value through profit/loss
318 528
-
Securities at fair value through profit/loss - mandatory
465 211
-
-
-
-
117 817
318 528
-
465 211
433 665
414 135
134 419
36 428
13
( 674)
413 461
-
-
-
-
134 419
36 428
13
433 665
Securities at fair value through other comprehensive
income
675 046
( 211)
674 835
2 109 045
( 589)
2 108 456
Securities at amortised cost
8 524 914
( 291 567)
8 233 347
8 691 800
( 291 567)
8 400 233
Loans and advances to customers
23 915 735
( 935 991)
22 979 744
23 848 444
(1 057 567)
22 790 877
Derivatives - hedge accounting
683 074
-
683 074
562 886
-
562 886
Other assets
543 218
( 191 543)
351 675
591 030
( 117 590)
473 440
Guarantees and standby letters provided
2 347 433
( 74 665)
2 272 768
2 262 092
( 82 392)
2 179 700
Documentary credits
187 024
-
187 024
169 410
-
169 410
Revocable and irrevocable commitments
5 996 626
( 9 068)
5 987 558
5 955 096
( 7 066)
5 948 030
44 098 091
(1 503 712)
42 594 379
45 208 463
(1 557 445)
43 651 018
For financial assets in the balance sheet, the maximum exposure to credit risk is represented by the accounting book value,
net of impairment. For the off-balance sheet elements, the maximum exposure of the guarantees is the maximum amount
that the Bank would have to pay if the guarantees were executed. For loan commitments and other credit-related
commitments of an irrevocable nature, the maximum exposure is the total amount of the commitments assumed.
The Bank calculates impairment, on a collective or individual basis in accordance with the accounting policy as described in
Note 6.12. In the cases where the value of the collateral, net of haircuts (considering the type of collateral), equals or
exceeds the exposure, the individual impairment may be nil. Hence, novobanco does not have any overdue financial assets
for which it has not performed a review regarding their recoverability and the subsequent impairment recognition, when
necessary.
37.3.2 - Impairment Models scenarios
As proposed in IFRS 9 regulations, the Bank’s calculation of impairment reflects different expectations of macroeconomic
evolution, that is, it incorporates multiple scenarios. To incorporate the effects of future macroeconomic behavior in the
loss estimates, forward looking macroeconomic estimates are included in some of the risk parameters used in the
impairment calculation. In effect, different possible scenarios are considered which give rise to the same number of
impairment results.
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In this context, the process of defining the macroeconomic scenarios considers the following principles:
• Representative scenarios that capture existing non-linearities (e.g., a base case scenario, a scenario with a more
favorable macroeconomic outlook and a scenario with a less favorable macroeconomic outlook).
• The base case scenario is consistent with inputs used in other exercises in the Bank, since the same methodology is used
for the impairment calculation as the Bank uses in internal and regulatory planning exercises.
• The alternative scenarios to the base case do not reflect extreme scenarios.
• The correlation between the projected variables is realistic with the economic reality (e.g., if GDP is increasing,
unemployment is expected to be decreasing).
The exercise of building the base and alternative macroeconomic scenarios for the Portuguese economy is based on a
combination of econometric forecasts, information on forecasts from other external institutions and application of
subjective expert judgment.
In the first component, GDP growth is estimated through estimates for the growth of expenditure components, obtaining
GDP through the formula GDP = Consumption + Investment + Exports - Imports. The econometric specifications chosen
are those that, after testing different alternatives, generate the best result.
The econometric estimates thus obtained are then weighted with forecasts from external institutions, according to the
principle that the combination of different projections tends to be more accurate than just a forecast (the risk of errors and
bias associated with specific methods and variables is minimised).
The forecasts for prices (consume and real estate) and unemployment follow a similar methodology: own forecasts based
on an estimated model, weighted with forecasts from external institutions, if available. In a base scenario, the projections
for interest rates start from market expectations (provided by Bloomberg), with possible adjustments in accordance with
the principles defined above, if considered appropriate (weighting by expert judgment and forecasts from external
institutions). The alternative scenarios are based on the historical observation of deviations from the trend in GDP behavior
(cost and contraction cycles), the reference of EBA recommendations for extreme adverse scenarios, the stylised facts of
economic cycles, with respect to the components of expenditure, prices, unemployment, etc. and estimates.
Thus, when revising / updating the scenarios, the respective probabilities of execution are also reviewed. Once the
scenarios are updated, the values of the risk parameters are updated for later consideration in the scope of the Impairment
calculation. The final impairment calculated will thus result from the sum of the impairment value of each scenario, weighted
by the respective probability of execution.
Currently, 3 scenarios are considered for the calculation of impairment on a collective basis: base case, downside case (or
adverse) and an upside case. The scenarios considered and the respective evolution of the main macroeconomic variables
are described in the tables below:
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A – Base Cenario, with a relative weight of 72,5%
Unit
2023
2024
2025
2026
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Unemployment
Euribor (annual average)
3-months
End of the period
6-months
End of the period
12-months
End of the period
Yields Soberanas (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
% workforce
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
2,1
1,0
1,2
1,5
4,2
1,3
1,1
4,6
6,5
2,2
2,0
6,5
3,43
3,96
3,69
3,92
3,88
3,77
2,53
2,81
3,33
3,64
2,96
2,99
80
83
37
65
1,4
0,8
1,2
4,7
2,0
3,4
1,6
2,9
0,2
0,1
0,0
6,7
3,58
3,19
3,52
3,11
3,40
3,03
2,81
2,81
3,71
3,78
2,89
2,79
90
97
82
99
2,0
1,3
1,3
5,1
3,9
4,0
2,0
2,2
1,5
0,6
0,0
6,9
3,02
2,85
2,99
2,87
2,97
2,90
2,87
2,92
3,89
4,00
2,92
3,05
103
108
97
95
2,2
1,7
1,4
4,2
6,4
6,3
2,2
2,0
3,3
1,6
0,0
6,8
2,84
2,83
2,87
2,86
2,91
2,92
2,98
3,04
4,11
4,21
3,18
3,31
113
117
93
90
After GDP growth of 6.8% in 2022, the base scenario assumes a slowdown in activity in 2023, to growth of around 2.1%,
supported by net external demand, given the strong growth in exports at the beginning of the year (in particular from
tourism), and the resilience of private consumption. The decline in GDP growth is explained by the adverse impact on
domestic demand of high inflation and rising interest rates. For 2024, it is assumed that GDP growth will decline to 1.4%,
with additional lagged impacts from a restrictive monetary policy (increase in debt service), a slight rise in unemployment
and a slowdown in exports. The decline in growth is mitigated by the decline in inflation, budgetary support and an
acceleration of investment (mainly public investment) within the scope of the Recovery and Resilience Plan. In 2025-26,
GDP growth is assumed to converge to trend (annual growth around 2%-2.2%).
After reaching a peak of 7.8% in 2022, average annual inflation remains high in 2023, at around 4.6% (mainly with the
contribution of services). A more visible slowdown in consumer prices is assumed for 2024-26, towards the 2% target. In
any case, persistent inflation in 2022-24 supports the scenario of higher key interest rates. In the base scenario, these
reach their peak in the 4th quarter of 2023. The annual average Euribor in months is seen to increase from 0.35% in 2022
to 3.43% in 2023 and to 3.58% in 2024, before to gradually decrease to 2.84% in 2026 (the rate is expected to peak at
around 4% in the 4th quarter of 2023). The PGB-Bund spread is expected to remain contained, below or around 100 basis
points in 2024 and 2025.
The household savings rate is expected to increase from 6.5% in 2022 to 7.3% in 2025 and 2026, as private consumption
slows, following the post-Covid boom and with the effects of higher interest rates and more restrictive financing
conditions. The unemployment rate remains contained, at around 6.5%-6.8% of the active population.
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B – Less favorable / adverse scenario, with a relative weight of 17,5%
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Unemployment
Euribor (annual average )
3-months
End of the period
6-months
End of the period
12-months
End of the period
Yields Soberanas (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
Unit
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
% workforce
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
2023
2024
2025
2026
2,1
1,0
1,2
1,5
4,1
1,3
1,1
4,9
4,7
1,6
1,5
6,7
3,49
4,56
3,79
5,05
3,99
5,10
2,90
3,65
3,69
4,84
2,86
4,39
80
119
83
45
-3,2
-3,9
0,1
1,2
-3,2
-0,3
-2,3
4,7
-10,1
-15,2
-50,0
8,9
4,37
3,98
4,66
3,87
4,65
3,75
2,93
2,21
4,31
3,78
3,69
2,99
138
157
62
79
-1,5
-2,6
0,1
1,0
0,4
0,5
-1,4
1,9
-4,8
-6,5
-45,0
13,1
2,96
2,45
2,84
2,33
2,72
2,21
1,98
1,75
3,48
3,17
2,68
2,36
150
142
80
81
1,6
1,4
0,8
3,7
6,3
6,5
1,8
1,8
0,8
0,4
-35,0
10,6
2,25
2,05
2,15
1,96
2,08
1,94
1,80
1,85
3,08
2,99
2,24
2,11
128
114
85
88
The adverse scenario is based on the assumption that inflation will become more persistent than expected. This could be
due to an energy shock, with new impacts from the wars in Ukraine and the Middle East. The ECB responds by further
increasing policy rates in late 2023 and 2024. This leads to sharply restrictive financial conditions and a recession in 2024-
2025.
In the Portuguese economy, GDP growth falls by 3.2% in 2024 and 1.5% in 2025, mainly as a result of a significant
contraction in private consumption, which is negatively impacted by the increase in interest rates, the fall in purchasing
power purchase and a significant increase in unemployment. Private investment by families and non-financial corporations
also falls in real terms. However, total investment still increases, as a result of the public component, reflecting the
implementation of the Recovery and Resilience Plan funds. It is assumed that net external demand will have a negative
contribution to growth (decrease in exports, including services).
Average annual inflation is expected to remain well above the target in 2024 (around 4.7% in Portugal). But tighter financial
conditions, with higher policy and market interest rates, contribute to the recession in 2024-25, which is assumed to be
disinflationary in nature. Inflation falls quickly to levels below 2% in 2025-26, leading the ECB to cut key rates in that period,
which translates into a fall in market interest rates, to levels below those observed in the base scenario.
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The unemployment rate rises to 8.9% in 2024 and to 13.1% in 2025. The fall in private consumption and the need to
compensate for the erosion caused by inflation result in an increase in the household savings rate, to 9. 9% of disposable
income in 2025, above pre-Covid levels.
C – Most favorable scenario, with a relative weight of 10%
Unit
2023
2024
2025
2026
PIB
Private Consumption
Public Expenditure
Investment
Exports
Imports
Internal Demand
Prices
CPI
Real Estate (Residential)
Real Estate (Commercial)
Equity prices (incremental change)
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
Real growth %
%
%
%
%
Unemployment
% workforce
Euribor (annual average)
3-months
End of the period
6-months
End of the period
12-months
End of the period
Yields Soberanas (average)
Bund 10Y
End of the period
PGB 10Y
End of the period
PGB 2Y
End of the period
10Y PGB-Bund spread
Annual average
End of the period
10Y-2Y PGB Spread
Annual average
End of the period
%
%
%
%
%
%
%
%
%
%
%
%
bps
bps
bps
bps
2,3
1,3
1,2
1,5
4,2
1,3
1,3
4,6
7,5
2,5
2,0
6,4
3,44
3,96
3,70
3,92
3,88
3,77
2,53
2,85
3,33
3,64
2,96
2,99
80
79
37
65
2,1
1,8
1,2
5,5
3,1
4,6
2,4
3,0
1,8
0,6
15,0
6,5
3,83
3,69
3,76
3,60
3,65
3,52
2,87
2,88
3,65
3,66
2,91
2,83
79
78
74
83
2,4
2,4
1,5
6,1
4,7
5,9
3,0
2,4
2,5
0,8
20,0
6,4
3,52
3,35
3,42
3,24
3,33
3,13
3,05
3,21
3,76
3,86
2,92
3,01
72
65
84
85
3,1
3,5
1,4
5,0
6,9
7,7
3,5
2,1
3,7
1,2
25,0
5,9
3,17
2,99
3,11
2,97
3,04
2,95
3,28
3,35
3,91
3,96
3,00
2,99
63
61
91
97
The favorable scenario assumes that the increase in inflation in 2023 proves to be transitory. After recording 4.6%, price
growth converges, in the remaining projection horizon, to values close to 2%. This development could be associated with
a rapid resolution of conflicts in Ukraine and/or the Middle East and a strong reduction in energy and food prices. Short-
term market interest rates decline in 2025-2026 but remain clearly above pre-Covid levels. Long-term interest rates rise
throughout the projection horizon, but with the 10-year PGB-Bund spread retreating and evolving at low levels. In this
context, it is assumed that economic activity will expand at an above-trend pace for most of the projection horizon and
accelerating until 2026. GDP growth benefits from positive investment performance (with the implementation of funds
from the PRR), private consumption and exports. Strong external demand and favorable financing conditions support
house price growth, albeit in single digits. The unemployment rate is seen falling to close to 5% of the active population.
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37.3.3. Impairment Models
37.3.3.1. Individual Credit Analysis
The Individual Impairment Analysis aims to determine the most appropriate impairment rate for individually significant
clients, regardless of the value resulting from the Collective Impairment Model. The identification of individually significant
customers is carried out based on the criteria defined in the standard.
The Individual Analysis of individually significant clients is carried out based on the information provided by the Commercial
Structures and DRCE (Corporate Credit Recovery Department) regarding the client/Group framework, historical cash flows
(wherever possible, at least 3 years) and forecasts (when available) and existing collateral.
In the analysis of quantifying impairment on an individual basis, possible scenarios are established for credit recovery, either
through the continuity of the client's business, through the giving/execution of collateral or through the sale of the credit,
weighted by the respective probability of occurrence. If the analysis results in no specific impairment being necessary, the
impairment will be determined by collective analysis, that is, by the collective impairment model.
The scheme below is illustrative of the individual credit analysis to be carried out for the purpose of concluding on the
classification in terms of staging of debtors.
