Rodrigo Amaral talks to Nelson
Machado, head of retail banking at Portugal’s Millennium BCP.
Putting the difficulties of last year behind it, Machado says the
bank is focusing on improved cross selling and strategic branch
openings as ways to find growth in a stubbornly stagnant Portuguese
consumer banking market.

You won’t find many Western banks
celebrating their performance over the past year. But few will have
gone through as much pain as Millennium BCP, Portugal’s second
largest banking group. In 2007, Millennium had to deal not only
with the affects of the subprime crisis and the subsequent global
credit crunch, but also with a whole set of problems created within
its own ranks.

A failed bid to purchase BPI, a smaller
rival, triggered a period of management strife between opposing
groups of shareholders that ended with a number of changes at the
very top of the company.

Asset growthIf the internal crisis was not enough, Millennium has also
been investigated by the Portuguese financial authorities regarding
alleged irregular loans and stock purchases involving offshore
accounts. In mid-July, CMVM, Portugal’s securities commission,
fined the bank €3 million ($4.7 million) as a result of its

All in all, most of 2007 was “brutal” for
Millennium BCP admits Nelson Machado, the bank’s head of retail
banking, in an exclusive interview with RBI.

“I’ve been at the company for over 20
years, but had never seen anything like the second semester of
2007,” he said. “For a bank that is usually known for its
discretion, it was hard to find ourselves in the pages of
newspapers every day for the wrong reasons. It was extremely
difficult for us.”

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Work has started to make up for lost
ground, stressed Machado, in an effort to rebuild the reputation of
a bank that once was seen as unable to put a foot wrong. And in
terms of retail banking, Machado says things have not been as bad
as in other parts of the group.

“In 2007, we had a year that was almost as
good as 2006, when we posted our best performance ever,” he said.
“But no doubt it was the year where profits were obtained with more
effort.” Retail banking income at the end of 2007 was 1 percent
down on the year before, a performance that, considering the
circumstances, was not badly received by Machado. “In almost all
our products and services, our sales were actually higher than in
2006,” he remarked. This year, the situation is looking up

“The first two quarters of 2008 have been
better than the last two quarters of 2007, but not as good as the
first half of last year. We are in a slightly ascendant curve and I
believe we can close the third quarter on similar levels to the
three first quarters of last year.”

Machado pointed out that the Portuguese
market has changed markedly in recent months. By March or April, he
said, deposits became the most important part of retail banking

And Millennium BCP and its rivals have
turned ever more aggressive in their efforts to lure new clients
and new money – not an easy task in a country where economic growth
has been stagnant for several years. To keep margins, banks have
been forced to rationalise their operations and to seek efficiency

“You can’t do miracles. The economy hasn’t
grown, or has grown very little, for six years already. So it is
not a casualty that Millennium BCP [has been] through a
rationalisation process,” he noted.

In 2008, 40 new branches are being opened,
with 30 in 2009. In another rationalisation step, clients who had
several different accounts in the bank were also called to
amalgamate them into a single one, with 94 percent agreeing to go
through the process.

The company has also focussed on boosting
cross-selling opportunities and identifying new areas of

“We have a strong cross-selling culture
within the bank. We have recently reached 4.06 products per client,
up from 3.93 one year before,” Machado said. The increase meant
that Millennium’s retail clients purchased over 300,000 extra
products from the bank.

While not all of them are profitable for
the company, Machado argued that they help to increase loyalty and
to focus the relationship with clients.

On new products, the most successful
additions to the range have been unit-linked investments and
structured products. Millennium Super Aforro, a guaranteed deposit
with remuneration linked to Euribor, has been a particularly
successful structured product, Machado said.

He added that levels of staff satisfaction
have also improved over the past few months, reversing a trend that
cost his department valuable human resources last year.