Selection Criteria
The Group considers as the target of an Individual Analysis process (staging analysis and, when applicable, individual
impairment quantification), customers who:
• Register exposure in stage 3 and liability equal to or greater than 1 million euros (or equal to or greater than 250
thousand euros if they are DRCE clients);
• Are identified by the Committee itself based on another justified criterion (e.g. sector of activity);
•
•
In the past, they have been assigned specific impairment;
In the event of any new evidence that may have repercussions on the calculation of impairment, they are
proposed for analysis by one of the participants of the Impairment Committee or by another Body/Forum, namely
GARC (e.g.: Reclassification in stage 3 within the scope of GARC).
The identification of customers targeted for Individual Analysis will be updated monthly, in order to take into account any
changes that may occur throughout the year.
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Quantification of Impairment on an Individual Basis
The impairment calculation on an individual basis may take into account different recovery strategies, which must include
different possible scenarios, weighted by the respective probability of occurrence, and they must include information on
past and current events and forecasts of future economic conditions (forward scenarios -looking).
It is understood that there are two methods of estimating the amount to be recovered by the Bank:
• Going Concern approach (“business continuity” method): estimation of cash flows through the client’s activity;
• Gone Concern approach (“cessation of activity” method): presupposes the cessation of the Client’s activity,
whereby the recoverable value is determined based on scenarios of execution/granting of guarantees provided,
the Client’s liquidation/insolvency and/or of the respective guarantors/guarantors, and/or the sale of credits to
third parties.
Going Concern
This scenario involves a situation of recovery of outstanding amounts through the cash flows generated by the client's
business.
The going concern scenario is considered to be applicable when:
•
•
There is updated and reliable financial information about the debtor so that it is possible to reliably estimate the
future cash flows that will be channeled to fulfill the debt service (e.g.: financial information aged less than or equal
to 1 year and/or reports audits that do not recurrently present reservations);
The available information suggests that the debtor will have the capacity to generate cash flows from its
operational activities.
This analysis can be carried out using the following approaches:
•
•
•
“Discounted Cash Flow” approach supported by a reliable business plan and adjusted to the expectations of the
evolution of the debtor's activity;
“Twostep Discounted Cash Flow” - approach supported by a Discounted Cash Flow (Step 1), complemented with
a Terminal value (Step 2);
“Steady state” in the absence of a reliable business plan, the latest available financial statements may be used,
and the Group must make any adjustments it deems necessary to determine the operational cashflow that will be
generated to cover debt service.
Gone Concern
In the gone concern approach, the recovery of amounts owed will be materialized through a scenario of payment in kind
and/or the execution of collateral allocated to the credit granted. This approach therefore considers the scenario of
cessation of the company's activity and the preparation of estimates of the flows that result from the execution and sale
of collateral allocated to credit.
The consideration of a scenario of donation or execution of collateral must, in a first phase, take into account the eligibility
of the collateral for recovery of the amounts owed, i.e., the verification that the asset meets the necessary conditions to
be considered for consideration. effects of calculating the recoverable value (e.g.: registration of mortgages, lack of seizure
of assets, among others). By way of example, if another creditor has a preferential mortgage on the collateral that is greater
than the recoverable value of the asset, then the Group should not consider any amount recoverable from that collateral.
Subsequently, the recoverable value must be determined in accordance with the rules described in Circular Letter no.
CC/2018/0000006, particularly with regard to the deadlines for receiving collateral, sales costs, maintenance costs,
haircuts to be applied in accordance with the age of the evaluation, among others.
37.3.3.2. Collective analysis adjustments to the automatic result of the model
After processing the automatic impairment calculation and validating the consistency of the results obtained, all situations
that may need an adjustment to the calculated impairment value are assessed. These adjustments are reflected, whenever
possible, directly in the exposures.
When this is not possible, the calculated impairment value is recorded without being allocated to specific exposures and,
for that purpose, the stage and the type of credit to which it refers are associated. Having the prerogative to ensure that
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all impairment is allocated to specific exposures, these impairment amounts initially constituted in the unallocated form
will, once conditions exist, be fully distributed over the exposures in which their allocation is determined.
In terms of the governance model, both adjustments to specific exposures and impairment amounts constituted in the
unallocated form must be validated and supported by an approval by a competent body, which, as a rule, will be the
Extended Impairment Committee.
37.3.4. Credit Risk Monitoring
37.3.4.1. Internal rating models for corporate, institutional and equity portfolios
Regarding the rating models for corporate portfolios, different approaches are adopted depending on the size and sector
of activity of the clients. Specific models are also used, adapted to loan operations of project finance, acquisition finance,
object finance, commodity finance and real estate development finance.
Below is a summary table on the types of risk models adopted in the internal assignment of credit ratings:
The Bank's Rating Department has a Rating Model for the following segments: Start-ups; Individual Business Owners
(ENIs); Small Businesses; Medium Businesses; Large Companies; Real Estate and Rental Real Estate; Large Business
Holding; Financial Institutions; Municipalities and Institutions; Countries; Project Finance; Object, Commodity and
Acquisition Finance; Financial Holding.
The segments for which rating models are not available are:
• Insurance and Pension Funds.
• Churches, political parties, and non-profit associations with a turnover of less than Euro 500 thousand.
Regarding the credit portfolios of Large Companies, Financial Institutions, Institutional, Local and Regional Administrations
and Specialised Loans - namely Project Finance, Object Finance, Commodity Finance and Acquisition Finance - the credit
ratings are assigned by the novobanco’s Rating representation. This structure is made up of 7 multisectoral teams that
comprise a team leader and several specialised technical analysts. The attribution of internal risk ratings by this team to
these risk segments, classified as low default portfolios, is based on the use of “expert-based” rating models (templates)
that are based on qualitative and quantitative variables, strongly correlated with the sector or sectors of activity in which
the clients under analysis operate. Apart from assigning a rating to specialised loans, the methodology used by the Rating
representation is also governed by a risk analysis at the level of the maximum consolidation perimeter and by the
identification of the status of each company in the respective economic group. The internal credit ratings are validated
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daily in a Rating Committee composed of members of the Rating Department's Management and the various specialised
teams.
For the medium-sized companies’ segment, statistical rating models are used, which combine financial data with
qualitative and behavioral information. However, the publication of credit ratings requires the execution of a previous
validation process that is carried out by a technical team of risk analysts, who also consider behavioral variables. In addition
to rating, these teams also monitor the customers’ loan portfolio of novobanco through the preparation of risk analysis
reports, as provided for in internal regulations, in accordance with the current responsibilities / customer rating binomial,
which may include specific recommendations on the credit relationship with a given customer, as well as technical advice
on investment support operations, restructuring, or other operations subject to credit risk.
For the business segment, statistical scoring models are also used which have, in addition to financial and qualitative
information, the behavioral variables of the companies and the partner(s) in the calculation of credit ratings.
There are also implemented scoring models specifically aimed at quantifying the risk of start-ups (companies established
less than 2 years ago) and individual entrepreneurs (ENI). These customers together with the small companies, depending
on the exposure value, are included in the regulatory retail portfolios.
Finally, for companies in the real estate sector (companies dedicated to the activity of real estate promotion and
investment, especially small and medium-sized companies), considering their specificities, the respective ratings are
assigned by a specialised central team, based on use of specific models that combine the use of quantitative and technical
variables (real estate appraisals carried out by specialised offices), as well as qualitative and behavioral variables.
As for the risk positions equivalent to equities held by the novobanco, directly or indirectly through the holding of
investment funds, as well as advances and accessory benefits, all included in the equity risk class for the purpose of
calculating risk-weighted assets, are classified in various risk segments according to the characteristics of their issuers or
borrowers, following the segmentation criteria presented earlier. These segmentation criteria determine the type of rating
model to be applied to the issuers of the stocks (or borrowers of the advances / accessory benefits) and, therefore, to
them.
37.3.4.2 - Relationships between internal and external ratings
The assignment of an internal rating to entities with an external rating is made through the Markets Template available in
the Rating Calculation application. The Markets Template gathers the external ratings that were assigned to a specific
entity by the rating agencies Standard & Poor’s (S&P), Moody’s and Fitch.
Specifically, the functionality of providing external ratings from S&P - XpressFeed feeds the application of External Ratings
daily, which allows the external ratings published by these agencies for a given entity to be filled in the Markets Template.
The external ratings assigned by Moody’s and Fitch are not obtained automatically, having to be entered manually in the
Markets Template, after consulting the respective websites.
The internal rating results, in the majority of situations, from the S&P equivalent external rating and, in exceptional
situations, from the S&P equivalent external rating plus an internal adjustment, which must always be accompanied by
justifying comments prepared by the analyst.
It should be noted that the S&P equivalent external rating is obtained by making a correspondence between the available
external ratings and the rating scale of the referred financial rating agencies. The internal ratings produced by the Markets
Template, and which have had adjustments must be mandatorily approved and validated by the Rating Committee
The table below shows the correspondence between the external ratings S&P, Moody's and Fitch and the equivalent
external rating S&P:
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S&P
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
SD
D
Moody's
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
B1
B2
B3
Caa1
Caa2
Caa3
Ca
C
External rating equivalent
to S&P
Aggregation classes of
rating*
Prime Grade
High grade
Upper medium grade
Lower medium grade
Non investment grade
speculative
Highly speculative
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
Lower than CCC
Others
Fitch
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
RD/D
* for the purposes of disclosing information in the explanatory notes
37.3.4.3 - Internal scoring models for Individual portfolios
Regarding scoring models for individual portfolios, NB has origination / concession and behavioral scoring models (applied
to operations older than 6 months).
These models are automatic, based on statistical models developed with internal information, considering socio-
demographic information, loan characteristics, behavioral information and automatic penalties (if there are warning signs).
In the case of behavioral models, information on the remaining loans of the contract holders is also considered.
The Bank is authorised by Bank of Portugal to use internal models in the calculation of regulatory capital requirements for
the main portfolios of individuals: Mortgage Loans and Individual Loans. In addition, it has origination and behavioral
scorings for the Credit Card, Overdraft and Loan Accounts products, which it uses for the purposes of designing and
monitoring credit quality, however, not being IRB portfolios.
37.3.4.2. Other specific disclosures
Forward Looking Models
Collective impairment models incorporate forward looking information through macroeconomic models, which estimate the
evolution of risk parameters through the evolution of macroeconomic variables.
Regarding the PD model, the forward looking adjustment is carried out for the segments of Large and Medium-sized
Companies, Small Companies and Start-ups, Home Credit and Other Consumer Credit. For LGD models, there is a specific
macroeconomic adjustment for the Housing, Consumer and Corporate Credit segments.
The aforementioned models are based on the historical series of defaults and, on the other hand by the historical series of
the main macroeconomic variables (GDP, inflation, interest rate, unemployment rate and property prices), having been used
quarterly historical data since 2010. The definition of the final models depends on the economic sense and their statistical
performance.
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37.3.5. Delinquency
The table below displays the assets impaired, or overdue but not impaired:
Deposits with and loans and advances to banks
Securities held for trading
Bonds issued by government and other public
entities
Securities at fair value through profit/loss - mandatory
Bonds issued by other entities
Securities at fair value through other comprehensive
income
Bonds issued by government and other public
entities
Bonds issued by other entities
Securities at amortised cost
Bonds issued by government and other public
entities
Bonds issued by other entities
Neither
overdue or
impaired
323 465
318 528
318 528
465 211
465 211
654 462
285 852
368 610
8 084 645
4 402 729
3 681 916
2023
(thousands of Euros)
Overdue but
not impaired
Impaired
Total
exposurel
Impairment
Net Exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
323 465
318 528
318 528
465 211
465 211
( 667)
322 798
-
-
-
-
318 528
318 528
465 211
465 211
20 584
675 046
( 211)
674 835
-
285 852
( 21)
285 831
20 584
389 194
( 190)
389 004
440 269
8 524 914
( 324 344)
8 200 570
-
4 402 729
( 585)
4 402 144
440 269
4 122 185
( 323 759)
3 798 426
Loans and advances to customers
22 792 360
16 162
1 107 213
23 915 735
( 935 991)
22 979 744
Deposits with and loans and advances to banks
Securities held for trading
Bonds issued by government and other public
entities
Neither
overdue or
impaired
414 135
36 428
36 428
Securities at fair value through profit/loss - mandatory
433 665
Bonds issued by other entities
Securities at fair value through other comprehensive
income
Bonds issued by government and other public
entities
Bonds issued by other entities
Securities at amortised cost
Bonds issued by government and other public
entities
Bonds issued by other entities
433 665
2 083 797
1 629 639
454 158
8 281 706
4 590 460
3 691 246
2022
(thousands of Euros)
Overdue but
not impaired
Impaired
Total
exposurel
Impairment
Net Exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
414 135
36 428
36 428
433 665
433 665
( 674)
413 461
-
-
-
-
36 428
36 428
433 665
433 665
25 248
2 109 045
( 589)
2 108 456
-
1 629 639
( 382)
1 629 257
25 248
479 406
( 207)
479 199
410 094
8 691 800
( 291 567)
8 400 233
-
4 590 460
( 1 714)
4 588 746
410 094
4 101 340
( 289 853)
3 811 487
Loans and advances to customers
22 487 282
5 765
1 355 397
23 848 444
(1 057 567)
22 790 877
Impaired exposures correspond to (i) exposures with objective evidence of loss (“Exposure in default”, according to the
internal definition of default - which corresponds to Stage 3); and (ii) exposures classified as having specific impairment
after individual impairment assessment.
The exposures classified as not having impairment relate to (i) all exposures that do not show signs of significant
deterioration in credit risk - exposures classified in Stage 1; (ii) exposures that, showing signs of significant deterioration in
credit risk, have no objective evidence of loss or specific impairment after an individual assessment of impairment.
The following table presents the assets that are impaired or overdue but not impaired, split by their respective maturity or
ageing (when overdue):
559
Management Report
Sustainability Report
Separate Financial Statements
Annex
2023
(thousands of Euros)
Securities Portfolio - debt
instruments
Deposits with and loans and
advances to banks
Loans and advances to
customers
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
Overdue but
not impaired
Impaired
-
-
-
-
-
-
-
-
-
-
-
-
-
102 968
-
-
-
1 746
101 222
357 885
13 510
344 284
-
91
-
460 853
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16 162
13 063
1 283
1 071
709
36
-
-
-
-
-
-
347 942
13 274
121 865
130 683
15 882
66 238
759 271
56 576
109 559
87 260
187 422
318 454
16 162
1 107 213
2022
(thousands of Euros)
Securities Portfolio - debt
instruments
Deposits with and loans and
advances to banks
Loans and advances to
customers
Overdue but
not impaired
Impaired
Overdue but not
impaired
Impaired
Overdue but
not impaired
Impaired
-
-
-
-
-
-
-
-
-
-
-
-
-
102 968
-
-
-
6 696
96 272
332 374
327 619
-
-
4 755
-
435 342
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 765
332 385
3 423
1 448
822
53
19
-
-
-
-
-
-
15 525
102 395
91 577
38 165
84 723
1 023 012
49 932
172 570
225 914
81 317
493 279
5 765
1 355 397
Overdue
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
Due
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
Overdue
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
Due
Up to 3 months
From 3 months to 1 year
From 1 to 3 years
From 3 to 5 years
More than 5 years
The following table shows the assets impaired or overdue but not impaired, broken down by the respective impairment
Stage:
2023
2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(thousands of Euros)
Deposits with and loans and advances to banks
Securities at fair value through other comprehensive income
Securities at amortised cost
-
-
-
-
-
-
-
-
20 584
20 584
440 269
440 269
Loans and advances to customers
11 235
4 927
1 107 213
1 123 375
11 235
4 927
1 568 066
1 584 228
-
-
-
-
-
-
-
-
-
-
25 248
25 248
410 094
410 094
-
1 361 162
1 361 162
-
1 796
504
1 796
504
560
Annual Report 2023 | novobanco
Distribution of credit risk by rating level
Regarding assets that are neither past due nor impaired, the distribution by rating grade is presented below. For the debt
instruments, the rating assigned by the Rating Agencies is taken into account, for the credit to clients and cash and
deposits with credit institutions, the internal rating and scoring models are used, that assign a risk rating, which is
periodically reviewed. For the purposes of presenting the information, the ratings have been aggregated into five major
risk groups, with the last group including the unrated exposures.
2023
(thousands of Euros)
Prime +High
grade
Upper Medium
Grade
Lower Medium
grade
Non-
Investment
Grade
Speculative +
Highly
speculative
Others
Total
Deposits with and loans and advances to banks
2 093
75 234
5 739
20 769
219 630
323 465
Securities held for trading
121 431
114 400
82 697
Bonds issued by government and other public entities
121 431
114 400
82 697
Bonds issued by other entities
Securities at fair value through results
Debt instruments from other public entities
Debt instruments - other issuers
Securities at fair value through profit/loss - mandatory
Bonds issued by government and other public entities
Bonds issued by other entities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securities at fair value through other comprehensive income
145 868
253 586
200 641
Bonds issued by government and other public entities
145 868
129 993
9 991
Bonds issued by other entities
-
123 593
190 650
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
318 528
318 528
-
-
-
-
465 211
465 211
-
-
465 211
465 211
54 367
654 462
-
285 852
54 367
368 610
Securities at amortised cost
2 270 897
1 822 665
1 568 211
551 373
1 871 499
8 084 645
Bonds issued by government and other public entities
2 236 452
1 366 307
517 534
-
282 436
4 402 729
Bonds issued by other entities
34 445
456 358
1 050 677
551 373
1 589 063
3 681 916
Loans and advances to customers
5 610 977
6 013 313
2 541 315
7 704 060
922 695
22 792 360
561
Management Report
Sustainability Report
Separate Financial Statements
Annex
2022
(thousands of Euros)
Prime +High
grade
Upper Medium
Grade
Lower Medium
grade
Non
Investment
Grade
Speculative
+ Highly
speculative
Others
Total
Deposits with and loans and advances to banks
625
26 595
57 692
72 881
256 342
414 135
Securities held for trading
Bonds issued by government and other public entities
Bonds issued by other entities
Securities at fair value through results
Debt instruments from other public entities
Debt instruments - other issuers
Securities at fair value through profit/loss - mandatory
Bonds issued by government and other public entities
Bonds issued by other entities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securities at fair value through other comprehensive income
700 313
717 790
616 785
Bonds issued by government and other public entities
686 424
683 903
259 312
Bonds issued by other entities
13 889
33 887
357 473
-
-
-
-
-
-
-
-
-
-
-
-
36 428
36 428
36 428
36 428
-
13
-
13
-
13
-
13
433 665
433 665
-
-
433 665
433 665
48 909
2 083 797
-
1 629 639
48 909
454 158
Securities at amortised cost
2 935 513
2 036 816
1 048 626
553 872
1 706 879
8 281 706
Bonds issued by government and other public entities
2 252 149
1 668 779
341 704
-
327 828
4 590 460
Bonds issued by other entities
683 364
368 037
706 922
553 872
1 379 051
3 691 246
Loans and advances to customers
5 783 346
5 852 343
2 457 978
7 677 338
716 277
22 487 282
37.3.6. Concentration of credit risk
The analysis of risk exposure by sector of activity, on 31 December 2022 and 2021, is presented as follows:
Loans to customers
Securities
held for
trading
Derivatives
held for
trading
Gross Value
Impairment
Securities at
fair value
through
profit or loss
Securities
mandatorily
at fair value
through
profit or loss
2023
Derivatives -
Hedge
accounting
Agriculture, Forestry, and Fishing
302 578
( 6 334)
Extractive Industries
57 469
( 3 269)
Food, Beverage and Tobacco Industries
472 014
( 9 440)
Textiles and Clothing
Tanneries and Footwear
Wood and Cork
332 265
( 11 408)
58 155
( 1 197)
106 131
( 816)
Paper and Graphic Industries
86 284
( 4 214)
Oil Refining
15 448
( 4 747)
Chemical and Rubber Product
331 556
( 7 430)
Non-Metallic Mineral Products
208 819
( 2 705)
Basic Metallurgical Industries and metal products
339 892
( 14 102)
Manufacture of Machines, Equipment and Electrical
Appliances
182 068
( 3 360)
Manufacture of Transport Materials
156 110
( 9 988)
Other Manufacturing Industries
143 730
( 4 871)
Electricity, Gas and Water
342 545
( 1 595)
Construction and Public Works
1 274 696
( 127 075)
Wholesale and Retail Trade
1 445 291
( 41 169)
Tourism
1 109 052
( 50 448)
Transport and Communications
873 078
( 29 181)
Financial Activities
Real Estate Activities
1 014 892
( 80 027)
1 791 295
( 140 115)
Services Provided to Companies
1 987 456
( 143 810)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Administration and Public Services
443 232
( 25 369)
318 528
Other collective service activities
395 004
( 21 317)
Mortgage Loans
Loans to Individuals
Others
TOTAL
8 752 346
( 63 563)
1 513 441
( 118 337)
180 888
( 10 104)
-
-
-
-
23 915 735
( 935 991)
318 528
117 817
-
-
1 084
106
-
256
325
-
116
9
804
384
-
-
5 329
14 485
3 714
738
12 088
72 345
4 672
1 359
-
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(thousands of Euros)
Securities at fair value through
other comprehensive income
Securities at amortized cost
Guarantees and endorsements
provided
Gross Value
Impairment
Gross Value
Impairment
Gross Value
Impairment
8 363
14 764
19 620
-
-
-
-
-
( 7)
( 6)
-
-
-
-
13 429
( 2)
-
-
184
-
-
-
5 766
18 697
( 6)
( 5)
7 648
9 387
( 107)
( 280)
107 785
( 304)
33 717
( 83)
7 103
5 024
42 486
29 181
60 341
258 791
123 274
( 77)
-
( 410)
( 138)
( 11)
( 127)
( 63)
88 643
( 346)
6 089
( 2 140)
1 445
9 527
5 066
11 910
9 246
13 243
41 467
( 115)
( 245)
( 17)
( 2)
( 383)
( 155)
( 374)
36 493
( 18)
211 288
-
-
-
12 710
18 032
145
34 582
-
-
-
( 33)
( 9)
-
( 6)
( 21)
( 77)
( 7)
( 21)
( 4)
-
-
-
100 058
20 378
( 48)
( 78)
( 16)
19 792
( 3 974)
12 379
( 38)
15 123
( 2 045)
243 643
( 243)
35 311
( 25)
214 382
( 137 557)
778 122
( 40 992)
104 873
( 77)
180 231
( 3 417)
-
-
44 683
( 643)
340 776
1 095 420
( 234)
( 615)
425 074
( 1 396)
186 374
( 82)
178 027
( 86 951)
81 590
( 4 069)
704 318
( 95 482)
342 618
( 12 882)
4 419 909
( 597)
20 705
( 84)
144 751
( 959)
40 889
( 893)
-
-
-
-
-
-
-
-
-
-
15 797
( 224)
1 434 485
683 074
161 309
-
205
-
-
-
-
-
-
-
-
-
-
-
-
34 258
76 977
285 852
24 728
-
-
-
1 434 690
683 074
741 446
( 211)
8 524 914
( 324 344)
2 347 433
( 74 665)
562
Annual Report 2023 | novobanco
Loans to customers
Gross Value
Impairment
Securities
held for
trading
Derivatives
held for
trading
Securities at
fair value
through
profit or loss
Securities
mandatorily
at fair value
through
profit or loss
2022
Derivatives -
Hedge
accounting
Securities at fair value through
other comprehensive income
Securities at amortized cost
Guarantees and endorsements
provided
Gross Value
Impairment
Gross Value
Impairment
Gross Value
Impairment
(thousands of Euros)
Agriculture, Forestry, and Fishing
314 282
( 6 361)
Extractive Industries
65 487
( 5 033)
Food, Beverage and Tobacco Industries
451 857
( 11 092)
Textiles and Clothing
Tanneries and Footwear
Wood and Cork
399 438
( 21 326)
71 976
( 1 253)
135 642
( 2 490)
Paper and Graphic Industries
95 294
( 5 900)
Oil Refining
16 314
( 114)
Chemical and Rubber Product
288 743
( 7 069)
Non-Metallic Mineral Products
186 565
( 2 412)
Basic Metallurgical Industries and metal products
389 416
( 16 041)
Manufacture of Machines, Equipment and Electrical
Appliances
229 052
( 10 721)
Manufacture of Transport Materials
176 450
( 4 941)
Other Manufacturing Industries
146 223
( 4 877)
Electricity, Gas and Water
235 377
( 3 438)
Construction and Public Works
1 402 541
( 133 395)
Wholesale and Retail Trade
1 455 117
( 41 766)
Tourism
1 159 301
( 83 692)
Transport and Communications
908 728
( 28 609)
Financial Activities
Real Estate Activities
717 583
( 65 727)
1 736 996
( 162 024)
Services Provided to Companies
2 263 447
( 161 737)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Administration and Public Services
409 300
( 25 241)
36 428
Other collective service activities
423 173
( 42 174)
8 484 134
( 44 889)
1 286 010
( 133 047)
399 998
( 32 198)
-
-
-
-
-
-
4 302
298
-
609
629
1
357
4
145
42
-
-
4 916
16 597
7 371
-
7 345
90 113
1 428
98
-
145
-
-
19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
129
-
2 378
-
-
-
-
-
-
-
-
-
-
8 616
14 277
19 152
-
-
-
-
13 718
-
14 839
433
-
( 7)
( 9)
-
-
-
-
( 2)
-
( 5)
-
41 511
( 25)
-
-
6 435
14 533
17 373
124
46 531
29 699
80 134
-
-
-
( 6)
( 10)
-
( 20)
( 92)
( 11)
( 11)
5 788
18 445
( 15)
( 8)
11 878
( 5 902)
8 851
( 335)
112 027
( 188)
35 920
( 260)
9 690
5 522
53 959
28 906
59 816
221 901
93 571
48 649
191 510
58 643
39 244
( 9)
( 1)
( 114)
( 139)
( 16)
( 186)
( 105)
( 75)
( 63)
( 65)
( 22)
7 026
( 958)
1 518
7 563
5 780
2 264
15 775
35 468
( 117)
( 255)
( 22)
-
( 135)
( 165)
34 232
( 390)
21 824
( 3 559)
12 813
( 290)
18 174
( 2 452)
170 300
( 2 675)
33 760
( 88)
229 922
( 117 563)
709 328
( 45 840)
87 673
( 58)
178 985
( 3 190)
-
-
48 385
( 1 027)
228 236
1 639 254
( 304)
( 492)
394 609
( 1 762)
152 540
( 133)
150 030
( 73 610)
90 041
( 3 484)
692 736
( 93 479)
358 605
( 10 716)
1 629 863
( 382)
4 403 137
( 1 714)
21 158
( 109)
24 849
( 9)
92 579
( 662)
38 037
( 962)
-
-
13 889
-
-
-
-
-
-
-
-
-
-
-
50 262
( 4)
17 558
( 241)
1 535 145
562 886
207 058
23 848 444
( 1 057 567)
36 428
134 419
13
1 537 652
562 886
2 183 034
( 589)
8 691 800
( 291 567)
2 262 092
( 82 392)
Mortgage Loans
Loans to Individuals
Others
TOTAL
37.4. Market risk
Market Risk represents the potential loss resulting from an adverse change in the value of a financial instrument due to
fluctuations in interest rates, foreign exchange rates, equity prices, commodity prices, volatility and credit spread.
Market risk management is integrated with the balance sheet management through the CALCO (Capital Asset and Liability
Committee) structure, being this risk monitored by the Risk Committee.
In terms of market risk, the main element of risk measurement consists of estimating potential losses under adverse market
conditions, for which the Value at Risk (VaR) methodology is used. The novobanco Group uses a VaR using Monte Carlo
simulation, with a 99% confidence interval and an investment period of 10 days. Volatilities and correlations are historical
based on a one-year observation period. Validation of the suitability of the VaR model is carried out daily through the
backtesting process (theoretical and real). Additionally, on a monthly basis, market risk monitoring includes the reporting of
additional metrics within the scope of the stress testing framework, namely Stressed VaR (SVaR), historical stress scenarios
and sensitivity analyzes to the main risk factors. Additionally, the market risk control framework incorporates a monthly
process of monitoring portfolio positions within the scope of controlling the boundary between the trading book and the
banking book, as well as independent validation (2nd line of defense) of the valuation of financial instruments at fair value.
2023
2022
December
Annual
average
Maximum
Minimum
December
Annual
average
Maximum
Minimum
(thousands of Euros)
Exchange risk
Interest rate risk
Shares and commodities
Volatility
Credit spread
653
1 096
0
0
317
584
1 752
21
60
607
1 348
4 707
250
312
2 271
Diversification effect
( 1 016)
( 780)
( 2 025)
Total
1 051
2 244
6 864
356
422
0
0
234
( 32)
979
328
586
0
1
415
1 299
5 532
0
380
841
4 362
47 720
0
2 117
2 386
328
586
-
1
229
( 433)
( 1 738)
( 7 766)
( 248)
897
6 314
48 820
897
novobanco has a VaR of Euro 1.051 thousand euros (31 December 2021: 897 thousand euros) in respect of its trading
positions. The decrease is essentially explained by the decrease in the position in interest rate risk hedging derivatives of
the bank portfolio.
563
Management Report
Sustainability Report
Separate Financial Statements
Annex
37.4.1. Interest Rate Risk
Following the recommendations of the European Banking Authority explained in the set of guidelines published in 2022
(EBA/GL/2022/14, EBA/RTS/2022/09 and EBA/RTS/2022/10) novobanco Group calculates its exposure to risk balance
sheet interest rate based on prescribed shocks, classifying notional and interest amounts by repricing or key rate duration
brackets, of all asset, liability and off-balance sheet items sensitive to interest rates, which do not belong to the trading
portfolio . The calculation of balance sheet interest rate risk is also measured through internal shocks defined by the bank,
namely through VaR metrics.
In this context, novobanco Group has implemented a stress testing approach to interest rate risk based on three pillars:
interest rate shock scenarios, sensitivity analyzes and reverse stress testing.
The interest rate risk control framework allows novobanco Group to monitor and measure the impact of different interest
rate scenarios, both from an economic value perspective and from a financial margin perspective, changing and adapting its
risk profile in in line with the defined risk management strategy. Given the recent scenario of a significant increase in interest
rates starting in the second half of 2022, this monitoring and control has become even more relevant, in order to guarantee
the protection of economic value and financial margin in the face of interest rate volatility.
As a result of novobanco Group's risk profile, with variable rate assets predominating and an essentially fixed rate liability
structure, the rise in interest rates translated into a significant increase in financial margin, as a result of the favorable interest
rate environment and the careful management of asset interest rates and financing costs. In addition, and taking into
account the EBA's new regulatory shock on net interest income, whose regulatory limit is 5% of Tier 1 (on December 31, 2023
this limit was still indicative), the Bank adopted management measures in order to be able to fit the sensitivity of net interest
income in a scenario of falling interest rates within the (indicative) limit established.
Following the recommendations of Basel II (Pilar 2) and Instruction No. 19/2005, of the Bank of Portugal, novobanco Group
calculates its exposure to balance sheet interest rate risk based on the Bank of International Settlements (BIS) methodology.
classifying all asset, liability and off-balance sheet items, which do not belong to the trading portfolio, by repricing levels.
Eligible
amounts
Up to 3 months
3 to 6 months
6 months to 1
year
1 to 5 years
More than 5
years
2023
(thousands of Euros)
Loans and advances to banks
5 865 014
5 762 343
100 000
2 629
42
-
Loans and advances to customers
23 323 150
13 384 158
4 434 408
2 777 436
1 867 795
859 353
Securities
Other assets
Total
Deposits from banks
Due to customers
Debt securities issued
Other liabilities
Total
10 134 098
1 753 679
842 514
182 160
3 995 853
3 359 892
178 059
178 059
-
-
-
-
21 078 239
5 376 922
2 962 225
5 863 690
4 219 245
6 547 035
5 895 702
269 066
147 441
231 689
3 137
29 121 550
12 290 023
3 673 355
4 061 919
6 204 248
2 892 005
2 165 658
-
-
-
600 000
1 565 658
969 072
774 505
39 489
79 734
75 344
-
18 960 230
3 981 910
4 289 094
7 111 281
4 460 800
Balance sheet GAP (Assets - Liabilities)
697 005
2 118 009
1 395 011
(1 326 870)
(1 247 590)
( 241 555)
Off-Balance sheet
Structural GAP
Accumulated GAP
-
(3 442 043)
( 155 145)
( 140 937)
4 052 806
( 314 681)
697 005
(1 324 034)
1 239 866
(1 467 807)
2 805 216
( 556 236)
(1 324 034)
( 84 168)
(1 551 975)
1 253 241
697 005
(thousands of Euros)
564
Annual Report 2023 | novobanco
Eligible
amounts
Up to 3 months
3 to 6 months
6 months to 1
year
1 to 5 years
More than 5
years
2022
Loans and advances to banks
6 530 130
6 425 590
100 000
4 502
18
20
Loans and advances to customers
23 311 653
13 474 715
4 299 392
2 898 241
1 748 925
890 380
Securities
Other assets
Total
Deposits from banks
Due to customers
Debt securities issued
Other liabilities
Total
11 863 628
1 813 859
787 465
2 086 492
2 953 975
4 221 837
134 045
134 045
-
-
-
-
21 848 209
5 186 857
4 989 235
4 702 918
5 112 237
10 493 818
9 704 967
325 100
171 592
( 752)
292 911
28 403 671
18 000 157
2 670 859
3 702 650
3 179 172
850 833
2 640 658
275 000
-
299 964
100 036
1 965 658
787 899
738 146
6 882
9 783
26 990
6 098
28 718 270
3 002 841
4 183 989
3 305 446
3 115 500
Balance sheet GAP (Assets - Liabilities)
( 486 591)
(6 870 062)
2 184 016
805 246
1 397 473
1 996 736
Off-Balance sheet
Structural GAP
Accumulated GAP
1 045
(1 300 422)
1 302 320
( 590 086)
810 306
( 221 073)
( 485 545)
(8 170 484)
3 486 336
215 161
2 207 779
1 775 663
(8 170 484)
(4 684 148)
(4 468 987)
(2 261 208)
( 485 545)
Sensitivity analyses are carried out for the interest rate risk of the banking portfolio based on an approximation to the
duration model, with various scenarios of shift of the yield curve being carried out in all interest rate brackets.
2023
(thousands of Euros)
Parallel increase
of 200 pb
Parallel
decrease of 200
pb
Short Rate
Shock Up
Short Rate
Shock Down
Steepener
shock
Flattener shock
As at 31 December
Exercise average
Exercise maximum
( 219 057)
( 162 778)
147 303
( 119 451)
70 207
( 106 756)
44 560
209 961
( 13 794)
Exercise minimum
( 380 019)
( 152 580)
( 247 596)
65 416
59 039
135 003
8 691
7 766
18 799
40 358
( 49 405)
( 63 603)
( 20 429)
419
( 144 031)
2022
(thousands of Euros)
Parallel increase
of 200 pb
Parallel
decrease of 200
pb
Short Rate
Shock Up
Short Rate
Shock Down
Steepener
shock
Flattener shock
As at 31 December
( 334 517)
200 038
( 227 249)
Exercise average
Exercise maximum
Exercise minimum
( 17 375)
69 075
2 525
( 94 998)
205 226
( 57 198)
( 334 517)
( 235 847)
( 227 249)
123 841
68 433
123 841
35 622
38 128
69 877
98 327
30 932
( 132 267)
( 118 588)
( 71 234)
( 143 180)
565
Management Report
Sustainability Report
Separate Financial Statements
Annex
37.4.2 Foreign Exchange Risk
Regarding foreign exchange risk, the breakdown of assets and liabilities, by currency, on 31 December 2022 and 2021, is
analysed as follows:
2023
2022
Spot
Forward
Other
elements
Net
exposure
Spot
Forward
Other
elements
Net
exposure
(thousand of Euros)
UNITED STATES DOLLAR
( 499 111)
506 031
( 18)
GREAT BRITISH POUND
( 46 498)
48 788
USD
GBP
BRL
BRAZILIAN REAL
DKK
DANISH KRONE
JPY
CHF
SEK
JAPANESE YEN
SWISS FRANC
SWEDISH KRONE
908
( 7 213)
( 1 385)
( 2 022)
( 5 087)
-
7 635
1 521
4 590
5 795
NOK
NORWEGIAN KRONE
48 641
( 47 178)
CAD
CANADIAN DOLLAR
( 19 853)
22 060
ZAR
SOUTH AFRICAN RAND
( 516)
757
AUD
AUSTRALIAN DOLLAR
8 309
( 7 317)
VEB
VENEZUELAN BOLIVAR
MOP
MACAO PATACA
3
108
-
-
MAD
MOROCCAN DIRHAN
( 1 350)
2 064
MXN
MEXICAN PESO
AOA
ANGOLAN KWANZA
59
( 13)
( 91)
-
PLN
CZK
DZD
CNY
POLISH ZLOTY
3 081
( 2 507)
CZECH KORUNA
225
( 425)
ALGERIAN DINAR
YUAN REN-MIN-BI
OTHER
7 593
( 8)
( 1 648)
-
( 255)
3 022
6 902
2 290
908
422
138
2 568
708
1 463
2 207
241
992
3
108
714
( 32)
( 13)
574
( 200)
7 593
( 263)
1 374
( 635 627)
634 533
91
( 1 003)
( 47 219)
46 965
866
( 3 439)
( 2 357)
( 9 359)
-
3 079
2 318
9 769
17 568
( 17 578)
53 277
( 53 059)
( 17 250)
19 003
( 11)
( 530)
9 589
( 9 463)
2
2 409
-
-
( 2 558)
2 256
( 7)
( 23)
( 2 998)
6
7 638
-
-
3 010
( 114)
-
326
( 347)
( 406)
1 574
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 254)
866
( 360)
( 39)
410
( 10)
218
1 753
( 541)
126
2
2 409
( 302)
( 7)
( 23)
12
( 108)
7 638
( 21)
1 168
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note: asset / (liability)
37.5. Liquidity Risk
( 515 777)
544 490
( 16)
28 697
( 629 573)
641 416
91
11 934
Liquidity risk is the current or future risk that arises from an institution's inability to meet its obligations as they fall due,
without incurring substantial losses.
Liquidity risk can be subdivided into two types:
• Asset liquidity (market liquidity risk) - consists in the impossibility of selling a certain type of asset due to a lack of
liquidity in the market, which results in the widening of the bid/offer spread or the application of a haircut to the
market value;
• Funding (funding liquidity risk) - consists in the impossibility of financing assets in the market and/or refinancing
maturing debt, within the desired terms and currency. This impossibility can be reflected through a sharp increase
in financing costs or the requirement of collateral to obtain funds. The difficulty of (re)financing can lead to the sale
of assets, even if incurring significant losses. The risk of (re)financing should be minimized through appropriate
diversification of financing sources and maturities.
Banks are subject to liquidity risk inherent in their maturity transformation business (long-term lenders and short-term
depositors), making prudent liquidity risk management crucial.
As at December 31, 2023, and 2022, the main liquidity indicators is as follows:
566
Gross funding from the ECB
Net funding from the ECB (1)
Annual Report 2023 | novobanco
(thousand of Euros)
2023
1 129
( 4 246)
2022
6 323
385
Portfolio of Eligible Assets for Repos (ECB and others), net of haircut
14 145
16 848
Used collateral
Liquidity Buffer (2)
Transformation Ratio (3)
Liquidity Coverage Ratio (LCR) (4)
Net Stable Funding Ratio (NSFR) (4)
6 947
13 529
84,3%
155%
115%
9 962
13 667
83,3%
202%
105%
(1) Includes ESCB financing and investments; a positive value corresponds to a resource; a negative value corresponds to an investment
(2) Corresponds to eligible assets portfolio adding HQLA securities non eligible for ECB, deducted of the used collateral
(3) (Total Loans - Accumulated Impairment on Loans)/ Customer Deposits
(4) Preliminary
The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) are included in regulatory legislation, and the
LCR aims to promote the resilience of Banks to short-term liquidity risk, ensuring that they hold high quality liquid assets,
sufficient to survive a severe stress scenario, for a period of 30 days, while the NSFR aims to ensure that Banks maintain
stable funding for their assets and off-balance sheet operations, for a period of one year. In accordance with current
regulatory legislation, the novobanco Group is required to comply with a minimum regulatory limit of 100% in both ratios
(LCR and NSFR).
In the novobanco Group, liquidity is managed in a centralized manner at the Headquarters for the prudential consolidated
group, with analysis and decision-making based on reports that allow not only to identify negative mismatches but to
perform dynamic coverage of them. In accordance with the rules of the ITS (Implementing Technical Standards), the
calculation of the net contractual deficit and the rebalancing capacity (counterbalancing capacity) is made for the end of
2023 and 2022:
Total
Up to 7 days
7 days to 1
month
1 to 3 months
3 to 6
months
6 months to 1
More than 1
year
2023
(thousands of Euros)
OUTPUTS
Liabilities from emitted transferable securities (if
they're not treated as retail deposits)
Liabilities from guaranteed lending operations and
operations associated to financial markets
623 639
7 747
4 593
5 842
6 939 455
-
1 150 391
526 714
Behavioural output from deposits
29 699 742
457 933
222 240
532 270
743 368
10 496
30 744
1 026
-
-
167 368
265 471
year
-
-
5 500
599 957
2 891 083
2 371 267
131 309
269 064
28 451 828
85 993
20 143
52 621
49 386
86 945
672 813
38 538 474
477 202
1 407 968
965 395
237 445
3 267 654
32 182 810
-
-
-
-
-
-
-
Exchange swaps and derivatives
Other output
Total Output
INPUTS
Secured lending operations and operations
associated to financial markets
Behavioral inputs from loans and advances
26 477 815
75 994
55 218
147 193
216 681
441 741
25 540 988
Exchange swaps and derivatives
571 179
9 239
31 410
264 420
83 267
52 138
130 705
Own portfolio securities maturing and other entries
10 004 315
80 063
321 079
394 041
251 000
356 039
8 602 093
Total Input
Net contractual deficit
37 053 309
165 296
407 707
805 654
550 948
849 918
34 273 786
(1 485 165)
( 311 906)
(1 000 262)
( 159 741)
313 503
(2 417 736)
2 090 977
Accumulated net contractual deficit
-
( 311 906)
(1 312 168)
(1 471 909)
(1 158 406)
(3 576 142)
(1 485 165)
CAPACITY TO READJUSTMENT
Total
Up to 7 days
7 days to 1
month
1 to 3 months
3 to 6
months
6 months to 1
More than 1
year
Cash
Deployable reserves from the central bank
Negotiable and non-negotiable assets eligible for the
central bank
171 006
5 082 915
6 773 777
-
-
1 095 910
393 824
( 150 627)
251 828
(8 364 712)
Authorized facilities and not utilized received
2 698 448
( 16 140)
( 71 111)
( 185 312)
( 297 069)
717 916
(2 846 732)
Net variation of capacity to adjustment
-
( 16 140)
1 024 799
208 512
( 447 696)
969 744
(11 211 444)
Accumulated capacity to readjustment
14 726 146
14 710 006
15 734 805
15 943 317
15 495 621
16 465 365
5 253 921
(thousands of Euros)
567
Management Report
Sustainability Report
Separate Financial Statements
Annex
OUTPUTS
Liabilities from emited transferable securities (if
they're not treated as retail deposits)
Liabilities from guaranteed lending operations and
operations associated to financial markets
Total
Up to 7 days
7 days to 1
month
1 to 3 months
3 to 6
months
6 months to 1
More than 1
year
2022
year
1 426 968
2 247
4 593
10 535
5 486
296 776
1 107 331
10 059 656
57 154
66 513
1 732 249
3 341 048
739 188
4 123 504
Behavioral output from deposits
29 944 525
490 403
45 719
145 209
166 803
416 287
28 680 104
Exchange swaps and derivatives
Other output
Total Output
INPUTS
Secured lending operations and operations
associated to financial markets
753 198
623 245
5 230
4 477
52 647
384 395
-
-
82 939
15 824
65 165
162 822
34 000
568 944
42 807 592
559 511
169 472
2 272 388
3 612 100
1 551 416
34 642 705
-
-
-
-
-
-
-
Behavioral inputs from loans and advances
36 105 674
5 817 950
63 286
169 329
252 210
507 323
29 295 576
Exchange swaps and derivatives
753 433
6 056
53 146
385 920
83 582
63 089
161 640
Own portfolio securities maturing and other entries
12 335 751
49 286
167 097
266 806
225 215
2 091 882
9 535 465
Total Input
Net contractual deficit
49 194 858
5 873 292
283 529
822 055
561 007
2 662 294
38 992 681
6 387 267
5 313 782
114 057
(1 450 332)
(3 051 094)
1 110 878
4 349 976
Accumulated net contractual deficit
-
5 313 782
5 427 839
3 977 507
926 413
2 037 291
6 387 267
CAPACITY TO READJUSTMENT
Total
Up to 7 days
7 days to 1
month
1 to 3 months
3 to 6
months
6 months to 1
More than 1
year
Cash
176 797
Deployable reserves from the central bank
5 653 802
(5 653 802)
Negotiable and non-negotiable assets eligible for the
central bank
Authorized facilities and not utilized received
Net variation of capacity to adjustment
7 841 356
56 109
62 178
( 116 348)
( 126 324)
(1 918 431)
(5 794 060)
-
-
( 23 829)
( 77 909)
1 378 676
2 739 531
( 84 317)
(3 932 151)
(5 621 522)
( 15 731)
1 262 328
2 613 207
(2 002 748)
(9 726 211)
Accumulated capacity to readjustment
13 671 955
8 050 433
8 034 702
9 297 030
11 910 237
9 907 489
181 278
At the end of 2022, there was a net contractual surplus accumulated over one year of 2,037 million euros, having changed
on December 31, 2023 to a net contractual deficit accumulated over one year of 3,576 million euros. Despite this variation,
the liquidity position remained stable, given that this increase of 5,613 million euros is essentially due to a change in
regulatory reporting criteria, given that last year the deposits at the ECB, totaling 5 654 million euros were considered as a
cash inflow and this year this item is included in the rebalancing capacity.
The counterbalancing capacity for 1 year at the end of 2023 was 16,465 million euros, 6,558 million euros higher than the
value recorded at the end of 2022 (9,907 million euros). This increase is essentially due to the change in regulatory criteria
referred to in the previous point (+5,083 million euros) and the increase in secured funding, which partially offset the
reimbursement of borrowings from the ECB.
In order to anticipate possible negative impacts, internal liquidity stress scenarios are created that represent the types of
crisis that may occur, based on idiosyncratic scenarios (characterized by a loss of confidence in the Bank) and market
scenarios.
568
Annual Report 2023 | novobanco
Assets and Liabilities - Tiering by maturity dates
As at December 31, 2023, and 2022, the tiering of assets and liabilities by maturity dates is as follows:
2023
(thousands of Euros)
Financial Assets
2 488 249
2 522 643
11 244 108
18 207 705
1 399 983
Financial Assets and Liabilities held for trading
Securities
Trading derivatives
101 049
96 068
4 981
231 713
222 460
9 253
15 815
-
15 815
87 768
-
87 768
-
-
-
Up to 3
months
From 3
months to
one year
From one to
five years
More than
five years
Indefinite
duration /
Past due
credit
Total
35 862
688
436 345
318 528
117 817
Financial assets mandatorily measured at fair value through profit or loss
-
112
50
465 049
969 479
1 434 690
Financial assets mandatorily measured at fair value through other
comprehensive income
Securities
126 782
85 400
296 349
166 515
66 400
741 446
126 782
85 400
296 349
166 515
66 400
741 446
Financial assets mandatorily measured at amortized cost
2 259 886
2 190 231
10 596 889
17 156 023
364 104 32 567 133
Securities
Loans and advances to banks
Credit to Customers
Derivatives - Hedge Accounting
Financial Liabilities
Financial Liabilities held for trading
708 639
5 087
1 546 160
532
434 145
102 165
1 653 921
15 187
4 145 647
16 144
6 435 098
335 005
3 236 483
3 088
13 916 452
332 350
-
-
8 524 914
126 484
364 104 23 915 735
683 074
21 857 624
6 264
11 092 558
8 670
3 098 330
15 234
1 141 651
70 439
-
- 37 190 163
100 607
-
36 964
599
1 128 807
-
5 495 077
-
-
3 867 053
- 29 255 056
1 366 382
-
584 159
-
501 500
-
-
-
124 957
- 36 790 731
- 9 446 463
4 667 150
-
4 779 313
-
27 344
268
13 672 134
13 672 134
-
-
-
Financial liabilities measured at amortised cost
21 851 321
11 083 412
2 980 581
1 049 285
Due from central banks
Due from other credit institutions
(of which: Operations with repurchase agreement)
Due to Customers
(of which: Operations with repurchase agreement)
Liabilities represented by securities
Subordinated liabilities
Financial liabilities associated with transferred assets
Derivatives - Hedge Accounting
Notional
Trading derivatives
Notional Purchase
Notional Sale
178 807
1 643 753
854 275
20 028 761
813 660
-
-
-
39
2 173 776
2 120 776
1 045 013
1 075 763
950 000
1 905 618
1 452 461
8 227 794
302 564
-
-
-
476
2 442 709
1 122 003
561 063
560 940
-
1 943 540
1 560 317
931 566
250 158
105 475
-
-
102 515
20 814 116
2 059 646
1 022 075
1 037 571
-
2 166
-
66 935
-
478 684
501 500
-
21 927
11 360 130
4 144 038
2 038 999
2 105 039
Derivatives - Hedge Accounting
53 000
1 320 706
18 754 470
7 216 092
Notional Purchase
Notional Sale
26 500
26 500
660 353
660 353
9 377 235
9 377 235
3 608 046
3 608 046
569
Management Report
Sustainability Report
Separate Financial Statements
Annex
2022
(thousands of Euros)
Financial Assets
Financial Assets and Liabilities held for trading
Securities
Trading derivatives
1 314 646
13 479
-
13 479
3 694 724
16 816
4 911
11 905
9 499 196 21 116 122 1 516 126
-
-
-
107 202
21 462
85 740
33 350
10 055
23 295
Up to 3
months
From 3
months to
one year
From one
to five
years
More than
five years
Indefinite
duration
/ Past
due
credit
Total
37 140 814
170 847
36 428
134 419
Financial assets mandatorily measured at fair value through profit or loss
Securities
Financial assets measured at fair value through profit or loss
Securities
Credit to Customers
-
-
-
-
-
-
-
18
13
13
2 469
431 196 1 103 987
1 537 652
2 469
-
431 196
-
1 103 987
-
1 537 652
18
-
-
-
-
-
-
13
13
Financial assets mandatorily measured at fair value through other
comprehensive income
142 178
1 588 220
252 293
126 354
73 989
2 183 034
Financial assets mandatorily measured at amortized cost
1 158 981
2 089 292
9 072 122
20 027
837
338 150 32 686 382
Securities
Loans and advances to banks
Credit to Customers
Derivatives - Hedge Accounting
Financial Liabilities
Financial Liabilities held for trading
Financial liabilities measured at amortised cost
Due from central banks
Due from other credit institutions
(of which: Operations with repurchase agreement)
Due to Customers
(of which: Operations with repurchase agreement)
Liabilities represented by securities
Subordinated liabilities
Financial liabilities associated with transferred assets
Derivatives - Hedge Accounting
Notional
Derivatives held for trading
Notional Purchase
Notional Sale
Derivatives - Hedge Accounting
Notional Purchase
Notional Sale
37.6. Operational risk
786 798
363
371 820
8
24 131 408
8 098
24 123 307
1 627 198
1 001 089
123 620
21 495 020
-
-
-
-
3
535 014
101 476
1 452 802
383
10 582 744
11 055
10 571 109
3 750 000
669 315
-
5 460 348
-
275 874
415 572
-
580
2 688 889
1 598 251
2 682 849
1 342 255
1 340 594
6 040
3 020
3 020
1 470 895
735 763
735 132
127 356
63 678
63 678
2 830 097
39 322
138 962
5 116 010
18 690
5 038 794
950 000
2 214 958
2 027 204
1 469 855
450 906
403 981
-
-
58 526
4 539 891
4 977
6 202 703 15 482 969
423 533
878 502
61 474
755 525
-
293 949
-
-
-
461 576
-
-
61 503
13 683
959
1 947 176 4 639 927
2 285 684
963 226
2 354 243
983 950
9 262 176 9 044 032
4 522 016
4 631 088
4 522 016
4 631 088
11 209 352
-
-
338 150
-
44 451
-
8 691 800
146 138
23 848 444
562 886
40 753 115
99 317
44 451 40 533 186
6 327 198
4 179 311
2 150 824
28 425 223
450 906
1 141 431
415 572
44 451
120 612
-
-
-
-
-
-
-
44 451
-
-
-
-
-
-
-
-
29 180 451
10 740 847
5 326 928
5 413 919
18 439 604
9 219 802
9 219 802
Operational risk generally translates into the probability of the occurrence of events with negative impacts, in the results or
in the capital, resulting from the inadequacy or deficiency of procedures and information systems, the behaviour of people
or motivated by external events, including legal risks. Thus, operational risk is understood as the calculation of the following
risks: operational, information systems, compliance and reputation.
For the management of operational risk, a system was developed and implemented to ensure the uniformity,
systematisation and recurrence of the activities for the identification, monitoring, control and mitigation of this risk. This
system is supported by an organizational structure, integrated in the Global Risk Department exclusively dedicated to this
task, as well as by Operational Risk Management Representatives designated by each of the departments, branches and
subsidiaries considered relevant, which are responsible for complying with the procedures. and the day-to-day management
of this Risk in its areas of competence.
37.7. Capital Management and Solvency Ratio
The main objective of the capital management is to ensure compliance with the novobanco’s strategic objectives in terms
of capital adequacy, respecting and enforcing the requirements for calculating risk-weighted assets and own funds and
ensuring compliance with the levels of solvency and leverage defined by the supervisory entities, in particular by the
European Central Bank (ECB) – the entity directly responsible for the supervision of novobanco - and by the Bank of
Portugal, and internally stipulated risk appetite for capital metrics.
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The definition of the strategy for capital adequacy management rests with the Executive Board of Directors and is integrated
in the global definition of novobanco‘s objectives.
The capital ratios of novobanco are calculated based on the rules defined in Directive 2013/36/EU and Regulation (EU) nº
575/2013 (CRR) that define the criteria for the access to the credit institution and investment company activity and
determine the prudential requirements to be observed by those same entities, to the calculation of the ratios mentioned
above.
novobanco is authorised to apply the Internal Ratings-Based Approach (IRB) for the calculation of risk weighted assets by
credit risk. In particular, the IRB method is applied to the exposure classes of institutions, corporate and retail of novobanco
Portugal. The equity’ risk classes, the positions taken in the form of securitization, the positions taken in the form of
participation units in investment funds, and the elements that are not credit obligations are always handled by the IRB
method regardless of novobanco’s entities in which the respective exposures are recorded. The standard method is used in
the determination of risk weighted assets by market and operational risks.
The regulatory capital components considered in the determination of solvency ratios are divided into own funds of level 1
(common equity Tier I or CET I), additional own funds of level 1 (additional Tier I) which combined with the CET I constitute
the own funds of level I (Tier I), and own funds of level 2 (or Tier II) which added to the Tier I represent the total own funds.
The total own funds of novobanco are composed by elements of CET I and Tier II.
Supplementary information on the evolution and composition of Novobanco Group's capital ratios can be found in the
Group's Market Discipline Document (section 3. Capital Adequacy).
The summary of own funds, risk weighted assets and capital ratios capital of novobanco as of 31 December 2023 and 2022
are presented in the following table:
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Realised ordinary share capital, issue premiums and own shares
Reserves and Retained earnings
Net income for the year attributable to shareholders of the Bank
Non-controlling interests (minority)
A - Equity (prudential perspective)
Net income for the year attributable to non-eligible Bank shareholders
Non-controlling interests (minority)
Adjustments of additional valuation
Transitional period to IFRS9
Intangibles assets
Insufficiency of provisions given the expected losses
Pension fund assets with defined benefits
Deferred tax assets and shareholdings in financial companies
Others (1)
B - Regulatory adjustments to equity
C - Own principal funds level 1 - CET I (A+B)
Capital instruments eligible for additional Tier I
Other elements eligible for additional Tier I
D - Additional own funds Level 1 - Additional Tier 1
E - Level 1 own funds - Tier I (C+D)
Subordinated liabilities eligible for Tier II
Other elements eligible for Tier II
Regulatory adjustments for Tier II
F - Level 2 own funds - Tier II
G - Eligible own funds (E+F)
Credit risk
Market risk
Operational risk
H - Risk Weighted Assets
Solvability ratio
CET I ratio
Tier I ratio
Solvability ratio
Leverage ratio (2)
2023
(fully
loaded)(3)
(millions of Euros)
2023
(phase in))
2022
6
568
( 3
339)
801
-
4
029
-
-
( 4)
-
( 34)
-
( 12)
(
246)
6 568
6 305
( 3 339)
( 3 692)
801
454
-
-
4 029
3 067
-
-
( 4)
79
( 34)
-
-
-
( 5)
122
( 70)
-
( 12)
( 52)
( 246)
( 332)
( 413)
( 398)
( 248)
(
701)
3
328
-
-
-
3
328
497
78
-
575
3
903
18
339
100
1 905
20
344
16,4
%
16,4
%
19,2
%
7,2%
(C/H)
(E/H)
(G/H
)
( 615)
( 584)
3 415
2 483
-
-
-
-
-
-
3 415
2 483
497
78
-
399
91
-
575
490
3 990
2 973
18 406
19 855
100
1 905
77
1 621
20 411
21 553
16,7%
11,5%
16,7%
11,5%
19,5%
13,8%
7,4%
5,2%
(1) Includes adjustments to the CCA receivable, reflected in reserves, and not received from the Resolution Fund,
as well as the amount relating to the backstop.
(2) The leverage ratio results from dividing Tier 1 by the exposure measure calculated under the terms of the CRR.
(3) Capital and leverage ratios not considering effects relating to the transitional period
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Annual Report 2023 | novobanco
Note 38 – Provision of Insurance or Reinsurance Mediation Service
On 31 December of 2023 and 2022, the compensation arising from the provision of insurance or reinsurance mediation
services has the following composition:
Life
Unit Link and other life commissions
Credit protection insurance (life part)
Traditional products
Non-Life
Private Insurance
Business Insurance
Credit protection insurance (non-life)
Note: the amounts shown are net of accruals
(thousands of Euros)
2023
2022
16 084
19 152
945
775
14 364
12 054
10 674
177
1 203
1 795
877
16 480
9 891
8 300
177
1 414
28 138
29 043
The Bank does not collect insurance premiums on behest insurers, nor does it move funds related to insurance contracts.
Thus, there is no other asset, liability, income or charge to be reported, related to the insurance mediation activity carried
out by the Bank, other than those already disclosed.
Note 39 –Subsequent Events
• On 1 February 2024, Novobanco announced that on that date Fitch had assigned a BBB- rating to Novobanco's long-
term preferred senior debt. The Investment Grade rating reflects i) the Bank's current business model; ii) a significant
improvement in asset quality; iii) profitability levels that compare favorably with peers; iv) significant improvement in
capital buffers in 2023; and v) stable financing, along with adequate liquidity.
• On February 21, 2024, novobanco informed about the issuance of Covered Bonds worth 500 million euros, maturing on
March 1, 2027 (soft bullet). The expected rating of the issue is Aaa by Moodys. The bonds have an annual interest rate of
3.25%, equivalent to 3-year mid-swaps plus 45bps;
• On February 28, 2024, novobanco issued Senior Preferred debt in the amount of 500 million euros, maturing on March 8,
2028 and with an early repayment option on March 8, 2027. The bonds were issued with an annual coupon rate of 4.25%.
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€743mn
Net Income
18.2%
CET 1 ratio
574
20.4%
RoTE
Annual Report 2023 | novobanco
ANNEX
576
584
592
596
Auditor’s Report on the Consolidated Financial
Statements
Auditor’s Report on the Separate Financial Statements
Evaluation Report
Report of the General And Supervisory Board
575
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Financial Statements
Annex
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577
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Sustainability Report
Financial Statements
Annex
578
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579
Management Report
Sustainability Report
Financial Statements
Annex
580
Annual Report 2023 | novobanco
581
Management Report
Sustainability Report
Financial Statements
Annex
582
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583
Management Report
Sustainability Report
Financial Statements
Annex
584
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585
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Sustainability Report
Financial Statements
Annex
586
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587
Management Report
Sustainability Report
Financial Statements
Annex
588
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589
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Sustainability Report
Financial Statements
Annex
590
Annual Report 2023 | novobanco
591
Evaluation Report from the General and Supervisory Board
on the adequacy and effectiveness of the organizational
culture in place in Group Novo Banco, S.A. and the
governance and internal control frameworks as defined
in b) c) and d) of Article 58th of the Notice from Bank of
Portugal nº 3/2020
Introduction
1.
This evaluation report is presented to comply with
b) c) and d) of Article 58th of the Notice from Bank
of Portugal nº 3/2020 (the “Notice”) and belongs to
the annual report on the evaluation of the adequacy
and effectiveness of the organizational culture in
place in Group Novo Banco, S.A. (the “Group”) and
the governance and internal control frameworks with
reference to the period from December 1, 2022, to
November 30, 2023.
Responsibilities
2.
The management and the supervisory bodies are
responsible, under their respective competencies,
for promoting the existence in the Group of an
organizational culture supported in high ethical
standards which:
• promotes an integral risk culture which encompasses
all activity areas of the Group and ensures the
identifications, assessment, monitoring and control of
the risks that the Group is or can become exposed;
• promotes a professional conduct prudent and
responsible to be observed by all employees and
members of the management and supervisory
boards under their roles and aligned with high ethical
standards documented in a code of conduct specific
for the Group;
• reinforces the reputation and levels of confidence
on the Group, both internally as in the relations with
customers, investors, supervisory bodies and other
third parties.
It is also the responsibility of the management and
supervisory bodies to ensure that: the organizations
culture of the Group and the governance and internal
control frameworks, including the remuneration actions
and policies and other matters included in the Notice,
are adequate and effective and promote a sound
and prudent management; the Group evaluates the
adequacy and effectiveness of the organizational
culture in place and the governance and internal control
frameworks and issues an yearly report on the results of
that evaluation (the “Report”).
3.
It is our responsibility to issue this report as described in
b) c) and d) Article 58th of the Notice in order to include
in the Report.
Activities performed
4.
In order to comply with our responsibilities regarding
the organizational culture and the governance and
internal control frameworks, we performed the following
activities, for which we present a summary:
• Maintained regular interactions with the Executive
Board of Directors. For that purpose, we met with
members of the Executive Board of Directors to clarify
issues, we read the minutes of the meetings of the
Executive Board of Directors; During these meetings,
it was presented to us the situation of the Group,
including matters related to the subsidiaries, which
allows us to appreciate the internal control in place at
Group level;
• We met with the managers responsible for the Risk
Management, Compliance and Internal Audit functions
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Management ReportSustainability ReportFinancial StatementsAnnex with responsibility at Group level and reviewed the
annual activity reports. Regarding the annual report
of the internal audit function, we considered the
validation of the classification of deficiencies that was
guaranteed for each of the entities of the novobanco
group (novobanco, novobanco dos Açores and Best);
• We additionally assessed the self-assessment reports
of the control functions, evaluated their declaration
of independence and inquired about the existence
of any fact or circumstance that could affect their
independence, namely i) by analyzing the potential
impact of the deficiencies identified in each of the
functions of control, ii) by ensuring that there are
no conflicts of interest; iii) the remuneration policy
and rules do not constitute a risk, iv) the skills and
preparation of the teams in each control function, v)
the unobstructed access to all relevant bodies, or vi)
the communication and reporting channels that are
implemented .We assessed the audit plan for 2023
and the results of the internal audit actions;
• We met with the external auditor and analyzed the
contents of the Audit report, Impairment Reports,
Asset safekeeping Report, Additional Report to the
Supervisory Board, the interim limited review reports
for March 31, June 30 and September 30 of 2023 and
the Factual Findings Report issued by Ernst & Young –
Audit & Associados – SROC, S.A., including the test on
the classification of the deficiencies. We appreciated
the content of the communication of significant
deficiencies of internal control of the Group sent by the
external auditor on December 14, 2023;
• We read the Group Report and the individual reports of
the relevant subsidiaries, including the deficiencies and
planned measures to correct them and assessed the
status of those measures;
• We requested the necessary information that would
allow us to ensure the adequacy of the processes
and controls implemented by the Group and
compliance with the provisions of the internal policies
and regulations of the most relevant subsidiaries,
for example, “NG0025_2023 – Individual and
consolidated financial statements consolidation and
reporting rules” and “RG 0003_2022 – Regulation of
the risk function of the Novo Banco Group”;
• We confirmed that for the most relevant processes,
Policies are defined, approved and implemented across
the Novobanco Group Entities, with the processes and
controls being mostly applied across the board, but
with due adaptation when applicable. We interviewed
those responsible for the departments to confirm the
consistency of the application of procedures for the
Group’s most relevant subsidiaries;
• We confirmed that the Group has implemented
processes and controls that ensure the obtaining
of relevant information from subsidiaries for
the consolidation process, including accounting
information and other information elements;
• We met with the supervisory bodies of the most
relevant subsidiaries and inquired about the main
developments that occurred during the reference
period with an impact on the internal control system,
the consistency between the internal control systems,
about compliance with the body’s activity plan and
jointly identified potential concerns and/or deficiencies
identified in the existing processes in each entity;
• We were aware of the deficiencies identified in
each of the subsidiaries as well as their severity
and the mitigation plans defined by the responsible
departments in order to guarantee their mitigation;
• We assessed the coherence between the internal
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Annual Report 2023 | novobanco control systems of the subsidiaries, using the
conclusions of contacts with the supervisory bodies
of the most relevant subsidiaries, the assessment of
the content of the evaluation reports of these same
supervisory bodies, in addition to all other procedures
carried out and previously described;
• The members of the FAAC participated in a training
session on the Policy for the Selection, Appointment
and Assessment of the Statutory Auditor and the
Hiring of Non-Prohibited Distinct Auditing Services.
the criteria defined by the Group and the process to
classify the deficiencies according to the criteria and
assumptions. Given the judgment associated with the
definition of the criteria, the assumptions and in the
evaluation of the impacts, different classification could
be given to the deficiencies in case different criteria
or assumptions were defined. Equally, an evaluation
performed in other date on the same deficiency
could reach different conclusions, and the impact of a
deficiency can materialize differently from what was
estimated.
Inherent limitations
5.
The General and Supervisory Board is aware of the
inherent limitations of any internal control framework
which, irrespectively its adequacy and effectiveness,
may only provide reasonable assurance to the
management and supervisory bodies on the purposes
related to organizational culture, governance and internal
control systems, as well as other matters described in
the Notice. Additionally, an appropriate internal control
in place regarding the financial and prudential reporting
is not on itself sufficient to ensure the reliability of the
disclosed financial and prudential information. In fact,
there are prior processes in the different operational and
support areas of the Group, where it is critical to have an
adequate internal control in place to ensure the reliability
of the information provided to the areas responsible
for the prudential and financial reporting. Therefore,
given the inherent limitations on any control system,
deficiencies, fraud or errors may occur without being
detected.
Given the usual dynamic in any internal control system,
any conclusion on the adequacy or effectiveness of that
system cannot be projected for future periods, as there
is the risk that the controls and procedures in place may
become inappropriate due to changes in the context
or deterioration in the compliance with the policies,
procedures and controls.
The evaluation of the impacts of the deficiencies is an
estimate of the Executive Board of Directors and follows
Conclusion
As described in the novobanco Group Report,
deficiencies were identified and classified as F3 – High
and F4 – Severe, which may have an impact on the
financial situation, own funds requirements, internal
governance, business model or risk management and
control of the Group.
For each of these deficiencies, a mitigation plan and a
proposed implementation calendar were presented to
the supervisory body. Considering the importance of
the matter in the Group, these deficiencies are being
monitored by internal structures, in particular by the
control functions and the Executive Board of Directors,
and will periodically be subject to analysis of the
implementation status by the supervisory body.
Considering the activities we performed and findings
which are described in paragraph 4 above and except
on the eventual impact of the matters described
in paragraphs 6 to 7, notwithstanding the ongoing
implementation the new requirements of the Notice
and with reasonable assurance in respect to the material
aspects:
• In our opinion, the organizational culture and the
governance and internal control frameworks of Novo
Banco, S.A. were adequate and effective on Nov\
ember 30, 2023;
• We appreciated positively the completeness status
of the defined measures from December 1, 2022,
to November 30, 2023, to correct the deficiencies
identified in the Report, confirming the effort to
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Management ReportSustainability ReportFinancial StatementsAnnex implement mitigation measures during the period and
the positive evolution recorded in terms of severity;
Other matters
• We declare that the classification given to the
deficiencies classified as level F3 “High” or F4 “Severe”
is adequate;
• In our opinion, the internal control functions, including
the outsourced operational procedures, are performed
with adequate quality and we have considered
demonstrated its independence;
• The financial and prudential reporting processes were,
insofar as we could appreciate due to our procedures
inherent to our responsibilities, reliable from December
1, 2022, to November 30, 2023;
• The processes to produce information disclosed to
the public by the Group due to legal or regulatory
requirements, including the financial and prudential
disclosures were, insofar as we could appreciate due to
our procedures inherent to our responsibilities, reliable
from December 1, 2022, to November 30, 2023;
• The requirements to disclose information to the public
resulting from applicable law or regulation and related
with the matters described in the Notice were, insofar
as we could appreciate due to our procedures inherent
to our responsibilities, adequately complied with from
December 1, 2022, to November 30, 2023;
• The internal control systems of the subsidiaries were,
insofar as we could appreciate due to our procedures
inherent to our responsibilities, coherent with the
internal control system of the parent;
• The Group has no foreign branches or offshore
institutions with remuneration policies, as these
entities do not make payments of remuneration to any
member of governing bodies or personnel.
6.
This Evaluation Report is prepared and issued solely
for information of the Executive Board of Directors of
the Group and to be presented to the Bank of Portugal
as required by the Notice and as an integral part of the
Report. Therefore, cannot be used for any other purpose,
or read outside the context of the Report, nor can be
presented to third parties without our previous written
consent.
Lisbon, December 14, 2023
General and Supervisory Board of Novo Banco, S.A.
Chairman
Member
(This report was approved by the General and Supervisory Board at a meeting held on December 14, 2023)
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Annual Report 2023 | novobanco Report of the General and Supervisory Board and
Opinion of the Financial Affairs (Audit) Committee
on the Management Report and on the Individual and
Consolidated Financial Statements of Novo Banco, S.A.
for the year ended 31 December 2023
Pursuant to the mandate the General and Supervisory
Board (“GSB”) has been given and in compliance with
the provisions of paragraphs h) and q) of paragraph 1 of
article 441 and article 444 of the Commercial Companies
Code and the Articles of Association of Novo Banco,
S.A. (“novobanco”), the GSB is required to issue the
Annual Report on the activity developed and the
Financial Affairs (Audit) Committee is required to issue
an opinion on the Management Report and the individual
and consolidated financial statements of novobanco,
which comprise the individual and consolidated income
statement and individual and consolidated statement
of comprehensive income, individual and consolidated
balance sheet, individual and consolidated statement
of changes in equity and individual and consolidated
statement of cash flows and the respective Annexes,
as well as on the proposed application of results,
presented by the Executive Board of Directors (“EBD”)
of novobanco, for the year ended on 31 December 2023.
1. Report of the General and
Supervisory Board for the year
2023
1.1. Composition and scope
In accordance with the applicable law, novobanco’s
articles of association and best practices at the date
of this Annual Report, seven of the ten members
who comprise the GSB, including the Chairman, are
independent. During 2023 the composition of the GSB
has undergone some changes: on 24 February, 2023
Benjamin Friedrich Dickgiesser presented his resignation;
upon the conclusion of the fit & proper process, on 21
June, 2023 Monika Wildner has joined the GSB as an
independent member; Evgeniy Kazarez joined the GSB
as a non-independent member on 7 November, 2023
following the conclusion of fit & proper process; Donald
John Quintin presented his resignation as a member on
14 December 2023; and on 22 December 2023, a fit &
proper process was submitted for a new independent
member to join the GSB for the current term of office
(2021 to 2024), whose exercise of functions is subject to
authorisation from the competent regulatory authorities
and approval by novobanco’s General Shareholders’
Meeting.
The GSB has the powers foreseen by law, by the articles
of association and by its own regulation, in particular
the supervision of the EBD’s management of the Bank
and Group companies and the supervision of all matters
related to risk management, compliance and internal
audit.
596
Management ReportSustainability ReportFinancial StatementsAnnex During 2023, the GSB monitored the activity of the Bank
and its most significant financial subsidiaries. The activity
of the GSB is directly supported by 5 (five) Committees,
some of them mandatory pursuant to applicable law,
to which some of its powers have been delegated,
namely, the Financial Affairs (Audit) Committee, the Risk
Committee, the Compliance Committee, the Nomination
Committee and the Remuneration Committee, as
provided for in Articles 6 and 16 of the articles of
association of novobanco, and in the GSB regulation.
These Committees are chaired and composed by
members of the GSB, respecting the legal and
regulatory composition requirements, and can also
have the presence of EBD members or other managers
responsible for the areas covered by the activities of
these Committees.
The GSB meets on a monthly basis and whenever is
deemed necessary.
1.2. Activity undertaken in 2023
General and Supervisory Board
During the year 2023, the GSB held 12 meetings, the
several matters discussed, analysed and approved are
identified in the agendas prepared for each meeting
and are detailed in the respective minutes. These
matters included, amongst others, the individual and
consolidated financial statements of novobanco for the
year ended 31 December 2023 and the consolidated
financial statements for the six months period ended 30
June 2023, as well as the financial results for the first
and third quarters of 2023, the 2023-2025 Strategic and
Medium Term-Plans, the NPA Plan for 2023-2025, the
strategy and risk appetite for 2023, the status of Bank
rating agencies reviews, the approval and/or monitoring
of the sale of assets by novobanco, the closure of the
Spanish Branch and the opening of a Representative
Office in that country, the strategic review of the Banco
Best, the simplification of the GNBGA Group, the closing
of the sale of non-performing loans (NPLs) portfolios
and related assets (including Project Phoenix), the sale
of REO assets, the external communication strategy,
the monitoring of the activity of the Internal Audit
Department, the approval of the Annual Internal Audit
Plan for 2024, the monitoring of the main legal processes
involving the Bank, including arbitration processes, the
progress of headquarters project in Tagus Park, updates
on the implementation of the Human Resources agenda
including the People and Culture program and the
monitoring of all the activity developed and decisions
taken by the GSB Committees.
Throughout the year, the GSB was informed about the
Group’s operating results, the evolution of the retail,
corporate, treasury and digital businesses, the capital
and liquidity position of novobanco, as well as about the
regular forecasts (capital and results) for the end of the
2023 financial year and Group’s Impairment Report. In
addition, within its responsibility for the oversight of the
institution and for the implementation of governance
arrangements that ensure effective and prudent
management, the GSB has analysed and approved the
changes made to the internal policies of novobanco,
namely the Code of Conduct, Conflict of Interest Policy,
Policy on Transactions with Related Parties, Policy for
Reporting Irregularities (Whistleblowing), Anti-Bribery
and Anti-Corruption Policy, Money Laundering and
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Annual Report 2023 | novobanco
Terrorism Financing Prevention Policies, as well as
amendments to the Policy for Selection and Evaluation
of the novobanco Group Statutory Auditor and
Contracting of Non-Prohibited Non-Audit Services,
Remuneration Policies for Management, Supervisory
Bodies and Staff, Policy for Selection and Evaluation of
Novo Banco’ Management and Supervisory Bodies and
Key Function Holders, as well as carried out a regular
review and approved amendments to the GSB and GSB
Committees’ Terms of Reference.
With regard to matters relating to the CCA, the GSB
regularly monitored all matters relating to the execution
of the agreement, including the 2021 capital call, the
activity of the Verification Agent and the progress of the
arbitration matters in connection with the CCA.
The GSB also acknowledged the Monitoring Trustee DG
Comp Final Report noting that the Bank complied with all
of its viability commitments, including the Restructuring
Period, which was formally ended during 2023 by
reference to 31 December 2022.
On the organizational culture, the GSB followed the
results of the Report on Organizational Culture, as
well as the measures defined by the EBD to improve
the culture within novobanco with the setup of a new
project, Strategic Alignment and Cultural Transformation,
designed with the support of external parties and
monitored the progress and the implementation of such
project during 2023.
At the end of the 2023 financial year, and within its
responsibility for the supervision and oversight over
the internal governance and control functions, the GSB
concluded its assessment report on the adequacy and
effectiveness of the organizational culture in force in
the novobanco Group and the governance and internal
control framework with reference to the period from 1
December 2022 up to 30 November 2023, assessing
the Self-Assessment Reports of the Risk, Audit and
Compliance Functions, in accordance with paragraphs b),
c) and d) of Article 58 of Notice no. 3/2020 of the Bank
of Portugal, in which the GSB recognized the deficiencies
detected by the EBD, approved the respective
mitigation plans and proposed implementation deadlines
for each of them.
These deficiencies included 16 classified as F3 -
High Risk and 4 classified as F4 - Severe. The GSB,
through its Chairman, maintained an open and regular
communication channel with the supervisory and
regulatory authorities, monitored closely the MREL
objectives set by the SRB and approved the operations
implemented to achieve these objectives, including
a Tier 2 New Insurance, reviewed and approved the
ICAAP and ILAAP for 2023, as well as the Liquidity
and Capital Plans, closely monitored the evolution of
the implementation of the ESG Strategy, including its
governance model and approved the ESG Policy, and
also monitored the Group’s ECB Stress Test exercise. In
the performance of its functions, the GSB was regularly
notified on regulatory changes and informed on material
correspondence of novobanco.
The GSB also approved the 2023 Recovery Plan, the
IRB Renovation Strategy and Operational Plan, the
AML Annual Report 2023, and accompanied the SREP
Supervisory Dialogue 2023.
During the year the GSB was updated on major topics
and initiatives discussed at the Compliance Committee
including transactions with related parties, Bank
compliance activities and compliance regulatory matters
including Bank inspections, execution of Project Darwin,
APIC project and Whispli KPIs.
During 2023 the GSB acknowledged the new EBD
organizational chart, which reflected the internal
organizational changes including the Chief Commercial
Officer Retail remit, the appointment of the new
Chief Operating Officer (Seamus Murphy) to support
novobanco in achieving its strategic objectives of digital
transformation, operational efficiency and process
simplification, and the appointment of the new CFO
Benjamin Friedrich Dickgiesser.
The GSB also reviewed and approved the new
composition of the GSB Committees following the
changes occurred during 2023 and approved its 2024
activity plan.
Regarding the actions and initiatives taken by
novobanco regarding the challenging macro-economic
environment; the contagion effects of increased
financial market volatility impact arising from the
Russian / Ukraine conflict, and later in the year also
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operational risk including cyber-attacks and outsourcing;
and the increased focus on emerging risks like climate
and environmental risk, were regularly discussed and
assessed by the GSB.
In 2023 a Training Programme on IT and cybersecurity
was set up to strengthen knowledge on information
technology and improve the skills and experience of
the members of the corporate bodies. Several training
sessions were attended last year by the members of the
GSB and EBD. Within the scope and for the purposes of
performing its functions and carrying out the analyses
and verifications necessary, the GSB requested, and
obtained, documentation and clarification of the multiple
questions raised, with full collaboration from Banks’
internal structures and internal control functions’ heads
and staff.
The CEO, CFO and CRO attended GSB meetings as
guests and whenever necessary other EBD members or
senior staff members were invited to attend for specific
agenda items.
Financial Affairs (Audit) Committee
The Financial Affairs (Audit) Committee held 16 meetings
during 2023 and focused its activity on assessing the
Bank’s financial statements and the Statutory Auditor’s
reports for the 2023 financial year, as well as supervising
and monitoring the activity of Internal Audit (IA).
The oversight activity included, among others, the
discussion and analysis of IA monthly update reports
(covering topics such as the implementation of
the agreed plan and related findings, follow-up on
outstanding issues and issues related to IA resources and
practices), and the assessment of the Annual Activity
Execution Report for 2023, and the approval of the
Internal Audit Plan for 2024 (including the multi-annual
plan).
Throughout 2023, the Financial Affairs Committee
monitored the closing of the sale of Non-Productive
Assets, including Project Phoenix and the sale of REOs,
the review process with the Rating Agencies, the RaRoc
project, on-going M&A and Partnerships projects, as well
as the status of the deferred tax assets (“DTAs”) and the
capital increases carried out relating to the exercise of
2018 and 2019.
During 2023, the Committee also monitored the
evolution of novobanco’s capital ratios, as well as the
evolution of several other relevant projects, including the
new Tier 2 issuance process, the RWA (Risk Weighted
Assets) review process, the MREL requirements process
and issuance, the RaRoc levels and the activity of the
Valuation Unit. In addition, during 2023, the Financial
Affairs Committee undertook legal entity reviews of
novobanco´s subsidiaries and branches and monitored
the assessment of novobanco’s equity investments,
including restructuring funds.
The Committee monitored, on a continued basis, the
independence and the work of the external auditor,
including the supervision and approval of other
additional services provided to novobanco’s Group by
that auditor.
The meeting agendas included updates on the
regulatory aspects of the Bank’s activity, the follow-up
of the 2023-2025 Medium-Term Plan (as well as the
preparation of the 2024-2026 Medium-Term Plan) and
the evaluation process for supervisory purposes (SREP)
for 2023.
The Committee also followed the IT strategy, Data
Governance and Data Quality, complying with BCBS239
principals, which will be reported to ECB and Bank of
Portugal, and the 2023 Recovery Plan.
During the year, the Financial Affairs Committee
undertook detailed business reviews of the main
business segments: (1) Retail & Small Business;
(2) Corporates & SME; and (3) Treasury & Capital
Markets, including the progress and status of digital
transformation. In addition, there were regular updates
as to the performance of NB’s Pension Fund and the
approval of the new governance structure introduced
for the monitoring and review of NB’s Pension Fund’s
Assets and Liabilities. Specific reviews of the costs
execution also took place.
The Financial Affairs Committee monitored the internal
control systems during the year and concluded the
annual review of the evaluation of the Internal Audit
function, in accordance with Notice 3/2020 of the Bank
of Portugal.
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Annual Report 2023 | novobanco The members of the Financial Affairs Committee met
with the Supervisory Boards (Audit Committees) of
the Subsidiaries, namely, Banco BEST, novo Banco dos
Açores, GNB Fundos Mobiliários – Sociedade Gestora
de OIC (GNB FM), S.A., GNB Gestão de Patrimónios –
Empresa de Investimento, S.A. (GNB GP), GNB Gestão
de Ativos, SGPS, S.A (GNB SGPS), GNB Real Estate
– Sociedade Gestora de OIC, S.A (GNB RE) and GNB
Sociedade Gestora de Fundos de Pensões, S.A (GNB FP),
having discussed the matters proposed by those Audit
Committees.
A review of the Policy for selection, appointment
and evaluation of the novobanco Group Statutory
Auditor and contracting of Non-Prohibited Non-
Audit Services was made following a principle of
good internal governance of regular update of Bank’s
internal regulations. A proposal of review of the
policy was submitted, in December 2023, to GSB’s
opinion, before its submission for approval by the next
General Shareholders’ Meeting. Additionally, since
the Financial Affairs Committee is the body involved
in the process of selecting and appointing a statutory
auditor and contracting non-prohibited services, its
members attended a training on the subject and on their
responsibilities under the law, performed in November
2023.The Committee members met individually with
the Statutory Auditor and the Head of Internal Audit,
without the presence of EBD members.
Risk Committee
The Risk Committee held 14 meetings during 2023. In
addition to approving loans to individual customers or
groups of associated customers, in accordance with its
Regulation, it also assessed and discussed the strategy,
risk appetite and limits for 2023, in accordance with
the Medium-Term Plan for 2023-2025, the NPA Plan
for 2023-2025 and monitored the main initiatives and
activities in 2023 relating to the challenging macro-
economic environment; the contagion effects of
increased financial market volatility impact arising from
the Russian / Ukraine conflict, and later in the year also
from the Middle East conflict; to the heightened levels of
operational risk including cyber-attacks and outsourcing;
and the increased focus on emerging risks like climate
and environmental risk.. Other topics discussed and
reviewed by the Risk Committee included the main
monthly risk indicators (credit risk, market risk and
operational risk), detailed portfolios, products and sector
exposure analyses, non-financial risks, including cyber
risks and outsourcing risks and the credit provisions and
impairments contained in the financial statements for
the 2023 financial year, as well as the approval of the
Risk Activity Plan for 2024.
The Bank’s non-performing loans portfolio (NPL) was
also monitored and compared with the portfolio of
similar institutions and with the European Banking
Authority (EBA) benchmarks. The risk governance model
was also subject to review in 2023.
The agendas of the meetings regularly included reports
on the regulatory aspects relating to the risks faced
by the Bank, particularly in the context of the IRB Plan,
especially on LGD (loss given default), IRRBB (interest
rate risk of the banking book) and the review of the
risks inherent to the challenging macros-economic
environment, the analysis of economic groups with high
exposure to impacted sectors and the conclusions of the
SREP. The calculation of the Bank’s risk-bearing capacity
was also a frequent topic at the Risk Committee
meetings. Other regulatory risk matters were also
discussed and analysed throughout the year, including
the results of the OSI (On-Site Inspections) carried out
in 2023.
The Risk Committee approved ICAAP, ILAAP, ECB Stress
Tests, the IRB Renovation Strategy and Operational Plan,
the RWA Framework, Early Warning System Project and
the PMO Credit & Risk Transformation Implementation.
The Committee also followed the IT strategy, Data
Governance and Data Quality complying with BCBS239
principals, which will be reported to ECB and Bank of
Portugal, and the OSI on Digitalisation, on Credit Quality
Review (CRE), and on IMI Retail SME.
At the end of 2023, the Risk Committee analysed
the assessment of the risk management activities,
in accordance with Bank of Portugal Notice 3/2020,
including the Annual Self-Assessment Report (RAA).
The Head of the Risk Function, the CEO, the CFO, the
CCO and the CRO attended the meetings as guests,
whenever necessary.
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Management ReportSustainability ReportFinancial StatementsAnnex Compliance Committee
Nomination Committee
The Compliance Committee held 7 meetings during 2023,
monitoring and deciding on government, regulatory and
legal issues related to the Bank’s Compliance activity
and analysing and discussing the Bank’s regulatory
compliance matters, including those relating to Notice
3/2020 of the Bank of Portugal and the EBA Guidelines
on internal control and implementation in the areas of
compliance, legislation on financial crime matters, where
the prevention of money laundering, anti-bribery and
corruption and market abuse are included, legislation on
personal data protection, whistleblowing procedures,
other legal and regulatory matters and relevant
ongoing projects, such as APIC (updated information on
clients), as well as if the activity plan of the Compliance
Department was being followed. The Committee also
analysed and discussed topics related to transactions
with related parties and conflicts of interest, compliance
matters relating to subsidiaries and the Luxembourg
Branch, including local inspections and audits on AML
topics and the remediation plan that encompassed the
transfer of legacy accounts from Luxembourg to Lisbon,
as well as regularly monitoring of the most relevant fines
and sanctions applied to novobanco.
During the year, a new Whistle-blowing platform
(“Whispli”) was successfully launched across the
novobanco Group, as part of the Strategic Alignment and
Culture Transformation program and internal processes
were revised, enhanced and reinforced. Annual review
and amendment of compliance related policies were also
completed during the year including, Code of Conduct,
Conflict of Interest Policy, Policy on Transactions with
Related Parties, Policy for Reporting Irregularities
(Whistleblowing), Anti-Bribery and Anti-Corruption
Policy, Money Laundering and Terrorism Financing
Prevention Policies.
The Compliance Committee regularly monitored the
execution of Project Darwin, the enhancement of the
Target Operating Model enhancement of financial crime
with focus on KYC / KYT and correspondents’ banking.
At the end of 2023, the Compliance Committee analysed
the assessment of the compliance management activities,
in accordance with Bank of Portugal Notice 3/2020,
including the Annual Self-Assessment Report (RAA), and
approved the Activity Plan of Compliance for 2024.
The Nomination Committee held 4 meetings during
2023. The Fit & Proper Officer supported the Nomination
Committee on the annual assessment (individually
and collectively) of the adequacy and suitability of
the members of the Executive Board of Directors of
novobanco and of the members of the Board of Directors
of the subsidiaries novobanco dos Açores, Banco BEST
and GNB – Gestão de Ativos and of the Bank’s Key
functions holders.
During 2023, Fit and Proper processes were also
submitted to supervisory authorities regarding certain
members of the governing bodies of novobanco, as well
as for the governing bodies of novobanco dos Açores,
Banco BEST and GNB GA and its subsidiaries.
During 2023, the Nomination Committee discussed,
reviewed and approved the new EBD organizational
structure with updated roles and responsibilities as
detailed previously. Also updated the Succession
Planning coverage of novobanco, informed of the results
of the measures defined by the EBD to improve the
Bank’s culture with a new project designed with the
support of external parties and appointed the new Group
Fit & Proper Officer.
On gender diversity, an Action Plan with specific
targets was approved in March 2023 by GSB following
an assessment made in the Nomination Committee
and submitted to the supervisory authorities. The
implementation of such plan is being monitored by the
Nomination Committee and a year-end status was
presented and assessed by the GSB.
The performance and potential of top management at
novobanco was also analysed, together with the HR’s
reviews conducted with each of the members of the EBD
in respect of each of their departments.
The Nomination Committee has assessed and approved
the changes on the composition (members) of the
General and Supervisory Board, being such approval
always subject to the Fit & Proper process conducted by
the competent authorities.
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Annual Report 2023 | novobanco Remuneration Committee
The Remuneration Committee held 5 meetings during
the year 2023. At these meetings, the Committee
monitored the implementation of the remuneration
policies concerning the management and supervisory
bodies and the staff and adopted a set of decisions
related to the variable component of the remuneration
for the EBD and Identified Staff for the year 2023.
The Remuneration Committee also set and approved the
main individual and collective performance indicators
for the EBD members for the year 2023, based on
the approved budget for that year and approved the
2022’s EBD KPI results. The Remuneration Committee
acknowledged and confirmed the List of Identified
Staff for year 2023 following a recommendation of the
EBD. It also approved the budget for 2023 variable
remuneration and the amounts allocated to the
Identified Staff and EBD members (subject to the rules in
the respective policy).
Those functions were performed also with the
involvement of the relevant Bank’s internal areas and
with the control functions.
Annual review and amendment of the remuneration
policies for Management and Supervisory Bodies
and Staff were also completed during the year. The
Remuneration Committee also approved the selection
of certain employees under the Shaping the Future Plan
for 2023.
At the end of 2023, the Remuneration Committee
concluded the independent internal analysis foreseen
in Notice 3/2020 of Bank of Portugal aimed at verifying
compliance of the remuneration, processes and policies
in the Bank to be submitted to the Shareholders’
Meeting, the General and Supervisory Board and the
Executive Board of Directors.
1.3. Interactions with the Statutory
Auditor
The GSB and the Financial Affairs (Audit) Committee
held several working meetings throughout the year with
the Statutory Auditor, Ernst & Young Audit & Associados
- SROC, S.A., both within the scope of the audit of the
individual and consolidated financial statements for the
year ended on December 31, 2023, as well as within the
scope of regular monitoring and discussion of the most
relevant aspects arising from the evaluation of internal
control.
Within the scope of the existing articulation with the
Statutory Auditor, the GSB obtained the necessary and
sufficient clarifications to the questions raised within the
scope of its functions and, in particular to the following
aspects:
• The completeness and adequacy of the accounting
records and documents that support them;
• The existence of goods or values belonging to
novobanco’s Group or received in guarantee, deposit
or other title; and
• If the accounting policies and valuation criteria
adopted lead to an adequate representation of the
assets and of the results of novobanco.
The GSB analysed all matters contained in the Auditor’s
Reports on the individual and consolidated financial
statements issued by the Statutory Auditor for the
year ended December 31, 2023, having obtained
from the auditors all clarifications necessary for their
understanding, in particular on the relevant audit matters
included therein:
• Impairment for loans and advances to customers;
• Financial instruments measured at fair value and
classified as level 3 under IFRS 13;
• Restructuring provisions;
• Restructuring funds valuation;
• Pension funds liabilities valuation;
• Measurement of real estate obtained through credit
foreclosure;
• NPA sale transactions;
• Contingency on property tax;
• Disclosure of other contingent liabilities;
• Contingent Capital mechanism matters;
• Financial Disclosure matters; and
• Internal control matters, in particular compliance with
Notice 3/2020 Bank of Portugal.
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Management ReportSustainability ReportFinancial StatementsAnnex individual and consolidated financial position of
novobanco, its individual and consolidated results of
changes in equity and the individual and consolidated
cash flows;
b. the accounting policies and valuation criteria adopted
are appropriate;
c. the management report is sufficiently clear as to
the evolution of the business and the situation of
the Bank and all the subsidiaries included in the
consolidation, highlighting the most significant
aspects, as well as a description of the main risks and
uncertainties that the Bank faces;
d. the proposed application of results does not
contradict the legal and statutory provisions
applicable; and
e. pursuant to paragraph 5 of article 420 of the
Commercial Companies Code, applicable by reference
to article 441, paragraph 2, the information on
corporate governance includes the elements required
under the terms of article 29-H, no. 5 of the Securities
Code and other applicable legislation.
Therefore, the Financial Affairs (Audit) Committee issues
a favourable opinion to:
a. the management report as well as the individual
and consolidated financial statements for the
year of 2023, presented by the Executive Board of
Directors, including the proposed application of results
submitted by the EBD in its Management Report;
b. the Audit Report on the consolidated and individual
financial statements of the Bank issued by EY for
2023.
Finally, the General and Supervisory Board would like
to express its appreciation to the Executive Board of
Directors, to the managers in charge of the various areas
of the Bank and to the remaining employees, as well as
to the auditors, for the cooperation and the support in
the completion of its work.
Lisbon, 5 March 2024
All these matters were monitored by the GSB and
its Committees, which, on these matters, were kept
informed by the EBD, by the internal control functions,
by the relevant Departments and by the external
auditors.
In preparation of the accounts of the financial year, the
GSB analysed the management report as well as other
documents submitted by the EBD, having proceeded to
verifications, and obtaining the clarifications deemed
necessary, which comply with the applicable legal and
accounting requirements.
The accounts were audited by the audit firm Ernst &
Young Audit & Associados SROC, S.A., which issued the
Audit Report on the financial information for the year
ended 31 December 2023 on 5 March 2024, without
qualifications nor emphasis of matter, to which the GSB
expresses its agreement.
The GSB reviewed the Additional Report to the
Supervisory Board issued by the Statutory Auditor
on the same date, which corresponds in substance to
the matters that have been discussed during the year,
and for which they have obtained all the necessary
clarifications.
2. Opinion of the Financial
Affairs (Audit) Committee on
the Management Report and
the individual and consolidated
financial statements
Within the scope of our functions, and in accordance
with article 444, number 2, of the Code of Commercial
Companies, the GSB verified that:
a. the individual and consolidated balance sheet,
the individual and consolidated income statement
and the individual and consolidated statement
of comprehensive income, the demonstration of
changes in individual and consolidated equity, the
individual and consolidated cash flow statement
and the corresponding Annex, allow a proper
understanding of the asset, liabilities and the
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Annual Report 2023 | novobanco General and Supervisory Board and the Financial
Affairs (Audit) Committee
Byron James Macbean Haynes
Chairman of the General and Supervisory Board and member of
the Financial Affairs (Audit) Committee
Karl-Gerhard Eick
Vice-Chairman of the General and Supervisory Board and
Chairman of the Financial Affairs (Audit) Committee
Kambiz Nourbakhsh
Member of the General and Supervisory Board and member of
the Financial Affairs (Audit) Committee
Mark Andrew Coker
Member of the General and Supervisory Board
John Herbert
Member of the General and Supervisory Board
Robert A. Sherman
Member of the General and Supervisory Board
Carla Antunes da Silva
Member of the General and Supervisory Board
William Henry Newton
Member of the General and Supervisory Board
Monika Helene Wildner
Member of the General and Supervisory Board
Evgeniy Kazarez
Member of the General and Supervisory Board
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Annual Report 2023 | novobanco